Q4 2023 Equifax Inc Earnings Call
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Operator: Greetings, welcome to the Equifax fourth quarter 2023 earnings conference call. At this time, all participants are in a listen only mode.
Yeah.
Yeah.
Speaker Change: Greetings and welcome to the Equifax fourth quarter 2023 earnings Conference call. At this time, all participants are in a listen only mode.
Operator: The question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Trevor Burns, Senior Vice President of Corporate Investor Relations. Thank you.
Speaker Change: A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad. Please note. This conference is being recorded I would now turn the conference over to Trevor Burns Senior Vice President of corporate Investor Relations.
Speaker Change: You may begin.
Trevor Burns: Thanks, and good morning.
Trevor Burns: Today's conference call I'm, Trevor Burns with me today are mark peek or since you're checking them off shirt and children Campbell.
Trevor Burns: With me today are Mark Begor, Chief Executive Officer, and John Gamble, Chief Financial Officer. This call is being recorded. An archived recording will be available later today in the IR calendar section of the News and Events tab on our IR website. During the call, we'll be making reference to certain materials that can also be found in the presentation section of the News and Events tab on our IR website. These materials are labeled 4G2023, earnings conference call. Also, we're making certain core linking statements, including first quarter and full year 2024 guidance, to help you understand Equifax and its business environment. These statements involve a number of risks, uncertainty, and other factors that could cause actual results to differ materially from our expectations. Certain risk factors that may impact our business are set forth in filings with the SEC, including our 2022 Form 10-K and subsequent filings will also be referring to certain non-GAAP financial measures, including adjusted EPS and adjusted EBITDA, which will be adjusted for certain items that affect the comparability of our underlying operational performance.
Trevor Burns: Sure.
Trevor Burns: Today's call is being recorded in our cabinets recording will be available later today.
IR calendar section, that's amazing events tab of our IR website.
Trevor Burns: During the call well be making reference to certain materials that can I'll speak out in the presentation section of the news and events tab of our IR website.
Trevor Burns: These materials are illegal ports each by 23 earnings conference call.
Trevor Burns: So what makes them certain forward looking statements, including first quarter and full year of 'twenty 'twenty four guidance.
Hope you understand that pulled back challenged business environment is.
Trevor Burns: These statements involve risks uncertainties and other factors.
Trevor Burns: Could cause actual results in Detroit.
Trevor Burns: All of our expectations.
Trevor Burns: Certain risk factors that may impact our business are set forth in filings with the U S. H eight.
Trevor Burns: Leading our 'twenty 'twenty cheap Form 10-K and subsequent filings.
Trevor Burns: Well also be referring to certain non-GAAP financial measures, including adjusted EPS, and adjusted EBITDA, which will be adjusted and certain items that affect the comparability of our underlying operational performance.
Trevor Burns: Yeah.
Fourth quarter was.
Trevor Burns: Excellent structuring charge of $19 million.
Trevor Burns: I'm sure. This charge was for costs incurred as we realize this at all change.
Trevor Burns: This charge was for costs incurred as we realigned business functions ahead of completing our technology transformation. This construction charge is excluded from adjusted EBITDA and adjusted EPS. These non-GAAP measures are detailed in Reconciliation Tables, which are included with our earnings release and can be found in the Financial Results section of the Financial Info tab on our IR website. Now I'd like to turn it over to Mark.
Ed.
Trevor Burns: Our technology transformation.
Trevor Burns: This restructuring charge is excluded from adjusted EBITDA and adjusted EPS.
Trevor Burns: non-GAAP measures Chinchillas in reconciliation tables, which are included with our earnings release.
Trevor Burns: Can be found in the financial result, sexual health and financial Info tab of our IR website now I'd like to turn it over to Mark.
Jeff P. Meuler: Thanks, Trevor and good morning, before I cover our results for the quarter I wanted to spend a few minutes on our 2023 performance.
Mark W. Begor: Thanks, Trevor. Good morning. Before I cover results for the quarter, I wanted to spend a few minutes on our 2023 performance. Equifax performed extremely well last year against our EFX 2025 strategic priority. Our strong performance was against one of the most challenging mortgage markets in the last 20 plus years, with our USIS mortgage inquiries down 34% and Equifax mortgage revenue down 17%, which equates to almost $500 million of lost mortgage revenue last year. Despite the significant decline in 2023 mortgage revenue, Equifax delivered.
Jeff P. Meuler: Equifax performed extremely well last year against our E. F X 2025 strategic priorities are.
Jeff P. Meuler: Our strong performance was against one of the most challenging mortgage markets in the last 20 plus years with our U S. I S mortgage inquiries down, 34% and Equifax mortgage revenue down, 17%, which equates to almost 500 million of lost mortgage revenue last year.
Jeff P. Meuler: Despite the significant decline in 2020 three mortgage revenue Equifax delivered.
Mark W. Begor: We delivered 2% organic constant currency revenue growth with 7% organic constant currency non-mortgage revenue growth, which was at the low end of our long-term 7% to 10% growth rate. However, we had sequential improvement during the year with 8% total growth and 9% non-mortgage growth in the fourth quarter. We also delivered over 100 new products with a vitality of 14%, which is a record for Equifax and well above our 10% long-term goal.
Jeff P. Meuler: We delivered 2% organic constant currency revenue growth with 7% organic constant currency non mortgage revenue growth, which was at the low end of our long term, 7% to 10% growth rate.
Jeff P. Meuler: Importantly, we had sequential improvement during the year with 8% total growth and 9% non mortgage growth in the fourth quarter.
Jeff P. Meuler: We also delivered over 100, new products with the vitality of 14%, which was a record for equifax and well above our 10% long term goal.
Jeff P. Meuler: UWS delivered strong 10% organic non mortgage revenue growth, which allowed them to deliver flat total growth. Despite mortgage revenue there was down 23%.
Mark W. Begor: EWF delivered strong 10% organic non-mortgage revenue growth, which allowed them to deliver flat total growth despite mortgage revenue that was down 23%. They delivered sequential non-mortgage revenue growth and exited the fourth quarter with strong 17% non-mortgage growth. Verifier non-mortgage revenue grew 14%, led by government that grew over 30%, and talent that grew 5% despite the white-collar hiring market that was down just under 10%. EWS Group current twin records to 168 million, up 16 million or 11%, and grew total records to 657 million at 53 million records.
Jeff P. Meuler: They delivered sequential non mortgage revenue growth and exited fourth quarter with strong 17% non mortgage growth.
Jeff P. Meuler: Verifier non mortgage revenue grew 14% led by government that grew over 30% and talent. They grew 5%. Despite the white collar hiring market that was down just under 10%.
Jeff P. Meuler: EDF UWS group current Quinn records to a 168 million up 16 million or 11% and grew total records to 657 million 53 million Records.
Jeff P. Meuler: We added 17, new twin partnerships last year, our highest number ever and I have a strong pipeline for 2024.
Mark W. Begor: We added 17 new twin partnerships last year, our highest number ever, and have a strong pipeline for 2024. And in the third quarter, EWS signed a contract extension to provide income verification to the U.S. Centers for Medicare and Medicaid Services as part of a contract valued at up to $1.2 billion over the next five years, which is the largest contract in Equifax's history. EWS also delivered over 20% new product vitality. USIS delivered 4% revenue growth with 7% non-mortgage growth within their 6-8% long-term growth framework, while mortgages declined 5%. The USIS Commercial and Consumer Solutions business had very strong years with double-digit revenue growth led by strong market penetration and new products. International delivered 12% constant dollar revenue growth and 6% organic constant dollar growth, led by continued very strong 17% organic growth in Latin America, with a vitality index over 15%, and close to 10% revenue growth in our UK CRA. And in July, we completed the BVS acquisition in the fast-growing Brazilian market.
Jeff P. Meuler: And in the third quarter UWS signed a contract extension to provide income verification. The U S centers for Medicare and Medicaid services as part of a contract valued at up to $1 2 billion over the next five years, which is the largest contract in equifax is history.
Jeff P. Meuler: Yeah, but yes also delivered over 20% new product vitality.
Jeff P. Meuler: U S. I S delivered 4% revenue growth with 7% non mortgage growth within their 6% to 8% long term growth framework, while mortgage declined 5%.
Jeff P. Meuler: The U S. I S commercial and consumer solutions business had very strong years with double digit revenue growth led by strong market penetration and new products.
Jeff P. Meuler: International delivered 12% constant dollar revenue growth and 6% organic constant dollar growth led by continued very strong 17% organic growth in Latin America, with a vitality index or 15% and close to 10% revenue growth in our U K CRA.
Jeff P. Meuler: And in July we completed the DVS acquisition in the fast growing Brazilian market.
Jeff P. Meuler: We delivered these strong results, while making significant progress towards completing our cloud migration ending the year with about 70% of Equifax revenue and the new Equifax cloud.
Mark W. Begor: We delivered these strong results while making significant progress towards completing our cloud migration, ending the year with about 70% of Equifax revenue in the new Equifax cloud. We decommissioned seven data centers and migrated about 37,000 customers to the Equifax cloud. We are convinced that our new EFX cloud, single data fabric, and AI capabilities are delivering new differentiated products faster with better performance and will provide a competitive advantage to Equifax for years to come. The strong progress we made in 2023 will enable the substantial completion of our North American transformation and customer migrations in the first half of 2024, including the decommissioning of the mainframes and major North American data centers. Also in 2024, we expect to make substantial progress towards completing transformation activities in Europe and Latin America.
Jeff P. Meuler: We decommissioned seven days, we decommissioned seven datacenters and migrate at about 37000 customers to the Equifax cloud.
Jeff P. Meuler: We are convinced that our new E. FX cloud single data fabric and AI capabilities are delivering new differentiated products faster with better performance and will provide a competitive advantage to equifax for years to come.
Jeff P. Meuler: The strong progress we made in 2023 will enable the substantial completion of our north American transformation in customer migrations in the first half of 2024, including decommissioning of the mainframes and major North American data centers.
Jeff P. Meuler: Also in 'twenty 'twenty four we expect to make substantial progress towards completing transformation activities in Europe and Latin America.
Mark W. Begor: By the end of 2024, we expect to have about 90% of our revenue in the new Equifax cloud, with the vast majority of new models and scores being built using Equifax AI. In 2023, we executed very well against our EFX cloud and broader operational restructuring plan across Equifax, reflecting cost reductions from the closure of major North American data centers and other broad and other broader spending controls in excess of our original $210 million goal. We expect an incremental $90 million of run rate spending reductions in 2024, which is up about $25 million from our prior forecast due to the additional actions we took in the fourth quarter that will benefit 2024. Of this $90 million, 2024 spending reduction, about $60 million is to reduce operating expenses, and $30 million is to reduce capital spending.
Jeff P. Meuler: By the end of 'twenty 'twenty four we expect to have about 90% of our revenue and the new Equifax cloud with the vast majority of new models and scores being built using equifax AI.
Jeff P. Meuler: In 2023, we executed very well against our <unk> cloud and broader operational restructuring plan across the equifax, reflecting cost reductions from the closure of a major north American data centers and other sport and other broader spending controls in excess of our original 210 billion dollar goal.
Jeff P. Meuler: We expect an incremental $90 million of run rate spending reductions in 'twenty 'twenty, four which is up about $25 million from our prior forecast due to the additional actions. We take we took in the fourth quarter that will benefit 2024.
Jeff P. Meuler: Of this 90 million 'twenty 'twenty 'twenty four spending reduction about 60 million reduces operating expenses and 30 million reduces capital spending.
Jeff P. Meuler: These actions are improving operating margins and lowering the capital intensity of our business.
Mark W. Begor: These actions are improving operating margins and lowering the capital intensity of our business. As we move into 2024, I'm energized by our commercial momentum, NPI capabilities, and the benefits of the new Equifax cloud. Turning to slide four, our strong fourth quarter gives us momentum as we move into the new year. Fourth quarter revenue of $1.327 billion and adjusted EPS of $1.81 per share were both at the high end of our guidance, and EBITDA margins at 33.7% were up about 60 bps sequentially. Our non-mortgage businesses, which represent about 85% of total revenue in the quarter, were very strong with 14% constant currency and 9% organic constant currency non-mortgage revenue growth, also at the high end of our 7-10% long-term organic growth framework, driven by strong performances at EWS and International. The U.S. mortgage market was slightly stronger than we expected in the quarter, with USIS inquiries down 17%.
Jeff P. Meuler: As we move into 2024, I'm energized by our commercial momentum N P I capabilities and the benefits of the new Equifax cloud.
Jeff P. Meuler: Turning to slide four our strong fourth quarter gives us momentum as we move into the new year.
Jeff P. Meuler: Fourth quarter revenue of 1.327 billion and adjusted EPS of $1 81 per share were both at the high end of our guidance.
Jeff P. Meuler: And EBITDA margins at 33, 7% were up about 60 bps sequentially.
Jeff P. Meuler: Our non mortgage businesses, which represented about 85% of total revenue in the quarter were very strong with 14% constant currency and 9% organic constant currency non mortgage revenue growth also at the high end of our 7% to 10% long term organic growth rate framework driven by strong performances at AWS.
Jeff P. Meuler: And international.
Jeff P. Meuler: Total U S mortgage market was slightly stronger than we expected in the quarter with U S. I S inquiries down 17%.
Jeff P. Meuler: As mortgage rates declined during the quarter from a 23 year high of seven 9% in late October to about 6.8% late in the year. We saw some increased activity do you expect will grow if rates continue to decline in 2024.
Mark W. Begor: As mortgage rates declined during the quarter from a 23-year high of 7.9% in late October to about 6.8% late in the year, we saw some increased activity we expect will grow if rates continue to decline in 2024. Mortgage volumes began to strengthen slightly relative to normal seasonal levels in December, and we've continued to see slight improvements during January, which is a good sign that the market is bottoming. Mortgage market outperformance of 33% for USIS and 18% for EWS last year in the quarter was strong and about as expected. We'll share further perspectives on the mortgage market when we discuss our 2024 guidance. At the BU level, EWS non-mortgage revenue was up a strong 17% and above our expectations, principally due to strength in our government and talent businesses, which drove adjusted EWS EBITDA margins sequentially to above 51%.
Jeff P. Meuler: Mortgage volumes began to strengthen slightly relative to normal seasonal levels in December and we've continued to slight improvements during January which is a good sign that the market has bottomed.
Jeff P. Meuler: Mortgage market outperformance of 33% for U S. I S and 18% for AWS last year in the quarter were strong at about as expected.
Jeff P. Meuler: We will share further perspectives on the mortgage market when we discuss our 2020 for guidance.
Jeff P. Meuler: At the Bu level AWS non mortgage revenue was up a strong 17% and above our expectations principally due to strength in our government and talent businesses, which drove adjusted <unk> EBITDA margins sequentially to above 51%.
Mark W. Begor: USIS had a good quarter with revenue up 5%, slightly above our expectations, principally due to stronger mortgage revenue, which drove adjusted EBIT job margins up about 100 basis points sequentially to 35%. International delivered 22% constant dollar revenue growth and 6% organic constant currency revenue growth, excluding the impact of the BVS acquisition. Very strong growth in Latin America and Europe was principally offset by lower-than-expected growth in Asia-Pacific.
Jeff P. Meuler: U S. I S had a good quarter with revenue up 5% slightly above our expectations, principally due to stronger mortgage revenue, which drove adjusted EBITDA margins up about 100 basis points sequentially to 35%.
Jeff P. Meuler: International delivered 22% constant dollar revenue growth and 6% organic constant currency revenue growth, excluding the impact of the DVS acquisition.
Jeff P. Meuler: Very strong growth in Latin America, and Europe were principally offset by lower than expected growth in Asia Pacific.
Mark W. Begor: International delivered very strong 31.2% adjusted EBITDA margins, up about 500 basis points sequentially and much stronger than our expectations. Before I cover our business unit results in more detail, I wanted to provide an overview of what we're seeing in the U.S. economy and with the consumer. Broadly, outside of what appears to be a bottoming of the mortgage market, there's not a lot of change from our prior view. The U.S. consumer and our customers remain broadly resilient. Employment remains at historic levels with low unemployment and almost 9 million open jobs, which is positive for consumers and our customers. However, there continue to be some constraints on white-collar hiring.
Jeff P. Meuler: International delivered very strong 31, 2% adjusted EBITDA margins up about 500 basis points sequentially and much stronger than our expectations.
Jeff P. Meuler: Before I cover before I cover our business unit results in more detail I wanted to provide an overview of what we're seeing in the U S economy and with the consumer.
Jeff P. Meuler: Broadly outside of what appears to be a bottoming of the mortgage market, there's not a lot of change from our prior view.
Jeff P. Meuler: The U S consumer and our customers remain broadly resilient.
Jeff P. Meuler: Employment remains at historic levels with low unemployment and almost 9 million open jobs, which is a positive for consumers and our customers.
Jeff P. Meuler: However, there continue to be some constraints in white collar hiring.
