Equifax, Inc.

Good day, everyone, and welcome to the Equifax First Quarter 2020 Earnings Conference Call. Today's conference is being recorded. I'd like to now turn the conference to your host, Mr. Jeffrey Dodge. Please go ahead, sir.

Thank you. Good morning, everyone. Welcome to today's conference call. I'm Jeff Dodge, and on today's call with me are Mark Begler, Chief Executive Officer, and John Gamble, Chief Financial Officer. Today's call is being recorded. An archived recording will be available later today on our website at www.equifax.com in the investor relations section under earnings calls, presentations, and webcasts. During the call today, we will be making reference to certain materials that can also be found under the earnings calls, presentations, and webcasts section. These materials are labeled Q1 2020 earnings release presentation. During this call, we'll also be making some certain forward-looking statements to help you understand Equifax and its business environment. These statements involve a number of risks, uncertainties, and other factors, including the impact of COVID-19 and economic conditions on our future operations that could cause actual results to differ materially from our expectations. Certain risk factors inherent in our business are set forth in filings with the SEC including our 2019 Form 10-K and subsequent filings. Also, we will be referring to certain non-GAAP financial measures, including adjusted EPS attributable to Equifax and adjusted EBITDA, which will be adjusted for certain items that affect the comparability of our underlying operational performance. For the first quarter of 2020, adjusted EPS attributable to Equifax excludes costs associated with acquisition-related amortization, expense, gains on fair market value adjustments of equity investments, the foreign currency impact of certain intercompany loans, evaluation allowance for certain deferred tax assets, a tax benefit on the legal settlement related to the 2017 cybersecurity incident, the income tax effects of stock awards recognized upon vesting or settlement, and foreign currency losses for re-measuring the Argentinian peso denominated net monetary assets. Adjusted EPS attributable to Equifax. Excuse me. It also excludes legal and professional fees related to the 2017 cybersecurity incident, principally fees related to our outstanding litigation and government investigations, as well as the incremental non-recurring project costs designed to enhance our technology and data security. This includes projects to implement systems and processes to enhance our technology and data security infrastructure, as well as projects to replace and substantially consolidate our global network and systems, as well as the cost to manage these projects. These projects that will transform our technology infrastructure and further enhance our data security were incurred throughout 2018 and 2019 and are expected to occur in 2020 and 21. Adjusted EPS defined as net income attributable to Equifax, adding back interest expense, net of interest income, income tax expense, depreciation and amortization, and also, as is the case for adjusted EPS, excluding costs related to the 2017 cybersecurity incident. Gains on fair market value adjustments of equity investments, the foreign currency impact of certain intercompany loans, and foreign currency losses from re-measuring the Argentinian peso denominated net monetary assets. These non-GAAP measures are detailed in reconciliation tables, which are included with earnings release and are also posted on our website. Now I'd like to turn it over to Mark.

