Q3 2024 Equifax Inc Earnings Call
Again the conference. Please press Star Zero on your telephone keypad as a reminder, this conference is being recorded it is now my pleasure to introduce your host Trevor Burns SVP head of corporate Investor Relations. Thank you you may begin.
Oh, Thank you and good morning, Welcome today's conference call I'm Trevor Burns with me today are Mark <unk>, Chief Executive Officer, and John Gamble, Chief Financial Officer.
Today's call is being recorded and all cavity recording will be available later today.
The IR calendar section of the news and events tab at our Investor Relations website. During the call we will be making reference to certain materials that can also be found in the presentation section of the news and events tab at our IR website as mature as a label in <unk> 'twenty 'twenty four earnings conference.
Speaker Change: I'll be back with you, John Gamble.
John Gamble: Greetings and welcome to the Equifax Inc. 3rd quarter 2024 earnings conference call.
Speaker Change: At this time, all participants are on a listen-only mode, a question and answer session will follow the formal presentation. If anyone requires operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Trevor Burns, S.B.P. Head of Corporate Investor Relations. Thank you. You may begin.
Call also we're making certain forward looking statements, including fourth quarter and full year 2020 core guidance.
As well as certain 2025 guidance to help you understand equifax and its business environment. These statements involve a number of risks uncertainties and other factors that could cause actual results to differ materially from our expectations certain risk factors that may impact our business are set forth in filings with the SEC.
Speaker Change: and John Gamble, Chief Financial Officer.
Including our 2023 Form 10-K and subsequent filings.
Speaker Change: Today's call is being recorded, and our cavity recording will be available later today in the IR calendar section of the Museum of Vence tab at our Industrial Relations website.
Yeah.
We will also be referring to certain non-GAAP financial measures, including adjusted EPS, and adjusted EBITDA, which will be adjusted for certain items that affected the durability of our underlying operational performance.
Speaker Change: During the call, we will make a reference to certain materials that can also be found in the presentation section of the Museum of NSTAB and our IR website. These materials are labeled 3Q-2024, Ryan's Conference Call.
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 it.
Financial info tab of our IR website.
Speaker Change: Also, we're making certain reports of state events, including court quarter and four-year 2020 court guidance, as well as certain 2020 five guidance.
Speaker Change: Uh huh.
Speaker Change: In the third quarter Equifax incurred a restructuring charge for cost reduction actions aligned with the completion of the migration of significant data exchanges and applications in the United States, and Canada and certain countries in Latin America to the Equifax clouds as well as cost actions to streamline.
Speaker Change: Tokyo Understand Equal Tax and its business environment. These patents involve a number of risks on certainties and other factors that could cause actual results to diplomat's early, no more expectations.
Speaker Change: Service Factors in the Impactor Business are set forth and following with the SEC, including our 2023-110K in subsequent finance.
Speaker Change: Our workforce globally.
Speaker Change: Charges totaled $42 million.
Speaker Change: Expect it to be and expect it to deliver ongoing savings.
Speaker Change: When completed in early 2025.
Speaker Change: We've also been preparing to certain non-contact financial measures, including a trust-to-BPS and a trust-to-deep enough.
Over $70 million a year.
Speaker Change: We expect to generate further savings as we complete cloud migrations in Europe.
Speaker Change: which will be adjusted for certain items to affect the comparability of our underlying operational performance.
Speaker Change: Remainder of Latin America, and Brazil, and Australia, New Zealand, principally over 25 and 26.
Speaker Change: These non-gap measures are detailed in reconciliation tables, which are included with our lens release.
Speaker Change: Now I would like to turn it over to Mark.
Speaker Change: and can be found at a financial results section of the financial info tab at our higher websites.
Mark: Thanks, Trevor and good morning.
Mark: Before I cover our strong third quarter results I want to update you on the strong progress of our cloud transformation.
Speaker Change: Don't forget to subscribe to our channel!
Speaker Change: In the third quarter, Michael Faxon Clitor was struck from George.
Mark: In the quarter U S. I has completed the migration.
Speaker Change: For Cost Production Actions aligned with the completion of the migration.
Mark: Onto the cloud data fabric of the remaining customers and services for their consumer credit and telco and utilities exchanges, which is a huge milestone.
Speaker Change: of significant data exchanges and applications.
Speaker Change: in the United States and Canada, and certain countries in Latin America to the Apple X-Cloud.
Mark: Along with AWS the work number exchange, which we completed migrating to the Equifax cloud over two years ago. We now have our three largest data exchanges new equifax cloud.
Speaker Change: as well as cost actions to streamline a workforce globally.
Speaker Change: is charged with total of $4,000,000,000.
Mark: As at the end of September we have about 80% of Equifax revenue in the Equifax cloud.
Speaker Change: and are expected to be unexpected to deliver on-going savings when completed in early 2025 over $70 million a year. We expect to generate further savings as we complete cloud migrations in Europe , remainder of Latin America and Brazil, and Australia and New Zealand, principally over 25 and 26. Now I'd like to turn it over to Luke. Luke.
Mark: And expect to approach, 90% of our revenue in the Equifax cloud by yearend.
Mark: The cloud migrations have been a huge effort across equifax over the past four plus years, requiring a ton of focus by the entire equifax team.
Mark: We expect to have a significant competitive advantage as we fully deploy our new cloud capabilities and pivot from building to leveraging the cloud in 2025 and beyond it will allow us to fully focus on customers' growth innovation, new products and AI.
Speaker Change: Thanks, Trevor, and good morning. Before I cover our strong third quarter results, I want to update you in the strong progress of our cloud transformation.
Luke: In the quarter, USIS completed the migration onto the cloud data fabric of the remaining customers and services for their consumer credit and telco and utilities exchanges, which is a huge milestone. Along with EWS, the work number exchange, which we completed migrating to the Equifax cloud over two years ago, we now have our three largest data exchanges in the new Equifax cloud. As of the end of September , we have about 80% of Equifax revenue in the Equifax cloud and expect to approach 90% of our revenue in the Equifax cloud by year end. The cloud migrations have been a huge effort across Equifax over the past four plus years, requiring a ton of focus by the entire Equifax team.
Mark: We're using in the U S. I S consumer in telco and utility migration to the Equifax cloud allowed us to begin decommissioning legacy on Prem systems and software in U S. I S. In the third quarter supporting our goal of cloud spending reductions in 2024, which expand our operating margins and are lowering the capital into.
Mark: City of our businesses our business in 2025 and beyond.
Mark: In the third quarter. We also made substantial progress in our international technology transformation activities with Canada, completing migration of all customers off of their consumer and commercial credit exchanges onto the new FX cloud data fabric. This is another big accomplishment for the international team with cloud migrations in Argentina.
Luke: We expect to have a significant competitive advantage as we fully deploy our new cloud capabilities and pivot from building to leveraging the cloud in 2025 and beyond. It will allow us to fully focus on customers, growth, innovation, new products and AI.
Mark: Chile.
Mark: In the Dominican Republic completed earlier in the year, adding to candidates completion, a few weeks ago.
Our international cloud migration efforts will continue in 'twenty, five and 26, resulting in additional cloud savings as those migrations are completed.
Luke: Greetings to USIS consumer and telco and utility migrations to the Equifax cloud allowed us to begin decommissioning legacy on-prem systems and software in USIS in the third quarter supporting our goal of cloud spending reductions in 2024, which expand our operating margins and are lowering the capital intensity of our businesses of business in 2025 and beyond. Thank you very much for your time, and thank you very much for your time.
Mark: It is energizing to be approaching the finish line of our cloud transformation. We are entering the next chapter of the new Equifax as we pivoted from building the new Equifax cloud to leveraging our new club capability to drive our top and bottom line.
Mark: Turning to slide four we had a strong third quarter with reported revenue of $1 44, 2 billion up 9% and at the top end of our July guidance with organic constant dollar revenue up 10%, which is at the top end of our long term growth framework is.
Luke: In the third quarter, we also made substantial progress in our international technology transformation activities with Canada, completing migration of all customers off of their consumer and commercial credit exchanges onto the new EFX Cloud Data Fabric.
Adjusted EBITDA margins of just under 33% were in line with our expectations and adjusted EPS of $1 85 per share with the top end of our July guidance.
Luke: This is another big accomplishment for the international team with cloud migrations in Argentina, Chile, and the Dominican Republic completed earlier in the year, adding to Canada's completion a few weeks ago. Our international cloud migration efforts will continue in 25 and 26 resulting in additional cloud savings as those migrations are completed.
Mark: Our global non mortgage businesses, which represent about 80% of total revenue in the quarter had strong 10% constant currency revenue growth.
Mark: Which was in line with our expectations.
Mark: Non mortgage organic constant currency revenue growth was 8% in the quarter.
Luke: is energizing to be approaching the finish line of our cloud transformation. 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 line.
Mark: The strong non mortgage performance was driven by 9% growth in AWS with very strong 19% non mortgage growth in AWS verifier led by very strong 29% growth in government and talent that was up over 9% and AWS.
Luke: Turning to slide four, we had a strong third quarter, the reported revenue of 1.442 billion of 9% and at the top end of our July guidance.
Mark: U S <unk> non mortgage revenue growth of almost 5% with stronger than our expectations principally from our consumer business in financial marketing services, our offline batch business.
Luke: with organic constant dollar revenue, up 10%, which is at the top end of our long-term growth framework. Adjusted EBITDA margins at just under 33%, were in line with our expectations, and adjusted EPS of $1.85 per share was the top end of our July guidance.
Mark: International delivered just under 18% constant dollar revenue growth and strong 12% organic growth led by continued strong growth in Latin America and Europe.
Mark: Total U S mortgage revenue was up 17% in the quarter and above our.
Luke: A global non-border to businesses which represent about 80% of total revenue in the quarter had strong 10% constant currency revenue growth, which was in line with our expectations.
Mark: Our July guidance.
Mark: U S mortgage revenue was 20% of equifax revenue in the quarter in.
Luke: The strong non-mortage performance was driven by 9% growth in EWS with very strong 19% non-mortage growth in EWS verifier led by very strong 29% growth in government and talent that was up over 9% in EWS.
Mark: In late September as mortgage rates declined to just over 6% we saw modest mortgage inquiry activity increases.
Mark: We believe this improvement was likely led by mortgage refi activity off the lower mortgage rates.
Mark: New home purchase activity appears to have remained at the lower levels. We've been seeing throughout 2024, reflecting continued low home inventory levels elevated home prices impacting affordability and prospective homebuyers waiting for further mortgage rate reductions.
Luke: U.S. IS-9 mortgage revenue growth of almost 5% was stronger than our expectations, principally from our consumer business and financial marketing services are offline batch business.
Mark: As mortgage rates increased in early October to over six 6%, we have seen mortgage activity reduced to levels closer to what we saw in July and August John will cover our expectations for mortgage activity in the fourth quarter. Shortly we continue to believe that activity will improve towards 2015 to 2019 levels as mortgage.
Luke: International delivered just under 18% constant dollar revenue growth and strong 12% organic growth led by continued strong growth in Latin America and Europe.
Luke: Total U.S. mortgage revenue was up 17% in the quarter and above our July guidance.
Mark: Rates come down in the future.
Mark: In the third quarter the growth in mortgage revenue was driven principally by U S. I S, where mortgage revenue was up a strong 36% and slightly above our expectations.
Luke: U.S. mortgage revenue was 20% of Equifax revenue in the quarter. In late September, as mortgage rates declined to just over 6%, we saw modest mortgage inquiry activity increases.
Mark: This strong growth was again driven by the benefit of strong vendor pricing actions and the performance of our new mortgage Prequalified X.
Luke: We believe this improvement was likely led by mortgage refi activity off the lower mortgage rates.
Mark: The lower mortgage rates, we saw in late September did drive a small increase in mortgage application activity, which benefited us in the quarter.
Luke: New home purchase activity appears to have remained at the lower levels we've been seeing throughout 2024, reflecting continued low-home inventory levels, elevated home prices impacting affordability and perspective home buyers waiting for further mortgage rate reductions.
Mark: Gws mortgage revenue returned to growth with revenue up 4% and was also slightly better than our expectations. As a reminder, AWS mortgage inquiry volumes lag Usia's credit inquiry volumes as credit has pulled earlier in the mortgage application cycle than income and employment, which is typically pulled in the middle.
Luke: As mortgage rates increase in early October to over 6.6% we have seen mortgage activity reduce to levels closer to what we saw in July and August.
Luke: John will cover our expectations for mortgage activity in the fourth quarter shortly, but we continue to believe that activity will improve towards 2015 to 2019 levels as mortgage rates come down in the future.
Mark: Of course at closing of the mortgage application.
Mark: USAA is typically sees the benefits of mortgage shopping behavior earlier into a greater extent that AWS as a result, AWS did not see the same level of incremental inquiry volume is <unk> did from the slight increase in mortgage activity occurred in late September.
Luke: In a third quarter, the growth in mortgage revenue was driven principally by USIS where mortgage revenue was up a strong 36% and slightly above our expectations.
Mark: Gws mortgage revenue exceeded 20 inquiry volume by about nine 5% in the quarter up a very strong 300 basis points sequentially from second quarter, principally from strong twin record growth.
Luke: This strong growth was again driven by the benefit of strong vendor pricing actions and the performance of our new mortgage pre-qual products.
Luke: The lower mortgage rates we saw in late September did drive a small increase in mortgage application activity which benefited USIS in the quarter.
Mark: Equifax had another strong quarter of new product innovation with a V I or vitality index of 13% above our 10% guidance for the year and our long term framework of 10% vitality.
Luke: HeWS mortgage revenue returned to growth with revenue up 4% and was also slightly better than our expectations.
Luke: As a reminder, EWS Mortgage inquiry volumes, lag, USIS credit inquiry volumes, as credit is pulled earlier in the mortgage application cycle than income employment, which is typically pulled in the middle, and of course, it closing of the mortgage application.
Mark: We saw strong broad based new product rollouts with double digit growth in AWS in international and <unk> of 9% and <unk>, which was up 100 basis points sequentially from the second quarter.
Mark: We expect our NPI revenue to grow revenue growth to remain strong and are increasing our 2020 for vitality index guidance to 11% up 100 basis points from our prior framework for 2024 as we further leverage our new <unk> cloud capabilities in FX Dot AI to drive new product.
Luke: U.S. I.S. typically sees the benefits of mortgage shopping behavior earlier into a greater extent than EWS. As a result, EWS did not see the same level of incremental inquiry volume as U.S. I.S. did from the slight increase in mortgage activity occurred in late September.
Luke: EWS Mortod revenue exceeded twin inquiry volume by about 9.5% in the quarter of the very strong 300 basis points sequentially from second quarter, principally from strong twin record growth.
Mark: Into the marketplace.
Mark: Turning to slide five workforce solutions revenue was up about seven 5% and slightly below our July guidance, principally due to lower than expected employer services revenue.
Luke: Equifax had another strong quarter of new product innovation with a vi or vitality index of 13% above our 10% guidance for the year and our long-term framework of 10% vitality.
Mark: Non mortgage verification services revenue again delivered very strong 19% growth, which was in line with our expectations.
Mark: Government had another outstanding quarter with very strong 29% revenue growth from continued penetration in their large $5 billion government Tam.
Luke: We saw a strong broad-based new product roll-outs with double-digit growth in AWS and international and a vi of 9% in USIS, which was up a 100 basis point sequentially from the second quarter.
Government revenue grew sequentially from strong growth in state penetration and insights incarceration data solutions, we expect.
Luke: We expect our NPI revenue to grow, revenue growth to remain strong, and are increasing our 2024 vitality index guidance to 11% of 100 basis points from our prior framework for 2024. As we further leverage our new EFX cloud capabilities and EFX.ai to drive new products into the marketplace.
Mark: Continued strong sequential growth.
Mark: Sequential government revenue growth again in the fourth quarter.
Growth rates in the fourth quarter are expected to continue to show strong double digit performance, but will be lower than third quarter levels, principally due to comping against very strong growth we saw last year.
Mark: We expect our government vertical to continue to deliver very strong double digit growth in the future and outgrow both equifax in AWS.
Speaker Change: According to slide five, workforce solutions revenue was up about 7.5%. And slightly below our July guidance, principally due to lower than expected employer services revenue.
Mark: Talent solutions revenue was up a strong 9% in the quarter talent solutions continues to benefit from their new total verified data hub, which includes trended employment data as well as insights incarceration education and licensing and Credentialing data.
Speaker Change: 9-Worget's Reification Services revenue, again delivered very strong 19% growth, which was in line with our expectations.
Speaker Change: Government had another outstanding quarter with very strong 29% revenue growth from continued penetration in their large $5 billion government term.
Mark: Based on data through August AWS talent solutions outperformed the BLS white collar hiring markets by approximately 18 percentage points from additions of records, the rollouts of new products and penetration into the talent vertical during the quarter.
Speaker Change: Government revenue grew sequentially from strong growth and state penetration and insights and incarceration data solutions.
Speaker Change: We expect continued strong sequential growth, sequential government revenue growth again in the fourth quarter.
Mark: We did see somewhat weaker volumes late in September, which we have assumed will continue and is expected to impact talent revenue growth in the fourth quarter.
Speaker Change: Growth rates in the fourth quarter are expected to continue to show strong devil-digit performance, but we lower than third quarter levels. Principally due to, comping against very strong growth we saw last year.
Mark: Gws mortgage revenue was up 4% in the quarter and slightly better than our July guidance.
Mark: Twin inquiries in the third quarter were down about five 5% and slightly better than our July guidance.
Speaker Change: We expect our government vertical to continue to deliver very strong double digit growth in the future and outgrow both aquifax and EWS.
Mark: Total AWS mortgage revenue outperformed twin inquiries by about nine 5% and again up through over 300 basis points sequentially from strong record growth during the quarter.
Speaker Change: Talent Solutions Revenue was up a strong 9% in the quarter. Talent Solutions continues to benefit from their new total verified data hub, which includes trended employment data as well as insights and incarceration, education, and licensing and credentialing data.
Mark: We expect strong growth in twin records to benefit mortgage and our other AWS verticals again in the fourth quarter.
Mark: UWS consumer lending revenue was up 16% from strong double digit growth in P loans and high single digit growth in debt management and auto.
Speaker Change: Based on data through August, EWS talent solutions outperform the BLS white-collar hiring markets by approximately 18 percentage points from additions of records, rollouts of new products and penetration into the talent vertical during the quarter.
Employer services revenue was down 19% in the quarter and weaker than we expected compared to last year employer declined principally from lower ERC revenues into a lesser extent lower I nine and Onboarding revenues as the slower white collar hiring we saw in late September impacting talent solutions also impacted our onboard.
Speaker Change: We did see somewhat weaker volumes late in September, which we have assumed will continue and is expected to impact talent revenue growth in the fourth quarter.
Speaker Change: EWS mortgage revenue was up 4% in the quarter and slightly better than our July guidance. Twin increase in the third quarter were down about 5.5% and slightly better than our July guidance.
Mark: <unk> business.
Mark: There was also some onetime post COVID-19 related project revenue that benefited onboarding in the third quarter of last year.
Speaker Change: Total EWS mortgage revenue outperform twin inquiries by about 9.5% and again up over 300 basis points sequentially from strong record growth growth during the quarter.
Mark: Third quarter, I, nine and Onboarding revenue was consistent with the first and second quarters.
Mark: And we expect fourth quarter employer revenue to be down mid single digits as the ERC comparisons mitigate.
Speaker Change: We expect strong growth in twin records to benefit mortgage and our other AWS verticals again in the fourth quarter.
Mark: Workforce solutions adjusted EBITDA margins were 51, 6% and were slightly above our expectations and continued to be very strong, reflecting strong verifier revenue growth and continued strong cost controls.
Speaker Change: EWS Consumer Lending revenue was up 16% from strong double-digit growth in p-wones and high-single digit growth in debt management and auto.
Speaker Change: Turning to slide six the AWS government team continued their very strong performance in the quarter with revenue up 29%.
Speaker Change: In Plur, service is revenue with down 19% in the quarter and weaker than we expected.
Speaker Change: Compared to last year, employer declined principally from lower ERC revenues and to a lesser extent lower I-9 and onboarding revenues as the slower white collar hiring we saw on late September impacting talent solutions, also impacted our onboarding business.
Speaker Change: The governance team continued to focus on penetration of our unique DIY and VOA solutions for social services at both the federal level and across the state agencies and.
Speaker Change: In the quarter the AWS government team signed an extension to their SSA redetermination contract to provide income and employment data for individuals applying for we're currently receiving social security disability income and supplemental security income benefits with a potential contract value of about $500 million over the next five years.
Speaker Change: It was also some one-time post-COVID-related project revenue that benefited on boarding in the third quarter of last year.
