Hello, and welcome to the Equifax First Quarter 2022 Earnings Conference Call and Webcast. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to John Gamble, Chief Financial Officer. Please go ahead.

Thanks and good morning. Welcome to today's conference call. I'm John Gamble, Chief Financial Officer. With me today are Mark Begor, Chief Executive Officer; and Trevor Burns, Head of Investor Relations. Today's call is being recorded. An archive of the recording will be available later today in the IR Calendar section of the News and Events tab at our IR website, www.investor.equifax.com. During the call today, we will be making reference to certain materials that can also be found in the Presentations section of the News and Events tab at our IR website. These materials are labeled Q1 2022 Earnings Conference Call. Also, we will be making forward-looking statements, including second quarter and full year 2022 guidance to help you understand Equifax and its business environment. 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 our filings with the SEC, including our 2021 Form 10-K and subsequent filings. We will also 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 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. As a reminder, in the fourth quarter of 2021, we eliminated our GCS operating segment and moved its lines of business into Workforce Solutions, USIS, and international in Canada and Europe. As a result, Equifax now has three operating segments. You can find reconciliations of our 2020 and 2021 prior business unit operating segment results to this new structure in the 4Q '21 earnings release Q&A. Equifax has a non-controlling ownership interest in a Credit Bureau in Russia. We are providing no operational or financial support to the company. In the first quarter, we wrote off our investment and reflected a $19.5 million one-time charge. And beginning with the first quarter of 2022, we are no longer reflecting income from the venture. Also in the first quarter, Equifax deposited the remaining balance of $345 million into the restitution fund for the U.S consumer class action settlement. Now, I would like to turn it over to Mark.

Thanks, John. Equifax is off to a very strong start in 2022 and delivered a record $1.36 billion of revenue which was up 12% and well above the levels we discussed with you in February. We continue to execute very well under delivering strong core revenue growth while delivering on our key EFX 2023 strategic initiatives. However, as we look to the remainder of 2022, we are reducing our full year financial guidance reflecting the likelihood of a much more substantial decline in the U.S mortgage market than we expected in February. Over the past several months, mortgage rates have increased more rapidly and expected with the 30-year mortgage rate reaching over 5% last week, a 10-year high. And there's increased expectation for further increases in U.S interest rates as we move through 2022 as the Fed manages record levels of inflation. As a result, our guidance now reflects the likelihood of a much more rapid and significant decline in mortgage originations than we expected a few months ago. With U.S mortgage credit inquiries for the -- over the last 9 months of '22, declining on the order of 37.5% or 38%. Over the last half of 2022, we expect U.S mortgage credit inquiries to be down 40%, which we believe is equivalent to mortgage originations being down more than 40% and is in line with most market forecasts including NBA and Fannie Mae. This level of mortgage market credit inquiries over the last half of 2022 is approaching 25%, below the 5-year average levels we saw prior to the beginning of the pandemic in 2020 and also pulls forward the mortgage market declines we had expected in 2023 into 2022. U.S mortgage credit inquiries in early April are beginning to show some of this weakening and are at levels…

Thanks, Mark. As Mark discussed earlier, we have updated our view of the U.S mortgage market reflecting the significant changes in current and expected future levels of U.S interest rates. As shown on Slide 15, in 2022, we are now expecting declines in U.S mortgage credit, increase of 33% in the second quarter and 40% in the third and fourth quarters of 2022, which we believe is consistent with mortgage originations being down over 40% and is consistent with market forecasts. As we saw in the first quarter, the decline in mortgage inquiries was less than the expected mortgage originations, we believe driven by increased shopping by consumers as rates began to rapidly rise. We expect to see some of the same behavior, but at lower levels as we move through the remainder of the year. As we have shared in prior quarters, Slide 16 provides a view of both the number of home mortgages that would have a rate benefit from refinancing on the left, and a view of the levels of home purchases on the right. Our updated assumptions for U.S mortgage market credit inquiries, we believe are consistent with the trends these charts reflect. The left side of this -- the left side of the slide provides a perspective on the number of home mortgages for which a refinancing would provide a rate benefit, the in-the-money population of mortgages. The in-the-money population as of mid-April when the 30-year fixed rate was about 5% is about 3.3 million homes, down about 80% from the levels we saw in January when rates were 3.6%. As the in-the-money population declines, mortgage refi is increasingly driven by cash out refis, that are often executed with no rate benefit or rate increase. For prospective, for Black Knight data from February 2022, about…

