Equifax Inc. (EFX) on Q1 2021 Results - Earnings Call Transcript

Operator: Good day and welcome to the Equifax First Quarter 2021 Earnings Conference Call. Today’s conference is being recorded. And at this time, I would like to turn the conference over to Mr. Dorian Hare, Senior Vice President and Head of Investor Relations. Please go ahead sir. Dorian Hare: Thanks and good morning. Welcome to today’s conference call. I’m Dorian Hare. 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 Investor Relations section in the About Equifax tab of our website at www.equifax.com. Mark Begor: Thanks Dorian. Before I address Equifax's very strong first quarter results, I want to again thank our 11,000 employees and families that supported them for the tremendous dedication they continue to show under the challenging COVID environment over the past year. We continue to make the health and safety of our employees a top priority and I hope that you and those close to you remain safe. Turning to slide four and as I will cover in a moment, Equifax delivered an outstanding first quarter with record revenue and strong sequential growth versus fourth quarter. The tremendous progress we have made executing against our strategic priorities and building out our Equifax cloud capabilities is allowing us to outperform our underlying markets and deliver outstanding revenue growth and margin expansion. In the US where the economy is still recovering from the COVID pandemic more rapidly than we anticipated, we continue to outperform the overall mortgage market, which remains strong in the first quarter. We're also seeing a real recovery and strong growth across our core banking, auto, insurance, government, and talent business segments. We delivered growth again in the first quarter internationally with continued challenging COVID restrictions in place in most of our global markets and we expect to see acceleration in this growth as economies recover outside the US. John Gamble: Thanks, Mark. As Mark referenced earlier, US mortgage market inquiries remained very strong in 1Q '21 and up 21%, but that growth was slightly lower than the 24% we had expected when we provided guidance in early February. As shown on the left side of Slide 10, as mortgage rates increased over the past few months and refinancing activity continues, the number of US mortgages that could benefit from a refinancing has declined to about $30 million. Although still very strong by historic standards, this is down from the levels we saw in 4Q '20 and early 1Q 2021. Based upon our most recent data from 4Q 2020, mortgage refinancings were continuing at about $1 million per month. As shown on the right side of slide 10, the pace of existing home purchases continues at historically very high levels. This strong purchase market is expected to continue throughout 2021 and into 2022. Based on these trends and specifically, the reduction in the pool of mortgages that would benefit from refinancing, we are reducing our expectation for the mortgage market financing activity in 2021. As shown on slide 11, we now expect mortgage credit inquiries to be about flat in 2Q 2021 versus 2Q 2020 and to be down about 25% in the second half of 2021 as compared to the second half of 2020. Overall, for 2021, we expect mortgage market credit inquiries to be down approximately 8%. This compares to the down approximately 5% we discussed with you in February. Slide 12 provides our guidance for 2Q 2021. We expect revenue in the revenue in the range of $1.14 billion to $1.16 billion, reflecting revenue growth of about 16% to 18% including a 2.1% benefit from FX. Acquisitions are positively impacting revenue by 2%. We are expecting adjusted EPS in 2Q 2021 to be $1.60 to $1.70 per share compared to 2Q 2020 adjusted EPS of $1.63 per share. In 2Q 2021, technology transformation costs are expected to be around $44 million or $0.27 per share. Excluding these costs that were excluded from 2Q 2020 adjusted EPS, 2Q 2021 adjusted EPS would be $1.87 to $1.97 per share, up 15% to 21% from 2Q 2020. This performance is being delivered in the context of the US mortgage market, which is expected to be flat versus 2Q 2020. Slide 13 provides the specifics on our 2021 full year guidance. We are increasing guidance substantially despite the expectation of a weaker US mortgage market. 2021 revenue of between $4.575 billion and $4.675 billion reflects revenue growth of about 11% to 13% versus 2020, including a 1.4% benefit from FX. Acquisitions are positively impacting revenue by 1.7%. EWS is expected to deliver over 20% revenue growth with continued very strong growth in verification services. USIS revenue is expected to be up mid to high single-digit driven by growth in non-mortgage. International revenue is expected to deliver constant currency growth in the upper single-digits, and GCS revenue is expected to be down mid-single-digits in 2021. 2Q 2021 revenue was also expected to be down mid-single-digits for DCS. As a reminder, in 2021, Equifax is including all cloud technology transformation costs and adjusted operating income, adjusted EBITDA, and adjusted EPS. These one-time costs were excluded from adjusted operating income, adjusted EBITDA, and adjusted EPS through 2020. In 2021, Equifax expects to incur one-time cloud technology transformation costs of approximately $145 million, a reduction of about 60% from the $358 million incurred in 2020. The inclusion in 2021 of this about $145 million in one-time costs would reduce adjusted EPS by $0.91 per share. This is consistent with our guidance for 2021 that we gave in February. 2021 adjusted EPS of $6.75 to $7.05 per share, which includes these tech transformation costs, is down approximately 3% to up 1% from 2020. Excluding the impact of tech transformation costs of $0.91 per share, adjusted EPS in 2021, which show growth of about 10% to 14% versus 2020. 2021 is also negatively impacted by redundant system costs of over $65 million relative to 2020. These redundant system costs are expected to negatively impact adjusted EPS by approximately $0.40 a share. Additional assumptions included in 2021 guidance are provided -- will be provided in the 1Q, '21 earnings slide deck to be posted later this morning. Slide 14 provides a view of Equifax Total and core revenue growth from 2019 through 2021. Core revenue growth excludes the impact of movements in the mortgage market on Equifax revenue, as well as the impact of changes in our UC claims business within our EWS employer services business, and also the employee retention credit revenue from our recently acquired HIREtech business. Employee retention credits are specific US government incentives for companies to retain their employees in response to COVID-19 and the associated revenue is not expected to continue into 2022. The data shown for 2Q, '21 and full year 2021 reflects the midpoint of guidance ranges we provided. In 1Q, '21, we delivered very strong core revenue growth of 20% and expect to continue to deliver strong core revenue growth in 2Q, '21 of about 20% and 16% for all of 2021. This very strong performance, we believe, positions us well entering 2022 and beyond. And now I'd like to hand it back over to Mark. Mark Begor: Thanks, John. Turning to Slide 15. This highlights our continued focus on new product innovation, which is a critical component of our next chapter of growth as we leverage the Equifax cloud for innovation, new products and growth. We continue to focus on transforming Equifax into a product-led organization, leveraging our best-in-class Equifax cloud-native data and technology to fuel topline growth. In the first quarter, we delivered 39 new products, which is up from the 35 we delivered last year. We're encouraged by this continued strong performance, especially following the record 135 new products we delivered last year. We wanted to highlight some of these new products, which we expect to drive revenue in '21 and beyond. First, Insight Score for credit card launched by USIS provides the credit card industry with a specific credit risk score created using credit and alternative data that predicts the likelihood of a consumer becoming 90 days past due or more within 24 months of origination. USIS also launched a new commercial real estate tenant risk assessment product suite, which provides real-time and unmatched data analytics and risk assessment for tenants, buildings and portfolio strength, delivered through an interactive, ignite marketplace app or as a stand-alone report. And Workforce Solutions continues to expand its suite of products focused on the government vertical. Their government enhanced solutions, social services verification product gives the ability for the customer to choose desired period of employment history with options ranging from 3 months, 6 months, 1 year, 3 years or the full employment history. These products help government agencies quickly and efficiently administer federally – federal supplement -- supplementary nutrition, child health insurance, Medicaid, Medicare benefits, managed child support and insurance program integrity. In the first quarter, over 2/3 of our new products launched or in development leveraged our new Equifax cloud-based global product platforms. This enables significant synergies and efficiencies in