Q2 2020 Equifax Inc Earnings Call

Good day and welcome to the Equifax second quarter 2020, <unk> earnings Conference call. Today's conference is being recorded at this time I would like to turn the conference over to Jeff Dodge. Please go ahead.

Thanks, and good morning, everyone welcome to todays conference call I'm, just talking with me today or more people are Chief Executive Officer, John Campbell, Chief Financial Officer in trouble Guernsey Investor Relations.

Today's call is being recorded nonpartisan recording will be available later today in the Investor Relations section under your belt in Kazakhstan.

Upside at Www Dot Equifax Dot com.

During the call today, we will be making reference to certain materials that can also be dropping investor relations section of the website under earnings calls presentations and Webcasts.

This was hurdles are labeled Q3 2020 mornings release presentation.

This call.

I'll be making sure.

These statements to help you understand that this extra that's business environment.

Well the number of risks uncertainties and other factors that could cause actual results to differ materially from our expectation certain risk factors inherently lumpy business are set forth in the files with you after she including our 2000 like chain form 10-K and stuff.

Also will be for into certain non-GAAP financial measures, including adjusted Vps attributable to Evertecs any just maybe give you did.

Each will be adjusted for certain items affecting comparability of underlying operational performance.

These non-GAAP measures are detailed in reconciliation tables, which are included in the earnings release and also posted on our website I'd like to turn it over to Mark.

Thanks, Jeff Good morning, everyone, thanks for joining or second quarter industry.

She was around the world continued to face challenges bought and every cobot 19 pandemic I hope you're independent you consider to be safe in managing this unusual environment.

We'd like to once again, thank the dedicated itself with health care professionals first responders volunteers and others around the World War on the front one why do you just pandemic.

Sympathize with the need to people the U.S. around the world has been affected.

The helping back to the Cobiz endemic in devastating but what is equally challenging to our customers would be unprecedented impact from the covisint dynamic.

Anything in our lifetime, Luckily unemployment furloughs and salary reductions, beating any analytics in this environment is more valuable than ever.

During the second quarter, we operated very effectively at work from home mode. After cobot restrictions were put in place in late March.

Afterward sheltered placed orders started to get the early June Yep Yep officers in markets like Atlanta and began to return to office up 50% density.

Routine mutational basis.

Currently we have 30 40 51 offices open they were operating in that move we expect to stay in the 50% density.

Rotation of old until a vaccine is available.

We are operating at very high level and have realize meaningful productivity engagement with customers and across our equifax team through video collaboration including meeting all of our cloud technology, Indeed, a transformation milestones.

Turning now to slide for our financial results for the second quarter was very strong second consecutive quarter of double digit revenue growth and margin expansion driven by workforce solution. You watch mortgage market you know positive performance in the marketplace.

Ill follow up momentum in the second half of 29 gene into strong fourth quarter and were well above our expectations.

Once in a challenging cobot economic environment reflects the strength in resiliency of our business model, a differentiated data assets, including between kind of employment.

That's helpful utility in commercial data and the value of data analytics and be done precedent in time.

Revenue was $983 million was up 12% on a reported basis and 13% on a local organic local currency basis, which was well above our expectation is about the framework of 3.5% to 5% that I'm sure you would or would you.

If you're just for the 48 million of incremental workforce solutions unemployment claims rather than a quarter or revenue increased a strong 8% local currency.

The core of older Dingy no revenue on all fronts continued to improve the trends we shared on the Junaid call a shelter in place orders lifted economic activity improved.

These strong results position us well moving to third quarter in the second half.

Well look in the quarter was powered by your you wouldn't be businesses U.S. and workforce solution.

Oh performed extremely well combined U.S. revenue up 28% in a combined adjusted EBITDA margins of over 50%.

Workforce solutions revenue was exceptionally strong it's about 53% and EBITDA margins were 56%, which is their strongest quarterly results since the acquisition almost 13 years ago and following a strong first quarter in second half a 29.

Yes, I guess revenue was up a strong 10%, which we force there were turned what competitive market position.

International revenue was down 15% local currency the continued to show broad based sequential improvement throughout the quarter.

Consumer revenue was down just under 5% principally in our you got Parker business.

Revenue growth drove adjusted EBITDA of 353 million, 19%, we've been over 200 basis points Spansion, our adjusted EBITDA margins of 35.9% as we balanced cost controls, while executing our cloud data and technology transformation and making targeted investments in new products and data analytics.

Yes, yes. The dollar 60 this year was up 14%, despite incurring increased data analytics and incremental cloud cost of 12 cents per share.

Interest expense of six cents centsper share for April bond offering.

EBITDA, yes were well above our expectations that yes framework of $1.22 to $1.32 and shared with you in early June June.

Is there very strong U.S. it'd be revenue growth was driven principally by three factors first U.S. mortgage revenue is up over 70% versus 29 team was extremely strong in the current record low interest rate environment as equifax outperformed the overall mortgage market growth.

On the order 30 percentage points, principally workforce solutions.

As you know we over indexing the board in mortgage versus our competitors do the workforce solutions in our U.S. tried bureau mortgage business.

Mortgage market inquiries, our proxy for the overall mortgage market growth rose, 41% in second quarter works is our 70 cents, 70% of combined growth in workforce solutions and U.S. lights mortgage.

Although you asked why its mortgage revenue growth of 44% 3300 basis points above the mortgage market. The driver of the substantial outperformance versus the overall market was workforce solutions, where mortgage revenue more than doubled in the quarter driven by the value of our unique twin incoming appointed data and new products and customers.

Improve customer penetration in the expansion of our twin database.

We expect continued strong mortgage growth in the third quarter.

Second our unemployment insurance claims business also part of workforce solution. So we shouldn't delivered more than 150% broke in the quarter to $76 million incremental revenue growth of $43 million in the quarter is driven by a significant increase in unemployment claims that we all know no doubt during second quarter.

Which added five percentage points overall equifax revenue growth.

Did you know workforce solutions.

Process is close to one in five unemployment claims and U.S., we expect going to point when it claims to continue above 2019 levels in third quarter, but at a rate below the second quarter.

Third our U.S. BBB non mortgage revenue, excluding unemployment insurance claims based revenues showed substantial improvement as we move through the second quarter was down only about 7%.

Our U.S.P.B. non mortgage revenue, excluding U.S. you see claims.

Impact showed sequential improvements during the quarter from down 10% in April two down just 2% in June and shelter in place restrictions were lifted and economic activity, which reflects our competitive market position and provide good momentum going into third quarter.

<unk> I'll provide more detail these doctors as weve discussed each of our business units on slide five.

Starting with U.S. is their revenue was up 366 million was up 10% in the second quarter on a reported organic basis in their 12% first half revenue growth was their strongest since 2013.

Mortgage revenue grew 44% 300 basis points faster than the overall marketing.

Were up 41% driven by new products customers in pricing.

Total mortgage revenue growth from both purchasing requite transaction strengthened significantly through the quarter.

During June and over 60% above 2019.

Total non backed mortgage revenue online and offline combined decreased 7% much better than expected when we entered the quarter it down 13% in April.

Total non mortgage revenue was down only one person in June as economic activity improved sequentially during the quarter, which was above our expectations in a reflection of the U.S. aureus competitive position in the marketplace.

For the quarter online revenue was up 7% online more non mortgage revenue was down 10 in the quarter strengthened significantly during the second quarter with June just.

Now over 2%, which was down 17% in April.

In June we had positive growth in auto insurance.

Lot of direct to consumer.

Commercial decline in high single digit at U.S. economic activity improved.

Telco and banking were both down mid single digits in June and showed improvement during the quarter.

Banking or me down as customer marketing continues to be at a reduced level. So the direction of the economy in the consumer becomes clear.

Mortgage solutions are mortgaging tried your business was up 44% in the quarter outgrowing the market by 300 basis points from new products new customers in pricing.

Mr Marketing services revenue was up 1% compared to last year in better than our expectations risk Decisioning, which includes portfolio you revenue when it makes up over 30% of total financial marketing services was up over 15% in second quarter as companies expanded their portfolio review activities.

Marketing revenue, which also makes up about half of Fms in the quarter was down just under 20%.

Remainder of Fms, which include or are you in collections products was up over 25% in the quarter.

These general trends are consistent with our expectation. However portfolio review revenue was stronger than expected. We expect portfolio review activity to remain strong as customers manage challenging customer collections and take proactive portfolio management actions.

We're also starting to see increased activity from customers for a marketing services at quarter end, although at much lower levels in 2019.

Yes, I guess is winning competitively and continues to accelerate commercial activity and their do deal pipeline remains strong.

So I asked this new deal pipeline opportunity as it. He ended June was at their largest level since 2017.

Almost 10% over last year.

We positive U.S. I guess is when rates in the quarter were up over 300 basis points from last year.

Yes, I guess is new deal pipeline growth and when rates were both both above our expectations and reflects the things commercial focus in leadership at U.S. I ask returns to market competitiveness.

You asked I guess is adjusted EBITDA margins of 44.1% were down 150 basis points from last year.

