Q3 2023 Equifax Inc Earnings Call

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Hello, and welcome to the Equifax Q3, 2023 earnings conference call. If anyone should require operator assistance. Please press star zero on your telephone keypad, a question and answer session will follow the formal presentation.

You May ask your question at any time by pressing star one on your telephone keypad. We ask you. Please limit yourself to one question and one follow up.

As a reminder, this conference is being recorded its now my pleasure to turn the call over to Trevor Burns Senior Vice President head of corporate Investor Relations cover. Please go ahead.

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

Today's call is being recorded in our cabinet recording will be available later today in the IR calendar section of the news and events tab at our IR website Investor <unk> Com.

During the call today, we will be making reference to certain materials that can also be found in the presentations section.

The news and events tab.

Our web site.

Change the Jewish people 30 June 2023 earnings conference call.

Yes.

Also we'll be making.

Certain forward looking statements, including fourth quarter and full year 2023 guidance to help you understand that protects and its business environment. These statements involve a number of risks uncertainties and other factors could cause actual results to differ materially from our expectations certain risk factors that may occur.

That's our business.

For them filings with U S G H.

Our 2020 to Form 10-K and subsequent filings.

Well, it's in real terms certain non-GAAP financial measures, including adjusted EPS attributable.

Adjusted EBITDA, which will be adjusted for certain items that affect the comparability of the underlying operational performance.

Recently Equifax reached an agreement with the UK financial conduct authority.

Turning to the 2017 cybersecurity incident.

In connection with the agreement.

That's taking a charge in the third quarter and $14 million, which is excluded from third quarter adjusted EBITDA and adjusted EPS.

These non-GAAP financial measures a G children reconciliation tables, which are included in our earnings release.

Tangela Salt section.

Financial info tab of our IR website.

Now I would like to turn it over to Mark.

Thanks, Trevor and good morning, turning to slide four we continue to face a very challenging U S mortgage market weakened substantially in August and September but lot beyond our July framework, but mortgage rates moving above 7% and now we're approaching almost 8% over a 20 year high.

Revenue in the third quarter was 1.32 billion was up 6% on a reported basis six 5% on a constant currency basis, and three 5% on an organic constant currency basis and.

And adjusted EPS of $1 76 per share was up 2% versus last year.

In the quarter Pvs, the Brazilian credit Bureau that we acquired in August had revenue of $23 million and contributed <unk> <unk> per share to adjusted EPS. It was not in our July framework for the third quarter.

Overall Equifax revenue was up 1.32 billion was $34 million below the midpoint of the guidance. We provided in July which excluded Brazil, driven primarily by the weaker U S mortgage market and FX.

Together these items impacted revenue by about $28 million and adjusted EPS by about 10 cents per share.

Adjusting for the mortgage market and FX impact revenue in the third quarter would have been just below the midpoint of our July framework and both adjusted EPS and EBITDA margins would have exceeded the framework we provided in July .

Overall market volumes measured based on our credit and twin inquiry volumes were on the order of 650 basis points weaker than we expected in our July guidance.

Mortgage rates increased substantially during the quarter with a 100 basis point increase in the 10 year treasury rate driving mortgage rates to almost seven 5% in September .

The mortgage volume declined negatively impacted mortgage revenue by about 22 million and a strengthening dollar negatively impacted revenue versus our July expectations by about $6 million.

U S mortgage revenue from AWS and U S. I S was down about 8%, reflecting the significantly weaker mortgage market conditions.

Mortgage outperformance relative to the mortgage industry volumes I referenced remained strong in both U S. I S at over 30% and AWS at 22%.

Non mortgage constant dollar revenue was up a strong 11% in the quarter and was up 8% excluding revenue from Bbs.

The strong 20% growth last year.

Non mortgage constant dollar organic growth was up 7% versus last year with our non mortgage growth rate strengthening 300 basis points sequentially from the second quarter.

Non mortgage growth was led by AWS. It was up over 11% and up 800 basis points sequentially and U S. I S that was up almost eight 5% and up 50 bps sequentially.

International organic non mortgage revenue growth at three 3% was slightly weaker than our expectations principally due to lower revenue in our UK debt management business.

Yeah.

We had another very strong quarter, and new product growth with a record, 15% vitality index, which is well above our 10% long term growth framework for N P eyes.

As I referenced earlier, despite the much lower than expected mortgage revenue in the third quarter, we delivered adjusted EPS of $1 76 per share and adjusted EBITDA margins of 33, 1%.

Excluding bvs, we delivered adjusted EPS of $1 74, and adjusted EBITDA margins of 33, 3% up 60 bps sequentially. Both in line with the guidance. We provided in July while absorbing the significant impact of the $22 million of lower mortgage revenue.

The impact of lower mortgage revenue and FX negatively impacted adjusted EPS by about 10 cents per share.

We delivered very good execution against our $210 million cloud and broader spending reduction programs, which allowed us to grow margins sequentially in the quarter. Despite the lower mortgage revenue.

We continue to expect to deliver spending reductions of $210 million in 2023, with a 120 million benefiting operating expenses and over 65 million of incremental run rate savings in 2024.

We also continue to make good progress on completing our cloud transformation with large north American customers migrating to the cloud during the quarter.

We expect expect both U S. I S in Canada to complete their credit exchange cloud migrations in the first half of 2024.

At the end of the quarter about 75% of North American revenue was being delivered from the new Equifax cloud. We are convinced that our equifax cloud single data fabric and AI capabilities provide a competitive advantage the equifax in the future.

As we look to the fourth quarter, we expect revenue of 1.317 billion adjusted EPS of $1 77, and adjusted EBITDA margins of 34% at the midpoint of our guidance ranges. This includes about $38 million of revenue from bvs, which adds about 3% to our revenue growth.

We expect fourth quarter revenue would be up 10% with organic constant dollar growth of 7%.

Adjusted EPS to be up over 16% and adjusted EBITDA margins will expand about 300 basis points versus last year.

Non mortgage constant dollar growth is expected to be strong at about 13% with organic growth of about 9% led by AWS, which should deliver over 15% non mortgage growth.

However, excluding bvs. This framework is about $70 million below the implied fourth quarter revenue guidance of $1.31 35 billion at the midpoint, we provided in July .

The sharp decline in the mortgage market and FX drive the majority or about $60 million of this decline.

Our guidance assumes that substantially weakening trends in the U S mortgage market that we're currently seeing continue through the remainder of the year and then we also see normal seasonal mortgage declines in November and December .

On this basis, we're assuming U S mortgage credit inquiries will be down about 22% in the fourth quarter driving a reduction in overall mortgage volumes of about 18 percentage points versus the guidance implied for the fourth quarter in our July framework.

This negatively impacts mortgage revenue in the fourth quarter by about $47 million.

At these levels U S mortgage activity will be down and unprecedented more than 50% from 2015 to 29 averages, which we consider to be normal more mortgage market levels.

We expect FX to negatively impact revenue in the fourth quarter versus our July guidance by $13 million.

The net impact of the 70 million dollar reduction in revenue is driving the reduction in EPS and EBITDA margin.

Our original fourth quarter goals of $2, a share and 36% respectively respectfully.

The second half of 2023 has clearly been very challenging as the accelerated decline in the U S mortgage market in August and September as well as FX negatively impacted revenue by almost $90 million.

Like many we are struggling to forecast the bottom of the mortgage market in this unprecedented environment of fed rate increases driving mortgage rates up over to X to 20 year highs in such a short 20 months timeframe.

Outside the unprecedented mortgage market decline, we are executing extremely well.

As I'll cover in the remainder of Michael's remarks, we are delivering accelerated non mortgage growth.

Executing on our cloud customer migrations and overall cost plans outperforming our expectations for new products, and adding new AWS record partnerships and records at an accelerated pace, adding over 25 million records since the beginning of last year.

In both our mortgage and non mortgage businesses, we are continuing to outgrow our underlying markets.

Before I cover our business unit results in more detail I wanted to provide a brief overview of what we're seeing in the U S economy and consumer.

Outside of the challenging U S mortgage market the U S consumer and our customers remain broadly resilient.

Employment remains at record historic levels with low unemployment and about 10 million open jobs against about 5 million people, who are looking for jobs.

Excess consumer savings built up during the pandemic still exist. However have declined to the lowest levels since the second quarter of 2020, particularly amongst lower and middle income households.

Credit card utilization is increasing.

Got a card delinquency rates for prime consumers, which represent about 20% of the market are stable, but are above pre pandemic levels in less than 1%.

However, subprime borrower delinquencies, what should have been which have been increasing over the past year are now above pre pandemic levels in approaching the levels. We saw in 2009 and 2010.

Auto delinquency rates for prime consumers, which represent about 20% of the market are also stable, but above pre temp pre pandemic levels and still well below 1%.

Linked with these for subprime consumers are above pre pandemic levels as well above levels that we saw in 2009 and 2010.

And any any customer credit tightening has largely been in fintech and subprime, which started over a year ago.

Overall still a solid market for equifax outside of mortgage in hiring when consumers are working they largely have the capacity to keep current on their financial obligations.

Turning to slide five overall workforce solutions revenue was up 3% in the quarter a return to growth, which is a very positive sign as we look towards 2024.

Strong strong twin record growth the positive impact of 2023 price actions and strong NPI performance driven by the adoption of mortgage trended data drove a strong 22 points of mortgage outperformance again in the quarter.

AWS had another very strong quarter record additions with an incremental 2 million current records added to the twin database.

E Ws closed the third quarter with 163 million current records.

121 million unique individuals or S. S S, which was up 12% and 9% respectively versus last year.

Total records, both current and historic are now over $640 million.

We now have current records on over 70% of U S nonfarm payroll and over 50% of the 220 million people in the U S with employment and income records relevant to the twin database.

The AWS team has acquired over 11 million records. So far in 2023 that are driving topline growth and it will significantly benefit benefit verifier revenue growth when the U S mortgage and white collar hiring markets recover.

During the quarter, we signed agreements with four new payroll processors that will deliver records in the fourth quarter in 2024.

Over the past three years, we've added partnerships with 27 payroll processors.

As a reminder, about 50% of our records are contributed directly by individual employers from our employer services customer relationships, where we are.

50% are contributed through partnerships with payroll processors HR software companies pension administrators and other relationships increasingly more of our new products are incorporating both current and historical records with about 50%.

Of our third quarter verification services revenue as well as about 50% of our mortgage verification services revenue coming from products that include historical records.

Turning to slide six workforce solutions delivered strong non mortgage revenue growth of 11% a return double digit revenue growth with the growth rate up about 800 basis points sequentially.

And as a reminder, AWS non mortgage revenue was up a very strong 40% in the third quarter last year, which of course was a very tough comp.

Verification services non mortgage revenue, which represents just under 70% of verifier revenue delivered 11% growth versus last year in the quarter. This was also again against a very challenging 72% non mortgage growth comp last year.

In government. We saw continued very strong growth with revenue up 23% compared to over 90% revenue growth last year in the third quarter.

Government revenue was slightly lower than our expectations due to timing of Medicaid Redetermination volumes. We continue to expect that AWS will could capture significant volume from this redetermination as a complete prior to the end of the second quarter of next year.

During the quarter, we signed a contract extension to provide income verification to the U S centers for Medicare and Medicaid services as a part of a contract valued at up to $1.2 billion over the next five years.

This contract is the largest in Equifax is history and extends our services via health care Dot Gov for HCA related determinations, while allowing workforce solutions to continue to work to penetrate the state level Medicaid verification services market.

Also during the quarter Usda's food and nutrition service awarded a national contract Equifax workforce solutions to provide verification services in support of the supplemental nutrition assistance program, commonly known as snap.

The award is for $38 million in the base year, which began on September 30th with a potential total contract value of $190 million. These large new AWS government contracts reflect the uniqueness of the twin data supporting the delivery of social services at the U S Federal state and local led.

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These new contracts give us confidence in strong future AWS growth in the large 4 billion Tam for our government vertical.

We expect to see accelerating sequential growth in our government vertical in the fourth quarter driven by growth from CMS Medicaid Redetermination.

Open enrollment volume further state government penetration and pricing from state contract renewals as well as revenue from the new staff snap agreement with the U S D. A.

Yeah.

Talent solutions was up 6% in the quarter versus a very strong over 110% growth last year in the third quarter from black record levels of U S hiring as.

As a reminder, we are currently more heavily penetrated to white collar workers, including technology professional services health care and financial services, what you have seen a greater reduction in hiring activity and broader hiring freezes and the about 10%, but decline that the BLS reported in the third quarter through August .

We outperformed the hiring market by about 20% percentage points in the quarter as we delivered new digital solutions and background screening strong new product growth continued expansion of twin records and pricing.

Employer services revenue of $118 million was up 13% driven by growth in our I nine and Onboarding businesses. Despite the negative impact of U S hiring as well as growth in our ACO business in the fourth quarter, we expect overall employer services revenue to decline slightly as growth in <unk>.

And on boarding is offset by declines in ERC revenue as the U S. Government has suspended processing new E. R. C claims.

Okay.

Earlier this year, we announced the launch of people HQ.

Workforce solutions cloud native solution that brings together multiple best in class employer compliance services in a single unified customer experience.

People HQ will help companies of all sizes access AWS employer services, including income verification.

Nine and a see a from our new self service portal.

Since the launch of people HQ and the first quarter Dws has on boarded about 45000 companies, which also delivers new records for twin.

Workforce solutions adjusted EBITDA margin of 59% was up 140 basis points versus last year, but down 60 basis points from the second quarter from the mortgage market decline.

The AWS team continued to perform very well despite the despite the macro headwinds for mortgage and U S hiring outperforming their underlying markets from strong twin record growth.

Penetration new products and price.

As shown on slide seven U S. I S revenue of $426 million was up over 7% and down slightly from our expectations due to the impact of the much weaker mortgage market.

U S. I S delivered strong non mortgage revenue growth of about 8% in the quarter.

U S. I S mortgage revenue was up 4% and outperformed the mortgage credit inquiries that were down 29% by 33 points.

The strong pricing environment that we discussed in July drove very strong outperformance.

At 101 million mortgage revenue was 24% of total U S. I S revenue in the quarter.

B to B non mortgage online revenue growth was up a very strong, 10% total and up 6% organically.

During the quarter online revenue, we had strong double digit growth in commercial and banking and lending from strong identity and fraud revenue and mid single digit growth in auto and insurance offset by declines in telco and direct to consumer.

U S. I S. Also saw strong double digit growth in count from very good new business and NPI performance.

Natural marketing services, our BTB offline business had revenue of $51 million. It was down just under 1%.

In marketing declines in prescreen marketing revenue in the quarter that were consistent with declines in the first half more than offset nice revenue growth from our <unk> consumer wealth data business.

And pre screen, we continue to see weakness with the smaller F. EIS in fintech in the subprime space offset by growth with larger <unk>.

We then risk and account reviews, we did see limited growth in our portfolio review business, but we have not seen a meaningful increase in risk based portfolio reviews that are typical during challenging economic periods.

Operator: Hello, and welcome to the Equifax Q3 2023 Earnings Conference call. If anyone would require operator assistance, please press star zero on your telephone keypad. A question and an intercession will follow the formal presentation. You may ask a question anytime by pressing star one on your telephone keypad. We ask you, please let me yourself to one question and one follow up. As a reminder, this conference is being recorded.

U S <unk> consumer solutions D to C business had another very strong quarter with revenue of $56 million up 12%.

From very good performances in both our consumer direct and our indirect channels.

U S. I S. Adjusted EBITDA margins were 34, 2% in the quarter and slightly below the 35% we had guided from the impact of weaker mortgage market as well as higher technology spend as we migrate customers to the new cloud data fabric.

Trevor Burns: It's not my pleasure to turn the clover to Trevor Burns, senior vice president, head of corporate invest relations. Cover, please go ahead. Thanks and good morning. Welcome to today's conference call.

Todd in the U S. I S team are on offense as they work to complete their cloud transformation and pivot to leveraging their new cloud capability to deliver new products and drive share gains.

Trevor Burns: On Trevor Burns with me today are Mark Begor, chief executive officer and John Gamble, chief financial officer. Today's call is being recorded. An archive of the recording will be available later today in the IR calendar section of the news and events tab at our IR website, investor dot epiphex.com. During the call today, we'll be making reference certain materials and can also be found in the presentation section of the news and events that are IR website.

In the third quarter U S. I S onboard a new large customer to our new cloud platform, which you expect to deliver share gains moving forward.

Turning to slide eight international revenue was $316 million up 12% in constant currency and up 3% and organic constant currency and below the four 5% growth we had guided to in July due to the greater decline in our European debt collection revenue than we expected.

Europe local currency revenue was down three 2% in the quarter, our U K and Spain CRA business revenue was up a very strong 8% in the quarter a very good performance.

Trevor Burns: These materials are able to reach you 2023 Earnings Conference call. Also, we'll be making certain poor looking statements, including fourth quarter and full year 2023 guidance to help you understand equal facts and its business environments. These statements involve a number of risks uncertainties and other factors that could cause actual results to different materially from our expectations. Certain rates factors that may impact our business are separate and follow into the SEC, including our 2022 form 10K and subsequent filings. We will also be referring certain non-gap financial measures, including adjusted EPS through those aquifacts and adjusted EBITDA, which will be adjusted for certain items that affect the comparability of underlying operational performance.

Set by the weaker than expected, 17% decline in our U K debt management business.

We expect Europe to deliver almost 10% growth in the fourth quarter from continued strength in the CR Cri business and a return to growth in our debt management business as we lap difficult comps from last year.

Latin America local currency revenue, including Brazil was up a very strong 21% topping off a very strong 34% growth in the third quarter of last year, driven by double digit growth in Argentina, and Paraguay and from new product introductions and pricing accurate actions, we expect to attempt to deliver strong double digit revenue growth again.

In the fourth quarter.

Canada and Asia Pacific both delivered low single digit growth in the quarter as we expected.

Mark Begor: Recently, aquifacts reached an agreement with the UK financial conduct authority in relation to the 2017 cybersecurity incident. In connection with the agreement, aquifacts taken a charge in the third quarter of $14 million, which is excluded from third quarter adjusted EBITDA and adjusted EPS. It's non-gap financial measures are detailed in reconciliation tables, which are included in our earnings release and can be found in the financial assault section of the financial info tab at our IR website.

International adjusted EBITDA margins of 26, 3% were up 210 basis points sequentially, excluding Brazil, adjusted EBITDA margins of 26, 8% were up 260 basis points and in line with our expectations.

The improvement was driven by revenue growth and good execution against our 2023 cost reduction plans by Lisa and our international team.

Yeah.

Turning to slide nine in the third quarter overall non mortgage constant dollar revenue growth grew a strong 11% with organic growth of 7%.

