Equifax Inc Q3 2024 Earnings Call Summary

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

Question: Manav Patnaik - Barclays - Analyst : Thank you. Good morning, Mark and John. I just had a question around kind of the guidance philosophy. So in the prior years, every time you had lowered guidance, I guess, it was mainly due to the mortgage weakness, so we all got wrong, but there were some other non-mortgage areas that were weak. And this year, even though mortgage is getting better, you're still lowering guidance. So I'm just curious, is there something about the philosophy in not being conservative? Or is it execution? I was just hoping you could help us clear that up. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 17, 2024 / 12:00PM, EFX.N - Q3 2024 Equifax Inc Earnings Call

Question: Manav Patnaik - Barclays - Analyst : Okay, fair enough. Thank you for that. And just on the tech transformation, I think we're all looking forward to the benefits that can provide to USIS. Can you give us some maybe early signs or examples of what maybe you did with tech transformations in other divisions that give you confidence that we should see some outperformance outside of just the macros on the USIS side? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 17, 2024 / 12:00PM, EFX.N - Q3 2024 Equifax Inc Earnings Call

Question: Manav Patnaik - Barclays - Analyst : Thank you for that. And looking forward to hearing about it next year.

Question: Kelsey Zhu - Autonomous Research - Analyst : Hi, good morning. Thanks for taking my question. Have you sized the incremental record additions from the Workday partnership? And can you talk a little bit more about the timeline for those new electrics to come online? Is it more towards kind of Q1, Q2 next year? Or is it towards second half of next year?

Question: Kelsey Zhu - Autonomous Research - Analyst : Got it. Thank you. Also curious to hear a little more about what's driving the reacceleration of growth in consumer lending vertical within workforce solutions, especially because of against the backdrop of a pretty soft end market. So just curious, is it really to new product launches? Is it the pricing? Is it increased customer penetration? Yeah, I appreciate your thoughts on this.

Question: Kelsey Zhu - Autonomous Research - Analyst : Thanks. Appreciate it.

Question: Andrew Nicholas - William Blair & Company - Analyst : Hi, good morning. Thanks for taking my questions. I wanted to first ask on [SNS] really good order. And I'm just curious if there's anything for us to read into that. It sounds like it was primarily batch. Is that kind of customers thinking about being more aggressive with marketing is that portfolio review? Just help me understand if there's anything to read into that strength?

Question: Andrew Nicholas - William Blair & Company - Analyst : Understood. So it doesn't sound like anything major sort of like a macro read-through perspective more of --?

Question: Andrew Nicholas - William Blair & Company - Analyst : Okay. That's helpful. And then maybe changing gears a little bit on the mortgage business and the mortgage business within EWS in particular. If I heard you correct, John, you said you expect 16% growth in mortgage there in the fourth quarter on 6% growth in inquiries, 10% outperformance, certainly better than what you saw in the first half, but I think a little bit lower than what you had messaged earlier this year. So just curious about the puts and takes there, what, if anything, has changed in terms of record growth relative to your expectations, pricing, new product development, anything like that, that would help bridge that gap? Thank you.

Question: Andrew Nicholas - William Blair & Company - Analyst : Appreciate it. Thank you.

Question: Surinder Thind - Jefferies - Analyst : Thank you. Following on up on the mortgage question here. Any color on how important the mix is in terms of the revenue recovery when we think about the $1.1 billion in terms of purchase versus refinance? Do we have to kind of get back to the historical average? Or are there other considerations that we should be thinking of?

Question: Surinder Thind - Jefferies - Analyst : Thank you. And then as a follow-on to that, I believe in the prepared comments, you mentioned that additional pricing benefits in 2025. Any color you can provide there in terms of the strength of the pricing benefits that you expect maybe next year relative to what we've got -- what we saw this year?

Question: Surinder Thind - Jefferies - Analyst : Got it. Just as a clarification, I think is the commentary that you'll try and do pricing consistent with historical without talking about guidance. Is that the idea that pricing?

Question: Surinder Thind - Jefferies - Analyst : Thank you.

Question: Kyle Peterson - Needham & Company Inc. - Analyst : Great. Thanks, guys. Good morning and appreciate you taking the questions. Just wanted to see if you guys had any color, I know on kind of some of the thoughts on purchase mortgage still being pretty subdued kind of partially due to rates and pursuing prices and affordability. Do you guys have any thoughts on how much rates would need to fall before purchase starts to improve? I know I know some of the inventory and home price issues are a little tougher to piece together. But at least on the rate side, I guess how much do you guys think rates need to fall before there would be some relief at least from that end of the market.