how we build the new products, our speed to bring the products to market and our ability to move the new products easily to our global markets. Our new cloud-based Luminate platform for fraud management is a great example, which is launching in Canada and the US simultaneously and will soon launch in the United Kingdom, Australia, and India. This would have taken much longer and been much more expensive in a legacy environment. We're also rolling out our Equifax cloud-based Interconnect and Ignite platforms for marketing and risk and decisioning and management products throughout Latin America, Europe, Canada, as well as the United States. As we discussed on our call in February, we're focused on leveraging our new cloud capabilities to increase NPI rollouts and new product revenue growth in 2021 and beyond. As a reminder, our NPI revenue is defined as the revenue delivered by new products launched over the past three years and our vitality index is defined as the percentage of current year revenue delivered by NPI revenue. As I mentioned earlier, we've increased our 2021 vitality index guidance from 7% by 100 basis points to 8%, as you can see from the left side of the slide, is a significant increase from about 500 basis points in 2020. NPIs are a big priority for me and the team as we leverage the Equifax cloud for innovation, new products, and growth. Turning to slide 16, M&A plays an important role in our growth strategy and will be central to our long-term growth framework. Our team is focused on building an active pipeline of bolt-on targets that will both broaden and strengthen Equifax. Our M&A strategy centers on acquiring accretive and strategic companies to add unique data assets, new capabilities, deliver expansion into identity and fraud, or expand our geographic footprint. In the first quarter, we closed five acquisitions totaling $866 million across strategic focus areas of identity and fraud, Workforce Solutions, open data, and SME. We discussed three of these transactions with you in February, which were the acquisitions of Kount and Kount score, and Credit Works. As I discussed earlier, we're excited about expanding opportunities we see from the combined Kount and Equifax in the fast-growing identity and fraud marketplace. In March, we closed two Workforce Solutions bolt-on transactions, HIREtech and i2verify, which will further broaden and strengthen our Workforce Solutions business. HIREtech is a Houston-based company that provides employee-related tax credit services as well as verification services. HIREtech also has unique channel relationships to provide these services through payroll providers, consulting firms, and CPA firms. i2verify is a Newburyport, Massachusetts-based company that provides secure digital verifications of income and employment services. The company has a unique nationwide set of record contributing employers with concentrations in the healthcare and education sectors. i2verify also brings unique records to the twin database, all of which are contributed by direct relationships. You should expect Equifax to continue to make acquisitions in these strategic growth areas that offer unique data and analytics to our customers with a goal of increasing our topline by 100 to 200 basis points annually from M&A. Before wrapping up, I want to speak to you about an area of significant focus at Equifax and importance to me personally. Slide 17 provides an overview of Equifax's ESG strategy and how it helps position us for long-term sustainability. I hope you saw and had a chance to read our annual report letter that highlighted our increased focus on ESG. First, Equifax plays an important role in helping consumers live their financial best. A primary example of this is that, our alternative data assets, such as utility and phone payment data, provide lenders with a better picture of the approximately 30 million US individuals that do not have traditional credit files or access to the formal financial system. I've also made advancing inclusion and diversity a personal priority since I joined Equifax. Believing that diversity of thought leads to better decisions, we've taken clear steps to broaden diversity at Equifax, including the last 3 Directors added to our Board are diverse, and all 7 individuals have been added to my Senior Leadership Team since I joined 3 years ago, have also been diverse. We're carrying out this focus on inclusion and diversity across Equifax. We're also focused on environment -- on our environmental impact and greenhouse gas footprint. Our cloud transformation will move our existing legacy technology infrastructure to the cloud, which will dramatically reduce our environmental impact as we leverage the efficiencies and carbon-neutral infrastructure at our cloud service providers. Over the course of this year, we -- or over the course of last year, we decommissioned 6 data centers, over 6,800 legacy data assets and over 1,000 legacy applications. We have a detailed program underway to baseline our energy usage and benefits from our cloud transformation as we work towards a commitment regarding carbon emissions and a net zero footprint. We're also committed to being the industry leaders regarding security, with the leadership of our CISO Gamefirst, our culture quick security first. All employees are required to take a mandatory security-focused training sessions every year. And all of our 4,000 bonus eligible employees have a security role in their annual MBOS. We believe -- we also believe in sharing our security protocols and strategies with our partners, customers and competitors to collaborate to keep us all safe. In 2020, we hosted our inaugural Customer Security Summit, where we detailed our progress on security transformation and discussed advancements in supply chain security. As threats continue to evolve, we remain highly focused on continuing to advance our security efforts. Wrapping up on Slide 18. Equifax delivered a record-setting first quarter and we have strong momentum as we move into second quarter in 2021. Our 27% overall and 20% core growth in first quarter reflects the strength and resiliency of our business model while still operating in a challenging COVID environment. We've now delivered 5 consecutive quarters of sequentially improving double-digit growth. We're confident in our outlook for 2021. And as John described are raising our full year midpoint revenue by 500 basis points to $4.65 billion and our EPS midpoint by 9% to $6.9 a share. Our revised revenue estimate of 12% growth in 2021 at the midpoint of the range, off of a very strong 17% in 2020 reflects the resiliency, strength and momentum of the EFX business model. Our increased 2021 growth framework incorporated our expectation as John discussed that the US mortgage market will decline about 8% in 2021 and while operating in a still recovering COVID economy. Our expectation for core revenue growth of 16% in 2021 reflects how our EFX 2023 strategic priorities are delivering. Workforce Solutions had another outstanding quarter of 59% growth and will continue to power Equifax's operating performance throughout 2021 and beyond. The work number is our most differentiated data asset and workforce Solutions is our most valuable business. Rudy Ploder and his team are driving outsized growth by focusing on their key levers; new records, new products, penetration, and expansion into new verticals with our differentiated twin database. USIS also delivered an outstanding quarter of 19% growth highlighted by non-mortgage revenue growth of 15% and 11% organic non-mortgage growth. We expect our non-mortgage growth to accelerate as the US economy recovers. The acquisition of Kount is providing new opportunities and products in the rapidly expanding identity and fraud marketplace and USIS continues to outperform the mortgage market from new products, pricing, and increased penetration. USIS is clearly competitive and winning in the marketplace and will continue to deliver in 2021 and beyond. International grew in the first quarter for the second consecutive quarter, overcoming economic headwinds from significant COVID lockdowns and slower vaccine rollouts in our global markets. Our expectations are high for ongoing sequential improvement in international during 2021 and for accelerating growth as their underlying markets recover from the COVID pandemic. We're also making strong progress rolling out our new EFX cloud technology and data infrastructure and remain confident, as John described, in the significant topline, cost, and cash benefits from our new EFX cloud capabilities. These financial benefits will ramp as we move through 2021 and continue to grow in 2022 and are enabled by our always on stability, speed-to-market and ability to rapidly build and move products around the globe. Our strong performance -- operating performance is allowing us to continue to accelerate investments in new products leveraging our new Equifax cloud capabilities. And we're off to a strong start in 2021 with 39 NPIs in the first quarter on top of the record 134 we launched in 2020. And our strong outperformance is fueling our cash generation, which is allowing us to reinvest in accretive and strategic bolt-on acquisitions. As discussed earlier, we closed five acquisitions and