Q2 2025 Equifax Inc Earnings Call
Greetings, welcome to the second quarter 2025 earnings conference call for Equifax.
At this time, all participants are listening only mode.
A question and answer session will follow the formal presentation.
if anyone today shoot a car operator, assistance, during the conference, please press star Zero from your telephone keypad,
Please note this conference is being recorded.
I'll now turn the conference over to Trevor Burns. Senior, vice president head of corporate investor relations.
Thank you. You may now begin.
Thanks and good morning. Welcome to today's conference call. I'm Trevor burns with me today, are Mark, Porter, chief executive officer and John gamble, Chief Financial Officer.
Today's call is being recorded and archived. Recording will be available later today. In the IR, calendar section of the news and events tab, our investor relations website
During the call, we will make reference to certain materials that can also be found at the presentation section of the news and events tab at our IR website.
Also we'll be making certain for the statements including third quarter and 4 year 2025 guidance as well as our long-term Financial framework.
To help you understand Equifax and its business environments. These statements involve a number of risks and uncertainties and other factors it could cause actual results to differ materially from our expectations.
Certainly its factors that may impact our business are set forth in our followings, with the SEC, including our 2024, form 10K and subsequent filings.
Who also be referring to certain non-gaap Financial measures, including adjusted, EPS adjusted Eva, cash conversion, which will be adjusted for certain items. It affect the comparability of our underlying operational performance. These non-gaap measures are detailed in reconciliation tables, which are included with our earnings release and can be found in the financial results section of the financial info tab at our IR website. Now, I'd like to turn it over to mark.
Mark: Thanks Trevor turning to slide 4. Equifax had a very strong second quarter with revenue of 1.54 billion up. 8% in constant currency and 7% reported nicely within our long-term framework and the highest ever quarterly Revenue in equifax's history.
Mark: Revenue was 27 million above the midpoint of our April guidance, despite the weaker mortgage and hiring markets, the majority of the revenue outperformance was in US, Mortgage principally in USIS from stronger, pre-approval product growth and a slightly stronger Market with Harding. Credit inquiries down about 8 and a half percent, but better than our expectations of down 11%
Mark: Consumer Lending.
Mark: USIS had another quarter of solid non- mortgage growth as they are operating in a post Cloud mode.
Mark: FX negatively, impacted Revenue year-to-year by 000, or about 40 basis points compared to last year.
Mark: However, the US dollar weakened since we provided guidance in April benefiting, second quarter Revenue by 9 million, or about 60 basis points, relative to our April framework.
Adjusted EPS of 2 dollars. A year was 10 cents above the midpoint.
Of our April guidance range from operating leverage from stronger, Revenue growth and solid cost management with an adjusted ebita margin of 32 and a half percent.
During the second quarter, ews had a strong performance with Revenue up 8% led by verifier government and consumer lending which were both up double digits and mortgage that was up 9%.
Mark: And ews had a strong second. Strong 10% record growth in the quarter.
Mark: USIS also had a strong performance in the quarter with Revenue up 9%.
Mark: USIS is gaining momentum. Post Cloud transformation with non- mortgage Revenue. Growth of over 4%, and a Vitality index of 10% the strongest Vitality ever. And in line, with our long-term Vitality, go across Equifax of 10%
Mark: USIS is stronger, focus on Innovation, new products like the twin indicator sets them up for sets them up, well for the second half and 2026.
Mark: Mortgage Revenue was up 20% in the quarter, reflecting expected benefits from annual price increases principally, rated related to credit scores and stronger than expected growth in pre-approval products.
Mark: In international, we saw a broad-based 6%, constant dollar Revenue growth led by strengthened Europe and Latin America.
Revenue growth was slightly below our expectations due to overall economic weakness in Canada.
Mark: The international team continues to deliver strong technology and product execution. Completing customer migrations to our new cloud-based technology in the UK and Peru.
Mark: We made strong progress in new products in the quarter with an overall Vitality for Equifax of 14% which was 14 400 basis points above our long-term framework.
Mark: EFX AI is powering our new Solutions, leveraging our scale and unique Equifax data in our single data fabric.
Mark: We have our new twin indicator mortgage credit solution in market, and our on-track to launch Auto and P loan products. Powered by twin later in 2025, and these will combine credit alternative data, in Twin income indicators into a single solution.
Mark: Based on our strong first craft NPI performance, we're increasing our Vitality outlook for 2025, from 11% to 12%, which sets us up well for the second half and for 2026.
And in the quarter, we repurchased 127 million in shares under our new 3 billion, share repurchase program.
Mark: The Equifax team is executing very well leveraging, our new Cloud capabilities to drive NPI and growth.
Given the uncertainties in the economy. Inflation and tariffs were holding our full year. Constant currency framework from April, even with the strong first half performance. But we are increasing our reported full year Revenue guidance by 305 million and adjusted EPS by 3 cents a share for the impact of FX.
Mark: John will share more details on our third quarter and full-year guidance shortly.
John: Turning the slide 5 work force solutions, Revenue was up 8% in the quarter driven by strong 10%, verify our Revenue growth.
John: Government government revenue, grew 14% in the quarter and up 12 percentage points, sequentially due to the ramp in SSA volumes and growth in state and agency penetration twin record growth and pricing.
John: The new SSA Amendment with an annual contract value of about $50 million allows, the Social Security Administration to continue ramping, the use of a twin solution that delivers monthly income and employment information, for re-certification of eligibility, for individuals, currently receiving disability benefits from the Social Security Administration.
Talent Solutions revenue is up about 4% in the quarter and was consistent with our expectations.
John: Overall us hiring and particularly white collaring hiring continue to be relatively weak. In the second quarter with overall BLS data up only slightly in April and May compared to last year.
John: Underlying Talent employment, verification Revenue was up low. Double digits in the second quarter driven by new records, new products, penetration and pricing.
John: This was partially offset by insights Revenue related to criminal background, screening, that was below. Our expectations principally rated to share shifts between background screeners
John: From economic uncertainty impacting, both Talent Solutions and our employer onboarding businesses.
Mortgage Revenue was up a strong 9% in the quarter despite the continued weak weakness in mortgage volumes.
John: Ews mortgage Revenue continues to benefit from record growth and pricing.
John: Consumer lending Revenue in ews was up a very strong 19% in the quarter with double digit Revenue growth in P loans and card as well as high single digit Revenue. Growth. In Auto from continued, strong growth in records, new products, penetration and pricing.
John: Tan saw particularly strong growth from increases in large customer volumes.
John: Employer, Services revenue is down 2% in the quarter, consistent with our expectations, with I9 and onboarding revenue. Still negatively impacted by the weaker hiring Market.
Workforce Solutions. Adjusted ebit, margins of 53.3% were up, 50 basis points. Compared to last year, margins were better than our expectations driven by both higher than expected Revenue growth and solid cost management.
Turning the slide 5, we continue to engage in Washington around the new administration's focus on the estimated $160 billion dollars of improper social service and tax payments, tax payments which is a positive Macro for ews.
John: A couple of weeks ago, the president signed the new. Oh bbba legislation. That provides several potential future growth opportunities for the ews government business, including increasing, the frequency of CMS redetermination from annually, to semiannually adding Community engagement or work requirements for certain Medicaid, recipients. And in snap tying Federal funding to error rates and enforcing work requirements. These changes are all positive for our ews government business.
John: We're continuing to ramp up our engagement in Washington, in order to support new federal government programs. Including the IRS, earning income tax credit that do not pay portal. Unemployment, insurance and a Department of Education.
John: We expect these new programs to be potential, positive growth for Equifax in the future.
John: We also continue to have opportunities to expand 20 utilization at the state agency level as States, Implement stronger verification requirements aligned with these new government uh requirements
This includes our new Workforce Solutions, integrated complete income solution that will support, State's ability to validate income, through the work number and validate, other sources of income such as gig work, self-employed wages and non D income through consumer permission Bank transaction data.
John: We're launching this new solution at third quarter and are working with multiple States, on evaluation and implementation.
John: While we have significant opportunities for the medium and long-term government revenue growth in supporting federal and state programs. The pace and extent of changes in federal program structure and funding. From the prior Administration is resulting in some continued near-term. Volatility as agencies at the state level manage these funding changes on their operations.
John: As a result, we expect our government, revenue growth in the second half to be consistent with the first half.
John: We are working closely with our state customers as they operationalize. The 2024 funding changes and remain confident in our medium and long-term ews government revenue. Growth framework at above the ews long-term Revenue growth framework of 13 to 15% as we grow into the large 5 billion dollar government can
John: turn your slide 7 twin record, editions were strong again. In the second quarter with active records up about 18 million or 10% over last year to 198 million and total records were up 10% to 767 million records.
Underlying those 18 million active record. Editions ews added about 1.3 million contributing companies in the past. 12 months, to 4.6 million companies contributing to Twin and outstanding performance by the team which would not have been possible without the Equifax cloud.