Thanks, Jeff, and good morning, everyone. We're all facing unprecedented times during the COVID global pandemic. I hope you and your families are safe and managing in this unusual environment. We'd like to start by thanking the dedicated and selfless healthcare professionals, first responders, volunteers, and others around the world who are fighting the frontline pandemic. Their dedication and sacrifice is nothing less than heroic. The economic impact from the COVID-19 pandemic is still unfolding and will clearly be deeper than anything we've seen in our lifetimes. To help with today's discussion, we posted a first quarter 2020 investor relations presentation which is available in the investor relations section of our website under events and presentations. We plan to walk through the presentation on today's call if you want to pull it up. At Equifax, as we execute during this pandemic in our work-from-home protocol and business continuity plans, we're focused on five critical priorities highlighted on slide four. Number one, the health and safety of our employees and their families. Number two, continuing to deliver for our customers with the highest level of service and supporting our customers with new data and and analytical services they will need as they respond to the pandemic and economic impacts and their businesses and priorities change. Number three, supporting consumers as they are challenged by the economic impacts of COVID-19 by providing free credit reports and financial education. Number four, executing on our cloud technology, data, and security transformation. Our focus and investment in our cloud-native technology, data, and security transformation are continuing at the same levels we had originally planned for 2020, with a goal of accelerating our cloud-based data and technology capabilities to make them available more rapidly to our customers. Funding and executing of our cloud technology transformation continues to be a priority for Equifax. And number five, continuing on the new product momentum from 2019, with NPI tailored off Equifax's unique data assets for the recession environment. We started to accelerate new product rollouts in 2019, and that focus is continuing in 2020. Like most companies, we initiated our COVID-19 business continuity plans in mid-March, which included activating our crisis management team reporting directly to me, as well as instituting ongoing interaction with our board to keep them apprised of our plans. We have over 9,000 employees working from home across our global workforce. Only essential roles in customer support and data center operations continue to work from our facilities. We've virtually eliminated travel, with limited exceptions for essential customer or regulatory business needs. For our close to 2,000 associates in essential roles that are still working from our facilities, we have implemented social distancing of workspaces, aggressive cleaning and sanitizing, and other actions to make sure our sites are as safe as possible. We've been in the work-from-home mode and no-travel environment for five weeks, actually now going on six weeks, and are operating continuously and effectively for our customers. We believe our team's efficiency and productivity is continuing at levels at or better than pre-crisis. We are seeing tremendous benefits from our move to cloud native tools that are driving significant collaboration as a part of our cloud technology and data transformation. Our development teams are working almost exclusively on Google Cloud Platform and Amazon Cloud Services, and their efficiency continues at very high levels. And our movement to cloud-based security tools over the past 30 months has also proven to be highly beneficial in this new work-from-home environment. I hope this gives you a strong sense that ExpoFax is executing and delivering well during these challenging times for our customers and consumers while continuing our cloud and new product investments for the future. I'm also pleased with the team we have in place to manage through these challenging COVID-19 crisis. They are battle-tested with deep domain and experience. My personal experience leading GE Capital's card business during the 2009 global financial crisis gives me a very unique customer lens on the value of data and analytics in a recession environment. Moving now to our results for the first quarter, let's turn to slide five. We're very pleased with our financial performance in the first quarter as both revenue and adjusted EPS significantly exceeded our expectations and our guidance for the quarter. The first quarter delivered our strongest performance since the 2017 cyber event and continued our strong momentum from the second half of 2019, where our organic growth revenue rate jumped to over 9% during the last six months of 2019. First quarter revenue of $958 million was up over 15% in constant currency and up 14% on an organic constant currency basis. We had strong revenue growth driven by our U.S. B2B businesses, USIS and EWS. It collectively were up a very strong 22% overall, with workforce solutions up an outstanding 32%, and USIS up a very strong 15%. U.S. mortgage market inquiries were historic high levels given the low interest rate environment, with inquiries up almost 42%. International revenue was up 3% in constant currency, and global consumer continued their path back to growth, with revenue up over 3%, consistent with fourth quarter and their third consecutive quarter of year-over-year growth. These results were dampened by the COVID-19 lockdown impacts during the last two weeks of March, which reduced first quarter revenue by around $20 million. Adjusted EPS of $1.40 per share was up 16%, and well above our expectations and the top end of the guidance we provided in February. As we discussed on prior calls, we incurred redundant systems costs in the quarter, including incremental DNA, cloud, and other operating costs of $15 million, or about $0.09 a share, which dampened our earnings growth rate. Adjusted EBITDA was up a strong 20%, with margins of 32.4% that were up 190 basis points compared with the first quarter of 2019, given our strong revenue growth and the cost actions that we took in the fourth quarter of 2018, and first quarter of 2019, with strong margin growth in USIS, EWS, and international. As we discussed on prior calls, we expect our EBITDA to grow more rapidly than EPS in the coming years due to the increased amortization of our incremental cloud transformation investments. FX movements in the quarter were more negative to revenue, and adjusted EPS than expected by $13.02 per share, respectively. Our constant dollar revenue growth through February at 15% provides a good view of the continued strong progress we are making across all of our businesses and the positive momentum of Equifax over the past three quarters. This performance positions us well to navigate the COVID-19 economic headwinds. I'll shift now to a discussion of the first quarter performance of each of the four business units as highlighted on slide six. Later in my comments, I will discuss in some detail the impacts we are seeing in April as the coronavirus lockdowns impact portions of our business and their implications for our financial performance in the second quarter. USIS revenue of $343 million in the first quarter was up 15% versus the first quarter of 2019 on a reported basis, and 13% on an organic basis. For the quarter, online revenue was up 16%. Online non-mortgage revenue was up 3% in the quarter, and online non-mortgage organic revenue declined 1%, reflecting the decline in March volumes associated with declines in economic activity from the COVID-19 pandemic. Through February, USIS online non-mortgage revenue was up 7% in total, and a solid 2.5% on an organic basis. We saw nice growth across auto, direct-to-consumer, banking insurance, which was partially offset by declines in telco in the first two months of the first quarter. In telco, we won back primary share with a major customer beginning in March, which is a positive going into second quarter. The strengthening of online revenue through February is very positive. and another sign of our continued progress in USIS commercially. This positive momentum in the first quarter and second half of 2019 will serve USIS well as we enter the COVID-19 economic environment. Mortgage Solutions was up a very strong 33% in the quarter and lower than Mortgage Market Inquiry growth given the mixed shift in the quarter from Mortgage Solutions to online. Mortgage Solutions continues to perform very well in this low interest rate environment. USIS's financial marketing service business revenue was down 2% in the quarter compared to last year. Revenue declines were due to lower than expected project revenue in March brought on by the COVID-19 lockdowns. I'm very encouraged by the performance of Sid Singh and his USIS team in the first quarter, both in their strong growth through February and in the speed at which they are adapting product offerings and their selling efforts in March to meet the substantial change in customer needs from the COVID-19 pandemic. This follows USIS's momentum in the second half of 2019. Later in my comments, I'll discuss the success we are having across Equifax in focusing our efforts with customers on solutions leveraging our unique data assets to help them manage through this new COVID-19 recession environment. U.S. is accelerating commercial activity, and new deal pipelines remain strong. During the current market conditions, the number of pipeline opportunities as of the end of March was up 6% compared to December 2019 and up 33% for March 2019, and our win rate in the first quarter was up about 500 basis points from the first quarter of 2019. We are continuing to close new deals with customers in the past few weeks, even with the COVID-19 work environment, and we expect strong mortgage growth in the second quarter in the current low interest rate environment. USIS adjusted EBITDA margins of 44.7%. We're up 170 basis points from the first quarter of 2019, driven by the increase in revenue, partially offset by increased royalty costs, as well as the increased investments in new product development, data analytics, increased consumer support costs, and redundant systems costs. Turning now to Workforce Solutions, they had another exceptional quarter with revenue up a very strong 32% versus the first quarter of 2019. Rudy Ploder and his EWS team delivered the highest growth quarter for EWS since we acquired the business in 2007. And on a run rate basis for the 12 months ended March 31st, EWS crossed the billion-dollar revenue mark for the first time in their history, both huge milestones. Verification services revenue was up an extremely strong 48% compared with the prior year, driven by outstanding revenue growth in verification and mortgage. The strong verification services revenue growth also reflects continued year-over-year growth in work number active records, as well as the rollout of new products in mortgage, talent solutions, and other verticals in continued expansion of system-to-system integration with customers, which you know is really critical. EWS and Verification Services non-mortgage revenue growth was a strong 9% and 15%, respectively, compared to last year. Through February, Verification Services non-mortgage revenue growth was up 18%, with strong double-digit growth across key non-mortgage verticals, including government, auto, talent solutions, and debt management. Non-mortgage verifier revenue growth for the quarter was up 15%, but down from the 18% run rate we saw in February, reflecting the COVID-19 impact in the latter half of March, principally in auto, debt management, and talent solutions. The Work Number Database closed the first quarter with 105 million active records and 80 million active unique individuals, up 18 percent compared to March 2019, and the database now represents about half of U.S. nonfarm payroll. Our contributors are also growing rapidly from just under 30,000 a year ago to over 700,000 companies contributing in the first quarter. Growing twin records drive hit rates that translates into revenue almost immediately. We expect to continue twin contributor and record growth in second quarter in 2020. The work number database is Equifax's most unique and differentiated asset, particularly with the scale and currency of the database that can provide incremental value to our customers in today's challenging times where there is so much income and employment uncertainty around consumers in the U.S. Through February, our employer services business revenues were flat compared to first quarter 2019. This was slightly better than the performance we saw over much of 2019 and reflected growth in our I-9 and other talent management businesses, offset by declines in unemployment insurance claims management in our workforce analytics business. For the quarter, employer services revenue was up 2%, with our unemployment insurance claims management business up 8% organically in the quarter due to a very substantial increase in unemployment claims volume in the second half of March, with daily volumes up six-fold during the last two weeks of March or the quarter, given the rise in U.S. unemployment filings. We expect continued substantial growth in unemployment claims in the second quarter. John will discuss this in more detail when he covers March and April trends in a few minutes. The strong verifier revenue growth resulted in strong adjusted EBITDA margins of 51.5%, an increase of 210 basis points compared to last year due to the strong revenue growth and proactive cost management, which more than offset increased royalty costs, and our redundant system costs from the technology transformation. Workforce Solutions is an outstanding business that continues to deliver very strong results even in challenging times. John will discuss later that we expect Workforce Solutions to deliver strong growth again in the second quarter. International revenue of $216 million was up 3% in constant currency and down 4% on a reported basis. Through February, international constant currency revenue was up a strong 8%, with organic revenue growth also up 7.5%. The strong growth through February was a continuation of international strong second half 2019 momentum. Their commercial momentum in the first quarter positions the international business to operate well in the new COVID-19 environment. Asia Pacific, which is primarily our Australian and New Zealand business, and that also includes our India business, had first quarter revenue of $70 million, up 3% in constant currency year over year. Through February, however, Asia Pacific was up a strong 5% in local currency, and Australia grew over 4%, both stronger than our expectations. Broad and ID and commercial online were both very strong, in Australia, up 20% and 9% respectively, and marketing services continues to decline, but at a much slower rate than in 2019. Shifting now to Europe, our European business with revenue of $66 million was down 1% year-over-year in constant currency, with the credit business and debt management businesses also down 1%. And our credit business is negatively impacted by the decline in the economic activity from the COVID-19 pandemic in the second half of March. Through February in Europe, we showed strong constant currency growth of 8.5%. Our U.K. and Spain credit businesses grew 7% in total through February. In the U.K., we saw growth in our financial services vertical both direct and through reseller partners. We also saw growth in the gaming vertical and from new products launched in 2019 in open banking and digital marketing. European debt management revenue was up over 10% through February as we saw higher debt placements with the UK government. As John will discuss shortly, we are expecting a significant decline in debt management revenue in the UK in the second quarter as the UK government has suspended tax collection activities during the COVID crisis as well as declines in our European credit businesses due to customers pausing on collection activities during the early phases of COVID-19. Shifting now to Latin America, our business in Latin America delivered revenue of $43 million in the first quarter and was up 9% in local currency. However, through February, Latin America was up a strong 15% in local currency, led by strong double-digit growth in Argentina and Mexico, low teens growth in Chile and Ecuador, and high single growth in Uruguay. Our Latin American businesses are adding new logos and benefiting from the rapid adaption of Ignite and Interconnect in their markets. Canada revenue of $37 million was up 2% in local currency in the first quarter. Unlike most of our international markets, Canada has a mortgage business that benefits, like the U.S., from lower interest rates. Revenue growth in our Canadian mortgage business in the first quarter, which makes up just over 10% of Canadian revenue, were largely offset by declines in our consumer and commercial businesses during the last two weeks of March due to the COVID-19 pandemic. Through February, Canada was up 5% driven by consumer credit, specifically mortgage, in our commercial and ID and fraud businesses. International adjusted EBITDA margins at 27.8% were up a strong 250 basis points compared to last year. The strong growth in margins reflects the benefit of revenue growth and the cost actions implemented by the international team in the fourth quarter of 2018 and throughout 2019. Shifting out of global consumer solutions, their revenue was up 3% on a reported basis in the quarter and constant currency basis in the quarter. This was their third consecutive quarter of growth. Global consumer direct revenue, which represents about 40% of total GCS revenue, was down about 2% year over year in the quarter. We saw mid-single-digit growth across the U.K. and Canada's combined consumer direct businesses. While the U.S. consumer direct business declined 7% in the first quarter, it continued to improve from the fourth quarter of 2019 to and still represents a substantial improvement from the double-digit decline in the U.S. consumer direct business we saw in the third quarter of 2019 and since the cyber event in 2017. Sequentially versus fourth quarter, total subscribers are stable to slightly increasing across the U.S., Canada, and U.K., which is an encouraging sign as we move into second quarter. Our GCF partner business has increased 8% in the quarter as a result of growth from our U.S. free model partners, our benefits channel, and our breach business, offset by revenue declines with some of our paid model partners. Our partners' business was up a solid 9% through February as we saw nice growth in our benefits business and event-based businesses, as well as our traditional partners. Revenue was negatively impacted in the last couple weeks of March by declines at some partners, particularly in the lead gen space, and we expect COVID-19 impacts at our partners to affect our second quarter partner revenue. John will discuss this in a few minutes when he discusses April trends. GCS adjusted EBITDA margins of 23.1%, decreased 80 basis points compared to the prior year, primarily driven by mixed shifts and increased COVID-19 consumer call center support costs in late March. We also increased marketing spend in the U.S. and Canada in the quarter. With the substantial weakening in several of our business units and verticals that began in the second half of March from the coronavirus pandemic, we took actions to tighten controls all over our costs and to dramatically reduce travel. We've frozen hiring except for roles directly related to consumer support. The EFX 2020 