Equifax, Inc.

Greetings and welcome to the Equifax second quarter 2026 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I'd now like to turn the call over to your host, Mr. Trevor Burns, Senior Vice President, Investor Relations. Thank you, sir. Please go ahead.

Thanks, and good morning. Welcome to today's conference call. I'm Trevor Burns. With me today are Mark Begor, Chief Executive Officer, and John Gamble, Chief Financial Officer. Today's call is being recorded, and an archive of the recording will be available later today in the IR calendar section of the News and Events tab at our Investor Relations website. During the call, we will be making reference to certain materials. They can be found in the presentation section of the news and events tab at our IR website. These materials are labeled 2Q2026 earnings conference call. Also, we'll be making certain forward-looking statements, including third quarter and full year 2026 guidance to help you understand Equifax and its business environment. These statements involve a number of risks, 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 our filings with the SEC, including our 2025 Form 10-K and subsequent filings. During this call, we will be making certain non-GAAP financial measures, including adjusted EPS, adjusted EBITDA, adjusted EBITDA margins and cash conversion, which are adjusted for certain items that affect the comparability of our underlying operational performance. All references to EPS, EBITDA, EBITDA margins and cash conversion are references to non-GAAP measures. During the second quarter, we recorded a $40 million charge net of insurance proceeds for a legal settlement associated with a resolution of claims related to a previously disclosed coding issue. These non-GAAP measures are detailed in reconciliation tables, which are included with our earnings release and can be found in the financial results sections of the financial info tab at our IR website. Now I'd like to turn it over to Mark.

Thanks, Trevor, and good morning. Turning to slide four, Equifax delivered strong results in the second quarter with revenue of $1.7 billion, up 11% on a reported basis and 10% in constant currency, which was 5 million above the April guidance midpoint. Ex-FICO mortgage royalties reported revenue was up about 7%. We also delivered very strong margin performance driving strong EPS growth of 13%. Organic diversified markets constant dollar revenue grew about 5.5% in the quarter and better than our expectations principally in workforce solutions benefiting from strong execution in talent solutions and consumer lending. EWS government revenue declined slightly in the quarter as expected due to a tough 2025 comp. We were very pleased with the commercial execution in government during the first half, signing principally state government contracts that bring the total in the last four months to about $300 million, with about $100 million of the new business that will principally benefit 2027 and $200 million of contract renewals. This is a strong indicator of the unique benefit our proprietary twin data provides to government customers and the long runway for government against their $5 billion TAM. USIS diversified markets revenue was slightly better than we expected, accelerating over 300 basis points sequentially, and international revenue was slightly lower than we expected at up 4%, principally reflecting market weaknesses in Canada and the U.K. U.S. mortgage revenue was up 25% in the quarter and up 7% ex-FICO. This was stronger than our expectations against a weaker-than-expected U.S. mortgage market from higher interest rates. During the quarter, U.S. mortgage rates increased meaningfully, with the current 30-year fixed rates up 30 basis points to about 6.6% versus the 6.3% when we gave guidance in April. As a result, we saw overall industry transaction volumes run below our expectations that were offset with new products and some share gains. U.S. macroeconomic conditions remain relatively consistent with the environment we saw in April. The ongoing Middle East conflict has resulted in continued higher levels of inflation that has disproportionately pressured the lower income or subprime consumer demographic. These inflationary pressures Low unemployment continues to support overall consumer health. Continued high employment levels have acted to limit more broad-based credit impacts, which gives lenders the confidence to continue originating loans. We have not seen financial institutions increase their portfolio management views or decrease consumer credit lines, which are actions they would typically take when they anticipate an economic downturn. to the Equifax team is to leverage the power of AI to expand our margins and free cash flow through accelerating growth of high margin proprietary database products and driving operational productivity through accelerated AI deployments across Equifax. Second quarter EBIT 552 million was up about 10.5% with an EBITDA margin excluding FICO of almost 35% up a very strong 120 basis points year to year and 40 basis points above the midpoint of our April framework. EBITDA margin expansion was well above our 75 basis point target for 2026 and 70 basis points above our 50 basis point long-term financial framework goal. The strong EBITDA margins were driven by operating leverage and AI-driven cost productivity principally in operations. Equifax reported EBITDA margins, including the impact of FICO, were 32.5% in the quarter, flat with last year. EPS at $2.25 per share was up a very strong 13% and 5 cents above our April guidance midpoint. Equifax returned $366 million to shareholders or over 1% of shares outstanding for $300 million, taking advantage of the lower Equifax stock price. And Equifax paid $66 million of dividends in the quarter after increasing our dividend by 12% in February. Over