Q3 2020 Equifax Inc Earnings Call
Good day.
Equifax third quarter earnings conference.
Earnings Conference call today's conference is being recorded.
At this time I would like to turn the conference over to Doran here.
Please go ahead.
Thanks, Good morning.
[laughter] topic.
Right.
Thank you Dave.
Chief Executive Officer John.
Yes.
Hey, Paul.
Well.
Oh I'm sorry.
Later today.
Certainly.
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During the call today, maybe making.
Certain material.
Religion section.
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That's really the B shoot Threed 2020.
Very good.
Certain forward looking statements.
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Exactly right.
The factors that could cause actual super material.
Certain risk factors inherent in our business our board.
It's getting hurt yourself.
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We'll be referring to certain non-GAAP financial measures, including adjusted yes, It should be I can back into adjusted EBITDA.
Maybe adjusted for certain items.
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Non-GAAP figures are detailed.
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Okay.
Now I'd like to turn it.
Thanks, Brian Good morning, everyone and thanks for joining us for core earnings call.
This is the consumers Randy we continue to face challenges.
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Thank you and your families are continuing to be safe imagine you're supposed to barb.
The fact is we continue to make that helps dig deeper 1000.
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Gross margins in cash in the future.
Today, we sell to any industry vertical customer gets bigger challenges through differentiated data assets and best in class.
Most of our differentiated in Dallas.
Differentiated and this value.
When do you become important.
We are building an industry leading.
Do you have technology.
That's the class cloud native to leverage a new cloud based.
You take an industry leadership position due to security by changing our culture of technology solutions and governance to ensure customer consumer data.
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[laughter] focused on a couple of what's been challenged he wants to be positioned in 25 countries.
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<unk> dollar cloud technology transformation.
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Legacy applications.
Wrapping up our investments in innovation, new product resources to drive new product acceleration by leveraging our cost investments.
We're strengthening our differentiated portfolio.
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How is your consumers.
Leveraging analytics patented <unk> technology.
Did you give the multi data solutions.
Differentiate our business before.
Our new capabilities and get her years like.
Turning now to slide five cobot makers accelerating key market Max those are positive for equifax and for the industry.
First in our <unk> driven economy, it's clear that deeper insights for comprehensive data sources like the U.S. consumer database that exercise and the use of multiple alternative data types are critical for risk management customer prospecting.
Application.
Other activities engaging our customers.
We're just French you'd be able to the positive macro prior to <unk>.
Economic impacts of the endemic have only accelerated just trend differentiated.
Differentiated data analytics are more valuable.
For customers.
Second providers of credit are increasingly to literally every meal times advanced analytics did utilize artificial intelligence and machine learning to get incremental insects Encore gate just.
This trend has been accelerating openings what difference is worth rosters of expanded upwards around fraud account takeover or activity such warm stacking.
Such loans backing identity and fraud solutions are increasingly valuable certain consumers, especially those from the digital age expectation, but their financials were placed interactions function just like we did.
We've seen this trend towards digital accelerate the current open environment, that's face to face interactions have become increasingly rare.
Since that's an alternative lenders are we taking share of wallet from traditional financial institutions. We've seen this trend challenge somewhat the near term due to economic pressures and disruptions in capital flows you expect will accelerate as we move into 2021.
Yes, it's actually been laser focused on delivering solutions to help our customers meet the challenging up an economic demand caused by the cold 19 pandemic or do you.
Our new cloud native applications are delivering integrated basically data solutions and we were unable to execute on our legacy wire with.
With unprecedented due to currency.
We're applying advanced did it literally alternative data assets toward the creation of trended insights that can better help our customers manage the scope environment, where the consumer credit ours are complicated.
Salary reductions, where there's a lot of combinations are.
Our new cloud based human eight.
Blood platform that uses these data analytics, along with machine learning and deep frustrations, writing risk managers with greater insights to better genetics fraud.
And our solutions enable organizations across industries, two jobs do reality <unk> digital solutions to interact with their customers, but it's an automotive dealership to convert.
Online browsers.
I like purchasers stepping through the dealership or credit unions looking for ways to support members, while operating with reduced branch footprint.
Our solutions help organizations of all types to drive huge all interactions.
The current recession has accelerated key market macros around the value of Watergate assets in real time Decisioning.
That's in the future.
Turning to slide the slide six highlights.
Go beyond just the credit reports to give lenders employers marketers and other service providers or more complete 360 degrees picture.
Other consumers financial life to enhance decision.
We're working with our customers to leverage the traditional lenders already.
Lenders are evil I understand the fracture profile candidates for loan services instead of focusing only on page, let future delinquency over the past three to six months, our trended data analytics lenders look at delinquencies over an extended period of closely monitoring indicators of financial distress, such as utilization increases and when.
Combinations.
We estimate that the deeper view of traditional credit reports may allow nearly 4 billion consumers, who recently moved down from prime and Super Prime credit categories due to credit policy tightening to move back up.
The move back up.
Consumers that may be good candidates for cards or personal loans, who may otherwise Jo Walton Leds are lenders execute your traditional recession playbook.
Even more importantly alternative gate is a form of axis, you need 20 kind of implement information becomes increasingly critical.
Certain job market impacts underwriting and the ability of consumer to repay their loans.
You need data, we provide helps lenders and consumers together to verify that borrowers employed when a credit decisions made.
The do it yourself alternative requesting hardcopy employment and income verification lengthy process workflows and cannot be verified we.
We estimate that the addition of twin income and employment.
Into credit Decisioning can do more than 7 million consumers up into prime and Super Prime category. So they can receive larger loans and other services, which is a new lender confidence.
Telco utility bank transaction and commercial data are further examples of equifax is unique and differentiated data sets.
Technology transformation is delivering a single data fabric that combines our multiple databases into one environment to enable more nimble innovation insights and analytics all at the same time enhancing regulatory compliance we have a.
We have an incredible appetite for new and differentiated gave you do we get more data delivers better decisions for our customers.
Give you a strong sense of our broad range of strategic initiatives as they're transforming Apple thats for the future.
Turning now to slide seven and our third quarter financial results.
Fax continues very strong performance again in the third quarter.
I'm very encouraged by the resiliency and strength of Equifax and our teams around the world to be you can challenge. The challenge is a cold and so our customers partners and consumers, we are operating more effectively and efficiently with more energy and momentum that I've seen since I joined Equifax and I believe will be a stronger more resilient organization and its global endemic is over.
During the third quarter, so very strong revenue performance, particularly at workforce solutions could you update us with broad based improving revenue trends, resulting in strong cash generation you need EBITDA margins, while we continue to make incremental investments in technology and product innovation and security.
Revenue growth of 19% the highest quarterly growth in our history, and we put $1 billion of quarterly revenue for the first time in Equifax history, both milestones I'll talk more in a minute about our financial results.
We continue to make proactive customer collaboration to keep her where she wanted to drive engagement deal pipeline and new product innovation.
During the quarter in past several weeks I've been engaged with our key customers.
The most challenging environment bigger fixed.
Broadly data is more valuable today than ever and our unique.
Yes, it's like twins, and again analytics are critical to helping our customers navigate through this pandemic.
We continue to take advantage of our strong cash generation to accelerate our cloud gated technology transformation investments under braking tell his leadership and with the support of thousands of technology team members. We are making continued strong progress on our 1.5 billion dollar technology transformation and we are seeing new customers access.
During our cloud native solutions, each week as our migration to accelerate.
We're also continuing to expand our investments resources around innovation, new products that are helping our customers manage todays challenging environment at all.
So with an eye on beyond the pandemic.
Our transformation into a product led organization focused on innovation enabled by best in class cloud data assets and World class technology, just becoming more real everyday you will power of our business 2021 and beyond.
Our teams strong execution and outperforming the third quarters, another very positive step forward for Equifax.
Turning to slide eight our financial results for the third quarter were strong and broad based.
He was 1.07 billion was up 19% on a reported and local currency basis, which is well above our expectations in the framework of 10% to 12% that we shared with you in early September.
Okay contributed less than 1% in the quarter.
Our growth was again powered by our U.S. BTB businesses U S. I S in workforce solutions.
Which had a combined revenue of up a very strong first you wouldn't have personnel in combined adjusted EBITDA margins over 50%.
Workforce solutions continued their exceptional performance driven by the value of the twin database with revenues up 57% in the quarter, while generating EBITDA margins of 58%.
It's Mark you workforce solutions second consecutive quarter of 50% plus revenue growth.
Yes, I'll also exhibited strong revenue growth of 15%.
Our strong U.S. BT business performance continues to be powered by our focus on growth and our differentiated data assets.
U.S. mortgage revenue was up almost 90% compared to the third quarter 2019, U.S. mortgage market inquiries are proxy for the overall mortgage market growth were up 51% in the third quarter driven by strength in both of you purchase and refinancing mortgage volumes the driver of our U.S.B.B. businesses substantial outperform.
That's versus the market continues to be workforce solutions, where mortgage revenue more than doubled for the second consecutive quarter to roll.
This was driven by the value that our customers place orders each waiting profit employment together data the rollout of new products. The addition of new customers and improve customer penetration and expansion of our twin data records.
Mortgage revenue growth of 57% also outpaced the market by 600 basis points.
Our unemployment insurance claims business grew over 70% in the quarter with revenue of $50 million.
In the third quarter workforce solutions processed about 3.4 million initial unemployment claims which is down from 7.5 million initial claims in the second quarter.
Workforce solutions continues to process roughly one in five U.S. initial unemployment claims.
We expect unemployment claims to continue above 2019 levels in the fourth quarter, but at a reduced level compared to the third quarter.
Excluding growth from unemployment claims, which we would not expect to recur in 2021 Equifax revenue growth was up a very strong 17% that third quarter is up over 12% year to date.
Revenue growth drove adjusted EBITDA to 391 million up 29% with the 274, a 270 basis point expansion in our margins to 36.6% we purge.
We prudently balance cost controls, while making targeted investments in our cloud transformation, new products and data and analytics adjusted.
Adjusted EPS was $1.87 a share was up a strong 26% despite incurring increased depreciation and amortization and you can apply cost of 15 cents a share an increase expense interest expense of six cents per share our second quarter bond offering.
This exceeded our expectations in the framework of $1.50 to $1.60, we shared with you in September.
Yes, I guess revenue of $386 million up a very strong 15% if the order with the M&A contribution less than half a percent.
