Equifax Inc Q4 2024 Earnings Call Transcript

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

Question: Jeff Meuler - Robert W. Baird & Co., Inc. - Analyst : Yeah, thank you. Good morning. So I'm trying to listen everything you're saying on EWS margin guidance, but it's still hard for me to reconcile margins contracting year-over-year on 7% revenue growth. And I get that there's macro factors that are impacting volumes and there's a decremental margin associated with that. You also called out that there's onboarding costs for new partners, but I would think you've had that for a while, including last year. So just any other factors and if you can specifically hit on what's going on in terms of payout ratios for TWN Record partners, both as you sign new and renew?

Question: Manav Patnaik - Barclays - Analyst : Good morning. I just wanted to confirm, Mark, when you said without the mortgage and hiring headwinds, growth would have been 200 basis points higher. I guess, is that assuming that those markets would be flat. And then I just wanted to know how you would quantify what the EPS impact of that would be?

Question: Manav Patnaik - Barclays - Analyst : Okay. Got it. And then maybe just on the government side, Mark, just help us with that cadence again in terms of what's going on there? And are you seeing any early impacts on [DOGE] and all that stuff that's been thrown out there?

Question: Andrew Steinerman - JPMorgan - Analyst : I have two quick ones on mortgage. The first one is, John, could you just tell us what mortgage revenues were as a percentage of fourth quarter revenues? And the second one is just sure we get a definition of US hard mortgage credit increase, which Equifax has been seeing down the last six weeks, as you just stated, that's a difference from what the MBA has reported on their mortgage, weekly application reports. And I just wanted to know if maybe you're measuring different things, hard versus soft I'm not sure, really. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 06, 2025 / 1:30PM, EFX.N - Q4 2024 Equifax Inc Earnings Call

Question: Andrew Steinerman - JPMorgan - Analyst : Okay, thank you.

Question: Toni Kaplan - Morgan Stanley - Analyst : Thanks so much. Maybe first on just USIS, 2% non-mortgage growth versus last quarter of up 5%. Just wanted to hear about any changes in the selling environment or just any factors you wanted to share on the overall broad market conditions that you're seeing. And obviously, you've mentioned mortgage and hiring, but anything outside of those two would be helpful.

Question: Toni Kaplan - Morgan Stanley - Analyst : Great. And then on my follow-up, I did want to ask about the government opportunity. I know you've spoke a lot about the trajectory. So thank you for giving that. Just more in general, when you think about government programs, I feel like you had some success with CMS and SSA, but I guess as the government is rethinking their programs, and you can provide some efficiency to them. How are you thinking about the opportunity for basically getting new programs and -- but offset by the point that potentially there could be a lot of programs that are cut? So just how do you sell into that environment? How are you thinking about the change in opportunity just more broadly? 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. FEBRUARY 06, 2025 / 1:30PM, EFX.N - Q4 2024 Equifax Inc Earnings Call

Question: Faiza Alwy - Deutsche Bank - Analyst : Yeah, hi, thank you. So I wanted to follow up on the precore products and the soft pulls. I think you mentioned that 70% of maybe the inquiries or the revenues are hard pull. So I just wanted to clarify if that's what you meant 30% are soft pulls and 70% are hard credit pulls. So I'm curious what you're expecting in terms of the penetration of pre-qual products. And if you're seeing any share shift there, whether lenders are using one or two bureaus. And how are you -- in the initial shopping process? And how do you expect that to play out in '25?

Question: Faiza Alwy - Deutsche Bank - Analyst : Got it. Thank you. And then just as a follow-up -- apologies if I missed this, but -- any thoughts on when inquiries for '25 and outperformance? I know we saw some improvement in the fourth quarter on both of those metrics. So curious how you're thinking about that.

Question: Faiza Alwy - Deutsche Bank - Analyst : All right. Thank you.

Question: Kyle Peterson - Needham & Company Inc. - Analyst : Great, good morning and thank you for taking the question. Just one for me. I wanted to focus on capital allocation. Obviously, the leverage and the balance sheet is in a pretty good spot. You guys are hinting both increasing the dividend and starting a buyback. How are you guys thinking about balancing and priorities between the two as well as potential timing as to when we could see some of these actions is in like is it middle of the year, late in the year? How should we think about that? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 06, 2025 / 1:30PM, EFX.N - Q4 2024 Equifax Inc Earnings Call

Question: Kyle Peterson - Needham & Company Inc. - Analyst : All right. Thank you very much.

