Equifax, Inc.

Greetings and welcome to the Equifax Inc. Q3 2025 Earnings Conference Call and Webcast. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. You will be placed into question queue at any time by pressing star 1 on your telephone keypad, and we ask that you please ask one question, one follow-up, and return to the queue. If anyone should require operator assistance, please press star 0 on your telephone keypad. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Trevor Burns, Senior Vice President, Head of Corporate Investment Relations. Trevor, please go ahead.

Thanks, and good morning. Welcome to today's conference call. I'm Trevor Burns. With me today are Mark Peacore, Chief Executive Officer, and John Gamble, Chief Financial Officer. Today's call is being recorded. An archived recording will be available later today in the IR calendar section of the news and events tab at our investor relations website. During the call, we'll be making reference to certain materials that can be found in the presentation section of the news and events tab at our IR website. Also, we'll be making certain forward-looking statements, including forward quarter and full year 2025 guidance, as well as our long-term financial framework to help you understand Equifax and its business environments. These statements involve a number of risks, uncertainties, and other factors that could cause actual results to differ materially from our expectations. Certain risk factors that may impact our business are set forth in filings with the SEC, including our 2024 10-K and subsequent filings. In the third quarter, Equifax included a restructuring charge for cost reduction actions as we continue to streamline our operations globally as we complete the new Equifax cloud, advance our global data and application cloud infrastructure, and deploy EFX.AI capabilities across the organization to drive cost savings. These charges totaled about $44 million and are expected to deliver ongoing savings when completed by late 2026. of about $30 million per year. We will also be referring to certain non-GAAP financial measures, including adjusted EGS, adjusted EBITDA, and cash conversion, which will be adjusted for certain items that affect the comparability of our underlying operational performance. These non-GAAP measures are detailed in reconciliation tables, which are included with our earnings release and can be found in the financial results section of the financial info tab at our IR website. Now I'd like to turn it over to Mark.

Thanks, Trevor. Turning to slide four, Equifax had a strong third quarter with revenue of $1.54 billion, up over 7% in constant currency and reported dollars. Revenue was $25 million above the midpoint of our July guidance, driven by outperformance in U.S. mortgage and EWS and USIS non-mortgage. About two-thirds of the revenue outperformance was in USIS mortgage from stronger market volumes later in the quarter off lower mortgage rates. Mortgage hard credit inquiries were down about 7%, but better than our expectations of down over 12%, with the 30-year mortgage rate dropping just below 6.5% in September. Total U.S. mortgage revenue was up a strong 13% in the quarter. In September, we saw modest mortgage inquiry activity increases. We believe this improvement was likely led by mortgage re-buy activity off the lower rates. New home purchase activity appears to be remaining at the lower levels we've seen throughout 2025, reflecting continued low home inventory levels, elevated home prices impacting affordability, and prospective home buyers waiting for further mortgage rate reductions. U.S. mortgage revenue was 21% of Equifax revenue in the quarter. John will cover our expectations for mortgage activity in the fourth quarter shortly, but we continue to believe that mortgage activity will improve over the long term towards the 2015 to 2019 levels as inflation comes under control and rates come down. EWS non-mortgage revenue is better than expected, principally from strong high single-digit revenue growth in EWS government driven by state penetration. We've seen a meaningful acceleration of post-OB3 discussions as both federal and state agencies move towards implementation of new solutions to comply with the more stringent income and work requirements in OB3. And this is a very encouraging sign for 26 and 27 EWS government growth. USIS had another good quarter of B2B non-mortgage revenue growth, up about 150 basis points sequentially, as they are focused on customers and growth in a post-cloud mode. FX had an immaterial impact on revenue in the quarter and was consistent with our July guidance. Adjusted EPS of $2.04 per share was 12 cents above the midpoint of our July guidance, reflecting stronger revenue growth and solid operating leverage. Adjusted EBITDA margins of 32.7% were up 20 basis points sequentially. Our business units continue to execute very well. During the third quarter, EWS saw revenue growth of 5% better than our expectations, driven by the above-expectation high single-digit growth in government and 20% growth in consumer lending. EWS also continues to see strong growth with active records, which were up 9% versus last year. USIS revenue growth of 11% was also stronger than expected and well above their 6% to 8% long-term framework. USIS is gaining momentum post-cloud transformation, driving new product innovation and customer growth. In the quarter, USIS launched their new audit credit file with a twin indicator to differentiate our credit file and drive share games. International constant dollar revenue was up 7%, consistent with