Question: Kyle Peterson - Needham & Company Inc. - Analyst : Got it. That makes sense and is really helpful. And I guess just a follow-up on capital return. You guys can tease the potential for buybacks and dividends potential dividend increase in 2025. How do you guys think about priority and balanced between the two, whether it's the firms you guys kind of want to do some of both. I know it's been a while since you guys have raised the dividend. But yeah, just some more thoughts on how you guys are thinking about capital return and what the relative priority is?

Question: Kyle Peterson - Needham & Company Inc. - Analyst : Got it. That's very helpful. Thank you.

Question: Kevin McVeigh - UBS Equities - Analyst : Great. Thanks so much. I just want to circle back to the mortgage revenue opportunity. It's been pretty consistent in framing $1 billion-plus, but that's based on kind of current pricing more to your point penetration and TWN records, things like that. if I go back, right, to kind of the '15 to '19 time period, you had 71 million records as opposed to $182 million today. So what I'm trying to understand is, is there any way to think about kind of what your yield is to get to that number today as opposed to what the inquiry or interest rate number has to be. So I guess said another way, you've got a lot more product and higher records, things like that. So do you need the same level of interest rate to kind of drive that revenue? Or is there any way to think about that aspect of it?

Question: Kevin McVeigh - UBS Equities - Analyst : Helpful. And then just real quick on the ERTC -- ERC, rather. What percentage of the revenue was at today? And where was that? Maybe at it's peak? Just trying to dimensionalize what that headwind has been?

Question: Kevin McVeigh - UBS Equities - Analyst : Very helpful. Thank you.

Question: Scott Wurtzel - Wolfe Research - Analyst : Hey good morning, guys. Thank you for taking my question. Just wanted to ask on the government vertical. I know we've talked about sort of the penetration story in terms of the amount of state federal agencies that are out there. But I guess I would love to kind of hear your thoughts on when we look at sort of the different buckets of benefits of security, Snap, ACA, Medicaid like where you kind of see most sort of white space for penetration over the near to medium term here?

Question: Scott Wurtzel - Wolfe Research - Analyst : Got it. That's helpful. And just as a follow-up on the mortgage side. I guess when looking at some industry data, it looks like maybe the gap between sort of USIS mortgage inquiries versus some of the application data in terms of kind of maybe widened during the quarter. I'm just wondering if there were anything to sort of call out with that? Was it due to maybe mix dynamics between purchase and refi. Any information on that would be helpful.

Question: Scott Wurtzel - Wolfe Research - Analyst : Got it. Thanks, guys.

Question: Jason Haas - Wells Fargo Securities, LLC - Analyst : Hey good morning and thanks for taking my questions. Maybe circling back to talent verifications. I'm curious if you have any insight into which industries you're seeing that slowdown in hiring then I'm also curious if you're seeing any increase in competition or any more in-sourcing by some of the large background screeners.

Question: Jason Haas - Wells Fargo Securities, LLC - Analyst : Got it. That's good to hear. And then as a follow-up question, I was curious if we look at the EWS mortgage increase versus USIS, they're still under pacing. My understanding is that the function of people shopping around by not closing. So I'm curious what's your expectation for when that gap closes looks like what you said maybe probably a little bit of a narrower in fourth quarter. Does that -- do you expect that would converge in next year, sometime next year?

Question: Jeff Meuler - Robert W. Baird & Co., Inc. - Analyst : Yeah, thank you. Good morning. I just want to circle back to the Q4 guidance. I get it, $15 million is not that great in the grand scale of Equifax. But if I also consider the 9-point better mortgage market assumption, which impacts almost 20% of your revenue run rate, it does seem like a fairly sizable adjustment. So just, I guess, any other callouts of size beyond the industry gross hiring volumes? And maybe if I could just hit it head on, like, was there any sort of sizable client loss or meaningful reduction in client relationships that also contribute just so we don't have to wonder about.

Question: Jeff Meuler - Robert W. Baird & Co., Inc. - Analyst : Got it. And then sorry to get the weeds on this. I get the typical methodology in terms of run rating forward recent mortgage. But just given the volatility in the last few weeks, I want to know what period specifically you're uniting forward because you're calling out the late September improvement. And then I think you said subsequently it reduced back to maybe like July, August levels in October. So just what period are you extrapolating forward given the recent.

Question: Jeff Meuler - Robert W. Baird & Co., Inc. - Analyst : Got it. Just wanted to make sure that was accounted for. Thank you.