John: We've also added 4 new Partnerships this year, which is on top of the 10, add in the second half of last year and expect, those new agreements to contribute to record growth in the second half of 2025.
At our investor day a few weeks ago we shared our metric. We've been using internally for several years. Current records, which is defined as the number of people in Twin that have been paid within the last 35 days.
John: This metric more closely aligns with how we monetize. Twin records, ews ended the quarter with 113 million current records, which was up 9%.
John: 50 million income producing Americans.
John: Turning to slide 8 USIS had a very strong quarter with Revenue up 9% and much better than our expectations principally led by mortgage Revenue.
John: Non-mortgage revenue was up over 4% in the quarter and also slightly slightly above or slightly better than our expectations.
John: Mortgage Revenue in the quarter was up a very strong, 20% principally from third-party vendor pricing and stronger pre-approve pre-approval revenue. And despite the about 8 and a half percent decline in USIS hard, mortgage inquiries.
John: USIS is gaining share in prequel and pre-approval products, which we expect to accelerate in the second half. As we roll out. Our new mortgage credit file with the twin indicator.
John: USIS has seen very strong interest in their new mortgage, pre-approval and pre-qualify. The twin income and employment information.
John: We are supportive of the fhfa recent announcement to support access to housing by maintaining the use of the tri merge credit report.
John: We are committed to helping expand consumers, access to credit and helping lenders, mitigate risk through data-driven decision-making.
We have a long history of collaborating and supporting mortgage industry initiatives and applaud the fhfa recent decision.
John: B2B non- mortgage Revenue grew about 4% in the quarter as we continue to see a stable lending environment. Although continuing at the levels below longer term norms,
we saw high single-digit growth in Auto in low, single digit Revenue growth in fee. All other B2B verticals and aggregate were upload single digits.
John: Financial marketing services are being offline business with up 6% in the quarter. And we saw a broad-based growth across all offline. Segments with strong double digit Revenue growth, in pre-screen marketing,
John: We have not seen an increase in portfolio review spending. That would be indicative of increased risk management activity in a weaker economic environment.
John: Consumer Solutions, Revenue remains strong at 8%.
John: USIS adjusted Evita margins at 35% were consistent with our expectation and up about 180 basis points compared to last year.
John: We're seeing the benefits of cost savings from our Cloud migration, which we completed in the second half of last year as well as operating. Leverage from revenue growth in the quarter.
John: The acceleration in USIS, NPI Vitality to 10% and in line with our long-term goal is a clear indication of the benefits of our new Cloud infrastructure and the team's ability in USIS to fully focus on leveraging. Our technology and product advantages to better serve, our customers and drive growth through Innovation and new products.
John: Turning the slide 9 International Revenue was up 6% in constant currency and broad-based revenue growth across all regions.
John: Strong, 11% Latin American Revenue growth was led by very strong growth in Argentina and Brazil.
The bowl of Vista business is performing very well up 8% in the first half versus last year as we bring new Equifax platforms. Like ignite interconnect and the Equifax data fabric to both Vista. And engage our Brazilian customers with new models and scores built using EFX AI.
Europe growth rates improved nicely in the quarter at up 6% in asia-pacific performed. Well, at up 4%. Candidate's growth of 1% continues to be impacted by weaker economic conditions.
John: International adjusted. Evia margins of 26.4% were up about 80 basis points versus last year from revenue growth and cost improvements from our Cloud migrations.
Turning the slide 10 in the second quarter. We deliver a Vitality index of 14% with over a 100 new products launched in the first half led by double digit. Vitality in all business units, led by Workforce Solutions, Vitality at 18%,
John: As mentioned earlier, based on our strong NPI performance in the first half, we're increasing our Vitality outlook for 2025 by 100 basis. Points to 12%, which is 200 basis points of our 10% long-term goal, and double our pre-cloud by tality index, we're energized by our post Cloud completion, momentum and Innovation, and new products.
1 of the cornerstones of our NPI program is developing multi-data Solutions using our EFX Cloud. EFX Ai and scale, proprietary data assets,
John: These only Equifax Solutions provide greater value for our customers and will deliver Revenue growth for Equifax.
John: The ability to deliver information to our customers from the work number alongside a credit report provides value. Only Equifax can deliver
Mortgage prequel credit file solution with a twin indicator differentiates. Our credit file with incremental data, including work status, employer name, and potentially, some levels of historic income.
This unique solution will help lenders optimize their marketing processes and deliver more certainty around how they can automate consumer loan underwriting.
We are seeing strong interest from the mortgage Market as lenders. Begin to integrate the twin indicator into the workflows and we expect to launch similar twin indicator Solutions in Auto and P Loan in the second half of this year.
John: And as a reminder we plan to deliver the twin indicator alongside our credit file at no incremental cost in order to differentiate our credit file and drive incremental growth and share gains.
John: And now I'd like to to turn over to John to provide more detail, on our 2025 guidance, and third quarter framework.
John: Thanks, Mark, turning to slide 11 as Mark, referenced hard, mortgage credit inquiries, where somewhat better in the second quarter than we had expected. However, they continued to decline near to year in the second quarter at down about 8 and a half percent and we're down about 9% for the first half of 25.
John: 30-year mortgage rates, remained, consistently above 6.7% during the quarter housing, prices remain high and inventories of available homes remain at low levels.
John: These factors have kept both home purchase and refinance activity. At historically, low levels with total hard, credit, inquiries down over 50% from 2015 to 19 averages.
John: Based on run rates from mortgage hard, credit inquiries over the latter part of the second quarter and continuing volatility in both mortgage rates and volumes our mortgage hard. Credit inquiry expectation included in guidance for second half 2525 is down over. 13% generally consistent with levels we shared in April,
John: As we discussed last quarter, although current home mortgage activity, is low based on Equifax data, we believe there are almost 13,030 year mortgages issued since 2022 with an interest rate above 6% and about 9 million with an interest rate above 6 and a half percent. This creates a growing pool of mortgages available to refinance when mortgage rates decline,
As Mark indicated. We are holding our full year 2025 guidance. Shown on slide 12 on a constant currency basis to be unchanged from our April guidance. Even with our strong, 2q performance there, continues to be a heightened level of economic uncertainty.
John: continuing to result in weaker levels of hiring as well as uncertainty in the direction of interest rates and therefore mortgage volumes
John: we increased our guidance to reflect the impact of FX changes since April increasing the midpoint of our reported Revenue guidance by 35 million to about 6 billion dollars and adjusted EPS by 3 cents per share the 7.48 cents per share
John: Consistent with our April grads non-mortgage, constant dollar Revenue growth at the midpoint of guidance, is expected to be about 6% and over 6% for mortgage due to Stronger, 2q mortgage results.
FX is about 30 basis points, negative to revenue growth.
John: At the business unit level Workforce Solutions Revenue growth in 2025 is expected to be about 5% down from 7% in our April guidance.
Ews delivered Revenue. Growth of just over 5% in first, half 25, and we expect second half. 25 growth to be slightly below those levels. Second half verifier, non- mortgage Revenue. Growth is expected to be slightly below the 8% we saw in the first half of 25.
John: Revenue growth in both talent and government in the second half are expected to be slightly below the levels. We saw in the first half of 25 due to the weaker hiring Trends and the near-term government volatility that Mark discussed.
Speaker Change: Second half 25 employees should be down slightly year to year.
Ews mortgage Revenue. Based on the slower run rates, we have seen over the last several weeks and consistent with the market expectation for us is hard credit inquiries should show limited growth in second half 2525 at a much slower Pace than the about 6%. We saw in the first half.
Speaker Change: Ews IBA margins. In 2025 are expected to be about 51% up, 50 basis, points from our April guidance, despite the lower Revenue, guidance, reflecting strong cost management, and to a lesser extent, favorable, mix
2025 is expected to be about 7%, much stronger than our April guidance. We expect mortgage Revenue to grow about 13% up from our April guidance. As the stronger performance in preapproval Solutions. We saw in the first half of 25 continues through the second half of 25 and fiscal year. 25 benefits from the better levels of hard inquiries, we saw in the first half
Speaker Change: As I referenced earlier, our second half 25 mortgage hard inquiry expectation at down. Over 13% is generally consistent with the levels we shared in April reflecting. This mortgage Revenue growth and the second half of 25 is expected to be about 10% about 500 basis points weaker than we saw in the first half of 25.
Speaker Change: Non- mortgage revenue is expected to grow over 4 and a half percent up about 50 basis. Points from our April Guidance, with the second half growth, slightly lower than the first half, given uncertainty, around the economy and interest rates.
Speaker Change: USIS. Ebita margins are expected to be about 35.5% up about a 100 basis points year to year.
Speaker Change: We expect 2025 International constant, currency Revenue, growth to remain about 7% consistent with our April guidance.
