Equifax Q4 2024 Earnings Report

Equifax EPS Results

• Actual EPS: $2.12
• Consensus EPS: $2.12
• Beat/Miss: Met Expectations
• One Year Ago EPS: N/A

Equifax Revenue Results

• Actual Revenue: N/A
• Expected Revenue: $1.44 billion
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Equifax Announcement Details

• Quarter: Q4 2024
• Date: 2/6/2025
• Time: Before Market Opens

Equifax (NYSE:EFX) operates as a data, analytics, and technology company. The company operates through three segments: Workforce Solutions, U.S. Information Solutions (USIS), and International. The Workforce Solutions segment offers services that enables customers to verify income, employment, educational history, criminal justice data, healthcare professional licensure, and sanctions of people in the United States; and employer customers with services that assist them in complying with and automating payroll-related and human resource management processes throughout the entire cycle of the employment relationship. The USIS segment provides consumer and commercial information services, such as credit information and credit scoring, credit modeling and portfolio analytics, locate, fraud detection and prevention, identity verification, and other consulting services; mortgage services; financial marketing services; identity management services; and credit monitoring products. The International segment offers information service products, which include consumer and commercial services, such as credit and financial information, and credit scoring and modeling; and credit and other marketing products and services, as well as offers information, technology, and other services to support debt collections and recovery management. The company serves customers in financial services, mortgage, retail, telecommunications, utilities, automotive, brokerage, healthcare, and insurance industries, as well as government agencies. It operates in Argentina, Australia, Brazil, Canada, Chile, Costa Rica, Dominican Republic, Ecuador, El Salvador, Honduras, India, Ireland, Mexico, New Zealand, Paraguay, Peru, Portugal, Spain, the United Kingdom, Uruguay, and the United States. The company was founded in 1899 and is headquartered in Atlanta, Georgia.

Equifax Q4 2025 Earnings Call Transcript

Presentation

[Operator]

Greetings, and welcome to the EcoFax Incorporated's 4th-Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone today should require operator assistance, please press star zero from your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Trevor Burns, Senior Vice-President, Head of Corporate Investor Relations. Trevor, you may now begin.

[Trevor Burns, Senior Vice President, Head of Corporate Investor Relations at Equifax]

Thanks, and good morning. Welcome to today's conference call. I'm Trevor Burns. With me today are Mark Bieglor, Chief Executive Officer; and John Gamble, Chief Financial Officer. Today's call is being recorded. An archive of the recording will be available later today in the IR Calendar section of the News and Events tab at our Investor Relations website. During the call, we will be making reference to certain materials that can also be found in the Presentations section of the News and Events tab at our IR website.

These materials are also labeled 4Q 2024 earnings conference call. Also, we'll be making certain forward-looking statements, including first-quarter and full-year 2025 guidance to help you understand Equifax and its business environment. These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from our expectations. Certain risk factors that may impact our business are set forth in filings with the SEC, including our 2023 Form 10-K and subsequent filings.

We will also be referring to certain non-GAAP financial measures, including adjusted EPS, adjusted EBITDA and cash conversion, which will be adjusted for certain items that affect the comparability of our underlying operational performance. These non-GAAP financial measures are detailed in reconciliation tables, which are included with our earnings release and can be found in the financial results section of the Financial Info tab at our IR website. As a note, based on feedback from many of you, starting with our first-quarter Call on April, we will plan on shortening our prepared remarks. Some of the content that we normally share in the prepared remarks may be included in the appendix to our quarterly earnings presentations. If you have any questions or comments, please feel free-to share them with me and. Now I'd like to turn it over to Mark.

[Mark Begor, Chief Executive Officer at Equifax]

Before I cover our results for the quarter, I want to spend a few minutes on our 2024 performance. Turning to Slide 4, we were pleased with our financial performance in 2024 that was in-line with the goals we set at the beginning of the year against some challenging mortgage and hiring macros. 2024 revenue was up almost 8% on a reported and organic constant-currency basis at the low-end of our long-term to 12% growth framework.

Adjusted EPS was $7.29 per share, up over 8.5% versus last year. Cash conversion was 89%, approaching our target of 95% plus with free-cash flow of $813 million, up 58% and we reduced our debt leverage to our target levels of under three turns. We delivered accelerated improvement in constant dollar revenue growth at almost 10% and EBITDA margins at over 34% in the second-half of the year, although not at the levels we had planned given market headwinds, principally in US hiring and the mortgage market.

Overall, 2024 performance was strong, aligned with our EFX 2027 strategic priorities and was an important inflection point in our ability to accelerate our free-cash flow generation that sets us up well to drive growth through targeted bolt-on acquisitions, while positioning Equifax to return capital to shareholders through both dividend growth and launching a multi-year share purchase -- share repurchase program in 2025.

We delivered against our EFX 2027 strategic priorities. We made strong progress towards completing our cloud, data and technology transformation as USIS, Canada, Spain, Chile and several other Latin-American countries completed their cloud -- their consumer cloud customer migrations, a huge milestone for Equifax. We now have close to 85% of Equifax revenue in the new Equifax cloud, which is a big accomplishment after five years of investment.

We expect to have a significant competitive advantage as we pivot from building to leveraging the Equifax cloud in 2025 and beyond that will allow us to fully focus on growth, innovation, new products and AI. Our cloud progress allowed us to decommission legacy systems and data centers and deliver about $300 million in spending reductions last year that increased to about $360 million in 2025. Leveraging the new Equifax Cloud, we are now on offense with effects.ai.

In 2024, 95% of our new models and scores were built using Equifax AI and machine-learning, up from 70% in 2023. In 2024, the EWS team had another outstanding year of record additions, ending the year with 188 million active records, up 20 million records or 12% with 734 million total records in the Twin dataset. The team signed 15 new strategic partnerships in 2024, including Workday, which we expect will fuel EWS Verification Services revenue growth in 2025 and beyond. And we continued our strong new product growth with broad-based 2024 Vitality Index of 12%, which was 200 basis-points above our long-term 10% goal and equates to about $650 million of new product revenue last year.

Our Vitality Index in EWS and International were very strong and importantly, we saw USIS Vitality Index strengthen 200 basis-points from the first-half to the second-half of last year. We expect our Vitality Index to be above our long-term goal of 10% again in 2025 as we leverage the Equifax cloud to deliver new products that only Equifax can provide. As we move into 2025, I'm energized by our commercial momentum, new product innovation and AI capabilities and the benefits of the new Equifax Cloud.

Turning to Slide 5, Equifax 4th-quarter reported revenue of $1.419 billion was up 7%. The dollar strengthened substantially in the quarter, negatively impacting revenue about $12 million versus our October guidance. On an organic constant-currency basis, revenue growth of 9% was just over 100 basis-points or $17 million below the midpoint of our October framework, driven principally by weaker US hiring and mortgage markets, which declined significantly in the last half of the 4th-quarter.

The weaker US hiring markets impacted our talent and onboarding businesses, driving the bulk of the weakness versus our guidance midpoint. This resulted in non-mortgage constant dollar revenue growth being just under 6% in the quarter and about 150 basis-points weaker than our expectations. Total US mortgage revenue was up 29% in the quarter and also below our expectations. US mortgage revenue declined meaningfully in late December and January as mortgage rates have moved above 7%.

Based on these trends, we expect 2025 mortgage revenue credit inquiries to be down 12% in 2025. Despite the pressure from weaker mortgage and hiring macros, Equifax delivered 4th-quarter adjusted EBITDA of $502 million, which was up about $30 million sequentially with adjusted EBITDA margin of 35.4%, in-line with our October framework. And this is the first-quarter in Equifax's history of adjusted EBITDA over $500 million, a big milestone for the future.

Adjusted EPS of $2.12 per share was at the midpoint of our October guidance and was the first-quarter of adjusted EPS over $2 a share since the second-quarter of 2022. We were disappointed that we were below October revenue guidance for 4th-quarter revenue given the mortgage and hiring declines late in the quarter. However, the team performed well in managing costs and expenses to deliver on our commitments on both adjusted EBITDA and EPS.

We remain focused on delivering on our commitments and have no change in our Equifax long-term growth framework. Turning to Slide 6. Workforce Solutions revenue was up 7% in the quarter and below our October guidance, principally due to the lower-than-expected talent solutions and I-9 and onboarding revenue from the weaker hiring market. Talent solutions revenue was up 2% in the quarter. In October, we discussed declining trends in hiring volume that weakened meaningfully during the 4th-quarter.

And in January, we saw a further weakening of monthly hiring volumes off the lower December levels. Despite the weaker hiring macro, Talent solutions continues to outperform their underlying markets, benefiting from new records, new products, penetration and pricing as well as new solutions from the new Total Verified data hub, which includes trended employment data as well as incarceration, education and licensing and credentialing data.

Government had another strong quarter with revenue up 11% and consistent with our expectations. As expected, growth rates in the 4th-quarter were lower than the 3rd-quarter, principally due to comping off very strong growth we saw last year from redetermination volumes. We saw continued strong momentum in incarceration data sales in the 4th-quarter with insights revenue up double-digits. EWS mortgage revenue was up 17% in the quarter with Twin inquiries up 6%. EWS total mortgage revenue outperformed Twin inquiries by 11%, up about 150 basis-points sequentially from strong record growth in the 4th-quarter.