Question: Owen Lau - Oppenheimer & Co., Inc. - Analyst : Hey, good morning. Thank you for taking my question. Could you please add more color on insurance and commercial vertical? It grew double digit and looks pretty strong there. What are you seeing there? Thanks. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 17, 2024 / 12:00PM, EFX.N - Q3 2024 Equifax Inc Earnings Call

Question: Owen Lau - Oppenheimer & Co., Inc. - Analyst : Got it. And then going back to your cloud migration, could you please give us an update on how we should think about incremental top line revenue contribution in 2025 and maybe 26%. Any timeline of product launches you can share over the next few quarters or so?

Question: Craig Huber - Huber Research Partners - Analyst : Great. Thank you. You talked about a long-term outlook for your vitality index at 10%. I think you said you're 11% right now. Can you give us some examples that you're quite positive with new products out there today, but particularly outside the US, I'd like to hear something you have already touched on today. That's my first question. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 17, 2024 / 12:00PM, EFX.N - Q3 2024 Equifax Inc Earnings Call

Question: Craig Huber - Huber Research Partners - Analyst : Thanks. My other question, if I could. When you think about costs for next year, I know you want to give formal guidance at this stage when we think about costs for next year given all the cost savings initiatives you guys have put in place here. You're going to be at 90% through the cloud transformation at the end of this year. And so for the cost next year that you guys can control and assuming the economy holds together, mortgage rates come down as you're talking about and stuff. I'm assuming you have a very strong flow-through down to the EBITDA line if you have strong revenue growth here. But I'm curious on your cost side, do you have to step up any investment spending next year? I mean how should we just broadly think about your cost outlook for next year in your two main segments. Thank you.

Question: Craig Huber - Huber Research Partners - Analyst : Great. Thank you.

Question: Toni Kaplan - Morgan Stanley - Analyst : Thanks. My first question actually picks up on the last part of the last one. You mentioned the 6% to 7% CapEx in the long-term framework. This year, obviously, a really big move with USIS going on to the cloud there. So a lot of I imagine a lot of spend being spent on that. So I guess, should we see a big step down in '21 on the CapEx side or should we expect the move towards the 6% to 7% to be more gradual since you still have 10% of revenue left and maybe there are some other things that you're working on? And maybe just a follow-up, what's the next step in the technology plan from here now that you have most of this done. Thanks.

Question: Toni Kaplan - Morgan Stanley - Analyst : Great. And this one sort of touched on a few times, but just hoping you could give any sort of update on like green shoots that will make you more optimistic in the consumer credit environment about 2025, if you're seeing any, if you're not, that's fine, too. But just anything that makes you more or less optimistic about 2025 with regard to consumer credit?

Question: Toni Kaplan - Morgan Stanley - Analyst : Thank you so much.

Question: Ashish Sabadra - RBC Capital Markets - Analyst : Thanks for taking my question. I have two clarifying questions. First one was on that $70 million savings in 2025 from cost actions. Just wondering, is that all OpEx? Or does it also have CapEx saving and does that include all the cloud savings? So that's my first question. Thanks.

Question: Ashish Sabadra - RBC Capital Markets - Analyst : That's helpful color. And then maybe just a clarification on the inquiries for 2025 expectation for a 5% growth. I was just wondering, is that largely just based on as Mark explained, the near-term dynamic? Or are you also baking in the Fed rate cuts going in, in 2025 or those could be incremental upside? Thanks. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 17, 2024 / 12:00PM, EFX.N - Q3 2024 Equifax Inc Earnings Call

Question: Ashish Sabadra - RBC Capital Markets - Analyst : Definitely helpful, sir. Thank you.

Question: George Tong - Goldman Sachs - Analyst : Hi. Thanks. Good morning. Mark, can you talk a bit more about what you're seeing broadly with consumer credit health, particularly across prime and subprime consumers, data seems to suggest that delinquency rates are continuing to go up year-over-year across lending categories.

Question: George Tong - Goldman Sachs - Analyst : Got it. That's helpful. And then, John, can you talk about the puts and takes with your updated EBITDA margin outlook for the year, 32.4% at the midpoint compared to 32.6% previously.

Question: Andrew Stein - FT Partners - Analyst : Hi good morning and thank you. So my first question, I just wanted to shift to the International segment. I realize the Boa Vista acquisition lapped its one-year marker in August and LatAm had a really strong quarter. So can you help us understand the run rate organic growth trends between Boa Vista and LatAm x Brazil? And then what is Boa Vista's market share now compared to the 15% at the time of acquisition. I'm just wondering what opportunities you have to gain market share over the next year.

Question: Andrew Stein - FT Partners - Analyst : Got it. Thanks. And then just a follow-up on the international margin expansion. That was also a really strong this quarter. And just wondering if you could help us understand the remaining potential for margin expansion in LatAm and Europe as the cloud transformation is completed for those segments?

Question: Andrew Stein - FT Partners - Analyst : Got it. Thank you.