the last 12 months, end of June 30th, Equifax has returned over $1.6 billion of cash to our shareholders or 100% of our operating cash flow. We continue to expect strong free cash flow in the future of over $1 billion in 2026 and cash conversion to continue at over 100%. With our financial capacity of over $1.5 billion, we can execute the circulo de credito acquisitions while maintaining a strong balance sheet with debt leverage at under three times EBITDA and while continuing to repurchase shares in the second half, but at a slower pace than the first half. Equifax continued its strong execution against our EFX 2028 strategic priorities as listed on the right side of slide four with several big milestones during the quarter. We further accelerated our implementation of AI energetic capabilities across our global analytical decisioning and operational platforms for new products. In the first half of the year, we launched 54 new products that have AI capabilities directly embedded in the product architecture which directly benefit our customers and contributed to our strong 16% vitality index in the quarter. We also expanded the deployment of AI tools and agents across Equifax in internal product and model development, operations, technology, and our G&A support functions. The pace of AI adoption inside Equifax is accelerating rapidly, which allows us to double our AI for EFX productivity goal from $75 million to $150 million from 2026 to 2028. We know we are in the very early innings of our deployment of AI and energetic automation inside Equifax, both on enabling new products based on our proprietary data and driving speed, accuracy, and productivity across every corner of Equifax. In the second quarter, we delivered a very strong 16% new product vitality index, leveraging the Equifax Cloud and EFX.AI capabilities. New products based on differentiated proprietary data, including our twin indicator solution, continue to drive strong new product growth and share gains. We were energized to sign a definitive agreement two weeks ago to acquire Circulator Credito, the fastest-growing credit bureau in Mexico, for an enterprise value of $750 million. with a very attractive EBITDA multiple of 9.4 times, including run rate synergies. Turning to slide five, workforce solutions revenue was up 7% and better than our expectations, principally in verifier diversified markets, which grew 7%. EWS diversified market revenue growth was driven by outstanding performance in talent solutions and consumer lending, both up high double digits in the quarter. Talent Solutions continues to outperform the underlying white-collar labor market with strong growth in employment-based solutions and increased product penetration across our incarceration and education data sets, new solutions built co-intervening with background screeners, and pricing. Talent volumes were up mid-single digits in the quarter relative to an overall market decline in the first two months of the second quarter. The team continues to execute very well. Consumer lending also had another very strong quarter with strong double-digit revenue growth across the portfolio in auto, card, and consumer finance, principally due to strong volume growth and new product rollouts. As mentioned earlier, the EWS government team delivered an outstanding quarter signing about $300 million in principally state customer agreements in the last four months, including renewals, win-backs, and new customer wins. This is a very strong performance and reflects the unique twin position in government and strong commercial momentum post-OB3 legislation that was signed last July. The contract signings were positive and stronger than our expectations. Second quarter government revenue was down about 4%, and reflects a challenging comp from a large win in 2025. EWS mortgage revenue was up 8% in the quarter and continues to outperform underlying market volumes by high single digits from record growth, new products and pricing. In workforce solutions, EBITDA margins at 52.1% were consistent with the first quarter. However, margins were higher than we expected given strong operating leverage from better than expected diversified markets revenue performance. Twin record editions continue to perform well again in the second quarter with strong 10% growth in active records up to 217 million and 124 million total current active records, which were also up 10%, which represents 108 million unique SSNs. EWS has a long runway for record growth against the 250 million income-producing Americans. Turning to slide six, In the first half, we made outstanding progress with our government customers, converting our record commercial pipeline with renewals, extending existing relationships, and adding new principally state government customers. In the last four months, EWS signed agreements with state agencies for the provisioning of income and employment data from Equifax, supporting CMS and SNAP, totaling about $300 million in annual contract value, including about $100 million in new business and $200 million in renewals. An extremely strong result that will deliver some benefits in the second half but principally drive 2027 growth. These substantial contract signings along with our current deal pipelines up about 2x versus last year reinforces our confidence in the medium and long-term growth opportunities for EWS government at the federal level and in supporting states in meeting a new OB3 federal requirements regarding accuracy and frequency of income validation in Medicaid and SNAP. On slide six, we provided examples of some of the recent government wins, including an almost $60 million annual contract value win back supporting a state in delivering CMS benefits. The win back is a key proof point of the value of the twin data relative to other sources of income verification data, including state