Greetings, and welcome to the Equifax Inc. Third Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Trevor Burns, SVP, Head of Corporate Investor Relations. Thank you. You may begin.

Thanks, and good morning. Welcome to today's conference call. I'm Trevor Burns. 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 Investor Relations website. During the call, we will be making reference to certain materials that can also be found in the presentation section of the News and Events tab at our IR website. These materials are labeled 3Q 2024 earnings conference call. Also, we will be making forward-looking statements, including fourth quarter and full year 2024 guidance as well as certain 2025 guidance to help you understand Equifax and its business environment. These statements involve a number of risks, uncertainties, and other factors that could cause actual results to differ materially from our expectations. Certain risk factors that may impact our business are set forth in filings with the SEC, including our 2023 Form 10-K and subsequent filings. We will also be referring to certain non-GAAP financial measures, included in adjusted EPS 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 included in our earnings release and can be found in the Financial Results section of the Financial Info tab at our IR websites. In the third quarter, Equifax incurred a restructuring charge for cost reduction actions aligned with the completion of the migration of significant data exchanges and applications in the United States and Canada and certain countries in Latin America to the Equifax Cloud as well as costs to streamline our workforce globally. These charges totaled $42 million and are expected to deliver ongoing savings when completed in early 2025 of over $70 million a year. We expect to generate greater savings as we complete cloud migration in Europe, the remainder of Latin America, and Brazil and Australia and New Zealand, principally over '25 and '26. Now I'd like to turn it over to Mark.

