Equifax Inc Q1 FY2022 Earnings Call

Hello, and welcome to the Equifax First Quarter 2022 Earnings Conference Call and Webcast. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Operator Instructions: As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to John Gamble, Chief Financial Officer. Please go ahead.

Thanks and good morning. Welcome to today's conference call. I'm John Gamble, Chief Financial Officer. With me today are Mark Begor, Chief Executive Officer; and Trevor Burns, Head of Investor Relations. 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 the call today, 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 Q1 2022 Earnings Conference Call. Also, we will be making forward-looking statements, including second 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 2021 Form 10-K and subsequent filings. We will also be referring to certain non-GAAP financial measures, including adjusted EPS attributable to Equifax and adjusted EBITDA, which will be adjusted for certain items that affect the comparability of 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. As a reminder, in the fourth quarter of 2021, we eliminated our GCS operating segment and moved its lines of business into Workforce Solutions, USIS, and international in Canada and Europe. As a result, Equifax now has three operating segments. You can find reconciliations of our 2020 and 2021 prior business unit operating segment results to this new structure in the 4Q '21 earnings release Q&A. Equifax has a non-controlling ownership interest in a Credit Bureau in Russia. We are providing no operational or financial support to the company. In the first quarter, we wrote off our investment and reflected a $19.5 million one-time charge. And beginning with the first quarter of 2022, we are no longer reflecting income from the venture. Also in the first quarter, Equifax deposited the remaining balance of $345 million into the restitution fund for the U.S. consumer class action settlement. Now, I would like to turn it over to Mark.