Thanks, John. As highlighted on Slide 21, we remain laser-focused on our EFX2023 growth strategy to leverage new EFX Cloud for innovation new products. EFX2023 is the foundation for our new 8% to 12% long-term growth framework. We continue to make significant progress executing the EFX data cloud and technology transformation. And we now have over half of our revenue being delivered from the new Equifax cloud. This will build meaningfully in 2022 as we expect to substantially complete our North American cloud migrations. We completed over 120,000 B2B migrations, over 10 million consumer migrations and 1 million data contributor migrations. In North America, our principal consumer exchanges are in production on our new cloud-based single data fabric and delivering to our customers. Our International transformation is also progressing and is expected to be principally complete by the end of 2023 with some migrations being completed in 2024. And we're in the early days of leveraging our new EFX cloud capabilities, and remain confident that it will differentiate us commercially, expand our NPI capabilities, accelerate our top line growth and expand our margins from the growth and cost savings in 2022 and beyond. We remain on track and confident in our plan to become the only cloud native data analytics technology company. As shown on the next slide, Equifax is increasingly much more than a Credit Bureau and focused on faster growing identity and fraud, talent, employer and government verticals. The consistent execution of our strategy over the past 4 years and the strategic bolt on acquisitions we completed in '21, and so far in 2022, are all aligned with our strategy and in faster growing markets. In 2022, over 50% of Equifax revenue is expected to be outside our traditional consumer and commercial Credit Bureau Market segments, principally in…

[Operator Instructions] Our first question is coming from Manav Patnaik from Barclays. Your line is now live.

Thank you. Good morning. I appreciate and I applaud the de-risking of the mortgage. I just had a question around the incremental or decremental margins there. John maybe of the $0.50 EPS reduction, it sounds like $0.12 is from the Russia write-down. So is the remaining all on the mortgage side, I was just hoping you would help us understand that a bit.

Yes. So, the remaining revenue decline of $100 million, right is the revenue decline offset by $75 million of non-mortgage growth, but it's all online, revenue decline. And Manav, as you know that we have very high mortgage …

In mortgage.

… in mortgage, yes. But as you know, we have very high variable margins across online, online mortgage as well. So, it flows through and you can just do the math, right, it flows through it's something on the order of 60% is the -- what we brought forward.

Okay, got it. That’s helpful. And then, Mark, maybe just on the talent side, some -- pretty impressive growth there. Can you just help us appreciate the volume or cyclicality to that business? Obviously, the labor market is hot. And so, the touches on that kind of data is good. Do you anticipate that slowing down? Or how should we think about the sensitivity there?

Yes, it's a great question, Manav. I think as you know, 75 million people a year change jobs, every year. It's a -- it's one that has some cyclicality, but there's an underlying base, it's very, very high. The growth that we're getting, though, is really from our penetration in the market, the new products we're rolling out, leveraging the work history we have in the 540 million records, where we have a resume for Manav of all the jobs you've had, so that work history is very valuable. And the kind of the macro change in talent is around speed, which we don't think is going to change, meaning hiring managers want to get that individual on the floor more quickly. That’s always the case, even pre-pandemic and instant data that you can get from Equifax, work history data and now with incarceration data, we have medical credentialing data, we have the education data, and we're adding more datasets there allows the background screeners, which are our customers and other hiring businesses to really speed up their decisioning for the hiring manager. So, the bulk of the growth that we have there, and it's obviously, very, very strong, and we expect to continue is really putting these solutions together. And we've got more new products in the pipeline that we plan to bring out. We've talked with you before and others that, last year, we rolled out solutions that had more work history versus where does Mark work today with Equifax, where he work over the last 10 years. So those solutions we rolled out last year, and we're bringing those to the market. Those are really driving a lot of the top line growth. And then in 2022, we'll start combining some of the solutions like incarceration data…

Just one thing to add, we can see the power of the historical records, because if you look at twin revenue excluding mortgage, take mortgage out of the mix, we're now seeing over 50% of the revenue include historical records.

Got it. Thank you.

Thank you. Our next question is coming from Kevin McVeigh from Credit Suisse. Your line is now live.

Great. Thanks so much. Hey, I know you've talked about this a lot, but clearly you're outperforming the mortgage market pretty dramatically. Mark or John, can you bracket because it looks like the USIS will be down about 6% to 7% versus mortgage down 33%. Is there any way to think about just a couple of buckets of what's driving that relative outperformance just trying to frame it on a percentage basis, just to contextualize that a little bit more?

And Kevin, your question is around USIS in particular versus EWS?

Yes, USIS if you want to open it up to EWS as well, it's fine.