Total U.S. itis mortgage revenue of 179 million was up 57% in the quarter as both purchase and refi transactions remained strong throughout the quarter and better than our expectations.
About 45% of our call last month.
Non mortgage revenue also strengthen in U.S.I.F. sequentially in the quarter and down 6% up from down 7% in the second quarter impact.
Importantly, we saw substantial improvement not mortgage online revenue, which was down only 5% as compared to almost 10% decline we saw in the second quarter.
We saw very good sequential improvement in banking insurance rental and direct to consumer with insurance turning from down double digits up double digits in the quarter.
You're starting to see signs of customers restarting origination efforts with several major that buys revenue up versus 2019 for the first time, it depends which is a positive sign for the future.
In September we saw positive growth in both insurance and direct to consumer which although still negative we saw improvements in banking auto and auto both of which had only single digit declines.
Financial marketing services revenue, which is broadly speaking our offline or batch business.
46 million was down 9% consistent with our expectations.
Cutting related revenue, which represents just under 40% of Fms continues to be down significantly, but did show some improvement as we move through the third quarter.
Risk Decisioning, which includes portfolio right to my review activities and represents about 40% of MFS and that.
And that does revenue was down slightly due to a large one time project last year.
Identity and fraud related revenue, which represents about 20% of Fms was flat.
I'm very encouraged by the progress of this thing in the U.S. bias teams continue to make especially during these challenging economic times. They are competitive commercially going on all fronts. We continue to see very strong new deal pipeline growth that you saw us with total pipeline value up over 30% versus last year driven by growth in the volume.
Average size of our U.S., So I asked type white opportunities.
Your deal opportunities are very positive side as we look to accelerate you apply as revenue growth.
You bet I asked adjusted EBITDA margins of 46% were up 160 basis points from last year.
180 basis points sequentially.
The improvements both year over year and sequentially were driven principally by the significant growth in high margin online revenue.
Turning now to workforce solutions had another exceptional quarter with revenue of $377 million up a very strong 57%.
Year to date revenue was already over $1 billion at workforce solutions.
Rudy Ploder and dws team continued to leverage broad structural growth drivers, including new products penetration pricing, new verticals and record additions to fuel their above market growth.
You'd have to U.S. remains our most differentiated business, particularly this unprecedented consumer environment, where our twin income and employment data is immensely valuable.
Verification service revenues at 301 billion was up 63% versus 2019.
Verification services mortgage revenue more than doubled for the second quarter in a row growing more than 80 percentage points faster than the 51% growth. We saw in the mortgage market craving for is the third quarter.
Verification services non mortgage revenue was up about 4% for the quarter slightly outperformed our expectations similar to the second quarter, we continue to see growth in government and healthcare as well as of yet because it wasn't the auto vertical as we increased penetration of twins.
During the third quarter, we saw significant recovery in council talent solutions, reflecting both increased U.S. hiring and the rollout of new products.
This is the second quarter.
She used to be very soft.
Employer services revenue was 76 billion decreased 37% this quarter driven by unemployment claims business, which had revenue of 50 million it was up 70% compared to last year.
Adjusting for the 20 million of incremental you see claims revenue in the quarter employer services was flat with revenue growth of nine I nine Onboarding services that was driven by the acceleration of line nine anywhere solutions offset by declines in our tax credit business.
Transaction activity are I know I can onboarding products improved through the third quarter and sequentially versus the second quarter, driven by new hiring activity with our customers.
Many of the large regional shipping in E commerce companies utilize our I nine Onboarding products. In addition, we are seeing a positive shift to our new remote nine product suite with new customer wins.
Strong Cws Verifi revenue growth resulted in adjusted EBITDA margins of workforce solutions of 57.8%, a 900 basis point expansion from the prior year.
Turning now to international revenue of $218 million, we got 5% on a constant currency basis, a substantial improvement from the down 15% in second quarter and better than our expectations as shelter in place orders were lifted in many markets and economic economic activity resumes.
Asia Pacific, which is principally our Australian business had a very good performance in the quarter with revenue of $80 million about flat in local currency versus last year and better than the down 5% we expected earlier in September.
Australia consumer unlike revenue was down 5% versus last year, a significant improvement from the down double digits, we saw in the second quarter.
Our straight commercial business combined online and off line, what revenue was up 1% in the quarter I get a nice improvement from the prior period.
Identity was also up over 15% in the third quarter versus the down 12% in second quarter.
Very good throughput offset declines in consumer marketing services, our consumer online to offline business in HR solutions.
For the second quarter, they continued to be down versus last year.
You deal with revenue was down just over 10% in the quarter significant improvements in the down 25% and the second in the second quarter.
European revenues of 59 million were down 13% in local currency in the third quarter are you.
Our European credit business was down about 7% with Spain, performing slightly better than the UK in the U.S.
In the UK consumer on online revenue was down just over 10% a significant improvement from the down 20% and saw the second quarter.
Analytical indecision solutions revenue was almost flat in the quarter, a significant improvement from about down about 20% in second quarter.
Combined consumer online in analytical decision solutions represented about 70%, 75% of our UK business. So.
Similar to the U.S., our consumer offline business continued to show significant declines due to reductions in economic activity and credit originations.
Banking revenue driven by new wins with top five UK banks was up over 25% in the quarter.
Our UK banking, even seeing real momentum.
Our European debt management business declined 20% local currency in line with our expectations, principally driven by government enacted policy that continued to temporarily called debt collections due to covert 90.
UK government debt placement activities, we started in August.
We expect for the fourth quarter debt management revenue to improve meaningfully as September.
Placements were up fivex versus pre coated balls.
Turning to Latin America their revenue of 40 million decreased 6% local currency in the third quarter better than the down 9%, we expected earlier in the quarter imports.
Importantly, our Latin American revenues were much better than the down 14% we saw in the second quarter.
Quarter, Chile, our largest country in Latin America delivered positive revenue growth in our Argentina, Uruguay, Paraguay businesses showed significant improvement some second quarter down about 4% in the quarter versus 2019.
Eat markets continue to benefit from the resumption of economic activity expansion of ignite the migration of customers to our global cloud based interconnects that it.
SAS Decisioning platform.
We're also seeing the benefit of the strong new product introductions over the past three years in the region.
Canada revenue 39 billion was flat in local currency the third quarter, a significant improvement from the down 13% in second quarter in line with our expectations from our September call.
Our online and commercial were both down about 5% of the third quarter and in bulk or substantial improvement from almost 20% declines in the second quarter.
Analytical decision solutions were about flat in the quarter I get substantial improvement from the second quarter, we did.
We delivered nice growth in candidate our idea broad business and property service businesses. It combined with the improved performance to the other segments allowed us to improve to flat in the third quarter.
International adjusted EBITDA margins of 32.3% roughly 130 basis points from last year. Despite the decline in revenue principally reflecting benefits from cost actions taken in 2019 and stronger strong expense management this year.
Turning now to global solutions revenue, which was down 2% on a reported and local currency basis in the quarter.
Our global consumer direct business was up 6% our highest growth since 2017 are now.
Our North American consumer direct business revenue was up a solid 6% versus 2019, all the UK consumer direct revenue was about flat comps.
Importantly, we continue to see sequential sequential subscriber growth in Western Canada, our two largest markets.
Not a continuation of these trends, we expect our consumer direct business to show positive revenue growth in the fourth quarter.
That Anderson in the Gcs team.
Good job, returning our global direct business to a growth mode.
The remaining gcs business is positive principally our partner businesses as well as our benefits channel an event based businesses decreased about 10% of the quarter in line with our expectations.
We delivered 11% growth in our benefits channel and event based businesses, but this growth was more than offset by declines in our US lead Gen partner business as originations continued to be soft in the third quarter.
Cts adjusted EBITDA margins of 24.8% decreased 10 basis points compared to the prior year period due to increased marketing spend.
To drive future direct revenue and lower lead generation revenue offset by onetime setup costs incurred during the third quarter 2019 related to a new multi year contract the contract.
Slide nine highlights the acceleration of revenue growth over the last several years and quarters broken down between the growth drivers from the extraordinary you see claims revenue in 2020 from high unemployment.
And the strong U.S. mortgage revenue market to help you look through the impact of the strong market factors to the underlying equifax for growth.
As we discussed earlier in the third quarter Equifax grew 19% overall with 200 basis points of that growth from you see claim revenue and 11 points of your equity.
Equifax revenue growth from the strong us mortgage market.
We are very pleased with the 6% core growth with strong sequenced the sequential growth versus the minus 2% in second quarter, particularly with the headwind headwinds from the coated recession.
Equifax is clearly outperforming our your expectations in the corporate recession.
The impact of the strong U.S. mortgage market is highlighting hurtful reflects wrote driven directly by the strong underlying us mortgage market to be.
To be clear this is not the growth of Equifax U.S. mortgage revenue, but he's dead only growth directly attributable to the U.S. mortgage market itself. If we estimate estimate based on mortgage market credit inquiries during the.
During the third quarter 11 points of Equifax is 19% growth was from the strong us mortgage market.
The impact of the extraordinary you see claims growth in 2020 is highlighted in blue.
We're providing this given the dramatic unusual growth year, we are seeing in 2020, and we expect to normalize over time.
Equifax core growth isn't really reflects the resiliency and breadth of our business performance in the quarter session essentially.
Essentially isn't the some of the growth in our us non mortgage businesses are.
Our international businesses in GTS.
And our end to end growth in our us mortgage businesses above underlying mortgage market growth.
Excluding the impact of the U.S. mortgage market and you see claims.
Thats correct core growth as the expanding from 2% to 3% in 2018 2019 during the global financial crisis.
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While we're still in the middle of the cold and debt.
This performance reflects reflects the resiliency and breadth of the equifax portfolio.
And that will cover on the next slide it's important to recognize that in the third quarter a significant portion of the 6% of Equifax core growth is being driven by our outperformance.
We need to be mortgage vertical powered by workforce solutions core growth, which was a strong 30% and U.S. I asked which was only down 1% on a core growth basis.
Its ability to substantially outgrow the underlying market is core to our business model is substantial strength that should continue to provide significant benefits through the balance of 2020, and indeed 2021.
Equifax is dramatically stronger at 2020 versus between 2008, 2009 recession with revenue up 19% in the quarter.
