Q3 2022 Equifax Inc Earnings Call

Okay.

Greetings and welcome to the Equifax third quarter 2022 earnings Conference call.

Time, all participants are in a listen only mode a.

A question and answer session will follow the formal presentation.

Anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.

As a reminder, this conference is being recorded I would now like to turn the call over to Trevor Burns Senior Vice President head of corporate Investor Relations. Thank you you may begin.

Thanks, and good morning, welcome to today's conference call I'm Trevor Burns with me today are Mark <unk>, Chief Executive Officer, and John Gamble, Chief Financial Officer.

Today's call is being recorded an archive recording will be available later today in the IR calendar section under news and events tab.

At our IR website Www dot investor.

That helps.

During the call, we'll be making references to certain materials that can also be found in the presentation section.

The news and events tab at our IR website.

Materials are labeled Q3 2022 earnings conference call.

Also we will be making certain forward looking statements, including fourth quarter and full year 2020 guidance.

I understand apples action its business environment.

Statements involve a number of risks uncertainties and other factors that could cause actual results to differ materially from our expectations certain risk factors that may impact our business are set forth in filings with the SEC.

Our 2021 Form 10-K and subsequent filings.

Yes.

But we'll also be referring to certain non-GAAP financial measures, including adjusted EPS attributable to Equifax, and adjusted EBITDA, which will be adjusted for certain items affecting comparability of our underlying operational performance. These non-GAAP measures are chi children reconciliation tables, which are included.

Included with our earnings release and can be found in the financial section of the fab.

Angela Info tab.

Our website now I'd like to turn it over to Mark beginning on slide four.

Thanks, Trevor Equifax delivered another very solid quarter with continued execution against our FX 2025 strategic priorities in a challenging economic environment.

Third quarter revenue of one point to four 4 billion was up 2% or 4% in constant currency and was above the high end of our guidance driven by strong non mortgage revenue growth in the quarter.

This strong revenue performance was well above our July framework and delivered despite a more negative FX environment than we expected, which had 200 basis points or $29 million was 5 million or about 50 basis point greater headwind for FX than we expected when we put out July guidance.

Adjusted EPS of $1 73 per share without the stronger than our July guidance, we are continuing to significantly outperform our underlying markets as we navigate the challenging economic environment and mortgage market decline.

Our global non mortgage businesses, which now represent over 78% of total Equifax revenue were very strong with 20% totaling 13% organic non mortgage constant current currency dollar revenue growth stronger than we expected when we provided guidance in July .

And stronger than our 8% to 12% long term growth framework.

We're now tracking to 20% non mortgage constant dollar growth in 2022, we're just which is up about 100 basis points from our July guidance.

The outperformance was again led by outstanding performance at workforce solutions that delivered 40% total and 20% organic non mortgage revenue growth U S. <unk> non mortgage grew 9% online and 5% total which is about consistent with the second quarter, but weaker than we expected.

International delivered a record quarter up a very strong 17% constant dollar growth and 15% organic constant dollar growth well above our expectations.

Equifax total mortgage revenue was down 30% about as expected and outperform the underlying market declined by over 10 points from pricing New twin records penetration system to system integrations and new products.

The U S mortgage market as expected weakened substantially in the third quarter with originations estimated it down 50% in the quarter, which was about nine points weaker than our July guidance.

As a reminder, workforce solutions mortgage revenue is more closely tied to originations.

U S. I S mortgage credit inquiries were down 41% in the quarter and better than our expectations from increased shopping activity. Despite the weaker than expected mortgage originations were continuing to see higher than normal levels of shopping which continued throughout the quarter intends to benefit U S. I S credit file polls combine.

The negative mortgage market impact on Equifax was about as expected as the more negative market impact from originations I need Ws was offset by the less negative impact on U S. I S from increased shopping activity.

We saw continued weakening of the mortgage market as we move through September and the first few weeks of October as mortgage rates continue to rise to their highest level since 2008.

We now expect mortgage originations to decline over 60% in the fourth quarter versus our July framework of 48% and U S. I S credit inquiries to decline over 50% versus our July guidance of 46% John will talk about our updated mortgage framework in a minute.

Third quarter, adjusted EBITDA totaled $405 million was flat compared to last year.

Adjusted EBITDA margins of 32, 5% were slightly below our expectations for the quarter principally to due to higher sales and marketing expenses driven by our outperformance in non mortgage verticals.

John will walk you through our margin performance in the third quarter and expectations for fourth quarter later in the presentation.

We continue to make significant progress executing the FX cloud data and technology transformation, we're now approaching 70% of North America, and 60% of total <unk> revenue being delivered from the new way of <unk> cloud our focus for the remainder of 'twenty, two and 2023 as accelerating full customer migrations in North America to enable decommissioning of our.

<unk> and data centers.

Our new FX FX cloud infrastructure is delivering always on capabilities and faster new product innovation with integrated datasets faster data delivery and industry, leading enterprise level security.

We're convinced that our FX cloud and single data fabric will provide a competitive advantage to equifax for years to come.

We're in the early days of leveraging our new H E F X cloud infrastructure structure and single data fabric and are seeing acceleration of innovation and new product rollouts or new product vitality index of 14% in the quarter is a record and over 500 basis points improvement from our 9% vitality index last year and well above our 10% long term goal.

For vitality.

As a reminder, our vitality index as a percentage of revenue derived from new products launched in the past three years, our strong momentum on NPI rollouts, leveraging the new E. F X cloud allowed us to raise our full year vitality index outlook for 2022 for the second time this year from 11% to 13%, which is up three <unk>.

Basis points from our long term framework and from the framework. We started earlier this year.

This strong NPI performance gives us momentum into 2023 as most new products reach commercial matured maturity in years, two and three.

And third quarter, we continued to execute our bolt on acquisition strategy, completing two acquisitions, while logics, which will further strengthen strengthen workforce solutions onboarding of nine nine solutions, and mitigate or which will strengthen count and our broadened our identity and fraud franchise. These are our 11th and 12 bolt on acquisitions since January 2021, and aligned with our M&A.

Strategy to strengthen workforce solutions, our largest and fastest growing business add unique and differentiated data and expand in the fast growing identity and fraud market.

Bolt on acquisitions that broaden and strengthen equifax are strong levers for future growth and are central to our long term growth framework to add 100 to 200 basis points annually to our revenue growth from strategic bolt on M&A.

Our guidance for 2022 revenue of just under $5 1 billion is essentially unchanged from the framework, we provided in June and July with.

With third quarter revenue third quarter revenue was stronger than our July guidance by about $25 million. Our current guidance reflects a decline in fourth quarter from our prior implied view by about 25 million from the weaker mortgage market and FX.

The continued weakening of the U S mortgage market is negatively impacting fourth quarter revenue by about $45 million and negative FX is impacting revenue in the fourth quarter by about $15 million, partially offsetting this $60 million negative impact is stronger non mortgage revenue in workforce solutions and international and the acquired revenue from.

While logics and mitigate or.

The strong 20% constant dollar non mortgage growth in 2022, it gives us great momentum as we look to 2023 and a bottoming of the mortgage market in the coming quarters.

Our guidance for adjusted EPS of $7 54, a share is down about 13 cents from the midpoint of our July guidance.

As our third quarter adjusted EPS was about eight cents per share stronger than our July guidance. This results in a reduction in the fourth quarter from our implied EPS of about 21 cents a share about $33 million in pre tax pre tax income.

The most significant drivers of this reduction in EPS are first the $45 million reduction in higher margin fourth quarter mortgage revenue due to the weakening mortgage market, which more than drive this level of reduction in pretax income and second higher interest expense.

These negative impacts were partially offset by stronger non mortgage growth.

And the addition of acquisition related non mortgage revenue from wall logics, and mitigate or and again, John will provide details on fourth quarter and full year guidance shortly.

We were very pleased with our continued very strong constant dollar non mortgage revenue growth of 20% totaling 13% organic which is well above our 8% to 12% long term framework and our ability to outperform the underlying mortgage market as shown by our third quarter results.

Turning to slide five our critical delivery of our strategic priorities is the continued expansion of our addressable market data sources and revenue Equifax is much more than a credit Bureau today in our addressable Tam has expanded three ex Dover $45 billion over the past several years, we've expanded into faster growing markets outside financial services and mortgage.

These faster growing markets include identity and fraud talent management government and employer services verticals. This is accelerated our growth outside of financial services and mortgage and increase the resiliency and diversity of E. S. S E FX by broadening our revenue streams, including markets that are expected to deliver future growth at levels above our traditional markets.

As shown on the slide since 2019, we've grown our total non mortgage business by over $1 $1 billion with a combined CAGR since 2019 of 12%, which is at the high end of our 8% to 12% long term growth framework in 2022, we expect non mortgage revenue to represent over 75% of total equifax revenue.

In the fourth quarter, it'll be well over 80%.

Also since 2019, we grown our non credit Bureau, based revenues by $1 $5 billion were very strong CAGR of about 30% to over half of Equifax total revenue.

This is led by our $2 $4 billion of workforce solutions business, which is up $1 4 billion. Since 2019 at a very strong CAGR of about 35%, but also supported by strong double double digit growth in identity and fraud from count and mitigate or as well as strong growth in debt services.

We've also completed 12 acquisitions since 2021 that are all in the non mortgage space and are delivering strong double digit growth.

Workforce solutions strong above market growth in verticals like employer solutions talent in government, our expansion into identity and fraud, and our focus on new product investments coupled with our bolt on acquisitions focused on non mortgage priorities will continue to accelerate the growth of these non credit and non mortgage revenue streams at equifax.

Turning to slide six in third quarter Equifax core revenue growth. The Green section of the bars grew a very strong 16% reported and 19% in constant currency, which was consistent with our July guidance call.

Constant dollar core revenue organic revenue growth of 14% in the quarter was also substantially above the organic growth in our long term financial framework of 7% and 10%.

Non mortgage constant dollar organic revenue growth of 13% drove three quarters of the organic constant dollar core growth in the quarter.

Core mortgage outperformance predominantly in AWS drove the remainder of core organic constant dollar revenue growth.

We continue to expect strong core revenue growth of 17% total and 19% in constant currency in 2022, which again is well above our eight to 12 long term equates to 12% long term growth framework and 300 basis points higher than the core growth for 2022 provided last November at our Investor day.

This strong constant currency growth is driven by stronger non mortgage revenue growth of 20% total and 13th in organic due to broad based performance across workforce solutions and strengthen international.

As detailed on slide seven U S mortgage revenue was down about 30% in the quarter. This compares to third quarter mortgage originations are down.

Down 57% as estimated by mortgage industry third parties and USAA is credit inquiries that declined 41%.

