Mark W. Begor
Chief Executive Officer at Equifax
Thanks, Trevor. Equifax delivered another very solid quarter with continued execution against our EFX's 2025 strategic priorities in a challenging economic environment. Third quarter revenue of $1.244 billion [Part 1 end] Was up 2% or 4% in constant-currency and was above the high-end of our guidance driven by strong non-mortgage revenue growth in the quarter. This strong revenue performance was well-above our July framework and delivered despite a more negative FX environment than we expected which at 200 basis-points or $29 million was $5 million or about 50 basis-point greater headwind for FX than we expected when we put our July guidance. Adjusted EPS of $1.73 per share was also stronger than our July guidance. We are continuing to significantly outperform our underlying markets as we navigate the challenging economic environment and mortgage market decline. Our global non-mortgage businesses which now represent over 78% of total Equifax revenue were very strong with 20% total and 13% organic non-mortgage constant-currency dollar revenue growth, stronger than we expected when we provided guidance for July, and stronger than our 8% to 12% long-term growth framework. We're now tracking to 20% non-mortgage constant dollar growth in 2022 which is up about 100 basis-points from our July guidance. The outperformance was again led by outstanding performance at Workforce Solutions that delivered 40% total and 20% organic non-mortgage revenue growth. USIS B2B non-mortgage grew 9% online and 5% total, which is about consistent with second-quarter but weaker than we expected. International delivered a record quarter up a very strong 17% constant dollar growth and 15% organic constant dollar growth well-above our expectations. Equifax total mortgage revenue was down 30%, about as expected and outperformed the underlying market decline by over 10 points from pricing, new TWN records, penetration, system-to-system integrations and new products. The US mortgage market as expected weakened substantially in the third quarter with originations estimated at down 50% in the quarter which was about nine points weaker than our July guidance. As a reminder, Workforce Solutions mortgage revenue is more closely tied to originations. USIS mortgage credit inquiries were down 41% in the quarter and better than our expectations from increased shopping activity despite the weaker-than-expected mortgage originations. We're continuing to see higher than normal levels of shopping which continued throughout the quarter and tends to benefit USIS credit file pulls. Combined a negative mortgage market impact on Equifax was about as expected as the more negative marketing impact from originations and EWS was offset by the less negative impact on USIS from increased shopping activity. We saw continued weakening of the mortgage market as we moved through September and into the first few weeks of October as mortgage rates continue to rise to their highest-level since 2008. We now expect mortgage originations to decline over 60% in the fourth quarter versus our July framework of 48%, and USIS credit inquiries to decline over 50% versus our July guidance of 46%. John will talk about our updated mortgage framework in a minute. Third quarter adjusted EBITDA totaled $405 million and was flat compared to last year. Adjusted EBITDA margins of 32.5% were slightly below our expectations for the quarter principally to -- due to higher sales and marketing expenses driven by our outperformance in non-mortgage verticals. John will walk you through our margin performance in the third quarter and expectations for fourth quarter later in the presentation. We continue to make significant progress executing the EFX cloud data and technology transformation. We're now approaching 70% of North-America and 60% of total EFX revenue being delivered from the new EFX cloud. Our focus for the remainder of '22 and 2023 is accelerating four customer migrations [Phonetic] in North-America to enable decommissioning of our applications in datacenters. Our new FX EFX cloud infrastructure is delivering always on capabilities and faster new product innovation with integrated datasets, faster data delivery, and industry-leading enterprise-level security. We are convinced that our EFX cloud and single data fabric will provide a competitive advantage to Equifax for years to come. We're in the early days of leveraging our new EFX cloud infrastructure and single data fabric and are seeing acceleration of innovation and new product rollouts. Our new product vitality index of 14% in the quarter is a record and over 500 basis-points improvement from our 9% vitality index last year and well-above our 10% long-term goal for vitality. As a reminder, our vitality index is a percentage of revenue derived from new products launched in