Employer services revenue was down 9% in the quarter. The weaker hiring market also negatively impacted I-9 and onboarding revenue. And as I referenced earlier, the weak hiring market has continued in January and we expect it to impact first-quarter performance. Workforce Solutions adjusted EBITDA margins of 51.9% were up a strong 70 basis-points and consistent with our guidance despite the weaker-than-expected revenue growth.

The EWS team continues to tightly manage costs while staying focused on driving top-line growth. Turning to Slide 7. Twin record additions continued to be very strong again in the 4th-quarter with active records up $6 million in the quarter and $20 million for the year or 12% to 188 million records. In the 4th-quarter, EWS signed agreements with three new strategic partners, which brings the total new partnerships in 2024 to 15.

We expect these new partnerships along with our new Workday partnership to drive record growth and EWS revenue growth in 2025. At 137 million unique active records, we have plenty of room to grow the Twin database towards the TAM of about 225 million income-producing Americans. Turning to Slide 8, USIS revenue was up over 10% in the quarter, driven by strong mortgage outperformance, which was consistent with our guidance and well-above the USIS long-term revenue growth framework of 6% to 8%.

USIS non-mortgage revenue grew almost 2.5% in the quarter and was slightly below our guidance. Within online, we saw mid-single-digit growth in FI, which was an improving trend, low single-digit growth in auto and a return to growth in our direct-to-consumer business, the segment where we principally sell data to the other credit bureaus. Telco declined in the quarter, comping off a very strong 4th-quarter Last year and we saw declines in Identity and fraud, principally from our charge-back management business. USIS mortgage revenue was up a very strong 47%. Mortgage credit inquiries were flat during the quarter, but we saw them weaken late in the quarter and declined meaningfully sequentially in December as rates moved above 7%. The strong pricing environment along with growth in mortgage pre-approval and pre-qualification products drove the mortgage revenue growth. In the 4th-quarter, mortgage pre-approval and pre-qual inquiries declined sequentially. At about $115 million, USIS mortgage revenue was just over 24% of total USIS revenue in the quarter. Financial marketing services, our B2B offline business was about flat in the quarter and in-line with our October guidance. We saw strength in our identity-based businesses and with our expanding relationships in the payment segment. Our IXI wealth data revenue was down in the quarter, comping against a very strong 4th-quarter in 2023. USIS Consumer Solutions D2C business had another very strong quarter, up 9% with strong growth in our consumer-direct channel from strong customer acquisition trends. USIS adjusted EBITDA margins were 38.3% in the quarter, up 440 basis-points sequentially and consistent with our guidance. USIS performed extremely well in delivering the expected cloud cost reductions as they decommissioned legacy consumer, telco and utility technology platforms. With the USIS consumer and our telco and utilities cloud transformations complete, the USIS team is positioned well for growth in 2025 and beyond. Turning to Slide nine, international revenue was up a strong 11% in constant-currency and above their 7% to 9% long-term revenue framework and stronger than our October guidance. Latin-American growth was very strong, driven by double-digit growth in Brazil. Canada and Australia delivered higher-growth rates sequentially and Europe grew mid-single digits in the 4th-quarter, which was sequentially weaker in the UK CRA, reflecting overall UK economic conditions. International adjusted EBITDA margins of 32.5% were stronger than our October guidance, up 480 basis-points sequentially and the highest since the 4th-quarter of 2020 from strong revenue growth and good cost execution. Turning to Slide 10, we continue to make very strong progress driving innovation new products, delivering a 12% vitality in the 4th-quarter from broad-based double-digit performances across all of our businesses. We expect strong Equifax double-digit Vitality Index again in 2025, above our 10% long-term goal, leveraging our Equifax cloud capabilities to drive product rollouts using our differentiated data and effects.ai capabilities. With our USIS consumer and telco customer migrations complete, we are rapidly developing and bringing to-market new solutions that include our unique twin income and employment data along with our USIS credit and alternative data assets. We expect our Twin-powered credit solutions to help our clients gain deeper insights into consumer credit worthiness from solutions using both credit and Twin income and employment indicators, which is a big win for our clients, for consumers and Equifax. We're rolling out a new solution that provides mortgage lenders key twin income and employment information along with the Equifax credit report. This new solution allows lenders to instantly obtain information about both a mortgage applicant's credit worthiness and the applicant's employment status with a single data request from Equifax, a huge differentiator leveraging the power of our unique EWS and USIS data assets that are in the Equifax single data cloud fabric. We plan to launch additional only Equifax solutions in 2025 for the auto vertical, where both credit and income verifications are integral to credit underwriting. Moving to Slide 11, we enter 2025 executing well against our Equifax 2027 strategic priorities and we're well-positioned to deliver continued strong AI-powered new product growth, leveraging new Equifax cloud that will drive our top-line growth. 2025 is a pivotal year for Equifax in our ability to accelerate our free-cash flow generation as CapEx comes down and our EBITDA expands. Our strong free-cash flow conversion that will approach -- our 95% long-term goal and leverage our expanding EBITDA positions Equifax to return capital to shareholders through both growing our dividend and launching a multi-year share repurchase program in 2025. We are continuing to face challenging end-markets in the US and US mortgage and hiring. With mortgage rates above 7%, we've seen meaningful declines in hard mortgage inquiries over the past six-weeks. Based on those trends, our 2025 guidance reflects USIS hard credit inquiries declining 12% compared to last year. We will continue to forecast our mortgage revenue of current EFX credit and Twin inquiry run-rates and as in the past, we do not include interest-rate decreases or increases in our forecasts. For perspective, the USIS hard credit inquiries that we disclosed quarterly represent over 70% of total USIS mortgage revenue in 2024. Also, based on weak hiring trends over the past eight weeks, we expect 2025 US hiring be down about 8% relative to 2024 and out-of-the order of over 10% below average BLS hires over the last 10 years. And last, with the US dollar strengthened significantly over the past three months and at current FX rates, 2025 revenue will be negatively impacted by about 130 basis-points or about $75 million. Based on these economic assumptions, we expect to deliver 2025 revenue of about $5.95 billion, up 4.7% on a reported basis at the midpoint of our guidance. Constant-currency revenue growth is expected to be about 6% with both mortgage and non-mortgage constant-currency revenue up about 6% in 2025. The assumed declines in the US mortgage and hiring markets are impacting our overall growth rate by over 200 basis-points. Absent these mortgage and hiring market declines, 2025 organic constant dollar revenue growth would be at the midpoint of our long-term organic framework -- organic growth framework of 7% to 10%. At the business unit-level, we expect Workforce Solutions to deliver revenue growth of over 7% in 2025. Verification services revenue is expected to be up about 8% and lower than our long-term framework due to the weak mortgage and hiring markets. Mortgage revenue is expected to be up about 3% due to the impact of the expected decline in the US mortgage market. Non-mortgage verifier revenue was expected to be up over 9%, down from the levels seen in 2024, principally driven by the expected decline in US hiring and the resulting expected mid-single-digit growth in our talent business and government growth is expected to be impacted due to tough 2024 comps and some weakness in the first-half of 2025 as states adjust to modified CMS and USDA food and nutrition service funding practices. Government growth -- revenue growth should return to double-digit levels in the second-half of 2025. Continued strong twin record growth, a Vitality Index of over our 10% Equifax goal and continued growth in both pricing and penetration will continue to drive verification services revenue growth despite the mortgage market and hiring market headwinds. We expect employer services to be about flat in 2025 with gross -- growth also impacted by the expected declines in US hiring and onboarding. We expect USIS to deliver revenue growth over 5% in 2025, which would bring US USIS revenue to about $2 billion. We expect mortgage revenue to grow over 8% despite the expected 12% decline in hard mortgage credit inquiries. Non-mortgage revenue growth is expected to grow about 4%, up from 2% last year and USIS revenue is expected to benefit from accelerating NPIs and share gains as they leverage the new Equifax Cloud. And we expect international constant-currency revenue growth to be about 7% in 2025, consistent with their 7% to 9% long-term financial framework. At these revenue levels and at the midpoint of our guidance, EBITDA margins should increase about 25 basis-points with EBITDA increasing about 5% to over $1.9 billion. Adjusted EPS at the midpoint of our guidance is expected to be $7.45 per share, up 2% over last year with free-cash flow at about $900 million and free-cash flow conversion at about our long-term target of 95%. With our leverage now below 2.6 turns, we are well-positioned to continue our bolt-on acquisition strategy and start increasing the return of capital to shareholders through both growing the dividend and a multi-share repurchase program during 1920 -- -- during 2025. Now I'd like to turn it over to John to provide more detail on our 2025 assumptions and guidance and also provide our first-quarter framework.

[John Gamble, Chief Financial Officer at Equifax]

Thanks, Mark. As Mark discussed and is shown on Slide 12, our planning assumes USIS hard mortgage credit inquiries are down about 13% in 1Q '25 and 12% for all of 2025, which again in 2024 represented over 70% of USIS mortgage revenue. Sequentially, we are assuming that our US mortgage business will have normal seasonality in 2025. Slide 13 provides the specifics of our 2025 full-year guidance. 2025 is being significantly impacted by declines in US mortgage and hiring markets as well as negative FX.

The year-to-year declines in these markets are impacting revenue growth by over 200 basis-points, adjusted EBITDA margins by about 150 basis-points and Equifax adjusted EPS growth by about 7 percentage points. Absent these market factors, our constant-currency revenue growth would be consistent with our 7% to 10% long-term framework and adjusted EPS growth would be approaching 10%. Slide 13 also includes additional detail on expected BU adjusted EBITDA margins as well as guidance on specific P&L line items.