Speaker Change: We expect second half Revenue growth to be just over 7% compared to the 6.4%. We delivered in the first half. We expect to see strengthening growth in Canada. As they begin to benefit from cloud infrastructure, which they fully migrated to in the fourth quarter of last year as well as improving growth Trends in Europe and Asia Pacific.
Speaker Change: Evita, margins are expected to be about 28.5% up about a 100 basis points from 2024.
Speaker Change: I also want to briefly discuss 2 q25, corporate expense which at 152 million was about 7 million dollars. Above the guidance we shared in April, this increase was principally driven by higher consumer litigation costs which are generally related to resolving single plaintiff litigation cases, and other litigation costs, as well as certain non-recurring costs.
We expect higher levels of litigation costs will also impact 3Q and 4 q.
As a result, we expect full year, corporate costs to be about 590 million up from our April guidance. These higher corporate costs will be partially offset by lower interest and other expense and a lower tax rate of about 26.5% down from 26.75% in our April guidance.
Speaker Change: The increase in corporate costs from 2025 versus 2024 is due to higher litigation costs higher variable compensation, higher depreciation and amortization and certain non-recurring costs incurred in 2025.
Adjusted IBA. Margins are expected to be about flat versus 2024. This is down from our guidance, in April principally reflecting the impact of FX and the increase in corporate expenses related to litigation, partially offset by the increase in ews margins.
Speaker Change: Slide 13 provides the details of our 3Q 255 guidance.
Speaker Change: In 3225, we expect total, Equifax Revenue to be up over 5% on a constant dollar basis year-to-year at the midpoint
Speaker Change: With minimal. Minimal impact from FX.
Speaker Change: as a reminder, the third quarter has a very difficult comparison against 3Q 24, which had 10% organic constant dollar Revenue growth 1 of our strongest quarters in the last couple of years led by 19% verifier non-, mortgage Revenue growth,
Speaker Change: Adjusted EPS in 3Q, 255, is expected to be A1 87 to $1.97 per share up, over 3 and a half percent versus 3Q 24 at the midpoint.
Speaker Change: Equifax, 3Q, 25 adjusted. Evita margins are expected to be about 32 and a half percent at the midpoint of our guidance down slightly from 3Q. 24, adjusted ebit on margins. At The Bu level are up, year-to-year driven by solid margin increases in USIS and international. The increased view, margins are offset by higher corporate costs principally. The higher litigation I discussed earlier
Speaker Change: Business unit performance in the third quarter is expected to be as follows. Workforce Solutions, Revenue growth is expected to be up over 3 and a half percent year to year.
Speaker Change: Verification Services, Revenue growth is expected to be about 4 and a half percent.
Mortgage revenue is expected to be up about low single digit percent with the growth in records and pricing offset by the expected continued. Mortgage market decline.
Speaker Change: 5 and a half percent again against a very difficult comp.
Speaker Change: Talent revenue is expected to be up at levels consistent with or slightly above the second quarter year-to-year. Growth rates reflecting continued week overall us hiring.
Mark: government revenue is expected to be up mid single digits reflecting the near-term, headwinds mark discussed earlier
Mark: Ews IBA. Margins are expected to be above 51% and down slightly year to year.
Mark: USIS revenue is expected to be up about 7% year to year. Mortgage revenue, is expected to be up about mid-, teens percent and non- mortgage revenue. Is expected to be up about 4%, mortgage Revenue growth is still being impacted by significant declines in USIS heart inquiries, which are being more than offset principally by third-party. Vendor pricing actions as well as strengthening revenue and pre-approval and pre-qualification products.
Mark: USIS adjusted, Evita margins are expected to be up about 130 basis points a year to year at about 35 and a quarter percent again reflecting the benefits from us ISD, commissioned Legacy systems and revenue growth.
Mark: International Revenue is expected to be up about 7% in constant currency adjusted IBA. Margins are expected to be up about 180 basis points. A year to year at about 29.5% in 3Q 25
Mark: Our guidance assumes economic and market conditions do not change. Meaningfully from current levels, us interest rates at levels also about consistent with current levels and reflects the uncertainty in global economies, and US interest rates both in Direction and volatility.
Turning to slide 14 in April, we laid out our new capital, allocation framework with a 3 billion, share repurchase program and a 28% increase in our quarterly dividend to 50 cents per share.
Mark: During the second quarter we returned about 190 million dollars to shareholders purchasing about 480,000 shares for 127 million and paying dividends of 62 million.
Mark: As we complete the Equifax Cloud, we are accelerating free cash flow while lowering the capital intensity of our business. 2q 255 free cash flow was solid at 239 million up over a 100 million from 2224 driven by increased income and lower Capital spending, we expect to generate over 900 million dollars of free cash flow in 2025 with a cash conversion of over 95% which aligns with our long-term framework. We are energized to be
Mark: Entering this new phase of Equifax as we return cash to shareholders. Now, I'd like to turn it back over to mark.
Mark: Thanks John turning your slide, 15 at our June investor day. A few weeks ago, we reconfirmed our 7 to 10% long-term organic growth framework and provided a 2030 Equifax. Financial scenario that included a base case where the mortgage Market grows about 2 to 3%. Annually in line with long-term GDP growth with us. Mortgage pricing growing at Mid single digits as we discussed at our investor day. This is not guidance, but a scenario showing how Equifax can deliver. Our long-term Financial framework without a recovery in the US mortgage market and without outside pricing increases in mortgage scores.
This scenario reflects organic Revenue growth.
Mark: At an 8 and a half percent kagar with Revenue growing to about 9.6 billion dollars in 2030 ebit, do man margins. Ex exceeding 35% and adjusted EPS of about 15 dollars per share in this scenario. Equifax were to turn about 2.5 billion dollars to shareholders in 2030.
Adjusting this scenario to reflect the mortgage Market recovering, the 2015 to 19 volume levels by 2030 as measured by hard credit inquiries at current pricing records and penetration 2030 Revenue would grow to about 10.8 billion for an 11% kagar with an adjusted EPS of about 19 dollars. A share and Equifax would return an incremental billion dollars or 3.5 billion dollars to shareholders in 2030.
Mark: To clarify the 2030 mortgage Market. Recovery scenario assumes. Current mortgage pricing products, share and records with no growth from 2025 levels, which is clearly a conservative assumption.
Mark: As we have shared consistently, we are investing at the right levels in Equifax and any mortgage Market recovery will drop through to margin and EPS growth for return to shareholders via dividend growth and increase BuyBacks.
Mark: with significant potential upside when that mortgage Market recovery, improves,
Wrapping up on slide 16. We had a strong first half financial performance with Organic constant dollar Revenue. Growth of 7%, led by strong 8%, ews verifier, and 8% USIS Revenue growth. Despite the weaker mortgage and hiring markets.
Mark: Both both first and second quarters were above our expectations and guidance reflecting the resilience of the new, Equifax business model, even in a in a declining mortgage market and uncertain economy.
Mark: As we've outlined, we felt it was prudent to hold guidance in the second half even with our strong first half performance. Given the high uncertainty from tariffs on inflation rates and economic growth.
Mark: Our strong free cash flow generation and the strength of our balance sheet positions as well to return cash to shareholders in the second quarter. We returned about 190 million dollars to shareholders to share our purchases and increase dividend and we expect to continue the repurchase shares in the second half of the year.
Mark: We're entering the next chapter of the new Equifax with our Cloud transformation substantially behind us as we pivot, our entire team to leveraging the Equifax Cloud for Innovation, new products and growth.
We're using our new Cloud capabilities, single data fabric efx.co.uk.
We're accelerating multi-data assets Solutions, including those that combine traditional credit, alternative credit assets and twin income employment indicators, inverters verticals, like mortgage audit Auto and P loan. That only Equifax can deliver that will drive shared gains and growth.
Speaker Change: I'm energized by our strong first half performance. But even more energized about the next chapter of the new Equifax. This is an exciting time to be at the new Equifax. And with that operator, let me open it up for questions.
Mark: Thank you.
Speaker Change: We'll now be conducting a question and answer session.
Mark: We ask you, please listen to yourself to 1 question and 1 follow-up.
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Speaker Change: Thank you. And our first question is from the line of Jeff Miller with spared, please, just stay with your questions.
Speaker Change: Yes, thank you. Can you give some more perspective on the twin state agency? Headwinds is this more headwinds tied to the programs that are impacted by the federal government data expense subsidization changes? Or is it something else and just any reason why? Now midcal year, um, there's incremental headwinds,
Yeah. Jeff that that is the challenge that we're still feeling from the changes. Uh, the Biden Administration made in 2024 around some of the data reimbursements. We've talked about that, probably now for 3 or 4 quarters and it's a, it's a little bit dynamic, as the states are dealing. Uh, we're dealing with states that have kind of contract timing that are happening throughout the year. And, you know, some states are able to sort through it, with their budgets and the funding it on their own others. It's just taking longer to get that sorted out. Um, so, you know, that's some of the pressures we're seeing in that business, in the very near term, we talked a bunch about, you know, kind of the momentum that we have. I would call it over the more medium term. You know, for example, some of the waivers that were put in place by the prior Administration are now expiring as we speak. Meaning in the middle of 2025, um, they were done by the bid Administration and they have to go back to the more stringent, you know, requirements. So we're seeing momentum and Commercial discussions there which, you know
Speaker Change: Sharing and just working through um, State budgets, which are very complicated.