Yes, maybe I'll start John. But there's a number of levers that we have to outperform all our underlying markets and you can use mortgage in particular, obviously, that gets more challenging when you talk about a mortgage market in the second half, that's going to be down 40%. But we've had strong outperformance for a long history. Workforce has more levers than USIS, but both businesses and I'll talk about USIS. One of their levers outperform underlying markets is price, increasing the price of the solution or the credit file and both Workforce Solutions and USIS have regular price increases that help them offset or increase their revenue depend upon where the markets going. The other is new products. Both businesses rollout new solutions. And Workforce Solutions has a lot more product opportunities than USIS, but USIS has had some new product rollouts to help them outgrow the underlying or in this case, in 2022, declining market. Third is going to be new customers. In USIS's case, that's really in their tri-merge business, growing some share there will grow their revenue. In Workforce Solutions, as you know, we only see 60% plus of mortgages still. 40% are done with manual paper pay stubs, we've been growing that. So, adding customers is a lever, or usage, if you will, is a lever. The other one both businesses have is the number of polls that happen in a transaction, and that's been growing in both USIS and in Workforce Solutions. Particularly as you see more digital interactions with consumers, which we would characterize as shopping, meaning consumers are shopping for mortgages and deciding which mortgage originator to work with in that shopping process, which is fairly new and more utilized in the last couple of years. And it's here to stay in our view, there's some data polled to qualify the customer. So, in the shopping process that mortgage originator can respond with some framework about the offer. So that's a place where number of polls, is another opportunity for the business. System-to-system integrations in USIS, it's virtually 100%, fully system-to-system. And Workforce Solutions, we've talked many times that of the 60% of mortgages, we see about 70% plus are system-to-system. We've been growing that, that's up, I think, 50% from where it was 3, 4 years ago. So, there's still opportunities versus web access. And in system-to-system we get a 20% lift in the number of polls. And then the last one that I touch on, it's really unique to Workforce Solutions is growing records. As you grow records, we have higher hit rates. Remember, in a system-to-system integration, or even a web access, our customers are coming to us for all of their mortgage applications or in their process. And when they do that, when we grow our records, which are up 19%, year-over-year in the first quarter for Workforce Solutions, that becomes revenue. We're able to monetize those additional records, which is why we're so focused on records.

Hey, Kevin, if you're specifically just talking about USIS being down 6% to 7%, relative to the market being down 33.5% again, 6% to 7% are total revenue, right and the order of two-thirds of their revenue is non-mortgage. So, and we're seeing 6% to 8% growth in their B2B revenue, which is over half of their revenue, which is consistent with the long-term framework for USIS. And we're also expecting to see growth at a somewhat lower level, but growth in the consumer business that came over from GCS. So, it's those two -- the two-thirds of the business that's showing nice growth, that's offsetting the weaker mortgage market. And as Mark said, USIS is also outperforming the mortgage market.

That helps. And then just real quick, John. What percentage of total Equifax is mortgage in kind of Q1 and then where do we think it'll end 2022?

Yes, the Q1 was about 29.5%. And then as we move through the year, I think we'll get down to the point where we're just -- we're in the neighborhood of 21% to 22% as we get into the fourth quarter.

Super. Thank you.

Thank you. Our next question today is coming from Andrew Steinerman from JPMorgan. Your line is now live.

Hi, John. On the mortgage percentages you just gave was that the U.S mortgage revenue or total mortgage revenues? I heard you mentioned mortgage in Canada today. My second question is, I know you like to look at core growth rates. I'm going to ask a question that's total. Could you tell us what the first quarter organic non-mortgage growth rate was?

Okay. So the first question, the 29.6 is total, right. But Canada is very small.

It's really U.S.

It's really driven by very, very small and we'll validate that to make sure, but I believe that's correct. And then in terms of core organic …

No, no. I don't want to work core. I just want first quarter organic non-mortgage, total company.

First quarter organic. So, I don't think that's a number we've disclosed, right, we give core organic, right. We gave organic for the business units.

And we give total.

And we give total.

But certainly, one that -- we probably don't have in front of us here, Andrew, and we can look at getting that for you.

Okay. Thanks so much. I appreciate it.

Thank you. Our next question is coming from Toni Kaplan from Morgan Stanley. Your line is now live.

Thanks so much. Mark, I was hoping you could talk about what you're seeing in Europe. It seemed like this was a good quarter, in the first quarter, but was that more front end weighted? And just trying to think about how you're viewing it for the rest of the year?

Yes, we haven't seen any different. In Europe, for us, as you know, as U.K and Spain, which is really where we participate there. We're seeing a positive as the government and companies in the U.K., following the pandemic start to focus on some of the collections that were suspended during the pandemic timeframe. So that's kind of a positive for the business, which we expect to continue through 2022. And the underlying kind of credit businesses, we don't have kind of a mortgage issue. If you want the mortgage market macro in Europe, in our two countries, because we really don't participate in mortgage there. And it's really operating what you'd see in the non-mortgage business, here in the States, where it's pretty, pretty steady. And we see elements of kind of post-pandemic recovery, card issuers wanting to do marketing, wanting to rebuild their balance sheets, similar discussion around consumers, being fairly strong meaning employment is high, unemployment is low, which is kind of a good macro in those markets, same in Canada, Australia, and frankly, in Latin America, around the globe, people are working. So, outside of the interest rate environment, and then you can, as a result the inflation environment, the higher interest rates are going to attempt to offset. You see consumers that are working low unemployment, that have better balance sheets than they had coming into the COVID pandemic, because they got some stimulus spending, and of course, they're working. So, we're pretty optimistic for kind of the core portions of the business, and we're delivering that when you see the results.

Terrific, very helpful. And just thinking about mortgage in 2023, you talked about some of the decline that you were expecting in '23, you're pulling it forward into your '22 guidance. Are you thinking that 2023 sort of returns to what a normal level like we've been seeing -- that we saw on like 2015 to 2019? Or is there sort of more to go even beyond this year, just given the match of outperformance from prior -- the prior 2 years?