Equifax EBITDA margins are expected to be up about 25 basis-points in 2025, which is below the 50 basis-points of annual improvement in our long-term framework, principally due to revenue growth also being below our long-term framework due to-market factors we just discussed. The benefits from the cost actions Mark referenced are benefiting margins, more than offsetting the impact of higher costs, particularly in USIS mortgage.

EWS EBITDA margins in 2025 are about 50.5%, down from the 51.8% delivered in 2024. Margins in 2025 are impacted by lower revenue growth levels, revenue mix as well as costs related to the addition and boarding of Twin Partners. USIS EBITDA margins at about 35.5% are expected to be up about 100 basis-points year-to-year, realizing the full-year benefit of cost reductions from decommissioning legacy systems, again more than offsetting higher costs, particularly in mortgage.

International EBITDA margins at about 28.5% are expected to expand about 100 basis-points from 2024, benefiting from revenue growth and 2024 cost actions related to decommissioning legacy systems. Corporate expense, excluding depreciation and amortization is increasing in 2025 relative to 2024, principally due to increased variable compensation as we return to target levels of incentive payouts as well as continued investments in corporate technology, security and compliance.

Depreciation and amortization is expected to increase by about $55 million in 2025 as we put significant North American and other cloud-native systems into production in 2024. And our estimated tax-rate is expected to be about 26.75% in 2025 and above 2024 due principally to increased impact of overseas taxes and lower US development tax credits as we reduce capital spending. Capital spending should be about $480 million in 2025, down from $496 million in 2024.

And as we complete the cloud, more of our capital spending will be dedicated to innovation driving revenue growth versus building our infrastructure. We believe that our guidance is centered at the midpoint of both our revenue and adjusted EPS guidance ranges. Slide 14 provides the details of our 1Q '25 guidance. In 1Q '25, we expect total Equifax revenue to be between $1.390 billion and $1.420 billion, up about 1% on a reported basis year-to-year at the midpoint. Constant dollar revenue growth at the midpoint is almost 3%. Adjusted EPS in 1Q '25 is expected to be $1.33 to $1.43 per share, down 8% versus 1Q '24 at the midpoint.

The decline in adjusted EPS of about $0.12 per share is principally driven by higher depreciation and amortization of about $15 million or $0.09 a share and the higher effective tax-rate in 1Q '25, reducing adjusted EPS by about $0.02 a share. Equifax 1Q '25 adjusted EBITDA margins are expected to be about 28.5% at the midpoint of our guidance, down about 50 basis-points year-to-year. The sequential decline in adjusted EBITDA margins reflects seasonally higher 4th-quarter revenue and higher first-quarter equity compensation.

Business unit performance in first-quarter is expected to be as follows: Workforce Solutions revenue growth is expected to be up about 1% year-to-year. Verification services revenue is expected to be up 2.5%. Mortgage revenue is expected to be about flat with growth in records and pricing offset by the expected continued mortgage market decline. Verifier non-mortgage revenue is expected to be up about 3.5%. Government revenue is expected to be about flat with a difficult comp versus 1Q '24 CMS redetermination volumes and as Mark indicated, some weakness in the first-half of 2025 as states adjust to modified CMS and USDA Food and Nutrition service funding practices.

Government revenue growth should return to double-digit levels in the second-half of '25. Talent revenue should be up mid-single digits as growth is impacted by expected declines in US hiring. Employer revenue is expected to be down mid-single digits. EWS adjusted EBITDA margins are expected to be about 49%, down about 200 basis-points due to the lower revenue growth and cost impacts from boarding record contributors. USIS revenue is expected to be up about 3% year-to-year.

Mortgage revenue is expected to be up about 5% and non-mortgage revenue is expected to be up about 2.5%. Mortgage growth is being impacted by significant declines in USIS hard inquiries, which are being more than offset principally by third-party vendor pricing actions. Adjusted EBITDA margins are expected to be up 150 basis-points at about 34%, again reflecting the benefits from USIS decommissioned legacy consumer and telco and utility systems. International revenue is expected to be up about 6% in constant-currency. Adjusted EBITDA margins are expected to be flat year-to-year in 1Q '25.

Turning to Slide 15, free-cash flow is expected to continue to strengthen to about $900 million and approach our 95% cash conversion goal in 2025. As Mark indicated, as we have reached leverage levels consistent with our long-term goals and targeted BBB BAA2 credit ratings, we have significant flexibility to both restart bolt-on acquisitions and increased capital return to shareholders. Turning to Slide 16, the US mortgage market assumed in our 2025 guidance is over 50% below its historic average hard credit inquiry levels.

As the mortgage market recovers toward its historic norms, at current mortgage pricing and mix and current twin records, that represents on the order of $1.2 billion of annual revenue opportunity for Equifax. At current average mortgage gross margins, this would deliver adjusted EBITDA and adjusted EPS above the $700 million and $4 per share, respectively, that we have discussed with you in the past and that we would expect to move into our P&L as the mortgage market recovers toward normal levels in 2026 and beyond. Now I'd like to turn it back over to Mark.

[Mark Begor, Chief Executive Officer at Equifax]

Thanks, John. Turning to Slide 17. In 2025, our guidance reflects the challenging markets in both US mortgage and hiring, resulting in our expectation that constant-currency revenue at 6% will be below our long-term financial framework. Despite this end-market weakness, we expect to deliver adjusted EBITDA of over $1.9 billion, driven by margin expansion of 25 basis-points and about $900 million of free-cash flow from cash conversion of about 95%.

As end-markets normalize, we are confident in our ability to deliver organic revenue growth in our 7% to 10% long-term range, continue expanding EBITDA margins at 50 basis-points per year and growing cash conversion at above 95%, while executing on our bolt-on M&A strategy. And in 2025, we expect to significantly increase return of capital to shareholders. Wrapping up on Slide 18, in 2024, Equifax delivered financial performance in 2024 that was in-line with the goals we set at the beginning of the year with revenue up almost 8% on a reported basis and on an organic constant-currency basis.

Adjusted EPS at $7.29 per share, up 8.5%, free-cash flow of $813 million and cash conversion of 89%. And we had strong execution against our EFX 2027 strategic priorities in a challenging economic environment. We delivered on the critical priority of completing our North American consumer cloud transformation As well as significant portions of our global markets with close to 85% of Equifax revenue now in the new Equifax cloud. Our cloud-native infrastructure is already providing competitive advantages of always-on stability, faster data transmission speeds and industry-leading security for our customers and importantly, Equifax resources in technology, product and DNA are pivoting from building to leveraging the Equifax cloud for innovation, new products and growth. We are using our single data fabric EFX.ai and ignite our analytics platform to develop new credit solutions powered by twin indigators in verticals like mortgage and auto that only Equifax can deliver, which we expect will lead to share gains and growth for our USIS business. Exiting 2024 with close to 85% of Equifax revenue in our new cloud environment is a huge milestone for the team, so we can fully focus on growth. We are also at an important inflection point with our accelerating free-cash flow and a strong balance sheet to position Equifax to return our substantial excess free-cash flow to shareholders in 2025. We are entering the next chapter of Equifax with our cloud transformation substantially complete. I'm energized by our momentum as we enter 2025, but even more energized about the future of the new Equifax. And with that, operator, let me open it up for questions.

[Operator]

Thank you. We'll now be conducting a question-and-answer session. If you'd like to ask a question, please press star one from your telephone keypad and a confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick-up your handset before pressing the star keys. In the interest of time, it's allow as many as possible to ask questions, we ask that you please limit yourself to one question and one follow-up. Thank you while we pause a moment for poll for questions.

Questions and Answers

[Operator]

Thank you. And our first question will be coming from the line of Jeff with Baird. Please proceed with your question.

[Jeff Meuler, Analyst at Robert W. Baird]

Yeah. Thank you, and good morning. So I'm trying to listen to 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 cost 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 Twin Record partners, both as you sign new and renew?

[Mark Begor, Chief Executive Officer at Equifax]

Yeah, Jeff, I'll start and John can jump-in. I think you hit the factors impacting EWS and Equifax in 2025. Clearly, the mortgage market decline takes a lot of high-calorie revenue out-of-the forecast as well as the same on the talent side. Onboarding is larger now than it was in prior years. As you know, we added 20 million records last year, but we added 15 partners, including three in the 4th-quarter. So we've had our highest record addition last year and our highest partner additions last year.

So onboarding, we do expect to be larger in 2025, those onboarding costs, which of course will benefit us in the future moving forward. What else, John, would you add?

[John Gamble, Chief Financial Officer at Equifax]

So we have seen also nice growth. We talked about in Insights. We've seen nice growth in some education products and we want to continue to drive that growth. But those products have lower variable margins and contribution margins, obviously than twin that has very, very-high margins. So that is pressuring margins to a degree. And we're continuing to make substantial investments in EWS to drive future growth and deliver new products.

And given the fact that revenue growth is a bit lower, that obviously is somewhat decremental to margin in the year. So overall, I think we still expect this to be a very strong margin business. We believe as the mortgage market and hiring recovers, we're going to return to margin growth. But the factors we just talked about plus the headwinds of the difficult markets is what's resulting in the decline in '25.

[Jeff Meuler, Analyst at Robert W. Baird]

Okay. But just on the payout ratios that you're...