Mark W. Begor: Credit card delinquencies rates for prime consumers, which represent about 80% of the market, are stable and at historically low levels, at less than 1%, but above pre-pandemic levels. However, subprime borrower delinquencies, which have been increasing over the past year, are now above pre-pandemic levels and are approaching 2009 levels. Auto delinquency rates for prime consumers, which represent about 80% of the market, are also stable and well below 1%, but they are above pre-pandemic levels. Delinquencies for subprime consumers are also above pre-pandemic levels, as well as above the levels we saw in 2009. And any credit tiding that we've seen has been largely in fintech and subprime, which started well over a year ago. When consumers are working, they largely have the capacity to keep current on their financial obligations, which is good for our customers and for Equifax.
Jeff P. Meuler: Credit card delinquency rates for prime consumers, which represent about 80% of the market are stable and at historically low levels at less than 1%, but above pre pandemic levels.
Jeff P. Meuler: However, subprime borrower delinquencies, which have been increasing over the past year are now above pre pandemic levels and are approaching 2009 levels.
Jeff P. Meuler: Auto delinquency rates for prime consumers, which represent about 80% of the market are also stable and well below 1%, but are above pre pandemic levels.
Jeff P. Meuler: Delinquencies for subprime consumers are above pre pandemic levels as well as above the levels. We saw in 2009.
Jeff P. Meuler: And Eddie credit tightening that we've seen has been largely in fintech in subprime, which started well over a year ago.
Jeff P. Meuler: When consumers are working they largely have the capacity to keep current on their financial obligations, which is good for our customers and for Equifax.
Jeff P. Meuler: Turning to slide five strong twin record growth and the positive impact from new products penetration and price drove a strong 18 points of AWS mortgage outperformance in the quarter.
Mark W. Begor: Turning to slide five, strong twin record growth and the positive impact from new products, penetration, and price drove a strong 18 points of EWS mortgage outperformance in the quarter. However, as expected, mortgage outperformance was down sequentially from the third quarter as we lapped the 2022 launch of our Mortgage36 Trended Data product. EWS had another very strong quarter of twin record additions, adding 5 million current records in the quarter and 16 million during 2023. EWS grew its twin records 11% in the quarter to 168 million on 124 million unique individuals, which was up 9%. Total records, both current and historic, are now over $655 million, and we're up 9%. In terms of coverage, we have current employment records on about 75% of U.S. nonfarm payroll and about 60% coverage on the 220 million income-producing Americans. At 124 million active records, we have plenty of room to grow the twin database.
Jeff P. Meuler: As expected mortgage outperformance was down sequentially from the third quarter as we lap the 2022 launch of our mortgaged thirty-six trended data product.
Jeff P. Meuler: UWS had a net another very strong quarter of twin record additions, adding 5 million current records in the quarter and $16 million during 2023.
Jeff P. Meuler: UWS grew twin records, 11% in the quarter to $168 million on 124 million unique individuals which was up 9%.
Jeff P. Meuler: Total records, both current and historic are now over $655 million and were up 9%.
Jeff P. Meuler: In terms of coverage, we have current employment records on about 75% of U S nonfarm payroll and about 60% coverage on the 220 million income producing Americans.
Jeff P. Meuler: At 124 million active records, we have plenty of room to grow the twin database.
Jeff P. Meuler: During the quarter, we signed agreements with six new payroll processors that will deliver records in 2024.
Mark W. Begor: During the quarter, we signed agreements with six new payroll processors that will deliver records in 2024. In 2023, we added partnerships with 17 payroll processors, and over the past three years, we have added partnerships with 33 payroll processors. During the quarter, EWS also surpassed a significant milestone with over 3 million companies contributing to the work number every pay period, a huge milestone as we continue to focus on expanding our twin coverage. The market continues to adopt higher-value solutions that include trended employment and income history that only Equifax can deliver. For example, in the fourth quarter, over 50% of mortgage revenue incorporated a historic record.
Jeff P. Meuler: In 2023, we added partnerships with 17 payroll processors and over the past three years have added partnerships with 33 payroll processors.
Jeff P. Meuler: During the quarter AWS also surpassed a significant milestone with over 3 million companies contributing to the work number every pay period, a huge milestone as we continue to focus on expanding our twin coverage.
Jeff P. Meuler: The market continues to adopt higher value solutions that include trended employment and income history that only equifax can deliver for.
Jeff P. Meuler: For example, in the fourth quarter over 50% of mortgage revenue incorporated Historic Records.
Jeff P. Meuler: Turning to slide six workforce solutions revenue was up a strong 10% in the quarter, which is a very positive sign as we look towards 2024.
Mark W. Begor: Turning to slide six, workforce solutions revenue was up a strong 10% in the quarter, which is a very positive sign as we look towards 2024. Non-mortgage revenue growth of 17% was very strong and up 600 basis points sequentially and at the highest levels that we saw in 2023. Importantly, verification services non-mortgage revenue, which represents about 75% of verifier revenue, delivered very strong 27% growth in the quarter, and it was up 16 points sequentially. In government, we saw continued very strong growth with revenue up 47% in the quarter and over 30% for the year. Government revenue was slightly stronger than our expectations, given continued CMS redeterminations, the new SNAP contract, record growth, state penetration, and price. We expect continued growth in government throughout 2024, with stronger growth in the first half as CMS redeterminations complete prior to the second quarter. Talent Solutions revenue was up 13% in the quarter and up 700 basis points sequentially. As we discussed, we are currently more heavily penetrated into white-collar workers, including technology, professional services, and financial services, which have seen a greater reduction in hiring activity and broad hiring freezes and layoffs than the total labor market over the past 12 to 18 months.
Jeff P. Meuler: Non mortgage revenue growth of 17% was very strong and up 600 basis points sequentially and at the highest levels that we saw in 2023.
Jeff P. Meuler: Importantly, verification services non mortgage revenue, which represents about 75% a verifier revenue revenue delivered very strong, 27% and the growth in the quarter and was up 16 points sequentially.
Jeff P. Meuler: In government. We saw continued very strong growth with revenue up 47% in the quarter and over 30% for the year.
Jeff P. Meuler: Government revenue was slightly stronger than our expectations given continued CMS redetermination, the new snap contract record growth state penetration and pricing.
Jeff P. Meuler: We expect continued growth in government throughout 2024 with stronger growth in the first half as CMS redetermination complete prior to the second quarter.
Jeff P. Meuler: Talent solutions revenue was up 13% in the quarter and up 700 basis points sequentially as.
Jeff P. Meuler: As we discussed we are currently more heavily penetrated to white collar workers, including technology professional services and financial services, which has seen a greater reduction in hiring activity in broad hiring freezes and layoffs than the total labor market over the past 12 to 18 months. These.
Mark W. Begor: These markets are off to a slow start again in January, and we would expect to see slower revenue growth in the first quarter of talent than we delivered in the fourth quarter. We outperformed these underlying markets in the fourth quarter by over 25 points as we delivered new digital solutions, strong new product growth, pricing, and continued expansion of Twin Records.
Jeff P. Meuler: These markets are off to a slow start again in January and we would expect to see slower revenue growth in the first quarter and talent than we delivered in the fourth quarter.
Jeff P. Meuler: We outperformed these underlying markets in the fourth quarter by over 25 points as we delivered new digital solutions strong new product growth.
Jeff P. Meuler: Pricing and continued expansion of twin records.
Jeff P. Meuler: Services revenue was down 7% and in line with our expectations driven by declines in ERC revenue, which is now about $5 million per quarter as the U S. Government has suspended processing new ERC claims.
Mark W. Begor: The total services revenue was down 7%, and in line with our expectations, driven by declines in ERC revenue, which is now about $5 million per quarter, as the U.S. government has suspended processing new ERC claims. ERC revenue is expected to stay at about these levels through 2024, and we'll see headwinds in our employer vertical from this ERC decline through the third quarter of 2024. Excluding the impact of the declining ERC revenue, employer services revenue grew during the quarter, driven by growth in our I-9 and onboarding businesses, despite the negative impact of U.S. hiring. Workforce solutions adjusted EBITDA margins of 51.2% were better than our expectations, principally due to better expected revenue performance. The strength of EWS and the uniqueness and value of their twin income and employment data and employer services businesses was clear again in 2023.
Jeff P. Meuler: You see revenue is expected to stay at about these levels through 202024 and will see headwinds in our employer vertical from this ERC decline through the third quarter of 2024.
Jeff P. Meuler: Excluding the impact of the declining ERC revenue employer services revenue grew and grew during the quarter driven by growth in our I nine and Onboarding businesses. Despite the negative impact of U S hiring.
Jeff P. Meuler: Workforce solutions adjusted EBITDA margins of 51, 2% were better than our expectations, principally due to better expected revenue performance.
Jeff P. Meuler: The strength of AWS, and uniqueness and value of their twin income and employment data and employee employer services businesses with clear again in 2023.
Jeff P. Meuler: AWS is expected to deliver strong growth in 2024 and continue above market growth in the future.
Mark W. Begor: EWS is expected to deliver strong growth in 2024 and continue above market growth in the future. On slide 7, I'd like to expand on the significant opportunities still in front of us for EWS. This slide details the big $15 billion EWS TAM versus their $2.3 billion of revenue last year. EWS has plenty of room to grow. As you can see, with the exception of housing, which includes mortgages, where our penetration is on the order of 60%, our penetration is in the range of 10 to 20% in each target market where we compete. In each of these markets, we principally compete against paper pay stubs or other forms of manual verification.
Jeff P. Meuler: On slide seven I'd like to expand on this significant opportunity still in front of us for AWS.
Jeff P. Meuler: This slide details the big $15 billion AWS Tam versus their $2 3 billion of revenue last year.
Jeff P. Meuler: AWS has plenty of room to grow as you can see with the exception of housing which includes mortgage where our penetration is on the order of 60%. Our penetration is in the range of 10% to 20% in each target market, where we compete.
Jeff P. Meuler: And each of these markets, we principally compete against paper pay stubs or other forms of manual verifications and we deliver instant verifications productivity speed and accuracy.
Mark W. Begor: And we deliver instant verifications, productivity, speed, and accuracy. In both mortgage, government, and talent, where there's a requirement for broad coverage and depth of detail, and in talent and mortgage, where there's a need for historical data, we have an opportunity to drive strong future growth from penetration in our existing verticals and leverage that penetration as we continue to expand twin record coverage towards the 220 million income-producing Americans in the United States. As shown on slide 8, USIS revenue was up over 5% and above our expectations, principally due to stronger than expected mortgage revenue. USIS delivered non-mortgage revenue growth of about just over 3% in the quarter and slightly below our 4% growth expectation. USIS mortgage revenue was up 16% and outperformed mortgage credit inquiries that were down 17% by 33 points. The strong pricing environment drove the very strong outperformance. At $78 million in the quarter, mortgage revenue was 18% of total USIS revenue.
Jeff P. Meuler: In both mortgage government and talent, where theres a requirement for broad coverage and depth of detail and in talent in mortgage where there's a need for historical data, we have an opportunity to drive strong future growth from penetration in our existing verticals and leverage that penetration as we can continue to expand twin record coverage towards the 22 202.
Jeff P. Meuler: $20 million income producing Americans in the United States.
Jeff P. Meuler: Okay.
Jeff P. Meuler: As shown on slide eight U S. <unk> revenue was up over 5% and above our expectations, principally due to stronger than expected mortgage revenue.
Jeff P. Meuler: U S. I S delivered non mortgage revenue growth of about just over 3% in the quarter and slightly below our 4% growth expectation.
Jeff P. Meuler: U S. I S mortgage revenue was up 16% and outperformed the mortgage credit inquiries that were down 17% by 33 points.
Jeff P. Meuler: Long pipe strong pricing environment drove the very strong outperformance.
Jeff P. Meuler: At $78 million in the quarter mortgage revenue was 18% of total <unk> revenue.
Jeff P. Meuler: B to B non mortgage online revenue growth was down slightly less than 1% and below our expectations.
Mark W. Begor: B2B non-mortgage online revenue growth was down slightly less than 1% and below our expectations. We continue to see double-digit growth in commercial and single-digit growth in telco and auto, with banking and lending about flat. The declines were principally due to weakness in D2C, our business where we sell data to other credit bureaus and insurance.
Jeff P. Meuler: We continue to see double digit growth in commercial and single digit growth in telco and auto with banking and lending about flat.
Jeff P. Meuler: The declines were principally due to weakness in D C. Our business, where we sell data to other credit bureaus and insurance.
Jeff P. Meuler: Financial marketing services, our BTB offline business was up 7% and much better than our expectations in marketing we saw mid single digit growth in the quarter led by double digit growth in our <unk> side consumer wealth data business, partially offset by declines in prescreen marketing.
Mark W. Begor: Financial Marketing Services, our B2B offline business, was up 7% and much better than our expectations. In marketing, we saw mid-single-digit growth in the quarter, led by double-digit growth in our IXI consumer wealth data business, partially offset by declines in pre-screen marketing. While pre-screen marketing revenue was down in the quarter, we did see an improvement over prior quarters with a return to growth in FinTech pre-screen marketing. We continue to see declines in smaller FIs partially offset by growth in larger FIs.
Jeff P. Meuler: While pre stream screen marketing revenue was down in the quarter, we did see an improvement over prior quarters with the return to growth in Fintech Prescreen marketing.
Jeff P. Meuler: We continue to see declines in smaller <unk>, partially offset by growth in larger ethos.
Mark W. Begor: Within risk and account services, we saw limited growth in our portfolio review business, but not to the levels we would typically see if our customers were expecting a weakening economy. And within fraud, we saw double-digit revenue growth primarily from new business. USIS Consumer Solutions D2C business had another very strong quarter, up 15% from very good performances in both our consumer direct and indirect channels, and USIS adjusted EBITDA margins to 35.1% in the quarter and in line with our October guidance. Todd and the U.S. team are on offense as they complete their cloud transformation in the first half of 2024 and pivot to leveraging their new cloud capabilities to deliver new products and drive share gain. In the quarter, the USIS team signed an extension to the NCTUE cell phone and utility payment data relationship, allowing USIS to exclusively manage the database and continue bringing new products to market that expand lending to consumers, including our differentiated USIS mortgage credit file solution that incorporates NC plus cell phone and utility data that only Equifax can provide.
Jeff P. Meuler: Within risk and account services, we saw limited growth in our portfolio review business, but not to the levels. We would typically see if our customers were expecting a weakening economy.
Jeff P. Meuler: And within fraud, we saw double digit revenue growth primarily from new business.
Jeff P. Meuler: USAA is consumer solutions D to C business had another very strong quarter up 15% from very good performances in both our consumer direct and indirect channels.
Jeff P. Meuler: In <unk> adjusted EBITDA margins were 35, 1% in the quarter and in line with our October guidance.
Jeff P. Meuler: In the U S team are on offense as they complete their cloud transformation in the first half of 2024 and pivot to leveraging their new cloud capabilities to deliver new products and drive share gains in.
Jeff P. Meuler: In the quarter the U S. I S team signed an extension to the N C T cell phone and utility payment data relationship, allowing us to exclusively manage the database and continue bringing new products to market that expand lending to consumers, including our differentiated U S. I S mortgage credit file solution that incorporates NC plus.
Jeff P. Meuler: Cell phone and utility data that only equifax can provide.
Mark W. Begor: Turning to slide nine, international revenue was up 22% in constant currency and up 6% in organic constant currency, excluding the impact of BVS. And above the 20% growth we guided to in October due to better than expected revenue in Latin America, slightly offset by lower Asia-Pacific revenue. Europe local currency revenue was up a strong 9% in the quarter, from strong double-digit growth in our UK CRE business and, as expected, a return to growth from our UK debt management business. Latin America local currency revenue excluding Brazil was up 30% versus last year, driven by strong double-digit growth in Argentina, Uruguay, Paraguay, and Central America from new product introductions and pricing actions. Brazil Revenue in the Quarter, on a reported basis, was 41 million.
Jeff P. Meuler: Turning to slide nine international revenue was up 22% in constant currency and up 6% and organic constant currency, excluding the impact of bvs and above the 20% growth we guided to in October due to better than expected revenue in Latin America, slightly offset by lower Asia Pacific revenue.
Jeff P. Meuler: Europe local currency revenue was up a strong 9% in the quarter from strong double digit growth in our U K CRE CRA business and as expected a return to growth from our U K get management business.
Jeff P. Meuler: Latin America local currency revenue, excluding Brazil was up 30% versus last year, driven by strong double digit growth in Argentina, Uruguay, Paraguay, and Central America from new product introductions and pricing actions.
Jeff P. Meuler: Brazil revenue in the quarter.
Jeff P. Meuler: On a reported basis was 41 million, we continue to make good progress on the Brazil integration with strong progress in bringing new Equifax solutions, such such as count and mitigate or to the Brazilian market as well as bringing E F X data and analytics expertise to our Brazilian customers are.