strategic growth areas in the first quarter and we have an active M&A pipeline. We look for bolt-on acquisitions that will strengthen our technology and data assets and that are financially accretive with the goal of adding 100 to 200 basis points to our topline growth rate in the future. I'm energized about what the future holds for Equifax. We have strong momentum across all of our businesses as we move into second quarter. We're on offense in position to bring new and unique solutions to our customers that only Equifax can deliver, leveraging our new EFX cloud capabilities and our strong results and the increased guidance that we provided reflect that. With that, operator, let me open up for questions. Operator: Thank you very much. All right. We'll take the first question from David Togut with Evercore ISI. David Togut: Thank you. Good morning. Looking at the over 20% EWS revenue growth guide for this year, can you quantify contributions you expect from new unique record growth, pricing, and new use cases? Mark Begor: Yes, I think the answer is yes. Those are all meaningful levers. I would add the system, system integrations in our mortgage market and other solutions is also a lever for growth. David, I think as you know, we don't break those out specifically, but it starts with records. We've clearly had a real focus on some room momentum in adding records to the TWN Database as you know we have a dedicated team that that's all they do. And we've got active dialogues going with individual corporations to bring their data to us as we add new services like UC claims and Watsi and all the myriad of services that we provide and also with other payroll processors. And as you know in February, we announced that our plan -- and we're on track to add one of the major payroll processors records to our database in the second half of 2021, which will add meaningfully. And I think you know our business model as we grow records, we're able to monetize those really instantly because of the inquiries that we receive just drive our hit rates up. We clearly have the ability to use price, which we talked about. I think you've seen a real increase in the focus on new products at Workforce Solutions, particularly as they're becoming cloud-enabled. It's giving them the opportunity to bring new solutions to the marketplace to really leverage their data sets. And these new solutions are typically at higher price points and delivering more value to our customers. So that's another big lever. We've talked about – in the second half that, they're continuing to focus on systems and system integrations, and we just find higher usage when customers move from accessing the TWN database through the web to system-to-system integrations, we get really all their volume, which is another big lift. And as I mentioned a couple of times, we're still on track to launch our new agreement with the Social Security Administration. It's a very meaningful contract that will go live in the second half and we expect that to be $40 million to $50 million in run rate. So there's a large amount of levers available for workforce Solutions. As you point out, it starts with records and while we've grown records to 90 million uniques in the quarter. As you know, there's 155 million non-farm payroll. So there's a lot of room between 90 million and $155 million as we continue to grow towards having the full data set. And then we talked before that we're also widening dataset beyond W2 income, including 1099 and other data sources as we look for other ways to include other portions of the US population around are they working and how much do they make. David Togut: Thanks for that. Just as a quick follow-up. You closed 2020 at almost 60% EBITDA margin for EWS. Can you quantify operating leverage in this business for 2021? Mark Begor: Well, there's a lot of leverage, as you could see in the first quarter results. I think you're talking about Workforce Solutions. We're continuing to invest in the business. There's no question about that. But with the revenue growth that we're getting on both the mortgage and non-mortgage side and Workforce Solutions, there's real operating leverage that we expect to continue through 2021. David Togut: Understood. Thank you. Operator: The next question is from Manav Patnaik with Barclays. Manav Patnaik: Thank you. Good morning. I was just hoping, Mark, you could talk about the comments you made towards the end of the call around acceleration of the non-mortgage business with this reopening? And perhaps off that $225 million that you raised revenue by, like how much of that was just the strong performance in EWS, you called out versus maybe some incremental M&A and this reopening benefit that you think you'll see? Mark Begor: Yes, we don't have any incremental M&A in that guide. We wouldn't include that we haven't completed yet. I think we talked that we have a pipeline and a goal of increasing acquisitions. Of course, we're off to a very fast start this year on M&A. You know this, we took down our framework for mortgage inside of that revenue framework that we shared, which is quite significant. We think that we've got mortgage in the right spot now at down 8% versus the down 5% for the year. And as you know, that the way we frame that as most of that happens, really all of it really happens in the second half. And an expectation that there will be a recovery in the economies as vaccine rollouts continue and lockdowns are reduced, there's still some impact, we believe, of the COVID pandemic in the US market, although, as we pointed out, we saw some real recovery by our customers. And I characterize that as confidence, meaning they're starting originations in the latter part of the first quarter and into April, which we expect that to continue. But you still have -- our international markets are still significantly impacted by the COVID pandemic and we expect that to unfold at some pace during 2021 and that will be a positive as we move forward. Would you add anything, John? John Gamble: No, we've just said in the past, right, that increasingly, as we go through 2021, as the non-mortgage markets recover, increasingly, their contribution to core growth is going up, right? So, we're -- so we expect that to continue as we go through the year. And the outperformance in the first quarter, as we said, more than half of it was driven in our non-mortgage segments, and you're seeing that obviously flow through the rest of this year as well. Mark Begor: And then I would add to it, too, that I hope you caught our comments around, we really feel like the Equifax cloud is providing benefits. Our NPI focus is providing benefits that will benefit our mortgage business as well as our non-mortgage business. And of course, the majority of Equifax is non-mortgage, but the initiatives that we launched over the last couple of years, the investments that we've made over the last couple of years we feel are starting to pay off. When you talk about USIS, we mentioned many times even over the last year, on each of these quarterly calls that we feel a real strength in the marketplace by our USIS team competitively. Commercially, how they're going to market. I think we've talked about we've rebuilt that team a year ago and there's some room momentum there. And again, the focus on new products, those are driving revenue growth and we guided up 100 basis points in our vitality index. The bulk of that is going to come in our non-mortgage business. Manav Patnaik: Okay, got it. And Mark, I was hoping you could just help us also, just appreciate the different moving pieces in the -- I think you talked about Workforce Solutions growing about 20% this year, but there's obviously a lot of moving pieces between employer and verification services. I was just hoping you could give us some guidance there on how they should end up in the year. Mark Begor: You want to try it on that? John Gamble: Sure. So -- yes, I think in Mark's script, we tried to walk through what the real big drivers, right? Verifier is continuing to perform extremely well. Obviously, mortgage is a bit of a draw -- a drag. But as you go through the rest of this year, if you think about what we said in February, we'd indicated that for total mortgage for Equifax, that even though the market was down 5%, we expected revenue to grow more than 10%. And even though we now have the market weaker at down 8%, we still expect mortgage revenue to grow more than 10%. But some significant drivers of EWS in 2021 continue to be in the non-mortgage segment. We talked about talent solutions growing very, very fast, almost doubling, I think we said in the first quarter and I-9 also growing very, very fast and a recovery in WFA. So what we think you're going to see is very nice growth across the non-mortgage segments, obviously, excluding UC, where we gave very specific guidance. And then also continued good performance in mortgage despite the fact that the market is slowing, right? We're not going to quantify each of those. But directionally, that's what's going on. Manav Patnaik: All right. Thank you. Operator: The next question is from Kyle Peterson with Needham. Kyle Peterson: Hey good morning. Thanks for taking the question guys. I just wanted to touch on EWS, particularly the momentum and