[Mark Begor, Chief Executive Officer at Equifax]

No change. I get that... Sorry, Jeff. Yeah, sorry, I didn't cover that one. No change. There's no change in our payout ratios. We extended it. We have about 60 partners. I think there was a handful of those that extended last year, same terms as in the past, no change in what our payouts are. We have attractive partnerships with a lot of partners. They get a lot of value at it and so do we, but we see no change in those payout ratios. That's not impacting our margins at all.

[Jeff Meuler, Analyst at Robert W. Baird]

Very helpful. Thank you. Yeah.

[Operator]

Our next question is from the line of Manav Patniak with Barclays. Please proceed with your questions.

[Manav Patnaik, Analyst at Barclays]

Good morning. I just wanted to confirm, Mark, when you said without the mortgage and hiring headwinds, 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?

[Mark Begor, Chief Executive Officer at Equifax]

Yeah. Manav, I think as you know, back-in October, when we talked about our 3rd-quarter earnings, we gave you some comments around what trends were at that time and rolled that forward to 2025. At that time, we thought the mortgage market was going to be up about 5 points-based on current trends. And obviously, the decline that happened in mid-December and is happening as we speak was surprising to us.

Obviously, 7% mortgage rates are high, but the decline was a lot sharper than we expected over the last six-weeks. So really what we're comparing to is somewhere between that flat and up 5 when we think about the impact that it would have had because as recently as two months ago, we were looking at 2025 being a slightly positive mortgage market environment and it's not now from an EPS standpoint, it's very-high calories.

[John Gamble, Chief Financial Officer at Equifax]

So Manav, when we calculated the benefit to EPS, obviously, we just assumed recovery to a flat market. And the growth rate recovery again is just really relative to a flat market and we just use the variable margins that we would have on those products, right? And so we assumed both for mortgage, USIS and Twin inquiries would go to flat and then we just assume the hiring market as opposed to being down 8% would be flat and we flow-through variable margins.

[Manav Patnaik, Analyst at Barclays]

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 from Dodge and all that stuff that's been thrown out there?

[Mark Begor, Chief Executive Officer at Equifax]

Yeah. Yeah. So I think you're focused on maybe the 4th-quarter end 2025, we have been performing exceptionally well, as you know, with very-high growth rates. So you're getting into some hard comps in the 4th-quarter and then in 2025, including in the first-quarter. We did mention that CMS in particular, made a change in the reimbursement program with the states where they used to reimburse that CMS reimbursed 100% of data costs.

They're now at 75%. So the states have to pay 25%. That had some impact in the fourth and likely in the first as states are adjusting to that. As you know, states have budgets. And if they're going to start paying for some of that data cost themselves, they've got to adjust their budgeting and their operating statements. And we're focused on working with the states to, in some cases going direct to them with our solutions that have some impact in the first-half of the year-on our government business.

As John said, we expect the government business to return to double-digit growth in the second-half. You may remember, we signed a large contract extension with SSA in September last year that really comes into effect in 2025. So that will have a positive impact, particularly in the second-half. And then our contracts have pricing escalators that aren't uniform on when they go into effect during the year, but we have some larger government contracts that have escalators that are positively impacting the second-half. So that's another good guy as we get into the year.

Anything else, John?

[John Gamble, Chief Financial Officer at Equifax]

Just in the first-half, and Mark mentioned, we're still dealing with the fact that there were redeterminations in the first-quarter of last year and part of the second-quarter. So revenue was very strong in the first-quarter of 2024 and moving into the second-quarter of 2024?

[Manav Patnaik, Analyst at Barclays]

Thank you.

[Operator]

Our next questions are from the line of Andrew Steinerman with J.P. Morgan. Please proceed with your questions.

[Andrew Steinerman, Analyst at J.P. Morgan]

Hi. 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 4th-quarter revenues? And the second one is just to make sure we get a definition of US hard mortgage credit increase, which Equifax has been seeing -- seeing down for 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.

[John Gamble, Chief Financial Officer at Equifax]

So 4Q '24 was 17.7%. And we -- and you know this, Andrew, we've been disclosing hard inquiries, the inquiries that actually impact your credit file for 10-plus years, right? And so we consistently disclose that number. I mean, it doesn't Doesn't include soft inquiries, right? So a pre-qual or a pre-approval product. But -- and we focus on hard inquiries because that's what's in the trimerge, that's what's required to be purchased to close a loan. Loan and we think that probably has the highest-level of correlation over-time over-time with originations, right? And we've taken a look at originations historically. We have good origination date in the credit file through think about early 2024, that time period relative to the 15% to '19 average is down something -- something on the order of 45%. And if you look at hard inquiries, in that same time period, we're down not quite 50%. So the correlation seems quite good, and that's why we continue to disclose that number specifically.

[Andrew Steinerman, Analyst at J.P. Morgan]

Okay. Thank you.

[Operator]

Thank you. Our next question is from the line of Tony Kaplan with Morgan Stanley. Please proceed with your questions.

[Toni Kaplan, Analyst at Morgan Stanley]

Thanks so much. Maybe first on just USIS, 2% non-mortgage growth versus last quarter of up 5%. Just wanted to hear about any sort of changes in the selling environment or just any factors you wanted to share on sort of 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.

[John Gamble, Chief Financial Officer at Equifax]

No, generally speaking, I think what we indicated is we thought auto performed relatively well, right, in the 4th-quarter. We thought FI also low-single digits, right, performed relatively well. I think the biggest difference that you saw, right, was that FMS in the 3rd-quarter was up double-digits. The team did a great job selling into some new customers in the 3rd-quarter, which drove FMS very strong. We talked about the fact that we built some outstanding new relationships in the payment industry.

Some of that really drove really good growth in our FMS or batch business. So that was probably the biggest difference between what was delivered in the 3rd-quarter and the 4th-quarter. But in terms of online, I think we feel like auto performed relatively well. Again, low-single digits, FI, low-single digits. D2C actually came back to growth for the first time in quite some time and we actually saw a little bit of performance in insurance. So I'd say the online performance relatively consistent. The big difference was FMS.

[Toni Kaplan, Analyst at Morgan Stanley]

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 sort of rethinking their programs and you can provide some efficiency to them, how are you thinking about the opportunity for a -- like 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.

[Mark Begor, Chief Executive Officer at Equifax]

Yeah, it's a great question, Tony. We still think there's a big market opportunity. And in this administration, you know, even more focus around delivering social services accurately to those in need and focusing on where there is improper payments or abuse in the system, which really means people that are receiving benefits that perhaps don't qualify. And I think we've all read and seen all the studies that says there's quite a bit of that.

Our view is, and I suspect it's yours too is that broadly, social services aren't going to be cut. There will be a focus and there is -- we see a focus in Washington and we're working both on the hill and also on the -- towards the White House around how our programs can really help in the delivery of social services accurately. So that's, we think a positive macro for Equifax. I know you know that TAM for us is about $5 billion of manual verifications that are done in the in the government space.

And again, it's done at the state-level. We have penetration in a lot of states, but a lot of states are fully manual. And as you know, a state is not typically a customer, it's the agencies within a state. So we've got a large commercial team. We're out there selling the productivity from using our solution, the accuracy and speed from using our solution. And again, the big macro, I think a positive for us in 2025 is broadly, there's been a bigger focus in Washington around accuracy, which we think plays well to our data, which is verified.

So we remain very bullish on the future of our government business in that big $5 billion TAM, we exited the year at roughly $700 million. So we've got a lot of opportunity. And the battleground for us or the opportunity is really at the state-level and the agencies. So that's why we've got Equifax resources deployed in the state capitals to really work on these programs. So we remain very optimistic around government in the future.

[Toni Kaplan, Analyst at Morgan Stanley]

Uper, thanks.

[Operator]

Our next questions are from the line of Faiza Alwy with Deutsche Bank. Please proceed with your questions. Y

[Faiza Alwy, Analyst at Deutsche Bank Aktiengesellschaft]

Es, hi, thank you. So I wanted to follow-up on the pre-core products and the soft. I think you mentioned that 70% of -- of maybe the inquiries or the revenues are. So just wanted to clarify if that's what you meant that 30% are soft pulls and 70% are hard credit pools. So I'm curious what you're expecting in terms of the penetration of pre-qual products and if you're seeing any share shifts 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?

[Mark Begor, Chief Executive Officer at Equifax]

Yeah. It started playing out in 2024. Your metrics are pretty close that there is a large shopping element or soft hole element of mortgage. That was a real tailwind for us following COVID when rates started to increase, people were shopping around further. We have seen some decrease in shopping really as a part of the -- what we've seen in the last, Call-IT, two months or six, eight weeks. As rates went higher, people -- those that are shopping are still shopping, but there's less people shopping, meaning a thinking about a mortgage.

So there's been a change in consumer confidence. The other changes that we've seen happening is there's some moves by mortgage originators who historically might pull all three in the shopping process. Some originators are either pulling one or two credit files instead of the full three, which obviously has an impact on our revenue. Our focus there is obviously to be responsive commercially, but more importantly is a big focus around our differentiated data.

And I talked about we're rolling out as we speak a Call-IT a shopping credit file for mortgage that has twin indicators on it, twin data that makes our shopping file more valuable to the mortgage originator because we want to differentiate between our competitors in that one and two B world in the shopping side. You may remember, we also have NC+ attributes that we're including with our mortgage credit file that also differentiates our mortgage credit file and that shopping process.

