Equifax Inc at RBC Capital Markets Technology, Internet, Media and Telecommunications Conference Summary

The following is excerpted from the question-and-answer section of the transcript.

Question: Ashish Sabadra - RBC Capital - Analyst : <_ALACRA_META_ABSTRACT>Maybe we'll just kick it off talking about the state of consumer lending. If you can talk about what's -- what do you see from a credit card, autos, consumer lending, personal loans, but also on the mortgage front? And how do you think about it as we get into more of a procyclical environment? Obviously, there are a lot of macro factors in terms of rates, theN fed rate cut, but also longer-term yields going up. You also have new administration, which are going to be more pro-business. How does all of that fit together? Thanks. John Gamble - Equifax Inc - Chief Financial Officer, Chief Operating Officer, Executive Vice President Well, that was a lot. Okay. So just taking a look at kind of what we're seeing currently. And we talked about this a little bit in October, right? I mean, basically, we're continuing to see the lending environment around card, around auto, just banking and lending in general, be relatively constructive, right? USIS, which is really where you'd see that in our business perform relatively well in the quarter, had fairly good growth. We saw a decent performance in banking and lending. Auto was a little weaker, but actually performed okay. So we continue to see the consumer is relatively strong. We're not really seeing our customers pull back, right? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 19, 2024 / 9:40PM, EFX.N - Equifax Inc at RBC Capital Markets Technology, Internet, Media and Telecommunications Conference And as we said frequently, right, even though we have seen delinquencies certainly in subprime go up relatively significantly over the past, say, 18 months, they plateaued a little bit. But really, as long as people are working, we tend to think the lending environment will stay relatively good. And we're continuing to see very good employment. So we think that's leading to a relatively healthy lending environment. Some things we are seeing, right, that we talked a little bit about recently is we are seeing hiring be a little bit weaker, right? We talked about that in October. We had talked about that seeing some weakening in late September and in early October before the earnings call in our talent solutions business, which as a reminder, is about $100 million a quarter, right? So -- and we saw weakness in hiring across our background screeners, that's -- our customers are background screeners. And we've actually seen that continue as we -- weakening continue as we went through the rest of October and a little bit into November. So the hiring environment does appear to be a little weaker from our perspective. Mortgage also, we -- you mentioned rates. We have seen rates move up. And we talked about in October, the fact that we've seen weakness in the mortgage market in early October that if you took the run rate that we were seeing at the time in early October and apply them to 2025, that you would have seen mortgage credit inquiries growing something north of 5% at the time, which was certainly weaker than we had -- than we were seeing back in July. We've actually seen that weaken a little further now as we've moved through October into November. This is not a surprise. As rates have gone up, we saw a pop, an improvement in credit activity around mortgage in September when rates fell to near 6%, now that rates have gone back up. We've seen it weaken. Probably now if you apply the current run rate to the mortgage market -- the current run rates of credit in the mortgage market to 2025, you'd see a growth rate of, say, something in the order of 5% or maybe a little less. And as everyone knows, we tend to use the current run rates when we do our forecasts, and we do our longer-term plan, right? So we all put -- made a few comments around our margins as we look into 2025. And I think really consistent with what we've talked about for years, right? When we drive growth rates over a longer-term basis kind of within our normal growth rates and our long-term model 7% to 10% organic, we expect to see margin expansion of, say, 50 basis points a year. We also have made very good progress in 2024 of completing very substantial cloud migrations in our US consumer business, our US telco business as well as in our Canadian consumer business. And those things allowed us to drive cost reductions, and we took a charge related to that in the third quarter that some of which we'll start to see in the fourth quarter, more of which we'll see next year. We talked about that reducing spending by $70 million. On the order, three-fourth of that is probably expense. Some of that will get in the fourth quarter, so the wraparound benefits a little less than that 75%. But taking that benefit and adding it to the 50 basis points, that's why we made the comment that you should see our margins expand something under 100 basis points in 2025. So we think, again, very good performance. We do like to remind people, even in a flat mortgage market or a slightly up mortgage market, our mortgage business performs very well. Workforce solutions outperforms the mortgage market by somewhere between 8% and 11% or 12%, depending on market conditions, but substantially outperforms the mortgage market. And USIS obviously should significantly outperform the mortgage market in 2025, part of it driven by the price increases that were executed by one of our partners. So we still feel very good about our mortgage business, growing very nicely even in a market that isn't as constructive as maybe people thought it was going to be a few months ago. But even in that case, we think we'll have a very, very strong mortgage business next year. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 19, 2024 / 9:40PM, EFX.N - Equifax Inc at RBC Capital Markets Technology, Internet, Media and Telecommunications Conference

Question: Ashish Sabadra - RBC Capital - Analyst : Yeah, no, not guidance.