Prequel products that are already driving strengths or share in the quarter. I ask because it sounds like the twin indicator product is still pretty early ramping. Um and then any other callouts that's leading to the Step Up in uses Vitality. Thank you.
Speaker Change: Yeah, so, um, you know, we've been in the marketplace with the twin indicator now for, you know, call it 6 months of discussions, uh, you know, we've got it in some of the, uh, aggregators. So it's a, you know, available. The discussions are super positive on it, you know, there isn't a single mortgage originator that isn't, uh, you know, interested in the solution. I think that's, you know, helping us commercially, you know, until they can adopt that new solution. It's just helping us commercially, win some share in that prequel, uh, pre-approval stage, you know, where customers might be doing a 1B, or a 2B poll instead of a 3B, um, because of our Innovation and our kind of close relationships now because, uh, we're talking about the, uh, new solution with the twin indicator. And as a reminder, we're also adding NC plus attributes. Um, you know Telco, uh cellphone util, utility Telco attributes, to our mortgage credit file. And I think that's just helping us, you know, from a share perspective. As you point out, we really expect the twin indicator to, you know, take hold
Speaker Change: As we get into the second half in 2026, you have to change, you know, the process flow inside of a mortgage originator in order to absorb it. But, you know, just as a reminder, and, as I said earlier, on the call, you know, our intention is to offer that twin indicator as a differentiator for our mortgage credit file, in order to drive, you know, more value in the Equifax credit file with that twin indicator, um, to drive, uh, you know, share gains. I mean, we're not going to charge a higher price for it, we want to use it to differentiate in that uh, you know, kind of pre-application stage. When there is, uh, many Originators that are doing 1 or 2 B pulse.
And generally on NPI in USIS. I think we're just seeing more traction on multi-data Solutions, right there being more effective at delivering more multi-data solutions. It's occurring in commercial, it's occurring in in our consumer businesses, and they're also seeing more traction on helping customers, use ignite around marketing and advanced Marketing Solutions and analytics. So I think generally that what we have been talking about for a long time where we can deliver more data more quickly, um, through standard pipes is occurring and the and the team is seeing growth.
Okay, thank you.
Speaker Change: The next question is from the line of Andrew Steinman with JP Morgan. Please receive your questions.
Andrew Steinman: Hi, uh, 2 questions. Um, first first 1 is just, what is mortgage revenues as a percentage of total revenues, uh, in the second quarter, just reported and then looking at the beginning of this third quarter that we're in right now for us, is, you know, what are you seeing in terms of non- mortgage lender and Consumer Credit activity?
Andrew Steinman: So to the first question is 22% flat.
Andrew Steinman: Um and and in terms of non- mortgage, I think what we're seeing right now is it's continuing to be relatively good like we saw in June. Right generally speaking. What we're seeing is Otto has remained relatively strong and it's continuing to perform pretty well. Um, I think fee strengthened a bit. Is we expect fee to be stronger in the third quarter, sorry than than we saw in the second quarter? Um, second quarter growth rate was down a little bit in fee, but that was simply a grow over. We have very good sequential performance in fee in the second quarter. And we're expecting to see nice growth in the third, right? And um and then broadly speaking, I think we're expecting the other businesses which aren't as large but also continue to perform relatively well with with some improvements across commercial and some of our and some of our payment spaces. So generally speaking, I think we're expecting third quarter to look to look okay.
Speaker Change: Good. Thanks. John.
Speaker Change: Thank you. The next question is from the line of manav pot with sparkles. Please receive with your questions.
Speaker Change: Thank you. Good morning. Uh, I just wanted to revisit the government of business again, you know, maybe it's a question just more on, you know, the visibility and assumptions there for the second half of the year. Because, you know, in the last several years I guess you have assumed the ramp in the second half and you've always had to lower it but this time around it felt like you had more visibility. So I was just wondering what what exactly changed like was there, like a state that you had to cancel, or had to step out because of budget reasons, or is this just a little bit of, you know, all your different states.
Speaker Change: The changes that were made, uh, last year in the prior Administration around the uh, cost sharing between the federal government and the state government. And, you know, these are different contractual periods. When we get to that, you know, end of the contractual period, you know, we don't always know how a state's going to respond. You know what, um, impacts they're going to have from a budget standpoint. I think you read enough to know that, you know, Most states are quite challenged around their budgets. Meaning, they're in deficit positions, you know? So that creates an impact when they have to come up with additional dollars and, you know, we've solved that in lots of States. Um, we're solving it and others and, you know, as we handicap our Outlook in the second half we thought it was prudent to, uh, you know, put handicaps, you know, as far as where we think. Uh, some of those discussions are going to land, um, that are still in flux in the second half, you know, in a way that, you know, we thought was prudent, you know, as we uh as we look forward, you know, that we still see, you know, lots of positives but the timing of those of when they're whether they're going to hit in the second half.
Speaker Change: Or, you know, likely more in 2026, you know, for example, the waivers that were in place the co waivers that, uh, were extended by the Biden Administration through the end of, uh, June, you know, have all come off. That's created a lot of dialogues with states that now have to respond with more, stringent, um, income, verification requirements. That's good news for ews. So, you know, we expect that to be a positive. But, you know, when those come in, when they have budget dollars because they have to pay for more of it, you know, we handicap that in there. And, as I mentioned earlier, you know, the
Speaker Change: The new, uh, changes in Washington, you know, a really strengthening, um, the verification requirements, uh, you know, at, uh, application and then strengthening the redetermination requirements. Meaning, every 6 months and then adding the work requirement, you know, those are all going to be positive which we're in Dialogue on all 3 of those, you know, at the state level, um, as far as implementation principally in 26, you know, but that's why, you know, we still have a lot of confidence, you know, in the growth in this vertical, as we go into 26, and Beyond in particularly, in this current administration's Focus around the 160 billion dollars of improper payments. We're just dealing with, you know, kind of the uh aftermath of uh what was done in the prior Administration. So we got to work through that in the second half.
Speaker Change: Okay. Uh, and then, you know, just on the talent segment uh on the criminal data. I think you mentioned something around shares between background screeners I was hoping you could just elaborate on that and also, you know uh what what the alternative is to address, I guess.
Speaker Change: Yes. So um, so so we deliver Port records, right? And and the alternative is to get court records through another Source 1 of 1 of the customers that we have a large relationship with happened to lose 1 of their large customers. And they went to someone else where that, that um, background screener doesn't happen to use Equifax for court records and that's all it was. So, um, it's it's a revenue impact but it's not really a material.
Um, operating profit impact, obviously, um, obtaining court records directly from a court. This is the more manual process is something that is um relatively low margin for us. It's a business that we certainly want to grow but it's not a strategic business for us and it's 1 that we'll continue to invest in, but but um not not 1 that we uh, we consider as important as twin for example, and and just remember on the app or insights business, you know, the core business we have is the data set. We have on all incarceration records that are used as that indicator. You know, it's the first stop in a background check and that's when where we have, you know, a very strong business and we continue to grow. That is John pointed out. The Second Step that takes place when you find out, someone has been historically. Incarcerated is there's a verification of that, actual court record. We do some of that. Some background screeners do that on their own. There are some other competitors that only do that step of the process and as John pointed out, you know, that's a lower margin in many cases, it's actually a manual operation in some cases, it's digital, some states have a digital portal um to get those court records.
Speaker Change: Where you pay for them, but many states in many quarts, you actually have to send in what's called a court Runner to actually go in and, and pull the documents. So, that's a lower margin business, and we just saw a little bit of change there.
Speaker Change: Okay, thank you.
The next question is from the line of Tony Kaplan with Morgan Stanley, please just use your questions.
Thanks so much. I was hoping you could talk about, uh, Vantage score and what you're expecting in terms of price competition in the mortgage Market. Um, are you expecting Vantage score to be priced at a level that could lead to share gains versus FICO thanks?
Speaker Change: Have a, you know, really strong underwriting because of the differences between the 3 credit files. You know how the Vantage or FICO is going to unfold is certainly going to take time, you know. That's a, you know, a kind of a complex change uh, for the industry. Um, it's 1 that uh, you know, will certainly take time. Um, as you know, we have access to the Vantage score as due to you and Experian as a part of our, uh, you know, joint venture. Um, that's a score that we have, uh, you know, full access to meaning. Uh, you know, we don't have any cogs when we use that. Um, so, you know, we'll certainly work with our customers, you know, around that as an option. And I think those conversations, well, very new, you know, will unfold as we go through the second half of the year.