And unrelated to mortgage, we're doing the same thing as I mentioned in auto, we'll be rolling out in the first-half of this year, a twin indicator on our auto credit file for the same reason. And obviously, what we want to do is provide incremental value with the twin data on our credit file for both mortgage and auto, but still capture the twin full polls which are required for mortgage and are required for auto that happened later in the process.

So it's a -- it's, I think a really attractive advantage for Equifax to compete in both spaces with our differentiated data that really only we have. Only Equifax can put those twin -- twin indicators on our mortgage and credit file.

[John Gamble, Chief Financial Officer at Equifax]

And just in terms of the numbers, right, so we were quoting revenue, right? So it's something over 70% of revenue is hard poles. And then in addition to soft poles, there is a high single-digit percentage of a batch job, UDM, property data, rental data, et-cetera, that wouldn't be a soft pole, right? So when you break-down our mortgage revenue, it's something over 70s hard, right, high single-digit percentages that is the other things that I just referenced and the remainder would be soft inquiries.

[Faiza Alwy, Analyst at Deutsche Bank Aktiengesellschaft]

Got it. Thank you. And then just as a follow-up, apologies if I missed this, but any thoughts on twin inquiries for '25 and outperformance? I know we saw some improvement in the 4th-quarter on both of those metrics. So curious how you're thinking about that.

[John Gamble, Chief Financial Officer at Equifax]

Yes. Just in general, right, we're expecting Twin inquiries probably to be a little better than mortgage inquiries in 2025 just for the shopping reasons Mark referenced. And I'm talking about hard inquiries, but really no more -- no more specificity than that.

[Faiza Alwy, Analyst at Deutsche Bank Aktiengesellschaft]

All right. Thank you.

[Operator]

Our next question is from the line of Kyle Peterson with Needham. Please proceed with your questions.

[Kyle Peterson, Analyst at Needham & Company LLC]

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 balance sheet is in a pretty good spot. You guys are kind of hinting at both increasing the dividend and starting the 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 and as in like is it middle of the year, late in the year? How should we think about that?

[Mark Begor, Chief Executive Officer at Equifax]

Yeah. I think we tried to be more than hinting and we've been doing that for quite some time. As you know, it's been a goal of ours to complete the cloud transformation where we invested quite a bit of capex into moving us to the cloud-native mode. And then when that capex coming down is in our margin expansion and the savings from that really generating a lot of excess free-cash flow. So we've checked that box at close to 85% in the cloud, that's complete.

The one we want to see a little more visibility around before making that decision really to your timing question is where-is the economy, where-is the mortgage market, where-is the hiring market? To be frank, 60 days ago, Call-IT, you know in-kind of November and early December, we didn't anticipate rates going to 7% or the mortgage market declining 12% over the last six, seven weeks, that has been surprising to us and it's so rapid and so recent, we want to see a little more time there.

Where-is that mortgage market going, where-is the -- where are rates going, what impact are tariffs going to have on that. So I think getting through a portion of the year, so we have some more visibility on that, I think will be quite important. Our confidence around, you know, our guidance for 2025 is high with the underpinning of the mortgage market and hiring market, which we think we've baselined at the best data we have now.

And as we mentioned, we're going to -- we're going to have very strong free-cash generation this year. Even with our EBITDA expansion, we're going to generate a lot of EBITDA and a lot of excess free-cash flow. We do plan to use some of that, both leverage that grows with our margins expanding and EBITDA expanding as well as the free-cash to look for continued attractive bolt-on M&A, no change in our bolt-on M&A strategy.

And then we want to return cash to shareholders. We want to get back to growing the dividend again and we'll give that framework on growing the dividend at the time -- at the right time in 2025. And then we also want to return cash to shareholders. And what we would envision is a multi-year buyback program authorization by our Board to buy-back stock as we go through '25, '26, '27, pick that timeframe.

And when you look out in our model, I think yours looks like that too, you know, and you can pick your mortgage market assumptions or recovery assumptions, we generate a lot of cash over the next three-plus years and it's going to give us the ability to return that cash to shareholders. It's been a clear part of our strategy and it's a focus of ours and we clearly envision implementing that in 2025. All right.

[Kyle Peterson, Analyst at Needham & Company LLC]

Thank you very much

[Operator]

Our next questions are from the line of Craig Huber with Huber Research Partners. Please proceed with your questions.

[Craig Huber, Analyst at Huber Research Partners]

Yeah. Thank you. 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 the extrapolating the current trends out for the remainder of the year. There's nothing new with how you guys forecast the mortgage part of your -- of your of your business and so forth. The rest of your business, however, you are making some various assumptions and so forth. Maybe can you just talk about the differences there about how you put together your outlook for the year?

[John Gamble, Chief Financial Officer at Equifax]

Thank you. Sure. Yeah. No change in how we do that. We don't have many parts of our business that are impacted by macros, really mortgage principally is one and to a lesser degree, the hiring market, it's a smaller impact. But when you have a 10% decline in the underlying activity, which we've heard from background screeners has been happening same thing over the last Call-IT, you know, 60, 80, 90 days that has an impact.

For the rest of the business, we have a lot of visibility. We know that we took price up on 1/1 broadly across all of Equifax. We know what that price is. We know where we have subscription agreements that are in-place, multi-year contracts, either with minimums or with terms in them that we can forecast. We have deal pipelines where we're adding new business. We have contracts that we signed last year. They're going into effect this year that we lay into our forecast.

On the record side in EWS, we have quite a bit of visibility of new partners that we added to three in the 4th-quarter and some that we added in the second-half, record additions when we expect those to come online. And as you know, those translate into revenue instantly as soon as we add the records because we have the inquiries coming in. You know, with other partners that are already with us, we also have, you know, lots of programs with them because we don't have all their records typically.

So we're working with them to add those records in. So across the rest of the business, I think we have a lot of visibility and we typically are able to forecast well. Our goal in setting a framework for the quarter or for the year, in this case, first-quarter in 2025, is to lay out our best forecast, a forecast that we know-how to meet and with a goal of beating it. And we -- I would say, like any company, we try to have the right balance of conservatism in that forecast with that goal of delivering for our investors around what we lay out.

I mean, some specifically like around auto, for example, I think our expectation is auto sales new and used kind of flat, maybe a little better. And we -- again, we get input from our customers, similar concept around card and personal loans. I mean generally speaking, I think we think the consumer is relatively healthy, right, but we are seeing some cracks in consumer confidence. You've seen that obviously come through in January.

And then internationally, like we're assuming that we're going to see the markets continue to grow, but nothing substantial, not really any stronger than their long-term average growth framework and probably the UK and Europe, we're expecting to see slower-growth in their long-term framework.

[Craig Huber, Analyst at Huber Research Partners]

I appreciate that. Includes 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 put in-place there? Thank you.

[Mark Begor, Chief Executive Officer at Equifax]

Yeah, there's a whole bunch and I already highlighted, I'll highlight again because it's top of my list is, you know, with USIS now in the cloud, obviously EWS got in the cloud a couple of years ago, we can now combine those data assets. And we think that's going to be super powerful. And as I mentioned a few minutes ago and in my prepared comments, the rollout of a mortgage credit file that includes twin indicators on it, you know, we think is very powerful because only we can deliver that.

We're doing the same thing with our cell phone utility attributes on the mortgage credit file. And then we're going to do the same thing in auto and likely in personal loans because we think it will differentiate our credit file and that's going to be particularly powerful when there's only one credit file being pulled. We want to be the one to be pulled, we want to drive market-share there. So I think the cloud is really giving us in our single data fabric a lot of opportunities to leverage our differentiated data assets. We're also having great success with a solution here in the US we call OneScore, which takes our non-credit file datasets.

And as you know, we have the cell phone utility dataset. We have DataX and Teletrack that we acquired. You put that together, we have a very large set of consumers and trade lines that are not in the credit file, which allows us to differentiate our credit file again and drive on performance. The third one I would highlight is just the use of AI. We've been ramping-up our AI capabilities around scores and models and products. I think as you know, we're using it in the vast majority of our models and scores today and we're seeing very meaningful performance lifts around wider sets of data being used in that score and model driving performance like the one score data element.

So whole bunch there. And as you know, innovation and new products is central to our strategy and our DNA at Equifax. So we report to you, but we run the company around the Vitality Index. And that makes us a stronger partner with our customers. When we're innovating and bringing new ideas to our customers, we're viewed as a more valued partner. So that's a clearly central to how we want to operate in Equifax going-forward. And the cloud and our scale differentiated data really enables us to be advantaged around that innovation and new products.

[Craig Huber, Analyst at Huber Research Partners]

And I just wanted to clarify my answer to the last question about international -- and international growth rates was relative to economies, not the Equifax growth rates themselves. Yeah. Understood. Thanks, guys.

[Operator]

Our next questions are from the line of Jason Haas with Wells Fargo. Please proceed with your questions.

[Jason Haas, Analyst at Wells Fargo & Company]

Hi, 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 -- white-collar hiring 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 think about talent excluding the impacts from the softer hiring market?

