Q4 2022 Equifax Inc Earnings Call

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

At this time all participants are in a listen only mode.

And answer session will follow the formal presentation.

No one 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 head of Equifax 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.

IR calendar section of it.

News and events tab.

IR website, www dot Equifax dot com.

During the call today.

Yes.

I'll be making references to certain materials that can also be found in the presentations section.

The news and events tab.

Our IR website.

Materials are labeled Q4 2022 earnings conference call.

Also when we make certain forward looking statements, including first quarter and full year 2023 guidance to help you understand equifax and 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 may impact our business are set.

<unk> filings with the SEC, including 2021 Form 10-K and subsequent filings.

We will also be making to certain non-GAAP financial measures, including adjusted EPS attributable to FX and adjusted EBITDA.

But it will be adjusted for certain items that affect.

Their ability of our underlying operational performance. These non-GAAP measures are detailed in reconciliation tables, which are included with our earnings release and can be found in the financial result, such hope.

The financial Info tab.

Our IR website.

Quarter, Equifax incurred a restructuring charge of $24 million.

Any sense of share discharged much for gods and staying current to reduce head count in 2023.

Our business fundamentals and of completing our technology transformation.

Restructuring charges are excluded from adjusted EBITDA and adjusted EPS now I'd like to turn them over to Mark on slide four.

Thanks, Trevor and good morning, Equifax delivered another very strong quarter to close out 2022 with continuing execution against our <unk> 2025 strategic priorities.

Fourth quarter reported revenue of $1 2 billion was down about four 5% and down 4% on an organic constant currency basis, both as expected against an unprecedented mortgage market decline, but above the high end of our October guidance from broad based strength across equifax and stronger NPI rollouts.

Fourth quarter, adjusted Equifax, EBITDA totaled 371 million with an EBITDA margin of 31%.

Adjusted EPS of $1 52 per share was at the upper end of our October guidance range of $1 45 to $1 55 per share and John will provide more detail in a few minutes.

Equifax U S mortgage revenue was down 41% in the quarter, but outperformed the overall market by 27 percentage points with estimated U S mortgage originations down 68%.

Our global non mortgage businesses, which represented about 84% of total revenue in the fourth quarter were very strong with 12% constant currency and 10% organic constant currency revenue growth stronger than we'd expected. When we provided guidance in October and at the top end of our 8% to 12% long term growth framework.

This strong growth was driven again by outstanding performance at workforce solutions was 17% non mortgage revenue growth overall, and 23% non mortgage revenue growth in verifier.

As I'll discuss more later government continued very strong in workforce solutions with growth at over 40% and talent to 99 boarding delivered over 20% growth, but were impacted by slowing U S hiring in November and December .

Delivering 20% growth in that vertical against a slowing hiring market was a very strong performance.

Second U S. I S. Non mortgage had an outstanding quarter, delivering very strong double digit beta be non mortgage growth of 10% total and 19% online.

Which was much better than our expectations and last international delivered another strong quarter with 9% constant dollar and 8% organic constant dollar growth led by very strong performance in Latin America.

We continue to make strong progress against the final chapter of our E FX cloud data and technology transformation in 2022.

Currently about 70% of North American revenue was delivered from the new Equifax cloud.

During 2022, we made the decision to increase capital spending by approximately $175 million to a total of $625 million to accelerate the completion of our north American cloud transformation.

The progress made in 2022 will enable the substantial completion of North America transformation in customer migrations this year, including decommissioning the applications and our major North American data centers.

Capital capital spending will decline significantly in 2023 due to the strong progress on completing the cloud last year.

Our new <unk> 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 <unk> cloud and single data fabric will provide a competitive competitive advantage to equifax for years to come.

New product innovation is also executing at a very high level, our new product vitality index of 14% in the quarter is a record.

And a 500 basis point improvement from the 9% vitality index last year, and 400 basis points above our 10% long term new product vitality goal, our focus on new solutions, leveraging the new Equifax cloud is paying off.

As a reminder, our vitality index as a percentage of Equifax revenue from new products launched in the past three years.

As our fourth quarter performance highlights, we continue to execute very well driving strong non mortgage growth across equifax and record levels of new product revenue and.

In addition to accelerating long term revenue growth two critical goals of our <unk> 25, 2025 strategic framework are significant and consistent EBITDA margin expansion and the lowering of the capital intensity of our business to drive our free cash flow in.

In 2023, we are executing a broad operational restructuring across equifax, reflecting both the acceleration of our cloud transformation and a broader focus on operational process improvements.

We will reduce our total workforce of over 23500 employees and contractors by over 10% during 2023 as well as delivering cost reductions from the closure of a major north American data centers as we complete the cloud and other broader spending controls.

Total spending reductions from these actions in 2023 are expected to be about $200 million with about $120 million reduction in expenses and an $80 million reduction in capex.

Cover our 2023 plan in more detail shortly but first we'll provide more detail on our strong performance in the fourth quarter.

Turning to slide five in the fourth quarter. We continued our strong non mortgage performance with revenue growth up 12% in constant currency led by AWS verification services non mortgage revenue, which was up 23% led by talent, which was up 19 and government up 43%.

AWS I 99, boarding which was up over 40%.

<unk> online mortgage was up almost 20% in Latin America was up over 30% all very strong performances for.

Fourth quarter constant dollar non mortgage growth of 12% was at the top end of our 8% to 12% long term revenue framework. Despite some slowdown in the U S hiring activity impacting our workforce solutions talent vertical.

Non mortgage revenue growth continues to be very strong across equifax.

Turning to slide six workforce solutions delivered another outstanding quarter mortgage revenue outperformed the overall mortgage market as measured by originations by about 30% in the fourth quarter and 38% for the full year.

And verify our non mortgage revenue was again very strong with organic growth of 23% in the quarter and 40% for the total year.

During 2022, we signed 10, new agreements with U S payroll processors, including four in the quarter that will be added to the twin database during 2023.

Recently, we also signed a substantial direct relationship that added over 2 million New Twin records.

These new partnerships along with continued growth in existing partner records and the new direct contributors through our employer services business are delivering continuing strong growth in our twin database with current records up $6 million 6 million records sequentially, reaching 142 million records.

152 million records with 114 million unique and over $600 million total current and historical records from over $2 6 million employers.

Industry, leading data security and operational processes as well as our ability to provide substantial value to our direct contributors and revenue share to our payroll partners are delivering exceptional record growth for workforce solutions.

The 114 million unique individuals in twin deliver high hit rates and represent almost 70% of the 165 million U S nonfarm payroll.

Adding gig and pension records, we have the ability to almost double our twin records in the future, which is a big driver of AWS revenue and margins.

As a reminder, about 50% of our records are contributed directly by into individual employers with the remaining contributed through partnerships principally with payroll companies.

Workforce solutions also continues to lead equifax and new products delivering a vitality index over <unk>, our long term, 10% vitality goal, which is a great proof point for the power of the Equifax cloud to drive innovation new products.

Workforce solutions vitality index has expanded from low single digits, a short four years ago to over 20% vitality.

In 2022.

Workforce solutions as you know was the first equifax business to be substantially complete with their cloud transformation over a year ago, allowing the team to fully focus on innovation and NPI is leveraging their new cloud capabilities.

The work number is also seeing accelerated expansion outside the United States in the U K, Canada and Australia.

In January workforce solutions signed an agreement with a leading UK payroll technology partner, obtaining access to over 40% of U K U K private sector employees.

Workforce solutions now has access to over 20 million active and historical records in Australia, Canada, and the U K. In addition to over 40 million active and historic alternative income records, including pension data and tax returns.

Turning to slide seven workforce solutions delivered revenue of $508 million.

Down 4% in the fourth quarter.

Revenue was slightly weaker than expected driven by slower growth in talent and onboarding businesses from declines we saw in U S hiring in November and December .

Verification services revenue of $399 million was down 7% driven by the unprecedented 68% decline in U S mortgage originations as mentioned earlier AWS mortgage revenue outperformed the overall market by a very strong 30 percentage points driven by strong twin record additions penetration pricing and <unk>.

New product revenue growth with the strong adoption of our new mortgage 36 solution that was rolled out late last year.

Verification services non mortgage revenue, which now represents almost 70% verifier revenue delivered strong 23% growth in the quarter we.

We saw continued very strong 43% growth in the government vertical which is almost 40% 45% of verifier non mortgage revenue driven by strong growth in our center for Medicare and Medicaid services volumes.

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

We expect to continue this strong growth in our government vertical in 2023, and a big $2 billion Tam.

Talent solutions delivered strong 19% growth in the quarter. Despite the impact of the weakening overall hiring which is estimated to be down about 8% in the quarter. We outgrew. This market declined by over 25 percentage points and delivered 19% growth a very strong performance driven by continued penetration of our digital solutions and background screening.

Strong new product growth continued expansion of twin records and favorable pricing.

In the first quarter, we will launch new products in the talent space targeted at the staffing and hourly segments designed to meet specific needs of background screeners in these high volume segments, which will drive talent growth.

Employer services revenue of $110 million was up four 5% in the quarter due to strong growth in our I nine onboarding and healthy FX businesses, which were up 17%.

Our I nine and Onboarding businesses remained strong at 20% growth, but were also negatively impacted by the declines in U S hiring late in 2022.

Our unemployment claims and employee retention credit businesses were down 11% driven by lower jobless claims and lower ERC transactions as the Covid Federal tax program expires.

Despite the slowdown in hiring we have not seen a meaningful increase in UC transactions yet.

Workforce solutions adjusted EBITDA margins of 46, 8% were lower than our October guidance, principally due to lower revenue growth and talent and onboarding related to the slowdown in U S. Hiring we expect dws margins to return to about 50% in the first quarter and will be above 50% for all of 2023.

The strength of AWS, and uniqueness and value of their twin income and employment data in employer services businesses were clear again in 2020 to Rudy.

Rudy floater in the AWS team delivered another outstanding quarter outperforming the mortgage originations by 30 points and delivering strong 17% non mortgage revenue growth.