Mark W. Begor: We continue to make good progress on the Brazil integration, with strong progress in bringing new Equifax solutions such as Count and Mitigator to the Brazilian market, as well as bringing EFX data and analytics expertise to our Brazilian customers. Our global Equifax teams are very engaged in integration activities, including moving BVS to the Equifax cloud and single data fabric. Canada delivered low single-digit growth in the quarter, as expected.
Jeff P. Meuler: Our global Equifax teams are very engaged in integration activities, including moving bvs to the Equifax cloud and single data fabric.
Jeff P. Meuler: Canada delivered low single digit growth in the quarter as expected.
Mark W. Begor: Canada will complete its migration to the Equifax cloud by mid-2024, and similar to USIS, we expect to see accelerated NPI growth going forward. And Asia-Pacific revenue was below our expectations with revenue down 2% due to lower market volumes in consumer and commercial, particularly late in November and December. We expect Asia-Pacific to have declining revenue in the first half of 2024 due to these softer market conditions and the near-term impact of long-term contract extensions we signed with several large customers. We expect Asia-Pacific to return to revenue growth in the second half of 2024. Despite the decline in revenue, Asia Pacific adjusted EBITDA margins were up over 200 basis points sequentially from strong cost management. International adjusted EBITDA margins of 31.2% were up almost 500 basis points sequentially, an outstanding performance.
Jeff P. Meuler: We will complete their migration to the Equifax cloud by mid 2024, and similar to U S. I S. We expect to see accelerated NPI growth going forward.
Jeff P. Meuler: In Asia Pacific revenue was below our expectations with revenue down 2%.
Jeff P. Meuler: Due to lower market volumes in consumer and commercial particularly late in November and December.
Jeff P. Meuler: We expect Asia Pacific to have declining revenue in the first half of 2024 due to the softer market conditions in the near term impact of long term contract extensions, we signed with several large customers.
Jeff P. Meuler: We expect Asia Pacific to return to revenue growth in the second half of 2024.
Jeff P. Meuler: Despite the decline in revenue Asia Pacific adjusted EBITDA margins were up over 200 basis points sequentially from strong cost management.
Jeff P. Meuler: International adjusted EBITDA margins of 31, 2% were up almost 500 basis points sequentially and outstanding performance. The improvement was driven by revenue growth and good execution against our 2023 cost reduction plan by Lisa and the international team.
Mark W. Begor: The improvement was driven by revenue growth and good execution against their 2023 cost reduction plan by Lisa and the international team. Turning to slide 10, in the fourth quarter, overall non-mortgage constant dollar revenue grew a very strong 14%, with organic growth of 9%, up over 250 basis points sequentially, a very good sign as we move into 2024. The acceleration in organic revenue growth was driven by very strong EWS verifier non-mortg
Jeff P. Meuler: Turning to slide 10 in the fourth quarter overall non mortgage constant dollar revenue grew a very strong 14% with organic growth of 9% up over 250 basis points sequentially, a very good sign as we move into 2024.
Jeff P. Meuler: The acceleration in organic revenue growth was driven by very strong AWS verifier non mortgage revenue performance.
Jeff P. Meuler: As we look to 'twenty 'twenty four we expect non mortgage constant dollar revenue growth to be over 10, 5% with organic growth of almost eight 5% about 150 basis points above the levels delivered last year.
Mark W. Begor: As we look to 2024, we expect non-mortgage constant dollar revenue growth to be over 10.5%, with organic growth of almost 8.5%, about 150 basis points above the levels delivered last year. Non-mortgage organic revenue growth is expected to be led again by EWS, driven by strong growth in their government and talent business. Turning to slide 11, we delivered strong 14% vitality again in the quarter, led by very strong performance in EWS with a VI over 20%, as well as over 15% in Latin America. Importantly, USIS accelerated in the fourth quarter to 7%, which was up over 200 basis points sequentially, as we get closer to cloud completion and are able to begin to leverage our new cloud-native infrastructure for innovation and new products. Our strong Vitality Index results are not only led by over 100 new products launched in each of the last four years but by increasing average revenue per new product, which is up close to 50% since 2021. During the quarter, about 90% of new product revenue came from non-mortgage products leveraging the Equifax cloud.
Jeff P. Meuler: Non mortgage organic revenue growth expected is expected to be a led again by AWS driven by strong growth in their government and talent businesses.
Jeff P. Meuler: Turning to slide 11, we delivered strong 14% vitality again in the quarter led by very strong performance in dws with a V I over 20%.
Jeff P. Meuler: As well as over 15% and Latin America.
Jeff P. Meuler: Importantly, U S. I S accelerated in the fourth quarter to 7%, which was up over 200 basis points sequentially as we get closer to cloud completion are able to begin to leverage our new cloud native infrastructure for innovation and new products are.
Jeff P. Meuler: Our strong vitality index results are not only led by over 100, new products launched in each of the last four years, but the increasing average revenue per new product, which is up close to 50% since 2021 during.
Jeff P. Meuler: During the quarter about 90% of new product revenue came from non mortgage products leveraging the equifax cloud.
Jeff P. Meuler: The positive momentum in our NPI and vitality index is encouraging for the future and reinforces our long term strategy of leveraging our differentiated data assets and new cloud capabilities to drive new solutions for our customers.
Mark W. Begor: The positive momentum in our NPI and Vitality Index is encouraging for the future and reinforces our long-term strategy of leveraging our differentiated data assets and new cloud capabilities to drive new solutions for our customers. Leveraging our Equifax cloud capabilities to drive new product rollouts, we expect to deliver a vitality index of over 10% again in 2024. On the right side of the slide, we've highlighted several new products introduced in the quarter.
Jeff P. Meuler: Leveraging our equifax cloud capability to drive new product Rollouts, we expect to deliver a vitality index of over 10% again in 2024.
Jeff P. Meuler: On the right side of this slide we've highlighted several new products introduced in the quarter.
Mark W. Begor: These new solutions are a testament to the power of the Equifax cloud in driving innovation that can increase the visibility of consumers to help expand access to credit and create new mainstream financial opportunities, as well as drive Equifax top-line growth and margin. Turning to slide 12, we believe Equifax AI, leveraging our differentiated data assets, our new Equifax cloud capabilities, and new product focus, is positioning our industry-leading EFX AI-powered models, scores, and products. On the left side of the slide, our large and diverse proprietary data sets are a significant differentiator for Equifax. Our proprietary data at scale, keyed and linked in our single data fabric, leveraging our new EFX cloud, gives us significant advantages in using AI to build more predictive multi-data models, scores, and products. Our EFXI is enabled by our EFX team-developed explainable AI solutions that leverage our Ignite platform and our Google Vertex capabilities, our modern AI and ML-enabled cloud-based model scoring engine, and our over 1,000 Equifax V&A professionals.
Jeff P. Meuler: New solutions are a testament to the power of the Equifax cloud and driving innovation that can increase the visibility of consumers help expand access to credit and create new mainstream financial opportunities as well as drive equifax topline growth and margins.
Jeff P. Meuler: Turning to slide 12, we believe equifax AI, leveraging our differentiated data assets, our new equifax cloud capabilities and new product focus is positioning our industry, leading E. FX AI powered models scores and products.
Jeff P. Meuler: On the left side of the slide our large and diverse proprietary datasets is a significant differentiator for equifax, our proprietary data had scaled keyed in linked in our single data fabric leveraging our new FX cloud gives us significant advantages in using AI to build more predictive multi data models scores and products.
Jeff P. Meuler: Our <unk> is enabled by our FX develop explainable AI solutions that leverage our ignite platform and our Google vertex capabilities.
Jeff P. Meuler: Our modern AI and ml enabled cloud based models, scoring engines and our over 1000 Equifax DNA professionals.
Mark W. Begor: AI Leveraging our patented explainable AI capabilities is a big priority for Equifax and 24 and beyond as we complete the Equifax cloud. As shown on the chart in the middle of slide 12, we've made tremendous progress building advanced models and leveraging our market-leading AI capability. In 2023, 70% of our new models will be built using AI and ML tools, up from 60% in 2022, with a goal of over 80% this year.
Jeff P. Meuler: AI leveraging our patented explainable AI capabilities is a big priority for Equifax in 'twenty, four and beyond as we complete the equifax cloud.
Jeff P. Meuler: As shown on the chart in the Middle of Slide 12, we have made tremendous progress building advanced models and leveraging our market leading AI capabilities in 2023, 70% of our new models were built using AI and ml tools up from 60% in 'twenty two with a goal of over 80% this year.
Jeff P. Meuler: Our investments in AI are generating results to date Equifax has received over 90 approved AI patents supporting areas such as our proprietary AI and there's certain neuro decision technology or N D T and explainable AI with over 138 patents pending.
Mark W. Begor: Our investments in AI are generating results. To date, Equifax has received over 90 approved AI patents supporting areas such as our proprietary AI neurodecision technology, or NDT, and explainable AI, with over 130 AI patents pending. We've launched new products developing FDFX AI, including Equifax OneScore for consumers incorporating traditional credit, alternative credit, as well as cell phone utility, and paid TV data, which has improved the performance of the solution to score 20% more consumers. We are energized about the capabilities that Equifax AI is bringing to strengthen our business and accelerate the value of our proprietary data through richer data combination. Now let's turn to 2024 guidance. Moving to slide 13, we enter 2024 with momentum from the fourth quarter and the underlying growth of our non-mortgage businesses and strong execution against our EFX 2026 strategic priorities.
Jeff P. Meuler: We've launched new products developing F E FX AI, including Equifax, one score for consumer for consumers incorporating traditional credit alternative credit as well as cell phone utility and pay TV data, which has improved the performance of the solution to score 20% more consumers.
Jeff P. Meuler: We are energized about the capabilities that equifax AI is bringing to strengthen our business and accelerate the value of our proprietary data to Richard data combinations.
Jeff P. Meuler: Now, let's turn to 2024 guidance moving to slide 13, we enter 2020 forward momentum from the fourth quarter and the underlying growth of our non mortgage businesses and our strong execution against our FX 2026 strategic priorities.
Jeff P. Meuler: The U S mortgage market appears to have bottomed and through January we're seeing some slight improvements versus our expectations in both U S. I S. In AWS, which is good news for the future.
Mark W. Begor: The U.S. mortgage market appears to have bottomed, and through January, we're seeing some slight improvements versus our expectations in both USIS and EWS, which is good news for the future. Our 2024 planning assumption is that the current level of U.S. mortgage activity will continue for the rest of the year with adjustments for seasonality. On this basis, U.S. mortgage inquiries across USIS and EWS would be down on a blended basis by 15%. We're assuming twin inquiries will see a slightly smaller decline than USIS credit inquiries as the level of consumer shopping behavior moderates.
Jeff P. Meuler: Our 2020 for planning assumption is that the current level of U S. Mortgage activity will continue for the rest of the year with adjustments for seasonality.
Jeff P. Meuler: On this basis U S O U S mortgage inquiries across U S. I S. In AWS would be down on a blended basis by 15%.
Jeff P. Meuler: We're assuming twin inquiries will see a slightly smaller decline in U S. I S credit inquiries as the level of consumer shopping behavior moderates.
Jeff P. Meuler: For perspective, our 2024 framework is over 30 points lower than the average current forecast from M. B, a which is currently forecasting 24 origination units up 17% versus our down 15% and Fannie Mae, which does not forecast units, but is forecasting origination dollar volumes up 24.
Mark W. Begor: For perspective, our 2024 framework is over 30 points lower than the average current forecast from MBA, which is currently forecasting 24 origination units up 17% versus our down 15%. And Fannie Mae, which is not forecasting units, but is forecasting origination dollar volumes up 24%. MBA and Fannie Mae forecast mortgage rates to move down to 6.1% and 5.8%, respectively, from 6.8% today.
Jeff P. Meuler: 4%.
Jeff P. Meuler: NBA and Fannie Mae forecast mortgage rates move down to $6, one and five 8% respectively from six 8% today.
Jeff P. Meuler: We will continue to forecast our mortgage market trends, our current E. FX run rates as we have done for the past five plus years and as in the past. We do not include interest rate decreases or increases in our forecast.
Mark W. Begor: We will continue to forecast our mortgage market trends off current EFX run rates as we have done for the past five plus years, and as we have done in the past, we do not include interest rate decreases or increases in our forecast. We will continue to share mortgage credit inquiry volume changes with you each quarter so you can make your own judgments on the mortgage market outlook for the future. Further, we are assuming that the U.S. economy will see modest deacceleration in 2024, with growth slightly below the 2% average we generally assume in our long-term growth framework. In our key international countries, we expect slowing and low levels of GDP growth in Australia, and in Canada, the UK, and Brazil, we expect about flat GDP.
Jeff P. Meuler: We will continue to share mortgage credit inquiry volume changes with you each quarter. So you can make your own judgments on the mortgage market outlook for the future.
Jeff P. Meuler: Further we are assuming that the U S economy will see modest acceleration in 'twenty four with grow slightly below the 2% average we generally assume in our long term growth framework.
Jeff P. Meuler: In our key international countries, we expect slowing and low levels of GDP growth in Australia, and in Canada, U K and Brazil, we expect expect about flat GDP.
Jeff P. Meuler: Despite the decline in the U S mortgage market and some modest economic de acceleration across our major markets. We expect to deliver 2020 for revenue of about 572 billion at the midpoint of our guidance with reported growth at the midpoint of eight 6%.
Mark W. Begor: Despite the decline in the U.S. mortgage market and some modest economic deacceleration across our major markets, we expect to deliver 2024 revenue of about $5.72 billion at the midpoint of our guidance, with reported growth at the midpoint of 8.6 percent. Constant currency revenue growth is expected to be about 10.5%, with organic constant currency revenue growth of 8.5%, and again, at the center of our 7-10% long-term organic growth framework. Well, mortgage revenue growth should be about 9.5%, about 24 points better than the about 15% decline from the US-IS&E to US mortgage increase in our framework. Non-mortgage constant dollar revenue should grow over 10.5% with organic growth of almost 8.5%, and FX is about 190 basis points negative to our revenue growth. We expect workforce solutions to deliver revenue growth of about 8% in 2024.
Jeff P. Meuler: Constant currency revenue growth is expected to be about 10, 5% with organic constant currency revenue growth of eight 5% and again at the center of our 7% to 10% long term organic growth framework.
Jeff P. Meuler: Total mortgage revenue growth should be about nine 5% about 24 points better than the about 15% decline.
Jeff P. Meuler: The U S I S needed, where U S mortgage inquiries in our framework.
Jeff P. Meuler: Non mortgage constant dollar revenue should grow over 10, 5% with organic growth of almost eight 5% in.
Jeff P. Meuler: And FX is about 190 basis points negative to our revenue growth.
Jeff P. Meuler: We expect workforce solutions to deliver revenue growth of about 8%. In 2024. This was this reflects mortgage revenue at up just under 2% about 15 points better than underlying AWS mortgage transactions and.
Mark W. Begor: This reflects mortgage revenue rising just under 2%, about 15 points better than underlying EWS mortgage transactions, and EWS non-mortgage verticals are expected to grow almost 10.5%. Excluding the expected significant decline in ERC revenue as that pandemic support program completes, EWS non-mortgage revenue growth is about 12%, which is a strong performance given the expected weak hiring market in 2024, as well as the weak Talent in EWS is expected to grow about 7% despite a decline in our underlying markets, and government is expected to deliver over 15% growth against a very strong over 30% comp last year. Twin record growth in the NPI Vitality Index of over our 10% EFX goal and continued strong growth in both pricing and penetration will continue to drive EWS outperformance.
Jeff P. Meuler: In AWS non mortgage verticals are expected to grow almost 10, 5%.
Jeff P. Meuler: Excluding the expected significant decline in ERC revenue as that pandemic support program completes UWS non mortgage revenue growth is about 12%, which is a strong performance given the expected weak hiring market in 2024 as well as the weaker overall U S economy.
Jeff P. Meuler: Talent and AWS is expected to grow about 7%. Despite a decline in our underlying markets and government is expected to deliver over 15% growth against the very strong over 30% comp last year.
Jeff P. Meuler: Twin record growth and NPI vitality index of over our 10% FX goal and continued strong growth in both pricing and penetration will continue to drive AWS outperformance.
Jeff P. Meuler: We expect U S. I S deliver revenue growth of almost 8% in 2024 at the high end of their long term growth target of 6% to 8%.
Mark W. Begor: We expect USIS to deliver revenue growth of almost 8% in 2024, at the high end of its long-term growth target of 6 to 8%. Mortgage revenue is expected to grow over 20%, more than 35 points stronger than the expected 16% decline in mortgage market inquiries. We are continuing to see substantial revenue benefits from both pricing increases from one of our largest USIS mortgage vendors that we pass on to customers at levels to maintain consistent margins and new product and pricing benefits by USIS. Non-mortgage revenue in USIS is expected to grow almost 4% despite modestly slower economic growth. The non-mortgage growth will be driven by continued strong commercial and identity and fraud growth, as well as mid-single-digit growth in FI and auto. Consumer services is expected to grow about 5%, with financial marketing services expected to grow in the low single-digit percent.