Thanks, John. Equifax is off to a very strong start in 2022 and delivered a record $1.36 billion of revenue which was up 12% and well above the levels we discussed with you in February. We continue to execute very well, delivering strong core revenue growth while delivering on our key EFX 2023 strategic initiatives. However, as we look to the remainder of 2022, we are reducing our full year financial guidance reflecting the likelihood of a much more substantial decline in the U.S. mortgage market than we expected in February. Over the past several months, mortgage rates have increased more rapidly and unexpectedly, with the 30-year mortgage rate reaching over 5% last week, a 10-year high. And there's increased expectation for further increases in U.S. interest rates as we move through 2022 as the Fed manages record levels of inflation. As a result, our guidance now reflects the likelihood of a much more rapid and significant decline in mortgage originations than we expected a few months ago. We expect U.S. mortgage credit inquiries over the last 9 months of '22 to decline on the order of 37.5% to 38%. Over the last half of 2022, we expect U.S. mortgage credit inquiries to be down 40%, which we believe is equivalent to mortgage originations being down more than 40% and is in line with most market forecasts including the MBA and Fannie Mae. This level of mortgage market credit inquiries over the last half of 2022 is approaching 25% below the 5-year average levels we saw prior to the beginning of the pandemic in 2020 and also pulls forward the mortgage market declines we had expected in 2023 into 2022. U.S. mortgage credit inquiries in early April are beginning to show some of this weakening and are at levels somewhat weaker than we saw in the first quarter, but are not anywhere near the levels of decline we've included in our guidance. However, given the recent substantial increase in mortgage rates and expectation for further rate increases, high inflation and the war in Ukraine, our guidance reflects the much higher likelihood of a more significant decline in the U.S. mortgage market as we move through the second quarter, and continued significant sequential declines as we move through the balance of the year. We thought it was prudent to de-risk our guidance for the mortgage market and pull forward from 2023 the normalization of the mortgage market into '22. For the full year, this results in U.S. mortgage credit inquiries being down about 33.5% for the year, which is almost 10% below the 5-year average levels we saw prior to the beginning of the pandemic in 2020 and about 12 percentage points below the 21.5% decline in our February guidance. For the balance of the year, this equates to a 37.5% reduction versus the same period in 2021. And as I mentioned earlier, a run rate of minus 40%, which is 25% below the 5-year pre-pandemic levels in the latter parts of 2022. The impact on our revenue guidance of this additional 12% reduction in the mortgage market is over 350 basis points or over $175 million. We expect to offset just under half of the mortgage revenue decline with stronger core revenue growth that will now exceed 17% from stronger Workforce Solutions performance and NPI rollouts, which is an increase of about 150 basis points or $175 million for the year. Broadly, Equifax is operating very well with our first quarter core growth of 21%. Together this results in a reduction in our full year revenue guidance by $100 million to a midpoint of $5.2 billion, which is still up a solid 6% after absorbing an over $500 million decline from the mortgage market. The $100 million reduction in revenue and the elimination of income from our non-controlling interest in our Russian joint venture of $0.12 a share, drives our guidance for EBITDA margin expansion in '22 to about 125 basis points increase, but a reduction of 50 basis points from our prior framework. This also results in guidance for our adjusted EPS to a midpoint of $8.15 a share or reduction of $0.50 per share. As I mentioned, at these levels, we still deliver solid '22 revenue growth of 6% and adjusted EPS growth of 7% despite a significant mortgage market decline impacting our revenue by almost 10.5 points, or over $500 million. Our ability to deliver 17% core revenue growth reflects the underlying breadth, depth and strength of the Equifax business model, and is well above our new long-term growth framework of 8% to 12%. John will provide more details on our view of the mortgage market and our guidance shortly. Turning to Slide 4, in the first quarter, we delivered revenue and adjusted EPS above the high end of our guidance range. Revenue at $1.36 billion was up 12% with our organic constant currency growth of 8%, and was the highest quarterly revenue in our history, and our ninth consecutive quarter of double-digit revenue growth. This was delivered despite U.S. mortgage market credit inquiries being down 24.5% in the quarter, about as expected. Core revenue growth of 21% and core organic revenue growth at 17% were both very strong and well above our new long-term financial framework. Our growth was again powered by our U.S. businesses Workforce Solutions and USIS. In total, Workforce Solutions and USIS generated $1.08 billion in revenue, almost 80% of Equifax total revenue, with 14% total and 7.5% organic revenue growth, again, despite the 24.5% decline in the U.S. mortgage market inquiries. Non-mortgage U.S. revenue represented over 60% of total U.S. revenue and delivered growth of over 32% total, with organic growth of just over 18%. International also delivered strong revenue growth of 10% in local currency, above the high end of their long-term framework of 7% to 9%. First quarter adjusted Equifax EBITDA totaled $484 million, up 12% and EBITDA margins of 35.5% were in line with our expectations for the quarter. Adjusted EPS at $2.22 a share was up a strong 13% from last year and above the guidance of $2.08 to $2.18 we provided in February, driven by strong revenue growth and progress in realizing the benefits of our cloud technology transformation. We continue to accelerate our EFX cloud data and technology transformation in the quarter, including migrating approximately an additional 10,700 customers to the cloud in the U.S. and approximately 1,500 customers internationally, as well as decommissioning two significant data centers this month. As you may have also seen, we recently issued our second annual security report, which is another important illustration of our ESG commitment and the power of our EFX cloud transformation and cloud technology and data transformation. In 2018, we committed that Equifax will become an industry leader in security. Our latest report highlights our investments in market leading cybersecurity capabilities and talent that enable us to detect and respond to threats with more speed and precision. We view our leading security capabilities as another competitive advantage for Equifax. Leveraging our new EFX cloud infrastructure, we continue to accelerate new product innovations. In the first quarter, we released about 30 new products continuing momentum from 2021 where we launched a record 151 new products. We're seeing increasing commercial traction and revenue generation from these new products leveraging the new Equifax cloud. In the quarter, our vitality index defined as revenue from new products introduced in the last 3 years exceeded 12%. This is over a 300 basis point improvement from our 9% vitality index last year, and the highest level for Equifax in the last decade. For 2022, we now expect a vitality index of over 11%, up 100 basis points from the 10% guidance we provided in February, which will fuel our growth in 2022, 2023 and beyond. In the first quarter, we invested our strong free cash flow in two strategic bolt-on acquisitions, with a focus on accelerating growth in Workforce Solutions with the acquisition of Efficient Hire and expanding our geographic footprint with the acquisition of Data-Credito, the largest credit bureau in the Dominican Republic. Bolt-on acquisitions that broaden and strengthen Equifax are strong leverage to accelerate our growth and are central to our long-term growth framework to add 100 to 200 basis points to our revenue growth from strategic bolt-on acquisitions. Even facing the macro mortgage market headwinds, we are energized by our strong start to 2022 and are clearly seeing the momentum from our EFX 2022 growth strategy leveraging our new EFX cloud capabilities. Turning now to Slide 5. In the first quarter, Equifax core revenue growth, the green sections of the bars, grew very strong 21% which was above our expectations and substantially above our long-term financial framework of 8% to 12%. Core organic revenue growth of 17% in the quarter was also substantially above the long-term framework. Non-mortgage growth in EWS and international as well as the U.S. drove about two-thirds of our core organic revenue growth in the quarter. Strong 27% core mortgage outperformance in Workforce Solutions drove the remaining third of first quarter core organic revenue growth. With our strong 21% core growth in the first quarter, and accelerating NPI rollouts, we now expect 2022 core revenue growth of over 17%, which is up about 150 basis points from our February guidance and 250 basis points from our original 2022 framework. This is driven by broad-based strong performance across Workforce Solutions, as well as strength in international, Kount Identity and Fraud, Appriss Insights and accelerating NPIs. As detailed on Slide 6, core mortgage revenue growth in first quarter was up a very strong 17%, driven by Workforce Solutions with their core mortgage revenue growth of 27% and 2% at USIS. Due to the strong core revenue growth, our first quarter mortgage revenue was down only 7% despite the 24.5% decline in overall U.S. mortgage market. Core mortgage growth of 27% at Workforce Solutions was consistent with our guidance in February and driven by twin record additions, new products, increased system-to-system integrations and increased penetration. Turning to Slide 7. Workforce Solutions continues to deliver outstanding core revenue growth, delivering over 40% growth for the fourth time in the last five quarters. This very strong performance is driven by consistent execution across their key growth levers. First, growing the work number database. As we mentioned in February, we signed three new exclusive arrangements with large payroll processors late last year that we expect to implement starting in the second quarter. And we signed another new exclusive payroll processor agreement last month that we expect to also bring on board in 2022. We ended the quarter with 135 million total current records, which was up 19% from last year. There are 104 million unique individuals, which deliver high hit rates and represent about 65% of U.S. nonfarm payroll. The flat sequential performance from year-end was also very strong as we offset reductions of approximately 3 million records from the normal seasoning hire declines from the fourth quarter with new record additions. As of today, we're already back to over 136 million records as we have begun boarding records from one of the new exclusive payroll processor agreements we signed late last year. And as a reminder, almost 55% of our records are contributed directly by individual employers. Second, Workforce Solutions' increasing penetration in their key verticals of mortgage, talent, government and consumer finance, with all four verticals having significant opportunity for continued expansion by leveraging our expanded data hub strategy for the fast-growing talent and government markets driving over 80% core growth in these verticals. Third, Workforce Solutions is delivering increased average revenue per transaction through both higher value new product rollouts and increasing the value or pricing of existing products by expanding the depth and breadth of our data coverage. And finally, Workforce Solutions is expanding their system-to-system integrations. Currently more than 75% of our mortgage transactions are system-to-system, up over 2x from 2019. As you know, we get a 20% plus lift in mortgage polls when we convert our customers from the web to system integrations. In talent solutions, system-to-system now represents more than 80% of our transactions. And last, Workforce Solutions continues to add capabilities in records through strategic bolt-on acquisitions. Over the past 2 years, we've completed five bolt-on acquisitions supporting EWS growth, including Appriss Insights last fall and Efficient Hire a few weeks ago. The strength of Workforce Solutions and the unique system value of their twin income and employment data was clear again in the first quarter. Rudy Ploder and the EWS team delivered another outstanding quarter with 33% revenue growth, well above their 13% to 15% long-term framework and are positioned to deliver a very strong '22 and continue above-market growth in the future. Turning to more details on Workforce Solutions on Slide 8, another exceptional quarter delivering record revenue of $649 million, their first quarter above $600 million. Revenue growth was up a very