technology and data transformation of new products will also continue at current levels. and we've also reduced discretionary spending across the company. At this stage, we're looking at $90 million of discretionary cost takeout versus our business plan for 2020, and if necessary, we prepare to take additional cost actions as required. That said, we will take actions to protect our franchise during this economic event. As I mentioned earlier, we are continuing our cloud technology and data transformation investment spending at planned levels, and our new product growth initiatives because of the significant strategic and operational value from both initiatives. These strategic priorities will benefit Equifax during the COVID economic impacts and power us in the recovery. Shifting now to trends we are seeing post the start of the COVID-19 crisis. Starting in mid-March, Equifax began seeing revenue impacts in several of our business units and verticals, from the broad lockdown actions taken globally to slow the spread of COVID-19. To help as you form your view on the potential impact of this pandemic, we wanted to provide you with a couple of things. First, our perspective on which portions of our businesses are recession resilient today. Second, our performance during the global financial crisis and a comparison of our business mix in 2009 compared to today or 2020. And then last, John will cover current revenue trends we're seeing in our daily transactions and over the past few weeks. To estimate the impact the recession could have on Equifax or will have on Equifax, we assigned our line of businesses into three categories. First, recession resistant. These businesses have drivers that are not directly aligned with economic activity in the recession, and we expect them to grow through COVID-19. The best examples of these businesses are Workforce Solutions, our U.S. mortgage business, and our government lines of businesses that we expect will continue to grow from the uniqueness of the data, including TWIN, or from the low interest rate environments, including mortgage. Second, countercyclical businesses, and these are businesses that perform better during the recession, and the best example is our unemployment claims management business in Workforce Solutions, where we expect significant growth in Workforce Solutions revenue from growing unemployment claims in the United States. And third are recession-impacted businesses. These are businesses that are directly impacted by economic activity and contraction in a recession and include auto, cards, and P loans where both consumer activity declines or lender activity is contracted for risk containment reasons. We expect these business lines to have negative revenue growth in a recession. Today, about 65% of Equifax U.S. businesses are either recession-resistant or counter-cyclical, and about 55% of our global business is recession-resistant or counter-cyclical. This compares in the 2009 global financial crisis where only about 40% of our businesses were either recession-resistant or counter-cyclical compared to the 55% today. This meaningful growth The meaningful growth in EWS and U.S. mortgage since 2009 positioned Equifax well for the COVID-19 recession. As shown on slide 7, during the 2009 global financial crisis, Equifax performed very well and exhibited the resiliency you would expect from a data analytics business. In 2009, we saw only a 6% decline in total revenue for the year, with our largest single quarterly decline at 10% in the first quarter of 2009 at the deepest point of the recession. The largest declines in 2009 were in international, with smaller declines in USIS as we benefited from growth in mortgage from low interest rates. Importantly, workforce solutions grew throughout the period and showed substantial growth of 17% in 2009, both as the work number continued to grow records, and contributors during the global financial crisis, which drove verification hit rates, and we saw strong unemployment insurance claims revenue growth from growing unemployment levels in the U.S. in 2009, and we expect a similar pattern in 2020. Shifting now to slide eight, Equifax business mix is better positioned for an economic event today than it was during the global financial crisis. Strong workforce solutions growth has increased their relative size in Equifax from 10 percent of revenue in 2009 to 27 percent of revenue today, and U.S. mortgage has grown from 12 percent of Equifax revenue in 2009 to over 20 percent today. In addition, workforce solutions growth in revenue and significant margin expansion has increased their percentage of total Equifax EBITDA to 30 percent today, from only 11% in 2008. Over the last 12 years, Workforce Solutions outsized revenue growth and the expansion of U.S. mortgage, as well as the growth of less cyclical government-related businesses, including the growth of Workforce Analytics, as increased Equifax recession's resistancy in counter-cyclical businesses from 40% of revenue in 2009 to over 55% today. which we believe has significantly improved our capability to continue to invest and execute during the COVID-19 economic impacts. Our cloud technology and data transformation execution is well-timed as the benefits begin to roll in during 2020 and accelerate in 21 and 22. The cloud transformation investments have allowed us to more rapidly access multi-data assets in the new cloud data fabric environment and deliver new products to market with speed to address the new COVID economic challenges for our customers. The cloud transformation will improve our revenue growth, cost structure, margins, and cash generation in the future. Clearly, the COVID-19 recession is much different than 2009, and like anything we've ever seen before, but Equifax is a stronger business with a scale of workforce solutions and U.S. mortgage and much better positioned to weather the COVID-19 economic impacts with our unique data and technology leadership. Our financial performance and strength allows us to continue to invest in the cloud transformation and new products, which will benefit us in the future. I'll now turn the discussion over to John so he can cover recent financial trends we are seeing in the business units, as well as an update on our liquidity, technology cost savings, and some other financial items. I'll come back and review our progress on the cloud technology and data transformation, new products, and our vision for the future of Equifax in 21 and 22. John? Thanks, Mark. As a reminder, I will generally be referring to the financial results from continuing operations represented on a GAAP basis, but will refer to non-GAAP results as well. First, a few items in 1Q20. In the first quarter, total non-recurring or one-time costs principally related to the cybersecurity incident and our transformation were $81 million, a decrease of $16 million compared to the prior year. The cost includes $78 million of technology and security and $3 million for legal fees. In the first quarter, general corporate expense was $134 million. Excluding non-recurring costs, adjusted general corporate expense for the quarter was $91 million. of $17 million from 1Q19. The increase reflects the higher security, technology, and equity compensation costs in 2020 as compared to 2019 that we discussed with you in February. For 1Q20, the effective tax rate used in calculating adjusted EPS was 25.3%, and in line with the rate we guided to in February. Interest expense for the quarter was $31 million, an increase of $4 million from 1Q19, and in line with our expectations due to financing the $341 million of legal settlements payments made during 3Q19. Our liquidity and balance sheet remains strong. As indicated on slide nine, we had almost $1.6 billion in available liquidity at March 31, including $370 million in cash, and available borrowing capacity on our bank credit NAR facilities of $1.2 billion. We have no debt maturities in 2020. In 2021, we have debt maturities beginning in June and will likely pay the remaining $355 million of our U.S. comprehensive consumer settlement in the first quarter of 21. In addition, we recently worked with our credit facility lenders to modify our covenants beginning in 2Q20 through 2021. At March 31, our leverage ratio was 2.7 on the basis of our amended credit agreement, well inside of our new leverage covenant of 4.5 times. This amendment provides us with significant and enhanced financial flexibility to support the continued execution of our Equifax 2020 cloud technology and data transformation and investment in new products and capabilities during this recession. We are watching current trends closely and will continue to manage proactively to protect these critical investments. This also gives us the ability to manage our liquidity and balance sheet. 1Q20 operating cash flow of $31 million was flat with 1Q19. As you know, our cash flow in the first quarter of each year is low as we make bonus payments, our annual 401K match, dividends, and interest payments all in 1Q. We also made legal settlement payments related to the 2017 cybersecurity incident in 1Q20 of $47 million related to the $100 million accrued in 4Q19. Capital expenditures in 1Q20 was $88 million, down $27 million from 2019. We have approximately $400 million of remaining payments on litigation and regulatory outcomes related to the 2017 cybersecurity incident. About $53 million will be paid in 2020, predominantly in 2Q. The timing of when the remaining approximately $350 million of the U.S. Consumer Restitution Fund is paid depends on the resolution of the appeals filed related to this case, which timing is uncertain at this time. At this time, we do not expect to fund the remainder of the settlement until early 2021. Details on the status of all outstanding regulatory and legal issues will be provided in our 1Q 2020 Form 10Q. Turning to slide 10, entitled Cloud Technology and Data Transformation 2020 Impacts. As we discussed in our February call, as we put our new cloud native systems into production, we begin to depreciate these new systems and incur the cloud and other operating costs of running these new cloud native systems. as well as the costs related to our legacy systems. It will generally take six to 12 months from the time the cloud native system is fully in production to transition a legacy exchange or decisioning system to a new cloud native system. During that time period, in addition to the depreciation on the new cloud native systems, we incur the cloud and other operating costs of the new system, as well as the operating costs of the legacy systems. As 2020 is a transition year and the decommissioning of legacy systems is not expected to substantially occur until late 4Q20 and 2021, we will incur these additional redundant system transition costs for much of 2020. For 2020, we continue to expect these additional redundant system transition costs to be in the range of 40 to 50 cents per share, with increased depreciation representing about two-thirds of this additional cost, and cloud costs, net of any legacy system decommissioning savings, representing approximately one-third of this additional cost. At the midpoint of this range, this is a total of about $75 million, with $50 million in increased depreciation and $25 million in incremental cloud and other operating costs. In 1Q20, these additional redundant systems costs were about $15 million, or 9 cents per share. As we move into 2021, we expect the savings from the decommissioning of legacy systems to begin to exceed the cloud and other operating costs from our new cloud-native systems, resulting in a net benefit to COGS at some point in the second half of 2021. This net benefit to COGS will continue to grow in 2021 and through 2022, as well as customers migrating to our transformed infrastructure, and we fully decommission our legacy systems. As we have said and as shown in slide 11, we expect to generate significant cost savings from our cloud technology and data transformation. A 15% plus savings in the technology cost, excluding depreciation and amortization of our cost of goods sold, excluding one-time items. In 2019, technology costs represent about 45% of total COGS. and full run rate savings in COGS from the completion of the technology transformation on a 2019 basis would have been about $90 million. A 25% reduction in our development expense is expected to be generated when we complete the transformation. Again, at 2019 development expense run rate levels, this is a savings of about $35 million per year. At 2019 cost levels, these two items would drive cost savings of up to $125 million and margins to invest in new products and growth, as well as higher EBITDA. And capital spending levels are expected to decrease 35% from the 10.5% of revenue we saw in 2019. We believe our cloud-native infrastructure and dramatically reduced application footprint should allow us to be more capital efficient than our peers. to at or under 7% of revenue. From 2019's elevated spend levels, this is a reduction in capital spending of about $115 million per year, which will enhance our long-term cash flow. In total, that is a pre-tax cash savings of about $240 million per year on a full run rate basis using 2019 spend levels as a proxy. substantially strengthening our financial profile and giving us the capability to further invest in new products and capabilities while enhancing our margins. In addition to the cost and cash benefits from the cloud transformation, we expect our new single data fabric and cloud-based applications to accelerate innovation and new products that will be accretive to our revenue growth rate. We expect to begin to see net COG savings during second half of 21 and are targeting reaching the full run rate of COGS development expense and capital savings during 22. We will certainly reinvest some of the savings, so we'll all not fall to margin. We have come a long way since 2018 and are seeing accelerating progress on our cloud technology and data transformation. We are becoming increasingly confident we will achieve our goals. Now let's take a few minutes to talk about the trends we were seeing in the markets over the past few weeks. Given the very unique nature of the COVID-19-led recession, the best perspective we can provide on the impact on our business is to share the trends we are seeing so far in the month of April. We are unable to forecast the economic event of COVID-19 in our markets, so we are not providing 2020, sorry, 2Q20 guidance and are removing our guidance for 2020 until we have more visibility on the economy. Slides 12 through 14 show details of revenue trends on a constant currency basis so far during the month of April, and their implications on 2Q20 if they were to continue. As you would expect, we have daily transaction reporting broadly available across our business, which we turned into daily revenue estimates. The trends I am sharing are based on this reporting and our view of these directional trends, which principally covers our online business activities, which is about 80% of revenue in the U.S., with lesser coverage in international. As shown on slide 12, USIS represents about 37% of our revenue in the first quarter, of which about 85% is online between OCIS and Mortgage Solutions. Looking at the trend in April, total USIS online revenue is pointed toward down a little over 10% versus 2019. Online mortgage revenue, the sum of tri-merge and online single file, has continued to show strong year-to-year growth in April up about 15%. Online non-mortgage revenue over the month of April is currently pointed at a decline of about 30% versus last year. As expected, the greatest declines are occurring in auto, banking, and insurance verticals from declines in economic activity with better performance in telco as we regained a primary position with a major customer. The remaining revenue in USIS's financial marketing services which is offline batch revenue, which performed relatively well in the first quarter and was down about 4% in March. Our assumption is FMS will be down over 20% in the second quarter of 20, as it is a blend of marketing-related activity, which we expect to decline consistent with online non-mortgage, offset by portfolio reviews volume, which we expect to perform much better than marketing as the recession unfolds. We do not have a meaningful daily trend for FMS. Workforce Solutions represented about 31% of Equifax revenue in the first quarter, of which over 75% is online for verification services. Over the last three weeks, verification services has shown high growth, but at a level below the 48% increase we saw in 1Q. Based on the April trends and movement growth rates, verification services growth appears to be pointed at about a 25% increase over 2019. Mortgage, which is the largest of the verification services verticals, has been extremely strong, up over 50% over the past three weeks, showing substantial growth versus 2019. Non-mortgage verification services is about half government services related to our contract with the Center for Medicare Services and the provisioning of benefits at the state level, with the remaining being talent management, debt services, and banking, principally in auto. Non-mortgage verification services, based on the April trends we have seen, is pointed toward a decline of about 15%. Government verification services revenue is performing better than commercial verticals, as CMS has reopened for applications, and we are seeing more benefits activity at the state level. The non-government verticals, principally debt management, talent management, and banking, have been down consistent with levels seen at USIS, with debt management performing much weaker than than expected in a traditional recession as our customer base is weighted towards student loans. In employer services, unemployment insurance claims management represents about half of the revenue. We expect meaningful revenue growth in UC in the second quarter as we process about one in six unemployment claim filings in the U.S. Over the past three weeks, claims filings by EWS have averaged about 600,000 per week versus an average in 2019 of 20,000 per week. We expect our GC business to increase by well over 50% versus the just under $30 million of revenue we saw in 2019. Workforce analytics, our W2 business, and our talent management businesses are principally subscription-based businesses and make up the bulk of the remainder of employer services. These businesses are expected to see low single-digit percentage declines year-to-year in the second quarter due to limited new customer acquisition. In total... If April trends hold, as well as these assumptions, we expect employer services revenue to be up over 35% in the second quarter. Our U.S. B2B businesses, USIS and EWS, make up about 67% of Equifax revenue. The online courses of these businesses make up 54% of Equifax revenue, and based on April trends, online is trending to be up low single-digit percent. Overall, based on April trends and assuming they hold throughout 2Q, our U.S. B2B should be up a little under 5% in 2Q20. Moving to slide 13, international represents about 25% of Equifax revenue, of which under half is online across its four regions. Based on April revenue trends, Asia Pacific is pointed to be down about 20, between 20 and 25%. This excludes revenue from our recent acquisition of the remainder of our India operations, which will be about $2 million in the second quarter. Left-hand April revenue trends also point to a decline of a little over 20%. In April, Canada is seeing more significant declines, pointing to revenue declines of about 40%. In Europe, we have both a CRA business and a debt management business. The