5% in second quarter was down 6% during the global financial crisis again, reflecting the strength of today's equifax portfolio.
A continued strategic focus and strength of that book taxes are deep and broad array of products and solutions for the U.S. mortgage market and build.
And ability to consistently outgrow the underlying market.
Slide 10 highlights this for our U.S. BBB businesses workforce solutions and U.S. I guess.
Workforce solutions and use by Aes has consistently outgrow outgrow the underlying us mortgage market.
The driver of the acceleration this outperformance over the past several years has been a tremendous growth in workforce solutions mortgage revenue, which.
Which exceeded mortgage market growth rates by over 20 points in 2019 accelerating to about 80 points of outperformance this year.
Drivers of the strong workforce solutions performance includes increased market penetration, which by this we mean, both an increase in the percentage of mortgage applications for which the underwriter requests and income and employment verification.
Next.
Decrease in the number of times and mortgage underwriter requested in color employment verification during the application process. Both of these drive increased 20 inquiries.
As we view U.S. mortgage marketing it.
We view us more to drive inquiries as a proxy for the overall market an important metric. We track is twinned inquiries as a percent of U.S. aureus credit inquiries.
Third quarter. This metric for the first time exceeded 50%, where we got one twin more mortgage market inquiry for every to us.
I guess credit mortgage market inquiries. This metric has been growing substantially over the past three years and has more than doubled since early 2018. However.
However, it only 50% it shows that we have a lot of runway ahead of us to reach the same utilization for twin as the credit file.
We are actively working with our customers continue to drive penetration through both expanded selling efforts across our customer ecosystem in increasing customer system to system integrations.
Second is increased fulfillment rate just the percentage of times, we receive a mortgage inquiry that we can't fulfill and is driven by that we can't fulfill and is driven by growth in between database.
While we have real scale that over 50% of the nonfarm payroll that database, we only facilities for 50% of our airports as.
As we add records. They are immediately monetize which provides real leverage for workforce solutions, adding you twin contributors in records as a priority for the twin pairs for the U.S. Cws team.
And third as new products, we continue to introduce new workforce solutions products to provide greater value to our customers in terms of depth of data and frequency of polls with higher price points and marred by margins, we expect npis to accelerate in workforce solutions from the addition of new product resources and leverage from the cloud transformation.
Workforce solutions is clearly our most powerful business slide 11 shows they are above market.
They are above market strong performance, which is highly accretive to equifax revenue growth margins and cash flow.
Through third quarter overall workforce revenue growth of 330 through 2 billion or 48% through 13 points of Equifax revenue growth in workforce core revenue growth of 163 million contributed six points of equifax for revenue growth versus last year.
The impact on Equifax, and EBITDA was even more powerful workforce solutions, delivering $572 million of equifax, EBITDA or 44% of our total EBITDA through the third quarter.
Let's go back to the powerful business, an important driver of Equifax results to 2020 and in the future.
As shown on slide Slide 12, you can see the continuing growth in our twin database, which has been a significant drivers for this value to our customers and the growth of workforce solutions in the third.
In the third quarter, we continued to add twin records and deliver new twin record growth of 6 million active records in the quarter even.
Even in the high unemployment environment, which drove twins the twin database to over 111 billion records up from 105 million, we had at the end of both first quarter and second quarter.
Twitter Records were up a strong 20% versus 2019.
We had a significant milestone in the third quarter, we contributors surpassing surpassing the 1 billion level. This is a million companies in the United States that are contributing their payroll records equifax up from 64000, a year ago, which has moved between data data being deeply into small and mid market companies.
With the twin database now providing information that over 88 million unique individuals.
Currently over half of the U.S. nonfarm payroll, we view this as a catalyst for workforce solutions, given the increasing hit rates and the uniqueness of the data.
As we've discussed previously we are.
For solutions teams expanding their focused on records beyond just W. Two April into areas like 10, 99 employees the gig economy and pension income.
The increase in depth of between database with now over 450 billion total records as the additional benefit of Crisa, increasing the completeness of an individual job history that we have in the database. This also significantly increases the value of unique twin data for both credit decisioning as well as in talent solutions and other revenue.
Patients.
As a reminder, we generate almost 20% of our verification services revenue from inactive records and we have built up over the past decade.
Which helps provide a full picture of an individual's employment history. This.
It's also expand the uniqueness and value of twin versus other sources of income or on the data.
What has been the most challenging economic and health environment, we face in our lifetimes Equifax delivered exceptionally strong performance again in the third quarter, while investing in our five transformation to new products. We are focused on finishing 2020 strong while investing for 2021 and beyond.
I'll now turn the discussion over to Jon just to discuss recent trends and revenue in our underlying markets is where else as well as review some other financial line items. After John's discussion I'll come back and review our progress on the tech transformation and new products.
Thanks, Mark I will generally be referring to the financial results from continuing operations represented on a GAAP basis, but we'll refer to non-GAAP results as well.
Third quarter General corporate expense was $155 million.
Excluding nonrecurring costs adjusted general corporate expense for the quarter was $109 million up $38 million from Threeq. Your 19 corporate function expenses, such as finance HR and legal were down year to year and cost containment activities, we outlined in April.
Increase in total general corporate expense was primarily due to higher incentive compensation costs 2022 are.
You are strong and improving financial performance.
We continue to exercise discipline cost management across the business, while also continuing to invest in our technology transformation and analytics new products and security.
Accelerate investments in these areas and I'm just wondering if we believe this will deliver accelerating benefits outside.
Outside of these areas headcount additions remain at levels below attrition and discretionary spending has been reduced across the company business travel remains at very low levels for the.
For Threeq you 20, the effective tax rate used in calculating adjusted EPS was 21.2% and in line with our expectations. We expect the Fourq eutwenty tax rate and full year effective tax rate used in calculating adjusted EBITDA, yes, the around 24%.
In Threeq, you 20 and year to date operating cash flow of 367 million and $645 million were up 532 million and $566 million, respectively. From 2019 increases reflect substantial improvements in operating performance in 2020, as well as lower payments for litigate.
And settlements in Threeq, you 20, and year to date of $341 million and $246 million respectively.
The timing of payment of the remaining $347 million to the U.S. consumer restitution funds, it's principally dependent on the resolution of the appeal filed related to this case at this time, we do not expect to fund the remainder of the settlement until early 2021.
Our liquidity and balance sheet remain very strong at September Thirtyth, we had $1.5 billion in cash and available borrowing capacity on our bank credit facility of $1.1 billion.
As Mark mentioned, our Threeq results were substantially stronger than the implication of the trends through August that we discussed in our September investor call.
Proved results are predominantly in our U.S. b to B business importantly, the improvement was in our U.S. online revenue.
Significant improvement in non mortgage revenue as well as in mortgage we also had stronger results in international and Australia and Canada.
The strength and adjusted EPS reflects the margin impact from the stronger revenue in September.
Slides 13 through 15 show details of revenue trends on a local currency basis that we saw in Twoq and threeq as well.
As well as monthly data for July August and September. We are also providing a view of the trend so far during the month of October and their implications on Fourq. You 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 monthly actuals, but it.
By two to 23 to 20 data as well as an estimate for Fourq you 20, but.
The monthly actionable data, providing should be viewed as directional.
Looking at Slide 13, starting at the bottom of slide you SBB revenue growth trending very positively in September relative to August and in Threeq, you 20 relative to each one of the U.S. Beach.
When you SBB revenue up 32% and three new 20 year to year as compared to 28% year to year growth. We saw in Twoq 20. This was.
This was driven by improved year to year growth in U.S.P. to be online revenue.
Mortgages year to year revenue growth strengthened significantly in September versus off course August and in Threeq, you 20 year to year and don't U.S. I asked and you've got the U.S. and stronger growth was in the context of the stronger mortgage market. We saw in Threeq 19, when you grew 20% from Threeq you wait.
Importantly online non mortgage revenue growth trends also improved meaningfully in both September entering Q 20, U.S. I guess non mortgage revenue was down only 3% in September and 5% in Threeq, you 20 year to year and Cws saw year to year growth in online non mortgage revenue in both September in third quarter 20.
Workforce solutions unemployment insurance claims business grew substantially year to year again in the third quarter of 20, we expect strong growth and you see again in Fourq, you 20 up about 30% year to year.
The column on the far right of Slide 13 provides a view on year to year revenue growth trends through mid October and the implications on Fourq you 20 revenue that those trends should continue.
Few reminders as we look at those trends.
Fourth quarter is seasonally the lowest quarter for mortgage revenue, reducing the relative mix of mortgage revenue and overall equifax revenue.
For Q 19 saw very strong growth in the U.S.P. to be online at <unk>.
18% driven by very strong for Q 19 online mortgage revenue growth of 34%.
Again, starting at the bottom of the slide 13 should be implication of the revenue revenue trends through mid October continue throughout 14, 20, U.S. beat to be online year to year revenue should continue to be extremely strong with growth rates and just under 30% both yes online E.W.S. online.
Perfect. Thanks, and service growth rates will be very strong but at levels slightly below what we saw in Threeq. You 20 mortgage revenue growth rates would be slightly weaker than in Threeq, you 20, reflecting strength in Fourq, you 19 mortgage revenue, particularly dws.
I asked not mortgage and year to year growth rates would be about flat with Ricky 20, and workforce Nonmortgage as expected declined slightly versus the slight growth you saw in Threeq you 20.
Workforce solutions employer services and year to year revenue would be up under 15%.
Unemployment insurance claims business continued good growth, but at levels lower than Threeq you 20.
Financial marketing services revenue would be down consistent with the levels, we saw in the third quarter.
Turning to slide 14, as Mark discussed earlier international saw significant improvements in all regions. In Threeq, you 20 been constant currency year to year revenue down only 5% trends through mid October international continued to improve and should the implication of the revenue trends through mid October continue throughout 14, 20, we expect international revenue.
It could be down only slightly in the fourth quarter.
Gcs October trends reflect a continuation of doses that mark discussed earlier.
Consumer direct growing total subscribers are expected to lead to a second consecutive quarter of global direct revenue growth in fourq.
As we referenced last quarter the decline in partner revenue. We saw in Threeq. You 20 is expected to increase significantly in Fourq you any declines in the lead Gen related partner business.
Expected weakness in partner revenue to continue into the first half of 2021.