AWS is expected to deliver a strong 2023 and continue above market growth in the future.

As shown on slide eight <unk> revenue of $406 million was down six 5% and slightly better than our expectations.

<unk> mortgage revenue was down about 46% and was in line with our expat expectations against an unprecedented 54% decline in credit inquiries compared to the 50 plus percent and our October guidance declined 50, plus percent decline that we had in our October guidance.

<unk> revenue outperformance relative to credit inquiries was strong at 8% driven by favorable new mortgage business penetration, new mortgage products and new mortgage pricing.

Credit inquiry performance continues to be less negative than estimated originations, reflecting higher relative levels of mortgage shopping behavior that we've talked about before at.

At $67 million mortgage revenue is now about 15% of total <unk> revenue.

<unk> non mortgage revenue of $280 million 288 million, which represents over 70% of total <unk> revenue was up 10% with organic revenue growth of about six 5%.

This was a significant sequential increase in much stronger than the levels, we expected in October .

Importantly, <unk> non mortgage online revenue growth was very strong up 19% total and up over 13% organically, reflecting pricing and product rollouts as well as stronger volumes in banking as lenders continue to drive new originations.

During the quarter, we saw strong double digit revenue growth in commercial identity and fraud and auto with banking at just under 10% growth.

Financial marketing services, our BTB offline business had revenue of $72 million that was down 9% and slightly above our expectations.

As we discussed during the year, we expect Fms to return to growth in 2023 with revenue up low single digits in the first quarter.

<unk> consumer solutions business had revenue of $50 million in fourth quarter up 8% from penetration and new product introductions in 2023, we expect low single digit growth from our U S consumer direct business.

<unk> adjusted EBITDA margins were 35, 3% in the quarter up 120 basis points sequentially due to very strong double digit BTB online non mortgage revenue growth.

EBITDA margins were down 400 basis points compared to prior year to declines in high margin high margin mortgage revenue.

International revenue as shown on slide nine was $284 million up a strong 9% in constant currency and 8% organically we're.

We're seeing broad based execution for our international businesses with particular strength in Latin America NPI Rollouts.

Europe local currency revenue was up 3%, principally driven by 9% growth in our debt management business.

We continue to see strong debt placement debt placements from the UK government as we have over the past several quarters.

Our U K and Spain, CRA business revenue was about flat in the fourth quarter and below our expectations, principally due to lower new business penetration.

Asia Pacific, which is our Australia business delivered local currency revenue of 6% driven by growth in our commercial consumer identity and fraud and HR identification businesses.

Latin America local currency revenue was up a strong 31% driven by very strong double digit growth in Argentina, Uruguay, Paraguay, and Central America from new product introductions and pricing actions. This is the fifth consecutive quarter of strong double digit growth for the Latin American team.

Canada local currency revenue was up 7% and above our expectations growth in consumer commercial analytical solutions identity fraud revenue were partially offset by mortgage volume declines and lower direct to consumer direct to consumer revenue.

International adjusted EBITDA margins at 25, 8% were down 100 basis points sequentially and below our expectations due to a greater mix of lower margin that services revenue and higher costs principally from purchase data.

Turning to slide 10 to 2022 was an outstanding year for new product innovation and central and as you know <unk> are central to our FX 2025 growth strategy, we delivered over 100, new products for the third year in a row and a record full year vitality index of over 13% and our fourth quarter vitality index of 14.

Percent.

The 13% vitality index in 2022 was over up over 400 basis points above our strong 2021 results in over 300 basis points higher than our 10% long term growth framework goal for new products and our vitality.

New product revenue in 2022 was $650 million up over 50% from about $420 million in 2021 and in 2022 over 90% of new product revenue was from non mortgage products.

Leveraging our new Equifax cloud capabilities to drive new product Rollouts, we expect to deliver a vitality index in 2023 at.

At level similar to the 13% we delivered in 2022, which is well above our 10% long term NPI vitality index goal and this equates to over $700 million of revenue in 2023 from new products introduced in the past three years.

New products, leveraging our differentiated data, our new <unk> cloud capabilities and single data fabric are central to our long term growth framework and are driving equifax topline growth and margins.

Turning to slide 11, 2022 was also a strong year for bolt on acquisitions as we continue to focus on our strategic M&A M&A priorities and growing our non mortgage revenue.

Since 2021, we've completed 13 acquisitions that are delivering $450 million of principally non mortgage revenue run rate.

Run rate revenue.

Our 8% to 12% long term growth framework includes one to two points of annual revenue growth from strategic bolt on M&A aligned around our three strategic priorities expand number one expanding and strengthening workforce solutions, our fastest growing and most profitable business number two building out our identity and fraud capabilities number three adding unique.

<unk> data assets we.

We expect these strategic acquisitions delivered growth synergies in 'twenty three 'twenty four as we complete their technology and product integrations.

Last week, we announced the acquisition of the food industry Credit Bureau, leading provider of credit information for the Canadian food industry with over 90% commercial data coverage. This acquisition expands our commercial product offerings in Canada.

We also continue to work closely with the board of directors of Boa Vista services. The second largest credit Bureau in Brazil on the proposed acquisition, we announced in December .

When completed the Bvs acquisition will add $160 million of run rate revenue in the SaaS growing fast growing Brazilian market.

The transaction is expect is subject to Boa Vista shareholder approval and other customary closing conditions to the extent, we're able to finalize terms with the Boa Vista Board, we expect the transaction to close in mid 2023.

Turning to 2023 guidance on slide 12, we ended the year with significant momentum in the underlying growth of our businesses and in the execution of our <unk> 2025 strategic priorities. However.

However, we also enter 2023 with a continuing decline in the mortgage market and broader economic uncertainty impacting our underlying markets.

Our assumption for U S mortgage market originations.

As a further decline of 30% in 2023, which is more than 30, 30% below the lowest level of originations in the past 10 years.

For perspective, NBA is currently forecasting 2023 origination units down about 22% versus our 30% assumption minus 30% assumption.

Fannie and Freddie do not forecast units, but are forecasting origination dollar volumes down, 30% and 25% respectively and.

In our planning we've assumed a bulk of the mortgage declines in the first half with first quarter originations down about 55%.

Second late in 2022, we saw hiring freezes and head count constraints impact our background screening volume in November and December and we expect these conditions to continue in 2023 with hiring down over 10% impacting our talent solutions and I nine employee Onboarding onboarding businesses, even with these.

Market impacts our market declines, we expect both businesses to grow over 10%.

Finally in our planning, we're expecting to see weakening in our key markets in the U S, Canada, UK and Canada in 2023.

We're assuming slowing growth in the U S. As we move through the year, although at this point, we've not assumed a U S recession.

Similarly, we are expecting to see economic slowdowns in Australia, and Canada, with perhaps a more significant slowdown in the U K.

The slow growth in these markets compares to the two to two 5% underlying economic growth, we assume in our long term growth model.

As we enter 2023, we have strong underlying growth across our businesses with execution of our <unk> 2025 growth strategies. Despite the significant decline in the U S mortgage market and slower economic growth across our major markets, we expect to deliver revenue growth at the midpoint of 4% and 202023.

Total mortgage revenue should decline about 8% over 20 points better than the 30% reduction in mortgage originations and non mortgage revenue should grow over 8%, which is within our long term growth framework. Despite the slower economic growth in our major markets.

We expect workforce solutions to deliver revenue growth of about 6% in 2023. This reflects our mortgage revenue decline of about 8% over 20 points stronger than you expected, 30% decline in mortgage originations.

AWS non mortgage verticals verticals are expected to grow about 13% overcoming the expected, 10% plus decline in U S hiring and about 15% decline in our Es ERC businesses at that Covid program winds down.

Twin record growth strong new product Rollouts and continued strong growth in both pricing and penetration will continue to drive workforce solutions outperformance.

We expect <unk> to deliver revenue growth of about 2% this year.

Mortgage revenue expect is expected to decline about 7% more than 20% 20 points stronger than the than the expected 30% decline in mortgage originations.

In 2023, Usa's will begin to benefit from their new mortgage credit file that was rolled out late last year that includes telecommunications pay TV and utilities attributes to help streamline the mortgage underwriting process and support loans with a secondary mortgage market equifax as the first and only in the industry to provide these insights which.

We'll be available to equifax customers in the first quarter and can help grid create greater home loan opportunities for consumers across the U S.

We're also seeing the impact of pricing increases from one of our largest mortgage vendors that we pass on to customers at levels to maintain consistent margins.

Non mortgage revenue is expected to grow about 5% despite the slowing growth.

Non mortgage revenue growth of about 5% will be driven by strong commercial identity and fraud banking and auto growth in financial marketing services expected return to growth in 2023 after a disappointing 2022.

International had a very strong 2022 with revenue up 12% in constant dollars, but we saw some weakening end markets late in the year, particularly in debt services.

We expect international growth of 5% in constant currency in 2023.

This is below our long term growth framework for international is 7% to 9% principally due to the expected weakening economic conditions in our major markets of the UK, Canada, Australia and also a decline in debt services off a very strong 2022.

As we discussed last year that services revenue in 2022 was somewhat of a catch up year as the UK government collections were put on hold during the Covid pandemic.

We continue to expect international to operate within their 79% growth framework over the mid and long term.

<unk> will again be very strong which is.

And consistent with last year's 13% vitality index, well above our 10% long term vitality goal and this will be led by workforce solutions in Latin America.

As <unk> in Canada are complete their cloud transformation, we expect their NPI rollouts to accelerate as we exit 2023.

As we complete our North American cloud transformation in 2023, we will pivot to leveraging our differentiated data assets and new cloud infrastructure to drive new product Rollouts and topline growth.

Workforce solutions will accelerate its focus on leveraging their new cloud capabilities in USA and Canada will complete their consumer credit alternative data in Iff's transformation this year.

These are big milestones in completing the cloud that we've been building towards for almost five years.