Mark Begor: Now if I could turn it over to Mark. Thanks Trevor and good morning.

Mark Begor: Turning to slide 4, we continue to face a very challenging US mortgage market that we can substantially in August and September beyond our July framework, with mortgage rates moving above 7% and now approaching almost 8% over a 20-year high. Revenue in the third quarter was 1.32 billion, was up 6% on a reported basis, 6.5% on a constant currency basis, and 3.5% on an organic constant currency basis. In adjusted EPS of $1.76 per share was up 2% versus last year.

Both inside our long term framework.

Positively this was up 300 basis points sequentially.

Acceleration in organic revenue growth was driven by strong 11% AWS non mortgage growth and improvement of about 800 basis points sequentially.

As we look to the fourth quarter, we expect non mortgage revenue growth to be about 13% with organic growth of about 9% above the delivers above the levels, we delivered in the third quarter.

The acceleration of organic growth is expected to be led again by AWS with growth of over 15% driven by their government and talent businesses.

Mark Begor: In the quarter, EVS, the Brazilian credit bureau that we acquired in August, had revenue of 23 million and contributed 2 cents per share to adjusted EPS, which was not in our July framework for the third quarter. Overall, Equifax revenue of 1.32 billion was $34 million below the midpoint of the guidance we provide in July, which excluded Brazil, driven primarily by the weaker US mortgage market and FX. Together, these items impacted revenue by about $28 million in adjusted EPS by about $0.10 per share.

Turning to slide 10, new product introductions, leveraging our differentiated data and new FX cloud are central to our E. F F 'twenty twenty-five growth strategy.

In the quarter, we delivered a record 15% vitality again led by very strong performances in AWS and Latin America.

Ws non mortgage V I in the quarter was over 25% a very strong performance.

And in the third quarter about 85% of new product revenue came from non mortgage products leveraging the FX cloud.

Mark Begor: Adjusting for the mortgage market and FX impact revenue in the third quarter would have been just below the midpoint of our July framework, and both adjusted EPS, and EBITDA margins would have exceeded the framework we provided in July. Overall, market volumes measured based on our credit and twin inquiry volumes were on the order of 650 basis points weaker than we expected in our July guidance, mortgage rates increased substantially during the quarter with the 100 basis point increase in the 10 year treasury rate, driving mortgage rates to almost 7.5% in September.

Leveraging our new <unk> cloud capability to drive new product Rollouts, we expect to deliver vitality index of approximately 14% in 2023, which is about 400 basis points above our 10% long term vitality index goal.

Importantly, second half U S. I S V. I is expected to be up about 100 bps higher than first half as we are closer to cloud completion enable to leverage our new cloud native infrastructure in U S. I S for innovation and new products.

Mark Begor: The mortgage volume declined negatively impacted mortgage revenue by about $22 million in the strengthening dollar negatively impacted revenue versus our July expectations by about $6 million. US mortgage revenue from EWS and USIS was down about 8% reflecting the significantly weaker mortgage market conditions. Mortgage out performance relative to the mortgage industry volumes I referenced remains strong in both USIS at over 30% in EWS at 22%. Non mortgage constant dollar revenue was up a strong 11% in the quarter and was up 8% excluding revenue from BBS against a strong 20% growth last year.

This is broadly positive momentum for 2024.

On the right side of this slide we've highlighted several new products introduced in the quarter.

These new solutions are a testament to the power of the Equifax cloud and AI and driving innovation that increase that can increase the visibility of consumers to help expand access to credit and create new mainstream financial products, while driving equifax as top line.

Turning to slide 11, we're very excited to have closed the Boa Vista acquisition acquisition in early August and welcomed the bogus team to Equifax.

We're focused on driving growth in Brazil, and expanding bbs's capabilities by deploying our cloud based decisioning and analytical products as well as expanding in new verticals like any deep identity and fraud.

Mark Begor: Non mortgage constant dollar organic growth was up 7% versus last year with our non mortgage growth rate strengthening 300 basis points sequentially from the second quarter. Non mortgage growth was led by EWS that was up over 11% and up 800 basis points sequentially in USIS that was up almost 8.5% in up 50 Bips sequentially. International organic non mortgage revenue growth at 3% was slightly weaker than our expectations principally due to lower revenue in our UK debt management business.

In the third quarter for the period after our acquisition closed on August 7th.

E F X, Brazil delivered revenue of $23 million and was accretive to adjusted EPS by <unk> <unk> per share.

Going forward, Brazil would be included in our Latin American region for reporting.

And as a reminder, we expect Brazil to deliver approximately 160 million in run rate revenue for equifax to be accretive to adjusted EPS in its first year.

And now I'd like to turn it over to Jon to provide more detail on our fourth quarter and full year guidance John .

Mark Begor: We have another very strong quarter in new product growth with a record 15% vitality index which is well above our 10% long term growth framework for NPI's. As I referenced earlier despite the much lower than expected mortgage revenue in the third quarter we delivered adjusted EPS of $1.76 per share and adjusted EBITDA margins of 33.1%. Excluding BBS we delivered adjusted EPS of $1.74 and adjusted EBITDA margins of 33.3% up 60 Bips sequentially both in line with the guidance we provided in July while absorbing the significant impact of the 22 million dollars of lower mortgage revenue.

Thanks, Marc turning to slide 12, as Mark mentioned third quarter mortgage market credit inquiries were down about 29% weaker than the down 23% in our July guidance and AWS mortgage outperformance was about 22% from records and price product and mix and consist of.

With the second quarter.

For the fourth quarter, we are assuming the weakening trend in mortgage market volume estimated based on the change in our credit inquiries. We've seen in October continues as well as further normal seasonal declines in November and December on this basis, we expect mortgage credit inquiries to be down about 22% in the fourth quarter.

Mark Begor: The impact of lower mortgage revenue and FX negatively impacted adjusted EPS by about 10 cents per share. We delivered very good execution against our $210 million cloud and broader spending reduction programs which allowed us to grow margins sequentially in the quarter despite the lower mortgage revenue. We continue expected deliver spending reductions of $210 million in 2023 with a 120 million benefiting operating expenses in over 65 million of incremental run rate savings in 2024.

<unk>, which is an 18 percentage point reduction from our July framework for the fourth quarter for.

For perspective to the extent the mortgage market continues at the levels. We've assumed for <unk> 23, which is more than 50% below pre pandemic averages 2024 mortgage market credit inquiry volumes would be down approaching 15% versus 2023.

Mark Begor: We also continue to make good progress on completing our cloud transformation with large North American customers migrating to the cloud during the quarter. We expect both USIS and Canada to complete their credit exchange cloud migrations in the first half of 2024. At the end of the quarter, about 75% of North American revenue was being delivered from the new Equifax cloud. We are convinced that our Equifax cloud single data fabric and AI capabilities will provide a competitive advantage to Equifax in the future.

Slide 13 provides the details of our guidance for <unk> 23, and <unk> 23, we expect total equifax revenue to be between 1.307 and $1.3 billion to $7 billion with revenue up 10% at the midpoint non mortgage constant currency revenue.

Growth should strengthened to 13%.

Mortgage revenue in the fourth quarter is expected to be below 15% of equifax revenue.

Mark Begor: As we look to the fourth quarter, we expect revenue of 1.317 billion, adjusted EPS of $1.77 and adjusted EBITDA margins of 34% at the midpoint of our guidance ranges. This includes about 38 million of revenue from BVS, which adds about 3% to our revenue growth. We expect fourth quarter revenue would be up 10% with organic constant dollar growth of 7%, adjusted EPS to be up over 16%, and adjusted EBITDA margins will expand about 300 basis points versus last year.

Business unit performance in the fourth quarter is expected to be as described below.

Workforce solutions revenue growth is expected to be up about 8%, which is lower than the implied fourth quarter framework. We outlined in July the bulk of the $47 million mortgage market impact on revenue that mark referenced impacts AWS as we discussed in July U S. I S benefits from greater mortgage <unk>.

And the early application phases, which should continue into the fourth quarter.

<unk> non mortgage revenue will return to strong over 15% growth year to year in the fourth quarter. However, this strong growth is below our framework from July <unk>.

Mark Begor: Non-mortgage constant dollar growth is expected to be strong at about 13%, with organic growth of about 9%, led by EWS, which should deliver over 15% non-mortgage growth. Over excluding BVS, this framework is about $70 million below the implied fourth quarter revenue guidance of $1.35 billion at the midpoint we provided in July. The sharp decline in the mortgage market and FX drive the majority or about $60 million of this decline. Our guidance assumes that substantially weakening trends in the U.S, mortgage market that we're currently seeing continue through the remainder of the year, and that we also see normal seasonal mortgage declines in November and December.

Government growth should be above the 23% we saw in the third quarter, but is below our framework from July as state benefit Redetermination are occurring at a slower pace than we anticipated.

Talent growth should be above the 6% we saw this quarter as well, but we'll also be below our July framework as overall hiring has decelerated from the levels. We were seeing in July with B I'll ask now down 10% with white collar verticals down significantly more and employer services revenue.

B below our <unk> framework from July for both I, nine and Onboarding that should continue to deliver a year to year growth, but at levels below our July framework from weaker overall hiring and E. R. C with the IRS announcement that they would pause on new ERC claims.

Mark Begor: On this basis, we're assuming U.S, mortgage credit inquiries will be down about 22% in the fourth quarter, driving a reduction in overall mortgage volumes of about 18 percentage points versus the guidance implied for the fourth quarter in our July framework. This negatively impacts mortgage revenue in the fourth quarter by about $47 million. At these levels, U.S, mortgage activity will be down and unprecedented more than 50% from 2015 to 29 averages, which we consider to be normal mortgage market levels.

Adjusted EBITA margins for AWS are expected to be about 55%.

U S. I S revenue is expected to be up about 4% year to year. Despite the increased mortgage headwind non mortgage year to year revenue growth of 4% should be down from about eight 5% growth. We saw this quarter as we lap <unk> 2022 pricing actions.

Mark Begor: We expect FX to negatively impact revenue in the fourth quarter versus our July guidance by $13 million. The net impact of the $70 million reduction in revenue is driving the reduction in EPS and EBITDA margin from our original fourth quarter goals of $2 a share and 36% respectively.

This is so much stronger than we expected in our July framework driven by continued good growth in commercial consumer solutions auto and across our count IV products <unk>.

Adjusted EBITDA margins are expected to be about 35% up sequentially, principally due to revenue growth and cost actions.

Mark Begor: The second half of 2023 has clearly been very challenging as the accelerated decline in the U.S, mortgage market in August and September, as well as FX negatively impacted revenue by almost $90 million. Like many, we are struggling to forecast the bottom of the mortgage market in this unprecedented environment of Fed rate increases, driving mortgage rates up over 2X to 20 year highs in such a short 20 month timeframe.

International revenue is expected to be up about 20% in constant currency due to the addition of bvs and as we lap headwinds in our UK debt management business revenue is expected to be up about 6.5% in organic constant currency. This was somewhat stronger than our July framework.

EBITDA margins are expected to be about 30%, reflecting revenue growth and strong cost management, including the benefit of planned cost reduction actions.

Mark Begor: Outside the unprecedented mortgage market decline, we are executing extremely well. As I cover in the remainder of my remarks, we are delivering accelerated non mortgage growth, executing on our cloud customer migrations in overall cost, plans, outperforming our expectations for new products, and adding new EWS record partnerships and records at an accelerated pace, adding over 25 million records at the beginning of last year. In both our mortgage and non mortgage businesses, we are continuing to outgrow our underlying markets.

We expect Brazil to deliver revenue of about $38 million in the fourth quarter.

Equifax for Q twenty-three adjusted EBITDA margins are expected to be about 34% at the midpoint of our guidance an increase sequentially of almost 100 basis points.

And adjusted EPS in <unk> 'twenty three is expected to be $1 72 to $1 82 per share up 17% versus <unk> 22 at the midpoint.

Both adjusted EPS and adjusted EBITDA margin are below the $2 per share and 36% targets that we set as goals as we entered 2023, principally due to the assumed further decline in mortgage market volumes and associated reduction of high margin mortgage revenue that mark discussed.

Mark Begor: Before I cover our business unit results in more detail, I wanted to provide a brief overview of what we're seeing in the US economy and consumer. Outside of the challenging U.S, mortgage market, the US consumer and our customers remain broadly resilient. Employment remains at record historic levels with low unemployment and about 10 million open jobs against about 5 million people who are looking for jobs. Excess consumer savings built up during the pandemic still exists.

Slide 14 provides the specifics of our 2023 full year guidance 2023 revenue and adjusted EPS are being reduced consistent with our three Q 'twenty three results and our <unk> 2023 guidance. We expect 2023 non mortgage constant currency revenue revenue growth to be strong at about 9%.

Mark Begor: However, had declined to the lowest levels since the second quarter of 2020, particularly amongst lower and middle income households. Credit card utilization is increasing. Credit card delinquency rates for prime consumers, which represent about 20% of the market are stable, but are above pre-predemic levels and less than 1%. However, sub-prime borrower delinquencies, which have been, which have been increasing over the past year, are now above pre-pendemic levels and approaching the levels we saw in 2009 and 2010.

And organic revenue growth of about 7%.

Total capital spending for 2023, including the addition of Brazil, which was not previously included in our guidance is expected to be about $580 million capital spending in the third quarter was about $145 million. We did see the expected decline in spending sequentially. However, the reduction was slightly less.

Then the expected principally due to higher spending related to customer migrations, we expect capital spending in the fourth quarter declined sequentially by about $15 million as we continued to progress U S and Canadian migrations to date of Heidrick, we remain focused on reducing capex as a percentage of revenue to about seven <unk>.

Mark Begor: Auto delinquency rates for prime consumers, which represent about 20% of the market are also stable, but above pre-pendemic levels and still well below 1%. Delinquencies for sub-prime consumers are above pre-pendemic levels as well above levels that we saw in 2009 and 2010. And any customer credit tightening has largely been in FinTech and sub-prime, which started over a year ago. Overall, still a solid market for aquifax outside of mortgage and hiring. When consumers are working, they largely have the capacity to keep current on their financial obligations.

Percent by the end of 2025.

We remain focused on executing our long term model delivering 8% to 12% revenue growth with 50 plus basis points of margin expansion annually on average over a cycle.

Although the unprecedented decline in the U S mortgage market in 2022, and 2023 pushes out our prior midterm goal of 7 billion in revenue and 39% EBITDA margins to beyond 2025. It does not change our focus on expanding our margins toward our 39% goal as we drive revenue higher we will.

Mark Begor: Turning to slide five, overall workforce solutions revenue was up 3% in the quarter, a return to growth, which is a very positive sign as we look towards 2024. Strong twin record growth, the positive impact of 2023 price actions and strong NPI performance driven by the adoption of mortgage trended data drove a strong 22 points of mortgage out performance again in the quarter. EWS had another very strong quarter of record additions with an incremental 2 million current records added to the twin database.

Continue to focus on delivering strong non mortgage growth at or above our long term revenue growth framework outperforming our underlying markets, including the mortgage market and executing our cloud transformation, including delivering ongoing cost improvements as mentioned earlier to the extent the mortgage market continues at the levels, we have assumed for <unk>.

Mark Begor: EWS closed the third quarter with 163 million current records on 121 million unique individuals or SSNs, which was up 12% and 9% respectively versus last year. Total records, both current and historic are now over 640 million. And we now have current records on over 70% of US non farm payroll and over 50% of the 220 million people in the US with employment and income records relevant to the twin database. The EWS team is acquired over 11 million records so far in 2023 that are driving top line growth and will significantly benefit, benefit, verify revenue growth when the US mortgage and white collar hiring markets recover.

<unk> 23, 2024 mortgage market inquiry volumes would be down approaching 15% versus 2023.

Now I'd like to turn it back over to Mark.

Thanks, John .

Wrapping up Equifax delivered on its earning guidance in the third quarter with adjusted EBITDA margins and adjusted EPS within our guidance range. Despite the challenging U S mortgage market.

While the mortgage market was down significantly again, our non mortgage businesses delivered strong constant dollar organic growth of 7% and overall growth of 11%, including DVS.

Importantly, AWS returned to strong 11% non mortgage growth in U S. I S delivered a strong over 8% non mortgage quarter.

Mark Begor: During the quarter, we signed agreements with four new payroll processors that will deliver records in the fourth quarter in 2024. And over the past three years, we've added partnerships with 27 payroll process. As a reminder, about 50% of our records are contributed directly by individual employers from our employer services customer relationships. The remaining 50% are contributed through partnerships with payroll processors, HR software companies, pension administrators, and other relationships. Increasingly more of our new products are incorporating both current and historical records with about 50% of our third quarter verification services revenue, as well as about 50% of our mortgage verification services revenue coming from products that include historical records.

We expect a strong third quarter constant dollar non mortgage revenue of 11% to accelerate in the fourth quarter to about 13%, including EDI, AWS above, 15% and international including Bvs at about 20%.

The breadth and depth of our non mortgage businesses, which account for about 81% of equifax revenue in the third quarter and execution against our 2023 cloud and broader spending reduction program allowed us to deliver against our earnings guidance. Despite the decline in the mortgage market.

While its early to provide 2024 guidance I wanted to give you a perspective on how we plan to operate in 'twenty, four and what could be another challenging year from a macro perspective, as we exit 2023 with U S mortgage volumes at historically low levels with record mortgage rates.

Mark Begor: Turning to slide six, workforce solutions delivered strong non-mortgage revenue growth of 11%, a return double digit revenue growth with a growth rate up about 800 basis points sequentially. And as a reminder, EWS non-mortgage revenue was up a very strong 40% in the third quarter last year, which of course was a very tough comment. Verification services non-mortgage revenue which represents just under 70% of verifier revenue delivered 11% growth versus last year in the quarter.

We remain committed to executing against our FX 2025 strategy with a focus on things we can control as we move towards 2024, we're focused on first continuing above market non mortgage growth inside our 8% to 12% long term framework and outperforming the underlying mortgage market.

Second substantially completing our cloud transformation in 2024 with revenue from our new cloud platforms approaching 90% by the end of the year, which will be a big milestone to allow our team to pivot to fully focus on innovation and growth.

Mark Begor: This was also against a very challenging 72% non-mortgage growth comp last year. In government, we saw continued very strong growth with revenue up 23% compared to over 90% revenue growth last year in the third quarter. Government revenue was slightly lower than our expectations due to timing of Medicaid re-determination volumes. We continue to expect that EWS will capture significant volume from these re-determinations as they complete prior to the end of the second quarter of next year.

Third as we complete our cloud investments, we expect capex to move towards our long term goal of 7% of revenue in 2025, and our capex spend to pivot from maintenance and cloud investments to innovation and new products.