As with our prior two earnings calls and due to the continuing uncertainties in forecasting the direction depth and duration of the reception in relation to the actions to come back up at 19, we're not going to provide fourth quarter guidance. However for perspective on total Equifax Fourq you 20 performance, we will again provide an illustrative fourth quarter framework to help you think about our performance.
Please turn to slide 15 to the extent total Equifax revenue continues at the pace I described earlier for Q 20 revenue would be up about 9.5% to 11.5% or 84 to 100.
Or $84 million to $104 million year to year, resulting in Fourq, you 20 revenue of 990 million to $1.41 billion adjusted EPS in Fourq you 20 at these revenue levels to be in the range of $1.40 to $1.50 a share down slightly from 14 19 Slide 15 also provides a walk through.
Explaining the translation versus 14 19 of the revenue increase to the increase in pre tax income and adjusted EPS importantly, either just to meet the s. levels at Equifax should deliver over $350 million and adjusted EBITDA in the quarter.
That guidance is there are still much uncertainty as to what impact the pandemic will have on the economy, our customers business activities and therefore, our revenue and earnings. This range provided reflects current variability in trends not abuse potential or outcomes.
As I referenced earlier in transit Equifax mortgage inquiry volume remain at record levels in the third quarter consistent with a very strong market data on originations and indeed.
In addition to very strong refinancing activity new purchase volume has been hit record levels in the June through August period up 20% from last year and.
And as we referenced last quarter for Black Knight estimates approximately 18 million households, still benefit from refinancing current average 30 year mortgage rates of under 2.9% for perspective current estimates of refinance originations in Twoq, you 20 or under 1 million per month.
As Mark referenced earlier, we continue to look to accelerate the completion of our tech transformation, including increasing investment levels in 2020.
President we expect Twentytwenty, one time costs related to the Equifax 20 point technology and data security transformation to be above $340 million, we expect capital spending to be about $410 million for the full year. As a reminder, in 2020. One we will no longer be adjusting our financial results for one time costs related.
Into the cloud technology transformation. These onetime technology transformation costs are expected to decline substantially in 2021 and will likely be largest in 121 decreasing throughout the remainder of Twentytwenty one those were.
Those onetime technology transformation costs will impact development expense DNA and we will continue to disclose these onetime tech transformation costs to allow you to have comparability with our financial results and 2017 to 2020 and with that I'll turn it back over to Mark. Thanks, John I'll wrap up with an update on our cloud technology.
Media transformation at <unk> and are accelerating focused on new products turning to slide 16, ex FX continues to make very meaningful progress on our cloud data technology transformation.
We're energized by the revenue cost margin and cash benefits, we expect from our cloud investments.
For a single cloud native data fabric and common cloud.
Mobile cloud based infrastructure will be able to innovate to do.
To develop more robust product solutions and multi data insights at our portable around the world enabled by our differentiated cloud data technology.
We'll be able to unlock new use cases and verticals with our solutions for new and existing customers.
Our cloud based infrastructure will also enable us to accelerate the velocity at which we can develop new products for months two weeks.
Celebrating the benefits our customers receive from these products in dry.
In driving our revenue growth.
We are already starting to see increased system availability as we move from our legacy technology into the cloud and can we expect this trend to continue.
Always on capability are table Stakes as a global technology company, we believe that as more customers move to the cloud and cloud to cloud Operability will deliver best in class systems availability, and a customer interaction seamless and faster.
And lastly, we're continuing on our path to be didn't return data security or security is core to everything we do led by advancements and data governance, we know the data security the battle that we must fight alongside our industry peers and our customers every day.
Turning to slide 17, we moved into the final phase of our North America technology transformation with a focus on customer migrations.
We're continuing our progress to migrate our customers into into our new cloud based systems, including our interconnect ignite capable.
Capabilities as a result.
As a reminder, this is the common set of services on which we are working to migrate all US is you gave us and international customers.
At the end as of the end of the third quarter by US as migrated over 4800 us customers and internationals completed migrations of less 6500 customers for you.
Are you up by EPS is up about fourx from be about 1200 customers migrating to the end of June.
We continue to expect this pace of migration to accelerate in the fourth quarter with over 10000, U.S. customer migrations expected by year end with the remaining us customer migrations completed during 2021, we.
We continue to adjust our development priorities to AD platform capabilities to ease our customers ability to easily migrate to our new platforms are.
Our progress on the transformation since our last earnings call in July is positive condition.
Condition will drive migration to GCP of our major North American exchange data us and Canadian consumer agro risk exchanges. The work number NCTC is principally complete.
We expect to have completely full migration, including all data ingestion processes for these extreme interest by year end.
This is a big milestone with these exchanges with these exchanges generating about 70% of North America online revenue.
We're also making very good progress in the full migration GCP of our secondary U.S. exchanges, the U.S. and Canadian commercial risk exchanges property and data ex exchanges. These exchanges are expected to be to complete full migration as we move through 2021.
Investments in Europe, Tam in Australia in deploying cloud native data fabric and our night interconnect Apiay analytical assisting framework are also progressing well.
Data fabric as lives and six global cloud regions global.
We completed the additional migration of our debt.
That'd be validation system in the third quarter and started customer migrations, which we expect to complete by year end and our.
And our eliminate cloud identity and fraud suite is now available to customers in the us and Canada and India I'd Cloud Native service is also available for the for the U.S. as part of our newly transform cloud eliminate offering.
Additional data sources will continue to be integrated our regular regular basis as we move forward.
We still have plenty plenty of work in front of US we are making strong progress in our cloud data and technology transformation.
Remain energized about the future top and bottom line benefits.
Our cloud native data and infrastructure.
Differentiate eplex in the marketplace today and will be even more valuable as we complete the transformation.
Slide 18 highlights our expanded new product innovation focus, which is a key component of our yet Thats 2020 strategy and the next chapter in Equifax is there.
As I mentioned earlier, we are focused on transforming our company to a product led organization and powered by best in class cloud Big data and technology to fuel growth as we.
As we progress through 2020, we continue to make strong progress on our goal to expand our NPR roles and are on track to deliver about 110, new products in 2020.
Through September we launched about 85, new products and we have an active pipeline at various stages of the funnel.
In the third quarter, we continued our strong focus on recession based product launches, including our response recovery product offering which provides.
Which provide lenders and service providers, the data and analytics they need to both care for their customers and ensure the long term health of their portfolios as well.
To sponsor a recovery enabled by our night market intelligence Sandbox ride lenders access to point in time in trended consumer insights in order to make better underwriting decisions during a period of economic instability as well as get the information they need to reach out to support their existing customers already in accommodations situations in other.
Yes.
And you asked is we continue to build on our strength in the commercial business in the third quarter US is launched B to B connect designed to help enterprises better prospect segment and retain key business clients with intelligence on more than 160 billion global companies, including 53 million us businesses in.
<unk> billion DDB contacts BB.
BB Connex is providing an extended omni channel view of business businesses companies need to better qualified commercial prospects and improve engagement with existing customers.
The commercial B to B product will be further enhanced by data from our recent acquisition of insomnia, which brings unique commercial leasing data to our already robust set of commercial assets.
And workforce solutions, we continue to focus on the hiring process and as a significant growth opportunity for our business and there are more than $70 million new hires per year in the United States.
In the third quarter workforce solutions launched the first the industry's first I nine management service designed specifically as an E commerce platform and with.
And with small and mid sized side business owners in mind.
For years large enterprise businesses.
Their trust in the market, leading high nine management solution to the macro effects now with the E commerce launches launches of our I nine starter and our line nine standard packages equifax it makes it easier than ever for businesses of any size to manage their requirements within.
With an automated automated I'd platform organizations could have more confidence in the onboarding and nine compliance and deliver a better onboarding experience for their new hires were.
Workforce solutions also continued to innovate and use this new solutions to support their financial and mortgage verticals in 2020, including our new mortgage trended income unemployment in multi borrower products.
Npis continued to be an important lever for equifax growth in a priority for me and the team.
We've expanded our focus and resources on driving in Rollouts in 2020, and more recently with a global focus on products to support our customers during the quarter the recession, we will.
We will continue to prioritize new products and innovation as we move into 2021 to leverage our cloud data and technology transformation.
Future for future growth.
Wrapping up on slide 19, as John outlined earlier, we're still unable to provide guidance for the fourth quarter.
We still see meaningful uncertainty from the impacts from the colder pandemic as cases, rising many markets impacting shelter and place orders consumer confidence and economic activity.
Also real risk of a second cold wave and potential increase lockdowns we.
We also expect further impacts from unemployment furloughs and salary reductions.
It's challenging open environment Equifax is operating exceptionally well our strong.
Our strong business model is resilient and delivering while investing in the future.
As we look forward to the rest of 2020 towards 2021 beyond and beyond we are confident the drivers of our business model and our growth strategy.
Our strong 19% growth in third quarter reflects the breadth and resiliency of the Equifax business model the strong us mortgage market and you see claims revenue with delivering incremental revenue margin and cash that allows equifax and continue to be aggressive about investing our cloud transformation, while expanding new investments in innovation new products and DNA.
Our strong results also strengthened our balance sheet to allow us to focus on accretive M&A.
In the third in our third quarter core 6% revenue growth, excluding the impact of U.S mortgage market and you see claims revenue is very strong performance in the current environment with our non mortgage and international businesses still pressure from the current recession we.
We expect those markets to recover in the future with the rollout of a broad based cobot vaccine and as markets recover and economic activity improves.
Workforce solutions is clearly a franchise equifax business that is strongly outperforming with multiple structural growth levers from new records in products, improving product mix, new verticals and incremental polls driven by the growth in system the system integrations.
While the mortgage market is a positive tailwind this year for workforce solutions their underlying 27% core growth year to date, excluding the impact of you see claims and the mortgage market reflects the power and breadth of the workforce solutions business model.
Multiple structural growth levers give us confidence in our ability to drive future incremental value for our customers and future revenue growth for equifax.
And the addition of 6 million Twin records in the third quarter will drive revenue growth in the future.
Our new that's a big contracts will security administration contract. It will begin generating 40 to 50 million of annualized revenue. Starting next year is another future workforce solutions growth driver.
We're also seeing enhanced and broaden the value of it.
Twinning company appointed gated given the scale and depth of the database.
Turning to US is they also had a strong quarter led by growth in mortgage.
It seems that offsets and winning in the marketplace.