the past three years. Our strong momentum on NPI rollouts leveraging the new EFX cloud allowed us to raise our full-year vitality index outlook for 2022 for the second time this year from 11% to 13%, which is up 300 basis-points from our long-term framework and from the framework we started earlier this year. This strong NPI performance gives us momentum into 2023 as most new products reach commercial maturity in years two and three. In third quarter we continued to execute our bolt-on acquisition strategy completing two acquisitions, while Logix which will further strengthen Workforce Solutions on-boarding and I-9 Solutions, and Midigator which will strengthen count and broaden our identity in fraud franchise. These are our 11th and 12th bolt-on acquisitions since January 2021 and aligned with our M&A strategy to strengthen Workforce Solutions our largest and best growing business, add unique and differentiated data, and expand in the fast-growing identity and fraud market. Bolt-on acquisitions that broaden and strengthen Equifax are strong levers for future growth and are central to our long-term growth framework to add 100 basis-points to 200 basis-points annually to our revenue growth from strategic bolt-on M&A. Our guidance for 2022 revenue of just under $5.1 billion is essentially unchanged from the framework we provided in July. With third quarter revenue -- third quarter revenue was stronger than our July guidance by about $25 million, our current guidance reflects a decline in fourth quarter from our prior implied view by about $25 million from the weaker mortgage market and FX. The continued weakening in the US mortgage market is negatively impacting fourth quarter revenue by about $45 million, and negative FX is impacting revenue in the fourth quarter by about $15 million. Partially offsetting this $60 million negative impact is stronger non-mortgage revenue in Workforce Solutions and International and the acquired revenue from LawLogix and Midigator. The strong 20% constant dollar non-mortgage growth in 2022 gives us great momentum as we look to 2023 and a bottoming of the mortgage market in the coming quarters. Our guidance for adjusted EPS of $7.54 a share is down about $0.13 from the midpoint of our July guidance. As our third quarter adjusted EPS was about $0.08 per share stronger than our July guidance, this results in a reduction in the fourth quarter from our implied EPS of about $0.21 a share or about $33 million in pretax income. The most significant drivers of this reduction in EPS are first, the $45 million reduction in higher-margin fourth quarter mortgage revenue due to the weakening mortgage market which more than drives this level of reduction in pretax income; and second, higher interest expense. These negative impacts were partially offset by stronger non-mortgage growth and the addition of acquisition-related non-mortgage revenue from LawLogix and Mitigator. And again, John will provide details on fourth quarter and full-year guidance shortly. We were very pleased with our continued very strong constant dollar non-mortgage revenue growth of 20% total and 13% organic which is well-above our 8% to 12% long-term framework, and our ability to outperform the underlying mortgage market as shown by our third quarter results. Turning to Slide 5, a critical deliverer of our strategic priorities and the continued expansion of our addressable market data sources in revenue. Equifax is much more than a credit bureau today and our addressable TAM has expanded 3 times to over $45 billion. Over the past several years, we've expanded into faster-growing markets outside Financial Services and mortgage. These faster-growing markets include identity and fraud, talent management, government and employer services verticals. This has accelerated our growth outside of financial services and mortgage and increased the resiliency and diversity of EFX by broadening our revenue streams including markets that are expected to deliver future growth at levels above our traditional markets. As shown on this slide, since 2019 we've grown our total non-mortgage business by over $1.1 billion with a combined CAGR since 2019 of 12%, which is at the high-end of our 8% to 12% long-term growth framework. In 2022, we expect non-mortgage revenue to represent over 75% of total Equifax revenue, and in the fourth quarter it will be well over 80%. Also since 2019 we've grown our non-credit bureau based revenues by $1.5 billion, or a very strong CAGR of about 30% to over half of Equifax total revenue. This was led by our $2.4 billion Workforce Solutions business which is up $1.4 billion since 2019 at a very strong CAGR of about 35%, but alss supported by strong double-double digit growth in identity and fraud from count and Midigator as well as strong growth in debt services. We've also completed 12 acquisitions since 