strong 33% with organic revenue growth of 20% despite the significant decline in the U.S. mortgage market. Core revenue growth was a very strong 45% in the quarter with core organic revenue growth of 34%. Non-mortgage is now 60% of Workforce Solutions revenue, delivering organic growth of over 30%. Verification Services revenue was over $500 million for the first time, with strong growth driven by non-mortgage verticals that represent almost 50% of Verifier revenue and delivered 90% total and 50% organic growth. The inorganic growth was driven by the acquisition of Appriss Insights that performed very well during the quarter, driven by higher volumes, product penetration and new customer wins. Talent and Government Solutions, which now represent 30% and almost 40% of Verifier non-mortgage, respectively, both had outstanding quarters and combined were up a very strong 100% total and over 55% organic growth. The continued expansion of the Workforce Solutions data hub and the fast growing $5 billion Talent and $2 billion Government TAMs is driving strong double-digit organic growth in both verticals, leveraging Workforce Solutions' over 540 million historical records for new products. The introduction of the unique Appriss Insights National Student Clearinghouse data and other talent-related data assets strengthens our ability to deliver new solutions leveraging the EWS data hub. The non-mortgage consumer lending business principally in banking and auto showed strong growth as well, up 40% in the quarter. Increasing records penetration and system-to-system integrations are driving growth in auto, card and consumer finance and debt management grew over 25% in the quarter. As mentioned earlier, mortgage revenue for Workforce Solutions was up 3% versus last year, 27 points stronger than the overall U.S. mortgage market decline and consistent with our expectations that EWS would outperform the mortgage market by approaching 30 points in 2022. Employer Services revenue of $136 million was up a strong 33% in the quarter. Combined our unemployment claims and employee retention credit businesses had revenue of $50 million, up 6% year-over-year, but down 7% sequentially as expected. We expect total UC and ERC revenue to be down about 25% for all of 2022 driven by lower jobless claims and ERC as the COVID federal tax program runs out. Employer Services non-UC and ERC businesses had revenue of $86 million, up over 55% versus last year with strong organic growth of over 15%. Our I9 business driven by our new I9 Anywhere product continues to show very strong growth, up over 55%. In the first quarter, our I9 and onboarding business made up almost 25% of Employer Services non-UC and ERC revenue. Our combined Health e(fx) business, which is the combination of Equifax workforce analytics and our Health e(fx) acquisition that we acquired in the third quarter last year represented about 45% of Employer Services non-UC and ERC revenue in the quarter and delivered total growth of just under 70% with organic growth of about 1% as expected. As we discussed, the seasonality of ACA revenue was concentrated in the first half of the year. Workforce Solutions adjusted EBITDA margins were 54.6%, consistent with the guidance we provided in February and very strong. The decline in margins versus last year was principally driven by the addition of Appriss Insights and Health e(fx). And as expected, initial margins from these acquisitions are dilutive to Workforce Solutions. As we move through 2022 and drive synergies, this dilutive impact will be mitigated. As shown on Slide 9, continued expansion of the Workforce Solutions data hub is a key strategic focus for Workforce Solutions and the engine driving future growth in the fast-growing Talent and Government Solution markets. Talent Solutions delivered 145% total and 80% organic growth in the quarter. And we began introducing new multi-data talent products in the quarter with new product introductions expected to accelerate as we move through 2022 leveraging the Equifax cloud. We also saw strong growth in the government vertical with revenue up 89% total and 39% organic with significant new wins at the state level and continued growth of our large SSA contract. As I mentioned earlier, Appriss Insights performed very well, delivering 20% growth in the quarter from increased volumes, new customers and success with existing products. More broadly, we expect revenues from NPIs to increase as the integration of Appriss Insights continues in the back half of 2022. Shifting now to USIS on Slide 10, their revenue of $433 million was down 6% compared to first quarter last year, and slightly below our expectations. The decline was driven by the reduction in USIS mortgage revenue, which were $140 million, and is about 30% of total USIS revenue when it was down 21% for the quarter. Positively, this was about 300 basis points stronger than the overall mortgage market decline of 24.5%. Importantly, USIS delivered their fifth consecutive quarter of growth in B2B non-mortgage revenue at $242 million, which represents over 55% of total USIS revenue, and was up 4% with organic revenue growth of 2%. This was somewhat lower than the mid-single-digit organic growth we discussed in February due to the timing of deal closures in their financial marketing services business. Importantly, B2B non-mortgage online revenue growth, which excludes FMS was strong, at up 10% with 6% organic growth. During the quarter, we saw double-digit growth in insurance, commercial and identity and fraud, and auto and direct-to-consumer both showed high single-digit growth. In telco and banking and lending grew in the mid-single digits. Kount had an outstanding quarter with organic revenue growth approaching 50%. The Kount teams now delivered two consecutive quarters of very strong new deal bookings and along with the monetization of synergies between the Kount and Equifax customer and product base and continued vertical expansion. Our core new product growth continues to be very strong in Kount and the team continues to execute on the development of joint solutions, leveraging both Kount and Equifax data that we believe will drive strong growth in '22 and beyond. Financial Marketing Services, our B2B offline business had revenue of $46 million, down 14% from last year's 12% growth. Importantly, we continue to see growth in marketing related projects, but our batch business was below our expectations. As we discussed in the past, our batch or portfolio review project business can be choppy as the revenue is often driven by larger one-time offline data licensing projects. We expect to return to growth in second quarter driven by growth in marketing pre-screen and in the portfolio review solutions inside of FMS. USIS Consumer Solutions business, the U.S. D2C business from GCS, combined with USIS in the fourth quarter had revenue of $51 million, up 2% year-over-year, which was below our expectations. With their cloud transformation complete, the team is now focused on delivering best-in-class consumer experiences, leveraging the cloud to roll out new products, and leveraging B2B relationships in traditional financial services, credit unions and new fintech players to return the business to growth. The USIS sales team had a strong quarter with a number of key wins resulting in a healthy win rate. The new deal pipeline remains very strong with the overall pipeline slightly higher than the fourth quarter. And USIS adjusted EBITDA margins were 39.3% in the quarter, about flat with fourth quarter and slightly better than our expectations. Turning to Slide 11, our investments and acquisitions of unique data assets are positioning USIS for sustainable long-term non-mortgage growth. Our unique data goes far beyond traditional credit data and contains alternative data covering telco payment history, specialty finance transactions, cash flow and bank transaction, wealth data, e-commerce transactions and unique commercial business data. These unique and only-Equifax datasets provide scores analytics and insights that allow lenders to increase approval rates, expand credit lines and reduce losses, particularly with underbanked consumers. These differentiated alternative data assets are important growth levers for USIS to deliver new solutions that will help expand access to credit and the over 60 million unbanked and underbanked population in the United States. Earlier this week, Equifax announced the new data partnership with Fiserv, a leading global provider of payments and financial services technology solutions to leverage their unique data assets in combination with Equifax data to deliver new solutions to the market. We intend to co-innovate with Fiserv to develop solutions that will help financial institutions and other businesses embrace the power of expanded data and real-time data insights to drive speed, mitigate risk and improve overall customer experience with an initial focus on small business commercial solutions. We're very energized about our new partnership with Fiserv. Shifting now to international on Slide 12. Their revenue of $281 million was up a very strong 10% on a local currency basis. Europe revenue was up 16%, driven principally by our U.K. debt management business. We've seen significant increases in debt placements from the U.K. government over the past several quarters that we expect to continue. As you recall, in December, Equifax was awarded a 4-year extension with the U.K. on their government debt resolution contract with an estimated value of $136 million, with an incremental $90 million of potential incremental sales from analytics and other CRA related solutions. Our European CRA business was up 2% in the quarter driven by growth in identity and fraud, insurance and telco and partially offset by the U.K direct-to-consumer business which was below our expectations. Asia Pacific revenue was up 6% driven by strong growth in our Australia commercial business, verification services, and identity and fraud. Latin America was up a strong 23% driven by double-digit growth in Chile, Argentina, Mexico and Central America. The team's strong new product introductions over the past 3 years and pricing actions continue to benefit growth across the region. This is the fifth consecutive quarter of growth for Latin America. Canada was up 2% and below our expectations driven by lower volumes in consumer direct and mortgage market declines from higher interest rates. And auto was flat for the quarter. International adjusted EBITDA margins at 25.4% were down 150 basis points, primarily due to the elimination of equity income from our Russian joint venture that John discussed. Excluding this impact, EBITDA margins would have been about flat with last year and up slightly from our expectations. As shown on Slide 13, we're off to a very strong start with our new product vitality index over 12% in the first quarter, which is above our 10% goal for the year and the highest vitality index since we began tracking this measure over 10 years ago. Building on the record 151 new product introductions last year, we delivered about 30 new products so far in 2022, which is on a similar strong pace to the fourth quarter. Some of the more significant new product launches are detailed on the slide. Leveraging our new EFX cloud capabilities to drive new product rollouts, we expect to deliver a vitality index in 2022 of over 11%, which equates to over $550 million of new product revenue this year. The 11% vitality is up 100 basis points from our February guidance and up 200 basis points from our strong 2021 results. NPIs are central to our long-term growth framework in driving EFX top line growth. As detailed on Slide 14, reinvesting our strong cash flow in accretive and strategic bolt-on M&A is central to our EFX 2023 growth strategy and our new long-term growth framework. We expect to add 1% to 2% of revenue growth each year from strategic bolt-on M&A. And we're starting '22 strong with two strategic and accretive bolt-on acquisitions, Efficient Hire and Data-Credito. Efficient Hire further strengthens Workforce Solutions by bringing expanded Employer Services to hospitality, building services and senior living markets. The acquisition also allows Workforce Solutions to better compete and penetrate the hourly and high-volume hiring market, and of course provides us with incremental twin records. Data-Credito is the largest consumer credit reporting agency in the Dominican Republic that adds to our strong market presence across Latin America. Since the beginning of 2021, we've completed 10 strategic bolt-on acquisitions that strengthen and broaden EFX and that fit our M&A priorities. Number one: to expand and strengthen our strongest and fastest growing business Workforce Solutions. Number two: to add unique data assets. Number three: to expand in a fast growing $19 billion identity and fraud space; and number four: to expand our global credit bureau footprint. We're well down the path of integrating the acquisitions in the EFX cloud and driving synergies to accelerate our growth. And with that, I'll turn it over to John to provide more detail on our second quarter and our full year 2022 guidance.

