Hello, and welcome to the Equifax Q4 2021 Earnings Conference Call and Webcast. All participants are currently in listen-only mode, and a question-and-answer session will take place after the formal presentation. This conference is being recorded. It's now my pleasure to turn the call over to Dorian Hare, Senior Vice President, Head of Corporate Investor Relations. Please go ahead.

Thanks and good morning. Welcome to today's conference call. I'm Dorian Hare. With me today are Mark Begor, Chief Executive Officer; and John Gamble, Chief Financial Officer. Today's call is being recorded. An archive of the recording will be available later today in the IR Calendar section of the News and Events tab at our IR website, www.investor.equifax.com. During today's call, we will be making reference to certain materials that can also be found in the Presentations section of the News and Events tab at our IR website. These materials are labeled Q4 2021 Earnings Conference Call. Also, we will be making certain forward-looking statements, including first quarter and full year 2022 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 our filings with the SEC, including our 2020 Form 10-K and subsequent filings. We will also be referring to certain non-GAAP financial measures, including adjusted EPS attributable to Equifax, adjusted net income and adjusted EBITDA, which will be adjusted for certain items that 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. In 4Q 2021, Equifax incurred a restructuring charge of $8.6 million or $0.05 a share. This charge was for COGS principally incurred to reduce technology development expense as we complete the Equifax data and cloud transformation. This restructuring charge is excluded from adjusted EBITDA, adjusted income and adjusted EPS. As we have previously discussed, in July 2019, we entered into a settlement agreement to resolve the U.S. consumer class action litigation arising out of the 2017 cybersecurity incident. That settlement agreement has been the subject of numerous court appeals. On January 10, 2022, the U.S. Supreme Court denied the last remaining petitions seeking to appeal, and the settlement agreement became effective as of January 11, 2022. In January, we deposited the remaining $345 million into the consumer restitution fund, and the claims administrator will begin to validate consumer claims. As a result, in the fourth quarter, we eliminated—excuse me, as a reminder, in the fourth quarter, we eliminated our GCS operational segment and moved its lines of the business into Workforce Solutions, USIS and International in Canada and Europe. As a result, Equifax now has three operating segments. In our remarks today, we will discuss 2021 and fourth quarter results as well as our 2022 guidance focused on this new structure, unless we indicate otherwise. For your reference, we have included in our 4Q 2021 earnings release Q&A reconciliations of our 2020 and 2021 prior business unit operating segment results to this new structure. Now I'd like to turn it over to Mark.

