Mark W. Begor
Chief Executive Officer at Equifax
Thanks, Trevor, and good morning. Before I cover results for the quarter, I wanted to spend a few minutes on our 2023 performance. Equifax performed extremely well last year against our EFX 2025 Strategic Priorities.
Our strong performance was against one of the most challenging mortgage markets in the last 20-plus years, with our USIS mortgage inquiries down 34% and Equifax mortgage revenue down 17%, which equates to almost $500 million of lost mortgage revenue last year.
Despite a significant decline in 2023 mortgage revenue, Equifax delivered. We delivered 2% organic constant currency revenue growth, with 7% organic constant currency non-mortgage revenue growth, which was at the low end of our long-term 7% to 10% growth rate. Importantly, we had sequential improvement during the year, with 8% total growth and 9% non-mortgage growth in the fourth quarter. We also delivered over 100 new products with a vitality of 14%, which was a record for Equifax and well above our 10% long-term goal.
EWS delivered strong 10% organic non-mortgage revenue growth, which allowed them to deliver flat total growth despite mortgage revenue that was down 23%. They delivered sequential non mortgage revenue growth and exited fourth quarter with strong 17% non-mortgage growth. Verifier non-mortgage revenue grew 14%, led by government that grew over 30% and talent that grew 5%, despite the white collar hiring market that was down just under 10%.
EDS -- EWS grew current twin records to 168 million, up 16 million or 11%, and grew total records to 657 million at 53 million records. We added 17 new twin partnerships last year, our highest number ever, and have a strong pipeline for 2024. And in the third quarter, EWS signed a contract extension to provide income verifications to the US Centers for Medicare and Medicaid Services as part of a contract valued at up to $1.2 billion over the next five years, which is the largest contract in Equifax's history. EWS also delivered over 20% new product vitality.
USIS delivered 4% revenue growth, with 7% non-mortgage growth within their 6% to 8% long-term growth framework, while mortgage declined 5%. The USIS Commercial and Consumer Solutions business had very strong years with double digit revenue growth, led by strong market penetration and new products.
International delivered 12% constant dollar revenue growth and 6% organic constant dollar growth, led by continued very strong 17% organic growth in Latin America with a Vitality Index over 15% and close to 10% revenue growth in our UK CRA. And in July, we completed the BVS acquisition in the fast growing Brazilian market.
We delivered these strong results while making significant progress towards completing our cloud migration, ending the year with about 70% of Equifax revenue in the new Equifax Cloud. We decommissioned seven data centers and migrated about 37,000 customers to the Equifax Cloud. We are convinced that our new EFX Cloud single data fabric and AI capabilities are delivering new differentiated products faster with better performance, and will provide a competitive advantage to Equifax for years to come.
The strong progress we made in 2023 will enable the substantial completion of our North American transformation and customer migrations in the first half of 2024, including decommissioning of the mainframes and major North American data centers. Also in 2024, we expect to make substantial progress towards completing transformation activities in Europe and Latin America. By the end of 2024, we expect to have about 90% of our revenue in the new Equifax Cloud, with the vast majority of new models and scores being built using Equifax AI.
In 2023, we executed very well against our EFX Cloud and broader operational restructuring plan across to Equifax, reflecting cost reductions from the closure of major North American data centers and other broader spending controls in excess of our original $210 million goal.
We expect an incremental $90 million of run rate spending reductions in 2024, which is up about $25 million from our prior forecast due to the additional actions we are take -- we took in the fourth quarter that will benefit 2024. Of this $90 million 2024 spending reduction, about $60 million reduces operating expenses and $30 million reduces capital spending. These actions are improving operating margins and lowering the capital intensity of our business. As we move into 2024, I'm energized by our commercial momentum, NPI capabilities and the benefits of the new Equifax Cloud.
Turning to slide four, our strong fourth quarter gives us momentum as we move into the new year. Fourth quarter revenue of $1.327 billion and adjusted EPS of $1.81 per share were both at the high end of our guidance. And EBITDA margins at 33.7% were up about 60 bps sequentially.
Our non-mortgage businesses, which represent about 85% of total revenue in the quarter, were very strong with 14% constant currency and 9% organic constant currency non-mortgage revenue growth, also at the high end of our 7% to 10% long-term organic growth framework, driven by strong performances at EWS and International.
Total US mortgage market was slightly stronger than we expected in the quarter, with USIS inquiries down 17%. As mortgage rates declined during the quarter from a 23-year high of 7.9% in late October to about 6.8% late in the year, we saw some increased activity that we expect will grow if rates continue to climb in 2024.