I think as John and I both mentioned, we tried to really stress kind of the mortgage market outlook. And let me be -- obviously transparent. This is a hard thing to forecast. We don't know where interest rates are going to go. It's pretty clear, they're going to go higher. We've never seen a Fed navigate an 8.5% inflation environment with full employment. That's a very tricky thing to do. So, it's probably hard to forecast. But what gave us comfort in de-risking, the outlook for 2022, which as you point out, and I did to that pulls forward what we thought would have been a more gradual return to normalization, until inflation heated up. We think that that's a pretty strong stress scenario from the way we looked at it. And as John pointed out, when you go back the past 5 to 10 years, pre-COVID, meaning -- and pre-COVID meaning is pre the refi run up when interest rates were slashed because of the COVID environment and refis really exploded. We're 25% below kind of a normal market when we exit the year. And really in the second half, that we think is kind of as low as it can go because when you think about the mortgage market, there's a steady purchase volume even in a recession. And this -- I don't know how to talk about what environment this is. It's certainly not a recession. But even in a recession people move. 40 million people a year move, they're buying houses, so there's a steady level of purchase volume. And then even in a rising interest rate environment, consumers do refis, particularly when they have some level of equity in their homes. And that's another calculus and looking at the way we tried to stress the mortgage environment and came up with our kind of down 40 in the second half is -- there's still a lot of home equity out there that's untapped. And doing cash out refi is even at higher interest rates is something you could see consumers do, and we've seen them do before. So, a bit long winded. But what we tried to do was really stress this in this uncertain environment to kind of is a darker mortgage environment as we could see.

Thanks so much. Helpful.

Thank you. Our next question is coming from Kyle Peterson from Needham. Your company -- your line is now live.

Hey, good morning, guys. Thanks for taking the questions. I want to touch on kind of the performance in the non-mortgage business. Really impressive, especially given the mortgage headwinds. What do you guys think is the biggest driver behind that? Is it other credit products kind of performing better than expected? Or is it a share gain story? Or kind of what do you think is driving the upside on the non-mortgage side?

Yes, how much time do we have? We went through a lot of factors. I would start first with Workforce Solutions. Workforce Solutions, and we went through in real detail in our comments, non-mortgage businesses are very strong. And then, yes, I know you asked about non-mortgage, but even their ability start with growing records. Records up 19%, and the ability to continue to grow records, and their history of growing records, that puts a -- an element in the business, both mortgage and non-mortgage. Your question was around non-mortgage. So, as we grow records and what's unique about workforce is, we don’t have all the records. And up 19% in the first quarter we've got three, now four larger kind of chunkier additions. Of course, we're doing M&A to add records through our Employer Services, business. So I would say that one unique element at Workforce. Certainly, our pricing power in Workforce and to a lesser degree in USIS allows us to outperform and drive non-mortgage growth. But then, as I talked about in the back half of my comments, some of the new verticals we're in where we're making acquisitions, or leveraging the cloud to roll out new products, like the talent space, or the government space, really strong growth rates they were delivering there. And then more broadly, Workforce, I think, is one which I talked about a bunch. The second is new products. Our new products are primarily a non-mortgage, because that's where most of our businesses, and that’s where we're rolling them out. And a lot of our new products, as you know, are really leveraging our historical or multi data solutions. Whether it's in the talent space, instead of having a solution, that's where it is Mark worked today, which is what historically we…

That’s helpful. And then just a quick follow-up on kind of your updated thoughts on capital allocation. You guys have given some pretty detailed thoughts at the Analyst Day in November. But I guess just given the higher rate environment of any -- the priorities in the near-term change between debt reduction or potential M&A or new product launches that will kind of help you diversify away from mortgage faster. Just want to see how you guys are thinking about it in this current environment?

Yes, so there's a couple of different questions there. First on our capital allocation, we were pretty clear at our Investor Day. We talked about it really in every earnings call, no change in that. First, we believe our free cash flow will continue to accelerate meaningfully through '22, and '23 and '24. And there's no change in what our free cash generation will be in 2022. We're still confident in that. And that free cash flow gives us a lot of flexibility, certainly around M&A. And as you know, we've done well over $3 billion of M&A in the last 15 months, all of that M&A has been oriented in kind of non-mortgage, if you want to use that term. But really in kind of core areas of Workforce Solutions, differentiated data that that's really been clearly our focus is to broaden Equifax. And you saw the slide that we put in the deck, again, that we had at Investor Day about our broader focus into faster growing markets. There -- we don't have competitors that talk about growing in the $2 billion government TAM. We don't have competitors that really talk about growing in the $4 billion talent TAM. I think they have focused on the identity and fraud, TAM that we're playing in, but really a clear focus there. And as our cash flow continues to accelerate, our priorities are certainly investing in Equifax, which we're doing through the cloud transformation. As you know, we're going to complete that, then that'll free up cash for us to invest more in new products going forward, which should drive our top line. But outside of investing in CapEx, we still view M&A as an important way to do bolt on acquisitions to strengthen the core of Equifax, really discipline around where we want to do it to strengthen the core of workforce, differentiated data, or identity and fraud. But then there's going to be excess free cash flow from Equifax. And as our EBITDA continues to grow, as we go through '23 and '24, we're going to delever the company. And at the right time, we'll certainly look at returning some of that cash to shareholders through buyback, or through increasing our dividend. We're not ready to do that today, but we are clear in our Investor Day that that's a -- kind of that balance of how we think about a capital allocation framework going forward against the backdrop of a significant increase in both our free cash flow going forward and our leverage available -- cash flow available from leverage as we grow our EBITDA.

