Q4 2019 Earnings Call

Please standby.

Kinetics and welcome to the Equifax fourth quarter 2019 earnings Conference call.

Today's conference is being recorded at this time I'd like to turn the call over to John Campbell. Please go ahead.

Thanks, and good morning, welcome to todays conference call I'm, John Campbell, Chief Financial Officer with me today, I guess more keyboard Chief Executive Officer.

This call is being recorded an archive of the recording will be available later today in the Investor Relations section and the about Equifax tab of our website at Www Dot Equifax Dot com.

During this call will be making certain forward looking statements, including full year Twentytwenty guidance to help you understand equifax and its business environment. These statements involve a number of risks uncertainties and other factors that could cause us could cause actual results to differ materially from our expectations certain risk factors inherent in our business are set.

Fourth in filings with the FCC, including our 2018 form 10-K, and subsequent filings also we will be referring to certain non-GAAP financial measures, including adjusted EPS attributable to Equifax, and adjusted EBITDA, which will be adjusted for certain items that affect comparability of our underlying operational performance.

For the fourth quarter of 2019, adjusted EPS attributable to Equifax excludes accruals for legal matters related to the 2017 cyber security incident cost associated with acquisition related amortization expense. The income tax effects of stock awards recognized upon vesting or settlement and foreign currency losses for Remeasuring.

Continuing in peso denominated net monetary assets.

Adjusted EPS attributable to Equifax and what that also includes legal and professional fees related to the 2017 cyber security incident, principally fees related to our outstanding litigation and government investigations as well as the incremental nonrecurring project costs designed to enhance our technology and data security. This includes.

Our next to implement systems and processes to enhance our technology and data security infrastructure as well as projects to replace and substantially consolidate our global network some systems as well as well as of the cost to manage these projects. These projects that will transform our technology infrastructure and further enhance our data security we're encouraged throughout 2018.

And then 2019 and are expected to occur in 2020 and 2021 adjusted EBITDA is defined as net income attributable to equifax, adding back interest expense net interest income income tax expense depreciation and amortization and also as is the case for adjusted EPS, excluding accruals for legal matters related to the 20.

17, cyber security incident costs related to the 2017, cyber security incident, and foreign currency losses from Remeasuring. The Argentinian peso denominated net monetary assets. These non-GAAP measures are detailed and reconciliation tables, which were included in our earnings release and are also posted on our website.

I would also like to welcome back Jeff Dodge will be joining us for the next several months until Trevor Burns returns from its medical leave Mark and I would like to thank Jeff for stepping back and it is greatly appreciated and Jeff has joined us today.

I would like to turn it over to Mark.

Thanks, John Good morning, everyone. If you've been following the news. This week. It was another busy week cured equifax before I get into the fourth quarter financial results. Let me just spend a few minutes on Mondays the department of Justice and FDI announcement on their indictment of for Chinese military officials for their roll into 2017 cyber attack on Equifax.

We're pleased that the FBI Indio, Jay were successful in identifying a criminals, who attacked equifax and U.S. consumers.

Today's announcement as another positive step forward for Equifax as we close the chapter on the 2017 event.

Continuing on the 2017 favour event you recall that we took a 700 million dollar charge in the first half of 2019 related to the comprehensive settlement.

Most significant legal and regulatory matters facing equifax.

In the fourth quarter, we recorded net additional charge of $100 million related to resolution of all remaining us legal proceedings and investigations arising from the 2017 cyber security incident.

Discharge include settlements reach into Securities class action and the shareholder derivative, let it litigation.

The financial institutions class action lawsuits by the states of Indiana in Massachusetts, who did not joint last year's multi state attorney Attorney General settlement.

The charge also includes an estimate to resolve the remaining open U.S. proceeding to investigations.

Discharges net of insurance proceeds related to these matters.

The matters for which no estimate is included in discharge other resolution of the review being undertaken by the financial conduct authority in the UK and the Canadian consumer class action litigation.

Consistent with prior legal settlement charges related to the 2017 cyber security incident, the 100 million dollar net charge is excluded from our fourth quarter.

2019, adjusted EBITDA and adjusted EPS.

In January the court granted final approval for the multi district consumer class action settlement, we entered into in 2019.

The timing of when the remaining approximately $360 million of the consumer restitution funding will be paid depends on the resolution of the appeals filed related to this case.

The timing of that resolution of the appeals is still uncertain.

Details on the status of all outstanding legal and regulatory issues. We provided in our 10-K be filed later this month.

One days indictment by the department of Justice and our resolution of the U.S. matters related to 2017 cyber event allows our team to fully turn the page and focus on our FX 2020 security and technology transformation and growth that equifax as a leading data analytics and technology company.

Let me move now to our fourth quarter results.

We're very pleased with our financial performance in the fourth quarter and strong progress in 2019.

The results were broad based showed sequential improvement we're above guidance and were another very positive step forward for equifax.

These results are our strongest since the 2017 event and reflect equifax returned to a more normal growth mode.

Revenue at 906 million was up 10% in constant currency.

8% on an organic constant currency basis and above the top end of October guidance.

We had strong revenue growth driven by our two you SBB businesses US is any ws that collectively were up a strong 13% overall with workforce solutions up a strong 22% and USL bias up a very solid 8%.

The 22% growth that Cws was its strongest since 2016 and US is the second half performance was their strongest since 2015.

US market U.S. mortgage market inquiries remained strong with inquiries up just under 21% and consistent with our guidance.

International delivered 4% constant currency revenue growth with growth in all regions in the quarter, but Weve continued press pressure from the slowdown in Australia, Brexit uncertainty in the UK and most recently the unrest in Chile.

Global consumer continued continued their past back to growth with revenue up almost 3.5% and add that as expected improving revenue growth driven by the recovery of our us consumer business.

Adjusted EPS of $1.53 per share was at the top end of our guidance we provided in October.

Adjusted EBITDA margin of 35.2% grew nicely up 200 basis points compared to 2018.

While we are seeing increased depreciation and duplicate cloud costs as our transform systems move into production. These costs were in line with our guidance provided in October.

Let me move now to the individual business units first USA us.

Their revenue was up 8% versus the fourth quarter 2018 on a reported basis and 5% on an organic basis.

Total mortgage revenue was up just over 20% consistent with the growth of the mortgage market inquiries.

Mortgage solutions revenue was up 19% in the quarter much stronger than prior quarters in 2019, as we lapped the negative impact of the mix shift from a large mortgage retailer which occurred in the fourth quarter of 2018.

Our non mortgage revenue growth grew 3% in the quarter and non mortgage organic.

Gross was positive again, but up only slightly compared to last year.

This was lower than the third third quarter and lower than our expectation and reflects the continued choppiness of USA as recovery that we discussed over the past two years.

We saw continuation some very positive trends in USA us and feel good about accelerating us is non mortgage organic growth in 2020.

Online revenue in USA us was up 7.5% on a reported basis and up 4.5% on an organic basis, we saw double digit growth in mortgage IDN fraud insurance and data acts as well as in auto and banking in lending. These are all very.

Goals for USA us.

This growth was principally offset by declines in our telco segment and our direct to consumer segment.

Direct to consumer is the segment in which you ESI US sales credit files in scores to other credit reporting agencies. This was down due to a onetime sale that occurred in the fourth quarter 2018 that did not repeat.

We expect this segment to return to growth in the first quarter of 2020, and telco saw a decline while stand while telcos saw a decline in the quarter. We've had very good success with recent customer wins and win backs and expect to see a clear line to sort of site to growth in telco as we move into 2020.

Financial marketing services revenue was up 3.5% in the quarter compared to last year.

For full year, 2019, Fms delivered 2.5% revenue growth as compared to 2018.