We're on track to deliver the cost and capital spending reductions from the cloud transformation that are central to our long term growth framework.

As I referenced earlier and as shown on slide 13, our accelerated cloud transformation cost reductions and broader cost restructuring will deliver $200 million of cost and capex savings in 2023 that will expand our margins and free cash flow in the future.

During 2023, we plan to reduce our total workforce of about 23500 employees and contractors by over 10%.

As we complete our North American cloud transformation in 2023, we expect to close about 15, Datacenters consolidate development centers and continue to reduce our software application footprint.

And we will closely manage it made discretionary spending including professional services.

We expect these actions to deliver $200 million and spending reductions in 2023, representing $120 million cost and expense reductions or about 75 per share an $80 million and capital spending reductions.

The savings in the first quarter are limited and accelerate in the second quarter and through the second half of 2023.

In 2024, the run rate benefit of these actions will reduce our spending by over $250 million.

The lower cost in capital expanding accelerates as we move through 2023 from transfer me cloud transformation cost benefits and other costs and restructuring actions planned throughout the year.

As shown on slide 14, adjusted EBITDA margins and adjusted EPS improved significantly as we move through 2023, and the first quarter revenue is expected to be down 6% due to the about 55% reduction in mortgage originations.

EBITDA margins and adjusted EPS are at their lowest levels in 2023 in the first quarter, principally due to the higher incremental margins from the declining mortgage revenue and the timing of the recognition of the majority of our annual equity.

Incentive plan expense in the quarter.

Normalizing for this timing compared to the fourth quarter first quarter EBITDA margins are slightly below fourth quarter margins of 31%.

As revenue growth improved throughout 2023, and cloud and broader cost reductions accelerate EBITDA margins and adjusted EPS improved sequentially with EBITDA margins expect expected to exceed 36% and adjusted EPS exceeding $2 per share in the fourth quarter.

For the full year, EBITDA will be up 4% or $70 million in line with revenue growth with margins flat to 33, 6% we delivered last year.

Adjusted EPS is expected to be about $7 20 per share down about 5% from 2022, principally reflecting higher depreciation and amortization of about $50 million as north American cloud system implementations principally completes.

And also from higher interest and other expense of about $60 million and a higher tax rate.

Capital spending will decline by $65 million to about $545 million in the year or about 10% of revenue as we move closer to completing our cloud transportation, we expect capex to decline again in 2024.

We have a clear line of sight to executing these proactive actions that will expand our margins and drive our free cash flow. In addition to cost benefits completing our north American cloud transformation will enable significant commercial benefits to drive market share and revenue growth, including our always on capabilities better data quality faster data delivery and <unk>.

Our new product innovation, and we're beginning to see meaningful meaningful commercial benefits from our new Equifax cloud technology transformation.

And now I'd like to turn it over to Jon to provide more detail on our 2023 assumptions in guidance and also provide our guidance for the first quarter our.

Our 2023 guidance builds on our strong 2022, non mortgage growth from new products record growth pricing and acquisition synergies.

Thanks, Mark before we discuss 2023 I'll share a little more detail on <unk> 2022.

As Mark referenced earlier Equifax EBITDA margins came in slightly lower than expected in the fourth quarter at 31% principally driven by lower than expected margins in workforce solutions as Mark discussed and also in international.

Capital spending in the fourth quarter was $156 million as we maintained investments to accelerate completion of North American cloud transformation.

Capital spending will decline and <unk> 22 to 23 to about $150 million and then sequentially further in each quarter of 2023, as we complete significant U S and Canadian customer migrations.

Total capital spending in 2023 is expected to be about $545 million capex as a percent of revenue will continue to decline in 2024, and thereafter, as we progress toward reaching 7% of revenue or below.

Moving onto 2023 guidance Mark provided an overview of our planning assumptions of a 30% reduction in mortgage originations in 2023 as shown on slide 15 at these levels and again using credit inquiries as a proxy for the mortgage market in 2023, the U S mortgage market will be substantially below any level we have.

<unk> seen in the past 10 years <unk> 'twenty three is expected to see the mortgage market down about 55% year to year sequentially as we move through 2023, we're planning on a more normal pattern of mortgage activity.

With mortgage originations increasing sequentially on the order of 15% and <unk> 23 from <unk> 23, <unk> hundred 23, being about flat with the second quarter and normal sequential decline in the fourth quarter versus 323, we expect with the sequential patterns U S mortgage originations would be up slightly in the second half of 'twenty.

Three versus the first half of 'twenty, three and the fourth quarter over quarter of 23 would be up slightly year to year.

And at least the first half of 2023, we are expecting <unk> to benefit from mortgage shopping behavior with better performance than originations.

Slide 16 provides a revenue walk detailing the drivers of the 4% revenue growth to the midpoint of our 2023 revenue guidance of $5 $3 5 billion, a 30% decline in the U S. Mortgage market is negatively impacting 2023 total revenue growth by about seven percentage points the mortgage revenue outperformance.

Relative to the mortgage market is expected to offset about five points of the negative seven percentage points impact of the mortgage market on overall revenue growth as a result, the expected 8% decline in equifax mortgage revenue as a negative about two percentage point impact on overall revenue growth.

Non mortgage organic growth is expected to exceed 7% on a constant currency basis and is driving about 5% of the growth in overall equifax revenue as.

As Mark referenced earlier, the gross growth is broad based across all three be use and is within our long term framework of 7%, 10%. Despite the economic uncertainty across our major markets in the U S, Australia, Canada and the U K the acquisitions completed in 2022 and year to date are expected to contribute about one <unk>.

<unk> of growth to 2023 for clarity. This does not include revenue from the potential acquisition of Boa Vista.

Slide 17 provides an adjusted EPS walk detailing the drivers of the expected 5% decline to the mid point of our 2023 adjusted EPS guidance of $7 20 per share.

Revenue growth of 4% and our 2022 EBITDA margins of about 33, 6% will deliver five 5% growth in adjusted EPS and EBITDA margins in 2023 are expected to be about flat from the 33, 6% we delivered in 2022.

In 2023, the cost actions, we are taking are expected to deliver about $120 million of expense reductions. These cost benefits are being principally offset by several factors first in 2022 variable compensation, including incentive and sales comp we're at very low levels due to the substantial impact of the week.

Each market on our performance in 2023, our planning assumes we returned to targeted levels of performance and therefore, these compensation drivers royalties and cost for data and third party scores are increasing as we continue to add new partners and broadened data sources.

Also in 2023, we are also still incurring a level of redundant system costs as we continue to operate legacy North American systems prior to their decommissioning later in 2023.

As we look beyond 2023, the impact of variable compensation moving to target and the cost of redundant systems in North America are behind us and therefore, the benefits of our cost actions as well as accelerating high variable profit revenue growth are expected to drive significant improvement in EBITDA margins dip.

Depreciation and amortization is expected to increase by just over $50 million in 2023, which will negatively impact adjusted EPS by about 4% DNA is increasing in 'twenty three as we accelerate putting cloud native systems in production.

The combined increase in interest expense net other expense and tax expense in 2023 is expected to negatively impact adjusted EPS by just over six percentage points. The increase in interest expense reflects the impact of higher interest rates and also the increased staff from our 2022 acquisitions, our estimated tax rate of about 26.

6% is up about 150 basis points from 2022 due to a higher mix of non U S revenue and lower tax benefits as we reduced capital and development spending.

Slide 18 provides the specifics of our 2022 full year guidance that Mark discussed in detail. The slide includes additional detail unexpected Bu EBITDA margins as well as guidance on specific P&L line items UWS EBITA margins in 2023% to 52% are expected to be up from the 51 three.

3% delivered in 2022, given the strong non mortgage revenue growth from new products penetration and pricing and the benefits of the cost actions Marc discussed earlier.

EBITDA margins at over 35% are expected to be down from the 36, 8% delivered in 2022.

<unk> is also benefiting from cost actions, however revenue growth at 2% again due to the impact of the U S. Mortgage market decline is resulting in the year to year margin decline International EBITDA margins at 27% are expected to expand versus the 25, 7% delivered in 2022, driven principally by pricing and the 2023 cost.

Actions.

Corporate expense, excluding depreciation and amortization is increasing in 2023 relative to 2022 due to the increases in incentive and equity compensation from the lower left lower levels incurred in 2022 that I referenced earlier corporate functions, such as finance legal HR and others are reducing costs in 2023, consistent with our cost.

Actions.

We believe that our guidance is centered at the midpoint of both our revenue and adjusted EPS guidance ranges.

Slide 19 provides our guidance for <unk> 'twenty three as Mark discussed earlier <unk> 23 is expected to have the largest year to year decline in the U S mortgage market that will see in 2023 at down about 55% as we compared to the relatively strong mortgage market in the first quarter of 2022, despite the strong.

<unk> non mortgage constant currency currency growth of about 9%, we will see a decline in <unk> 'twenty three revenue about 6% at the midpoint of our guidance.

<unk> 23, EBITDA margins are expected to be about 29% down about 200 basis points sequentially. Overall Bu EBITDA margins in total are up sequentially from <unk> 2022, driven by workforce solutions, delivering about 50% EBITDA margins in the quarter, which offsets declines at USA and international.

The decline in EBITDA margins in <unk> 'twenty three sequentially from <unk> 2022 is driven by higher corporate expense, specifically, the higher incentive and equity compensation cost referenced earlier, the bulk of the expense related to our equity plans occurs in the first quarter and is reflected in corporate excluding the impact from the sequential increase in equity.

Station expense EBITDA margins are approaching flat sequentially at just under 31%.

Corporate expenses will decrease meaningfully sequentially and <unk> 23 is the equity compensation was principally reflected in the first quarter revenue.

Revenue increases sequentially in <unk> 'twenty three relative to <unk> 2022, we're not seeing the expected increase in EBITA margin sequentially in the first quarter driven by the same factors impacting all of 2023 that I referenced earlier and the fact that there is limited first quarter benefit related to our 2023 cost actions in the second quarter of 2023.