Speaker Change: Perfect and wanted to ask, also, John about the ebita margin. Um, you know, raised your Revenue but lower date. But uh, touch on, on the margin side, uh is is that from investing? Or is there a mix element there? I just wanted to.
Speaker Change: Hear all the drivers, thanks.
Speaker Change: Sure. So for a full year, margin for for a full year guidance, again, the increase in guidance will really principally related to FX, right? So Revenue went up about 35 million and and EPS about about 3 cents, a share. So I think the reason why our ebita margins fell, a bit 1 is just FX is generally, um, positive FX is obviously very beneficial to our Revenue but it's a little dilutive to our margins. Um, based on the numbers that I just
Speaker Change: I just shared and then also we're seeing some higher corporate expenses and a specifically related to those litigation costs. And then also some 1-time costs related to some employee exits that occurred in the second quarter. So so those 2 items are driving the IBA margin down for the year. Um, but bu margins are actually performing nicely, we're seeing very nice growth in in USIS and, and the international margins in the second half. And as we talked about in the, in the second quarter, we saw very good performance in ews margins and they remain nicely over 50%. So it's uh, the the, the, the, the reduction in our ebata margin and full year guidance, is really specifically related to those corporate cost increases related to litigation and 1 time actions, and then also FX
Speaker Change: Very clear. Thank you.
Speaker Change: The next question is from the line of fisa. I'll wait with Deutsche Bank. Please receive 3 questions. Yes.
Speaker Change: Yes. Hi. Thank you. Um, John just to follow up on those litigation costs. Can you give us a bit more color on on what's going on there? And if this is something that might continue into 2026
Speaker Change: Yep, so so it's effectively 2 significant portions. Some of it is just general litigation costs related to um, outstanding lawsuits that we're dealing with some of which are public and they're, they're they're generally disclosed in our, in our financial filings. The other is the volume that we're seeing of small claims from individuals, um, that come into Equifax and quite honestly come into all 3 bureaus. And what we're seeing is just a higher volume of those, We Believe across the industry. Um, so there's a cost to obviously settling or resolving those cases, and we're seeing that that cost has gone up um, in 2025 relative to 2024 actually more than we expected. Um and and that that's a cost probably that we're going to work to try to manage effectively, but that's a cost that probably is going to retain remain high for a little bit of time. Some of the costs related to larger. Some of the larger cases that I referenced those costs we may be able to mitigate as we go forward, um, but uh, but in terms of the sum of the costs related to the small claims and the the smaller
Speaker Change: Our consumer cases, those will probably see elevated levels. Certainly through the second half as we mentioned in our prepared remarks.
Speaker Change: All right, understood and then wanted to follow up on, on the talent business. You mentioned slightly weaker Talent market, so I'm curious if you could give us a bit more Colour on, you know, some of the trends, like, when did things start getting worse and it sounds like, you're not assuming an improvement there. So maybe just a finer point on, how much of the, um, you know, low.
Speaker Change: Word guidance on Talent, is related to the criminal data that you talked about versus the market. And also, if that is what is driving the lower guide on employer services.
Renewed discussion around tariffs. Uh, you know, as we got into kind of the middle of June. Um, I I my personal view is that corporate confidence, you know, is going to continue to be shaky, you know, until there's some clarity on, you know, a path towards closure of the Tariff issue, you know, because of its broad, you know, ranging impact. You saw this morning, you know, General Motors, announcement and stellantis, Jeep manufacturer, having huge impacts, you know, from tariffs on a financial standpoint, you know, companies like that. You know, I'm sure have very tight hiring, you know, in place. You know, when they're having those kind of hits from raw material costs and and so on. So I think until that sorted out, you know, we expect to see certainly in the second half. That's reflected in our guide. A continued, you know, kind of softer hiring environment. There's still a lot of jobs changes take place, that's just the reality of the, uh, us, you know, kind of Workforce economy. Um, but there's just uh, you know, a dampening of that that, you know, has an impact on our rep.
Speaker Change: Great. Thank you.
Speaker Change: The next question is from the line of Ashish sobota with RBC Capital markets, please receive your questions.
Speaker Change: Thanks for taking my question. I I have a 2-part question on the USIS non mortgage 1 was on Autos. Uh we've seen some pretty strong growth there in the first half. Some of it is cycop pricing but we were wondering if you have also seen any pull forward there. Or have you seen any slowdown on the auto front and then the second part is just around the offline business. Uh again we've seen some good momentum there in the first half, what's driving it and how do we think about the B2B offline going forward in the second half. Thanks,
Speaker Change: No, Autos performed nicely. In both the first quarter and the second quarter and it's continuing to perform relatively nicely. Yes, some of its pricing. But overall, we think we're performing relatively well and, and we're happy with how otter performed in the first half and we expect to see relatively good performance going forward. Um, you've also seen offline or our batch businesses performed relatively well, as well. We've seen good performance, really across pre-screen and across marketing businesses. We've seen a little bit of also a benefit across some of the the header data we sell into into uh, our companies that provide fraud and and other types of services as well. So those businesses have been relatively good. We haven't seen a substantial increase in account reviews which would generally be an indication that you're starting to go into some into a weakening economy or at least that that our, our customers believe they are because they're ramping up account reviews. We've seen some growth there but not not really material. So overall, um,
Speaker Change: This is also an area where we're seeing some of the benefits from NPI, some of the newer solutions that are being launched. Are being are benefiting this line item in our p&l and our marketing business. So we're seeing some benefit there as well and that we would expect to continue.
Speaker Change: That's very helpful. Thank you.
Our next question is from the line of Owen Lao with aheim. Please receive your questions.
Hi, good morning. Thank you for taking my question. So, going back to, uh, find a Score Mark. I understand that, uh, in maybe 2 early, to talk about the pricing, but what's the goal for vage score longer term? I mean, if you have an opportunity to make a push, would you push for higher market shares? Thanks.
Speaker Change: Yeah, you know, we we this is not new, we have advantages, I don't know, 20 plus years old, maybe it's 30. Um, it's been around for a long time and, you know, we Equifax have been taking that to Market along with Equifax scores, um, you know, to, uh, help support our customers. And we've been working to grow that and we'll continue to do that, not only in mortgage. But, you know, in all verticals that's a, that's a part of our approach to Market. You know. I it's very clear that that's a in, in some places is a tough sell that has to be a catalyst, you know, in order to create that kind of change, you know, from traditionally the
Speaker Change: The wide. The vast majority of the industry uses the FICO score for the reasons of longevity and the depth of that score, you know, from its uh, its history. But you know, we're always in the marketplace trying to support our customers, you know, with solutions that uh, you know, help them. Um but I just think it takes time to displace something that's embedded as deeply as the FICO score is
Speaker Change: Got it, that's helpful. And then maybe quickly on consumer lending. It was pretty strong up. 19% yield for a year in a second quarter. Up from 11% last quarter, and Peter was very strong. Could you please give us more details on that? Uh, strength and also, the sustainability. Thanks a lot. Yeah, I think you're referring to ews, uh, you know, consumer lending and we're pleased with some of the penetration and new products and you know, custom new customers that we're adding there. Um, that's just really taking advantage of that income and employment data.
Speaker Change: That meaning they're 10 20, 30000 unsecured loans. So there's a additional underwriting there, that's really been, uh, you know, the driver which we're pleased with. This was an area, where record growth is really, really helpful, right? As we continue to build out the record base, then more and more customers and consumer lending, want to use the work number.
Speaker Change: Thanks a lot.
Andrew Nicholas: Our next question is from the line of Andrew. Nicholas with William. Blair please receive your questions?
Andrew Nicholas: Hi, good morning, thanks for taking my questions. Uh, first of all is just on on the international business, broadly, um, in the US, you kind of characterized.
Andrew Nicholas: The, the consumer account backdrop as, as the stable, but, but subdued relative to historical Trends. I'm just curious in your major International markets. Would you describe
Kind of the the status quo there, a similar, or, you know, where, where would it be, maybe running above or below averages compared to to maybe what you would expect over a full cycle?