CRA business has seen a weakening trend in April and is pointing to a decline in at current trends of about 40%. Although not an online business, our debt management business will be significantly impacted in the second quarter, with revenue expected to be down almost 60%, reflecting the UK government's suspension of tax-related debt collection activities during the pandemic. Debt management is about one-third of our European business. On the basis of these metrics, in total, international revenue is pacing down over 30% in April. GCS represents about 10% of Equifax revenue. GCS Consumer Direct, which represents about 40% of the GCS business, saw very limited impact on revenue in the second half of March. Total subscriptions in the U.S., Canada, and the U.K. are down slightly versus 1Q20 averages, with these trends holding relatively stable, versus 2Q19 U.S. Consumer Direct, which is expected to be down, reflecting subscriber declines that occurred in 2019. We are seeing overall declines in partner revenue run rates in the high single-digit percent range as our partners' businesses are impacted by the pandemic. In total, GCS is seeing revenue declines in the high single-digit percent so far in April. Although we are certainly seeing meaningful impacts from the COVID-19 lockdowns over the past month, the resiliency of our business model and strength of workforce solutions and our U.S. mortgage business, as well as GCS to a degree, is mitigating this impact, particularly in the US. Due to the uncertainties in forecasting the depth and duration of the recession related to the actions to combat COVID-19, we are not going to provide second quarter guidance and are retracting all full year guidance, as we indicated earlier. We will reinstate guidance when the path of recovery from the COVID-19 recession becomes more clear. However, for perspective on total Equifax 2Q20 performance, As shown on slide 14, we are providing an illustrative second quarter framework to help you think about our performance. To the extent total Equifax revenue continued at the pace I described earlier, based on April trends, 2Q20 revenue would be down about 6.5% to 8.5% on a constant currency basis, or $55 to $75 million versus 2Q19. Based on current FX rates, revenue would be down 8.5% to 10.5%, were $75 and $95 million year-to-year, resulting in 2Q20 revenue of $785 to $805 million. Adjusted UPS in 2Q20 at these revenue levels could be in the range of 78 to 88 cents per share, down 37% to 44% from 2Q19. Slide 19 also provides a walkthrough explaining the translation versus 2Q19 of the revenue decline to the decline in pre-tax income and adjusted EPS. Importantly, at these adjusted EPS levels, Equifax will still deliver about $225 million in adjusted EBITDA. This is not guidance. There is still much uncertainty as to what impact the pandemic will have on the economy, our customers' business activities, any path to opening up the economy, and therefore our revenue and earnings. This range provided reflects current variability and trends, not a view of potential quarter outcomes. We are offering this framework as you determine your view of the possible impacts to Equifax revenue in 2020 and think about your modeling for Equifax. We hope the detail and framework we provided on the impacts we have seen to date are helpful as you estimate Equifax second quarter results. Let me turn it back to Mark. Thanks, John. I hope our transparency on recent revenue trends in the framework for the second quarter is helpful. Let me wrap up with a discussion on our future. our $1.25 billion EFX 2020 cloud technology and data transformation, and our continuing investment in new products. Turning first to the cloud transformation. As it has only been two months since we last discussed our progress with you on the technology transformation, my discussion today will be abbreviated, and I'll return to a full update in July. Our investment in the transformation continues to be a top priority during 2020 as we work towards completing the strategic transformation and delivering the top-line revenue, cost, and cash benefits that John talked about from the investment. We are not seeing any negative impacts on the cloud transformation progress from the new working environment, as our technology team was already well-versed in remote working capabilities. We remain on track to complete the initial migrations of several large data exchanges by the end of the third quarter, including the work number, NCTUE, U.S. Consumer Risk, or ACRO, IXI wealth, U.S. commercial, auto, and property data assets. Our DataX exchange will follow in the fourth quarter as we made the decision to migrate DataX to the new cloud environment after the Acro database conversion or transformation is completed to allow us to leverage the Acro cloud exchange for DataX integration. In addition, initial migration of our EID identity validation systems will be completed in April, with customer migrations expected to be completed over the next three to four months. Our new Luminate cloud identity and fraud suite, which includes a new EID as a service, is being developed as a cloud-native solution and is expected to be available to customers in the US and Canada beginning in the third quarter. Our Ignite analytics and machine learning platform that includes attribute and model management capability as well as the ability for customers to easily and securely ingest their own data is integrated with InterConnect and is now available for customer migrations at AWS and on track to be available at GCP by the end of the second quarter. We continue to make strong progress globally rolling out Ignite Analytics platform with almost 200 customers now using Ignite Direct and Marketplace and more than 30 customers using our patented explainable machine learning or NDT-based models. We are continuing our progress in the migration of our customers onto our new cloud-based systems, including our InterConnect Ignite API framework. As a reminder, this is a common set of services on which we are working to migrate all USIS, EWS, and international customers. As of the end of the first quarter, USIS had migrated over 1,200 US customers and international completed migrations with almost 1,000 customers. This is slightly ahead of the pace we discussed with you back in February. We expect this pace to accelerate significantly through 2020, with over 10,000 U.S. customer migrations expected by year end, and the vast majority of U.S. customer migrations completed in early 2021. Customer migrations are an important part of our technology transformation, and we continue to work closely with customers to define and execute migration plans, and speed their access to the advanced products and services we can increasingly offer with our new cloud-native services. We are seeing the customer migration work continue at a normal pace in the past five weeks of the COVID-19 environment, which is encouraging. We are focused on the execution and, where possible, accelerating our cloud technology and data transformation roadmap in 2020 to ensure we deliver the customer and commercial benefits from the transformation and achieve the revenue cost and cash benefits in 21 and 22. This is a top priority for Equifax. Turning now to slide 15. New product innovation remains a key component of our EFX 2020 strategy, and accelerating new product generation is key to our long-term revenue growth. We have an active pipeline of new products with over 100 launches forecast for 2020, which is up from about 90 in 2019 and 60 in 2018. We're off to a strong start to the year with 34 new product launches in 2020, which is up 2x from the 14 we delivered in the first quarter last year. Increasingly, our new products are leveraging the broad scope and capabilities of our cloud native production systems, including a rapid acceleration in time to market. This quarter, Workforce Solutions launched several new products, including an expanded suite of mortgage products that provides access to richer employment and income data to customers, as well as access to poll data throughout the mortgage application lifecycle, and enhanced talent reports that provide a more complete view of candidate employment, income, education, credentials, and licenses, as well as identity validation, all critical in the hiring process. In March, as the depth of the COVID-19 pandemic initiated recession became clear, our data and analytics product and commercial teams quickly refocused their activities to work with customers and partners to leverage Equifax's unique and differentiated data assets and capabilities to support all elements of our customers' operations in this challenging work environment. Central to that effort is the work number. our unique and differentiated employment and income data asset becomes increasingly essential in this environment with unprecedented consumer income and employment dynamics from accelerating unemployment, salary reductions, and furloughs in the United States. Our team focused on how to refine existing products as well as generate new products to utilize the differentiated capabilities to meet these new customer needs. Our data and analytics teams reacted immediately to enhance our credit trends reporting that has long been utilized by our customers to evaluate trends across consumer and commercial lending, as well as the changes in overall consumer and small business credit standing. We immediately moved from a monthly update to weekly reporting service and added more proprietary Equifax data to help customers have more real-time data to make critical decisions. This product is now available on our Ignite Marketplace analytics platform. We also customize this capability for specific needs of our customers. This includes making it available over a secure Ignite application that includes advanced visualization of analytics across our diverse data assets, including over 11 industry groups, eight different Vantage Score bands for 11 loan products with three delinquency stages across 55 states and territories, as well as over 350 metropolitan areas in the United States. In the mortgage market, we are working across the industry to utilize our data to meet the requirements for the more current employment and income data and originations using TWIN and enhancing offline analysis using, including the use of income and employment data again to help mitigate portfolio risk and help customers identify consumers that may require specific collections treatment or support. We are in discussions with customers about weekly and monthly versus quarterly or annual portfolio reviews using our differentiated data given the rapidly changing financial condition of the consumer. We've also launched a product we call ResponseNow, a premium portfolio review solution across auto, credit card, personal loan, and other product lines, which incorporates credit trends, weekly reporting, economic data, consumer financial behavior, and income and employment solutions allowing customers to proactively manage their risk portfolio and lower credit losses while factoring in the current economic environment. These models are highly predictive and calibrated to the current economic environment to help lenders identify deteriorating credit risks. We also launched a capital markets economic suite, a suite of products to provide insight to the credit health of U.S. consumers and small businesses, including delinquency, default, and loss severity analytics for mortgage and other products, as well as the loan detail level across zip codes, vintages, and market segments. Our ability to bring these new capabilities to market so quickly is accelerated by our progress from moving our data assets into a cloud-native data fabric. This is just the beginning of the new product and analytic offerings in front of us from our cloud data and technology investments. We will continue to prioritize and invest in new products, including recession-based product solutions during the second quarter and beyond. We recognize the important role that Equifax plays in the markets around the world where we do business. During this COVID-19 pandemic, we are working with consumers and other stakeholders in the public and private sectors on creative solutions that ease the burdens on consumers and businesses and while assisting in recovery efforts. In every country where we do business, Equifax is actively engaged with national and local governments to ensure continued credit reporting that captures the status of consumer payments and lender accommodations, while recognizing the intentions of policymakers to minimize negative impacts to consumers' credit ratings caused by COVID-19 hardships. In the U.S., we've worked independently and in conjunction with Experian and TransUnion to provide assistance to financial institutions seeking guidance on how to report during this challenging time period. We recognize that many consumers have been impacted by the COVID-19 pandemic and will experience economic distress, particularly in the short term. Equifax is offering support through our website and other channels to consumers looking to minimize the pandemic's potential impact on their credit standing. Yesterday, we announced that the three U.S. credit bureaus, Equifax, Experian, and TransUnion, would be making free weekly credit reports available to all U.S. consumers for one year through April 2021. We are also offering free credit reports to Canadian consumers. We encourage consumers to take advantage of ongoing educational support regarding how credit reports and scores work. And for small businesses, we are partnering with policymakers and others to support small businesses as they navigate the current environment. I'm proud of the many steps that we've taken to support consumers and small businesses and look forward to engaging as a constructive partner to help with additional solutions to help consumers and businesses in the overall economy during this challenging time. Wrapping up, let's turn to slide 16 on the future of Equifax in 2021 and 22. As we battle through the economic impacts of COVID-19, we remain confident that the future of Equifax is strong. Our financial performance allows us to continue on offense and invest in our cloud transformation and new products. As we look forward to the rest of 2020 and into 2021 and 2022, we are confident in our business model, our investments, and our ability to perform in this challenging COVID-19 economic environment. We have the right team in place of seasoned leaders who understand data and analytics and how to operate in a recessionary environment. Second, our unique and differentiated data assets, including consumer credit, employment and income, utilities and property data assets, along with unique commercial credit data assets, position us to deliver the products and analytics our customers will demand as they manage through this unprecedented environment. Third, Workforce Solutions is a powerful business that we expect to grow through the COVID-19 recession and have strong growth potential in the long term. Our very unique twin income and employment data is even more valuable in this unprecedented economic environment due to the scale, accuracy, and latency of the data. EWS will continue to grow and monetize the twin database and has real scale with half of the U.S. nonfarm payroll in the database today, which drives hit rates and workforce solutions revenue. At 105 million records, the TWIN database is up more than 2x from 2009, making it even more valuable than the global financial crisis many years ago. We expect TWIN record growth to continue and to enhance the value of the database as hit rates continue to increase. Fourth, the momentum of the U.S. recovery continues. and USIS International and GCS performances in the second half of 2019 and the first quarter give us confidence that our businesses are competitive and well down the path of recovery. Contracts in our history from the U.S. Social Security Administration that is expected to deliver $40 to $50 million of revenue per year over five years starting in 2021. This contract reinforces the unique capabilities of our twin data assets, and will deliver strong growth and margins in the future. Sixth, we are continuing to invest in new products. As you know, NPIs fuel our growth, not only in the current year, but in the future. In 2019, we increased our NPI spending and delivered 90 new products. We are continuing to invest in 2020 and expect over 100 new products this year. Our NPI capabilities are being accelerated by our cloud transformation and remain a top priority for 2020 and the future. We will continue to expand our investments in new products, inspect the cloud transformation to accelerate our growth from NPIs in the future. And seventh and last, we're making strong progress on our cloud transformation, and the execution of the cloud investments is a clear priority for our team in 2020. There is no change in our spending or focus on the cloud transformation. We are continuing our investments and expect to make continued progress in 2020, and be substantially complete in the North America transformation in early 21 with international to follow. Our new cloud-native data and applications and always-on stability and speed to market and ability to do products around the globe will deliver significant benefits to Equifax that John discussed earlier. They'll enhance our competitiveness and drive our market share in products and accelerate our revenue growth. They'll reduce our technology COGS and development expense by over 15%, delivering $125 million of savings in 21 and 22. These savings ramp through 21 and 22 and allow us to reinvest further in new products and growth while expanding EBITDA margins. And they also reduce our capital spending to below 7% of revenue in the 21 and 22 period from the 10.5% of revenue we saw in 2019 and during the last couple of years. This is equivalent to about a $115 million reduction in capital spending from 2019 levels, which provides additional cash for investments or distribution to shareholders. We believe Equifax is well positioned to weather the economic challenges with strong revenues for growth in 21 and 22. We are still working towards reestablishing our long-term financial framework and an investor day in the second half of 2020. Wrapping up, These are challenging and unprecedented times for everyone. None of us know the depth or duration of this economic event, but Equifax is operating well, we're prepared for the crisis, and we're well positioned to weather the economic impacts of the COVID-19 pandemic. We are focused on protecting the health and safety of our team, supporting consumers, and delivering for our customers worldwide. We remain confident that the future of Equifax is strong. Our financial performance allows us to continue to invest in our future. Our business model is resilient, and we have a strong balance sheet that allows us to invest and accelerate our cloud transformation and new product investments for future growth, cost improvements, margin expansion, and cash generation in 21 and 22. We hope for the continued health of our employees and the consumers, customers, partners, shareholders, and all of our stakeholders. And again, we thank the healthcare professionals, first responders, and others on the front line of this pandemic for their bravery and dedication. We will continue to be transparent with you and our investors as the COVID-19 pandemic and the economic fallout unfolds. We plan to reinstate our 2020 guidance as soon as we have more clarity on the economic impact from COVID-19 and the path to recovery. And with that, operator, please open it up for questions.