That's helpful. Thanks, guys.

Thank you. Our next question today is coming from Ashish Sabadra from RBC Capital Markets. Your line is now live.

Thanks for taking my question. Mark, I just wanted to go back to the comments that you made about the health of the consumer balance sheet being really healthy, which makes sense. But one of the concerns is that the higher fuel prices inflation, there may be some cracks in the low to mid income consumers, which could potentially weigh on consumer lending. Maybe in the back half of the year. I was just wondering, based on your conversations with the banks, have they indicated any slowdown there, or any color on that front around the state of the consumer itself?

Yes, we haven't seen it. And our looks are we don't expect to see it based on what we see 2022 unfolding. Certainly, inflation is a real challenge, fuel prices, food prices, et cetera. 8.5% is very, very high inflation. Some states in the U.S are above 10%. But at the same time, people are working, wages are up meaningfully for a lot of wage categories. So that's a positive. And when I talk about their balance sheet, it's really over the last 2 years, they couldn't spend much because we were in the COVID pandemic lockdown. And there was a lot of stimulus, which is still out there. There's still a lot of stimulus coming from -- and again, I'm talking about the U.S government. While they're not individual payments, a lot of the social services payments, some of the requirements have been suspended. You've seen the administration talking about pausing on student debt collections that helps balance sheets for a lot of consumers that are working out there, and they're very low unemployment. And then when we talk to the banks, and you've seen some of their numbers in the last couple of weeks, like use credit card originations, up 10% -- I'm sorry, credit card usage up 10% and the bank's balance sheets declined during COVID. So, you've got very strong customers, meaning in our financial institutions that need to grow their balance sheets, and you've got what I would still argue is a fairly strong consumer, because of the wage inflation and the fact they're working and you add to stimulus, is balancing out the inflation, but it's certainly something you will continue to watch going forward.

That's very helpful color, Mark. That’s very helpful. And then maybe just on the USIS non-mortgage B2B business. The improvement that is expected from the first quarter to second quarter obviously you provided a lot of good color. I was just wondering how much of it is coming from just volume growth at your existing customers, but also from customers going -- sorry, accessing alternate data sets as well as potential new events? So, I was wondering if you could comment on those two, the new wins, the pipeline there as well as the demand? Obviously, we've continued to see greater demand for alternate data. But are you seeing more of that in the near-term? Thanks.

Yes, for sure. Just again on USIS, we were quite pleased with their core online business. It was up really -- slightly above or at our expectations on the online piece, which is comes from either market share gains, or new solutions that we're delivering that deliver the online. The piece that USIS didn't deliver on within their batch, or account management, review business, there was really just some timing in March, and some of those deals closed in April. And so we expect USIS to continue moving their growth going forward in the second quarter through the rest of the year in non-mortgage. And we are seeing some good wins in the marketplace, both with the market share gains we expect from being cloud native, providing stronger stability, those are going to continue to be a positive for the USIS commercial team going forward. And as you point out, our increasing focus on alternative data in our single data cloud fabric is another positive and we're seeing definite traction around the use of alternative data. All of our customers are looking for new data solutions to help them drive originations. And when you add some of the unique data assets that we have, which we believe we have at scale, more -- much more than our competitors, those are the kinds of solutions that the USIS team are bringing to market through our new products that we're rolling out.

And just some color on just USIS online in the first quarter non-mortgage, our FI business was up over 10%. So that was good growth. We saw auto and insurance up high single digits, again, very good growth. And as Mark mentioned in the script, Kount was up almost 50%, which is identity and fraud. So we feel good about the way the online business was trending [multiple speakers] covered, yes.

Sorry about that. Yes, thanks.

Thanks.

Thank you. Our next question today is coming from Hamzah Mazari from Jefferies. Your line is now live.

Good morning. Good morning. Thank you. My first question is just on Workforce Solutions. Maybe if you could update us or just walk us through the ability to take some of the products we have in the U.S and bring them to international markets? Is every international market sort of available to you to penetrate around Workforce Solutions? Or sort of just walk us through which markets are more penetrated versus others? Is it an early innings today?