As a reminder, in a rising rate environment, we believe consumers tend to rate shop more frequently current creating a favorable variance between mortgage credit inquiries in originations that benefits usia's credit file pulls from shopping.

In the third quarter, we saw mortgage credit inquiries perform in the order of 16 points better than the change in the estimated mortgage originations.

<unk> revenue declined 35% in the quarter about six points better than credit inquiries.

However, twin income and employment is typically pulled later in the mortgage application process and at closing as a result, AWS does not benefit as much from the upfront shopping trend that occurs in a rising rate environment as twin inquiries are more closely aligned with completed mortgage originations twin.

Twin mortgage drag renewed twin mortgage revenue declined 28% in the quarter.

UWS core mortgage revenue growth that was up a strong 14% in the quarter and when adjusting for the 16 point negative spread between mortgage inquiries in originations was up a very strong 30% and consistent with prior quarters.

Overall, equifax mortgage revenue outperformed <unk> credit inquiries by 11% or 11 points in the quarter and outperformed estimated mortgage originations by a strong 27 points in the quarter.

This reflects the strength of our U S enterprise mortgage sales and operations team that bring the combined <unk> and AWS products and solutions to market in this challenging mortgage macro.

Turning to slide eight workforce solutions delivered another outstanding quarter with 32% core revenue growth driven by very strong non mortgage non UC and ERC growth of 62%.

As a reminder, non mortgage revenue is now about 70% of workforce solutions and a big workforce solutions driver for future growth from their fast growing talent and government verticals.

Workforce solutions above market.

32% core growth in the quarter continues to be driven by very strong performance on twin record additions new products and pricing.

System to system integrations and greater penetration there.

There are market outperformance is very strong, particularly in a period of declining market transaction volumes for mortgage.

We expect to see continued very strong core growth in fourth quarter from workforce solutions Rudy floater in the workforce solutions team continue outstanding execution across their key growth drivers detailed on the right hand side of the slide.

Over the past 12 months, we've signed 10, new agreements with payroll processing processors in the us, including three new agreements in the third quarter that will be added to the twin database over the next several quarters. These new partnerships along with continued growth in our direct contributors through our employer services business are delivering continued strong <unk>.

And the twin database with current records up 16%, reaching 146 million current records in the third quarter.

There are 111 million unique individuals in twin deliver very high hit rates and represent over two thirds of the 165 million U S nonfarm payroll.

And as a reminder, about 50% of our twin records are contributed directly from individual employers that we have long relationships with.

The remaining or contributed through.

Partnerships, principally with payroll companies.

In addition to traditional W. Two wage earners, we estimate there are approximately $30 million to $40 million gig workers and 20 to 30 million pensioners in the U S who will also bring valuable income and employment insights to lenders background screeners and government agencies. We recently signed an agreement with a payroll processor to gain access to their pension of records and we have an <unk>.

<unk> pipeline with other companies to acquire new pension records to the twin database.

We're in the very early innings of collecting records on these $50 million to $70 million gig in pension or <unk>.

Kurds, but expect to make significant progress as we move through 2023 and beyond.

Twin record additions will continue to drive workforce solutions revenue growing forward from higher hit rates and we had the ability to double our records in the future to the roughly $220 million total W. Two gig and pension recipients in the United States. This is incredibly powerful level lever for future growth at workforce solutions and a key.

Driver of their of their 13 to FERC, 30% to 15% long term growth that growth outlook.

Turning to <unk>.

Slide nine with some more detail in workforce solutions, they really had an exceptional quarter delivering revenue of $559 million.

<unk>, who was up a strong 9% with overall organic revenue growth of about flat overall, despite the significant 28% decline in AWS mortgage revenue in the quarter non mortgage revenue was up a very strong 40% and is now 70% of workforce solutions.

Verification services revenue of $455 million was up 13% more than offsetting the 57% decline in estimated mortgage originations.

Non mortgage verticals now represent over 60% of verifier revenue and delivered 72% total and 30% organic growth.

The insights business, which we acquired which we acquired late last year continues to perform very well driven by strong performance in their largest verticals risk intelligence and justice.

<unk> intelligence helps background screeners analyzed people's risks via background checks and continuous monitoring.

Justice Intelligence helps channel partners as this law enforcement agencies in their investigations.

Talent and government solutions, which now represent almost 40% of verifier non mortgage had outstanding quarters.

<unk> solutions delivered a $100, a 110% total and over 50% organic growth in the quarter from record growth pricing and strong new product rollouts.

We also saw strong growth in government and the government vertical with revenue up 90% total and 44% organic driven by strong penetration at the state level.

The AWS government vertical is benefiting from penetration pricing record growth and leveraging our strong product portfolio, including insights data at the federal state and local level across the United States.

The continued expansion of workforce solutions data hub through our new total verify solution is driving very strong growth in the fast growing 5 billion talent and 2 billion government markets are.

Our total our total verify solution is enabling our customers to access multi multi data solutions drive from an unparalleled set of differentiated information assets spanning employment income education incarceration health correct Credentialing and identity.

As of the third quarter AWS has over 580 million total records in the twin database, both current and historic that provide both current and previous employment information on individuals', allowing us to increasingly provide an instant digital resume our employment verification on both current and historical job histories.

The non mortgage gws consumer lending business, principally in card auto and consumer Fernand finance.

Led by our U S. Enterprise sales teams also showed good growth with revenue up 18% in the quarter.

Employer services revenue of $104 million was down 7% due to the expected decline in our unemployment claims and employee retention credit businesses.

We expected total UC NERC revenue to be down about 20% in 2022, driven by the lower jobless claims claims and ER transit ERC transactions as the Covid Federal tracks Covid Federal tax program runs out.

Employer services revenue, excluding UC NERC was up a strong 29% in the quarter driven by broad based double digit growth in our I nine and Onboarding healthy FX and our tax credit businesses.

We are increasingly seeing the ability to deliver bundled packages of our differentiated employer services solutions to customers in the third quarter, we signed a large multi year agreement to provide a broad suite of AWS solutions, including a nine W for tax services and other HR solutions to a large multinational company.

<unk> with annual guaranteed workforce solutions revenues approaching $20 million with total annual revenue opportunities with you with the agreement of over $30 million.

Workforce solutions adjusted EBIT margins of 29, 5% were lower than our July guidance, Andy over 50% margins, we expect from AWS on an ongoing basis. The main drivers of the lower than expected margin was negative mix due to lower mortgage mortgage revenue higher sales and marketing costs, principally due to <unk>.

Strong non mortgage revenue growth and cost to add the new trend contributors I talked about earlier.

The decline in EBITDA margins versus last year was driven by similar factors, including negative product margin mix as higher margin mortgage declined as a percentage of revenue and was replaced with verifier non mortgage revenue and revenue from the most recent acquisitions, which at this point have lower margins than verifier overall.

And second increased marketing and sales expense from both investments to drive NPI and driven by our extremely strong non mortgage sales and record acquisition performance and then last as I mentioned costs related to Onboarding, new twin contributors.

We expect these same factors to impact margin twin sorry, AWS margins in fourth quarter as we see further declines in mortgage revenue with AWS EBITDA margins of about 48, 5% in fourth quarter. As we look to 2023, we expect to see AWS margins returned to above 50% as product and pricing initiatives expand.

Profitability and we see additional savings from their cloud transformation.

The strength of AWS, and uniqueness and value of their twin income and employment data in employer services businesses were clear again in the third quarter Rudi floater in dws team delivered another above market quarter, with 9% revenue growth and 32% core growth and are well positioned to deliver a very strong 2022 and continue above market growth in the future.

As shown on slide 10, <unk> revenue of about $397 million was down 9% and slightly better than our expectations.

<unk> mortgage revenue was down about 35% and was also better than expected with a 41% decline in credit inquiries versus a 46% wed expected.

At 97 million mortgage revenue is now about 25% of total <unk> revenue.

<unk> non mortgage revenue was $250 million, which represents over 60% of total <unk> revenue and was up 5% with organic revenue growth of 3%.

This was below the low end of the 6% to 7% growth we discussed in July .

Importantly, <unk> non mortgage online revenue growth remained strong at 9% total and 6% organic assign that lenders continue to originate.

During the quarter, we saw double digit growth in commercial in telco and solid single digit growth across financial services auto and insurance offset by a decline in our direct to consumer business.

Count, which provides unique identity and fraud solutions continues to execute execute very well developing joint solutions, leveraging both count and Equifax data with 2022 global revenue expected to exceed 20%.

The recent acquisition of mitigate or will continue to strengthen our identity and fraud franchise and growth.

The weakness relative to expectations in the quarter was again in financial marketing services, our BTB offline business that had revenue of $51 million down, 8% and lower than our expectations as.

As we discussed in previous quarters. The principal driver of decline in Fms services was our fraud and data services vertical where we provide header data principally to providers of identity and fraud services and to a much lesser extent in our risk management and portfolio review business, where we provide data and analytical services to financial institutions to evaluate the health of their existing.

Sting portfolios or in some cases portfolios they are acquiring.

As we discussed in prior quarters, we expect the declines in these businesses to continue through the fourth quarter with improvements in 2023, as we introduce new products leveraging unique and differentiated data assets available through the new Equifax single data fabric.

We also saw a decline in batch marketing services, where we provide data and decisioning principally to financial institutions for pre screeners as well as delivering our ISI data for marketing activities at some customers cut back on originations.

We had seen high single digit single digit growth in marketing services in the first half. So this is the first signs of any pullback in marketing.

For fourth quarter <unk> non mortgage we expect online to continue to be strong with growth rates above third quarter from commercial execution as.

As well as progress in pricing and new product rollouts that overcome a somewhat slower growth in financial services.

We expect financial marketing services to continue to be weak down over 10% with declines across header risk and marketing continuing in the fourth quarter overall for <unk> non mortgage we expect fourth quarter organic revenue growth to be about the levels. We saw in the third quarter.

U S <unk> consumer solutions business had revenue of $50 million down 1% in the quarter, but up 2% sequentially. We expect fourth quarter revenue to grow again sequentially with positive growth rates in the in the fourth quarter.

<unk> adjusted EBITDA margins were 34, 1% in the quarter and slightly below our expectations principally due to continued investments in sales resources focused on non mortgage growth.

International revenue was Sonet is shown on slide 11 was up $288 million up a very strong 17% on a local currency basis and 15% on a non organic constant currency basis.

We're seeing broad based execution from our international businesses.

Europe local currency revenue was up 24% principally driven by over 75% growth in our UK debt management business, we've seen significant increases in debt placements from the UK government over the past several quarters.

Our European CRA revenue accelerated in the third quarter with revenue of 7% and above our expectations driven by broad based product execution across our <unk> online products and identity and fraud slightly offset by lower consumer revenue.