Thank you. The question and answer session will be conducted electronically. To ask a question, please press star 1 on your telephone keypad. If you're on a speakerphone, please make sure your mute function is turned off to allow the signal to reach our equipment. Again, that's star 1 if you would like to ask a question. We'll go first to Andrew Steinerman with JP Morgan.

Hi, good morning. First, I want to thank you for that slide deck. That disclosure is like industry best. I want to go back to slide seven when you really went over the great financial crisis. Mark, you kind of segued to talking about how EWS might do something through this crisis. My feeling is thinking back to 2009. 2009 is really just two years after Torx was acquired in 2007. I remember it was getting a lot of initial benefit from just being part of the Equifax ecosystem. Now, obviously, a decade later, that's sort of like a a standard. And so I'm thinking, you know, just about Verifier. Do you feel like it might just be more subject to end market volatility now than it was in 2009, just because, again, that benefit has been kind of in place for a decade now?

Yeah, Andrew, thanks for the question. And, you know, you're right. Workforce Solutions or TOCS was only a couple years into Equifax at the point and it was a different scale of the business. Their database was a fraction of the size it is today. It's 2x the scale of it. There's no question that there will be pockets in our perspective. I think John showed you some of the trends in April where income and employment data is used in personal loans or in auto, subprime auto, where we're seeing some pressure. There are declines in the recent weeks as a result of reductions in originations. You know, there aren't many people buying cars in the last five weeks, for example. But if you look at the broader perspective of the business and where income and employment data is used, we believe that the twin data or income and employment data is more valuable today in this economic event from COVID-19 than it was in the global financial crisis. In the global financial crisis, you know, you had unemployment levels that were quite high. We're going to have that again. the uncertainty around consumers that were on furlough that had reduced salaries. You didn't have the salary reductions that are so widespread today. And you didn't have the pace of the scale of the unemployment waves going through the economy. And what we're hearing from our customers is that the value of knowing if someone's working and the value of knowing how much they're making is more important today in this economic cycle because of the uncertainty unprecedented impact on consumers' incomes in the United States is really just, you know, changes dramatically. You add to it, you know, the scale of the use of the product in mortgage, which is much larger today than it was back then, the system-to-system connections that we have. You know, we have a low-interest environment today that's going to drive refis. The purchase volume, you know, we expect to be down during the pandemic, but with low interest rate environments and stimulus, will that increase in the future? And then you have the ability of the business to continue to add data records. We've really scaled our capability to add records. And as you know, while we have hit rates that vary from 30 to 40%, we have 50, 60, 70% situations where we can't meet a customer's request for income and employment data because our database is only 50% of non-farm payroll. So as we grow the database, the revenue in that business just grows from hit rates because of the system's impacts there. So that's a bit of a long-winded discussion that, you know, first off, we think Workforce Solutions has, you know, a really strong position in this COVID pandemic environment, and we think it has a lot of levers to continue to strengthen that position going forward. And then last, is that we really believe that if you think about data assets and value in the COVID pandemic versus the global financial crisis or prior recessions, understanding someone's income and employment is critical.

I hope that helps. I agree. Thank you. Thanks, Andrew.

We'll go next to Andrew Jeffery with SunTrust.

Hi. Good morning. Appreciate all the detail, guys. Mark, a couple questions for you, I guess. First, when I think about Verify, I think you touched on it in response to Andrew's question. Could you discuss how much of the business is SMB? It seems like much of the disruption we're seeing is at that level. So I wonder if that, how much, you know, in terms of the employer business, how much you wind up capturing based on mix?