Thanks, Trevor, and good morning. Before I cover our strong third quarter results, I want to update you on the strong progress of our cloud transformation. In the quarter, USIS completed the migration onto the cloud data fabric of the remaining customers and services for their consumer credit and telco and utilities exchanges, which is a huge milestone. Along with EWS, the work number exchange, which we completed migrating to the Equifax Cloud over two years ago, we now have our three largest data exchanges in the new Equifax Cloud. As of the end of September, we have about 80% of Equifax revenue in the Equifax Cloud and expect to approach 90% of our revenue in the Equifax Cloud by year-end. The cloud migrations have been a huge effort across Equifax over the past four plus years, requiring a ton of focus by the entire Equifax team. We expect to have a significant competitive advantage as we fully deploy our new cloud capabilities and pivot from building to leveraging the cloud in 2025 and beyond. This will allow us to fully focus on customers' growth, innovation, new products, and AI. Leaving the USIS consumer and telco and utility migrations to the Equifax Cloud allowed us to begin decommissioning legacy on-prem systems and software in USIS in the third quarter supporting our goal of cloud spending reductions in 2024, which expand our operating margins and lower the capital intensity of our business in 2025 and beyond. In the third quarter, we also made substantial progress in our international technology transformation activities with Canada completing migration of all customers off of their consumer and commercial credit exchanges onto the new EFX Cloud Data Fabric. This is another big accomplishment for the international team with cloud migrations in Argentina, Chile, and the Dominican Republic completed earlier in the year, adding to Canada's completion a few weeks ago. Our international cloud migration efforts will continue in '25 and '26, resulting in additional cloud savings as those migrations are completed. It is energizing to be approaching the finish line of our cloud transformation. We are entering the next chapter of the new Equifax as we pivot from building the new Equifax Cloud to leveraging our new cloud capability to drive our top and bottom line. Turning to Slide 4, we had a strong third quarter with reported revenue of $1.42 billion, up 9% and at the top end of our July guidance. With organic constant dollar revenue up 10%, which is at the top end of our long-term growth framework. Adjusted EBITDA margins at just under 33% were in line with our expectations, and adjusted EPS of $1.85 per share was the top end of our July guidance. Our global non-mortgage businesses, which represent about 80% of total revenue in the quarter had strong 10% constant currency revenue growth which was in line with our expectations. Non-mortgage organic constant currency revenue growth was 8% in the quarter. The strong non-mortgage performance was driven by 9% growth in EWS and very strong 19% non-mortgage growth in EWS Verifier, led by very strong 29% growth in government and talent that was up over 9% in EWS. USIS non-mortgage revenue growth of almost 5% was stronger than our expectations, principally from our consumer business and financial marketing services, our offline batch business. International delivered just under 18% constant dollar revenue growth and strong 12% organic growth, led by continued strong growth in Latin America and Europe. Total U.S. mortgage revenue was up 17% in the quarter and above our July guidance. U.S. mortgage revenue was 20% of Equifax revenue in the quarter. In late September, as mortgage rates declined to just over 6%, we saw modest mortgage inquiry activity increases. We believe this improvement was likely led by mortgage refi activity off the lower mortgage rates. New home purchase activity appears to have remained at the lower levels we've been seeing throughout 2024, reflecting continued low home inventory levels, elevated home prices impacting affordability, and prospective homebuyers waiting for further mortgage rate reductions. As mortgage rates increased in early October to over 6.6%, we have seen mortgage activity reduced to levels closer to what we saw in July and August. John will cover our expectations for mortgage activity in the fourth quarter shortly, but we continue to believe that activity will improve towards 2015 and 2019 levels as mortgage rates come down in the future. In the third quarter, the growth in mortgage revenue was driven principally by USIS where mortgage revenue was up a strong 36% and slightly above our expectations. This strong growth was again driven by the benefit of strong vendor pricing actions and the performance of our new mortgage pre-qual products. The lower mortgage rates we saw in late September did drive a small increase in mortgage application activity, which benefited USIS in the quarter. EWS mortgage revenue returned to growth with revenue up 4% and was also slightly better than our expectations. As a reminder, EWS mortgage inquiry volumes lagged USIS credit inventory volumes as credit is pulled earlier in the mortgage application cycle than income and employment, which is typically pulled in the middle and the closing of the mortgage application. USIS typically sees the benefits of mortgage shopping behavior earlier and to a greater extent than EWS. As a result, EWS did not see the same level of incremental inquiry volume as USIS did from the slight increase in mortgage activity that occurred in late September. EWS mortgage revenue exceeded twin inquiry volume by about 9.5% in the quarter, up a very strong 300 basis points sequentially from the second quarter, principally from strong twin record growth. Equifax had another strong quarter of new product innovation with a Vitality Index of 13%, above our 10% guidance for the year and our long-term framework of 10% Vitality. We saw strong broad-based new product rollouts with double-digit growth in EWS and International and a Vitality Index of 9% in USIS, which was up 100 basis points sequentially from the second quarter. We expect our NPI revenue growth to remain strong and are increasing our 2024 Vitality Index guidance to 11%, up 100 basis points from our prior framework for 2024, as we further leverage our new EFX Cloud capabilities in EFX.AI to drive new products into the marketplace. Turning to Slide 5, Workforce Solutions revenue was up about 7.5% and slightly below our July guidance, principally due to lower-than-expected employer services revenue. Non-mortgage verification services revenue, again, delivered very strong 19% growth, which was in line with our expectations. Government had another outstanding quarter with very strong 29% revenue growth from continued penetration in their large $5 billion government TAM. Government revenue grew sequentially from strong growth in state penetration and insights incarceration data solutions. We expect continued strong sequential government revenue growth again in the fourth quarter. Growth rates in the fourth quarter are expected to continue to show strong double-digit performance, but will be lower than third quarter levels, principally due to comping against very strong growth we saw last year. We expect our government vertical to continue to deliver very strong double-digit growth in the future and outgrow both Equifax and EWS.