Thanks, Mark. As Mark discussed earlier, we have updated our view of the U.S. mortgage market reflecting the significant changes in current and expected future levels of U.S. interest rates. As shown on Slide 15, in 2022, we are now expecting declines in U.S. mortgage credit inquiries of 33% in the second quarter and 40% in the third and fourth quarters of 2022, which we believe is consistent with mortgage originations being down over 40% and is consistent with market forecasts. As we saw in the first quarter, the decline in mortgage inquiries was less than the expected mortgage originations; we believe that was driven by increased shopping by consumers as rates began to rapidly rise. We expect to see some of the same behavior, but at lower levels as we move through the remainder of the year. As we have shared in prior quarters, Slide 16 provides a view of both the number of home mortgages that would have a rate benefit from refinancing on the left, and a view of the levels of home purchases on the right. Our updated assumptions for U.S. mortgage market credit inquiries, we believe are consistent with the trends these charts reflect. The left side of the slide provides a perspective on the number of home mortgages for which a refinancing would provide a rate benefit, the in-the-money population of mortgages. The in-the-money population as of mid-April when the 30-year fixed rate was about 5% is about 3.3 million homes, down about 80% from the levels we saw in January when rates were 3.6%. As the in-the-money population declines, mortgage refis are increasingly driven by cash-out refis, that are often executed with no rate benefit or even at a rate increase. For perspective, Black Knight data from February 2022 showed about 25% of refinancings were by borrowers that had an increase in their borrowing rate. As shown on the right side of Slide 16, the pace of existing home purchases continues at historically high levels about consistent with the levels we saw in 2021. Our assumptions for the U.S. mortgage market over the last 9 months of 2022 are consistent with the trends just discussed. We have assumed that U.S. mortgage purchase market volume stays strong, but declines in the second half by 5% to 10% from the levels we saw in 2021. We're assuming that the U.S. refinance market volume declined substantially with volume increasingly driven by cash-out refis. We expect refi volume to be down over 50% in 2Q and over 60% by 4Q with significant sequential declines in each quarter. Refinance will be about one-third of total mortgage volume in the second half at the lowest levels we have seen over the last 10 years. Slide 17 provides a revenue walk detailing the drivers of the 6.2% constant currency and 5.6% total revenue growth to the midpoint of our 2022 revenue guidance of $5.2 billion. The 33.5% decline in the U.S. mortgage market is negatively impacting 2022 growth by about 10.4%, over 350 basis points and $175 million more negative than the levels we discussed in February. When combined with the expected declines in the Workforce Solutions unemployment claims and ERC business that we have discussed with you in February, total headwinds in 2022 revenue growth were about 11.5 percentage points. As Mark discussed earlier, core revenue growth is expected to be over 17% and up 150 basis points from the levels discussed in February. Core organic revenue growth is up 120 basis points with the remainder coming from the acquisition of Data-Credito. This stronger core revenue growth drives about $75 million in revenue benefit, offsetting just under half of the impact of the weaker mortgage market. Non-mortgage organic growth is driving almost 60% of the growth. The largest contributor continues to be Workforce Solutions with strong organic growth in talent solutions, government and employee boarding solutions including I9. International and USIS non-mortgage are also expected to drive core growth. Slide 18 provides an adjusted EPS walk detailing the drivers of the expected 7% growth to the midpoint of our 2022 adjusted EPS guidance of $8.15 per share. Revenue growth of 5.6% at our 2021 EBITDA margins of about 33.9% will deliver 8% growth in adjusted EPS. EBITDA margin expansion of about 125 basis points is expected to drive about 6% growth in adjusted EPS. The reduction in EBITDA margin expansion by over 50 basis points from our prior guidance is driven by both the elimination of equity income from our Russian JV, which was reducing margins by over 30 basis points, as well as from the negative margin impact of the net loss of $100 million of high-margin online revenue. We are on track to deliver the reductions in tech transformation expenses and savings from migration to our cloud systems that we discussed with you in February. Consistent with our guidance from February, depreciation and amortization is expected to negatively impact adjusted EPS by about 3%. D&A is increasing in 2022, as we accelerate putting cloud-native systems into production. The combined increase in interest expense and tax expense in 2022 is expected to negatively impact adjusted EPS by about 4 percentage points. Interest expense is higher in 2022 by about $26 million and higher than our expectation in February by about $6 million. Our estimated tax rate used in this framework of 24.7% does not assume any changes in the U.S. federal tax rate. Slide 19 provides the specifics on our 2022 full year guidance, which I also just discussed. At a BU level, our updated view of U.S. mortgage impacted both EWS and USIS. EWS is expected to deliver revenue growth of about 15%, as stronger non-mortgage growth expected to be over 35% partially offsets the impact of the weaker mortgage market. EWS EBITDA margins are expected to be about 54%. USIS revenue is expected to be down 6% to 7%, reflecting the greater 33.5% assumed decline in the U.S. mortgage market. Consistent with February, non-mortgage revenue is expected to be up 6% to 8%. USIS EBITDA margins are expected to be about 38%, reflecting the impact of the weaker mortgage market. Consistent with our February guidance, combined EWS and USIS mortgage revenue is expected to outperform the overall market by almost 20 percentage points. And international revenue is expected to deliver constant currency growth of about 7% to 9%. International EBITDA margins are expected to be up over 50 basis points. The decline from our February guidance is due to the impact of the loss of income from our Russian JV. Absent this item, our guidance for international EBITDA margins is unchanged. Slide 20 provides our guidance for 2Q '22. We expect revenue in the range of $1.31 billion to $1.33 billion. Acquisitions are expected to positively impact revenue by 4.4%. 2Q '22 EBITDA margins are expected to be flat to down sequentially. Looking at business units in the second quarter, Workforce Solutions revenue growth is expected to be up almost 20% year-to-year with mortgage down mid-single digits and very strong non-mortgage growth continuing. EBITDA margins are expected to be about flat sequentially. USIS revenue is expected to be down about 6%. Non-mortgage is expected to be up 6% to 7%, partially offsetting mortgage revenue down just over 30%. EBITDA margins are expected to be about 38%, reflecting lower mortgage revenue. International revenues expected to be up about 10% year-to-year in constant currency and EBITDA margins are expected to be up slightly sequentially. Corporate expenses expected to be about flat sequentially. We're expecting adjusted EPS in 2Q '22 to be $1.98 to $2.08 per share, compared to 2Q '21 adjusted EPS of $1.98. We believe both our second quarter and full year 2022 guidance are centered at the midpoint of the revenue and adjusted EPS ranges we provided. Now I'd like to turn it back over to Mark.