their long-term framework. The international team continued strong progress towards cloud completion, which delivers margin expansion from legacy infrastructure decommissioning, and which is a tailwind to their margin expansion. International adjusted EBITDA margins were up a strong 360 basis points versus last year. We made strong progress in NPIs in the quarter with a vitality index of 16%, which was a quarterly record, with strong new product rollouts like i9 Virtual that we are selling direct and through background screeners and payroll processors. Raising our 2025 vitality guidance for the third time this year from 12% to 13%, given our continued strong performance in NPI pipelines. And with our strong free cash flow, we returned about 360 million to shareholders, including repurchasing 1.2 million shares for $300 million, or about 1% of our shares outstanding. Given our strong three-quarter results, we are raising our full-year revenue guidance by $40 million and adjusted EPS by 12 cents per share. With our strong operating performance, we're also increasing our free cash flow guidance to $950 million to $975 million, up from the $900 million we provided in July, with a cash conversion in excess of 100%, up from the 95% framework we had for the year. We have positive momentum from the strong third quarter as we move into the fourth quarter and head towards 2026. John will share more details on our fourth quarter and full guidance shortly. Turning to slide five, workforce solutions revenue is up 5% and stronger than expected, driven principally by government performance. Verifier revenue was up over 5% in the quarter with non-mortgage verifier growth of about 7%. Government revenue grew high single digits in the quarter and better than our expectations of mid-single digit growth from state penetration and OB3 momentum, which is positive as we move past the impact from 2024 CMS funding changes. Talent Solutions revenue was up low single digits in the quarter and below our expectations from weaker hirings. Overall U.S. hiring, particularly white-collar hiring, continued to be relatively weak in the third quarter, with overall BLS data down about 4% in July and August compared to last year. Underlying talent employment verification revenue continued to perform well in the third quarter, driven by new products, penetration, pricing, and records growth. EWS mortgage revenue was up 2% against a market as measured by U.S. hard inquiries that was down about 7%. and was also slightly better than our expectations. As a reminder, EWS mortgage inquiry volumes lag USIS credit inquiry volumes as credit is pulled earlier in the mortgage application cycle than income and employment data. USIS typically sees the benefits of mortgage shopping behavior earlier and to a greater extent than EWS. EWS mortgage revenue continues to benefit from record growth and pricing. Consumer lending continues to perform very well, with revenue up a strong 20% in the quarter from broad-based double-digit growth in P-loans, auto, and card. Employer services revenue returned a positive growth in the quarter, up 1%, and up over 250 basis points sequentially. We continue to see some weakness in I-9 and onboarding revenue from the weaker hiring market across both blue-collar and white-collar segments. Workforce solutions adjusted EBITDA margins at 51.2% were strong and slightly better than expected, driven by both higher-than-expected revenue growth and strong operating leverage. Coin record additions were strong again in the third quarter, with 199 million active records up 9% and 113 million current records, which were up 6%. Twin database growth continues to add significant value for verifiers and contributors from the higher hit rates Twin delivers. We added five new partnerships this year on top of the 10 we added in the second half of last year and expect those new Twin relationships to contribute to record growth in the fourth quarter and in 2026. And as a reminder, our 100 million current SSNs are a great indicator of the long runway for Twin growth towards the 250 million income-producing Americans. Turning to slide six, we continue to engage in Washington and at the state level around the big focus on the estimated $160 billion of improper social service and tax payments, which we believe is a positive medium and long-term macro for workforce solutions. In the second quarter, the President signed the OB3 legislation that provides strong future growth opportunities for our EWS government business, from the increased focus on program integrity and the new requirements from OB3. Our discussions in Washington and with the state agencies are ramping rapidly post-OB3, given the strong value proposition from TWIN on speed of social service delivery, caseworker productivity, and accuracy of income verifications, which drives a reduction in improper payments. The new OB3 bill heightened verifications in several areas, first in SNAP, tying federal funding levels to error rates and enforcing work requirements. Today, over 80% of the states and territories do not meet the new OB3 6% income verification error rate for SNAP, with about 40% of states with an error rate over 10%. At current error rates, nearly $12 billion in SNAP benefit costs would shift from the federal government to the states, making our TWIN solutions even more attractive to drive those error rates down. Second, by adding community engagement or work requirements for certain Medicaid recipients, which we can verify with the hours worked that are included in the TWIN dataset. Third, by increasing the frequency of CMS