While quarterly SMS revenue is still choppy they delivered growth in three of the four quarters, and 29, 2019, which we view as positive.

The revenue growth reflects the continuing growing pipeline that we discussed over the past couple of quarters in that business.

Good thing in the USA as team continued to show accelerating commercial activity through 2019 with good momentum coming out of the for fourth quarter and into 2020.

There are new deal pipeline is up 15% at year end 2019 versus year end 2018, and new deals one in 2019 increased over 2018 by almost 25% and into fourth quarter. The dollar value of new deals one with the highest it's been in the past four years.

We continue to believe that our differentiated data assets, coupled with our technology investments will return us to its traditional growth mode. The fourth quarter in 2019 results show that they are well down that path.

Yes, I asked adjusted EBITDA margins of 45.1% were down 240 basis points from fourth quarter 2018, primarily due to increased royalty costs as well as higher development expense and investments and data analytics commercial resources and new product resources.

Shifting now to workforce solutions, they had a very strong quarter with revenue up 22% compared to last year, which was much better than our expectations.

Verification services revenue was up an extremely strong 33%.

Driven by broad based strong double digit growth across mortgage healthcare debt management auto government and talent solution verticals.

This strong and broad based verification services revenue growth reflects continued growth in work number active records is that as well as the rollout of new products expansion into new verticals. In addition of new customers.

Cws and verification services revenue growth, excluding the benefit of the mortgage market were up a strong 12 and 19% respectively.

Rudy Ploder and Cws team did an outstanding job in 2019 growing their business and expanding the twin database.

20 has almost 105 million active records at the end of 2019 and over 82 million active unique individuals up 15% from a year ago.

These compared to the roughly 170 million, including self employed individuals in the us nonfarm payroll, which gives us plenty of room to grow our database in the future.

As you know these twin records really drive our revenue hit rates for our customers and benefits to us consumers our system to system integrations with our customers allow us to monetize additions to the twin database as soon as they are added by delivering the higher hit rates to our customers as they access our.

Database in their system to system applications.

Employer services declined in the quarter, 6% and in line with our expectations, primarily due to the expected declines at workforce analytics, our EPA business as well as our unemployment claims business.

The strong verifier revenue growth resulted in strong adjusted EBITDA margins of 47%.

Org margins were lower in the quarter compared to the prior year, principally due to incremental third party implementation and royalty costs associated with the twin records expansion and some higher selling costs.

Workforce solutions is clearly equifax best business and they continue to deliver strong results with significant future growth potential.

Shifting now to international their revenue was up 4% in local currency in almost flat on a reported basis.

And this was.

Weaker than our expectations the majority of the weakness versus our expectations was in Latin America, particularly in Chile and to a lesser degree in the UK debt management business.

Importantly, we saw better than expected performance in Asia Pacific, including Australia.

I am encouraged about the trajectory of the international business given the revenue growth posted in the second half of 2019, despite the continuing economic headwinds in Australia, Chile in the UK.

Asia Pacific, which is primarily our Australian and New Zealand businesses was up almost 1% in local currency in the fourth quarter versus fourth quarter 18.

One of the half percent for the second half of 2019.

Importantly in Australia, we saw our consumer and commercial online revenue, which combined represents just under half of Australian revenue grow about 5% in the quarter.

We also saw a nice growth in our identity and fraud business and our HR solutions business.

We continue to see weakness in our marketing services business, which we expect to continue but to it at a lesser extent through the first half of 2020.

I was in Australia, two weeks ago, with our new leader Lisa Nelson She and her team are focused on returning the business to growth in 2020.

We expect local currency, Australia revenue growth to return to growth in the first quarter and strengthen in the second half of 2020.

Yes trillion business continues to make very good progress with positive data and by ended the fourth quarter, we had 80% of positive data from contributors, including 90% of the credit card in mortgage data for Australia.

We expect this additional data to be a new lever for growth for the business in the future.

Shifting now to our European businesses, which were up 1% in local currency in the fourth quarter and weaker than our expectations, primarily in our debt management business.

Importantly, our European credit business was up 5% in local currency an improvement from the up 1% in the third quarter of 2019 and their strongest performance in 2019.

Consumer online in batch was which represents almost 60% of our.

European Crs revenue was up 3% in the fourth quarter.

Our analytics and scores business in ignite interconnect revenue grew double digits in the quarter and this growth was driven by strength in Fintech and financial services.

Commercial and I'd fraud revenue was weak in the quarter.

Our European debt management business declined 7% in local currency principally in Spain.

And our debt management business with UK government did not returned to growth in the fourth quarter I'm sorry, good return to growth in the fourth quarter, which was positive.

However, we expect the overall debt management business to remain weak through the first quarter of 2020 as the Brexit situation normalizes.

Shifting to our Latin American Latin American business. They grew a strong 10% in local currency in the fourth quarter 2019, despite the impact of Chile do the recent unrest.

We saw double digit constant currency growth in Argentina, Ecuador, Uruguay El Salvador in Mexico.

And we're seeing growth accelerate as our Latin American businesses benefit from the expansion of ignite interconnect SaaS customer Rollouts and strong MPCI Rollouts in 2018 and 2019.

Canada was up a strong 9% in local currency in the fourth quarter and 8% for the full year, reflecting a continued focus on customer innovation and new products.

And it continues to be a very strong growth market for equifax.

International adjusted EBITDA margins at 36.4% were up 400 basis points compared to the prior year.

The strong recovery and margin reflects both the return to growth in the quarter and the benefit of the cost action actions, we implemented in the fourth quarter 2018, and during 2019 as well as improve income from an already investments.

Shifting now to global consumer solutions revenue that business was up 3.5% on a reported and constant currency basis in the fourth quarter, a substantial improvement from the 50 basis point increase in the third quarter of 2019.

Global consumer direct revenue, which represents just under half of our total gcs revenue was down only 1% in the quarter.

Double digit growth across the UK in Canada is combined consumer direct businesses was offset by an 8% decline in us consumer.

Although us slightly greater decline in the us than we expected to still represents a substantial improvement from the double digit decline in us consumer direct we saw in the third quarter in earlier in 2019.

Our gcs partner business increased 6% in the quarter as result of solid growth with our US partners, our benefits channel and our Canadian breach business.

Our gcs partner team continues to close new logos in their pipeline has grown nicely from this time last year.

Gcs adjusted EBITDA margins of 26.9% increased 580 basis points compared to the prior year increased 200 basis points sequentially from the third quarter of 2019.

As expected in the fourth quarter, we saw the effective revenue growth in the benefit of caustic actions taken earlier in 2019.

The Gcs team has done an excellent job turning this business around in returning it to growth.

Dan Adams, our leader of Gcs retired from Equifax in late 2019. After a 21 your career at Equifax I want to personally think gain for all his contributions to equifax, including as president of US is WMS and gcs during his career.

And leaves a tremendous legacy and will be missed.

Taking over for Dan is that Anderson, who joined us.

After more than 30 years of experience in financial services that joins us from Wells Fargo, where she was most recently responsible for leading the growth and transformation of their consumer credit card business in operations.

Really excited to have debt joined my leadership team to lead the GCF business.

Turning now to our technology transformation in the fourth quarter, we reached some significant milestones in our $1.25 billion FX 2020 security and Trent technology transformation.

As you recall, we launched a three year program in 2018 to migrate our data and applications to the Google cloud.

We've made significant progress on the implementation of our Usdeight exchanges in the new cloud based data fabric during 2019, and we have some real momentum as we move into 2020.

As of today initial migrations of the work number NCT, we auto target connect and our I IXI wealth exchanges in cloud native environments are complete.

We expect to begin delivering in production to customers from these migrated exchanges as early as March with complete migration of all data ingestion processes and legacy system decommissioning completed over the next six to 12 months.

