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 Begor, Chief Executive Officer; and John Gamble, Chief Financial Officer. Today’s call is being recorded. An archive of the recording will be available later today 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 Webcast 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, a valuation allowance for certain deferred tax assets, a tax benefit on a 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 remeasuring the Argentinean peso-denominated net monetary assets. Adjusted EPS attributable to Equifax - excuse me, also excludes legal and…

Thanks, Jeff. And good morning, everyone. We are all facing unprecedented times during the COVID global pandemic. I hope you and your families are safe in managing in this unusual environment. We’d like to start by thanking the dedicated and selfless health care 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 on 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 at 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 analytical services they will need as they respond to the pandemic and economic impacts and their business – 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…

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 1Q ‘20. 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, up $17 million from 1Q ‘19. 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 1Q ‘20, 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 1Q ‘19 and in line with our expectations due to financing the $341 million of legal settlements payments made during 3Q ‘19. 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 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 we’ll likely pay the remaining $355 million of our US 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 2Q ‘20 through 2021. At March 31, our leverage ratio was…

Thanks, John. I hope our transparency on recent revenue trends and 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 topline 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 end of the third quarter, including the work number, NCTUE, US Consumer Risk or Acro, IXI Wealth, US 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…

Thank you. The question-and-answer session will be conducted electronically. [Operator Instructions] We’ll go first to Andrew Steinerman with JPMorgan.

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 [Technical Difficulty] Mark, you kind of segued to talking about you know, how EWS might do through this crisis. And my feeling is, thinking back to 2009, 2009 is really just two years after TALX [ph] was acquired in 2007. And I remember, it was benefiting - getting a lot of benefit, initial benefit from just being part of the Equifax ecosystem. And now, obviously, a decade later, that’s sort of like a standard. And so I’m thinking, 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’re right, the Workforce Solutions or TALX was only a couple of 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 is no question that there will be pockets in our perspective. And I think John showed you some of the trends in April, where income employment data is used in personal loans or in auto, subprime auto, where we’re seeing some pressure there or declines in the recent weeks as a result of reductions in originations. 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 TWN 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 had unemployment levels that were quite high. We’re going to have that again. But you didn’t have 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 is working and the value of knowing how much they’re making is more important today in this economic cycle because of the unprecedented impact on consumer’s incomes in the United States is really just changes dramatically. You add to it the scale of the use of the product in mortgage, which is much…

I agree. Thank you.

Thanks, Andrew.

We'll go next to Andrew Jeffrey with SunTrust.

Hi, good morning. Appreciate all the - all the detail, guys. Mark, a couple of questions for you, I guess. First, when I think about Verifier, 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 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 is no question. You look back, I think we shared some stats back, in 2009 we had 30,000 contributors. Those were largely - 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 we ended the quarter I think with 700,000 companies contributing data to us. So we’re clearly getting more small businesses contributing. Where the impact of the pandemic is, it’s really going to be widespread. You think about large companies, whether they’re airlines or hotels or hospitality, restaurants, there is large companies out there that are furloughing lots of their employees, their executive team and very - and salaried employees are taking large salary reductions. So this is a pretty broad-based economic event. And as I discussed with Andrew, what we’re hearing from our customers is that 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? 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…

Okay. 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. It’s not our gig. There is others that do that quite well. We look at all the mortgage forecasts 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, 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 beyond – we’re really focused on daily trends at this point.

Thank you.

And as you know, right, between MBA, Fannie and Freddie that 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, understanding 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.

Right.

Our next question will come from Manav Patnaik with Barclays.

Well, thank you. Good morning gentlemen. My first question is to your point you just made around the wide impact of the COVID crisis with lower salaries furloughed across the board. I was just curious why you bucketed a mortgage as a recession resilient bucket. I mean, I understand the trends early on with the rate of the refis. But I’m just curious how you think about how that will perform resilient and maybe compared to ‘08 or ‘09 when the new lines of between purchase in site probably?