Speaker Change: Third quarter, I-9, and I'm born in revenue was consistent with the first and second quarters. And we expect fourth quarter employer revenue to be down, mid-single digits, as the ERC comparisons mitigate.
Speaker Change: Yes.
Speaker Change: AWS services support program integrity for the SSA as well as reducing the administrative burden for consumers seeking these important services.
Speaker Change: Workforce Solutions adjusted EBITDA margins were 51.6% and were slightly above our expectations and continue to be very strong, reflecting strong verifier revenue growth and continued strong cost controls.
Speaker Change: Chad and the government team are on offense driving penetration in the Big 5 billion dollar government Tam.
Speaker Change: Turning to slide seven AWS had another outstanding quarter of new record additions a few weeks ago, we announced a new strategic partnership with workday to provide verification services to workdays large customer base.
Speaker Change: Turning the slide six, the U.S. government team continued their very strong performance in the quarter with revenue-up 29%.
Speaker Change: The governance team continue to focus on penetration of our E-E-E-Y and V-O-E solutions for social services at both the federal level and across the state agencies.
Speaker Change: Later in the fourth quarter, we'll begin rolling out the free value added AWS income and employment verification services to workdays U S customers and expect to onboard a sizable number of new records through 2025 from this new strategic relationship.
Speaker Change: In the quarter, the AWS Government team signed an extension to their SSA Redetermination Contract.
Speaker Change: to provide incoming employment data for individuals applying for or currently receiving Social Security Disability income.
Speaker Change: Also in the quarter, we signed agreements with five additional new strategic partners that will contribute over 5 million records collectively to the twin database in the future.
Speaker Change: and supplemental security income benefits with a potential contract value of about 500 million dollars over the next five years.
Through September AWS is executed 12 strategic partnerships during 2024 and since the beginning of 2021 Dws has completed 45 strategic partnership agreements. We expect these five new partnership signed during the quarter to come online and begin generating revenue late in the fourth.
Speaker Change: EWS Services Support Program Integrity for the SSA, as well as reducing the administrative burden for consumers seeking these important services.
Speaker Change: Chad and the government team are on offense, driving penetration in the big $5 billion government team.
Speaker Change: According to Flight 7, EWS had another outstanding quarter of new record editions.
Speaker Change: <unk> and substantially in the early parts of 2025.
Speaker Change: A few weeks ago, we announced the news strategic partnership with Workday to provide verification services to Workday's large customer base.
Speaker Change: In the third quarter EW at AWS added 2 million active records to the twin database ending the quarter with 182 million active records up a strong 12% on a 134 million unique individuals.
Speaker Change: Later in the fourth quarter, we'll begin rolling out the free value-added EWS income and employment verification services to work days, U.S. customers, and expect to onboard a sizable number of new records through 2025 from this new strategic relationship.
Speaker Change: UWS now has $3 8 million companies contributing income and employment records to the twin database every pay period, a very strong 40% CAGR since 2020.
Speaker Change: Also in the quarter we signed agreements with five additional news strategic partners that will contribute over 5 million records collectively to the twin database in the future.
Total records are now over $700 million and up 11% in the quarter supporting our trended or historical solutions with about half of verifier revenue from products, including historical records.
Speaker Change: Through September, EWS has executed 12 strategic partnerships during 2024, and since the beginning of 2021, EWS has completed 45 strategic partnership agreements.
Speaker Change: At 134 million unique active records, we have plenty of room to grow the twin database towards the Tam of $225 million income producing Americans.
Speaker Change: We expect these five new partnership signed during the quarter to come online and begin generating revenue late in the fourth quarter and substantially in the early parts of 2025.
Speaker Change: Turning to slide eight.
Speaker Change: <unk> achieved a major milestone in the third quarter completing the migration to the new Equifax data cloud fabric of both of the U S consumer credit and our cellphone utility databases.
Speaker Change: In the third quarter, EWS added 2 million active records to the twin database, ending the quarter with 182 million active records up a strong 12% on 134 million unique individuals.
Speaker Change: This big milestone makes U S consumer credit telco and utilities data fully available across our new data fabric for use in advanced AI based solutions to enhance our density and fraud solutions and to accelerate our only equifax solutions, leveraging both AWS and <unk> data <unk>.
Speaker Change: HeWS now has 3.8 million companies contributing and coming employment records to the twin database every pay period, a very strong 40% cager since 2020.
Speaker Change: Coder records are now over 700 million and up 11% in the quarter supporting our trended or historical solutions with about half a verifier revenue from products including historical records.
Speaker Change: <unk>.
Speaker Change: It also allows our U S commercial product and technology teams to fully shift their focus to delivering these new advanced Equifax solutions to customers that will drive new product rollouts and topline growth for equifax.
Speaker Change: At 134 million unique active records, we have plenty of room to grow the twin database towards the Tam of 225 million income producing Americans.
Speaker Change: U S revenue was up 12% in the quarter and well above the July guidance of up eight 5%.
Speaker Change: Turning to slide A, US ISAG, the major milestone in the third quarter, completing the migration to the new Equifax Data Cloud fabric of both the US consumer credit and our cell phone utility databases.
Speaker Change: And our long term revenue growth framework of 6% to 8%. Despite the continuation of some weakness in the FA and auto end markets.
Speaker Change: This was driven by both strong performance in non mortgage revenue as well as stronger mortgage revenue, reflecting a slight increase in mortgage activity. We saw in late September.
Speaker Change: This big milestone makes US consumer credit telco and utilities data fully available across our new data fabric for use in advanced AI based solutions to enhance our identity and fraud solutions and to accelerate our only Equifax solutions leveraging both EWS and USIS data assets.
Speaker Change: Total non mortgage revenue was up 5% in the quarter and was also well above our July guidance of over 2% growth for U S. I S.
Speaker Change: We saw strong double digit growth in consumer solutions in financial marketing services, which were offset by a less than 1% decline in U S. I S. BTB online revenue from softer consumer and end market demand, which importantly was up about 300 basis points sequentially.
Speaker Change: It also allows our U.S. commercial product and technology teams to fully shift their focus, to delivering these new advanced aquifax solutions to customers, they will drive new product rollouts and top line growth for aquifax.
Speaker Change: <unk> online saw double digit growth in insurance and commercial high single digit growth in telco and low to mid single digit revenue growth in banking and auto offset by declines in third Party Bureau sales in identity and fraud we.
Speaker Change: U.S. I.S. revenue was up 12% in the quarter in well above the July guidance of 8.5% in their long-term revenue growth framework of 6 to 8% despite the continuation of some weakness in the F.I. and auto and markets.
Speaker Change: We expect third party girl sales to be about flat in the fourth quarter as we lap the weakness that started in late 2023.
Speaker Change: This was driven by both strong performance in non-morgan's revenue, as well as stronger mortgage revenue reflecting the slight increase in mortgage activity we saw in late September.
Speaker Change: Identity and fraud revenue was also down and weaker than our expectations, principally due to weakness in chargeback management volumes.
Speaker Change: Total non-morted revenue was up 5% in the quarter and was also well above our July guidance of over 2% growth for USIS.
Speaker Change: <unk> and transactional identity revenue grew in the quarter from tight penetration in large strategic accounts identity and fraud is starting to launch their new count 360 solutions platform and products, which will help strengthen growth in 2025 as these solutions take hold in the marketplace.
Speaker Change: We saw strong double-digit growth in consumer solutions and financial marketing services, which were offset by a less than 1% decline in U.S.IS B2B online revenue from software consumer and end market demand, which importantly was up about 300 basis points sequentially.
Speaker Change: Financial marketing services, our BTB offline business was up a very strong 14% in the quarter, reflecting substantial new wins and customer expansion across banking services and payments verticals as well as continued strong growth in prescreen marketing and our unique ISI wealth data.
Speaker Change: U.S. ISB to be online saw double digit growth in insurance and commercial high single digit growth in telco and load amid single digit revenue growth in banking and auto, offset by declines in third party bureau sales and identity and fraud.
Speaker Change: <unk> consumer solutions D to C business had another very strong quarter up 17% from strong double digit growth in our consumer direct channel and from strong customer acquisition trends.
Speaker Change: We expect third party drill sales to be about flat in the fourth quarter as we laughed the weakness that started in late 2023.
Speaker Change: We expect fourth quarter revenue to grow mid single digits as we start comping against very strong DTC growth last year.
Speaker Change: Again, if the infrad revenue was also down and weaker than our expectations, principally due to weakness in charge back management volumes.
Speaker Change: U S mortgage revenue was up a very strong 36% and better than our July guidance mortgage credit inquiries were up 1% and were also better than our July guidance of down 7% principally due to the slight increase in mortgage activity that we saw in late September.
Speaker Change: Payment and transactional identity revenue grew in the quarter from penetration and large strategic accounts. Identity and fraud is starting to launch their new count 360 solutions platform and products, which will help strengthen growth in 2025 as these solutions take hold in the marketplace.
Speaker Change: This was the first quarter of mortgage credit inquiry growth since the first quarter of 2021, which is a big milestone and reinforces for us that the mortgage market has clearly bottomed and poised for recovery in the future.
Speaker Change: Financial Marketing Services are needed to be offline business was up a very strong 14% in the quarter, reflecting substantial new wins in customer expansion across banking services and payments of articles, as well as continued strong growth in pre-screen marketing in our unique IXI Welp data.
Speaker Change: Consistent with the first half the strong pricing environment, along with the strengthened our new mortgage pre qual products also drove the very strong mortgage revenue growth at $137 million mortgage revenue was just under 30% of total U S. <unk> revenue in the quarter.
Speaker Change: U.S.I.S. consumer solutions D to C business had another very strong order, up 17% from strong double-digit growth in our consumer direct channel and from strong customer acquisition trends.
Speaker Change: <unk> adjusted EBIT margins were 33, 9% in the quarter up 70 basis points sequentially and in line with our expectations from higher than expected revenue growth offset by higher technology costs to complete cloud customer migration activities.
Speaker Change: We expect for a quarter revenue to grow mid-single digits as we start comping against very strong D2C growth last year.
Speaker Change: USIS mortgage revenue was up a very strong 36% and better than our July guidance. Mortgage credit inquiries were up 1% and were also better than our July guidance of down 7% principally due to the slight increase in mortgage activity that we saw on late September.
Speaker Change: With the U S consumer and our cellphone utility and data cloud transformation is complete Todd in the U S. S team are clearly focused on offense and growth.
Speaker Change: Turning to slide nine international revenue was up a very strong 18% in constant currency and up a strong 12% and organic constant currency, excluding the impact of bvs due to continued very very strong growth in Latin America and Europe.
Speaker Change: This was the first quarter of mortgage credit inquiry gross since the first quarter of 2021, which is a big milestone and reinforces for us that the mortgage market is clearly bottomed and poised for recovery in the future.
Speaker Change: Consistent with the first act, the strong pricing environment, along with the strength in our new mortgage pre-qual products, also drove the very strong mortgage revenue growth. At 137 million, mortgage revenue was just under 30% of total U.S.I.S. revenue in the quarter.
Speaker Change: Europe local currency revenue was up a very strong 9% in the quarter with continued strong 7% growth in our credit and data businesses and 12% growth in our debt management business.
Speaker Change: Latin America local currency revenue was up 58% principally due to the acquisition of Boa Vista with very strong organic growth of 31% led by 28% vitality index from new products in the region during the quarter.
Speaker Change: U.S. IS suggested EBITDA margins with 33.9% in the quarter of 70 base points sequentially, and in line with our expectations from higher than expected revenue growth, offset by higher technology costs to complete cloud customer migration activities.
Speaker Change: And as a reminder, we closed the bvs acquisition in August last year.
Speaker Change: With the U.S. I.S. consumer and our self-community and data cloud transformations complete, taught in the U.S. I.S. team are clearly focused on offense and growth.
Speaker Change: Canada delivered 1% growth in the quarter, which was below our expectations from a softer economy.
Speaker Change: Previously mentioned that Canada completed their consumer and commercial credit exchange customer migrations to data fabric, a few weeks ago and similar to the U S. We expect to see accelerating NPI and revenue growth going forward from the Canadian team.
Speaker Change: Turning to slide 9, international revenue was up a very strong 18% in Conson currency, now a strong 12% in organic conson currency, excluding the impact of BVS due to continued very strong growth in Latin America and Europe.
Speaker Change: Asia Pacific revenue returned to growth up 2% as expected.
International adjusted EBITDA margins of 27, 7% were up 210 basis points sequentially from strong revenue growth and good cost execution.
Speaker Change: You're a local currency revenue was up a very strong 9% in the quarter, with continued strong 7% growth in our credit in data businesses and 12% growth in our debt management business.
Speaker Change: Turning to slide 10, we continue to make very strong progress driving innovation with 30, new products launched in the quarter that delivered a 13% vitality from broad based performance across all of our business units.
Speaker Change: In America, local currency revenue was up 58 percent, principally due to the acquisition of Boladista, with very strong organic growth of 31 percent led by 28 percent vitality index from new products in the region during the quarter.
Speaker Change: Dws had very strong third quarter.
Speaker Change: With vitality index of 16%.
Speaker Change: and as a reminder, we close the BVS acquisition in August last year.
Speaker Change: Spanning solutions in the government vertical as well as incorporating incarceration education data into new talent solutions products.
Speaker Change: Canada delivered 1% growth in the quarter, which was below our expectations from a softer economy.
Speaker Change: <unk> saw continued sequential improvement with a vitality index of 9% up 100 basis points sequentially from the second quarter, we expect <unk> to continue to show strong vitality improvement from the cloud completion as they leverage our new cloud native infrastructure for innovation and new products as well as free.
Speaker Change: I previously mentioned the candidate completed their consumer and commercial credit, exchange, customer migrations to date of fabric a few weeks ago, and similar to the U.S., we expect to see accelerating NPI and revenue growth going forward from the Canadian team.
Speaker Change: As a Pacific revenue return to growth up 2% as expected, international adjusted EBITDA margins of 27.7% will up 210 basis points sequentially from strong revenue growth and good cost execution.
Speaker Change: Their product and technology resources that previously were working on cloud transformation in key verticals, such as identity and fraud commercial and our new mortgage pre qual products.
Speaker Change: Turning to slide 10, we continue to make very strong progress driving innovation with 30 new products launched in the quarter that delivered a 13% vitality from broad-based performances across all of our business units.
Speaker Change: International also had strong 11% vitality in the quarter with a strong focus on identity and fraud solutions.
Speaker Change: We expect strong double digit vitality in the fourth quarter, leveraging our equifax cloud capability to drive new product Rollouts and we are raising our full year vitality index guidance from 10% to about 11%, reflecting a strong innovation performance across all our businesses so far in 2024.
Speaker Change: EWS had very strong third quarter with vitality index of 16% expanding solutions in the government vertical as well as incorporating incarceration and education data into new talent solutions products.
Speaker Change: U.S. I.S. continued sequential improvement with a vitality index of 9% of 100 basis points sequentially from the second quarter.
Speaker Change: AI and ml are changing the way, we develop our new products and our single data fabric and build higher performing model scores and products for our customers.
Speaker Change: We expect USIS to continue to show strong vitality improvement from the cloud completion as they leverage our new cloud native infrastructure for innovation and new products, as well as free up their product and technology resources that previously were working on cloud transformation in key verticals such as identity and fraud, commercial, and our new mortgage pre-qual products.
Speaker Change: We're accelerating accelerating the pace at which we are developing new FX models and scores using our advanced AI and ml capabilities in areas, such as identity and fraud and consumer loan affordability, It will drive higher performance and predictability in.
Speaker Change: In the quarter of 100% of our new models and scores were built using equifax AI and machine learning, which is up from about 89% last quarter and ahead of our 2024 goal of 80% and last year's 70%.
Speaker Change: International also had strong 11% vitality in the quarter with a strong focus on identity and fraud solutions.
Speaker Change: We expect strong double digit vitality in the fourth quarter, leveraging our EchoFax cloud capability to drive new product rollouts and we're raising our full year vitality index guidance.
Speaker Change: Clearly on offense deploying our proprietary FX AI capabilities that will drive higher performing model scores and products for our customers.
Speaker Change: From 10% to about 11% reflecting the strong innovation performance across all our businesses so far in 2024.
Speaker Change: Now I'd like to turn it over to Jon to provide more detail on our third quarter financial results and to provide our fourth quarter framework.
Jon: Our fourth quarter guidance builds on our strong third quarter performance from new products penetration record growth and pricing.
Speaker Change: AI and ML are changing the way we develop our new products in our single-day fabric and build higher performing model scores and products for our customers.
Jon: Thanks, Marc turning to slide 11, as Mark discussed we started to see an improvement in the run rate of U S. I S credit inquiries in late September as mortgage rates declined to just over 6%.
Speaker Change: We're accelerating the pace at which we are developing new EFX models and scores using our DanteI and ML capabilities in areas such as identity and fraud and consumer loan affordability, it will drive higher performance in predictability.
Jon: We believe the improvement principally reflected higher refinance activity in late September.
Speaker Change: In the quarter of 100% of our new models and scores were built using Equifax AI and machine learning, which is up to about 89% last quarter, and ahead of our 2024 goal of 80% and last year's 70%.
Jon: New home purchase activity does not appear to have increased meaningfully at this point likely reflecting continued low home inventory levels.
Jon: Prices at near all time highs and respective homebuyers waiting for further mortgage rate reductions.
Speaker Change: We're clearly on offense deploying our proprietary EFX AI capabilities that will drive higher-performing model scores and products for our customers.
Jon: As a reminder, the normal mix of mortgage originations defined as the average over the 2015 to 2019 period is about 55% purchase and 45% refinance.
Speaker Change: Now I'd like to turn over to John to provide more detail on our third quarter financial results and to provide our fourth quarter framework.
In the first two weeks of October we have seen mortgage inquiry volumes for both credit and between slow versus September if mortgage rates have increased to above six 5%.
John Gamble: Our fourth quarter guidance builds on our strong third quarter performance from new products, penetration, record growth, and pricing.
John Gamble: Thanks, Mark, Bernie to slide 11. As Mark discussed, we started to see an improvement in the run rate of USIS credit inquiries in late September as mortgage rates declined to just over 6%.
Jon: The run rate over the last two weeks of both credit and twin inquiries is relatively consistent with the expectations. We had we had when we provided guidance in July.
Consistent with our practice from 2024 and the last several years our guidance for credit inquiries was based on our current run rates over the last two to four weeks modified to reflect normal seasonal pattern.
John Gamble: You believe the improvement, principally reflected higher refinance activity in late September.
John Gamble: New Home Practice Activity does not appear to have increased meaningfully at this point, likely reflecting continued low-home inventory levels, home prices at near all-time highs and respective home buyers waiting for further mortgage reductions.
Jon: This effectively assumes market conditions will continue for the quarter.
Our fourth quarter guidance reflects mortgage credit inquiries to be up about 9% versus <unk> 23, and down 16% sequentially.
John Gamble: As a reminder, the normal mix of mortgage originations defined as the average over the 2015-2019 period is about 55% purchase and 45% refinance.
Jon: Calendar year 'twenty for mortgage credit inquiries are expected to be down about 7% for.
Jon: For the fourth quarter, we expect U S mortgage revenue to be up over 40% and much stronger than the underlying mortgage market, reflecting both strong performance in mortgage pre qual products as well as vendor pricing actions.
John Gamble: In the first two weeks of October, we have seen mortgage inquiry volumes for both credit and twin slow versus September, as mortgage rates have increased to above six and a half percent.
Jon: Our guidance reflects twin inquiries in the fourth quarter to be up about 6% versus <unk> 23, and down about 12% sequentially.
John Gamble: The run rate over the last two weeks of both credit and twin inquiries is relatively consistent with the expectations we had when we provided guidance in July.
Jon: For the full year twin inquiries are expected to be down about 11%, we expect AWS mortgage revenue to be up over 16% in the fourth quarter and much stronger than the underlying twin inquiries again, principally reflecting strong record growth in 2024 as well as annual mortgage pricing that occurs early on.
John Gamble: Consistent with our practice in 2024 and the last several years, our guidance for credit inquiries is based on our current run rates over the last two to four weeks.
John Gamble: Modified Turf-Lact Normal Seasonal Pattern, with effectively assumes Market Conditions will continue for the quarter.
John Gamble: Our fourth quarter guidance reflects mortgage credit increase to the up about 9% versus 1423 and down 16% sequentially. Calendar year 24 mortgage credit increase are expected to be down about 7%.
Jon: In the first quarter each year.
Jon: As a reminder.
Jon: The fourth quarter is historically seasonally the lowest quarter of the year for both credit and twin inquiries.