Asia Pacific Asia Pacific, which is principally our Australia, New Zealand business delivered local currency revenue of 6% driven by strong growth in our commercial in identity and fraud businesses and to a lesser extent growth in consumer.

Latin America local currency revenue was up a strong 34% driven by double digit growth in Chile, Argentina, Erg wave, Paraguay, Ecuador, and Central America.

The teams new product introductions over the past three years and pricing actions continue to drive strong growth across all product lines is.

This is the third consecutive quarter of double digit growth for Latin America.

Canada, Canada local currency revenue was up 12% and above our expectations. We saw growth in commercial analytics solutions, Decisioning and identity and fraud revenue, which was partially offset by some onetime revenue in the quarter.

From mortgage volume declines.

Consumer revenue also returned to growth during the quarter, we expect mid single digit revenue growth from Canada in the fourth quarter.

International adjusted EBITDA margins at 26, 8% were down 200 basis point down 210 basis points sequentially and above our expectations given strong revenue growth.

EBITDA margins were up slightly versus last year, but up about 150 basis points adjusting for the loss of equity in income from the Russian joint venture that we sold.

As shown on slide Slide 12, we had a very strong new product quarter with vitality index of 14%, which is our highest vitality index ever and it was over 500 basis points above last year's results and 400 basis points above our 10% long term growth framework for vitality.

We delivered about 80, new products, so far in 2022, leveraging our new <unk> cloud capabilities.

We now expect to deliver a vitality index of 13% in 2022 up 200 basis points from our previous guide of 11%, which equates to over $650 million of new product revenue in the year.

The growth in our 2022 vitality index is principally coming from workforce solutions, which is encouraging as they are further along in completing their cloud transformation.

It's positive to see the strong <unk> results in the early innings of the Equifax cloud new products, leveraging our differentiated data, our new equifax cloud capabilities and single data fabric are central to our long term growth framework and driving future Equifax topline growth.

This week at the annual mortgage Bankers Association conference, we will showcase a new offering that delivers telecommunications pay TV and utilities attributes alongside the traditional mortgage credit report to help streamline the mortgage underwriting process.

Delivering telco pay TV and utilities attributes to mortgage lenders alongside the traditional credit reports will also help expand access to credit and help create greater homeownership opportunities for U S consumers to.

The use of these expanded data insights can also provide visibility to millions of credit invisible consumers those without traditional credit files and enhance the financial profiles of thin young and on score will consumers as they complete their first mortgage applications.

This new offer offering leveraging the equifax cloud will provide powerful new insights that help to automate save time and resources and streamline the first marriage process for every applicant, creating more opportunities for consumers to secure sure alone.

And equifax as the first and only in the industry to offer these unique insights to the mortgage industry.

Turning to slide 13, we outlined the 12 strategic bolt on acquisitions. We completed since January 2021, do you expect will deliver over $450 million of principally non mortgage run rate revenue.

As you know are 8% to 12% long term growth framework includes 1% to 2% of annual revenue growth from strategic bolt on M&A aligned around our three strategic priorities first expanding and strengthening workforce solutions, our fastest growing and most profitable business second building out our identity fraud capabilities and third adding unique data assets.

And with that I'll turn it over to Jon to provide more details on the mortgage market in.

In our fourth quarter and full year 2022 guidance. Thanks.

Thanks, Mark as Mark mentioned and as shown on slide 14, our guidance reflects an expectation of the decline in the U S mortgage market will steepen in the fourth quarter with mortgage originations declining over 60% and mortgage credit inquiries declining over 50%. This is a significant reduction from our expectations in July and as Mark referenced earlier this expectation of a firm.

Weakening of the mortgage market negatively impacted <unk> revenue by almost $45 million.

<unk> mortgage revenue was 21, 9% of total equifax revenues compared to 29, 5% and 24, 7% and <unk> 22, and <unk> 22, respectively and.

In <unk>, we expect mortgage revenue to be about 16% of total equifax revenues the rapidly changing an unprecedented macro environment makes forecasting the impacts on the U S mortgage market incredibly challenging we will continue to be transparent with you about changes in the mortgage market and the impacts on our business.

EBITDA margins at 32, 5% were slightly below the level of at or below 33%. We discussed in our July guidance Mark discuss the main drivers in each bu, partially offsetting these items were lower corporate and corporate technology expenses.

Slide 15 provides our guidance for <unk> 'twenty.

<unk> 22, we expect revenue in the range of $1 165 to $1 25 billion, reflecting revenue down about six 3% year to year at the midpoint of our guidance are down about three 7% on a constant currency basis.

<unk> 22, EBITDA margins are expected to be about 31, 5%.

We're expecting adjusted EPS in <unk> 2002 to be $1 45 to $1 55 per share compared to <unk> 21, adjusted EPS of $1 84 per share.

As Mark shared earlier the decline in our <unk> 'twenty two guidance as compared to implied levels. We shared in July is driven by the significant reduction in our expectations for the U S mortgage market in the fourth quarter.

<unk> 22 revenue in our current guidance relative to our implied view in July is down about $25 million Mark covered this earlier as a $45 million decline from the weakening U S mortgage market and $15 million decline driven by FX or partially offset by revenue from the acquisitions of <unk> and mitigate or and stronger non mortgage revenue growth.

<unk> 2022, adjusted EPS in our current guidance relative to our implied view in July is down about 21 per share or about $33 million of pre tax income.

This decline is driven by the impact of the decline in the U S mortgage market on revenue of $45 million, which given high variable margins drives our pre tax income decline that exceeds the total variance level strong core revenue growth both from the acquisitions of <unk> and mitigate or as well as stronger organic growth are delivering improvements in pre tax income. However.

These improvements are being offset by the higher marketing sales and G&A expense that we referenced earlier and higher interest and other expenses.

Reflecting the above our expectations for the be used in the fourth quarter are as follows.

AWS revenue was expected to have and about 3% or greater decline.

Continued strong non mortgage organic revenue growth is expected to offset the bulk of the impact on AWS mortgage revenue of the expected over 60% decline in mortgage originations UWS EBITDA margins are expected to be about 48, 5% in the quarter.

<unk> revenue is expected to have an about seven 5% or greater decline, reflecting the greater than 50% assumed decline in the U S mortgage and credit credit inquiries.

<unk> non mortgage revenue growth is expected to improve from the levels. We saw in the third quarter and BTB online continuing with high single digit growth.

<unk> EBITDA margins are expected to approach 36%.

International continues to deliver a strong year and is expected to deliver constant currency revenue growth of up to eight 5% down from the third quarter as we lap growth from our UK debt management business International EBITDA margins are expected to be up sequentially approaching 29%.

The declines in both revenue and adjusted EPS in <unk> 2022 year to year are also principally driven by the significant decline in the U S mortgage market and the significant impact.

Of FX looking at revenue at the midpoint of our guidance of $1 $75 billion revenue was down about $78 million FX is negative about $35 million or two 6% year to year. So on a constant currency basis revenue was down about $43 million the impact of the decline in the U S mortgage market using.

Originations declines for AWS and credit inquiries declines for Usaf's is negative about $185 million or almost 15 points. Excluding these factors effectively constant dollar revenue growth, excluding the impact of the U S mortgage market revenues up over $140 million, reflecting predominantly the very strong non mortgage growth principle.

And he'd Ws in international and also in USB to be online and strong outperformance in mortgage relative to the overall market predominantly in AWS.

Looking at adjusted EPS at the midpoint of our guidance of $1 50, adjusted EPS is down about 34 cents a share below operating income items, principally higher interest expense and the loss of equity income from our Russia, JV as well as the impact of FX explain just over half of the decline in adjusted EPS. The remainder of the decline is principally driven by the <unk>.

Reduction in constant currency revenue of about $43 million.

Slide 16 provides the specifics on our 2022 full year guidance, we expect revenue of approximately $5 1 billion and adjusted EPS is expected to be 749% to $7 59 per share.

For the full year of 2022, we expect capital expenditures to be over $550 million capital expenditures or above the levels. We expected in July as we maintained capital spending at first half 2022 levels in the third quarter to continue the pace of migration of major exchanges to our cloud infrastructure, we expect to bring down capital spending in 2023.

Consistent with the completion of the migration of the major North American exchanges.

We believe both our fourth quarter and full year guidance is centered at the midpoint of the revenue and adjusted EPS ranges we provided.

As you as you consider the first quarter of 2023, we wanted to provide some general perspective on our current thinking on the U S mortgage market for the quarter using our current view of mortgage credit inquiries in the fourth quarter as a base. We currently expect mortgage credit inquiries to be down about 50% year to year in the first quarter of 'twenty three as we move through 2023.

<unk> a year to year compares get substantially easier, particularly in the second half.

Now I would like to turn it back over to Mark Thanks, Jon turning to slide 17, we have some very unique macros and our industry and EBITDAX growth levers driving our performance in 2023 and beyond <unk>.

The acceleration of the digital macro across every industry is expanding the use of identity data signals and solutions to drive better decisions across new and existing verticals Equifax is well positioned to take advantage of the accelerating digital macro macro through our <unk> cloud investments and our recent acquisitions of insights count and mitigate or.

Although we've been impacted by the significant declines in U S. Mortgage market. We believe we are unique levers at equifax to deliver strong future growth, including workforce solutions above market growth and margins and our expanded focus on new data assets like insights USAA's non mortgage growth in count and mitigate or identity and fraud growth, our <unk> cloud driving competitive <unk>.

<unk> top line and of course cost savings in 'twenty three and beyond.

<unk>, leveraging the <unk> cloud and our expanded resources and focus on new products and bolt on M&A to broaden and strengthen equifax.

These attractive market macros, along with abroad, FX growth levers and our strong core outperformance strong core and non mortgage outperformance in the past few years gives us confidence in our ability to deliver above market growth in the future.

And yet.

We do see further economic weakness driven by slowing consumer demand. We believe equifax is well positioned for continued growth as we shared with you in July turning to slide 18, the new Equifax is a much different and more diverse business than we were in the last recession.

We are more resilient and better positioned for stronger revenue and earnings growth in challenging economic environments.

During the <unk> global financial crisis, Equifax performed very well and exhibited the resiliency you would expect from a data analytics businesses.

In 2009, we saw only a 6% decline in total revenue importantly, AWS grew throughout the global financial crisis and showed substantial growth of 17% in 2009.

We believe that Equifax, we believe that equifax business mix today is much better positioned for a potential economic event.

Then in 2009.

First strong AWS growth has increased their relative size in equifax from 16% of revenue in 2009 to almost 50% today with margins over 50% and over 15 percentage points higher than the Equifax average AWS is benefiting from strong growth levers that are not directly tied to economic activity, including record growth.

Penetration in new and fast growing verticals like talent and government system to system integrations, deploying new higher value products as well as measured price actions, taking advantage of the scale of the twin database.