wage data and consumer permission data. We're also seeing expanding opportunities with multiple federal agencies in support of their big focus on reducing improper payments. Equifax is serving as a key advisor at the federal and state level, leveraging our differentiated income and employment data to drive speed, accuracy, and productivity of social service benefits delivery. The EWS team is clearly on offense supporting the states with their social service program requirements and has significant opportunities for long-term revenue growth supporting the federal and state programs in EWS's big $5 billion ham. Turning to slide seven, USIS second quarter revenue was up a strong 17% and up 6% excluding FICO and consistent with their long-term framework. This performance was delivered despite a weaker than expected US mortgage market that I discussed earlier. Diversified markets revenue grew 6%, accelerating over 300 basis points sequentially and slightly stronger than our expectations. B2B revenue was up 5% and also up over 300 basis points sequentially. Within online, we saw high single-digit growth in FI from stronger volumes, new business and pricing, and high single-digit growth in auto from pricing and new business wins. The strength in FI and auto was partially offset by weakness in third-party bureau sales from our sales to Experian and TransUnion. Consumer Direct, our D2C business, delivered continued strong growth with revenue up a very strong 11%. USIS mortgage revenue was up 40% and up mid-single digits excluding FICO with hard mortgage inquiries up only 1%. As I referenced earlier, mortgage rates were up from the levels we saw in April throughout most of the quarter, and as a result, mortgage origination activity was lower in the second quarter than the levels we expected when we gave guidance back in April, partially offset by share gains in pre-qual and pre-approval products. As a reminder, USIS began to deliver significant share gains in the second quarter of last year from both pre-qual and pre-approval products that included both the unique twin indicator in our NC Plus data. USIS EBITDA margins were 32.8% in the quarter. Excluding FICO, USIS EBITDA margins were 40.5% and up over 140 basis points versus last year, which was a very strong performance. The improvement was driven by stronger diversified markets revenue growth and good cost management. In April, the FHFA activated use of VantageScore for over 20 mortgage lenders. This was a big milestone to bring score competition to the mortgage industry. While the vast majority of these mortgage lenders have begun using VantageScore, we have also seen a groundswell of VantageScore adoption with about 1,200 additional mortgage lenders pulling our free Vantage Score alongside a paid FICO score from Equifax. On the left side of slide 8, you can see that our second quarter Vantage Score volume is up almost 3x compared to the first quarter. The vast majority of the 2.2 million transactions were pulled by the 1,200 lenders pulling a free Vantage Score alongside a paid FICO score as they drive their adoption of the new Vantage Score opportunity. We also have about 100 mortgage lenders, principally smaller non-GSE lenders and lenders underwriting HELOCs, or home equity loans, who have moved to exclusively utilizing VantageScore at our $1 price point for their mortgage originations. Although volumes remain low at about 10,000 transactions in the quarter, we saw significant acceleration as we moved through the tail end of the quarter. And as a reminder, We make no margin on the sale of FICO scores. FICO mortgage scores revenue is about 50% of USIS mortgage revenue and almost 7% of total Equifax revenue, delivering zero margins. We continue to expect strong adoption of Vantage score given the substantial $1 billion annual cost savings opportunity for the mortgage originators and consumers. Equifax plans to maintain the $1 Vantage score price through the end of 2027 to continue driving VantageScore adoption with our customers. The FHFA decision last July to allow mortgage score choice between Vantage and FICO is a big win for consumers and for the industry. Turning to slide nine, international revenue was up about 4% in constant currency. International saw high single-digit revenue growth in Asia Pacific and mid-single-digit growth in Canada. Latin American and Europe delivered low single-digit revenue growth in the quarter. Internationals saw market headwinds in both Canada and the UK, which dampened their growth rates. In LATAM, we saw solid mid to high single-digit growth in our largest markets like Brazil, Chile, and Argentina, with lower growth rates in some of our other smaller Latin American markets. International EBITDA margins were 27.6% in the quarter, up a strong 120 basis points versus last year. EBITDA margin improvements were driven by technology savings as the final stages of our cloud tech transformation gets completed and strong cost management. Moving to slide 10, two weeks ago Equifax signed a definitive agreement to acquire Circulo to Credido for an enterprise value of $750 million. This represents an 11.7 times EBITDA multiple based on Circulo's expected 2026 EBITDA. With the addition of expected run rate savings, the EBITDA multiple is expected to be about 9.4 times, which is attractive and significantly below our current EBITDA multiple. We expect the Circulo acquisition to be completed in the fourth quarter, subject to customary closing conditions and regulatory approvals, and for the acquisition to be accretive in year one. Circulo is the fastest-growing credit bureau in Mexico and the only credit bureau licensed to operate both a consumer and commercial credit bureau of service, with more than 1,700 bank, retail, fintech, and small business lending, microfinance, and telecommunications customers, and importantly, 2 billion