Mark W. Begor
Chief Executive Officer at Equifax
Thanks, Trevor, and good morning.
Before I cover our strong third quarter results, I want to update you on the strong progress of our cloud transformation. In the quarter, USIS completed the migration onto the cloud data fabric of the remaining customers and services for their consumer credit and telco and utilities exchanges, which is a huge milestone. Along with EWS, the work number exchange, which we completed migrating to the Equifax Cloud over two years ago, we now have our three largest data exchanges in the new Equifax Cloud. As of the end of September, we have about 80% of Equifax revenue in the Equifax Cloud and expect to approach 90% of our revenue in the Equifax Cloud by year end. The cloud migrations have been a huge effort across Equifax over the past four-plus years, requiring a ton of focus by the entire Equifax team. We expect to have a significant competitive advantage as we fully deploy our new cloud capabilities and pivot from building to leveraging the cloud in 2025 and beyond that will allow us to fully focus on customers, growth, innovation, new products and AI.
Completing the USIS consumer and telco and utility migrations to the Equifax Cloud allowed us to begin decommissioning legacy on-prem systems and software in USIS in the third quarter, supporting our goal of cloud spending reductions in 2024, which expand our operating margins and are lowering the capital intensity of our businesses -- our business in 2025 and beyond. In the third quarter, we also made substantial progress in our international technology transformation activities with Canada completing migration of all customers off of their consumer and commercial credit exchanges onto the new EFX cloud data fabric. This is another big accomplishment for the international team with cloud migrations in Argentina, Chile and the Dominican Republic completed earlier in the year, adding to Canada's completion a few weeks ago. Our international cloud migration efforts will continue in '25 and '26, resulting in additional cloud savings as those migrations are completed. It is energizing to be approaching the finish line of our cloud transformation. We are entering the next chapter of the new Equifax as we pivot from building the new Equifax Cloud to leveraging our new cloud capabilities to drive our top and bottom line.
Turning to Slide 4, we had a strong third quarter with reported revenue of $1.442 billion, up 9% and at the top end of our July guidance with organic constant dollar revenue up 10%, which is at the top end of our long-term growth framework. Adjusted EBITDA margins at just under 33% were in line with our expectations and adjusted EPS of $1.85 per share was the top end of our July guidance.
Our global non-mortgage businesses, which represent about 80% of total revenue in the quarter, had strong 10% constant currency revenue growth, which was in line with our expectations. Non-mortgage organic constant currency revenue growth was 8% in the quarter. The strong non-mortgage performance was driven by 9% growth in EWS with very strong 19% non-mortgage growth in EWS Verifier, led by very strong 29% growth in Government and Talent that was up over 9% in EWS. USIS non-mortgage revenue growth of almost 5% was stronger than our expectations, principally from our consumer business and financial marketing services, our offline batch business. International delivered just under 18% constant dollar revenue growth and strong 12% organic growth, led by continued strong growth in Latin America and Europe.
Total U.S. mortgage revenue was up 17% in the quarter and above our July guidance. U.S. mortgage revenue was 20% of Equifax revenue in the quarter. In late September, as mortgage rates declined to just over 6%, we saw a modest mortgage inquiry activity increases. We believe this improvement was likely led by mortgage refi activity off the lower mortgage rates. New-home purchase activity appears to have remained at the lower levels we've been seeing throughout 2024, reflecting continued low home inventory levels, elevated home prices impacting affordability and prospective homebuyers waiting for further mortgage rate reductions. As mortgage rates increased in early October to over 6.6%, we have seen mortgage activity reduce to levels closer to what we saw in July and August. John will cover our expectations for mortgage activity in the fourth quarter shortly, but we continue to believe that activity will improve towards 2015 and 2019 levels as mortgage rates come down in the future.
In the third quarter, the growth in mortgage revenue was driven principally by USIS where mortgage revenue was up a strong 36% and slightly above our expectations. This strong growth was again driven by the benefit of strong vendor pricing actions and the performance of our new mortgage pre-qual products. The lower mortgage rates we saw in late September did drive a small increase in mortgage application activity, which benefited USIS in the quarter.