By the end of second quarter.

In 2020, we expect to have completed initial migration of our us commercial exchanges property exchange in our data ex exchange and by third quarter of 2020 initial migration of all us exchanges, including our property exchange us consumer or Acro exchange are both scheduled to be completed.

These data migration to cloud are meaningful milestones in our technology transformation program.

Our ignite analytics and machine learning platform that includes attribute in model management capability is integrated with interconnect will be fully available for our customer migrations that cws by the end of the first quarter and at GCP by the ended the second quarter 2020.

This will include the ability for customers to easily ingest and manage their own data as well as equifax data in their own ignite instance.

We continue to make strong progress globally, and rolling out our ignite analytics platform with over 150 customers now using ignite direct and marketplace.

NBT, our patented explainable machine learning technology has now been deployed in the in the night development with over 30 customer models and a few weeks ago. We were awarded our second us patent for NBT.

We're also making progress internationally with our cloud transformation. The initial migration of the Canadian consumer risk exchange and known flawed exchange to GCP any give us will occur by the end of the second quarter of 2020 with similar progress in the UK, Australia, New Zealand on consumer exchange is expected by year end.

Yes.

We're also seeing accelerating progress in the migration of our customers onto our cloud based interconnect and ignite Apiay framework.

This is the common set of services on which we are working to migrate all us is cws and international customers.

By the ended the first quarter 2020, we expect to have migrated approximately a thousand us customers with a similar amount in international.

Pace will accelerate significantly through 2020 with the vast majority of us customer migrations completed by early 2021.

As we discussed customer migrations are certainly the most challenging part of our technology transformation to forecast.

We're very pleased with customers enthusiasm for the benefits of our new cloud native environment, and the accelerating pace of customer migrations.

I Hope this gives you a sense of the significant progress, we're making at our technology transformation that will deliver industry, leading cloud native technology to our customers.

We are laser focused on execution and if continued good momentum as we move into 2020.

Shifting now to new products. This remains a key component of our FX 2020 strategy in a long term muscle for equifax.

We have an active pipeline of innovation and new products and we've launched over 90, new products in 2019 up 50% from 2018 and up from the guidance. We gave you in October.

As you will know innovation and new products fuel our growth on our integral to our strategy.

Importantly, us is product launches were up two weeks in 2019, and our back to the level that we were seeing in 2016.

Cws always also had a very strong new product year doubling their new product launches.

Innovation, new product rollout Rollouts will get increasing focus from our team in 2020 and 21 as we leverage the unique benefits of our cloud native data fabric and cloud based applications to deliver capabilities and new capabilities to our customers.

This is a key lever for equifax growth in the future.

In 2019 US is launched new or enhanced products in marketing, including enhanced email append data ex prescreen and pre approval of one.

Identity and fraud, including our Luminate, new eliminate fraud product suite instant synthetic I'd 2.0, and in several vertical specific products in commercial which allow our customers take advantage of our broaden commercial lease payment dataset with the acquisition of payment in real estate for lead scoring.

A new insights score for personal loans and for the insurance industry, a new score the inflection score, which we developed jointly with Verisk.

Cws also expanded their product offerings to the addition of the through the addition of new data assets, including education property and other data to augment their unique incoming employment data, which is part of their path towards being a data hub that centers around their unique income unemployment data asset.

You WSS new products include expanding expanded mortgage product offerings as well as new talent reports to be rolled out to support identification of loan stacking for the personal loan industry.

International also had a strong year with new products, increasing launches over 30% with good distribution across all of our geographies.

The strength in international Npis is driven by over 100 customer ignite installations at our international customers.

As you can see we really prioritize our focus and resources on driving innovation and NP Rollouts in 2019, and we plan to invest even further.

In innovation and new products in 2020 and beyond.

We continue to be an increasingly important lever for equifax growth, particularly as we leverage the new product opportunities in front of us from the cloud transformation.

We also recently announced new partnerships with rent reporting platforms, including Xuzhou low cafe and Xin go to help develop a more complete picture of a consumer's financial profile from rental data.

These rent reporting platforms enable consumers to opt in to include rental payment data as a part of their credit report to allow more complete picture of their financial history.

All three companies as a part of their credit credit education initiatives will also present their users with a three weekly or monthly vantage score. So consumers can track score changes over time.

We believe these partnerships our win for consumers and a new data source for Equifax.

And earlier this month, we completed the acquisition the remaining interest in our India business to take a 100% control of that business.

We view, India as a strategic long term market with per 10 with tremendous potential with our unique data assets and capabilities.

Wrapping up and looking back at 2019, we made tremendous progress in executing against our FX 2020 strategy.

That we're convinced will return equifax to market leadership and growth as a leading data analytics and technology company.

We have strong operational momentum coming out of 29 keen with revenue growth in the second half a 2019 at almost double the pace of our first half performance.

The second half acceleration, particularly in our us businesses as well as return to year to year over year growth in EBITDA margins and adjusted EPS positions us well for 2020 and beyond.

Monday's announcement of the DLJ indictment, along with our resolution of the principal remaining legal issues related to the cyber event is another very positive step forward for equifax that allows us to close the chapter and the 2017 event and turn our focus fully towards the future growth of Equifax.

Our 1.25 billion FX 2020 cloud native technology transformation has accelerating momentum and we aren't out now implementing in production major exchanges as well as their ignite analytical environment in our cloud native into infrastructure.

We're also actively migrating customers onto our cloud based interconnect ignite CPI based platform.

And we're equally energized about all the learning that we have about the power of the new cloud native environment to drive innovation speed to market, new products and solutions always on stability and the cost and cash savings we've talked about previously.

We remain convinced that our cloud investment will be transformational for Equifax and drive our top and bottom line in the future.

We continued our focus in 2019 on advancing our already differentiated data assets by adding significant new data capabilities in the us through our pain at acquisition and in our partnerships with FICO Yodle early in our Jeanette.

This focused on expanding our data assets will continue in 2020 and beyond.

We continue to make big investments in our data security to deliver on our goal of being an industry leader in data security.

And last we have the right team in place for the future of Equifax over the last two years, we brought in strong talent to my leadership team and the broader business, we're all aligned and returning equifax to growth in market leadership.

We're energized by all we accomplished in 2019 in the momentum in the business as we move into first quarter in 2020.

We know what we have a lot of work still in front of us, but our focus is clear around executing our $1.25 billion cloud technology transformation, while driving new innovation and products that will accelerate our growth in the future.

With that let me turn it over to John.

Thanks, Mark I will generally be referring to the financial results from continuing operations represented on a GAAP basis, but we'll refer to non-GAAP results as well in the fourth quarter total nonrecurring or onetime costs related to the cyber security incident, and our transformation, excluding the $100 million and legal accruals that Mark discussed were 80.

The $2 million and below our expectations, principally due to lower legal fees.

The cost includes $76 million of technology, and security and $6 million for legal and investigated fees.

For all of 2019 us mortgage market inquiries were up over 6.5% versus 2018, which is in line with what we had expected in October for 2019 inquiries for Q 19 inquiries were up almost 21% consistent with what we had expected in October in the fourth quarter mortgage related revenue.

Represented just over 19% of Equifax revenue.

As a reminder, the estimate we provide is for Twentytwenty mortgage market credit inquiries, we base our estimates on multiple third party forecasts of mortgage originations in dollars, including an MBA Fannie and Freddie our current forecast originations of about flat in 2020 is we believe only slightly more positive.

On the order 50 basis points than the current EMEA regions for originations forecast of down 7% increase can be very meaningfully.

Can vary meaningfully from originations principally due to mortgage tight mix and timing of inquiries versus closed loans.

In the fourth quarter General corporate expense was $211 million, excluding nonrecurring costs adjusted general corporate expense for the quarter was $72 million down $4 million from Fourq to 18.