Thanks, Mark. Turning to Slide 11. As Mark discussed, we started to see an improvement in the run rate of USIS credit inquiries in late September as mortgage rates declined to just over 6%. We believe the improvement principally reflected higher refinance activity in late September. New home purchase activity does not appear to have increased meaningfully at this point, likely reflecting continued low home inventory levels, home prices at near all-time highs, and prospective homebuyers waiting for further mortgage rate reductions. As a reminder, the normal mix of mortgage originations defined as the average over the 2015 to 2019 period is about 55% purchase and 45% refinance. In the first two weeks of October, we have seen mortgage inquiry volumes for both credit and twin slow versus September as mortgage rates have increased to above 6.5%. The run rate over the last two weeks of both credit and twin inquiries is relatively consistent with the expectations we had when we provided guidance in July. Consistent with our practice in 2024 and the last several years, our guidance for credit inquiries is based on our current run rates over the last two to four weeks, modified to reflect normal seasonal patterns. This effectively assumes market conditions will continue for the quarter. Our fourth quarter guidance reflects mortgage credit inquiries to be up about 9% versus 4Q '23 and down 16% sequentially. Calendar year '24 mortgage credit inquiries are expected to be down about 7%. For the fourth quarter, we expect USIS mortgage revenue to be up over 4% and much stronger than the underlying mortgage market, reflecting both strong performance in mortgage pre-qual products as well as vendor pricing actions. Our guidance reflects twin inquiries in the fourth quarter to be up about 6% versus 4Q '23 and down about 12% sequentially. For the full year, twin inquiries are expected to be down about 11%. We expect EWS mortgage revenue to be up over 16% in the fourth quarter and much stronger than the underlying twin inquiries, again, principally reflecting strong record growth in 2024, as well as annual mortgage pricing that occurs early in the first quarter each year. As a reminder, the fourth quarter is historically the lowest quarter of the year for both credit and twin inquiries. For perspective, as we look to 2025, carrying these current run rates with normal seasonality, twin '25 mortgage credit inquiries would grow versus 2024, up just over 5% for the year and also just over 5% in the first quarter of 2025. Slide 12 provides the details of our 4Q '24 guidance. In 4Q '24, we expect total Equifax revenue to be between $1.438 billion and $1.458 billion, up about 9% at the midpoint. Organic constant dollar revenue growth at the midpoint is about 10% and at the high end of our long-term financial framework. At the midpoint, mortgage revenue is expected to be up almost 30% and non-mortgage constant dollar revenue up over 7%. Equifax 4Q '24 adjusted EBITDA margins are expected to be about 35.5% at the midpoint of our guidance. The sequential increase in EBITDA margins reflects revenue growth and cost management across Equifax, including the decommissioning of USIS legacy consumer and telco and utility systems and Canada legacy consumer and commercial systems. This is our first ever quarter with EBITDA over $500 million. This would be a very strong performance. Adjusted EPS in 4Q '24 is expected to be $2.08 to $2.18 per share, up 18% versus 4Q '23 at the midpoint. The midpoint of our fourth quarter revenue guidance is about $15 million below the levels implied by the guidance we provided in July. The primary driver is lower revenue in EWS and in the employer business driven by lower revenue and onboarding, as well as ERC. This is consistent with the factors that impacted the third quarter and also the slower U.S. hiring Mark referenced earlier that is impacting both onboarding and talent solutions. We believe we are centered at the midpoint of our guidance.

I just had a question around kind of the guidance philosophy. So in the prior years, every time you had lowered guidance, I guess, it was mainly due to the mortgage weakness, so we all got wrong but there were some other non-mortgage areas that were weak. And this year, even though mortgage is getting better, you're still lowering guidance. So I'm just curious, is there something about the philosophy in not being conservative? Or is it execution? I was just hoping you could help us clear that up.

Yes, Manav. There’s no change in our philosophy. Our goal is to be very transparent with you and our investors about the marketplace conditions, growth drivers, and our strategic direction. We aim to provide guidance that we are confident we can meet and exceed. I've been here for six years, and as you noted, the mortgage decline in '22 and '23 was quite unusual. However, if you look beyond that, we have consistently met and exceeded our expectations. During the '22 and '23 period, our non-mortgage performance was also quite consistent. Regarding the third quarter, I don't think that’s your main question; it’s more about the fourth quarter. As mentioned earlier, we are experiencing some volatility in the market that affects certain sectors. We are happy with our third-quarter performance and the strong guidance we have for the fourth quarter, although it is slightly lower than last quarter’s guidance due to the EWS employer business. We expected activity regarding the employee retention credits, which the IRS halted earlier this year, but there has been none, impacting Workforce Solutions. We've also discussed changes in the federal work opportunity tax credit and the slow state responses that may delay revenue to 2025. Additionally, we noticed unexpected slowdowns in background screening volumes late in September, which may reflect cautious hiring practices among companies leading up to the election. These impacts are relatively minor compared to our strong third-quarter performance and the solid fourth-quarter guidance, which, as John mentioned, is expected to be around $500 million EBITDA and over $2 a share—an achievement we’ve never reached before. Some may question our capability to deliver the expected fourth-quarter results in terms of both revenue and margin growth. While we might be slightly below, we still anticipate strong numbers. To reiterate, our philosophy remains unchanged. We strive to present transparent numbers and share the details behind those figures, with the goal of consistently meeting and exceeding our targets, which has always been our commitment.