EWS mortgage revenue returned to growth with revenue up 4% and was also slightly better than our expectations. As a reminder, EWS mortgage inquiry volumes lag USIS credit inquiry volumes as credit is pulled earlier in the mortgage application cycle than income and employment, which is typically pulled in the middle, and of course, at closing of the mortgage application. USIS typically sees the benefits of mortgage shopping behavior earlier and to a greater extent than EWS. As a result, EWS did not see the same level of incremental inquiry volume as USIS did from the slight increase in mortgage activity that occurred in late September. EWS mortgage revenue exceeded twin inquiry volume by about 9.5% in the quarter, up a very strong 300 basis points sequentially from second quarter, principally from strong twin record growth.
Equifax had another strong quarter of new product innovation with a VI or Vitality Index of 13%, above our 10% guidance for the year and our long-term framework of 10% vitality. We saw strong broad-based new product rollouts with double-digit growth in EWS and International and a VI of 9% in USIS, which was up 100 basis points sequentially from the second quarter.
We expect our NPI revenue to grow, revenue growth to remain strong and are increasing our 2024 Vitality Index guidance to 11%, up 100 basis-points from our prior framework for 2024 as we further leverage our new EFX Cloud capabilities and EFX.AI to drive new products into the marketplace.
Turning to Slide 5, Workforce Solutions revenue was up about 7.5% and slightly below our July guidance, principally due to lower-than-expected employer services revenue. Non-mortgage verification services revenue again delivered very strong 19% growth, which was in line with our expectations. Government had another outstanding quarter with very strong 29% revenue growth from continued penetration in their large $5 billion Government TAM. Government revenue grew sequentially from strong growth in state penetration and insights incarceration data solutions. We expect continued strong sequential growth -- sequential Government revenue growth again in the fourth quarter. Growth rates in the fourth quarter are expected to continue to show strong double-digit performance, but be lower than third quarter levels, principally due to comping against very strong growth we saw last year. We expect our Government vertical to continue to deliver very strong double-digit growth in the future and outgrow both Equifax and EWS.
Talent Solutions revenue was up a strong 9% in the quarter. Talent Solutions continues to benefit from their new TotalVerify data hub, which includes trended employment data as well as insights incarceration, education and licensing and credentialing data. Based on data through August, EWS Talent Solutions outperformed the BLS white-collar hiring markets by approximately 18 percentage points from additions of records, rollouts of new products and penetration into the Talent vertical during the quarter. We did see somewhat weaker volumes late in September, which we have assumed will continue and is expected to impact Talent revenue growth in the fourth quarter.
EWS mortgage revenue was up 4% in the quarter and slightly better than our July guidance. Twin increase in the third quarter were down about 5.5% and slightly better than our July guidance. Total EWS mortgage revenue outperformed twin inquiries by about 9.5% and again up over 300 basis points sequentially from strong record growth during the quarter. We expect strong growth in twin records to benefit mortgage and our other EWS verticals again in the fourth quarter. EWS consumer lending revenue was up 16% from strong double-digit growth in P loans and high-single-digit growth in debt management and auto.
Employer Services revenue was down 19% in the quarter and weaker than we expected. Compared to last year, Employer declined principally from lower ERC revenues and to a lesser extent, lower I-9 and onboarding revenues as the slower white-collar hiring we saw in late September impacting Talent Solutions also impacted our onboarding business. There was also some one-time post-COVID-related project revenue that benefited onboarding in the third quarter of last year. Third quarter I-9 and onboarding revenue was consistent with the first and second quarters, and we expect fourth quarter Employer revenue to be down mid-single digits as the ERC comparisons mitigate.
Workforce Solutions' adjusted EBITDA margins were 51.6% and were slightly above our expectations and continued to be very strong, reflecting strong Verifier revenue growth and continued strong cost controls.