Thanks, John. As highlighted on Slide 21, we remain laser-focused on our EFX2023 growth strategy to leverage the new EFX Cloud for innovation and new products. EFX2023 is the foundation for our new 8% to 12% long-term growth framework. We continue to make significant progress executing the EFX data cloud and technology transformation. And we now have over half of our revenue being delivered from the new Equifax cloud. This will build meaningfully in 2022 as we expect to substantially complete our North American cloud migrations. We completed over 120,000 B2B migrations, over 10 million consumer migrations and 1 million data contributor migrations. In North America, our principal consumer exchanges are in production on our new cloud-based single data fabric and delivering to our customers. Our International transformation is also progressing and is expected to be principally complete by the end of 2023 with some migrations being completed in 2024. We're in the early days of leveraging our new EFX cloud capabilities, and remain confident that it will differentiate us commercially, expand our NPI capabilities, accelerate our top line growth and expand our margins from the growth and cost savings in 2022 and beyond. We remain on track and confident in our plan to become the only cloud native data analytics technology company. As shown on the next slide, Equifax is increasingly much more than a credit bureau and focused on faster growing identity and fraud, talent, employer and government verticals. The consistent execution of our strategy over the past 4 years and the strategic bolt-on acquisitions we completed in '21, and so far in 2022, are all aligned with our strategy and in faster growing markets. In 2022, over 50% of Equifax revenue is expected to be outside our traditional consumer and commercial credit bureau market segments, principally in Workforce Solutions and our identity and fraud businesses. These businesses represent about two-thirds of our $45 billion addressable markets in identity and fraud, talent, government, and HR services as well as the employment and income portions of our credit businesses, with growth rates twice as fast as our traditional credit markets. As we move forward, these businesses will increasingly become larger portions of Equifax and drive our top line growth. As shown on Slide 23, very strong 17% core revenue growth in '22 and 22% core growth last year is driven by our outperformance in higher growth vertical markets. We are a different company today with over 40% of Equifax revenue delivering over 10% growth. And even more powerful are the businesses delivering over 20% growth in fast growing markets, including Workforce Solutions, which is up 33% in the first quarter, with their talent businesses approaching 150%; their government business up about 90%; their consumer lending business up 40%; and I9 Anywhere over 50%. Our Kount business and the identity and fraud space delivered almost 50% growth in the fast-growing market. Our Appriss Insights business was up over 20% and our 11% NPI vitality index is fueling our growth. These faster growing verticals in new markets like talent, government and identity and fraud are driving our top line and allow us to outgrow underlying market macros. Wrapping up on Slide 24, Equifax delivered another strong and broad based quarter with 12% overall growth and 21% core growth, more than offsetting the 25% decline in the mortgage market with broad based performance which was above your and our expectations. We are operating very well with strong momentum and now have delivered nine consecutive quarters of strong above-market double-digit growth reflecting the power of the new Equifax business model and our execution against our EFX2023 strategic priorities. Equifax is resilient and on offense. We have strong momentum and are delivering the strongest results since the 2017 Cyber Event and arguably the strongest results in the past 10 years at Equifax. At our Investor Day last November, we discussed how the execution of our EFX2023 strategic priorities including the Equifax data and technology cloud transformation, would lead to stronger revenue growth, faster margin expansion and higher adjusted EPS growth. And as you know, we introduced the new long-term financial framework with total revenue growth of 8% to 12%, including 100 to 200 basis points of growth from bolt-on acquisitions. We also expect to deliver margin expansion of 50 basis points per year over the long-term that will help us deliver adjusted EPS growth at 12% to 16%, which combined with our 1% dividend yield target will allow us to deliver a total return to shareholders of 13% to 18%. The rapidly changing and unprecedented environment makes forecasting the impacts of the U.S. mortgage market incredibly challenging. We do not take guidance changes lightly. But we thought it was prudent to de-risk the year by reducing our U.S. mortgage market credit inquiry outlook to down 37.5% for the balance of the year, resulting in a full year decline of 33.5% in our mortgage market. This includes a decline in the mortgage market of 40% in the back half of '22, which is approaching 25% below the 5-year run rate levels from prior to 2020 and pulls forward the market declines we'd expected in 2023 into 2022. We also believe this equates to mortgage originations being down more than 40% in the back half of 2022, which is aligned with most market estimates. We feel this is a prudent and balanced framework given the unprecedented macro environment. Against the declining mortgage market, Equifax is resilient and continues to deliver strong results. Our updated outlook delivers 6% growth offsetting more than $500 million or over 10% of mortgage market decline, with strong core revenue growth of 17% in 2022, which is up 150 basis points from our February guide, and over 250 basis points from the framework we shared with you at our Investor Day in November. Our ability to offset the 33.5% decline in the mortgage market and deliver 6% total growth, driven by 17% core growth is powerful. Looking back at '08 and '09 global financial crisis, which is the last time we saw a macro event like this impacting the mortgage market, Equifax revenue was down 6% versus the 6% growth we will deliver in our 2022 framework. We're a different company today: more diverse, resilient, faster growing, higher margin, higher free cash flow company, a new Equifax with stronger growth levers. Workforce Solutions is our strongest and fastest growing business and will be north of 45% of our revenue in 2022 with a runway to move past 50% of Equifax revenue in the near future. A 33% growth in the first quarter is over 4x the growth rate of the rest of Equifax and the 55% EBITDA margins are over 15 points above our average and highly accretive to Equifax. Workforce Solutions has multiple levers to deliver their 13% to 15% long-term growth rate, which is highly accretive to Equifax. Our core non-mortgage market growth is very strong at 21% in the first quarter and 17% in our new 2022 guidance and above our new 8% to 12% long-term framework. We think about core revenue growth as a strong indicator of the breadth, depth and strength of the underlying Equifax business model. We expect our mortgage teams will continue to outperform the market decline by almost 20 percentage points in 2022, consistent with our February guide, with Workforce Solutions outperforming by approximately 30 points from pricing NPIs, new twin records, new customers and system-to-system integrations. And as you know, we're in the early days of leveraging the 50% of Equifax that's now in the Equifax cloud environment and we're just starting to realize the top and bottom-line benefits from the cloud. As we move over the coming months and quarters to be fully cloud native, the top and bottom-line benefits will really kick in over the next 2 to 3 years and drive our top line while enabling us to achieve our 2025 margin goal of 39%. And as we talked on the call this morning, we're ramping our new product capabilities, leveraging our differentiated data assets in the Equifax cloud. Our vitality index in 2022 will now be 11% or over $500 million, which is up from 9% last year and 100 basis points from our start in 2021. NPIs are fueling our growth. And last, our 10 bolt-on acquisitions in the last 15 months are adding $375 million to our run rate revenue. But more importantly, the M&A synergies will be kicking in during 2022 and 2023 as we complete our integrations and drive our NPI rollouts. To be clear, we believe Equifax continues to operate at a very high level. There's no change in our long-term outlook for Equifax. The change in our mortgage market framework simply pulls forward the market normalization into 2022. We remain confident in our 8% to 12% long-term growth framework and 50 basis points a year of long-term margin expansion that we rolled out at our Investor Day in November. And there's no change to our 2025 goal of $7 billion of revenue and 500 basis points of margin expansion to reach EBITDA margins of 39%. We are a new Equifax: a more resilient, more diverse, higher growth and higher margin company. I'm energized by our strong first quarter performance, but even more energized about the future of the new Equifax. I'd like to close by welcoming Trevor Burns back to the Equifax senior leadership team. We announced earlier this week that Dorian Hare has taken another position outside of Equifax and we wish him well. We'd like to thank Dorian for his service, leading Investor Relations for the past 2 years. Trevor will now reassume the lead responsibilities for Investor Relations effective immediately. And with that, operator, let me open it up for questions.