increased adoption you guys are seeing in some of the non-mortgage. Could you guys dive a little more into where the strongest area is that – is that in other lending products like auto or card or where is some of the strength that you guys are seeing coming from right now? Mark Begor: Yes. Non-mortgage is obviously more than financial services. I'll come back to that, but we've talked a bunch about our government vertical, which is growing quite positively. Our employer services is non-mortgage. Our talent Solutions business, so we talked about the growth there. And I think specifically, you're talking about non-mortgage verification. So, I'll go back to that versus non-mortgage broadly in workforce because we've got a bunch of levers that are outside of verification that are growing quite positively, again, excluding the negative impact of UC Claims on a year-over-year basis. So in financial services as you know, mortgage is our largest in verification, for sure and we're getting real leverage and outgrowing the market there. So first, records health everywhere. Right? So, in -- whatever the solution is, as we grow our records and of course, they're up 10% year-over-year and we've got a clear path to increase them in 2021, and that's part of our framework. Those hit rates are good in any vertical you're in, whether it's mortgage or auto or government, etcetera. So records are number one. We’ve had a real focus on new products broadly in Equifax and in Workforce Solutions. And then you talk about some of the verticals, we're seeing increased usage in auto, where -- kind of year ago or 2 years ago, it was more of a subprime usage along with the credit file. Now we're seeing it more in near prime. So there's just more usage in the auto sector and broader usage at those lower credit scores. So that's helping there. Personal loans has always been a pretty strong space for us in the Fintech market for verification, using it because if you think about a personal loan, it's $10,000, $20,000, $30,000, it's a very large transaction. And verifying how much someone makes and are they employed at the time of the loan is a very important lift in the predictability. And then we've talked really for the last, I think, 3 or 4 quarters about the fact that we're seeing a number of card issuers take our data and of course, a sliver of our data. We don't – given the depth of data that they would have in a mortgage application and using it in originations, in other applications in the card space. And we've got now, I believe, 2 of the large card issuers that are using our data ad origination along with the credit file, which is a big breakthrough. We've been chasing this market for some time. I'm an old card originator. I did that for a decade before Equifax. The predictability of adding is someone working and how much do they make to the credit file enhances every credit decision. And it was really around getting our database to scale. And we've talked the last couple of quarters that as we've gone over 50% hit rates in the database, as we get to that 90 million uniques versus the $155 million non-farm payroll, it becomes a data set that's more usable because you get more hit rates. So, that's another thing that we -- reason we think we're getting more new uses of it in things like that cards. John Gamble: Only thing I'd add, right, and as Mark said, our two biggest segments in verifier are government and talent solutions, and they're growing very fast. And both of those are highly benefited by the depth of the database by the fact that we have over 450 million total records. Being able to pry history in those market segments is very important. So, we're seeing very strong growth in the two biggest nonmortgage verifier segments of both government and talent solutions. Kyle Peterson: Got it. That's really helpful color. And then I guess just a quick follow-up on the verification side of the business, like increased noise in the last few months with Transunion and Clad, both making some splashes in that space. Have you guys noticed any change in competition when you guys go-to-market either with users of the verification services or potential employers, pay providers, et cetera? Mark Begor: We have not. We actually hear mostly about it from you, meaning the sell-side. And we talked many times that we think we have a strong franchise. The scale of our database is extremely large. I think of the 90 million uniques at 150 million actives, the ability to get those kind of records is quite challenging, we believe, meaning to have a database that's usable. Having a database that has $1 million or $2 million or $3 million or 10 million records, it's just very challenging for -- to take that to market. When we can deliver over 50% hit rates, it just is quite challenging. And I think you know 60% of our records come from individual companies and we get those records through long-term relationships. We've been doing this for a decade. We have a full suite of services. We provide HR managers that allow us access to those records and we provide that service, the income employment piece of that for free to the company and to their employees, and it's a real benefit to them. So, those kind of services are really required, we think, to have a database of our scale. And as we've talked, the other 35% or so of our database comes from payroll partnerships and the bulk of those are exclusive, meaning we're an exclusive arrangement, they're not going to provide those records to someone else. So, we think that's quite challenging. And you add on top of that, that we've been investing in this business for over a decade. We've put about $2 billion into it, including a couple of acquisitions just in the last 30 days, the strengthened Workforce Solutions. In the last two or three years, we've probably invested $200 million to $300 million in the technology of the business. This is -- requires a massive investment. And I'm not sure the competitor you reference is thinking about or planning to have the kind of investments that we have. And just to be clear, we intend to protect and grow our franchise. Kyle Peterson: Got it. That’s really helpful for us. Thanks guys. Next quarter. Mark Begor: Thanks. Operator: Thank you. And the next question is from Hamzah Mazari with Jefferies. Hamzah Mazari: Good morning. Thank you. My question on the Fraud and ID business. You had mentioned e-commerce maybe retail as new verticals with the Kount deal. And at the same time, you talked about scale. Could you maybe talk about whether the fraud and ID business is at scale today? How do you define scale? And just as part of that discussion, you've seen companies like Mastercard recently buy Encarta. Mitek is doing some stuff around ID. Is there a lot more M&A opportunity in this market? How do you think about sort of when this business scales or if it's at scale today? Mark Begor: Yes. It's a great question. It's one that's been a deliberate focus of ours. You've heard us talk about it for the last couple of years that it's a fast-growing space, the ID and broad space globally is, I don't know, $18 billion, something like that, growing at 20%. You've seen -- we've had growth there. We've been in it for a long time. We have a lot of existing differentiated data assets at Equifax around ID and fraud and the Kount acquisition was quite strategic for us. They have real scale. And I think as a reminder, they play in the retail e-commerce space. Have real scale around their interactions. I think it's 32 billion consumer interactions per year. They've got 400 million unique e-mail addresses verified. They've got cellphone addresses are verified, IP addresses. So just a wealth of data. And the power is really combining their data with ours. And that's really why we acquired Kount. And as you point out, it also brings us into a new vertical. We weren't in the retail e-commerce space and that's where Kount plays. And of course, we're going to bring Kount and their data financial services, banking, telco, insurance, where we play. So that's why we acquired Kount? The answer is yes. You heard me comment earlier this morning on the call that, when we think about new M&A or additional M&A, ID and fraud is a place that we want to continue playing in. We see opportunities. We have opportunities in our pipeline to continue to strengthen the combination of Equifax and Kount going forward. And then when you -- your question of scale, from our perspective, the combination of Equifax and Kount gets us into kind of a strong market position, but it's a huge market at $18 billion. So, there's a lot of room to grow. And we look at product introductions. We're investing in like our new Luminate platform gets us more capabilities organically in this marketplace. And as I mentioned earlier, we're rolling that out and then acquisitions like Kount really strengthen our data assets and the combination of Equifax and Kount is quite powerful. So you should look for us over the coming years to find ways to grow. Certainly, we're going to invest organically, but also to invest through M&A to strengthen this. We like the space and we want to be bigger in it. Hamzah Mazari: Got you. And my second question, I've asked this before a couple of quarters ago, but I think I'm going to ask