Jon: For perspective, as we look to 2025 carrying these current run rates with normal seasonality through 'twenty five mortgage credit inquiries would grow versus 2024 up just over 5% for the year and also just over 5% in the first quarter of 2025.
John Gamble: For the fourth quarter, we expect U.S. I.S. mortgage revenue to be up over 40% and much stronger than the underlying mortgage market, reflecting both strong performance and mortgage pre-qual products, as well as vendor pricing actions.
John Gamble: Our guidance reflects an increase in the fourth quarter to be up about 6% vs. 4223 and down about 12% sequentially.
Jon: Slide 12 provides the details of our <unk> 'twenty for guidance and <unk> 24, we expect total equifax revenue to be between $1 43, eight and 145 8 billion.
John Gamble: for the full year to an increase or expected to be down about 11%.
John Gamble: We expect EWS mortgage revenue to the up over 16% in the fourth quarter, and much stronger than the underlying twin inquiries, again principally reflecting strong record growth in 2024, as well as annual mortgage pricing that occurs early in the first quarter each year.
Up about 9% at the midpoint.
Organic constant dollar revenue growth at the midpoint is about 10% and at the high end of our long term financial framework.
Jon: At the midpoint mortgage revenue is expected to be up almost 30% and non mortgage constant dollar revenue up over 7%.
John Gamble: as a reminder.
John Gamble: The fourth quarter is historically seasonally the lowest quarter of the year for both credit and twin inquiries.
Jon: Equifax <unk> 24, adjusted EBITDA margins are expected to be about 35, 5% at the midpoint of our guidance.
John Gamble: For perspective, as we looked at 2025, carrying these current run rates with normal seasonality through 25, mortgage credit inquiries would grow versus 2024, up just over 5% for the year, and also just over 5% in the first quarter of 2025.
Jon: The sequential increase in EBITDA margins reflects revenue growth and cost management across equifax include.
Jon: Including the decommissioning of Usaf's legacy consumer and telco and utility systems, and canvas, Canada legacy consumer and commercial systems.
John Gamble: Blight 12 provides the details of our 4Q24 guidance.
Jon: This is our first ever quarter with EBITDA over $500 million.
John Gamble: In 4Q24, we expect total Equifax revenue to be between $1.438 and $1.45 billion off about 9% at the midpoint.
Jon: This would be a very strong performance.
Jon: Adjusted EPS in <unk> 24 is expected to be $2 eight to $2 18 per share up 18% versus <unk> 23 at the midpoint.
John Gamble: Organic constant dollar revenue growth at the midpoint is about 10% and at the high end of our long-term financial framework.
Jon: The midpoint of our fourth quarter revenue guidance is about $15 million below the levels implied by the guidance we provided in July.
John Gamble: At the midpoint, Morgan's revenue is expected to be up almost 30% and non-mortgage constant dollar revenue up over 7%.
Jon: The primary driver is lower revenue in AWS in the employer business, driven by lower revenue and Onboarding as well as the RC and this is consistent with the factors that impacted the third quarter and also the slower U S. Hiring mark referenced earlier that is impacting both onboarding and talent solutions.
John Gamble: Equifax 4Q24 adjusted EBITDA margins are expected to be about 35.5% at the midpoint of our guidance.
John Gamble: The sequential increase in EBITDA margins reflects revenue growth and cost management for cross-equal facts.
Jon: We believe we are centered at the midpoint of our guidance.
John Gamble: including the decommissioning of U.S.I.S. Legacy Consumer and Telco and Utility Systems and Canvas Canada Legacy Consumer and Commercial Systems.
Jon: Business unit performance in the fourth quarter is expected to be as follows.
Jon: Workforce solutions revenue growth is expected to be up about 10%.
John Gamble: This is our first ever quarter with EBITDA over $500 million. This would be a very strong performance.
Jon: Non mortgage revenue should be up about 8% year to year.
John Gamble: Adjusted EPS in 4Q24 is expected to be $2.8 to $2.18 per share of 18% versus 4Q23 at the midpoint.
Jon: Verifier non mortgages revenue growth will continue to show strong double digit growth.
Jon: Although below the levels, we saw in the third quarter.
Jon: Verifier non mortgage growth will again be driven by strong growth in government and talent.
John Gamble: The midpoint of our fourth quarter revenue guidance is about $15 million below the levels implied by the guidance we provided in July.
Jon: Government revenue growth is expected to grow sequentially and year to year, however year to year growth will be below the levels. We have seen year to date in 2024, as we lap very strong <unk> 'twenty three revenue growth in government.
John Gamble: The primary driver is lower revenue in EWS, and the employer business driven by lower revenue and onboarding as well as ERC. And this is consistent with the factors that impacted the third quarter and also the slower U.S. hiring Mark referenced earlier that is impacting both onboarding and talent solutions.
Jon: Both verifier mortgage and non mortgage revenue growth should benefit from the continued strong growth in twin records, we are seeing throughout 2024.
<unk> adjusted EBITDA margins are expected to be up slightly from the third quarter at about 52%.
John Gamble: We believe we are centered at the midpoint of our guidance.
John Gamble: Business Unit performance in the fourth quarter is expected to be as follows. Workforce solutions revenue growth is expected to be up about 10%. Non-mortgage revenue should be up about 8% year to year. Verifier non-mortgage revenue growth will continue to show strong double digit growth.
Jon: U S. <unk> revenue is expected to be up over 10% year to year.
Jon: Non mortgage revenues should be up about 3% year to year slightly lower than the third quarter, principally due to lower growth in U S. ISP to see as they begin to lap periods of strong growth that started in <unk> 23.
John Gamble: Although below the levels we saw on the third quarter, Verifier non-mortage growth will again be driven by strong growth in government and talent.
Jon: Financial marketing services, which is expected to be about flat year to year.
Jon: Adjusted EBITDA margins are expected to be over 38% up very strong sequentially as U S. S decommission legacy consumer and telco and utility systems.
John Gamble: Government Revenue Growth is expected to grow sequentially and year to year. However, year to year growth will be below the levels we have seen year to date in 2024, as we laughed very strong for Q23 Revenue Growth in Government.
Jon: International revenue is expected to be up over 9% in constant currency EBITDA margins are expected to be over 32% up very strong sequentially, reflecting both revenue growth and good cost controls.
John Gamble: Both Verify or Mortgage and non-Mortgage revenue growth should benefit from the continued strong growth in twin records we are seeing throughout 2024.
John Gamble: EWS adjusted EBITDA margins are expected to be up slightly from the third quarter at about 52%.
Slide 13 provides the specifics of our 2020 for full year guidance constant currency revenue growth is expected to be about 10% with organic constant currency growth of 8% within our 7% to 10% long term organic growth framework.
John Gamble: U.S. IS revenue is expected to be up over 10% year to year.
John Gamble: 9 mortgage revenues should be up about 3% year to year, slightly lower than the third quarter, principally due to lower growth in U.S. ISP to C as they begin to lap periods of strong growth that started in 4Q-23 and financial marketing services which is expected to be about flat year to year.
Total mortgage revenue is expected to grow about 12, 5%. Despite the 7% decline in U S mortgage credit inquiries.
Jon: Non mortgage constant dollar revenue is expected to grow almost 10% with organic growth of over 7% led by very strong non mortgage growth in our workforce solutions verification services business and in international.
John Gamble: Adjusted EBITDA margins are expected to be over 38 percent, up very strong, sequentially, as U.S. I.S. decommissions legacy consumer and telco and utility systems.
Jon: This is within our long term framework.
Jon: <unk> is about 180 basis points negative to revenue growth.
John Gamble: International revenue is expected to be up over 9% in constant currency.
Jon: Adjusted EPS is expected to be $7 30 per share and adjusted EBITDA margins are expected to be 32, 4% adjusted EPS and EBITDA are both expected to grow 9% in 2024, all at the midpoint of our guidance.
John Gamble: Even though margins are expected to be over 32% up very strong sequentially reflecting both revenue growth and good cost controls.
John Gamble: 13 provides the specifics of our 2024 full-year guidance.
Jon: Capital expenditures in the third quarter or $123 million down $8 million sequentially.
John Gamble: Constant Currency Revenue Growth is expected to be about 10% with organic constant currency growth of 8% within our 7% to 10% long-term organic growth framework.
Jon: We expect fourth quarter capital expenditures to be just over $105 million as <unk> was completed customer migrations to the U S consumer data fabric and Canada has completed customer migrations to their consumer and commercial data fabric.
John Gamble: A little mortgage revenue is expected to grow about 12.5% despite the 7% decline in U.S. mortgage credit increase.
John Gamble: 9 mortgage constant dollar revenue is expected to grow almost 10% with organic growth of over 7% led by very strong non-mortgage growth in our workforce solutions verification services business and international.
Jon: Capital expenditures for 2024 are expected to be about $485 million, which is a year to year reduction of about $100 million.
Jon: As we accelerate our cloud migrations, we are seeing increasing levels of depreciation and amortization in.
John Gamble: This is within our long-term framework. FX is about 180 basis points negative to revenue growth.
Jon: In 2020 for DNA, excluding acquisition amortization is expected to be about $410 million up about $50 million versus 2023 in 2025, we expect DNA to increase slightly above the $50 million increase we saw in 2024.
John Gamble: Adjusted EPS is expected to be 730 per share and adjusted EBITDA margins are expected to be 32.4%. Adjusted EPS and EBITDA are both expected to grow 9% in 2024, all at the midpoint of our guide piece.
Jon: As of the end of the third quarter, our leverage ratio was two eight times and we expect to further reduce leverage in the fourth quarter.
Speaker Change: Capital expenditures in the third quarter are $123 million down $8 million sequentially.
Speaker Change: We expect fourth-quarter capital expenditure to be just over $105 million, as U.S. IS was completed customer migrations to the U.S. consumer data fabric, and Canada has completed customer migrations to their consumer and commercial data fabric.
Jon: We believe this leverages nicely within the levels required for our current triple BBB <unk> credit ratings.
Jon: Turning to slide 14, and as we discussed in July the U S. Mortgage market is on the order of 50% below its historic average inquiry levels as the mortgage market recovers towards historic norms that presents that represents over $1 billion of annual revenue opportunity for equifax in 2025 and beyond.
Speaker Change: Capital expenditures for 2024 are expected to be about $485 million, which is a year to year reduction of about $100 million.
Speaker Change: As we accelerate our cloud migrations, we are seeing increasing levels of depreciation and amortization.
Jon: At current product pricing twin records contracted and products. We expect this opportunity to increase as we enter 2025 from pricing actions twin records and new products.
Speaker Change: In 2024, DNA excluding acquisition, amortization is expected to be about $410 million, up about $50 million versus $20.23. In 2025, we expect DNA to increase slightly above the $50 million increase, we saw in 2024.
Jon: At current mortgage gross margins this over $1 billion of incremental mortgage revenue would deliver on the order of $700 million of EBITDA and $4 per share that we would expect to move into our P&L as the mortgage market returns to normal levels in 2025 and beyond.
Speaker Change: As of the end of the third quarter, our leverage ratio was 2.8 times and we expect the further reduced leverage in the fourth quarter.
Speaker Change: We believe this leverage is nicely within the levels required for our current Triple B W 2 credit ratings.
Jon: Now I would like to turn it back over to Mark.
Mark: Thanks, Sean turning to slide 15, and important part of our long term financial framework is delivering strong free cash flow and returning cash to shareholders.
Speaker Change: Turning to slide 14, and as we discussed in July, the U.S. mortgage market is on the order of 50% below its historic averaging 40 levels.
Mark: We're adding a new cash conversion goal to our long term framework of 95% or greater with cash conversion defined as free cash flow as a percent of adjusted net income.
Speaker Change: has the mortgage market recovers toward historic norms that represents over $1 billion of annual revenue opportunity for Equifax in 2025 and beyond at current product pricing, twin records contracted, and products.
Mark: During the cloud technology transformation over the last four years, we saw elevated cloud capital expenditures.
Mark: Each impacted our free cash flow and cash conversion.
Speaker Change: We expect its opportunity to increase as we enter 2025 from pricing actions to in-record and new products.
Mark: Our cash conversion ratio is expected to improve significantly in 2024 to about 80%.
Speaker Change: At current mortgage gross margins, this over $1 billion of incremental mortgage revenue would deliver a me order of $700 million of EBITDA and $4 per share that we would expect to move into our PNL as the mortgage market returns to normal levels in 2025 and beyond.
Mark: As we reduce capex and dry higher relative levels of free cash flow.
Mark: We expect our free cash flow to accelerate in 2025 post our cloud investments as capex reduces to 6% to 7% of revenue supporting cash conversion of over 95%, while strong margin expansion and growth in net income from our underlying operating leverage in cloud cost savings <unk>.
Speaker Change: Now I would like to turn it back over to Mark.
Mark Bernie: Thanks, John. Turning this light 15, an important part of our long-term financial framework is delivering strong free cact flow and returning cash to shareholders.
Mark: <unk> cash generation positions equifax to continue to invest in growth with Capex and bolt on M&A and begin returning excess free cash flow to shareholders from dividend growth and share repurchase repurchases in 2025 and beyond it's energizing to be approaching this important milestone for our investors as we complete the new <unk>.
Mark Bernie: We're adding a new cash conversion goals where a long-term framework of 95% or greater. We've cash conversion defined as free cash flow as a percent of adjusted net income.
Mark Bernie: During the cloud technology transformation over the last four years, we saw elevated cloud capital expenditures, which impacted our free cash flow in cash conversion.
Mark: <unk> cloud.
Mark: Turning to slide 16, 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 line.
Mark Bernie: Our cash conversion ratio is expected to improve significantly in 2024 to about 80% as we reduce cat-backs and dry higher relative levels of free cash flow.
Mark: We are convinced that our new equifax cloud differentiated data assets and our new single data fabric, leveraging equifax got AI and machine learning and market, leading businesses will deliver higher revenue growth expanded margins and accelerating free cash flow.
Mark Bernie: We expect a free cash flow to accelerate in 2025, post our cloud investments, as CapX reduces to 6% to 7% of revenue, supporting cash conversion of over 95% of strong margin expansion and growth in net income, more underlying operating leverage in cloud cost savings.
Mark: In the middle of the Slide 16, we've added the new cash conversion metric to our long term growth framework.
Mark: And our long term growth framework as you know is made up of strong revenue growth of 7% to 10% and is led by very strong 13% to 15% UWS revenue growth Dws is clearly our largest and fastest growing business led by strong double digit non mortgage verification services revenue growth from our government and talent solutions.
Mark Bernie: This strong cash generation positions Equifax to continue to invest in growth with CapEx and bolt-on M&A and begin returning excess free cashflow to shareholders from dividend growth and share repurchases in 2025 and beyond. It's energizing to be approaching this important milestone for our investors as we complete the new Equifax cloud. . .
Mark: Verticals.
Mark: As a part of our long term financial framework, we expect to add one to two points of revenue growth from bolt on M&A aligned around strengthening the core of equifax or bolt on M&A strategy will continue to be focused on strengthening workforce solutions added, adding differentiated data assets across equifax and growing into big 20 billion identity and fraud.
Mark Bernie: Turning to slide 16, we are entering the next chapter of the new Equifax as we pivot from building the new Equifax cloud to leveraging our new cloud capabilities to drive our top and bottom line.
Mark Bernie: We are convinced that our new Equifax Cloud differentiated data assets in our new single data fabric, leveraging Equifax.ai and machine learning, and market leading businesses will deliver higher revenue growth, expanded margins, and accelerating free cash flow.
Mark: <unk> space.
Speaker Change: As John covered a few minutes ago, the pace of mortgage market recovery will add to our revenue growth as the market returns to normal 2015 to 2019 levels in 2025 and beyond.
Mark Bernie: In the middle of what slide 16, we've added the new cash conversion metric to our long-term growth framework.
Speaker Change: The mortgage market recovery will also drive our margins and free cash flow from the very high incremental margins from this incremental revenue do we expect to come into Equifax is P&L in 2025 and beyond.
Mark Bernie: And our long-term growth framework, as you know, is made up of strong revenue growth of 7% to 10% and is led by very strong 15% to 15% EWS revenue growth. EWS is clearly our largest and fast-scoring business led by strong double-digit non-mortgage verification services revenue growth from our government and talent solutions verticals. EWS is clearly our largest and fast-scoring business led by very strong double-digit non-mortgage verification services
Speaker Change: We expect operating leverage off our strong 8% to 12% revenue growth to generate 50 basis points of annual EBITDA margin expansion and very strong cash conversion of 95% and.
Mark Bernie: As a part of our long-term financial framework, we expect to add one to two points of revenue growth from bolt on M&A, aligned around strengthening the core of aquifax. Our bolt on M&A strategy will continue to be focused on strengthening workforce solutions, adding differentiated data assets across aquifax, and growing in the big 20 billion identity and fraud space.
Speaker Change: And above.
Speaker Change: As margins improve capex declines to 6% to 7% of revenue with the completion of the Equifax cloud transformation and leverage continues to progress towards two five turns by year end, we expect our free cash flow to accelerate and that will enable us to start returning cash.
Speaker Change: Cash to shareholders in 2025 and beyond through growing the dividend in a multi year share buyback program.
Speaker Change: As John covered a few minutes ago, the pace of mortgage market recovery will add to our revenue growth as the market returns to normal 2015 to 2019 levels in 2025 and beyond.
Speaker Change: We are energized to be pivoting from building the equifax cloud over the past four years, leveraging our new industry, leading cloud and <unk> AI capabilities to drive revenue growth margin expansion and free cash flow.
Speaker Change: The Mortgage Marker Recovery will also drive our margins and free cash flow from the very high incremental margins from this incremental revenue we expect to commend to Equifax's P&L in 2025 and beyond.
Speaker Change: Wrapping up on slide 17, Equifax delivered another strong quarter with 11% constant dollar revenue growth.
Speaker Change: We expect operating leverage off our strong 8-12% revenue growth to generate 50 basis points of annual EBITDA margin expansion and very strong cash conversion of 95% in the above.
Speaker Change: Which was at the upper end of our 8% to 12% long term revenue growth framework.
Speaker Change: Collecting the hour and breadth of the Equifax business model strong execution against our <unk> 2026 strategic priorities the resiliency of the U S consumer and the strength of our customers.
Speaker Change: As margins improve, capex declines to 67% of revenue with the completion of the Equifax Cloud transformation and leverage continues to progress towards two and a half turns by year end. We expect our free cash flow to accelerate and that will enable us to start returning cash to shareholders in 2025 beyond for growing the dividend in a multi-year share buyback program.
Speaker Change: Our very strong 19% AWS non mortgage verifier revenue growth.
Speaker Change: <unk> percent AWS active record growth strong, 13% broad based vitality index give us momentum as we enter the fourth quarter and move towards 2025.
Speaker Change: And as we talked earlier, we took another big step in the quarter towards cloud completion with 80% of our revenue now in the Equifax cloud, which will enhance our competitiveness drive innovation and new product development.
Speaker Change: We are energized to be pivoting from building the Equifax Cloud over the past four years, to leveraging our new industry-leading Cloud and ESX.AAI capabilities to drive revenue growth, margin expansion, and free cash flow.
Speaker Change: Entering 2025, with 90% of Equifax revenue and the new Equifax cloud is a really big milestone. So the team can move towards fully focusing on innovation new products powered by <unk> dot AI customers and growth.
Speaker Change: Rapping up on slide 17, Equifax delivered another strong quarter with 11% constant dollar revenue growth, which was at the upper end of our 8-12% long-term revenue growth framework, reflecting the plot, power and breadth of the Equifax business model, strong execution, against our EFX 2026 strategic priorities, the resiliency of the US consumer and the strength of our customers.
Speaker Change: I'm energized now more than ever about the future of the new Equifax that will deliver strong 8% to 12% revenue growth 50 basis points of margin expansion lower capital intensity and expanding free cash flow to invest in equifax and add bolt on M&A.
Speaker Change: A very strong 19% EWS-9 mortgage verified revenue growth 12% EWS active record growth, strong 13% broad-based vitality index, give us momentum as we enter the fourth quarter and move towards 2025.
Speaker Change: And in the future growing our dividend and positioning to start a multi year stock buyback program in 2025 and beyond and with that operator, let me open it up for questions.
Speaker Change: Thank you the floor is now open for questions. If he would like to ask a question. Please press star one on your telephone keypad at this time, a confirmation tone will indicate that your line is in the question queue. You May press star two if he would like to remove your question from the queue for participants using speaker equipment it may be necessary.
Speaker Change: And as we talked earlier, we took another big step in the quarter towards cloud completion, with 80% of our revenue now in the Equifax Cloud, which will enhance our competitiveness, drive innovation and new product development.