I asked revenue is outperforming in the colder recession with total third quarter.
Both improving to down 1%, excluding both the U.S. mortgage market.
You ESI as mortgage business continues to outgrow the market nine points of core growth before third quarter up from six points in the second quarter importantly, USA as pipelines remain at their highest levels since 2017 from or a new commercial focus and rollout of new products.
As we look out beyond the impacts of the Covidien endemic we believe that our non mortgage revenues, which historically represents about 70% of U.S. Ais revenue are poised for growth.
US sites is competitive and winning in the marketplace are.
Our international business has a well balanced portfolio of global businesses, representing over 20% of Equifax revenues that have historically, driven topline revenue growth through new products and analytics.
Like our U.S. B to B business is most of our international markets do not have mortgage businesses and therefore not have seen a larger decline in revenue growth in 2020.
From the deeper quoted recessions in more severe GDP coal declines that have also impacted growth.
We began to see recovery are.
Capital markets in the third quarter, with Australia, and Canada flat versus last year and expect to see continued improvement as economic activity resumes globally.
And last our Gcs direct business is poised for continued growth behind our disciplined investments our DTC businesses are improving as we invest in new products and marketing and we surpassed 7 million by Equifax members in the quarter, which is a sizable base to cross sell financial products.
Did that summarize we're making very good progress on our cloud transformation. The data transformation with significant milestones are being achieved while customer migration to accelerate we are.
We are energized about the significant topline cost and cash benefits that will come from this transformation, including always done stability speed to market ability to rapidly new products around the globe, which we expect will help us improve our position in the marketplace.
Last our balance sheet is strengthened in 2020, our strong performance, allowing us to be aggressive about investing in our 20 give X 2020 update in technology transformation do products and data security, while looking for accretive bolt on acquisitions that will add to our strategy.
As we continue to deliver above market results in the Cokers session and focused on investing for future growth I'm more excited than ever about our future as a market leading data analytics and technology company with that.
With that operator, let me open it up for questions.
Thank you if you would like to ask a question. Please press.
Sorry, one telephone keypad.
If you are using a speakerphone. Please check your mute function is turned off.
Well I guess.
Hi.
Okay.
One to ask a question.
We will take our first question.
Okay.
Hey, good morning, Thanks for taking my question.
Just wanted to start on the the Mark and that they looks can really strong this quarter, especially within each of us and others have been marking up over time.
Do you think what we saw on the margin side.
To be sustainable and more normalized environment or is there anything you know like one time that we should be thinking about for this quarter.
Yes, it's a great question, you've seen over the last several years and certainly in 2020 so.
Strong topline performance in workforce solutions, and that's certainly translated into margin growth as you know in our industry Internet business in particular, but in all our businesses increase.
Incremental revenue growth drives a very attractive incremental margins and we see very strong performance in 2020, we expect that the.
That business to continue to perform in the future.
I think we are prepared to give any guidance around margins you know for the future because we can't do that broadly, but we've got a lot of confidence in the workforce solutions business given the multiple levers that they have to.
To drive to drive future growth.
Got it that's helpful. And then just one follow up I know you mentioned that you could even increase now that you're having about one inquiry and twin for every two or if you like mortgage origination inquiries.
What do you guys find is the biggest gating factor there Tam getting now moving that ratio higher is that does that more like consumer like lender awareness.
The data database or is it just that you just need to keep pushing the snowball down the hill and adding more employers and records onto the network.
Yes, it's less about the employers and records, it's really what you pointed out it's really getting in front of our customers.
Showing them the value of the product.
It's also driven by new products.
It's about the last couple of calls that workforce solutions is rolling out new.
Rolling out new products that provide multiple holes in a package for mortgage application as one purchase from Apple facts, and we see that driving.
Although the polls, we also see the system to system integrations.
Being a real driver, where we're getting embedded in our customer workflows and we've got a dedicated team that works on that with our customers to show them. The value of the income unemployment data and then you know as you pointed out just getting in front of customers. So they understand you know that.
Let's say getting predictability feared.
Your mortgage originator and you're going to spend call. It $4000 in a mortgage application. When you start that application process you want to make sure that you are working with a customer that is going to be able to be approved how part of that is historically pulling the credit file up front to understand what the credit profile of that customer and that's kind of a common pratt.
This today increasingly the more sophisticated mortgage originators are starting to pull up front the incoming employment data, particularly in this environment you know understanding where are people still employed and then pulling it multiple times. So those are just multiple opportunities that the team has and using mortgage as an example, it of course.
The same holds in other verticals, where we're seeing.
Secularly database becomes almost a catalyst to over well over 50% of the nonfarm payroll, it's becoming an asset at the hit rates are very valuable in multiple verticals beyond mortgage.
And we'll take our next question.
<unk>.
Good morning, maybe I can just follow up you know.
That leads from I guess, the big team, but we've seen a lot of the ACA.
Acquisitions are mines black on the whole bunch of stuff going on out there and I guess the side.
Trying to get more penetration Bluetooth despite like how do you look at the opportunity.
With that.
Do you have.
Plans are probably solution than the norm wouldn't just some thoughts there would be helpful.
And if I apologize I missed the first portion of the question can you just give Harvard race.
Yeah, It was tied to the team around.
That being said I guess, there's a lot of opportunities striding from back and I was just wondering if you had drawn at plan for your mortgage business outside of just kind of you know little bit more penetration that you just talked about.
Yes.
Obviously, we have a large mortgage business and we're benefiting from the market Tailwinds, We've got a real focused on rolling out new products.
Particularly in workforce solutions, but also in U.S. I asked our yen products.
Or another growth area for us and I think what we're pleased with is the fact that both us vias and workforce solutions are outgrowing the mortgage market. How do you do that when you do that with new products, New solutions I'm driving more usage of your products you know in particular, you know that's a.
Around the two.
Tweeting incoming appointed data being.
Or.
Pull more frequently and then just the system the system integrations, where we still have a lot of runway to work with our customers did you have.
Convert them from dialing in Kenya into the system on an individual applicant basis to pull the income unemployment data to going to system. The system integrations, which is it is you know is more of a more of a credit file side.
But it's one that's an opportunity on the incoming employment side that really yeah, we've seen big lifts utilization when we are embedded in the workflows of incoming appointed data we've had great progress in adding those in the third quarter and in 2020.
Got it.
Just on the tech transformation when we started the program.
It's about 1.25.
And it's a pretty big bundle, we talked maybe that's some buffer but last quarter, you said 1.4, and I can put it into the 1.5 billion program. So I was just curious that incremental since it's been more than like I guess ready to go over budget away that X system have been required today.
Yeah, and that's been an area that we've been clear that we are going to invest more if we see opportunities to do that to accelerate the transformation and just to be clear and I know you'd notice, but the billion five we now talk about is the incremental spend in 2018 1920.
So that so thats going to be behind us and thats, how much we're going to spend through the end of the year and we'll obviously be spending money in our technology as we go into 2021 and beyond that that's going to be at our run rate and versus the incremental spend that we talk about and with our strong financial performance.
In the second half of 2019, we started investing more in the tech transformation and.
And as we continued in 2020 and performed so strongly during the cold recession, you know we've made strategic decisions to accelerate our spend in order to drive it.
More rapidly we think that's the right thing to do because of the sizable benefit that we expect to get from the transformation.
Yeah.
Your next question comes from Andrew Steinerman.
Good morning, I guess two questions that have first of all I Didnt catch if you gave the total equifax third quarter revenue is related to mortgage so I'd like that if you are correct and that I'm looking at slide 13, Ondeck Cws Nonmortgage September stood out to me.
Like jump forward and.
Forward and sort of October kind of normalize back to July August rates could you just talk a little bit a backpack September come forward.
Sure. So in terms of a total mortgage revenue total mortgage I was a little over a third of Equifax total revenue. So that's the best way to estimate that in terms of September non mortgage for Cws, we have substantial business with government and other participants and so it can just be a little choppy and and obviously the under law.
Revenue base isn't that large so just just movements between months, Ken can result in different growth rates between the months quite honestly thats why we indicate that that when you're looking at those numbers you should consider them indicative and that's why we focus a lot more on the quarterly numbers right.
Thank you.
Well take our next question from Tony.
Thanks.
So much for taking my question I just wanted to.
Just wanted to ask broadly about how you're thinking of that they trends in consumer credit unwinding handling for some lenders talking about firelayers more borrowers exceeding forbearance and defaulting, which could impact the appetite for lending, but on the other hand, you have recovery trends, taking hold in the economy or anything.
Not so great to hear broadly about that and specifically how so just wanted to ask about the sort of better September nine mortgage and barely Kenya, SAS and Ah.
October getting a lot of that line between like where September I mean, I'm not quite sure.
Right.
Thanks.
The first half of the question Tony is obviously complicated you know its a.
It is a echo.
Economic event to help a bit like we've never seen before kind of broadly the consumer.
Is that it's still fairly strong obviously, there's the high unemployment that some of the stimulus benefits of health the consumer when we.
When we talk to our customers they're at their delinquencies are not increasing yet because they're making minimum payments and they're not behind in credit card payments et cetera kind of I'm talking broadly. So I think that's kind of what's happening. So far I think what we're all watching is what happens as stimulus dollars I want out.
We are not going to use.
Plus dollars either pre or post the election in a few weeks says is tough too tough to see where's unemployment going to go you add on top of that the what's the timing of vaccine you don't how like how quickly will it be deployed.
Across the.
Relation, which obviously will drive economic activity is just a lot of you know channel.
Challenging site that's.
Messages there to try to try to work through what's underlying that from our perspective is that data is more valuable than ever for our customers and that's what we're seeing obviously our performance is quite strong.
Data is being used to try to look through to who are the customers. The consumers that are still working.
For the consumers that a you know can take Hawaiian increase or a you know have a more.
Have a mortgage refinance.
What did the data so I think thats a positive for our industry, but you point out which is why we struggled providing guidance for the fourth quarter 2021.
Stage, it's still quite uncertain about where that consumer is going.
In terms of your question on September at minus three and then the quarter minus five in our discussion around that October at about minus five.
Again, the about minus five and about minus three to US are very similar numbers right and that's and September's monthly data. So I think the important fact is we are seeing an improving trend we expect that the that we're seeing our business improvement non mortgage and we're very happy with that trend, but as we look through the rest of the rest of the fourth quarter.
