Mark W. Begor
Chief Executive Officer at Equifax
Thanks, Trevor. Good morning. Equifax delivered another solid quarter with record second quarter revenue of $1.32 billion, which was up 7% and at the middle of our April guidance including the negative impact of 190 basis points or $23 million of FX. Constant currency revenue growth was almost 9%, at 8.5%. Adjusted EPS of $2.09, was above the top-end of our April guidance range with U.S. mortgage market overall about at the level of our April guidance with U.S. mortgage credit inquiries down 33% versus last year. As expected, the mortgage market decline increased as we move through the quarter. In the first half of July mortgage credit inquiries were down about 40% versus last year.
Core revenue growth in the quarter of 19% and core organic revenue growth of 16% in the quarter were very strong, consistent with our expectations, which allowed us to deliver the 8.5% constant currency growth against a 33% U.S. mortgage market decline. Importantly, non-mortgage constant currency growth of 22% was very strong in the quarter and well above our 8% to 12% long-term framework, and of course, this represents about 75% of Equifax revenue.
Workforce Solutions core revenue growth of 41% was outstanding and above our expectations. International delivered 11.5%, constant currency growth, which was also above our expectations and USIS B2B non-mortgage growth at 6%, was up from first quarter but lower than we expected. B2B non-mortgage online was strong at 9%. However, our B2B offline business was much weaker than expected, declining 5% in the quarter and I'll cover this more fully shortly. Second quarter adjusted EBITDA totaled $461 million, up 7% and adjusted EBITDA margins of 35% were about in line with our expectations for the quarter.
We continue to make strong progress during the quarter on our EFX Cloud data and technology transformation. Year-to-date we've migrated approximately 14,500 customers to the cloud in the U.S. and since the start of the transformation, we now have migrated about 70% of our U.S. customers. So far in 2022, we've also migrated approximately 13,000 international customers and decommissioned four U.S. data centers. Leveraging our new EFX cloud infrastructure, we continue to invest in new product resources and accelerate new product innovations. So far in 2022, we released 50 -- over 50 new products, continuing the momentum from 2021 where we launched a record 151 new products.
In the quarter, our vitality index, defined as revenue from new products introduced in the last three years was extremely strong and exceeded 13%. This is over a 400 basis point improvement from our 9% vitality last year and the highest level in over 10 years at Equifax. For 2022, we expect vitality of over 11% which is 100 basis points above our 10% long-term vitality goal and 100 basis points above the framework when we started the year. This strong NPI performance will benefit our growth in the second half and in 2023 and beyond.
We continue to invest our strong free cash flow in strategic bolt-on acquisitions with the acquisition of LawLogix that we announced earlier this morning, which will further strengthen our EWS Employer Solutions I-9 and Immigration Regulatory Service capabilities. This is our sixth acquisition in Workforce Solutions since January 2021 and aligned with our M&A strategy to strengthen Workforce, our largest and fastest growing businesses -- business. Bolt-on both acquisitions that broaden and strengthen Equifax or a strong lever for future growth and are central to our long-term growth framework to add 100 to 200 basis points to our revenue growth annually from strategic bolt-on M&A.
We are very pleased with our strong second quarter results, particularly our strong 22% non-mortgage constant currency growth. This is clearly an unprecedented economic environment with record inflation, strong Fed actions and the impact from higher interest rates on the mortgage market. Despite our strong first half performance, we felt it was prudent to adjust our 2022 guidance to reflect expectations for further weakening of the U.S. mortgage market in the second half beyond the framework we provided in April, as well as the significant negative impact of FX from the stronger dollar.
Importantly, our expectations for 2022 core revenue growth remains a very strong 17% and our expectation for constant currency non-mortgage revenue growth remains a very strong 19%, both unchanged from our April guidance. While our second quarter mortgage results were aligned with our April guidance, we thought there was enough uncertainty between future Fed actions, the impact on interest rates and mortgage activity to further adjust our second half mortgage outlook. Our updated expectations for mortgage or that credit inquiries will decline by over 46% in the second half, which is down about 600 basis points from our April framework with mortgage originations declining 200 to 300 basis points beyond these levels. This compares to the Mortgage Bankers Association forecast for the second half of 2022 mortgage origination units of down 43.5% that was released last night.