Adjusted EBITDA margin was 35.2% in 14 19 of 200 basis points from Fourq to 18, and up 130 basis points from Threeq to 19, as we discussed in October and that's covered in marks comments the increase in overall adjusted EBITDA margins year to year is driven by positive mix as high margin us I asked and.

You asked at the highest revenue growth rate in 14, 19 growth in margins and international and Gcs as well as leverage on corporate costs as revenue gross margin declines and USA Aesynt SWS from strategic investments, partially offset these increases.

For for Q 19, the effective tax rate used in calculating adjusted EPS was 22.7% slightly below the approximately 23%. We have provided for guidance for up for Q 19 in October we expect our twentytwenty effective tax rate to be about 24% full year operating cash flow of positive $314 million.

It was down $358 million from 2018, the decline was more than driven by the following nonrecurring items Equifax made payments of $341 million in Threeq you 19 for the consumer settlement announced in the second quarter no such payments were made in 2018.

And payments related to the $57 million of restructuring charges taken in Fourq you 18 in one Q 19 were $36 million.

Capital spending or the incurred cost of capital projects.

In Fourq to 19 and year to date was $90 million and $376 million down 28 million and up $8 million respectively from 2018.

Excluding payments related to excluding.

Payments related to settlements of litigation or regulatory actions full year 2019 free cash flow was above $250 million and was better than our expectations.

Now, let's take a look at 2020 2020 is an important turning point for Equifax 2020 security and transfer trends security and technology transformation as we accelerate the move of our data exchanges to data fabric at GCP, our customer transitions to our ignite interconnect apiay framework and our.

Entity and fraud customers transition to using our new systems at Cws.

As we put our cloud native systems into production, we will begin to depreciate These new systems and incur the cloud and other operating costs of running these new cloud native systems. It will generally take six to 12 months from the started production to fully transitioned a legacy exchanger decisioning system to a new cloud native system.

During that time period, we will incur both the cloud and other operating cost of the new system as well as the operating costs of the legacy systems as Twentytwenty as a transition year and the decommissioning of legacy legacy systems is not expected to substantially occur until late for Q2 thousand 20, and 2021, we will.

Clinker these additional system transition costs for much of Twentytwenty.

For Twentytwenty, we expect these additional system transition costs to be in the range of 40 to 50 cents per share with increased depreciation representing about two thirds of this additional costs and cloud costs net of any legacy system decommissioning savings representing approximately one third of this cost.

As we move into Twentytwenty, one we expect the savings from the decommissioning of legacy systems to exceed the incremental cloud costs, resulting in a net benefit to the BNL as opposed to duplicate costs, we will be incurring in twentytwenty.

As we have set in the past when this transition is complete we expect to generate significant cost savings of 15% plus savings in technology cost portion of our cost of goods sold and the technology costs portion of our cost of goods sold represents just under 15% of our total Cogs and a 25% reduction in our development spend.

Both in expense and capital and we expect our new single data fabric and cloud based applications to accelerate innovation and new products that will be accretive to our growth rate.

Now for 2020 guidance, we expect total revenue to be between 3.65 billion and 3.75 billion, reflecting constant currency revenue growth of 4% to 7%. This assumes the us mortgage market will be about flat in 2020, FX will negatively impact revenue by almost 1% and adjusted EPS by about three.

Sends us I asked revenue is expected to be up mid single digits in 2020.

NWS revenue will continue to deliver double digit revenue growth with very strong growth and verification services.

Employer services. It is expected to be flat to down international revenue will grow mid single digits with growth strengthening in the second half of 20 due to expected economic improvement in Australia in Europe Gcs revenue will also grow mid single digits and Twentytwenty with continued growth in our partner business at 80 watchdog and in our UK.

In Canada consumer direct businesses, we expect us consumer direct to return to growth late in 2020.

2020, we expect adjusted EPS to be $5, and 62, $5, an 80 cents per share reflecting constant currency growth of approximately flat to 3.5% versus 2019 as I discussed earlier impacting adjusted EPS in Twentytwenty is 40 to 50 cents per share of increased depreciation and additional.

System transition costs. This represents approximately eight percentage points of growth and adjusted EPS as such excluding this tech transition impact adjusted EPS growth is 8% to 11%, which helps give a clear picture of the post Equifax Twentytwenty earnings power of Equifax.

Due to the substantial increase in depreciation we will end twentytwenty at our add to our discussion with you more focus on adjusted EBITDA margins, which we believe will better reflect the true earnings power of Equifax and Twentytwenty adjusted EBITDA margins are expected to expand by approximately 50 to 100 basis points. This includes the drag.

Of about 50 basis points from the additional system transition costs. Excluding this transition costs adjusted EBITDA margins would expand between 100 to 150 basis points in Twentytwenty as we discussed the duplicate legacy and cloud costs will be in place during Twentytwenty and 20.1, as we migrate customers to the new cloud environments.

And decommission legacy mainframe and server environments.

And Twentytwenty, we expect to incur approximately $255 million and nonrecurring expenses comprised of $250 million and nonrecurring security and technology transformation expenses and less than 5 million legal and regulatory expenses. This does not include the cost of any potential judgments or other regulatory outcomes.

Should they occur in Twentytwenty as we have stated previously we will no longer exclude sorry in 2021 as we as stated previously we will no longer exclude these nonrecurring expenses from our adjusted EPS.

Capital spending and Twentytwenty is expected to be approximately $335 million.

Our several important assumptions impacting twentytwenty in total as well as the individual quarters us mortgage market inquiries for all of Twentytwenty are expected to be flat. However, one Q 20 inquiries are expected to remain strong up over 21% year to year to few 20 inch inquiries are expected to be about flat.

And we expect inquiries to decline about 10% in each of the third and fourth quarters.

Twentytwenty corporate costs are expected to increase approximately $45 million versus 2019 depreciation expense within the corporate cost line is expected to increase over $15 million Twentytwenty corporate costs, excluding depreciation are expected to increase year over year by about $30 million the IND.

Increases are principally in security and technology as well as equity compensation, the higher security and technology costs are partially a result of the system transitions and twentytwenty as we invest to ensure we maintain high levels of security and both of the new cloud native and legacy systems as we decommission legacy systems at a more rapid.

Pace beginning in late Twentytwenty, we would expect these security and technology costs to moderate over half of the Twentytwenty total increase of $45 million in corporate costs will occur in one to 20 interest expense is expected to increase about $13 million or eight cents per share in twentytwenty, reflecting the incremental borrowings to fund.

The legal settlement payments in Threeq, you 19 in one Q 20 about two thirds of this increase will occur in the first half of 2020 note that our guidance does not reflect any incremental borrowings associated with approximately $355 million remaining in consumer legal settlements as the timing of that payment is still not known.

Our 2020 tax rate is expected to be slightly higher than the 2019 tax rate at 24%. We continue to expect our normal seasonal pattern for reported revenue and adjusted EPS with one Q being the lowest in Threeq and Fourq you being the highest in dollar terms. However in terms of year over year growth rates, we would expect one Q to have the high.

This growth rates for revenue and adjusted EPS.

For 120, we expect revenue in the range of $915 million to $930 million, reflecting constant currency revenue growth of 9% to 11%, we're expecting adjusted EPS to be $1.29 to $1.34 per share FX is expected to negatively impact revenue by over 1% and once you 20 and negatively in.

Packed adjusted EPS by one cents per share higher interest expense negatively impacts adjusted EPS by three cents per share versus 119, the tax rate and 120 is expected to be about 25% and with that operator. Please open it up for questions.

Thank you I'd like to ask a question. Please signal by pressing star one on your telephone keypad using a speakerphone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment.

And that is star one as you think to ask a question.