Aligned with our cloud technology completion, we will continue to execute against the cloud and broader spending reduction program, we announced in February which we expect to deliver $65 million of 2023 carryover next year with additional cost savings next year as we complete the cloud.

Mark Begor: During the quarter, we signed a contract extension to provide income verification to the U.S. Centers for Medicare and Medicaid Services as a part of a contract value that had up to $1.2 billion over the next five years. This contract is the largest in Equifax's history and extends our services via healthcare.gov for ACA related determinations while allowing workforce solutions to continue to work to penetrate the state level Medicaid verification services market. Also during the quarter, USDA's Food and Nutrition Service awarded a national contract to Equifax Workforce Solutions to provide verification services in support of the Supplemental Nutrition Assistance Program, commonly known as SNAP.

Our 14% vitality performance in the second half of this year gives us strong momentum as we move towards 2024.

We will continue our focus on new product innovation, using our single data fabric cloud capabilities and AI to bring new models and scores to the market, including a focus on bringing AWS in U S. I S assets much closer together with a long term annual vitality goal of 10%.

Six will focus on adding new EIB records to further strengthen the twin dataset, including the acquisition of traditional W. Two pension and 10 99 records.

Mark Begor: The award is for $38 million in the base year which we began on September 30th with a potential total contract value of $190 million. These large new EWS government contracts reflect the uniqueness of the twin data supporting the delivery of social services at the U.S, federal, state, and local level. These new contracts give us confidence in strong future EWS growth in the large 4 billion TAM for our government vertical. We expect to see accelerating sequential growth in our growth from CMS Medicaid re-determinations, ACA open enrollment volume, further state government penetration, and pricing from state contract renewals, as well as revenue from the new staff agreement with the USDA.

And last we'll continue to look for financially attractive bolt on M&A aligned with our strategic priorities around differentiated data strengthening AWS in identity and fraud.

Despite the challenges of an unprecedented decline in the U S mortgage market Equifax district demonstrated in 'twenty, two and 23 that we can grow revenue as we outperformed our underlying markets over the last two years from above market non mortgage growth outperforming the mortgage market vertical penetration new product innovation.

Adding new records to twin and pricing.

We are committed to delivering on our long term framework of 8% to 12% revenue growth.

50 basis points of annual margin expansion as well as our medium term term goal of 39% EBITDA margins.

And when the mortgage market recovers, we are poised to generate accelerated above market growth and margin expansion from investments. We've made in our cloud technology, new products when record additions and expanding our unique data assets.

Mark Begor: Talent solutions with up 6% in the quarter versus a very strong over 110% growth last year in the third quarter from record levels of U.S, hiring. As a reminder, we are currently more heavily penetrated to white collar workers, including technology, professional services, health care, and financial services, which has seen a greater reduction in hiring activity and broader hiring freezes than the about 10% decline that the BLS reported in the third quarter through August.

During the next chapter of the new Equifax as we pivot from building the new Equifax cloud to leveraging our new cloud capabilities to drive our top and bottom line.

We are convinced that our new Equifax cloud based technology differentiated data assets and our new single data fabric and market, leading businesses will deliver higher growth expanded margins and free cash flow in the future.

Mark Begor: We outperform the hiring market by about 20 percentage points in the quarter as we delivered new digital solutions and background screening, strong new product growth, continued expansion of twin records and pricing. Employer services revenue of 118 million was up 13% driven by growth in our i9 and onboarding businesses despite the negative impact of US hiring as well as growth in our ACA business. In the fourth quarter, we expect overall employer services revenue to decline slightly as growth in i9 and onboarding is offset by declines in ERC revenue as the US government has suspended processing new ERC claims.

With that operator, let me open it up for questions.

Thank you, we'll now be conducting a question and answer session. As a reminder, we ask you ask one question. One follow up then return to the queue, if you'd like to be placed in the question queue. Please press star one on your telephone keypad you May press star two if you'd like to remove your question from the Q1 moment. Please while we poll for questions.

Mark Begor: Earlier this year, we announced the launch of People HQ, a workforce solutions cloud-native solution that brings together multiple best in class employer compliance services and a single unified customer experience. People HQ will help companies of all sizes access EWS employer services, including income verification i9 and ACA from our new self service portal. Since the launch of people HQ in the first quarter, EWS is on board at about 45,000 companies, which also delivers new records for twin.

As a reminder, please ask one question and one follow up our first question is coming from an F&I from Barclays. Your line is that life.

Thank you good morning.

Mark I just had a question you know I think Oh, my goodness, 15% I guess potential decline in mortgage will increase next year based on our current run rate seasonality book that if that is the case, you've obviously been outperforming the market a consistency.

Are there other English circles, you can put in place to potentially you know outperformed sober or just curious on you know what the strategy in a in a longer weaker for longer I guess mortgage market would be.

Yeah, we have we believe that we have multiple.

Multiple levers in both mortgage and non mortgage I'll focus on mortgage because that's your question to continue to outperform the underlying market and you've seen us do that over an extended period of time and you know what I.

Mark Begor: Workforce solutions adjusted EBITDA margin of 50.9% was up 140 basis points versus last year, but down 60 basis points from the second quarter from the mortgage market decline. The EWS team continue to perform very well despite the macro headwinds from mortgage and US hiring outperforming their underlying markets from strong twin record growth, penetration, new products and price.

I will talk about U S. I S. N E. Ws, if you want because that's a mortgage you know in U S. I S. There, obviously you have the ability to deliver price and we expect to you know.

Price to be a part of the levers for 2020 for Theres, new product Rollouts are inside of our U S. I S. If for example, you recall earlier this year, we rolled out our new mortgage credit report that includes those NC plus attributes that's going to be a positive for us to outperform the underlying market and then if you go to AWS you got the same two levers there plus more.

Mark Begor: As shown on slide 7, USIS revenue of 426 million was up over 7% and down slightly from our expectations due to the impact of the much weaker mortgage market. USIS delivered strong, non mortgage revenue growth of about 8% in the quarter. USIS mortgage revenue was up 4% and outperformed the mortgage credit inquiries that were down 29% by 33 points. The strong pricing environment that we discussed in July during very strong outperformance.

We're obviously.

Prices are is an opportunity as we have a more records and we can deliver more value to the mortgage customers. We've got a big focus are in more leverage in AWS around new products and you've seen us rollout new solutions like a year ago mortgage 36, with 36 months worth of history. So new products will be a continued lever for.

For us in the mortgage space and of course records growing records are double digit in the quarter are the new payroll processors that we're adding in the fourth quarter and next year that we signed up during the quarter and of course, our pipeline of New records those drive higher hit rates in the AWS mortgage business, which we expect that to continue going forward.

Mark Begor: At 101 million mortgage revenue was 24% of total USIS revenue in the quarter. B2B non mortgage online revenue growth was up a very strong 10% total and up 6% organically. During the quarter online revenue had strong double digit growth and commercial and banking and lending from strong identity and fraud revenue and mid single digit growth and auto insurance offset by declines and telco and direct a consumer. USIS also saw strong double digit growth and count from very good new business and NPI performance.

And then the last for AWS quite uniquely is built to drive penetration, meaning more usage of the income and employment data inside the mortgage process and as we've talked before you know we don't have every customer doesn't use our solution some still use manual.

Verifications and we're driving them to using our verified solution. So yeah, we've got a confidence about our ability I wouldn't characterize that we have new levers, but we've got a lot of focus around them and I think when you think about AWS and U S. I S and we mentioned it earlier in our prepared comments you know as a U S. I S completes the class.

Mark Begor: Financial marketing services are B2B offline business had revenue of 51 million that was down just under 1%. In marketing declines and pre-screen marketing revenue in the quarter that were consistent with declines in the first half, more than offset nice revenue growth from our IXI consumer wealth data business. In pre-screen we continue to see weakness with the smaller FIs and fintechs in the subprime space offset by growth with larger FIs. We're in risk and account reviews.

And of course AWS is already there we think the ability to have each business bring new products to market will continue but the ability to bring solutions that combine the two businesses data assets for mortgage and non mortgage with U S. I S getting into the cloud is another gear on for us in the future.

Mark Begor: We did see limited growth in our portfolio review business, but we have not seen a meaningful increase in risk based portfolio reviews that are typical during challenging up economic periods. USIS consumer solutions D to see business had another very strong quarter with revenue of $56 million of 12% from very good performances in both our consumer direct and our indirect channels. USIS adjusted EBIT down margins were 34.2% in the quarter and slightly below the 35% we had guided from the impact of weaker mortgage market, as well as higher technology spend as we migrate customers to the new cloud data fabric.

Okay got it and then just on the module funds in a D D city's office and so the fourth quarter is that a right run rate to think about as you exit the year I know you have a lot of mortgage headwinds and then cost savings coming in to offset that.

And if you could just remind US you know listen D 39, just in Tiger that you add Hamilton that it's going to be a.

Mortgage shortfall in terms of getting to that 39.

I think first on the 39, we've tried to be clear our goal Hasnt changed as you know for a couple of years we carried.

Mark Begor: Todd and the USIS team are on offense as they work to complete their cloud transformation and pivot to leveraging their new cloud capability to deliver new products and drive share gains. In the third quarter USIS onboarded a new large FI customer to our new cloud platform which you expect to deliver share gains moving forward.

Our goal of 2025 or 39% against 7 billion of revenue clearly that 7 billion is going to be pushed out with the mortgage market decline and we want it to be.

Transparent today that are you know, we view that as being post twenty-five.

But our focus on 39 hasn't changed we have a path to 39 are you know in the future it's going to be beyond 2025, and then post 39, we still see between operating leverage in the business is the <unk> are.

Mark Begor: Turning to slide 8 international revenue was 316 million of 12% in constant currency and of 3% in organic constant currency and below the 4.5% growth we had guided to in July due to the greater decline in our European debt collection revenue than we expected. Europe local currency revenue was down to 2% in the quarter. Our UK and Spain CRA business revenue was up a very strong 8% in the quarter.

Strong margins in AWS, the ability to grow 50 basis points per year post at 39.

And as you're specifically looking at 2024 ramp you've already talked about the fact that we have significant cost reduction plans. We put in place in 2023, They will drive an additional 65 million of savings as we get into next year. We also will get some savings as we continue to migrate to the cloud which weren't included in that $65 million. So we expect to have cost levers that will help drive our margins higher obviously, we're not.

Mark Begor: A very good performance offset by the weaker than expected 17% percent decline in our UK debt management business. We expect Europe to deliver almost 10% growth in the fourth quarter from continued strength in the CRA business and a return to growth in our debt management business as we laugh difficult comps from last year. Latin America local currency revenue including Brazil was up a very strong 21% pumping off a very strong 34% growth in the third quarter last year driven by double digit growth in Argentina and Paraguay and from new product introductions and pricing actions.

Hitting revenue guidance, but again for us for 2024, but for US as you know our variable margin on new revenue is very high right. So as we drive more revenue that also is a way that we drive margins as we go forward. So just as a reminder, though as people think about next year first quarter margins for us tend to be lower because significant amount of of equity and variable.

Compensation expense hits in the first quarter as opposed to being spread throughout the year because of the structure of our plants. So just as a reminder, first quarter margins tend to move down.

Mark Begor: We expect a lot of time to deliver strong double digit revenue growth again in the fourth quarter. Canada and Asia Pacific both delivered low single digit growth in the quarter as we expected international adjusted EBITDA margins of 26.3% were up 210 basis points sequentially excluding Brazil adjusted EBITDA margins of 26.8% were up 260 basis points and in line with our expectations. The improvement was driven by revenue growth and good execution against their 2023 cost reduction plans by Lisa and our international team.

Yeah.

Thank you next question is coming from Andrew sentiment from JP Morgan Your line is that life.

Hi, too quickly is well actually I hope, we'll see it for the quick the first one is for third quarter, what was mortgage as a percentage of total revenues and then the second the second question has to do with could you just review with us.

The cadence of Equifax government revenues from the Medicaid Redetermination fourth quarter to second quarter I I'm also assuming that it might be higher in total now because you talked about additional states penetration.

Mark Begor: 20th slide nine the third quarter overall non mortgage constant dollar revenue growth grew a strong 11% with organic growth of 7% both inside our long term framework. Positively this was up 300 basis points sequentially the acceleration in organic revenue growth was driven by strong 11% EWS non mortgage growth and improvement of about 800 basis points sequentially as we look to the fourth quarter we expect non mortgage revenue growth to be about 13% with organic growth of about 9% above the delivers above the levels we delivered in the third quarter. The Acceleration Organic Growth is expected to be led again by EWS with growth of over 15% driven by their government and talent businesses.

I think the first question John It was a 19% 19% in the third quarter that'll be lower in the fourth quarter for obvious reasons, yeah on the percent of revenue Andrew from a mortgage on the government one.

So maybe just a couple of comments on government and I'll get to Redetermination and John can jump in yeah. We got a lot of positive levers in government I Hope you saw Andrew and noted that there was two large contracts, which we alluded to in July a meaning that we talked about some visibility that we had of our new contracts are the 1 billion the $1 2 billion in the.

$190 million a USDA contracts.

Give us some visibility and momentum in our government vertical not only in the fourth quarter, but also for 2020 for those contracts as well as others also give us the ability to continue our expansion at the state level as.

Mark Begor: Turning to slide 10, new product introductions leveraging our differentiated data and new AFX Cloud are central to our EFX 2025 growth strategy. In the quarter we delivered a record 15% vitality again led by very strong performances in EWS in Latin America. EWS non-mortgage VI in the quarter was over 25% a very strong performance. And in the third quarter about 85% of new product revenue came from non-mortgage products leveraging the EFX Cloud.

As you know our government vertical inside of AWS is call. It roughly 500 million dollar run rate business, but in a $4 billion Tam. So theres a lot of opportunity to add new states and new agencies of the state levels and you might imagine we have a deal pipeline of our customers or agencies that we're working on adding.

You know at the state level, which is a part of our visibility for fourth quarter and into 2020 for you know for the the government vertical and in particular the CMS contract is a is a N. The USDA contract actually are both helpful. You know in the addition of more state level relationships on Redetermination, that's clearly been a.

Mark Begor: Leveraging our new EFX Cloud capabilities to drive new product rollouts, we expected to deliver vitality index of approximately 14% in 2023, which is about 400 basis points above our 10% long-term vitality index goal. Importantly, back and half USISVI is expected to be up about 100 bibs higher than first half as we are closer to cloud completion and able to leverage our new cloud native infrastructure in USIS for innovation in new products.

[noise] challenging I'm forecasting about when will states actually activate those redetermination, we saw a a straw.

Strong volume of that in the third quarter, we expect that to continue in the fourth and then as you point out are in first and second next year there'll be continued redetermination because of the timeline is to really complete those I believe at the end of the second quarter. So you know we work closely on those but it has been a bit more challenging to.

Mark Begor: This is broadly positive momentum for 2024. On the right side of the slide we've highlighted several new products introduced in the quarter. These new solutions are a testament to the power of the Equifax Cloud and AI in driving innovation that can increase the visibility of consumers to help expand access to credit and create new mainstream financial products while driving Equifax's top line.

Forecast those anything you or John just in terms of pacing you covered it right. It's just it's very difficult to forecast rates. Although we did see lift from re determinations. It wasn't to the level, we expected and we certainly saw that to a degree in the third quarter and the fourth quarter, but we still think we're the best solution and expect to get to get the revenue related to re determinations as Mark said by the time.

Mark Begor: Turning to slide 11, we're very excited to have closed the Boavis to Acquisition in early August and welcome the Boavis and team to Equifax. We're focused on driving growth in Brazil and expanding DBS's capabilities by deploying our cloud-based decisioning and analytical products as well as expanding new verticals like entity and fraud. In the third quarter for the period after our acquisition closed on August 7, EFX Brazil delivered revenue of $23 million and was accretive to adjust an EPS by 2 cents per share.

It completes at the end of the second quarter, but as we said the third and the third quarter and certainly in the fourth quarter, a little lower growth than the level, we'd expected perfect. Thank you.

Yeah.

Thank you next question is coming from Kelsey Zhou from Autonomous Research. Your line is now live.

Hey, good morning, Thanks for taking my question.

On the talent Panic call you talked about 20 percentage point outperformance if I heard that correctly I was wondering you know between the different factors are driving about 20 percentage outperforming.

Mark Begor: Going forward, Brazil will be included in our Latin American region for reporting. And as a reminder, we expect Brazil to deliver approximately $160 million in run rate revenue to Equifax and to be accretive to adjust the DPS in its first year.

Hey, good actor.

How durable it says 20 percentage point outperformance over the next few quarters.

John Gamble: And now I'd like to turn over to John to provide more detail on our fourth quarter and full-year guidance.

Yeah.

The 20% we were pleased with you know that the market for that business was up 6% the talent vertical and you know from our measure the BLS market was downturn, we think the white collar market was down double that so that's how you get you know close.

John Gamble: John?

John Gamble: Thanks, Mark. Turning to slide 12, as Mark mentioned, third quarter mortgage market credit inquiries were down about 29 percent, weaker than the down 23 percent in our July guidance. An EWS mortgage outperformance was about 22 percent from records and price, product and mix and consistent with the second quarter.

Close to double that so that's how you get to the 20 points of outperformance and there isn't really I wouldn't characterize a single lever that's really driving that outperformance. It's really similar in all our businesses and talent, we've got the ability to you know.

John Gamble: For the fourth quarter, we are assuming the weakening trend in mortgage market volume estimated based on the change in our credit inquiries we have seen in October continues, as well as further normal seasonal declines in November and December. On this basis, we expect mortgage credit inquiries to be down about 22 percent in the fourth quarter, which is an 18 percentage point reduction from our July framework for the fourth quarter.

Dry price, which we do every year and we expect to do that as we go into 2024 and the talent vertical like our others because of the value, we're delivering and talent quite uniquely we have the ability to drive penetration you know that's a big multibillion dollar Tam you know in our business, it's roughly $400 million at run rates. So theres a lot of.

Customers and talent that are still doing manual verification of employment history that a or a 640 million jobs that we have in our database are just immensely valuable from a speed and productivity standpoint. So that's the lever and talent that we think is quite durable along with price on products. Another big one.

John Gamble: Center. For perspective, to the extent the mortgage market continues at the levels we've assumed for 4Q 23, which is more than 50% below free pandemic averages, 2024 mortgage market credit inquiry volumes would be down approaching 15% versus 2023.

You've seen US rollout are you know almost every quarter a couple of new products from AWS and the talent vertical really to get more narrowly focused around products that match kind of job categories. We rolled out an hourly solution I think last quarter.