Yes, it definitely early innings. We see kind of global market opportunity. As you may recall, pre our cloud transformation, we launched Workforce Solutions businesses in Australia, Canada and in India. We paused on doing any more international rollouts until we got our cloud stack in place for Workforce. And then about a few months ago -- actually a month and a half ago, we announced our entry into the U.K., where we have our cloud stack in there. And we're starting to onboard records from companies and partners in the U.K. So those are the four markets we're in today. We're definitely intending and looking to grow in other markets in the future. And even in markets where we don't do business, meaning we don't have Credit Bureau businesses. As you know, we're in 25 countries outside the United States, but we see the opportunity. And you think about some of the leverage points we have. Number one is our cloud stack, meaning our infrastructure. We spent hundreds of millions of dollars building this and now we can just move it very easily into a new market. Second is our existing customer or contributor relationships if you're a big multinational company, like a GE and IBM, pick a big industrial company, a bank that's doing global business, and there's a bunch of those in the United States. If we're doing the income and employment verification for them here, they liked the idea of us doing it for them in all their global markets. So that's a kind of an opportunity to load records and add in those different markets. And then last is payroll partners that we have. As you know, we've got a substantial number of them on an exclusive basis, most of them are exclusive. And same thing, a handful of those in the U.S are global. And we already have the connections, the pipes, the relationships with them here in the States. So, the ability to do the same thing globally is a leverage point for us. So, you should look for us to do more. In the scheme of Equifax, or Workforce, what's going to move the needle is more of the U.S levers that Workforce has over the next 2, 3, 4, 5 years, but you would expect us to, and we are, investing in some of these longer-term opportunities outside the United States, like the U.K expansion that we did a few weeks ago.

Got it. And just my follow-up question is just around the cloud transformation. I think you said half of your revenue is on the cloud. Maybe if you could talk about, and maybe you mentioned this already, but just timing of when the other 50% of revenue comes on the cloud and just related to the cloud, the cost savings are baked into your 2022 guide. What is that number again, that's baked in around cost savings? Thank you.

Sure. I'll start and let, John, jump in. So, at year-end, we had about 50% of Equifax revenue in the new Equifax cloud. We talked about that in our February call. By the end of this year, 2022, we expect to have substantially completed North America, which is U.S and Canada, all of that in the cloud. So that'll be a big jump for us. And as you know, the United States for us revenue wise is approaching 80% of Equifax. And then International, some of the international markets, we won't complete until '23 and there might be some migrations that will complete in 2024. So that's really our runway around -- completing the cloud. And I'll let John jump on the actual cost savings. But as you know, we had some cost savings last year, a bigger number this year, they continue in '23 and they're likely be some in 2024. But they're all embedded in our 500 basis point margin expansion between now and 2025. I think on Investor Day, we talked about half of those roughly being from the cloud. So, if there's any change in that, and John can talk a little bit about the actual numbers.

Yes. So, what we talked about in the past, right, is that we -- in terms of transformation investments, as you went from '21 to '22, that you would see savings and investments, net of new product development reinvestment [indiscernible] the order of $40 million to $50 million. That's still correct, we're still moving forward with that. We also indicated that we would see net cloud savings as we move through 2022. And as Mark said, those were embedded in the margin guidance we gave. We didn't give specific dollar values. But the net cloud savings will be delivering this year as more and more moves on to the cloud. A cloud native infrastructure is embedded in the guidance that we gave, the updated guidance today is for up 125 basis points in 2022 relative to 2021.

Got it. Thank you.

Thank you. Our next question today is coming from Craig Huber from Huber Research Partners. Your line is now live.

Yes, good morning. Thank you. My first question, maybe give us a flavor of the new products that you've rolled out that you're excited about here in the U.S? Let's start there, please.

Oh, my gosh, how much time do we have? We talk about it in every call we have. There's a bunch. And I would really focus them in a couple of buckets. First is Workforce Solutions. We talked about this before. If you go back a couple of years, Workforce Solutions products they deliver to market were generally around a snapshot of where does someone work today and how much did they make, and a bunch of attributes, but they were really time based and current. And so, one of the big changes we've been able to do as a result of the cloud is really leverage those historical records. And whether it's looking at someone's income and employment over a long timeframe in a mortgage application, or looking at their work history, in the hiring or talent space that trended or time-based data, historical data is incredibly valuable and was very difficult to do pre the cloud transformation. So that's been a big change. And those products are really solving a lot of our customers problems. Our customers needed more than just where does Mark work today for certain consumers, that -- if they have a -- if you're a sales commissioned employee, my income today might not reflect my annual income because I get my bonus in February. So having that 12 months data is incredibly valuable, and we can sell it at a higher price point, using the example of a Workforce Solutions that we would sell at $30, $40, $50 per pole for kind of where does Mark work today, that historical data we're able to bring to the marketplace because of its value to our customers at $150, $135, $200. So, I would say that's a very powerful element of the cloud transformation that allows…

That's great. My other question is in -- what is embedded in your outlook for the rest of the year for the U.S for autos, credit cards and personal loans? I mean, you gave us some good data there, how it did in the first quarter. Are you expecting that this significantly slow the rest of the year, given the higher interest rate environment? How are you sort of think about those three categories for the rest of the year? Thank you.