First question will come from Andrew Steinerman with JP Morgan.

Hi, It's Andrew I, just wanted to understand how using the word mortgage inquiry is like Amit are to be flat in 2020 as your teams expectation is that starts to be a proxy for equifax has revenues in 2020 for that part of the business, which as you say aggressive at 19% and then.

So a 4% to 7% constant currency revenue growth would mean.

Hi single digit non mortgage revenue growth right.

Yes so.

The credit inquiries is exactly as it sounds right. It is with each mortgage transaction, we get an inquiry and we're simply trying to let you know what we forecast those increased the beat for the year and as I said, we estimate that based on the information we have in terms of the number of inquiries that we get per closed the mortgage.

Good loan and then we use we use the forecast provided by an MBA and Freddie and Fannie two to do an overall originations forecasts and then we translated into credit inquiries. So so it does reflect the inquiries receive it isn't necessarily a proxy for our revenue because obviously, there's pricing changes in a year. We also get new records.

Workforce solutions, so we get growth from that and we also.

We also launched new products and mortgage which drives our growth higher we also get some penetration with some mortgage customers, where they are using our credit reports or the the twin records.

Sometimes three times four times in there on mortgage process. So that's another part of our revenue model absolutely such.

As you know historically, we tended to outperform the inquiry index. So so it is to give you a view as to what we think the market's going to do in terms of the number of time to market will request information from the credit bureaus.

And John the second part ways to do 4% to 7% constant currency revenue growth, you're assuming that that 19% heavier revenues as a headwind take it would have to do look at high single digit constant currency revenue growth in the non mortgage segment right.

So certainly our guidance indicates that non mortgage is going to be higher right.

It is going to do better now again, but you have to keep in mind will outperform that dws for example, as they continue to grow records will certainly outperformed in the mortgage segment the revenue they generate versus that inquiry index. So you can't just use the the credit inquiries as a proxy directly for revenue because certainly we do perform differently than that.

Certain circumstances.

Thank you.

Your next question will come from Kevin Mcveigh with credit Suisse.

Great. Thanks.

Hey, John if I heard writing it seems like it added back the depreciation EPS would be six to 620.

That's a lot better than where the street is on revenue, which pretty much in line is that the mix in cws or where else does that leverage come through a little model.

So just asked the question more time I Didnt fully follow I'm, sorry, yes. So it looks like there's depreciation if I heard your rate was kind of a 40 to 50 cents headwind duplicative depreciation.

Which would imply six to 620 overseas.

What are your guidance would be six to 620 versus the street at 580.

Thats a lot better than kind of where the street is the adjusted EPS versus kind of where the revenue guidance seeds relative to the street is that just.

The mix Thats driving that day, I guess I'm, assuming there's some margin outperformance there is that margin outperformance in workforce solutions, there might just not thinking about that right.

So.

So what we indicated was it was 40% 50 cents per share for both the increase in depreciation and the and the duplicate costs were occurring because we're running both cloud systems and our legacy systems and so those legacy systems are decommissioned.

So so that is 40% to 50% and yes, we did say thats about eight points of growth in the years, so relative relative to where the street was.

I can't specifically address that but I can indicate that we did in the third quarter give pretty specific guidance as to how much we thought our depreciation would go up right. So I think there was a pretty good understanding generally prior to prior to the fourth quarter beginning following our third quarter earnings call that we were going to see significantly increased depreciation in two.

2020, and we're also going to see significant increases in cloud costs in 2020, So I think that information was broadly out there before.

That's helpful. And then just with the indictments does that open the potential that maybe can recover some of those costs you've incurred already the on kind of insurance or does that change the outcome in terms of what you've already incurred.

I think we fully taking advantage of our insurance coverage there as far as any recovery. So.

Our expectation is that the charges that we took last year and net charge. We took in the fourth quarter will be equifax funded.

These are all net the numbers, we share with your net of insurance.

Super Thank you.

Next question will come from.

Barclays.

Thank you good morning.

Mark you over the course.

Talked a lot about how the pipeline.

Product all the progress you need that at the same time I think in a few quarters that you said the ex mortgage science has been short of expectations. So I would just curious if you could just couple of bridge that gap and meeting what is your expectation for USA. Thanks mortgage between 2000.

Yes, I think that John John talked about we expect that us is.

Overall to be in that mid single digits.

With regards to expectations, we've got a high bar here Thats, how I operate I think thats.

You know that we want that business to return to historical growth rates, it's making.

Great progress I think you know.

A year ago. When we were on this call with fourth quarter 2018 that business was.

In the flat to negative mode and.

I was just getting out of the penalty box with our customers and we're now four quarters or so into that recovery, we're making great progress.

Bars their pipelines building and.

There when we run rates and we see some really positive momentum as we move into 2020, we expect that business to continue to improve as we go through the year.

And expect it to return to historical growth rate. It's just a matter of time, it's still one that.

The non mortgage growth theres, a lot of variables there as far as pipelines being rebuilding the timing of closing deals that we've talked about.

Actually every quarter that.

Since the cyber security incident that we're just seeing deeper pipelines and better when rates, which gives us confidence as we go into 2020.

I just want to make sure to Anders initial question just to make sure I was clear right. So so equifax has historically performed better than the mortgage index in terms of our revenue. So again as you're doing your analysis on the implications of our mortgage market guidance.

In terms of its implication to our non mortgage revenue growth you need to please recognize and take a look at history. The fact that we've generally significantly outperformed the mortgage index in terms of our mortgage revenue growth.

Got it add John just to clarification on the guidance. So one could you just.

Any M&A bake into 215 gathering.

And then I lost you a little bit on.

Since that we incurred this year and how that.

Anything that can you say was one point of the cloud costs, it's something we'll so piece has been.

With that in 21.

Yes, so term the only thing we included in our guidance is acquisitions that have actually closed so there'd be no new acquisitions included in terms of the.

The I think you're asking about the 40 to 50 cents per share and transition costs and system transition costs, yes.

At 40 to 50 per cent per share is made up of of two things. We said about two thirds of it is incremental depreciation right. So we've been investing heavily over the past several years building new production systems cloud native production systems in the cloud and as they go into production, obviously, we start to depreciate them so of that.

40 to 50 cents, we said about two thirds of it will be substantial increase in depreciation in 2020 versus 2019.

And then about one third of the incremental costs is related to duplicate costs and operations, because we're running a cloud systems as well as our legacy systems in parallel for an extended period of time, while we migrate customers. So we're incurring effectively double cost the cost of the existing.

Legacy premise system as well as the cost of the cloud system during the transition period, and we said that that transition costs. The period of running two two sets of systems would be about one third of that 40 to 50 cents per share and the final comment I made it on that specific cost.

The the the duplicate cost of running two sets of systems. We had said as we move into 2021 as we move through the here, we expect that to actually become a positive where the savings related to shutting down legacy systems will exceed the cloud costs and that will start to become a positive for the company.

And then I'll just add it added mark.

I think as you know a lot of our investors have asked for some transparency around that because number one on the second point John raised on the duplicate cloud costs as you know those aren't going to be here forever and those are going to start ways. We decommission system that will turn into being a positive will be some of that in 20.

20, that's in our guidance now in the numbers, John talked about and that only accelerate in 2021, and we'll get to a fully migrated basis sometime in the future and we'll give you guidance on that so that was that element and then on the increased amortization same thing that's.

A temporary element if you will have which will be there for a number of years of that increased amortization, which had a noncash item and thats going to work its way down as we amortized off our investments in the cloud costs and as you know our intention is to reduce our capex spending in 2021.

As we complete the cloud migration. So our intention is to be clear about our guidance, which John gave you, but also give you additional visibility of what's inside that guidance. So you can be aware and think about what equifax looks like on the other side.