redeterminations for certain populations from 12 months to every six months. And last, by a broader tightening of income verification requirements that TWIN delivers. As I mentioned, we've seen a meaningful increase in commercial discussions at the federal and state level post OB3 signing in July. We're uniquely positioned with our differentiated twin data assets to help support state agencies meet these new requirements, which we expect to be a big positive for our EWS government business in 26, 27, and beyond. While the OB3 revenue opportunities will likely be in the second half of 26 and 27, the increased engagement at the state level presents opportunities in the near term to penetrate the approximately 50% of states not using TWIN for CMS or SNAP verifications today. We are also continuing to ramp our engagement in Washington in order to support the administration's broader focus on program integrity and improper payments on new programs that TWIN has historically not supported, including the IRS Earned Income Tax Credit, overtime data for the new IRS overtime requirements, and unemployment insurance. These are large potential new programs that will be positive growth drivers for EWS in the future. The EWS government team is also bringing new innovative solutions to federal and state agencies supporting the government's goal of reducing fraud, waste, and abuse. New products, including continuous evaluation of state SNAP participant income data to verify changes in recipient incomes above program levels and reduce SNAP error rates, will be available this quarter from EWS. Continuous evaluation of state Medicaid hours work data will be available in mid-26 as a new solution from Workforce Solutions to meet the OB-3 work requirements. An EWS complete income solution, which was launched in the third quarter and supports state's ability to validate income through the work number, include other sources of income such as gig work, self-employed wages, and non-earned income through permissioned services. We've already signed one state for this new solution and have several other states in our pipeline. This is a unique window of opportunity for our government vertical with the big focus on improper payments and the new OB-3 bill. EWS has significant opportunities for the medium and long-term revenue growth supporting government programs and remain confident in our medium and long-term government vertical revenue growth framework at above the EWS long-term revenue growth framework of 13% to 15%. as we grow into the large $5 billion government TAM. Turning to slide seven, USIS had a very strong quarter with revenue up 11% and much better than our expectations, principally led by mortgage revenue. Non-mortgage revenue was up 5% in the quarter and better than our expectations, a very positive sign as we look to the fourth quarter in 2026. B2B non-mortgage revenue was up about 5% in the quarter and up over 150 basis points sequentially as we continued to see a stable lending environment, although continuing at levels below longer-term norms. We saw low double-digit revenue growth in auto and mid-single-digit revenue growth in FI, and all other B2B verticals in the aggregate were up low single digits. Financial marketing services, our B2B offline business, was up a strong 9% in the quarter from very strong revenue growth in our identity and fraud solutions enabled by the new Equifax cloud. We have not seen an increase in portfolio review spending that would be indicative of increased risk management activity in a weaker economic environment. Consumer solutions revenue continued to perform well at up 6%. And mortgage revenue in the quarter was up a very strong 26% and above our expectations. This strong growth was driven by mortgage volumes later in the quarter from a small decrease in rates, the benefit of FICO pass-through, and the performance of our new mortgage pre-approval products. We continue to see strong interest in our pre-approval products with the twin indicator. USIS adjusted EBITDA margin at 35.2% was up 130 basis points compared to last year. We are seeing the benefits of cost savings from our cloud migration, which we completed in the second half of last year, as well as operating leverage from revenue growth in the quarter. Turning to slide eight, two weeks ago, Equifax announced we are expanding our Vantage 4.0 mortgage credit score offerings in response to FICO's aggressive price actions. FICO has taken up pricing for mortgage credit scores at a CAGR of over 100% per year over the last four years, including a 2X increase to $10 per score in 2026. even after losing their 30-year monopoly position with the federally guaranteed mortgages in July. Importantly, we detailed steps to drive competition in the mortgage credit scoring market, drive conversion to Vantage Score 4.0, and deliver over $100 to $200 million of savings to our mortgage customers and consumers. Specifically, Vantage 4.0 for mortgage will be priced at $450 a score to accelerate conversions to the higher-performing, lower-cost Vantage Score 4.0. We'll also hold the 450 price through the end of 2027 to give customers confidence in the conversion. In 2026, the trended credit file with Advantage 4.0 used in a mortgage hard inquiry is expected to be priced in line with the 2025 Equifax trended credit file with a FICO score. We are also going to deliver free Advantage scores through the end of 2026 to all mortgage, auto, card, and consumer foreclosures consumer finance customers who purchase FICO scores to drive customer acceptance and conversion. And as you know, we've added a new twin