Mortgage volumes began to strengthen slightly relative to normal seasonal levels in December, and we've continued the slight and improvements during January, which is a good sign that the market is bottom. Mortgage market outperformance of 33% for USIS and 18% for EWS last year in the quarter were strong and about as expected. We'll share further perspectives on the mortgage market when we discuss our 2024 guidance.
At the BU level, EWS non-mortgage revenue was up a strong 17% and above our expectations, principally due to strength in our government and talent businesses, which drove adjusted EWS EBITDA margins sequentially to above 51%. USIS had a good quarter with revenue up 5%, slightly above our expectations, principally due to stronger mortgage revenue, which drove adjusted EBITDA margins up about 100 basis points sequentially to 35%.
International delivered 22% constant dollar revenue growth and 6% organic constant currency revenue growth, excluding the impact of the BVS acquisition. Very strong growth in Latin America and Europe were principally offset by lower than expected growth in Asia Pacific. International delivered very strong 31.2% adjusted EBITDA margins, up about 500 basis points sequentially and much stronger than our expectations.
Before I cover our business unit results in more detail, I wanted to provide an overview of what we're seeing in the US economy and with the consumer. Broadly, outside of what appears to be a bottoming of the mortgage market, there's not a lot of change from our prior view.
The US consumer and our customers remain broadly resilient. Employment remains at historic levels with low unemployment and almost 9 million open jobs, which is a positive for consumers and our customers. However, there continue to be some constraints in white collar hiring.
Credit card delinquency rates for prime consumers, which represent about 80% of the market, are stable and at historically low levels at less than 1% but above pre-pandemic levels. However, subprime borrower delinquencies, which have been increasing over the past year, are now above pre-pandemic levels and are approaching 2009 levels.
Auto delinquency rates for prime consumers, which represent about 80% of the market, are also stable and well below 1%, but are above pre-pandemic levels. Delinquencies for subprime consumers are above pre-pandemic levels as well as above the levels we saw in 2009. And any credit tightening that we've seen has been largely in fintech and subprime, which started well over a year ago. When consumers are working, they largely have the capacity to keep current on their financial obligations, which is good for our customers and for Equifax.
Turning to slide five strong twin record growth and the positive impact from new products penetration and price drove a strong 18 points of EWS mortgage outperformance in the quarter. As expected, mortgage outperformance was down sequentially from the third quarter, as we lapped the 2022 launch of our Mortgage 36 trended data product.
EWS had another very strong quarter of twin record additions, adding 5 million current records in the quarter and 16 million during 2023. EWS grew twin records 11% in the quarter to 168 million on 124 million unique individuals, which was up 9%. Total records, both current and historic, are now over 655 million and were up 9%.
In terms of coverage, we have current employment records on about 75% of US non-farm [Phonetic] payroll and about 60% coverage on the 220 million income producing Americans. At 124 million active records, we have plenty of room to grow the twin database.
During the quarter, we signed agreements with six new payroll processors that will deliver records in 2024. In 2023, we added partnerships with 17 payroll processors and over the past three years have added partnerships with 33 payroll processors. During the quarter, EWS also surpassed a significant milestone with over 3 million companies contributing to the work number every pay period, a huge milestone as we continue to focus on expanding our twin coverage. The market continues to adopt higher value solutions that include trended employment and income history that only Equifax can deliver. For example, in the fourth quarter, over 50% of mortgage revenue incorporated historic records.
Turning to slide, six Workforce Solutions revenue was up a strong 10% in the quarter, which is a very positive sign as we look towards 2024. Non-mortgage revenue growth of 17% was very strong and up 600 basis points sequentially and at the highest levels that we saw in 2023. Importantly, verification services non-mortgage revenue, which represents about 75% of verifier revenue, delivered very strong 27% in the growth in the quarter and it was up 16 points sequentially.
In government, we saw continued very strong growth with revenue up 47% in the quarter and over 30% for the year. Government revenue was slightly stronger than our expectations, given continued CMS redeterminations, the new SNAP contract, record growth, state penetration and pricing. We expect continued growth in government throughout 2024, with stronger growth in the first half, as CMS redeterminations complete prior to the second quarter.
Talent solutions revenue was up 13% in the quarter and up 700 basis points sequentially. As we've discussed, we are currently more heavily penetrated to white collar workers, including technology, professional services and financial services, which has seen a greater reduction in hiring activity and broad hiring freezes and layoffs than the total labor market over the past 12 months to 18 months. These markets are off to a slow start again in January, and we would expect to see slower revenue growth in the first quarter in talent than we delivered in the fourth quarter. We outperformed these underlying markets in the fourth quarter by over 25 points, as we delivered new digital solutions, strong new product growth, pricing and continued expansion of twin records.
