Mark W. Begor
Chief Executive Officer at Equifax
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 on 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 a likelihood of a much more substantial decline in the US mortgage market than we expected in February. Over the past several months, mortgage rates have increased more rapidly than expected with the 30-year mortgage rate reaching over 5% last week, a 10-year high. And there's increased expectation for further increases in US 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 with US mortgage credit inquiries for the -- over the last nine months of '22 declining on the order of 37.5% or 38%.Over the last half of 2022, we expect US 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 MBA and Fannie Mae.
This level of mortgage market credit inquiries over the last half of 2022 is approaching 25% below the five-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. US 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 expectations for further rate increases, high inflation in the war in Ukraine, our guidance reflects the much higher likelihood of a more significant decline in US mortgage market as we move through the second quarter and continued significant sequential declines as we move through the balance of the year. We felt it was prudent to derisk our guidance for the mortgage market and pull forward from 2023 the normalization of the mortgage market into 2022. For the full year, this results in US mortgage credit inquiries being down about 33.5% for the year, which is almost 10% below the five-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, our run rate of 40 -- minus 40%, which is 25% below the five-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 2022 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, a reduction of $0.50 per share.
As I mentioned, at these levels, we still deliver solid 2022 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 in our guidance shortly. Turning to slide four, in the first quarter we delivered revenue and adjusted EPS above the high end of our guidance range. Revenue of $1.36 billion was up 12% with 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 a US mortgage market where credit inquiries were 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 US 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 US mortgage market inquiries.
Nonmortgage US revenue represented over 60% of total US 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 of $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 US 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 would 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 are 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 three 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 strength in Equifax are a strong lever 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 2023 growth strategy, leveraging our new EFX Cloud capabilities.
Turning now to slide five. In the first quarter, Equifax core revenue growth, the green sections of the bars, grew a very strong 21%, which was above our expectations and substantially above our long-term framework -- 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 US drove about two-thirds of our core organic revenue growth in the quarter. Strong 27% core mortgage outperformance in Workforce Solutions drove the remaining one-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, count identity and fraud, Appriss Insights and accelerating NPIs. As detailed on slide six, 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 US 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 seven. Workforce Solutions continues to deliver outstanding core revenue growth, delivering over 40% growth for the fourth time in the last five quarters. This is very strong performance is driven -- this very strong performance is driven by Workforce Solutions' 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, deliver high hit rates and represent about 65% of US non-farm payroll. The flat sequential performance from year end was also very strong as we offset reductions of approximately three million records from the normal seasoning higher declines from the fourth quarter with new record additions. As of today, we're already back to over 136 million records as we begun boarding records from one of the new exclusive payroll processor agreements we signed late last year. And as a reminder, almost 50% -- 55% of our records are contributed directly by individual employers.
Second, EWS is 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, EWS 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 poles 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 and records through strategic bolt-on acquisitions. Over the past two 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 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 five. They had 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 US mortgage market. Core revenue growth was a very strong 45% in the quarter with core organic revenue growth of 34%.Nonmortgage 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 nonmortgage 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 nonmortgage, 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 nonmortgage consumer lending business, principally in banking and auto, showed strong growth as well, up 40% in the quarter. Increasing records, penetration, 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 US 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 employer retention credit businesses had revenue of $50 million, up 6% last 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 I-9 business, driven by our new I-9 Anywhere product, continued to show very strong growth, up over 55%. In the first quarter, our I-9 and onboarding business made up over -- 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 nine, 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 slide 10 and USIS. Their revenue of $433 million was down 6% compared to first quarter and slightly below our expectations. The decline was driven by the reduction in USIS mortgage revenue, which at $140 million is about 30% of total USIS revenue. And 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. And 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 batch in the past, our batch or portfolio review project business can be choppy as the revenue is often driven by larger onetime off-line data licensing projects. We expect to return to growth in second quarter, driven by growth in marketing prescreen and in the portfolio review solutions inside of FMS. USIS Consumer Solutions business, the US D2C business from GCS that was 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 US for sustainable long-term nonmortgage 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 data sets 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 an important growth lever for USIS to deliver new solutions that will help expand access to credit in the over 60 million un and underbanked population in the United States. Earlier this week, Equifax announced a 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, account acquisition, 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 UK debt management business. We've seen significant increases in debt placements from the UK government over the past several quarters that we expect to continue. As you recall in December, Equifax was awarded a four-year extension with the UK 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 UK 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 three 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 of 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 slightly -- 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 this slide. Leveraging our new EFX Cloud capabilities to drive new product rollouts, we expect to deliver 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 and driving EFX top-line growth.
As detailed on slide 14, reinvesting our strong cash flow and 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 2022 off strong with two strategic and accretive bolt-on acquisitions of 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 TWN 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 the fast-growing $19 billion identity and fraud space; and number four, to look to expand our global credit bureau footprint. We are well down the path of integrating the acquisitions into 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.