As you know USIS mortgage revenue was tied more closely to credit inquiries while Workforce Solutions revenue was tied more closely to mortgage originations. And for the second half of 2022, FX is a headwind of over $40 million, up from an impact of about $7 million in our April guidance from the stronger dollar. The change in the second half mortgage inquiries and FX impact results in our revised 2022 guidance for revenue at the midpoint of $5.1 billion, down $100 million from our April framework, but still up almost 4% versus last year or 5% on a constant currency basis. This reduction in revenue was about two-thirds related to mortgage, with the balance from FX. Our updated adjusted EPS guidance is to a midpoint of $7.68, down $0.47 from our April guidance and up about 1% from 2021.
As I said earlier, there is no change in our core organic revenue growth framework, which remains a very strong 15% for 2022% and 13% in the second half of 2022, and our non-mortgage growth framework, which remains up a strong 16% for the year and 12% in the second half as we comp off some strong double-digit results in the second half of 2021 and -- in the second half of 2021. In the second half of 2022 non-mortgage is about 80% of Equifax revenue consistent with 2019, and up from 68% last year.
Turning to Slide 5, in the second quarter, Equifax core revenue growth, the green section of the bars, grew a very strong 19%, which was in line with our expectations and substantially above our long-term financial framework of 8% to 12%. Core organic revenue growth of 16% in the quarter was also substantially above the long-term framework of 7% to 10% for organic growth. Non-mortgage organic growth in EWS international and USIS drove about 12 points of core organic revenue growth in the quarter. Core mortgage outperformance of 13% predominantly in Workforce Solutions drove the remaining 4% of second quarter core organic revenue growth. Both were very strong performances.
With our strong 19% core growth in the quarter and accelerating NPI rollouts, we continue to expect 2022 core revenue growth of 17%. This is driven by broad-based strong performance across Workforce Solutions, as well as strength in USIS non-mortgage B2B online and international, which is supported by our accelerated new product introductions.
As detailed on Slide 6, U.S. core mortgage revenue growth in the quarter was up a strong 13%, driven by Workforce Solutions core mortgage revenue growth of 20% and 2% in USIS. Second quarter mortgage revenue was down only 19% despite a 33% decline in the overall U.S. mortgage market is measured by our credit inquiries and an MBA June estimated decline in mortgage originations of about 37%. Workforce Solutions' core mortgage growth of 20%, continues to be driven by very strong performance on TWN record additions, new products and pricing, system-to-system integrations and continued penetration. The 20 points of market outperformance is very strong, particularly in a period of declining market transaction volumes. We expect to see continued very strong core mortgage growth from EWS approaching this level in the second half.
As a reminder, we estimate the U.S. mortgage market as the change in USIS credit inquiries. In a rising interest rate environment, we believe consumers tend to rate shop more frequently, thus creating a favorable variance between mortgage credit inquiries in originations, this trend benefits USIS credit file pulls. In the second quarter, we saw mortgage credit inquiries perform on the order of 4 points better and the estimated change in the mortgage origination units estimated by MBA. However TWN income and employment is typically pulled later in the mortgage application process and at closing. As a result EWS does not benefit as much from the upfront rate shopping trend that occurs in a rising interest rate environment as TWN increase are more closely correlated to mortgage originations.
Turning to Slide 7, in 2022, we expect non-mortgage revenues to be 77% of total Equifax revenues, which is up a very strong 900 basis points from the 68% of total Equifax revenues that we saw in 2021. Given the above-market growth in fast growing Workforce Solutions verticals such as talent, government and card, further penetration identity and fraud accelerated by our 2021 acquisition account and accelerated NPIs with a vitality index expected to be 11% in 2022, and of course, growth in our international markets. We also expect non-mortgage revenue will benefit from being the only cloud native credit bureau through always on system stability, faster transaction processing and leveraging the data fabric to expand our NPIs.
Turning now to Slide 8. Workforce Solutions delivered outstanding 41% core revenue growth in the second quarter, the fifth quarter over 40% revenue growth in the last six quarters, and their 10th quarter of double-digit revenue growth driven by outstanding non-mortgage growth of over 50%. As a reminder, non-mortgage revenue is over 60% of Workforce Solutions and a big EWS growth driver for the future. Rudy Ploder in the Workforce Solutions team continue outstanding execution across their key growth drivers detailed on the right hand side of this slide.
As I referenced earlier, we signed a definitive agreement to acquire LawLogix last night, the next in a string of bolt-on acquisitions that strengthen Workforce Solutions Employer Services vertical and adds TWN records. Over the past two years, we've completed six bolt-on acquisitions supporting Workforce Solutions growth including Appriss Insights last fall and LawLogix this morning.