Do you mean on the contributor side or on the verification side, Andrew? on the contributor side? Yeah, well, there's no question. You know, you look back, I think we shared some stats. Back in 2009, we had 30,000 contributors. Those were largely large, primarily large businesses. And I think you know we've had an intentional strategy of not only adding large businesses over the last decade and last year and current months, but also really getting to small businesses because that's where a lot of the workforce is. And, you know, we ended the quarter, I think, with 700,000 companies you know, contributing data to us. So we're clearly getting more small businesses contributing. You know, where the impact of the pandemic is, it's, you know, it's really going to be widespread. You know, you think about large companies, whether they're airlines or hotels or hospitality, restaurants, you know, there's large companies out there that are furloughing lots of their employees. Their executive team and salaried employees are taking large salary reductions. You You know, so this is a pretty broad-based economic event, and as I discussed with Andrew, what we're hearing from our customers is that, you know, understanding the impact of forbearances and delinquencies is a challenge, and it's more challenging now than it was in the global financial crisis. But understanding who's working, how much they're making, you know, has their salary been reduced, are they on – furlough at 30% reduction, are they in a salary reduction and down 50% is really critically important. And the pace of those changes are so rapid, meaning salary reductions happening last week. And if you think about the data assets we have and the industry has, this is the most current data asset in the industry, meaning we're updated every pay cycle. So we have data every week or two weeks from our contributors which makes that data incredibly valuable because of its currency. So that's why that business is doing so well and why we expect it to do well in this economic environment. And we're not going to slow down our strategy around adding new records. As you know, we have a dedicated team. That's all they do is work with big companies and payroll processors to – increase our data contributors, and that's clearly a part of our strategy. You saw the growth that we've had in the last year, up to 105 million records or 80 million uniques, and that's going to continue. So that's another lever for that business in April and May and June and in the second half of 2020 as we continue to add data records going forward. While we're pleased we have close to half of the non-farm payroll in our database. We don't have the other half. And that's our opportunity to go work on that, which is a unique lever for growth because, as you know, the business model, the system-to-system integrations, you know, when a mortgage originator is hitting our file, if they get a hit rate on our 80 million uniques, then they use that for the income and employment verification. If they don't, they have to go down another path. So every day that we're adding new records, that revenue goes up in any economic cycle as they hit our database.

Yeah, that's all very helpful. Thanks.

And then just a quick follow-up on mortgage, and I know you're not making any projections, but as you look into the back half, do you think the MBA forecast is the right way to think about your business?

Yeah, as you know, and I'll let John jump in, we don't forecast mortgage. You know, it's not our gig. There's others that... do that quite well. We look at all the mortgage forecasts, you know, when we're doing our normal modeling, I think as you know, and we translate that through in a pretty formulaic way into our typical forecast and guidance. And I think as John pointed out, you know, with where the future is, it's very hard, I think, even for them to forecast what's going to happen. So we're not really using that, you know, beyond we're really focused on daily trends at this point. Thank you. And as you know, right, between NBA, Fannie and Freddie, their forecasts are extremely divergent right now. So it's made it more difficult to rely on those. We obviously talk to them a great deal, understand what their economists think. But as Mark said, given that no one can really forecast the economy right now, we're heavily focused on trends. Great.

Our next question will come from Manav Patnik with Barclays.

Well, thank you. Good morning, gentlemen. My first question is, you know, to your point you just made around the wide impact of the COVID crisis with lower salaries for those across, you know, the board. I was just curious, you know, why you bucketed, you know, mortgage as a recession, but really in buckets. I mean, I understand the trend, you know, early on with the rate that we find, but I'm just curious how you think about you know, how that will perform, is it going to be, you know, maybe compared to 08, 09, and the nuances between 4.0 and 5.0?

I think, Manav, thanks for the question. You know, I think we and I don't think there's any company out there that can forecast where this is going to go. How long are these lockdowns going to last? You know, when are these going to be relaxing with economic activity? You know, if consumers are stuck in their homes, how can they buy a car, you know, or how can they, you know, do a lot of financial activity. And, you know, that's why we don't see a way, you know, to forecast 2020 versus 2009. You know, we tried to point out some of the very powerful differences in Equifax, you know, versus the global financial crisis, which we think serves us well as we enter this COVID, you know, crisis. But, you know, we don't know what the next stimulus package is going to be. You know, You know, we don't know what's going to happen when the payroll protection program ends in September. You know, is there going to be another wave of layoffs? You know, likely, you would think. You know, it's hard to tell. Are people going to start flying again and going to hotels? Are they going to go to restaurants? You know, those things, there's so many uncertainties. So what we focused on was try to be really transparent with you, try to help you understand the significant changes in Equifax, you know, versus 2009, you know, with workforce solutions up to 37% of our business and, you know, a sizable part of our EBITDA, U.S. mortgage, which we expect to, you know, continue to grow through this pandemic because of low interest rates and refis driving that. And, you know, the cost actions that we've taken, we've tried to, you know, give you the best framework we can. And as soon as we have some visibility in you know, around where we think 2020 or 21 is going, you know, we'll certainly provide it. But we think we're better positioned today than we certainly were in 2009 because of the mix of our businesses.

Got it. And then just to, you know, to clarify on the employee services business and the business side to unemployment claims, John, I think you mentioned you guys do one in six claims. So I was just curious, is the revenue model just simply you get paid for each claim, or is there some other nuance to it? I think there's just some confusion around that.

Sure. So the way the business model works is it's a subscription business, in effect, where when people sign up for a subscription, they get a certain number of claims as part of the subscription, and then as they run through the subscription, they pay overages. So what's occurring, right, is obviously no one anticipated this level of claims. so customers are running through their annual subscription and then when they run through that they start to pay overages and the reason you're seeing the revenue start to grow but it isn't consistent necessarily with movements in unemployment is because of the fact that as employers run through their subscription level, then they start paying for overages based on when their subscription effectively started. So that's what you're seeing, and that's why you're seeing the growth rates that we're talking about. And those, John, you know, are happening as we speak, meaning just with the – massive spike in unemployment claims coming in. We're certainly in revenue mode with those subscription agreements that we have. Got it. Thank you, guys.

We'll go next to George Mahalos with Cowan.

Thank you, George. Let me add my thanks for the presentation you put out this morning. I guess Where I'd like to start is if we look at slide number 12 where you're talking about the 2020 April revenue trend, at least for the U.S.

business, USIS and EWS, can you maybe give us a sense of how those trends have trended throughout the month of April? Were they dramatically different last week versus, say, the first week of the month?

John, maybe I'll start a little bit, and then maybe you can jump in. There was a difference between the last two weeks of March and as we got into April, for sure. And if you remember, the last two weeks in March, you know, all of us were spooling up our BCP plans, going into work from home, and, you know, there just was, I think, a different level of activity with our customers and with consumers. As we got into April, if you want to call, you know, the work from home shelter in place mode being some level of normal. It was more normal in April. But, John, I don't think there was much difference outside of, like, unemployment claims coming in and stuff like that. I guess the only thing I would add to that is it has been relatively variable, right? So we look at the trends daily, and you will see meaningful changes in any given day. in the level of revenue when you look year over year. And that's why we tend to look over the longer periods. But I don't think there were any really distinct trends. Probably if you looked at USIS online mortgage, you'd say it was probably somewhat trending a little bit negative. But quite honestly, we consider that in the chart that we put forward. But other than that, you know, the trends, I'd say the trends are a bit variable, and that's quite honestly why we put a range on what we provided on slide 14, not because it's a guidance range, but because there's variability in the activity we're seeing in the month. And the only other place we're probably seeing some trends where we mentioned is seeing a little bit of a trend in the U.K. It's trending negatively. And in some countries, we're seeing some stability, right? So we've started to see stability in, let's say, Australia. So that's been somewhat of a positive. But overall, the trends are relatively consistent, but they are highly variable in the period, although wobbling around the averages we gave. I think what will be interesting is the next couple of weeks. You know, I think as everyone's watching this, You're seeing some markets start to relax the shelter-in-place. Chile, I think, where we have a business, is starting next week. New Zealand is starting. You see some states in the United States that are talking about, you know, relaxing that in the coming weeks. And I think that will be indicative of, you know, as we have this, you know, walk back from shelter-in-place to having, you know, some levels of economic activity, you know, of what that does to our current run rates. And the other point to make sure we're clear on, right, is that international, right, the percentage of online business is just lower. So the clarity on the impact of the rates that we're giving you, the percentages we're giving you on the entire business is less. We think what we've done is reasonable, but the level of online reporting is just lower.

Understood. Understood. I appreciate that, Colin. And, John, just a number of questions, if I may, just on slide 11.

you had $125 million of potential savings, which obviously would go into EBITDA once they're consummated. Is it right to think that from an earnings perspective, there will also be additional savings coming through from lower depreciation and amortization? And then I know you're not giving guidance on slide 14, but looking at that negative $85 to $100 million impact, Is it reasonable to assume that there will be some offsets from the $90 million of annualized cost cutting that Mark talked about earlier in the call? Thank you.

Yeah, so just looking at slide 11, right? I mean, what we tried to do was just provide some indicative levels of dollars based on 2019 actual cost levels, since that's the only data we have that's a complete year and available today. So, you know, we've talked about this in the past, right? So the COG savings or XDNA, and those are things that will ramp in as we start shutting systems down, right? So as things decommission, you know, principally starting very late this year and then going into 2021 and then 2022, you'll see those ramp. The development expense, obviously, next year, we stop with Sierra reporting in 2021. So our development expense, you'll actually see an increase in 2021, not because the spending is higher. The spending will actually be lower. It's just because in 2020 and 2019, we were showing we included some of this development spending in Sierra in separate reporting, right, which we had separated so that it wasn't included in our adjusted EPS. So you'll see an increase in dev expense, but then as we complete the transformation, you will see the debit expense starts to decline principally as we get into 2022, hence Mark's comments. Same thing with capital, right? As you complete the U.S. transformation, which Mark talked about completing in 2021, once that's complete, that's when you start seeing the capital reduction start to occur. So these things will phase in over time. DNA, I think we've indicated, was a big step up this year. We don't have a crystal ball into 2021. It's unlikely you'll see a big reduction in 2021. You could actually see somewhat of an increase based on the spending we're seeing now. So I wouldn't expect that. But, again, we don't have a crystal ball that's – That's a difficult thing at this point to forecast. In terms of near term, if you're talking about second quarter, getting some benefit from this in the second quarter, no, we've included everything that we believe that will occur in the second quarter. And it's the prior slide which gives a view as to the impact on the transformation in 2020. And there we're actually incurring the incremental costs of transformation because we're seeing the duplicate costs that we've talked about in the past and that we've shown on slide 10. So hopefully that covered your question. John, maybe I could just add, I think the group on the call knows that up until today's call, we've kind of talked about percentages that we see from savings from the cloud transformation. But now that we're at kind of the end of the first quarter and you know, heading towards the last three quarters of the year, we thought it was helpful to put some dollars in of what we expect those benefits to be in 21 and 22, you know, and going forward.