We will see both the benefit of reduced corporate expense and increased benefits from our 2023 cost action supporting growth and EBITDA margins.

Business unit performance in the first quarter earnings are expected to be as described below workforce solutions revenue growth is expected to be down about eight 5% year to year due to the about 55% decline in the mortgage market non mortgage revenue will continue to deliver double digit growth EBITDA margins are expected to be about 50% up over 300.

Basis points sequentially, driven by sequential revenue growth from new product and pricing actions workforce solutions will represent just under 50% of equifax revenue in the quarter U.

<unk> revenue is expected to be down about five 5% year to year again again, driven by the about 55% decline in the U S mortgage market Usia's credit inquiries are expected to somewhat outperformed the overall mortgage market due to consumer shopping the mortgage decline is partially offset by growth in non mortgage expect it to be up <unk>.

Single digits EBITDA margins are expected to be about 32% down sequentially due to negative mix from growth in core mortgage and higher overall mortgage royalties as well as the normalization of incentive costs that I referenced earlier.

<unk> is also incurring incremental costs from customer migrations to data fabric better recurring principally in the first half of 'twenty three <unk>.

International revenue is expected to be up about 5% in constant currency the weakness relative to the strong <unk> 22 growth of about 9% is principally a decline in the UK debt management business. As we are now comparing to the very strong 2022 revenue driven by catch up in our UK government business in 2022 as the UK government suspended.

<unk> during the pandemic.

EBITDA margins are expected to be about 22% down sequentially due to seasonally lower revenue in Canada, and UK, CRA and normalization of incentive costs as well as higher data costs, we're expecting adjusted EPS in the first quarter of 'twenty three to be about $1 30 to $1 40 per share.

Looking forward, we remain focused on delivering our midterm goal of $7 billion of revenue.

With 39% EBITDA margins.

Market conditions are significantly different than when we first discussed in November of 'twenty. One our goal of achieving these results in 2025. The U S. Mortgage market is expected in 2023 to be down over 35% from the normal 2015 to 19 average levels. We have discussed is expected to deliver $7 billion of revenue in 2020.

Five our core organic revenue has grown over 300 basis points faster than we discussed with you in November of 'twenty. One however recovery in the mortgage market of on the order of two thirds of the lost volume is light still likely needed to achieve our $7 billion goal in 2025, we're focused on driving above market growth, including.

Through accretive acquisitions, and delivering the cost and expense improvements committed as part of our data and technology cloud transformation and needed to achieve 39% EBITDA margins will continue to discuss with you our progress toward our $7 billion.

And 39% EBITDA margin goals, if the mortgage and overall markets evolve in 2023 and forward.

Now I would like to turn it back over to Mark. Thanks.

Thanks, John wrapping up on slide 20, Equifax delivered another strong and broad based quarter with above market growth in 2022 more than offsetting a significant 55% decline in the U S mortgage market originations.

We delivered our eighth consecutive quarter of strong above market double digit core revenue growth and strong double digit 12% non mortgage growth, reflecting the power of the <unk> business model and our execution against our FX 2025 strategic priorities.

At the business unit level first workforce solutions had another outstanding year powering our results delivering 14% revenue growth and strong organic non mortgage growth of 24%.

Twin current records reached $152 million up 12% and total record surpassed $600 million.

Workforce also delivered a vitality index over 20% from innovative new products and solutions leveraging their cloud capabilities, while further penetrating the high growth talent and government verticals.

<unk> had a very strong finish to 2022 with fourth quarter non mortgage growth of 10% total and 7% organic driven by online non mortgage growth of 19% total and 13% organic.

<unk> team remains competitive and is winning in the marketplace.

International delivered 12% local currency growth, our second consecutive consecutive year of double digit growth.

And our 2022 vitality in excess of 13% was a record as we delivered over 100, new products for the third consecutive year in a row.

And since 2021, we completed 13 strategic bolt on acquisitions to strengthen equifax and identity and fraud.

That we expect to deliver over $450 million of principally run rate.

Revenue going forward.

And six we made significant progress in 2020 to executing against our FX cloud data and technology transformation with about 70% of North American revenue being delivered from the new Equifax cloud and we're laser focused on completing our north American migration in 2023 to become the only cloud native data analytics company.

Sure.

We're in the early days of leveraging our new cloud capabilities, but remain confident that it will differentiate us commercially expand our NPI capabilities and accelerate our top line.

Our strong progress on the cloud allowed us to accelerate cost savings and launch a proactive restructuring across the across equifax that will deliver $200 million of cost savings in 2023.

It will expand our margins to 36% as we exit 2023 and position us for an uncertain economic environment.

As we look to 2023, we're committed to completing our north American data and technology transformation, while delivering continued above market revenue growth and a substantial and consistent EBITDA margin growth and a reduction in capital intensity that is a key benefit of our data and technology cloud transformation.

As mentioned earlier the cost actions were taken in 2023, reducing our spending by $200 million this year and over $250 million in 2024 will expand our margins and position us for a more certain uncertain economic environment.

I'm energized about our strong above market performance in 2022, but even more energized about the future of the new Equifax in 2023 and beyond.

We're convinced that our new <unk> cloud based technology differentiated data assets that are now in our single data fabric and our marketing leading market, leading businesses will deliver higher growth expanded margins and free cash flow in the future and with that operator, let me open it up to questions.

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

A 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 and may be necessary to pick up your handset before pressing the star keys.

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 good morning.

Mark.

You said you've assumed.

Weakening economy pretty much globally, but not a recession, but I guess my question is more the weakness that you've assumed.

The magnitude of what you've seen already today versus what he is union gets worse.

Okay.

Yeah. So I think there's a couple of levels. There manav as you know we've been living through a mortgage market recession here in the United States for the last nine months and that's going to continue and it's really unprecedented so I. Thank you and our investors understand that pretty clearly.

It's really a massive impact on our business and what's positive is our non mortgage businesses are performing exceptionally well.

We had talked about where we've seen the impact of hiring declines in late in the year, we expect that to continue.

Being down about 10% in 2023 and that impacts our talent business and also our Onboarding and <unk> businesses. So that's certainly in our outlook and then we did factor in what we would characterize as an uncertain or slowing economic environment really more in the second half of 2023.

Hard to forecast, where the economy is going to do but it certainly feels like at these higher interest rates and higher inflation.

You've got the impact of mortgage and now in the hiring space that we're going to see.

Slowdowns as we go through 2023.

Well just to clarify on ballpark I guess can you talk about zoom on the credit card and auto side.

Do you still find today.

Almost as lumen and then John just for you on free cash flow that can you just walk us through what the working capital move this year boys and how we should think about what free cash flow will be in 2023.

Yeah. So on your first half of your question John can take the second.

Youre correct, Manav and a lot of verticals, we haven't seen that economic impact yet.

We're expecting to see that as we go through 2023. So that's a part of our guide in a part of our outlook.

Verticals like cards like P loans like auto we've seen some limited economic impacts there, but as you point out.

Cards for example are still operating quite well, but.

Given where interest rates have been and where they're going and where it is.

The fed is signaling they're going to take them and the challenge of.

<unk> inflation, we think it was prudent to include in our outlook for 2023 are softening.

Of the economy as we go through.

Go through the year as you look around outside of the U S rate, we saw weakening in the UK Thats already occurred started to happen in the fourth quarter and we saw relatively weaker performance in some of the other markets around the world as well.

So to free cash flow. So as we look through 2023, <unk>, we're expecting to see expanding margins as mark talked about and we're expecting to see obviously, therefore, expanding EPS as well and we're also expecting to bring down capital spending. So we expect to see very nice growth and free cash flow as we move through 2023 sequentially as we go through the.

Quarters.

In terms of working capital as we've discussed on prior calls.

As we were going through a significant billing system migration, we did see some increase in our accounts receivable.

The bulk of that is now completed we've completed all of North America, and there's just a there's a little bit more to go as we go through 2023 and some of our international operations. Our internal metrics are showing a nice improvement in terms of our operational performance and those systems in terms of what we're seeing in terms of collections activity and so although we haven't you haven't really seen it yet in the.

And the numbers you would assume in the fourth quarter, we're expecting to start to see some benefit as we move through 2023.

In terms of our in terms of AAR, which would affect overall working capital. So net net I think free cash flow, we're expecting to see obviously expanding margins improving profitability lower capex and then improvements as we move through the year and working capital in general.

Got it thank you.

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 make sure I understand the $120 million of Opex.

Of Opex reduction on slide 13 is this $120 million for 23 could be realized in year one.

Is that a run rate by the end of the year and then I have a follow up question. So that you realized in year that's correct.

John pointed out.

Those will be executed.

Principally the actions of the contractors.

Tricia and some equifax ftes will be executed in the first quarter. So the benefits will accelerate as we go through second third and fourth and then as we said.

We get a benefit positive benefit in 2024 from the full year impact of that Okay. And then on the $120 million of expense savings Opex savings is this really an acceleration.

The original plan or does this add to total target cost savings of the cloud transformation.

It's a combo of the two we tried to be clear about that Andrew in our comments.

Because of the extra efforts and.

Additional work we did in 2022, it's allowed us to accelerate the cloud savings that we've talked to you about for multiple years. So a big piece of the 120 years, the cloud savings, but there is a meaningful increment to that of just a broader restructuring of the company to improve our efficiencies.

And how we operate the company some of that from the investments in the cloud that are outside of technology, just allow us to operate more effectively so it's a combo with it too. Thank you.

Thank you our next questions come from the line of Kyle Peterson with Needham <unk> Company. Please proceed with your questions.

Great. Good morning, guys. Thanks for taking the questions.

Wanted to dig into the talent solutions piece.

Definitely it seems like there was some softness there compared to what you guys were expecting and I know.

You had mentioned that hiring was.

A headwind and became more challenging but I guess it was the softer results in that.