it a bit differently. So, if we exclude Workforce Solutions and we just look at USIS and the margin differential just between USIS and international, it's pretty large. And then if you look at your international margin and you compare it to your competitors, there's also a big gap. And so I realize that -- so we're taking Workforce Solutions out of the mix. And so then maybe there's some mix differentials between USIS and international. And I realize international has to get the revenue where you get the incremental margin and the op leverage, and that's maybe in earlier innings. But could you -- how much of the gap can you close between international and USIS and how much of the gap is structural? And we're excluding Workforce Solutions here. Mark Begor: And again, we don't exclude Workforce Solutions, but we'll just do that for your discussion and really focus on those other businesses. Obviously, USIS has real scale, and that scale drives their margins. And that's clearly a big difference when you think about our international. International, we're in 25 countries. We have some larger businesses like Australia, that's over $300 million and then some smaller countries that we play in. So, that drives a difference in the margins between our USIS, which has really massive scale versus our international businesses. We're always focused on improving our margins. The cloud investments that we're making will benefit Workforce Solutions margins, USIS margins and international and GCS margins. That's part of our strategy to improve our cost structure. But there's no question the subscale nature of some of our international markets result in margins being lower, which I would characterize as structural, but we see opportunities to improve those margins going forward. Would you add anything, John? John Gamble: Yes. As you look at the countries we're in, the countries that are looking more like USIS, where they're more specifically, like, for example, Canada, margins are much better, right? And so as Mark said, it really depends on the size of the market and then the diversity of the market that we're playing in. And then -- and so we certainly expect to see improvements in margins as we go to the cloud. But some of it certainly is structural just by the fact that we're in so many markets, and some of those businesses are very small. So, not to get into specific numbers, we do expect to see improvements in those margins over time. But some of it is structural. We have no expectation that they're going to reach the type of margins we see with USIS. Hamzah Mazari: Got it. Thank you. Very helpful. Operator: Okay. The next question is from Andrew Steinerman with JPMorgan. Andrew Steinerman: It's Andrew. I wanted to hear about the different areas of US credit applications, meaning card and auto and personal loan with large pickup in non-mortgage USIS online revenues accelerating to 16% in the first quarter, in particular, I don't think we've heard the credit card issuers talk about loan growth picking up yet, and I just wanted to know if you anticipate that soon? Mark Begor: I think we said, Andrew, that it was fairly broad-based. And some of the marketing spend is card issuers starting to, I would characterize, restart originations but that's the marketing piece. That doesn't necessarily result in loan growth yet. I think that's the -- starting to spend money and starting to put new offers out in the marketplace that presumably would result in some loan growth either in second or third quarter, but there's a lag on that between the marketing spend and when those originations go on their books and become loans. Broadly, I would say, what we hear from the US customers is an element of confidence that wasn't in place certainly for most of 2020, certainly, the early parts of 2021. And I think as we've all seen vaccine rollouts in the United States really accelerate and now really, everyone over age 16 can get one, that's resulting in consumer confidence as we seen it in retail spending. And you've seen banks in their earnings releasing reserves, so I think there's an element of confidence of we're moving towards a more normal economy. I would say, we're not there yet, but we saw some real increases what I would call in confidence and it's in our numbers in March and as we moved into April. Andrew Steinerman: And auto was strong? Mark Begor: So auto was stronger than card, right? So if you just kind of tier our structure, auto was stronger than card and identity and fraud was also very strong. Andrew Steinerman: Okay. Thank you. Operator: And your next question is from Craig Huber with Huber Research Partners. Craig Huber: Yes, hi. Thank you. I wanted to focus on costs, if I could, please. Can you give us a sense what your hiring plans are this year in terms of full-time equivalent employees? Are you thinking your plans should maybe pick up hire than other say, 5% more employees in the US? That's my first question. Another related question to that is, as we move through this virus things, hopefully get better, your employees are turned to the offices and stuff in the US, should we expect your cost base to materially go up when that happens? Mark Begor: Yes. First off, Craig, welcome. I think this is your first Equifax call or at least in recent times. So, it's great to have you covering the company. Craig Huber: Thank you. Mark Begor: On the people side, I would say our employment will be fairly stable. There's some areas where we're investing, like in product resources, in some technology areas. But at the same time, I think you know we've got plans to reduce some of our technology costs as the cloud transformation unfolds. So, there'll be some reductions in that area, which is in our framework. So, I wouldn't think about big changes in our employment. But you should think about Equifax being on offense, meaning we're investing with our strong performance. And of course, our acquisitions that we talked about, the 5 acquisitions bring incremental employees into our headcount, which is in our framework that we've shared with you. With regards to the returnable office, we've been open since last June. We've been very careful about that. It's been really up to our team, if they want to come in. We've limited our occupancy to 50%, no more than 50%, and of course, exercising all those protocols. And we've seen in the last -- I don't know, 30 to 60 days as vaccine rollouts have increased an increase of people coming back to our office. And what we've been telling our employees, when you're vaccinated come back and start operating with Equifax. We also announced post whatever our full reopening is, which is hard to see what that date is. We're going to -- we introduced what we call an Equifax Flex Day where we're going to have some flexibility in our workforce that they can pick on '1 day per week with their managers approval to work remotely. And it was really a reflection on that there are many benefits that we learned over the last year that we can be productive from working from home, but so-called 4/1, meaning we're going to work from the office at least 4 days per week. Is a reflection that we're a collaborative culture, the teamwork is how we operate, whether it's doing NPIs or technology or new customer solutions, we think that happens best in the office. And to your question about we don't expect our cost to go up. We haven't changed our footprint. We don't expect them to go down as a result of this return to office. John Gamble: And just as you think about our cost structure, just for perspective, right, we're like most technology companies. Obviously, a significant portion of our cost structure is our own employees. We also have a very significant footprint of contract employees and contractors, right? So, we end up -- we move cost. Obviously, the contractor workforce is more variable to us. Craig Huber: And then also if I could ask guys, in the US, where do you think the biggest opportunity is to be able to raise price steady as each year goes on to in the US operations? Mark Begor: Yes, we don't talk a lot about price, but if you think about our US businesses, which is really I'll leave our consumer business aside GCS, but you think about USIS and Workforce Solutions. We focus on new product rollouts that become incremental margin and many times at a higher price point because they're delivering incremental value to the customer. So, that's one way to get revenue pricing margins. Workflow Solutions is clearly our most differentiated business and differentiated data asset and has more ability to bring more value to our customers that we can monetize with different price points of the solutions we're delivering. And if you think about it, if you look at our hit rates now that are over 50%, and you go back two years ago when they were, I don't know, pick the right number, 40%, 50%-plus hit rate is more valuable to our customers, becomes a data asset that they can use more broadly in their solutions. So, Workforce is clearly a business that has more ability to drive its topline through multiple levers that we've talked about a couple of times on this call. Craig Huber: Great. Thank you. Operator: And your next question is from Toni Kaplan with Morgan Stanley. Toni Kaplan: Thank you so much. Just