Okay. I think - Manav, thanks for the question. I think we and I don’t think there is any company out there that can forecast where this is going to go. How long are these lockdowns going to last? When are these going to be relaxing with economic activity? Consumers are stuck in their homes, how can they buy a car? Or how can they do a lot of financial activity? And that’s why we don't see a way to forecast 2020 versus 2009. We tried to point out some of the very powerful differences in Equifax versus the global financial crisis, which we think serves us well as we enter this COVID crisis. But we don’t know what the next stimulus package is going to be. We don’t know what's going to happen when the payroll protection program ends in September. Is there going to be another wave of layoffs? Likely, you would think. It’s hard to tell. Are people going to start flying again and going to hotels? Are they going to go to restaurants? 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 versus 2009 with Workforce Solutions up to 37% of our business and a sizable part of our EBITDA. US mortgage which we expect to continue to grow through this pandemic because of low interest rates and refis driving that and the cost actions that we’ve taken. We’ve tried to give you the best framework we can. And as soon as we have some visibility around where we think 2020 or 2021 is going, 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 clarify on the Employer Services business and the business tied to unemployment premiums. John, I think you mentioned you guys do 1 in 6 claims. So I was just curious, is the revenue model just simply you get paid for each claim? Or is there some other nuance? 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 is 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’s at a - it isn’t consistent necessarily with movements in unemployment, it’s because of the fact that the - 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, are happening as we speak, meaning, just with the massive spike in unemployment claims coming in and off, we’re certainly in revenue mode with those subscription agreements that we have.

Got it. Thank you, guys.

We'll go next to George Mihalos with Cowen.

Good morning, George.

Good morning, John. 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. Like for the US 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, all of us were schooling up our BCP plans, going to work from home, and 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 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, right? 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. So - but other than that, 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 UK, it’s trending negatively. And in some countries, we’re seeing some stability, right? So we 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 that next couple of weeks, I think as everyone is watching, you’re seeing some markets start to relax the shelter in place. Chile, I think, where we have a business is starting next week. And New Zealand is starting. You see some states in the United States that are talking about relaxing that in the coming weeks. And I think that will be indicative of, you know, as we have this walk back from a shelter in place to having some levels of economic activity of what that does to our current run rates.

The other point to make is 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 color. And then John, just two numbers questions, if I may. Just on slide 11, the $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 million 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 what we – that’s the only data that we have, that’s a complete year and available. So, we’ve talked about this in the past, right? So the COGS savings or ex D&A, and those are things that will ramp in as we start shutting systems down, right? So, as things decommission, 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 recording, right, which we had separated. So, it wasn't included in our adjusted - in our adjusted EPS. So you’ll see an increase in dev expense, but then as we complete the transformation, you will see the dev expense starts to decline principally as we get into 2022 and to Mark’s comments. Same thing with capital, right? As you complete the US 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. D&A, D&A, I think we’d 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, that - we don’t have a crystal ball. 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, now 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 cost 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 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 and going forward.

Thank you.

Thanks.

We’ll go next to David Togut 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 where you’re seeing the biggest increases in your win rate 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. We’ve seen fairly steady, but there’s been some bumpy sequential improvement over the last couple of years 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 non-mortgage online responding there. The win rates have been pretty broad-based. I think you know we’ve got a really strong commercially oriented leader in Sid Singh that was kind of a year and change into his role. So he’s really taking hold. He’s restructured the commercial organization in the last few months, and that’s bringing some new energy into how they’re focused in the marketplace. The new product rollouts are helpful, 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. We’re focused on all of them. And I think you know we put a particular focus on fintech because that’s a space where our competitors are much stronger than we are. 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 today that are in that space. And of course, that has historically been growing pre-COVID 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 there’s just been a real focus around driving that. And the second half of your question is, are we back yet? The question, no, of course, USIS, our competitors pre-COVID, and I don’t know what their first…

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, so.

Understood. Thank you.

We’ll go next to Jeff Meuler with Baird.

Yeah. Thank you. Just I 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 higher increase? 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 expect, Jeff, would roll through. There’s the travel benefits. No one’s traveling. We’ll -- I would guess there’ll be no internal travel at Equifax for the rest of the year until there’s some clarity around the vaccine and there’ll be limited commercial travel. So that rolls in there. And then we also are tightening our belt around our other discretionary costs with third parties, advisers, consultants, others that are doing work that are not integral to the cloud transformation or to the - our new product rollouts. Those are areas that we’re trimming back and that - 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 savings on 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 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 is 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 – we’re spending what we plan to spend in 2020. 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. 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, these are belt tightenings that are obviously meaningful, but are focused on areas where we won’t, in my words, impact the franchise in 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.

Yeah. It's just - tactically, it’s when we deliver the service, right? So when this 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.

But we’re clearly in that mode with a whole bunch of like a lot of the customers in the last couple of weeks.

Got it. Thank you, guys.

Thanks, Jeff.

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

Hi, Bill.