2021 that are all in the mortgage space and are delivering strong double-digit growth. Workforce Solutions strong above-market growth in verticals like employer solutions, talent and government, our expansion into identity and fraud, and our focus on new product investments coupled with our bolt-on acquisitions focused on non-mortgage priorities will continue to accelerate the growth of these non-credit and non-mortgage revenue streams at Equifax. Turning to Slide 6. In third quarter, Equifax core revenue growth the green section of the bars grew a very strong 16% reported and 19% [Part 2 end] In constant-currency which was consistent with our July guidance. Constant dollar core revenue -- organic revenue growth of 14% in the quarter was also substantially above the organic growth in our long-term financial framework of 7% to 10%. Non-mortgage constant dollar organic revenue growth of 13% drove 3/4 of the organic constant dollar core growth in the quarter. Core mortgage outperformance predominantly in EWS drove the remainder of core organic constant dollar revenue growth. We continue to expect strong core revenue growth of 17% total and 19% in constant-currency in 2022, which again is well above our 8% to 12% long-term growth framework and 300 basis-points higher than the core growth for 2022 provided last November at our Investor Day. This strong constant-currency growth is driven by stronger non-mortgage revenue growth of 20% total and 13% organic due to broad-based performance across Workforce Solutions and strength in International. As detailed on Slide 7, US mortgage revenue was down about 30% in the quarter. This compares to third quarter mortgage originations of down 57% as estimated by mortgage industry third-parties and USIS credit inquiries that declined 41%. As a reminder, in a rising rate environment we believe consumers tend to rate shop more frequently creating a favorable variance between mortgage credit inquiries and originations that benefits USIS credit file pulls from shopping. In the third quarter we saw mortgage credit inquiries perform in the order of 16 points better than the change in the estimated mortgage originations. USIS revenue declined 35% in the quarter, about six points better than credit inquiries. However, TWN income and employment is typically pulled later in the mortgage application process and a closing. As a result EWS does not benefit as much from the upfront shopping trend that occurs in a rising rate environment as TWN increase are more closely aligned with completed mortgage originations. TWN mortgage revenue declined 28% in the quarter. EWS core mortgage revenue growth that was up a strong 14% in the quarter and when adjusting for the 16 point negative spread between mortgage inquiries in originations was up a very strong 30% and consistent with prior quarters. Overall, Equifax's mortgage revenue outperformed USIS credit inquiries by 11% or 11 points in the quarter and outperformed estimated mortgage originations by a strong 27 points in the quarter. This reflects the strength of our US enterprise mortgage sales and operations team to bring the combined USIS and EWS products and solutions to market in this challenging mortgage macro. Turning to Slide 8. Workforce Solutions delivered another outstanding quarter with 32% core revenue growth, driven by very strong non-mortgage non UC and ERC growth of 62%. As a reminder, non-mortgage revenue is now about 70% of Workforce Solutions and a big Workforce Solutions driver for future growth from their fast-growing talent and government verticals. Workforce Solutions above-market 32% core growth in the quarter continues to be driven by very strong performance on TWN record additions, new products and pricing, system-to-system integrations, and greater penetration. Their market outperformance is very strong particularly in a period of declining market transaction volumes for mortgage. We expect to see continued very strong core growth in fourth quarter from Workforce Solutions. Rudy Ploder and the Workforce Solutions team continue outstanding execution across their key growth drivers detailed on the right-hand side of the slide. Over the past 12 months, we've signed ten new agreements with payroll processors in the US, including three new agreements in the third quarter that will be added to the TWN database over the next several quarters. These new partnerships along with continued growth in our direct contributors through our Employer Services business are delivering continued strong growth in the TWN database with current records up 16% reaching 146 million current records in the third quarter. There are 111 million unique individuals in TWN deliver very-high hit rates and represent over two-thirds of the 165 million US non-farm payroll. And as a reminder, about 50% of our TWN records are contributed directly from individual employers that we have long relationships with. The remaining are contributed through partnerships principally with payroll companies. 