About 5% you know is can be a little bit on either side of 5%.
Yeah.
Okay.
Our next question comes from.
Hi.
Hi, Thank you good morning, and appreciate all the helpful disclosure and the gap or the number one investor question I received on Equifax with weather revenue and earnings growth is peaking given this extraordinary mortgage market expansion, which clearly benefits both U.S. I asked mws, along with increased appetite for tw unemployed.
And then.
And income.
Data during the coated pandemic and clearly there are a number of positives that will sustain the 20% growth and tw and records the growth and CPI the growth in the pipeline, but as you start to think about a 2021 framework.
You want people to start with that 6% core growth from the third quarter what are some of the parameters.
You know that that you're starting to think about as you framed your own views on 2021.
Again, I think we're going to try to avoid getting into 2021 guidance, but we were quite intentional because we're getting the same questions you're getting about you know what how do we look through Equifax is very strong performance in the year, particularly you know from the decremental you see claims revenue which is meaningful.
We've highlighted will likely normalize in 2021.
With unemployment did presumably coming down are appointed claims not continuing and then of course, the us mortgage market.
Mortgage market. That's one that is difficult for us to handicap, John talked a little bit about that one.
We can't forecast, what's going to happen in 2021 on the mortgage market, but the fundamentals.
You know are still quite positive for 2021 on the U.S. mortgage market with the fed state.
Stating pretty strongly that they're going to keep interest rates at the record lows.
In 2021, so thats a positive.
Or refinancings and for purchase volume, we've seen a purchase volume really accelerate in the last 90 days in the United States is consumers are going out to buy homes or upgrade to get larger homes or move to the suburbs and you know again, we're not forecasting but it feels like theres some legs on that that macro.
And then of course, the refinance side.
It's still a very sizable population as John pointed out of consumers that have not refinance their mortgages yet that is multiple quarters, you know of that.
Thats, but thats benefit.
With regard to 2021.
Like some of the positives for Equifax you know you can start with a lot of our businesses are still challenged by the cobot pandemic when we're.
We're not forecasting 2021, but if you believed it was going to be a vaccine in the vaccine is going to result in.
More normal.
Recovery, a recovery of some sort that that's going to be good news for equifax in international or are.
Non mortgage businesses in the United States.
Our gcs business. So that's a positive as we go forward as you point out the power of workforce solutions as we.
As we entered the pandemic U S. I S was in a recovery mode. Following a cyber event we build.
We believe us is performing quite strongly on a mortgage and non mortgage bases during the pandemic, but as we get into more of an economic recovery, we expect that to accelerate as exhibited.
By the.
Deal pipelines are growing and indeed increased commercial activity and of course workforce solutions, we tended to really highlight how important that business is that importance performances you know they've got.
They've got a long list of structural us levers that they can that there been pulling and will continue to fall as you pointed out records 6 million addition, in the quarter is going to serve them well, but with higher take rates in which drives higher revenue in the fourth quarter and into 2021, and then of course, the other elements of the of the business.
So our attentive providing additional disclosures this quarter was to help you at our investors you'll see through the underlying performance of the cobot recession and again, we're still in a cold recession, you know equifax delivering justice.
X percent core growth is really quite strong and.
The Tailwinds you add on top of that the benefits from the transformation that as Weve talked about the you know we've been very clear, we'll begin really kicking in in 2021, which will be another positive for us on both our top on topline.
Margins and cash generation.
I appreciate that just a quick follow up on capital return will you be in a position to do more in turn.
Do more in terms of capital return as we approach 2021 in terms of dividend growth buyback got more M&A.
Yeah, we've been we've been clear that so again I don't want to give guidance and we don't as you know we don't have a financial framework in place, but we've been pretty clear that it's our goal to get back to that you know we've been in.
We've been investing heavily in our tech transformation and we are getting a.
The expanded our tech transformation certainly behind us in 2023 years.
Three year plan and it is we believe that our cash.
Cash generation will accelerate as we go through 21, 22, 23, which is going to provide free cash flow to work for us to invest in M&A, which we talked about earlier in the call. Its our intention to have more focus there and we don't want to give any guidance around our intent to do a buyback or you don't reinstate dividend growth but.
We've had that framework in place before and we'll certainly consider it at the right time, when we put our financial framework and capital allocation plan back in place and in the future.
Yes.
Next question comes from Kennen Mackay with credit Suisse.
Great, Thanks, and pay ups spend a minute on the progression of the clients in E.W.S.
If I did my math it looks like the.
Average client size was about 4000 backing in 2008 in that numbers closer to a 110, they sense the supplement to kind of profit versus records.
Records in the work number.
Given the small.
The smaller clients commit increase in English or any way to frame what the opportunity is.
If you turn to triangulate from a dollar perspective kind of the work number with the core US all this business as you look out a little bit. So just trying to get a sense of again the market opportunity as you go more down market and then what that can mean key enterprise overall.
Yes first off more records.
As more valuable right and were contributors as two and moving and moving.
Now moving 6 billion up 6 million records. This quarter, we think is a big milestone, where we were flat in the second quarter, but there's.
There's some bumpiness to went records come in and we had a very strong quarter of execution, there, but were up 20% of records year over year as you know and that's going to drive hit rates and revenue growth going forward and then to your point that you just really the addition of more companies. There's all kinds of numbers out there on how many companies are our United States, where.
There's three or four or $5 million, but going from 69000, a year ago to a billion companies really does increase the breadth and depth of the database. So that's very very positive for equifax and for our customers.
You know one area, where the databases you do you know what I would call.
In the more near prime or subprime customers and you see those customers and all kinds of companies, but adding a you know more companies going a million companies just brings more value to the database and yeah. We're really intently focused on continuing to grow the database.
So I mentioned earlier in the comments that you know getting to this level of scale, I think 88 million uniques or 110 million active as well as the inactive.
Really takes the database almost as a catalyst to being a very very valuable just because the hit rates go up and the other thing I commented on is that the team is expanding their focus we've had a W. Two focus on nonfarm payroll for a long long time in the last year, we started to expand that focus around the gig economy 10 90.
Nine we're actually in testing now into our database and 99.
Income data pension data is another one that we've got our sights set on so there is that we're going to head towards nonfarm payroll, that's going to take time, but we've expanded our focus to go well beyond that to get all levels of employment or other income. It consumers are having so we become really a one stop shop for all that all that.
Data.
Got it and then just to follow up on off real quick I know.
I know obviously the focus bet on the mortgage side, but it seems that there's the opportunity to flex our out across other credit instruments as well so.
Yeah, that's a big focus for us and we've talked on prior calls that.
The values that we've been there and we see.
We shared with you and others that if you take a credit data and add income unemployment data to with the predictability or the Ks for from that decision goes up dramatically so that.
So thats always been the fact, it's one that we've been sharing with our customers for years because.
The coking prices created a catalyst for that and we talked about in the last call.
In the second quarter call that we're seeing for example credit card customers. You know we've got a couple of major credit card customers that are now embedding the work number data into their origination workflows, so adding into the credit file that's a big deal for us to get into that space in the auto space. Historically, it's been used in closing for sale.
Customers and now we're seeing it used more broadly because it increases the predictability that underwriting decision and it's really around our our focus on differentiated data but of course, the tweet incoming employment data is just a very very unique and ended scale, which provides real value and of course you know we.
Being talked about in this call, but government is also a very fast growing.
Fast growing vertical for us I talked about the new social security administration contracted kicks in in 2021.
You know that's an example of how we're expanding the use cases of the 2000 data and then of course.
Another growth area for us around the data is in the employment decisions when you're hiring someone we call talent solution. So thats another area that we see a future growth. So there's just a lot of levers for growth in that business.
Our next question comes from <unk>.
With Deutsche Bank.
Hi, Thanks for taking my question.
All right. Thanks, Herb execution under SMS My question a follow up question there was a.
The fact that difficult comp from a big Black run last year, I'm listening and middle East boxing, let's get back to a more normalized.
[music].
Sorry, you're breaking up a little bit can you repeat that question Oh, sorry, sorry about that my question was on Fms. There was a difficult comp that I was just wondering when you look back difficult comp with city and they do we get back to a more normalized Kirk and SMS there.
Yeah. So your question about yet, but that's been the go first off we're still in the colored recession in yeah.
That business provides data for both portfolio management and marketing and as I pointed out my comments like John did too you know a lot of our customers have curtailed or slowed down due account originations, which impact the business and.
So when you talk about normalized growth you know the first thing are the biggest factor that's going to drive that will be a resumption of originations, which we started to see we commented that we had a couple of customers in India in the quarter ended September.
Started to originate started originations and actually had origination volumes with us our revenue with us that were above last year. So we're starting to see signs of those originations as John pointed out we also had.
Bob a couple of larger deals if you will in 2019, I would attribute that to part of the U.S. diets recovery.
That haven't repeated in 2020.
I would characterize most of that is driven by the cobot recession, India impact decisions, our customers are making around having the resumption of originations, but we all know that our customers will start originating again once their confidence grows.
They have to your that's a part of your business you have to.
You have to continue to add new customers. So it's just a matter of when they start doing that and we would expect the business to grow there on the portfolio management side, that's one where we've seen some increased activity as customers are focused on managing the fact book we would.
We would expect that to continue to be a positive a you know a tailwind as we move into the fourth quarter 2021, Joe is typically that is you're coming out of the recession or in a recession. There is a lot of focus around managing your existing portfolio.
That's very helpful color and maybe just a quick follow up on the cost savings Ah. Thanks for those details I was wondering if you have a timeline by which we should start seeing the cdks flow to the bottom line and an incremental touch on.
How should we should we think about the investments going forward. Thanks.
Yes, that's why they were not ready to give 2021 guidance, we're not giving guidance on that.
It is our plan to provide some visibility.
In the in the future in the near future around what we expect some of the benefits to be in 2021 as we have.
Have some level of framework for 2021, we're not sure we're going to be able to provide guidance, but we'll definitely do that was not ready ready to do that today.
That said, we have been quite clear around what we expect the yet the benefits to be.
Sizing of the cost benefits.
They were going to get from the cloud transformation the cash benefit do we expect to generate which we believe are sizable as you know we havent frame yet we expect the revenue benefits to be those will all be firmly embedded in our long term framework when we put it back in the back in place.
Our next question comes from George.