John Gamble: Slide 13 provides the details of our guidance for 4Q 23 in 4Q 23 we expect total Equifax revenue to be between 1. 3.307 and 1.327 billion dollars with revenue up 10% at the midpoint. Non-mortgage constant currency revenue growth should strengthen to 13%. Mortgage revenue in the fourth quarter is expected to be below 15% of Equifax revenue.

For hourly workers to try to drive some growth there. So new products are clearly a growth and then the addition of records and as you know with the 50 attributes we get every pay period, we get job title and a 75 million people a year or roughly that number I change jobs in the United States, So having those new jobs from our record Ids.

John Gamble: Businessing a performance in the fourth quarter is expected to be as described below. Work for solutions revenue growth is expected to be up about 8%, which is lower than the implied fourth quarter framework we outlined in July. The bulk of the $47 million mortgage market impact on revenue that Mark referenced impacts EWS. As we discussed in July, USIS benefits from greater mortgage revenue in the early application phases, which should continue into the fourth quarter.

Actions every pay period is a very valuable asset that just drives higher hit rates, which drives our revenue going forward. So we have a lot of confidence in our ability to outperform the underlying talent market just like we do with the rest of our markets because of those levers.

Got it Super helpful. Thanks, So much my second question is.

John Gamble: EWS non mortgage revenue will return to strong over 15% growth year to year in the fourth quarter. However, this strong growth is below our framework from July. Government growth should be above the 23% we saw in the third quarter, but is below our framework from July as state benefit redeterminations are occurring at a slower pace than we anticipated. Talent growth should be above the sixth percent we saw this quarter as well, but will also be below our July framework as overall hiring has decelerated from the levels we were seeing in July, with BLS now down 10% with white collar verticals down significantly more.

I was wondering if you can talk a little bit about scrap patrol kind of the increased trend, Chris says Orange, a little sad and how your tax rate in markets outperform malls for I E.

Yeah, It's Tom.

Start and let John jump in we'd been consistent really there has been a phenomena. That's a major change a meaningful change in the mortgage market over the last call. It 12 to 18 months, where when rates were starting to increase consumers did a lot more shopping and that benefited our U S. I S business, meaning that their consumers would go to multi.

All mortgage originators and as you know is a part of that process. When someone applies online. The first thing mortgage originator will do is determine is that a consumer that can qualify for the loan they're trying to get meaning are they going to invest that five or 6000 or actually 7000 of cogs in that mortgage process. So there's a but.

John Gamble: And employer services revenue will be below our 4Q framework from July for both I9 and onboarding that should continue to deliver year to year growth, but at levels below our July framework from weaker overall hiring and ERC with the IRS announcement that they would pause on new ERC claims. Adjusted EBITDA margins for EWS are expected to be about 50.5%. USIS revenue is expected to be up about 4% year to year despite the increased mortgage headwind.

An inquiry that goes into a poll on the U S. I S side, and that's why inquiries and versus originations or closed loans have really separated theres been a increase in originations and we expect that to continue with these high interest rates consumers there'll be more deliberate around their shopping behavior and that's why there's a pause.

John Gamble: Non mortgage year to year revenue growth of 4% should be down from the about 8.5% growth we saw this quarter as we lap 4Q 2022 pricing actions. This is somewhat stronger than we expected in our July framework driven by continued good growth in commercial consumer solutions, auto and across our count ID products. Adjusted EBITDA margins are expected to be about 35% up sequentially principally due to revenue growth and cost actions. International revenue is expected to be up about 20% in constant currency due to the addition of VBS and as we lap headwinds in our UK debt management business revenue is expected to be up about 6.5% in organic constant currency. This is somewhat stronger than our July. Framework. EBITDA margins are expected to be about 30% reflecting revenue growth and strong cost management, including the benefit of plain cost reduction actions.

Dave If you will for U S I S in and inquiries or credit polls on in this environment, where AWS typically in the backend of the mortgage process and are really around closed loans.

Broadly right, we were finding it difficult to get good market data and that we can correlate across applications and other measures, including originations. So as you know for U S high gas rate, we we determine our outperformance based on our own internal volume data and we share that internal volume data, obviously with you every quarter right and then.

Going forward and what we're gonna do is we're going to provide outperformance for AWS also based on our internal volume data, which our actuals, which we can we can actually measure and as we've been talking to you about for quite some time right. Our outperformance is driven by record growth, which is more specific to twin, but then also product price and mix and as we said in the <unk>.

John Gamble: We expect Brazil to deliver revenue of about $38 million in the fourth quarter. Equifax 4Q23 adjusted EBITDA margins are expected to be about 34% at the midpoint of our guidance and increase sequentially of almost 100 basis points. And adjusted EPS and 4Q23 is expected to be $1.72 to $1.82 per share of 17% versus 4Q22 at the midpoint.

Those are things, we can measure it together understand the difference between our volume and our and our overall revenue and that's our outperformance and I think going forward, we'll use that measure it because it's all based on internal data that we can validate each quarter.

And again what were our internal volume data is transaction volume data. It's the transactions that are related directly to mortgage application approvals doesn't really include things around batches are monitoring so that the data stays pure.

John Gamble: Both adjusted EPS and adjusted EBITDA margins are below the $2.00 per share and 36% targets that we set as goals as we entered 2023, principally due to the assumed further decline in mortgage market volumes and associated reduction of high margin mortgage revenue that marked discussed.

And we feel like that's a much better measure of the level of outperformance driven by record growth product pricing and mix that we can deliver each quarter and we'll continue to share that with you and maybe just one more point John as a reminder, as you know we get mortgage originations because we have the credit file on every consumers. So we see the actual new mortgage originations, but.

John Gamble: By 14 provides the specifics of our 2023 full year guidance, 2023 revenue and adjusted EPS are being reduced consistent with our 3Q23 results and our 4Q 2023 guidance. We expect 2023 non mortgage constant currency revenue revenue growth to be strong at about 9% in organic revenue growth of about 7%.

They're typically on at what five six month lag.

So between that five six month lag we're forecasting based on M. B a data based on our own tracking based on our own run rates, we use multiple inputs to try to forecast those originations. We obviously you have been challenged by that in this current environment with interest rates, increasing but you know we have a lot of data around.

John Gamble: Total capital spending for 2023, including the addition of Brazil, which was not previously included in our guidance is expected to be about $580 million. Capital spending in the third quarter was about $145 million. We did see the expected decline in spending sequentially, however the reduction was slightly less than the expected principally due to higher spending related to customer migrations. We expect capital spending in the fourth quarter to decline sequentially by about $15 million as we continue to progress US and Canadian migrations to date of average.

Round, our mortgage originations.

Got it thanks, so much.

Thank you. Your next question is coming from Andrew Jeffrey from truly Securities. Your line is now live.

Hi, Good morning. Appreciate you taking the question this morning.

Mark I mean, I I get there.

A lot of moving pieces here.

Outside of mortgage, especially thinking about AWS.

Verifier Gov.

Government, a little bit weaker maybe than you thought and you enumerated the reasons.

Yes. My question overall is do you think that that AWS non spare fire or sorry, our non mortgage verifier businesses, perhaps gotten a little more difficult to forecast as you do more business with the government and all of these different programs are appreciating the new contract wins and do you think youre going to take that into account.

John Gamble: We remain focused on reducing CAPX as a percentage of revenue to about 7% by the end of 2025. We remain focused on executing our long-term model, delivering 8-12% revenue growth with 50 plus basis points of margin expansion annually on average over a cycle. Although the unprecedented decline in the US mortgage market in 2022 and 2023 pushes out our prior midterm goal of 7 billion in revenue in 39% EBITDA margins to beyond 2025, it does not change our focus on expanding our margins toward our 39% goal as we drive revenue higher. We will continue to focus on delivering strong non-mortgage growth at or above our long-term revenue growth framework, outperforming our underlying markets including the mortgage market and executing our cloud transformation, including delivering ongoing cost improvements.

When you start to think about guiding for 'twenty four.

Yeah for sure. There's no question if you look at the Big business. It's it's dealing in multiple verticals in some regards these like talent and government are I would still characterize them as fairly new verticals for us at scale.

We've only been large in those verticals in the last couple of years and you've got some macro impact certainly in talent leave mortgage aside which we talked about a bunch, but you know the hiring market is you know obviously under some pressure, particularly in white collar in the U S and we've tried to forecast that and Oh, we're going to try to be more conservative or more.

John Gamble: As mentioned earlier, to the extent the mortgage market continues at the levels we have assumed for 4Q23, 2024 mortgage market inquiry volumes would be down approaching 15% versus 2023.

Balance whatever word you want to used around that vertical you'll same with government you know theres a lot of moving parts. There I would say the most complex for US are the ones. We've been challenged by as the Redetermination you know outside of that we have pretty clear visibility about adding new customers, adding new clients new product rollouts.

Mark Begor: Now I would like to turn it back over to Mark. Thanks, John. Wrapping up, ECFX delivered on its earning guidance in the 3rd quarter with adjusted EBITDA margins and adjusted EPS within our guidance range despite the challenging US mortgage market. While the mortgage market was down significantly again, our non-mortgage business has delivered strong, constant dollar organic growth of 7%, and overall growth of 11%, including BBS. EWS. Importantly, EWS returned to strong 11% non-mortgage growth, and USIS delivered a strong over 8% non-mortgage quarter.

Pricing actions in government that is pretty pretty dialed in and I think the other you know if you think about 2023 both of those businesses had really really really strong 'twenty twos. So we're comping off you know very strong years set which is great because we're driving more penetration more product more price.

And we've had to.

Look forward to where we're gonna take those businesses and you know while we've been off a little bit you know, we're really pleased with the growth of those businesses. You know those are they both delivered strong growth in the quarter you know you've seen accelerated growth in non mortgage in AWS from second quarter, and we expect that non mortgage verifier growth to accelerate again in fourth.

Mark Begor: We expect our strong third quarter constant dollar non-mortgage revenue of 11% to accelerate in the fourth quarter to about 13%, including EWS above 15% and international including DVS at about 20%. The breadth and depth of our non-mortgage businesses which account for about 81% of Equifax revenue in the third quarter, and execution against our 2023 cloud and broader spending reduction program allowed us to deliver against our earnings guidance despite the decline in the mortgage market.

<unk>, which gives US you know really positive momentum going into 2024, but short answer to your question about are we going to be more balanced around how we forecast there for sure.

Okay, Yeah, I think the market would welcome that and then if I could just ask the it feels like obligatory competitive question, an AWS or a couple of pieces.

Mark Begor: Well, it's early to provide 2024 guidance. I wanted to give you a perspective on how we plan to operate in 24, and what could be another challenging year from a macro perspective as we exit 2023 with US mortgage volumes at historically low levels with record mortgage rates. We remain committed to executing against our EFX 2025 strategy with a focus on things we can control. As we move towards 2024, we're focused on first continuing above market non-mortgage growth inside our 8 to 12% long-term framework and outperforming the underlying mortgage market.

Pieces of business that you characterized it is manual and low margin kind of like our last quarter.

Can you just sort of reiterate your you're thinking, especially in mortgage verifier in terms of the the competitiveness of your solution.

No change from what we talked about in July and July we tried to talk about the manual work we were doing for customers. When we didn't have records and Ah that got I think a somewhat misconstrued or in the marketplace. We're not seeing an impact from competition in our more.

Mark Begor: Second, substantially completing our cloud transformation in 2024 with revenue from our new cloud platforms approaching 90% by the end of the year, which will be a big milestone to allow our team to pivot to fully focus on innovation and growth. Third, as we complete our cloud investments, we expect CAPEX to move towards our long-term goal of 7% of revenue in 2025, and our CAPEX spend to pivot from maintenance and cloud investments to innovation and new products.

<unk> business or any other businesses you know we tried to be clear about that July and I'll be clear again today, you were well aware of what our you know our competitors data records that they have and what they don't have to.

To me a big proof point about our competitiveness is our ability to continue to add new partnerships. We added four in the quarter. We added I think 27 in the last couple of years you know we're growing our records. That's you know really I think a proof point of the they are the strength of our ability to.

Mark Begor: Aligned with our cloud technology completion, we will continue to execute against the cloud and broader spending reduction program we announced in February, which we expected to deliver $65 million of 2023 carryover next year with additional cross-saving next year as we complete the cloud. Since our 14% vitality performance in the second half of this year, gives a strong momentum as we move towards 2024. We will continue our focus on new product innovation using our single-data fabric, cloud capabilities, and AI to bring new models and scores to the market, including a focus on bringing EWS and U.S.

You know deliver solutions to our partners and execute for them and they want to be partner with Equifax. So I think that's a really important metric for us going forward.

Thank you next question is coming from Kyle Peterson from Needham and company. Your line is now live.

Great. Thanks, Good morning, guys and I appreciate taking the questions I wanted to touch on the consumer lending volumes.

Volumes within UWS looks like that was down a bit year on year. Just wanted to see is that you know fairly broad based or was there any more concentration you know, whether it's card or personal loan or auto just want any more color would be helpful.

Mark Begor: ISS as much closer together with a long-term annual vitality goal of 10%. Sixth, we'll focus on adding new EW records to further strengthen the twin data set, including the acquisition of traditional W2 pension and 1099 records. And last, we'll continue to look for financially attractive bolt-on M&A, aligned with our strategic priorities around differentiated data, strengthening EWS and identity of fraud. Despite the challenges of an unprecedented decline in the U.S, mortgage market, Equifax demonstrated in 22 and 23 that we can grow revenue as we outperform our underlying markets over the last two years from a above-market, non-mortgid growth, outperforming the mortgage market, vertical penetration, new product innovation, adding new records to twin and price.

Yeah, you know, maybe the kind of the macro level about a year ago, we talked about and we continue to talk about subprime I'm really got tightened up so that happened over the last call it 345 quarters.

That's starting to bottom out because we're comping off you know really sharp declines from last year as we go into fourth quarter, but you know subprime has clearly pulled back you know a combination of concern around that consumer base, you know being more challenged not from unemployment, but really from inflation and.

And we talked earlier that we've seen some delinquencies increase there and you know as an old card Guy.

From my prior life, you know when delinquencies go up you typically will pull back on originations or be more deliberate around originations, meaning you want to make sure you're finding the consumers that can really afford that financial product. You know prime is a is still fairly strong you know the consumers are a working you know they've had some wage growth while they'd be.

Mark Begor: We are committed to delivering on our long-term framework of 8-12% revenue growth and 50 basis points of annual margin expansion, as well as our medium-term goal of 39% EBITDA margins. And when the market market recovers, we are poised to generate accelerated above market growth and margin expansion from investments we have made in our cloud technology, new products, twin record additions, and expanding our unique data assets. During the next chapter of the new Equifax, we pivot from building the new Equifax cloud to leveraging our new cloud capabilities to drive our top and bottom line. We are convinced that our new Equifax cloud-based technology differentiated data assets in our new single-data fabric and market leading businesses will deliver higher growth, expanded margins, and free cash flow in the future.

Impacted by inflation, we haven't seen much impact there and would you add anything John not just us.

As Mark said and are tends to be in our in our consumer finance business right is that we tend to be more concentrated we tend to be more concentrated in subprime and more concentrated on specific lender. So the fact that we're seeing subprime week and we're seeing some fintech week.

It's driving it and because we have more concentration rather than an extremely broad.

Broad coverage that U S. I guess has we tend to be we tend to move around a little bit more in AWS and our revenue for consumer finance.

Got it that's really helpful. And then just a follow up I know you guys have talked a bit about some of the previous spending reductions and kind of the benefits that'll be in the 24 numbers are based on the actions taken in the here.

Operator: And with that operator, let me open it up for questions. Thank you.

Operator: Now we're conducting a question and answer session. As a reminder, we ask you ask one question, one follow-up, then return to the queue. If you'd like to be placed in the question queue, please press star one on your telephone keypad. You may press star two if you'd like to remove your question from the queue. One moment please, what we pull for questions, as a reminder, please ask one question and one follow-up.

I just wanted to see are there any other spending plans or things you guys are looking at you know if you guys are if we're gonna be in kind of a lower for longer I kind of mortgage inquiry market. Just wanted to know are there any more levers you guys can push on.

Andrew Steinerman: Our first question is coming from an open eye, from Barclays. You're right. Is that right?

On the cost side of things if if volumes don't come back next year.

Mark Begor: Thank you. Good morning. Mark, I just had a question. I think they be negative, 15%, I guess, potential decline in mortgage increase next year based on, I guess, your current run rates, these now, etc. If that is the case, you've always even outperforming the market consistency this year, but are there other initiatives you can put in place to potentially outperform further or just curious on what the strategy in a longer, weaker for longer, I guess, mortgage market would be.

Yeah, I think as John mentioned and we did earlier, we had the 65 of carryover from our $275 million program. This year.

Hoak of that as you know is from a cloud completion and cloud cost savings and as we go through 'twenty four we mentioned and we'll give guidance in fab on that but we will have additional cloud cost savings as we complete migrations next year as we said, we expect to complete U S. I S.

Canada and in other of our international platforms and as a reminder, we're carrying double cost today, you know in those environments, where we have a cloud environment. We're paying for and then we also have a legacy environment. When we complete the migrations, we shut down the legacy so that'll be the incremental savings, which we expect to have in 'twenty four and 'twenty five.

Mark Begor: We believe that we have multiple levers in both mortgage and non-mortgage. I'll focus on mortgage because that's your question. To continue, I'll perform the underlying market. You've seen us do that over an extended period of time. We'll talk about USIS and EWS if you want, because that's mortgage. USIS, they obviously have the ability to deliver price and we expect price to be a part of the levers for 2024. There's new product roll outs inside of USIS.

We will give guidance on that beyond those kind of savings you know, we're going to keep our belt type in 2024, where we're going to want to continue to invest in the right places, but I'd I'd characterize that as we're gonna be balanced around it are you know given the given the environment.

Mark Begor: For example, you recall earlier this year we rolled out our new mortgage credit report that includes those NC plus attributes that's going to be a positive for us to outperform the underlying market. And then if you go to EWS, you've got the same two levers there plus more, obviously. Price is an opportunity. We have more records and we can deliver more value to the mortgage customers. We've got a big focus in more leverage in EWS around new products.

Thank you. Our next question today is coming from Simon <unk> from Redburn Atlantic. Your line is now live.

Hi, Thanks for taking my question I mean, a lot of my questions have been asked already but maybe we could zero in again on him when he ws mortgage and I just wanted to.

Just go back to your the way you're mentioning the outperformance is timing and the implied decline in origination volumes this quarter that you've seen versus what the sort of industry forecast have been for a flipside quota and there's quite a wide gap and I just wanted to make sure that there's nothing else at play here in terms.