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 US who will also bring valuable income and employment insights to lenders, background screeners, and government agencies. We recently signed an agreement with a payroll processor to gain access to their pensioner [Phonetic] records and we have an active pipeline with other companies to acquire new pension records to the TWN database. We're in the very early innings of collecting records on these 50 million to 70 million gig and pensioner records but expect to make significant progress as we move through 2023 and beyond. TWN record additions will continue to drive workforce Solutions revenue going forward from higher hit rates, and we have the ability to double our records in the future to the roughly 220 million total W2, gig, and pension recipients in the United States. This is incredibly powerful lever for future growth at Workforce Solutions and a key driver of their 13% to 15% long-term growth rate -- growth outlook. Turning to work -- Slide 9 with some more detail on Workforce Solutions. They really had an exceptional quarter delivering revenue of $559 million. Revenue was up a strong 9% with overall organic revenue growth of about flat overall despite the significant 28% decline in EWS mortgage revenue in the quarter. Non net mortgage revenue was up a very strong 40% and is now 70% of Workforce Solutions. Verification Services revenue of $455 million was up 13% more than offsetting the 57% decline in estimated mortgage originations. Non-mortgage verticals now represent over 60% of verify revenue, and delivered 72% total and 30% organic growth. The Insights business which we inquired -- which we acquired late last year, continues to perform very well driven by strong performance in their largest verticals Risk Intelligence and Justice. Risk intelligence helps background screeners analyze people's risks via background checks and continuous monitoring. Justice intelligence helps channel partners assist law enforcement agencies in their investigations. Talent and Government Solutions which now represent almost 40% of verifier non-mortgage had outstanding quarters.Talent Solutions delivered 100% --110% total and over 50% organic growth in the quarter from record growth pricing and strong new product rollouts. We also saw strong growth in government -- in the government vertical with revenue up 90% total and 44% organic, driven by strong penetration at the state-level. The EWS government vertical is benefiting from penetration, pricing, record growth and leveraging a strong product portfolio including Insights data at the federal, state and local level across the United States. The continued expansion of Workforce Solutions data hub through our new Total Verify solution is driving very strong growth in the fast-growing $5 billion Talent and $2 billion Government markets. Our new -- our Total Verify solution is enabling our customers to access multi-data solutions derived from an unparalleled set of differentiated information assets spanning employment, income, education, incarceration, healthcare credentialing and identity. As of the third quarter, EWS has over 580 million total records in a TWN database 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 non-mortgage EWS consumer lending business principally in card, auto, and consumer finance and led by our US enterprise sales teams also showed good growth with revenue up 18% in the quarter. Employer Services revenue of $104 million was down 7% due to the expected decline in our unemployment claims and employee retention credit businesses. We expected total UC and ERC revenue to be down about 20% in 2022 driven by the lower jobless claims and ER transit -- ERC transactions as a COVID federal tracks -- COVID federal tax program runs out. Employer Services revenue excluding UC and ERC was up a strong 29% in the quarter driven by broad-based double-digit growth in our I-9 and onboarding, healthy FX, and our tax credit businesses. We are increasingly seeing the ability to deliver bundled packages of our differentiated Employer Services solutions to customers. In the third quarter, we signed a large multi year agreement to provide a broad suite of EWS solutions including I-9, W4, tax services and other HR Solutions to a large multinational company with annual guaranteed Workforce Solutions revenues approaching $20 million with total annual revenue opportunities with the agreement of over $30 million. Workforce Solutions adjusted EBITDA margins of 29.5% were lower than our July guidance and the over 50% margins we expect from EWS on an ongoing basis. The main drivers of the lower-than-expected margin was negative mix due to lower [Part 3 end] Mortgage