Mark W. Begor
Chief Executive Officer at Equifax
Thanks, Trevor, and good morning. Turning to Slide 4, we're off to a strong start in 2024. First quarter reported revenue of $1.389 billion was up 7% and at the high end of our February framework. Adjusted EBITDA margins of 29.1% were slightly above our expectations. And adjusted EPS of $1.50 a share was well above the high end of our guidance. Total US mortgage revenue was up 6% in the quarter, stronger than expected. The strength in mortgage revenue was in USIS, where mortgage revenue was up 38% against credit inquiries that were down 19% and 700 basis points better than expected, and continued strong performance in our new mortgage prequal products. EWS mortgage revenue was down 15% and consistent with our expectations. TWN inquiries at down 22% were slightly better than expected, and this was offset by slightly lower than expected revenue per inquiry, principally driven by product and customer mix. Our global non-mortgage businesses, which represented about 80% [Phonetic] of total revenue in the quarter, had strong 9% constant-currency revenue growth, which is well within our 8% to 12% long-term revenue growth framework. This was slightly below our expectation of 9.5% non-mortgage revenue growth. Non-mortgage organic constant-currency revenue growth was 5% in the first quarter.
At the BU level, EWS verifier non-mortgage revenue was up a strong 15% and stronger than expected, driven by very strong 35% growth in government and good growth in auto and debt management, slightly offset by some weaknesses in talent. Employer revenue was down 10% and weaker than expected. This was principally driven by a more rapid decline in ERC revenue than we expected and delays in state government processing of WOTC claims. ERC is now at a run rate of under $3 million a quarter and should stay at about that level for the rest of the year. For WOTC, the federal requirements for states to validate WOTC claims changed late last year, and most states have not yet completed the changes required to process claims, which dampened our revenue in the quarter. This impacted our WOTC revenue in the first quarter, but we expect this to be a timing issue. And this essentially creates a backlog of WOTC submissions that will have to be completed by the states that will begin turning to revenue as state processing accelerates in the remainder of 2024. Offsetting these declines in the quarter, we saw mid-single-digit growth in I9 and onboarding revenue. And going forward, we expect Employer revenue, including ERC, to be up low-single-digit percentages for the remainder of 2024. In total, EWS non-mortgage revenue was up 7%, and overall EWS revenue was up 1%. And adjusted EBITDA margins at EWS of 51.1% were over 50 basis points stronger than our expectations from strong operating leverage and strong performance.
USIS had a very strong quarter with revenue up 10%, its highest quarterly revenue growth in three years, even against the 19% mortgage market decline. As I referenced earlier, mortgage revenue was up 38% and stronger than expected from market and pricing pass-through and our new prequal solution. Non-mortgage revenue was up 1% and was weaker than expected. Although we had very strong double-digit growth in Kount and consumer solutions and mid-single-digit growth in banking and lending, we saw double-digit declines in third-party bureau sales and low-to-mid single-digit declines in telco and auto. And USIS adjusted EBITDA margins were up -- were 32.7% in the quarter and up -- about 70 basis points higher than our expectations.
International delivered 20% constant-dollar revenue growth and 6% organic constant-currency revenue growth, excluding the impact of the BVS acquisition, both of which were above our expectations. Very strong growth in Latin America and Europe was partially offset by lower-than-expected growth in Asia Pacific. International delivered 24.3% adjust EBITDA margins, up slightly from our expectations. As you can see from the right-hand side of the slide, we added a new strategic priority this year to focus on driving AI innovation. As mentioned in February, 70% of our new models and scores were built last year using AI and ML with a goal of 80% this year. In the first quarter, we exceeded this goal with 85% of our new models and scores being built with Equifax AI and machine learning. Equifax.AI leveraging our proprietary data, Equifax Cloud and NPI capabilities is a big area of focus and execution for Equifax in 2024 and beyond.
We're maintaining our 2024 guidance with revenue at the midpoint of $5.72 billion and adjusted EPS of $7.35 a share. Our strong first quarter with revenue at the top end of the range, EPS above the top end of the range, gives us confidence in our ability to deliver the full year guidance we provided in February. We expect strong constant-dollar non-mortgage revenue growth of over 10%. And our full year guidance is based on the assumption that the US mortgage market continues at levels consistent with current run rates, with US credit inquiries down about 11% from 2023.