wanted to ask a bit of a different question on the guide. My interpretation is that it seems like the vast majority of the increase is from the 1Q beat. And then the rest I'm expecting is maybe a better 2Q with 2H in line with your expectations previously. Is that a fair assessment? And I know your mortgage expectations are a little bit lower than before in the rest of the year. It just seems like a lot of your non-mortgage trends are positive. So, I'm just hoping you could provide any extra color on how you're thinking about whether these positive trends continue through the year or not? Thank you. Mark Begor: Yes, I think, Toni, you got to remember, we have seen in the last 60 days, a weakening -- slight weakening of mortgage inquiries, which we rolled into our new framework. So, we took down mortgage by 300 basis points for the year, which we think is prudent, offsetting that and our ability to guide up is that our outsized and strong performance in non-mortgage in the quarter, and our expectation is that will continue. John? John Gamble: Look, you're looking at revenue, Toni, right, I mean, the over $200 million increase, right, only less than half of it was really out of the first quarter. And then obviously, yes, the second quarter is stronger. And then the -- as Mark said, third and fourth quarter are impacted somewhat by the much greater decline in the mortgage market. But we are seeing very substantial growth, and we think improvement in the non-mortgage segments. And as you look at revenue, we think a significant amount of the improvement in the guide is from periods after the first quarter. Toni Kaplan: Okay. And then looking at financial marketing, you mentioned the 20% marketing-related growth. Just curious about why there's -- why marketing dollars are being spent there, but within the consumer indirect business you're still seeing pressure. Just wondering what the disconnect is between that and when you expect the indirect business and consumer to show signs of recovery? Mark Begor: Yes. Toni, I think about it quite naturally. What we saw and what I would have done when I was running P Capital's credit card business is when, you get in a tough economy, you tighten up originations and stop spending marketing money. In the first place you stop spending marketing money is with third-parties, meaning lead gen companies. Same thing when you come out of a difficult environment, the first place you'll start is your own, you have more confidence in that. It's generally lower cost. It's more efficient desire predictability, and that's what we're seeing. And we do expect our indirect to improve, but it's going to be lag some at least the framework we put together and happened later in the year. Toni Kaplan: Great. Thank you. Operator: And then we'll take the next question from Andrew Nicholas with William Blair. Andrew Nicholas: Hi, good morning. You’ve touched on it a bit in your prepared remarks, but I was hoping you could walk through the i2 VERIFY acquisition a bit further. How should we think about it contributing to the TWN database in terms of record count? And then relatedly, can you give us a sense for how many other assets like this are out there that could add records to the database in a meaningful way? Certainly, it seems like these types of deals come with some pretty immediate revenue synergies. So, any additional detail on that opportunity set would be helpful. Mark Begor: Yes. There aren't many of them. We know who all of it – they all are, and we talk to them all the time. There are a handful of companies like i2 VERIFY and HIREtech and as you may know, you've followed us for a while that we've made acquisitions like this over the last couple, 3, 4, 5 years. So, when they're available, we like to make them. And maybe I'll just touch on HIREtech first. HIREtech has what we thought was a very attractive Watsi Solution, particularly delivered through third-parties to companies. And again, one of the ways to get records is to deliver value-added services like Watsi, like I-9, like Unemployment Claims like W2 Management, like ACA2 companies. And then in order to complete those services for them, which are regulatory requirements, you get access to records. And in HIREtech's case, we have a Watsi business so today, but there was -- we thought, very attractive in how attractive in how they deliver those solutions through partners. And we'd like to grow our partner Watsi business, which not only will bring the records they already have, but get access to records in the future. And of course, there's a revenue stream just from providing those Watsi services. As John mentioned, they also have an Economic Recovery Credit, ERC, which is a very special and unique credit in 2021 that there's another way to gain access to records, which will benefit us this year. In i2 VERIFY, a bit different in their approach to market. They have a very attractive. We like the team a lot. As we do in HIREtech, the i2 VERIFY was very advanced around relationships and how they went to market with non-profit organizations, with the healthcare industry or hospitals -- and hospitals and the education or think universities. And there's lots of employees in those kinds of organizations and companies, and they developed a very attractive go-to-market of how they built relationships and delivered those services. And so we like that, which is why we were very attracted to i2verify, and we're looking for them to really expand our relationships through different services we provide to those kind of companies and then allow us to get records in order to grow our records. And again, at 90 million uniques, we're very pleased with the scale of our database, but there's a lot of runway between 90 million and 155 million. Andrew Nicholas: Great. Makes sense. That's all very helpful. Thank you. And then for my follow-up, you've mentioned 100 basis point improvement in your vitality index expectation a couple of times. I imagine that's primarily a consequence of faster than expected adoption on the new product side. So, I was just kind of hoping you could talk about what's driving that specifically through the first couple of months of the year? And then relatedly, what do you think that pickup in adoption means as you think about the vitality index in 2022 and beyond? And how NPIs are expected to contribute over a longer term timeframe? Thanks. Mark Begor: Yes. I think you know we've been pretty clear that we've been talking for well over a year, maybe two years about the power of NPI, and that's not new to Equifax. It's not new to our industry. Our competitors are focused on new products. And it really is the fuel for growth that allows us to grow multiples of GDP. That's the inherent in the data analytics business. And we talked a bunch about our investment in the cloud transformation over the last three years from 2018 through 2020, the $1.5 billion we invested in our new infrastructure, we did that for lots of reasons. Operator: Please stand by. Mark Begor: Sorry, we're back. We had a fire alarm go off here, and we just got to shut it off. We're fine. Andrew, sorry, could you repeat your question again? Andrew Nicholas: No problem. I can't -- not surprised if that would throw anyone off. Yes. My question was just on the vitality index and how you might look at 2022 and beyond on that metric given the faster than expected adoption so far this year? Mark Begor: I think I was talking about the cloud investment. We invested in the cloud because we knew it was going to give us cost benefits, security, a competitive advantage, but we really invested in the cloud to deliver new products and growth. And we've been really focused on that over the last 12, 18 months. We talked last year that we've been expanding our resources in new product capabilities. And we think we're starting to see the leverage of the cloud, our ability to bring new solutions to the marketplace. And our guide up was really – we increased our NPI rollouts last year to 139, which was a record. We're 39 in the first quarter, which is up from 35. So, we've got more products in the marketplace. And you've got a commercial team that's out selling them. So that's why we feel the confidence of increasing the guidance going forward, at least for 2021. I don't want to get into 2022 guidance. We'll include that in our long term framework, which we intend to put in place later this year, and the vitality index of new products will be central and really important to us in how we grow the business going forward. Andrew Nicholas: Great. Thank you. Operator: Thank you. And the next question is from Shlomo Rosenbaum with Stifel. Unidentified Analyst: All right. Adam on for Shlomo. Can you talk a little bit more about the unemployment claims strength? Is it from better industry volumes than expected, or does it have more to do with product sales or more clients? Thanks. A – Mark Begor: Yes. We've been taking advantage of what's a strong unemployment claims market over the last year and looking for new customer relationships, the teams out there still selling and growing our space. And I think we mentioned we've grown our share slightly to -- we believe, 1-in-3 claims we process versus 1-in-5 maybe in 2020. So, it's just another area of growth we're focused