Subsegment of UBS was that purely a kind of quantity and kind of hiring volume headwind or did you see any clients like trading down to kind of less expensive.

Alex or doing anything else in kind of that area that might have caused some pressure.

No.

Our analysis of it is it's all Q and when we talk to our customers, meaning there's just less background screens happening and I think we were watching this as we went through the fourth quarter I think all of US saw companies as we went through the tail end of the year and they've accelerated in the first quarter here announcing layoffs announcing hiring freezes.

That all is going to impact.

The hiring market.

It's a bit bifurcated I think we all we all know that the hiring at the call.

Call. It the hourly wage area is still very strong so that it really wasn't impacted this is more white collar impact where companies are just tightening their belt and being more cautious around hiring so.

So we haven't seen any impact from.

Our new product Rollouts.

The penetration that we have and just as a reminder, this is a $2 billion Tam for us is talent.

And we have a lot of penetration opportunities, meaning we're continuing to work into bring new solutions.

Convert our customers from their manual work to digital and that's what really allows us to outgrow a declining market, which we expect to continue to do in in.

In 2023, and then as we also mentioned that same hiring impact.

Companies are tightening their belts.

Around adding new resources impacted our onboarding.

Or and are nine.

Business.

In the latter parts of the year, we expect it to impact in 2022, as we said in the comments earlier, we expect both of those businesses to grow.

Double digit even with those market declines because of the new product capabilities, the new penetration opportunities that we have and of course, our normal pricing that we rolled out on a one one.

On January one.

Yes.

Got it.

Got it that's that's.

Helpful. And then I guess, just my my kind of follow up was on pricing I know last quarter you guys mention.

You mentioned that pricing will be a tailwind in 'twenty three to margins and I know like the <unk> guide kind of implies a couple of hundred basis points of pressure on EBITDA margins I think I get some of that seasonality, but is some of this that compared to what you guys saw in <unk> that just volumes.

Mortgage and some of the other areas are just facing pressure that's that's offsetting.

Some of those price effects that went into place on one one or did you guys temper any of those.

Yes, I'll, let John jump in no change in what we told you we were going to do in October and price and what we actually did.

Obviously, what's happened is the mortgage market first off we have a very challenging comp in the first quarter in the second quarter versus last year, a year ago. The mortgage market was super strong. So you start with that and that was as expected although as we talked about we've reduced our mortgage outlook for 2023 from what we thought in October .

Pressure on the quarter and on the year from a margin standpoint, there is some small pressure from the.

Lower growth in talent, and Onboarding and <unk> because of the.

Tightening belts around hiring taking place, but the bulk of the first quarter impact is what John described.

Really from a cost standpoint in 2022 or.

Our incentive compensation was well below target because of the decline in the mortgage market as John said, we expect 2023 to be paying at target. So that has a higher expense to us that flows through the year and then we typically have in the first quarter when we make our <unk>.

Retention equity grants to our team.

And equity expense that takes place in there I don't know what else would you add John just in terms of price and product you can see the benefit of price and product in the fourth quarter. Obviously in USAF very strong performance in online we saw volume in banking, but we had very strong performance in auto and and and and and banking and lending and card so and some of that was product and some of that was price and your.

Certainly seeing it in the first quarter and AWS rate as Mark mentioned pricing increases go in in January and we're seeing the benefit of both product and pricing and AWS with their margins expanding in the first quarter. So no difference and youre seeing it in the performance of the businesses I think John you also said in your comments that if you look at first quarter versus fourth quarter and isolate around.

These expense items around incentive and equity.

Our margins are basically flat, which means we're absorbing a weaker mortgage market than the fourth quarter.

And still getting the benefits of operating leverage and price and everything else to kind of offset that.

Ex the.

The cost items that we had that we talked about.

Yes.

Thank you our next questions come from the line of Kevin Mcveigh with Credit Suisse. Please proceed with your questions.

Great. Thanks.

Still a lot of volatility in the mortgage market is there any way to think about kind of purchase versus refinance and as you get into 'twenty four.

22 short enough, but do you expect a little bit more recovery in refinance off of 'twenty, two or just any way to think about kind of that base level of originations and how it trends over the course of the year.

Yes, I'll, let John jumped in as you might imagine refi is virtually gone.

The refi.

Really disappeared from the mortgage market.

I don't know six months ago as rates started increasing we don't anticipate refi coming back until there is a change in interest rates, meaning that there is some interest rate decline, which really very unusual and we've never seen before is the meaningful decline in purchase volume at this level I think as John pointed out.

Our outlook for 2023 as mortgage inquiries, 30% below the 10 year average and Thats really the 10 year average includes purchase and refi. So you've got purchase down dramatically. So at some point.

Purchase volume should improve on Theres no question, if it's 30% below a 10 year average now.

We're assuming that doesn't happen in the second half.

Should it improve in 'twenty four I think it's part of it's tied to what's happening in the economy.

Are we.

Stabilized around inflation and interest rates of the interest rate increase has flattened out in <unk>.

<unk> that are thinking about a home can have some confidence.

Where the economy's going that should help purchase volume, but at some point, whether it's in 'twenty four 'twenty five the mortgage market should move up on the purchase side as.

As the economy stabilizes to get back to that call. It 10 year average.

It has never had this kind of an impact of course, we never seen interest rate increases at this pace.

Ever ever before.

I think you covered it quite well.

Great and then just real quick.

As you think about kind of you mentioned the gig and pension workers couple of times is that aggregation process similar to the traditional kind of.

Record aggregation or is it.

How does that process occur and it is at the same price point or is it kind of less profitable.

Yes no.

Very attractive records, we want them all.

First let me just make a point we've got a long runway in traditional nonfarm payroll and I think as you saw a 12% growth last year in twin records was very very strong we.

We signed.

10.

New partners that will come online in 2023.

We said before.

That.

And our existing partners think about payroll partners.

There is meaningful records that we still haven't brought onboard with them and Theres a lot of incentive to do that so that's kind of the base records and over the last couple of years, we've scaled up resources that are going after pension records I think it was in the third quarter last year, we signed our first pension partner to bring pension records into our data set and we've got a pipeline.

One of those in process wise, it's quite similar if.

If you think about pension records. They are probably in three different places, it's more than that but three principal places one is there are.

Companies that are much like payroll processors that process defined benefit pensions for legacy companies that have those so going to those companies and developing those partnerships is strategy number one number two is large.

Large legacy companies.

Process their own pension payroll lots of them. So we're already collecting their employee payroll so going in and collecting their pension payroll as a part of that strategy. So we know how to do that in just a matter of executing it and then the third is in the federal state and local governments.

<unk> of them have their own pension processing operations, so going to collect those records. So that's where we're going on the pension side and then on the gig side Theres a lot of different strategies individual companies as you might imagine.

Going to get that in other entities that will have those gig records and as we've talked before at the 114 million uniques that we have there is about $220 million working Americans between non farm payroll gig and pension.

Over the long term.

<unk> got the ability to double the scale of our records going forward. So that's a big lever for growth from workforce and I think as you know.

The day, we added new record, we're able to monetize it instantly because we're already getting inquiries for the record we don't have right with our 50 plus percent hit rates as we add that 50 150 <unk>.

Set of data records, we're able to monetize instantly so it's a very powerful.

<unk> of the revenue engine and margin engine for workforce solutions, which is why we have such a dedicated team focusing on it and if you think about the scale of our records. If you go back four years ago versus the 140 million Uniques, we had something like $70 million and 300000 companies we ended <unk>.

Last year with $2 6 million companies contributing their data to us. So the cloud has allowed us to really scale that and there's a long runway for future growth.

Thank you.

Thank you our next questions come from the line of <unk> with Autonomous Research. Please proceed with your questions.

Hey, guys.

Mark just kind of pro that was advocate here.

Intel has been a little bit better what's the biggest risk factors from margins to drop below your guidance supersonic.

Mortgage market down more than 30%.

Over exceeding our targets.

Government harder to call.

Just wanted to understand a little better.

So John this was on AWS margins and the question was.

We've said that we expected to be 50 plus percent in 2023, what are the risks of that.

Yes look the driver let me talk about what's driving the margins to be at those levels right in it and it is heavily driven by what Mark talked about in terms of the record growth and therefore, the outperformance relative to mortgage in the very very strong non mortgage growth and then the cost actions that they're taking in order to not only.

Maintain but enhance their margins as they go through the year right. So AWS has been executing extremely well obviously, if the mortgage market was to be substantially weaker that's very high revenue and high margin. It's very high margin revenue that would be a risk to.

To the extent that there is risk to revenue in general obviously that can be a risk to margins, but overall, we think we've taken a very reasonable view in terms of what 2023 looks like AWS.

Their execution has been very strong the record growth has been very good they've already executed their pricing actions there performance and new product has been outstanding as Mark said growing at twice the rate of our 10% goal for vitality index. So so we feel like we've given a very balanced view of AWS as we look into 2020, maybe I'll just add to that John as John mentioned, we.

Old out our pricing actions late in the year and effective one one so we know what those are so that's.

That's kind of baked in so that gives you a lot of confidence is as I mentioned earlier, John did too we already know some meaningful record additions that we've signed agreements for that'll come in in 2023, that's revenue and margin.

We've got new products and workforce that were rolled out in 2022 that get full year benefit in 2023, and we know our pipeline of new products, we're expecting to rollout in the first quarter and second quarter from our workforce.

Going forward.

So we think there is a we have a lot to give us confidence in our outlook. There I think as John pointed out to me the factor would be.

If the economies worse than we've factored into this or if the mortgage market significantly worse than we've factored into this outlook that would put pressure on that and then.

We would take actions to respond to it.

Got it Super helpful and then.

So from all of this I think that would be.

Really nice addition to your laptop or lay out and I was wondering.

A little bit more colors on how you're thinking about Eric data at that in your strategy.

Merger and acquisition call you mentioned part of it.

It is very strong regional strategy.

<unk>.

Kind of more towards SaaS.

Our culinary team will share with that.