indicator and key employment indicators, which are available on our mortgage prequal and preapproval products at no cost to expand the value of the Equifax credit file and drive share gains. We're adding telco and utility attributes available on our trended mortgage prequal preapproval and hard pull credit files, also at no cost in 2026, to enhance the value of the Equifax credit file. We plan to incentivize our commercial teams to drive conversion to the VantageScore 4.0 so we can deliver the performance and cost savings to our customers. We believe these are significant steps to drive competition in the scores market while also differentiating the Equifax mortgage credit products. Following FICO's doubling of their score pricing and Equifax's move to deliver 50% cost savings, we've seen a groundswell of interest from the industry and from mortgage resellers on using VantageScore 4.0 and have many direct mortgage customers either in production with VantageScore, in the contracting stage, or expressing very strong interest in converting to Vantage. As you can see from the left side of this slide, VantageScore.0 is expected to deliver an incremental 450 per score in profit to Equifax, which we would expect to generate at full adoption an incremental annual over $100 million of profit at current mortgage levels and additional over $100 million of profit as the mortgage market recovers for a total of $200 million. The incremental $200 million of annual profit would be additive to the over $700 million of Equifax EBITDA growth we've discussed previously as the mortgage market fully recovers to normal 2015 to 2019 levels in the future. Conversions like we're driving from FICO to VantageScore are not easy given FICO's 30-year monopoly in federally guaranteed mortgages. But we believe FICO's 16x price increase over the past four years and unprecedented 2x price increase to $10 in 2026 provides the catalyst to accelerate managed conversion in the mortgage market. Equifax is focused on delivering savings to our mortgage customers and consumers and margin expansion to Equifax in this new scores environment. We are not expecting to change our 2026 financial framework that we will share with you in February for mortgage profit in our 2026 guidance as a result of the FICO increase or the new Vantage pricing. But we do expect the conversion advantage to be a positive for Equifax over the medium and longer term as those conversions unfold. Turning to slide nine, international revenue was up 7% in constant currency with broad-based revenue growth across all regions. Canada revenue was up 11% in the quarter, which is very strong sequential growth as the team is leveraging their cloud transformation to drive innovation and customer growth. Latin America revenue was up 9%, led by double-digit growth in Argentina and in Brazil. The Boa Vista business is performing very well, up 12% in the quarter versus last year, as we bring new multi-data Equifax solutions to the Brazil market and we gain shares. Europe and Asia Pacific both had nice performances, up 4% in the quarter. And international adjusted EBITDA margins of 31.3% was up a very strong 360 basis points versus last year from revenue growth, operating leverage, and cost improvements from our cloud migrations. Turning to slide 10, in the third quarter, we delivered a vitality index of 16%, which was 600 basis points above our 10% long-term goal and a quarterly record. We saw strong double-digit vitality across all business units as we leverage our differentiated data, EFX.AI, and new technology stack in a post-cloud environment. To date, we've launched over 150 NPIs in 2025, which is the most product launches ever through the third quarter and a very positive sign for the future and in 2026. Given our strong NPI performance, we're raising our full-year vitality index guidance by another 100 basis points, to 13%. This is our third vitality raise in 2025. We're energized by our post cloud completion momentum in innovation and new products. The next chapter of product innovation is deploying efx.ai along with our cloud native technology, our ignite in analytics platform and proprietary data to deliver higher performing efx.ai powered scores, models and products to our customers. Our strategy is to expand from being a provider of data in analytics to also being an essential partner with AI-powered decision intelligence. We are realizing this vision with our recently announced Ignite AI Advisor solution. Out of a growing suite of EFX.AI-enabled solutions and new to the Equifax Ignite ecosystem, Ignite AI Advisor uses a lender's own data alongside Equifax data create clear, actionable insights that drive more infirm decision-making for our customers. Lenders can ask questions through a generative AI chat with complementary visual dashboard illustrations, dynamic charts, and graphs. This enables lenders, particularly those from smaller organizations that may not have large in-house data and analytics staff, to easily compare information, discover new trends, and create new offers for their consumers and small businesses. We'll formally launch additional EFX.AI-powered innovations in the first quarter of 2026, including our powerful new EFX IQ capability, which is currently in pilots across a number of organizations in the U.S. and several global markets. EFX IQ is designed to help our customers make fundamentally better and faster decisions across every stage of their business, from marketing to originations to account management, using our EFX.AI capabilities. One element of Equifax IQ is our new affordability model, which