Jeff P. Meuler: Mortgage revenue is expected to grow over 20% over six over 35 points stronger than you expected, 16% decline in mortgage market inquiries.
Jeff P. Meuler: We are continuing to see substantial revenue benefits from both pricing increases from one of our largest U S. I S mortgage vendors that we pass on to customers at levels to maintain consistent mortgage margins and new product and pricing benefits by U S. I S.
Jeff P. Meuler: Non mortgage revenue in <unk> is expected to grow almost 4% despite modestly slower economic growth.
Jeff P. Meuler: In non mortgage growth will be driven by continued strong commercial and identity and fraud growth as well as mid single digit growth in FY in auto.
Jeff P. Meuler: Consumer services is expected to grow about 5% with financial marketing services is expected to grow in the low single digit percent and we expect to see weaker revenue growth in DTC and telco.
Mark W. Begor: And we expect to see weaker revenue growth in D2C and telco. International had a very good 2023 with 6% organic constant dollar revenue growth but saw some weakening in end markets late in the year, particularly in Canada and Australia. We expect international constant currency growth to be over 15% in 2024, with organic constant currency growth of about 10%. The accelerating inflation we are seeing in Argentina is expected to benefit overall international revenue growth by over 5%.
Jeff P. Meuler: International had a very good 2023 with 6% organic constant dollar revenue growth, but saw some weakening in end markets late in the year, particularly in Canada and Australia.
Jeff P. Meuler: We expect international constant currency growth to be over 15% in 2024 with organic constant currency growth of about 10%.
Jeff P. Meuler: The accelerating inflation, we are seeing in Argentina is expected to benefit overall international revenue growth by over five percentage points.
Jeff P. Meuler: Although uncertain, we have been soon currency devaluation in Argentina, Argentina will be more than offset by inflation in our 2020 for planning.
Mark W. Begor: Although uncertain, we have ensured currency devaluation in Argentina will be more than offset by inflation in our 2024 planning. We expect our new product Vitality Index to be over 10% again in 2024, led by EWS in Latin America. As US and ISN Canada principally complete their cloud transformation, we expect their NPI roll-ups to accelerate as we exit 2024. For the full year, EBITDA is expected to be about $1.9 billion, up over 12%, with adjusted EBITDA margins of about 33.3%. And adjusted EPS is expected to be about $7.35 per share, up about 9.5% from last year. However, capital spending will decline by over $100 million to about $475 million, or about 8.3% of revenue.
Jeff P. Meuler: We expect our new product vitality index to be over 10%.
Jeff P. Meuler: Again in 2024 led by AWS in Latin America.
Jeff P. Meuler: As U S and I S in Canada, principally complete their cloud transformation, we expect their NPI rollouts to accelerate as we exit 2024.
Jeff P. Meuler: For the full year EBITDA is expected to be about $1 9 billion up over 12% with adjusted EBITDA margins of about 33, 3%.
Jeff P. Meuler: And adjusted EPS is expected to be about $7 35 per share up about nine 5% from last year.
Jeff P. Meuler: Capital spending will decline by over $100 million to about $475 million or about eight 3% of revenue.
John W. Gamble: The reduction reflects our progress in completing our cloud transformation and is a significant step towards our goal of 7% or below as we exit 2025. Now I'd like to turn it over to John to provide more detail on our 2024 assumptions and guidance and also to provide our first quarter framework. Our 2024 guidance builds on our strong 2023 non-mortgage growth from new products, record growth, and pricing.
Jeff P. Meuler: The reduction reflects our progress in completing our cloud transformation and is a significant step towards our goal of 7% or below as we exit 2025.
Jeff P. Meuler: Now I'd like to turn it over to Jon to provide more detail on our 2024 assumptions in guidance and also to provide our first quarter framework.
Jon: Our 2024 guidance builds on our strong 2023, non mortgage growth from new products record growth and pricing John.
Jeff P. Meuler: John.
Jon: Thanks, Mark as Mark discussed and as shown on slide 14, our planning assumes a 16% reduction in mortgage credit inquiries in 2024, <unk> 24 is expected to see U S. I S mortgage credit inquiries down over 26% year to year with AWS twin inquiries at similar levels sequentially as we.
John W. Gamble: Thanks Mark. As Mark discussed, and as shown on slide 14, our planning assumes a 16% reduction in mortgage credit inquiries in 2024. 1Q24 is expected to see USIS mortgage credit inquiries down over 26% year-to-year, with EWS twin inquiries at similar levels. Subsequently, as we move through 2024, we are assuming overall mortgage activity stays at about these levels with normal seasonality for the remaining quarters of 2020. Slide 15 provides a full-year revenue walk detailing the drivers of 8.6% revenue growth to the midpoint of our 2024 revenue guidance of $5.72 billion. The combined about 15% decline in U.S. mortgage credit and twin inquiries is negatively impacting 2024 total revenue growth by almost 3%. Mortgage revenue outperformance relative to the mortgage market, at about 24 points, is expected to benefit 2024 total revenue growth by about four and a half percent, more than offsetting the almost three percentage points of negative revenue impact from the mortgage market decline. As a result, the expected about 9.5% increase in total mortgage revenue is expected to have a positive 1.5% impact on overall revenue growth.
Jeff P. Meuler: We move through 2024, we are assuming overall mortgage activity stays at about these levels with normal seasonality for the remaining quarters of 2024.
Jeff P. Meuler: Slide 15 provides our full year revenue walk the tailing the drivers of the eight 6% revenue growth to the midpoint of our 2020 for revenue guidance of $5 seven $2 billion.
Jeff P. Meuler: The blended about 15% decline in the U S mortgage credit and twin inquiries is negatively impacting 2020 for total revenue growth by almost 3%.
Jeff P. Meuler: Mortgage revenue outperformance relative to the mortgage market at about 24 points is expected to benefit 2020 for total revenue growth by about four 5% more than offsetting the almost three percentage points of negative revenue impact from the mortgage market decline as a result, we expected about nine 5% increase in <unk>.
Jeff P. Meuler: Total mortgage revenue was a positive one 5% impact on overall revenue growth.
John W. Gamble: Non-mortgage organic revenue growth is expected to be about 8.5% on a constant currency basis and is driving about 7% of the growth in overall revenue. As Mark referenced earlier, the growth is within our long-term framework and is broad-based across all three BUs, with again, the strongest performance in workforce solutions. The BVS acquisition, completed last August, is expected to contribute about two percentage points of revenue growth to 2024. Slide 16 provides an adjusted EPS walk detailing the drivers of the expected 9.5% increase to the midpoint of our 2024 adjusted EPS guidance of $7.35 per share.
Jeff P. Meuler: Non mortgage organic revenue growth is expected to be about eight 5% on a constant currency basis and is driving about 7% of the growth in overall revenue.
Jeff P. Meuler: As Mark referenced earlier the growth is within our long term framework and is broad based across all three be us and again the strongest performance in workforce solutions.
Jeff P. Meuler: The Bvs acquisition completed last August is expected to contribute about two percentage points of revenue growth to 2024.
Jeff P. Meuler: Slide 16 provides an adjusted EPS walk detailing the drivers of the expected nine 5% increase to the midpoint of our 2024 adjusted EPS guidance of $7 35 per share Rev.
John W. Gamble: Revenue growth of 8.6% at our 2023 EBITDA margins of 32.2% would deliver 12.5% growth in adjusted EPS. EBITDA margins in 2024 are expected to be about 33.3%, expanding about 110 basis points from 2023. The margin expansion delivers about six points of adjusted EPS growth.
Jeff P. Meuler: Revenue growth of eight 6% at our 2023 EBITDA margins of 32, 2%, we'll deliver 12, 5% growth in adjusted EPS.
Jeff P. Meuler: EBITDA margins in 2024 are expected to be about 33, 3% expanding about 110 basis points from 2023, the margin expansion delivers about six points of adjusted EPS growth. The expansion in margins is driven by the following factors organic constant dollar revenue growth in 2024.
John W. Gamble: Organic constant dollar revenue growth in 2024 at about eight and a half percent is within our long-term financial framework. Consistent with that framework. We will generate about 50 basis points of margin expansion from high variable margins on our revenue growth. The cost reduction actions we executed in 2023, as well as actions related to the charge we announced this quarter, will generate about $90 million in incremental spending reductions in 2024, of which about $60 million is expense savings in 2024, or about 100 basis points of EBITDA margin expansion. The actions we took in 2023 will generate an additional $65 million in spending reductions in 2024, on top of the $210 million in spending reductions in 2023. The cost action we announced this quarter will generate an additional $25 million in spending reductions in 2024.
Jeff P. Meuler: At about eight 5% is within our long term financial framework consistent with that framework, we will generate about 50 basis points of margin expansion from high variable margins on our revenue growth.
Jeff P. Meuler: The cost reduction actions, we executed in 2023 as well as actions related to the charge, we announced this quarter will generate about $90 million in incremental spending reductions in 2024 of which about $60 million as expense savings in 2024, or about 100 basis points and EBITDA margin expansion.
Jeff P. Meuler: The actions we took in 2023 will generate an additional $65 million and spending reductions in 2024 on top of the $210 million of spending reductions in 2023, the cost action, we announced this quarter will generate an additional $25 million and spending reductions in 2024.
John W. Gamble: In 2024, the cost savings we will generate from decommissioning North American infrastructure in the second half of 2023 will exceed the redundant system and migration costs we are incurring, generating about 30 basis points of margin benefit. Partially offsetting the about 180 basis points of margin expansion I referenced above, it's principally higher variable compensation expense from the normalization of incentive and sales comp in 2024, which were at low levels in 2023 due to the substantial impact of the weak mortgage market on our performance. In 2024, our planning assumes we will return to target levels of performance.
Jeff P. Meuler: In 2020 for cost savings, we will generate from decommissioning of North American infrastructure in the second half of 'twenty three will exceed the redundant system and migration costs, we are incurring generating about 30 basis points of margin benefit.
Jeff P. Meuler: Partially offsetting the about 180 basis points of margin expansion I referenced above is principally higher variable compensation expense from the normalization of incentive and sales comp in 2024 that were at low levels in 2023 due to the substantial impact of the weak mortgage market on our performance.
Jeff P. Meuler: In 2024, our planning assumes we returned to target levels of performance.
John W. Gamble: As we look beyond 2024, the cost benefits of completing our cloud migration, as well as accelerating high variable profit revenue growth, are expected to drive significant improvement in EBITDA margins. In 2024, adjusted EBITDA should increase to about $1.9 billion, up 12.5% from 2023. Depreciation and amortization is expected to increase by about $60 million in 2024, which will negatively impact adjusted EPS by about 5%. DNA is increasing in 2024 as we accelerate putting cloud native systems into production.
Jeff P. Meuler: As we look beyond 2024, the cost benefits of completing our cloud migration as well as accelerating high variable profit revenue growth are expected to drive significant improvement in EBITDA margins.
Jeff P. Meuler: In 2024, adjusted EBITDA should increase to about $1 $9 billion up 12, 5% from 2023.
Jeff P. Meuler: Depreciation and amortization is expected to increase by about $60 million in 2024, which will negatively impact adjusted EPS by about 5%.
Jeff P. Meuler: DNA is increasing in 2024, as we accelerate putting cloud native systems into production.
John W. Gamble: P&L light items below operating income, principally interest and other expense and tax expense, are expected to negatively impact adjusted EPS by about 4 percentage points. The increase in interest expense reflects the impact of higher interest rates and the increased debt from our BVS acquisitions. Our estimated tax rate of about 26.7% is 50 basis points higher than 26.2% in 2023, principally from higher foreign earnings. Slide 17 provides the specifics on our 2020 full-year guidance that Mark discussed in detail. The slide includes additional detail on expected BU-adjusted EBITDA margins, as well as guidance on specific P&L line items. EWS EBITDA margins in 2024, at 52%, are expected to be up from the 51% delivered in 2023. Given strong non-mortgage revenue growth from new products, record growth, penetration, and pricing partially offset by the normalization of incentives, USIS EBITDA margins are USIS is benefiting from revenue growth and 2023 cost action. However, in the first half of 24, USIS will have redundant systems costs as well as costs related to customer migrations prior to completion of the migration of the consumer credit systems to Data Fabric. USIS is also being impacted by the normalization of incentives.
Jeff P. Meuler: The P&L line items below operating income principally interest and other expense and tax expense are expected to negatively impact adjusted EPS by about four percentage points. The increase in interest expense reflects the impact of higher interest rates and the increased debt from our <unk> acquisition, our estimated tax rate of about 20.
Jeff P. Meuler: Six 7% is 50 basis points higher than the 26, 2% in 2023, principally from higher foreign earnings.
Jeff P. Meuler: Slide 17 provides the specifics on our 2020 full year guidance that Mark discussed in detail. The slide includes additional detail unexpected be you adjusted EBITA margins as well as guidance on specific P&L line items.
Jeff P. Meuler: Ws EBITA margins in 2024 at 52% are expected to be up from the 51% delivered in 2023, given strong non mortgage revenue growth from new products record growth penetration and pricing, partially offset by the normalization of incentive comp.
Jeff P. Meuler: U S. I S. EBITDA margins are expected to be about 34, 5% about flat with 2023 U S. I S was benefiting from revenue growth in 2023 cost actions. However in the first half 'twenty for U S. I S will have redundant systems costs as well as costs related to customer migrations prior to <unk>.
Jeff P. Meuler: <unk> of migration of the consumer credit systems to data fabric <unk> is also being impacted by the normalization of incentive comp.
Jeff P. Meuler: International EBITDA margins at about 28% are expected to expand versus the 26, 5% delivered in 2023, driven principally by revenue growth and good performance on 2023 cost actions.
John W. Gamble: International EBITDA margins of about 28% are expected to expand versus the 26.5% delivered in 2023, driven principally by revenue growth and good performance on 2023 cost actions. Corporate expense excluding depreciation and amortization is increasing in 2024 relative to 2023 due to the increases in incentive and equity compensation from the lower levels incurred in 2023 that I referenced earlier. Corporate functions such as finance, legal, HR, corporate technology, and others are managing costs consistent with the cost actions we have taken in 2023.
Jeff P. Meuler: Corporate expense, excluding depreciation and amortization is increasing in 2024 relative to 2023 due to the increases in incentive and equity compensation from the lower levels incurred in 2023 that I referenced earlier corporate functions, such as finance legal HR corporate technology, and others are managing costs consistent with it.
Jeff P. Meuler: Cost actions, we have taken in 2023.
John W. Gamble: As Mark indicated, capital spending should be about $475 million in 2024, down over $100 million from 2023. We believe that our guidance is centered at the midpoint of both our revenue and adjusted EPS guidance. With EBITDA increasing to about $1.9 billion and capital spending declining to $475 million, we expect to deliver over 50% growth in free cash flow in 2024 versus the $518 million we delivered in 2014. At this level of EBITDA and free cash flow, our EBITDA leverage should decline from the current levels of about 3.2 times to 2.5 times as we complete 2024. We believe these levels of leverage are nicely within the levels required for our current BBB and BAA2 credit ratings.
Jeff P. Meuler: As Mark indicated capital spending should be about $475 million in 2024 down over $100 million from 2023, we believe that our guidance is centered at the midpoint of both our revenue and adjusted EPS guidance ranges.
Jeff P. Meuler: With EBITDA, increasing to about $1 $9 billion in capital spending and declining to $475 million, we expect to deliver over 50% growth in free cash flow in 2024 versus the $518 million, we deliver in 2023.
Jeff P. Meuler: At this level of EBITDA and free cash flow or EBITDA leverage should decline from the current levels of about three two times to two and a half times as we complete 2024. We believe these levels of leverage are nicely within the levels required for our current triple B B double a two credit ratings as we achieve these levels we will have significant.
John W. Gamble: As we achieve these levels, we will have significant flexibility to begin to return cash to shareholders through dividend increases and share repurchases, as well as continue to do bolt-on acquisitions. Slide 18 provides our guidance for 1Q24. Revenue at the midpoint of guidance is expected to be about $1.385 billion, up 6.4% from 1Q23. Constant currency growth is expected to be about 7.8%, with organic constant currency growth about 4.7%.
Jeff P. Meuler: Flexibility to begin to return cash to shareholders through dividend increases and share repurchases as well as continue to do bolt on acquisitions.
Jeff P. Meuler: Slide 18 provides our guidance for <unk> 'twenty for revenue at the midpoint of guidance is expected to be about 1.385 billion up six 4% from <unk> 23 constant currency growth is expected to be about seven 8% with organic constant currency growth about four 7%.
John W. Gamble: Non-mortgage revenue, constant currency growth will be about 9.5%. Mortgage revenue should grow about 1%, despite overall USIS and twin inquiry transactions being down about 26%. Business unit performance in the first quarter is expected to be as described below. Workforce Solutions revenue is expected to grow about 2% year to year.