Question: Craig Huber - Huber Research Partners - Analyst : Thank you. I just want to just better understand, I mean, obviously, trying to forecast the US mortgage market has been quite difficult for a number of years and so forth. You're obviously taking -- extrapolating the current trends out for the remainder of the year. There's nothing new with how you guys forecast the mortgage part of our your business and so forth. For the rest of your business, however, you are making some various assumptions and so forth. And maybe you can just talk about the differences there about how you put together your outlook for the year. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 06, 2025 / 1:30PM, EFX.N - Q4 2024 Equifax Inc Earnings Call

Question: Craig Huber - Huber Research Partners - Analyst : I appreciate that. Just a follow-up question. On the Vitality Index, is there any specific products that you'd want to call out that you're very energized about for long-term growth that you guys are putting in place there? Thank you.

Question: Craig Huber - Huber Research Partners - Analyst : Understood. Thanks, guys.

Question: Jason Haas - Wells Fargo Securities, LLC - Analyst : Hey, good morning and thanks for taking my questions. Apologies if I missed it, but can you say what the talent verification outperformance was versus the white collar hire market in 4Q and then how do you expect that to trend going forward? Because I think that will give us some helpful understanding of how you're thinking about talent excluding the impacts from the softer hiring market? Thanks.

Question: Jason Haas - Wells Fargo Securities, LLC - Analyst : Okay. Great. That's very helpful. Thank you. And then as a follow-up, can you talk about the implied USIS mortgage outperformance for 2025? I think if I did the math right, and I heard everything correctly, it's about 20 percentage points of mortgage outperformance. It's a bit of a step down from 2024. I think I may know why, but can you talk about that, that would be helpful. Thanks.

Question: Jason Haas - Wells Fargo Securities, LLC - Analyst : Okay, and sorry to ask you a third follow-up, but our second follow-up. But I thought maybe you would also allude to the supplier price increase. So is that less of a tailwind in 2025 than it was in 2024?

Question: Jason Haas - Wells Fargo Securities, LLC - Analyst : Okay, alright, no problem. Thank you.

Question: Owen Lau - Oppenheimer & Co., Inc. - Analyst : Hey, good morning. Thank you for taking my question. So on your international revenue growth, it was 11% year-over-year in the fourth quarter and you guided 7% in 2025, and 6% in the first quarter. Could you please unpack a little bit more about the (inaudible) of that slowdown? Thanks.

Question: Owen Lau - Oppenheimer & Co., Inc. - Analyst : Got it. So quickly on mortgage assumption. I know there's a lot of questions about mortgage already. But you mentioned that you haven't baked in any weight or rate increase. But if there is a, let's say, 25 to 50 basis point rate cut in 2025, do you still expect incremental benefit for your mortgage inquiries given that last year's 30-year mortgage went down to 6% and there was a refinancing wave already. How do you think about that this year?

Question: Andrew Nicholas - William Blair & Company - Analyst : Hi, good morning. Thanks for taking my questions. First one is on margins. I think in the quarter, you talked about wanting to or thinking you canapproach 100 basis points of margin expansion, 25, obviously, the 25 basis point guide this year is a little bit lower, but -- if I do the math, it seems like the lighter mortgage would more than account for that delta. So I'm wondering if there were other cost actions you took in the quarter to protect margins or if maybe you're getting a bit better expansion than you had thought from the tech transformation in '25.

Question: Andrew Nicholas - William Blair & Company - Analyst : Perfect. Thank you. And then for my follow-up, I know it's a little bit more detailed. But on the new product that you're -- or a set of products that you're offering that are going to have the TWN data flags on them in mortgage and in auto later in the year. Is that predominantly a market share play? Or do you also get more price for those products with with that flag? Just trying to understand kind of strategically how that plays out. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 06, 2025 / 1:30PM, EFX.N - Q4 2024 Equifax Inc Earnings Call

Question: Kelsey Zhu - Autonomous Research - Analyst : Hi, thanks for taking my question. I wanted to talk about the SSA contract extension that you've announced at the end of Q3. I was wondering if you can talk a little bit more about what's the current level of run rate revenue in 2024 from SSA and they expect the growth in '25 and beyond? I think the originally announced $500 million for five years does rely on some amount of state -- further state penetration as well. So I'm just wondering how you're thinking about that in light of CMS changing your (inaudible).