Operator Instructions: Our first question is coming from Manav Patnaik from Barclays. Your line is now live.

Thank you. Good morning. I appreciate and I applaud the de-risking of the mortgage. I just had a question around the incremental or decremental margins there. John maybe of the $0.50 EPS reduction, it sounds like $0.12 is from the Russia write-down. So is the remaining all on the mortgage side, I was just hoping you would help us understand that a bit.

Yes. So, the remaining revenue decline of $100 million is the revenue decline offset by $75 million of non-mortgage growth, but it's all online revenue decline. And Manav, as you know that we have very high variable margins in mortgage.

In mortgage.

In mortgage, yes. But as you know, we have very high variable margins across online mortgage as well. So, it flows through and you can just do the math, it flows through. It's something on the order of 60% is what we brought forward.

Okay, got it. That’s helpful. And then, Mark, maybe just on the talent side, some pretty impressive growth there. Can you just help us appreciate the volume or cyclicality to that business? Obviously, the labor market is hot. And so, the touches on that kind of data is good. Do you anticipate that slowing down? Or how should we think about the sensitivity there?

Yes, it's a great question, Manav. I think as you know, 75 million people a year change jobs, every year. It's a business that has some cyclicality, but there's an underlying base, it's very, very high. The growth that we're getting, though, is really from our penetration in the market, the new products we're rolling out, leveraging the work history we have in the 540 million records, where we have a resume for people of all the jobs they've had, so that work history is very valuable. And the macro change in talent is around speed, which we don't think is going to change, meaning hiring managers want to get that individual on the floor more quickly. That's always the case, even pre-pandemic, and instant data that you can get from Equifax, work history data and now with incarceration data, medical credentialing data, education data, and we're adding more datasets allows the background screeners, which are our customers and other hiring businesses, to really speed up their decisioning for the hiring manager. So, the bulk of the growth that we have there, and it's obviously very, very strong, and we expect it to continue, is really putting these solutions together. We've got more new products in the pipeline that we plan to bring out. Last year, we rolled out solutions that had more work history versus where someone works today. Those solutions we rolled out last year, and we're bringing those to the market. Those are really driving a lot of the top line growth. And then in 2022, we'll start combining some of the solutions like incarceration data with the work history, with education data to have a one-click solution, and then we'll customize those around job categories. Because as you know, in each hiring process, the data that's used is different depending upon who you hire, a white-collar worker versus a banking employee versus a warehouse worker versus a truck driver or a dentist or a doctor. Those are all different data requirements, which is where we want to work towards productizing around families of jobs, which again, will make it easier for our customers to pull the data and then also results in higher revenue for Equifax because we're bringing more value to the space. The other point I would make is we're increasingly driving system-to-system integrations here. You go back a couple years ago, the talent space was accessing a lot of our data through the web, through a manual web interface, meaning keying into the web and putting a name in there and pulling down the data. Moving to system-to-system, we get the same lift going forward. So, there's a lot of runway still with that going forward. So, it's a space that we like, it's a big space and one that we see a lot of potential going forward. Just one thing to add, we can see the power of the historical records, because if you look at twin revenue excluding mortgage, take mortgage out of the mix, we're now seeing over 50% of the revenue include historical records.

Got it. Thank you.

Our next question is coming from Kevin McVeigh from Credit Suisse. Your line is now live.

Great. Thanks so much. Hey, I know you've talked about this a lot, but clearly you're outperforming the mortgage market pretty dramatically. Mark or John, can you bracket because it looks like the USIS will be down about 6% to 7% versus mortgage down 33%. Is there any way to think about just a couple of buckets of what's driving that relative outperformance just trying to frame it on a percentage basis, just to contextualize that a little bit more?

Kevin, your question is around USIS in particular versus EWS?

Yes, USIS if you want to open it up to EWS as well, it's fine.

Maybe I'll start John. There's a number of levers that we have to outperform underlying markets and you can use mortgage in particular, obviously that gets more challenging when you talk about a mortgage market in the second half that's going to be down 40%. But we've had strong outperformance for a long history. Workforce has more levers than USIS, but both businesses — and I'll talk about USIS — one of their levers to outperform underlying markets is price, increasing the price of the solution or the credit file and both Workforce Solutions and USIS have regular price increases that help them offset or increase their revenue depending upon where the market's going. The other is new products. Both businesses roll out new solutions. And Workforce Solutions has a lot more product opportunities than USIS, but USIS has had some new product rollouts to help them outgrow the underlying or in this case, in 2022, declining market. Third is going to be new customers. In USIS's case, that's really in their tri-merge business, growing some share there will grow their revenue. In Workforce Solutions, as you know, we only see 60% plus of mortgages still. 40% are done with manual paper pay stubs, we've been growing that. So, adding customers is a lever, or usage, if you will, is a lever. The other one both businesses have is the number of polls that happen in a transaction, and that's been growing in both USIS and in Workforce Solutions. Particularly as you see more digital interactions with consumers, which we would characterize as shopping, meaning consumers are shopping for mortgages and deciding which mortgage originator to work with in that shopping process, which is fairly new and more utilized in the last couple of years. And it's here to stay in our view, there's some data polled to qualify the customer. So, in the shopping process that mortgage originator can respond with some framework about the offer. So that's a place where number of polls, is another opportunity for the business. System-to-system integrations in USIS, it's virtually 100%, fully system-to-system. And Workforce Solutions, we've talked many times that of the 60% of mortgages we see, about 70% plus are system-to-system. We've been growing that, that's up, I think, over 2x from where it was 3 to 4 years ago. So, there's still opportunities versus web access. And in system-to-system we get a 20% lift in the number of polls. And then the last one that I touched on, it's really unique to Workforce Solutions is growing records. As you grow records, we have higher hit rates. Remember, in a system-to-system integration, or even a web access, our customers are coming to us for all of their mortgage applications or in their process. And when they do that, when we grow our records, which are up 19% year-over-year in the first quarter for Workforce Solutions, that becomes revenue. We're able to monetize those additional records, which is why we're so focused on records.

Hey, Kevin, if you're specifically just talking about USIS being down 6% to 7% relative to the market being down 33.5%, again, 6% to 7% are total revenue, right, and the order of two-thirds of their revenue is non-mortgage. So, we're seeing 6% to 8% growth in their B2B revenue, which is over half of their revenue, which is consistent with the long-term framework for USIS. And we're also expecting to see growth at a somewhat lower level, but growth in the consumer business that came over from GCS. So, it's those two pieces that's offsetting the weaker mortgage market. And as Mark said, USIS is also outperforming the mortgage market.

That helps. And then just real quick, John. What percentage of total Equifax is mortgage in kind of Q1 and then where do we think it'll end 2022?

Yes, the Q1 was about 29.5%. And then as we move through the year, I think we'll get down to the point where we're just in the neighborhood of 21% to 22% as we get into the fourth quarter.

Super. Thank you.

Our next question is coming from Andrew Steinerman from JPMorgan. Your line is now live.

Hi, John. On the mortgage percentages you just gave was that the U.S. mortgage revenue or total mortgage revenues? I heard you mentioned mortgage in Canada today. My second question is, I know you like to look at core growth rates. I'm going to ask a question that's total. Could you tell us what the first quarter organic non-mortgage growth rate was?

Okay. So the first question, the 29.6 is total, but Canada is very small.

It's really U.S.

And then in terms of the first quarter organic non-mortgage growth, I don't think that's a number we've disclosed. We give core organic and we gave organic for the business units. We didn't disclose total company first quarter organic non-mortgage, but we can look into getting that for you.

Okay. Thanks so much. I appreciate it.

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

Thanks so much. Mark, I was hoping you could talk about what you're seeing in Europe. It seemed like this was a good quarter, in the first quarter, but was that more front-end weighted? And just trying to think about how you're viewing it for the rest of the year?