Second completion of the Equifax cloud will deliver cost savings in 2023 and beyond that we expect will drive about half of our targeted 500 basis point margin expansion from 2022 to 2025.

The cloud migration cost savings are independent of any economic event and driven solely by our execution.

And then last we're leveraging the new Equifax cloud to accelerate new product Rollouts with a goal of 13% vitality in 2022, which is over $650 million of annual incremental revenue from Equifax as a reminder, <unk> rolled out in 'twenty, one and 'twenty two will drive topline growth and 20 332023 and beyond as they mature in the market.

Place.

Today, we believe about 50%, 54% of our global business is recession resilient or counter cyclical and will grow in a recession. This is a big change in a strong position compared to equifax in the OE <unk> Global financial crisis were only about 37% of our businesses were either recession resilient or countercyclical the <unk>.

Meaningful revenue growth in workforce solutions U S U S.

Mortgage in identity and fraud since 2009, as well as cloud transformation cost savings position Equifax very well if theres, an economic event a recession in 2023 and beyond.

Wrapping up on slide 19, Equifax delivered another strong and broad based quarter, driven by 13% organic and 20% total non mortgage constant currency constant dollar growth that more than offset the 41% decline in the mortgage market, reflecting the broad based strength of equifax in this challenging economic environment.

This was our seventh consecutive quarter of double digit core growth and our sixth consecutive quarter of double digit non mortgage growth.

Against the declining mortgage market Equifax is resilient on offense and investing for future growth.

Against the unprecedented 37% mortgage market decline in 2022, we expect to deliver constant currency revenue growth of over 5% due to the breadth and strength of our underlying businesses more importantly, our core revenue growth our core revenue growth of 17% and non mortgage constant currency growth of 2020%.

<unk> are both well above our 8% to 12% long term framework.

And reflect the strength of the underlying equifax business model.

This strong momentum positions us well in 2023 and beyond.

<unk> continues to deliver above market growth and as our largest fastest growing and highest margin business workforce solutions above market revenue growth over the past three years is powering equifax growth as they approached 50% of our revenue.

And new products leveraging the new Equifax cloud are also driving growth.

13% vitality from NPI as in 2022 will drive growth in 2023 and beyond.

And we're in the early days of leveraging the new Equifax cloud to drive innovation new products.

And expect to deliver strong vitality in the future.

Our 12 bolt on acquisitions since January 'twenty, one and expanded our capabilities and are delivering strong topline growth and will deliver synergies in 2023 and beyond.

And then lastly, we are in the final chapters of completing our new Equifax cloud data and technology transformation that will deliver topline growth and cost benefits in 'twenty, three and beyond as we complete the cloud and leverage our new cloud capabilities and single data fabric.

Even in this uncertain economic environment Equifax continues to be on offense and reinvesting in the new Equifax cloud new products data and analytics and bolt on M&A to drive future growth.

We continue to be confident in our long term growth framework of 8% to 12% total revenue growth of 7% to 10% organic revenue growth with ongoing margin expansion of margins of 50 basis points per year.

We also remain focused on delivering on our 2025 goal of $7 billion in revenue and 39% EBITDA margins that we set at our Investor day, a year ago.

Our ability to deliver non mortgage growth of 20% in 2022 that is well above our long term growth framework gives us confidence in the future.

We remain energized about our performance in 2022 in a challenging mortgage market macro and even more energized about the future of the new Equifax, a faster growing higher margin cloud native data analytics company.

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

Thank you we will now be conducting a question and answer session. He would like to ask a question. Please press star one on your telephone keypad.

Confirmation tone will indicate your line is in the question queue.

You May press Star two if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.

We ask that you please limit yourself to one question and one follow up question. One moment. Please while we poll for your questions.

Our first questions come from the line of Manav Patnaik with Barclays. Please proceed with your questions.

Thank you.

Mike I was hoping just on slide 17, where you gave us some of the levers that <unk> I think I was hoping you could touch on some of the macro trends you're seeing in the card and auto verticals just some perspective on.

We ought to be in those categories relative to.

Pre COVID-19, our history and some of the.

The trends, you're seeing there whether they're in a decelerating or staying the same or any color around those would be helpful.

We talked a bunch of Manav. Good morning about mortgage so we're happy to talk more questions on that maybe if you step back kind of where we are with the consumer and our customers.

<unk> continues to be exceptionally strong.

Their credit scores are still up from 2019, they are working well.

Havent seen real changes in delinquencies accepted the subprime level. There is some small changes, but even their delinquencies are lower than they were in 2019.

So you've got consumers that have had wage growth.

Employment is low so its a very good environment.

For the consumer which really impacts the verticals you talked about and then our customers are still very strong there's no question about that.

When you think about the last economic event, we had in the global financial crisis you had.

The traditional financial institutions banks, and Fintech that really had balance sheet problems. That's not the environment. We have today. So it's similar to our dialog that we had.

In July and back in April we see a strong consumer continuing through the fourth quarter and into 2023 and the same thing with our customers So with regards to.

Kind of activity around originations and some of those verticals.

Not a lot of change there is still some challenges in auto around supply chain availability, I think theres expectations thats going to get better in the coming quarters, but it's still hard to find the car, particularly at certain models that you want to get.

Which is resulting in auto being down some from a year ago, but.

Again kind of our expectation no real change in cards I think we mentioned in our comments that we've seen a little bit of weakening in some marketing, but I wouldn't call that a trend.

<unk> our customers are still focused on originations card volume is very very strong card originations is very very strong.

And again you go back to you've got consumers that are very strong I think everyone.

Is watching.

Very closely both us and our customers.

When will there be a change in delinquencies.

You know my history, Irina card business for a decade at GE capital and that was what I watched in the minute you see delinquencies start to move you think about changing your originations going forward and we just haven't seen that yet.

Employment being so high and unemployment being so low.

Just on mortgage online organic growth rates in the third quarter right. We saw telco was up double digit.

Insurance and auto were up mid to high single digits.

Very strong.

Got it and then just on the workforce solutions in the two thirds of non farm payroll data now in your database it sounds like you've I think.

Closing that gap, maybe faster than we had expected.

Just some thoughts at that.

The same case versus your internal expectations, but the question is.

How much of that is really locked in an exclusive per se.

So that competition is and isn't the way here.

Yes, I think manav a couple of points on that.

We're increasingly looking beyond nonfarm payroll as you know.

Adding in the gig economy as well as the pensioners and.

When we think about our 146 million records in 111 million uniques are individuals in our dataset.

About 200, plus 210 $220 million total working Americans and pensioners. So there's a long runway for us between W. Two.

Traditional employees self employed and remember self employed we think about gig workers are being Uber drivers door dash et cetera, but think about self employed doctors self employed lawyers self employed accountants self employed contractors. It's a large population and the net pension base is quite large and we mentioned in our comments.

Earlier that we've been starting to add pension records and gig records and we signed an agreement with a company that does pension payroll. If you will for various companies, where we're going to do the income and employment verification for them. So we have the ability.

80 to double our dataset.

Over a lot of years going forward and I think as you know we've talked to you before that we've got a 13% to 15% long term growth rate for workforce solutions.

That sits inside of Equifax is 8% to 12% growth rate and we've got three to four points of that from a record growth in the 13% to 15. So there's no question, we've had above expectation record growth over.

Over the last it's not new wasn't last quarter, it's really been for.

Three or four years, a lot of that has been from many of the payroll processors that you go back three or four years ago, we're not contributing our records and now they are in.

As well as continued growth from our core records, which are from individual companies. So with regards to the competitive position. We have we feel very good about it.

The agreements that we've signed or on an exclusive basis.

<unk>.

In 2022.

Since I've been here, it's the right relationship between our partners and.

In Equifax, they want it and we want it and when we think about half of our records coming from individual companies.

<unk> from long term relationships, where we're providing those.

Broad suite of services, whether it's <unk> nine <unk>.

<unk> management unemployment claims work opportunity tax credit.

HCA benefits all those solutions to companies. We also do income and employment verification for them as a part of that relationship for free. So that's a very sticky relationship from our perspective and you probably heard in my comments earlier that.

Workforce solutions is really doing a much better job going to market with the full suite of employer solutions, we have and we signed a contract with a large multinational.

It's going to.

Once it's implemented it'll be $20 million a year of Equifax revenue, where we're providing all those employer solutions services to that multinational of course, we're also doing their income and employment verification. So we're quite energized about our progress of adding new records to the dataset I think as you point out.

It's certainly been above the long term framework.

<unk>.

Broadly it's been quite positive for us and maybe a last point that you are well aware of.

As you know the day, we add the records were already able to monetize them because were getting inquiries from our customers either through system to system integrations or through their access to our website for all of their applicants. So the day, we add another record it's monetized either in a mortgage application a credit card application.

A personal loan and auto loan.

In a background screen or in a government social services. So we've got various.

Verticals that are looking for more records and we already have them in our in our order book, we just can't fulfill them until we outgrow the datasets. So it's a very powerful growth lever for our workforce solutions.

Got it thank you.

Thank you. Our next question is coming from the line of Ashish <unk> with RBC capital markets. Please proceed with your questions.

Hi, Thanks for taking my question.

One of the questions, we are getting as moat around us.

The fourth quarter, EPS and annualize that it implies or next you had a significant.

Decline in earnings I understand there are some puts and takes here obviously there was a discussion around.

<unk> benefits coming in 2023, but I was wondering if you could help us parse what are some of the headwinds puts and takes in the quarter, which may not make sense going into 2023, and what are their team wins as we think about 2000 feet.

Yes, I'll start and then John can jump in obviously, you want to start with revenue.

We expect to have <unk>.

Our active non mortgage growth next year, we are clearly going to have John talked about it a grow over challenge in the first half of next year, meaning that the mortgage market will be down versus first quarter and second quarter of 2022 based on where current trends look we don't have an outlook yet but.

There was a strong mortgage mortgage market in the first quarter and it started declining in the second and more rapidly in the third so that's clearly going to be a part of our outlook going forward.

You also have.

Our new product Rollouts will be a positive for us.

Vitality index being above 10%.

It gives us momentum next year to drive the top line with those new solutions and as I commented earlier.

The new products, we're rolling out this year, the 80 products, we've rolled out so far most of those arent really in the revenue in a meaningful way in 2022, they really mature in 'twenty three in 2024 last point I would make is that.

We've made a number of acquisitions in Alaska.

25 months or 20 months actually.

And those acquisitions are obviously in a run rate revenue, but the synergies that we expect to get typically kick in in years, two and three so meaning in 'twenty two 'twenty three we're going to get benefits from acquisition growth that.

We have going forward, John maybe add to that and maybe talk a little bit about some of the margin absolutely answer so as mark already really covered rates on non mortgage revenue growth both from NPI, but also from new product and also very importantly from pricing right will absolutely benefit us as we go into next year generally speaking I think most people know a lot of new products in <unk>.