Speaker Change: Entering 2025 with 90% of Equifax revenue in the New Equifax Cloud is a really big milestone so the team can move towards fully focusing on innovation, new products powered by EFX.ai, customers and growth.
Speaker Change: Pick up the handset before pressing the star keys.
Speaker Change: Do ask that you please limit yourself to one question and one follow up.
Speaker Change: Our first question today is coming from Manav Paranoiac of Barclays. Please go ahead.
Speaker Change: I'm energized now more than ever about the future of the new Equifax that will deliver strong 8-12% revenue growth, 50 basis points of margin expansion, lower capital intensity and expanding free cash flow to invest in Equifax and add both on M&A, and in the future growing our dividend and positioning to start a multi-year stock buyback program in 2025 and beyond. And with that operator, let me open it up for questions.
Manav Paranoiac: Thank you good morning, Mark and John.
Manav Paranoiac: I just had a question around kind of the the guidance philosophy. So in prior years and every time you have lowered guidance I guess it was mainly due to the mortgage weakness have you all got wrong, but there were some other non mortgage areas that are weak and this year, even though mortgages getting better in Houston.
Manav Paranoiac: Guidance. So I'm just curious is that something about the philosophy and not being conservative or is it execution. I was just hoping you could help us even clear that up.
Speaker Change: Thank you. The floor is now open for questions. If you would like to ask a question, please press star one on your telephone keypad at this time. A confirmation tunnel indicate that 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 the handset before pressing the star keys.
Yes.
Manav Paranoiac: <unk>.
Speaker Change: So there's no change in our philosophy and our goal is to be Super transparent with you and our investors.
Speaker Change: About what we're seeing in the marketplace and what the growth levers are and where we're taking the company.
Speaker Change: We do ask that you please limit yourself to one question and one follow-up.
Speaker Change: We work to provide guidance that we know how to meet and beat that's or no change in that goal I've been here six years and I think as you pointed out the mortgage.
Speaker Change: Our first question today is coming from Manov, Pranayak of Barclays. Please go ahead.
Manov, Pranayak: Thank you. Good morning, Mark and John. You know, I just had a question around kind of the guidance philosophy. So in the prior years, you know, every time you had lowered guidance, I guess it was mainly due to the...
Speaker Change: Decline in 'twenty, two 'twenty three was really quite unusual, but if you look around that.
Speaker Change: I think we've been pretty consistent about meeting and beating and if you look through our non mortgage performance during that 'twenty. Two 'twenty three time frame. We think we were pretty consistent with regards to.
Manov, Pranayak: Mortgage weakness of the all-guard prong, but they were some other non-mortgage areas that were weak. And this year, even though Mortgage is getting better, you're still lowering guidance.
Speaker Change: Third quarter, I think you know that.
Speaker Change: That's your question I think it's more around the fourth quarter and we highlighted in our earlier comments that there is some volatility in the marketplace that we're certainly dealing with.
Manov, Pranayak: So I'm just curious, is there something about the philosophy and not being conservative or is it an institution? I was just hoping you could help us see the clear that up.
Speaker Change: Some of our verticals, we're really pleased with our third quarter performance, we're pleased with the.
Speaker Change: Yeah, I'm not...
Speaker Change: So, there's no change in our philosophy. You know, our goal is to be super transparent with you and our investors about what we're seeing in the marketplace and what the growth levers are and where we're taking a company. We work to provide guidance that we know how to meet and be, you know, that's our no change in that goal. I've been here six years and I think, you know, as you point out the mortgage. I'm. [inaudible]
Speaker Change: The guidance that we have for the fourth quarter, which is super strong.
Speaker Change: And as you point out it's slightly below the guidance that we had last quarter principally from AWS employer business I think we've talked for the last couple of quarters about the impact of the employee retention credits that were really stopped by the IRS earlier this year.
Speaker Change: We thought there'd be some activity there theres, none so that's obviously impacting that.
Speaker Change: Decline in 22 and 23 was really quite unusual, but if you look around that, I think we've been pretty consistent about meeting and meeting and if you look through.
Speaker Change: Inside of workforce solutions and then we also talked over the last couple of quarters about the change in the federal government made around work opportunity tax credit and the state's response to getting that in place. We thought the states would be responding a little bit quicker they haven't which is pushing some of that revenue.
Speaker Change: are non-mortage performance during that 20-23 timeframe we think we were pretty consistent. We regard to the third quarter, I think that's a question that it's more around the fourth quarter.
Speaker Change: Likely out of the fourth quarter and into 2025 is not going to go away and then to a lesser degree I think we talked about I won't touch mortgage because I don't think that your point I'll touch non mortgage.
Speaker Change: We highlighted in our earlier comments that there is some volatility in the marketplace that we're certainly dealing with.
Speaker Change: in some of our verticals. We're really pleased with our third quarter performance. We're pleased with the guidance that we have for the fourth quarter, which is super strong. And as you point out, it's slightly below the guidance that we had last quarter principally from the US employer business. I think we've talked for the last couple of quarters about the impact of the...
Speaker Change: We talked about some of the slowdowns we saw.
Speaker Change: On the background screeners late in September.
Speaker Change: Was unexpected on our part I think you've seen a number of corporations across the United States announcing layoffs. So you know, whether it's boeing's 10% of companies like that.
Speaker Change: Employee Retention credits that were really stopped by the IRS earlier this year. You know, we thought there would be some activity there that was none. You know, so that's obviously impacting that business inside of our course solutions.
Speaker Change: I think coming into the election, it feels like <unk>.
Companies are being a little more prudent about the new hiring which as we saw in the background screening volumes in late in the month.
Speaker Change: And then we also talked over the last couple quarters about the change that the federal government made around work opportunity tax credit and the state's response to getting that in place, you know, we thought the states would be responding a little bit quicker they haven't, you know, which is pushing some of that revenue, you know, likely out of the fourth quarter and into 2025, it's not going to go away. And then to a lesser degree, I think we talked about I won't touch mortgage because I don't think that's your point. I'll touch non mortgage. You know, we talked about some of the slowdowns. [inaudible]
Speaker Change: These are from my perspective fairly small impacts when you look at the strong performance in the third quarter and a strong guide we have for the fourth quarter as John pointed out the.
Speaker Change: <unk> fourth quarter, we're going to be in the neighborhood of $500 million EBITDA over two bucks a share, which we've never done before so.
Speaker Change: So I think that's strong performance earlier in the year I think some questioned our ability to deliver.
Speaker Change: Kind of performance, we've laid out in the fourth quarter, both from a top line and our margin expansion I think we're in that direction.
Speaker Change: on the background screener's late in September. That was on our part. I think you've seen a number of...
Speaker Change: Immediately a bit below that but still very very strong numbers.
But tier just really to the point of your question no change in our philosophy, we want to put out numbers that are super transparent, we're going to give you what's behind those numbers and our goal is to have numbers that we can meet and beat and that has never changed and it won't change in the future.
Speaker Change: Corporations across the United States announcing layoffs, whether the Boeing's 10% or companies like that, but I think coming into the election, it feels like...
Speaker Change: Companies are being a little more prudent about new hiring, which is we saw in the background screening volumes in late in the month.
Speaker Change: Okay fair enough. Thank you for that.
Speaker Change: Okay and just on the Tech transformation I think we all are looking forward to the benefits that can provide you with Diane can you give us some maybe early signs of examples of what maybe you did.
Speaker Change: He's from my perspective, fairly small impacts. When you look at the strong performance in the third quarter, and the strong guide we have for the fourth quarter is John pointed out, the fourth quarter, we're going to be in the neighborhood of $500 million, EBITDA, and over two bucks a share, which we've never done before. So I think that's strong performance earlier in the year. I think some questions our ability to deliver the kind of performance we lay out in the fourth quarter, both from a top line. And a margin expansion, I think we're in that direction admittedly a bit below that, but still very, very strong numbers.
Speaker Change: The technical conditions in other divisions that give you confidence that we should see some.
Speaker Change: <unk> outperformed the pathway to addressing other macros in the U S side.
Speaker Change: Yes.
Speaker Change: It's a great question, we talked about the last quarter, we didn't as much on this call, but it's obviously, it's obvious that that USAA has clearly impacted.
Speaker Change: In 'twenty three and then the really through the third quarter.
Speaker Change: Many regards.
Speaker Change: But dear, just really to the point of your question, no change in our philosophy. We want to put out numbers that are super transparent. We're going to give you what's behind those numbers. And our goal is to have numbers that we can meet and be. And that has never changed and it won't change in the future.
Speaker Change: Round all the effort they had to put in the cloud transformation candidates in the same boat.
Speaker Change: These are big big projects very intrusive with our customers. The good news is it's done well.
Speaker Change: We're really encouraged by when we think about <unk>, even with that in the in the second quarter and third quarter you saw their vitality go up meaning they were able to start taking advantage of being in the cloud to start moving forward on innovation and new product, that's going to benefit U S. I S. In the fourth quarter, but really principally in 2025.
Speaker Change: Okay, fair enough. Thank you for that, for your thoughts there. And just on the, you know, tech transformation, I think we're all looking forward to, you know, the benefits that can provide the USIS. You know, can you give us some, maybe early signs or examples of what maybe you did, you know, with tech transformations and other divisions that give you confidence that, you know, we should see some, you know, our performance outside of just, you know, the macros in the USIS. Thanks, guys.
Speaker Change: And as you know they increase their vitality in the second quarter of 100 bps and then again in the third quarter of 100 bps. So we would expect them to move towards that 10% vitality.
Speaker Change: As we get into 2025, which is really going to be a positive on the cost savings John already talked about you saw the charge we took that was expected.
Speaker Change: Yeah, it's a great question, we talked about in the last quarter, we didn't as much on this call, but it's obvious that U.S.A.S. is clearly impacted.
We're executing that.
Speaker Change: In 23, and in the 3rd quarter, in many regards around all the effort they had to put in the cloud transformation candidates in the same boat, these are big big projects, very intrusive with our customers.
Speaker Change: That's a real positive for our margins, which we've committed to and we're executing on and the other benefit.
Speaker Change: Two other benefits actually will start to see now that they are in the cloud.
Speaker Change: Those share gains that we expect to have we have those in flight that will start showing up in the P&L. Some in the fourth quarter, but I think principally in 2025 of being always on and being a cloud native provider and then the last one is one that will.
Speaker Change: The Devil's Hearddown.
Speaker Change: What work really encouraged by, when we think about USIS, even with that in the second quarter, in third quarter, you saw their vitality go up, meaning they were able to start taking advantage of being in the cloud, just start moving forward on innovation and new product. That's going to benefit USIS in the fourth quarter, but really principally in 2025. And as you know, they increased their vitality in the second quarter, 100 dips, and then again in the third quarter, 100 dips. So we would expect them to move towards that 10% vitality.
Speaker Change: More about that.
Speaker Change: In February during our fourth quarter call and in 2025 is what were internally, calling only equifax initiative, where we're focused on.
Speaker Change: Solutions that combine.
Speaker Change: Twin our income and employment data with the credit file to make our credit file more valuable.
Speaker Change: When we talked on the last call about the new solutions that we're piloting in the marketplace as we speak.
Speaker Change: You know, as we get into 2025, you know, which is really going to be a positive. The cross-saving genre, he talked about, you saw the charge we took that was expected, you know, that's, you know, we're executing that, you know, and that's a real positive for our margins, which, you know, we've committed to and we're executing on. And the other benefit, you know, it's two other benefits, actually, we'll start to see now that they're in the cloud, you know, as those sharegames that we expect to have, you know, we have those in flight, those are showing up in the PNL, some in the fourth quarter, but I think principally in 2025, of being always on and being a cloud native provider. And then the last one is one that will, you know, talk more about the, you know, in February during our fourth quarter call and in 2020.
Speaker Change: Around the flag on our credit file if someone's working for mortgage shopping to make our mortgage shopping credit file more valuable a flag on our auto credit file same thing that someone's working that will differentiate our credit file we think it'll drive share gains with our credit file it should make our credit file more valuable and it gives you.
Speaker Change: No. We're also adding to our credit file.
Speaker Change: Solutions, including our differentiated data from data ex pellet tracking and Cte we are cellphone utility data and these are all solutions only equifax can do our competitors don't have these data assets. So we can strengthen the underlying credit file, which arguably can be commoditized in some solutions that make our products more.
Speaker Change: 5 is what we're internally calling only EquipAX initiative where we're focused on.
Speaker Change: Solutions that combine twin or income and employment data with the credit file to make our credit file more valuable.
Speaker Change: <unk> those are the things that youre going to see going forward is what we've been talking about for four years.
Speaker Change: The good news now is we can actually execute on it because we are in the cloud with.
Speaker Change: You know, when we talked on the last call about the new solutions that were piloting in the marketplaces, we speak around a flag on our credit file that someone's working for mortgage shopping to make our mortgage shopping credit file more valuable, a flag on our auto credit file. Same thing that someone's working that will differentiate our credit file. We think it'll drive share gains with our credit file. It should make our credit file more valuable. And I think as you know, we're also adding to our credit file solutions, including our differentiated data from Data X TeleTrack and NCTU, we are self-immutility data. And these are all solutions only Equifax can do. You know, our competitors don't have these data assets so we can strengthen.
Speaker Change: U S I S and I can't say I can't really reinforce enough about the impact of the distraction.
Speaker Change: Say over the last four years, but your question's around Usaf's really over the last 18 24 months of all the effort that went into complete its really massive technology transformation. The good news is it's done so that whole team now can take all of their energy and effort. It was balanced between growing the company rolling out new products.
Speaker Change: Executing our AI solutions and doing the cloud migrations to just focused on growth and that gives us a lot of energy as we look to the fourth quarter and then as we move into 2025.
Speaker Change: Thank you for that and looking forward to hearing about it next year.
Speaker Change: The underlying credit file which arguably can be commoditized in some solutions and make our products more differentiated. Those are the things that you're going to see going forward. It's what we can talk about for four years.
Speaker Change: Thank you. The next question is coming from Kelsey <unk> of Autonomous research. Please go ahead.
Speaker Change: Hi, good morning, Thanks for taking my question.
Speaker Change: The good news is that we can actually execute that, because we're in the cloud with USIS. And I can't really reinforce enough about the impact of the distraction.
Speaker Change: You cite.
Speaker Change: Incremental record addition, crown for Workday partnership.
Speaker Change: Can you talk a little bit more about the timeline for that to come online.
Speaker Change: You could say over the last four years, but your questions are on USIS really over the last 18-24 months.
Speaker Change: Q1, Q2 next year oriented towards second half of next year.
Speaker Change: of all the effort that went into complete this really massive technology transformation.
Speaker Change: Yeah, So maybe a couple of points on that I'll I'll respond to your specific workday question, but maybe just make it a little bit wider because workdays one of many partners. We added during the quarter I think we added a total of six in the quarter Workday, obviously, a very significant one very strategic partnership, but all six of them are.
Speaker Change: The good news is it's done. So that whole team now can take all their energy and effort. It was balanced between growing the company, rolling out new products, executing our AI solutions and doing the cloud migrations to just focused on growth. And that gives us a lot of energy as we look to the fourth quarter and then as we move into 2025. Thank you very much.
Speaker Change: I think we sized that we expect.
From the other five to be something like 5 million records coming on over the coming quarters.
Speaker Change: Thank you for that looking forward to hearing about it next year.
Speaker Change: It takes time to make those integrations are super complex.
Speaker Change: Thank you. The next question is coming from Kelsey Zill of Autonomous Research. Please go ahead.
Speaker Change: Really our partners side you've.
Speaker Change: <unk> seen very strong record growth with 12% in the quarter. So you can see that we're really executing that we talked about the sizable number of partners. We added this year as well as last year and over the last couple of years.
Speaker Change: Hi, good morning. Thanks for taking my questions. Have you sized the incremental record additions from the workday partnerships, and you know, can you talk a little bit more about the timeline for those new records to come online, is it more towards kind of Q1, Q2 next year, or is it towards second half of next year?
Speaker Change: And with every partner we have is they add new clients and they're all growing their business every quarter. If you think about an HR software company or payroll processor when those new clients come on board. They are typically boarded to twin so there's growth that's happening with every one of our clients most of our clients have records.
Speaker Change: Yeah, so many a couple points on that. I'll respond to your specific work day question, but maybe just make it a little bit wider because you know, work day is one of many partners we added during the quarter. I think we added a total of six.
Speaker Change: Going back to clients, we added even 234 years ago that we haven't fully deployed into equifax, meaning we're working with them.
Speaker Change: in the quarter, work day, obviously, a very significant one, a very strategic partnership, but all six of them are, I think we size the, that we expect, you know, from the other five, to be something like five million records.
Speaker Change: Through their technology suite of different databases. They have they're typically not a single tech stack to bring those records and so we have.
Speaker Change: Coming on over the coming quarters, it takes time to make those inaugurations, they're super complex for really our partners side. You've seen very strong record growth, we're 12% in the quarter, so you can see that we're really executing and we talked about.
Speaker Change: A lot of opportunity.
Speaker Change: With current and new partners use workday and the others. We added this quarter.
Speaker Change: As well as those that we've added over the last couple three years to add records and workday, specifically, we haven't sized that except to say, it's sizable I think it's well known that they were a very big company.
Speaker Change: The size of the number of partners we had this year as well as last year and over the last couple of years.
Speaker Change: Company and a good partner and now we're Super excited to have that move on board. We expect some records to come on in the fourth quarter, but really the substantial growth.
Speaker Change: and you know with every partner we have is they add new clients.
Speaker Change: In the all growing of business every quarter, if you think about an HR software company or payroll processor.
Speaker Change: From Workday and the other partners, we added in the third quarter and those we expect to add in the fourth quarter to come on in 2025, and I think the other point to remind everyone on the call about as you know we talked tend to talk a lot about our partner <unk>.
Speaker Change: When those new clients come on board, they're typically boarded to twin, so there's growth that's happening with every one of our clients.
Speaker Change: Most of our clients have records going back to clients. We added even two, three, four years ago that we haven't fully deployed into Equifax, meaning we're working with them through their technology, through the different databases they have. They're typically not a single tech stack to bring those records in. So we have a lot of opportunity, both with current new partners, use Workday and the others we added this quarter, as well as those we've added over the last couple for years to add records.
Speaker Change: Record addition, but we also have a very sizable direct record.
Speaker Change: Approach, where our employer business is adding new clients and when we bring those new clients on and we offer that free value added service of income and employment verification and those become records that become a part of Equifax is one last reminder, and I think youre seeing the benefits of that in December last year, we changed.
Speaker Change: Change the organization of AWS, So we have one leader and one team.
Speaker Change: On Workday specifically, we haven't sized that except to say it's sizeable. I think it's well known that there are very big company and a big partner and we're super excited to have that move on board. We expect some records to come on in the fourth quarter but really the substantial growth. [inaudible]
Speaker Change: It's solely focused on record additions from HR.
Speaker Change: HR software companies from.
Speaker Change: Payroll processors.
Speaker Change: For $10 99 records and pension records, so really the whole gamut. So we've got a very large focus and you're seeing that pay off we're really pleased that record additions at 12% are way out outgrowing our long term framework for record additions, which are more in the single digit range is admittedly we've.
Speaker Change: You know, from work day and the other partners we added in the third quarter and those we expect that in the fourth quarter to come on in in 2025 and I think the other points to remind everyone on the call about as you know, you know we talk tend to talk a lot about our partner record edition, but we also have a very sizable direct record.
Speaker Change: Doing that for five plus years.
Speaker Change: So we've had a lot of really positive momentum there and I think you know the power of adding a record of the day, we had a record we monetize it across all of our verticals because we're already getting inquiries for that record because our customers centers every inquiry and then the breath of our ability to monetize is just scaled so substantially from even.
Speaker Change: A approach where our employer business is adding new clients and when we bring those new clients on we offer that free value out of service of income and employment verification.
Speaker Change: and those become records that become a part of the Equal Facts and as one last reminder I think you're seeing the benefits of that in December last year we changed your organization in EWS so we have one leader and one team.
345 years ago, when you go across the spectrum from call it higher income consumers.
Speaker Change: Mid market consumers that are doing mortgages.
Speaker Change: that it's solely focused on record additions from HR software companies, from payroll processors, for 1099 records and pension records, so really the whole gamut. So we've got a very large focus. You're seeing that payoff. We're really pleased that record additions at 12% are way outgrown in our long-term framework for record additions, which are more in the single-digit range. Admittedly, we've been doing that for five plus years.
Speaker Change: And through autos, and auto and Pilon and cards and then go to the other end of the spectrum.
Speaker Change: Those that are going after social services at the federal and state level.
Speaker Change: It was a very just over 100 million people a year that.