Before I cover our business unit results in detail, I wanted to provide a brief overview of what we're seeing in the US economy and with the consumer. Broadly, outside of the bottom of the -- bottoming of the mortgage market, there's not a lot of change from our view back in February. US consumer and our customers remain broadly resilient. Employment remains at historic levels with low unemployment, which is a positive for consumers and customers. Employment turnover and hiring at lower levels entering 2024 than last year, hiring levels in January and February were at their lowest levels in three years. This is more pronounced for higher salaried roles and lower salaried or hourly jobs. Credit card and auto 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. And subprime credit card and auto delinquency rates continue to remain above pre-pandemic levels with auto subprime delinquencies above 2009 levels. As we discussed before, it's our view that when consumers are working, they largely have the capacity to keep current under financial obligations, which is good for our customers and good for Equifax.
Turning to Slide 5, Workforce Solutions revenue was up 1% in the quarter, slightly below our expectations. EWS mortgage revenue was down 15%, as expected. TWN inquiries at down 22% were slightly better than expected, although weaker than USIS credit inquiries, as home buyers continued to have difficulty completing purchases, while shopping behavior continued to be fairly strong. Our revenue [Indecipherable] Kount inquiries by 7%, which was below the about 11% we have got into in February, relative to our February guidance, the benefit of the mortgage price increases implemented in January by EWS and stronger fulfillment rates due to the growth in TWN records, were expected. However, these were partially offset principally by a shift in product and customer wins. As we look to the remainder of 2024, we expect TWN record growth to result in improved mortgage outperformance, with the second quarter up slightly from first quarter levels and the second half of the year at about 14% outperformance. For the full year of 2024, we expect mortgage outperformance to be about 11% at EWS. This is down significantly from the 20% we saw last year, as we lap the late '22 launch of our higher-priced Mortgage 36 trended data solution.
Non-mortgage verification services revenue, which represents over 70% of verifier revenue, delivered a very strong 15% growth at the top end of the EWS long-term revenue growth framework of 13% to 15%, and was also above our expectations. Government, which is now our largest verification services vertical, had another outstanding quarter and was stronger than our expectations with 35% revenue growth. Government revenue benefited from both our new CMS and SNAP contracts, continued expansion of state contracts, continued TWN record growth and pricing. We expect continued growth in government throughout 2024, with stronger growth rates in the first half as post COVID CMS redeterminations principally complete in the first quarter.
Talent solutions revenue was down 4% in the quarter, which was weaker than expected, as we saw very slow volumes through both January and February. March saw about flat revenue, which was more consistent with our expectations and which we expect to continue into the second quarter. Consumer lending revenue was [Phonetic] 6% in the quarter, as we saw strength in our auto and debt management businesses, slightly offset by declines in card. This is the second consecutive quarter of consumer lending revenue growth as we're lapping headwinds from the fintech lending pullbacks in '22 and '23. Auto and debt management revenue growth was principally driven by strong record growth and our pricing actions in the first quarter. As I referenced earlier, Employer Services revenue was down 10% compared to the about 4% decline we discussed in February from ERC and WOTC reductions. Going forward, we expect Employer revenue excluding ERC to be up low-single digits for the remainder of 2024. Workforce Solutions adjusted EBITDA margins of 51.1% continue to be very strong from non-mortgage revenue growth, good cost execution, while we continue to invest in new products, expand into high-growth verticals like government talent, and grow our claim records. As a reminder, EWS first quarter margins are seasonally lower from a higher mix of employers solutions revenue, principally from ACA and W-2 in the first quarter.
Turning to Slide 6 and expanding on our discussion of EWS TAMs, in February, we provided additional details on our fast-growing government vertical. On the left side of the slide, we outline some of the federal agencies we're supporting with Workforce Solutions digital income/employment incarceration data that accelerated time to deliver needed social service benefits to over 90 million Americans and help government agencies ensure program integrity, a win-win for all parties. And in the middle of slide, you can see the substantial progress our EWS government vertical has made in a short period of time, penetrating the $5 billion TAM with a three-year CAGR of over 50%. We expect EWS to continue making significant progress penetrating the government vertical from additional sales resources to federal and individual state capital level, strong TWN record growth, new product roll-outs with our differentiated incarceration data and system-to-system integrations enabled by our cloud-native technology that makes our solutions easier for our government customers to consume. Our SSA contracts, last year's $1.2 billion CMS contract extension and the new $190 million SNAP contract are examples of how EWS is helping various government agencies improve the consumer experience and their own operating efficiency from the application of authentication phases to redetermination and recovery processes. The strength of the EWS government vertical was clear again in the quarter, and we expect strong future growth in this business in '24 and beyond.