Employer services revenue was down 7% and in line with our expectations, driven by declines in ERC revenue, which is now about $5 million per quarter, as the US Government has suspended processing new ERC claims. ERC revenue is expected to stay at about these levels through 2024, and we'll see headwinds in our employer vertical from this ERC decline through to third quarter of 2024. Excluding the impact of the declining ERC revenue, employer services revenue grew during the quarter, driven by growth in our I-9 and onboarding businesses despite this -- the negative impact of US hiring.
Workforce Solutions' adjusted EBITDA margins of 51.2% were better than our expectations, principally due to better expected revenue performance. The strength of EWS and uniqueness and value of their twin income and employment data and employer services businesses would clear again in 2023. EWS is expected to deliver strong growth in 2024 and continued above-market growth in the future.
On slide seven, I'd like to expand on the significant opportunity still in front of us for EWS. This slide details the big $15 billion EWS TAM versus their $2.3 billion of revenue last year. EWS has plenty of room to grow. As you can see, with the exception of housing, which includes mortgage where our penetration is on the order of 60%, our penetration is in the range of 10% to 20% in each target market where we compete. In each of these markets, we principally compete against paper pay stubs or other forms of manual verifications and we deliver instant verifications, productivity, speed and accuracy.
In both mortgage, government and talent, where there's a requirement for broad coverage and depth of detail, and in talent and mortgage where there's a need for historical data, we have an opportunity to drive strong future growth from penetration in our existing verticals and leverage that penetration as we continue to expand twin record coverage towards the 22 -- 220 million income producing Americans in the United States.
As shown on slide eight, USIS revenue was up over 5% and above our expectations, principally due to stronger than expected mortgage revenue. USIS delivered non-mortgage revenue growth of about just over 3% in the quarter and slightly below our 4% growth expectation. USIS mortgage revenue was up 16% and outperformed the mortgage credit inquiries that were down 17% by 33 points. The strong pricing environment drove the very strong outperformance. At $78 million in the quarter, mortgage revenue was 18% of total USIS revenue.
B2B non-mortgage online revenue growth was down slightly less than 1% and below our expectations. We continue to see double-digit growth in commercial and single-digit growth in telco and auto, with banking and lending about flat. The declines were principally due to weakness in D2C, our business where we sell data to other credit bureaus and insurance.
Financial marketing services, our B2B offline business was up 7% and much better than our expectations. In marketing, we saw mid-single digit growth in the quarter, led by double-digit growth in our IXI consumer wealth data business, partially offset by declines in prescreen marketing.
While prescreen marketing revenue was down in the quarter, we did see an improvement over prior quarters with the return to growth in fintech prescreen marketing. We continue to see declines in smaller FIs, partially offset by growth in larger FIs. Within risk and account services, we saw limited growth in our portfolio review business, but not to the levels we would typically see if our customers were expecting a weakening economy. And within fraud, we saw double digit revenue growth, primarily from new business.
USIS consumer solutions D2C business had another very strong quarter, up 15%, from very good performances in both our consumer direct and indirect channels. And USIS adjusted EBITDA margins were 35.1% in the quarter, and in line with our October guidance. ToD [Phonetic] in the US came on offense as they complete their cloud transformation in the first half of 2024 and pivot to leveraging their new cloud capabilities to deliver new products and drive share gains.
In the quarter, the USIS team signed an extension to the NCTUE cell phone and utility payment data relationship, allowing USIS to exclusively manage the database and continue bringing new products to market that expand lending to consumers, including our differentiated USIS mortgage credit file solution that incorporates NC plus cell phone and utility data that only Equifax can provide.
Turning to slide nine, International revenue was up 22% in constant currency and up 6% in organic constant currency, excluding the impact of BVS and above the 20% growth we guided to in October due to better than expected revenue in Latin America slightly offset by lower Asia Pacific revenue. Europe local currency revenue was up a strong 9% in the quarter from strong double-digit growth in our UK CRE -- CRA business and, as expected, a return to growth from our UK debt management business.
Latin America local currency revenue excluding Brazil was up 30% versus last year, driven by strong double-digit growth in Argentina, Uruguay, Paraguay and Central America from new product introductions and pricing actions.
Brazil revenue in the quarter on a reported basis was $41 million. We continue to make good progress on the Brazil integration, with strong progress in bringing new Equifax solutions, such as count and mitigator to the Brazilian market as well as bringing EFX data and analytics expertise to our Brazilian customers. Our global Equifax teams are very engaged in integration activities, including moving BVS to the Equifax Cloud and single data fabric.