[Mark Begor, Chief Executive Officer at Equifax]

Thanks. Yeah. So at the 4th-quarter, we indicated it was about eight points, right, better. That was a little weaker than it was in the 3rd-quarter. I don't think we gave guidance for what it would be going-forward, but historically, we've been running somewhere between high-single-digits and low-double-digits better than the market over-time. 4th-quarter was a

[John Gamble, Chief Financial Officer at Equifax]

Little weaker than 3rd-quarter and it was really specific to the way pricing -- our annual pricing was executed in the two different years. Our 2024 annual price increases actually a portion of them were executed in the 4th-quarter of '23 and then the remainder in the first-quarter of '24, our 2025 price increases substantially hit in the first-quarter of 2025. So we just had a grow over effect issue in the 4th-quarter of '24 versus 2023 because of the difference in timing of price increases?

[Jason Haas, Analyst at Wells Fargo & Company]

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 might know why, but can you talk about that? That would be helpful.

[Mark Begor, Chief Executive Officer at Equifax]

Thanks. Yeah. The biggest difference is really around and it was a question that was asked earlier around soft poles, around pre-qual and pre-approval products. What we saw going from '23 to 2024 since those products were relatively new in late '23 going into 2024 was very, very substantial growth in those products in 2024. So that drove a substantial amount of outperformance relative to hard pulls. What we -- what we're expecting in 2025 is we're continuing to expect pre-approval and pre-qual to perform well, but the growth rate will obviously be much lower because of the fact that we're coming off of a much larger base.

[John Gamble, Chief Financial Officer at Equifax]

So that's really the biggest difference in outperformance. We're expecting to continue to perform well year-on-year to continue to drive more new products. Mark has talked about it substantially, but it's really just the difference in the base on that's driving the difference in growth rate.

[Jason Haas, Analyst at Wells Fargo & Company]

Okay. And I'm sorry to ask that third call, 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 wasn't in 2024?

[John Gamble, Chief Financial Officer at Equifax]

And on dollar amount, they're relatively similar. Okay. All right. That's helpful. Thank you.

[Operator]

The next question is from the line of Owen Lau with Oppenheimer. Please proceed with your questions.

[Owen Lau, Analyst at Oppenheimer]

Hey, good morning. Thank you for taking my question. So on your international revenue growth, it was 11% year-over-year in the 4th-quarter and you guide to 7% in 2025 and 6% in the first-quarter. Could you please unpack a little bit more about the driver of that slowdown? Thanks.

[Mark Begor, Chief Executive Officer at Equifax]

Well, actually, we think 7% is quite good, right? So our long-term model is 7% to 9%. And so we feel very, very good about the 7% to 9% growth. I think Mark talked about where we're seeing the growth come from and the good news is what we're seeing is really improved performance and growth really across all geographies. The only geography, I think that's dealing with a little bit of market headwinds is the UK, and we're seeing some economic slowdown in the UK.

That's affecting -- that's affecting us in 2025 as well as we're expecting the UK economy in general to be a bit weaker. Brazil was really strong in the 4th-quarter. We had an outstanding performance from Brazil in the 4th-quarter and in the second-half really. In the second-half really, we're expecting -- we're expecting Brazil to perform well in 2020 -- in 2025, perhaps not double-digit, so -- but we're very happy with the way our Brazil acquisition is performing. So net-net, I'd say we feel pretty good about the 7% next year.

[Owen Lau, Analyst at Oppenheimer]

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 way cut or wage 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 inquiry 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?

[Mark Begor, Chief Executive Officer at Equifax]

Thanks. Yeah, we've seen, you know with changes in the 10-year and changes in mortgage rates had definitely an impact back-in kind of August, September when mortgage rates went down with the 10-year in advance of the election, we did see an uptick in activity or inquiries, both shopping and mortgages, both purchase and refi, as you point out. This late new year impact that happened in mid-December and all the way through January when rates went above 7 surprised us with the magnitude of it and how deep it's been to drop another 12 points.

But yeah, if we've clearly seen as rates move-up, there is an impact and we would expect the same if rates come down. It's hard to see that now with rates with the tariff discussions going on and when is that going to settle down in the marketplace and how the bond market reacts, which, as you know, has a big impact on mortgage rates. And then John mentioned it and I mentioned it also is that there's some element of consumer confidence that is lower-right now, which rolls into decisions around buying a home or decisions around buying a car, that clearly is consumer confidence is lower, perhaps with all the activity taking place in the new administration, we're clearly seeing that.

But over the long-term, you know, we're 50% below historic levels in mortgage inquiry activity. We don't think that's going to stay there over the long-term. The question is when will rates come down and we've been very clear and we showed it in our deck again today that we expect that to be a very meaningful impact for Equifax to the tune of over $1 billion of incremental revenue as well as incremental margin. And we'll flow that through. If there's a positive impact against our minus 12% outlook, we would expect that to be accretive to our framework for 2025, meaning that we'd have incremental revenue and we'd let that margin drop-through.

We're doing the right investments for the future of Equifax as you expect us to do, we wouldn't incrementally invest more if the mortgage market recovers. We're going to continue to focus over the long-term for Equifax. And if there is an uptick, that's going to drive our margins up and our EPS and our cash-flow up.

[John Gamble, Chief Financial Officer at Equifax]

And as Mark mentioned, again, our long-term framework only assumes that we're going to see modest growth in overall markets, including mortgage, think 2% to 3%, right? So again, to deliver our long-term framework, which includes substantial revenue growth and earnings growth of north of 10%, right, we don't need a mortgage -- the mortgage market to fully recover. We just need the mortgage market to stabilize and start growing slowly two to three points a year and we can deliver extremely well.

[Owen Lau, Analyst at Oppenheimer]

Got it. Thanks a lot.

[Operator]

Thank you. Our next question is from the line of Andrew Nicholas with William Blair. Please proceed with your questions. Hi, good morning. Thanks for taking my questions. First one is on margins. I think intra-quarter you talked about wanting to or thinking you can kind of approach 100 basis-points of margin expansion in '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 kind of cost actions you took intra-quarter to protect margins or if maybe you're getting a bit better expansion than you had thought from the tech transformation in '25?

[John Gamble, Chief Financial Officer at Equifax]

Yeah. So the numbers you quoted are correct, right? So I think the team did a really nice job in the 4th-quarter. What you saw is on weaker revenue. We delivered the margins we committed and I think the team did a nice job of managing costs as we went through the 4th-quarter. So obviously, as we're going into next year, we're continuing to try to manage costs closely to allow ourselves to deliver margin growth even in the face of those substantial declines in both mortgage, but also talent.

So we implemented sizable cloud cost-savings in the 3rd-quarter that as you know, are giving us year-over-year benefit in 2025. So we have real visibility to that, but those are done, right? So we've already completed those. So that's good news for us as we go into '25. And we have some incremental cloud cost-savings. As you know, we still have some markets we're completing.

We're going to complete Spain in the first-quarter. We'll get some small benefit from that. We've got Paraguay we completed in December. So those kind of completions that kind of roll-through '25 as we move from that close to 85% of our revenue in the cloud towards the 100% present incremental cloud cost-savings as we go through -- principally in '25. So we've got those in our outlook.

[Andrew Nicholas, Analyst at William Blair]

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 our set of products that you're offering that are going to have the twin 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 that flag? Just trying to understand kind of strategically how that plays out.

[Mark Begor, Chief Executive Officer at Equifax]

We look for both. You know, if you think about, you know, mortgage where some customers are only using one file in shopping, we want to be that file. So getting that incremental revenue or market-share as you describe it is very attractive. We're delivering more value, so we should get price for it. And then same thing in auto. Auto, many dealers will pull one mortgage credit file when a consumer comes in. We want to be that credit file we pull because it's pulled because we're going to provide incremental information around the eligibility for that consumer because remember, they'll echin auto And in mortgage, but I'll use auto example. A consumer comes in, their credit is super important, but many mortgage loan -- auto loans require income verification in certain income levels in order to qualify for that auto loan, knowing that upfront in the early stages of that consumer interaction is super valuable and only Equifax can provide it. And as I mentioned, we'll likely have a solution for personal loans. And as an old credit card guy, I know the value of combining income with credit score even in a credit card space. So the power we have now is having those data assets, twin and our credit assets in USIS, but having both businesses in the cloud post USIS completing the cloud last summer gives us the ability to really leverage those in the marketplace and drive share and drive revenue and price.

[Operator]

Thank you. Next questions are from the line of Kelsey Zhu with Autonomous Research. Please proceed with your questions.

[Kelsey Zhu, Analyst at Autonomous Research]

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 FSA and 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 just wondering how you're thinking about that in light of CMS and changing.

[Mark Begor, Chief Executive Officer at Equifax]

Yeah, this particular contract with SSA is a federal contract, so it's not one that's done like CMS where the states deliver that service and the states to use the data at the local agency level. And as you point out, the customer for us in CMS is really the agency at the state-level. In this case of CMS, this is a federal contract that's used for disability benefits, eligibility that are delivered directly at the federal level and it's really used to authenticate the individual's recipients eligibility to continue receiving that Social Security disability income.

If they have a change in income, then it changes their benefits to eligibility. So that's a contract that we've had in-place in the past. We extended the contract in September, you know, with the higher prices in it. And that's what I mentioned is going to give us benefits as we go into 2025.

[Kelsey Zhu, Analyst at Autonomous Research]

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?

[Mark Begor, Chief Executive Officer at Equifax]

Yeah. We don't -- as you know, we typically don't discuss any of our partners Workday is unique because we both announced it last September. So we just highlight the fact that we have that one. So we don't talk about what specific partner record additions in. We have over 60 partners. And as I said, we added 14 last year-plus Workday, including three of those 15 in the 4th-quarter. Record additions were very strong last year, 20 million records, up 12%.