Yeah, broadly it's quite similar. Um, you know, as you know, we see stronger growth in Latin America just because the D dynamics of that consumer base, there's just a lot of unbanked consumers in all Latin American countries, including Brazil moving into the bank sector. So that's why you know we expect Latin America and it's been performing that way to be at the you know higher end of that 7 to 9 range for international um Canada's clearly been impacted by the the
Andrew Nicholas: Pair of discussions in 2025. Um, you know, we've seen, you know, a Slowdown in in consumer confidence up there. Um, in really, you know, quite meaningful. You know, we were only up 1% in the quarter, um, which was clearly below our expectations and, you know, we expect that to continue. I guess, because of the, you know, maybe it's the neighborly rhetoric, but the rhetoric is so much stronger up there around the Trump tariffs and perhaps, you know, is more uncertain in that market. It clearly has had an impact economically. Meaning less consumers, buying cars, less consumers, you know, taking out a new credit card, you know, just being, you know, kind of conservative in this uncertain time frame. If you go around the rest of the globe into, uh, you know, like Australia, which is a big market for us, um, UK Spain, um, you know, normal, you know, kind of, there's nothing different that we would see there. Um, you know, as far as, uh, you know, what's, what's impacting from an economic activity or consumer in corporate competence?
Speaker Change: Very helpful. Thank you. And then for my follow-up, just on on the guidance broadly, um, obviously, to really strong quarters to start the year above guidance on, on both of those your decision to to kind of maintain the full year guy. I'm just curious. How how much is that would you characterize as conservatism versus, you know, the macro deterioration, maybe you've seen a little bit in Talent OR or delays in the government business. If there's a way to kind of frame the different factors and what ultimately,
LED you to to maintain uh, the full year guys.
Yeah, I'll take a shot at that and John could jump in, you know, there's a, when you think about macros, you know, clearly the mortgage Market is defined by us by hard. Inquiries was better than we, uh, expected in the second quarter. But that declined as we, uh, exited June and came into July, you know. So we've got back down to that, you know, kind of negative 12%, uh, you know, mortgage Market is, we're running today. So that's what we got it out for the second half. So that's clearly an impact. The hiring Market. You know, has been weaker than, uh, you know, we expected kind of going through the year. So that's clearly had an impact that we carried through. In the second half. We talked about, you know, some of the, some of the, the state issues we're working through, um, due to the prior administrations of funding changes. So there's an element of that. And then I think broadly, you know, there's enough uncertainty with what's happening with tariffs, I think the whole tariff narrative in Washington spooled up again, you know, kind of in late June and into July.
Speaker Change: And, you know, it's it's more topical now that and it's unresolved and it just feels quite uncertain, you know, we we've seen the impact on, uh, the 10 year we've seen the impact on mortgage rates, you know, and then, you know, you see consumer confidence which a few months ago was very weak. Now it's a little bit better. Um, but, you know, we don't have a, a new read on, you know, how consumers feel about this latest. Uh, tariff discussion to me the big variable is,
Speaker Change: That we've seen, um, you know, we're we're super pleased with our first and second quarter performance and you should be too. I think you are. Um, and hopefully, uh, you know, you appreciate that. We're intending to provide guidance. That is balanced around everything we know, and, uh, you know, factoring in enough of the uncertainties which I just rattled on about, um, that, uh, you know, are still out there that, uh, are unresolved principally in my eyes in our eyes around. You know, what's going to happen with tariffs, how that's going to impact interest rates how that's going to impact the economy. You know, in the second half we want to be balanced on. That only thing I'd add is it's it's uncertainty and it's also volatility. We've seen lots of meaningful movements in the level of mortgage activity even within a quarter, right? We saw increases in mortgage activity, early in the quarter and then substantial decreases. And lots of lots of lots of movement as we went through periods. And so it. So certainly direction is uncertain, and it's also very volatile. So, your ability to put a bank
And around it becomes more difficult. So that's really why we decided to, to, to be what we believe is prudent. But at, but probably also a conservative, in terms of the way we got it.
Speaker Change: Thanks Mark. Thanks John.
Our next questions are from the line of surrender signed with Jeffrey's, please, just see with your questions.
Speaker Change: Um, thank you. Um, I'd like to start with the, the talent business and just kind of the big picture overall here. As you think about just hiring Trends and generally how they've consistently been weaker for sometime. Now, are there secular considerations here is, is we kind of, you know, The Narrative of AI continues to kind of take hold and in terms of hiring plans and especially within the white collar and environment. How have you taken that into consideration as you think about the big picture here?
Speaker Change: I think everything, you you just talked about is right, you know, you know, it starts with, uh, you know, when corporations are nervous around the future, they tighten their belts in the first place. They tighten, their belts is on hiring, they leave jobs open longer and uh, you know, they take time to fill them or they, you know, do hiring freezes, you know. So, I think there's a clearly an element that that going on. I think your point on AI is also right on. I'm not sure there's a lot of, um, near-term impact. Um, from AI on, you know, certainly White Collar jobs, uh, you know, or even, uh, you know, Blue Collar jobs. But I know we know what we're doing inside of Equifax, you know. We're going to be more productive through operational AI going forward. And that's, uh, you know, clearly a big effort of ours internally and I think every company is doing that. Um, and I think over time, you know, you think over the long term, you know, I think that's a
Macro that will will result in uh, you know, less hiring, you know, going forward. Meaning Less jobs. You know. And again you describe long term, is it 5 years? Is it 3 years? But directionally, you know, that's clearly going to take place and, you know, I'm sure there's some companies out there that are keeping a tight belt around bringing new people in um, until you know they, uh, you know, see what kind of traction they're getting out of AI, you know, that's going to improve operational efficiency. So I think all of the above but I would just caution all of us that uh, there's a lot of churn in the US. Um, Workforce. You know, you think about there's still 70 million plus people a year changing jobs um, both in blue and white collar. Um, so there's a lot of churn that ain't going to go away, you know, is it going to be dampened? Sure. But is it still, you know, a massive amount of change takes place that, uh, you know, our customers are in the middle of meaning the background screeners and you know, we're, you know, going to be providing data for, you know. I that it's not going to
Speaker Change: Go away.
Speaker Change: Currently. And right now what we're seeing in our own data is that the level of churn is just down, right? So you're leaving and hiring is down right. People are staying in roles longer and hiring is also down. So, um, the longer term Trend as Mark described is 1. We'll certainly we're watching closely but currently it's it's just it appears. Given the uncertainty in the economy, people aren't leaving jobs either, so churn is just way down.
Timeline or how should we think about when you guys might realistically be able to start selling or the bank starting incorporating value scoring to the into the, the origination process.
Speaker Change: Yeah, I think it's it's still early to, you know, give any kind of a concrete timeline except to say it's as you pointed out, it's super complex. Um, you know, there's a lot of different, you know, most mortgage, Originators have their own platforms, the large ones. And and then there's just all kinds of Technology work that would have to go into that process in order to, uh, you know, put it in place. So, you know, I think it's safe to say it's very complex. It's, it's safe to say that it's going to take time. I wouldn't think about anything in the second half of this year, like meaningful change. Um, you know, that you know, we're going to be able to see or you're going to be able to see. Um, it's 1 that clearly will take time to uh, Implement and then you know, obviously The Originators are going to have choice, you know, based on uh you know, what the director is is put in place, you know? And you know, there's lots of Originators that may may decide that, you know, they want to stay with what they've been using for 30 years, you know. So I think that's a something that the industry will have to sort through and it'll be uh, driven by, you know, the individual
Speaker Change: Originators and how they think about the you know risk profile. How they think about change the Investments, they want to make in their process flows and their technology. Um but it's clearly going to take time.
Speaker Change: Thank you.
Speaker Change: Our next question is coming from the line of Kevin McVay with UBS, please receive your questions.
Kevin McVay: Great. Um, can you give us a sense has the mortgage pricing been fully seasoned.
Kevin McVay: So far and what is the price? The rest of the business. So what's pricing contributing to, to kind of the overall Revenue, um, embedded in the guidance,
Kevin McVay: Yeah, so um you know pricing broadly for Equifax, you know, goes in place on a calendar basis. You know, broadly on a 1 1, both mortgage and non-mortgage and generally around the globe. So you know, using your word seasoned. It's, you know what we have in our guide is pricing that we put in place early this year, you know, in our different products, uh, you know, in in all the different business units. Um, so when we talk about the impact of price, uh, in like second quarter, it's versus second quarter last year and, you know, uh the vast majority meaning, most of our businesses had some level of price increase on 111, you know. So that's clearly in place I think as you know, um, you know because of the credit pricing um in mortgage the credit score pricing that is 1 where there's a been a large
Kevin McVay: Your price increase this year also, last year. So in USIS mortgage, you've seen that, you know, in our results, there's a big impact, you know, from that pass through of the credit score pricing. Um, so that's embedded in our guide for the year and, uh, you know, we have real visibility, you know, around that. Um, so you know, and then our non- mortgage pricing is typically much lower than what, what you see in that pass through of the credit score in, uh, in mortgage. And then ews has their own, uh, you know, pricing, you know, algorithms or or, or structures that they put in place on 111. And those are embedded in our, uh, in our Outlook and guide for 2025.
Kevin McVay: Great. Thank you.
Speaker Change: The next question is from the line of Kyle Peterson with Nino and Company, please, this is your questions.