Question: Kelsey Zhu - Autonomous Research - Analyst : Thanks. I was also wondering if you have any updated thoughts on sizing the incremental record additions from the Workday partnership or just in general, how should we think about record growth in '25? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 06, 2025 / 1:30PM, EFX.N - Q4 2024 Equifax Inc Earnings Call

Question: Scott Wurtzel - Wolfe Research - Analyst : Hey guys, good morning. Just one question from me. When we think about the guidance for EWS revenue growth and sort of in the context of your medium-term framework, that color on record growth was helpful. But maybe if you can frame sort of the pricing and penetration contribution to growth this year that you're expecting relative to the long-term growth framework.

Question: Matt O'Neill - FT Partners - Analyst : Yeah. Hi. Thank you so much for taking my question. Just curious, going back to the talent and labor areas, any incremental comments on verticals, employers' size or type or public private, where some of the conservatism or weakness is most noted. And then while I fully understand not commenting on price, I guess, just with the mortgage score price rolling through last month. Just curious if there was anything of note there if that's been a smooth process. Thank you so much.

Question: Matt O'Neill - FT Partners - Analyst : Yeah, just if there was anything to note on how that's flowing through in the market or if it's been fairly received as expected nothing (multiple speakers) --

Question: Simon Clinch - Redburn Atlantic - Analyst : Hi, thanks for taking my question. I've got two questions. First, first of all, just wondering if you could just walk through the outperformance that we've seen in EWS mortgage just over the last four quarters. We've seen weaker contribution from pricing and mix, as you talked about before, but that's still pervasive today. despite easier comparisons and as well as your record growth on top of that. So I was wondering how we should think about that portion going forward from here?

Question: Simon Clinch - Redburn Atlantic - Analyst : And if I strip the records growth contribution?

Question: Simon Clinch - Redburn Atlantic - Analyst : Okay. That's helpful. Just on the point about the TWN indicator, I know you've had a few questions on this already. But when I'm thinking about the indicator that you're going to bundle with the credit file, is that one going to be available only to customers of the TWN of VWS verifications, first and foremost? And then secondarily, how are you going to balance? I mean, how do you balance the risk of reducing the value of records from EWS by providing that indicator in the credit file?

Question: Simon Clinch - Redburn Atlantic - Analyst : That's great. Thank you so much.

Question: Arthur Truslove - Citi - Analyst : Thanks everyone. A couple from me. So first one, you've said that your margin in USIS can go up from 34.5% in '24, 35.5% in 2025. I was just wondering why this increase was so small. I mean, I guess, given the cloud-based cost savings you might have expected 300 bps or so. So I just wondered what was missing there. Second question, you've made clear on this call that over the last month or two, the situation in mortgage and hiring has clearly deteriorated. And -- it seems like this is probably the key reason to you guiding down at this point. I just wanted to confirm as well, is your mortgage forecast of minus 12% on volumes, that is just a function of what you've seen in the last few weeks, isn't it? And that obviously factors in mortgage rates at 7%. So can you just confirm that I've understood that properly?

Question: Arthur Truslove - Citi - Analyst : Thank you. Just one follow-up for me, if it's okay. you're obviously forecasting margins down in Workforce Solutions, and you're saying part of that is bringing on TWN partners. Just give an idea of how many basis points bringing on the TWN partners costs and then whether that then comes back in subsequent years.

Question: George Tong - Goldman Sachs - Analyst : Hi, thanks. Good morning. With respect to your margin outlook, can you elaborate on key drivers you have internally that could drive upside to your 2025 EBITDA margin guide? Or would you say your outlook is relatively fixed given external conditions?

Question: George Tong - Goldman Sachs - Analyst : Yeah, makes a lot of sense. And then with respect to your cloud transformation savings, any color you could provide on the quarterly phasing of savings in 2025 and perhaps 2026?