Turning to Slide 9, Workforce Solutions, very strong performance is driven by the team's consistent execution across their key growth levers that will drive their long-term growth of 13% to 15% including, first, growing the Work Number database. Since late last year, we signed four new exclusive agreements with large payroll processors that we started to board in the second quarter and expect to have all of them contributing records by the end of the third quarter. We ended the quarter with 144 million total current records, which is up a very strong 22% from last year and up 6% sequentially. These 144 million total record represent a 110 million unique individuals representing two-thirds of the over 160 million W2 employees included in U.S. non-farm payroll. In addition to traditional W2 wage earners, we estimate there are approximately 30 million to 40 million Gig workers and 20 million to 30 million pensioners in the U.S., who will also bring valuable insights to lenders background screeners, and government agencies. We're in the very early innings of collecting records on these 50 million to 70 million non-W2 wage earners but expect to make significant progress as we move through 2022 and 2023.
We have the ability to double our TWN database with the total potential market for income and employment information on about 220 million individuals versus the 110 million we have today. As a reminder, over 50% of our records are contributed directly by individual employers. The remaining are contributed through partnerships principally with payroll companies. The vast majority of our partnerships with payroll companies are exclusive including all the relationships we've signed in the past four-plus years. Second, workforce is increasing penetration in their key non-mortgage verticals at mortgage, talent, government and consumer finance. With all four verticals having significant opportunity for continued expansion by new products, leveraging our expanding TWN active and historical data assets.
Our talent and government businesses have seen average organic growth of over 50% since last year and over 20% CAGR since 2017. Our strength in talent and government is driven by the depth and coverage of our TWN database with over 570 million total records, both current and historic that provide both current and previous employment information on individuals, allowing us to increasingly provide an instant digital resume or employment verification on both current and historical job histories. The expanding depth of our TWN database and expansion of the Workforce Solutions talent data hub, as well as the increasing ease of integrations as workforce leverages the API capabilities through our new Google Cloud is also providing the ability to continue to increase penetration in key verticals.
Fourth, workforce is expanding their system-to-system integrations. Currently more than 75% of our mortgage transactions are system-to-system integrations as web access, which is up over -- versus web access, which is up over 2 times from 2019. As you know, we get about a 20% lift in mortgage pulls when we convert our customers from web to system-to-system integrations.
In Talent Solutions system-to-system now represents more than 85% transactions, while in government, we have more opportunity with about 65% of transactions on a system-to-system basis. As a reminder, close to 100% of credit files are delivered systems-to-system for originations. From our perspective, it's only a matter of time for TWN to approach these levels of system-to-system integrations with customers, which of course will drive our revenue.
As Workforce continues to deliver greater value to customers through deepening the database and extending real time system-to-system integrations and accelerating its launch of higher value vertical specific new products. Average revenue per transaction will continue to grow significantly, both through higher value and price new products and annual price increases. As I said earlier, Rudy and EWS team have a long runway for growth leveraging multiple levers in 2022 and beyond. We have a lot of confidence in Workforce's ability to deliver on their 13% to 15% long-term framework. As a reminder, over the past three years, they've delivered 34% CAGR which of course is well above their 13% to 15% long-term growth framework.
Turning to Slide 10, Workforce Solutions had another exceptional quarter, delivering $609 million of revenue, their second revenue quarter above $600 million. Revenue growth was up a very strong 21% with organic revenue growth of 11% despite the significant decline in the U.S. mortgage market. Non-mortgage revenue is now over 65% of Workforce Solutions with organic growth of 30%.
We Verification Services revenue of $505 million, up 28%, was over $500 million for the second quarter in a row, again, despite the decline in the mortgage market. Non-mortgage verticals now represent almost 60% of verifier revenue and delivered 90% and 53% -- 90% total and 53% organic growth. Appriss Insights, which we acquired late last year, delivered strong 15% growth in the quarter. Growth was strong in their key verticals of risk and justice intelligence. Risk intelligence helps background screeners analyze people risks via background checks and continuous monitoring and justice intelligence helps channel partners assist law enforcement agencies in their investigations. Increased customer penetration, whitespace expansion and strong hiring volumes are driving growth, and their NPI pipeline also remains strong. We are very positive about the future growth and potential of our Insights business.