That's higher than what we expect over the long-term, but record additions have been quite strong over the last five years, above our long-term for EWS. We think about record additions of being in the kind of 3%, 4% kind of range. So very strong years. And the positive for 2025 is we have a lot of visibility around the three partners we added in the 4th-quarter. Those records didn't come on yet and we have partners we added in the second-half. They were still onboarding records. And as I mentioned earlier, we have partners we added two, three, four, five years ago where we're still adding records. When they get a new client, those become new records.

But typically we have pockets of records given the structure of their technology or databases that we're still onboarding to Equifax even from partners that are a couple of years ago. So that's a big part of our visibility around records when we look-forward a quarter or through a year like 2025. And then we also have a list of a set of potential partners that we've been talking to for a year, two years, three years that are not with Equifax today that we're looking to bring on-board like the 15 we added last year.

And then as a reminder, a little under 50% of our records come from our direct relationships through our employer business. And as we grow I9 clients or UC clients, they're bringing in records there also. So it's a multifaceted approach. We have one leader and one team that drives record additions. That was a change we made a year-ago and it's paid-off in 2024 with the kind of focus from having a dedicated leader giving the obvious benefit or value of adding records.

So we've got a big focus on that. So we are expecting, you know, record growth in 2025 that is aligned with the growth kind of frameworks we laid out for the year for EWS.

[Kelsey Zhu, Analyst at Autonomous Research]

Thanks a lot.

[Operator]

The next question is from the line of Scott with Wolfe Research. Please proceed with your questions.

[Scott Wurtzel, Analyst at Wolfe Research]

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 records growth was helpful. But maybe if you can frame sort of the kind of pricing and penetration contribution to growth for this year that you're expecting relative to the long-term growth framework?

[Mark Begor, Chief Executive Officer at Equifax]

Thanks. Yeah, we don't -- as you know, we don't talk about price in any of our businesses, but we can be clear that we take price up every year in all of our businesses, including EWS. I think we've said many times, we have more pricing, you know, advantage, if you will, because of the uniqueness of what we deliver with EWS and Twin that we do in other parts of Equifax. Penetration will be a positive for us in 2025. In EWS, we expect new product rollouts to also be a positive.

They've been over-indexing our 10% goal for gosh, almost four years DWS and we expect again very strong over 10% vitality. So the continued rollout of new products. As you point out, records is an important pillar on the ability to grow in that space. And then penetration, we just have large verticals with a lot of room to grow and we're principally competing, as you know, against manual verifications, whether it's a verification of employment with a background screener, verification of income with a government agency in auto where there's still penetration opportunities. So those are some of the areas where our teams are focused on.

[Scott Wurtzel, Analyst at Wolfe Research]

That's helpful. Thank you.

[Operator]

Our next questions are from the line of Ashish Sabara with RBC Capital Markets. Please proceed with your questions.

[Unidentified Participant, at Equifax]

Hi, this is David on for Ashish. Thanks for taking our question. Just a follow-up to that last question. Are you seeing any -- I know you're not commenting on pricing, but are you seeing any competitive dynamic shifts related to the First Advantage and merger? Thank you.

[Mark Begor, Chief Executive Officer at Equifax]

Yeah, we don't talk about specific customers. As you know, we have a great relationship with Sterling and a great relationship with First Advantage and we do with the other background screeners. We view them as strategic partners and we have all kinds of relationships with them, whether it's a verification of employment. As you know, we have an education solution. We sell incarceration data to them, new products that we're working to deliver to them.

So I don't want to talk about specific impacts, but we have very strong partnerships with the two you mentioned as well as the rest of the industry.

[Unidentified Participant, at Equifax]

Yeah, thank you.

[Operator]

Our next questions are from the line of Matt O'Neill with FT Partners. Please proceed with your questions.

[Matthew O'Neill, Analyst at]

Yes. Hi, thank you so much for taking my question. Just curious, going back to the talent and labor areas, any incremental comments on your verticals, employers sort of size or type sort of 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 is anything of note there if that's been a smooth process. Thank you so much.

[Mark Begor, Chief Executive Officer at Equifax]

Yeah, the first one on hiring and remember, it also impacts us in onboarding where we're selling i9 solutions. If there's less new employees, there's less background screens, there's less I-9. So clearly an impact. And you use the term conservatism. We're telling you what trends are. When we talk with our customers, it's very broad-based. There's a mode, it seems to be kind of coming into the election and post-election that companies are keeping a tight belt around hiring as they think about their budgets and plans for 2025 as they are concerned about what's going to be the impact in Washington.

The whole tariff conversations create a lot of with lots of customers about what's going to happen. I think you've seen the impact on consumer confidence that likely is impacting lots of customers when they think about what kind of investments around people and resources. But it's -- it's been surprising to us like mortgage that the hiring activity Declined so meaningfully in the latter half of the quarter kind of post the election, companies are kind of sitting on the sidelines to see where -- how is this all going to play-out. And when that happens, you just don't hire a lot of people and that clearly -- clearly impacts us. Yeah. And sorry, the second-half of your question was I think on the supplier pricing piece that went through. And what was the question?

[Matthew O'Neill, Analyst at]

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 and nothing to do. I think received as expected is probably the right way to describe it.

[Mark Begor, Chief Executive Officer at Equifax]

Nobody likes a price increase and a price increase of that size is challenging. But we did mention that there's some change in behavior around the shopping process where historically a mortgage originator might have pulled free credit files from all three credit bureaus in that shopping process, some changes going to a single poll or a dual pool and then pulling the three later on in the process, that's likely driven by the cost of the credit file.

[Matthew O'Neill, Analyst at]

Understood.

[Mark Begor, Chief Executive Officer at Equifax]

That's why we're focused. That's why -- that's why we're focused on how do we differentiate our credit file and we're quite energized about our ability to add those twin indicators to it that we would expect would drive share and revenue for us having something that is differentiated from our competitors.

[Matthew O'Neill, Analyst at]

Makes a lot of sense. Yeah, thank you.

[Operator]

Thank you. The next question is from the line of Simon Clinch with Redburn Atlantic. Please proceed with your questions.

[Simon Clinch, Analyst at Redburn Atlantic]

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 certainly weaker contribution from pricing and mix as you've talked about before, but that's still sort of pervasive today despite easier comparisons and as well as your records growth on-top of that. So I was wondering how we should think about that portion going forwards from here?

[John Gamble, Chief Financial Officer at Equifax]

So you're referring to the performance of mortgage revenue relative to underlying inquiries. When you say, is that what you're asking about?

[Simon Clinch, Analyst at Redburn Atlantic]

EWS. In EWS? Yes. Actually the records growth contribution.

[John Gamble, Chief Financial Officer at Equifax]

Yeah, we think it's -- we think it's actually strengthened as we've gone through the year, right? We feel relatively good about the way -- about the performance we've seen in terms of adding records, which is the biggest driver, right, in our ability to outperform the underlying inquiry market. So we feel very good about how it's progressed during the year. It's gone from -- it improved during the year. Yeah, very nicely during the entire year and we ended-up double-digit in the 4th-quarter.

So, so we think the performance is good and it's all driven by -- I mean, heavily driven by what Mark talked about, which is a tremendous success we had this year in boarding new records, right? So -- and as we go into next year, that will be the driver again, right? So our ability to continue to successfully board new records, which we feel very good about is what's going to allow us to continue to perform well relative to whatever the mortgage market does. And I'd remind you, I know this makes sense, but you know, not every record that's added as a mortgage customer.

[Mark Begor, Chief Executive Officer at Equifax]

There's a -- as you know, a smaller portion of the population in the United States owns a home and will participate in the mortgage space. Generally, they're near-prime and prime customers. We're adding records that are, Call-IT subprime customers or lower-income consumers. And those records are super valuable in auto loans, they're super value in personal loans and they're really super valuable in government.

And the beauty of EWS is that every record we add now, given the demographics of a of the different verticals we participate in, have value and generally multiple value going-forward. So it's a really powerful model on records. In addition to records in the mortgage space, we do take a price. We do roll-out new products, which we rolled some new products out in the second-half last year in EWS and we've got some new products rolling out in 2025, like the twin indicator that we talked about that will be a positive for Equifax revenue?

[Simon Clinch, Analyst at Redburn Atlantic]

Okay, that's helpful. Just on the point about the 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 twin of EWS 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 the records from EWS by providing that indicator in the credit bar?

[John Gamble, Chief Financial Officer at Equifax]

No, it's a great question. In the mortgage space, you know, most mortgage originators, I'd say the vast majority of mortgage originators use twin. So their customers now auto, there's pockets of customers that don't. So that will be an opportunity. But we'll make this credit file with the twin indicators available to all customers because even if they're doing a manual verification, which is a very small portion in mortgage and Call-IT a larger portion in auto, knowing upfront that Mark is employed when they're in the shopping parts process with Mark in a mortgage or auto application is very valuable.

And we're going to be very careful, as you might imagine, around giving you know, Call-IT, it's not slivers of information, but giving important information upfront that helps in the shopping process, but being very balanced around the fact that we want to protect that full pull that happens later on, that's very deep levels of data. We have 50 different attributes on the full twin credit report. It's got trended data going back 12 months, 24 months, 36 months. That's not what we're anticipating put on upfront on the mortgage shopping or auto shopping credit file.