Yes, sure. So first we're working to try to finish the acquisition we've been negotiating since December with the board of Boa Vista, We're pleased with the progress and where we want to conclude that so that's kind of priority number one but everything we talked about in December we're still quite energized about first and foremost we would bring all of the equifax.

Capabilities to Boa Vista, whether it's our new cloud technology or products from around the globe are big platforms like ignite and interconnect.

We'd really bring their capabilities up substantially versus what they have today as a <unk>.

Standalone number two.

Credit Bureau in.

In the market. So that is a real positive in the underlying business is performing exceptionally well they've got strong double digit growth.

A big market in Brazil, Thats expanding theirs.

Lot of alternative data available there that we would want to focus on.

We just see a bunch of potential as we pointed out they have some unique data.

Outside of that normal banking data, that's unique to Boa Vista, which is another element that we like about it. So we're focused on completing our negotiations. So we can try to move forward in closing it.

Thanks.

Thank you our next questions come from the line of Andrew Jeffrey with Truest. Please proceed with your question.

Hi, Good morning. Appreciate you taking the question and all the detail as usual guys.

Mark one of the things that happened obviously that drove your your mortgage growth.

Before this from the collapse of the overall market was.

Greater digital engagement and I think.

Talk to mortgage shopping a little bit today too has.

Given that did mortgage volumes are down so much purchase and refi.

Do you think there's anything that's structurally changed in the market such that your customers either wanted to engage more digitally with you are less digitally so I guess, what I'm asking is when mortgage recovers is that lever, which was such a nice driver for you and when volumes were booming is that still there.

There is it.

To get more leverage less leverage about the same to think about that structurally if anything has changed.

It's a great question and we believe that it's more leverage or more opportunity to really drive our digital solutions.

Do you think about a mortgage originator that clearly is under significant financial pressure now because of the reduced the reductions in.

And volumes Theyre looking to improve their productivity and the only way to improve your productivity is through instant decisioning and the goal that they always have in the leading players in this space are working too.

Really shorten the timeframe between application and closing as you know, it's a very long timeframe in that timeframe has cost involved in it. It also has risk involved in it around the consumer changing and as risk involved in it and the consumer deciding I'm not going to buy the home meeting you've spent a bunch of Cogs on it and you've heard us talk before the average mortgage mortgage.

Nader spending $5000 of expense in a mortgage application if they can shorten the time and take labor out of it by using instant data. That's a positive. So we expect our conversations around using our instant data, particularly around twin.

To accelerate in this environment, meaning we're going to become more embedded in more instant which has been a trend as you know over the last couple three years, even in a stronger mortgage environment some of that over the last in 2020 one was <unk>.

<unk> by that just the pace of the volume they had they didn't have time to really focus on changing their processes now they do so it's clearly a focus of ours and we think a positive going forward that incident is going to drive speed and drive productivity and that doesn't only apply to mortgage that applies to really all our verticals.

Think about government think about talent, if we're able they're under cost pressure today.

And those verticals, whether you're a background screen or a government agency.

Improving your productivity and improving the speed of the service you deliver.

Is very very valuable to them and the way to do that is to use instant data from equifax like like our twin data our income and employment data.

That's very helpful. Thanks, I appreciate it.

Thank you. Our next question is come from the line of Andrew Nicholas with William Blair. Please proceed with your question Hi.

Hi, Good morning, Thanks for taking my questions I wanted to first touch on a comment you made about a win for AWS and verification services within the U K I believe.

I wanted to ask I think you said, 40% of the private sector employee base, if I heard correctly. If you could clarify that and then just curious is that an exclusive relationship and how important could that relationship be to getting a foothold or the pole position in the U K market.

Especially given a competitor of yours ambitions to build a similar business there.

Yes, I think we've been quite clear that over the last couple of years as we completed the cloud we're looking for new international markets to take workforce solutions into.

We talked on the call earlier.

That building our businesses in Australia, and Canada, and then most recently a year ago really in the first quarter, we launched our U K business.

Using our new cloud capabilities and started too.

Go into the market and talk to both individual contributors in payroll processors.

Around adding data records. So we've made some positive traction over the last I guess four years in Australia, and four years and Canada over the last 12 months.

In the U K.

We're looking to continue to grow and expand our capabilities. There we had I don't know the number but we've had a handful of.

Agreement signed in the U K and we also signed an agreement with an entity that has a tax data that <unk>.

Proxy for income and employment. So that's been a positive addition in the U K that gives us a lot of coverage. So we can start rolling out solutions. There in Australia. We've got had an agreement with the pension administrator that brought that kind of data in which is.

And it also has.

The equivalent of.

W. Two type data in it it's quite accretive also so it's clearly part of our strategy to continue to continue to build out and invest into a.

International footprint for our workforce.

Great. Thank you and then for my follow up I just wanted to ask a question on margins it looks like Youre expecting 30%.

Plus tight margins exiting the year.

Is there any reason not to believe that's a good starting point for 24, and I know youre not going to give guidance for that year, but mostly asking about if they're kind of cost saving actions that you expect to still be.

Underway that late in the year or if that fourth quarter number is a decent run rate.

Think about kind of a stable base for out years. Thank you.

Yes, so I think as we talked about in the presentation, we're expecting in the fourth quarter to get to 36% EBITDA margins driven by some recovery in revenue, but also really significantly by the acceleration of the cost actions and the cost actions have a continuing benefit in 2024.

So we're expecting additional benefit from the cost actions as we go into 2024, and we're also expecting to get additional cost benefits as we continue to complete the cloud transformation beyond North America, and we will start to start to see some of those benefits occur in 2024. So we think we still have a tailwind on the cost side that will benefit our margins.

As we get into 2024, and then obviously as we get closer to 24, we can start talking about revenue, but theres certainly our cost tailwind that continue.

Out of 23% into 'twenty four.

Thank you.

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

Hi, Thank you for taking my questions, Hey, Mark I wanted to ask you a little bit about.

The main functional areas for head count reduction reduction.

What I'm trying to focus on is NPI has been big driver in driving particularly non mortgage growth and how do you make sure that youre going to not harm kind of it goes this way in the Golden eggs in terms of.

The ramp of revenue that we should expect over the next several years by reducing your head count by 10% and then I have a follow up.

Yeah.

Obviously quite thoughtful about that as you might imagine we want to make sure were quite.

Quite strategic about where we are doing it I'll remember the bulk of the actions are really related to the cloud transformation and accelerating those so you've got a lot happening in technology.

And the bulk of.

The actions are also in contractors, we hired a bunch of contractors to do the cloud work and we're taking actions now when we complete that and decommission our legacy infrastructure.

Take those out.

The rest of the actions I would characterize as kind of normal focus and thoughtful focus around where do we have opportunities to be more efficient and more productive.

While protecting our focus on on growth and growth includes our new products.

I would add is as transformation completes the effort necessary to launch new products comes down substantially right. It's one of the real benefits from cloud transformation that we've been talking about substantially and as data is on fabric and everything is running through ignite and interconnect then the level of investment necessary to launch those new products really starts to become something that we can.

Can do faster and cheaper so so as Mark said, we we do a very good job of making sure we understand who's working on what so as we reduce resource we take it out of specifically transformation, but also as we go forward, we expect to get a lot of leverage in product launches in terms being able to launch them faster and cheaper because of the around the clock the transform cloud infrastructure.

<unk>.

Okay. Thank you and then.

And we've seen that AWS by the way.

It isn't something that we haven't seen it's already happened in AWS. So I think it's a great point just to add on that I think we mentioned on the call today that AWS new product Rollouts.

We're kind of two X our long term goal of north of 20% last year and as you know they were in the cloud.

A year ago 18 months ago, and it's really shown what we envisioned happening that the ability to bring more new solutions to market more quickly and more productively as John pointed out and efficiently what happen. When you are cloud native and that's part of what.

We expect to happen as we go through 2023.

We expect to continue in 2024 meeting we're going to have additional cloud benefits as John pointed out in 2024, and then we get the full year run rate impact of our actions in 2023.

Got it got it and then just as a follow up I wanted to ask a little bit more about the competitive environment on the work number.

You have a.

Competitor in the market that talking about signing more contracts with mortgage processors and the vast majority of those are being putting them at the top of the waterfall I'm just trying to square what they're talking about in some of the growth that they're they're they're communicating to the analyst community with <unk>.

The market position and what you are seeing I mean are you seeing increased threats to your market position and the volumes that are coming through.

We're not.

Clarify with them.

If you want to try to understand better the top a waterfall comment we don't know where that is.

Now how that happens.

We haven't seen them as a competitive threat in the marketplace I think as you know our record additions are quite substantial.

We added in the quarter more records more unique records than they have.

So we've clearly got the ability to.

Track, new partnerships and individual relationships given the scale of the company and then on the commercial side. Our integrations are so deep and so substantial we haven't seen an impact from a revenue standpoint as you can see the numbers are super strong in workforce solutions across all of our verticals you incur.

<unk>, including mortgage their outperformance is exceptionally strong it hasnt slowed down.

And just please remember our historical record base is incredibly valuable to our customers certainly in talent certainly in government increasingly in mortgage we talked about mortgage 36 on.

And the conference call and Thats, a place where we have.

We have tremendous strength in general in verification services, and an even stronger position and historical records.

Got it thank you.

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

Thanks, so much.

Firstly I was hoping you could talk a little bit about the bearishness within the mortgage forecast.

30% inquiries decline.

<unk> would imply that originations are even lower than that and I think just I know, sometimes the third party forecasts are a little bit optimistic, but I just felt like there was a pretty big Delta there and so if you could just go into maybe why.

Your mortgage forecast is still bearish.

Yes.

First off it's very difficult to forecast and I think we've shown over the last year that it's a hard thing to do.

We've been pretty good about forecasting inside of a quarter, meaning out for a couple of months because the trends are pretty clear on what we're seeing on a daily and weekly basis, but as you get out a couple of quarters in this uncertain environment, it's much more challenging and John correct me, if I'm wrong I believe for the last year, we've had our outlooks.