Yes, we don't see any change in those categories in 2022, already had some comments around the consumer. And we don't think the higher interest rates will impact that in cards or -- autos impacted today by supply shortages. We're dealing with that and the market is, I'm not sure when that's going to be resolved. That's more of an inventory issue, but the underlying consumer and the underlying customer of ours that's trying to grow their financing businesses. We don't see any change from where we were a few months ago.

That's it. Thank you.

Thank you. Our next question today is coming from Simon Clinch from Atlantic Equities. Your line is now live.

Hi. Thanks for taking my question. It's kind of -- maybe a difficult one to answer. But I was thinking about the pace of outperformance that we've seen from the mortgage revenues in EWS over the last several years, can we learn anything from that and use that as a guide to how we should think about the outperformance or the growth? Has the non-mortgage verification services business really started to take off? As in, should we expect a much faster pace of growth initially at the outset, maybe even faster, because you've got even more records now. And then perhaps a faster normalization, as -- I guess a more compressed cycle, before you get to a more normal sort of level of outgrowth there.

Yes, that's a complex question, Simon. Let me talk about a couple of things. The one thing that I always start with, and I know you do too, it's very unique about Workforce Solutions is the ability to grow their assets, their data assets, meaning their twin records and drive revenue growth. And we talked before, when you think about 19% revenue growth in the first quarter, that was -- they were up roughly 19% for the year, last year. We've already got a pipeline of additional records, those records translate into revenue, just because we have the system-to-system integrations, and it just takes our hit rates up. So, that's kind of a base element of their ability to outperform their underlying markets, because you're adding records. And then you add on top of that, the ability to roll out new products, drive system-to-system integrations, all of those that we've talked about drive penetration, drive usage, those are all become levers for them to drive their top line growth. And on top of that, when you talk about non-mortgage, as you know, they're operating in some underlying macro markets, whether it's talent, or the government space, that are just growing strongly. These are kind of 20% type, high double-digit growth type markets that help fuel their non-mortgage growth of Workforce Solutions. And I think, an Investor Day we talked about a 13% to 15%, long-term revenue growth rate for the business. Obviously, they outgrew that in the first quarter, they're going to outgrow that in 2022. They outgrew that in '20 and 2021. So, we see a lot of momentum in the business going forward, a lot of levers for growth going forward.

Okay. That's helpful. And just as a follow-up, I mean, when we're just going back to mortgages. Just kind of curious to the comments made that you're now bringing your inquiry guide -- inquiry guidance, kind of in line with the outlooks provided by the NBA and Fannie Mae. Whereas previously, I can assume that you weren't doing that. And I was just kind of curious as to the reasons why you weren't using those sort of more public forecasts, what you saw on your numbers that made you more, more positive in those outlooks and why now it's time to go to the more extreme outlooks. When you said yourself that you're nowhere near those trends at this point.

Yet, so just two things. First, I think what you would have seen over the past several months is obviously NBA, Fannie, Freddie have also substantially changed their outlooks, given the main ticket taking them down, given the significant increase in interest rates. And what we've been doing over the past several years, I think, which we've been very open about as we've been taking a look at the markets based on the run rate trends that we have in our own business, because we can see inquiries. And what we started to see and the reason we made the change we did is because we're starting to see that the inquiry trends that we were, that we can measure, were starting to decline more rapidly. So, as we took a look at the information we had, and the analysis we could do, we believe we're headed toward the type of the down 40% that we talked about, which as we do, the analysis, we now see is consistent with where NBA and Fannie are, but we think the analysis we've done and the analysis they've done are just more consistent to those point in time.

I would add to point that, we talked about it a couple times this morning. But that kind of second half, fourth quarter run rate for the mortgage market that's underlying our new guide, its 25% below the kind of normal markets pre the COVID pandemic. And that's a pretty strong stress, and that was our -- intent was to put something that is it's very uncertain, how far interest rates going to go, how's the Fed really going to tame inflation, which they've never done before at this level with employment at this level. And that's why we decided to do a really strong de-risk of the underlying mortgage market, but then also have a lot of transparency about how the rest of Equifax is operating. Our strong core growth and actually stronger for this -- we took our guidance up for the rest of Equifax for the second time this year.

Okay, excellent. Well, thanks very much.

Thank you. Our next question is coming from Andrew Nicholas from William Blair. Your line is now live.

Hi. Thank you and good morning. I wanted to spend my two questions on some updates in terms of recent M&A. Maybe I'll start with Kount. I think twice now you mentioned the 50% Plus or 50%-ish growth in that business seems pretty, pretty meaningfully higher than I think the 20% growth that was originally expected when you knocked the deal early last year. So, if you could spend some time kind of talking about what's going right in that business where the momentum is, and the extent to which that growth is, is based on synergies from the Equifax relationships or the Equifax business, or if it's just continued momentum in that area, broadly, both of those would be interesting topics, I think, to cover.