Yes, we haven't seen any meaningful change. In Europe, for us, it's primarily the U.K. and Spain, which is really where we participate. We're seeing a positive as the government and companies in the U.K., following the pandemic, start to focus on some of the collections that were suspended during the pandemic timeframe. So that's a positive for the business, which we expect to continue through 2022. And the underlying credit businesses, we don't have a mortgage issue — in our two countries we don't participate much in mortgages. It's really operating like the non-mortgage business in the U.S., where it's pretty steady. We see elements of post-pandemic recovery: card issuers wanting to do marketing, wanting to rebuild their balance sheets; consumers being fairly strong with employment high and unemployment low, which is a good macro in those markets, same in Canada, Australia, and frankly, in Latin America. Outside of the interest rate and inflation environment, consumers are working and many have better balance sheets than coming into the COVID pandemic because of stimulus and employment. So, we're pretty optimistic for the core portions of the business and we're delivering that when you see the results.

Terrific, very helpful. And just thinking about mortgage in 2023, you talked about some of the decline that you were expecting in '23, you're pulling it forward into your '22 guidance. Are you thinking that 2023 sort of returns to what a normal level like we've been seeing — that we saw in 2015 to 2019? Or is there sort of more to go even beyond this year, just given the pull-forward of declines from prior years?

I think as John and I both mentioned, we tried to stress the mortgage market. It's a hard thing to forecast. We don't know where interest rates are going to go. It's clear they're going to go higher. We've never seen the Fed navigate an 8.5% inflation environment with full employment. That's a very tricky thing to do. What gave us comfort in de-risking the outlook for 2022, which pulls forward what we thought would have been a more gradual return to normalization, is that we believe the down 40% back-half scenario is a strong stress scenario. When you go back to pre-COVID levels, we're about 25% below a normal market when we exit the year. In the second half, we think that's near as low as it can go because the purchase volume remains steady even in a recession — people buy houses — and there's still home equity out there that can drive cash-out refis even at higher rates. So, we've tried to stress the mortgage environment and have a prudent, balanced framework for 2022.

Thanks so much. Helpful.

Our next question is coming from Kyle Peterson from Needham. Your line is now live.

Hey, good morning, guys. Thanks for taking the questions. I want to touch on the performance in the non-mortgage business. Really impressive, especially given the mortgage headwinds. What do you guys think is the biggest driver behind that? Is it other credit products kind of performing better than expected? Or is it a share gain story? Or what do you think is driving the upside on the non-mortgage side?

A lot of factors. Start with Workforce Solutions. Non-mortgage businesses there are very strong. Growing records — records up 19% — is unique to Workforce Solutions and translates directly into higher hit rates and revenue because of our system-to-system integrations. Pricing power in Workforce Solutions and to a lesser degree in USIS allows us to outperform and drive non-mortgage growth. New verticals where we're making acquisitions, or leveraging the cloud to roll out new products, like talent or government, are delivering very strong growth rates. New products are primarily non-mortgage, leveraging our multi-data solutions. System-to-system integrations and the single data fabric are unique advantages. We're in the early innings of leveraging the cloud to drive NPIs and product rollouts. The stronger core growth that we adjusted up twice this year is mostly driven by non-mortgage strength, which reflects our confidence in the underlying business.

That’s helpful. And then just a quick follow-up on kind of your updated thoughts on capital allocation. You guys have given some detailed thoughts at the Analyst Day in November. But given the higher rate environment, any change in priorities in the near-term between debt reduction or potential M&A or new product investment? How are you thinking about it now?

No change to our capital allocation priorities from Investor Day. We believe our free cash flow will continue to accelerate meaningfully through '22, '23 and '24. That gives us flexibility for M&A — we've done well over $3 billion of M&A in the last 15 months focused on non-mortgage and strengthening Workforce Solutions, differentiated data, and identity and fraud. Our priorities: invest in Equifax (cloud transformation and product development), disciplined bolt-on M&A in areas that strengthen the core, delever the company as EBITDA grows, and at the right time return cash to shareholders through buybacks or dividend increases. We aren't making changes today but the framework stands.

That's helpful. Thanks, guys.

Our next question is coming from Ashish Sabadra from RBC Capital Markets. Your line is now live.

Thanks for taking my question. Mark, I just wanted to go back to the comments that you made about the health of the consumer balance sheet being really healthy, which makes sense. But one of the concerns is that with higher fuel prices and inflation, there may be some cracks in the low to mid income consumers, which could potentially weigh on consumer lending, maybe in the back half of the year. Based on your conversations with the banks, have they indicated any slowdown there, or any color on that front around the state of the consumer itself?

We haven't seen it. Inflation is a real challenge — fuel and food prices are up and 8.5% is very high inflation. But people are working and wages are up meaningfully for many wage categories. Over the last 2 years, many consumers couldn't spend much during lockdowns and there's still stimulus effects in play. Many social service benefits have been extended or paused and unemployment is low, which supports balance sheets. Conversations with banks and their reported numbers show resilience — credit card usage up, balance sheets in good shape. We don't see a material deterioration in consumer credit trends at this time but we'll continue to monitor closely.

That's very helpful, Mark. And then maybe just on the USIS non-mortgage B2B business. The improvement that is expected from the first quarter to second quarter you provided color on. How much of it is coming from volume growth at existing customers, and how much from customers adopting alternate data sets or new events? Any color on new wins and pipeline and demand for alternate data would be helpful.

USIS online core business was at or slightly above expectations in the quarter, coming from market share gains and new solutions. The batch/account management business was below expectations due to timing in March and some deals closed in April; we expect a rebound in Q2. We're seeing good wins commercially and cloud-native stability is a selling point. Demand for alternative data is increasing and USIS is leveraging Equifax's unique datasets in new product rollouts.

Some color on USIS online in the first quarter non-mortgage: our FI business was up over 10%, which was good growth. We saw auto and insurance up high single digits. Kount was up almost 50%, which is identity and fraud. So we feel good about the way the online business was trending.

Our next question is coming from Hamzah Mazari from Jefferies. Your line is now live.

Good morning. Thank you. My first question is just on Workforce Solutions. Maybe if you could update us or just walk us through the ability to take some of the products we have in the U.S. and bring them to international markets? Is every international market available to you to penetrate around Workforce Solutions? Which markets are more penetrated versus others? Is it early innings today?

Definitely early innings. We see global opportunity. Pre-cloud, we launched Workforce Solutions in Australia, Canada and India and paused broader rollouts until the cloud stack was ready. Recently we announced entry into the U.K. and are onboarding records there. We can leverage the cloud to move into new markets easily, leverage existing multinational customer and contributor relationships, and payroll partners that are global. We will invest in longer-term opportunities outside the U.S., but the U.S. levers will move the needle in the near term.

Got it. And just my follow-up is around the cloud transformation. You said half of your revenue is on the cloud. Maybe if you could talk about the timing of when the other 50% of revenue comes on the cloud and how the cloud cost savings are embedded in the 2022 guide? What is that number embedded around cost savings?

At year-end we had about 50% of Equifax revenue on the new cloud. By the end of 2022, we expect to have substantially completed North America (U.S. and Canada) migrations, which is a big jump since the U.S. is about 80% of revenue. International migrations will be principally complete by end of 2023 with some in 2024.

On transformation investments from '21 to '22, we indicated net savings and investments, net of new product development reinvestment, would be on the order of $40 million to $50 million. That's still correct. We also indicated we would see net cloud savings as we move through 2022 and those savings are embedded in the margin guidance. We didn't give specific dollar values beyond that, but the updated guidance today reflects roughly 125 basis points of EBITDA margin expansion in 2022 relative to 2021.