Have you sized the incremental record additions from the Workday partnership? And can you talk a little bit more about the timeline for those new records to come online? Is it more towards kind of Q1, Q2 next year? Or is it towards second half of next year?

Yes, I have a few points to share on that. I'll address your question about Workday specifically, but I want to broaden the context since Workday is just one of several partners we added this quarter, totaling six. Workday is certainly a critical and strategic partnership, but all six partnerships are significant. We anticipate adding around 5 million records over the next few quarters, although the integration process can be quite complex and takes time. We experienced 12% record growth this quarter, demonstrating our effective execution. We've noted the considerable number of partners added this year, as well as in previous years, all of whom are expanding their client bases. For HR software companies or payroll processors, new clients typically join TWN, thereby contributing to our growth. Many of our clients have records from partners we brought on board two, three, or even four years ago, and we are still working to fully integrate those records into Equifax. This presents substantial opportunities with both new partners like Workday and existing ones from the last few years. While we haven't quantified Workday's contribution specifically, we know it's significant given their size and influence, and we're excited to have them on board. We expect some records to start flowing in the fourth quarter, but most of the significant growth from Workday and other new partners should materialize in 2025. Additionally, I want to emphasize our direct record acquisition strategies as we also add new clients in our employer business. For these clients, we provide valuable free services like income and employment verification, which translate into new records for Equifax. Furthermore, back in December, we restructured our team in EWS, assigning a single leader to focus on record additions from a variety of sources, including HR software and payroll processors. This concentrated effort is yielding positive results, with record additions growing at 12%, which outpaces our long-term expectations that are typically in the single digits. We're seeing the advantages of adding new records quickly; we monetize them across all verticals as soon as they are added since we receive inquiries immediately from our customers. Our ability to monetize has significantly expanded over the last few years, covering a wide range of consumer types—from higher income groups to mid-market clients applying for mortgages, auto loans, and credit cards, as well as those seeking social services. The growth in our Workforce Solutions government sector has also benefited from record additions. There is a substantial opportunity ahead as we still aim to capture many records among the 225 million working Americans, with nearly 100 million records still missing. This underscores the need for us to continue adding resources and personnel to enhance this valuable data set.

Also curious to hear a little more about what's driving the reacceleration of growth in consumer lending vertical within Workforce Solutions, especially because of the backdrop of a pretty soft end market. So just curious, is it really new product launches? Is it the pricing? Is it increased customer penetration?

Yes, it's really the value of the data set. When you think about consumer lending and I'll use P loans, you could use auto, the value of someone's credit score is super important. It's really, as you know, is a reflection of their past payment behavior of other loans they have, and it's really a prediction where they keep paying going forward. So very valuable. When you add to that someone's ability to pay, which means their income and their employment, meaning they're working. Because remember, if you pull a credit report, you have no idea if that individual is actually working today. Did they lose their job last week? Did they retire? What's changing? So the combination of income in employment from EWS with the credit file is very, very valuable. And we have increasing numbers of our customers. As you point out, we roll out new products as well as we drive penetration of customers understanding the value of pulling the credit report with income and employment, they can approve more consumers and approve more consumers with lower loss rates. So that's a really strong combination and very positive for our customers. So that's what we're really seeing in the outgrowth of the underlying market. As you point out, there is in some of those verticals, some end-user, meaning consumer demand pressures primarily because of higher APRs, particularly in bigger ticket transactions, think about P loans or cards, we have a solution by combining credit with income and employment that allows our customers to approve more of those applicants with a higher degree of confidence around their ability to repay the loan when you add the income and employment data to it.

Those segments are also benefiting substantially just by record growth, right? So since records are up over 10%, that drives their hit rates higher, so it's a direct benefit to those segments.

I wanted to first ask on SSNs really good order. And I'm just curious if there's anything for us to read into that. It sounds like it was primarily batch. Is that kind of customers thinking about being more aggressive with marketing; is that portfolio review? Just help me understand if there's anything to read into that strength?

It was a very strong quarter, exceeding our expectations when we provided guidance. This was partly due to securing a few significant transactions with new customers in the payments industry. We believe this is crucial for us, not only because it contributed to a robust quarter but also because we see it as a sustainable revenue source, particularly in batch processing and increasingly in other areas. We are thrilled about signing those partnerships and generating revenue during the quarter, and we think it positions us very well as we continue to enhance the utilization of our data in the payments sector.