Turning to Slide 7, EWS had another strong quarter of new record additions and signing new payroll processors. During the quarter, EWS signed agreements with two new payroll processors, including one large payroll processor that will contribute over 6 million current records to the TWN data set. This adds to the six partnerships we signed in the fourth quarter that are coming online in the first half of 2024. And this brings the total number of payroll providers added to the TWN database to 35 since the beginning of 2021, and the pipeline for new records continues to be strong. Both of these wins in the quarter are a testament to EWS' ability to deliver the highest levels of client service from a technology, data security and accuracy, operational excellence, as well as the highest level of record monetization as EWS participates in a broad range of verticals, including government, mortgage, talent solutions, talent screening, card, auto, and personal loans. And given our advancements in AI and cloud-native capabilities, the time to board new records from payroll processes had decreased over the past few years. We expect these new record additions in the first quarter to come online and beginning generating revenue in early third quarter.
In the quarter, EWS added 4 million current records, growing the TWN database by 10% over last year. At the end of the quarter, the TWN database had 172 million current records on 126 million unique individuals. Total records, both current and historic, are now about 670 million and were up about 8%. These are very strong results, given the typical churn in holiday season hiring in the first quarter. In terms of coverage, we have current employment records on about 75% of US non-current [Phonetic] payroll, and over 55% coverage on the estimated 225 million income-producing Americans. At 126 million unique active records, we have plenty of room to grow the TWN database towards the TAM of 22 million income-producing Americans.
As shown on Slide 8, USIS revenue was up 10%, stronger than our expectations and well above their 6% to 8% long-term growth framework, principally due to stronger-than-expected mortgage revenue. As I referenced earlier, USIS mortgage revenue was up 38% and stronger than our expectations. Mortgage credit inquiries at down 19% were still down substantially, but 700 basis points above our February guidance. We also continue to see very strong performance from our new mortgage prequal solution. The strong pricing environment, along with the strength in our prequal product, drove the very strong mortgage outperformance of 57%. At 145 million, mortgage revenue was just over 30% of total USIS revenue in the quarter. Non-mortgage revenue was up just over 1% and weaker than the above 3% growth we had expected. Third-party sales to credit bureaus, including Experian and TransUnion, were down double digits in the quarter. Excluding the impact of third-party bureau revenue, USIS non-mortgage revenue was up about 2% and closer to our February guidance. B2B none-mortgage online revenue growth was down less than 1% and below our expectations, again driven by lower third-party bureau sales, and to a lesser extent, declines in auto and telco. Offsetting these declines was strong double-digit growth in Kount and very good mid-single-digit growth in banking and lending. Commercial revenue growth was up low-single digits in the quarter. Financial Marketing Services, our B2B offline business, was down 1% and slightly below our expectations. Marketing revenue was down 4%, principally due to a 10% decline in ISI revenue versus a difficult comp in the first quarter last year. We expect ISI revenue to grow for the full year. Prescreen marketing was down less than 1% and at similar levels to the quarterly revenue we had in 2023. We continue to see declines in smaller FIs, principally -- or partially offset by growth in larger FIs. Within risk and accounting reviews, we did see 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 fraud revenue was up a strong 8% from new business. USIS consumer solutions D2C business had another very strong quarter, up 10% from very good performances in both consumer direct and our indirect channels. And USIS EBITDA margins were 32.7% in the quarter and higher than our expectations from stronger mortgage revenue growth.
Turning out to Slide 9, international revenue was up 20% in constant currency and up 6% in organic constant currency, excluding the impact of BVS, and above the 18% growth we guided to in February due to better-than-expected revenue in Europe and Latin America. Europe local-currency revenue was up very strong 10% in the quarter from strong growth in our UK CRE -- CRA B2B consumer and direct-to-consumer channels, as well as our debt management business. Latin America local-currency revenue, excluding Brazil, was up 31% versus last year, driven by strong double-digit growth in Argentina and Central America. Brazil revenue in the quarter on a reported basis was $41 million. We expect to make good progress on the BVS integration, as we expect to implement Interconnect, our end-to-end decision platform, this summer for small and medium-sized businesses, and by year-end, for large businesses, and implement Ignite our advanced analytics platform, by year-end. The combination of our Ignite and Interconnect platforms will bring significantly enhanced capabilities to our [Indecipherable] to business and to the Brazilian market. Canada delivered 4% in the quarter as expected. And Canada is on track to complete their migration of the Equifax Cloud in the second quarter. And similar to USIS, we expect to see accelerating NPI as they complete the cloud. Asia Pacific revenue was below our expectations with revenue down 10% due to lower market volumes, principally in our Australian commercial business. We expect Asia Pacific to have declining revenue in the first half 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 this year. International adjusted EBITDA margins of 24.3% were above our expectations due to revenue growth and continued strong cost management.