60 down 60 basis points sequentially.

The decline is principally driven by the higher mix of lower margin mortgage revenue in resulting higher royalty costs and data purchases and we are non mortgage online revenue.

Yes, I am also continued to invest in commercial resources in Npis and sources during the quarter for future growth.

Following U.S. ice is commercial momentum in the second half of 2019 and strong above.

Expectation results in first and second quarter, we're confident that Didnt think leadership is U.S. <unk> back into a competitive position in the U.S. market.

Shifting to workforce solutions, they had another exceptional quarter with revenue of 353 million up 53%.

This is the strongest revenue growth since we acquired talks in 2007.

Yeah, that's real results were up a strong 33%, excluding the 48 million of incremental you see claims revenue in the quarter.

Trailing 12 month revenue was 1.15 billion up 32% with 49.6% EBITDA margins up 350 basis points.

Rudy Ploder any vws team gave you a deep dive on argue WPS business in broke out like in early June.

They continue to leverage core growth products penetration pricing move or verticals and record additions to fuel the growth.

Yeah. The rest is on track to be well over a billion dollars at revenue in 2020 for the first time with 50, 50% plus margins.

Workforce solutions is clearly our strongest business, particularly in this unprecedented consumer environment, we're twin incoming employment data you didn't mentally valuable.

Your application services revenue was 252 billion was up 46% versus 29 team.

Your application services mortgage revenue more than doubled in the quarter growing more than 68 percentage points faster than the 41% growth we saw in the mortgage market credit inquiries in the quarter.

This dramatic outperformance relative to the overall mortgage market is driven by the strategic and operational focus on product penetration usage and record additions that we discussed in our view an investor call.

As a reminder of the presentations margin calls available in the Equifax website.

Several growth Robert levers are driving this outperformance of verification services Mega mortgage revenue relative to the overall mortgage market, including growth in twin contributor and records.

During the quarter the number of company contributing to the twin database increase substantially to over 900000 from over 700000 in March and 37000, a year ago.

As we expand into more mid in smaller markets companies.

You did this growth in new contributors workforce solutions was able to offset the negative impact on active twin records of increasing unemployment.

Total active records were 105 million it ended the quarter with over 80 million unique individuals, which is just over 50% of the U.S. nonfarm payroll.

Total active records were up over 15% from a year ago, but flat with March due to the impacts on the database from unemployment.

Between database now includes about 435 million active easy inactive records and as you know we are able to monetize both active and inactive twin records.

In addition to growth and employer contributors and overall twin records and a focus on adding new customers. Several new critical strategies have been important components of driving the verification service mortgage revenue growth in excess of the overall mortgage mortgage market.

First direct to consumer integrations with mortgage underwriters continues to grow with the work number integrated directly to our customers underwriting processes. These integration increased the usage between records in the frequency of twin polls mortgage origination underwriting and closing process, which drives twin verification revenue.

Second new products focused on increasing the number of times between income or employment verification did you during the mortgage application approval process.

Share some of the new solutions, we are bringing in the marketplace that dry twin usage in provide value our customers with you in the June call and many of these products at pricing that is two to four times are between pull a court costs.

Number three expanding real time access to additional income sources to include increasing number of people that work is individual contractors or 10, 99 self employed consumers to deepening and broadening between database beyond nonfarm payroll.

Shifting to verification services Nonmortgage revenue growth.

It was down less than 5% in second quarter and deliver 2% growth in June.

The decline in the quarter was driven by substantial weakness and talent solutions are hiring related services business, where companies across the U.S. cutback on hiring during the quarter any get management services were temporary reductions in collections activity were implemented by many companies.

Partially well partially offsetting this were new product Rollouts and talent solutions strengthen government for verticals related to government health care and support services as well as the growth in records between database.

We also saw growth in the second quarter in auto through increased increased twin penetration with auto loan originators and increased use of twin with higher credit score applicants.

We also saw growth in our tween I'd product.

And in portfolio.

New product solutions, principally for card and personal loans, which we expect to continue to grow in the second second half given the unique value incoming employment data in the current environment.

Employer services revenue of 101 billion increased a strong 75% in the quarter driven by our unemployment claims business, which grew over 150% versus last year to 76 million.

Adjusting for the 48 million of incremental you see claims revenue quarter employer service was down about 8% as companies cut back on hiring.

As a reminder are you see businesses businesses manage the process of providing required unemployment data to state and local agency for employers.

Our typical contract is an annual subscription with volume limits and incremental fees that you see claims are above those limits.

We operate in all 50 States, Washington, D.C., Puerto Rico, and U.S. would you islands.

In the second quarter workforce solution processed about 7.5 million claims which is roughly one in five initial U.S. claims during the second quarter.

Clean spiked in April and May to about 5.8 million from month monthly run rate of 300000 per month in the first quarter.

In June we saw steady decline in declines from the elevated April and May rates to 1.7 million claims process for the month, which was still up dramatically over pre colder in 29 t. levels.

The remainder employed services saw revenue declined 17% in second quarter because of lower employee hiring activity.

In the quarter.

I nine in Onboarding, and our workforce analytics business make up the bulk of the remainder of employer services, we saw a 9% growth in our I nine and on Onboarding business, which partially offset the declines in workforce and workforce analytics and our tech services business.

The strong cws verify revenue growth resulted in adjusted EBITDA margins of 56.3% in the quarter, which was a record for workforce solutions in an expansion of 710 basis points versus last year.

The strong margin growth was partially offset by incremental costs incurred in the quarter for new Twin records.

Workforce solutions is clearly our most differentiated business with your with their unique twin incoming employment records.

The twin data assets are increasingly valuable in his koby consumer environment, where verification of income unemployment is critical.

As we discussed in June we think about us being in the second or third inning with multiple growth levers for future growth in 2021 and beyond.

International revenue of 181 million was down 15% local currency and down 21% on a reported basis in line with our expectations.

Cobot shelter in place orders have been deeper and longer in our international markets with some markets, including Australia. The UK in Canada still not open.

Yes, it impacted their revenue, but we've seen sequential revenue improvements from down 20% in April improving to down 7% in June.

Asia Pacific, which is Australia, New Zealand in India business delivered second quarter revenue of 65 million down 9% in local and 10% organic local currency versus last year.

The revenue growth was much stronger than the revenue trended down 20% we experienced in April as revenue trends continue to improve the June down 4% adjusted for a large collection deal that closed late in the second quarter.

Yes drill your revenue growth in fraud, Nike and collections, partially offset declines in our consumer and marketing services businesses into a lesser degree in our commercial business.

European revenues of 48 million were down 25% local currency in the quarter.

Our European credit business was down about 20% so.

Screen performed slightly better than the UK.

In the UK credit business revenue improved meaningfully during the quarter from down 27% in April but they were still down 15% in June as the UK stealing a lock down.

Spain credit revenue also improved during the quarter from down 21% in April but was still down 9% in June as shelter in place orders and just began to be lifted a few weeks ago.

Our European debt management business declined 34% in local currency is expected principally driven by government enacted policies the temporary temporarily halted consumer debt collections.

We expect debt collection activity resumes in the second half.

Our Latin American revenues of 34 million decreased 14% in local currency in the quarter, our two largest markets in Latin America, Chile, and Argentina make up over 50% of the revenue.

Importantly, these two markets performed relatively well in the quarter would surely down six in Argentina down 10 in local currency compared to last year.

April April revenue decline for Chile, Argentina were elevated levels, Stephen Colbert locked down for the June revenue declines in the low to mid single digits.

These markets continued to benefit from the expansion of ignite interconnect SaaS customer rollouts and strong new product introductions in those past three years.

Most of our other Latin American markets were down over 20% consistently through the quarter from the economic impact of the strong coded lockdown in those markets.

Canada revenue was 33 million declined 13% in local currency in the second quarter.

Revenue improvement declined about 25% in April to down only about 1% in June as economic activity improved but sheltered placed orders still have not been fully lifted in many parts of Canada.

Brought Nike revenue grew into second quarter from higher government volumes associated with associated with increased applications for government social services and we saw growth in June revenue in our mortgage auto in small business verticals in Canada.

International adjusted EBITDA margins of 21.7% were down 690 basis points from last year, principally reflecting the lower revenue across all regions, partially offset by cost savings achieved during the quarter.

Global consumer solutions revenue was down 5% on a reported in local currency basis in the quarter.

Our global consumer direct business, which is just under half of our Gtx business was down about 3%.

Our U.S. consumer direct business had revenue decline at about 5% versus 2019, but increased sequentially from the first quarter by about 200 basis points.

Canada in the UK combined consumer direct revenue was flat about flat in the quarter Importantly, we are seeing substantial subscriber growth in the western Canada, our two largest markets.

Based on a continuation of these trends, we expect our consumer direct business to show positive revenue growth in the second half, which would be our first growth since 2017 and in this market segment.

Gcs also continues to grow its Mike Equifax never base with over 6 million consumer members up from about 2 million a year ago, which provide the foundation for new product offerings.

Our remaining Jeep, yet business, principally our partner business as well as our benefits channel in advance and Vince the business decreased by 5% in the quarter.