South of the other forecast like NBA and stuff consistently so.

So that's not a new approach for us.

And Tony as you know, we have real visibility to originations that are actually happening.

A near term basis, which is what we try to factor into our forecast.

You could call it bearish or conservative or in our case, we tried to put it the most realistic outlook in.

In place.

That's what we put out there just a reminder, AWS, which is the bulk of the mortgage business right. There they're transactions tend to look a lot more like originations right.

It does have that shopping behavior, which is better but AWS now its really much closer to originations is a much better proxy.

And so also as we talked about I mean, what we do is we look at we looked at run rates and then just assumed kind of normal seasonality I think what you are hearing from some of the third.

Third party forecasters as an expectation of some type of substantial recovery in the mortgage market that could occur and if it does we'll benefit okay, but right now what we're assuming is we're going to see a market that looks a little more normal in terms of its seasonality versus this year and we're going to wait to see that recovery before we start saying it's going to happen.

Terrific.

To ask a little bit more broadly on consumer spending.

When you think about what.

What are you seeing I guess in year to date trends.

How are you expecting that to play out throughout the course of the year.

Yes, Tony it's really not a lot of change.

From the consumer.

From October meaning there is still strong.

They are working like unemployment being so low unemployment being so high and all the open jobs Thats a good thing.

For the consumer.

They've clearly we've seen they spent down some of their COVID-19 pandemic savings, but theyre still positive savings from where they were in 2019. So.

Element is quite positive obviously at the low end inflation is still pressuring.

The subprime consumer and we've seen some uptick in delinquencies there, but broadly we would characterize the consumer as being quite strong now when we look out for 2023 here in February .

We talked about.

We factored into our outlook, a more uncertain economy, which should impact the consumer call. It in the second half perhaps in the way we're thinking about it with these continued.

<unk> interest rates and every day, you see another company announcing layoffs or.

Hiring freezes and that's going to have to have an impact at some point.

And that's part of our outlook on the <unk> side.

I think we talked at length about.

What we're seeing in the hiring space that we've already talked about but thats impacting our businesses and in.

And background screening and talent, and then and I nine and Onboarding, we still expect to grow over 10% in those two businesses because of pricing and product.

Penetration, but the actual volume we expect to be down on a year over year basis. So that's going to have an impact.

Perfect. Thanks, so much.

Thank you our next questions come from the line of Seth Weber with Wells Fargo. Please proceed with your questions.

Hey, guys. Good morning, maybe for John is there any way to quantify.

What the what the Delta is from on the <unk>.

This compensation side, where youre going from.

Below plan last year to add plan. This year is there any way to just quantify what that represents as a year over year change.

I think in the quarter you talked about in the first quarter, if you exclude that and the equity impact margins are basically flat.

So just really the equity impact we're pretty close to flat. So we didn't so we tend to try to listings in order of importance. So what you can take from the listing we gave us it's fairly substantial no. We haven't quantified the total incentive and sales incentive differentia on year, but we're saving $120 million savings is obviously.

Quite substantial and the most substantial area. We're offsetting is that change in overall sales compensation and incentive compensation as well as equity compensation. So it's the biggest factor also we are seeing increases in royalty costs. If both in mortgage we talked about one of our mortgage vendors increasing prices, we do get some benefit from that.

On the revenue side as a pass through but it also significantly increases our our expenses.

And then also as we continue to substantially grow and workforce solutions, our partners, which we had an outstanding year growing 10, new exclusive partners for in the fourth quarter. We do see royalties go up but AWS is able to outgrow that and drive their margins higher so anyway. Those are the biggest things that we're that we're offsetting with the 100 that are offsetting the 120.

Cost savings.

Got it you actually anticipated my follow up question, just you mentioned this higher royalty and data.

Cost to you is that kind of just a catch up do you feel like or is this more of the new normal going forward that these costs are going to be higher structurally higher going forward for you guys.

So.

The specific comment around mortgage I think that was probably there was a large increase from a vendor and everyone knows that so so that was a onetime effect or we'll see what happens in the future on AWS, we've seen an increase in their royalties over time as they continue to grow partner Records and Thats just part of the business model and we think they can deliver 50% plus margins even.

As that grows so it's just it's a cost that we have to incur in the business, but it is extremely beneficial cost because the variable margin on the on the on those on the revenue that those records generate continues to be high but those costs are increasing the other costs I Didnt mentioned right that we're offsetting as we are continuing to see.

Duplicate cost because we're continuing to run the major U S systems and credit and the major Canadian systems and credit through the middle of this year or into the third quarter and so that duplicate costs is something we're still incurring and Thats also something thats, partially offsetting the cost savings we're generating.

Got it okay. Thank you very much guys I appreciate the color.

Thank you our next questions come from the line of David <unk> with Evercore. Please proceed with your questions.

Thank you good morning, looking at slide 13.

The $250 million total spending reduction for 2024.

Much of that is capex.

The reduction versus Opex and then.

Of those two numbers, particularly the opex reduction how much will flow through to earnings versus being offset by additional expenses.

So in terms of the split of capital and expense, we didn't give specifics, but it is probably a reasonable just to use the same split that you're having in 2023 and I think I'm going to have to ask you to wait to 2024 before we talk about.

We talk about 2024 guidance, but what we did talk about Wright as our substantial expense savings that we expect to see not just from this but also from continuing to execute on our transformation and we do expect our margins to grow right. So we're going to get margin enhancement through revenue growth because its obviously, we have obviously very high variable margins as the mortgage.

Market, even just normalizes at these levels our revenue growth starts to accelerate and then also will get cost savings. So how you decided to decide what goes where it's up to you, but we do expect to see margin enhancement with a better revenue growth environment and a more stable mortgage market.

Got it and just as a quick follow up.

You could quantify the AWS price increase at the beginning of this year.

Yes, I think you know we don't for competitive reasons and commercial reasons, we don't talk about any price increases I think we've been clear that we have.

More pricing leverage in AWS and our other businesses.

We've also been clear that we.

Generally do our price increases effective one one and roll them out in the in the fall or the fourth quarter to our customers.

So price for AWS <unk> International we got real clarity because it's in the marketplace and already negotiated with our customers.

Gives us a lot of a lot of confidence in that element of our of our margin and revenue levers for the year.

Understood. Thank you.

Thank you our next questions come from the line of Ashish <unk> with RBC. Please proceed with your questions.

Hi, This is Joe mazzoli filling up hershey's. Thanks for taking the question maybe just building more on this new Equifax theme in terms of the kind of restructuring efforts could these tech layoffs benefit the company in terms of hiring engineering talent.

Your comments suggest that kind of a white color layoffs are really concentrated in that type of kind of high growth high Tech area, and maybe that Patagonia investor session could actually help you in source Tech talent any color there won't be appreciate it. Thanks.

Yes, I'm not sure I understand the question could you just clarify that about.

Tech is an important function for equifax for sure as you know, we're a data analytics technology company, it's actually our largest number of employees and by far the largest number of contractors.

Most of the.

Cost savings have always been planned and that's what we're executing in 2023 come from completing the cloud and then exiting the plan. The contractors that were working on that are principally contractors and exiting those out.

Were you asking if the tech layoffs by some other large tech companies may benefit us in hiring.

Correct, yes. So if you can enforce those jobs that might have been done by contractors.

Yes.

We're always looking to improve our talent and upgraded I think we've got a very strong technology team today, but.

For sure and maybe I'll answer the question a little bit differently. If you ask the question a year ago about what's it like to hire tech talent.

A year ago 18 months ago 24 months ago. It was very hard today, when we're hiring tech talent, which we do all the time with in the environment. As you described to where a lot of tech companies are pulling back that is a positive for equifax, we're able to get.

Great talent and it's just.

Shorter timeframes between.

Opening a job in finding great people to come onboard in this current environment So for sure.

Great very helpful. And then maybe just building a little bit on that question, but in a different lens layoffs are broadening out across different industries.

Our non tech in nature is any of that baked into the unemployment claims assumptions in 'twenty, three and maybe due to the lag effect of severance could be there be a potential upside in the back half of the year as these unemployment claims could pick up.

I think you've seen before at Equifax, if you follow it closely.

Rising unemployment environment like in 2020, we get substantial upside from our unemployment claims business today, we don't have that you're really baked in in 2023, because we just haven't seen that yet, but if it comes forward that they will certainly be a positive.

Great color. Thanks again.

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 provided assumptions for industry mortgage volumes through 2023 can you discuss your expectations for card and auto origination volumes for this year as well.

Yes, we haven't disclosed those in the past George as you know we've.

In the past we've been very transparent around mortgage just because of the volatility if you will in that.

That space and the impact it's had in Equifax I.

I think what we have talked about is we were seeing we saw nice growth in card in the fourth quarter in terms of volumes not just a revenue was very good in banking, but also we saw a nice growth in banking and volumes in general So that trend continues to be positive auto was kind of flattish right. We think we performed well because of product pricing and some penetration gains. So we think we did very well in online.

<unk> auto we didn't see substantial.

Market growth in auto in terms of transactions in the fourth quarter, So and as Mark said as we go through next year, we've assumed a general weakening of the economy relative to where we are today.

Got it that's helpful and related to that.

That youre seeing on the card side can you discuss.

Growth trends, you're seeing with credit card marketing and Prequalification volumes.

Yes that was that was fairly strong in 2022 and in the fourth quarter.

We would expect that to continue at a fairly strong level in.

Certainly the first quarter, which we gave you guidance on.

In our broader guide for 2023, we expect a kind of a broad softening in the economy in the second half and that's factored into our outlook for the year.

As a reminder, our financial marketing services business was weak last year, right and we talked about that throughout the year.

And what we expect is we expect to see it kind of flatten out in 2023 part of it just because we are lapping a weak year and part of it because we think we're improving some of the product offerings, we have but.

So overall for us are our financial marketing services business.