And just what would be M&A contribution John.

Let me that between.

So it's relatively small right. If you think about we closed pain at in the I think in the second quarter of 2019 and that was the largest acquisition for the year. So there in the fourth quarter. We gave some indication total the total amount of acquisition revenue was was just over 1%.

Revenue, so not a significant number and it should decline as you move through 2020 markets through 2020.

Thank you then.

Your next question will come from George Mihalos with Cowen.

Good morning. This is Allison on for George Thanks for taking my question I wanted to follow up on the comments made about workforce solutions margins in the quarter I think I heard that the year over year decline was driven by third party implementation royalty costs I'm, just curious if anything else to call out there maybe mix and how we should think about segment margins going forward and.

Good morning.

Yes, I also mentioned Allison that there was some additional sales costs in the fourth quarter and net business, which.

Put some pressure on margins I think John also said that we expect that business to expand margins in 2020.

And we don't see any change in that with their high growth in their inherent margins. That's a business that we expect expanding margins going forward.

And just to make sure you're clear as of the royalty costs are actually separate from the third party implementation cost rates are those are two different cost items that affected us in the quarter as well as obviously increase sales expense.

Okay, great. Thank you that's Super helpful. And then just one quick follow up Mark I heard you mentioned the solid progress being made with positive data in Australia I'm curious if we should expect any impact from that from 2020.

Yes, we hope it will be accretive as we go through the year, we've seen in all the markets were positive data comes in it. Obviously first takes a lot of time to get that data from the contributors into equifax and the other credit bureaus, and then turning that into usable information that we can take to the marketplace has a lag to with the good news is we have the data.

And now, which we've been working to get there. So we expect it will be.

A positive element for that team in in 2020.

Great. Thanks very much.

Next question will come from Hamzah Mazari with Jefferies.

Good morning. Thank you. My first question is just if you could just.

Talk about how longer sales cycles per day is on new products currently and maybe how much they're contributing to growth today versus sort of pre breach just to give us a sense.

Sure.

Sales cycle, it really depends on the product right. So so if it's if it's a vast product something that we've sold historically, that's effectively reselling, it's something that can sometimes be initiated and and transacted within a period.

For implementing a new online service with a customer implementation period can be over a year.

And it really depends on the service in terms of of anti contribution to new product contribution and in 2019 versus prior years I think what we tried to be clear on is the level of acceleration, we're seeing a new product launches, which we think is very beneficial as we go forward into 2020 in 2021, obviously the level of new product revenue we generated.

In 2019 in 2018 was certainly down from what we saw historically because of because of the fact that we didnt have the same level of product generation over the 2017 28 period. So that was a so we're seeing a a period of lower.

New product revenue generation, but we are but we see very good signs that that will start to recover as we move into 2020, and certainly 2021. If you heard my comments just to add on that new product and innovation is a real priority of ours and it's one that obviously, we had some pressures on following the cyber security incident with all our focus unsecured.

The remediation everything else and Im pleased that our efforts in 2019 to make this a priority.

Central to Equifax of strategy and you saw the performance of us rolling out the highs new products and number of years in 2019 and that emphasis is going to continue we really believe that our cloud transformation and having our single data fabric and are having our our products in the cloud is going to allow us even accelerate that going forward and this is an area that.

We're going to continue to invest resources time and money on because of the positive impact it will have in the future around our topline by investing in more new products.

Very helpful. Just a follow up question I'll turn it over.

Did you give us a sense of how much of your portfolio.

Sort of directly linked to the credit cycle versus how much of the portfolio is.

Just data similar to sort of a handful of services company.

Any sense of rough percentage.

Or qualitative lead anything any comments there. Thank you.

The best thing I can suggest as if you take a look at the earnings deck that we publish on we published obviously last quarter and will be one published today and it we show revenue by market segment for Equifax and for the for each of the business units and that's probably the best place to take a look to so you can judge based on where we sell in.

How you think that into is impacted by the credit cycle I think thats the best source for you.

The other thing that you should be aware of is that.

Our business in our industry during a credit cycle, obviously expenditures by our customers on new originations may come down, but then as a shifting the focus to the back book to managing credit lines. So theres a element of counter cyclicality to it and any other element is quite different it equifax today versus the last economics.

Michael is the mix of our businesses. We're obviously larger internationally than we were in the last economic cycle than second workforce solutions is very different scale in our business in size and workforce solutions has that additional lever in a credit cycle of the ability to continue to add new data record.

That are monetizable, so thats another element of.

How we think about ourselves if there is a credit cycle, we're very different.

Positive way than we were in the last credit cycle.

Great. Thank you.

Your next question will come come come from Baird, Gary Bisbee with Bank of America.

Hi, guys. Good morning, I was hoping to dig in a little bit more to the us is.

Growth organic ex mortgage slowing from I guess it was three to slightly positive part of it clearly understand financial marketing and an outsize growth quarter last quarter, and maybe a more normalized trend number this quarter and so that's part of it and you called out a couple of the end markets that were a little weaker but.

Can you give us any other color just to understand this and maybe how we think about the cadence of that into Q1.

I would be helpful. Thank you.

Sure so the.

Yes, I think in Mark script ready talk specifically about direct our DTC business, which is the transactions, we do with our competitors and part of the reason that was down obviously was because we had a transaction that occurred in or a sale that occurred in the fourth quarter 18 that was onetime that didn't recur and that directly impacted impact of the the organic growth in the period and then.

Also we talked about telco and and yes. It was down but we think we see very nice path to growth as we get into the second quarter and beyond in 2020. So so I think overall, we're expecting to see.

Nice improvement in our level of organic non mortgage growth as we move into 2020 and beyond so we do like the trend right. We said it would be chopping. So that doesn't mean the trend is always straight up but we do like to trend. We do see continuing improvement the sales metrics are very good the level of growth and pipeline is.

Outstanding and we're very happy with our performance. So so I think overall, we're expecting to see nice improvement in 2020 relative to.

2019 in total and certainly relative to where we ended the year.

Thanks, and then a follow up just on the pipeline you've referred to improvement in growth, but in absolute terms is is like that.

The pipeline back to where it was in mid 2017 or are you still below that and and as part of that historically within piece you guys talked about a three year build the sort of mature revenues.

17, and 18, you had a lot less product.

Development MPCI or in that new products as you were.

We're trying to fix some of the challenges is the fact that you had this product launches in 19 should we think it's a three year process to really get a lot of that stuff, particularly in USA, Yes, you get in the business back churning.

The way one might expect it to on a normalized space what you hit a lot of the challenges that we've had following a cyber event first was we had a pipeline in place the day before December event happened in that pipeline virtually to zero for.

The balance of 2017 through the bulk of 2018 as you know we were on security for used for much of 2018 and as we finished 18 and moved into 19 were able to start getting into a more commercial mode. When customers grew quite comfortable about our security protocols in our investments in that pipeline has been building rapidly through 2019.

And John I don't know, if it's I believe it's actually back or above where it was.

Pre 2017, and we've seen.

Growth in that we've also got a different leader in the business Who's got a real commercial cadence to element.

So is it really intensity around pulling that forward I wouldn't think about.

New product, taking a full three years.

To get to revenue.

I think we've talked about before that Theres, a maturity element in that but each of these new products habit to have a different cycle depended upon the customer you've got to customer that.

The operations team or the marketing team or the risk team really likes the product and then they want to test. It and then they go we go through a contracting process with their sourcing team. Many times and of course, then you're going to implementation mode, which sometimes includes the righty team an expert need some unpredictability in a pipeline that maybe to your point is.

Less mature meeting you don't have two year old deals in their three year old deals one year old six months.

Layering our pipeline today is more of a call it a 12 month.

Kind of build versus historical would have to three in.