Thanks, Dorian, and good morning. Before I get to our strong fourth quarter results, I'd like to spend a few minutes discussing the tremendous progress and outstanding results we delivered last year. As shown on Slide 4, our financial performance in 2021 was very strong and built off an equally strong 2020. Revenue was up 19% with organic local currency revenue growth of 15% and core non-market growth of 22%, all well above our new 8% to 12% long-term financial framework, reflecting the strength of the new Equifax growth model. Adjusted EPS at $7.64 was up 10% and adjusted for the change in treatment of transformation expenses in 2021 was up a strong 24%. This is truly an outstanding year, substantially stronger than we expected when we started 2021 and despite a U.S. mortgage market that was down more than we expected at 7.5%. We delivered eight consecutive quarters of double-digit growth and two years of strong above-market performance with 17% growth in 2020 and 19% growth last year. Workforce Solutions delivered a milestone with revenue over $2 billion for the first time, up 39% with organic revenue growth of 34% and the business is up 2x from their 2019 revenue of $915 million. This was again driven by very strong performance in Verification Services with revenue up 46% and organic revenue growth of 41%. Active records on the work number grew by a very strong 22 million records or 19% to 136 million records at the end of the year. Mortgage revenue was up 41%, almost 50 percentage points stronger than the underlying market. And non-mortgage revenue in Verification Services had organic growth of 41% driven by talent solutions with organic growth of over 100%. USIS also had a strong year. Non-mortgage revenue was up 16% with organic growth of 10%. Total revenue was up 4% with organic revenue growth of 2% despite the 7.5% decline in the U.S. mortgage market. In total, our U.S. businesses of Workforce Solutions and USIS, which together represent almost 80% of Equifax revenue, delivered 20% total and 17% organic growth with non-mortgage revenue growth of over 21% total and 15% organic, again, all well above our new long-term framework of 8% to 12%. International also delivered a milestone in 2021 with their first year of revenues over $1 billion. Revenue grew 10% in local currency driven by double-digit growth in Asia Pacific, Canada and Latin America. In 2021, Equifax core revenue growth, the green section of the bars on Slide 5, grew a very strong 22% with fourth quarter revenue growth also a very strong 18%, both substantially above the new 8% to 12% long-term growth framework. Core organic revenue growth in 2021 was 18% and 13% in the fourth quarter, again, above our long-term framework. Non-mortgage organic growth in Workforce Solutions and USIS and growth in International drove almost 9% core organic revenue growth in 2021 and over 8% in the fourth quarter, excluding the impact of acquisitions and FX. Mortgage outperformance, primarily in EWS, drove the remaining 9% in 2021 and 5% in the fourth quarter, respectively, of core organic revenue growth. As we move through 2022 and 2023, we expect to see continued strong and balanced core growth, reflecting the benefits from the strength of Workforce Solutions, the new Equifax Cloud and accelerated NPIs. And we expect continued strong non-mortgage performance from both organic growth and acquisitions as well as continued strong mortgage outperformance from Workforce Solutions. Slide 6 covers our strong fourth quarter performance. Revenue at $1.25 billion was up 12% with organic constant currency growth of 6.6% despite a decline in the U.S. mortgage market of 21%, which was off a strong 23% growth a year ago in the fourth quarter. As I discussed earlier, core revenue growth was a very strong 18% in the quarter with core organic growth of 13% again driven by outstanding performance at Workforce Solutions. Fourth quarter Equifax adjusted EBITDA totaled $403 million, slightly higher than expected. EBITDA margins of 32.2% were consistent with our expectations. The decline in margins versus last year was primarily due to the inclusion of cloud technology transformation costs of $47 million in our adjusted results in the fourth quarter, which were excluded last year. Adjusting for these costs, our margins were 35.9%. John will provide a more detailed discussion on our 2022 margins in a few minutes and the drivers of our up to 200 basis points margin expansion in 2022 that we're targeting.

Thanks, Mark. Before we discuss 2022, I’ll share a little more detail on 4Q 2021. In 4Q 2021, items below operating income, specifically net interest and other expenses and effective tax rate, came in combined slightly weaker than expected. Net interest and other expense were slightly weaker than we expected, and our 22% effective tax rate was very close to the guidance we provided. As Mark referenced earlier, Equifax EBITDA margins came in as expected in the fourth quarter at 32.2%. The factors resulting in the year-to-year decline were considered in the guidance we shared in October. Specifically, two-thirds of the decline was driven by the treatment of cloud technology transformation costs in 2021, including them in our adjusted results. Remaining one-third of the decline is driven by the items Mark discussed earlier, specifically the impact on Workforce Solutions and USIS of the acquisitions completed in 2021 and the increased royalty costs. As I will discuss in detail in a moment, we expect 1Q 2022 Workforce Solutions margins to return to exceed 55% and overall, Equifax EBITDA margins to return to approach 35.5%, up about 325 basis points sequentially.

Yes. I’ll start, and John, you can jump in. As you know, forecasting the mortgage market is quite challenging. The good news is we have a lot of history which we rely on, and we have a lot of data that we rely on. But I would—you make the point that it’s obviously challenging. But we look at all of our data elements of the track record of new home purchases in the marketplace, the refi market. John went through some detail on the still sizable population of homes in the United States that will benefit from a refinancing. He also highlighted the significant increase in HPA or home price appreciation, which I think is 30% for most geographies across the United States. So the availability for consumers to access equity in their homes through a refinancing. Those certainly weighed in. And of course, offsetting that, as you point out, is the higher interest rates, which reduced the number of homes available for refi. So those were all the factors that we put into our models and our analysis. And we thought 21.5% was the right place, given everything we see today, obviously down dramatically from the minus 15% we were using for really the second or the last portions of 2021 as we were looking forward to 2022. And then, of course, we’re pleased that the core performance of Equifax is strong. And we can offset that with our core growth, particularly from Workforce Solutions from the momentum in the fourth quarter, the strong addition of records, which helps power their business and broadly the strong performance of Equifax.