Generally not strong in 2022, but we're expecting a little better performance and some growth in 'twenty three.

Okay. Thank you.

Thank you our next questions come from the line of surrender kind with Jefferies. Please proceed with your questions.

Thank you Hi, Mark just following up on the questions from the last analyst.

Just big picture wise.

The relative strength of kind of what youre seeing in like auto card P loans at this point in the economic cycle, both from like a marketing spend perspective, and as well as volumes.

Surprise you at this point and maybe how should we generally think about the cyclicality of the business.

If the economy was to maybe fall into a recession late 2023 is that when we would maybe expect to see lenders pulled back a bit more.

Just trying to gauge if they're structurally anything different that we should be thinking about this time around.

So I think this is a different economic event than we've ever seen before.

You've got interest rates, increasing rapidly you've got inflation at a level that it hasnt been in 40 years.

But you also have people working.

That usually doesn't tie together normally you see.

Unemployment increase as.

There is an economic event and I think the real question is that I'm not an economist but.

The real question is is that is there going to be the so called soft landing.

With interest rates and inflation.

With the Labor report from last Friday, it doesn't feel like that meaning there is going to be continued interest rate increases to try to tame inflation.

But the variable on all the verticals you described in financial services.

Financial services companies I ran a credit card company for a decade.

We are a credit card company or a financial services company will start tightening up as when people aren't working and when they're not working they can't pay their bills or they slowdown theyre paying payment of their bills. So thats a dichotomy that we have in 'twenty, two and I would call. It. The early parts of 2023 is you've got an economy that clearly is seeing pre.

You've got companies that are tightening their belts, which is impacting some of our <unk> volume.

But you got a consumer that is still fairly healthy their consumer confidence is down.

But they are working so there is still paying their bills or assumption for 2023 is that doesn't continue meeting it theres some weakening of that in the second half.

Is kind of how we laid it out and then of course on top of that were disproportionately impacted versus some of our peers.

By the massive mortgage market decline that we've had we've been living in a mortgage recession four six.

Six plus months and we've got another six months until we get.

The first half strength of 2023 behind us, but last year the mortgage market decline impacted us just the market impact of that was close to half a billion dollars a little over half a billion dollars. So we've been living in unusual economic environment.

From our perspective quite positively Equifax has continued to grow through that.

And just as a reminder, as you think about U S. <unk> two of the areas that are performing extremely well that are driving a lot of our growth our commercial in identity and fraud right.

Segments that are not necessarily embedded within the consumer, but where we think we have differentiated capabilities and benefits that should allow us to grow nicely and markets that may even weekend.

Thank you that was my question.

Thank you. Our next question comes from the line of Heather <unk> with Bank of America. Please proceed with your questions.

Hi, Thank you for taking my question I'd love to ask about the.

On workforce, the non mortgage verification side of things and how youre thinking about those businesses into the year, especially given the macro backdrop that you're.

Layering into your guidance.

And both on the talent and government side, how you're how you see that business is shaking out.

Yes.

We talked about that John can jump in but we expect those businesses to still perform very well.

Remember the underlying levers that verification as it starts with records.

So our 12% increase in records last year.

Benefits 2023, and then we.

Got it.

10.

New.

Processors that we're going to be adding records in 2020 during this year in 2023 So records.

The positive in all the different verticals that we sell into whether it's government talent.

Auto cards P loans, the non mortgage verticals in verification, we've got price increases in the marketplace.

We're rolling out new products in every one of those verticals.

That really benefit growth.

Forward.

So that's a positive and then just underlying penetration remember in every one of those non mortgage verticals for verification, we have fairly low penetration in cards.

In auto there's a lot of penetration opportunity P loans is pretty high.

Mortgage we do a lot we have we cover a lot of the ground and P loans, but then you go into talent and government.

There's just a lot of market penetration opportunities.

So then the flip side of that is the underlying <unk>.

Market for those what's happening to the economic impacts in there and the one place that we've highlighted.

His talent and.

Around verification, where there is some reduction in hiring but we said that we expect that business still be up over 10% for.

For 2020.

Three.

Government.

As also a vertical that if there is an economic event theres going to be more people going for social services, which will be a positive for that vertical we expect that to grow positively.

Through 2023.

Just as a reminder, <unk> Mark already mentioned that we're expecting total non mortgage for AWS next year about 13%. So still very very good and that even reflects weakness that we're going to see an ERC right. Here. So it was very strong and that was the end of that program that pandemic based program you will see a significant reduction there, which is non mortgage and we'll still grow 13%.

Through that so.

Great. Thank you and.

In terms of your sort of.

Overall non mortgage business that you talked about the fact that youre, assuming a weakening economy in the back half.

Can you just help US I know you don't necessarily guide.

So quarters, but that how to think about the cadence from <unk> to <unk> and then into the back half and just sort of what's.

Baked into your outlook.

It's tricky to do without getting into the quarters I think we've given you an outlook for the year and an outlook for the first quarter and then what you do.

We typically do we also.

It gave you some visibility around what we expect margins to do because of the.

Unusual the acceleration of the cloud cost savings in the broader restructuring of the company that.

Of the $30 to 36% EBITDA margins gives you a lot of visibility around the profitability side.

What else would you add John I think that's about all we can add right.

We have fairly good visibility on how we expect margins to substantially enhanced through the year going from.

About 30 ish rate to 36 by the end of the year and we said we will start seeing those cost savings really kick in in the second quarter, so beyond that not much more to say.

Thank you.

Thank you. Our next question is coming from the line of.

Ali with Deutsche Bank. Please proceed with your questions.

Yes, hi, thank you.

I just wanted to follow up on the U S.

B to B.

Online growth that looks like.

It accelerated in fourth Q.

I'm curious, how you expect that business to trend.

In 'twenty three.

Thanks.

Innovation or was it just a matter of.

Tom.

And maybe if you can comment on what type of pricing benefit do you expect to see in that business in 'twenty three.

Yes so.

But mark mentioned is that the way the planning was builders, we assumed about a 5% non mortgage growth and overall you were referring to acceleration in online right. This I'm, referring to overall non mortgage growth of about 5%.

Which is a little lower than it was in the fourth quarter, but still very very strong and I think the decline from the fourth quarter is principally driven by the fact that we've assumed that we're going to see weakening economic conditions as we move through the year right and I think what we're doing is just reflecting that in the 2023 guidance. We provided so we think at 5% growth with the U S.

Economy weakened through the year, we think is a very nice outcome.

And it shows very good performance and continued good performance across banking across auto across other verticals and then also a return to some level of growth not high but some level of growth and our financial marketing services business.

Okay. I guess is the cycle price increase that you mentioned is that primarily in mortgage or is that is that you think going to positively impact the.

The b to B online non mortgage business model, yes, we take we take price up.

Generally in all our products every year varying amounts dependent upon our market position.

Our commercial position et cetera.

Mortgage has a very defined price change on January one its pretty much industry wide right. So across other verticals generally speaking price increases do happen early in the year, but that isn't always the case right. So they tend to be more distributed throughout the year. So it isn't it isn't as a unified and event.

Outside of mortgage, but yes, we do expect to continue to get price. We certainly had a price benefit in the fourth quarter and we expect to continue to have price benefits as we move through 'twenty three.

Got it thank you.

Thank you our next questions come from the line of Andy Grobler with BNP Paribas. Please proceed with your questions.

Hi, Thank you very much.

Any more questions.

Firstly, just one on the compensation just to clarify.

That is going to come back.

In 'twenty three relative to <unk>.

<unk>.

With that spans 621 in other words.

'twenty two kind of artificially are unusually large haven't gone back to a more normal.

Yes, I think that's the right way to think about it in 2022.

We set out a plan for the year.

At this time last year, where we didn't anticipate a mortgage market change or interest rates going up or inflation, where it was.

We missed that plan and the way our compensation structures are aligned as you might imagine are tied to the performance against our plan for the year and we underperformed that so our compensation was substantially down in 2022.

In 2023, we're assuming we get back to target levels, which would be more like 21.

21 was a very good year right. So our comp was pretty strong in 'twenty. One 'twenty one was a strong year overall, yes, yes.

And just to kind of follow up on on the cost side.

You have cost savings from the transformation.

Anyway now.

Talked about $120 million of savings next year.

What is the what do you think would increment presses.

Previous expectations within the 120.

You said 120 next year its actually this year, which I think you've mentioned.

Yes.

Didn't break that out for you but.

120 is a combination of accelerating.

Some of the cloud cost savings that we had planned so I think we said in the call earlier no change in what we expected to deliver from the cloud savings. We're accelerating some of that into 2023. We also said we expect additional cloud cost savings in 2024.

Likely some in 2025, and then on top of that in 'twenty three.

Inside the $120 million is it a broader restructuring and efficiencies across the company to deliver additional cost savings that are incremental to.

Our long term.

Cloud savings that we've talked about for the last couple of years.

I suppose that's good.

And in terms of your incremental savings on that longer term plan. How much is how much is baked into this year's guide.

Yes, we haven't broken that out as a part of our conversation this morning.

Really just highlighted that obviously, it's a sizable number it's going to have a very positive impact on the company and its and there is an incremental piece to the accelerated cloud savings.

Okay. Thank you.

Just one more just from an AWS perspective.

Youre, having discussions with clients and data providers.

Now that there is.

Finally determined competitor in play all of those conversations changing.

They're not we still have.

Very effective ability to add new relationships I think we talked about adding 10.

That will come online this year during 2023, and we have the scale of workforce solutions the scale of their technology to scale of.

Our security and capabilities.

The longevity, we've had the business. So we've been in this business for over a decade.

And then the ability to deliver a rev share immediately.

Scale for those records from our partner.

It gives us.

Lot of power to continue to grow our record base and there's a long runway in front of us.

Of records that we will be adding to the twin dataset.

Okay. Thank you very much.

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

Thanks for everybody's time today and do you have any questions you can reach out to me in sale.

We'll be around.

Great.

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