Canada delivered low single digit growth in the quarter, as expected. Canada will complete their migration to the Equifax Cloud by mid 2024. And similar to USIS, we expect to see accelerated NPI growth going forward.
And Asia Pacific revenue was below our expectations, with revenue down 2%, due to lower market volumes in consumer and commercial, particularly late in November and December. We expect Asia Pacific to have declining revenue in the first half of 2024 due to these softer market conditions and the near-term impact of long-term contract extensions we signed with several large customers. We expect Asia Pacific to return to revenue growth in the second half of 2024. Despite the decline in revenue, Asia Pacific adjusted EBITDA margins were up over 200 basis points sequentially from strong cost management.
International adjusted EBITDA margins of 31.2% were up almost 500 basis points sequentially in outstanding performance. The improvement was driven by revenue growth and good execution against their 2023 cost reduction plan by Lisa and the international team.
Turning to slide 10, in the fourth quarter, overall non-mortgage constant dollar revenue grew a very strong 14% with organic growth of 9%, up over 250 basis points sequentially, a very good sign as we move into 2024. The acceleration in organic revenue growth was driven by very strong EWS verifier non-mortgage revenue performance.
As we look to 2024, we expect non-mortgage constant dollar revenue growth to be over 10.5%, with organic growth of almost 8.5%, about 150 basis points above the levels delivered last year. Non-mortgage organic revenue growth is expected to be led again by EWS, driven by strong growth in their government and talent businesses.
Turning to slide eleven, we delivered strong 14% vitality again in the quarter, led by very strong performance in EWS with a VI over 20% as well as over 15% in Latin America. Importantly, USIS accelerated in the fourth quarter to 7%, which was up over 200 basis points sequentially as we get closer to cloud completion and are able to begin to leverage our new cloud native infrastructure for innovation and new products.
Our strong Vitality Index results are not only led by over 100 new products launched in each of the last four years, but the increasing average revenue per new product, which is up close to 50% since 2021. During the quarter, about 90% of new product revenue came from non-mortgage products. Leveraging the Equifax Cloud.
The positive momentum in our NPI and Vitality Index is encouraging for the future and reinforces our long-term strategy of leveraging our differentiated data assets and new cloud capabilities to drive new solutions for our customers. Leveraging our Equifax Cloud capabilities to drive new product rollouts, we expect to deliver a Vitality Index of over 10% again in 2024.
On the right side of the slide, we've highlighted several new products introduced in the quarter. These new solutions are a testament to the power of the Equifax Cloud in driving innovation that can increase the visibility of consumers to help expand access to credit and create new mainstream financial opportunities as well as drive Equifax topline growth and margins.
Turning to slide 12, we believe Equifax AI leveraging our differentiated data assets, our new Equifax Cloud capabilities and new product focus as positioning our industry leading EFX AI powered models, scores and products. On the left of the -- side of the slide, our large and diverse proprietary data sets is a significant differentiator for Equifax. Our proprietary data at scale, keyed and linked in our single data fabric leveraging our new EFX cloud gives us significant advantages in using AI to build more predictive multidata models, scores and products.
Our EFXI [Phonetic] is enabled by our EFX developed explainable AI solutions that leverage our ignite platform and our Google Vertex capabilities, our modern AI and ML enabled cloud based model scoring engines and our over 1,000 Equifax DNA professionals. AI leveraging our patented explainable AI capabilities is a big priority for Equifax in '24 and beyond as we complete the Equifax Cloud.
As shown on the chart in the middle of slide 12, we've made tremendous progress building advanced models and leveraging our market leading AI capabilities. In 2023, 70% of our new models were built using AI and ML tools, up from 60% in '22 with a goal of over 80% this year. Our investments in AI are generating results. To date, Equifax has received over 90 approved AI patents supporting areas such as our proprietary AI neurodecision technology or NDT, and explainable AI, with over 130 AI patents pending.
We've launched new products developing EFX AI, including Equifax One Score for consumer -- consumers incorporating traditional credit, alternative credit, as well as cell phone utility and paid TV data, which has improved the performance of the solution to score 20% more consumers. We are energized about the capabilities that Equifax AI is bringing to strengthen our business and accelerate the value of our proprietary data through richer data combinations.
Now, let's turn to 2024 guidance. Moving to slide 13, we enter 2024 with momentum from the fourth quarter in the underlying growth of our non-mortgage businesses and in the strong execution against our EFX 2026 strategic priorities. The US mortgage market appears to have bottomed, and through January we're seeing some slight improvements versus our expectations in both USIS and EWS, which is good news for the future.