moves beyond predicting risk to predicting a consumer's actual capacity to take on new debt. This allows for more precise and responsible lending that will drive customer approval rates and lower losses. EFX IQ also includes unique decision optimization model, which allows clients to simulate the impact of different lending policies on their business outcomes before they implement them. We are seeing strong market validation for these offerings and our EFX IQ strategy. Fraud remains one of the most significant and rapidly evolving threats our customers face. We are leveraging our new advanced AI capabilities and unique data assets to deliver a new generation of fraud prevention tools that can identify risks that are invisible to traditional methods. We're launching two powerful new solutions this quarter to address distinct high-cost fraud challenges for our customers. First, our next generation synthetic identity model is designed to combat one of the fastest growing types of fraud where criminals fabricate new identities. Our AI model analyzes billions of nontraditional data points to detect the subtle patterns of these ghost identities. Second, our new first party fraud model targets credit abuse where an individual takes out credit with no intention of paying it back. This behavior is difficult to distinguish from a normal consumer, and EFX.AI is highly effective at identifying the behavioral patterns that predict this fraudulent intent. We are also accelerating development and implementation of energetic AI systems in our internal operations. This will allow us to generate meaningful opportunities to improve customer service, accuracy, and accuracy while driving revenue growth and cost savings. A powerful example of this inside Equifax is our AI agent for model performance monitoring, which automates the critical and labor-intensive work of ensuring our models are performing accurately and fairly while reducing the time required for monitoring investigation by the Equifax team. This frees up our data scientists to focus on innovation and allows us to more easily identify opportunities to improve our models. We're also expanding our use of energetic AI capabilities to improve the efficiency of our internal processes, including in our customer and customer support, operations, finance, and other support functions. These are some of the meaningful steps we're taking as we rapidly build out our global AI capabilities and deploy AI agents and capabilities across our entire enterprise. These capabilities will be a key driver of future operational efficiency and margin expansion and will accelerate our ability to embed intelligent automation into our products and services. Driving EFX.AI with customers and inside EFX is a big priority for 2026 and beyond. In 2025, the number of new products launched using EFX.AI is up 3x since 2023. All new models that we've developed have been built using EFX.AI this year. and our EFX.AI models maintain an over 30% performance increase for our customers over legacy models. In 2026, we plan to share more metrics on how we're delivering higher revenue and greater cost efficiency through the use of EFX.AI, both in the scores, models, and products we deliver to our customers and across Equifax and our back office to drive speed, accuracy, productivity, and cost savings. Turning to slide 11, we are seeing very positive customer response to our twin indicator rollouts that we expect to drive share gains for the USIS credit file. Our ability to deliver information to our customers from the work number alongside a credit report provides value only Equifax can deliver to our customers. Understanding a consumer's employment status along with their credit file adds valuable information in the marketing process to tailor application strategies that drive higher approval rates and speed and efficiencies for our customers. As a reminder, we're delivering the twin indicator alongside our USIS credit file at no incremental cost in all verticals in order to differentiate our credit file and drive incremental growth and share gains. Our new mortgage pre-qual credit file solution with a twin indicator differentiates our credit file with incremental data, including work status, employer name, and potentially some levels of historic income. This unique solution is helping mortgage lenders optimize their marketing processes and delivering more certainty for an applicant to accelerate the underwriting process. This is in addition to our unique telco utility and pay TV attributes that will also be delivered alongside our traditional mortgage credit file at no charge. The use of these expanded data insights provides expanded trade lines and visibility to millions of credit and visible consumers, those without traditional credit files, and enhance the financial profiles of thin, young, and unscorable consumers as they complete first mortgage applications. USIS has seen very strong interest in this new solution with several customers in production. Recently, we also launched a twin indicator solution for auto dealers in the auto industry. Like mortgage, we've seen strong interest from auto dealers who are looking to strengthen identity verification, improve customer segmentation, streamline workflows, and support better credit decisions with the addition of the twin employment status at no charge with their Equifax credit file. We expect to launch similar twin indicator solutions in P-Loan and CARD in the first half of 2026. Now I'd like to turn it over to John to provide more detail on our 2025 guidance and our fourth quarter framework. John?