Speaker Change: We're getting social services, and we've got a big opportunity to grow there you've seen the growth in workforce solutions government vertical that's been.
Speaker Change: Obviously impacted positively by a record additions. So records are a big focus of ours and we see a lot of momentum going forward. We still have a lot of records that go after with the $225 million.
Speaker Change: We've had a lot of really positive momentum there and I think you know the power of adding a record, the day we had a record, we monetized it across all of our verticals.
Speaker Change: because we're already getting inquiries.
We are working Americans, there's close to $100 million of records. We don't have yet so that's why we've added resources and people.
Speaker Change: For that record, because our customers send us every inquiry, and then the breath of our ability to monetize is just...
Speaker Change: Scaled so substantially from even three, four, five years ago when you go across the spectrum from a color of higher income consumers.
Speaker Change: To keep growing this valuable dataset.
Speaker Change: Got it thank you.
Speaker Change: I'm also curious to hear a little more about what's driving the reacceleration of crowds in customer lending vertical within workforce solutions.
Speaker Change: of Mid-Market consumers that are doing mortgages.
Speaker Change: in through autos and auto and p-loan and cards, and then go to the other end of the spectrum.
Speaker Change: Especially against the backdrop of a pretty soft end markets. So just curious.
Speaker Change: You know, those that are going after social services at the federal and state level, you know, there's over a hundred million people a year that are getting social services and you know, we've got a big opportunity to grow there. You've seen the growth. [inaudible]
Speaker Change: New product launches.
Speaker Change: Yeah.
Speaker Change: <unk> penetration.
Speaker Change: I appreciate your thoughtfulness.
Speaker Change: Yes, it's really the value of that dataset. When you think about consumer lending and I'll use P loans, you could use auto.
Speaker Change: and Workforce Solutions Government Vertical that's been obviously impacted positively by a record edition.
Speaker Change: So records are a big focus of ours and we see a lot of momentum going forward. We still have a lot of records to go after.
Speaker Change: The value of someone's credit score is super important it really as you know is a reflection of their past payment behavior of other loans. They have and it's really a prediction will they keep paying going forward. So very valuable when you add to that someone's ability to pay which means their income and their employment.
Speaker Change: You know, with the 225 million.
Speaker Change: You know, working Americans, there's close to 100 million of records we don't have yet.
Speaker Change: So that's why we added resources and people to keep growing this valuable data set.
Speaker Change: They are working because remember if you pull a credit report you have no idea if that individual is actually working today did they lose their job last week did they retire whats changing so the combination of income and employment from.
Speaker Change: Got it, thank you. I'm so curious to hear a little more about what's driving the re-exceleration of growth in consumer lending vertical within work for tuition, especially because it's against the backdrop of a pretty soft and more kits. So just curious, is it really to me product launches, is it's a pricing, it's a increased cost and penetration? Yeah, appreciate your thought for this.
Speaker Change: <unk> with the credit file is very very valuable and we have increasing numbers of our customers as you point out we rollout new products as well as we drive penetration.
Of customers understanding the value of pulling the credit report with income and employment.
Speaker Change: Yeah, it's really the value of the data set, you know, when you think about, you know, consumer lending and I'll use p-loans, you could use auto, you know, the value of someone's credit score is super important. It really, as you know, is a reflection of their past payment behavior of other loans they have. And it's really a prediction will they keep paying going forward. So very valuable when you add to that someone's ability to pay, which means their income and their employment, meaning they're working. Because remember, if you pull a credit report, you have no idea if that individual is actually working today. Did they lose their job last week? Did they retire? What's changing? So the combination of income.
Speaker Change: Can approve more consumers and approve more consumers with lower loss rates.
So that's a really strong combination and very positive for our customers. So that's what where you're really seeing in the outgrowth of the underlying market as you point out there is in some of those verticals some end user meeting consumer.
Demand pressures, primarily because of higher APR.
Speaker Change: Particularly in bigger ticket transactions think about P loans or cards.
Speaker Change: We have a solution between by combining credit with income and employment. It allows our customers to approve more of those applicants with a higher degree of confidence around their ability to repay the loan when you add the income and employment.
Speaker Change: and Employment from EWS with the credit file is very, very valuable. And we have increasing numbers of our customers. As you point out, we roll out new products, as well as we drive penetration of customers understanding the value of pulling the credit report with income and employment, they can approve more consumers and approve more consumers with lower loss rates. [inaudible]
Speaker Change: Data to it.
Speaker Change: We're also benefiting substantially just by record growth, yes, Frank So since records are up over 10% that drives our hit rates higher. So it's it's a it's a direct benefit to those segments.
Speaker Change: Thanks I appreciate it.
Speaker Change: Thank you. The next question is coming from Andrew Nicholas of William Blair. Please go ahead.
Speaker Change: So that's a really strong combination and very positive, you know, for our customers. So that's what we're really seeing in the outgrowth of the underlying market. As you point out, there is in some of those verticals, some end user meeting consumer, you know, demand pressures primarily because of higher APRs. Particularly in bigger ticket transactions, think about key loans or cards. We have a solution between by combining credit with income and employment. It allows our customers to approve more of those applicants with a higher degree of confidence around their ability to repay the loan when you add the income and employment data to it.
Andrew Nicholas: Hi, Good morning, Thanks for taking my questions I wanted to first ask.
Speaker Change: Yes.
Speaker Change: Yes.
Andrew Nicholas: Really good quarter.
Andrew Nicholas: And I'm just curious if there's anything for us to read into that it sounds like it was primarily batches that.
Kind of customers.
Andrew Nicholas: Thinking about being more aggressive with marketing as that portfolio review.
Andrew Nicholas: We understand if there's anything to read into that strength.
Andrew Nicholas: Sure It was a very strong quarter and and.
Andrew Nicholas: And stronger than we expected obviously, when we gave guidance part of it is because we signed.
Speaker Change: Those segments are also benefiting substantially just by record growth. Yes, right. So since records are up over 10%, that drives their hit rate higher, so it's a direct benefit to those segments.
Andrew Nicholas: Executed a couple of large transactions with new customers in the payments industry and we think that's very important to us not just from the fact that it delivered a strong quarter, but also because we think it's an ongoing revenue source not just in batch, but increasingly in our minds. So we're very excited about the fact that we signed those partnerships and delivered revenue in the quarter, but also.
Speaker Change: Thanks, appreciate it.
Speaker Change: Thank you, the next question is coming from Andrew Nicholas of William Blair, please go ahead.
Andrew Nicholas: We think it bodes very well very well for us across the payments industry as we continue to grow the use of our data and payments.
Speaker Change: Hi, good morning. Thanks for taking my questions. I learned the first F.
Speaker Change: I found that's really good order and I'm just curious if there's anything for us to read into that. It sounds like it was primarily batches that kind of customers thinking about being more aggressive with marketing is that we're totally overview and just help me understand if there's anything to read into that straight.
Speaker Change: Understood. So it doesn't sound like anything major from like a macro read through perspective more no I'm not a read through at all it was it was really just great execution by the team on winning new customers and delivering in period.
Andrew Nicholas: Okay. That's helpful and then.
Speaker Change: Maybe changing gears a little bit on the mortgage business in the mortgage business within AWS in particular if.
Speaker Change: It was a very strong quarter and stronger than we expected, obviously, when we gave guidance. Part of it was because we executed a couple of large transactions with new customers in the payments industry. And we think that's very important to us, not just from the fact that it delivered a strong quarter, but also because we think it's an ongoing revenue source, not just in batch, but increasingly in online. So we're very excited about the fact that we signed those partnerships and delivered revenue in the quarter, but also we think it bodes very well for us across the payments industry as we continue to grow the use of our data in payments.
Speaker Change: If I if I heard you correct. John you said, you expect 16% growth in mortgage there in the fourth quarter on 6% growth in inquiries.
Speaker Change: Percent outperformance certainly better than what you saw in the first half and I think a little bit lower than what you had messaged earlier this year.
Speaker Change: So just curious about the puts and takes there what.
Speaker Change: What if anything has changed in terms of.
Speaker Change: Record growth relative to your expectations pricing, new product development or anything like that that would help bridge that gap. Thank you.
Speaker Change: No look I think the big thing we were talking about as we started the year as you were expecting very good progression in terms of the outperformance within AWS mortgage that would happen as we went through the year and I think we saw consistently every quarter. We saw improvements in second third and now we would expect to be stronger in the fourth.
Speaker Change: So it doesn't sound like anything made or something like a macro read-through.
Speaker Change: Then we were in the third so we feel very good about that progression and again it is driven by record so record growth has been extremely strong.
Speaker Change: And given the partnerships that were signed this quarter and I'm sure more there'll be signed in the fourth quarter and then boarding those partnerships. We would expect to see very good record growth again next year or so.
Speaker Change: I think overall really nice really nice job by the team in driving that number back into the long term framework that we expect which is around 10% right. That's kind of a level, we've talked about 10% to slightly above 10% as the long term growth algorithm for the way we should outperform the mortgage market AWS, one I think we're back to <expletive>.
Speaker Change: Levering in that in that level.
Speaker Change: Understood.
Speaker Change: Thank you. The next question is coming from of.
Speaker Change: Deutsche Bank. Please go ahead.
Speaker Change: You may be on mute your line is live.
Speaker Change: Please go ahead your line is open.
Speaker Change: We'll move onto the next question. Our next question is coming from Surinder <unk> of Jefferies. Please go ahead.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: Following up.
Speaker Change: On the mortgage question here.
Any color on how important the mix is in terms of the revenue recovery when we think about the $1 $1 billion.
Speaker Change: In terms of purchase versus refinance do we have to kind of get back to the historical average or.
Speaker Change: Are there other considerations that we should be thinking of.
Speaker Change: Yes.
Speaker Change: Really assumes historical averages and that 2015 to 19 level as you know purchase.
Speaker Change: Generally a very large part of the underlying market and it was in that 2015 to 19 level. That's super depressed now as we pointed out there's a lack of inventory people are sitting on those lower.
Speaker Change: Interest rate loans and not upgrading from the condo that a three bedroom home with a yard.
Speaker Change: <unk>.
Speaker Change: That should we believe thats going to loosen up and there'll be more activity on the purchase side and then we.
Speaker Change: Should see both a combination of rate refi cash out refis as.
Speaker Change: As rates come down we saw just that blip I would call. It for a couple of weeks until the 10 year went up.
Speaker Change: I think John mentioned in his comments.
Speaker Change: The bulk of that increase was was rate refi. So you can see just a very small I think about 2025 30 basis points change.
Speaker Change: Some consumers that had taken out mortgages say a year or two years ago at higher rates than that or are looking at picking up that radar arbitrage. So theres clearly pent up demand that as rates come down.
Speaker Change: Gives us still a lot of confidence in the framework of that billion, one plus of kind of tailwind in the mortgage market and I think as John said in his comments just as a reminder, we will reset that number.
Speaker Change: In February of next year, but the billion. One is based off of today's pricing you're meeting 2024, 24, it's a product mix 20 fours record hit rates.
Speaker Change: That'll be a higher number likely.
Speaker Change: When we get to 2025 and kind of reset what that.
Speaker Change: <unk>.
Speaker Change: Going forward in 'twenty, five 'twenty six 'twenty seven as the market moves back with the rate declines.
Speaker Change: Thank you and then as a follow on to that.
Speaker Change: I believe in the prepared comments you mentioned that.
Speaker Change: Additional pricing benefits in 2025.
Speaker Change: Any color you can provide there in terms of the strength of the pricing benefits that you expect.
Speaker Change: Next year relative to what we've got what we saw this year.
Speaker Change: Yes, it's really early for that.
Speaker Change: We're not providing any 25 guidance, we tried to give some.
Speaker Change: Kind of what we're seeing that we would expect to happen, where we maybe have some confidence in it for next year, but I think it's too early on that.
Speaker Change: Just a reminder, we will be doing increases on January one.
Speaker Change: We will give some visibility to that.
Speaker Change: When we have our February call and we lay out a framework for 2025.
Speaker Change: But you should expect price increases for dws and from U S. I S.
Speaker Change: As we've done over the last number of years, we think that there is a lot of value in the solutions, we deliver and.
You should expect and we plan to increase prices.
Speaker Change: Got it just as a clarification I think.
Speaker Change: Is the commentary that youre trying to do pricing consistent with historical without talking about guidance is is that the idea that pricing power I think we're trying not to give any any framework on what the level of pricing is but just reinforcing that there will be price increases as is.
Speaker Change: Customary in our industry given the value of the data we have and it will give you real clarity on that when we get to.
Speaker Change: February in our 2025 guidance.
Speaker Change: Thank you.
Speaker Change: Thank you. The next question is coming from Kyle Peterson with Needham and company. Please go ahead.
Great. Thanks, guys. Good morning, I appreciate you taking the questions.
Speaker Change: Just wanted to see if you guys have any color I know on.
Speaker Change: Some of the thoughts on purchase mortgage still being pretty subdued partially due to rates in personal care.
Speaker Change: Prices.
Speaker Change: Affordability.
Speaker Change: You guys have any thoughts on how much rates would need to fall before purchase starts to improve I know I know some of the inventory and home price issues are a little.
Tougher to piece together, but at least on the rate side I guess how much.
Speaker Change: Do you guys think rates need to fall before there would be some some relief at least from that end of the market.
Speaker Change: Yeah.
Speaker Change: That's a tough one.
Speaker Change: As you know we've never I'll say it in our lifetime, maybe it's a little shorter than that.
Speaker Change: We haven't seen in 20 years of rate increase at this pace.
Speaker Change: This level.
Speaker Change: Ever so the shock of the where mortgage rates have gone from the super low levels. During COVID-19 time frame to where they are today is unprecedented so I think it's hard to correlate that back.
Speaker Change: I think what we saw in late August is just a great indicator of even a very small change in rates down.
Speaker Change: Stimulated to market in this case our view principally.
Speaker Change: In in refi, but theres clearly some purchase activity new purchase activity today.
Speaker Change: These higher rates people are buying homes.
Speaker Change: Either variable or a 30 year fixed.
Speaker Change: Right. It's just that there isn't a lot of inventory the real question I think is.
Speaker Change: When will it stimulate those that are call it three or 4% mortgages didnt.
Speaker Change: Want to upgrade to a larger home that's a normal part of the housing economy.
Speaker Change: And when how.
Speaker Change: What's the gap has to be from where they are today at call. It three to four versus the.
Speaker Change: Six plus is at 50.
Speaker Change: 50 bps is it 100 bps.
Speaker Change: Its clearly lower.
Speaker Change: And I think we will see that it goes forward, we'll be super transparent with you but.
Speaker Change: You should be encouraged that when rates come down the market responds pretty quickly, which we saw in the <unk>.
Speaker Change: In late September yes.
Speaker Change: Got it that makes sense and is very helpful and I guess, just a follow up on.
On capital return you guys compete in the potential for buybacks and dividend potential dividend increase in 2025, how do you guys think about.
Speaker Change: Priority and balance between the two.
Speaker Change: You know, whether it's you know over the near term. So that's kind of run or do some a pulse I know it's been a while since you guys have raised the dividend.
Speaker Change: But just some more thoughts on how you guys are thinking about capital return them.
Speaker Change: The relative priority is.
Speaker Change: Yes, and no change to how we've communicated since I've been here, we've always been working towards a goal to return cash to shareholders and as you know the last four five years, we've invested really substantial parts of our excess free cash flow and capex with the cloud transformation, we're getting at the finish line on that so that's really good news.
Speaker Change: Our capex is going to come down meaningfully, which will free up more cash.
Speaker Change: Four available to return to shareholders. We've also as you know is a part of our long term framework.
Speaker Change: Plan to continue with bolt on M&A strategy very disciplined on the financial returns are very disciplined around the strategic swim lanes that we're focused on whether its differentiated data strengthening AWS or growing in identity and fraud and because you know we've done a sizable amount of bolt on acquisitions, while we were doing the cloud.
We would expect to continue to do those bolt ons. Most recently, we did Boa Vista last August.
Continuing to build a pipeline of strategic and financially attractive acquisitions, but we've tried to frame for you that we would expect over the long term to have one to two points of revenue growth from that bolt on M&A.
If you think about one to two points of revenue growth annually thats $50 million to $100 million Boa Vista delivered north of that but in that kind of a range and if you think about the cash required for buying the kind of companies that would be financially attractive to us that fit that $50 million to $100 million of revenue obviously at attractive margins.
Speaker Change: And returns.
Speaker Change: Somewhere in the $500 million, a year roughly of capital or cash bolt on M&A and your model I'm sure. It looks like ours, when we get into 'twenty five 'twenty six 'twenty seven are.
Speaker Change: Our free cash flow really accelerates well in excess of what we would use for capex at 6% to 7% that south of $500 million.
Speaker Change: If you think about $500 million on the average some years it'll be lower some years it might be a bit higher on bolt on M&A.
Speaker Change: Stan shall excess free cash flow to grow the dividend and do buybacks. We've talked on the last call and we've talked I think on most of our earnings calls and when we're out with investors. When we think about returning cash to shareholders. We believe growing the dividend in a consistent way is a is a is a great way to return cash to shareholders and very <unk>.
Speaker Change: Discipline, we frame that and this isn't we haven't made decisions, but we frame that in the direction of growing the dividend in line with our earnings growth I think that's where we're working towards at the right time to.
We would expect over the long term to have one to two points of revenue growth from that bolt on M&A.
To do that and then the excess free cash flow, which is.
Speaker Change: Is meaningful we would do in a buyback and we'd be in the market kind of everyday with that.
If you think about one to two points of revenue growth annually. That's 50 to 100 million Boa Vista delivered north of that but in that kind of a range and if you think about the cash required for buying the kind of companies that would be financially attractive to us the split that $50 million to $100 million of revenue obviously at attractive margins.
Speaker Change: Use.
Speaker Change: The buyback is another mechanism to return cash to shareholders. This has been our strategy since I joined Equifax is to complete the cloud transformation, we're getting towards that stage at 80% now and 90% by year end and then bring capex down bring our margins up.
And returns that's somewhere in the $500 million a year roughly of a of a.
Speaker Change: The strong revenue growth rate, so we have that excess free cash flow to return to shareholders.
Capital or cash bolt on M&A and your model I'm sure it looks like ours, when we get into 'twenty five 'twenty six 'twenty seven.
Speaker Change: I think you've caught in our comments earlier. This morning, we shared with investors that we've added to our long term framework structure structure, which is how we run the company and how we measure our teams our cash conversion metric that's always been in our plan to do that we thought it was the right time now to put that into our long term framework and I think it shows to you.
Our free cash flow really accelerates.
Well in excess of what we would use for capex at 6% to 7% that south of $500 million.
If you think about $500 million on the average some years it'll be lower some years it might be a bit higher on bolt on M&A.
Speaker Change: You the discipline that we're going to have in running the company to generate that excess free cash flow to invest in equifax, but as importantly to return cash to shareholders.
Substantial excess free cash flow to grow the dividend and do buybacks. We've talked on the last call. When we talked I think on most of our earnings calls and when we're out with investors when we think about returning cash to shareholders.
Speaker Change: We look forward to getting to the stage to do that as we move into 2025.
We believe growing the dividend in a consistent way is a is a is a great way to return cash to shareholders and very disciplined we frame that and this isn't we haven't made decisions, but we frame that you know in the direction of growing the dividend in line with our earnings growth. So I think that's where we're working towards at the right time.
Speaker Change: Just as a reminder, free cash flow was strengthening and very strong but also we're delevering. So we had some not only execute what mark is talking about through free cash flow, we generate but also we have we will have significant leverage available to us given the substantial growth we are seeing in EBITDA.
Speaker Change: Got it.
Speaker Change: That's really helpful color. Thank you.
To do that and then the excess free cash flow, which you know is meaningful we would do in a in a buyback and we'd be in the market you know kind of everyday with that and use.
Speaker Change: Thank you. The next question is coming from Kevin Mcveigh of UBS. Please go ahead.
Kevin Mcveigh: Great. Thanks, so much I just wanted to circle back to the.
Buy back as another mechanism to return cash to shareholders. This has been our strategy since I joined Equifax is to complete the cloud transformation, we're getting towards that stage at 80% now and 90% by year end and then bring capex down.
Kevin Mcveigh: Mortgage revenue opportunity.
Kevin Mcveigh: It's been pretty consistent from the $1 billion plus.
Speaker Change: But that's based on kind of current pricing more to your point penetration in twin records and things like that.
Speaker Change: That great to kind of the 15 to 19 time period, you had 71 million records as opposed to 182 million today. So what I'm trying to understand is is there anything what do you think about kind of what your yield is to get to that number today as opposed to what the inquiry or interest rate number.