Mark Begor: You've seen us roll out new solutions like a year ago, mortgage 36 with 36 months worth of history. So new products will be a continued lever for us in the mortgage space. And of course, records, growing records, double digit in the quarter, the new payroll processors that we're adding in the fourth quarter and next year that we signed up during the quarter. And of course, our pipeline of new records. Those drive higher hit rates in the EWS mortgage business, which we expect that to continue going forward.

Okay.

I don't know maybe just you don't see all the volumes that you would otherwise be seeing or any sort of any sort of color you can give around that sort of divergence would be useful.

We we try to forecast what the originations are as mentioned earlier, we know what actual rigid originations are not like a five six month lag between that timeframe. You know we try to forecast you know if you're referring to like M. B, a and some of the other forecast. If you look back over the last you know two years three years four years five years they are consistently wrong.

Mark Begor: And then the last for EWS quite uniquely is ability drive penetration, meaning more usage of the income and employment data inside the mortgage process. And as we've talked before, we don't have every customer doesn't use our solution. Some still use manual verifications and we're driving them to using our verified solution. So yeah, we've got confidence about our ability. I wouldn't characterize that we have new levers, but we've got a lot of focus around them.

It's a it's a hard thing to forecast and we just try to use our best data on it and then we also factor in our current run rates on originations you know so that's the way that we're forecasting to try to get more current because you know M. B a is done on a survey basis I think they survey like half of the mortgage originators.

Mark Begor: And I think when you think about EWS and USIS, and we mentioned it earlier in our prepared comments, you know, as the USIS completes the cloud. And of course, EWS is already there. You know, we think the ability to have each business bring new products to market will continue, but the ability to bring solutions that combine the two businesses data assets for mortgage and non mortgage with USIS getting into the cloud is another gear for us in the future.

In order to get that data ours is actual originations on a lag and then our current forecast based on what we're seeing in our in current time frame.

And again going forward, what we're going to try to make sure. We do is we're going to make sure. We're providing you with actual data right. So I mean, what we'll be able to give you. The benefit we're seeing from records product price and mix, which are really the big drivers of our outperformance right and and we'll be measuring that against our actual volumes across the U S. I S. N twin separately, so that we can validate the information we.

Mark Begor: Okay, got it. And then just on the margin front in the 34% for the fourth quarter, is that a right run rate to think about as you exit the year? You know, I know you have a lot of, you know, it's a mortgage headwinds and then cost savings coming into offset that. And if you could just remind us, you know, versus the 39% target that you add, you know, how much of that is going to be a mortgage shortfall in terms of getting to that 39% I think first on the 39, we tried to be clear our goal hasn't changed.

What's what the actuals are and we can explain how we're performing and driving those levers, which we think is what's really important to make sure. We explained because that's what we that's what we're driving and delivering outperformance through.

Great. Thanks, and just as a follow up on I mean, if we wanted to talk about we'll think about a a tougher.

Tough or move it to market for longer.

Nevertheless, it does not in any way change the.

Mark Begor: As you know, for a couple of years, we carried a goal of 2025 for 39% against 7 billion of revenue. Clearly that 7 billion is going to be pushed out with the mortgage market decline. And we wanted to be, you know, transparent today that, you know, we view that as being post 25. But our focus on 39 hasn't changed. We have a path to 39, you know, in the future, it's going to be beyond 2025.

I guess the pricing power of the competitive dynamics for AWS in mortgage are going through a period like that prolonged periods like that I'm. Just wondering if you could help us think about the puts and takes in that regard.

We don't think so you know the the power of instant data in this case, we're talking about income and employment data is super valuable to every mortgage originator they want to make sure that they have accurate data we get it directly from the company every two weeks you know on the consumer we deliver it instantly.

Mark Begor: And then post 39, we still see between operating leverage in the businesses, the extra, you know, strong margins in EWS, the ability to grow 50 basis points per year, post that 39. And as you're specifically looking at 2024, right? We've already talked about the fact that we have significant cost reduction plans. We put in place in 2023. They'll drive an additional 65 million of savings as we get into next year. We also will get some savings as we continue to migrate to the cloud, which were included in that 65 million dollars.

In this environment of more shopping.

A mortgage originator that's investing in a consumer they want to make sure that they close that loan.

As they get down the path of delivering it. So we don't see a change in our ability to deliver new solutions, meaning products to the industry, obviously with more records. We're gonna drive higher hit rates that happens you know really because we're getting the inquiries are you know from our customers for all their applicants.

Mark Begor: So we expect to have cost levers that will help drive our margins higher. Obviously we're not getting revenue guidance. But again for us for 2024, but for us, as you know, our variable margin on new revenues very high, right? So as we drive more revenue, that also is a way that we drive margins as we go forward. So just as a reminder, those people think about next year, first quarter margins for us tend to be lower because significant amount of equity and variable compensation expense hits in the first quarter as opposed to being spread throughout the year because the structure of our plan. So just as a reminder, first quarter margins tend to move down. Thank you.

And then we still believe that we have a pricing power going forward because of the uniqueness of our dataset that the alternative for our customer has to do with the mortgage customers to do the Oh verification manually, which is very challenging you know, meaning getting a company on the phone you know to verify the income.

It's very hard to do and it takes time and that's labor and also time, so speed and productivity is the inaccuracy is the value we deliver.

Andrew Stannerman: Next question is sort of from Andrew Stannerman from JP Morgan. Your line is alive. Hi, two quickies.

Thank you next question is coming from Shlomo Rosenbaum from Stifel. Your line is now live.

Mark Begor: Well, actually, hopefully if we're quick. The first one is for third quarter, what was mortgage as a percentage of total revenues? And then the second question has to do with could you just review with us the cadence of Equifax government revenues from the Medicaid re-determination fourth quarter to second quarter. I'm also assuming that it might be higher and total now because you talked about additional state penetration. I think the first question, John, it was 19% in the third quarter.

Hi, Good morning, Thank you for taking my questions.

Just the first question I, just want to talk a little bit more about like how we should be thinking about the future about with some of the items that you were talking about the increase in subprime delinquencies, we talked about auto for a while we're talking about credit cards cash being used up like how does that impact the business over the next 12 months.

The employment has been fairly good at the lower end of the spectrum, but like you know, there's there's a lot of parts of the spectrum, where there's open jobs, but they don't really filling those open jobs and so I guess the first question is how are you thinking about this on a go forward basis, and then I have a follow up.

Mark Begor: That'll be lower in the fourth quarter for obvious reasons on the percent of revenue Andrew from mortgage on the government one. Maybe just a couple of comments on government and I'll get to re determinations and John can jump in. We've got a lot of positive lovers in government. I hope you saw Andrew and noted that those two large contracts, which we alluded to in July, meaning that we talked about some visibility that we had of new contracts.

Yeah, you know go forward, you've got it kind of took part time frames. When you think out. The next couple of quarters, you know it doesn't feel to us or to me like there's going to be a lot of change, meaning it's a fairly outside of the mortgage market. Obviously, let's leave that aside that's obviously super challenging and really unprecedented what's happening with interest rates, but when you have people working.

Mark Begor: The $1.2 billion in the 190 million USDA contracts give us some visibility and momentum in our government vertical not only in the fourth quarter, but also for 2024. Those contracts as well as others also give us the ability to continue our expansion at the state level. As you know, our government vertical inside of EWS is called it roughly $500 million run rate business, but in a $4 billion cam. There's a lot of opportunity to add new states and new agencies at the state levels.

And very low unemployment rates generally they were able to pay their bills when they pay their bills delinquency state generally low and then you have the ability of our customers.

Confidence in continuing to extend credit you know through our loans and other solutions to those consumers you know subprime has been challenged for a year. You know that's generally subprime is with the fin techs most of the big banks don't do subprime business.

And you know that's been challenged for a year and we're actually as I mentioned earlier, starting to comp against fairly low levels I would expect subprime to stay tight you know as we go through 2024, because those consumers are really more challenged not around being unemployed, but around our inflation and it always is is still pressured.

Mark Begor: You might imagine we have a deal pipeline of customers or agencies that were working on adding at the state level, which is a part of our visibility for fourth quarter and into 2024 for the government vertical. In particular, the CMS contract is in the USDA contract, actually, or both helpful in the addition of more state level relationships. On re determinations that's clearly been a very challenging forecasting about when will states actually activate those re determinations.

Them, but the big metric that I always think about and you should too in my view is unemployment. So back to your question about 'twenty 'twenty four give me your forecast for unemployment next year, you always are going to go up down or sideways. If you'd think unemployment is going to spike or go up which I don't think it will in this environment with 10 million open jobs and only 5 million people.

Mark Begor: We saw a strong volume of that in the third quarter. We expect that to continue in the fourth. And then as you point out in first and second next year, they'll be continued re determinations because of the timeline is to really complete those I believe at the end of the second quarter. So, you know, we were closely on those, but it's been a bit more challenging to forecast those anything. Not just in terms of facing you covered it, right?

Looking right now you know that's a pretty good environment to go into 'twenty 'twenty four you know.

Kind of the core elements of our business outside of mortgage.

Okay. Thank you and then just going back to those government Redetermination can you talk about like how does that work exactly like once they get done let's say they get done by June of next year is this is something that the government is gonna be doing annually or is this kind of a big one time thing and then we're going to end up with tough comps on that after after we're done with it.

Mark Begor: It's just it's very difficult to forecast, right? So, although we did see lift from re determinations, it wasn't to the level we expected. And we certainly saw that to agree in the third quarter and the fourth quarter. But we still think we're the best solution and expect to get the revenue related to re determinations, as Mark said, by the time it completes at the end of the second quarter. But as we said, and a third quarter and certainly in the fourth quarter, a little lower growth than the level we'd expected.

Yeah, I remember that the Redetermination as were suspended during COVID-19. So they didnt happened over the last couple of years once the president Biden lifted the Covid pandemic rule of requirement you know these redetermination went back into place. So it's really the completion of the annual Verifications are happening in this 12 month time.

Mark Begor: Perfect. Thank you. Good morning. Thanks for taking my question. I think on the talent vertical, you talk about 20 percentage point out performance if I heard that correctly. I was wondering, you know, between the different factors are driving that 20 percentage out performance. What is the biggest factor? And how durable is this 20 percentage point out performance? Over the next few quarters? Yeah, the 20% we were pleased with, you know, the market that businesses up 6% the talent vertical and, you know, for our measure, the BLS market was down 10.

Frame in third fourth and first and second quarter next year post second quarter they'll have the requirement to do the annual Redetermination that are are a requirement of the of the programs. So there may be some element of comp that are you know from a timing standpoint, but we don't expect it to be meaningful.

And these redetermination supply across multiple government subsidized appropriately not just Medicaid Medicare and so it's it's more broad and we participate in and many of those.

Yeah.

Thank you next question is coming from Jeff Mueller from Baird. Your line is now live.

Yes. Thank you I'm, sorry to keep pulling you back to this but just given that its a new metric you're going to be providing on an ongoing basis.

So on the footnote and you said this as well.

Mark Begor: We think the white collar market was down double that. So that's how you get, you know, close to double that. So that's how you get to the 20 points of out performance. And there isn't really, I wouldn't characterize a single lever that's really driving that out performance. It's really similar in all our businesses. You know, in talent, we've got the ability to, you know, drive price, which we do every year. We expect to do that as we go into 2024 and the talent vertical, like our others, because of the value we're delivering.

Youre looking at internal data and then Youre doing at Calgon Records product price and mix, it's not clear to me like I know you said you don't think there's any change in share dynamics relative to a quarter ago, but.

If there are share shifts is that accounted for in your market.

Estimated as it accounted for an outperformance. It's just it's not clear to me if youre looking at internal data based upon what volumes you are seeing how you would account for it.

Mark Begor: In talent quite uniquely, we have the ability to drive penetration, you know, that's a big multi billion dollar, Tam, you know, in a business that's roughly $400 million at run rate. So there's a lot of customers in talent that are still doing manual verifications of employment history. That are 640 million jobs that we have in our database are just immensely valuable from a speed and productivity standpoint. So that's a lever in talent that we think is, you know, quite durable along with price.

First off we don't see any share shifts Jeff.

If there were they would be in the outperformance and remember I still have a ground. We still have a grounding in originations as I mentioned, you know you have to forecast originations and there's M. B a wish a lot of you look at and we look at it too is really diverged from what we're seeing in originations I remember, we see originations on two sides of our.

Business, we see it in our in the credit business in U S. I S and we see it in AWS and then we get actual originations on a five to six month lag when they actually get posted to the credit file after the mortgages closed. So we have you know really meaningful data I think we were trying to highlight that the divergence we're seeing.

Mark Begor: Products, another big one, you've seen us roll out, you know, almost every quarter a couple of new products from EWS and the talent vertical. Really to get more narrowly focused around products that match kind of job categories. We rolled out an hourly solution, I think last quarter for hourly workers to try to drive some growth there. So new products are clearly a growth and then the addition of records. And as you know, with the 50 attributes we get every pay period, we get job title and 75 million people a year roughly that number change jobs in the United States.

Some of those industry forecasts.

We have just become larger in recent times My view my personal view because of the rapid change in rates you know what.

I think rates went up overnight or less the 48 hours by 50 bps.

That's not in our forecast at M. B a good you know a month ago, but we can see what's happening this afternoon.

Mark Begor: So having those new jobs from our record additions every pay period is a very valuable asset that just drives higher hit rates, which drives revenue going forward. So we have a lot of confidence in our ability to outperform the underlying talent market, just like we do with the rest of our markets because of those levers.

And so what we'll be disclosing so what we'll disclose every quarter again is the outperformance with records product price and mix right and then over time, obviously, you're asking and we're comparing that against our volume obviously right. So over time to the extent anything was to occur which we're not seeing okay. But then we would obviously talk to you about whether we're seeing differences between.

Mark Begor: That's super helpful. Thanks so much. My second question is on mortgage. I was wondering if you can talk a little bit about the scrap between kind of the increased trans versus origination and how you calculate the mortgage out performance for EWS. Yeah, I'll start and let John jump in. We've been consistent. Really, there's been a phenomenon. It's a major change, a meaningful change in the mortgage market over the last 12 to 18 months, where when rates were starting to increase consumers did a lot more shopping and that benefited our us business, meaning that consumers would go to multiple mortgage originators.

Our own volume and what we think's happening broadly in the market, but the metric we'll disclose every every quarter really gets driven by records product price and mix, which compares effectively our revenue to our volume right. Because that's what we can actually measure so when we talk about compare and it's what we've been doing in U S. I S.

Yes.

For a very long time right.

15, 20 years remember.

More than 10 years, so what we're talking about doing for AWS. Now is the same thing we've been doing for U S. I S for a very long period of time, comparing revenue and the drivers against our volume metrics.

Understood.

Mark Begor: And as you know, as a part of that process, when someone applies online, the first thing mortgage originator will do is determine is that a consumer that can qualify for the loan they're trying to get, meaning are they going to invest that five or 6000 or actually 7000 of cogs in that mortgage process. So there's an inquiry that goes into or a poll on the USIS side. And that's why inquiries and versus originations or clothes loans have really separated.

It uses share shifts now that dynamics I wanted to make sure I understood. It and then just can you just give us what the assumption is in the guidance for Q4.

Mortgage origination unit volumes and can you comment on the number of twin pulls per closed mortgage it took a step up I think it's like two and a half of the pandemic has that been stable since is that still going up has it come down at all.

Mark Begor: There's been an increase in originations. And we expect that to continue, you know, with these high interest rates. Consumers will be more deliberate around their shopping behavior. And that's why there's a positive, if you will, for USIS in inquiries or credit polls on this environment, where EWS, typically in the backhand of the mortgage process in really around closed loans, at just broadly, right? We're finding it difficult to get good market data and that we can correlate across applications and other measures including originations.

Yeah. So in terms of again, we're not forecasting mortgage originations right what were using as our internal volume data. So we gave you in the guidance what we're assuming for credit inquiries in the fourth quarter and Thats the basis, we'd ask you to consider but I think we're gonna see I think credit inquiries down, 22%, which is about <unk>.

18 percentage points worse than what we expected back in July and so we think we think that's an indication of the direction of the market and that's the basis on which we're calculating our volumes for U S. I guess, we havent, we havent similar metric, we use internally with AWS on their own volumes right and that's the basis on which we generated our.

Mark Begor: So as you know, for USIS, right, we determine our outperformance based on our own internal volume data. And we share that internal volume data, obviously with you every quarter, right? And then going forward, what we're going to do is we're going to provide outperformance for EWS also based on our internal volume data, which are actuals, which we can actually measure. And as we've been talking to you about for quite some time, right, our outperformance is driven by record growth, which is more specific to twin, but then also product price and mix.

Our our forecast.

We didn't we didn't try to come up with them with a mortgage originations forecast because we're going to focus on using the internal volume that we can actually measure it as Mark said, we can't measure originations at the end of the fourth quarter in the fourth quarter, it's something that we want we want to have visibility to for quite some time following.

Thank you. Your next question is coming from Andrew Nicholas from William Blair. Your line is now live.

Mark Begor: And as we said in the script, those are things we can measure together, understanding the difference between our volume and our, and our overall revenue. And that's our outperformance. And I think going forward, we'll use that measure because it's all based on internal data that we can validate each quarter. And again, what we're, our internal volume data is transaction volume data, it's the transactions that are related directly to mortgage application approvals, doesn't really include things around batches or monitoring so that the data stays pure.

Hi, Good morning, Thanks for taking my questions first wanted to touch on all of this stuff.

I know you had given originally like a $165 million of revenue run rate I think it was 160 when when you cited in the second quarter and you're holding that here today post close just kind of curious if you could bridge.

The performance there over the past.

Nine months with how how that end market is doing how the business is doing just kind of an update as it's now under your official ownership.

Mark Begor: And we feel like that's a much better measure of the level of outperformance driven by record growth, product pricing and mix that we can deliver each quarter and we'll continue to share that with you. Maybe just one more point, John, as a reminder, as you know, we get mortgage originations because we have the credit file on every consumer. So we see the actual new mortgage originations, but they're typically on at what five six month lag.

Yeah were only a I don't know 60 days inn of of having it under under the ownership but are.

Pleased to have it in.

The market from our perspective is growing kind of high singles digits. That's why we like the market down there in Brazil, you know, we're very active in driving the integration of getting our new products and solutions there were going to move them to the equifax cloud over the next number of quarters to get them on our new <unk>.

Mark Begor: So between that five six month lag, we're forecasting based on MBA data based on our own tracking based on our own run rates. We use multiple inputs to try to forecast those originations. We obviously have been challenged by that in this current environment with interest rates increasing, but we have a lot of data around mortgage originations. Got it. Thanks so much. Thanks.