Jeff P. Meuler: Non mortgage revenue constant currency growth will be about nine 5% mortgage revenue should grow about 1%. Despite overall U S. I S and twin inquiry transactions being down about 26%.
Jeff P. Meuler: Business unit performance in the first quarter are expected to be as described below.
Jeff P. Meuler: Workforce solutions revenue is expected to grow about 2% year to year AWS mortgage revenue will be down about 15% and is expected to outperform underlying twin inquiries by about 11%.
John W. Gamble: EWS mortgage revenue will be down about 15% and is expected to outperform underlying twin inquiries by about 11%. This mortgage outperformance is below the 18% we saw in 4Q as we lapped the substantial growth in mortgage 36 volumes that occurred in the first quarter of 2023. As we have discussed in the past, EWS long-term mortgage outperformance is expected to be about 11-13%, consistent with twin records, product, and price levers that will drive overall Workforce Solutions long-term revenue growth to 13-15%. Non-mortgage revenue should grow about 9%, with verifier non-mortgage revenue up 15%. Employer revenue will be down about 4% in the quarter due to the decline in ERC revenue that was referenced earlier.
Jeff P. Meuler: This work it out performance is below the 18% we saw in <unk> as we lap the substantial growth in mortgage 36 volumes that occurred in the first quarter of 'twenty three.
Jeff P. Meuler: As we have discussed in the past AWS long term mortgage outperformance is expected to be about 11% to 13% consistent with twin records product and price levers that will drive overall workforce solutions long term revenue growth to 13% to 15%.
Jeff P. Meuler: Mortgage revenue should grow about 9% with verify our non mortgage revenue up 15% employer revenue will be down about 4% in the quarter due to the decline in <unk> revenue that was referenced earlier, excluding the significant decline in ERC revenue total workforce solutions non mortgage revenue will be up over 11.
John W. Gamble: Excluding the significant decline in ERC revenue, total Workforce Solutions non-mortgage revenue will be up over 11%, with employer revenue up about 4.5%. EBITDA margins are expected to be about 50.5%, about flat year-to-year, and down a little over 50 basis points sequentially, principally due to a negative seasonal mix from higher employer services revenue in one. USIS revenue is expected to be up about 9% Mortgage revenue will be up over 25%. U.S. I.S.
Jeff P. Meuler: Were sent with employer up about four 5% EBITA.
Jeff P. Meuler: EBITDA margins are expected to be about 55% about flat year to year and down a little over 50 basis points sequentially, principally due to negative seasonal mix from higher employer services revenue in <unk>.
Jeff P. Meuler: U S. I S revenue is expected to be up about 9% year to year.
Jeff P. Meuler: Mortgage revenue will be up over 25% U S. I S. Mortgage revenue was expected to outperform U S. I S credit inquiries by over 50% in the quarter and the first quarter. We are benefiting from the significant price increases from a vendor that we discussed earlier as well as equifax, new product growth and pricing benefits this level of outperform.
John W. Gamble: Mortgage revenue is expected to outperform U.S. I.S. credit inquiries by over 50 percent in the quarter. In the first quarter, we are benefiting from the significant price increases from a vendor that we discussed earlier, as well as Equifax's new product growth and pricing benefits. This level of outperformance versus the mortgage credit increase is expected to decline to under 30% as we move through 2024. USIS non-mortgage revenue is expected to be up about 3%.
Jeff P. Meuler: <unk> versus the mortgage credit inquiries is expected to decline to under 30% as we move through 2024.
Jeff P. Meuler: U S. I S. Non mortgage revenue is expected to be up about 3% non mortgage will again be led by strong growth in commercial in identity and fraud and continued growth in Fi consumer in Fms.
John W. Gamble: Non-mortgage will again be led by strong growth in commercial and identity and fraud and continued growth in FI, consumer, and FMS. EBITDA margins are expected to be about 32% flat versus the first quarter of 2023 and down about 300 basis points sequentially. In the first half of 2024, USIS is also incurring incremental costs from customer migrations to the consumer credit exchange on data fabric. This is impacting 1Q24 margins, in addition to the seasonal decline in non-mortgage revenue and normalization of incentive compensation we referenced earlier. International constant currency revenue is expected to be up about 18%, representing about 4% organic constant currency growth from continued strong growth in LATAM in Europe, as well as mid-single-digit growth in Canada, offset by the decline in Asia-Pacific discussed earlier.
Jeff P. Meuler: EBITDA margins are expected to be about 32% flat versus the first quarter of 'twenty, three and down about 300 basis points sequentially in the first half of 2024 U S. I S is also incurring incremental costs from customer migrations to the consumer credit exchange on data fabric. This is impacting <unk> 'twenty for margins.
Jeff P. Meuler: In addition to the seasonal decline in non mortgage revenue and normalization of incentive compensation, we referenced earlier.
Jeff P. Meuler: Our national constant currency revenue is expected to be up about 18% representing about 4% organic constant currency growth from continued strong growth in Latam in Europe as well as mid single digit growth in Canada offset by the decline in Asia Pacific discussed earlier EBITDA margins are expected to be about 24% up.
John W. Gamble: EBITDA margins are expected to be about 24%, up about 50 basis points versus 1Q23, but down sequentially due to seasonally lower revenue in Canada and the UK CRA and incentive costs. 1Q24 Equifax EBITDA margins are expected to be about 29%, about flat with the first quarter of last year. As we discussed last year, corporate expense is much higher in the first quarter each year.
Jeff P. Meuler: About 50 basis points versus <unk>, 23, but down sequentially due to seasonally lower revenue in Canada, and the U K CRA and incentive costs.
Jeff P. Meuler: <unk> 'twenty for Equifax EBITDA margins are expected to be about 29% about flat with the first quarter of 'twenty three.
Jeff P. Meuler: As we discussed last year corporate expense is much higher in the first quarter each year the bulk of the expense related to our equity plans occurs in the first quarter and is reflected in corporate excluding the timing of equity compensation expense and the normalization of variable compensation in 2024, EBITDA margins would be over.
John W. Gamble: The bulk of the expense related to our equity plans occurs in the first quarter and is reflected in corporate. Excluding the timing of equity compensation expense and the normalization of variable compensation in 2024, EBITDA margins would be over $32,000. Corporate expenses will decrease meaningfully sequentially in 2Q24 as equity compensation was principally reflected in 1Q24. We are expecting adjusted EPS in 1Q24 to be $1.33 to $1.43 per share compared to 1Q23 adjusted EPS of $1.43 per share. Now, I'd like to turn it over to Mark.
Jeff P. Meuler: 32%.
Jeff P. Meuler: Corporate expenses will decrease meaningfully sequentially and <unk> 24, as the equity compensation was principally reflected in <unk> 24.
Jeff P. Meuler: We are expecting adjusted EPS in <unk> 24 to be $1 33 to $1 43 per share compared to <unk> 23, adjusted EPS of $1 43 per share now I would like to turn it over to Mark.
Mark W. Begor: Thanks, John. The unprecedented 50% decline in the mortgage market from normal 2015 to 2019 levels had a significant impact on Equifax, removing close to a billion dollars of revenue over the past 24 months from our P&L. Against that unprecedented mortgage market decline, EFX's diverse mix of businesses delivered strong growth by outperforming the mortgage market by over 20 percentage points. Strong 10-20% constant dollar non-mortgage growth, a 13% vitality index for new products, and the addition of bolt-on acquisitions. As shown on slide 19, based on our 2024 guidance, the U.S. mortgage market is on the order of 50% below its historic average inquiry level. As the market bottoms and moves from a headwind to a tailwind, and the mortgage market recovers towards its historic norms, that represents over a billion of annual revenue opportunities for Equifax, none of which is reflected in our current 2024 guidance.
Jeff P. Meuler: Thanks, John.
Jeff P. Meuler: The unprecedented 50% decline in the mortgage market from normal 2015 to 19 levels had a significant impact on equifax, we're moving close to $1 billion of revenue over the past 24 months from our P&L.
Jeff P. Meuler: Against that unprecedented mortgage market decline E. FX is diverse mix of businesses delivered strong growth.
Jeff P. Meuler: Through outperforming the mortgage market by over 20 percentage points strong, 10% to 20% constant dollar non mortgage growth.
Jeff P. Meuler: 13% vitality index from new products and the addition of bolt on acquisitions.
Jeff P. Meuler: As shown on slide 19 based on our 2024 guidance U S. Mortgage market is on the order of 50% below its historic average inquiry levels.
Jeff P. Meuler: As the market bottoms and moves from a headwind or tailwind in the mortgage market recovers towards this sort of its historic norms that represents over 1 billion of annual revenue opportunity for Equifax, none of which is reflected in our current 2020 for guidance.
Mark W. Begor: At our mortgage gross margins, this over $1 billion of mortgage revenue would deliver over $700 million of EBITDA and $4 per share that we would expect to move into our P&L in 2024, 2025, and 2026 as the market recovers. Wrapping up on slide 20, Equifax delivered another strong and broad-based quarter with 14% constant dollar non-mortgage revenue growth, reflecting the power and breadth of the Equifax business model and strong execution against our EFX 2026 strategic priority. We have strong momentum as we move into 2024.
Jeff P. Meuler: At our more mortgage gross margins. This over 1 billion of mortgage revenue would deliver over 700 million of EBITDA and $4 per share that we would expect to move into our P&L in 'twenty four 'twenty five and 26 as the market recovers.
Jeff P. Meuler: Wrapping up on slide 20, Equifax delivered another strong and broad based quarter with 14% constant dollar non mortgage revenue growth, reflecting the power and breadth of the equifax business model and strong execution against our FX 2026 strategic priorities.
Jeff P. Meuler: We have strong momentum as we move into 2024.
Jeff P. Meuler: As we looked at 2024, we expect to deliver 9% revenue growth and 110 basis points of adjusted EBITDA margin expansion from the revenue growth and our cost savings plans. Despite our expected about 15% decline in the mortgage market.
Mark W. Begor: As we look to 2024, we expect to deliver 9% revenue growth and 110 basis points of adjusted EBITDA margin expansion from the revenue growth and our Cost Savings Plans, despite our expected about 15% decline in the mortgage market. As discussed on the prior slide, with the mortgage market bottoming, we expect mortgages to move to a tailwind over the next several years as the market returns to normal inquiry levels. A big priority for 2024 is to complete our North American cloud transformation, as well as significant portions of our global markets, which will result in continued margin expansion and reductions in our capital intensity that is a key benefit of our data and technology cloud transformation. Exiting 2024 with 90% of Equifax revenue in the new Equifax cloud is a big milestone so the team can move towards fully focusing on growth. We are entering the next chapter of the new Equifax as we pivot from building the new Equifax cloud to leveraging our new cloud capability to drive our top and bottom lines.
Jeff P. Meuler: As discussed on the prior slide with the mortgage market bottoming, we expect mortgage to move from move to a tailwind over the next several years as the market returns to normal inquiry levels.
Jeff P. Meuler: A big priority for 2020 for us to complete our North American cloud transformation as well as significant portions of our global markets, which will result in continued margin expansion and reductions in our capital intensity that is a key benefit of our data and technology cloud transformation.
Jeff P. Meuler: Exiting 2024 with 90% of Equifax revenue in the new Equifax cloud is a big milestone. So the team can move towards fully focusing on growth.
Jeff P. Meuler: We are entering the next chapter of the new Equifax as we pivot from building the new Equifax cloud leveraging our new cloud capabilities to drive our top and bottom line.
Mark W. Begor: We are convinced that our new Equifax cloud, differentiated data assets in our new single data fabric, leveraging EFX AI and ML, and market-leading businesses will deliver higher growth, expanded margins, and free cash flow in the future. I'm energized by our strong performance in 2023 and the momentum as we enter 2024, but even more energized about the future of the new Equifax. And with that, Operator, let me open it up to questions. Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. The confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question.
Jeff P. Meuler: We are convinced that our new equifax cloud differentiated data assets and our new single data fabric leveraging E FX, AI and ml and market, leading businesses will deliver higher growth expanded margins and free cash flow into future.
Speaker Change: I'm energized by our strong performance in 2023, and the momentum as we enter 2024, but even more energized about the future of the new Equifax and with that operator, let me open it up for questions.
Speaker Change: Thank you we will now be conducting a question and answer session.
Speaker Change: I'd like to ask a question. Please press star one on your telephone keypad.
Speaker Change: A confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys, we ask that you. Please limit yourself to one question and one follow up question. One moment. Please while we poll for your questions.
Operator: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start button. We ask that you please limit yourself to one question and one follow-up. One moment, please, while we poll for your... Our first questions come from the line of Manav Patnaik with Barclays. Please proceed with your question. Hey, this is Brendan on from Manav.
Speaker Change: Our first questions come from the line of Manav Patnaik with Barclays. Please proceed with your questions.
Speaker Change: Hey, this is brendan on for Manav.
Operator: I just want to ask real quick on your guys give some more detail on the inquiries versus USIS versus Twin. It sounded like you were saying next year, actually, Twin will be a little bit better because USIS is actually, you know, comping, I guess, better shopping activity. So it will actually be a little bit better than that down 16.
Brendan: Just wanted to ask real quick on there that you guys gave some more detail on the inquiries versus usia's versus twin it sounded like you were saying next year actually twin there will be a little bit better because U S. I S is actually you know comping I guess better shopping activity.
Speaker Change: So we will actually be a little bit better than that down 16, just want to confirm that and then why because obviously this year. The the inquiries from tw and I've been a you know quite.
John W. Gamble: Just want to confirm that and then why, because obviously this year, the inquiries on TWN have been, you know, quite a bit worse than USIS. Yeah, so in your question, you gave a big chunk of the answer, right? So we do think what's happening is USIS is comparing itself to 2023, where shopping activity was extremely high, so that their growth, and their decline rate in 2024 will be less relative to that very high 2023 year because of shopping activity. And we think that's probably the biggest driver that we're seeing. Also, quite honestly, as we talked about, what we do is we take a look at current run rates in the market, what we're seeing in terms of growth rates, year on year, and we just run them throughout the year. That's when we say we're using run rates; that's what we mean.
Speaker Change: Quite a bit.
Speaker Change: Worse than than the U S ISI.
Speaker Change: Yeah.
Speaker Change: So in your question you you gave a big chunk of the answer right. So we do think what's happening is U S. I guess is comping off of off of 2023 were shopping activity was extremely high so that their growth their decline rate in 2024 will be less relative to that very high 2023 year because of the shopping activity.
Speaker Change: That's probably the biggest driver that we're seeing also quite honestly as we talked about what we do is we we take a look at current run rates in the market and what we're seeing in terms of growth rates year on year, and we just run them throughout the year. That's when we say we're using run rates. That's what we mean and we're kind of seeing that as we take a look through the beat the January in the latter parts of December so.
John W. Gamble: And we're kind of seeing that as we take a look through January and the latter parts of December. So we think it's both consistent with what we're seeing and also with the description I gave. Okay, and then just one more question. Could you walk through some of your assumptions on talent? Like the volume assumptions that you're using.
Speaker Change: We think it's both consistent with what we're seeing and also with the description I gave.
Speaker Change: Okay, and then just one more on could you walk through some of your assumptions on talent like the volume assumptions that you're using.
Speaker Change: Okay. So I think what we indicated in talent right as we're looking at E. L F and B L. S. Currently for the segments that we support is down about 10% and we're just expecting that we're going to significantly outperform.
John W. Gamble: So, I think what we indicated in talent, right, is that we're looking at DLS and BLS currently for the segments that we support, down about 10%. And we're just expecting that we're going to significantly outperform the markets we indicated by well over 10 points, right? So, we feel very, very good about our ability to continue to grow talent despite the fact that we're going to see a hiring market that we think is probably going to be down on the order of 10%, which, again, is kind of what we're seeing so far this year and in the, sorry, and in the back half of the four. All right, great.
Speaker Change: The markets we indicated.
Speaker Change: Bye.
Speaker Change: All over 10 points right. So we feel very very good about our ability to continue to grow talent. Despite the fact that we're going to see a hiring market that we think is probably going to be down on the order of 10%, which again is kind of what we're seeing so far this year.
Speaker Change: And in the sorry in the back half of the fourth quarter.
Speaker Change: Alright, great. Thank you.
John W. Gamble: Thank you. Thank you. Our next question has come from the line of Andrew Steinerman with JP Mortgage. Please proceed with your questions. Hi, John, could you just tell us how much mortgage revenue was as a percentage of revenues in the fourth quarter, and also could you just give us a sense of how much mortgage revenue was in terms of incremental margins in the 24 guide? So mortgage revenue in the fourth quarter was 15% of total, and for the fiscal year it was 19, right? And just for perspective, in the first quarter, it's going to be on the order of 20, we think, a little under 20.
Speaker Change: Thank you. Our next question does come from the line of Andrew <unk> with J P. Morgan. Please proceed with your questions.