Two and three year kind of deals in there that sometimes take that amount of time. So I think that layering create some of the choppiness, but the fact that the pipelines that building we're seeing.

Better when rates out of the pipeline in in the second half of the year than the first half, which tells us that we've got a better pipeline.

Net commercial activity gives us.

The enthusiasm about the continued progress of US is going forward as we get into first quarter in 2020.

Mark specifically referenced new deals one in his script and yet and that is that's up higher than we saw prior to 2017 right.

So we think the momentum is good.

Thank you.

Thanks.

Next question will come from Toni Kaplan with Morgan Stanley.

Thank you.

In an interview the other day, Mark you mentioned that you're about to Terry.

That transformation and you mentioned some color earlier in terms of of what you're guiding light you have left I guess my question is can you just give some color on how much risk is left in terms of execution.

Has has a lot of the difficult items came down already or is there still a lot.

And just any color on.

Sure I talked a bunch of my comments earlier, Tony about that and.

I think first off as you know these kind of tech transformations are not for the thing at heart, meaning that.

Use the term risk, but theres a lot to do in a lot to work on.

You know were two years into it call it that whatever that kind of timeframe in the milestones were achieving around this when I think about a tech transformation like this and I've done than before obviously not at this scale, but I've done them before.

First off you have to make sure to the technology work, meaning can we get our our databases from our legacy applications into the cloud I think when you know we're making this big move of going from silo databases to a single data fabric.

Thats in place we did that in 2019, we started moving our exchanges as you know we have I don't know what the number is but probably a couple hundred exchanges around the CLO close to 50 here in the us, but we have some big ones and we're moving big ones into that new Google cloud fabric and it's working we have customers accessing.

So thats kind of risk number one is will the technology work and I think we're over that hurdle. The second one is you got to migrate your customers and we've been very clear we view that.

The feedback from customers. These extremely positive if you think about it if your customer.

You want to do business with a company that has a very latest technology that is going to deliver always on capabilities, it's going to reveal deliver a latency in speed that is not possible in the industry today and with security that second to none given the focus on data security and so customers all want to do it.

The wildcard or the one complexity that talked about my comments earlier is getting into their schedule. In every one of our customers has an IP team they've got their own priorities for 2019, 20, and 21 and we just have to make sure we fit into that so thats that scheduling.

We're forecasting element that I talked about earlier, but as you also heard the comment we're really rolling meaning we're moving thousands of customers.

And so theres real progress there, but it just takes time and of course, we need to move all our customers off each of our different mainframe or server environments.

It different datacenters, we have in order to decommission those and get the savings that were looking for from the technology transformation. So to me, it's really around execution and you've heard our transparency around the technology element and we feel very good about that.

And we're making real progress around the customer migrations, but theres still work to be done there.

Great and then.

Legal settlement.

Behind you and pending a final payment if any new thoughts around capital allocation.

Right.

Seeing share repurchases. Thanks.

Yes.

Yes, I think you are leading the towards our financial framework, which as you know we pulled in 2017 and we've been clear with you that.

We want to put that back in place.

We're getting closer to that timeframe, we've been very consistent we talked about three areas that we wanted to make sure. We had clarity on before we put that framework back in place, which will include our capital allocation model, one was a real clarity and the legal settlements and with today's announcement of the.

Finalization of the US issues. We're we're at that stage with that first item number two was a tech transformation, we already talked about that really having some clarity about timetable our execution our confidence in that and I'd say every day and we get closer to completing that one and number three is USA us.

And you know were weight further along than we were a year ago and even in the fourth quarter with our confidence in USA Essen. So just a long winded answer that it's our expectation that the way we're pacing that we're looking to put that framework back in place for sure in 2020.

Thank you.

Your next question will come from Bill Warmington with Wells Fargo.

Ill.

Good morning, everyone.

So first off a tip of the half the Jeff Dodge try those just when I thought it was that they call me back in situations I think.

So my question is.

You gave some strong new staff.

On that on the new deals one and the fourth quarter I was just hoping to get some color. There you mentioned some on telco some wins and went back but.

For the new wins I am I need are going to new customers. How many are share gains how many are just.

Additional sales into the to the same customers.

Yes, thats, probably hard to split Theres I would just tell you that it's all of the above.

First off.

New wins as you know competitive takeaway as hard.

And it's one that we all work on but we've had a handful of those so that it's in that bucket.

New products are really a fuel for us whether it seems to touch or ignite rollout or some of the new products and scores that we talked about we got in the marketplace. Those are bread and butter really helping our customers grow their originations solving and fraud.

So thats a positive and then share gains we've had a handful of those too and I think you're talking mostly about USA us in your comments or that's where your question is directed but of course broadly that's the fuel for growth in Equifax is to.

Look for expanding either new customers new verticals.

Penetration and share gains with existing customers new products.

Really a big fuel for growth and.

I hope you get a sense of the focus we have around the new products. It's a real priority of mine. It's one that I think our tech transformation is going to leverage it's going to give us real fuel and 20 and 21 it beyond as we go forward to really be more aggressive.

Around funding new products investing in new products, and then bring into the marketplace.

And for US a follow up question just wanted to see if you get an update on the FICO partnership how that trend going and maybe some comments on the inflection score.

And together with Verisk.

Yes, first that the FICO partnership.

Announced that last March.

We're in the marketplace.

With our integrated.

Decisioning system inside of FICO with our.

Data.

Piped in there and we're in and with a handful of customer Pfcs, we've got a handful of customer wins.

Around the globe. So we're pleased with that performance with FICO and I think you know we're rolling out some other products, including an MLK why see here in the United States, it's going to be in market to into first quarter and we've got some other opportunities there. So theres a great collaboration between Equifax and FICO around how we can.

Leverage our respective capabilities in the marketplace and.

We'll look forward to that growth going forward on the score with Verisk as new which just in the marketplace. We've had good response from customers. So far I think it's another example.

Of what we what I'd like to do and we'd like to do is really collaborating with strong partners, Unlike FICO or verisk.

To really leverage our respective assets and in market capabilities to.

Bring new solutions to the marketplace and Thats just another example, seven just newly launched in the marketplace.

Got it thank you very much.

Thanks Bill.

Your next question will come from Jeff.

Eric.

Yes. Thank you it sounds like given the Capex guidance for 2020 that depreciations kind of continue to build and 21. So can you give us some sense of once you're through we effects 2020, and I know there some spillover into 21.

One of the Capex girder as a percentage of revenue on an ongoing basis, because I think the 25% development savings are both opex and capex. So that would be part one of the question. So we can get to EBITDA less capex.

And then part too on the 15% plus some.

Tax savings within Cogs do you get per substantial majority of that on a gross basis in 2022, and I understand there could be some reinvestment just trying to figure out the timing of when you'll get the step up on that.

Jeff you're leading us quite tactfully into a financial framework. So let me give you my best response to that I think a very good questions in the first on the on the Capex, we're not ready to get 21 guidance, but or financial framework for our capital allocation in the future, but we've been clear we view that we.

Expect.

Number one the incremental spend that we've had in 18 1920 to fund the the FX 2020 cloud transformation very clear that that's going to come down in that 21.

We'll continue at a more normal rate going forward meeting versus this incremental rate that we've had in 18 1920, and we've really showing you what the incremental dollars are so I think you can think about what it looks like on the other side and then as you pointed out we've also been clear that we expect to see development savings meaning.

With a new tech stack with a.

Single.

You know standardize set of products, we expect to see savings in the future. So that will be a part of that capex benefit.

In the future post 2020, and where we get to full run rate will be something will come to you when we put the financial framework in place.

On the operating cost savings. We've also been clear that we expect to see inside of our.

Cost structure for technology.

Real savings from going from legacy to cloud.