We also look closely at run rates. So really through January through early February, the run rates are consistent with what we’ve talked about in our first quarter – the first quarter estimate down 24% wasn’t changed that really materially from the estimate we gave in October. So we look closely at those run rates. We think they’ve been relatively predictive. And we’re also, as Mark said, we try to be very open about what we’ve assumed. So that if you have a different view on mortgage, at least you’ll have a very good view as to what we put into our numbers, and you can obviously act accordingly.

Yes. As you know, we don’t talk about specific pricing actions, but all of our businesses use price on an annual basis to offset inflation, of course, but also reflect the value of the solutions that we’re delivering. And we’ve been quite clear in prior discussions with you and our other investors that Workforce Solutions has more pricing power because of the uniqueness of the assets they deliver and the scale of the database. So it’s clearly one of the levers. But as you know, that’s only one. They’ve really ramped up their new product rollouts in the last 12 to 18 months, leveraging the cloud, particularly in the second half of 2021. And we talked about new solutions that we’re bringing to market in the mortgage space, for example, where we have mortgage solutions that provide more history at a meaningfully higher price point than the single solution that we have or the co-borrower solution that we now have called Mortgage Duo that is priced over $175 per pull because it provides real value on co-borrowers. So those are examples of leverage that Workforce has. And of course, the other levers, the adding of TWN records, our TWN records being up 19%. The new relationships that we’ve signed exclusively in the latter part of the year that we’ll be adding to our records in 2022. As you know, because of the very large volume of inquiries that we get on a system-to-system basis or through the web, as we add new records, we’re able to monetize those really instantly. So that 19% is another very meaningful lever for Workforce Solutions as we move into 2022. Yes. As you know, forecasting the mortgage market is quite challenging. The good news is we have a lot of history which we rely on, and we have a lot of data that we rely on. But I would—you make the point that it’s obviously challenging. But we look at all of our data elements of the track record of new home purchases in the marketplace, the refi market. John went through some detail on the still sizable population of homes in the United States that will benefit from a refinancing. Yes. We should provide those solutions and keep delivering to the customer’s value over time and then the core of the market is behind the guidance we have, and we're excited about that and all of our outlook in 2022 and beyond.

The other thing we'd just add is that if you think about the markets we're addressing, our penetration in those markets still has a long way to run, right? As Mark mentioned in his comments on mortgage, which is where we're the most highly penetrated, it's still just over 60%. And when you go into talent solutions and government, and it's important to remember in both of those segments, right, it's not just current record, it's depth of records, so that's extremely important, right? History makes an extremely important in both our government services and importantly, our talent solutions businesses.

Yes, it's a great question. We have a relationships all over the globe with the BNPL players. As you know, they're growing rapidly. We're selling them identity data, think Kount or other identity because you got to verify a consumer before you offer that for payment loan, for the blue jeans or whatever they're buying. We're also selling them some credit data in different markets, including the United States, particularly as they go to bigger-ticket transactions. If you're financing a pair of blue jeans for $100, over four-payments, there's a credit exposure to that. It's very different than you're doing a refrigerator. That's a $1,000 refrigerator or something. And so there's a trend there where you're seeing more credit data being used for BNPL players as customers. We’ve been in this business for 15 years. We’ve invested $1 billion – actually, more than that, we're up to like $3-plus billion probably in the business since we owned it when you add M&A. And then on the technology side, think about it, we put $300 million into the business incrementally in the last three years.

Thank you for joining today's call. We look forward to engaging with you further in meetings and conferences during the quarter. And of course, we look forward to convening again when we report our Q1 earnings in April. This does conclude the call.

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