<unk> and other verticals that we serve actually tend to get launched at year end and pricing actions tend to happen at year end. So we tend to get a nice benefit as you move from fourth quarter to first quarter every year and it's done very consistently we also expect to have as Mark mentioned improved cost position as we move into next year as we continue to migrate more and more of our major systems to the cloud.

And we start to be able to decommission more systems and we're starting to see savings as we move through 2023, that's certainly a benefit some of the marketing and sales of incremental costs. We talked about this quarter that would affect US next quarter are really driven by the fact that we're performing so very strongly this year right that we're paying we're paying compensation appropriately at very high levels.

So those organizations because they are substantially outperforming obviously when you get into a new plan year those things all reset. So we think there is certainly cost opportunities that will help margin, but also for us. The fact that we are driving very strong non mortgage growth with.

With new product and pricing.

And obviously that flows through at extremely high margins is real benefit to us as we go into next year. So again, we're not providing guidance yet as we didnt in this call, but we have a lot of levers that can help strengthen 2023.

Maybe last one.

Maybe just the last one is that we commented that there are some.

Unusuals or things that are going to work out the in workforce solutions margins in the third and fourth quarter.

From the mix of mortgage and some additional costs associated with our sales and marketing that we made the comment that we clearly expect that workforce to be back at 50 plus percent margins in 2023, which will be.

Obviously, a positive too.

Very helpful color and maybe just a quick follow up on AWS.

The expectation for revenues to be down, 3%, that's a significant moderation from 9% growth.

Obviously mortgage is a headwind that and maybe some of the acquisitions at any listening, but I was wondering if you could help parse what should how we should think about the organic verified non mortgage growth as we head into the fourth quarter and next year.

Sure. So I think we talked about it we talked about organic revenue growth for for AWS, and we said it was about 20%.

Negatively impacting that was up is almost 15 points from reductions in UC and ERC. So if you exclude UC and our CRC, we're seeing organic growth across workforce solutions of approaching 35%, but we think it's a very good number very strong in the third quarter and well above the 13% to 15% long term growth rate.

And so even as we look into next quarter, when we compare the 20% that they delivered this quarter. We expect to have very strong performance again next quarter also in non mortgage. So again, we think AWS non mortgage revenue growth has been really outstanding and continues to grow.

Thank you thanks for the color.

Thank you. Our next question is coming from the line of Andrew <unk> with Jpmorgan. Please proceed with your questions Hi, John I, just wanted to verify that that we have some figures here Im just for these questions. If it's okay, let's put aside.

Core when I ask these these mortgage questions.

I think we know mortgage as a percentage of total third quarter revenues I think thats, a 22% the inverse of the 78% on the first quarter. Just please verify that and the second thing I want to make sure that we have non mortgage organic revenue growth and I think thats, 13% I think that's what you gave on slide four and if you could just make a.

Comment about fourth quarter or what's implied in terms of non mortgage organic revenue growth.

Yes, so I believe both of the numbers you quoted were in the presentation.

Yes, I think they are correct.

In terms of non mortgage growth rate were expecting non mortgage growth to continue to be strong right Mark talked about the fact that for the full year, we're continuing to expect 20%.

We're expecting a strong fourth quarter, not quite probably as strong as the third quarter. So slightly so somewhat below the third quarter, but still a very strong number in and we're expecting to.

To see that the strength that you've been seeing all year continue okay. Thank you John .

Thank you. Our next question is coming from the line of Kyle Peterson with Needham <unk> Company. Please proceed with your questions.

Hey, Good morning, guys just wanted to follow up on the margin a little bit and maybe if you guys could run us through some of the puts and takes in the <unk> step down is really most or all of that.

Mortgage and lower volumes kind of running through and a full quarter's impact of that or are there. There is no other cost inflation or anything that you guys are seeing material in your business.

No cost no cost really inflationary impact, it's really the mix of the loss of that mortgage revenue was just such high margin.

And then I think we also talked about some costs from sales and marketing and Onboarding.

Some twin contributors, but the majority of it is the margin mix from our mortgage absolutely the step down in <unk> from <unk>. It was really driven by lower lower revenue in general because of but it's driven by lower because mortgage is lower and obviously mortgage has a very high variable margin. So that's the driver.

Got it that's helpful. And then just a quick follow up on an international obviously the constant currency trends have looked really good for you guys. I know FX is kind of a problem for you guys and a lot of companies, but a little surprising to us that I.

I guess with all the recessionary fears and such.

Are you guys seeing any slowdown or caution, especially in parts of Europe and such.

With your clients or has at least through October so far has those trends still held up and been pretty stable and healthy.

Yes, as you know Europe for US is primarily U K, but also Spain, where we participate.

And while inflation is a challenge there is still working right.

So we really haven't seen any meaningful change in whats happening with our customers everyone is worried about inflation, but.

When you've got people working they are generally going to pay their bills are also going to spend money in.

They operate in as you saw from our comments, our UK business, which is most of Europe had a very good quarter I think was up 7%.

So no we haven't seen it yet even with all the inflation fears.

Got it that's helpful. Thanks, guys.

Thank you our next questions come from the line of calcium.

Autonomous research. Please proceed with your questions.

Hey, Mark.

Yes.

Great.

For this quarter.

Non mortgage verifier revenue.

Now a little bit sequentially can you just help us understand a little of that.

In terms of what's going on.

That comes from your line.

Got it and then or other vertical.

Yes, so AWS non mortgage in verifier, but broadly rate was very strong so again.

The growth rates, we're talking about are extremely high we think government and talent continued to perform very very well.

What we.

So if youre just looking at growth rates, obviously as you move through the year comps get tougher because we grew very strongly in 2021, but overall as we take a look at talent solutions. I think we gave the growth rates. Yes. They are slightly they are slightly lower but it also driven by comps government very strong.

I think we saw very good performance in kind of commercial.

In the non mortgage finance segment, which again was very strong. So we feel very good about the about the trajectory and the trend and in continuing very strong non mortgage growth rates there.

Gotcha.

Quick follow up.

Margin.

Current mortgage environment.

I'm trying to figure out what sort of like.

Normal margin.

So we basically.

Why.

Quarter.

Q4 is all kind of in the 40% range.

We said in our comments and hopefully you heard is that we clearly expect.

Margins had yet to return to that 50% plus level in 2023.

We view that.

This mortgage mix as being a challenge in the third and fourth quarter that will definitely impact our margins as well as some of the additional costs in sales and marketing and twin contributor Onboarding in the third and fourth quarter I think we talked about.

Nine or.

Is it nine or 10.

Additions of new contributors 10 additions of new payroll processors Theyre, adding records, there's generally some incremental costs when those get added in our non mortgage growth is so high we're having some additional sales and marketing costs in AWS, but to be clear, we expect UWS margins over the long term to be at.

That 50% plus.

Rate versus where they are at this quarter and next quarter.

Thank you very helpful.

Thank you. Our next question is coming from the line of Andrew Jeffrey with truly Securities. Please proceed with your question.

Hi, Good morning, appreciate all the detailed color as usual guys John <unk>.

A question for you on <unk>.

Overall consolidated EBITDA margin progress I think you've touched on some of the potential tailwind next year.

But given the challenges, especially early in the year with mortgage.

I'm thinking about margins being flattish, maybe up a little and Thats my numbers not yours.

And then a bit of an improvement in 'twenty four it just seems like a heavy lift to get to 39% by 'twenty. Five is there a step function that we need to be thinking about I'm just trying to.

I understand that John you should jump in but remember a big piece of that past that 39 is the cloud transformation completion, and we get the meaningful impact on cost takeout.

Telegraph before every quarter, we talk about it that roughly half of that lift from our margins last year to the 39 is from cloud execution and that's in our hands. So we know how to do it it's not economic related we're going to whether the economy's up down or sideways, we're going to complete the cloud.

Plugs in you've got workforce solutions growing faster than the rest of equifax.

50%, plus EBITDA margins that accretive margin.

Between now and 2025.

<unk> also got new product Rollouts are non mortgage growth that we expect to deliver.

Also going to deliver margin expansion over that timeframe.

As we get to 2025 and the framework we laid out last November right. We indicated we expect.

Markets that we're in to be somewhat normal so we're expecting kind of a normal non mortgage market and we're expecting the mortgage market itself to move back toward more normal levels right. So a big part of in addition to the cost take out related to the tech transformation, which mark already referenced a big part of the mortgage increase is related to that revenue growth.

And clearly we do need in order to deliver those levels, we do need to see some recovery in the mortgage market and moving and having to move back toward more normal and then obviously some some normal non mortgage markets and given the fact that we're performing so well in non mortgage growth. It gives us comfort that we have a path there to that $7 billion.

We do need to see some recovery in some of the markets, we're serving particularly mortgage.

Okay I get that Thats helpful. Thank you and then Mark your comments.

In U S. I S about mortgage shopping being a tailwind I appreciate.

I just wonder as rates really have have blown out here in the 10 years the yield is up again today remarkably.

How long can that persist does there come a point where rates.

And accordingly housing affordability reaches a level, where you're just not going to see that kind of behavior and is that something you are contemplating as you think about.

The ultimate 'twenty three guidance you offer us.

It's not.

Our view is and what we've seen and we continue to see it is that at these higher rates consumers just spend more time shopping around and when they do that shopping usia's benefits from that credit pool that happens in the shopping process and we do not expect that to change I think your question. Maybe is maybe is a little bit different around.

At these high rates are people going to still buy houses.

And at these high rates are people still going to do some level of Refis, which there is some it's obviously down a bunch, but it's more cash out refis to access.

The multi trillion dollars of untapped home equity in the U S.

As you know the mortgage market doesn't disappear.

It's certainly declined further and more rapidly than we'd expected as you know we've been providing revised our mortgage guidance three times this year.

Because we didnt, we couldnt forecast, where the fed was going to take these rates and I don't think anybody can accept higher from where they are now we're actually getting better at forecasting out a couple of months, meaning inside the quarter, but as you get out past the quarter looking out with what's happening with the volatility of where rates are going it's more challenging.

<unk>.

We'll certainly take all of these factors in place when we put out our 2023 guide.

In February .

And you have a clearer view hopefully then of what the what the mortgage market is going to look like but there's no question. The mortgage market is going to bottom at some point.

It doesn't go obviously to zero there is going to be an area, where people still move and even at this interest rates and it has happened before and in the U S.

People still buy homes, so in meaning they buy homes and get mortgages. So there is that level of floor. I think we're all struggling with where it is and we will have a better view.

A few months of what that looks like for 2023.

John talked earlier first and second quarter, we're going to have.