Speaker Change: Hi. This is Brandon Barron for Kyle. Uh, thanks for taking my question, just 1 for me. Um, I'm just wondering if you can dig in on the international growth in the quarter and the rest of the year, um, particularly in latam and, um, Europe Cloud adoption and new products. And uh, maybe how margin should shape up, so that side of the business in the back half of the Year. Thank you. Yeah. We're pleased with the international performance. Um, you know, when I talked about Canada Canada's obviously you know lagging because of the economic situation up there from the concerns around tariffs. Um, we expect that to be, you know, better in the second half with some new product rollouts and uh, you know, some share gains. We we think we're going to land in the second half in Canada, you know. And and broadly we expect, uh, you know,
Speaker Change: How? That's uh, that's performing. Latin America is performing well. Um, you know, we still have Cloud completion work to do in international as, you know, the North America's done, US and Canada, um, and, uh, some of that's in Latin America. So, you know, we expect some incremental, you know, it's in our guide, but incremental Cloud cost savings, you know, in the second half as we complete, you know, some of the cloud migrations in 25 and they'll be a a tale of international Cloud completions in uh, in 26, principally in uh, in Australia, I know. Would you add anything else? John on, not just International NPI tends to be very high. So they deliver a lot of new products. I think, as we guided right, we expect, we expect something around 7% for the year. So a little better than 7% in the second half. You asked about margins. I think we already, we gave guidance on margins. We expect to see nicely increasing margins in the third quarter and nicely increasing margins for the full year. So as International completes Cloud migration, there are also being very diligent on costs. And, uh, and as they're growing obviously, that flow
Speaker Change: goes through at a very high variable rate. So they've delivered nice margin growth and we expect them to continue to deliver nice margin growth in the rest of the year.
Speaker Change: Okay, great. Thank you guys.
Speaker Change: Thank you. Next question is from the line of Arthur truslow with City, please receive your questions.
Speaker Change: Thank you very much and thanks for watching my question. Um, I guess 1 for me really. Um, I'm just wondering how you think about the kind of midterm outlook for FICO pricing. Um, obviously mortgage revenues of significantly exceeded volumes in USIS and a decent chunk of, that is clearly as a result of FICO, um, obviously as, as, as you say, the FH fhfa boss has been, um, talked about this,
What do you think FICO will price uh as we look forward and what sort of impact do we? Do you think that's going to have uh on your growth rates? Thank you.
Yeah, I think, uh, you know, with regards to FICO pricing, you should call FICO or join their earnings call, which I think is next week, um, and and see what will has to say about that. Um, you know, I'm sure he's got a point of view in the, you know, we don't have visibility to that generally, you know, we'll get inputs from them on what they're thinking about, for the next calendar year, as we get into later in the, uh, in the year typically September October November somewhere. In that time frame. Um, you know, we clearly had a, you know, a positive impact, you know, from that pass through, uh, in 24, and 25. You know, if if you were a part of our
Speaker Change: our investor day and you saw I put in, uh, you know, the slide, we use an investor day, where we provided a, you know, kind of a scenario for 2030, you know, where we showed Equifax, you know, growing you know, well within our long-term growth framework, you know, 8%
Speaker Change: Um, between now and 2030, you know, without any mortgage market growth or, you know, uh, with very modest um, mortgage pricing increases in it, you know? So we're not counting on that to deliver our long-term framework, you know, kind of substantial, mortgage pricing pass through. You know, we believe we have a, you know, in the mortgage business and in our, uh, you know, broader non- Mortgage business which is the bulk of Equifax, you know, lots of levers for growth to deliver, you know, a very strong framework, uh, you know, going forward. And uh, as we think about, you know, the kind of medium longer term, you know, we've got a lot of confidence in our ability to, uh, you know, grow the business, uh, you know, going forward, you know, without that kind of a pastor,
Speaker Change: Yeah, thank you.
Speaker Change: Our next question is from the line of Kelsey shoe with autonomous research. Please reach you with your questions.
Speaker Change: Hi, good morning, thanks for taking my question. I have 2 questions on the government vertical. The first 1 being, you know, we saw that you recently won an RFP with the state of May as part of your contract, renewal, and judging from the cost proposal. It looks like a contract value saw significant improvements from, I think it was 1 to 2 million in a couple of years ago and the proposal would suggest 9 million a year with the reason renewal. So just curious to hear your perspective on you know what's driving the significant growth there. We did see 1 of the main attributes that they asked for is ours worked. So maybe you can just talk about, you know, the the traction you're gaining with State Medicare programs after the, um, when they do fulfill has been passed
Speaker Change: But uh there's many states where we don't and typically the contracts are with specific agencies in the states, um, as opposed to, um, you know, the state itself. Um, so we'll have to follow up with you with some details on that. But I suspect, you know, it's an example of, uh, you know, a state using more of our services for their social service delivery, you know, because of the accuracy and speed and productivity that it delivers to them. So you know, we'll follow up with you on that 1, you know, kind of uh you know, broadly you know we're not seeing any impact now. Um, in our Revenue, around the changes that were made in the bill that was signed, uh, you know, around July 4th by President Trump. Um, that included a lot of the work requirements as you pointed out the, uh, 6-month redetermination, uh, in some of the more stringent. Um, income verifications is I commented earlier, you know, we do, we are having conversations now with States about their implementation of that, but it's not going to happen until
Speaker Change: In my view later this year or probably, you know, more accurately in 2026. But, uh, that planning has started. Uh, it's not going to show up in the revenue, but it gives us a whole bunch of confidence as we think about, uh, you know, 26 27/28, you know, uh, this is a, there's a lot of positive macros in government for us at the federal and state level. Um, you didn't ask about it, but we commented in our comments on it, you know, there's also a number of federal programs, which were
Speaker Change: Spending time in Washington, you know quite uh strongly you know, that our good would be net new programs for us like uh with IRS and earned income tax credit. We think there's an opportunity for them to use our data, you know, to verify eligibility in the IRS. Um, identify 16 billion dollars a year abroad from those payments that we think we could help mitigate um, that do not pay portal. Um, is something that we're working to, uh, get twin embedded in that which would also be a, you know, a new program. Um, there's a relationships with Department of Labor Department of Education and SSA have kind of new programs that, uh, you know, we think would help in that 160 billion dollars of improper payments and, you know, so a lot of focus there, you know, those will likely not impact the second half but uh, you know, as a as, as we we are hopeful and we're focused on making progress there, you know those could those will be positive for us and, you know, 26 and Beyond uh, you know, so big Focus, you know, on government, you know, both at the state and federal level
Given the current administration's heavy, heavy focus on that 160 billion of improper payments.
Speaker Change: Got it, super helpful and just more broadly. Um, Mark, I was wondering if you can help us think through the obvious A's impact on AWS.
Because on the on the positive side, you know, you've highlighted some of these drivers, you know, the working hours, requirement the double redetermination. Um, well obviously all presents here wins for Equifax, but then on the flip side, you know, there's some studies that would suggest that, you know, something like 8 million fewer people will be able to prove that they're eligible for Medicaid enrollment as an example which could present a headwind to ews. So, just curious to hear your perspective on all of this. Yeah, I think, you know, you point out the, you know, with, with the increased, uh, redetermination, uh, with the work requirements, The increased, uh, you know, uh, income verification requirements. That'll likely mean, there's less people, you know, that, uh, are receiving the services and, you know, is is the intention is is that you're not receiving Services, if you don't deserve them, meaning you don't qualify, you know. So I think that's the intent. But, you know, we think about the Tailwind as being, you know, way overwhelming that.
Speaker Change: Impact. Um, because remember, you know, we characterize and I think you support it, um, a 5 billion dollar Tam. You know, if our services were used fully at the state and federal level, you know, for all Social Service delivery and we think we have, you know, the right solution in order to deliver Social Services to those that qualify for it in a very accurate way. And against that 5 billion, you know, our revenue is uh you know, roughly 800 million, you know. So the tail
That qualify and deserve it because they need it. But those that no longer qualify, not receiving it. And you know, we shared before the uh, the income demographics of of, um,
Speaker Change: Individuals receiving social services are very Dynamic. You know, the individuals uh, you know, have life challenges where maybe they're not working and qualify for social services and should get them. But then a few months later they may work out their life challenges and be back working again and perhaps no longer qualify, that's what drives those improper payments. So the use of our data which is uh, you know, every pay period and is so broad base. Now, with the, uh, expansion of the, uh, you know, the network we have of, you know, 4.6 million companies and, you know, 197 million active records. We just have so much coverage that. Uh, we're very optimistic, you know, around, uh, the future, you know, of our government business. And I think we've said an investor day and we said it consistently, you know, we believe government, you know, will be our fastest growing vertical, you know, across all of Equifax, you know, for as long as, as long as I can see, obviously, we're working through some, you know, transitions from the prior Administration in 2025.