Turning to Slide 10, we continue to make very strong progress with new product innovation, launching over 25 new products in the quarter with a 9% Vitality Index from broad-based strong performances across all of our BUs. As a reminder, our VI measure includes NPIs for the last three years. And on January 1, drops out NIPs -- on January 1, dropped out NPIs from all of 2020. While our first quarter VI was slightly below our long-term goal of 10%, as we lacked a large EWS talent solutions product launched in 2020, we expect our quarterly VI to accelerate throughout the year, leveraging our EFX Cloud capability to drive new product rollouts, with a full year 2024 VI of over 10%. Consistent with the fourth quarter of last year, USIS delivered another strong quarter with VI of 7%, as we're closer to cloud completion and able to leverage our new cloud-native infrastructure for innovation in new products such as our suite of Ignite solutions, including Ignite for Prospecting and Ignite for Financial Services. EWS delivered VI of over 10%. We expect EWS VI to accelerate throughout 2024, with new product introductions focused on incarceration data, mortgage prequal, and I9 and onboarding products.
As I mentioned earlier, EFX.AI is a pillar of our EFX2026 strategic priorities, enabled by our EFX Cloud. In the middle of this slide, you can see that we're accelerating the pace at which we are developing new models, scores and products, using AI and machine learning. In the first quarter, 85% of our new models and scores were built using AI and ML, which is ahead of our 2024 goal of 80% and last year's 70%. NPI and AI are clear focus for Equifax, which will drive innovation that can increase the visibility of consumers to help expand access to credit and create new mainstream financial opportunities, as well as drive EFX top line growth and margins.
Before I turn it over to John, I want to spend a few minutes on our progress on two of our critical EFX2026 strategic priorities that support our long-term growth framework of 8% to 12% top line growth and 50 basis points of annual margin expansion. Completing the cloud from building and leveraging our cloud capabilities is a big 2024 priority, which is fundamental to accelerating NPI and execution of AI, and more broadly, analytics, as well as substantially strengthening system response time and resilience of our technology for our customers. Completing cloud also frees up our team to fully focus on growth, expanding innovation, new products and new markets. Our progress towards completing the cloud is gaining momentum with over 70% of our total revenue in the new Equifax Cloud at the end of the quarter. And we're focused on executing the remaining steps to reach 90% of Equifax revenue in the cloud by year-end. USIS expects to complete their consumer credit, mortgage, and telco and utilities exchange customer migrations to the new Equifax Cloud data fabric principally in the third quarter, which will allow them to decommission legacy systems in the second half of this year as planned. Customer feedback from the thousands of customers that we've migrated to Equifax Cloud year to date has been very positive. Candidates are progressing as planned to complete their consumer credit exchange migrations to the data fabric in late second quarter of this year with their data center decommissioning plan for the third quarter. Europe continues to make significant progress with the goal of completing Spain's consumer credit exchange migration to data fabric and the decommissioning of their legacy systems in the third quarter. And UK is now scheduled to complete cloud migrations decommissionings of their technology and data centers in the first half of 2025. In Latin America, we completed the Argentina and Chile cloud migrations and expect to make substantial progress on the remaining Latin American countries throughout the rest of 2024. And lastly, as planned, we expect Australia to make big progress this year towards completing their consumer credit exchange migrations to the Equifax Cloud in 2025.
Second, driving AI innovation is an important EFX2026 strategic priority that leverages our cloud-based data fabric and application architecture and global Ignite analytical and Interconnect decisioning platforms. We're making great progress in embedding these EFX.AI capabilities across our global footprint. Ignite and Interconnect are now broadly available worldwide. And during 2024, we're deploying both Equifax proprietary explainable AI, along with Google Vertex AI, across Ignite, Interconnect and our global transaction systems. For Equifax, Vertex AI enables faster and more predictive model development on our Ignite platform. And for our clients, Ignite, which combines data analytics and technology to one cloud-based ecosystem, customers can connect their data with our unique data through our identity resolution process to gain a single holistic view of consumers. We now have 100 -- access to 100% of the US population through our data sets in our single data fabric. This is expanding the scorable population of consumers for our customer cases by over 20%. And we're driving faster data ingestion and analytics with greater than five times the processing power of our legacy applications tied into our clients' existing campaign account management and business platforms.
Completing the cloud and expanding EFX.AI, along with continued expansion of our differentiated data sets will accelerate innovation and new products at Equifax that will drive both our top and bottom line. In the first quarter, we were also off to a good start on our broader operational cloud restructuring plan across Equifax, reflecting cost reductions from the closure of North American data centers and other broader spending controls against our $300 million goal. These actions are improving operating margins and lowering the capital intensity of our business. We're entering the next chapter of the new Equifax as we pivot from building the new Equifax Cloud towards leveraging our new cloud capabilities to drive our top and bottom line.
And now, I'd like to turn it over to John to provide more detail on our first quarter financial results and to provide our second quarter framework. Our second quarter guidance builds on our strong first quarter performance from new products, revenue growth and pricing. John?