That is we have some of that feathering in our guidance, it's in our numbers for 2019.

Sorry for 2020.

That will continue to accelerate to through the year as we decommission legacy environments and that'll continue into 2021, and we're now ready to give a run rate on that but we tried to give you.

Both by sharing what we view is that duplicate costs.

As well as that.

Guidance around our expectation of 15% to 20%.

Operating cost savings from technology going forward.

So you can think about what equifax looks like in the future and as you know those two benefits along with.

We expect.

Some accretion to our topline from ability to rollout more new products from the new.

Technology investments are the three benefits that.

We're driving too is a part of this big Tech investment.

Okay and then.

Just how meaningful is this either your OS data hub concept like new data sources beer unemployment unencumbered or just.

Any additional color on matter, how many total suspects.

Yes, it's another it's another element, Jeff I think we've we've been very clear that.

We think more data results and better decisions for our customers and dws has a very unique position in a lot of verticals with their income unemployment data that they provide.

As you know, it's really the only place to go to get that data set in a lot of our customers have to go to other datasets to get other data in either us building that out us partnering on it or making acquisitions to add those datasets. We think is is another lever for growth.

For you Ws, it's part of that theme that I've used with the team internally and with you and others in the investment community that while workforce solutions is clearly our best business.

Forming way above the rest of Equifax, we think about it being in the second inning with the opportunities in front of it both in its core business, but also.

And what it can do around things like leveraging its market position and its unique data assets with other capabilities in order to.

Bring more value to our customers.

Thanks, Mark welcome Richard.

Thanks.

Our next question will come from Andrew Nicolas with William Blair.

Hi, good morning.

You touched briefly on your decision to increase share shift stake 200%.

In India.

We are sabic this fast growing market.

Talk little bit more about your business in India today, how you think about the opportunity set there and then any color on.

This competitive positioning.

That'd be helpful.

Yes, it's a business that as you know we've been in for a time, a long time, we'd like the market a lot, but we had the opportunity and strategically.

Owning 100% of the business.

Makes it easier to operate easier to control and then we kind of on our whole destiny. So we're very pleased to move forward on that.

I think it's a market we want to be in it's a market that we want to grow you may know that we're doing a build of workforce solutions in India. As an example, we started that a couple of years ago Netscout.

Some traction on it.

Just think it's a market that we want to play in and in one that's a big market.

Great and then.

Just back on organic revenue growth guidance, just ask it another way.

Can you just walk us through what you consider to be the primary factors that will drive you to top and bottom and does that guide.

I would have any changes to mortgage inquiry volumes. Thanks.

Yes ill give you a few thoughts I don't want to go too far I missed but.

Obviously, you ESI EPS is.

Still not back to where it was before the cyber event.

And.

We're convinced I've been very clear, it's not a matter of if it's only when but their recovery, which we see great momentum in.

If that accelerates that's a real positive for us.

Our term and long term so you know thats a very positive one.

International I.

I think as you know, we gave guidance and where we expect the year to be but we're still battling some economic headwinds.

Brexit Wallace resolved.

Theres still some uncertainty on implementation and what is going to due to the economy over there. So I think thats a little bit of a have a headwind.

Latin America seems to have settled down but that tends to be temporary there is always issues and challenges down there and of course, Australia.

We've seen some positive momentum but.

The recent wildfires their summer same could have an economic impact there. So I think that's another.

Factor in there and then is the real positives, obviously workforce solutions has some great momentum.

Is performing extremely well and that's kind of a bedrock inside of Equifax that we've got a lot of confidence in that.

They continue to perform and they performed last year above our expectations quite significantly and we expect them to continue to perform very very well in in 20 2020.

Just wanted to be clear Asia, we provided overall guidance, we provided mortgage book inquiry guidance right. We didn't give mortgage guide mortgage revenue guidance or non mortgage revenue guidance and again just to repeat where we started right. So we did say flat for the total mortgage inquiry market, but people should keep in mind that historically, we have performed our red.

One of his performed.

Better than.

Better than than the overall mortgage inquiry market in some cases substantially so thats a judgment you're going have to make yourself.

Understood. Thank you.

Next question will come from George Tong with Goldman Sachs.

Hi, Ryan on for George So obviously, your 2020 revenue guidance, which I know comes below your prior long term targets.

I know you havent reinstated financial targets, yet based on customer conversations.

What degree bleed long term organic growth depends at.

Walter.

Yes, again, you've got a similar question earlier, Brian that on long term guidance. We clearly gave you our guidance for 2020, we're not ready to put a long term financial framework back in place. Although we're working towards that in 2020, we talked about the things we want to see and we're we're getting really close to that so I think I'll just.

The leave it at that.

Okay and then.

For your revenue guidance, what level of price increases are baked into that.

Yes, so any.

We didnt give specific information on price increases right. So general generally speaking there some level of price increase in the market Oliver Port for credit reports in general if you think about those they tendril tend to go down in price overtime. So so so we havent given we havent given specific price increase guidance as part of this process.

Okay, great. Thanks.

And operator, we have time for one more.

Right and our final question will come from Shlomo Rosenbaum with Stifel.

Hey, guys. Thank you very much for squeezing me in under the wire over here.

Okay.

[laughter] charts, we the company used to just give you straight out.

Organic growth, excluding mortgage and that's just wondering if theres a lot of positivity in terms of the sales momentum that's not a number that you're providing now and I was wondering if you could give us a little bit more just clarity just as the rubber meets the road is the organic growth of the business. Excluding the mortgage just so that we can track was it a little bit up was a little bit down.

Yes.

Where are we doing in terms of actual sales and things coming into revenue.

So we actually are giving that number you gave that number I think each quarter last year right in terms of organic non mortgage growth.

He indicated this quarter it was up slightly.

Last quarter I think it was it was just under 3% and I think we gave it each each of the first two quarters as well. So we are trying to give that that indication and we're also trying to separately give a view of just what the market did so so you can have some perspective.

So I think the depth of information is actually quite good.

It's in terms of how you Esas was performing to let you kind of disaggregate the performance by piece.

So this is this im talking about for the whole companies that net numbers that numbers, you're referring to over the whole company.

That's for Us is.

Okay, and just if I took the whole company together just in mortgage.

Look at it is like.

8.5% growth minus 4% that would be implied by you.

Good inquiries, so somewhat we do get we do give mortgage as what percentage of the total company mortgage revenue is right. So I think from that you can get a good view as what the what mortgage revenue is for the entire company and how it's changing and that's information we also provide.

So is it going up or down I mean, just it's just.

A question is if I look at it is the mortgage the non mortgage revenue organically up or down and just just look I know, it's choppy Im just trying to see if I can do the calculation to ways to do it.

So that isn't something specific week, specifically, we disclose right, so, but I kind of walk through what we do disclose and I think the information is available for you to do whatever analytics you'd like.

Okay, and then what drove the strong EBITDA margins and international.

Yes, I think mark walk through that and his discussion right. So we got back to growth. They did some very significant cost reduction actions as we take a look at fourth quarter of 18 in 2019 through that entire period. So their cost structure got nicely better and as they returned to growth. They got a lot of leverage from that in the fourth quarter and then.

Also had some benefit from from income from some non from some.

Minority investments so so those three things drove.

Drug drove their higher EBITDA margin.

So is that where the cost takeouts away that we can look at them kind of establishing a base here as that ramps, we should be ramping from these this kind of level.

Yes.

The significant majority of the cost actions I think that they plan to take had been executed.

So so yes. This is kind of the base of costs that were starting from the base that we ended with import you 19.

Okay, great. Thank you very much.

Okay like to thank everybody for participating and them and we'll talk to you Ducky again soon.

Once again that does conclude our call for today. Thank you for your participation you may now disconnect.

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