Speaker Change: But, you know, we like the macro a lot around government and we're pouring more resources into it. Um, you know, product resources product capabilities, I think you heard on investor day. We're rolling out our new total income solution. You know, in the third quarter, it's going to expand, uh, and be integrated with our twin, um, solution to really add consumer consented Bank. Transaction data, you know, around gig um, income, that'll just provide even more complete. Um, picture on that applicant that uh will help them get the services quickly but also help identify um, the improper payments. So we're we're pretty bullish around government going forward.
Speaker Change: Thanks so much appreciate this.
The next question is from the line of Scott, wortzel with wolf research. I was just here with your questions.
Speaker Change: Hey, good morning guys. Uh, just 1 from me, uh, going back to the margin guidance specifically on uh, USIS. Um, you know, you raised your Revenue growth guidance, but kept the margin, uh, guidance, pretty flat or, you know, maintained it for the year, just wondering what the Dynamics are that are, uh, driving that thanks.
Speaker Change: Sure. So anyway again, as a reminder, their margins are increasing very nicely year on year. So I think they're delivering very, very good margin performance. Some of the outperformance, what you're seeing is in mortgage, right? Because we took up the mortgage Revenue, guidance. More than we more than the non-, mortgage Revenue guidance mortgage has a lower margin profile. Um, because of the
Costs. And then the tri merge costs that are embedded in there. So the end up with a little bit of negative mix and then also obviously they're continuing to invest aggressively to drive NPI faster so we think they're going to be able to deliver that. They're going to deliver better Revenue performance, hold the margins and then put themselves in a very good position to continue that growth as we get into 26 as they invest in new products.
Speaker Change: Great. Thanks guys.
The next question comes from the line of George Tom. With Goldman Sachs, please receive your questions.
Speaker Change: All right, thanks. Good morning. Um, give me the variability in state level funding. Are you considering any alternative pricing strategies to reduce Revenue volatility in the ews government segment?
Speaker Change: Yeah, it's it's actually a good question. Um, I don't know if I would answer it the way you asked it. Um, but you know, we're we're we're working to be super flexible George, you know, around helping States navigate, um, this current period of uh, as you described it, budget challenges. And I think we talked on the April call. Um, about you know, where we're offering some subscription, you know, type Solutions, you know, for a time frame to help them bridge to their next, uh, you know, budget calendar year. Um, as you might imagine, you know, we want to support our customers. Um, we want to be flexible, you know, around helping them navigate, uh this I guess call it a 2025 window you know, where the funding
In order to uh help our customers, you know, through this uh period.
Speaker Change: Very helpful. Thank you.
Speaker Change: The next question is for coming from the line of Ryan Griffin with BMO Capital markets.
Speaker Change: Please see a few questions.
Speaker Change: Hey, thanks so much. You'd previously called out deepening penetration and broadening the solution set with a background screen here that you recent investor day. I know it's early now but any updates worth sharing or client feedback and how does that mesh out with the price? You take their as you look ahead. Thank you.
Speaker Change: Yeah, I think we can continue to what we continue to Mark. Just talked about the way we're structuring contracts with in government. We're doing something very similar in Talent, right? We're we're putting contracts in place that provide them with access to all of our products, right? Where we can drive Revenue growth and we can help them Drive higher usage of our products, and more efficient use of our products, which actually can improve their cost structure. So, we're, we're, we're doing this across, um, across multiple large customers and talent. It's something we expect to continue to expand. As you said, it's only been about a month. So I can't tell you. There's been a lot of progress in the last 30 days, but I'd say, as a, a directionally, that's something that we're moving forward with. And we've actually had some success already with some very large customers. So, we feel good about that direction. And the broadening, um, product base that we have in town.
Speaker Change: Great. Thank you.
Speaker Change: Our next question is coming from the line of Matt, O'Neal with ft Partners. Please assist you with your questions.
Morning, thanks for speaking with me in. Um, most of my questions are asked and answer, but I thought I would ask 1. Um, recently there's been some headlines and announcement, uh, that JP Morgan would be rolling out fees for API data polls was curious. Um, if this, uh, would impact, uh, Equifax directly and the extent to, which other Banks were to follow suit, is that something that, you know, will, would sort of become a, a potentially larger Dynamic, uh, to think about for, uh, for you guys. Thank you.
No, we we we don't expect that to be an impact on the, the kind of data we get from, uh, financial institutions, uh, uh, for sure.
Speaker Change: Great, thanks.
The next question is from the line of Simon clinch with rust child and Company Redbarn, please, receive your questions.
Simon Clinch: Hi, thanks for taking my question. Um, maybe I could go back to see the, the question previously about the, um,
Simon Clinch: About the challenges you're facing at the I guess at the state level, budgetary level um the headwinds that we're facing on the government side um what exactly are those States doing with their verifications? Uh you what data are they uh ending up using? Are they just doing you know just electing to you to do lower volumes. Uh yeah how is that?
Simon Clinch: Mapping out. And then how do we think about, you know, in the context of the obv bill. Um, and uh, you know, potential doubling of verifications the, how how do the budgetary constraints today? Uh, manifest in that kind of environment as well. Thanks,
Simon Clinch: So on the first, the first side, uh, it's it, it varies by state and what they're doing in some cases, they're relaxing income requirements. Uh, they're using State wage data that they, you know, get on a lag basis and it's not as complete as a certainly, the twin data, um, in all cases, they want to go back to using the twin data because of the speed of, uh, execution of the, uh, process of productivity, it delivers, you know, as well as the accuracy from an improper payment and then with the federal government, you know, putting more stringent income requirements on the states. Um, they really have to have, you know, more accurate, you know, processes, which twin delivers. So, you know, that's good. Something we're going to work through and States just are complex, you know, more complex, probably than companies, you know around, you know how rigid their budgets are from their calendar year. Uh, you know, process and you know, some of them have September calendar year. Some of them have January calendar years, uh you know, so there's you know, varying elements there and you know, we're working.
Simon Clinch: Working with them in order to uh you know, get this into their number 1 uh you know, budget plans, but number 2 for the future but also into their, you know, workflow plans because they're going to have to change their uh processes you know, whether it's a you know 6-month versus 12 months. You know adding a work requirement is super complex because I think as you know it includes not only
Um, you know, employment, you know, but also include some volunteer work or other elements that can be used as evidence of your attempt to, uh, you know, have activity, uh, when you're receiving social services. So it's going to require, you know, a bunch of work. But, you know, when we think about the macro for Equifax with the 5 billion dollar Tam, you know, we think that's good news for us. Uh, and that's why we're putting so much effort into, uh, you know, the supporting, you know, our customers as they, uh, navigate through these changes.
Speaker Change: That's really useful. Thanks Mark. And, and just does this bill
Do you consider the the the new policies as expanding that 5 billion dollar term opportunity?
Speaker Change: Yeah, it's a great question and and it certainly does. And we have an updated to 5 billion dollar Tam that, you know, the way we think about it, 5 billion is a big number. Um, it's a ton of opportunity. It's 1 of the biggest hams, we have, um, versus our 800 million, but it's 1. Uh, you know, obviously that only went in place a few weeks ago, um, it's a great reminder that we should take a fresh look at the 5 billion, you know, around the impact that's going to have on us uh and we'll do that but you know, look at it. You think about 800 million versus 5 billion 4?
4 billion plus of potential growth. There's plenty of growth for us. Uh, you know, in the government sector which is why, uh, you know, we're, you know, energized about it and that's why we're continuing to put more resources into it.
Speaker Change: Great. Thanks very much.
Thank you. Our final questions from the line of Craig, Hubert with Hubert research Partners, please receive your questions,
Craig Hubert: Great. Thank you. You may have touched on this as I missed part of the call earlier, but can you just give us your outlook for credit cards, in your auto business? For the second half of the year and maybe also just touch on the volume levels that you're seeing in those 2 areas. Now say a preco how do they Stack Up versus history?
Craig Hubert: We didn't get specific volume.
Your first half of the year and, and our expectation was we continue to see good auto performance as we move through the rest of this year. And, um, and and that's what we'd seen it even later in the uh, as we move through the second quarter and around, we didn't give credit card specifically, but our fee business in general, right? We had nice performance in the first quarter, it was a little weaker year on year in the second quarter. I think that that was mostly related to just to grow over second quarter of last year was very, very strong sequentially. We saw a nice growth in our fee. Business first to second quarter and we expect to see um, we expect to see good performance in fee in the in the back half of the year.
Speaker Change: Okay, great. Thank you.
Craig Hubert: Thank you.
Craig Hubert: At this time, this concludes our question and answer session. I'll now turn the floor back over to Trevor Burns for closing comments.
Uh yep um thank you for your time today and if you have any problem questions you can reach out to myself or Molly. Thank you.
Speaker Change: Thank you. This will conclude today's conference. You may now disconnect your lines this time. Thank you for your participation and have a wonderful day.
Craig Hubert: Everyone else has.