Our margins up off of the strong revenue growth rate. So we have that excess free cash flow to return to shareholders and I think you've caught in our comments earlier. This morning, we shared with investors that we've added to our long term framework structure structure, which is how we run the company and how we measure our teams our cash conversion metric.
Speaker Change: It has to be so I guess said another way you've got a lot more product and higher records things like that so do you need the same level of interest rate to kind of drive that revenue or is there any way to think about that aspect of it that's a tough one.
That's always been in our plan to do that we thought it was the right time now to put that into our long term framework and I think it shows to you the discipline that we're gonna have in running the company to generate that excess free cash flow to invest in equifax, but as importantly to return cash to shareholders.
Speaker Change: We've worked hard to try to model that it's just so unprecedented what's happened in the last three years with rates, we've never seen it before.
We look forward to getting to the stage to do that as we move into 2025 and just as a reminder, free cash flow is strengthening and very strong but also we're delevering. So we had some not only execute what mark is talking about through free cash flow, we generate but also we have we will have significant leverage available to us.
Speaker Change: And we picked in you can agree or disagree with what we've been using but we picked 2015 to 19 as being a normal level, but if you go back like a decade, you'll go back. The last time, there was really a kind of an unusual mortgage environment was a seven or eight or nine during the global financial crisis.
Given the substantial growth we're seeing in EBITDA.
Got it.
Speaker Change: That was more a underwriting.
That's really helpful color. Thank you.
Speaker Change: Crisis from a consumer mortgage standpoint versus a rate one and I think as you know it.
Thank you. The next question is coming from Kevin Mcveigh of UBS. Please go ahead.
Speaker Change: It's been very consistent there's just so much scale in the United States of consumers that want to move from an apartment to that first condo without apartment to a home they.
Great. Thanks, so much I just wanted to circle back to the.
Mortgage revenue opportunity.
Speaker Change: They want to upgrade their home and then there's a flip side when consumers.
It's pretty consistent you framed a $1 billion plus.
Speaker Change: Consumers age out and they start retiring they sell their big home they buy a smaller homes with mortgages with all of that so it's just such a large market and we've never seen a 50% decline.
But that's based on kind of current pricing more to your point penetration and including records and things like that.
If I go back right to kind of the 15 to 19 time period, you had 71 million records as opposed to 182 million today. So.
Speaker Change: We've tried to just lay out that.
What I'm trying to understand is is there anything what do you think about kind of what your yield is to get to that number today as opposed to what the inquiry or interest rate number.
Speaker Change: That's the anomaly in the market.
Speaker Change: Our view is that as rates come down we'll move.
Move into that $1 billion, one of market opportunities as we pointed out will be a larger number next year.
It has to be so I guess said another way you've got a lot more product and higher records and things like that so do you need the same level of interest rate to kind of drive that revenue or is there any way to think about that aspect of their that's a tough one.
Speaker Change: And we're just convinced that it's going to happen over time.
Speaker Change: Which will be additive to our our P&L and our framework and our long term framework of 8% to 12% revenue growth really just have GDP in here. When you think about a couple of points of of market expansion underlies our 8% to 12% and we've also been very clear that theres going to be very high incremental margins.
We've worked hard to try to model that it's just so unprecedented what's happened in the last three years with rates, we've never seen it before.
And we picked in you can agree or disagree with what we've been using but we picked 2015 and 19 as being a normal level, but if you go back like a decade, you know go back. The last time, there was really a kind of an unusual mortgage environment was a seven or eight or nine during the global financial crisis.
Speaker Change: As that mortgage market comes back, meaning we're not going to reinvest those dollars in more people, we have the right cost structure and equifax today to grow our business and it really can make the right investments so as that market.
And that was more a underwriting crisis from a consumer mortgage standpoint versus a rate one and I think as you know it's just it's been very consistent you know theres just so much scale in the United States of consumers that want to move from an apartment to that first condo without apartment to a home.
Speaker Change: Tailwind flows into our P&L, we would expect it to be incremental which you know obviously you will drive our top line, but also our margins and our free cash flow and give us more free cash.
Speaker Change: <unk> returned to shareholders.
Speaker Change: Helpful. And then just real quick on the E. R. A T C E R C rather.
They want to upgrade their home and then there's a flip side when you know a consumer's age out and they start retiring they sell their big home they buy a smaller home mortgages with all of that so it's just such a large market and we've never seen a 50% decline. So we've tried to just lay out that.
What percentage of the revenue was at today and where was that.
Speaker Change: At its peak just trying to dimensionalize, what that headwind has been.
Speaker Change: John can jump in and add of Equifax quite small, but in the employer vertical.
Speaker Change: It was a large number of announced.
John Gamble: Going down to nothing but you can just give you orders of magnitude right now ERC is zinc on the order of $1 million a quarter.
That's the anomaly in the market our.
Our view is that as rates come down we'll move.
John Gamble: And it was probably in the order of 10 ish, maybe a little higher millions per quarter as you as you go back two and three quarters right, even even the third quarter of last year. So that's the type of not that's the type of change you're talking about and in an employer business, that's $95 million a quarter, obviously that can be a significant change.
Move into that $1 billion, one of market opportunity as we pointed out will be a larger number next year.
And we're just convinced that it's going to happen over time.
Each will be additive to our our P&L and our framework and our long term framework.
8% to 12% revenue growth really just have GDP in here you know when you think about a couple of points of market expansion underlies, our 8% to 12% and we've also been very clear that.
Speaker Change: Very helpful. Thank you.
Speaker Change: Thank you. The next question is coming from Scott, What's sort of Wolfe Research. Please go ahead.
Scott: Hey, good morning, guys. Thank you for taking my question just wanted to ask on the government vertical I know, we've talked about sort of the penetration story in terms of the amount of state local and federal agencies that are out there, but I guess would love to kind of hear your thoughts on when we look at sort of the different buckets of benefit social security.
There's going to be very high incremental margins as that mortgage market comes back, meaning we're not going to reinvest those dollars in more people, we have the right cost structure and equifax today to grow our business and and really to make the right investments. So you know as that market.
Scott: Snap ECA Medicaid like where are you kind of see.
Tailwind flows into our P&L, we would expect it to be incremental which you know obviously you will drive our top line, but also our margins and our free cash flow and give us more free cash to return to shareholders.
Scott: The most sort of white space for penetration over the near to medium term here.
Yeah, It's a great question and thanks for bringing it up 29% growth.
Scott: First.
Scott: Analysts to bring up that vertical so we appreciate that as.
Helpful. And then just real quick on the E. R. T C E. R C. Rather what percentage of the revenue is today and where was that maybe it is peak just trying to dimensionalize what that headwind spend.
Scott: As a reminder, government has moved.
Moving to be our largest vertical in workforce solutions and as you know you've got that large $5 billion Tam against all around a little bit roughly an $800 million run rate business now.
Yeah.
John can jump in and out of Equifax quite small, but in the employer vertical.
It was a large number and that was going.
I wouldn't think about specific services I'd really think about the Tam itself and the biggest opportunity and the Tam is penetration at the states and the state agencies and agencies a place typically not a state.
Going down to nothing but you can just give you orders of magnitude right now he or she is thinking on the order of $1 million a quarter.
And it was probably in the order of 10 ish, maybe a little higher millions per quarter as you as you go back two and three quarter breakeven, even the third quarter of last year. So that's the type of not that's the type of change you're talking about and in an employer business. That's you know 95 million a quarter, obviously that can be a significant change.
Scott: And if you think about call it $800 million versus 5 billion net 4 billion plus of potential revenue for us in the government vertical our social service Verifications that are still being done manually.
Scott: So that's really the focus we've been adding resources in people, we're investing in new products and technology.
Very helpful. Thank you.
Thank you. The next question is coming from Scott what sort of Wolfe Research. Please go ahead.
Scott: To enable our ability to penetrate.
Speaker Change: Right those are states, there's when you meet with.
Hey, good morning, guys. Thank you for taking my question just wanted to ask on the government vertical I know, we've talked about sort of the penetration story in terms of the amount of state local and federal agencies. There are out there, but I guess would love to kind of hear your thoughts on when we look at sort of the different buckets of benefit social security.
Speaker Change: A director of an agency at a state.
Speaker Change: They all want to use it because it's a it's accurate.
Speaker Change: It adds productivity to them, they're always challenged with how do we deliver that.
Speaker Change: Civic services, whether it's food stamps are Medicare health support how do we deliver that more quickly and as you know the federal government that pays for the bulk of those social services requires the states to verify eligibility and that's where we come in eligibility is around income.
Snap ECA Medicaid like where are you kind of see the most sort of white space for penetration over the near to medium term here.
Yeah, It's a great question and thanks for bringing it up 29% growth you're the first.
Speaker Change: And in verifying the source of that income which is the employment.
Analysts to bring up that vertical so we appreciate that.
Speaker Change: So for us the big opportunity is really at the state level. As you know we have some large federal contracts last year, and we extended our CMS contract, which was a big billion dollar plus contract extension.
As a reminder, you know government is.
Moving to be our largest vertical in workforce solutions and as you know you've got that large $5 billion Tam against all around a little bit roughly an $800 million run rate business now.
Speaker Change: We announced.
On this call are we shared in this call that we just extended our SSA con.
I wouldn't think about specific services I'd really think about a the tam itself and the biggest opportunity and the Tam is penetration at the states and the state agencies and agency the place typically not a state and if you think about call it $800 million versus 5 billion net 4 billion plus.
Speaker Change: Contract, which as you know 500 million over five years. So you see the scale of those federal contracts, but the opportunity to continue to drive that strong double digit growth in government going forward is really penetration into states that the bulk of that 4 billion untapped Tam and as I said more people.
Of a potential revenue for us in the government vertical our social service Verifications that are still being done manually.
Speaker Change: More feet on the street, we have.
Speaker Change: Equifax people workforce solutions people that live in the state capitals that work with each of those agencies.
So that's really the focus we've been adding resources in people, we're investing in new products and technology.
Speaker Change: We're working with partners, we're adding new products as you know we have more data now incarceration data from our athletes insights acquisitions is used in that vertical we are working to put those data elements together.
To enable our ability to.
Penetrate those are states, there's when you meet with a a director or an agency at a state there's they all want to use it because it's a it's accurate it adds productivity to them, they're always challenged with how do we deliver the specifics just like services, whether it's food stamps are Medicare.
Speaker Change: When a single <unk>.
Speaker Change: Transaction today, they're all delivered individually.
Speaker Change: So there's just a lot of opportunities in the scale of workforce allows us to.
Speaker Change: Best in that and I think as we said in many calls that we expect the government vertical over the long term.
Health support how do we deliver that more quickly and as you know the federal government that pays for the bulk of those social services requires the states to verify eligibility and that's where we come in eligibility is around income and and verifying the source of that income which is the employment.
Speaker Change: To outgrow the 13% to 15% growth in workforce solutions, we just think there's that.
Speaker Change: So much opportunity for us because of the value it delivers.
All of the agencies at the state level.
So for us the big opportunity is really at the state level as you know we have some large federal contracts at last year, we extended our CMS contract, which was a big billion dollar plus contract extension we announced.
Speaker Change: Got it Thats helpful.
Speaker Change: As a follow up on the mortgage side.
Speaker Change: I guess when looking at some industry data it looks like maybe the gap between sort of U S mortgage inquiries versus some of the application data in terms of growth kind of maybe widened during the quarter.
On this call are we shared in this call that we just extended our SSA contract, which as you know 500 million over five years. So you see the scale of those federal contracts, but but the opportunity to continue to drive that strong double digit growth in government going forward is really penetration into states that the bulk of that $4 billion.
Speaker Change: I'm just wondering if there were anything to sort of call out with that wasn't due to maybe mixed dynamics between purchase and refi any information on that would be helpful.
Speaker Change: No I don't think is anything specific right I think.
Speaker Change: It continues to be we still think we have the same penetration and share that we have consistently obviously with hard inquiries, it's still required a polar Tri Bureau.
Untapped Tam and as I said more people.
More feet on the street, we have equifax people workforce solutions people that live at the state capitals at work with each of those agencies.
Speaker Change: So so I'm not sure what what you're specifically looking at but no. We don't see any changes that are meaningful and the heart and hard inquiries in the industry and I think as you saw we expected.
We're working with partners, we're adding on new products as you know we have more data now incarceration data from our athletes insights acquisitions is used in that vertical we are working to put those data elements together.
Speaker Change: We expected that to happen. We told you we had July we thought it would happen, but you saw the outperformance.
Speaker Change: From record growth that really move up positively in in AWS.
Speaker Change: So that's we were pleased with that.
When a single transaction today, they're all delivered individually.
Pre quality continues to be a big part of our business and obviously, that's something that that is shared amongst the three players. So sure can move between those but overall, we are happy with the way the business is performing.
So there's just a lot of opportunities are in the scale of workforce allows us to.
Best in that and I think as we said you know in many calls that we expect the government vertical over the long term.
Speaker Change: Got it thanks guys.
Speaker Change: Thank you. The next question is coming from Jason Haas of Wells Fargo. Please go ahead.
The outgrow that 13% to 15% growth in workforce solutions. We just think there is that so.
Jason Haas: Hey, good morning, and thanks for taking my question.
So much opportunity for us because of the value it delivers.
Jason Haas: Maybe circling back to talent Verifications I'm curious if you have any insight into which industries, you're seeing that slowdown in hiring and then I'm also curious if youre seeing any increase in competition or any more in sourcing by some of the large background screeners.
All of the agencies at the state level.
Got it that's helpful and just as.
To follow up on the mortgage side I guess when looking at some industry data it looks like maybe the gap between sort of U S mortgage inquiries versus some of the application data in terms of growth kind of maybe widened during the quarter I'm. Just wondering if there's anything to sort of call out with dad wasn't due to maybe mixed dynamics between purchase.
Speaker Change: Yeah, I think we what we heard from the background screening customer base that we have is that they saw some slowdowns kind of in mid late September in white collar.
Speaker Change: Even though we had a good quarter there was some slowdowns. There. So we took that and run rate rolling forward and I think you've seen enough lay offs over the last announcements over the last month or two from different companies.
And refi any information on that would be helpful.
No I don't think it's anything specific right I think.
It continues to be we still think we have the same penetration and share that we have consistently obviously with hard inquiries, it's still required a polar Tri Bureau.
Perhaps tightening up waiting to see where the election goes and you know what's going to happen in Washington.
So so I'm not sure what what you're specifically looking at but no. We don't see any changes that are meaningful in any harder and harder inquiries in the industry and I think as you saw we.
Speaker Change: So I don't think it's any different than that John now.
Speaker Change: We haven't really seen any movements in share we continue to work well with our partners.
Speaker Change: And we just think it's a matter of we happen to be focused in white collar and you've seen some slowdown in white collar specifically in September.
Expected that to happen. We told you we had July we thought it would happen, but you saw the outperformance.
From record growth really move up positively in.
Speaker Change: Got it that's good to hear.
Speaker Change: Here and then as a follow up question I was curious if we look at the AWS mortgage inquiries versus U S.
In AWS.
We were pleased with that.
Pre quality continues to be a big part of our business and obviously, that's something that that is shared amongst the three players. So sure can move between those but overall, we are happy with the way the business is performing.
Speaker Change: So I'm under pacing my understanding is that a function of I guess.
Speaker Change: People shopping around by not closing them I'm curious, what's your expectation for when that gap closing.
Got it thanks guys.
What do you said, maybe a little bit of a narrowing in fourth quarter does that do you expect that would converge next year sometime next year.
Thank you. The next question is coming from Jason Haas of Wells Fargo. Please go ahead.
We actually Joe if you go back to really in history, there's always been more than mortgage poles for the credit file than income and employment.
Hey, good morning, and thanks for taking my question.
Maybe circling back to talent Verifications I'm curious if you have any insight into which industries, you're seeing that slowdown in hiring and then I'm also curious if you're seeing any increase in competition or any more in sourcing by some of the large background screeners.
Speaker Change: On average we get five plus credit file polls per closed loan where there's two to three income and employment pulls per closed loan so that hasnt changed and we don't expect that to change.
Yeah, I think we what we heard from the background screening customer base that we have is that they saw some slowdowns are kind of in mid late September in white collar.
Speaker Change: Did change as rates went up was there was a consumer behavior of just more shopping to try to find another 25 bps off on alone, meaning they're going to multiple mortgage originators for either their refi or for their purchase loan and every time they go to a different originator theirs.
Even though we had a good quarter there was some slowdowns there. So we took that and run rate rolling forward and I think you've seen enough layoffs you know over the last you know announcements over the last month or two from different companies.
Perhaps tightening up waiting to see where the election goes and you know what's going to happen in Washington.
Speaker Change: The credit file fold at the shopping process because the originated wants to figure out is this someone that.
So I don't think it's any different than that John now and we haven't really seen any movements in share we continue to work well with our partners in <unk>.
Speaker Change: Has the credit score that would support the kind of loan they're going to poll. They typically don't pull income unemployment. There now we're trying to innovate to help that shopping process and I think you've heard us talk earlier on this call and on July also that we're piloting in the marketplace and Equifax credit file with.
And we just think it's a matter of we happen to be focused in white collar and you've seen some slowdown in white collar specifically in September.
Got it that's good to hear and then as a follow up question I'm. Just curious if we look at the AWS mortgage inquiries versus U S. I am there so I'm under pacing my understanding is that's a function of.
<unk> income and employment flag on it to really indicate that this consumer not only has this credit score.
Speaker Change: But they also are working today, you don't know that in the shopping process. If your originator, we think that should advantage, our credit file which should drive some credit file share.
Single shopping around but not closing them. So I'm curious, what's your expectation for when that gap closing.
What are you said, maybe a little bit of a narrowing in the fourth quarter does that you expect that would converge next year sometime next year.
Speaker Change: The shopping process, where three.
Credit reports are.
We actually don't you know if you go back to you know really in history, there's always been more mortgage poles for the credit file than income and employment.
Speaker Change: Universally pulled in the application process in shopping many originators pull three simple two simple one so we want to differentiate ourselves in the shopping process on the credit file side, but no. We don't expect them to converge and as John said earlier I think on an earlier question they've been fairly consistent.
On average we get five plus credit file polls per closed loan where there's two to three income unemployment pulls per closed loan so that hasnt changed and we don't expect that to change.
Speaker Change: In 'twenty, four and 'twenty three.
Speaker Change: Earlier this year, we had thought perhaps shopping might start to slow and when we gave guidance back in February we'd indicated we thought we might see that start to narrow or shopping might slow or said another way the percentage of applications that are better initiated would actually result in alone, but we just haven't seen it happen right and so the pattern.
It didn't change as rates went up was there was a consumer behavior of just more shopping to try to find another 25 bps off on alone, meaning they're going to multiple mortgage originators for either their refi or for their purchase loan.
Speaker Change: And every time they go to a different originator theres a credit file polls at the shopping process because the originated wants to figure out is this someone that.
We've seen over the past two to three years just continues to occur and so I think as Mark said, we are at this point our expectation is it'll just continue to work.
Speaker Change: Has the credit score it would support the kind of loan they're going to poll. They typically don't polling of unemployment. There now we're trying to innovate to help that shopping process and I think you've heard us talk earlier on this call and on July also that we're piloting in the marketplace and Equifax credit files with.
Speaker Change: Got it and then kind of Thats helpful. Thank you.
Speaker Change: Thank you. The next question is coming from Jeff Mueller of Baird. Please go ahead.
Jeff Mueller: Yes. Thank you good morning, I, just want to circle back to the Q4 guidance I get at $50 million is not that great and the grand scale of Equifax, but if I also consider the nine point better mortgage market assumption, which impacts almost 20% of your revenue run rate. It does seem like a fairly sizable adjustment. So just.
Speaker Change: <unk> income and employment flag on it so really indicate that this consumer not only has this credit score.
Speaker Change: They also are working today, you don't know that in the shopping process. If your originator, we think that should advantage, our credit file which should drive some credit file share.
Jeff Mueller: Any other call outs of size beyond the industry gross hiring volumes.
Speaker Change: The shopping process, where it's free.
Jeff Mueller: And maybe if I could just hit it head on like was there any sort of sizable client loss or meaningful reduction in client relationships, but also could jump just so we don't have to wonder about that.
Speaker Change: Credit reports are.
Speaker Change: Universally pulled in the application process in shopping many originators pull three simple two simple one so we want to differentiate ourselves in the shopping process on the credit side, but no. We don't expect them to converge and as John said earlier I think on an earlier question they've been fairly consistent.
Speaker Change: Yeah, you don't have to wonder about the Africa, John and I will jump into first on mortgage rates the difference between the two.
Jeff Mueller: Change in guidance.