Thank you.

We'll go next to David Toggett with Evercore ISI.

Thank you. Good morning, and thanks again for the added disclosure. Mark, you called out a 500 basis point increase year over year in the win rate in the first quarter. Can you just elaborate a little bit on were you seeing the biggest increases in your win rates by business segment? And at this point, do you feel that you're completely back to where you were pre-breach in terms of win rates in USIS?

Yeah, it's a great question. And there's clearly been momentum. You know, we've seen fairly steady, but there's been some bumpy, you know, sequential improvement over the last couple years, you know, post the cyber event in 2017. And as you know, USIS was impacted most significantly. And as we got into the second half of 2019 and the first quarter, you can see the, you know, the non-mortgage online, you know, responding there. The win rates have been pretty broad-based. I think you know, you know, we've got a really strong commercially-oriented leader in Sid Singh that, you know, you know, is kind of a year and change into his role, so he's really taking hold. You know, he's restructured the commercial organization in the last, you know, few months, and that's bringing some new energy into how they're focused in the marketplace. The new product rollouts, you know, are helpful. You know, growing products last year gives him more stuff to sell and his team, which I think is quite helpful. So really, there isn't a segment that stands out. You know, we're focused on all of them, and I think you know you know, we put a particular focus on FinTech because that's a space where our competitors are much stronger than we are. And, you know, we've spooled up, I think we've gone probably from a year or 18 months ago from a couple of people calling on FinTech to close to a dozen, you know, today that are, you know, in that space. And, of course, that has historically been growing, you know, pre-COVID, you know, much more rapidly than the normal market. So it was a space that we wanted to play in. So, No good answer on anything that really stands out except that, you know, there's just been a real focus around, you know, driving that. And the second half of your question is, are we back yet? And the question is no, of course. You know, USIS, you know, our competitors pre-COVID, and I don't know what their first quarter numbers look like, but I expect their non-mortgage growth, organic growth would be higher than USIS's in the United States. So that's, you know, a growth rate we're still chasing. We still believe that that, our team has the potential to get back and, you know, be competitive as exhibited by the win rates that they're having in the marketplace. And, you know, when I think about going into the COVID, you know, pandemic and the economic impacts, you know, having that momentum from USIS still in, you know, recovery mode, you know, is positive, you know, and the fact that they've had the sequential growth and the performance in the second half of 19 and the first quarter performance, you know, gives me confidence that they're going to you know, react and support our customers, you know, in the marketplace. And then you couple that, you know, with having some of the unique data assets we have, like Twin, that the USIS team can sell in the marketplace that can bundle with existing credit file sales or other, you know, ways to go to market and bring value to our customers. And using our new single data fabric with integrated solutions that combine our USIS data with our Twin data, You know, those are more opportunities for that team to, you know, have more wins in the marketplace. Thank you very much. The only thing I'd throw in there is, as you know, and I'm sure every business is dealing with, as we now work through April, May, and June, we're evaluating the funnel very closely given the effects that are happening to our customers around because of the pandemic.

Understood. Thank you.

We'll go next to Jeff Mueller with Baird.

Yeah, thank you.

Just wanted to talk through, I guess, the margin impacts and the cost cutting a bit more. So what's all in the 90 million of annualized? Are you reflecting any of the benefit in the Q2 illustrative examples? And is it just like the cost actions or does it also include savings from things like variable compensation that might be impacted or like the hiring freeze, just what's all in there and is it impacting Q2 at all? Thanks. Yeah, like most companies, we took actions as soon as we saw the pandemic hit. As I said in my comments, we've got a hiring freeze in place at Equifax, but that excludes where we see we need resources for the cloud transformation or for new products. So there's some benefits from that that you would expect Jeff would roll through. There's the travel benefits. No one's traveling. You know, I would guess there'll be no internal travel at Equifax for the rest of the year, you know, until there's some clarity around a vaccine, and there'll be limited commercial travel. So that rolls in there. And then we also are tightening our belt around our other, you know, discretionary costs with third parties, you know, advisors, consultants, others that are doing work that – you know, are not integral to the cloud transformation, you know, or to our new product rollouts. You know, those are areas that, you know, we're trimming back. And, you know, John can answer the question around the framework, and I'll let John take that. Sure. So, you also specifically mentioned variable compensation, and no, it doesn't include saving some variable compensation since the first quarter was so strong. Obviously, if that was to occur, that would be in the future. So, I think Mark covered it, right? Effectively what it is, it's the removal of any growth we had in spending in the plan that we would have shared with you back in February. And then the real reductions come in in the reductions in discretionary spend, which we have taken some and we're continuing to work and we'll expect to have more progress there. And then also substantial reductions in T&E. And then in terms of our Our employee expense, effectively, we're holding everything flat, as Mark said. So no new hiring, and we'll see the benefit of attrition. But that's what's in the numbers today, and that's what the second quarter reflects. And that's how we've done our longer-term scenario planning as we plan our business through the end of 2020. Beyond that, there's no incremental benefits to cost savings in the illustrative view that we provided you on slide 14. Jeff, maybe I'll add one more comment. From our perspective, when you think about how we're running the company, I said in my comments quite clearly, and hopefully clearly, that we're going to protect our franchise. We've got the financial strength to continue to make strategic investments even in this challenging economic time, and that includes the cloud transformation, which John and I both said we're spending what we plan to spend in 2020 on. And frankly, if we could find a way to accelerate the spending to accelerate the savings and benefits, we might do that. And the same with NPI. As you know, last year we increased our spending in NPI, and that resulted in more new products. You know, if we find opportunities to increase our spending around new products in 2020, we will do that. In order to deliver in the near term, you know, new products related to the recession impacts, but also for the future of Equifax. And then on the discretionary cost side, you know, these are belt tightenings that are obviously meaningful, but are, you know, focused on areas where we won't, in my words, impact the franchise and the future of Equifax in 21 and 22. Okay. And then I understand the subscription with overages model for the UE claims business, but Can you just kind of help me better understand the timing factor? Like when do you recognize revenue relative to when the initial claim is filed? Well, if they're outside of their subscription pretty quickly, meaning they're on the clock, that's how the economics work. And just tactically, it's when we deliver the service, right? So when the service is delivered, and the claim would be filed, and then the overage has occurred and we can bill for it, then the revenue would be recognized in period. Well, we're clearly in that mode with a whole bunch of, like, a lot of the customers, you know, in the last couple weeks. Got it. Thank you, guys. Thanks, Jeff.

We'll go next to Bill Warmington with Wells Fargo.

Hey, Bill. Good morning, everyone. So first, I just want to say congratulations on the Social Security contract. And I wanted to ask, when in 2021 do you start generating revenue?

Is that a Jan 1st start? Yeah, we don't have a specific timetable for that. It's a very significant contract for us, as I mentioned. It's the largest contract in our history, if we look back. And it's one that really represents the power of that income and employment data that we have in And we wanted to give you some visibility as we were talking about 21 and 22, and obviously 23 and 24, because it's a five-year contract, that that contract's going to be rolling in. And as we get closer to, you know, either the next few quarters or closer to our 21 guidance or the financial framework that we plan to put in place later in the year, we'll certainly give you more specifics on that.

Okay. Okay. And then for my follow-up, I was going to ask if you could put some numbers around what you're seeing in terms of volume originations for credit cards, for auto, and for insurance. And it'd also be helpful in terms of doing our modeling, if you could get a sense of what that represents and the percentage of total Equifax revenue.

Yeah, John, you're going to have to help me on that one. I don't know if we have handy that kind of data. I think You probably know that when it comes to cards and P loans, we're smaller than our competitors in the United States in that space. They're much larger than we are. And we've clearly globally seen the largest impacts in cards, P loans, and auto just because it's common sense, right? you know, consumers can't get out of their homes, they can't go to a car dealership and buy a car, and then they can't use the financing on it. So there's clearly been impacts in every market in those spaces. John, would you add to that in any way? No, I'd say, you know, I think we gave quite good detail on non-mortgage in total, but no, we haven't broken it down for everybody by line of business. So I think that's a level of granularity we're going to hold back on. We're okay where we are. I think maybe just as you might imagine, what we are seeing is that, you know, the customers we deal with have pulled back on, you know, prescreens or originations. You know, they're raising risk scores because of the uncertainty around the consumer, which impacts, you know, their volume. And as I mentioned in my comments, you may recall that I was running G Capital's credit card business, which is now Synchrony, back in 2009. And those are the actions we took. You know, until you have some clarity, you know, around the consumer in those kind of businesses, whether it's P-Loan, auto, or, you know, cards, you know, you're going to be more conservative on your originations. The flip side of that is, as I mentioned, which is the beauty of, you know, the business that we're in, is the counter-cyclical side is, you know, in my experience, we spent more money on portfolio management and credit line management increase and decrease actions in order to manage the existing book that you have because the consumer is changing so rapidly. And, you know, one area we see that, you know, we're seeing some real traction on is increased discussions and activity around our income and employment data from workforce solutions and some of those spaces where, you know, we historically, you know, had less, you know, penetration or market share. All right. Thank you very much.

We'll go next to Andrew Nicholas with William Blair.

Hi, good morning. Good morning.

You talked quite a bit about the new product enhancements you've rolled out to address the recessionary environment, many of which seem to prioritize more frequent data updates. Do you think demand for this level of frequency could persist coming out of the crisis and then

maybe relatedly, are there any other changes to customer behavior that you've seen that you think could have a more lasting impact on the demand side?