Andrew: Hi, John could you just tell us how much mortgage revenues was as a percent to revenues in the fourth quarter and also could you just give us a sense of how much mortgage revenues.
Andrew: In terms of incremental margins in the 24 died.
John: So mortgage rather revenue in the fourth quarter was 15% of total and for the fiscal year was 19, right and just for perspective in the first quarter, it's going to be on the order of 20, we think a little under 20.
John W. Gamble: Based on the guidance we provided. That's driven by our outperformance in both EWS and USIS that we talked about, Andrew. Okay. Can you ask the second question again?
Andrew: Based on the guidance, we provided but that's driven by our outperformance in both AWS and <unk> that we talked about Andrew.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: And can you ask the second question again.
Speaker Change: Yeah, what's the incremental margin on mortgage revenues assumed in the 'twenty four guide.
John W. Gamble: Yeah, what's the incremental margin on mortgage revenues assumed in the 24 guide? So, generally speaking, we've talked about this in the past, right, is that our, our variable, our, let's say our gross margin on mortgage blended, and obviously it's heavily dependent on mixed, because our margin on mortgage solutions, our tri-merge business, is very different than our margin in the USIS business overall, which is obviously very different than our margin in EWS, right, with EWS having the highest margins, obviously, of Okay.
Speaker Change: So so generally speaking we've talked about this in the past right is that our our variable.
Speaker Change: Our gross margin on mortgage blended and obviously, it's heavily dependent on mix because our margin on mortgage solutions. Our tri merge business is very different than our mortgage margin in the U S. <unk> business overall, which is obviously very different than our margin in EW asked right with AWS, having the highest margins obviously, if the three in general versus the blended.
Speaker Change: So I guess margins, but generally what we've indicated is you should think something like 65% gross margins for the mortgage business.
John W. Gamble: Thank you. Thank you. Thank you.
Speaker Change: Okay. Thank you.
Speaker Change: Thank you our next questions come from the line of Seth Weber with Wells Fargo. Please proceed with your questions.
John W. Gamble: Our next questions come from the line of Seth Weber with Wells Fargo. Please proceed with your questions. Hi, guys. Good morning.
Seth Weber: Hi, guys. Good morning, Thanks for taking the question.
John W. Gamble: Thanks for taking the question. Just on the guidance for eight and a half percent non-mortgage growth for 2024, can you just talk about how we should be interpreting that in maybe just any areas where you think there could be some upside in your mind as we go through? Well, we think the 8.5 is quite good. You know, it's obviously inside of our 8 to 12 range, which, you know, is how we want to grow the company. We've talked about some of the pressures on our non mortgage really in the talent market. And then second is the ERC impact, since that program has been curtailed by the IRS.
Seth Weber: Just on the guidance for eight 5% non mortgage growth for 2024 can you just talk to how we should be interpreting that and maybe just any areas, where you think there could be some upside in your mind as we go through the year. Thank you.
Seth Weber: Well, we think the gap is quite good. It's obviously inside of our eight to 12 range, which are you know as to.
Seth Weber: How we want to grow the company.
Seth Weber: We've talked about some of the pressures on our non mortgage really in the talent market.
Seth Weber: And then second is the ERC impact, which that program has been curtailed by the IRS.
Seth Weber: John talked about the impact that that's having which is.
John W. Gamble: John talked about the impact that that's having, which is a meaningful amount on Equifax, a meaningful amount on a year-over-year basis, as far as upsides, uh, you know, I don't think we should think about any upsides to that eight and a half because we think it's pretty good growth. Okay, fair enough. And then, can you just maybe talk about how much is left on the Medicaid determination here How much that'll actually... or sorry, through the first half of 24, how much that's gonna contribute.
Seth Weber: On equifax as a meaningful amount on a year over year basis.
Seth Weber: As far as upsides.
Seth Weber: Don't think we think about any upsides to that eight and a half because we think it's a pretty good growth rate.
Speaker Change: Okay Fair enough and then can you just maybe talk to how much is left on the Medicaid.
Speaker Change: Determination here for the second quarter, how much that alike.
Speaker Change: Or sorry, it's through the first half of 'twenty for how much that's going to contribute.
Speaker Change: <unk>.
Speaker Change: And so we haven't given specific dollar amounts what we've indicated right is that it continues to be a benefit for us benefit for us. It was in the fourth quarter and we expect it will continue to be in the first and second quarters.
John W. Gamble: So we haven't given specific dollar amounts. What we've indicated, correctly, is that it continues to be a benefit for us. It was in the fourth quarter, and we expect it will continue to be in the first and second quarters.
John W. Gamble: But then again, just as a reminder, right? Redetermination is something that occurs consistently as part of benefits programs that are funded by the federal government. So, yes, there was an accelerated redetermination program following the end of the pandemic and the pandemic freezes that occurred. But the fact is, as we go forward, we'll continue to see redetermination revenue across our government business, and it will be an ongoing driver of growth once we get through 24 and we get past this, we get past the accelerated redetermination activity we're seeing right now. And that's only one, you know, lever, obviously, for government vertical growth inside of workforce solutions, as we've talked about. As you know, that business was up, you know, super strong last year and again in 22nd, you know, ended the year at over $500 million.
Speaker Change: But then again just as a reminder rate redetermination assumption that occurs consistently as part of benefits programs that are funded by the federal government. So yes, there was an accelerated.
Speaker Change: Redetermination program following the end of the of the pandemic.
Speaker Change: The pandemic freezes that occurred but the fact is as we go forward, we'll continue to see redetermination revenue across our government business and it is it will be an ongoing driver of growth once we get through through 24, and we get past. This we get past the accelerated redetermination activity, we're seeing right now and that's only one lever obviously.
Speaker Change: The government vertical growth inside of workforce solutions as we've talked about as you know that business was up you know super strong last year and again in 'twenty. Two ended the year at over $500 million, So a very big business for us.
John W. Gamble: So, a very big business for us, you know, with big growth potential at the state level of continuing penetration. You know, we've got a TAM there that's, you know, $3 billion plus against that $500 million. So there are a lot of opportunities to get to states that are not using our solution today. They're still using manual verification of income and employment, which is required for government social services.
Speaker Change: With good growth potential its state at the state level of continuing penetration.
Speaker Change: <unk> got a Tam there thats, a three 3 billion plus against that 500 million. So there's a lot of opportunities to get the states that are not using our solution today, they're still using manual verification of income and employment, which is required for government social services. As you recall, we a couple of months ago, we landed a big extension to our CMS.
John W. Gamble: As you recall, a couple months ago, we landed a big extension to our CMS contract. It was $1.2 billion. You know, that rolls into 2024. And then the new USDA contract that we signed in September was a new contract that, obviously, rolls into 2024. So there's a meaningful number of growth levers at government that are quite bullish, as we talked about. We expect that business to, you know, be a big growth contributor to workforce solutions and outgrow, you know, workforce solutions' 13 to 15 long-term growth rate, significantly outgrow that again in 24. I got it.
Speaker Change: Frac that was 1 billion two you know that rolls into 2024, and then the new USDA contract that we signed in September with a new contract. It obviously rolls into 2024. So there's a there's a meaningful number of growth levers of government that we're quite bullish as we talked about we expect that business to be a big growth.
Speaker Change: Tributary to workforce solutions, and outgrow you know workforce solutions 13 to 15 long term growth rate significantly.
Speaker Change: Significantly outgrow that again in 'twenty four.
Speaker Change: Got it. Thank you guys I appreciate the color.
John W. Gamble: Thank you, guys. I appreciate the call. Thank you. Our next question comes from the line of Kyle Peterson with Needham & Company. Please proceed with your question. Great. Good morning, guys.
Speaker Change: Thank you our next questions come from the line of Kyle Peterson with Needham <unk> Company. Please proceed with your questions.
Kyle Peterson: Great. Good morning, guys. I appreciate you taking our questions wanted to touch on the non mortgage growth you guys called out in the guide I think you guys have walked through some.
John W. Gamble: I appreciate you taking the questions. I wanted to touch on the non-mortgage growth that you guys called out in the guide. I think you guys have walked through some assumptions on volume and mortgages and talent really well. I just wanted to see if you could provide any color for your volume assumptions around some other areas, such as whether it's auto or card and consumer, just to try to figure out the delta between pricing and share versus volume.
Kyle Peterson: Some assumptions on kind of volume.
Kyle Peterson: Mortgages talent really well I just wanted to see if you could provide any color or your volume assumptions around some other areas such as whether it's auto or or carton consumer just to try to kind of figure out the delta between pricing and share universe volume trends in those markets.
John W. Gamble: Trends in those markets. I'd start with, and I think we try to be clear about that, we don't see any real change as we go into 2024 from, you know, those verticals like cards, auto, P loans, you know, how they performed in the second half of last year. We talked a little bit about, you know, fintech was impacted in the second half of 22 and into 23. But that, you know, seems to be, you know, kind of at a stable level now, meaning it's not declining, which is good news versus the declines that happened last year. Large FIs are fairly consistent, you know, in as far as they're still originating because consumers are strong.
Kyle Peterson: But I'd start with that and I think we were we tried to be clear about that we don't see any real change as we go into 2024 from those verticals like cards auto P loans.
Kyle Peterson: You know how they performed in the second half of last year, we talked a little bit about you know fintech was impacted in the second half of 'twenty, two and into 'twenty three but that.
Kyle Peterson: It seems to be kind of at a I would call. It a stable level now, meaning it's not declining which is good news versus the declines that happened last year.
Kyle Peterson: Large F EIS are fairly consistent.
Kyle Peterson: As far as they're still originating because consumers are strong.
John W. Gamble: You know, there's some choppiness with some of the smaller FIs that might be impacted by some liquidity stuff. But again, not a real change from what we saw in the second half of last year. That makes sense and is helpful. And, you know, I guess just to follow up on capital deployment and, you know, priorities there. Just want to see how you kind of prioritize, you know, where some of the near-term priorities are on the capital front. I know you mentioned leverage and eventually being able to potentially buy back stock or increase the dividend. How are you guys thinking about some of those?
Kyle Peterson: Some choppiness with some of the smaller buys that might be impacted by some liquidity stuff, but again not a not a real change from what we saw in the second half of last year.
Speaker Change: That makes sense and is helpful and I guess, just a follow up on capital deployment and priorities. There just wanted to see how you. If you kind of prioritize soon where some of the near term priorities are and that the capital front I know you mentioned leverage and.
Speaker Change: And eventually being able to potentially buy back stock or increase the dividend. How are you guys thinking about some of those initiatives and priorities versus and potential bolt on M&A and kind of what's the near term priority between the two.
Mark W. Begor: initiatives and priorities versus potential bolt-on M&A and kind of what's the near-term priority between the two? Yeah, so I'll go with the near term, you know, which is 2024. I think we laid out that CapEx is coming down again this year and in 2024. We expect it to step down again next year as we complete the big, you know, cloud completion in our USIS business and some of our international properties in the first half of this year. And, you know, getting to 90% cloud complete will be a big milestone. So, you know, you're going to see our CapEx come down over the short term, meaning in 24 and over the medium term. And, you know, in 25 again, as we complete the cloud. And, you know, over that timeframe, we expect our margins to continue to expand, which will, you know, grow our free cash flow. Our free cash flow this year is up almost, well over 50% this year, yeah.
Speaker Change: Yeah. So I'll go near term, which is 2024 I think we laid out the capex is coming down again. This year in 2024, we expect it to step down again next year as we complete the cloud big cloud.
Kyle Peterson: Cloud completion in our U S <unk> business and some of our international properties in the first half of this year and getting to 90% cloud complete will be a big milestone so youre going to see our capex come down over the short term, meaning in 'twenty four and over the medium term and and twenty-five again as we complete the.
Mark W. Begor: Cloud.
Kyle Peterson: Over that timeframe, we expect our margins to continue to expand which will.
Mark W. Begor: Grow our free cash flow our free cash flow. This year is up almost <unk>.
Kyle Peterson: Almost two weeks it can well.
Mark W. Begor: Well over 50% out here, yeah, so our free cash flow in 'twenty 'twenty four is up substantially we expect that to continue to grow as we get into 'twenty five 'twenty six and so as you get over the again back in 24, you know we have a pipeline of M&A that we're watching him I suspect that given we're already in February here that that M&A would be in the second half if we do.
Mark W. Begor: So our pre-cash flow in 2024 is up substantially, and we expect that to continue to grow as we get into 2025 and 2026. And so as you get over that, again, back in 2024, you know, we have a pipeline of M&A that we're watching. I suspect that, you know, given we're already in February here, that that M&A, you know, would be in the second half. If we do some, we're going to be very disciplined around M&A as we always have been, and we're focused on integrating a large number of acquisitions. We've done 14 and, you know, a little over three years since we integrated like Boa Vista, as we talked about on the call, but when you get, look forward to, you know, 25 and 26, we'll continue to add a bolt on M&A An eight to 12 framework that includes one to two points of revenue growth from bolt-on M&A. So that's clearly a part of our strategy.
Kyle Peterson: So I'm not we're going to be very disciplined around M&A as we always have been and we're focused on integrating the large number of acquisitions. We've done 14, and you know a little over three years that we're integrating like Boa Vista as we talked about on the call, but when you get look forward to you know 25, and 26 will continue to add bolt on M&A inside of that eight to 12.
Mark W. Begor: Our framework that includes one to two points of revenue growth from bolt on M&A. So that's clearly a part of our strategy and we've been crystal clear that as our margins expand and we still have the goal of 39%.
Mark W. Begor: And we've been crystal clear that as our margins expand and we still have the goal of 39%, you know, and we still have the goal of growing 50 bps a year post 39. You know, as we move towards that 39%, you know, and our CapEx comes down, you know, we would expect to have significant excess free cash flow, you know, when you get into, you know, 25 and 26, where we could, you know, look at restarting the dividend and also look at buying back meaningful amounts of our stock. And that's no change in that. We've been very clear, you know, in that over the last really three years, that that's the goal we've been working towards as we complete the cloud. It's a great color.
Mark Begor: And are we still have the goal of growing 50 bps a year post 39.
Mark W. Begor: As we move towards that 39% you know in our Capex comes down we would expect to have significant excess free cash flow you know when you get into you know 25, and 26, where we could look at restarting the dividend and also look at buying back meaningful amounts of our stock and that's no change in that we've been very clear in that over.
Mark W. Begor: The last really three years that that's the goal we've been working towards as we complete the cloud.
Speaker Change: That's great color thanks, guys.
Mark W. Begor: Thanks, guys. Thank you. Our next questions come from the line of Kelsey Zhu with Autonomous Research. Please proceed with your, Hi, good morning.
Kelsey Zhu: Thank you our next questions come from the line of Cathy Xu with Autonomous Research. Please proceed with your questions.
Kelsey Zhu: Hi, good morning.
Mark W. Begor: Thanks for taking my advice. I think you have raised the government TAM numbers again from $4 billion to $5 billion. I was wondering if you could give us a little bit more color on where the incremental upside comes from. And, just in general, what are some of the major programs that you're targeting or states that you're trying to get growth into that will bridge to this $5 billion TAM number? Yeah, and it's really around government social services delivery, which is a huge problem. There are 90 million Americans, roughly, that get some form of government social services, whether it's food support, rent support, cash support, childcare support, student loan support, unemployment support, all of those different programs, all of those programs have to be verified by income, and you have to verify employment.
Cathy Xu: My question.
Speaker Change: You have great government Tam numbers again, some point Elliot.
Mark W. Begor: I was wondering.
Mark W. Begor: Just a little bit more color on.
Mark W. Begor: Where is that incremental upside comes from.
Mark W. Begor: What are some of the major programs that you were targeting for space and you're trying to get.
Mark W. Begor: Prince.
Cathy Xu: Sure.
Prince: Yeah, and it's really around the government's social services delivery, which is a huge there's a 90 million Americans are roughly to get some form of government social services, whether it's food support rent support.
Mark W. Begor: Cash support childcare support student lending support all those different programs unemployment support all of those programs have to be verified by income and you have to verify employment and there's also an incarceration checks on many of them, which is from our appaloosa dataset. Yeah, we've been growing rapidly there because of the real desire to deliver those social services.
Mark W. Begor: And there's also an incarceration check on many of them, which is from our APRS data set. You know, we've been growing rapidly there because of the real desire to deliver those social services quickly to those that deserve them and need them. And our instant data really delivers that. And we're competing, as you know, against manual processes and paper pay stubs, which means the recipient, who's after the social services generally has to bring in proof of income, we can deliver it instantly.
Mark W. Begor: As quickly to those that deserve them and need them and our instant data really delivers that and we're competing as you know against manual processes and paper pay stubs, which means the recipient whose after the social services generally has to bring and proof of income we can delivered instantly and of course, where our data is accurate.