Cloud environment, we're going to bring down our large platforms like interconnect, which they don't really have a version of that as well as ignite our analytics platform, which will really drive some strong competitiveness with suraj and experience in the marketplace. You know the business performance I would say is probably lagging.

Andrew Jeffrey: Next question is coming from Andrew Jeffrey from truly securities. Your line is now live. Hi. Good morning. Appreciate you taking the question this morning. Mark, I mean, I get there. A lot of moving pieces here outside of morgue, especially thinking about EWS, verifier government a little bit weaker. Maybe then you thought and you've enumerated the reasons. I guess my question overall is do you think that that EWS non verifier or sorry, a non mortgage verifier business is perhaps gotten a little more difficult to forecast as you do more business with the government and all these different programs are appreciating the new contract wins.

A bit that market performance.

Primarily through the integration you know this is a it was a complex integration for a small publicly traded company to go through the process. It was a long process to go through gosh. It was almost a seven.

Seven eight months of the process to do the take private.

But we're energized to you know around the future of the business and you know focused on you know getting this integration.

Integration complete and getting into new solutions and to help them drive their top line.

Great. Thank you and then if I could ask just a clarifying question for my follow up.

Andrew Jeffrey: And do you think you're going to take that into account when you start to think about guiding for 24. Yeah, for sure. There's no question to look at the big business. It's it's dealing in multiple verticals in some regards these like talent and government are I would still characterize this fairly new verticals for us at scale. You know, we've only been large in those verticals in the last couple of years and you've got some macro impacts certainly in talent.

In terms of the mortgage market outperformance and AWS I think first.

I want to clarify that the 15% decline.

For 24 that you talked about if if conditions persist I want to make sure that I understood that that's that's an inquiry estimate or is that an origination estimate and then also when we think about the gap between those two numbers is there any reason to believe that that gap would and this is just kind of a.

Andrew Jeffrey: We mortgage aside, which we talked about a bunch, but you know, the hiring market is, you know, obviously under some pressure, particularly in white collar in the US. And we've tried to forecast that and you know, we're going to try to be more conservative or more balanced whatever words you want to use around that vertical. You know, same with government, you know, there's a lot of moving parts there. I would say the most complex for us or the one we've been challenged by is the redeterminations.

Question around the the market itself not you guys performance any reason for that gap to narrow or widen in a prolonged.

Weak environment, just kind of thinking about the different levels levers.

I'll jump in and John can dive in behind me I'm, you know firsthand the last half of your question, we would expect the inquiries to be stronger than originations in this high mortgage rate environment.

Andrew Jeffrey: You know, outside of that, we have pretty clear visibility about adding new customers, adding new clients, new product rollouts, you know, pricing actions and government, you know, that is pretty, pretty dialed in. And I think the other, you know, if you think about 2023, both of those businesses had really, really, really strong 22s. You know, so we're comping off, you know, very strong years, which is great because we're driving more penetration, more product, more price.

You can call it weaker but you know if you're a consumer.

And you know in many cases stretching to get a mortgage for a home that you want to buy because prices are still very high you do a lot of shopping around when there's a high interest rate environment. I don't think that's going to change next year I think we're still going to see you know that environment, which certainly will benefit U S. I S with more credit polls.

And that are in that shopping environment, you want to add John on the center and forecast for the first question. He had the down 15% was was the statements specifically about to the extent the run rate we're talking about in the fourth quarter of 2023 for mortgage credit inquiries continues then we would expect 2024 to be down.

Andrew Jeffrey: And we've had to, you know, look forward to where we're going to take those businesses and, you know, while we've been, you know, off a little bit, you know, we're really pleased with the growth of those businesses. You know, those are, they both delivered strong growth in the quarter. You know, you've seen accelerated growth and non mortgage in EWS from second quarter. We expect that non mortgage, verified growth to accelerate again in fourth quarter, you know, which gives us, you know, really positive momentum going into 2024.

15%, if that's the level that the market stays at right. So.

From origination none for more mortgage credit inquiries, yeah, you're down 15% and then Oh.

Andrew Jeffrey: But, you know, short answer to your question about, are we going to be more balanced around how we forecast there, for sure. Okay, yeah, I think the market will welcome that. And then, if I could just ask the, it feels like obligatory competitive question in EWS, there are a couple of pieces of business that you characterize as manual and low margin, kind of let go last quarter. Can you just sort of reiterate your thinking, especially in mortgage verifier in terms of the competitiveness of your solution?

Against that I mean it.

We'll give guidance in February but against that down 15, we would have our levers in both businesses around price product penetration to deliver the outperformance against that market.

Thank you next question is coming from Craig Huber from Huber Research Partners. Your line is now live.

Oh Hi, Good morning first question can you quantify for US the revenue performance in the U S for credit cards and autos, what the outlook is there for the fourth quarter.

Andrew Jeffrey: Yeah, no chain from what we talked about in July. In July, we tried to talk about the manual work we were doing for customers when we didn't have records. And that got, I think somewhat misconstrued in the marketplace. We're not seeing an impact from competition in our mortgage business or any other businesses. We tried to be clear about that in July, and I'll be clear again today. You are well aware of what our competitors data records that they have and what they don't have.

Yeah, I don't think we'd give the actual revenue numbers, John we do not write what we indicated is we thought that if I performed well in the quarter that auto performed well in the quarter. We had very good performance in commercial and we had really nice performance in counts identity and fraud business. So the auto N F I, where two of the strong performers that showed very good growth in the quarter.

For us, but we don't actually disclose the specific revenue levels and I would say, we don't expect real change in the fourth quarter from that third quarter run rate that we're expecting does this get work back in fourth quarter to continue to be good in those businesses separately.

Andrew Jeffrey: To me, a big proof point about our competitiveness is our ability to continue to add new partnerships. You know, we added four in the quarter. We added, I think, 27 in the last couple of years. You know, we're growing our records, you know, that's, you know, really I think a proof point of the, the strength of our ability to, you know, deliver solutions to our partners and execute for them. And they want to be partnered with Equifax.

So is your argument then with a much higher interest rates out there obviously impacting mortgages, just you've talked quite a bit about here you know.

Not seen significant impact to the rest of your business, but a much higher rates up to obviously, the 10 year rates approaching.

5% here.

That level for many many years, but you've not seen them in past so much higher rates anywhere else in your business.

We haven't but again, let me just be a little more deliberate.

Mark Begor: So I think that's a really important metric for us going forward. Thank you.

For example, like in subprime auto you know there's been some pressure there from originations because there are more deliberate around that subprime consumer being challenged and then that subprime consumer at that higher interest rate you know even in parts. You know is sometimes challenge to qualify for that but broadly no.

Kyle Peterson: Next question is coming from Kyle Peterson from need of company. Your line is now live. Great. Thanks. Good morning guys and appreciate taking the questions. One to touch on the consumer lending volumes within EWS looks like that was down a bit year on year. Just want to see, is that, you know, fairly broad based or, you know, is there any more concentration, you know, whether it's, you know, card or personal or auto. I just want any more color. Be hopeful.

When you think sometimes a small portion of the financial services industry. You know most of it is near and and crime and a higher interest rates have not impacted.

Auto.

<unk>, you know or card originations in the near Prime and Prime space like they haven't mortgage mortgages, just a big ticket item that are you know has had a massive impact on the on the rates over such a short timeframe.

Mark Begor: Yeah, you know, maybe if the kind of macro level about a year ago, we talked about, and we continue to talk about, um, subprime really got tightened up. So that happened over the last call it three, four, five quarters. That's starting to bottom out because we're comping off, you know, really sharp declines from last year as we go into fourth quarter. But, you know, subprime is clearly pulled back, you know, a combination of concern around that consumer base, you know, being more challenged.

Great. Thank you.

Thank you next question is coming from Faiza <unk> from Deutsche Bank. Your line is now live.

Yeah. Thank you I wanted to ask about mortgage again and really inquiry.

Mark Begor: Not from. Unemployment, but really from inflation. And we talked earlier that we've seen some delinquencies increased there and, you know, as an old card guy from my prior life, you know, when delinquencies go up, you typically will pull back on originations or be more deliberate around originations, meaning you want to make sure you're finding the consumers that can really afford that financial product. You know, prime is still fairly strong, you know, the consumers are working, you know, they've had some wage growth while they've been impacted by inflation. You know, we haven't seen much impact there.

I know that the MBA forecast changes quite a bit but I'm curious how you think about the MBA index on the application data that comes out every Wednesday morning, because that showed that <unk> applications were down 29%, which is in line with your inquiry decline. So I would have thought.

But more inquiries because youre talking about higher shopping I would've thought inquiries little done better than that.

So just give us some perspective into how we should think about that data.

And you know really what's what's what's going on but the inquiry.

John Gamble: And would you add anything? No, just as Mark said, and our tends to be in our consumer finance business, right, is that we tend to be more concentrated. We tend to be more concentrated and subprime and more concentrated on specific lenders. So the fact that that we're seeing subprime week and we're seeing some FinTechs week. Is driving it and because we have more concentration than the extremely broad, the broad coverage that us has, we tend to be, we tend to move around a little bit more in EWS in our revenue for consumer finance. Janet, that's really helpful.

So all the type of application.

Yeah. So I think too early commentary right I think what we're finding is there's lots of pieces of our market estimates that are being disclosed by various third parties that I think in this current environment are difficult as estimates are difficult to make and admittedly there difficult to correlate right. So that's why I honest.

We've shifted to trying to use our own internal actual volume data. So that we can try to track it over time, and we will certainly have a perspective as we look back historically and we look at our volume data on inquiries relative to actual applications and actual legit origination so they occur and we'll be happy to talk about that but.

Mark Begor: And then, you know, just follow up. I know you guys have talked a bit about, you know, some of the previous spending reductions and kind of the benefits that'll be in the 24 numbers, based on the actions taken this year. I just want to see, are there any other, you know, spending plans or things you guys are looking at. You know, if you guys are, if we're going to be in kind of a lower for longer, kind of mortgage inquiry market, just want to see other in more levers, you guys can push on the cost side of things if volumes don't come back next year.

But trying to do it real time right. Now we think is just is very difficult given the movements in the environment and that's why we think it's better for us and better for you quite honestly, if what we talked to you about is our actual volume data and then the things that are driving our performance to be better than our actual volume paydown.

Okay understood and then maybe just give us some perspective again on this inquiry question sort of where we were you know maybe pre pandemic and what happened during the pandemic in terms of number of inquiries prior whether its application or origination it could have.

Mark Begor: Yeah, I think as John mentioned and we did earlier, you know, we had the 65 of carry over from our $275 million program this year. You know, the bulk of that is, as you know, is from cloud completion and cloud cost savings. And as we go through 24, we mentioned it will give guidance and feb on that, but we'll have additional cloud cost savings as we complete migrations next year, as we said, we expect to complete USIS and Canada and other of our international platforms.

How far ahead are V was it three or four inquiries back in 2019 did that far down are we at seven or eight now.

Mark Begor: And as a reminder, we're carrying double cost today, you know, in those environments where we have a cloud environment, we're paying for. And then we also have a legacy environment when we complete the migrations, we shut down the legacy. So that'll be the incremental savings, which we expect to have in 24 and 25 and we'll give guidance on that. Beyond those kind of savings, you know, we're going to keep our belt tight in 2024. We're going to want to continue to invest in the right places, but I characterize that as we're going to be balanced around it, you know, given the given the environment. Thank you.

There's some some perspective on how much higher inquiries are now would be helpful.

Versus what time frame.

We've grown over the last three four or five years really because of consumer behavior as well as <unk>.

You know more the majority of mortgage applications happen online today, which is a phenomenon that's very different from what it was five years ago, which drives more credit polls.

Over the last year, they're fairly consistent.

It hasn't changed in the last in the last year, but they're clearly up from five four years ago.

Even three years ago, and again and I know you know this right, but we disclose we provide every every quarter what the actual inquiry numbers look like how they start what the actual movements in inquiries were so you can see how that's trending over time.

Mark Begor: Next question says coming from Simon clinch from Redburn and Landtaker line is our lives. Hi, thanks for taking my question. I mean, a lot of my questions being asked already, but maybe we could zero in again on when EWS mortgage. And I just wanted to just just go back to your the way you're measuring the app performance this time and, you know, the implied decline in origination volumes this quarter that you've seen versus what these industry forecasts have been for for quarter and there's quite a wide gap.

Okay I missed that.

Thank you next question is coming from Toni Kaplan from Morgan Stanley . Your line is now live.

Thanks for taking my question.

Historically pricing wasn't really a contributor to growth for the bureaus overall.

Like it's more of a driver in recent years for you and especially now you know obviously work number it's been an area you've been able to increase.

Increased price I think you've also talked about introducing new products at higher price points than other parts of the business. So I guess, when we think about like a seven or 10% normalized organic growth rate for equifax.

Mark Begor: And I just wanted to make sure that there's nothing else at play here in terms of, I don't know, maybe sort of just you're not seeing all the volumes that you would otherwise be seeing or for any sort of any sort of colleagues can give around that for the divergence would be useful. We try to forecast what the originations are as mentioned earlier, we know what actual originations are and like a five six month lag between that time frame, you know, we try to forecast.

That should come from price increases and maybe help us out with regard to like those segments as well.

Sure Your first I'm not sure when you talk about history I've only been here five years, but.

Over the past five years price has always been a lever for equifax and I believe for our competitors I think it's one of the things that data analytics companies have is if you have more valuable data you're able to charge more for it.

Mark Begor: You know, if you're referring to like NBA and some of the other forecast, if you look back over the last, you know, two years, three years, four years, five years, they're consistently long. It's a hard thing to forecast and we just try to use our best data on it. And then we also factor in our current run rates, you know, on originations, you know, so that's the way that we're forecasting to try to get more current because, you know, NBA is done on a survey basis. I think they survey like half of the mortgage originators in order to get that data, ours is actual originations on a lag and then our current forecast based on what we're seeing in current time frame.

Price as you point out we really execute two ways pure price you know, meaning we do annual price increases.

And we also get price through delivering new products with either more historical data or data combinations that deliver more value to our customers and remember our sale is an ROI sale. So with regards to the seven to 10 organic which is a subset of our eight to 12 you know if you go back to our Investor day from a couple of years ago.

Mark Begor: And again, going forward, what we're going to try to make sure we do is we're going to make sure it provide you with actual data, right? So I mean, we'll be able to give you the benefit we're seeing from records, product, price and mix, which are really the big drivers of our out performance, right? And, and we'll be measuring that against our actual volumes across USIS and to inseparably so that we can validate the information we know what's what the actuals are, and we can explain how we're performing and driving those levers, which we think is what's really important to make sure we explain because that's what we, that's what we're driving and delivering out performance through.

Charts on each business, where we talk about the levers to deliver that seven to 10 and as a reminder.

The seven to 10 is really driven by.

By AWS being north of that and international and U S. I S being south of that and if you think about we have levers that are fairly balanced to deliver that seven to 10, you know you've got a few points over the long term a market I think GDP, you've got a few points of price I mean, you've got a few points.

Each of these are kind of a couple two points to three points a couple of points of product I'm.

Mark Begor: Great. Thanks. And just as a follow up, I mean, if we want to talk about or think about a, you know, a tougher mortgage market for longer, you know, so current levels, does not in any way change the, I guess by the pricing power, the competitive dynamics for EWS and mortgage, going through a period like that, a prolonged period like that. I just want to, if you could help us think about the puts and takes, never go.

Driving that top line and then you've got penetration new verticals that we are we move into and that's you know kind of how you walk up and then in AWS uniquely we get a couple of points from records.

I think 234 points from record additions over the long term.

That drive our revenue and as you know on the records as a because we're already getting inquiries and we added new record to the dataset, we monetize it so that drives the revenue growth. So.

Mark Begor: We don't think so. You know, the power of instant data in this case, we're talking about income and employment data is super valuable to every mortgage originator. They want to make sure that they have accurate data. We get it directly from the company every two weeks, you know, on the consumer. We deliver it instantly, you know, in this environment of more shopping, you know, a mortgage originator that's investing in a consumer, they want to make sure that they close that loan, you know, as they get down the path of delivering it.

I wouldn't characterize prices being disproportionate in you know versus the other levers that we have and it's been fairly consistent over the time I've been here about how we've executed it.

And then we will publish a supplemental deck here in the next couple of hours and then in that deck for each of the business units will provide a walk kind of for the long term model that gives you price and depending on the business unit records et cetera that can provide perspectives on how we expect to be able to drive benefits for the drivers between the drivers of our revenue grow.

Mark Begor: So we don't see a change in our ability to deliver new solutions, meaning products to the industry, obviously with more records, we're going to drive higher hit rates that happens, you know, really because we're getting the inquiries, you know, from our customers for all their applicants. And then we still believe that we have a pricing power going forward because the uniqueness of our data set, the alternative for our customer is to do it.

On a long term basis, so hopefully that'll help as well.

Yeah terrific.

And then if I caught your comments earlier correctly, you mentioned that 50% of your revenue is coming from.

Within each of the last it was coming.

From products containing historical record.

Mark Begor: The mortgage customer is to do the verification manually, you know, which is very challenging, you know, meaning getting a company on the phone, you know, to verify the income is very hard to do and take time. And that's labor and also time. So speed and productivity is the inaccuracy of the value we deliver.

How does that mix meaningfully change or things like that.

So just wanting to understand its probably up slightly from a year ago, but it's up meaningfully from 345 years ago.

Shlomo Rosenbaum: Thank you.

And it's really.

As you May recall, Tony and we've talked about it as we move to AWS to the cloud call. It. The you know 18 months ago. All my almost it really opened up the window for them number one to deliver new products and number two a lot of those new products are using trended or historical data which was more.

Mark Begor: Next question is coming from Slamo Rosenbaum from Steve, your line is not live.

Mark Begor: Hi, good morning. Thank you for taking my questions. Hey, Mark, just my first question, I want to talk a little bit more about like how should be thinking about the future about with some of the items that you were talking about. You know, the increase in subprime delinquencies, we talked about auto for a while, we're talking about credit cards cash being used up. Look, how does that impact the business over the next 12 months?

Challenging to do pre cloud so in and you've seen Uws's vitality index, which kind of pre cloud was in.

3% to 5% range something like that probably at the low end and now is as we talked about earlier. This morning is north of 20.

Mark Begor: I mean, I know the employment has been fairly good at the lower end of the spectrum, but like, you know, there's, there's a lot of parts of the spectrum where there's open jobs, they're only filling those open jobs. And so, I guess the first question is, how are you thinking about this on a go forward basis and then I have a follow. Yeah, you know, go forward, you got to kind of talk time frames when you think about the next couple of quarters.

All of those products either are data combinations.