Our 2024 planning assumption is that the current level of US mortgage activity will continue for the rest of the year with adjustments for seasonality. On this basis, US mortgage inquiries across USIS and EWS would be down on a blended basis by 15%. We're assuming twin inquiries will see a slightly smaller decline in USIS credit inquiries, as the level of consumer shopping behavior moderates.
For perspective, our 2024 framework is over 30 points lower than the average current forecast from MBA, which is currently forecasting 24 origination units up 17% versus are down 15% and Fannie Mae which is not forecast units but is forecasting origination dollar volumes up 24%. MBA and Fannie Mae forecast mortgage rates moved down to 6.1% and 5.8% respectively from 6.8% today.
We will continue to forecast our mortgage market trends or current EFX run rates, as we have done for the past five plus years. And as in the past, we do not include interest rate decreases or increases in our forecasts. We will continue to share mortgage credit inquiry volume changes with you each quarter, so you can make your own judgments on the mortgage market outlook for the future. Further, we are assuming that the US economy will see modest deceleration in '24, with growth slightly below the 2% average we generally assume in our long-term growth framework.
In our key international countries, we expect slowing and low levels of GDP growth in Australia. And in Canada, UK and Brazil, we expect about flat GDP. Despite the decline in the US mortgage market and some modest economic deceleration across our major markets, we expect to deliver 2024 revenue of about $5.72 billion at the midpoint of our guidance, with reported growth at the midpoint of 8.6%. Constant currency revenue growth is expected to be about 10.5%, with organic constant currency revenue growth of 8.5% and again at the center of our 7% to 10% long term organic growth framework.
Total mortgage revenue growth should be about 9.5%, about 24 points better than the about 15% decline from the USIS NIT [Phonetic] or the US mortgage inquiries. In our framework. Non-mortgage constant dollar revenue should grow over 10.5%, with organic growth of almost 8.5% and FX is about 190 basis points negative to our revenue growth.
We expect Workforce Solutions to deliver revenue growth of about 8% in 2024. This reflects mortgage revenue at up just under 2%, about 15 points better than underlying EWS mortgage transactions. And EWS non-mortgage verticals are expected to grow almost 10.5%. Excluding the expected significant decline in ERC revenue, as that pandemic support program completes, EWS non-mortgage revenue growth is about 12%, which is a strong performance given the expected weak hiring market in 2024 as well as the weaker overall US economy.
Talent in EWS is expected to grow about 7% despite a decline in our underlying markets and government is expected to deliver over 15% growth against a very strong over 30% comp last year.
Twin record growth and NPI Vitality Index of over our -- 10% EFX goal and continued strong growth in both pricing and penetration will continue to drive EWS outperformance. We expect USIS to deliver revenue growth of almost 8% in 2024, at the high end of their long term growth target of 6% to 8%.
Mortgage revenue is expected to grow over 20%, over 35 points stronger than the expected 16% decline in mortgage market inquiries. We are continuing to see substantial revenue benefits from both pricing increases from one of our largest USIS mortgage vendors that we pass on to customers at levels to maintain consistent margins and new product and pricing benefits by USIS.
Non mortgage revenue in USIS is expected to grow almost 4% despite modestly slower economic growth. The non-mortgage growth will be driven by continued strong commercial and identity and fraud growth as well as mid single digit growth in FY and auto. Consumer services is expected to grow about 5%, with financial marketing services expected to grow in the low single digit percent. And we expect to see weaker revenue growth in D2C and telco.
International had a very good 2023, with 6% organic constant dollar revenue growth, but saw some weakening in end markets late in the year, particularly in Canada and Australia. We expect International constant currency growth to be over 15% in 2024, with organic constant currency growth of about 10%. The accelerating inflation we are seeing in Argentina is expected to benefit overall International revenue growth by over 5 percentage points. Although uncertain, we have assumed currency devaluation in Argentina will be more than offset by inflation in our 2024 planning.
We expect our new product Vitality Index to be over 10% again in 2024, led by EWS and Latin America. As US and IS in Canada principally complete their cloud transformation, we expect their NPI rollouts to accelerate as we exit 2024.
For the full year, EBITDA is expected to be about $1.9 billion, up over 12%, with adjusted EBITDA margins of about 33.3%. And adjusted EPS is expected to be about $7.35 per share, up about 9.5% from last year. Capital spending will decline by over $100 million to about $475 million or about 8.3% of revenue. The reduction reflects our progress in completing our cloud transformation and is a significant step towards our goal of 7% or below as we exit 2025.
Now, I'd like to turn it over to John to provide more detail on our 2024 assumptions and guidance, and also to provide our first quarter framework. Our 2024 guidance builds on our strong 2023 non-mortgage growth from new products, record growth and pricing. John?