Turning to Slide 6, the EWS Government team continued their very strong performance in the quarter with revenue up 29%. The Government team continued to focus on penetration of our unique VOI and VOE solutions for social services at both the federal level and across the state agencies. In the quarter, the EWS Government team signed an extension to their SSA redetermination contract to provide income and employment data for individuals applying for or currently receiving Social Security disability income and supplemental security income benefits with a potential contract value of about $500 million over the next five years. EWS Services support program integrity for the SSA as well as reducing the administrative burden for consumers seeking these important services. Chad and the government team are on offense, driving penetration in the big $5 billion Government TAM.
Turning to Slide 7, EWS had another outstanding quarter of new record additions. A few weeks ago, we announced a new strategic partnership with Workday to provide verification services to Workday's large customer base. Later in the fourth quarter, we'll begin rolling out the free value-added EWS income and employment verification services to Workday's U.S. customers and expect to onboard a sizable number of new records through 2025 from this new strategic relationship. Also in the quarter, we signed agreements with five additional new strategic partners that will contribute over 5 million records collectively to the Twin database in the future.
Through September, EWS has executed 12 strategic partnerships during 2024 and since the beginning of 2021, EWS has completed 45 strategic partnership agreements. We expect these five new partnerships signed during the quarter to come online and begin generating revenue late in the fourth quarter and substantially in the early parts of 2025. In the third quarter, EWS added 2 million active records to the Twin database, ending the quarter with 182 million active records, up a strong 12% on 134 million unique individuals. EWS now has 3.8 million companies contributing income and employment records to the Twin database every pay period, a very strong 40% CAGR since 2020. Total records are now over 700 million and up 11% in the quarter, supporting our trended or historical solutions with about half of Verifier revenue from products including historical records. At 134 million unique active records, we have plenty of room to grow the Twin database towards the TAM of 225 million income-producing Americans.
Turning to Slide 8, USIS achieved a major milestone in the third quarter, completing the migration to the new Equifax data cloud fabric of both the U.S. consumer credit and our cell phone utility databases. This big milestone makes U.S. consumer credit telco and utilities data fully available across our new data fabric for use in advanced AI-based solutions to enhance our identity and fraud solutions and to accelerate our only Equifax solutions, leveraging both EWS and USIS data assets. It also allows our U.S. commercial, product and technology teams to fully shift their focus to delivering these new advanced Equifax solutions to customers that will drive new product rollouts and top line growth for Equifax.
USIS revenue was up 12% in the quarter and well above the July guidance of up 8.5% and their long-term revenue growth framework of 6% to 8% despite the continuation of some weakness in the FI and auto end markets. This was driven by both strong performance in non-mortgage revenue as well as stronger mortgage revenue, reflecting the slight increase in mortgage activity we saw in late September. Total non-mortgage revenue was up 5% in the quarter and was also well above our July guidance of over 2% growth for USIS.
We saw strong double-digit growth in Consumer Solutions and Financial Marketing Services, which were offset by a less than 1% decline in USIS B2B online revenue from softer consumer and end-market demand, which importantly was up about 300 basis points sequentially. USIS B2B Online saw double-digit growth in insurance and commercial, high single-digit growth in telco and low to mid single-digit revenue growth in banking and auto, offset by declines in third-party bureau sales in Identity and fraud. We expect third-party bureau sales to be about flat in the 4th-quarter as we lap the weakness that started in late 2023.
Identity and fraud revenue was also down and weaker than our expectations, principally due to weakness in charge-back management volumes. Payment and Transactional Identity revenue grew in the quarter from penetration in large strategic accounts. Identity and Fraud is starting to launch their new Count 360 solutions, platform and products, which will help strengthen growth in 2025 as these solutions take hold in the marketplace.
Financial Marketing Services, our B2B offline business, was up a very strong 14% in the quarter, reflecting substantial new wins and customer expansion across banking services and payments verticals as well as continued strong growth in pre-screen marketing and our unique IXI wealth data.