Hello.
Great. Good morning, guys and thanks for taking my questions I guess first to kick things off.
Mark I think you said that about 1% of verification revenues coming from from inactive accounts and I'm I'm I'm, just curious how long and an inactive accounts to be monetized mean, what's what's sort of the lifespan of an inactive accounts and then does that really skew to.
Two one vertical within each cws more than any other so for example, you know mortgage where you're bundling surfaces or or something like that.
That's a great question. It's one we haven't talked a lot about the 20% the big percentage of our revenue, but it really goes it's really every vertical has different use cases, where having a multi multi year period multi year history of someone's employment is quite valuable the other that use case, where they used to on working today and how much do they.
And then there is other use cases of work that they've been working for the last 12 months. So they've been working for the last two years and as you know people change jobs. So having a a you know a multi year or a multi job work history for someone is quite valuable we have something like an average of 4.5 jobs.
Per unique individual in the database, which makes sense you know.
There's a lot of people to change more often over a five year period six year period, two year period, and others and then some that are in the same job, but that history of data is incredibly valuable. There's some use cases, where you have to have the history. So that only having what someone is doing today is less valuable which really go down the path of like a somewhat.
To provide a pay stub.
That might work in some subsidy situation most of our customers don't take those anymore, but when you have a use case if someone wants to know where you work for the last two years, the only way to really prove that you know in getting quickly and completely inaccurately is to come to workforce solutions. So that's why.
Why the data is used and if you go around verticals.
It's really every vertical it's a you know mortgage he's got a lot of use cases, where it's very very important to have a real history at work and in employment and income.
Auto has it.
Cards less so others use cases, where some card issuers are looking at that are going to government space. You know, it's valuable volte today as well as the history and it just reflects the value of the business you know its taken us a decade to build up that 450 billion records.
Individuals.
Just a very very valuable.
Okay. That's that's a that's super helpful color really really appreciate it and then just as a quick follow up I think obviously within Ccs partner is under increased pressure and I I think if I caught the comments you were suggesting that it will stay weak. The first half of next year I'm. Just just curious if you could talk a little bit.
At about the visibility that you have.
In that channel of the business going.
Going forward.
Yes, I didn't say through the first half of last year I think we said we expected it to say to stay soft through the fourth quarter.
We don't have visibility just to be clear.
But in our discussions with the customers in that space, which is really in the lead generation states. It goes back to the origination point I had earlier around our USA a step in that business.
Customers originators, whether your bank card or personal loans, you know clearly curtailed in the coated recession, new originations so that impacts our Fms business and also impacts some of our partners to use our data embedded lead Gen space.
That will come back over time, we don't know what it is it's hard to forecast as we look out to the fourth quarter, we expect it still to be weak in the fourth quarter on the lead Gen side, just because we don't see signs, we see signs of improvement, but not to where it was a year ago.
Okay, great. Thank you I missed this or that.
Our next question comes from.
With Jefferies.
Hey, good morning. Thank you. My first question is just on the tech transformation timeline.
Any any way to think about the risk that that timeline bleeds into sort of 2020 do with Workover.
Yeah, we've been pretty clear on all of our calls during the covered recession that weve been meeting our milestones and we've had no change in our.
Our plans and we talked a bunch on the call. This already this morning around.
Outgrow twin et cetera, you know being in the cloud. So we're you know we're very pleased with our milestones and we're also very pleased with our migrations remember there's two pieces detect transformation one is getting the technology right getting our data assets and.
Applications into the cloud and then second is migrating our customers to it and you saw that we're making good progress in the third quarter and we expect to make good progress in the fourth quarter. So you know we're pleased with our progress there's still a lot of work to do but we're meeting our internal milestones that we are trying to share with you transparently.
And we've been clear that the focus was on North America, which is like 80% of the revenue and we have indicated that some smaller properties are smaller businesses, what would trail out further into the future, but that that would just become normal standard.
Great. That's very helpful. Then just my follow up on the on the mortgage market specific we just on Fannie and Freddie and you know any any potential changes there under either administration, you know either more autonomy new capital rules prioritization.
Just any charter on Fannie and Freddie and how that May impact you or is that not really a big deal. Thank you so much.
Yeah, we are.
There's a lot in that question you got into the yeah, what could happen.
The elections, and a you know versus Democratic Republic, and you've got to get into who holds the Senate et cetera.
I think thats, probably a longer question, but I would say more broadly.
Specifically to Fannie and Freddie we don't see any changes impacting equifax It front administration.
Current administration changes or not with Fannie or Freddie frankly, more broadly we don't see that the you know how equifax Equifax operates we provide a very valuable service to you as consumers and into our to our customers and we don't expect that to change to it you know whatever happens in November.
Well take our next question from Bill.
Yeah.
Good morning.
Hi, everyone.
So this new.
New I nine product you guys introduced last week that takes nine nine matching suite down market to the small and mid sized businesses.
I realize that's part of the in employer services, but and not verification services, but.
Is the strategy to you.
Product as a source of new leads for the work number.
Yes. It is you know we like our talent solutions in employer services business as a complement to our verification services business and for US the idea of having more connections and services when DHR manager, who is providing us making the decision to provide us there.
Their payroll records for the verification side of the business. We think is positive. So there's no question that we want to continue to expand the services and products that we provide on YY nine side. We've introduced a number of line nine products that were really pleased with their performance and only nine anywhere that.
Allows a yeah.
Prospective employee to complete that process remotely I'm using a digital solution and in some of the smaller company products that Weve introduced its just the examples of our our focus on innovation and new products, both to drive the business, but to expand our our relationship is I would characterize it when DHR.
Manager So we have more connections for the broader echo system of workforce solutions.
Got it.
My follow up question I, just wanted to ask on the social security contract. That's starting up next year, the 40 to 50 million in revenue.
Any additional color on the timing on the start of that revenue beginning of the year middle of year something.
Yes, too early on that one yeah, we certainly expect revenue in the in 2020, which is why we talked about it that way you know a full run rate is going to be to 40 to 50 billion.
Likely won't be full run rate for sure and 2021, but.
But we're actively working on the technology elements are you with our customer and driving it forward. We talk about this contract just because of the size of it it's unusual to have a dual contract at that size, a you'll get landed but it's just a reflection of the.
The value of the workforce solutions the data in so many different verticals and use cases in this case in the government space with so security administration.
Hi, Jeff.
Jefferies.
Yes.
Okay.
You may have a sunny.
Hi, guys.
I appreciate you taking the question I've been a long call Philip good information Mark I, just wonder if you could address.
Actual taxes position in Fintech I know, it's one of the areas in cobot that that maybe in a little bit weaker than some of the structural growth area you enumerated, but maybe.
A cyclical outlook bearing and also market share plans and outlook would be helpful.
Yes, I think we can clear it's a space that we refocused on the.
Started building our resources in the latter part of 2018, we added resources in 2019, I think from commercial resources, we're up probably between two and three X. What we had two years ago.
So it's a space we want to be bigger and we think we're well positioned to be bigger in it we had pretty strong market position with most of the fintex with our twin data, where it's used in of course, it's expanding usage during during coated and were working to take advantage of that relationship.
Some of our credit data and we've had some positive wins.
I don't know $250 million market, the United States I think you know our competitors are much stronger than we are but we think there is room for echo Baxter grow up many of those are single sourced in the Fintech.
From starting out that way and they're getting to scale, where they could be a dual source, which provides an opportunity for equifax, particularly when were already in the door with our twin data.
I have been more impacted than I would characterize it advised tick, particularly because of their oh funding requirements are they typically our balance sheet funded so they've been more impacted on originations, but we stayed supporting them and we're continuing to have some commercial wins during the last couple of quarters in that space and it's an area.
Since taking the U.S. is team or are focused on you know for rapid growth in the future we see it as a strategic market for us going forward.
Thank you appreciate it.
Well take our next question from Andrew.
With William Blair.
Hi, Good morning can you speak to the potential for competitors to replicate certain aspects of the work number database in the U.S. over a longer timeframe.
Certainly seem unlikely that that that had the same level of integration with employers and same number of employers but are there other ways to gather some of the same data aspects whether it be through you know some of that.
Some of the payroll processors or in the rising demand deposit accounts I guess I'm just wondering how you protect your remote there and whether alternative approaches to gathering income unemployment data could result in alternatives for your customers down the road.
Yes.
I think we have real scale in the business, which provides a competitive advantage for us would workforce solutions. We've been in this business for over a decade.
We've invested between the acquisition of the business and what we've invested in technology and resources Xeo a couple of billion dollars you over the last 10 years and the scale of the business. We think provides you know some real strength in the competitive advantage, we talked about the history of the data, which is really hard to get on an individual where he'd Barbara.
For the last two years, while you're at Equifax, where do you work. The two years before that are the two years before that color.
Collecting that data is quite challenging.
We're we're participating in some of the other ways to collect the data you pointed out the bank transaction data and trying to appeal to and you know the net pay in someone's a bank account.
That's a data source, but very difficult to get the consumer has to consent to give to data and so we think thats a quite challenging. So we think there's just a lot of Ah strengths around the business, we're always looking at.
Looking at who our competitors are in every business up and but this is one where we think we have some real market strength given the scale of it.
[music] point out the network of connections we have with so many customers and then of course.
Having a billion companies you know deliver data to us on a per unit basis.
That makes the dataset to you know very very valuable in tough to replicate.
And if you're a if you're a.
The company you are likely not going to get the data to two two companies you're going to give it to the company and its been in it for a long time, and we think Thats a in other important elements record back. So how are a strength of the business, our proprietary and a and a security around it. The fact that we authenticate or anyone of you.
The data.
Whether we're able to use that there's just a lot of security and protection around that which is very important to those that actually oh, he didn't contributed to us.
Okay.
Got it yes that makes sense. Thank you and then switching gears a little bit from my follow up.
Hoping you could speak to the margin performance in the international business in the third quarter margins expanded quite nicely year over year. Despite the revenue decline. So I was just wondering if there's anything you'd point to specifically on the cost front in that segment and the now permanent some of those savings could potentially be.
Yeah, we did some cost work in international in 2019 that we're getting benefits from and then there's been some tightening during a 2020 during the coated endemic because as you point out pretty strong performance on margins you know given.