on. And as we also guided, we clearly expect our revenue in 2021 to come down kind of sequentially in the second, third and fourth quarter. But this is a business that is important to Workforce Solutions, processing unemployment claims for companies. It gives us a very nice revenue source long term. We generally sell these on a subscription basis with limits, if you go over a certain number of claims processed, which is why we've had such strong incremental revenue in the high unemployment market in the last couple of years. But we have a very sophisticated solution that operates well in the marketplace. And remember, the second benefit in processing these claims and having this as a business is it gets us access to records that then we can monetize over in our TWN database in our verification business. Q – Unidentified Analyst: Thanks. Operator: And our next question is from George Mihalos with Cowen. George Mihalos: Hey guys. Thanks for taking my question and congrats on the quarter and the outlook. I wanted to start-off on mortgage. Again, if we look at verification revenues up another 100%, that's well higher than what you saw in the USIS revenue growth. And as a matter of fact, the growth in EWS has stayed kind of consistent at 100% even if when sort of SIs volumes in mortgage have come down. Can you maybe talk a little bit about that decoupling? Is it as simple, a strong record growth or is there something else that's allowing you to outperform that massively even when volumes come down a bit on the USIS side? Mark Begor: Yes. I think if you -- we've shown these charts before that Workforce Solutions have been consistently outperforming all markets that they operate in, including the mortgage market. And much more substantially than USIS. They just have more levers. So, they'll use the same levers that USIS use, which is price. So, if you increased price in an up or down market, you're going to have more revenue. New products is one where they just had more opportunities. And you've heard us talk over the last I don't know, four or five quarters about their increased focus on new products. Things like historically, we've had a single report that we'd offer, and now we're offering one with more history on it, 12 months, 24 months, 36 months. And instead of having a report that we sell at $25, we've got price points at $150 and $200, and that provides real value to the mortgage originator. And we rolled out a product that's for co-borrowers. A lot of mortgages in the states that have a dual career couple underwritten -- underwriting the mortgage and so we have a new solution there. Instead of having $225 reports polled, we've got a $200 solution. We've got solutions and new products now that encourage more polls. So, we'll have a solution where we sell it at a higher price point that includes multiple polls. So, new products is a real lever for Workforce Solutions. Of course, records we've talked multiple times in this call, adding records drive set rates. Because remember, we're getting inquiries on those mortgages, all those credit cards or auto loans, but your question was around mortgage. We're getting inquiries for the full database, the full set of consumers. And I say, we only have 90 million uniques. And as we grow that database, those hit rates go up automatically. So, records are a very central part of Workforce Solutions' ability to outgrow the mortgage and all their underlying markets. There's also a large portion of mortgages we don't see still. We only see, I think it's 65% of mortgages. So, we're out in the marketplace talking to those that are not doing business with Equifax and are using taste subs or some other mechanism for approving the income and employment elements of a mortgage application to use our solution. The move from a customer, we saw a lot of our customers, I think, over one-third that access our data through the web. Meaning they're actually keying in the mortgage applicants social security number, date of birth, name, et cetera. There's a lot of friction there, meaning it doesn't happen in every mortgage application for that originator or we don't get multiple pulls. So, going to system to system integrations is a big part of our strategy, and we're increasing those system integrations every quarter. We've got a dedicated team that works with mortgage originators to have them do system to system integrations. Another lever is the number of polls in a mortgage application. In a credit application -- on the credit side, there's four to five polls in many mortgage applications of the credit file. Historically, there was more like one to two in the income employment data, we're seeing the more sophisticated originators pull our data more often on every mortgage application. And remember, you think about a couple of elements. Number one, it's a big ticket transaction $250,000, $300,000, $400,000 or more is the loan. And then second is the mortgage originator that's spending $4,000, $5,000 in the application process, they want to make sure that they're spending time on an applicant that they can close on. So, not only verifying their credit multiple times in the process, but making sure that applicant is still working and how much they make as a part of the application process is another big opportunity. So, there's just a half dozen of very strong levers that all have dedicated teams on it, and they've been executing very strongly on those levers. Another kind of overriding macro, if you will, for Workforce Solutions is just really the scale of the database. Now, if you go back at our last economic crisis in 2008, 2009 or pick your year, go back three, four, five years ago, our database in Twin might have been having hit rates of 30% or 40%. Now that we're well over 50%, it becomes a very valuable data asset and all of our customers know that you enhance the credit decisioning of an applicant, if you add is someone working and how much do they make to their credit file. That drives predictability. And so, when you have a database that almost is at a catalyst or an inflection point of going over 50%, we think that's another positive factor. Of course, we've got a lot of opportunity and a lot of work to do in workforce. And we're quite optimistic about the long-term impact of our fastest-growing business with margins and revenue growth rates that are highly accretive to Equifax. George Mihalos: Okay. That's super comprehensive. So really appreciate that. And just really quickly, Mark, maybe going back to Andrew's question, on the FMS side, the increase that you're seeing in marketing for card solicitations and the like. Is it too early to know, if the success rate or the hit rate for the banks are in line with what they saw historically as they rolled out those programs? Mark Begor: Yes. We wouldn't have visibility to that. But what -- I'll tell you what we do find is that all of our finance – this is a macro that started before COVID is that all applications, all uses of data, whether it's in banking, credit cards, mortgage, auto, lending, telco, all of our customers want to use more data. And they want to use more differentiated and alternative data because it enhances the predictability of the decision they're making. And let's use originations. And that's why you're seeing more alternative data being used. We think our cloud transformation is going to differentiate us and the ability to house that data to – and as well as surface and deliver that data to our customers. And then, of course, TWN we talked earlier in this conversation in the call this morning about the power of that data set in that credit decisioning, meaning, is someone working, how much are they making added to the credit file and the other alternative data is very, very powerful. Operator: And the next question is from Simon Clinch with Atlantic Equities. Simon Clinch: Hi, thanks for taking my question. I just wondered if -- first off, so apologies, I was actually dropped off on my Internet connection during this call. And I was wondering if you could just refresh me on the growth targets for 2021 for the segments that you laid out, please? Mark Begor: Sure, Simon. We had a dropped off, too. We had a fire alarm go off, but there was not a fire. So we were off for a few minutes, too. Do you want to tie use us the growth rates by segment that we raised earlier? Simon Clinch: Yes. Okay, sure. Mark Begor: So we indicated that we expected Workforce Solutions to be up over 20%. We indicated we expected USIS to be up mid to high single digits. We indicated we expected international to be up constant currency high single digits and that we expected GCS to be down mid-single digits and also expected GCS to be down mid-single digits in the second quarter. Simon Clinch: Okay. Great. So, I was wondering, if I could follow-on from that, just on the international business then. I mean, this is -- obviously, with what happened through the pandemic because the comparisons are incredibly easy. And given sort of where we're expecting the framework you provided for a recovery out of the pandemic at the back end of this year. I'm curious as to sort of how sensitive do you think about that sort of hig
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Equifax Inc. (NYSE:EFX) Earnings Report Highlights