USIS Consumer Solutions D2C business had another very strong quarter, up 17% from strong double-digit growth in our consumer-direct channel and from strong customer acquisition trends. We expect fourth quarter revenue to grow mid-single digits as we start comping against very strong D2C growth last year.
USIS mortgage revenue was up a very strong 36% and better than our July guidance. Mortgage credit inquiries were up 1% and were also better than our July guidance of down 7%, principally due to the slight increase in mortgage activity that we saw in late September. This was the first quarter of mortgage credit inquiry growth since the first quarter of 2021, which is a big milestone and reinforces for us that the mortgage market is clearly bottomed and poised for recovery in the future. Consistent with the first half, the strong pricing environment along with the strength in our new mortgage pre-qual products also drove the very strong mortgage revenue growth. At $137 million, mortgage revenue was just under 30% of total USIS revenue in the quarter.
USIS adjusted EBITDA margins were 33.9% in the quarter, up 70 basis points sequentially and in line with our expectations from higher-than-expected revenue growth offset by higher technology costs to complete cloud customer migration activities. With the USIS consumer and our cell phone utility and data cloud transformations complete, Todd and the USIS team are clearly focused on offense and growth.
Turning to Slide 9, International revenue was up a very strong 18% in constant currency and up a strong 12% in organic constant currency, excluding the impact of BVS due to continued very strong growth in Latin America and Europe. Europe local currency revenue was up a very strong 9% in the quarter with continued strong 7% growth in our credit and data businesses and 12% growth in our debt management business. Latin America local currency revenue was up 58%, principally due to the acquisition of Boa Vista with very strong organic growth of 31%, led by 28% Vitality Index from new products in the region during the quarter. And as a reminder, we closed the BVS acquisition in August last year.
Canada delivered 1% growth in the quarter, which was below our expectations from a softer economy. I previously mentioned that Canada completed their consumer and commercial credit exchange customer migrations to data fabric a few weeks ago and similar to the U.S., we expect to see accelerating NPI and revenue growth going-forward from the Canadian team. Asia-Pacific revenue returned to growth up 2% as expected. International adjusted EBITDA margins of 27.7% were up 210 basis points sequentially from strong revenue growth and good cost execution.
Turning to Slide 10, we continue to make very strong progress driving innovation with 30 new products launched in the quarter that delivered a 13% vitality from broad-based performances across all of our business units. EWS had very strong third quarter with Vitality Index of 16%, expanding solutions in the Government vertical as well as incorporating incarceration and education data into new Talent Solutions products. USIS saw continued sequential improvement with a Vitality Index of 9%, up 100 basis points sequentially from the second-quarter. We expect USIS to continue to show strong Vitality improvement from the cloud completion as they leverage our new cloud-native infrastructure for innovation and new products as well as free-up their product and technology resources that previously were working on cloud transformation in key verticals such as identity and fraud, commercial and our new mortgage pre-qual products.
International also had strong 11% Vitality in the quarter with a strong focus on Identity and Fraud Solutions. We expect strong double-digit Vitality in the fourth quarter, leveraging our Equifax Cloud capabilities to drive new product rollouts, and we are raising our full-year Vitality Index guidance from 10% to about 11%, reflecting the strong innovation performance across all our businesses so far in 2024.
AI and ML are changing the way we develop our new products in our single data fabric and build higher-performing model scores and products for our customers. We're accelerating the pace at which we are developing new EFX models and scores using our advanced AI and ML capabilities in areas such as identity and fraud and consumer loan affordability that will drive higher-performance and predictability. In the quarter, 100% of our new models and scores were built using Equifax AI and machine learning, which is up from about 89% last quarter and ahead of our 2024 goal of 80% and last year's 70%. We're clearly on offense deploying our proprietary EFX.AI capabilities that will drive higher-performing model scores and products for our customers.
Now I'd like to turn it over to John to provide more detail on our third quarter financial results and to provide our fourth quarter framework. Our fourth quarter guidance builds on our strong third quarter performance from new products, penetration, record growth and pricing.