Yeah, I think that, you know, it's really tough to predict what's going to happen because we've never seen anything like this. And, you know, there's so many uncertainties about how is the consumer going to come back? What's the stimulus going to look like? Is there going to be a second wave, you know, after the payroll protection plant here in the United States, you know, of a unemployment action. So you have all those things layered in there, you know, which really impact, you know, how long this cycle is going to be and, you know, how much stimulus is going to be put at it. Clearly, we've seen unprecedented amounts that, you know, will be helpful. But the depth of this one, when you think about travel and the impacts from unemployment in so many sectors is just, you know, massive. Whether it will persist On the frequency post this economic event, hard to predict. I do expect the frequency of refreshing your data, refreshing your portfolio to be much more in this economic event than it was in 2009, just because there's so many more uncertainties in this environment. The second thing I would say that I mentioned earlier in my comments that I think is going to be uniquely valuable for Equifax is income and employment data. you know, who's working and who's not. You know, it's going to be, we didn't have the database in the scale that we had in 29. We do today, but the volatility of people's salaries and ability to repay their debts is so much different in this economic environment than the last one. And then to your point, you know, does that result in work number or our twin income and employment data becoming more of the workflows going forward. I think it's really possible, and we're opportunistically trying to work on that. You know, when you think about mortgage, you know, every mortgage in the United States that's originated, for the most part, pulls all three credit files, and they all have to really verify income and employment. We're very integrated in that workflow, but we still have more opportunities for system-to-system integration. You know, we don't have – we only have – I say only, we only have, you know, half of the non-farm payroll, so there's 50% of the originations or whatever the percentage is, something like that, that have to be verified in another way. So we'll be able to grow going in that space. We don't have that same penetration, you know, in some of the other sectors, and this could result in an extended period for workforce solutions to increase its market share in some of those other spaces like auto, you know, like P-loans, you know, and like cards, which we've been working on, you know, pre-pandemic, and we're really spooling up now.

Great. That's helpful.

And then one quick one.

As the workforce solutions business mix potentially stabilizes a bit this year with a faster-growing employer services business, could you refresh us on the margin profile of the verification employer services businesses, just trying to

gain appreciation for how a stronger employer services business might impact margin expansion trends over the next handful of quarters. Thanks.

John, maybe you could take that one. Yes. So we haven't given specific margin differences. What we have said is that verification services looks somewhat like the online portions of USIS, somewhat lower, right, because they have some loyalty payments that are larger than than what USIS might pay, and that employer services is quite a bit below that. But we haven't actually given a specific breakdown, although given the detail we give on split of revenue and then total margin for the BU, I think you can probably get pretty close. John, I think it's safe to say that the incremental margins on this incremental unemployment claim volume is quite high. It is. It is. Not quite as high as the verification, but it is relatively high.

Thank you. Our next question will come from Gary Bisbee with Bank of America.

Hi, guys. Good morning. I guess a two-part question. First, on your employer services, I'm sorry, workforce solutions business, How do we think about the 22 million, you know, jobs lost in the last couple of weeks on the records, you know, and how does that, you know, you talked about continuing to grow records, but it would seem the active records go down as people lose their jobs. How does that flow through to revenue?

Well, there'll clearly be some impact there. We don't process all unemployment claims. We pick up that data, which is valuable, on the claims that we do process. So there are Could be some impact, but I think it's quite minimal, John. Yeah, so, I mean, effectively, the dynamic that's occurring, right, is that as we get payroll files to the extent that we have a given employer that has done a layoff so that the employment is much lower, which I think is what you're referring to, then, yes, work number records would decline. What's been offsetting that, right, I mean, certainly year on year, but also continuing through this quarter, sorry, last quarter and the first quarter, is there was a substantial increase in the number of subscribers starting really, as we talked about, kind of September through the end of last year, and a very large increase in records. So what you're looking at is very large increases in records year on year and absolutely some offset from unemployment increasing once individuals become unemployed. And I think the dynamic that's benefiting us is the year-over-year benefit we have from what I just referenced, and then also the continued work that the team is doing to add new contributors at a relatively rapid pace. So as we go through this year, we'll have to see how those two dynamics play out in terms of our ability to add new contributors And then also the negative effect, which is our contributors have lower employee bases that you see that impact the record base. But so far, because of the large additions in new contributors we've seen over the past five, six to seven months, that continues to be a net positive. As we go through the year, we'll keep you up to date on what it looks like. And maybe, John, just to add to that, as you probably know or you may know, You know, we sell various flavors of our workforce solutions twin data. You know, we sell, you know, in a system-to-system integration, if a consumer's going through a mortgage process and the originator hits our file, if there's a consumer in that file, then they pull that record and we charge them for it. You know, whether they're working today or they were working six months ago, nine months ago, 12 months ago, et cetera, depending upon the product that they pull. And we also, there's applications or customer use cases where so-called inactive records, meaning someone was working or on our database a year ago or six months ago or two months ago and is not active today, is another revenue source for us that we sell. So there's multiple ways that we're able to sell the data, including the active records.

Okay, great. And then just a quick follow-up. We've seen a number of reports out there about tighter bank underwriting standards beginning to impact refinancing volumes and potentially consumer lendings. more broadly. Are you seeing that in the data? Is that incorporated at all in the mortgage rank that's implied by that April trend data? Thank you.

I think it's hard for us to see that in mortgage because mortgage is fairly strong both in the credit file and USIS and then with the verification and workforce solutions. I think, as John pointed out, In USIS, our non-mortgage volume is obviously, you know, trends are down, you know, versus first quarter and last year. And those are going to reflect, you know, things like auto and P loans and credit cards. And it's going to be a combination primarily of them, you know, reducing originations. You know, part of it is just from economic activity or foot traffic, meaning with people and shelter in place, you can't buy a car. or you can, but it's not as much happening. And then some of it's going to be, as you described, of, you know, lenders, which some I've talked to, and I know that's what I did in 2009 when I was running G Capital's business. You know, you tighten up origination, so you figure out, you know, where the consumer is going to be. So you raise score cutoffs or, you know, different ways to – make sure you're protecting your book while you're still doing some originations. But we've clearly seen, you know, declines in those markets, not only in the United States, but in other markets, you know, around the globe.

We'll go next to Brett Huff with Stevens Incorporated.

Good morning, and thanks for the exit rate data, guys. Hope you're both doing well. A couple questions from me. I'm looking back at my model, and I think you guys bottomed out in the USIS online at about minus 13%, one of the quarters in 09, if I'm remembering right. And I think you said you're seeing about minus 30% now. I'm just wondering kind of to compare, contrast between those two numbers, if I've got those right. You know, what's different and what's similar between those two, and why more today? Well, there's nothing similar about USIS. 29, well, there is, but I'm being a little sharp on that. You know, this is so different. You know, in 2009, there wasn't shelter in place, and there wasn't, you know, every, you know, retail operation, auto dealers, you name it, shut down for months at a time. That's dramatically different, you know, in just the economic activity. And as I mentioned earlier, as we're starting to see some relaxation, you know, in states like here in Georgia, you know, they're going to – allow restaurants to open in a week or two and things like that, that to me is one point that's just dramatically different and you really can't compare how we perform until we get back to what I would call normal economic activity, meaning consumers are allowed to go to stores and want to go to stores and so on. Even with that, it's my view that this is going to be dramatically different than 2009 from an economic standpoint just because of how consumers are gonna operate. Are they gonna go on a plane and on vacation? That drives economic activity and credit cards. Are they going to put off buying a new car? The waves of unemployment are very different now than they were in 2009 and we've never seen in our lifetimes the waves of furloughs or salary reductions. It's just never been at that scale which obviously changes how the consumer is is operating and can operate. So that's just dramatically different. Now, why we thought it was important to share that with you of what we looked like in 2009 was not about, you know, the specific percentages, but really how the resiliency of our businesses. And we tried to give you our view of how we categorize the businesses. And, you know, a business like Workforce Solutions, you know, powered through the 2009 crisis is currently powering through the COVID crisis, we expect that to continue. You know, the same with U.S. mortgage with low interest rates. You know, us being over indexed to mortgage in the United States is a good thing. It's generating margin that we can use to reinvest in the business, you know, as that business goes forward. So I think there's more differences and similarities, but the differences around the scale of our recession-resistant businesses being dramatically larger in this economic event versus 2009, which was the worst we'd ever seen until now, I think serves us well as we get deeper into this COVID economic recession. Just for clarity, we said non-mortgage is down 30% online. Total online, we said it's down just over 10%. I just wanted to make sure you're comparing the right numbers, that's all. Gotcha. That's helpful. Thank you. And then the second question is, John, you mentioned kind of having the online kind of daily tally, if you will. Do you have any insight into, you know, the credit files that are being pulled or the data that's being used, kind of what use cases are being more or less impacted? And I'm thinking sort of the difference between maybe marketing credit offers versus originating credit offers versus doing kind of portfolio management type stuff. Any sort of hints in the data on that, or is that too opaque still? So for us, most, not all, marketing and portfolio management would be batch. So that would be an FMS. And that's a place where we would have less visibility now, I think, as you mentioned in the call, because that batch business tends to happen for ended periods, and it isn't really as – subject to reliable trends. So we've made assumptions about what will happen there, but they're far less based on trends, and they're based on the trends we're seeing in online. Within online, we do know by general industry type, and I think there is some detail within industry type deeper than that, but in terms of a specific use case within a Within a lender, no, not so much, right? So, for example, if someone pulls a mortgage file, we'll certainly know who pulled it, but we don't necessarily know if it's for a refi or not or versus a new purchase. Or in some cases, it's difficult to tell if it's even for a HELOC. Great. That's it. Thanks, guys. Thanks.

And now I would like to turn the call over to Jeffrey Dodge. Please go ahead.

Okay, that will conclude our call for today. I appreciate everybody's time. I know the call went a little bit longer than normal, but again, refer you to the material that is on our website, and with that operated, we will conclude our call. Thanks, everybody.

That does conclude today's conference. Thank you all for your participation. You may now disconnect.