Or predominantly our trended historical data and if you think about it just didn't quite so it's common sense. You know Mark's income today is very valuable as a data element, but mark's income over the last 36 months is even more valuable if it's going up it's a very important indicator. If it was going down and then if it's stable it's an important indicators.

Mark Begor: You know, it doesn't feel to us or to me like there's going to be a lot of change, meaning it's a fairly outside of the mortgage market. Obviously, let's lead that aside. That's obviously super challenging and really unprecedented with happening with interest rates. But when you have people working in very low unemployment rates. Americans, generally they're able to pay their bills. When they pay their bills, the link when fees stay generally low, and then you have the ability, our customers, you know, have confidence and continue to extend credit, you know, through loans and other solutions, you know, to those consumers.

That's the value that we're able to deliver you know in that a massive historical dataset, we have and we would expect that 50% to move up but its.

Probably up 20 points in the last three or four years.

It's certainly significantly and Anna.

And I think if you just look at it by line of business mortgage has grown substantially as mark talked about because of mortgage 36, and the use of trended data across mortgage very broadly now and that's that's moved up towards 50% of of transaction.

Mark Begor: You know, subprime has been challenged for a year, you know, that's generally subprime is with the fintech, most of the big banks don't do subprime business, and you know, that's been challenged for a year, and we're actually, as I mentioned earlier, starting to comp against fairly low levels. I would expect subprime to stay hype, you know, as we go through 2024, because those consumers are really more challenged, not around being unemployed, but around inflation, you know, is still pressuring them.

Government is lasts right in terms of trended information it tends to be more point in time talent is virtually all trended information right and then so as as the mix of our business moves that.

Ratio can mix a bit it can change a bit but generally speaking in all of our verticals, we're driving the mix to trended data from the levels they're at today.

Thank you. Your next question is coming from a few sabedra from RBC capital markets. Your line is now live.

Mark Begor: But the big metric that I always think about, and you should too, in my view, is unemployment, you know, so back to your question about 2024, give me your forecast for unemployment next year. You know, is it going to go up down or sideways, you know, if you think unemployment is going to spike or go up, which I don't think it will in this environment, with 10 million open jobs, and only 5 million people looking right now, you know, that's a pretty good environment to go into 2024, you know, in kind of the core elements of our business outside of mortgage.

I'm, taking my question I, just wanted to drill down further on Tony's question on pricing and particularly.

FICO price increases with a significant deal for mortgage revenues.

Oh I S. A this year how can we think about those teams and going into next year and offsetting some of the mortgage bank quite headwinds for next year.

Yeah, I don't know if you've followed by quarters, you talked to the FICO team, but I would expect that theyre going to do a price increase in 2020 for.

Mark Begor: Okay, thank you, and then just going back to those government redeterminations, can you talk about, like, how is that work exactly? Like, once they get done, once they get done by June of next year, is this something that the government is going to be doing annually, or is this kind of a big one-time bang, and then we're going to end up with, you know, tough comps on that after we're done with it?

You should talk to them and if they do where obviously the conduit along with you would experience to deliver that to the marketplace.

That's something that we would execute on.

That's very helpful color and maybe just on the ball this stuff.

Mark Begor: Yeah, remember that the redeterminations were suspended during COVID, you know, so they didn't happen over the last couple of years. Once President Biden lifted the COVID pandemic rule or requirement, you know, these redeterminations went back into place, so it's really the completion of the annual verifications are happening in this 12-month time frame in 3rd, 4th and 1st and 2nd quarter next year. Post-2nd quarter, they'll have the requirement to do the annual redeterminations that are a requirement of the programs.

So.

That was pretty positive two cents accretion in the quarter is that going to need that you should think about going into 'twenty four or can you talk about what techniques from an earnings accretion perspective.

Mark Begor: So there may be some element of comp that, you know, from a timing standpoint, but we don't expect it to be meaningful. And these redeterminations apply across multiple government subsidized programs, not just Medicaid, Medicare. So it's more broad and we participate in many of those.

Thanks.

Yeah. So we'll give you that detail when we give guidance obviously for 2024, but in the fourth quarter, it's similar to what it wasn't a third.

Mark Begor: Thank you.

Yeah.

Thank you next question is coming from Seth Weber from Wells Fargo. Your line is now live.

Hi, good morning.

I just wanted to follow up on Bovis to for a second the the footnote on slide four seems to suggest the margins were higher.

Excluding fovista, but I thought at the time of the acquisition EBITDA margins for that asset. We're running you know like in the high 30% range. So were there some kind of like one time costs, there that that impacted the results or is there something I'm just trying to I'm just looking at the footnote on slide four things.

Jeff Meuler: Next question is coming from Jeff Mueller from Beargarline, is that live? Yeah, thank you. Sorry to keep pulling you back to this, but just giving that a new metric, you're going to be providing on an ongoing basis. So on the footnote, and you said this as well, you're looking at internal data and then you're doing a calcon records, product, price, and mix. It's not clear to me, like I know you said, you don't think there's any change in shared dynamics relative to a quarter ago, but if there are shareships, is that accounted for in your market? That's to me, is it accounted for an outperformance? It's just, it's not clear to me if you're looking at internal data based upon what volumes you're seeing, how you'd account for shares.

No fair enough I think EBITA margin was slightly for both Vista was slightly below was below the equifax average margin.

And what we're expecting over time as Mark talked about through the investments, we're making through integrating them into equifax processes that will work to drive that margin higher but yet for what you saw in the footnote. The bvs margins were below the equifax margins for the third quarter now as a reminder, we've owned them for about six weeks or so so we'll we'll see what happens as we move through the fourth.

Quarter, and then into 2024.

No. That's fair. Thanks, I just thought I thought at the acquisition the margins were high Thirty's.

Mark Begor: First off, we don't see any shareships, Jeff. If there were, they would be in the outperformance. And remember, we still have a grounding in originations. As I mentioned, you have to forecast originations, and there's MBA, which a lot of you look at, and we look at it too, is really diverge from what we're seeing in originations. Remember, we see originations on two sides of our business. We see it in the credit business in USIS, and we see it in EWS, and then we get actual originations on a five to six-month lag when they actually get posted to the credit file after the mortgage is closed.

That was the framework the spirit of the question but.

And then just.

Another follow up sorry, if I missed this but are there any more details on this the new $1 2 billion dollar contract.

When that starts you know how that rolls in as that.

You know ratable over the term of the over the term of the contract or just how we should start thinking about filtering that into our forecast.

Remember that's in it.

An extension of an existing contract so.

So we've had a contract for five plus years and maybe longer.

Mark Begor: So we have, you know, really meaningful data. I think we were trying to highlight that the divergence we're seeing from some of those industry forecasts have just become larger in recent times. My view is my personal view because of the rapid change in rates. You know, I think rates went up overnight or the last 48 hours by 50 bips. You know, that's not in a forecast that MBA did, you know, a month ago.

With the CMS its certainly larger.

And it'll it'll roll in are both at the federal and then at the state level as we go through our fourth quarter in 'twenty, four and 'twenty five and beyond.

And again, it's a it's an outstanding as Mark said largest contract we've ever signed right. Just as you take a look at over the next five years. It doesn't mean, you're going to will generate all of the revenue up to the maximum amount of the contract rate. So what it does is gives us the opportunity to work with states and obviously with the federal government to drive increasing revenue under the <unk>.

Mark Begor: But we can see what's happening this afternoon. And so what we'll be disclosing, so what we'll disclose every quarter, again, is the outperformance with records, product, price and mix, right? And then over time, obviously you're asking and we're comparing that against our volume obviously, right? So over time to the extent anything was to occur, which we're not seeing, okay? But then we would obviously talked to you about whether we're seeing differences between our own volume and what we think's happening broadly in the market.

Mark Begor: But the metric will disclose every quarter really is driven by records, product, price and mix, which compares effectively our revenue to our volume, right? Because that's what we can actually measure. So when we talk about, and it's what we've been doing in USIS for a very long time, right? It's more than 10 years. So what we're talking about doing for EWS now is the same thing we've been doing for USIS, for a very long period of time, comparing revenue and the drivers against our own volume. Our volume metrics, understood. It's just in, in USIS, shareships, now the dynamics I want to make sure I understood it.

Under the auspices of the agreement, which is extremely positive but it is certainly in no way a guarantee of revenue at that level.

Got it okay. Thank you guys I appreciate it.

Thank you. Your next question is coming from George Tong from Goldman Sachs. Your line is now live.

Alright. Thanks, good morning, you've previously seen evidence of mortgage in sourcing of their verification needs within AWS can you provide an update on some of those trends and in sourcing activity outside of the mortgage vertical.

So George I'm not sure what you mean by in sourcing or I think you used the terms. We provided evidence are you referring to our comments in July about the manual.

Work, we were doing for customers that are was where we did not have records.

No its where mortgage originators because volumes are down so much and because apparently had so much time on their hands. They were just doing it themselves rather than.

That was the that was the discussion we had back in July and it was around where we were doing the manual efforts for our customers in a very small operation in Iowa, where we did not have the records.

John Gamble: And then just can you just give us what the assumption is in the guidance for Q4 mortgage origination unit volumes? And can you comment on the number of twin pulls per closed mortgage? It took a step up, I think, to like two and a half in the pandemic, has that been stable since is it still going up as it come down at all? Yes, so in terms of, again, we're not forecasting mortgage originations, right?

And we talked about the fact that was moving in house, we haven't seen any evidence of mortgage originators shifting from.

Using our instant solution to doing it themselves.

So that that has not been a dialogue from equifax.

Yeah.

Got it and assuming that the same holds true outside of the mortgage is critical.

John Gamble: What we're using is our internal volume data. So we gave you in the guidance, what we're assuming for credit inquiries in the fourth quarter. And that's the basis we'd ask you to consider, right? I think we're going to see, I think, credit increased down 22%, which is about 18 percentage points worse than what we expected back in July. And so we think we think that the indication of the direction of the market, and it's the basis on which we're calculating our volumes for USIS.

Yeah for sure.

Now, how we're growing our business.

Because they're using more of our solutions, we deliver productivity and.

And we deliver speed and accuracy. So that's fundamental Oh, we see no trends in any of the verticals of.

Where they're going back to manual.

What you're seeing in the business, that's how we're delivering the double digit growth in the quarter and the double digit growth, we expect in the fourth quarter.

John Gamble: We have, we have a similar metric we use internally with EWS on their own volumes, right? And that's the basis on which we generated our, our forecast, we didn't just, we didn't try to come up with an with a mortgage originations forecast because we're going to focus on using the internal volume that we can actually measure, right? As Mark said, we can't measure originations at the end of the fourth quarter in the fourth quarter.

You know one of the levers as more conversions of existing manual effort to using our instant solution.

Got it.

For that and then sticking with AWS workforce solutions non mortgage non government can you discuss some of the trends that you're seeing there and the sensitivity of customers to pricing trends and the verifications business.

John Gamble: It's something that we want, we want to have visibility to for quite some time following.

Andrew Nicholas: Thank you.

Mark Begor: Next question is coming from Andrew Nicholas from William, there your line is now live. Hi, good morning. Thanks for taking my questions. First wanted to touch on Bolivista. I know you would give an originally like $165 million revenue run rate. I think it was 160 when you cited it on the second quarter and you're holding that here today post-close.

Yes, you do you want to talk about talent or exclude talent from that too.

Well focus on Verifications.

Well.

Okay. So you were talking about like in a and you want to leave mortgage out and focus on card and and P loans and auto or do you want to talk mortgage too I'm, just trying to figure out which part of verification you want to cover.

Yeah non mortgage nongovernment.

Mark Begor: Just kind of curious if you could bridge the performance there over the past nine months with how that end market doing, how the business is doing, just kind of an update is it's now under your official ownership. Yeah, we're only, I don't know, 60 days in of having it under under the ownership, but you know, please to have it in, you know, the market from our perspective is growing, you know, kind of high singles, you know, digit.

Non mortgage non government health, yeah, what's up some talent I guess, yes, so we havent seen sensitivity to our customers around pricing in any of those verticals because of the value that it delivers.

You got it they've gotta be obviously clear that we're balanced around pricing.

But our customers are using our solution because of the productivity and accuracy and then the incident.

Mark Begor: That's why we like the market down there in Brazil. You know, we're very active in driving the integration of getting our new products and solutions there. We're going to move them to the aquifax cloud, you know, over the next number of quarters to get them on our new cloud and buy them. We're going to bring down our large platforms like interconnect, which they don't really have a version of that as well as ignite our analytics platform, which will, you know, really drive some strong competitiveness with the Saras and experience in the marketplace.

Access to the information as well as the scale of the dataset. You know are we didn't talk about much on the call about our ability to continue to add records.

We're approaching 70 per cent of nonfarm payroll and over 50% of kind of working Americans, including 10, 99, an income producing Americans, including pension you know that dataset super valuable and all of those verification.

Markets and as you know we also have a big focus on adding new products, which is exhibited by the vitality index, which a lot of that vitality actually most of that vitality and verification.

Mark Begor: You know, the business performance, I would say it's probably lagging a bit that market performance, primarily through the integration. You know, this is a, it was a complex integration for a small publicly traded company to go through the process. It was a long process to go through.

<unk> is a is really delivering new solutions that help our customers.

Mark Begor: Gosh, it was almost seven, eight months of the process to do the take private, but we're energized, you know, around the future of the business and you know, focused on, you know, getting this integration complete and getting a new solutions and to help them drive their top line.

No expedite or complete the transactions using our instant data.

And talent I know, we've said this many times right no one likes price increases, but for example in talent one of the things we do in other segments as we provide incentives for people to be able to get better pricing from us by moving to top of waterfall or by selling additional products to drive growth across the broader sweat I'm, sorry, a broader suite of our entire group of.

Mark Begor: Great, thank you. And then if I could ask just a clarifying question for my follow-up, in terms of the mortgage market outperformance in U.S. I think first, I want to clarify that the 15% decline for 24 that you talked about if conditions persist. I want to make sure that I understood that that's an inquiry estimate or is that an origination estimate. And then also, so when we think about the gap between those two numbers, is there any reason to believe that that gap would, and this is just kind of a question around the market itself, not your guys' performance, any reason for that gap to narrow or widen in a prolonged week environment, just kind of thinking about the different levels, lovers, actually.

That's up account solutions like our education solutions like <unk> and other solutions and we're launching now products that support health care directly we have staffing products. We have other products that allow people to get better pricing from equifax, while helping us drive volumes through that through the system. So again.

We just like just like we don't like price increases we know no one likes price increases, but we try to be balanced and we try to structure them. So that people have the opportunity to purchase the products they want.

At price points that are better effective for them.

Got it thank you.

Thank you next question is coming from Heather Belsky from Bank of America. Your line is now live.

Hi, Thank you for taking my question I wanted to touch on the cloud migration and so so first part it sounds like it's lagging a little bit from from what you said last quarter I'm curious if you could help us kind of understand.

Mark Begor: I'll jump in and John can dive in behind me. First on the last half of your question, we would expect the inquiries to be stronger than originations in this high mortgage rate environment. You call it weaker, but if you're a consumer, and in many cases, stretching to get a mortgage for a home that you want to buy because prices are still very high, you do a lot of shopping around when there's a high interest rate environment.

What's going on with that transition and where I guess that the headwinds have been and then you know with regards to your plans with the transition when do you think we could start seeing the benefits of that on the U S. As I think.

Yeah like cloud transformations are hard this has been a supercomputer and the most complex cloud transformation that we're executing is in U S. I S. Given the age of the legacy infrastructure and are in and formats that we had and we're clearly.

Mark Begor: I don't think that's going to change next year. I think we're still going to see that environment, which certainly will benefit USIS with more credit folds in that shopping environment. You want to add John on the forecast. To the first question, yeah, the down 15% was a statement specifically about to the extent the run rate we're talking about in the fourth quarter of 2023 for mortgage credit inquiries continues. Then we would expect 2024 to be down 15%.

Few months behind them, but we can see the finish line and completing it is as we said earlier were migrating our large customers as we speak in the fourth quarter. Those will continue and are in the first quarter and we'd expect to be complete with U S. I S as well as our many of our international platforms.

Mark Begor: If that's the level that the market stays at, right? From origination for mortgage credit inquiries, down 15%. Then against that, and we'll give guidance in February, but against that down 15, we would have our levers in both businesses around price, product, penetration to deliver the outperformance against that market.

You know in the early parts of or first half of 'twenty 'twenty four.

John Gamble: Thank you.

That's a big pivot point as you point out now when are we going to start seeing the benefits, we're starting to see it and what we saw in AWS is what we would expect to see in our U S. I S and we talked earlier about uws's ability to drive new product rollouts at a very rapid pace well above our.

Craig Huber: Next question is coming from Craig Hubert from Hubert Research Partners. Your line is now live. Hi, good morning.

10% goal at the 20% plus we would expect U S. I S to grow their vitality index, which today is south of 10 and moved towards 10, and I think we mentioned they've grown their vitality about 100 basis points and we also mentioned.

Mark Begor: The first question, can you quantify for us the revenue performance in the US for credit cards and autos and what the outlook is there for the fourth quarter? Yeah, I don't think we give the actual revenue numbers, John. We do not, right? What we indicated is we thought that if I performed well in the quarter that auto performed well in the quarter, we had very good performance and commercial and we had really nice performance and counts identity and fraud business.

And we've talked about it on calls really for the last four years, but in the last couple of calls that in U S. I S. In particular.

Because of the ability to deliver always on stability the ability to have you know.

Mark Begor: So auto and FI were two of the strong performers that showed very good growth in the quarter for us, but we don't actually disclose the specific revenue levels. And I would say we don't expect real change in the fourth quarter from that third quarter run rate. Now we're expecting businesses, we're expecting fourth quarter to continue to be good in those businesses in February. So as you're arguing then with the much higher interest rates out there, obviously impacting mortgages as you've talked quite a bit about here.

Faster data transmission and then obviously leveraging our differentiated data we do expect in U S. I S to get some share gains and that really really comes forward, where we moved from a tertiary position to a secondary or primary position and we had one large fi in our in the U S, which is where <unk> is obvious.

<unk>.

Making that move with us because of the cloud.

So we would expect more of those to come forward as we complete the cloud in 'twenty four and then you know really between share gains and are in new product rollouts that to help us drive our U S. <unk> growth rates in the 24 and 25 and beyond.

Mark Begor: You're not seeing significant impact the rest of your business from the much higher rates out there, obviously the 10 year rates approaching, you know, 5% here. This has been at that level for many, many years. So are you not seeing impact the much higher rate anywhere else in here? Business. We haven't, but again, let me just be a little more deliberate, you know, for example, like in subprime auto, you know, there's been some pressure there from originations because they're more deliberate around that subprime consumer being challenged.