We delivered high single digit growth in our benefits channel and events based business, but this growth was more than offset by declines in our U.S. lead Gen partner business as banks pulled back on card and people on marketing and originations.

As we look to the second half of 2020 declines and are you actually Gen partner revenue are likely to accelerate as consumer marketing remains at reduced levels more than offsetting expected growth in global consumer direct our benefit our benefits channel in events based business.

This will likely result in second half revenue declines in gcs of greater than the 5% decline was delivered in the second quarter.

Gcs adjusted EBITDA margins of 20.8% decreased 210 basis points compared to the prior year due to the effective revenue declines partially offset by operating cost efficiencies.

What has been the most challenging economic and health environment, we faced in our luck lifetime Equifax delivered a very strong performance with revenue up 12% and adjusted EBITDA EPS at 14% in the first half.

A resilient business model differentiated data assets cloud data and technology transformation, new products and focus on commercial execution has driven our broad outperformance.

Are you SDDP businesses U.S. I asked me Ws delivered mortgage revenue growth that outperformed the overall overall mortgage market substantial growth in our you see revenue in improving revenue trends across our non mortgage businesses. The rested international drove our results.

Shifting now to slide six.

This page highlights the uniqueness in challenges of the current covert recession. It is clear that this is the most challenging consumer environment in our lifetime.

Compared to your weight of nine global financial crisis unemployment rates are up almost 500 basis points with over 20 million Americans out at work and for the 10% of Americans with negative wage impact the wages are down 5% to 6% with many households struggling to manage 25% or more salary reductions or even larger if they're going to for low.

The unprecedented consumer impact significantly cloud the ability for our customers to manage the business, including marketing underwriting portfolio management.

We've seen a significant performance deterioration of prime in your Prime credit for Florida portfolio is driven by these job losses of wage reductions many predict a continuation job losses were wage reductions as government support program to spot expire in the coming weeks.

In April this year, approximately 50% of those who suffered a decrease in pay in excess of 25% where individuals with a credit score 680 or higher which further complicate the environment for our customers.

Forbearances are also driving material loss or predictiveness, a traditional credit scores in the subprime market.

In further the care Zak with a clear indicator Zach loan accommodation keep delinquency rate artificially lower make and not representative of the actual portfolio health accommodations have grown from 2.8% pre koby March to 9% of balances today.

You need challenging times differentiated data is more valuable than ever we're seeing a meaningful increasing customer discussions and as you unique environment about data solutions broadly, but with a particular focus on our unique twin incoming employment data, which is sourced every pay period.

Turning now to slide seven we updated the comparison of our performance in the current Cobiz endemic driven recession to our performance in the oil nine global financial crisis.

Based on the growth of workforce solutions, and our us mortgage business, we are seeing significantly stronger performance in the current cobot recession with our 13% revenue growth in the second quarter than the early stages the way to nine global financial crisis work Equifax revenue was down 710% quarterly during that recession.

The key drivers of our strong outperformance relative to eight or nine include our resilient business model in stronger mix of businesses with 50%, 55% of equifax delivering growth or counter cyclical performance in 2020 versus only 40% weight or not.

Yes, second U.S.U.S. mortgage revenue is it very high levels would require purchase transactions continuing historic levels driven by record low interest rates.

We saw mortgage application purchase volume rebound as we exited the second quarter as consumers take advantage of record low interest rates.

The FDA application purchase index was up 15% versus 29 team in the last week of June.

This strength continued into July based on current rates over 15 million existing mortgages would benefit from refinancing refinancing, which is up about 70% higher than you'd be able to read by population in the late at night.

John will give you some further perspective than the second half use mortgage.

Market outlook shortly.

Mortgage is clearly much stronger today with revenue in the second quarter for Equifax up over 70%, which is significantly higher than the 27% peak revenue growth, we delivered during or we don't really.

Third workforce solutions growth has been accelerated from record growth penetration new products into verticals. There are 53% growth in second quarter significantly outperformed their peak quarterly growth performance at about 20% enjoyed on global financial crisis.

In addition to growth in verification to 40 per 6%. The unemployment claims processing business is seeing record volumes, resulting in the 48 million of incremental you see revenue in the second quarter I talked about earlier.

Then last our commercial momentum from the second half of 2019 and strong first quarter performance as we entered the covert environment in late March It clearly also driving our results.

The Equifax business model in recession, resiliency is clearly much stronger than last recession in a way to <unk>.

I'll turn the discussion over to John to discuss recent trends in revenue on our underlying markets as well as review some of other financial items, but looking at trends at a high level. You asked is in workforce solutions mortgage revenue continues to be very strong and relatively stable at the elevated levels. We saw in June.

While we expect mortgage revenue growth rates on a year over year basis to remain trip to remain strong in the second quarter, we do expect growth rates in the third quarter in second quarter declines were second quarter as we saw growth strong growth in mortgage markets in the second half of 2019.

The U.S. I ask the improvement in non mortgage revenue with flattened over the past few weeks after consistent sequential improvement throughout the second quarter in some markets in verticals. We started started to see some slight declines in the last few weeks as co would teach counts increase in some shelter in place orders were term.

In workforce solutions verification services trend in non mortgage revenue remained slightly positive product for trends driven by the strategic dynamics of the business new products Rollouts as we discussed earlier.

Workforce solutions unemployment insurance claims revenue remained elevated levels that are at a run rate of over 40 million for the quarter, which is what while positive were 29 team will be substantially lower than the unemployment claims we expect to be substantially lower than the unemployment claims volume and saw the second quarter.

And given the continued uncertainty regarding the direction in case of the U.S. and global economy, we do not expect to provide guidance throughout the remainder of 2020 as we did last quarter in in June will provide details on the trends we are seeing any indicative you will hear implications.

After John's discussion I'll come back and review our progress on the technology transformation, new products and are focused on the second half in 2021.

Thanks, Mark I'll Grantley, referring to the results from continuing operations represented on a GAAP basis and on a non-GAAP basis.

In the second quarter General corporate expenses was $122 million, excluding nonrecurring costs adjusted adjusted General corporate expense for the quarter was $75 million up $8 million from Twoq to 19.

Corporate function expenses, such as finance HR legal are down year to year, reflecting the cost containment activities Mark discussed in April increased in total general corporate expenses, primarily due to higher incentive compensation costs in 2020 due to the very strong financial performance as well as increased depreciation and amortization.

We continue to exercise disciplined cost management across the business. We are and will continue to invest in our technology transformation data and analytics, we products and security and will accelerate investment in these areas. If we believe we can deliver accelerated benefits outside of these areas head count additions are being held at levels below attrition and discretionary spending.

Has been reduced across the company business travel remains at virtually zero. We're in the process of reviewing our real estate footprint as well as other areas that may allow further structural cost improvements, we expect to begin implementing cost improvement items over the next several quarters, but do not expect meaningful cost improvements in 2020.

For two new 20, the effective tax rate used in calculating adjusted EPS was 24.4% at about 1% higher than we expected for the quarter. We expect the three key 20 tax rate to be about 21% full year effective tax rate used in calculating adjusted EPS is expected to be about 24%.

In two through 20 and year to date operating cash flow of 251 million and $282 million, respectively for both up $34 million from 2019 increases in operating cash flow into 20 in first half 20 were partially offset by 48 million and $95 million of legal settlement payments into 20 and year to date.

Respectively.

The timing of payments of the remaining 347 million to the us consumer restitution from principally dependent on the resolution of the appeals filed related to this case at this time, we do not expect to fund the remainder of the settlement until late Twentytwenty or early 2021.

Our liquidity and balance sheet remains strong as indicated on slide eight we had almost $2.7 billion and available liquidity at June thirtyth, including 1.4 billion in cash and available borrowing capacity on our bank credit any Arkansas billings of $1.3 billion.

As Mark mentioned, our two results were substantially stronger than the implication of the trends through may that we discussed in our dream Investor call. The improved results were about 70% in are you asked me to be business with the bulk of the remainder in international broad based across our geographies.

And you asked me to be online was about two thirds of the improvement split evenly between mortgage and non mortgage remainder with strength in U.S., I guess financial marketing services and workforce solutions unemployment insurance claims business.

The strength and adjusted EPS reflects the margin impact from the stronger revenue.

Slide nine through 12 through details of revenue trends on a local currency basis that we saw in once you in twoq as well as an April may and June.

There were two more business days in June this year versus 2019, which benefited growth rate on the order of 3%.

We're also providing a view of the trends so far during the month of July and their implications on three to 20, if they were to continue throughout the quarter for line items for which daily trends are not available or not relevant we did not provide act monthly actuals, but did provide one Q2 Q data as well as an estimate for Threeq 20, the monthly actual provided.

Should be viewed as indexes directional.

Starting with slide nine west need to be revenue trended very positively through June as online strengthened across U.S. I ask you ws driven by strength in mortgage online and improving trends in non mortgage online revenue.

Coupled with a very strong performance in workforce solutions unemployment insurance claims business and the growth in U.S., I guess financial marketing services, a much better performance than we had expected resulted in a very strong U.S. b to b revenue growth into Q.