So it doesn't sound like anything major sort of like a macro read-through perspective; more often?

No, not a read through at all. It was really just great execution by the team on winning new customers and delivering in period.

Just wanted to ask on the government vertical. I know we've talked about sort of the penetration story in terms of the amount of state local federal agencies that are out there. But I guess I would love to kind of hear your thoughts on when we look at sort of the different buckets of benefits of security, SNAP, ACA, Medicaid, like where you kind of see most sort of white space for penetration over the near to medium term here?

Yes, it's an important question. We appreciate you highlighting that area. A 29% growth rate is significant, and it's noteworthy that you're the first analysts to mention this vertical. As a reminder, the government sector is set to become our largest vertical in Workforce Solutions. The total addressable market for this sector is around $5 billion, while we are currently operating at approximately an $800 million run rate. Instead of focusing on specific services, I would encourage you to think about the total addressable market itself. The biggest opportunity within that market lies in increasing our presence at the state level and with state agencies, which are typically the ones deploying services. If we look at the potential revenue, there's over $4 billion available for us in the government vertical, particularly in social service verifications that remain manual. That's our primary focus right now. We are adding more resources and investing in new products and technology to help us penetrate those states effectively. When we meet with directors of state agencies, they are eager to use our services because they provide accuracy and increase their productivity. They continually face challenges in delivering specific services, such as food assistance and health support, more efficiently. The federal government, which funds most social services, mandates that states verify eligibility. Our role is crucial in this process, focusing on income and its verification through employment. The significant opportunity exists at the state level. As you're aware, we have several large federal contracts, including a major extension of our CMS contract last year, worth over $1 billion, and just recently, we extended our SSA contract for $500 million over five years. These contracts reflect the scale of our federal engagements. However, the key to sustaining strong double-digit growth in the government sector lies in our penetration efforts at the state level, which represents the majority of the $4 billion untapped market. As I mentioned, we are increasing our workforce presence, with Equifax and Workforce Solutions team members stationed in state capitals, collaborating with various agencies. We're also partnering up and introducing new products. Our recent acquisition of incarceration data from APRs Insights is valuable in this vertical, and we are working to integrate these data elements into a single transaction, rather than delivering them separately. There are numerous opportunities ahead, and our scale enables us to invest in this expansion. We believe that, over the long term, the government vertical will outperform the 13% to 15% growth rate we expect in Workforce Solutions, as we recognize the immense value we deliver at state agencies.

And just as a follow-up on the mortgage side. I guess when looking at some industry data, it looks like maybe the gap between sort of USIS mortgage inquiries versus some of the application data in terms of kind of maybe widened during the quarter. I'm just wondering if there were anything to sort of call out with that? Was it due to maybe mix dynamics between purchase and refi? Any information on that would be helpful.

No, I don't think there's anything specific, right? I think it continues to be. We still think we have the same penetration and share that we have consistently. Obviously, with hard inquiries, it's still required to pull a tribunal. So I'm not sure what you're specifically looking at, but no, we don't see any changes that are meaningful in hard inquiries in the industry.

We anticipated this outcome and communicated our expectations in July. The strong growth in EWS exceeded our expectations, which we were very pleased about.

Maybe going back to talent verifications. I'm curious if you have any insight into which industries you're seeing that slowdown in hiring. Then I'm also curious if you're seeing any increase in competition or any more in-sourcing by some of the large background screeners.

Yes, what we heard from our background screening customer base is that they experienced some slowdowns in mid to late September in the white-collar sector. Even though we reported a strong quarter, there were still slowdowns noted. We took that run rate into account moving forward. Given the numerous layoffs reported by various companies in the past month or two, it seems there is some caution as people await the outcome of the election and developments in Washington. I don’t believe it’s anything beyond that, John.

No. And we haven't really seen any movements in share. We continue to work well with our partners, and we just think it's a matter of we happen to be focused on white-collar, and you've seen some slowdown in white-collar specifically in September.

Yes. Thanks, everybody, for your time today, and if you have any follow-up questions, please reach out to myself or Molly and look forward to interacting with everybody throughout the quarter. Thank you.

Ladies and gentlemen, this concludes today's event. You may disconnect your lines or log off the webcast at this time and enjoy the rest of your day.