The revenue declines, which are still quite substantial you know emerging international because the cobi endemic. So we would expect a you know those are is the coding and then it got get behind us and economic activity improves. It obviously revenue should you should go with that and improve that should be positive for the margins have been.
So going forward.
Well take our next question from Jeff.
Thank you good morning, So John I think you tried to preempt. The question about the bridge you gave us on the slide but just.
But for illustrated framework.
He asked him down slightly on low double digit.
Revenue growth it looks like a lot of had one factors are calling on your bridge from Q.
All year yet.
Square, where we are the first three quarters or anything else to call out on Q4, you have some framework.
Now the only other thing you're seeing is the other is a little bigger than it's been in some of the other quarters right and that's really driven by the fact that the comment I made around corporate expenses, you're seeing a significant increase in incentive compensation because of the fact that the business has performed so incredibly well over the past two quarters are our expected performance has improved quite significantly and you're seeing that across.
Across different areas of incentives, including sales compensator and that's affecting the fourth.
The fourth quarter because of the very very strong performance. We continue to be continued to be spending related to that.
Related to the transformation some of that's flowing through and tech expense, but those are the biggest drivers. The other thing that you're seeing and its a footnote on the chart rate is X.
Great actually higher in the fourth quarter grain year on year, so that negatively affects negatively affects the comparison as well by three or four cents a share. So so those factors together are what drives the difference between the revenue growth and Andy and good morning.
Okay, and then I'm struggling to understand the magnitude of the change in trends in the Q4 outlook for the Tcs partner channel.
All about kind of activity at the weekends and member count not seen backfill yet on the churn side.
Sure, we're running we're running loss or partners or any changes or terms with sizable partners pricing or how to use you.
Yes, there's a number of things in there, Jeff and Oh, There's certainly says we're always working with our customers to help support them in tough economic events. So I think you could attribute that the changes in perhaps pricing and things like that but then there's also the underlying volume.
Volume is quite challenging mortgage is also a contributor as they are.
Their customers and of course in our case, so with our Fms business to store not anywhere the year pre coated levels with regards to water originations.
Okay. Thank you.
We'll take our next question is from George Tong with Goldman Sachs.
Hi, Thanks, Good morning, Mark you mentioned the core revenue growth was 6% in the quarter, excluding benefits from unemployment claims in the mortgage market can you talk a little bit about what may be driving that difference between the 6% core revenue growth in non mortgage fee. The fee revenue performance in the quarter. It was roughly flat to down.
So I guess I follow your question.
It's really going to be the outperformance of our mortgage businesses, which is worth of workforce solutions is growing obviously the mortgage market is up as we highlighted on couple of the slides in our comments they've got core growth in the mortgage business. So that you know thats going to drive that is the same with U.S. Palios said.
600 basis points of growth in mortgage core versus the mortgage market and workforce solutions is multiples that people do records and new products and everything else. So that's really what's driving it now, which we think is very positive and coated recession of course the rest.
The rest of it the non mortgage businesses in equifax that are still negative.
Many markets and verticals because of the cold recession, you know those should will recover as economic activity comes back in.
In the future a you know as we get through and pass the quoted market impact.
Marc indicated incorrect Georges units, our strategic focus to try to make sure we dramatically outgrow the mortgage market and what that's showing is that we're achieving that very successfully even though the non mortgage businesses are weaker because of coke.
Got it and looking at monthly trends.
Within the non mortgage business, new appliance revenue is largely.
Largely consistent down roughly 5% year over year, moving through the quarter and the non mortgage revenue as also consistently done about low single digits. If you exclude that jump that we saw in September.
Can you talk about some of the puts and takes around non mortgage revenue performance in Threeq, you that didn't seem to improve moving through the quarter the trends seem relatively stable. So we get some puts and takes around that.
I think it's all it's really all those verticals are really still not recovering and we expect they will.
Our competitors are seeing similar.
Challenges. The you know with the weather is card originations or a personal loan volume, but the financial institutions or or.
<unk>.
Quite conservative and they should be until they have some clarity around where the economy is going when they do they are going to start to originate again and that will be a positive for us as we go forward in our non mortgage businesses.
To be clear, we did see improvement in September and U.S. I asked on mortgage relative to what we saw over the July August period, right. It certainly didn't get better and and we saw that improvement we talked a bit about that in the script and the same is true any WSA didn't get better I would ask the question I was simply trying to indicate don't expect 16% to continue right, but the.
But we did see an improving trend both in U.S. I asked on mortgage any W.S. non mortgage during the period.
We'll take our next question from David with Bank of America.
Hi, good morning, Thanks, So I guess, a two parter on on.
Hi, Hi, could you talk to the beginning of the tech transformation about the opportunity to accelerate innovation I'd love to just.
To get a sense, where you are with that.
Made enough progress.
Happening and if it's more of a future opportunity what's the timeline.
And I guess, the second part of that.
Pre breach of contract talked a lot about the concept of vitality and even if the talk about annual classes of new products and sort of how the three year company forecast for revenue on those was doing.
Help us think through that as well obviously went down post breach is that growing again is that.
Yes.
Meaningful in this acceleration.
Okay.
Thank you.
Yes, the big priority of ours.
As you know and for the last couple of quarters, you've heard me talk about it because I really view it as the next chapter in Equifax to really accelerate our new product innovation to really leverage the cloud of the investments that we're making we believe that this figure real catalyst for us to drive topline growth.
I think as you asked about the timing. It you know it's really happening in 2019, we get into is what it is on the chart. We put in the in the earnings slides. We did 90, new products up from 60 in 2018 and Thats up from a you know in the 70 range kind of pre cyber event. So were in 2019, we were operating.
A higher level of course, we've gone from 90 last year to around 110 in a in 2020. So there's clearly a renewed focus on it you saw a few months ago, we brought on a new chief product officer, we're adding new product talents and resources.
So really scale up our ability to bring new products to market remember one of the.
Reasons, we're making as cloud investment that Weve talked so much about it because we got to put all our data assets into a single data fabric and we believe that's going to accelerate our ability to do data combinations and bring new solutions to the marketplace. So thats. What this new product team is going to be focused on is really leveraging you know it.
Cloud investments that we're making so what are you going to see benefits of what you're seeing it today you saw this quarter and we talked about some of the new products. We are rolling out to the marketplace that gives our commercial team more things to sell and.
And more solutions to bring to our customers. So going from 90 last year to 110 and my goal is to grow beyond 110.
In 2021 is we continue to invest in resources and really leverage the cloud transformation with regards to the vitality index and that's something that we've talked about before I guess pre the cyber event.
I think it's likely something will break back as a dialogue with our investors that we already have plenty to talk about but you know if there is interest and that will certainly bring that back but new products are a key priority of ours in a is I'd characterize it as the next chapter of Equifax is really going to drive our topline growth and.
And we've mentioned this before but are absolutely our products that are launched on the new infrastructure that are benefiting us already very mark talked about Luminate unit is in his script. Another fraud products. That's certainly the case I'd, we talked about so kind of the broadened broad suite is a is running on new infrastructure and then we also talked about the fact that they're recovered response products that were built specifically.
Okay on the new infrastructure that we couldn't have done otherwise. So those are some examples are certainly more and as you know we are seeing benefits from it we expect it to dramatically accelerate as we go into the first quarter.
Thank you.
Our next question comes from.
Right.
Hey thinks this is a long call. So I'll just be quick you talked a little bit about the analytics as one strategy and then unique data is another strategy and I think we've talked a lot about the unique data they would be that the U.S. can you give us an update on sort of the next major phase of the analytics development you guys are thinking about as we think.
About the economic recovery not a position equifax for that next phase of growth.
Yeah, there's a number of levers there Brett that we've talked about over the past couple of quarters. You know it is it starts with our ignite analytics sandbox I think you know we've invested heavily in that and we're rolling that out in the marketplace. That's a tool for our customers to access our data as well as their own and really you know drive analytics and solutions that.
Well result, didnt use more of our data so that's very very positive for us.
Let's say, we have a large DNA team that is focused on creating new solutions and we talked about some of those did well.
Really are from our analytics about combining data assets did increase the predictability in some of our coated response products to help our customers look at using trended data to understand how our customer outperformed in the past on to use that to create predictability to how they're going to perform in the future.
Adding income unemployment data those are all part of our analytics to deliver a solution and those result in more usage of our data or specific revenue opportunities and do scores or other ways that we deliver.
It was analytics to drive the predictability of the decision for our customers.
We believe the cloud.
Investments are really going to a advantage us in or just more opportunities to bring new solutions as you know from our DNA team to the marketplace.
Great. Thank you.
Our next question comes from strong revenue.
Hi, guys. Thank you for squeezing me in over sure Marc can you talk a little bit about the competitive environment. How you guys are doing outside of the mortgage markets in terms of like a wouldn't weights and pipeline I know John made a comment about the pipe aren't being strong is yes kind of white speeds, where you're able to go in with what you need data.
Like the work number and seemed to credit card or street out of head to head competition or you guys are kind of winning more it's outside of mortgage. If you can just kind of comment on that and if there's anything quantitative you can share.
Yeah, I think John shared some comments around our deal pipeline and U.S. I asked which is your focus in ours.
You have your pipeline is quite rich as you might imagine it is in international Gcs, but there's a lot of focus.
By our investors and on Equifax, which is why we talk about the U.S. I upset deal pipeline in particular, but that's up dramatically over what it was last year in the year before we're seeing increasing mid week rates.
And I've used the term that the U. S. I S is competitive in the marketplace now to covert recession, that's harder to see because you've got the pressures of the economic impacts from our customers on equifax and on US is but we see the deal wins coming into the covered recession you saw the kind of.
The strength of the us is revenue.
Revenue non mortgage numbers using that to in particular in the second half of 2019 and coming into.
The first quarter of 2020, and we seen competitively you know during the.
In the second quarter recession impacts of the second quarter and third quarter U S. I S is performing quite well. So we still got a lot of confidence that that business is business and its recovery.
Okay. Thank you.
And that concludes today's question and answer session I would like to now.
I will turn the conference back to Mr. <unk> for any additional remarks.
I just want to thank everybody for joining the call and for their interest in Equifax I. Just also wanted to let everybody know that we will be around today and in the days ahead to answer any follow up questions that you may have so once again, thanks for joining and this does conclude the call.
That concludes today's presentation. Thank you.
Participation you may now disconnect.
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[music].
Yeah.
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Hmm.