Trends and us online over the past month.

However have approximately flattened.

Online mortgage daily revenue levels continue to be strong, but are somewhat variable by weak and had been about on average consistent over the past month.

The July trends for mortgage reflect a continuation of the current daily revenue trend adjusted for seasonality with the lower growth rate due to significant increase in mortgage revenue, we saw last year in Threeq and Fourq.

Unwind mortgage revenue.

I'm, sorry, I'm line non mortgage revenue growth was flatten over the past month.

Yes, I asked Nonmortgage online revenue growth levels.

As shown slight declines while cws non mortgage revenue has remained relatively flat.

July trends provided for online non mortgage revenue reflect these trends.

Workforce solutions employer services, driven by unemployment insurance claims activity is expected to show growth into two again, but at levels much lower than in two to US I guess financial marketing services in two key vendors, we benefited from new business, both in portfolio review and marketing services.

In the uncertainty in the economy. The mid July estimate provided for U.S. I guess marketing services is not as does not assume that this recurs again.

In total for us need to be if the trends and assumptions hold for Threeq you, we could see another very strong quarter.

Turning to slide 10 is as Mark discussed earlier international saw improvements in all regions as we move through to Q with June revenue down only 7% versus 2019.

This consistent improvement across all regions resulted in a much smaller revenue decline in the quarter than anticipated. The July revenue growth trends shared reflect in general a continuation of the daily revenue trends seen over the past month through the rest of the third quarter.

Gcs July July trends shared with the reflect the trends Mark discussed earlier in consumer direct growing total subscribers are expected to lead to slight revenue growth in Threeq you partner revenue, which includes our benefits tree Hamilton event based business is expected to decline about 10% in Threeq, you with a significantly larger declines likely.

In Fourq you as Mark mentioned Gcs total revenue in second half 20 is expected to decline by more than 5%. The decline in 14 much larger than Threeq, you due to expected significant declines and lead Gen related partner business.

Slide 11 provides a comparison of economic factors impacting the mortgage market in the current environment. During Oh April nine financial crisis, and the 13 14 mortgage downturn.

Sharing this information to provide you with additional information for your use because you estimate of go back second half 20 results.

Based on data provided by Black Knight at current 30 year mortgage rates of about 3% there over 18 million mortgages likely eligible for refinance. This is the highest level, we've seen over the past year and much higher than 2008 through 10 or 2013 and 14.

The refi potential is highly dependent on a number of factors, including interest rates. For example, again based on Black Knight data an increase in the 30 year fixed mortgage rate to 3.5% reduce rifai potential to 10 million and an increased to 4% in the interest rate.

Reduce threefive potential to under 5 million as you saw last week mortgage rates at an all time low of just under 3%.

Current with unemployment at 11% is higher than we saw in either 2008 or 10 or 2013 14 14.

Forecast for unemployment in second half 20 that is provided in this chart is by Moody's analytics.

In addition, we'll continue to watch key metrics, including mortgage delinquency rates credit scores leverage levels. Both in terms of debt to income and loan to value closely.

As it is still early in the current prices and the impact on consumer employment income in the direction of ongoing government support are still evolving.

Due to the continuing uncertainties in forecasting the direction depth and duration of the recession and were related to the actions to come back over 19, we're not going to provide third quarter guidance and do not expect to provide guidance for the remainder of 2020.

Ever for perspective on total Equifax leasing 20 performance, we will again provide an illustrative third quarter Fame framework to help you think about our performance. Please turn to slide 12.

To the extent total equifax revenue continued at the pace I described earlier received 20 revenue would be up 4% to 6% year to year, resulting in three to 20 revenue of $930 million to $950 million adjusted EPS in Threeq.

20 at these revenue levels could begin the range of $1.30 to $1.40 per share down 6% to 12% from Threeq 19.

Slide 19 also provides a walk through explaining the translation versus Threeq 19 of the revenue growth to the decline in pre tax income and therefore adjusted EPS importantly at these adjusted EPS levels, Equifax will deliver over $325 million and adjusted EBITDA.

This is not guidance as they are still much uncertainty as to what impact the pandemic will have on the economy, our customers business activity, but the path to open the economy and therefore, our revenue and earnings. This range provided reflects current variability in trends not a view of potential quarter outcomes.

As a reminder, in our April earnings call, we provided detail on the cost and capital spending savings, we expect to generate the tech transformations completed as shown on slide 13 total cost savings. Excluding DNA are expected to be on the order of $125 million from the reduction of cost of goods sold and lower development expense. There will also be some.

Tangible capital spending savings as capital spending as a percentage of revenue declines to on the order of 7% a level that is at or slightly below that of our peers.

We expect to begin seeing that Cogs savings, excluding DNA in late 2021 and are targeting approaching the run rate of Cogs development expense and capital savings. During 2022, we will certainly reinvesting some of the savings. So it will not fall all fall to margin.

As Mark referenced earlier, we continue to look to accelerate the completion of our tech transformation, including increasing investment levels in 2020.

Presently expect twentytwenty onetime costs related to the Equifax Twentytwenty technology and data security transformation exclusive of legal accruals would be about $340 million.

Expects capital spending to be about $390 million for the full year.

As a reminder, and 2021, we will no longer be adjusting our financial results for one time costs related to the technology transformation.

These onetime technology transformation costs are expected to decline substantially from a level seen in 2020 and will likely be largest in 121 decreasing throughout the remainder of 2021. These onetime technology transformation costs will impact development expense DNA and Cogs.

We'll continue to disclose these onetime tech transformation costs to allow you to have comparability with our adjusted financial results.

From 2017 to 20 and with that I'll turn it back over to Mark. Thanks, John I'll wrap up if I give you an updated our cloud transformation cloud technology and data transformation ourselves in our accelerate focus on new products.

Moving to our X 2020 technology transformation during 2020, what was the bulk of our efforts in the cloud technology data transformation at our North American operations, which represent over 80% of our revenue and even higher percentage or income.

Investment in Europe, Latin America, and Asia Pacific and deploying cloud native data fabric and our night interconnect.

Analytical Decisioning framework are also progressing well.

Initial migration to GDP of our our major North American data exchange.

Canadian consumer Acro list exchanges, the work number and NTT, we it's principally complete.

We expect to have complete full migration, including all data ingestion processes for the exchanges in place by year end.

It is at this point that these migrated exchange has become our system of record with our customers.

These are critical deliverables for 2020, and completing them as planned remains a strategic focus and priority.

Exchanges generate about 70% of North American online revenue.

We're also making very good progress in the full migration the GCP of our secondary us exchanges, the commercial risk exchanges I exide property and data ex exchanges.

We expect a number of these exchanges did have.

Completed full migration by year end with the remainder completed in the first half of 2021.

Canadian commercial with exchangeable migration will also occur.

Between 21.

In April we discussed with you the initial migration of our yeah, I'd identity validation systems, which we expect to complete in the third quarter.

Customer migrations are expected to start in the second half and we expect to have fully migrated all Yankee customers by year end.

Our new eliminate cloud identity and fraud, we deployed as a cloud native solution will be available to customers in the western Canada in the third quarter.

In a new Yaghi cloud Native service is also available for the U.S. as part of the new transformed eliminate offerings.

We are continue our progress in my gut migrate our customers onto our new cloud based systems, including our interconnect.

Night Apiay framework.

As a reminder, this is the common set of services on which we are working to migrate all usfive.

You asked me international customers.

As the ended at the ended the second quarter US I asked that migrated 1200 us customers and international completed migrations about 2000 customers.

We expect to continue to pace of migration, we expected paced migration to accelerate in the second half of 2020 with over 10000, USA us customer migrations completed by year end in the majority of the remaining us customer migrations completed by mid 2021.

We continue to adjust our development priorities to add platform capabilities to ease our customers' ability to easily migrate to our new platforms.

As we discussed in April our new ignite analytics and machine learning platform is available in production Cws and will be available GCP this quarter.

We continue to make strong progress globally, rolling out or ignite analytics platform with over 200 customers using ignite direct in marketplace, including two new finfet customers added in the second quarter.

An additional substantial benefit from transforming forming their own the on premise infrastructure, Google to Google will be a significant reduction our targets for carbon footprint, which is a focus area or yesterday strategy.

Still remains the only cloud provider that uses a 100% renewable energy energy in their centers, which we will benefit from.

We're making strong progress in our cloud.

Technology data transformation and remain energized about the future top and Bottomline benefits John discussed earlier.

Our cloud native data in infrastructure is in will differentiate equifax in the marketplace.

Shifting to slide 14, this highlights our new product initiative focus which is a key component of our FX 2020 strategy is our next chapter as we leverage our cloud.

Eight in technology transformation for growth.

Strengthen our capabilities and product management NPI, we recently added a new chief product officer facility now with deep product expertise from prior roles at FICO Verisk and Oracle.

Facility joint Mark Luber, our new USA biased product officer with a goal of accelerating our product management capabilities to drive new product growth.

We expect to continue to add product resources in the second half that position us for growth in 21 and beyond.