Tougher comps against the very strong mortgage market in first quarter this year, but as we get to third and fourth will start.

Comping more towards what should be the.

<unk> floor until.

We get past whatever economic event where in here.

I appreciate it thank you.

Thank you. Our next question is coming from the line of Kevin Mcveigh with Credit Suisse. Please proceed with your questions.

Great. Thanks, so much.

Obviously.

Certainly on mortgage but with the inquiry guidance in Q1 is there any way to think about what percentage of revenue mortgage.

Could be in the first quarter and then.

Any way to think about how you think that will progress over the course of 'twenty three just as a percentage of revenue more broadly.

I think Kevin is we talked a few minutes ago.

Andrew we're in.

Not doing any guidance on anything on 23 right now we're focused on the fourth quarter and we'll certainly give that guidance when we get to likely our February .

Fourth quarter earnings discussion.

Okay, and then Mark you talked with any AWS, obviously kind of the relative outperformance is kind of a record penetration system. The systems direct integration pricing very in a way to ring fence the contribution across each one of those like is it primarily the records growth that drives it or just as it.

So we get a sense of across those five buckets or is it kind of evenly distributed.

I wouldn't say, even but theyre all important there is not one that's disproportionate look record additions are very attractive and very unique for the workforce solutions business because it drives revenue day. Two after you add the records and is 16% record growth in the quarter.

Driven records up double digit for the last number of years.

Certainly a positive we take prices up every year.

So that's something we'll do in January .

All the verticals and workforce and across Equifax, new products, we talked about workforce solutions is indexing kind of north of <unk>.

Our 14% in the quarter and our 13% guide for the year of new product introductions, that's very attractive for.

<unk> workforce.

We've talked in prior meetings about.

Changing to drive system to system integrations and penetration as a big opportunity in workforce.

If you think about the credit file is very highly penetrated in all financial services verticals workforce is not even in mortgage there's still.

40 odd percent of mortgages that we don't see that are still done with paper pay stubs.

We only do.

Roughly one in 10 roughly.

Background screens.

Government, you got a $2 billion Tam and we've got a $300 million roughly business. There. So there's a lot of government penetration opportunity.

So you can see each of them are attractive and very valuable which is why we have a lot of confidence in workforce solutions, 13% to 15% long term growth rate.

Great. Thank you.

Thank you. Our next question comes from the line of Shlomo Rosenbaum with Stifel. Please proceed with your questions.

Hi, Good morning. Thank you for taking my questions Hey, Mark can you talk a little bit about the NPI and whether theres been any kind of change in <unk>.

Strategically about how you approach that we're seeing is much higher NPI like 14%, but were seeing the numbers of new products.

Obviously much lower than we saw last year or is there some kind of strategy that you have in terms of less shots on goal, but more higher percentage shots at goal or just does that just vary per year, and we really can't look that much into the numbers of NPI like like we used to.

Numbers are important obviously I think just maybe spooling back to kind of two years ago. When we really ramped up our new product Resourcing, we brought in a chief product officer, we've got more of a cadence around it we did that intentionally in advance in advance of our single data fabric and in advance of our.

Cloud capabilities, because we were convinced that the cloud, which again, we still have to complete we are well down the road and a single data fabric will allow us to bring things to market. We couldnt do before use. The example of the product we rolled out this week at the mortgage bankers Association of taking our telco utility cell phone data and embedding it in.

The credit file.

That's a very sophisticated product that's going to drive higher hit rates to higher approval rates higher originations for our customers and.

It's something that only equifax can deliver so that multi data solution is a big part of our part of our new product capabilities. The second area is.

Really leaning more into our trended data our historical data workforce solutions now gets with 40%.

Revenue from historical records, almost with almost 50 now.

When you think about how they've changed that in the last couple of years through their new product capabilities and think about a mortgage solution that shows historical income data on our consumer back a year two years three years four years that helps in the underwriting process, we sell that at a higher price point.

Think about in that talent vertical.

Our history of job employment, that's required as you know.

500, and I think 60 million total records now.

In the twin database and Thats well over five five jobs and the average American.

That multi data as well as historical solution.

The other thing Thats quite encouraging I mentioned in my comments earlier is that.

Workforce solutions, that's further down the road in the cloud.

Is delivering well north of 14% vitality there one of the big drivers of that guide up for the year on new products and that's what we wanted to see Thats, what we expected to see and I think the good news is we're seeing it meaning as we get further into the cloud we're able to deliver those new solutions to our customers.

I think as you know new products are also very high.

Obviously, they drive incremental revenue growth, but theyre very high incremental margins.

Youre thinking 70% to 80% kind of incremental margins on new products.

Why we are driving the initiatives, but it also makes us more valuable to our customers, we're bringing them solutions that helps them solve problems.

Either drive their topline or bottom line.

Or both.

And a very positive way so it's a big focus of ours.

It's one that is central to our long term.

Growth strategy and you remember back in November at our Investor Day, we talked a bunch about that being one of the factors of increasing our long term growth rate to the eight to 12 was our.

Expectation and now Youre seeing it of our ability to deliver that 10% vitality and our long term growth rate.

And just a clarification the almost 50% I quoted as a verifier revenue yet.

From a historical.

Just to.

To clarify that I understand it's important I'm just trying to understand is the difference between the 14% in the amount of record.

NPI, that's coming out that's kind of the.

Yes.

I'm used to get at sure you used the term shots on goal or do you want to have more shots that go into more shots on goal and we want both right.

You have a bell curve with any new product portfolio, you've put in place youre going to have some products that are screaming winners that really hit the mark with our customers and some that are less successful.

And then Theres also maturity cycle to them as I mentioned, we will rollout products in the second half of this year that.

Won't deliver any revenue in 2022, but they'll start maturing in 'twenty three 'twenty four 'twenty five.

That's really what you have from a cycle standpoint, so to answer your specific question.

We're looking to have more and obviously, having more that deliver larger revenue and I think we're just getting better at that primarily because we're really be quite deliberate around.

Collaborating with our customers instead of creating a product we think the market once we're creating a product that we know our customer wants because we're collaborating with them and then once it works with one customer or two then we product ties it to take it out to the rest of our customer base.

Okay. That's helpful. Thank you and then just one just for John .

Thought that the AR DSO would improve sequentially this quarter because.

I thought that that billing system conversion would be behind you is that something that we should still be thinking about for the fourth quarter or is there something just.

Is this less.

Will they our DSO just.

While the mix of revenue more natural.

No. So the conversion you are talking about so part of as part of transformation. As you said, we're moving financial systems to the cloud as well and the major movement of financial systems, including billing systems actually runs through October right.

In November .

Some of the level of elevated DSO as we saw in the second quarter did continue into the third quarter, it's related to those transacted to that system migration and we expect to see substantial improvement as we move through the fourth quarter.

Great. Thank you.

Thank you our next questions come from the line of Craig Huber with Huber Research Partners. Please proceed with your question.

Yes, Hi, good morning. My first question you outpace acquisition can you maybe just tell us how the integration has been going here in the last year and I'd be curious what the pro forma organic.

Year over year.

Revenue growth was in the third quarter for the acquisition.

What was maybe forget to retail yes, so the appaloosa insights acquisition as you know is our incarceration data business. We're really pleased we bought it really just a year ago. So it's 12 months in and the integration is progressing very positively.

We talked about some of the joint solutions that were already bringing to market.

Their data into our total verified data hub.

And we've got new products in the pipeline bolt on.

Enhancing their their solutions with their data, but also combining their data with some of the other data that's used either in the talent or the government verticals to.

Deliver a single poll with either.

Employment data plus the incarceration data or employment education and incarceration. So we've seen really positive opportunities there and as far as growth rates it was growing.

Mid teens, when we bought it and it still is we're very pleased with the growth of the business.

Okay. Great. My other question is you've talked on this call and prior ones with a healthy U S consumer being quite strong versus pre pandemic 2019 levels. I'm curious are you seeing that with all the data you look at that it's not materially getting worse versus three and six months ago. The U S consumer.

Absolutely not no.

They are still strong and there really hasn't been a change in 2020 to about around the consumers you know employment as unemployment has gone down and employment has gone up.

Since the beginning of the year. So that's good for consumers wage growth is up which is good for consumers and that helps their balance sheet, obviously inflation's, a bad guy is hurting lots of consumers, but even with inflation consumers are still out there spending.

Traveling and doing all the things that.

They do in their lives.

The credit scores were up 15 points from 2019 that hasn't really changed they are in good shape. It you really have to watch employment and unemployment.

That's where things generally change with the consumer obviously inflation is challenging, particularly for the kind of the lower income demographic, but.

The rest of the population is.

Is doing okay.

Great. Thanks, a lot.

Thank you our next questions come from the line of Andrew Nicholas with William Blair. Please proceed with your questions.

Thanks, Good morning.

In the international business how much of.

The recent strength would you attribute to share gains versus end market strength at the country level and to what extent would you say the cloud transformation is already paying dividends in terms of growth and vitality index there.

Yes.

So I would add a couple of things to the lift I wouldn't call. It <unk>.

Obviously end market in 2022 is stronger than 2021 as the.

The international markets came out of the pandemic earlier this year.

But.

The end markets aren't.

Latin America. The end markets are always strong just because of the underlying growth there, but I wouldn't say there's been a change in the end markets.

Our team is executing well so there is some commercial.

Strength, there new products are a big deal.

As far as bringing new solutions new products to market. For example, we're bringing our count identity and fraud solutions to a lot of our international markets. So we're starting to get some traction there which is helping our international platforms.

Cloud isn't really a benefit to them yet further.

Further behind the North America intentionally in cloud with the exception of Canada.

So there are cloud benefits are really going to be more in 'twenty, three and really actually more than 24 as they complete the cloud but.

But would you add to international John with the debt management they.

They are growing very fast right I don't know, if you'd call that share or not right, but what it is we have certain large customers that we have very high positions with that are growing very fast and principally in the U K government. So that's driving a nice piece of growth obviously.

Sure.

That's helpful. Thank you and then for my follow up John maybe a question for you just a quick clean up item.

Corporate expenses ticked down pretty significantly on a sequential basis could you speak to the driver there and how sustainable kind of that new level is it's obviously ticked down quite a bit here a couple of quarters in a row I just want to make sure I understand the dynamics driving that thank you.

So if youre just doing sequential third versus second right. The big drivers were corporate technology spend and also tech transformation spend.

Some of that was just good cost management some of that is around tech transformation and that can move between b using corporate and we saw some of that in the third quarter.

As projects complete in corporate or teams move between between Corp, and to be used you can see expenses come down in corporate we had a little bit of that in the third quarter. We also saw some some good cost management and some sequential declines across corporate expenses in general and we did see some lower.

Some some lower expenses specifically related to.

Compensation and variable compensation broadly.

