EQUIFAX INC Q4 FY2024 earnings call

Management Statement and Operational Highlights

• 2024 Performance: Equifax was pleased with its financial performance in 2024, with revenue up almost 8% on a reported and organic constant currency basis. Adjusted EPS was $7.29 per share, up over 8.5% versus the prior year. Cash conversion was 89%, free cash flow was $813 million (up 58%), and debt leverage was reduced to under three turns. The company completed its cloud data and technology transformation with close to 85% of revenue in the new Equifax cloud. EFX.AI usage increased, EWS had record additions, 15 new strategic partnerships were signed in 2024, and the Vitality Index was 12% in 2024.
• Fourth Quarter 2024 Results: Equifax reported fourth quarter revenue of $1.419 billion (up 7%). On an organic constant currency basis, revenue growth was 9%. Adjusted EBITDA was $502 million (35.4% margin). Workforce Solutions revenue was up 7% but impacted by a weaker hiring market. Government revenue was up 11%, EWS mortgage revenue was up 17%, and Employer services were down 9%. TWN records were strong, with 20 million records added in the fourth quarter, and EWS signed 15 new strategic partnerships.

Segment Performance

• Workforce Solutions: Fourth quarter revenue was up 7%, with adjusted EBITDA margins of 51.9% (up 70 basis points).
• USIS: Fourth quarter revenue was up over 10%, driven by strong mortgage outperformance (mortgage revenue up 47%), and adjusted EBITDA margins of 38.3% (up 440 basis points sequentially).
• International: Fourth quarter revenue was up a strong 11% in constant currency, with adjusted EBITDA margins of 32.5% (up 480 basis points sequentially).

Guidance

• 2025 guidance reflects challenging markets in U.S. mortgage and hiring. Expected revenue is ~$5.95 billion (up 4.7% reported, 6% constant currency). USIS hard mortgage credit inquiries are expected to be down 12% in 2025. Workforce Solutions is expected to have revenue growth over 7%, USIS over 5%, and international constant currency revenue growth ~7%. Adjusted EBITDA is expected to be over $1.9 billion, and free cash flow ~$900 million (cash conversion ~95%). First quarter 2025 guidance: Total revenue between $1.390 billion and $1.420 billion, adjusted EPS $1.33 to $1.43 per share.

Risks

• Impact of U.S. mortgage and hiring markets on revenue and margins.
• Foreign exchange fluctuations affecting international revenue.
• Changes in economic conditions in international markets, particularly in the UK.
• Risks related to non-GAAP financial measure comparability and factors that could cause actual results to differ materially from expectations.

Question and Answer

Q: Jeff Muller on EWS margin guidance and TWN record partners A: Mark Begor and John Gamble discussed factors like the mortgage market decline, onboarding costs for new partners, and noted no change in payout ratios for TWN record partners.

Q: Manav Patnaik on mortgage and hiring impact on EPS A: Mark Begor and John Gamble explained the significant impact of the mortgage market decline and weaker hiring market on EPS, highlighting the high-calorie nature of mortgage and hiring-related revenue.

Q: Andrew Steinerman on mortgage revenues and hard vs. soft pulls A: John Gamble stated that 4Q '24 mortgage revenues were 17.7% of total revenue and explained that hard inquiries, which impact credit files, are focused on as they correlate with originations.

Q: Toni Kaplan on government opportunity A: Mark Begor discussed the positive macro for Equifax in government programs due to focus on accurate social service delivery, and John Gamble mentioned the impact of CMS reimbursement changes on government revenue in the first half of 2025.

Q: Faiza Alwy on TWN inquiries and pre-qual products A: Mark Begor and John Gamble talked about the differentiation of Equifax's credit files with TWN indicators for mortgage and auto, and the impact of soft pulls and shopping processes on revenue.

Q: Kyle Peterson on capital allocation A: Mark Begor discussed the importance of visibility into economic conditions, mortgage markets, and hiring markets before making decisions on dividend growth and share repurchases, emphasizing the focus on free cash flow generation and bolt-on acquisitions.

Q: Craig Huber on mortgage forecasting and Vitality Index products A: Mark Begor and John Gamble discussed visibility into other business segments, the Vitality Index, and the power of combining differentiated data with cloud capabilities for new product growth.

Q: Jason Haas on talent verification and USIS mortgage outperformance A: Mark Begor and John Gamble explained the impact of hiring market weakness on talent verification and the reasons for USIS mortgage outperformance, including pre-qual products and base effects.

Q: Owen Lau on international revenue growth and mortgage rate cuts A: John Gamble discussed international revenue growth drivers and Mark Begor explained the potential impact of mortgage rate cuts on Equifax's mortgage revenue and margins.

Q: Andrew Nicholas on margins and TWN data products A: Mark Begor and John Gamble talked about margin management, cloud cost savings, and the strategic value of TWN data products for differentiation and market share gain.

Q: Kelsey Zhu on SSA contract and record growth A: Mark Begor discussed the SSA contract extension and the multifaceted approach to record growth, including partnerships and direct relationships.

Q: Scott Wurtzel on EWS revenue growth and pricing/penetration A: Mark Begor discussed the importance of pricing, penetration, and new product rollouts in driving EWS revenue growth.

Q: Unidentified Analyst on First Advantage and Sterling merger impact A: Mark Begor stated that Equifax has strong partnerships with industry players but did not comment on specific competitive impacts.

Q: Matt O'Neill on talent labor and mortgage price impact A: Mark Begor discussed the impact of hiring market conservatism and supplier price increases on talent and mortgage revenue, and the differentiation of Equifax's credit files with TWN indicators.

Q: Simon Clinch on EWS mortgage outperformance and TWN indicator balance A: Mark Begor and John Gamble explained the drivers of EWS mortgage outperformance, including record additions and new products, and the strategic use of TWN indicators to differentiate credit files.

Q: Arthur Truslove on USIS margins and TWN partner onboarding costs A: Mark Begor and John Gamble discussed USIS margin expectations, cloud cost savings, and the one-time nature of onboarding costs for TWN partners.

Q: George Tong on margin upside and cloud transformation savings phasing A: John Gamble and Mark Begor discussed margin upside drivers and the phasing of cloud transformation savings, noting smaller savings in 2025 compared to prior years.

Q: Unidentified Analyst on banks' macro expectations and credit performance A: Mark Begor discussed banks' and fintechs' perspectives, noting impacts of unemployment, consumer confidence, and higher rates on credit performance, particularly in subprime areas.