revenue, higher sales and marketing costs principally due to very strong non-mortgage revenue growth, and costs to add the new TWN contributors I talked about earlier. The decline in EBITDA margins versus last year was driven by similar factors including negative product margin mix as higher-margin mortgage declined as a percentage of revenue and was replaced with Verifier non-mortgage revenue and revenue from the most recent acquisitions which at this point have lower margins than Verifier overall. And second, increased marketing and sales expense from both investments to drive NPI and driven by our extremely strong non-mortgage sales and record acquisition performance; and then lastly as I mentioned costs related to onboarding new TWN contributors. We expect these same factors to impact margin TWN -- sorry, EWS margins in fourth quarter as we see further declines in mortgage revenue with EWS EBITDA margins of about 48.5% in fourth quarter. As we look to 2023, we expect to see EWS margins return to above 50% as product and pricing initiatives expand profitability and we see additional savings from their cloud transformation. The strength of EWS and uniqueness in value of their TWN income and employment data in employer services businesses were clear again in the third quarter. Rudy Ploder and EWS team delivered another above-market quarter with 9% revenue growth and 32% core growth, and are well-positioned to deliver very strong 2022 and continue above-market growth in the future. As shown on Slide 10, USIS revenue of about $397 million was down 9% and slightly better than our expectations. USIS mortgage revenue was down about 35% and was also better-than-expected with a 41% decline in credit inquiries versus the 46% we had expected. At $97 million mortgage revenue is now about 25% of total USIS revenue. B2B non-mortgage revenue was $250 million which represents over 60% of two -- total USIS revenue and was up 5% with organic revenue growth of 3%. This was below the low-end of the 6% to 7% growth we discussed in July. Importantly, B2B non-mortgage online revenue growth remained strong at 9% total and 6% organic assigned at lenders continue to originate. During the quarter we saw double-digit growth in Commercial and Telco and solid single-digit growth across Financial Services, auto and insurance offset by a decline in our direct-to-consumer business. Kount which provides unique identity and fraud solutions continues to execute very well developing joint solutions leveraging both Kount and Equifax data with 2022 global revenue expected to exceed 20%. The recent acquisition of Midigator will continue to strengthen our identity and fraud franchise and growth. Its -- as relative to expectations in the quarter was again in Financial Marketing Services our B2B offline business that had revenue of $51 million down 8% and lower than our expectations. As we discussed in previous quarters, the principal driver of decline in FMS services was our fraud and data services vertical where we provide header data principally to providers of identity and fraud services and to a much lesser extent in our risk management and portfolio review business where we provide data and analytical services to financial institutions to evaluate the health of their existing portfolios or in some cases portfolios they're acquiring. As we discussed in prior quarters, we expect the declines in these businesses to continue through the fourth quarter with improvements in 2023 as we introduce new products leveraging unique and differentiated data assets available through the new Equifax single data fabric. We also saw a decline in batch marketing services where we provide data and decisioning principally to financial institutions for pre-screeners as well as delivering our IXI data for marketing activities as some customers cut-back on originations. We've seen high-single-digit -- single-digit growth in marketing services in the first-half so this is the first signs of any pullback in marketing. For fourth quarter B2B non-mortgage we expect online to continue to be strong with growth rates above third quarter from commercial execution as well as progress in pricing and new product rollouts that overcome a somewhat slower growth in financial services. We expect Financial Marketing Services to continue to be weak down over 10% with declines across header, risk and marketing continuing in the fourth quarter. Overall for B2B non-mortgage we expect fourth quarter organic revenue growth to be about the levels we saw in the third quarter. USIS Consumer Solutions business had revenue of $50 million down 1% in the quarter but up 2% sequentially. We expect fourth quarter revenue to grow again sequentially with positive growth rates in the fourth quarter. USIS adjusted EBITDA margins were 34.1% in the quarter and slightly below our expectations