Good morning everyone. So first, just want to say congratulations on the Social Security contract. And I wanted to ask, when in 2021 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. It’s one that really represents the power of that income and employment data that we have in EWS. 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 contract is going to be rolling in. And as we get closer to 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. 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 card, for auto and for insurance. And it would also be helpful in terms of doing our modeling if you could get a sense of what that represents as a 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? If 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 just – I’d say, 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 the customers we deal with have pulled back on prescreens or originations. They’re raising risk scores because of the uncertainty around the consumer, which impacts their volume. And as I mentioned in my comments, you may recall that I was running GE Capital’s credit card business, which is now Synchrony, back in 2009 and those are the actions we took. Until you have some clarity around the consumer in those kind of businesses, whether it’s P loan, auto or cards, you’re going to be more conservative on your originations. On the flip side of that is, as I mentioned, which is the beauty of the business that we’re in, is the countercyclical side is in my experience, we spent more money on portfolio management and credit line increase and decrease actions in order to manage the existing book that you have because the consumer is changing so rapidly. And one area we see that we’re seeing some real traction on is increased discussions and activity around our income and employment data from Workforce Solutions in some of those spaces where we historically had less penetration or market share.

Got it. Thank you very much.

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

Hi, 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 it’s really tough to predict what's going to happen because we’ve never seen anything like this and 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 after the payroll protection plans here in the United States of unemployment action? So you have all those things layered in there which really impact how long this cycle is going to be and how much stimulus is going to be put at it. Clearly, we’ve seen unprecedented amounts that 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 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, who’ working and who’s not, is going to be - we didn’t have the database and the scale that we had in 2009 [ph]. We do today, but the volatility of people’s salaries and ability to repay their debt is so much different in this economic environment than last one. And then to your point, does that result in work number or our TWN 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. When you think about mortgage, every mortgage in the United States that’s originated for the most part pulls all three credit files and most - 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. We don’t have - we only have - I say only, we only have half of the non-farm payroll. So there is a 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 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, like P loans and like cards, which we’ve been working on 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 royalty payments that are larger than what USIS might pay and that Employer Services is quite a bit below that, okay? But we haven't actually given a specific breakdown. Although given the detail we gave 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 the size of verification, but it’s high. It is relatively high, yeah.

Thank you.

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

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

Well, there will clearly be some impact there. We don’ process all unemployment claims. We pick up that data which is valuable on the claims that we do process. So there 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 in 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 - which as our contributors have lower employee bases that you see our - that impact the record base. But so far, because of the large additions in new contributors we’ve seen over the past five plus 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, we sell various flavors of our Workforce Solutions TWN data. We sell system to system integration if the 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 in the - we charge them for it, whether they’re working today or they were working six months ago, nine months ago, 12 months ago, et cetera, dependent upon the product that they pull in. 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 lending more broadly. Have you - are you seeing that in the data? Is that incorporated at all in the mortgage strength that’s implied by that April trend data? Thank you.

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

We’ll go next to Brett Huff with Stephens Incorporated.

Good morning, and thanks for the exit rate data, guys. I hope you’re all doing well. A couple of questions from me. I’m looking back at my model, and I think you guys bottomed out in the USIS online about minus 13% in 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 the compare contrast between those two numbers, if I’ve got those right. What’s different and what’s similar between those two, and why more today?

Well, there’s nothing similar about 2009. There is but I’m being a little sharp on that. This is so different. In 2009 there wasn’t shelter in place and there wasn’t every retail operation, auto dealers, you name it, shut down for months at a time. That’s dramatically different, just the economic activity. And as I mentioned earlier, as we’re starting to see some relaxation in states like here in Georgia, they’re going to allow restaurants to open in a week or two and things like that. That to me is what is one point that’s just dramatically different and you really can't compare how we performed 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 going to operate. Are they going to go on a plane 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 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 the specific percentages, but really how our - the resiliency of our business is, and we try to give you our view of how we categorize the businesses and a business like Workforce Solutions powered through the 2009 crisis is currently powering through the COVID crisis. We expect that to continue. The same with US mortgage. With low interest rates, 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 as that business goes forward. So I think there is more differences in similarities, but the difference is around the scale of our recession-resistant businesses being dramatically larger in this economic event versus 2009, which was the worst we’ve ever seen until now, I think, serves us well as we get deeper into this COVID economic recession.

Okay…

Sorry, just for clarity, we said non-mortgage is down 30% online. Total online, we said down just over 10%. I just wanted to make sure you’re comparing the right numbers, that’s all.

Got you. 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 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 batched. 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 end of periods and it isn’t really as subject to reliable trends. So we’ve made assumptions about what will happen there, but they are far less based on trends. And they are 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 lender, no, not so much, right. So for example, if someone pulls a mortgage file, we’ll certainly know who hold it. But we don’t necessarily know if it's for a refi or not or we don’t - or versus a new purchase or in some cases it’s difficult to tell if it's even for HELOC [ph].

Great. Understood. 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, operator, we will conclude our call. Thanks, everybody.

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