Talent and Government Solutions would now -- which now represents 40% of Workforce Solutions and almost 80% of verifier non-mortgage respectively, both had outstanding quarters. Talent Solutions delivered a 134% total, and 73% organic growth in the quarter on record growth and strong new product revenue. We also saw strong growth in the government vertical with revenue up 100% total and 50% organic with significant new wins at the state level, and continued growth of our large SSA contract. The continued expansion of Workforce Solutions data hub in the fast growing $5 billion talent and $2 billion Government TAMs is driving strong double-digit organic revenue growth in both verticals, leveraging Workforce Solutions over $570 million current and historical records for new products.
The integration of Appriss Insights National Student Clearinghouse and other talent related data assets strengthens our ability to deliver to these new solutions, leveraging the EWS data hub and drive outsized growth in the future. The non-mortgage consumer lending business, principally in banking and auto, also showed strong growth, up 18% in the quarter, and debt management grew over 70% in the quarter.
Employer Services revenue of $105 million was down 3% due to the expected decline in our unemployment claims in Employee Retention Credit businesses. We expect total UC & ERC revenue to be down over 25% during 2022, driven by lower jobless claims and lower ERC transactions, as well as the COVID federal tax credit program -- as the COVID federal tax program runs out. Employer Services revenue excluding UC & ERC was up a strong 42% in the quarter, driven by strong based double-digit growth in our I-9 and onboarding healthy FX in our tax credits businesses. Workforce Solutions adjusted EBITDA margin remained strong at 53%. In the quarter, we increased spending relative to our April expectations on both technology and marketing principally for new products.
The strength of Workforce Solutions and uniqueness and value of their TWN income and employment data, and Employer Services businesses was clear again in the second quarter. Rudy and the EWS team delivered another outstanding quarter with 21% revenue growth and 41% core growth, well above their 13% to 15% long-term framework, and we're well positioned to deliver a very strong '22 and continue above market growth in the future.
Turning now to Slide 11. USIS revenue of $421 million was down 7.5% compared to last year and slightly below our expectations. The decline was driven by the reduction in USIS mortgage revenue which had $113 million is about 25% of total USIS revenue, and was down 29% in the quarter, about 4 percentage point better than the overall mortgage market credit inquiries that declined 33%. Importantly USIS delivered their sixth consecutive quarter of growth in B2B non-mortgage revenue of $259 million, which represents over 60% of total USIS revenue and was up 6% with organic revenue growth of 4%. This is at the low-end of the 6% to 7% growth, we discussed in April, due to lower than expected FMS, Financial Market Services, revenue. Importantly B2B non-mortgage online revenue growth was strong at 9% with 7% organic growth.
During the quarter we saw double-digit growth in insurance, financial services, commercial as well as Kount, our identity and fraud business. We also saw growth in direct-to-consumer with auto about flat in the quarter on favorable pricing offset by lower volumes, given the continued auto supply chain issues. Kount, which provide unique identity and fraud solution continues to perform very well. Our core new product growth continues to be strong and the team continues to execute on the development of joint solutions, leveraging both Kount and Equifax data including combining Kount's market-leading Omniscore AI capabilities and digital identity data with Equifax's physical identity into a single score to enhance fraud protection.
Financial Marketing Services, our B2B offline business, had revenue of $55 million, down 5% year-over-year. And although, better than the first quarter was lower than our expectations. FMS is principally comprised of three lines of business, including, first, fraud and data services, in which we provide header data principally to providers of identity and fraud services, which is a line of business is driving the weakness in our B2B offline. Fraud and data services historically represents over 20% of our offline revenue, but is declined substantially in the first half. We saw this decline in the first quarter as customers either decreased frequency of refresh data or shifted to use of their own internal data. This decline continued in the second quarter. Revenue was about 10% of B2B offline in the first half. We expect revenue at this level to continue through 2022 as the team focuses on bringing new solutions to market later this year.
Marketing Services, which represented -- represents over half of B2B offline revenue in the first half, performed very well, growing it, but got consistent with our non-mortgage B2B online organic growth. This is a business in which we provide data and decisioning principally financial institutions for pre-screens, as well as providing our IXI data for marketing activities. And third, risk management, our portfolio review represents about a third of B2B offline revenue. This is a line of business in which we provide data and analytics services to financial institutions to evaluate the health of their existing portfolios or in some cases portfolios they are acquiring. This business is often somewhat countercyclical as customers perform more risk analytics during weak economic periods. This business was down slightly in the first half and slightly weaker than expected, and we expect this business to be down slightly for the remainder of the year.