We continue to launch new and refine existing products to support our customer specific needs during the cold endemic.

This includes our Equifax response, now product initiatives in USA us and tailored I nine and you see solutions and workforce solutions.

Yes, I guess recently announced the addition of an industry specific FICO score segmentation data to our weekly consumer trends.

Reports, we just integration Equifax, the first company to offer weekly industry specific FICO score separate segmentation reports, enabling.

Businesses across industries, the better attract anonymized consumer trends behaviors and credit performance across the us which allows our customers to better anticipate consumer behavior changes as a result of the coated recession.

As we progressed through the year, we'll continue to make strong progress on our goal to expand our npis rollouts and deliver over 100, new products in 2020, which is up from about 90 last year in 60 in 2018.

Through June we've launched 70, new products and we have an active pipeline of new products at various stages in the pipeline funnel.

Some of the new product launches include a us is launched a spike up launched FICO 10 Pete.

The FICO can keep score incorporates trended data for strategies and use cases that benefit from additional trended data insights into consumer behavior.

We worked with Blanco to incorporate trended credit Bureau data to offer a view on the trajectory of certain credit data yields over time, such as account balance announce reported over the past 24 months consumer behavior consumer payment behavior in credit limit information can also be captured via the trended data.

Workforce solutions also has a strong npis focus as we discussed on our Junaid call workforce solutions recently launched a number of new mortgage solutions, including mortgage twin I'd.

Anywhere products.

What we're seeing strong market growth another area of focus that the expansion of the data set in our talent reports.

New multi data solutions, incorporating employment I'd verification in degree verification can add value to hiring decisions in high turnover industry, such as retail restaurants manufacturing and hospitality, especially as we looked at the post coated recovery period.

We also continued to make good progress with our positive data in Australia, and now have over 80% of positive data from contributors with about 90% of the credit card and mortgage data in more than 50% of the auto and PD lone data in our database.

We've begun to use this positive data in Australia to provide analytical insights to our customers and expect to launch additional new products later this year.

Npis continued to be an important lever for equifax growth in a priority for meat and for the team.

We prioritize our focus and resources on driving NPL Rollouts in 2020, the more recently a global focus on products to support our customers during the cold recession.

We will continue to prioritize new products and innovation in the second half to leverage our cloud data and technology transformation for future growth.

During the cold 19 pandemic, we remain actively engaged with stakeholders in the public and private sectors regarding equifax solution that accurately portray the risk profile of consumers, while recognizing unique in likely temporary nature of the financial impact of the pandemic.

Every country, where we do business Equifax is in discussions with lawmakers and regulators to enable continued credit reporting that captures the status of consumer payments and lender accommodations.

Depending on the geography, we work independently in conjunction with our peers and our trade associations to provide proactive assistance to financial institutions seeking guidance on how to report during this timeframe.

In the U.S., we are in regular communications with federal regulators, including the CFPB and we're sharing data trends with the Bureau regarding both consumers and Furnitures. We're proud that our import has contributed to regulatory guidance that the bureaus published a broadly inform the marketplace. Furthermore at least.

Three of our most significant markets around the world Equifax is providing data and insights directly to federal governments to help policymakers understand the pandemics consequences and consumers in the credit economy.

We recognize that many consumers have impacted by the coated 19 pandemic and our experience economic distress.

With that has established a coat resource section on our website to assist consumers looking to manage their fedex potential impact on their credit standing.

In April we joined the other us credit bureaus and announcing that we're providing free credit reports all us consumers through April 2021.

We're also offering free credit reports to Canadian consumers.

More recently Bev Anderson, our business unit leader for Gcs hosted a series of informational webinars for consumers on managing credit during the cold pandemic. Our gcs team is also participating in industry webinars in advance to educate stakeholders regarding the options as well as the reporting standards.

We will continue to support consumers and remain engaged as a constructive partner to help consumers businesses in the overall economy. During this challenging time.

Wrapping up turning turn to slide 10, turning to slide 15 is Jeff John outlined earlier, we're still unable to provide guidance for the third quarter of the second half.

We still see meaningful uncertainty from the impacts of the coldest endemic as cases rise tragically in many markets impacting sharper and placed orders consumer confidence in economic activity.

There is also a real risk of a second coated wave in the fall in potential for increased lockdowns.

We also expect further impacts from unemployment furloughs in salary reductions at government support programs expire in coming weeks.

Like other companies, we have very limited visibility into the depth and breadth and linked with the cold the recession or the timing were strength of recovery until we have a broadly available vaccine.

Uncertainty makes it challenging to provide our traditional guidance for the third quarter in second half we hope the framework. John provided is helpful. As you think about the range of outcomes for Equifax and third quarter in second half.

Even in this challenging environment Equifax is operating extremely well.

Our strong business model is resilient and delivering into cobot environment, while investing while allowing us to invest in the future.

Our performance in the second quarter Falls is strong first quarter and our momentum in the second half of 2019.

Our strong results allow equifax to continue to invest in our cloud data and technology transformation dating analytics and new products to physician equifax for future growth and 21 and beyond.

As we look forward to the rest of 2020 and towards 21 22, we are confident in our business model strategy for growth cloud data and technology investments in the ability to perform in a challenging hoping environment.

We had a very strong team with deep domain expertise and we continue to strengthen that team.

We delivered strong financial results again in the second quarter with double digit constant currency revenue growth for the second quarter in a row with over 200 basis points of margin expansion, while continue invest in our cloud data and technology transformation data and analytics new products.

Workforce solutions the franchise business that is strongly outperforming we gave you a deep dive and workforce a few weeks ago and expect continued strong performance from workforce solutions in the cold recession with strong growth potential in the long term.

Workforce delivered extreme exceptionally strong revenue growth in the second quarter up to over 50% with adjusted EBITDA margins of 56% 55%.

These results are the strongest since we acquired the business in 2007, driven by macro events in mortgage in unemployment claims businesses.

In new tween record growth increased penetration in launching new products.

And workforce solutions is strongly outgrowing the mortgage market.

Our unique tween income deployment Davies, even more valuable this unprecedented economic event to do the scale accuracy and latency of that unique data.

We believe workforce solutions is well positioned for attractive long term growth.

Yes, I just had another strong quarter with revenue growth of 10% and the strongest first half revenue growth since 2013 led by strong growth in us mortgage.

You asked is is pipeline to the strongest since 2017 from there with new commercial focus and rollout of new products. The business is operating well in meeting in the marketplace.

International executed well against a challenging global economic environment, and our Gcs direct business is poised for growth in the second half of the year.

And as I outlined we're making very good progress in our cloud technology and data transformation and beginning to take advantage of the new cloud based capabilities.

Execution of the cloud investments is a clear priority for our team in 2020.

We've accelerated somewhere spending and are focused on the cloud transformation remains strong.

We expect the number of our eight exchange migrations to completed by year end and well down the path on customer migrations. We know we still have ought to work to do we're energized about the strong benefits that will come from this transformation, including always on stability speed to market ability to rapidly new products around the globe and a strong top and line Bennett.

As John talked about.

We're continuing to invest in new products and innovation by investing in new product leadership in resources to drive innovate innovative product rollouts.

Our npis capabilities are being celebrated buyer cloud transformation and we expect to launch over 100 Npis in 2020.

In pie remain a top priority for 2020 in the future and we continue to expand our investments in new products leveraging our cloud transformation.

We're also making proactive investments in technology in DNA, new products and security, while balancing cost controls across the rest of equifax.

And our balance sheet as John pointed out remains strong ensuring we are prepared to make the necessary investments in our yet Thats 2020 cloud data and technology transformation, you product and data security, while looking for attractive bolt on acquisitions.

And we continue to support consumers through challenging times with free credit Fortson consumer education at our website.

As we look to the second half of 2020 and towards 21, 22, I'm more excited than ever about our future as a market leading data analytics and technology company.

And with that operator, let me open it up for questions.

Thank you, Sir ladies and gentlemen, if you have a question today. Please press star one on your telephone keypad.

Speakerphone.

MS turned off your signals return.

Thanks again, everyone Star one to ask your question.

We'll go first to Toni Kaplan Morgan Stanley.

Very much congratulations on the quarter.

I was hoping you could talk about that trend of non mortgage hsas and how it improves significantly in Japan that can actually get that alone that weaker in July. So just wanted to understand what you're hearing from customers in terms of whats threat to the slower in July and and how we should be thinking about.

Going forward.

Yes.

I will start in then John to jump in we were pleased with the.

So I can't sequential improvement in US is broadly and then of course in non mortgages, we went through the quarter, particularly a shelter in place orders were lifted in economic activity improves. So that was a positive. We just wanted to point out there still real uncertainties in the marketplace, we've seen markets like Florida, and Texas and.

California that it had some of the recent coded spikes.

From our online volumes seen some impact on that.

It's not it's not meaningful but it's it's not that.

Continuing no sequential trend so really just wanted to point out that we expect.

Some uncertainty going forward what are the other positives that I pointed out a couple of times is the fact that you ASI at new deal pipeline in their when weight rate continue to grow through the second quarter off of the first quarter and off of last year and for US that's probably the most important elements is quite challenging to forecast the economic.