  • Earnings Per Share (EPS) of $2.12, aligning with estimates and showing growth from the previous year.
  • Reported revenue of $1.42 billion fell short of the estimated $1.44 billion.
  • Valuation ratios such as the price-to-earnings (P/E) ratio of 55.08 and price-to-sales ratio of 5.55 reflect high market expectations and investor confidence.

Equifax Inc. (NYSE:EFX) is a leading global data, analytics, and technology company, known for its comprehensive credit reporting services and data analytics capabilities. The company competes with major credit reporting agencies like Experian and TransUnion, operating across various segments including Workforce Solutions, US Information Solutions, and International.

On February 6, 2025, Equifax reported an EPS of $2.12, which was in line with the estimated EPS of $2.12. This performance marks a positive trend, with the company having reported an EPS of $1.81 in the same quarter of the previous year, indicating a growth in earnings. However, Equifax's actual revenue of approximately $1.42 billion fell short of the estimated $1.44 billion, according to Zacks Investment Research.

The company's strong performance in the fourth quarter of 2024 was driven by robust growth across its various segments, despite missing revenue targets. The price-to-earnings (P/E) ratio of 55.08 and the price-to-sales ratio of 5.55 suggest high market expectations for future earnings growth and reflect investor confidence in its revenue-generating capabilities.

Further financial metrics such as the enterprise value to sales ratio of 6.44 and the enterprise value to operating cash flow ratio of 27.23 provide insights into Equifax's valuation relative to its revenue and cash flow generation. The earnings yield of 1.82% offers a perspective on the return on investment for shareholders. Additionally, Equifax's debt-to-equity ratio of 1.11 indicates a moderate level of debt compared to its equity, while the current ratio of 0.88 suggests potential challenges in covering short-term liabilities with short-term assets.

Equifax Inc. (NYSE:EFX) Sees Positive Analyst Outlook Amid Strategic Expansions and Innovations

  • The consensus target price for Equifax Inc. (NYSE:EFX) has been steadily increasing, indicating growing analyst optimism.
  • Strategic international expansions and innovations in fraud detection and identity verification are key drivers of Equifax's positive outlook.
  • Equifax's strong performance in non-mortgage businesses and anticipated growth in mortgage revenue due to potential interest rate cuts are bolstering confidence.

Equifax Inc. (NYSE:EFX) is a prominent player in the information solutions and human resources business process automation outsourcing industry. The company operates through three main segments: Workforce Solutions, U.S. Information Solutions (USIS), and International. These segments provide a variety of services, such as employment and income verification, credit information and scoring, fraud detection, and identity verification. Equifax serves a wide range of clients across industries like financial services, healthcare, and government, and has a global presence.

The consensus target price for Equifax's stock has been on an upward trajectory over the past year. A month ago, analysts set the average price target at $320.50, up from $317.18 a quarter ago, and significantly higher than the $299.89 target from a year ago. This trend suggests growing optimism among analysts about Equifax's stock performance, as highlighted by the recent strong quarterly earnings report. The company's robust performance in its Workforce Solutions and USIS segments has likely contributed to this positive outlook.

Equifax's strategic expansion in international markets, particularly in Asia and Latin America, is another factor driving analyst confidence. This expansion is expected to fuel future growth, as evidenced by the anticipated revenue growth in Europe and Latin America for the third quarter of 2024. Analyst Georgios Mihalos from Cowen & Co. has set a price target of $295, reflecting a positive outlook for Equifax's international ventures.

Innovations in fraud detection and identity verification are also bolstering Equifax's competitive position. The company's investment in advanced technologies is likely to enhance its service offerings, contributing to the optimistic target price outlook. Equifax's strong growth in non-mortgage businesses and expected recovery in mortgage revenue further support this positive sentiment, as indicated by the 'Strong Buy' rating and a one-year price target of $360 per share.

Equifax's recent achievements, such as an 8% organic revenue growth in the second quarter and a notable 13% increase in non-mortgage sectors, demonstrate its resilience and adaptability. Despite a decline in mortgage credit inquiries, the company has maintained strong performance. The anticipated interest rate cuts by the Federal Reserve are expected to boost Equifax's mortgage revenue and overall Workforce Solutions, potentially accelerating growth from fiscal year 2025 onwards, as supported by analyst Georgios Mihalos.

Equifax Stock Plunges 9% After Q1 Results

Equifax (NYSE:EFX) shares tumbled more than 9% in premarket trading Thursday following the company's announcement of second-quarter and full-year financial guidance that didn't meet analysts' forecasts.

In its fiscal first quarter of 2024, Equifax reported earnings per share (EPS) of $1.50, beating the consensus estimate of $1.44. However, its revenue for the quarter was $1.39 billion, slightly below the expected $1.4 billion.

For the upcoming fiscal second quarter, Equifax expects its adjusted EPS to be between $1.65 and $1.75, which is below the analyst forecast of $1.86. The company also anticipates revenue for the quarter to be between $1.41 billion and $1.43 billion, which falls short of the expected $1.44 billion.

Looking ahead to the full year of 2024, Equifax predicts adjusted EPS to range from $7.20 to $7.50, whereas analysts had projected $7.64. The company maintained its full-year revenue forecast, expecting it to be between $5.67 billion and $5.77 billion, slightly below the analyst consensus of $5.8 billion.

Equifax Posts Q3 Miss Due to Weaker Mortgage Market

Equifax (NYSE:EFX) reported its third-quarter results, which fell below Wall Street expectations, primarily driven by a weaker U.S. mortgage market.

In the third quarter, the company reported revenue growth of 6% to reach $1.319 billion, slightly missing the Street estimate of $1.33 billion. Adjusted EPS increased by 2% to $1.76, also falling short of the Street estimate of $1.79.

For the full year, Equifax revised its revenue guidance downward by $44 million to $5.256 billion, and its adjusted EPS guidance was lowered by $0.31 to $6.67 per share. These figures also fell below the Street expectations of $5.29 billion and $6.91, respectively.

Equifax anticipates the challenges in the U.S. mortgage market, driven by current high-interest rates, to persist in the fourth quarter. As a result, the company now forecasts a 34% decline in Equifax mortgage credit inquiries for the full year, which is a 3% reduction from its previous forecast.

Equifax Inc Investor Day Takeaways

Analysts at RBC Capital provided their views on Equifax Inc. (NYSE:EFX) following the Investor Day, where the company unveiled its long-term financial framework, which came in slightly below the analysts’ expectations.

The brokerage sees cloud transformation driving sustainable top-line growth moving forward in the 8-12% range (7-10% organic) in combination with around 39% EBITDA margins, around $1.9 billion in FCF, and EPS of $12.75 by 2025. While the $12.75 figure came in modestly below expectations of $15, the analysts believe the company has baked in conservatism. Bottom line, RBC Capital sees the cloud transformation and technological leadership driving further upside to conservative estimates. With greater visibility and confidence into the longer-term revenue and earnings growth outlook, which should help the stock re-rate higher, the brokerage increased its price target to $294 from $270, maintaining its sector perform rating.