The implied guide in the fourth quarter from back in July for the actual guide now the change in mortgage isn't very substantial at all right. What you're talking about is credit inquiries I'm not quite sure. It's nine points I think that's an estimate that you are providing but but yes credit inquiries are slightly stronger and thats, making U S. I S revenue slightly stronger but that read through for the question. We just got it doesn't really apply to <unk>.
Speaker Change: In 'twenty, four and 'twenty three.
Earlier this year, we had thought perhaps shopping might start to slow and when we gave guidance back in February we'd indicated we thought we might see that start to narrow or shopping might slow or said another way. The percentage of applications that are that are initiated would actually result in alone, but we just haven't seen it happened right and so the pattern.
Jeff Mueller: U S because of the fact that what we're seeing in shopping behavior not closing behavior. So so the impact on our mortgage revenue between the guidance. We provided in October and the implied guide back from July is really relatively small right. So that's why what we're talking about here is specifically related to non mortgage revenue and as mark.
Speaker Change: We've seen over the past two to three years just continues to occur and so I think as Mark said, we are at this point our expectation is it'll just continue to work.
Speaker Change: Got it that makes sense that's helpful. Thank you.
Jeff Mueller: Said in his in his remarks and I reiterated the biggest driver is employer right and also there is some impact from talent because we saw weakness in talent and in September that we carried through in our run rates.
Speaker Change: Thank you. The next question is coming from Jeff Mueller of Baird. Please go ahead.
Jeff Mueller: Yeah. Thank you good morning, I, just want to circle back to the Q4 guidance I get at $50 million is not that great and the grand scale of Equifax, but if I also consider the nine point better mortgage market assumption, which impacts almost 20% of your revenue run rate. It does seem like a fairly sizable adjustment. So just.
In terms of our guidance, but the biggest driver is employer.
Jeff Mueller: And Thats really the driver, but mortgage wasn't a substantial improvement in our in the guidance in October relative to your expectations in July.
Got it and then sorry.
Speaker Change: Any other call outs of size beyond the industry gross hiring volumes.
Speaker Change: Sorry to try to get in the weeds on this I get the typical methodology in terms of run rating forward recent mortgage but just given the volatility of the last few weeks I wanted to know what periods specifically you're run rating forward. Because you are calling out the late September improvement and then I think you said.
Speaker Change: And maybe if I could just hit it head on like was there any sort of sizable client loss or meaningful reduction in client relationships, but also controls just we don't have to wonder about that.
Speaker Change: Yeah, you don't have to wonder about that but go ahead, John and I will jump into first on mortgage rates the difference in the the change in guidance.
Speaker Change: Subsequently it reduce back to maybe like July August levels in in October so.
Speaker Change: The implied guide in the fourth quarter from back in July for the actual guide now the change in mortgage isn't very substantial at all right. What you're talking about is credit inquiries I'm not quite sure. It's nine points I think that's an estimate that you are providing but but.
Speaker Change: Just what period are you extrapolating forward given the recent jet Jeff.
Speaker Change: No change in how we do it we always do it through like early this week right. So we're kind of in the mid October. So this is no change from last quarter to quarter bore a quarter before that whether it's mortgage or any other parts of our business but.
Speaker Change: Yes credit inquiries are slightly stronger and that's making U S. I S revenue slightly stronger but that read through for the question. We just got it doesn't really apply to AWS because of the fact that what we're seeing is shopping behavior not closing behavior. So so the impact on our mortgage revenue between the guidance we provided in October and the implied guide.
Speaker Change: To your point mortgage or in this case that we saw that the hiring impact late in September that continued in October same with the the impact on mortgage so we try to use the most current run rates. We typically use the last we'll look at how is it the last week how is it the last two weeks how is it the last three weeks four weeks you know something.
Speaker Change: Back from July is really relatively small right. So that's why what we're talking about here is specifically related to non mortgage revenue and as Mark said in his in his remarks and I reiterated the biggest driver is employer right and also there is some impact from talent because we saw weakness in talent in a in September that we carried through in our <unk>.
Speaker Change: That and try to see where those trends.
Speaker Change: Stronger in the last week in the last.
Speaker Change: Three weeks is it weaker in the last week and try to put that together and use our best.
Speaker Change: Right. So in terms of our guidance, but the biggest driver is employer.
Speaker Change: GAAP estimate.
Around where that we think that trend is and use that for the current quarter guidance that's no.
Speaker Change: And that's really the driver, but mortgage wasn't a substantial improvement in our in the guidance in October relative to your expectations in July.
Speaker Change: No change right Jonathan no change at all what we've seen in October right is obviously inquiries came down and they kind of stabilized in October right. So.
Speaker Change: Got it and then I'm sorry, the joint get in the weeds on this I get the typical methodology in terms of run rating forward recent mortgage but just given the volatility of the last few weeks I wanted to know what period, specifically you're run rating forward, because you know you're calling out there.
So that's kind of the basis that we're using going forward.
Speaker Change: Got it just want to make sure that was kind of four thank you.
Thank you. The next question is coming from Owen Lau of Oppenheimer. Please go ahead.
Hey, good morning, Thank you for taking my question.
Could you please add more color on insurance and commercial credit coal.
Speaker Change: September improvement and then I think you said subsequently it reduce back to maybe like July August levels in in October so.
Speaker Change: Grew double digit and looks pretty strong there what are you seeing there. Thanks.
Just what period are you extrapolating forward given the recipient just Jeff.
Speaker Change: Yes, John you can jump into.
The commercial vertical is our small business data business that.
Speaker Change: No change in how we do it we always do it through like early this week right. So we're kind of in the mid October. So this is no change from last quarter to quarter bore a quarter before that whether it's mortgage or any other parts of our business but to.
John Gamble: It had if you look at 'twenty two 'twenty three actually 'twenty, one 'twenty two 'twenty three that business was up very strong high singles.
Speaker Change: For many quarters double digit.
Speaker Change: We had some execution issues earlier this year, but it's now back to that similar levels, which we're really pleased with.
Luke: To your point, a mortgage or in this case, we saw that the hiring impact late in September. They continued in October same with the the impact on mortgage so we try to use the most current run rates. We typically use the last we'll look at how is it the last week I was at the last two weeks I was at the last three weeks four weeks you know something.
Speaker Change: I would expect that business to grow at the high end of the U S. I S. Six to eight range over the long term because of the unique data that we have and remember we made the pay net acquisition with the leasing trade lines. We're onboarding now.
Luke: That and try to see where those trends.
Speaker Change: Merchant data to enhance the picture around small businesses and obviously, bringing in the entrepreneur from our consumer data set. So we think that's a business that will continue to have a positive growth going forward and we're pleased to see it.
Luke: Stronger in the last week in the last.
Luke: Three weeks is weaker in the last week and try to put that together and use our best.
Luke: Yeah estimate.
Luke: Around where that we think that trend is and use that for the current quarter guidance.
Speaker Change: Back in that range, where we expect it to be.
Speaker Change: No change right Jonathan no change at all what we've seen in October right is obviously inquiries came down and they kind of stabilized in October right. So so that's kind of the basis that we're using going forward.
Speaker Change: <unk> for US is it's relatively small in the broader scheme of Usaf's, but we did see nice growth and it was principally online. So we just saw higher online transaction volume.
Speaker Change: Got it just want to make sure that was a kind of core thank you.
Speaker Change: Cross across the insurance vertical.
Speaker Change: Thank you. The next question is coming from Owen Lau of Oppenheimer. Please go ahead.
Speaker Change: Got it and then going back to like a cloud migration.
Speaker Change: Hey, good morning, Thank you for taking my question.
Speaker Change: Can you give us an update on how we should think about incremental top line revenue contribution in 2025, and maybe 26.
Speaker Change: Could you please add more color on insurance and commercial credit coal.
Speaker Change: Double digits and looks pretty strong there what are you seeing there. Thanks.
Speaker Change: Any timeline or product launches you can see over the next few quarters or so.
Speaker Change: Yeah, John you can jump in too.
Speaker Change: Yes, we talked earlier.
John Gamble: The commercial vertical is our small business data business that are you know is is that if you look at 'twenty. Two 'twenty three actually 21, 22, and 23, you know that business was up very strong high singles and for many quarters double digit.
Speaker Change: Youre seeing already some of the impacts of the cloud transformation you know if you go back our you know our long term framework for vitality is 10% we increased it from five to seven pre cloud. So we've been delivering north of that 10 of the last couple of years, including in 2020.
We had some execution issues earlier this year, but it's now back to that similar levels, which we're really pleased with where we would expect that business to grow at the high end of the U S. I S. Six to eight range over the long term because of the unique data that we have and I remember we made the paynet acquisition with the leasing trade lines, we're onboarding now.
Speaker Change: For as you know we increased the guide for this year and we think that's directly attributable to our cloud investments the benefits from the cloud investments are focused on innovation product as well as our focus on AI.
AI.
That innovation, we think is a very good metric around the benefits of cloud.
Luke: Merchant data to enhance the picture around our small businesses and obviously, bringing in the entrepreneur from our consumer datasets. So we think that's a business that will continue to have a positive growth going forward and we're pleased to see it back in that range, where we expect it to be.
Speaker Change: We think we'll also see share gains in <unk> and some of our international markets as we complete the cloud and deliver always on stability and move.
Speaker Change: Into you know either secondary or primary positions when we're below that today, so that should get into the into the P&L and specifically I think your question's around U S. I S. Since we talked about the U S. I S cloud completion.
Luke: Insurance for US is it's relatively small in the broader scheme of U S. I S. But we did see nice growth and it was principally online. So we just saw higher online transaction volume.
Speaker Change: Would expect there to vitality, which has been increasing this year from about 8% in third quarter of second quarter into nine in the third to move towards that 10.
Luke: Across across the insurance vertical.
Speaker Change: And we would expect it to allow them to deliver solidly inside of that 6% to 8% long term framework going forward.
Speaker Change: Got it and then going back to my.
Speaker Change: Migration could you please give us an update on how we should think about incremental topline revenue contribution in 2025, and maybe 26 O N.
Speaker Change: Alright.
Speaker Change: Thank you. The next question is coming from Craig Huber of Huber Research partners. Please go ahead.
Luke: The timeline or product launches you can see over the next few quarters or so.
Oh, great. Thank you.
Luke: Yeah, we talked earlier.
Speaker Change: Talk about a long term outlook for your vitality index of 10% could you see your 11% right now can.
Speaker Change: You're seeing already some of the impacts of the cloud transformation you know if you go back our you know our long term framework for vitality is 10% we increased it from five to seven pre cloud. So you know we've been delivering north of that 10 of the last couple of years, including in 2020.
Speaker Change: Can you give us some examples that you are quite positive moment with new products out there.
Today, particularly outside the U S I'd like to hear somebody you have already touched on today My first question.
Speaker Change: Yeah, so well.
Speaker Change: For as you know we increased the guide for this year and we think that's directly attributable to our cloud investments the benefits from the cloud investments are focused on innovation product as well as our focus on AI.
There's a lot of them I guess you are asking me to tell you. Some Sunday, we're excited but I think broadly you should be excited and we are too about a vitality international's vitality is still below 10, but.
Luke: AI.
I think it was 9% in the quarter, so very very strong.
Luke: That innovation, we think is a very good metric around the benefits of cloud.
Speaker Change: We would expect them to move towards that 10, as they complete cloud like in Canada, and some of the other markets. So that's a real positive and we've got some identity solutions in the marketplace internationally and in the U S that we're excited about.
Luke: We think we'll also see share gains in U S. I S. In some of our international markets.
Luke: And deliver always on stability and move.
Into you know either secondary or primary positions when we're below that today, so that should get into the into the P&L and specifically I think maybe your your questions around U S. I S. Since we talked about the U S. I S. Cloud completion, we would expect there to vitality, which has been increasing this year from about 8% in third.
Speaker Change: Some new solutions using alternative data.
Speaker Change: Have some real traction that adds to the credit file.
Speaker Change: We think are quite positive.
Speaker Change: We talked about earlier on this call some of the solutions, we're doing here in the U S between AWS and <unk> that are really unique that we think will benefit both U S and AWS.
On the second quarter into nine in the third you have to move towards that 10.
Speaker Change: Using the income flag on some of our credit files, which we think is very positive.
Luke: And we would expect it to allow them to deliver solidly inside of that 6% to 8% long term framework going forward.
Speaker Change: We've rolled out in the U S. Some one score solutions that combine our cellphone utility data as well as our other alternative data that's having.
Speaker Change: Uh huh.
Speaker Change: Thank you. The next question is coming from Craig Huber of Huber Research partners. Please go ahead.
Speaker Change: Big lifts in performance that differentiates really our score using our credit file that's other alternative data.
Craig Huber: Oh, great. Thank you.
Craig Huber: Talk about a long term outlook for your vitality index of 10% could you see your 11% right now can.
John Gamble: Our competitors. So we're excited about that do you add anything John I think we have some usaf's our solutions on the Fms side, where we have customers using ignite to generate analytics that they can use to improve marketing campaigns and conversion.
Speaker Change: Can you give us some examples that you are quite positive moment with new products out there.
Speaker Change: Today, particularly outside the U S I'd like to hear somebody you haven't really touched on today is my first question.
Speaker Change: All of those driven by fabric.
Speaker Change: Yeah, so well that's that's a there's a lot of them I guess, you're asking me to tell you. Some Sunday, we're excited but I think broadly you should be excited and we are too about a vitality you know international's vitality is still below 10, but you know.
Speaker Change: Thank you and then my other question if I could when you think about costs for next year. I know you don't want to give formal guidance at this stage. When we think about cost next year given all the cost savings initiatives you guys have put in place here you go.
Speaker Change: To be at 90% through the cloud transformation at the end of this year and stuff for the coarse mixture that you guys can control and assuming the economy holds together mortgage rates come down if youre talking about.
Luke: I think it was 9% in the quarter, so very very strong.
Speaker Change: Yeah, we would expect them to move towards that 10, as they complete cloud like in Canada, and some of the other markets. So that's a real positive and we've got some identity solutions in the marketplace internationally and in the U S that we're excited about.
Speaker Change: You should assume is show very strong flow through down to the EBITDA line, if you're a strong revenue growth here, but I'm curious on your cost side do you have to step up and any investment spending next year. How should we just broadly think about your cost outlook for next year and your two main second John you should jump in I think you saw we took a charge this quarter.
Luke: Some are new solutions using alternative data.
Luke: It has some real traction that adds to the credit file.
Luke: We think are a quite positive we talked about earlier on this call. Some of the solutions. We're doing here in the U S between AWS and U S. I ask that are really unique that we think will benefit both U S and AWS.
Speaker Change: It was planned to.
John Gamble: To execute the cloud cost savings principally from U S. I S and some of that from Canada that will benefit the fourth quarter, but that also benefits 2025. So you know that that benefit is a positive.
Speaker Change: Using the income flag on some of our credit files, which we think is a is very positive.
We've rolled out in the U S. Some one score solutions that combine our cellphone utility data as well as our other alternative data that's having big.
As you pointed out we're at 90% cloud complete which is a big milestone at year end, but we still have 10% to go so as we complete those last pieces of the cloud there'll be additional.
Speaker Change: Big lifts in performance that differentiates you know really our score using our credit file that's other alternative data versus our competitors. So we're excited about that do you have anything John I think we have some unless I asked our solutions on the Fms side, where we have customers usually get nights to generate analytics that they can use to them.
<unk> of the legacy infrastructure for that tail of our of our cloud completion. So that's going to benefit 25, and 26 and John you also it's not cost, but its depreciation you talked about being higher next year.
Because we're bringing on.
John Gamble: More of the new platforms.
Speaker Change: Prove marketing campaigns and conversion.
John Gamble: Into our into our operating mode and starting to depreciate. Those so we framed for you the depreciation will be up next year, but I think he said, it's we're kind of peaking in depreciation in 2025 with capex coming down.
Speaker Change: All of those driven by fabric.
Speaker Change: Thanks, and then my other question if I could when you think about cost for next year. I know you don't want to give formal guidance at this stage. When we think about costs next year given all the cost savings initiatives you guys have put in place here, you're going to be at 90% through their cloud transformation at the end of this year and stuff for the call.
And in terms of you mentioned investment right, so investments actually coming down on capital. So we've talked about the fact that we're moving down substantially on capital spending in 2024 versus 2023 weeks, you'll probably see us continue to drive down as a percentage of revenue our capital spending in 2025 relative to 2024.
Speaker Change: Cost next year that you guys can control and assuming the economy holds together mortgage rates come down if youre talking about.
Speaker Change: And stuff you should I would assume it's a very strong flow through down to the EBITDA line, if you're a strong revenue growth here, but I'm curious on your cost side do you have to step up and any investment spending this year. How should we just broadly think about your cost outlook for next year and your two main John you should jump in I think you saw we took a charge this quarter.
John Gamble: As we move forward or 6% to 7% long term framework and as you know investment spend.
John Gamble: Turns of capital expense moved together so we don't see we don't see an increase in investment spend that would be expense.
Speaker Change: That was planned to.
John Gamble: Because we're continuing to bring down our investment spend that capital.
Speaker Change: Cute the cloud cost savings principally from U S. I S and some of that from Canada that will benefit the fourth quarter, but that also benefits 2025. So you know that that benefit is it is a positive but as you pointed out we're at 90% cloud complete which is a big milestone at year end, but we still have 10% to go so as we complete those last P.
John Gamble: Great. Thank you.
Thank you. The next question is coming from Toni Kaplan of Morgan Stanley. Please go ahead.
Toni Kaplan: Thanks, My first question actually picks up on that the last part of the last one you.
Toni Kaplan: You mentioned, the 6% to 7% Capex in the long term framework this year.
Speaker Change: He says of the cloud there'll be additional decommissioning of the legacy infrastructure for that tail of our of our cloud completion. So that's gonna benefit 25, and 26 and John you also not cost, but it's a it depreciation you talked about being higher next year, because we're bringing on.
Toni Kaplan: We have a really big move.
Toni Kaplan: Live with USA S going onto the cloud there. So a lot of I imagine a lot of spend being spent on that so I guess should we see as a big step down in 25 on the Capex side or should we expect that moves towards the six to seven to be more gradual.
Speaker Change: You know more of the new platforms.
Speaker Change: Into our into our operating mode and starting to depreciate. Those so we framed for you the depreciation will be up next year, but I think he said, it's we're kind of peaking in depreciation in 2025 with the Capex coming down.
Toni Kaplan: Since you still have.
10% of revenue less than you know maybe theres. Some other things that you're working on and maybe just a follow up whats. The next step in the technology plan from here now that you have most of this done.
And in terms of you mentioned investment right, so investments actually coming down on capital or so we talked about the fact that we're moving down substantially on capital spending in 2024 versus 2023 weeks.
Speaker Change #101: So a couple of different questions there Tony first.
Speaker Change #102: Intending to get 25 guidance this year, but were happy to get some kind of indication. So I think we said we expect capex to come down next year again, you used the term big it's hard to define big you may think about big differently than I do but you know capex.
You'll probably see us continue to drive down as a percentage of revenue our capital spending in 2025 relative to 'twenty 'twenty four as we move forward or 6% to 7% long term framework and as you know investment spend in terms of capital expense move together. So we don't see we don't see an increase in investment spend that would be expense because were.
Speaker Change #101: Capex.
We will bring Capex down next year as we move closer to cloud completion, what's left to be done is outside the U S. Principally.
Australia few Latin American countries.
Partially through on U K will finish a lot of U K next year, Spain will be done by year end.
Speaker Change: Continuing to bring down our investment spend is apple.
Speaker Change: Great. Thank you.
Speaker Change #101: So it's really those kind of elements. So you should expect to see a reduction in capex.
Thank you. The next question is coming from Toni Kaplan of Morgan Stanley. Please go ahead.
Speaker Change #101: As a percent of revenue again in 'twenty six.
Toni Kaplan: Thanks, My first question actually picks up on that the last part of the last one you mentioned the 6% to 7% Capex in the long term framework. This year you know, obviously, a really big move with USAA S going onto the cloud there. So a lot of I imagine a lot of spend.
Speaker Change #101: We get added to that next stage, we frame the six to seven over the long term.
What we expect to do and as a reminder.
Speaker Change #101: We move into kind of a post quote cloud environment.
Speaker Change #101: That capex is increasingly used for innovation and new products versus.
Cloud transformation or maintaining legacy infrastructure. So we think we're going to be advantaged in having.
Speaker Change: Being spent on that so I guess should we see as a big step down in 25 on the Capex side or should we expect that moves towards the six or seven to be more gradual.
Speaker Change #101: Having what I would call <unk>.
Speaker Change #101: Capex.