Overall for our financial marketing services in B2B offline for the remainder of 2022, we expect to see declines in line with the second quarter as the weakness in the fraud and data services is partially offset by continued good growth in marketing services. As we look to 2023, the completion of the Equifax new cloud data fabric will enable enhanced product offerings in B2B offline, combining U.S. credit file, DataX, Teletrack, Kount, ID and Fraud, and NCTUE data. We believe this will drive growth across all three of our B2B offline lines of business as we get 2023. For B2B non-mortgage in total, we expect to see continued strong online growth consistent with the first half, however declines in Financial Marketing Services are expected to result in second half total B2B non-mortgage growth at or slightly below the bottom end of our long-term framework of 6% to 8% revenue growth.
USIS Consumer Solutions business, the U.S. B2C business from GCS that we combined with USIS in the fourth quarter last year, had revenue of $49 million, up 3% in the quarter and about flat versus last year. We expect second half growth rates to improve as the team leverages the cloud to rollout NPIs. USIS sales team had a strong quarter with a number of key wins resulting in a healthy win rate and their new deal pipeline remains very strong with the overall pipe, slightly higher than the first quarter. And USIS adjusted EBITDA margins were 38.2% in the quarter, a 110 basis points lower than the first quarter, but better than our expectations. The decline relative to the first quarter is principally driven by lower revenue from the decline in mortgage.
Turning now to international is shown on Slide 12, the revenue was $286 million, up a strong 11.5% on a local currency basis. We're seeing broad-based execution from our international businesses. Europe local currency revenue was up 16%, principally driven by strength in 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. Our European CRA businesses was about flat in the quarter and below our expectations, driven by declines in consumer direct and commercial, partially offset by strong growth in identity and fraud.
Asia Pacific local currency revenue was 6% driven by strong growth in our Australian consumer business, HR services and identity and fraud. Latin American local currency revenue was up 28%, driven by strong double-digit growth in Chile, Argentina, Uruguay, Mexico and Central America. The team's strong new product introductions over the past three years and pricing actions continue to drive strong growth across the region. This is the sixth consecutive quarter of growth for Latin America. Canada local currency revenue was up 2%, below our expectations. We saw growth in commercial and analytic solutions, which was partially offset by consumer services, mortgage-related products and online businesses, due to interest rate increases. International adjusted EBITDA margins at 24.7% were down 200 basis points from last year, due primarily to the elimination of equity income from our Russian joint venture.
As shown on Slide 13, we had another very strong new product quarter with a vitality index over 13%, which is up 400 basis points above our full year 2021 Vitality goal, and 300 basis points above our 10% long-term framework goal and our highest vitality performance ever. Building on the record 151 new products last year, we've delivered over 50 new products, leveraging the new EFX Cloud so far in 2022, with broad-based execution across all of our business units. We've detailed some of the more significant new products on the slide, leveraging our new EFX Cloud capabilities to drive new product rollouts, we expect to deliver a vitality index of over 11% this year, which equates to over $550 million of new product revenue in 2022. We believe our strong NPI revenue generation is an important early indicator of the benefits of the new Equifax Cloud, new products, leveraging our differentiated data and new EFX Cloud capabilities are central to our long-term growth framework and driving future Equifax topline 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 long-term framework. We expect to add 1% to 2% of revenue growth annually from strategic bolt-on M&A, including LawLogix that we announced this morning. We've completed 11 acquisitions since January 2021, aligned with our strategy to add bolt-on M&A around three strategic priorities. Number one, expanding and strengthening Workforce Solutions, our fastest growing and most profitable business. Number two, adding unique data assets. And number 3 building out and expanding our ID and fraud business.
Slide 15 provides detail on our latest acquisition of LawLogix, which further strengthens our Workforce Solutions Employer Solutions capabilities and provides I-9 management and immigration case management solutions focused on removing friction during the employee onboarding experience. LawLogix suite of products supplements Employer Services capabilities by building upon investments made to help clients enable automation, deepen employee insights and increase efficiency. Our I-9 Anywhere product has seen very strong 45% growth over the past few years. The LawLogix acquisition is aligned with our M&A priorities of expanding and strengthening our strongest and the fastest growing business Workforce Solutions.
And with that, I'll turn it over to John to provide some more details on the mortgage market and our third quarter and full year 2022 guidance.