Nick outlook, but seeing workforce solutions accelerate their new product rollouts.

And really winning in the marketplace competitively.

Is the is quite positive for us as we think about the third quarter.

Tony if you're looking at slide nine right. It just as a reminder, as you look at June June because of the number of business stays in a month right was was.

There's about a 3% benefit or a little over 3% that you're seeing in June that doesn't really continue into July. So that can help you understand the trend better between June and July. So for example, if you look at banking lending Mark Mark mentioned banking and lending there. If you adjust for that three point, you're probably looking at banking lending was down 10% to 15% and the.

In the June period, and what we have seen is slight weakening as you go into the very end of July ended June into July and the trends across several U.S. ice verticals and it wasn't substantial but down but the substantial improving trend we've seen from April through June flattened and weakened slightly.

Just big one last point Tony.

It is challenged right now is when we'll our customers restart marketing and we've seen some increased activity from a below 19, but there's just so much uncertainty for our customers around the consumer in the economy. Many have pulled back on marketing in counter to that we've seen a significant increase in activity in dialogues around portfolio management, which.

Typical in an economic downturn, a lot of resources shifted managing the backlog managing existing customers managing credit lines.

So you've got that positive going in marketing one will our customers get comfortable to market again I think is the big question I think there's lot uncertainty on that.

That's very helpful.

That's for my follow up just wanted to ask that they really strong margins and work fresh solutions.

Obviously had a very strong verifications corridor, so well in such a real driver or you also getting some additional leverage from the employer services for cars. While you know I just wanted to understand.

Shrinks have margins on that sustainability.

Yes. It was you hit yet that you items that are.

Very strong obviously you see claims is the is high incremental margin as is the growth in that verification.

Both of those are driving more margins, we've got as you know revenue growth broadly in our business and.

In workforce solution incremental revenue growth that delivers very very high incremental margins, which is which is driving that and the other thing of workforce that we pointed out that we were pleased with it is how we outgrew the mortgage market.

That really is a reflection of the power in the weakness of the data assets. They have in the multiple levers we talked about in the June call workforce solutions.

The other thing I Didnt mention as if this is happening at a period when we have strong cost controls in place. So you're seeing costs are being managed very very tightly while they're seeing very high revenue growth.

Makes sense, thanks, a lot.

Except from credit Suisse, It's Kevin Mcveigh.

Great. Thank you Kevin.

Hey, how are you.

But a very nice determine come to help NWS positively impacts mortgage.

Can you trying to help us frame how it impacts the rest of the credit products that you kind of offer right now and as we think about government to 2021, there's some startup cost according to a sidewall more broadly across mortgage and not dws.

Yeah, we've talked Kevin before I think you're talking about the fact that we go to market as one equifax.

With our customers and as you know you Sian.

Sales to all of our financial institutions USA as credit products as well as their workforce solutions verification product. So that's kind of bundled approach to our customers, we think as a smart way to go to market.

It gives us the ability to sent our commercial teams to sell a full equifax solution.

This is the ability to leverage of product positions on both the credit and verification side when we're in discussions with customers and.

So we're clearly seeing the ability to.

Approach customers with a broad equifax solution that would include credit data.

Our wealth and employment data are.

The key we'd data and then of course, our verification data from workforce solutions and bundled solutions in many cases, which we think is attractive for equifax.

Got it and then just real quick you talked about competing npis, so part of that being just.

Positively impacted by your cloud transformation in the cloud transformation. He said the expense benefit that allows you to do that or do they become more seamless through the cloud or just can you just surplus frame around a little bit more from an M&A NCR perspective.

Yeah, we've been consistently talked about as Kevin said last couple of years that was our expectation that the cloud transformation would allow us to accelerate.

On the ability to get more new products to market and also I'm getting product to market more quickly.

Starting to see that the good news is we're already at really in the last six months as we've gotten.

End of the cloud transformation, we've been able to rollout of new products and you talked about this on the April call, we're putting new product in the marketplace that we couldn't do two years ago because of the single data fabric, our ability to combine data assets, our ability to ingest new solutions.

Having a simpler application infrastructure.

Eating up our ability to bring products to market and we're excited about starting to see the early benefit to that and we do believe.

Those benefits will accelerate meeting our ability to do more new products in the future and you're seeing that as we go from 60 products to 90 last year to over 100. This year and our goal is and we're putting resources around it to really leverage our massive investments in the cloud transformation for both data and our technology.

To accelerate our new product Rollouts in 21, and 22 and I think it you know thats a real fuel for growth in our industry and for Equifax. So we've got a really big focus on it we brought some great new talent in we're going to add resources in the and people against it in the second half because we really look at a new products as being the next year.

After for Equifax around driving our growth and really leveraging our cloud that data and technology transformation.

Our next question.

And then.

Yeah.

It's actually expect hey, guys.

The first question are happy.

Okay.

Okay.

Okay.

Steve I.

I was just wondering you could be.

Pipelines, and then that we talked about coming from yours.

Competitive or is that Scott that maybe there is just kind of put on hold and the penalty box.

Yes that it's all the above I think you've got a new we've got a new not to be leader anymore, but since things going on the ground now for 18 months.

Really remake remade the commercial organization Thats been in place for six months.

There's a real.

You know increased focus commercially in the marketplace. So I think thats.

That number one.

The pipelines or combination of new products.

When you go from 60 to 90, and then towards 100 on there's just more opportunities for Sidney just think his team to bring new solutions to our customers.

On the pipeline growth. We also believe button obvious from that coated response products that we've rolled out. This is that we tried to highlight on the call earlier. This is a really unprecedented time for our customers and the value of data broadly for all of us in the industry is even more valuable you actually if you go back to Wedo nine Theres just since for our customers to use.

Data to manage into recession, so I think thats driving all of our capabilities in the in our conversations with our customers and then there's no question, we talked about our win rates being up on a year over year basis.

Clearly more competitive in the marketplace.

There is.

Overhang that was perhaps you're a year ago from the cyber event. We believe is way behind us when I'm in we're really just focus in a normal mode, but I would call. It a fairly aggressive mode in the marketplace to really support our customers in this challenging time.

Got it and just on the new products more.

Seven behind this key products.

It all depends who is actually hobbled students for a while investing in impressive but I'm just wondering how do you decide.

Thanks.

And why things in pasta sauces talk about how you would expect the implied to conclude kind of 10% of revenues.

In the to the tank into something.

Such forward to box to provide some perspective.

Yes, we have that we have a very I kind of standard rigorous process around what is new product it's got to do.

We've been had a consistent process John I think for five plus years is five years on how we define new products and we try to be transparent with you and others are about to our new product rollouts because of the importance.

To our future growth, we think there quite accretive.

To the future and that's why we're doubling down on people and resources to really leverage the cloud transformation I know there was a framework in the past.

Financial framework around the contribution of new products to our revenue growth as you know, we don't have a financial framework in place today.

We probably don't want to talk about how we think about that but.

I hope you appreciate the focus that I haven't we have around new products, because we believe it's a really important lever for growth that.

It's got to be accelerated by our cloud transformation. When you think about why did we do the cloud transformation was a lot of reasons on one for sure is to accelerate our top line and the way to accelerate your top line from the cloud transformation is to bring new solutions to market more quickly.

And more creatively and we believe more uniquely.

Than our competitors in that focus that we have with the cloud of course, you get all the costs and cash benefits that John talked about that will start rolling in and 21 and 22 ways. We complete the execution of the cloud transformation.

Right. Thank you guys.

Thanks.

Next step is someone sorry Jefferies.

Good morning, Thank you.

It's just a question on the international business, specifically just margins into your international business.

How much of the gap between the U.S. I asked business International or do you think is just structural and how much can be closed over time, especially as you complete the detect transformation.

Yes, there's no question.

Our international margins are lower than our US margins. We had just so much scale in workforce solutions in us I asked as you know versus many of our smaller markets and.

Some of that is going to be structural just given the scale of those businesses. We do believe the cloud transformation is going to be a accretive to that.

Improve those margins and of course, we're focused on.

Other actions and we have been this isn't new to improve those margins, whether it's from new products are incremental growth and the biggest way to improve margins internationally is is topline growth because of the incremental margin impact. It comes from that topline growth and of course, they were impacted most significantly in the second quarter because of the depth.

In the breadth and in how severe the Lockdowns were in course, many of our international markets are still in lockdown.

Another meaningful differences at this point, we don't have workforce solutions outside the U. asset and it's a very high margin business. So if it negatively impacts the margins relative to the U.S. outside the U.S.

Got it very helpful. Then just follow up question I turn it over.

Could you maybe comment on.

Your your exposure to Fintech and how that compares to maybe some of your peers, whether that's an opportunity for you going forward. Thank you.

Yeah, I think as you know are we talking about this many times our competitors are much stronger in fintech.

Thats been a a priority focus of our team since I joined the two years and change ago.

We had two years ago, a handful of people covering fintech and today, we've got I think 15 or 16. So it's a clear focus we more than tripled our commercial resources in the last couple of years, we see it as an opportunity.