trade lines covering 80 million validated identities in Mexico. Circular is a leader in alternative data or information not included in traditional credit reports in Mexico, including gig economy transactions and utility payment history. This alternative data can responsibly expand access to credit and support a more inclusive economy critical in a country where nearly 33 million people are engaged in informal employment, such as unregistered micro-businesses or gig employment. This acquisition will offer Circulo to Credito customers access to Equifax's industry-leading cloud-native capabilities, decision and analytic platforms, and patented EFX.ai technology and award-winning identity protection and fraud prevention offerings for the development of solutions designed to help their customers grow and expand functional inclusion in Mexico. The acquisition fits perfectly in our balanced capital allocation framework with our focus on highly accretive bolt-on acquisitions while continuing significant ongoing return of capital to shareholders and maintaining our strong investment-grade balance sheet. Turning to slide 11, Circulo's unique market position has delivered very strong financial results. Circulo's compound annual revenue growth rate was a very strong 23% from 23% to 25%, with revenue growth for the 12 months ended June 30th up a very strong 31%. Circulo revenue growth has been led by their unique alternative credit data advantage enabled by deep relationships with FinTechs with over 40% of Circulo's 2025 revenue generated from FinTechs with a growth rate of over 50%. Circulo's unique alternative data and the team's strong relationships with their FinTech customers are a key driver of future circular revenue growth in a market where consumer credit is underpenetrated and growing rapidly. Circulo delivered very strong mid-40s adjusted EBITDA margins in both 2025 and over the last 12 months through June 30th. For the full year of 2026, Circulo revenue is expected to grow high double digits while maintaining very strong mid-40s adjusted EBITDA margins. The very attractive circular financial results are accretive to the Equifax long-term financial framework of 7% to 10% organic revenue growth, consistent with our capital allocation plan and driving shareholder returns. Turning to slide 12, Equifax is executing a broad AI and energetic strategy that leverages EFX.AI along with our cloud-native technology, our Ignite analytics platform, and our scale proprietary data to deliver higher performing EFX.ai powered scores, models and products to our customers. Equifax has a strong AI data moat around Equifax's unique and proprietary data with over 90% of Equifax revenue generated from proprietary data sources included in over 100 unique data exchanges globally. These exchanges receive contributed proprietary data directly from the data owners that is not publicly available, such as our income and employment exchanges, credit exchanges, alternative credit data exchanges, and other unique proprietary data assets. Said differently, only Equifax and our credentialed customers can access our data. The use and protection of our data has another layer of from both the national and local laws that restrict the data's usage and by agreements with our contributors, including requirements regarding the accuracy and currency of this data and the requirement to provide consumers in the 24 countries in which we operate these exchanges with the ability to review and dispute the data managed in these unique Equifax exchanges. For example, in the U.S., our EWS income and employment data Our broad credit and alternative credit data exchanges are not only governed by the agreements with the contributors, but also by the U.S. Fair Credit Reporting Act, or FCRA. The contributory nature of the proprietary data and the complex regulatory and contractual compliance requirements that govern our data, along with the coverage and historical data these exchanges contain, create the strong data moat around Equifax's proprietary data. To reach us through leading technology, EFX.ai capabilities, and proprietary data, Equifax is accelerating a strategy to utilize AI and energetic capabilities to improve our customers' ability to utilize Equifax data and advanced technology to improve their decisions by incorporating more data and more effective AI-defined algorithms using patented capabilities that deliver explainable results to our customers. We are expanding from being a provider of data analytics to be an essential partner for the AI-powered decision intelligence that our customers are driving. We are realizing this vision through a growing suite of global EFX.AI-enabled solutions. In the first half of the year, we rolled out 54 new products that leverage these EFX.AI capabilities that drove our strong 16% vitality index. This includes the commercial launch of Ignite AI Advisor and Equifax IQ on our integrated Ignite Analytics and Interkick decisioning global platforms. Ignite AI Advisor is a multi-agent system that delivers AI-driven, real-time, personalized insights and actionable recommendations delivered through our natural language user interface to our customers. Lenders can ask questions through a generative AI chat with complimentary visual dashboard illustrations and dynamic charts and graphs. This enables our customers, particularly those with limited in-house data and analytics staff, to easily compare information, discover new trends, and drive more informed decisions to drive their growth and returns. For example, we have customers identifying missed opportunities to capture business from existing customers who have loans with another bank or FI. and customers comparing payoff and paydown speeds against competitors to determine if their rates and terms are competitive to drive application conversions and growth for their