principally due to continued investments in sales resources focused on non-mortgage growth. International revenue was -- shown on Slide 11 was up $288 million, up a very strong 17% on a local-currency basis and 15% on an organic constant-currency basis. We're seeing broad-based execution from our international businesses. Europe local-currency revenue was up 24%, principally driven by over 75% growth 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. Our European CRA revenue accelerated in the third quarter with revenue of 7% and above our expectations driven by broad-based product execution across our B2B online products and identity and fraud, slightly offset by lower consumer revenue. Asia-Pacific which is principally Australia-New Zealand business delivered local-currency revenue of 6% driven by strong growth in our commercial and identity and fraud businesses and to a lesser extent growth in consumer. Latin-America local-currency revenue was up a strong 34% driven by double-digit growth in Chile, Argentina, Uruguay, Paraguay, Ecuador and Central America. The team's new product introductions over the past three years and pricing actions continue to drive strong growth across all product lines. This is the third consecutive quarter of double-digit growth for Latin-America. Canada local-currency revenue was up 12% and above our expectations. We saw growth in Commercial, Analytics solutions, decisioning, and identity and fraud revenue which was partially offset by some one-time revenue in the quarter from mortgage volume declines. Consumer revenue also returned to growth during the quarter. We expect Mid-single-digit revenue growth from Canada in the fourth quarter. International adjusted EBITDA margins at 26.8% were down 200 basis-points -- down 210 basis-points sequentially and above our expectations given strong revenue growth. EBITDA margins were up slightly versus last year but up about 150 basis-points adjusting for the loss of equity income from the Russian joint-venture that we sold. As shown on Slide 12, we had a very strong new product quarter with vitality index at 14% which is our highest vitality index ever, and it was over, 500 basis-points above last year's results and 400 basis-points above our 10% long-term growth framework for vitality. We delivered about 80 new products so far in 2022 leveraging our new EFX cloud capabilities. We now expect to deliver vitality index of 13% in 2020 up 200 basis-points from our previous guide of 11% which equates to over $650 million of new product revenue in the year. The growth in our 2022 vitality index is principally coming from Workforce Solutions which is encouraging as they are further along in completing their cloud transformation. It's positive to see the strong NPL results in the early innings of the Equifax cloud, new products leveraging our differentiated data, our new Equifax cloud capabilities in single data fabric are central to our long-term growth framework and driving future Equifax topline growth. This week at the Annual Mortgage Bankers Association conference we will showcase a new offering that delivers telecommunications, Pay-TV and utilities attributes alongside the traditional mortgage credit report to help streamline the mortgage underwriting process. Delivering telco, Pay-TV and utilities attributes to mortgage lenders alongside the traditional credit reports will also help expand access to credit and help create greater home ownership opportunities for US consumers. The use of these expanded data insights can also provide visibility to millions of credit invisible consumers those without traditional credit files and enhance the financial profiles of thin, young and unscorable [Phonetic] consumers as they complete their first mortgage applications. [Technical Issues] offers -- offering leveraging the Equifax cloud will provide powerful new insights that will help to automate, save time and resources and streamline the first mortgage process for every applicant creating more opportunity for consumers to secure a loan. And Equifax is the first and only in the industry to offer these unique insights to the mortgage industry. Turning to Slides 13, we outlined the 12 strategic bolt-on acquisitions we completed since January 2021 you expect will deliver over $450 million of principally non-mortgage run-rate revenue. As you know, our 8% to 12% long-term growth framework includes 1% to 2% of annual revenue growth from strategic bolt-on M&A aligned around our three strategic priorities; first, expanding and strengthening Workforce Solutions, our fastest-growing and most profitable business. Second, building out our identity and fraud capabilities. And third, adding unique data assets. And with that, I'll turn it over to John to provide more details on the mortgage market [Part 4 end] And our fourth quarter and full-year 2022 guidance.