We are having wins there I talked about in my notes that we had to us fintech customers.

Add ignite in into second quarter.

So we're actively engaged with fintech in Fintech is a couple of hundred million dollar space in the west growing faster than the core market.

Actually a bit more impacted in coated recession.

Right now than the broader market, but space that we want to be bigger in we're focused on.

Great. Thank you.

Our next question.

Evercore ISI.

Thank you good morning.

I appreciate your thoughts on Joe Biden plan to mandate that federal agencies, using new public Credit Bureau can you just walk through your exposures.

Kind of government revenue and over what timeframe. This new bureau might be developed.

Yes, you got two different questions there David first on the government revenues are from our perspective are unrelated to.

Vice President Biden.

In Minot and Senator Sanders proposal.

And our government revenues are really yet for social services. So our government revenues will be impacted.

As you might imagine we think the current credit Bureau system in the us well serves consumers and Furnitures.

There is plenty of competition between the large three credit bureaus.

We don't see a need for what was outlined in that proposal.

We would suspect this perhaps more positioning and election cycle versus something that would have broad bipartisan support.

Support and if you look around the globe. The few global markets, where there is a government on credit Bureau over time, either they've been privatized.

Or private credit erosive operated against next to them.

So we think the system in the United States today serves the market extremely well in a very competitive way.

Got it to the extent government credit Bureau were to be developed.

Do you think it would take to build it just trying to assess the overall risk equifax.

Yeah, I think Thats, a tough question too David.

Equifax, we're spending a $1 billion a year in technology and.

In 2020, and we have for a long time to go look at the industry. This is extremely complex set as trillions of records theirs.

Thousands and thousands of contributors to it would be a very long road and again.

From my perspective, that's maybe a reason why.

There wouldn't be bipartisan support for I think the broader.

Perspective, and why there would be bipartisan support is the system works today.

Service it services the industry well it services consumers well, there's great transparency and if you look at the increase in alternative data.

There's just more opportunities to support consumers, which is really what I believe vice President Biden is focused on is how do you ensure that credit access to those that needed.

Is available in the marketplace and we believe the bureaus today provides a great supporting refocus on that.

Understood I greatly appreciate your insights.

Next we'll go to Bill Warmington Wells Fargo.

Bill.

Good morning, everyone.

So when it first question for you.

What per Se what was total mortgage exposure as a percent of total equifax revenue in Q2.

But.

At the top I had I don't know Bill it's up substantially I think it's on the order or 30% but.

But it could take a look at slide nine in slide 10, I think we get plenty of data there for you that the come up for that number yet.

Yeah.

Okay.

And then it sounds like a new product pipeline is pretty full I know you guys were.

First Bureau to do the beta test on valley cycle Resilient index.

I wanted to ask if there was a way too high but work number more closely into the FICO score.

That's a good question I think we talk bill broadly about our focus.

One of the benefits, we expect from our cloud native transformation and you know what the technology transformation in a data transformation, but the single data fabric that we're going to we believe is going to allow us to do.

Many more data combinations, then we're able to do easily today and Thats. One is in many regions were doing to cloud transformation and that would be an example.

But using a income employment data with some of our other data assets to bring unique solutions that are only equifax because of our.

For solutions business to the marketplace and we have those not in our current pipeline, but those kinds of things on our to do with.

In our pipeline in the future and it's another reason bill why I'm, expanding our product resources across equifax in a in the second quarter and we're going to expand and further in the second half is really too.

Really fuel fuel up that new product engine not only for the second half what debt for 21 in 22, that's a big focus of mine is to take advantage of the single data fabric in the cloud in the cloud technology technology, we're going to have onto really accelerate our new product rollouts.

Got it thank you very much.

And Andrew Nicolas from William Blair.

Hi, good morning, Thanks for taking my questions I'm just wondering if there is talk about operating expenses I think no matter, where a few months into this and if you understand the already committed to I believe it was $90 million cost cuts I was just wondering if you could speak a bit more about how you're thinking about that line in the medium to long term.

And I guess I'm wondering to what extent you've identified additional areas for cost rationalization over the past couple of months has the workforce gets more and more comfortable working from home whether again, the real estate side Tammy.

So on and so forth.

Yes, I hope you've got the tone of our conversation, we're keeping a tight belt here, because we still see meaningful uncertainty in the second half about the pandemic at the same time I hope you've got our tone that we're making targeted investments with our financial strength, we want to make sure we're making those investments for the future, but we are accruing kind of net benefit.

A year over year basis on our cost structure and certainly during our plan we had in place early in the year from some of the belt tightening. We've done you point out TNL travel when you think about the near term milind travelling in FX and so thats a clear savings on a year over year basis on a long term run rate I suspect.

The way, we use video will meaningfully change our travel spend going forward.

Working together and collaborating through the use of Google hang out and other video tools. So I think that that kind of a change that will be permanent I think our business travel to customers will likely be lower just because of the efficiency of video up instead of making three trips to a customer to work on a new product you might make one.

Post coated and then I have four or five the video calls him do the whole project quicker.

Just because of how we're working so I think theres state that the efficiency in a collaboration on video I do think we'll have a significant change on the real estate side, we're going to go through we've got a handful of small offices that.

Really got highlighted for us Nicole the recession, we're going to close those you know just doesn't make sense to have 2030 40 person offices.

Adult those teams can either work from home or Deconsolidate. Another site. So there'll be some real estate benefit there we haven't gone off the next step of.

Deciding whether we change our broader real estate footprints I suspect, we'll we'll look at that as the year progressive but.

But as you point out the work we operated very effectively in a work from home mode, and we're still operating with our Red Blue teams in a 50% we're actually higher work from home Bode meeting, we only have less than half of the team and our office is every week and the other half working from home and.

Equifax is operating extremely well so that will be something that we'll look at the into second half dreaded congestion nothing covered all okay.

Does that cover what rate, where you were head yes, no. That's really helpful. Thank you and then on just one more for my follow up it looks like.

In the case of Canada in Asia Pacific You had a little bit of a spike in growth in June.

Or at least.

Less less abrupt decline in June before slowing down again in July I mean, any any color on what we might be driving that spike and then how you're thinking about the international recovery time line more broadly in the second half. Thank you.

Yeah, It's it's tough as you know to predict that I think what we've seen pretty consistently in all markets.

If you looked at April and may be fairly severe locked down not a lot of economic activity.

You got into May and June in most markets our customers figured out how to operate in a lockdown environment in we're having commercial activity no selling cars without the showrooms being open or and that's happening around the globe. So if it does that kind of adaptability to a lock down.

I think a challenging international as their lockdowns, we've seen us lockdowns kind of brought relaxing the last four or five weeks in many many markets.

Course, you've seen some.

Tightening or or consumer confidence issues around the spikes in the last couple of weeks in many markets, but international Lockdown have just been extended that as much longer we have.

Markets like Australia, I think Melbourne, and our Melbourne market is not going to open until late August.

So those delays we believe ended depth of the Lockdowns in many international markets really dampened there.

Economic activity, which impacted our revenue as those markets open up we would expect to see improvements that we just can't predict when and how much. So we would expect to see those improve as a as the companys adapt and as a actually restrictions are lifted and there's some level of kind of co.

Good normalcy.

Looking at Slide 10 also just looking at APAC. It was a positive number but as Mark said in his comments there was a onetime sale to a government entity. There that resulted in that positive steps or excluding that it was down single digits and then again just as a reminder, looking at June right, there's probably a three to four point benefit from the fact that a number of business days and during this higher.

So when you compare June to July that something after taking into account.

Got I'm I must have missed the comment on the onetime so thanks a lot.

Next question is George Mihalos Colleen.

And George.

Good morning, guys, Congrats and thanks for taking my question.

Mark just just wanted to talk a little bit about about workforce solutions, and obviously tremendous momentum there, particularly this year would fit.

Within mortgage and on and on the unemployment side, you talked about it being still in sort of the second or third inning, if were looking out longer term from a growth perspective.

Just curious.

If we would have thought of workforce has at least being a high single digit topline growth probably low double digit top.

Topline growth.

Should we be thinking that as we look out over the next year or two that some of that was a substantial part of that growth has been kind of pulled forward now it in 2020, so that it may be sort out.

Sub praying for a year or two before sort of normalize in longer term farberware perfected.

Yes, we don't want to get into giving 2021 or 2.2 guidance, but we talked at length on the June 8th golf in more this morning about the multiple levers workforce solutions and as you know one of the very unique levers they have versus most of our businesses and I think most of the industry is the ability to grow their revs.

The new by driving hit rate through increased records.

And I think thats it very unique elements for that business and you do you think quite simply.

Which sometimes I do you know the business it will be over $1 billion. This year and it it has a call it roughly 50% of the nonfarm payroll in a database now our long term goal is to get all in on foreign whole upon payroll in our database and Weve shown a pretty consistent ability to add those records you know if we.

Yet from half the all in the nonfarm payroll you doubled the size that business over a timeframe extended for sure but thats a lever that said it's unique there's no question did there'll be a we're in the middle of a a middle I don't know what portion were end of the us mortgage.