What that originator or F&I individual at a dealer needs is, you know, is Mark employed? It might be where-is Mark working. It might be a an average of Mark's income over the last 12 months. It's just some snippets, if you will, that are super valuable in that shopping process to really separate a consumer that maybe couldn't qualify for that auto loaner mortgage. So do you want to work on that with that consumer or help steer what kind of products to put in front of that consumer by having that additional information?

Because remember, a credit score, which comes with today is really what you get-in a shopping process is a credit score and a credit file, really just gives information around someone's propensity to repay their new loan based on their past behavior, but it has zero information about their ability to repay. They might have a decent credit score, but they're out of work. You don't have visibility to that. So that's the kind of thing we want to deliver upfront. We think it will differentiate our credit file and deliver more value to our customers in their workflows.

And then as I mentioned twice now, protect you know the actually credit files a full credit file typically pulled in many of these processes a second or third time, but also protect the twin reports that are pulled either once or twice or sometimes three times in those workflows dependent upon the vertical.

[Simon Clinch, Analyst at Redburn Atlantic]

That's great. Thanks so much.

[Operator]

Thank you. The next question is from the line of Arthur Truslovewith Citi.Please proceed with your questions.

[Arthur Truslove, Analyst at Smith Barney Citigroup]

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 to 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 just wondered what was missing there. And 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 that 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, I've understood that properly?

[John Gamble, Chief Financial Officer at Equifax]

Yeah. The second one, 100%. What we've seen over the last six, seven weeks has been a sharp decline. I'm surprising in the depth of it, but a reality what we're seeing as far as activity as rates went over 7%. And I think you'd have to -- it lay in there, not only the rate shock of that, but also perhaps consumer confidence and what they're reading in the paper about what's happening, all the activity in Washington.

And just to be clear, again, we will update this again when we see changes in it. For sure, we'll give you an update in April when we report our first-quarter earnings. Over the last 10 years, this is how we forecasted mortgage because we're not economists, we can't forecast interest-rate increases or decreases. But we've been super clear with you that if this improves, that will expand our revenue and expand our margins in our EPS

[Mark Begor, Chief Executive Officer at Equifax]

EPS. If either there's a change in confidence in consumer activity or the rates come down slightly. And as we mentioned earlier in the call, in September -- August, September last year, we saw rates come down into the 6s and we saw an increase in activity. So we know there's a correlation between where rates are and what consumer behavior is going to be. John, do you want to take the first one on margins?

[John Gamble, Chief Financial Officer at Equifax]

Sure. And USIS margins, again, it's very similar to Equifax margins, right? So we're absolutely seeing savings from the cost-reduction from moving to the cloud that's driving -- driving improvement in margins. Our growth rate is lower in 2025 than in our long-term model. And obviously, we have very-high variable margins. So what we're seeing, right, is that -- is that with the growth rate higher inside the long-term model for USIS being 6% to 8%, you would see much -- you would see much larger margin expansion in terms of a percentage basis.

One of the things we are fighting against, which we've all been talking about for quite some time. Obviously, we get some revenue lift from our from our mortgage supplier price increase, but it also is margin-dilutive. So we can hold margins with our own price increases along with it, but it isn't really accretive to our -- to our margin profile because of the way the price increases pass-through. So beneficial on the revenue side, not beneficial on the margin percentage side, but beneficial on the margin dollar side.

[Arthur Truslove, Analyst at Smith Barney Citigroup]

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. Are you able to 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? Thank you.

[Mark Begor, Chief Executive Officer at Equifax]

Yeah, this is onboarding costs, so it's one-time costs. We'll have incremental people involved, technology costs and it's just a little bit bigger than normal because we added 15 partners last year. So as I said, some of those second-half additions are still being onboarded. So there's just additional activity. And yeah, it does go away. It's -- I think there's just a larger amount now because of our success last year of adding partners, John, right?

[John Gamble, Chief Financial Officer at Equifax]

Yeah. We pay incentives to partners to board faster, right? So as that happens that it ends up being margin-dilutive in the period which it occurs.

[Arthur Truslove, Analyst at Smith Barney Citigroup]

Thank you.

[Operator]

Thank you. Our next question comes from the line of George Tsong with Goldman Sachs. Please proceed with your questions.

[George Tong, Analyst at The Goldman Sachs Group]

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?

[John Gamble, Chief Financial Officer at Equifax]

Obviously, there's a lot of drivers internally on the way to drive revenue faster. The biggest ones Mark has already talked about, right, which is which is our ability to continue to drive more revenue growth, right? Right? Obviously, our long-term margin expansion of 50 basis-points a year is driven by the fact that we have extremely high variable margins across the vast majority of our product portfolio. So the faster we can -- as we drive-to introduce more products, new products faster, it drives incremental revenue benefit as we continue to put more AI and ML into our products, it drives better scores, higher-growth rates, more data contribution and more data usage by our customers.

So the biggest thing we can do is obviously drive revenue faster. And then we'll continue to work to drive down costs more rapidly. One of the ways we do that obviously is executing on our on our cloud migrations. As that occurs, we can continue to take-out costs more quickly as we execute those effectively that will drive costs out and we'll continue to manage cost prudently as we go through 2025, but in every year going-forward.

[Mark Begor, Chief Executive Officer at Equifax]

But the principal upside, I guess, George is where you're going, the principal upside for our revenue, margin, EPS and free-cash flow drive framework for 2025 is going to be what happens to mortgage and hiring markets. If they get better, we're not going to invest more costs from that margin expansion or revenue expansion, we're going to drop that through and that's -- you've seen the impact that it's had on us from what you expected, meaning the Street expected for 2025, it's quite substantial because they're all incremental margins.

[George Tong, Analyst at The Goldman Sachs Group]

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?

[Mark Begor, Chief Executive Officer at Equifax]

Yeah. I would think about them as much smaller. When you think about us being close to 85% in the cloud and the big increase like in USIS was a very substantial cloud completion. We got big savings from that in 2024 that also comp into 2025. They're going to be smaller. We haven't communicated what they are. When you think about Spain completing in the first-quarter, for example, and some of the other completions we expect this year, those are in our guidance.

So they're in our cost plans, what they expect to be, but you shouldn't think about them as being anywhere near the magnitude of what you saw last year and actually in some of the prior years?

[George Tong, Analyst at The Goldman Sachs Group]

Very helpful. Thank you.

[Operator]

Thank you. Our final question is from the line of Shlomo Rosenbaum with Stifel. Please proceed with your questions.

[Adam Oestreich, Analyst at Stifel Nicolaus]

Hi, this is Adam for Slomo. Just one from me. What are you hearing from banks in terms of macro expectations and how the various areas of credit are performing? Thanks.

[Mark Begor, Chief Executive Officer at Equifax]

Yeah. And so I think broadly, our customers, banks, fintechs here and around the globe with unemployment low and employment high, that's a positive. So that clearly is one as consumers are working, they generally get paid their bills. I think we've seen that impact on inflation, which is still high for -- in relative terms and impacting that subprime consumer. Their delinquencies have increased. So you've seen some already repositioning, if you will, around underwriting there and the level of capacity that principally fintechs want to take on, but you're still seeing very strong kind of focus in that space.

The subprime players you are focused on growing their originations there. And no real change on the broader set of the credit spectrum. And our customers are financially strong. When you think about the banks, the fintechs, you don't see issues there. The other piece of it is around consumer confidence and the impact of higher rates. I think we've talked ad nauseam around mortgage, we've seen an impact in auto where higher rates are either forcing consumers to buy used cars versus new or keep old cars and keep them on the road, meaning not buy that new car, that new used-car.

So there's clearly been an impact there from what we've seen at higher rates. But broadly, maybe stepping back, I don't think we see a change in '25 outside of, Call-IT, mortgage in FI, which we've already talked about, the down 12%. I don't think we see any real change in either customer behavior or consumer behavior as we go into 2025.

[Adam Oestreich, Analyst at Stifel Nicolaus]

Thank you.

[Operator]

At this time, I will now turn the floor back to Trevor Burns for closing remarks.

[Trevor Burns, Senior Vice President, Head of Corporate Investor Relations at Equifax]

Thanks, everybody. And if you have any follow-up questions, please reach-out to Lolly and myself. Otherwise, have a great day. Thank you.

[Operator]

This will conclude today's conference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day. Everyone else has left the call

Participants

Corporate Executives

• Trevor Burns, Senior Vice President, Head of Corporate Investor Relations
• Mark Begor, Chief Executive Officer
• John Gamble, Chief Financial Officer

Analysts

• Jeff Meuler, Robert W. Baird
• Manav Patnaik, Barclays PLC
• Andrew Steinerman, J.P. Morgan
• Toni Kaplan, Morgan Stanley
• Faiza Alwy, Deutsche Bank Aktiengesellschaft
• Kyle Peterson, Needham & Company LLC
• Craig Huber, Huber Research Partners
• Jason Haas, Wells Fargo & Company
• Owen Lau, Oppenheimer Holdings Inc.
• Andrew Nicholas, William Blair
• Kelsey Zhu, Autonomous Research
• Scott Wurtzel, Wolfe Research
• Unidentified Participant
• Matthew O'Neill
• Simon Clinch, Redburn Atlantic
• Arthur Truslove, Smith Barney Citigroup
• George Tong, The Goldman Sachs Group, Inc.
• Adam Oestreich, Stifel Nicolaus