Mark Begor: And then that subprime consumer at that higher interest rate, you know, even in parts, you know, is sometimes challenged to qualify, you know, for that. But broadly, no, you know, when you think, sometimes a small portion of the financial services industry, you know, most of it is near and prime and higher interest rates have not impacted, you know, auto originations, you know, or carter originations in the near prime and prime space, like they have in mortgage, you know, mortgage is just a big ticket item that, you know, has had a massive impact on the rates over such a short time frame.

Oh, sorry can I ask a follow up just when you talk about share gains how should we think about it are you taking business from other credits or or or is it expanding the wallet.

It's heading that way.

No we're not when we talk about share gains. It's what you would think of share gain is is where we're moving from secondary to primary or tertiary secondary.

Because of the cloud and you know that.

Having the most advanced technology, we think is an advantage. That's one of the reasons. We embarked on this as you know at our gut we believe to be a great data analytics company after great Technology company and when you overlay the digital macro of our customers doing the vast vast majority of their transactions with their consumers.

Online you have to deliver 99, just stability you can't do that in the legacy environment. You can only do with cloud and you have to have faster data transmission. So we think that's going to advantage equifax going forward and then you lay on top of it.

Mark Begor: Great. Thank you. Next question is coming from Faisal. We've from Deutsche Bank. Your line is that last? Yes. Hi. Thank you.

The ability to roll out new solutions more quickly and more of them that's going to be advantaged Equifax you become a more important partner that it'll drive us up from those secondary positions that could be 20 or 30% of the volume to the primary positions, which could be 60 70, 80% you know that's a that's really what we have in front of us.

Faiza Alwy: So, I wanted to ask about mortgage again and really inquiries. So, I know that the MBA forecast, you know, changes quite a bit, but I'm curious how you think about the MBA index and the application data that comes out every Wednesday morning, because that showed that 3Q applications were down 29%, which is in line with your inquiry decline. So, I would have thought that, you know, inquiries because you're talking about higher shopping, I would have thought inquiries would have done better than that.

From the cloud investment and we would expect those benefits to roll the U S. I S and one last point that we mentioned is getting U S. I S. Cloud native will also allow us to do more between AWS and U S. I S. You know that was hard pre cloud in two legacy environments with different datasets that are different data environments.

Faiza Alwy: So, just give us some perspective into how we should think about that data and, you know, really what's what's going on with inquiries relative to application. Yeah. So, I think to our early commentary, right? I think what we're finding is there's lots of pieces of market estimates that are being disclosed by various third parties that I think in this current environment are difficult estimates are difficult to make and admittedly they're difficult to correlate, right?

We went to a single data fabric and having them both in the cloud you know that's going to be another gear for us going forward to have a data combination solutions. You know between USA is knee Ws that was really hard to do before and of course, the only we can do that between our credit data and the other differentiated data in U S. I S in combination.

With the income and employment data, that's really only equifax.

Faiza Alwy: So, that's why, honestly, we've shifted to trying to use our own internal actual volume data so that we can try to track it over time. We'll certainly have a perspective as we look back historically and we look at our volume data on inquiries relative to actual applications and actual originations that they occur and we'll be happy to talk about that, but trying to do it real time right now I think is just is very difficult given the movements in the environment and that's why we think it's better for us and better for you, quite honestly, if what we talk to you about is our actual volume data and then the things that are driving our performance to be better than our actual volume data. Okay, understood.

Thank you we reached end of our question and answer session I would like to turn the floor back over for any further or closing comments.

Yep.

Do.

You have any follow up questions. Please reach out to me and Sam otherwise have a great day. Thank you.

Thank you that does conclude today's teleconference and webcast you may disconnect. Your lines at this time and have a wonderful day, we thank you for your participation today.

Mark Begor: And let maybe just give us some perspective again on this inquiry questions but where we were, you know, maybe pre-pandemic and what happened during the pandemic in terms of number of inquiries for whether it's application or poor origination, sort of how far ahead are we, was it, you know, 304 inquiries back in 2019? Did that fall down? Are we at seven or eight now? Just some perspective on how much higher inquiries are now would be helpful.

Mark Begor: And versus what time frame, you know, they've grown over the last three, four, five years really because of consumer behavior as well as, you know, more majority of mortgage applications happen online today, which is a phenomenon that's very different from what it was five years ago, which drives, you know, more credit polls. Over the last year, they're fairly consistent. Johnson, meaning it hasn't changed in the last year, but they're clearly up from five, four years ago, even three years ago.

Mark Begor: And again, and I know you know this, right, but we disclose, we provide every, every quarter what the actual inquiry numbers look like, how they, sorry, what the actual movements and inquiries were so you can see how that's trending over time. Okay, I'm just, but thank you. Thank you.

Toni Kaplan: Next question is coming from Toni Kaplan, from Morgan Stanley, your line is not live. Thanks for taking my question. Historically pricing wasn't really a big contributor to growth for the bureaus overall, but it seems like it's more of a driver in recent years for you and especially now, you know, obviously work numbers been an area you've been able to increase price. I think you've also talked about introducing new products at higher price points and other parts of the business too, so I guess when we think about like a seven to 10% normalized organic growth rate for Equifax, how much of that should come from price increases and maybe help us out with regard to like the segments as well.

Toni Kaplan: Sure, you know, first I'm not sure when you talk about history, I've only been here five years, but over the past five years of price has always been a lever for Equifax, and I believe for our competitors. I think it's one of the things that data analytics companies have is if you have more valuable data, you're able to charge more for it. Price, as you point out, we really execute two ways, pure price, meaning we do annual price increases, and we also get price through delivering new products with either more historical data or data combinations that deliver more value to our customers.

Toni Kaplan: And remember, our sale is an ROI sale. So with regards to the seven to 10 organic, which is the subset of our eight to 12, you know, if you go back to our investor day from a couple of years ago, there's charts on each business where we talk about, you know, the levers to deliver that seven to 10 is a reminder. The seven to 10 is really driven, you know, by EWS being north of that and international and USIS being south of that.

Toni Kaplan: And if you think about we have levers that are fairly balanced to deliver that seven to 10, you know, you've got a few points over the long term of market and GDP, you've got a few points of price. You've got a few points, you know, each of these are kind of a couple, two points, the three points, a couple points of product, driving that top line, and then you've got penetration new verticals that we move into and that's, you know, kind of how you walk up and then in EWS uniquely, we get a couple of points from records.

Toni Kaplan: You know, so think two, three, four points from record additions over the long term that drive our revenue. And as you know, on the records is because we're already getting inquiries and when we add a new record to the data set, we monetize it. So that drives the revenue growth. So, you know, I wouldn't characterize prices being disproportionate in, you know, versus the other levers that we have. And it's been fairly consistent, you know, over the time I've been here about how we've executed it.

Toni Kaplan: And then we'll publish a supplemental deck here in the next couple hours and then in that deck for each of the business units will provide a walk kind of for the long term model that gives you price and depending on the business unit records, et cetera, that can provide perspectives on how we expect to be able to drive benefits for the drivers between the drivers of our revenue growth on a long term basis. So hopefully that'll help as well. Yeah, terrific.

Mark Begor: And then, if I caught your comments earlier correctly, you mentioned that 50% of your revenue is coming or within EWS is coming from product containing historical records. Has that mixed meaningfully changed versus like a year ago just wanting to understand? It's probably up slightly from a year ago but it's up meaningfully from three, four, five years ago. And it's really, you may recall, Toni, and we've talked about it, as we've moved EWS to the cloud, call it 18 months ago almost.

Mark Begor: It really opened up the window for them. Number one, to deliver new products. And number two, a lot of those new products are using trended or historical data, which was more challenging to do pre-cloud. So, in you've seen EWS is Vitality Index, which kind of pre-cloud was in the 3 to 5% range, something like that, probably at the low end. And now, as we talked about earlier this morning, is north of 20.

Mark Begor: And all those products, either are data combinations or predominantly are trended historical data. And if you think about it, it's quite common sense. Mark's income today is very valuable to data element. But Mark's income over the last 36 months is even more valuable if it's going up. It's a very important indicator if it was going down. And then if it's stable, it's an important indicator. So that's the value that we're able to deliver in that massive historical data that we have. And we would expect that 50% to move up, but it's probably up 20 points in the last three or four years. It's certainly significant.

Mark Begor: And I think if you just look at it by line of business, mortgage is grown substantially. Mark talked about because of mortgage 36 in the use of trended data across mortgage very broadly now. And that's moved up toward 50% of transaction. The government is less in terms of trended information. It tends to be more point in time. Talent is virtually all trended information. And then so as the mix of our business moves, that ratio can mix a bit. I can change a bit. But generally speaking in all of our verticals, we're driving the mix to trended data from the levels they're at today. Thank you.

Ashish Sabadra: Next question is coming from a few sabadra from RBC capital mortgage.

Mark Begor: So why is that live? Thanks for taking my question. I just wanted to drill down further on Tony's question on pricing in particularly. FICO price increases with a significant deal went for mortgage revenues within U.S. I.S, or OIS this year. How should we think about those tailwinds going into next year and offsetting some of the mortgage inquiry headwinds for next year.

Mark Begor: Thanks. Yeah, I don't know if you follow FICO or if you talk to the FICO team, but I would expect that they're going to do a price increase in 2024. You should talk to them. And if they do, you know, we're obviously the conduit along with you would experience to deliver that to the marketplace. You know, and that's something that we would execute on.

Seth Weber: And that that's very helpful color and maybe just on the ball is the earnings accretion. So there was pre positive two cents accretion in the quarter. Is that the number that we should think about going into 24 or can you talk about about the puts and takes from an earnings accretion perspective in 20. So we'll give you that detail when we give guidance obviously for 2024, but in the fourth quarter, it's similar to what it was in the third. Thank you.

John Gamble: Next question is coming from Seth Weber from Wells Fargo, your line is now live. Hi, good morning. I just wanted to follow up on Bo Vista for a second. The footnote on slide four seems to suggest the margins were higher. Excluding Bo Vista, but I thought at the time of the acquisition, EBITDA margins for that asset were running, you know, like in the high 30% range. So where there's some kind of like one time cost there that impacted the results or is there something I'm just trying to I'm just looking at the footnote on slide four.

John Gamble: Thanks. No, fair enough yet the EBITDA margin was for Bo Vista was slightly below below the Equifax average margin. And what we're expecting over time is Mark talked about through the investments. We're making through integrating them into Equifax processes that will work to drive that margin higher. But yeah, for what you saw on the footnote, the BBS margins were below the Equifax margins for the third quarter. Now as a reminder, we've we've owned them for about six weeks.

John Gamble: Right. So so we'll see what happens as we move through the fourth quarter. And then in the end, we'll see what happens. Now, that's fair. Thanks. I just thought I thought at the acquisition the margins were high 30s. That's that was the frame. The spirit of the question.

Mark Begor: But and and then just just another follow up. Sorry to miss this, but are there any more details on this the new 1.2 billion dollar contract when that starts, you know, how that rolls in is that. You know, ratable over the term of the term of the contract or just how we should start thinking about filtering that into our forecast. Thanks. Remember, that's an extension of an existing contract. You know, so we've had a contract for five plus years and maybe longer, you know, with CMS.

Mark Begor: It's certainly larger. And it'll, you know, roll in, you know, both at the federal and then at the state level as we go through fourth quarter and 24 and 25 and beyond. And again, it's an outstanding, as Mark said, largest contract we've ever signed, right. Just as you take a look at over the next five years, it doesn't mean you're going to generate all the revenue up to the maximum amount of the contract.

Mark Begor: Right. So what it does is gives us the opportunity to work with states. And obviously with the federal government to drive increasing revenue under the, under the auspices of the agreement, which is extremely positive, but it is certainly in no way a guarantee of revenue at that level. Got it. Okay. Thank you guys. I appreciate it.

George Tong: Thank you.

Mark Begor: Next question is coming from George Tong from Goldman Sachs for Linus our lives. Hi, thanks. Good morning. You've previously seen evidence of mortgage in sourcing of their verification needs within EWS. Can you provide an update on some of those trends and in sourcing activity outside of the mortgage vertical. So George, I'm not sure what you mean by in sourcing or I think you use the terms we provided evidence. Are you referring to our comments in July about the manual work we were doing for customers that was where we did not have record.

Mark Begor: No, it's where mortgage originators because volumes are down so much and because they apparently had so much time on their hands, they were just doing it themselves rather than Yeah, and that was the discussion we had back in July and it was around where we were doing the manual efforts for our customers in a very small operation in Iowa where we did not have the records and we talked about the fact that was moving in house we haven't seen any evidence of mortgage originators shifting you know, from using our instant solution to doing it themselves so that that has not been a dialogue from Equifax Got it, assuming that the thing holds true outside of the mortgage critical Yeah, for sure, you know, that's how we're growing our business, you know, because they're using more of our solutions we deliver productivity and we deliver speed and accuracy you know, so that's fundamental, we see no trends in any of the verticals of, you know, where they're going back to manual what you're seeing in the business that's how we're delivering the double digit growth in the quarter and the double digit growth we expect in the fourth quarter of, you know, one of the levers is more conversions of existing manual effort to using our instant solution. Got it, thank you for that and then sticking with the EWS workforce solutions, non mortgage, non government, can you discuss some of the trends that you're seeing there and the sensitivity of customers to pricing trends in the verifications business?

Mark Begor: Yes, you want to talk about talent or exclude talent from that too? Well focus on verifications. Well, okay, so you're talking about like in, and you want to leave mortgage out and focus on card and, and P loans and auto or do you want to talk mortgage to I'm just trying to figure out which part of verification you want to cover? Yeah, non mortgage, non government, non mortgage, non government. So we haven't seen sensitivity to our customers around pricing in any of those verticals because of the value that it delivers.

Mark Begor: Now, you've got to be obviously clear that we're balanced around pricing, but the customers are using our solution because of the productivity and accuracy and then the instant access to the information. And as well as the scale of data set, you know, we didn't talk much on the call about our ability to continue to add records, you know, and we're approaching 70% a non farm payroll. And over 50% of kind of working Americans, including 1099 and income producing Americans, including pension, you know, that data sets super valuable in all those verification markets.

Mark Begor: And as you know, we also have a big focus on adding new products, which is exhibited by the vitality index, which a lot of that vitality, actually most of that vitality is verification is is really delivering new solutions that help our customers, you know, expedite or complete the transactions using our instant data. In talent, I know we've said this many times, right? No one likes price increases, but for example, in talent, one of the things we do and others segments as we provide incentives for people to be able to get better pricing from us by moving to top of waterfall.

Mark Begor: Or by selling additional products to drive growth across the broader sweat, sorry, broader suite of our entire group of products that support talent solutions like our education solutions like and other solutions and we're launching now products that support healthcare directly. We have staffing products. We have other products that allow people to get better pricing from aquifax while helping us drive volume through the through the system. So again, we just like we don't like price increases.

Mark Begor: We know no one likes price increases, but we try to be balanced and we try to structure them so that people have the opportunity to purchase the products they want at price points that are that are effective for them.

Mark Begor: Thank you for taking my question. I wanted to touch on the cloud migration. So first part, it sounds like it's lagging a little bit from from what you said last quarter. I'm curious if you can help us kind of understand what's going on with that transition and where I guess the headwind. And then, you know, with regards to your plans with the transition, when you think we could start seeing the benefits of that on the USIS.

Mark Begor: Thanks. Yeah, like cloud transformations are hard. This has been super complex and the most complex cloud transformation that we're executing is in USIS given the age of the legacy infrastructure and formats that we had. And, you know, we're clearly, you know, a few months behind, but we can see the finish line, you know, in completing it is as we said earlier, we're migrating. You know, large customers as we speak in the fourth quarter, it will continue in the first quarter.

Mark Begor: And, you know, we'd expected to be complete, you know, with USIS as well as many of our international platforms, you know, in the early parts or first half of 2024. And that's a big pivot point is you point out, you know, when are we going to start seeing the benefits? We're starting to see it. And what we saw in EWS is what we would expect to see in USIS. And, you know, we talked earlier about the EWS's ability to drive new product rollouts that are very rapid pace well above our 10% goal at the 20% plus.

Mark Begor: We would expect USIS to grow their vitality index, which today is south of 10 and move towards 10. And I think we mentioned they grown their vitality about 100 basis points. We also mentioned and we've talked about it on calls really for the last four years, but then the last couple of calls that in USIS in particular, because of the ability to deliver always on stability, the ability to have, you know, faster data transmission.

Mark Begor: And then obviously leveraging our differentiated data, we do expect in USIS to get some share gains. And that really, really comes forward where we move from a tertiary position to a second or primary position. And we had one large FI in the US, which is where USIS is obviously that's making that move with us because of the cloud. So we would expect more of those to come forward as we complete the cloud in 24 and then, you know, really between share gains and in new product rollouts, you know, that to help drive USIS growth rates in 24 and 25 and beyond.

Mark Begor: Thanks, Mark. And I can ask a follow-up. When you talk about share gains, how should we think about it? Are you taking business from other creditors or is it expanding the wallet and benefiting that way? No, when you talk about share gains, it's what you would think a share gain is. It's where we're moving from secondary to primary or tertiary to secondary because of the cloud. And, you know, having the most advanced technology, we think is an advantage.

Mark Begor: That's one of the reasons we embarked on this is, you know, at our gut, we believe to be a great data analytics company after great technology company. And when you overlay the digital macro of our customers doing the vast, vast majority of their transactions with their consumers online, you know, you have to deliver nine, nine to stability. You can't do that in a legacy environment. You can only do with cloud and you have to have faster data transmission.

Mark Begor: So we think that's going to advantage aquifax going forward and then you lay on top of it, the ability to roll out new solutions more quickly and more of them. That's going to be advantage to aquifax. You become a more important partner that will drive us up from, you know, those secondary positions that could be 20 or 30% of the volume to the primary positions, which could be 60, 70, 80%. You know, that's the, that's really what we have in front of us from the cloud investment and we would expect those benefits to roll the US is in one last point that we mentioned is getting us cloud native will also allow us to do more between EWS and us is, you know, that was hard pre cloud and two legacy environments with different data sets that are different data environments.

Mark Begor: You know, as you know, we went to a single data fabric and having them both in the cloud, you know, that's going to be another gear for us going forward to have data combination solutions, you know, between us is need WS that was really hard to do before. And of course, only we can do that between credit data and the other differentiated data in US is in combination, you know, with the income and employment data that's really only aquifax.

Thank you.

We reach into our question and answer session. I'd like to turn the floor back over for any further closing comments. Yeah, it's Trevor Burns. If you have any follow-up questions, please reach out to me and Sam. Otherwise, have a great day. Thank you. That doesn't include today's telecom. It's a webcast. Let me disconnect your line at this time and have a wonderful day.