Mark W. Begor: Of course, our data is accurate. It's one to two weeks old, depending upon the timeframe, because we're getting payroll every every two weeks. And we have such broad coverage. So, you know, our programs are really at kind of three levels at the federal, state, and local level. We have federal programs where some of that verification is done at the federal level, like with the Social Security Administration. You know, that's a large contract for us. We talked earlier in this call about the CMS contract that we extended, it's done at the federal level, but then executed at the state level, and the And then we operate at the very state level, and the state levels are more complex. There's a large, large penetration opportunity in the states, that's really where a big portion of our growth will come. And a big portion of that TAM that you referenced is all the states, all 50 states, you know, are not with Equifax. And it's really at the agency level; each state has separate agencies that deliver these services.
Mark W. Begor: It's a one to two weeks old dependent upon the timeframe because were getting paper payroll every every two weeks and we have such broad coverage. So our our programs are really kind of three levels at the federal state and local level, we have federal programs, where some of that verification has done it.
Mark W. Begor: Federal level like with social Security administration.
Mark W. Begor: That's a large contract for us.
Mark W. Begor: We talked earlier in this call about the CMS contract that we extended that <unk> done at the federal but then executed at the state level and the new USDA contract and then we operate at the very state level and the state levels are more complex theres, a large large penetration opportunity. The states, that's really where a big portion of our growth would come in a big portion of that.
Mark W. Begor: Tam that you referenced is a all the states all 50 states.
Mark W. Begor: Or are not with Equifax and it's really at the agency level. Each state has separate agencies to deliver these services and that's who our customers are I think as you know we've added resources over the last number of years at the state capital levels to work on deploying these resources. So we have a large pipeline as you might imagine.
Mark W. Begor: And that's who our customers are. I think, as you know, we've added resources over the last number of years at the state capital levels to work on deploying these resources. So we have a large pipeline, as you might imagine, we're focused on the large states, you know, California, Texas, New York, Florida, and you know, some of the big, big, big states that are out there, but we have a focus on all of them.
Mark W. Begor: And we're focused on the large states are California.
Mark W. Begor: California, Texas, New York, Florida, and some of the Big Big Big States that are out there, but we have a focus on all of them and as you go forward over the next.
Mark W. Begor: You know 24 into 'twenty five 'twenty six you know that'll be a big part of the growth is our penetration.
Mark W. Begor: And as you go forward over the next few months, thank you very much. One of the reasons TAM is growing is that we continue to integrate the Insights business into Workforce Solutions fully. We're able to now see that there are incremental products that can serve portions of that government market that we couldn't serve before. So I think that part of the increase in the TAM, in addition to what Mark described, is the broadening of our product set because of the Insights acquisition. So we feel very good about how that's going to continue to allow us to broaden that TAM even further over time as we generate new products to service government needs. That is super helpful. Thanks a lot.
Mark W. Begor: Into the states that to deliver the services and it's a it's a very strong value prop in many cases the data costs are subsidized by the federal government.
Mark W. Begor: As a social services are so it's a matter of getting the technology aligned with ours and in helping change the process flow at each of those different agencies in all 50 states in order to deliver those so we're very bullish about that business as we said to you know it's a it's a.
Mark W. Begor: Close to half a billion dollars at the end of last year, and we expect strong double digit growth again in 2024.
Mark W. Begor: One of the reasons. The Tam is growing as we continue to integrate the insights business into workforce solutions fully we're able to now see theres incremental products that can serve portions of that government market that we couldn't serve before so I think that'd be part of the increase in the Tam. In addition to what Mark described is the is the broadening of our product set because of the insight acquisition. So.
Mark W. Begor: Feel we feel very good how that's going to continue to allow us to broaden that dam, even further over time as we generate new products to service government needs.
Speaker Change: Super helpful. Thanks, a lot and my second question is.
Mark W. Begor: My second question is, I'm not sure if it's too early to talk about how you think about pricing for a Vantage Score 4.0 in the mortgage vertical. I think, based on the FHSA's original timeline guidance, we should start transitioning towards that two score system later this year, and I think the pricing decision for Vantage Score is being made at the Bureau level. So just curious to hear how you're thinking about setting prices for a Vantage Score for mortgages. Yeah, I think, as you know, there's two pieces to that potential change by the regulator that is still in a comment period. You know, one is to add value to every federally, you know, supported mortgage. That's going to be a good thing for Equifax, you know, when it happens, going forward.
Mark W. Begor: And I'm not sure if it's too early to talk about how you think about pricing or fancy score footprint.
Mark W. Begor: It's fair to call.
Mark W. Begor: Based on the atrophy.
Mark W. Begor: Its original timeline guidance wishes start translational towards that two scoring system later this year.
Mark W. Begor: I think the fishing for back to school and Blue Moon atmosphere, and I'm also just curious to hear how your input prices.
Mark W. Begor: That was a square for mortgage.
Mark W. Begor: Yeah, I think as you know, there's two pieces to that potential change by the regulator that is still in a comment period.
Mark W. Begor: One is to a advantage to every federally supported mortgage that's going to be a good guy for equifax when it happens.
Mark W. Begor: Going forward and then second is the.
Mark W. Begor: And then second, the 3B requirement going to 2B. We've talked before that, you know, we expect mortgage originators to continue to pull the three credit files because there are meaningful differences between the three credit bureaus or three credit files. For example, there are eight and a half million consumers that are only in one of the three credit files in the United States. So the value of three is quite important.
Mark W. Begor: <unk> three D requirement going to be we've talked before that we expect on the second half of that the mortgage originators to continue to pull the three credit files, because there are meaningful differences.
Mark W. Begor: Between the three credit bureaus or three credit files. You know for example, there's eight and a half million consumers that are only in one of the three credit files in United States. So the value of three is a it is quite important.
Mark W. Begor: You know, on the vantage plus FICO, same thing, it's, it's still in the comment period. We haven't put either of those into our framework for 2024 because we're not sure they're going to happen or what their impact would be. But, you know, you point out that if it's mandatory to have a FICO and a vantage score, that's a positive for our business to sell a second score and every mortgage. And no, we haven't thought about pricing on it because it's really unclear if it's going to happen or when it will happen if it does. I got it. Thanks so much.
Mark W. Begor: The vantage plus FICO same thing you know it's a it's still in the comment period, we haven't put either of those into our framework for 2024, because we're not sure they're going to happen or what the impact would be but you know you point out that a if it's a mandatory to have a FICO and vantage score that's a positive for our.
Mark W. Begor: Our business to sell a second score in every mortgage and no. We havent thought about pricing on it because we really it's unclear if it's gonna happen or when it will happen if it does.
Speaker Change: Got it thanks, so much.
Mark W. Begor: Thank you our next questions come from the line of Heather Basket with Bank of America. Please proceed with your questions.
Mark W. Begor: Thank you. Our next questions come from the line of Heather Vosky with Bank of America. Please proceed with your, Hello, thank you very much.
Heather Vosky: Hi, Thank you very much I wanted to ask first well I guess two clarifying questions for you one is the.
Mark W. Begor: I wanted to ask first, well, I guess I have two clarifying questions for you. One is, the issuance metric for the workforce on the mortgage side. I know that's something you guys introduced last quarter. Can you just help us again, walk us through what that measures, kind of how you're getting to that number?
Mark W. Begor: The issuance metric for workforce on the mortgage side and that's something you guys introduced last quarter can you just help us again walk us through what that measures kind of how you're getting to that number and yeah theres a theres a lot of data out there around like issuance is there just.
Mark W. Begor: And, you know, there's a lot of data out there around what issuance is, so just kind of helping us think through if we're comparing your number to kind of market data out there, what should we be thinking about? And then my second question is about the incremental margins on mortgages. I think last year the 80% came up a fair amount, and I realize there's a mixed impact. I think you said 65% earlier; I'm just trying to reconcile that, too. So I'll do the second one first, okay?
Mark W. Begor: Kind of helping us think through if we're comparing your and number two kind of market data out there what should we be thinking about and then my my second question is on the incremental margin on mortgage I think last year that 80% came up a fair amount and I realize there's a mix impact.
Mark W. Begor: He said 65 per cent earlier, just trying to reconcile that too. Thank you.
Mark W. Begor: Yeah.
Mark W. Begor: So so I'll do the second one first okay, and so I think I was asked about gross what I gave is gross margins right. So that people should think about gross margins incremental margins, maybe a little higher right, if they're going to be a little lower than the 80%. It would have been talking about last year simply because there's been a significant price increase from one of our vendors we pass it through we do mark it up so we can.
Mark W. Begor: And so I think I was asked about gross margins, what I gave is gross margins, right? So people should think about gross margins. Incremental margins may be a little higher, right? They're gonna be a little lower than the 80% that would have been talked about last year, simply because there's been a significant price increase from one of our vendors. We pass it through, we do mark it up so we can maintain EBITDA margins, but we don't, we can't mark it up to maintain gross margins, right?
Mark W. Begor: Maintain EBITDA margins, but we don't we can't market up to maintain gross margins right. So so yeah. We did see we will see some negative impact on variable margins on the mortgage universe overhauls are those incremental mortgage market is very high super attractive and you know we tried to be clear and including that you know are our view of what normal mortgage.
Mark W. Begor: So we did see, and we'll see some negative impact on variable margins on the mortgage business overall. Regardless, the incremental mortgage markets are very high. Super attractive, and we tried to be clear in including that, our view of what normal mortgage volumes are in the 2015 to 19 range, versus where we are today at 50% below that; there's a lot of upside in 24, 25, 26. And we tried to frame that in talking about the billions of revenue potential in the future. On the second half of your, the first half of your question about inquiries, the USIS inquiries, because of shopping, are different than the EWS inquiries, which are generally more involved in closed loans. You know, meaning on the shopping side, someone will shop at two or three different mortgage originators but close with only one. So that's the difference.
Mark W. Begor: Our volumes are in the 2015 to 19 range versus where we are today at 50% below that there's a lot of upside in 'twenty four 'twenty five 'twenty six and when we tried to frame that in talking about the $1 billion of revenue potential in the future on.
Mark W. Begor: In the second half of your first half of your question about inquiries.
Mark W. Begor: U S I S inquiries because of shopping or different than the AWS inquiries, which generally are more involved in closed loans, meaning on the shopping side someone who will do shopping on two or three different mortgage originators, but close with only one so that's the difference from last year. We ask you to try to disclose that data your rep.
Mark W. Begor: And last year, we decided to try to disclose that data. You referenced market volume data that's out there. There really isn't any market volume data out there, except on a very long lag. You know, there are forecasts, which you can describe as data. I would call those forecasts and not data.
Mark W. Begor: Currency market volume data that's out there.
Mark W. Begor: Really isn't any market volume data out there except on a very long lag basis, there are forecasts.
Mark W. Begor: You can describe as data I would call those forecasts and that data and we talked about with Nba's forecasting and some of the others and some of the street is forecasting you know improvements.
Mark W. Begor: And we talked about what MBA is forecasting and some of the others and some of the street is forecasting, you know, improvements later in the year based on rate cuts that haven't happened yet for mortgage volume. We've been very clear, and we've been doing it since I've been here, that we forecast mortgage volumes on the way up, we do it on the way down, and we're doing it currently, you know, based on our current trends. And as it changes, we'll share it with you.
Mark W. Begor: In the year based on rate cuts that haven't happened yet.
Mark W. Begor: Mortgage volume, we've been very clear and we've been doing it since I've been here that we forecast.
Mark W. Begor: Good volumes on the way up we did it on the way down and we're doing it currently based on our current trends.
Mark W. Begor: And as it changes we'll share it with you when we tried to frame you know the positive potential you know.
Mark W. Begor: And we've tried to frame, you know, the potential positive impact on us on the top line, as well as the bottom line, as mortgage returns to normal. And again, we think over time, whether it's 24, 25, 26, you know, mortgage volumes will return to normal; it's just uncertain when the Fed's going to make those rate changes. And, you know, we'll be transparent about what our activity is because we see activity every day. And that's what we talk about, when we talk about trends. You know, we have, we know what the inquiries are, we got yesterday, and we know what they were last week, and the week before, and we use those to really forecast what we think they're going to be going forward. Thank you for that. I was curious more on the origination side, but potentially, the answer is kind of the same there. It's actually a little bit different.
Mark W. Begor: Impact on us on the top line as well as the bottom line as mortgage returns to normal and again, we think over time, whether it's 'twenty four 'twenty five 'twenty six mortgage volumes will return to normal. It's just uncertain. When the fed is going to make those are rate changes and you know we'll be transparent on what our activity is because we see activity every day.
Mark W. Begor: That's what we talk about when we talk about trends you know we have we know what the inquiries are we got yesterday and we know what they were last week and the week before and we use those to really forecast.
Speaker Change: What we think they're going to be going forward.
Speaker Change: Thank you for that I I think I you know I was curious more on the origination side, but potentially the answers kind of the same they're at so it's actually it's a it's a little bit different originations, we don't get actual originations in the industry doesn't for until six months after they happened somewhere in that timeframe.
Mark W. Begor: Originations, we don't get actual originations, and the industry doesn't until six months after they happen, somewhere in that time frame. It's a complex process for mortgages to close, and then those mortgages to be posted, in essence, on the credit file is when we see it. Any mortgage origination data is actually on a lag basis. Obviously, there are forecasts that lots of people put together, but those are forecasts and not actual data. You can't determine how many originations happened yesterday because it's just not available.
Mark W. Begor: You know, it's a it's a complex process for mortgages to close and then those mortgages to be posted you know in essence on the credit file is when we see it so there any mortgage origination.
Mark W. Begor: Data is actually on a lag basis, obviously, there are forecasts that lots of people put together, but those are forecast and not actual data.
Mark W. Begor: You you cant determine what how many originations happened yesterday, which is not available inquiries, yes, and we're super transparent with you about inquiries that we see are you on a current basis.
Mark W. Begor: Inquiries, yes, and we're super transparent with you about inquiries that we see on a current basis. Thank you. Thank you. Our next questions come from the line of Shlomo Rosenbaum with Stiefel. Please proceed with your questions. Hi, thank you very much for taking my questions.
Shlomo H. Rosenbaum: Okay. Thank you.
Mark W. Begor: Thank you our next questions come from the line of Shlomo Rosenbaum with Stifel. Please proceed with your questions.
Shlomo H. Rosenbaum: Hi, Thank you very much for taking my questions first one.
John W. Gamble: First one, John, for you, could you talk a little bit about, maybe quantifying the duplicative costs and migration costs there in the first half of 2024, that should go away as you start to hit those milestones. And is there a substantial risk of some of this stuff trickling into 3Q and 4Q in terms of, Just not necessarily getting all the clients to migrate. That's kind of the first.
Shlomo H. Rosenbaum: John for you could you talk a little bit about.
John W. Gamble: Maybe quantifying the duplicative costs and migration costs there in the first half of 'twenty four.
John W. Gamble: That should go away as you start to hit those milestones and you know is there a substantial risk of some of this stuff kind of trickling into <unk> and <unk> in terms of.
John W. Gamble: You know.
John W. Gamble: Just not necessarily getting all the clients to migrate that's kind of the first question I got.
John W. Gamble: Yeah, so in the margin bridge, we talked about this, right? I think what we indicated is the net benefits, about 30 basis points a year. And so what you can think about Shlomo, it's exactly as described, right, we're incurring incremental costs in the first half of the year, the bulk of which go away by the second half of the year, principally related to the North American migrations to the consumer credit file, the data fabric. And, and so we see those incremental costs mostly occurring in the first half; some of them continue, right, because we're continuing to do But we see a substantial cost reduction or benefit from the elimination of redundant costs principally and also the elimination of migration costs as you go into next year. So in total, it's 30 basis points for the year, and the biggest part of the cost occurs in the first half.
John: Yeah. So I think in our in the margin bridge, we talked about this right I think what we indicated is the net benefits of about 30 basis points in a year right and so what you can think about Shlomo. It's exactly as you described breakfast, we're incurring incremental costs in the first half of the year, the bulk of which go away by the second half of the year principally related to the North American migrations to the of the consumer credit file database.
John W. Gamble: And and so we see those incremental costs, mostly occurring in the first half some of them continue right because we're continuing to do migrations and international et cetera, but we see a substantial cost reduction or benefit from the elimination of the redundant cost principally and also the elimination of that migration costs. As you go into next year. So in total it's 30 basis.
John W. Gamble: Points for the year the biggest part of the cost occurs in the first half.
John W. Gamble: And then also just going back to kind of those inquiries forecast. I think last quarter, you said that based on what you were seeing in the market, you know, the inquiries would be down around, you know, close to 15%. And it seems like, you know, that's the same forecast this quarter, despite the fact that rates are, you know, have gone down. And I was wondering, did you kind of hone your forecast a little bit based on, you know, changes in shopping activity, like, you know, can you can you talk about the difference in terms of, you know, the I guess the reason why you kept that, you know, forecast the same despite the fact that rates have gone, I think we did highlight that we saw some, and we use the term slight because they are slight, improvements in call at the net last almost 60 days, which we view as a positive, which is why it feels like we're at a bottom in the mortgage market, which I think is a positive for Equifax.