Speaker Change #101: As we move into 'twenty five 'twenty six 'twenty seven versus kind of building cloud Capex. We've had for the last number of years, which we think it'll be a positive.
Speaker Change: Since you still have 10% of revenue less than you know maybe theres. Some other things that you're working on and maybe it's just a follow up what what's the next step in the technology plan from here now that you have most of this done thanks.
Speaker Change #101: And in terms of the benefit to cash conversion I think certainly as we get into 2026, youre going to see depreciation probably likely be higher than capital spending. So again helps cash conversion significantly.
Speaker Change: Yeah. So a couple of different questions in there Tony first you know, we're not intending to get 25 guidance. This year, but were happy to get some kind of indication. So I think we said we expect capex to come down next year again, you used the term big it's hard to define big you may think about big differently than I do but our Capex Oh, we will bring capex down next year as well.
Speaker Change #101: Great.
Speaker Change #103: This was sort of touched on a few times, but just hoping you could give any sort of update on like green shoots that would make you more optimistic in the consumer credit environment about 2025, if you're seeing any if youre not that's fine too, but just any anything that makes you.
Speaker Change: Closer to cloud completion with left to be done is outside the U S. Principally you know Australia.
Speaker Change #103: More or less optimistic about 2025 with regard to consumer credit.
Speaker Change: And American countries.
I think we talked about consumer credit some end market consumer demand softening like in auto.
Speaker Change: Partially through on U K will finish a lot of U K next year, Spain will be done by year end.
Speaker Change: So it's really those kind of elements. So you should expect to see a reduction in capex.
Speaker Change #103: It's still okay. It's not like it's depressed you go back to two years ago. We had the fintech kind of was really impacted that's now normalize which I think is a positive meeting and we're growing in fintech.
Speaker Change: As a percent of revenue again in 'twenty six you know as we get added to that next stage, we framed the six to seven over the long term.
Speaker Change: What we expect to do and as a reminder.
Speaker Change #103: As we with cloud and new products going forward, so when I think about.
Speaker Change: As we move into kind of a post quote cloud environment.
Speaker Change #103: Green shoots.
Speaker Change: That capex is increasingly used for innovation and new products versus.
Speaker Change #103: From where we sit 2025 feels like certainly the first half of 'twenty five is going to be much like we're seeing today.
Speaker Change: Cloud transformation or maintaining legacy infrastructure. So we think we're gonna be advantaged in you know, having what I would call you know.
Speaker Change #103: I think the green shoot.
Speaker Change #103: Really would be in rate reductions, we talk a ton around the impact of rate reductions in mortgage.
Speaker Change: Growth Capex, you know as we move into 'twenty five 'twenty six 'twenty seven versus you know kind of building cloud Capex. We've had for the last number of years, which we think it'll be a positive.
Speaker Change #103: But rate reductions in auto.
Speaker Change #103: For auto loans are going to be helpful to that end market in my view and in people.
Speaker Change: In terms of the benefit to cash conversion I think certainly as we get into 2026, youre going to see depreciation probably likely be higher than capital spending. So again helps cash conversion significantly.
Speaker Change #103: Lesser degree in cards consumer sent tend to be less sensitive to rates and cards because most consumers.
Speaker Change #103: I don't think they're going to revolve with.
Speaker Change #103: With a credit card, but when you buy you're taking out of pilon, you're taking out of installment loan when youre buying a car on credit and those rates are higher too. So if there is any.
Speaker Change: Great.
Speaker Change: This was sort of touched on a few times, but just hoping you could give any sort of update on like green shoots that would make you more optimistic in the consumer credit environment.
Potential green shoots that we haven't seen yet is does the fed take rates down to the 10 year come down and does that not only benefit mortgage but also benefit a couple of the other end user markets.
Speaker Change: <unk> 2025, if you're seeing any if youre not that's fine too, but just any anything that makes you.
Speaker Change: More or less optimistic about 2025 with regard to consumer credit.
Speaker Change #104: Thanks, so much.
Speaker Change: I think we talked about consumer credit and some end market consumer demand softening like in auto.
Speaker Change #105: Thank you. Our next question is coming from Ashish <unk> of RBC capital markets. Please go ahead.
Speaker Change #106: Thanks for taking my question I have two clarifying questions first one was on that to $70 million of seating.
Speaker Change: It's still okay. You know, it's not like it's depressed you go back to two years ago. We had the Fintech you know kind of was really impacted you know that's now normalize now, which I think is a positive meeting and we're growing in Fintech you know so you know as.
Speaker Change #106: <unk> from cost actions, just wondering is that on the opex or does it also have capex evening.
Speaker Change #106: Does that include on the cloud seeding. So that's my first question.
Speaker Change: As we with cloud and new products going forward, so when I think about.
Speaker Change #107: Yeah, so the $70 million.
Speaker Change #107: Total spending savings so it would have some capex as well.
Green shoots.
Speaker Change: From where we sit 2025 feels like certainly the first half of 'twenty five is going to be much like we're seeing today you know I think the green shoot really would be in rate reductions, we talk a ton around the impact of rate reductions in mortgage.
Speaker Change #109: That's helpful color and then maybe just a clarification on the <unk> for 2025 expectation for 5% growth I was just wondering is that purely just based on as Mark explained.
Speaker Change #109: Near term dynamic or are you also thinking into effect going into 2025 of those would be incremental upside.
Speaker Change: But rate reductions in auto.
Speaker Change: For auto loans are going to be helpful to that end market in my view and and Piedmont.
Speaker Change #110: Yeah. So we weren't trying to give that as an expectation for 2025, we were just trying to provide it as a piece of information, but if you take the current run rates. We're seeing now in the first half of October and you just assume that they don't really change and then apply seasonality to them for 2025 that we would end up with inquiries up something over five.
Speaker Change: Lesser degree in cards consumer sent tend to be less sensitive to rates and cards because most consumers.
Speaker Change: I don't think they're going to revolve.
Speaker Change: With a credit card, but when you buy your you're taking out of pilon, you're taking out of installment loan when you're buying a car on credit and those rates are higher too. So if there is any.
Speaker Change #110: Per cent in 2025, and inquiries something up over 5%.
Speaker Change: Potential green shoots that we haven't seen yet is a you know does the fed take rates down to the 10 year come down and does that not only benefit mortgage but also benefit a couple of the other end user markets.
Speaker Change #110: In the first quarter, we weren't trying to indicate that was that was guidance from us in any way. We're just trying to give people perspective on what the current run rates would look like we know you in and many investors haven't had their own perspectives on what the mortgage market is going to do and how it will change over the rest of the year and we weren't trying to indicate we expect it to be flat. It's just that's where it is right.
Speaker Change: Thanks, so much.
Speaker Change: Thank you. Our next question from Ashish <unk> of RBC capital markets. Please go ahead.
Speaker Change #110: Now.
Speaker Change: Thanks for taking my question I have two clarifying questions first one was on that $17 million saving.
Speaker Change #110: And we we don't forecast rate changes, we never have we tried to frame for you.
Speaker Change #110: What the impact of a potential rate change could be like a mortgage but we don't forecast rate changes thats, just not our guidance philosophy.
25 from cost actions, just wondering is that on the opex or does it also have capex saving and does that include on the cloud savings. So that's my first question. Thanks.
Speaker Change #111: That's very helpful. Thank you.
Speaker Change: Yeah, so the $70 million.
Speaker Change #112: Thank you. The next question is coming from George Tong of Goldman Sachs. Please go ahead.
Speaker Change: Total spending savings so it would have some capex as well.
Speaker Change: That's helpful color and then maybe just a clarification on the inquiry for 2025 expectation for 5% growth I was just wondering is that just based on as Mark explained the neocon dynamic or are you also baking in the factory, that's going in and putting 25 of those.
George Tong: Hi, Thanks, Good morning, Mark can you talk a bit more about what you're seeing broadly with consumer credit health, particularly across prime and subprime consumers data seems to suggest that delinquency rates are continuing to go up year over year across lending categories.
Speaker Change #114: Yeah I think.
Speaker Change: Be incremental okay. Thanks.
Speaker Change #115: It's still in our view a pretty good market. That's what our customers are saying I don't think theres any alarm.
Speaker Change: So we weren't trying to give that as an expectation for 2025, we were just trying to provide it as a piece of information, but if you take the current run rates. We're seeing now in the first half of October and you just assume that they don't really change and then if I seasonality to them for 2025 that we would end up with inquiries up something over five per.
Speaker Change #115: George from our customers around where delinquencies are gone. They think I think most of our customers believe with low unemployment or high employment rates, meaning consumers working there even with delinquencies up that that's manageable and they're generally at a delinquency rates that are inside of how our customers think about growing there.
Speaker Change: <unk> in 2025, and inquiries something up over 5% in the first quarter, we weren't trying to indicate that that was guidance from us in any way. We're just trying to give people perspective on what the current run rates would look like we know you and and and many investors haven't had their own perspectives on what the mortgage market is going to do and how it will change over there.
Speaker Change #115: Business, So we haven't seen that impact.
Speaker Change #115: Haven't seen delinquencies be a reason that people are tightening up outside of subprime.
Speaker Change #115: Prime that's already happened.
Speaker Change #115: Subprime tightened up.
Speaker Change: Rest of the year and we weren't trying to indicate we expect it to be flat. It's just that's where it is right now.
A couple of years ago.
Speaker Change #115: But.
Speaker Change #115: From our perspective.
Speaker Change: And we we don't forecast rate changes, we never have we tried to frame for you with.
Speaker Change #115: If employment is going to stay at fairly low level.
Speaker Change: With the impact of a potential rate change could be like in mortgage, but we don't forecast rate changes, that's just not our guidance philosophy.
Speaker Change #115: We don't see that impacting our volumes in the <unk>.
Fourth quarter into into 'twenty or early parts of 2025, unless there's a change in the employment levels.
Speaker Change: That's very helpful. Thank you.
Speaker Change #115: Unemployment goes up.
Speaker Change #116: Got it that's helpful.
Speaker Change: Thank you. The next question is coming from George Tong of Goldman Sachs. Please go ahead.
Speaker Change #117: And then John can you talk about the puts and takes with your updated EBITDA margin outlook for the year of 32, 4% at the midpoint compared to 32.6% previously.
George Tong: Hi, Thanks, Good morning, Mark can you talk a bit more about what you're seeing broadly with consumer credit health, particularly across prime and subprime consumers data seems to suggest that delinquency rates are continuing to go up year over year across lending categories.
John Gamble: Yeah. So obviously, we gave our our revised guidance for the full year, we gave guidance for the first time for the fourth quarter and I think what you're seeing is the is the.
Speaker Change: Yeah, you know I think.
John Gamble: Very strong improvement in EBITDA margin in <unk> versus <unk>, which we're very happy with our <unk> adjusted EPS and EBITDA dollar level, which are at record levels. As we said on the call and Marc reiterated over $500 million in EBITDA in the fourth quarter. So I think what youre seeing is very strong delivery in the fourth quarter a lot of the <unk>.
Speaker Change: It's still in our view is a pretty good market. That's what our customers are saying, there's I don't think there's any alarm George from our customers around where delinquencies are gone they think.
Speaker Change: I think most of our customers believe with the low unemployment or high employment rates, meaning consumers working that even with delinquencies up that that's manageable and they're generally at a delinquency rates that are inside of how our customers think about growing their business. So we haven't seen that impact we havent seen.
John Gamble: Movement in EBITDA, driven by cost reductions and actions that are being taken now that we've completed the cloud transformation, sorry customer migrations on the consumer side in the U S. I S. And then obviously, Canada as well so we feel good about the improvements we're talking about about the higher margins, we're talking about in the fourth quarter, and we think that bodes well for next year.
Speaker Change: Delinquencies be a reason that people are tightening up outside of subprime subprime that's already happened.
Speaker Change: Subprime tightened up.
Speaker Change: You know couple of years ago, but.
Speaker Change #118: Thank you. The next question is coming from Andrew Stein of Ft Partners. Please go ahead.
Speaker Change: From our perspective.
Speaker Change: If employment is going to stay at this fairly low level, we don't see that impacting our volumes in the fourth quarter into into 'twenty or early parts of 2025, unless there's a change in the employment levels.
Andrew Stein: Hey, good morning, and thank you. So my first question just wanted to shift to the international segment I realize above its acquisition lap. This one year Mark in August and Latam had a really strong quarter. So could you help us understand the run rate organic growth trends between bovis.
Speaker Change: Unemployment goes up.
Speaker Change: Got it that's helpful.
Speaker Change: And then John can you talk about the puts and takes with your updated EBITDA margin outlook for the year of 32, 4% at the midpoint compared to 32.6% previously.
Andrew Stein: Latam ex Brazil, and then what is though versus market share now compared to the.
Andrew Stein: 15% at the time of acquisitions, just wondering what opportunities you have to gain market share over the next year.
John Gamble: Yeah. So obviously, we gave our our revised guidance for the full year, we gave guidance for the first time for the fourth quarter and I think what you're seeing is the is the.
Speaker Change #120: Yeah. So we're still excited very excited about Boa Vista as you know, we just lapped the one year Mark of our ownership of the business. We're still in the thick of integrating the business and bring out new products and technology down there.
Speaker Change: Very strong improvement in EBITDA margin in <unk> versus <unk>, which we're very happy with our <unk> adjusted EPS and EBITDA dollar level, which are at record levels. As we said on the call and Marc reiterated over $500 million in EBITDA in the fourth quarter. So I think what you're seeing is very strong delivery in the fourth quarter a lot of the <unk>.
Speaker Change #120: Suraj experience is a very strong business that they've executed very well on but the feedback we're getting from all the big banks and customers. There is that they welcome a global competitor and that's.
Speaker Change #120: Where we're going to operate you know we're pleased with the performance of our Boa Vista.
Speaker Change: And EBITDA driven by cost reductions and actions that are being taken now that we've completed called transformation sorry customer migrations on the consumer side in the U S. I S. And then obviously, Canada as well so we feel good about the improvements we're talking about about the higher margins, we're talking about in the fourth quarter, and we think that bodes well for next year.
Speaker Change #120: Through 2024, and we expect it to be continued strong in and we do expect some share gains going forward. It's too early to see that in the business. After just 12 months no.
Speaker Change #120: We havent really fully deployed a lot of the equifax technology of ignite and interconnect, but those are getting in place as we exit the year and into 2025. So we would expect some more traction there going forward Latin America had a very good quarter.
Speaker Change: Thank you. The next question is coming from Andrew Stein of Ft Partners. Please go ahead.
Speaker Change #120: We're forming well in that in that market really in all geographies.
Andrew Stein: Hey, good morning, and thank you. So my first question just wanted to shift to the international segment I realize above its acquisition lap. This one year Mark in August then in Latam had a really strong quarter. So could you help us understand the run rate organic growth trends between Boa Vista, and Latam ex Brazil.
Speaker Change #120: All the countries that we participate in and.
Speaker Change #120: Really big focus by that team as well as the international team on.
Speaker Change #120: Innovation and new products, which is really helping.
They're our effectiveness in the marketplace.
Speaker Change #121: Got it thanks, and then just a follow up on the international margin expansion that was also really strong this quarter and just.
Speaker Change: And then what is though versus market share now compared to the.
Speaker Change: 15% at the time of acquisitions I'm, just wondering what opportunities you have to gain market share over the next year.
Speaker Change #122: I'm wondering if you could help us understand the remaining potential for margin expansion in Latam in Europe is the cloud.
Speaker Change: Yeah. So we're still excited very excited about Boa Vista as you know, we just lapped the one year Mark of our ownership of the business are you know we're still in the thick of integrating the business and bring out new products and technology down there.
Speaker Change #122: Commission is completed for those segments.
Speaker Change #123: Yeah, we're expecting obviously very good margin expansion again in the fourth quarter and then we're expecting them to continue to grow margins as we get into 2025.
Speaker Change: Suraj Experian has a very strong business that they've executed very well on but the feedback we're getting from all the big banks and customers. There is that they welcome a global competitor and that's.
Speaker Change #123: Part of it obviously driven by continued good revenue growth organic revenue growth in international with again very high variable margins and they do and we do have more opportunities as mark talked about because we're completing cloud transformation in the U K in 2025, you'll see it more in Australia, New Zealand until 2026 and.
Speaker Change: Where we're going to operate you know we're pleased with the performance of Oh. This to you know through 2024, and we expect it to be continued strong in and we do expect some share gains going forward. It's too early to see that you know in the business. After just 12 months.
Speaker Change #123: And pieces as we go through 2025 in Latin America. So we expect to see that would be beneficial to margins in Latin America. As we go through 2025, but again, just a general trend of improving margins in Latam, sorry, and in international as we look over the next several years. John We also we just completed candidate two weeks ago or 10 days ago. So those benefits.
Speaker Change: Haven't really fully deployed a lot of the equifax technology of ignite and interconnect, but those are getting in place as we exit the year and into 2025. So we would expect some more traction there going forward Latin America had a very good.
We will roll into the fourth quarter and into 2025, and then we complete to Spain.
Quarter Yea, we're performing well in that in that market really in all geographies all.
Speaker Change #123: Later this year in a couple of other Latin American countries. So that cloud completion as you point out which is principally that 10% we have left to go.
Speaker Change: All the countries that we participate in in a really big focus by that team as well as the international team on.
Speaker Change #123: Is gonna benefits, principally international because that's where the work of the cloud completion is going to take place.
Speaker Change: Innovation, and new products, which is really helping our they're our effectiveness in the marketplace.
Speaker Change #124: Got it thank you.
Speaker Change: Got it thanks, and then just a follow up on the international margin extension that was also a really strong this quarter and just wondering.
Speaker Change #125: Thank you at this time I would like to turn the floor back over to Mr. Burns for closing comments.
Speaker Change: I'm wondering if you could help us understand the remaining potential for margin expansion in Latam in Europe as the cloud transformation is completed for those segments.
Speaker Change #125: Okay.
Speaker Change #126: I, thank everybody for their time today.
Speaker Change #126: Any follow up questions, please reach out to myself or Mala.
Speaker Change: Yeah, we're expecting obviously very good margin expansion again in the fourth quarter and then we're expecting them to continue to grow margins as we get into 2025.
Speaker Change #126:
Speaker Change #126: And report them interacting with her throughout the quarter.
Speaker Change #126: Sure.
Speaker Change #127: Ladies and gentlemen. This concludes today's event you may disconnect your lines or log off webcast. At this time I didn't join the rest of your day.
Speaker Change: Part of it obviously driven by continued good revenue growth organic revenue growth in international with again very high variable margins and they do and we do have more opportunities as mark talked about because we're completing cloud transformation in the U K in 2025, you'll see it more in Australia, New Zealand and towards 'twenty 'twenty six.
Speaker Change: And pieces as we go through 2025 in Latin America. So we expect to see that should be beneficial to margins in Latin America. As we go through 2025, but again, just a general trend of improving margins in Latam, sorry, and in international as we look over the next several years. John We also just completed Canada, two weeks ago or 10 days ago. So those benefits.
John Gamble: You know, we will roll into the fourth quarter and into 2025, and then we complete the Spain.
John Gamble: Later this year in a couple of other Latin American countries. So that's cloud completion as you point out of our which is principally that 10% we have left to go.
John Gamble: You know is gonna benefits, principally international because that's where the work out of the cloud completion is going to take place.
Speaker Change: Got it thank you.
Speaker Change: Thank you at this time I would like to turn the floor back over to Mr. Burns for closing comments.
John Gamble: Okay.
Speaker Change: Yep, thank everybody for their time today.
Speaker Change: If you have any follow up questions. Please reach out to myself or modeling.
John Gamble: And reported to interact and whenever people throughout the quarter.
John Gamble: Yes.
Speaker Change #100: Ladies and gentlemen. This concludes today's event you may disconnect your lines or log off webcast. At this time I didn't join the rest of your day.
John Gamble: [music].
John Gamble: Okay.
John Gamble: [music].
Faiza Alwy: The next question is coming from Faiza Alwy of Deutsche Bank. Please go ahead. You may be on mute.
Surinder Thind: The question is coming from Surinder Thind of Jeffries. Please go ahead.
Unknown Attendee: Thank you. Follow them up on the mortgage question here.
Unknown Attendee: Any color on how important the mix is in terms of the revenue recovery when we think about the $1.1 billion in terms of persons versus refinance. Do we have to kind of get back to the historical average, or are there other considerations that we should be thinking of?
Unknown Attendee: Yeah, that really assumes historical averages in that 2015-19 level. As you know, purchase is generally a very large part of the underlying market. And it was in that 2015-19 level.
Unknown Attendee: That's super depressed now. As we pointed out, there's a lack of inventory. People are sitting on those lower interest rate loans and not upgrading from the condo to the three-bedroom home with ER.