Got it. Thank you.

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

Good morning. Thank you. My first question, maybe give us a flavor of the new products that you've rolled out that you're excited about here in the U.S. Let's start there, please.

There are many. One big bucket is Workforce Solutions where we've moved from current snapshot products to leveraging historical records in the cloud. That allows us to sell higher-value products such as 12- or 24-month income verification, which can be much higher priced than a single current snapshot. These historical and time-trended products address real customer problems — for example, commissioned employees or seasonal income. We're also moving to productize around job categories to provide one-click solutions for specific roles. Another bucket is multi-data solutions enabled by the single data fabric, combining credit files with telco payment data, bank transactions, wealth data, etc., to provide higher predictive power. And the third is entering new verticals such as talent and government where we can apply these combined datasets and cloud-native capabilities. The cloud has been a big enabler to roll these out more effectively and at scale.

That's great. My other question is how is mortgage-exposed businesses like auto, credit cards and personal loans embedded in your outlook for the rest of the year? Are you expecting those to significantly slow given higher rates? How do you think about those categories for the rest of the year?

We don't see meaningful change in those categories in 2022. Credit cards and consumer lending demand remains steady; auto is impacted today by supply shortages, which is an inventory issue more than demand. Underlying consumers and financial institutions are in reasonably good shape, so we don't expect a big hit in those categories this year.

That's it. Thank you.

Our next question is coming from Simon Clinch from Atlantic Equities. Your line is now live.

Thanks for taking my question. Maybe a difficult one, but I was thinking about the pace of outperformance from mortgage revenues in EWS over the last several years. Can we learn anything and use that as a guide for how to think about the outperformance or growth? Has the non-mortgage verification services business really started to take off? Should we expect a faster initial pace of growth and then perhaps a normalization? In short, any thoughts on the sustainability and potential normalization of that outperformance?

Complex question. Unique attributes: Workforce Solutions can grow assets (records), which directly monetizes via higher hit rates with system-to-system integrations; that creates a base advantage. They also roll out new products, increase system-to-system penetration, and expand pricing. Non-mortgage verticals like talent and government are high-growth markets that fuel strong organic growth. We set a long-term target for Workforce of 13% to 15% growth; they're outgrowing that now given the current product rollouts and record growth. While some normalization may occur, the multiple levers and large addressable markets support sustained above-market growth for the business.

Okay. That's helpful. Thanks very much.

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

Hi. Thank you and good morning. I wanted to spend my two questions on updates to recent M&A. Starting with Kount, it seems you're seeing 50% plus growth there, materially higher than the initial expectations. Can you talk about what's going right in that business and the extent to which that growth is driven by synergies with Equifax relationships versus continued momentum in the market?

We are very bullish on identity and fraud. Kount is executing strongly in a rapidly growing digital market. The underlying Kount product is gaining traction, and we've added commercial resources and leadership. There are synergies that will ramp, especially in the back half, from combining Kount and Equifax data and customer bases, but much of the current performance is Kount's own momentum and strong execution. We've also given the Kount CEO responsibility for our overall identity business to drive integration and scale.

Helpful. And then similar on Appriss Insights — any early learnings on wins and integration, and whether you're applying lessons across talent solutions?

Appriss is performing well and delivering growth from its own momentum; we acquired them in October and are integrating into our cloud and product stack. They're winning new state contracts and benefiting talent and social services use cases. Integration synergies will start to appear in the back half of 2022 into 2023. The cloud really gives us confidence in doing M&A and integrating at pace. Our M&A criteria remain disciplined: strengthen Workforce Solutions, add unique data assets, expand identity and fraud, and expand the global credit bureau footprint.

Very helpful. Thank you.

Our next question is coming from George Mihalos from Cowen. Your line is now live.

Thanks for taking my questions, guys. Two quick ones. First, a point of clarification on FMS: it sounds like it was a timing issue in Q1 and you have good visibility now into Q2. Is your outlook for FMS unchanged for the year? Second, the $75 million of outperformance from core that's offsetting some mortgage headwinds — is that essentially all EWS or is any of that tied to USIS? If so, which verticals?

On the second part, the bulk of the $75 million is Workforce Solutions, with international also contributing. USIS is generally aligned with expectations and performing well.

On FMS, we expect to return to growth in Q2 as we discussed earlier. We still expect the FMS segment to perform consistent with our full-year outlook; the Q1 shortfall was primarily timing-related.

Our next question is coming from Heather Balsky from Bank of America. Your line is now live.

Hi. Mark, you mentioned EWS is set to outperform the mortgage market by 30 points. How confident are you in that outperformance even in a worse-than-expected mortgage environment? Also, are you able to take price and sell premium products in this environment?

Several levers support that confidence. Record growth (we grew records significantly and have visibility on new payroll processor boardings), pricing actions that go into effect in January, and product rollouts whose take rates we can measure. We have visibility around customer wins and system-to-system conversions which improve poll rates. So we have good visibility and confidence in outperformance despite a weak mortgage market.

Great. And as a follow-up on system-to-system integrations, what's your current penetration in mortgage and how much runway remains?

System-to-system for Workforce Solutions is over 75% of transactions, up substantially from 2019. We will post an updated number in the deck later today to provide additional visibility.

Thanks.

Our next question is coming from Jeff Meuler from Baird. Your line is now live.

Thanks. Want to see if you're willing to share any data around NPI uptake for clients that have completed their migration to the data cloud. Do you see explicit acceleration in NPI uptake post-migration?

Great question. We don't have a specific NPI uptake number to share on the call, but intuitively we see strong momentum where we've migrated clients. Let us run down the specific metrics and get back to you.

Thank you.

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

Hi. Thank you. Mark, you mentioned pricing at USIS. Is there a consistent pricing uplift every year in USIS similar to other parts of the business, or do you see pushback from clients there?

There is regular pricing activity. Workforce has stronger pricing power, but USIS also does price increases regularly, particularly in mortgage. There is customer pushback sometimes but pricing actions are part of the revenue resilience.

Okay. And on competition, some competitors try to build their own income databases with lower price points. Are you seeing that and how do you keep Equifax at the top of the waterfall?

Those alternatives are very small today; we haven't seen meaningful commercial pressure from them. We focus on demonstrating coverage and system-to-system reliability. Our coverage is up to around 65% of U.S. nonfarm payroll, which provides strong hit rates and commercial value that customers prefer.

Got it. Thank you very much.

Our next question is coming from Faiza Alwy from Deutsche Bank. Your line is now live.

Thank you and good morning. I wanted to ask about EWS EBITDA margins. Given strong top-line growth, I would have expected more flow-through to margins. Are acquisition-related dilutive effects and mix impacts the main drivers? Any color on organic margins or mix effects would be helpful.

We had a nice margin improvement from Q4 to Q1 and we are incurring the expected impact of recent acquisitions such as Appriss Insights and Health e(fx), which initially have dilutive margins. We don't disclose an explicit inorganic versus organic EBITDA split, but Workforce Solutions' adjusted EBITDA margins in Q1 were about 54.6% and we expect them to be about 54% for the full year. Different products and verticals have different margin profiles, but overall we feel good about the current margin levels given the acquisitions and the path to synergies.

Understood. Thank you.

We reached the end of our question-and-answer session. I'd like to turn the floor back over to management for any further closing comments.

We just wanted to thank everyone for participating. If you have more questions, please reach out to Investor Relations.

Thanks very much.

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