Reply in a purchase.

Market that is exceptionally strong there's going to grow over challenge on that for Equifax in 2021 that as you point out, but if you saw on our comments workforce solutions in particular significantly outgrew the mortgage market.

Because of new products because of new records because of new customers. They have all of those levers and new verticals that they can get into outside of mortgage.

Those give us a lot of confidence in the workforce solutions long term growth, which is why I characterize it is that being an early innings, meaning just as they mature businesses are well operating business, but it just has a lot of runway for growth opportunities.

Okay. That's that's that's very helpful. Appreciate that color and then just a quick question for you John as it relates to corporate expense and the outlook therapy. Those numbers came in a little bit better than what we were looking for is this sort of two to corporate expense run rate a good way to think about.

Reaching apps I think out a 5 million dollar increase in redundant system costs relative to Twoq.

Yeah. So so I think we're going to continue to perform well relatively speaking against corporate expenses within corporate expenses, obviously, some things that are a little more variable like.

Like incentive compensation and things that drive movements period to period, so I cant from not going to really give a forecast for threeq and fourq you, but in terms of the cost reduction actions. We have in place I think those are going to stay very firm in place rent corporate so you should see improving performance on our corporate expenses pretty consistently.

Okay, great. Thanks.

Thanks.

Next step is Andrew Steinerman JP Morgan.

Hi, just wanted to clarify a quick thing on international I definitely correct that you're saying stricter and longer like downturn. Some key international geography is like Australia.

I feel like figured out ways that garage went into locked down early on Friday reopening earlier and so when I look on flight Ken on the European salary line for Equifax.

That what you're saying or are you, saying something about lock down said I'm not catching about Europe.

Yeah, I know it from our perspective, Andrew like the UK is still in lockdown.

Meeting our office is not open our customers off is there an open there is still working from home economic activity. We believe is depressed because of that versus the you're looking at like Georgia, which has opened in other markets in the United States, a Spain open just a couple of weeks ago.

Canada is it, particularly the Toronto market is still in locked down and meaning that they're not open.

Sure.

Most commercial activity in Australia is still in locked down so.

Our experience is that a in our perspective is that the international markets walk down sooner and stayed lockdown longer of course, we don't do business in Italy, which as you know lockdown brighter and opened up quicker, but the markets that we're in are the ones I'm referencing.

No that's great but were heavily UK based right. So for us right across the bulk of this area of and it was UK.

Right.

Okay. Thank you.

Thanks, Jeff Mueller Baird.

So Jeff yes. Thanks.

Good morning, just a follow up Mark on that answer you. Just recently gave on the ability to consistently have records twin records just [noise].

How's the pipeline there is that being positively or negatively impacted by the current environment and then on or comments in the prepared remarks about kind of active records I think more flattish since March.

Tied to kind of initial jobless claims from an unemployment is that.

A headwind that is at all meaningful or are the individual rolling off after records, just not particularly active I guess from a credit application perspective, so it doesnt really impact here. Thanks.

Yeah first Doug on the pipeline. We've had is you know we have a dedicated team we talked about that and unique. This is all they do is focused on records that either but I would call going door to door to companies that are not a part of our database or I'm working on partnerships with the payroll processors and others that we do revenue share within they have a very.

Reacted pipeline.

We are.

Prices put them on office in the second quarter on Big work before but we're deliberately leaning in and in both.

Both sides, we think about your company and year under some financial pressure today, you do that yourself in many cases, meaning you're taking calls for mortgage originators into the HR Department and you've got a handful of people staffing a call center to respond to your employee calls on that if we go in and that can.

Share our value prop what we'll do it for free for them, we'll do it securely becomes a productivity improvement for that company. So thats a positive so infirmity climate standpoint, it's always a good discussion is maybe better now and then the partnerships you know the idea of getting an incremental revenue.

Share from Equifax from a two apparel processor those conversations are positives. So we'd like to pipeline is you know it's a bit choppy. Sometimes you know we added a large processor last September we are benefiting from that now those.

Can be clunky or chunky.

We have a consistent focus on adding records and Weve shown pretty good trend of adding them on your question about the impact of unemployment is something we're watching we expect there to be some pressure on actives in there we had some declines in the latter half of.

The second quarter that were offset by additions that we have of new contributors of new a new employees are records coming in and we expect to keep that focus going in the third quarter, but we're definitely watching it and I think lastly, I think as you know.

We not only sell active records meeting those that are working but we also have a pretty large portion of our revenue workforce solutions is inactive records meeting where with someone working two weeks ago, two months ago, three weeks ago, because people change jobs and.

If we don't have an active many times were able to sell the inactive meeting what they were doing six months ago before they change jobs and.

That becomes and that's another part of our revenue.

Well go next to George Tong Goldman Sachs.

Hi, Thanks, good morning.

So you want Sarnia online mortgage revenue growth moderated from 62% in June to 35% in July and then you Ws mortgage growth went from over 100% improved to 70% of July presumably this is all due to tougher comps any other factors that you might point out that would have contributed to the slowing growth and if it was due purely the tougher comps can you help for.

How comps would evolve over the next two to three quarters.

Instead as I'm sure, it's principally tougher comps a little bit a little bit of its seasonality right. If you take a look at the way to mortgage market tends to round you tend to see a weaker mortgage market, if we get towards the back half of the year.

But in terms of tougher comps.

The mortgage market really started to strengthen in 2019 in August and was very strong in September and was very strong in the fourth quarter. So you're going to see those tougher comps run through third quarter and fourth quarter and obviously you know how strong the mortgage market was in the first quarter and second quarter 20.

Got it that's helpful and then on the technology transformation program could you provide a timeline on when you expect to fund legacy systems.

So the frame the timing of when you expect to fully realize your cost savings that you outlined in the presentation.

Yeah, I think it for today, we're now ready to do that we've tried to give indications on it that's really probably getting more into our long term framework.

As well as our.

Outlook for 2021, or something which as you know, we're not providing guidance but.

Yes, we've tried to be clear about we've got a lot of confidence in the benefits.

We tried to talk about.

When we're bringing a applications on line and databases into the cloud and then how we're progressing on customer migrations because as you know we've got to complete migrations in order to sunset.

Our legacy infrastructure. So I think we're going to hold off given much more detailed and we already have.

Until we get a closer to 2021 and or putting our long term financial framework in place.

Got it thank you.

Next is Gary Bisbee Bank of America security.

Yes.

I'm sorry.

I understand you're not giving guidance, there's a lot of uncertainty around.

Mortgage trends interest trends in general, but if we think about it.

At some point mortgage business softening and obviously on employment claims as well.

We're also seeing through how the how's that.

Rental margins are.

With.

On softer sales from from those two end markets.

It's a Gary again, I think what that's kind of getting into kind of a longer term view and a 2021 outlook and we're just not ready to do that yet we've given a fair amount of commentary even in this even in this discussion around down around the fact that our margins in mortgage we're obviously not nearly as strong as they are in a normal online business.

Yes, principally because of mortgage solutions ranked as mortgage solutions, we purchase files from our two competitors. So there's those margins are still good in our mortgage business on average, but not nearly as high as we've seen a normal online bowl.

And but but theres a lot of moving parts that are going to go into what 2021 in 2022 look like so I think we're all going to have to see other markets evolve and we'll give you a lot more viewers to as to what we expect for that as we get towards the end of year.

Yeah, Let me take another kind of data if you can't answer that's fine, but as I look at the incremental margin on revenue growth in the last five years at workforce solutions. It's obviously been terrific and it's been relatively stable within a range, including the last few quarters, where there's been a major benefit.

Revenue is there any reason then I'm not asking you win and asking about 21, but any reason to think.

When revenue you know if revenue were to weaken in that business temporarily fee that you would see a very different incremental margin on the downside.

Right.

So again I don't think we're really going to answer that in detail right, but it will also goes into that is what actions. We would take demanded the cost as a business that we have across the entire portfolio not just specific to workforce solutions. So so again I think we're kind of getting into more of a long term outlook here and at this point, we're going to I think we're going to have to ask it away.

Until we get towards the end of year.

Fair enough if I could just sneak in one then on the pipeline encouraging comment in the in commentary and the win rates as well.

Level set for US is is the pipeline back to the pre reached levels are you still in the process rebuilding out and same question for wind right. Thank you.

Yes, I think where the pipeline what we're seeing it has improved a lot over the past three years.

Comparing pre and post rich pipeline, just a little bit difficult right, but the but I think the really promising thing that we're seeing the pipeline is growing consistently and then the win rate we're seeing against the pipeline is continuing to grow as well I guess, we're speaking about you if I ask you are right.

So so I'd say, that's that's what it looks like and I think we feel good about that trending.

Thank you.

Last time, we have for questions today at this time I'll hand things back for Jeff not just for any additional are closing remark.

I'd like to thank everybody for their time today, and I think with that operator, we can terminate the call.

Ladies and gentlemen that does conclude today's conference. Thank you all for your participation today you may now disconnect.

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