John W. Gamble: Okay.
John W. Gamble: And then also just going back to kind of those inquiries forecast.
John W. Gamble: I think last quarter, you said that based on what you were seeing in the market you know the inquiries will be down around you know close to 15% and it seems like that's the same forecast this quarter. Despite the fact that rates are you'll have gone down and I was wondering did you kind of a whole new your forecast a little bit based on changes in shopping activity.
John W. Gamble: Like you know can you can you talk about the difference in terms of you know the I guess the reason why you kept at a forecast the same despite the fact that rates have gone down.
John W. Gamble: Well I think we did highlight that we saw something we use the term slight because they are slight improvements in call. It. The net last almost 60 days, which we view as a positive which is why you know where you know it feels like we're at a bottom in the mortgage market, which I think is a positive for equifax and you know when you look at Equifax at AR.
John W. Gamble: When you look at Equifax, again, we're calling a mortgage market that's down, but meaning, said differently, in a flat mortgage market, we grow our revenue because of our outperformance in both businesses through price, more records in EWS, and penetration in EWS. I think 15 John is kind of in the same zip code, even with those slight improvements, but we'll continue to be transparent as we look forward, and we know you and many others on the call are looking for an improvement in inquiries. We are too. When it happens, we'll share it with you, and I think that's going to be a real positive for Equifax going forward, but we want to be consistent in how we forecast it for as long as I've been here based on current trends because, look, we're not economists. We can't forecast where rates are going.
John W. Gamble: And again, we were calling a mortgage market, that's down, but meaning said differently in a flat mortgage market, we grow our revenue because of our outperformance in both businesses through price product more records and dws and neo penetration and Dws I think with 15, John as you know kind of in the same ZIP code, even with a slight improvements.
John W. Gamble: But we will continue to be transparent as we look forward and you know we know you and many others on the call are looking for an improvement in our inquiries. We are too you know when it happens we'll share with you and I think that's gonna be a real positive for equifax going forward.
John W. Gamble: We want to be consistent in how we forecasted for as long as I've been here around current off of current trends because look we're not economists, we can't forecast where rates are going none of us forecastle the rates last year and you know the the increases in our you know as recently as this past weekend I think the deferred kind of.
Mark W. Begor: None of us forecasted the rates last year and the increases, and as recently as this past weekend, I think the Fed kind of pushed out the potential rate decreases that many were expecting in March up to later in the year. We think it's prudent to have a balanced forecast that's consistent with how we've done it historically. Great, thank you. Thank you. Our next questions come from the line of Owen Lau with Oppenheimer. Please proceed with your, "Hello, good morning." This is Guru Ansar Owen.
Mark W. Begor: Pushed out the potential rate decreases are you know that many were expecting in March out to later in the year.
Owen Lau: You know, we we think it's prudent to have a a balanced forecast that's consistent with how we've done it historically.
Mark W. Begor: Yeah.
Owen Lau: Great. Thank you.
Mark W. Begor: Thank you. Our next question is come from the line of Owen Lau with Oppenheimer. Please proceed with your questions.
Mark W. Begor: Hi, Good morning. This is drew on for Owen and thank you for taking my question.
Mark W. Begor: Thank you for taking my question. Can you maybe please talk a little bit about the mortgage increase trends in January? Has it been better, or was it better or worse than the 16% fully expected? Yeah, they're a little bit better than we thought they would be when we gave guidance in October. That started in December.
Mark W. Begor: Can you please talk a little bit about the mortgage increased trends in January hasn't been bad or was it better or worse than the down 16% full year expectation.
Mark W. Begor: Yeah, they were a little bit better than how we thought they would be when we gave guidance in October that started in December I think we call it slight improvements, but that's.
Mark W. Begor: I think we called them slight improvements. But, you know, that's factored into the guidance we shared with you this morning. And we've included that, you know, in the down 15. And we'll continue to watch that closely and, you know, watch it going forward. And, obviously, we all know if, in fact, the Fed is going to take rates down.
Mark W. Begor: That's factored into the guidance, we shared with you. This morning. So we've included that you know in the down 15, and we'll continue to watch that closely and you know.
Mark W. Begor: What's it going forward and you know it's it obviously, we all know it went back the fed is going to take rates down.
Mark W. Begor: You know, that's good news for our mortgage business in the future, which is why we tried to frame that billion dollars of potential revenue in the future, as mortgage volumes return to more normal levels. And we expect them to return to normal levels. At these high rates, people are sitting on homes that they want to upgrade and move to that four-bedroom home versus a three-bedroom, and they're waiting for rates to come down. Now, what's that inflection point?
Mark W. Begor: That's good news for our mortgage business in the future, which is why we tried to frame that $1 billion of potential revenue in the future you know as mortgage volumes return to more normal levels and we expect them to return to normal levels. At these high rates people are sitting on homes that they want to upgrade and move to the four bedroom.
Mark W. Begor: Home versus a three and a they're waiting for rates to come down now what's that inflection point.
Mark W. Begor: You know, we'll see. But the positive from our eyes is that, you know, it feels like the market is bottomed, and with the Fed, you know, managing inflation and indicating rate cuts in the future, you know, that's going to be a good guy for Equifax in the tailwind going forward. The question is when.
Mark W. Begor: We'll see but the positive and up from our eyes as did you know it feels like the market has bottomed and with the feds.
Mark W. Begor: Managing inflation and indicating rate cuts in the future that's going to be a good guy for equifax and the tailwind going forward. The question is when.
Speaker Change: Got it that's really helpful. Also could you maybe piece out some kind of a little bit.
Mark W. Begor: That's really helpful. Also, could you maybe please add some a little bit more color on how the 24% outperformance compared to the mortgage market figure was arrived at? I mean, I know some of this has already been touched upon, but if you can maybe expand on that a little bit. So you're talking about our overall mortgage outperformance, blended USIS and EWS, right? So, again, so it's kind of two drivers,
Mark W. Begor: More color on how the 24% outperformance compared to the mortgage market figure was arrived at.
Mark W. Begor: I know some of this has already been touched upon but if you can maybe expand on that a little bit.
Mark W. Begor: So you felt like our overall mortgage outperformance Atlanta U S. I S. T E. W. So again, so it's kind of two drivers right. So we've talked about we expect that we expect in the first quarter for example.
John W. Gamble: So we've talked about what we expect in the first quarter, for example, Pardon me. EWS outperformed by on the order of 11 points. And we think that's really driven by price and records, right? And then, and products, as we said, we're lapping the launch of mortgage 36, which occurred in the fourth quarter of 2022, and right, and was kind of fully implemented in the first quarter of 2023. So we don't see the big product benefits that we saw in 23 recurring here in 2024. Over time, we will continue to launch new products; we do it very consistently across the business. And we should see that in mortgage as well, and that will continue to add to the outperformance of EWS. In USIF, obviously, the outperformance is extremely strong in the first quarter, right on the order of 50 points relative to what we're seeing in the market. And again, there are really two big drivers.
John W. Gamble: Pardon me AWS style formed outperformed by on the order of 11 points and we think that's really driven by price and records right and then and product as we said we're lapping the launch of mortgage 36, which occurred in the fourth quarter of 2022, right and was kind of fully implemented in the first quarter of 2023. So we don't see the big product benefits that we saw in 'twenty.
John W. Gamble: Three recurring here in 2024 over time, we will continue to launch new products, we do it very consistently across the business and we should see that in mortgage as well and that will continue to add to the outperformance in.
John W. Gamble: In a in any Ws and U S. I guess, obviously the outperformance is extremely strong in the first quarter right on the order of 50 points relative to what we're seeing in the market at and again, it's really two big drivers we've talked about it already.
John W. Gamble: We've talked about it already. We've seen a substantial increase from a vendor that we pass through as part of our pricing, and we mark it up to try to maintain our EBITDA margins. That is a little dilutive on our overall margins, but it is something that we generate significant incremental profit from. So we do mark it up to maintain our EBITDA margins.
John W. Gamble: We've seen a substantial increase from a vendor that we pass through as part of our pricing and we market off to try to maintain our EBITDA margins that is a little dilutive on our overall margins, but it is something that we would generate significant incremental profit for them. So we do market up to maintain EBITDA margins. We're also seeing some incremental growth because in the second half of last.
John W. Gamble: We're also seeing some incremental growth because in the second half of last year, we saw some acceleration in products that are sold very early in the mortgage cycle. And since they accelerated in the second half of last year, relative to the first half of last year, we're seeing incremental growth relative to mortgage market transaction levels in the first quarter of 2023, relative to what we would have seen last year. Some new products that Equifax rolled out. And it's also the pre-qualification products that have gone on across the industry. So that's why we're indicating that as we move through 2024, we would expect the level of outperformance in USIF mortgages to decline as we lap the periods in which those pre-qualify products. Thanks a lot.
John W. Gamble: Year, we saw some we saw acceleration in products that are sold very early in the mortgage cycle and since they accelerated in the second half of last year relative to the first half of last year, we're seeing incremental growth relative to the mortgage market transaction levels in the first quarter of 2023.
John W. Gamble: Relative to what we would've seen last year and.
John W. Gamble: Some new products that Equifax rollout and it's also it's also the pre qual products they've got there.
John W. Gamble: That have gone on across the industry. So that's why we're indicating is as we move through 2024, we would expect the level of outperformance in the U S. I ask mortgage to decline as we lap the periods in which those prequel product for a while.
Speaker Change: Thanks, a lot.
Mark W. Begor: Thank you. Our next questions come from the line of Toni Kaplan with Morgan Stanley. Please proceed with your... Thanks so much.
Mark W. Begor: Thank you. Our next question is come from the line of Toni Kaplan with Morgan Stanley. Please proceed with your questions.
Toni Kaplan: Thanks, So much I wanted to ask about the comment you made on the delinquencies. It seems like subprime spent getting worse approaching oh nine level. Since you called out earlier do you see that spreading 10 near prime or prime and I guess, so far it hasn't we haven't seen changes in consumer behavior and.
Mark W. Begor: I wanted to ask about the comment you made on the delinquencies. It seems like subprime's been getting worse, approaching 09 levels, as you called out earlier. Do you see that spreading to near prime or prime? And I guess so far it hasn't. You haven't seen any changes here.
Mark W. Begor: But I guess, how do you think that this plays out? Yeah, you know, I've been in the financial services space for a long time, obviously here at Equifax for almost six years, but for 10 years, I was in what is now Synchrony. So I know the financial services space well. And, you know, personally, I don't.
Mark W. Begor: And things like that but I guess, how do you think that this plays out.
Mark W. Begor: Yeah.
Mark W. Begor: I've been in financial services space for a long time, obviously here at Equifax for almost six years, but for 10 years I ran what is now synchrony. So I know the financial services space, well and personally I don't none yet that's not my view that it's going to spread and primarily because unemployment is so low unemployment is so high.
Mark W. Begor: Yeah, that's not my view that it's going to spread, primarily because unemployment is so low and employment is so high. As long as people are working, you know, they have the capacity to maintain their, you know, financial obligations. And of course, financial institutions, like I said, our customers are using data to make sure they're offering credit to those that, you know, can pay it back. So we're in an environment where unemployment really drives positives in most of the delinquency bans. Some crimes have been pressured, primarily because of inflation in what we see, you know, while they're working, you know, that demographic inflation, whether it's heat, gas, groceries, you know, all those have pressured that group.
Mark W. Begor: As long as people are working.
Mark W. Begor: They have the capacity to maintain their financial obligations and of course financial institutions like meeting our customers are using data to make sure they're offering credit to those that can pay it back so we're in an environment.
Mark W. Begor: Where unemployment really drives positives in most of the delinquency bands subprime has been pressured primarily because of inflation and what we see you know, while they're working that demographic inflation.
Mark W. Begor: Inflation, whether it's heat gas groceries, you know all of those have pressured you know that that group and then it was a reminder, it's a small part a small part an important part, but a small part of the financial services ecosystem, meaning most of the lending that takes place.
Mark W. Begor: And then, as a reminder, it's a small part, a small part and an important part, but a small part of the financial services ecosystem, you know, meaning most of the lending that takes place in cards and auto loans is done in prime and near Prime. Subprime is generally done today with fintechs. That's where most of the, and, you know, they've tightened up, you know, starting in the summer of 22, you know, almost 18 months ago, they started tightening up because they saw subprime consumers pressured by inflation, and they were getting pressured around their balance sheets, you know, because most of them are, you know, bank funded or securitization funded, so they had some pressures.
Mark W. Begor: Cards and auto and it is done in a prime and near Prime.
Mark W. Begor: Subprime is generally done today with.
Mark W. Begor: With fin techs, that's where most of the and you know they've tightened up.
Mark W. Begor: Starting in the summer of 'twenty, two you know almost 18 months ago.
Mark W. Begor: They started tightening up.
Mark W. Begor: Because they saw subprime consumers pressured by inflation and they were getting pressured around their balance sheets.
Mark W. Begor: Because most of them are you know a bank funded or AR securitization funded so they had some pressures.
Mark W. Begor: So no, I don't see it as long as unemployment stays there. The thing that we watch a lot, and I watch it a lot personally, is where's unemployment? And as it stays low, and it feels like it's going to stay low, I think we still have, you know, something like 9 million jobs open, you know, with 5 million people looking, and we're still generating net new jobs. So that's a good environment, you know, generally, for financial services. This makes a lot of sense. But I wanted to ask a question on margins in a slightly different way.
Mark W. Begor: No I don't see it as long as unemployment stays or the thing that we watch a lot and I watched a lot personally is whereas unemployment and is it stays low and it feels like it's gonna stay low I think we still have you know something like 9 million jobs open you know with the 5 billion people looking and we're still generating net new jobs. So that's a.
Mark W. Begor: Good environment, you know generally you know for the financial services industry.
Speaker Change: Yeah. It makes a lot of sense.
Mark W. Begor: Wanted to ask that question on margins in a slightly different way.
Mark W. Begor: We talked about the moving pieces, a very helpful bridge that you gave, and so the way I'm thinking about it is you have sort of the normal margin expansion from growth, you have more cost savings than you previously expected, a better mortgage environment in the second half, and then you have some of the redundant system costs going away in the second half. So basically, a lot of positives in the second half of the year for margins. I guess where, what kind of ballpark should we be thinking about exiting 24, and obviously, I'm trying to think about my 25 number thing.
Mark W. Begor: You talked about the moving pieces are very helpful Bridge that you gave them and so the way I'm thinking about it is yes, sorry, the normal margin expansion from growth, yes that more cost savings than you previously expected better mortgage environment in the second half and then yes every time that some of the redundant.
Mark W. Begor: Some costs going away in the second half so basically a lot of positives in second half of the year for our margins and that's where we're at what kind of ballpark should we be thinking about exiting 'twenty four and obviously I'm trying to think of that 25 number. Thanks.
Speaker Change: I think it's a little too early for us to get into third and fourth quarter guidance, but look what we've said consistently we expect to see nice Margaret margin improvements as we move through this year and that's both sequentially and then relative to what we delivered last year. So we continue we expect that to continue to happen.
Mark W. Begor: I think it's a little too early for us to be giving third and fourth quarter guidance, but we've consistently said we expect to see nice margin improvements as we move through this year, and that's both sequentially and then relative to what we delivered last year. So we expect that to continue to happen. I think you summarized what we talked about very well, right? And we do expect to see very good margin progression as we go through this year, and then obviously, to the extent that there is a mortgage recovery, which we haven't forecast, we should see accelerated margin expansion as that occurs, right, based on the variable or gross profit margins that you apply against our mortgage.
Mark W. Begor: Thank you you you summarized what we talk about very very very well right.
Mark W. Begor: And we do expect to see very good margin progression as we go through this year and then obviously to the extent that there was a mortgage recovery, which we haven't forecast we should see accelerated margin expansion as that occurs right.
Mark W. Begor: Based on based on variable their gross profit margins that you apply against our mortgage.
Mark W. Begor: Great, thank you. Thank you. We have reached the end of our question and answer session. I would now like to turn the floor back over to Trevor Burns for any closing remarks. I just want to thank everybody for joining the call today, and if you have any follow-up questions, please reach out to myself or send an instruction. Everybody have a great day. Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.
Speaker Change: Great. Thank you.
Mark W. Begor: Thank you we have reached the end of our question and answer session I would now like to turn the floor back over to Trevor Burns for any closing remarks.
Mark W. Begor: Oh no.
Trevor Burns: I just wanted to thank everybody for joining our call today.
Trevor Burns: Follow up calls please reach out to myself or.
Mark W. Begor: Illustrates.
Speaker Change: Great job.
Mark W. Begor: Yeah.
Speaker Change: Thank you. This does conclude today's teleconference. We appreciate your participation you may disconnect. Your lines at this time enjoy the rest of your day.
Trevor Burns: .., www.thevenusproject.com The Bulletproof Executive 2013,...
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Trevor Burns: Okay.