We took the year down so.

I'd say those were the big drivers.

I think we expect to be at lower levels of expense in last year substantially right and what you've seen all this year, probably in the fourth quarter Youre going to see some of those expenses tick back up again, because we would expect to see some more investment in technology and corporate technology. So some of the benefit we got in the third quarter and we will give back because we're spending up we're spending more on transformation.

So for example, Shlomo question around financial system transformation. Some of that is occurring in the fourth quarter. So I hope that helps.

It does thank you very much.

Okay.

Thank you our next questions come from the line of Jeff Mueller with Baird. Please proceed with your questions.

Yes, Thank you and good morning.

Mark any additional perspective, you can provide on what you're hearing from customers on the prescreen and marketing activities starting to pull back just given the health of the consumer at this point and.

And bank balance sheet health. So we just wanted to kind of like square those two points.

As I said earlier, Jeff broadly the consumers' unchanged from second quarter, and so our bank balance sheets are very strong. So there's no change there. So don't take whatever you heard earlier is.

Some message around that were seeing big Pullbacks, what I will tell you is every time I meet in the C suite or which crows.

We're all talking about because we all watch CNBC, we all watch what's happening with inflation, we all see what's happening with interest rates or when will it have an effect on consumers and when will it have effect on the ability to pay and delinquencies and again my view of someone who has been around financial services for multi decades.

It all starts with employment.

Thats the indicator that we watch I watch and then after that as delinquencies, but we are seeing is still a strong job market I think.

Not quite too.

But there was $1 seven jobs open for anyone who is out of a job now something like that so it is still very vibrant.

We don't see indications of what I would call pullback.

But everyone's watching it it's clearly a conversation in every meeting.

Got it I appreciate the perspective.

And then within 2016% records growth.

As you said way above the long term framework.

Really good growth model.

<unk> growth accelerated year over year, the comp wasn't much tougher sequential growth seem just okay. Considering you are still onboarding partners in non farm payrolls are growing so.

Any perspective on on that figure.

And if you can confirm if there was any partner record attrition.

Yes.

Yes.

There is some levels, it's very de Minimis of what I would call churn inside of the records, but obviously theyre generally growing when you are up 16%. So there is that's not something that we see there is.

Obviously, a change some changes in employment with some of our partners as you go through the year. There is a seasonality as you might imagine where there's hiring in some industry think about retail warehouse related to the holiday season.

We see increased employment, which resulted in increased records for us call. It in the second half of the year and then a change in the first half of the year when some of that some of that holiday hiring it comes out of the system, but broadly.

We are seeing obviously at 16% strong record growth inside of the twin set.

I'd say, it's generally true that we're seeing it's actually been a very good year. Both in terms of signing new partners, but also direct contributors right. So I think we feel like in terms of the execution of the team and on building new contributors, it's really been an outstanding year.

Yep got it thank you.

Thanks.

Thank you. Our next question comes from the line of David <unk> with Evercore ISI. Please proceed with your questions.

Thank you and good morning.

Bridging to some of the earlier questions on revenue, but focusing specifically on AWS if we.

Take your fourth quarter 2022.

Revenue growth guide of down at least 3%.

Kind of think through your commentary on Q1 mortgage credit inquiries being down 50% or so year over year, how should we think about the starting point for AWS revenue.

2023.

Yes, again, we don't want to get into 2023 guidance. We gave you our fourth quarter guidance is too early to talk about 2023, and I think we talked about.

Obviously mortgage in for sure in the first half will be a challenge because of the strong mortgage market in the first quarter last year.

But we and some of the previous questions talked a bunch about.

What are the positives if you will having the non mortgage total growth of 20 and organic growth of 13, that's momentum coming out of 2022 into 2023.

It is obviously going to be important to us we talked about the fact, we do pricing actions typically on one one.

So thats going to be a positive for us in 2023, new products that we talked about the acquisition synergies and growth.

Going into 2023, what else would you add John .

We've got a pretty good lending earlier question I think it's a pretty good list right. So specific to AWS and specific to verifier and our records growth was obviously outstanding so far this year, a 16% records growth carries through till absolutely next year and I think we talked about 10 new.

Partners being signed up three in the quarter.

Those won't go online in the fourth quarter those will be additions that will happen in 2023 that will drive records and of course, we're out there working to add more records that will help but AWS.

Understood just as my follow up to <unk>.

38% organic non mortgage growth at workforce solutions in Q4 talent up 50% organic government up 44% organic how should we think about the runway for growth for both Cowen and government.

In 2023 of these types of growth rates sustainable or have they peaked.

Yes, we're not giving growth rate.

Outlook for 2023, that's not the intention of this meeting yet, but when you think about those two verticals I talked about it earlier when you think about talent as a $5 billion Tam, where we have a ton of penetration opportunity right. Because we're only doing one in 10 or to intend background screen. So thats our opportunity there and then in the government very similar.

Government, that's about a $2 billion Tam for that kind of verification of.

The income and employment in some cases.

We've got $300 million business. So there's a lot of growth potential there and add on top of it kind of the core workforce solutions growth levers outside of penetration.

Adding more records is going to drive hit rates in both businesses whether it's.

For background screening our government social services.

Add in our new products pricing changes that we're going to do early in the year systems system integrations drive revenue for us in both of those verticals. So those those are the kind of growth levers the team's going to work on.

And as in flight on as well as the momentum that we have coming out of the year, which is quite strong over the longer term, we have a 13% to 15% long term growth rate. So obviously the growth rates, we're delivering today in those specific verticals or well above that so we would expect over time, we're going to have very good performance on those verticals, but growth rates over time, we would expect in general.

Non mortgage we're going to converge more down toward our long term model.

Understood. Thank you.

Thank you. Our next question is coming from the line of Toni Kaplan with Morgan Stanley . Please proceed with your questions.

Thanks very much.

Looking ahead, how should we be thinking about your ability to pass on price increases and AWS versus prior years. If we do have an economic slowdown does that impact pricing.

Sure.

Trying to push through and just maybe if you could ground us on how we should be thinking about like a normal pricing baseline for AWS for pricing.

We don't see any real change in not only AWS, but across equifax about what we're going to do in price in 2023 and like it's already happening.

So it's not going to we're already in flight talking to customers about what our plans are around price for 2023, because most of the pricing goes into effect one one.

Workforce as you know is a very unique solution that delivers.

Really unique value to our customers. So we have more pricing.

Power their flexibility, but we're always balanced about.

Price, whether it's a.

Good or bad economic times, but I would say broadly we don't think about pricing being different if there is an economic event and again economically that hasnt happened yet.

The outside of the mortgage macro.

The economy is quite good our non mortgage business is very strong our customers are strong. The consumers are strong. So we're kind of doing what I would characterize as kind of a normal <unk>.

Process.

In January .

Great and then you've talked for some time now about getting the Canadian pension or records have you been.

Success in getting those and is there a different process for getting good records versus W. Two records are the harder to get because it's more maybe fragmented outside of ride sharing.

But how is the update on the process.

Earlier successes.

How different it is thanks.

Yes, there's still a bunch of runway and W. Two which you heard and we're penetrating that.

Which is most of our records today are W. Two so that 16% growth is primarily in that set and there is still.

Another 40 50 million records to get there and then if you go to gig is more dispersed and we've got a number of strategies underway to go after those records, which are equally valuable and we've got some traction around pension of records as I mentioned, we've signed a big partner to bring some records in we're also getting records <unk>.

<unk> from large kind of legacy companies that do their own pension or payroll processing or pension or payment processing. So we're working on all of those avenues.

We've got dedicated teams on them and.

Our expectation is to continue to add records from all three areas as we move through the fourth quarter and into 'twenty.

'twenty three and beyond what's energizing for us is the opportunity to still double the dataset.

111 million uniques.

Call it $210 million or thereabouts total employed or pension payment recipients in the United States, We've got a long runway to add.

New records to the twin data set and again I mentioned this a couple of times I know, it's not lost on you Tony that we're already getting inquiries on those right. So we get inquiries on the half of the records. We don't have so it's just a matter of adding them to drive our revenue growth.

Alright. Thanks.

Thank you our next questions come from the line of Simon claims with Atlantic Equities. Please proceed with your questions.

Hi, Ron.

I just wanted to go back to.

Two.

This is Hudson.

I've been tracking.

Our non mortgage revenue.

Yes.

Average recognized.

Yes.

Since the pandemic has been moving up.

Pretty much every quarter.

For the first time I'm, just wondering if anything.

In terms of that kind of structural opportunity on the revenue.

A record basis going forward.

Sure.

Any particular time.

We should read into that.

Yes, I know.

Been growing revenue per record quite meaningfully and again the way you should think about it in a way that's the way we think about it is as well.

We get into new verticals.

<unk> talent in government.

Or even I would characterize cards.

As a newer vertical autos underpenetrated.

All of those verticals.

We add those new revenue sources that records become more valuable.

Right, because we're monetizing that same record multiple times when someone applies for a mortgage and then a credit card and then an auto loan or a PD lone and then they apply for new job or then they have to get government social services, you've got multiple avenues to monetize that record. So it's a it's part of the power of the business.

The only thing I would add and you know the Simon rate is at.

Obviously, the different verticals, we have a very different price points and different product structure. So you can see mix changes in any given period.

When youre, taking a look at transactions and records in revenue, but so just make sure you keep that in mind as Youre running your analytics.

Okay. Thank you and just as a follow up.

We talked a lot about how the mortgage revenue declines are really impacting margins very high incremental margin I. Just wanted to just confirm again that should mortgages ever rebound should we just assume that it carries that 180% incremental margin on the way up as well is there any reason not to.

And then longer term.

Is there any reason why the non mortgage revenue shouldnt have the same kind of incremental margins.

The mortgage business today.

So are you specifically talking about verifier.

Yes.

Okay.

Yes, so so variable margins or the contribution margins for mortgage obviously, you had going in and coming out should be very similar.

Whether or not we reinvest some of the incremental profit generated would be a different discussion right, but but they certainly should be similar in terms of the contribution margin or both.

Generally speaking the margins across verify are similar.

It can be somewhat different depending on the relative price point and the volumes relative to the price points. So you can see some higher cost.

For different kind of to your earlier question, but broadly speaking, yes, the margins for the products across the verification services are relatively similar.

Okay. So it's just a question on reinvestment.

Okay.

Thank you.

Thank you. Our next question is coming from the line of Seth Weber with Wells Fargo. Please proceed with your questions.

Hi, good morning, guys.

I just wanted to ask about the sequential improvement in <unk> EBITDA margin that you guys are forecasting for the fourth quarter. It looks like revenues are kind of flattish sequentially is that just some of the sales and marketing expenses are going out or it doesn't seem like mix is really changing a lot. So just if theres any.