Question: Ashish Sabadra - RBC Capital - Analyst : That's very helpful color. And then something that you mentioned, your partner, or FICO, in particular, has already communicated that FICO price increases for next year. Historically, you have tried to maintain your margins on those price increases. Is that a fair assumption that you would continue to do that as we look going forward? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 19, 2024 / 9:40PM, EFX.N - Equifax Inc at RBC Capital Markets Technology, Internet, Media and Telecommunications Conference

Question: Ashish Sabadra - RBC Capital - Analyst : That's helpful color. And then maybe one final question on mortgage, just on this tri-merge to bi-merge. FHFA had communicated that data on 4Q '25, any thoughts on the timeline there, potential for that to get pushed out?

Question: Ashish Sabadra - RBC Capital - Analyst : Yes. That's very helpful color. Switching gears, let's talk about verification business. You've had some great success adding new payroll providers, even signing up big HR service providers, including Workday. Can you just talk about what's driving that strong momentum? And how do you think about the pipeline as we get through this year, but also going into next year, just high-level pipeline?

Question: Ashish Sabadra - RBC Capital - Analyst : That's great color. And I do want to go and drill down into government. But before we do that, in terms of contributors, as you mentioned, you've signed up Workday, but are there other opportunities to sign up other HR software provider, but also retirement service providers or gig economy? How do you think about that opportunity?

Question: Ashish Sabadra - RBC Capital - Analyst : That's great. Maybe drilling down further on the government side, one of the questions that we get is, how is this new department of government efficiency that may potentially come up. How does that affect your business? Is that a positive? Or could that be a headwind for the business?

Question: Ashish Sabadra - RBC Capital - Analyst : That's great color. And then in terms of penetration, as you said, it's adopted at the state level, and there's still room there for penetration. So just even taking an example of Medicaid how much -- how many states have already adopted and how much runway do you have for penetration?

Question: Ashish Sabadra - RBC Capital - Analyst : That's great. And then maybe just thinking about other verticals like talent, in particular. You talked about some of the weakness there, which was very apparent. Even when First Advantage reported, you continue to see base business decline. How do you think about those trends? And where are you seeing those weakness? Are there certain verticals, certain areas that you've seen weakness?

Question: Ashish Sabadra - RBC Capital - Analyst : Talking about outperformance, we continue to see really good outperformance and that improved in the mortgage market as well, the verification mortgage market. What's driving that outperformance? How do you think about that sustainability of the outperformance going forward?

Question: Ashish Sabadra - RBC Capital - Analyst : That's great. And I think that takes us into this conversation around moving on to the fully cloud and the vitality index. You've seen some significant acceleration in vitality in the business and what's really driving it. So you mentioned a couple of these cross-selling opportunities, but I was wondering if you could also talk about the new product initiatives? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 19, 2024 / 9:40PM, EFX.N - Equifax Inc at RBC Capital Markets Technology, Internet, Media and Telecommunications Conference

Question: Ashish Sabadra - RBC Capital - Analyst : That's great. If there are any questions, please raise your hands, and we can have the mic being brought around. I'll -- maybe one more question on employee services. The revenue decline, that was much worse in the third quarter. Obviously, some of it is ERC headwinds. Can you just talk about some of the headwinds that you've seen? And how do we think about those headwinds moderating as we go forward?

Question: Ashish Sabadra - RBC Capital - Analyst : Sure. Absolutely. That's very important.

Question: Ashish Sabadra - RBC Capital - Analyst : That's very helpful color. And if I can ask just one quick follow-up, just given the dislocation in the stock that we've seen recently, does that create opportunity for you? And when you think about buyback, you think about more opportunistic or more scheduled buyback? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 19, 2024 / 9:40PM, EFX.N - Equifax Inc at RBC Capital Markets Technology, Internet, Media and Telecommunications Conference