business. This solution is now being used by U.S. customers in auto, P-Loan and credit card to pinpoint new opportunities to improve their portfolio performance and is expanding to Canada in the third quarter with further global expansion through the balance of 2026. Complimentary to Equifax AI Advisor, Equifax IQ is a multi-algorithm AI system that allows customers to transition policy management from a manual rigid process to an AI driven multi-dimensional optimization engine. Equifax IQ uses EFX proprietary data and customer contributed data to help our customers better understand new market opportunities grow their business with the right customers, reduce fraud, and confidently extend more credit. It also delivers portfolio overviews, delinquency analysis, affordability assessments, fraud identification, and policy adjustments while streamlining workflows for seamless user experience. Our first implementation of Equifax IQ are helping customers across Latin America. In Argentina, we established an advanced origination risk policy for a global vehicle manufacturer's entry into the financing market, evaluating banked and unbanked populations. Equifax IQ will expand to the US and other regions globally as we move through the balance of the year and early in 2027. Ignite AI Advisor and Equifax IQ are great examples of the advantages derived from our global cloud-native infrastructure which is structured for the rapid expansion of AI and energetic advancements globally. These optimizations improve customers' processes and outcomes by improving analytical outcomes and more effectively using the breadth of data assets available to customers from Equifax. We believe our investments in EFX.AI will drive our new product rollouts, share gains, revenue growth, and margin expansion. I'm super energized about the momentum and pace of change and the big performance left from EFX.AI in our product models and scores development for our customers. Turning to slide 13, in the second quarter, we delivered a very strong 16% new product vitality index, leveraging the Equifax Cloud and EFX.AI capabilities, which is above our 2026 vitality index goal of 15% and our 10% long-term framework. In the first half, over 50% of our new products have AI capabilities embedded in the product architecture, which the customer directly interfaces with using LLMs. New products based on differentiated proprietary data, including our twin indicator solution for mortgage, continue to drive strong new product growth and share gains. As discussed over the last few quarters, our only Equifax twin indicator solutions in card, auto, and P-loans are starting to see early customer interest for these unique solutions. And as a reminder, we're providing the twin indicator solutions in all those verticals at no cost in order to drive differentiation of our credit file and deliver share gains to Equifax. Moving to slide 14, we're also rapidly expanding the implementation of AI and energetic-based solutions across our internal Equifax processes to improve operational speed, accuracy, and productivity. Ingetic and AI-assisted process redefinition improvement is occurring across operations, technology, product development, and support functions, including HR, legal, and finance. The pace of adoption is ramping very quickly and delivering big productivity lists in every corner of Equifax. As you can see from the chart on the left slide of the page, total gross labor spending at Equifax on both expense and capital is currently about $2 billion for about 40% of total gross spending. Of this amount, about 60% of our gross labor spend is within global operations and technology organizations, where we are seeing early and big gains from AI adoption. As we continue to rapidly drive rollouts and adoption of AI tools and agents that are delivering meaningful process improvement, We now expect run rate spending savings from these AI for EFX efforts to be about $150 million from 2026 to 2028, which is double the $75 million of savings we discussed with you in February. These AI efficiencies are expected to improve our financial performance while providing increased capability to reinvest and further accelerate our AI-ingetic deployments for speed, accuracy, and productivity. The foundation of our rapid AI deployment is our new Equifax cloud native architecture and our energetic AI development and management platform that is now in production broadly across Equifax, which enables efficient AI agent process development and management that is designed to ensure our energetic processes and capabilities fully comply with our extensive security and compliance requirements. In operations, we are executing a rapid rollout of operational AI across our business units in our call centers and document processing operations. In USIS, we are rolling out conversational AI in call centers and already seeing big lists in customer authentication and fulfillment rates, and AI-assisted processes have delivered decreases in back office dispute handle times, which are delivering productivity. In technology, we're seeing early but big benefits and our software development, IT operations, cybersecurity, and cloud cost optimization functions. With our Ingenic AI platform, we have moved beyond pilots to autonomous agents operating core internal processes built and run on a standardized, secure, Ingenic platform with governments, human-in-the-loop checkpoints, and model risk evaluation built in. We are super energized about the pace of our AI adoption inside Equifax, but we know that we are in the very early innings of our rollout. We are confident there is significantly more opportunity to both grow revenue and reduce costs as AI and energetic capabilities become fully embedded across Equifax. Now I'd like to turn it over to John to provide our third quarter and full year framework.