Color on the 200 basis points of uptick <unk> to <unk>.

Yes, so sequentially generally we see a little bit of an uptick certainly we definitely see an uptick in non mortgage revenue generally in <unk> in the fourth quarter. So we would expect to see some of that and it tends to drive very high variable margins.

So and given that we expect to see a little more leverage on some of the opex.

Al.

Okay, I'm just trying to understand.

Over the prior to the second quarter, the business was sort of high 30% margin. So I'm just trying to think through if there was any reason why you wouldn't get back to that level relatively quickly next year.

It sounds like Youre moving back in that direction.

Secondly, relatively quickly.

Obviously, the mortgage market decline has weighed on that.

Heavily right. So obviously as we get into 2023, we will give you a better view as to what we expect 2023 usa's margins to do.

Right, Okay, and then just a quick clarification.

<unk> talked about a couple of times you referenced M&A synergies expected over the next couple of years is that revenue synergies or expense synergies or both or just how should we think about that.

Yes.

When we when we do these bolt on acquisitions, you know part of our strategy is to bring in unique data assets that we can combine with other equifax data assets in order to drive.

New solutions to market and that generally takes time, we are going to integrate the business integrated their data set into a single data fabric and that usually takes call. It a year and change and then we can start bringing those to market and then those drive the top line and the bottom line.

Got it okay. Thank you guys appreciate it.

Thank you. Our next question is coming from the line of Phase out Ali with Deutsche Bank. Please proceed with your questions.

Yes, hi, good morning, Thank you.

Just I wanted to talk about AWS margins again, and I'm curious when you gave the margin earlier the CR. Thank you talked about 54%.

Just wanted to understand is the.

The region from that to where we are today entirely mortgage related or is there anything else in the underlying business that.

And that has impacted that change.

The biggest driver.

<unk> degradation by far is the impact on revenue and very high variable margins, we get for mortgage so.

That's the biggest driver right. We have talked about some increased expenses, we talked about some marketing investments and things, we're making this year to drive MPI, which had been very successful but <unk>.

Generally overall the biggest driver in the movement has been related to the to the reduction in revenue related to mortgage.

Okay got it.

And then just as we think about those margins I appreciate it.

I know youre, not providing 23 guidance, but I appreciate you, giving us <unk>.

<unk> two margin.

Outlook of above 50% and I'm curious if you can give us.

Just not numbers, but just.

Let's take quarter on how we should think about the I guess the quarterly cadence I mean, I'm thinking we should build through the course of the year is there anything you can say about <unk> given that you did provide.

Outlook for mortgage inquiries for the first quarter.

Yes, we're not ready to talk about 2023 guidance, we did want to make clear that.

First quarter is going to have a tough comparison, given the fourth quarter exit and the strength in the first quarter last year, and then I need Ws you said about 50%, we actually said over 50% just to be accurate.

But we'll be ready to give 'twenty three guidance when we get into 2023.

Perfect. Thank you.

Thank you our next questions come from the line of George Tong with Goldman Sachs. Please proceed with your questions.

Hi, Thanks, good morning.

You mentioned that non mortgage growth in <unk> will be strong, but not as strong as <unk> can you discuss data points that you're seeing in the bank card and auto lending sectors that suggest an incremental moderation in strength in those categories.

Don't know if you are listening George but we got that question from.

Earlier that we're not seeing any change.

The non mortgage growth rates that we're talking about are very very high and we.

We expect them to.

Still be very strong in the fourth quarter.

We did give a view of <unk>.

Of international in the fourth quarter International was outstanding in the third quarter is looking to be very strong in the fourth quarter, but its growth rate is somewhat lower and obviously international.

Their revenue is.

Virtually all non mortgage.

Okay got it.

As you look at the mortgage category.

Certainly there was a significant amount of refinancing activity that was pulled forward into 2020 in 2021.

To what extent this is pull forward structurally lower the medium term mortgage revenue growth outlook for equifax.

Obviously, we're seeing the impacts of that right now since since refinances has dried up.

Predominantly ranked so whats left is is just cash out refis and we're actually now starting to see substantial growth in helocs right, replacing even some of the cash out refi. So so I think we're living through the obviously the impact of that dramatic reduction in refinance right now.

Give a view of first quarter mortgage, but again in terms of giving a view as we go forward, which is kind of for us with 2023 would be midterm. It's just a little bit earlier. Unfortunately, there's going to have to wait until until we get into the first quarter.

For us to give our 2023 guidance.

Well it really wasn't a 'twenty three question more like a medium term longer term question since you've in the past given longer term guidance targets before.

I don't know what you mean by medium term longer term do we expect the mortgage market over the long term to return to a more normal level absolutely no question about it.

Is that what you mean.

Well medium term so I guess over the next two to three years or two to four years.

Whats going to happen with the economy in the first year or two of that cycle.

Then at the talent that you said two to four you get out to four years. It would my expectation you get back to a more normal level of it.

I don't know whats going to happen with the economy I don't think you do either George.

Got it okay helpful. Thank you.

Thank you our next questions come from the line of Heather <unk> with Bank of America. Please proceed with your questions.

Hi, Thank you for taking my question.

I wanted to just clarify.

Two questions one I wanted to clarify the benefit you see next year from the cloud transformation.

You said half the 500 basis point, so is that a gross or net 250 basis point benefit flowing through.

And then also does that include sort of rolling off some of that.

Additional cost.

Is that the savings or is that also rolling off.

Costs from the implementation and then the other question totally separate.

On the talent solutions side.

Alright, and the white space, there just sort of what can get you further penetrate in the background check industry.

So on transformation that the savings are related to all costs related to transformation in both the lower Cogs as well as the lower investment levels and then also theyre going to be more backend loaded than front end loaded right. Because you get the savings is as all customers migrate and you can actually decommission systems. So we will start getting savings in 2023 as we.

And we feel good that that's going to happen, but the bigger savings happen as you get into 'twenty four 'twenty five so you should think about that type of a cadence.

What was your second question again, sorry.

Just on the cloud transformation, the 250 basis points of that the flow through this year or into next year.

As John said and we said.

Instantly not only in this call and prior calls the 250 is really between 22% and 25 and at that path to 39%.

EBITDA margins in 2025 Thats our goal.

And that happens over 'twenty, three 'twenty four and 'twenty five that's not a 'twenty three change and I think in more of that would be backend loaded as I, just said right because it happens as systems actually decommission. So we'll see some in 'twenty three yes, but youre going to see more of it in 'twenty four 'twenty five.

Thank you very much.

Thank you. Our next question comes from the line of surrender event with Jefferies. Please proceed with your questions.

Good morning.

I'd like to start a question regarding your long term framework.

Can you maybe talk about is that intended to be like a rolling three year measurement period or like a five year period.

And then maybe when we think about something like AWS, non mortgage which continues to grow well above that framework.

How often do you revisit the framework.

Framework, such as that and maybe some of the factors that underpin it like for example at some point, whether it's three years five years out.

The W. Two records within the twin database will mature so how do we think about some of those longer term drivers of the business.

Yes, I think as you know we put this in place a year ago.

And I believe that was the first change in Equifax is long term framework in like five or six years at least maybe longer.

The old framework with seven to 10, we move to eight to 12 100 basis points on the low end and 200 and the high end. It was intended to be a long term framework and we can all talk about long term, but let's say five years, plus meaning we expect the company to grow.

In that range short of economic events. Those are something you can't put in a long term framework, but 8% to 12% growth for workforce in particular inside of the eight to 12, when we talked about this already this morning, we have an expectation of them growing 13% to 15.

They're long term framework inside of our eight to 12, meaning they're going to be highly accretive and grow faster than the rest of equifax. That's something that we expect as you point out they've been outgrowing that 13% to 15, which sits inside of our eight to 12, which is good news.

Is that gives us confidence in the 13% to 15 over the long term and of course. The 13 to 15 is made up of record additions.

Made up of new product Rollouts, it's made up of penetration.

And they've got uniquely a lot of penetration opportunities in all of their verticals because.

Our income and employment data is still a fairly new data asset.

In the scheme of data assets. The credit file has been around for 70 years income and employment data has been around in a digitized way only for 15.

We've got a lot of confidence in the 13 to 15 for workforce.

Because of all of their growth levers, but also because they've been outgrowing that 13% to 15 for the last three or four years.

And your question I think you also asked a question about when will we revisit this.

It's just it's actually not even 12 months old our Investor Day was I think on November 7th last year. So, we're very confident and comfortable with what it is today after almost 12 months.

At the right time, if things change, we would look at it again, but.

We see no reason to change it and we still have a lot of confidence in it.

That's helpful and then maybe as a follow on when we think about the contribution of new products to revenues as measured by the vitality index. So is that intended to be all.

Growth on top of the existing revenue base or is there some cannibalization of revenues that we need to consider or maybe the play between the two how should we think about.

The actual measurement of that and what it means from a modeling perspective.

Yes.

I think our long term framework, John we talked about new products in November last year, adding 1% to two points.

Yes.

10%, yes.

That's roughly a year and that translated into.

That was one of the drivers of us, bringing up our long term growth rate from seven to 10 to eight to 12 was.

The increased new product rollouts is going to be.

A factor of that change in our long term growth rate and then add to it.

Workforce solutions growing faster than the rest of equifax it approaching 50% of Equifax, that's accretive to that growth rate, if theyre growing 13% to 15 and then the average for our long term is eight to 12 that's accretive.

And then we believe the cloud completion and cloud competitiveness also was a factor in that change from 7% to 10 to eight to 12 I don't know if thats helpful.

Our vitality and this is supposed to represent truly new products right. I mean, certainly even new products can cannibalize, an existing product, but they're not supposed to be tweaks, we don't tweak a product and call. It a new product it needs to be a product thats substantially different or substantially substantially new to equifax.

So this would be claims generally buying these on top of whatever existing products or Brian Yes, Theres clearly it will replace some products, but they're generally as John pointed out unique editions and use. The example, I shared this morning of.

The mortgage credit file that we've been delivering to the marketplace for 70 years in some fashion, we rolled out a new solution that is going to be our file plus this telco utility.

Cell phone data, that's going to differentiate our mortgage credit file that's a new product out.

Some customers will only buy the new product.

Some will continue to buy just the credit file.

That's really so there is there some cannibalization.

Could be but theres also should be we expect share gains, meaning our credit files more valuable than our competitors' credit file because of the addition of that unique data to it.

That's very helpful. Thank you.

Okay.

Thank you there are no further questions at this time I would now like to turn the call back over to Trevor Burns for any closing comments.

I, thank everybody for your time today.

Feel free to reach out.

Thank you.

Thank you. This does conclude today's teleconference. We appreciate your participation you may disconnect. Your lines at this time enjoy the rest of your day.