Yes, so we are very bullish about the space first, identity and fraud and we're really energized about the team, the leader that we brought in, it's driving that business, and it's in a space that's growing rapidly. It's a digital macro is very, very strong. Their underlying growth is a big part of that. There's some elements of synergies, but I would say that those are more on the com, meaning some of the product solutions of combining Kount and Equifax data, we are more second half oriented, it's just a really strong execution, and they have a great product. We've added more resources in the business, I think the headcount in the business is up something like 20% or 30%, maybe it's more like that 30%, since we acquired the business. So, we're putting more feet on the street, we've got a new commercial leader, that's really partnering with the CEO that was the founder of the business that we really like a lot. We've also given the CEO responsibility for our full identity and for our business, so he was running Kount, during the 2021, early this year. He's now got responsibility for the whole business, and we think it will have a big impact there and really drive the synergies going forward. So, we're quite bullish about their market position, their pipeline, but it really starts with a space that's very good. And we bought a very attractive business that we're making stronger.

That's helpful. Thank you. And then maybe a similar question on afterwards. I think, Mark, in your prepared remarks, you mentioned, new customer wins as being part of the growth driver in the first quarter. Same sort of question is, is that from Equifax relationships, or just the momentum of the business? And then maybe relatedly, are there any kind of big picture learnings from kind of having integrated that business, we're beginning to integrate that business over the past couple of months that you're already applying within the talent solutions market? Or Sure, the sectors in which it exists? Thank you.

Yes, so great questions. First, on the Appriss business, another great business. I was there last week in Louisville, where they're headquartered with the team. We got a great leader there, and a great team, and the growth they're delivering is primarily from their own momentum. We only acquired them in October, so they're only a few months in. We're in the throes of integrating and bringing them into our technology and a cloud data fabric and the other elements on it. It's another space. So, they're winning new state contracts, they didn't have that were in their pipeline, when we acquired them, and just executing and the synergies that we're counting on, will really start kicking in the second half and '23, and probably likely into 2024. And we really liked the unique data. The criminal justice data that they have is very, very unique. And the instant decisioning from the talent space, plays in their world. And then, of course, in social services, it's also used. As part with regards to lessons learned, I sure wouldn't want to be doing these number of acquisitions if we weren't the cloud. It's -- it would be very hard to integrate these with the pace that we're going to be doing it. If we were still in our legacy environment, and that gives us a lot of confidence around doing acquisitions. And we're always learning about how we can do the integrations, more effectively, and -- but we've got some pretty good muscle around that, because it's not new for us. We've been doing acquisitions for a long time. Long before I joined 4 years ago, at Equifax, but we're getting better at it, I think and always looking to improve it. But the cloud gives us a lot of confidence, when doing M&A and I hope you agree that we're being very disciplined around the kind of businesses we want to buy. Our criteria and M&A is very clear. We want to grow, we want to buy businesses that are growing faster than Equifax. So, they're accretive to our growth rates.

We want to buy businesses that are going to deliver margin accretion with Equifax. And most importantly, we want to buy businesses that strengthen the core of Equifax, whether it's around differentiated data, or around the Employer Services business as you point out. If you look at all of our acquisitions, they're checking those boxes. And then of course, identity and fraud, around Kount is just a space we'd like to get larger in and if you look at our acquisition so far this year, efficient higher, it makes us stronger in that. Employers Solutions space that, we want to be bigger in but also delivers more records to the Workforce Solutions businesses, they add new customers.

Very helpful. Thank you.

Thank you. Our next question is coming from George Mihalos from Cowen. Your line is now live.

Great. Thanks for taking my questions, guys. Two quick ones. And I'll ask them upfront. Just first, a point of clarification, Mark and John on FMS. It sounds again, like it was just sort of a timing issue. You've got good visibility now in the second quarter. Your outlook has not changed at all for the year within that segment. And you maybe just kind of remind us how you're thinking about growth for FMS on a full year basis. And then secondarily, the $75 million of outperformance, if you will, from the core that's offsetting some of these mortgage headwinds, is that essentially all EWS and as you talked about some NPI benefits as well coming in, but is there any part of that outperformance that ties into USIS? And if so, what verticals or areas are performing ahead of your expectation? Thanks, guys.

I'll do the second one, John and you could take the first one on FMS, which is an easy one, but under $75 million, the bulk of that for sure is Workforce Solutions. But International is also a piece of that. Internationals performing exceptional. USIS I think, is kind of aligned with where we started the year, we don't see any change. They're performing very, very well. The outperformance is a piece of that is from international, but the bulk is Workforce and it's all the levers we talked about on the call this morning.

And in terms of non-mortgage really in USIS and we still expect them to perform in 6% to 8%, right. So, we believe in total non-mortgage which is both the online and the FMS portions, should still deliver in that 6% to 8% range, George.

Thank you. Our next question is coming from Heather Balsky from Bank of America. Your line is now live.

Hi, thank you for taking my question. I'm just curious [indiscernible] EWS is easy taught you. You maintained your outlook for 30% outperformance versus the mortgage market. I'd love to get your thoughts in a sort of, I guess worse than expected mortgage market environment sort of your confidence in sort of that outperformance kind of why it's not one for one or and also your ability to take price and sell premium products in this type of environment. Thanks.

Yes, there's a number of levers there on the drives the Workforce Solutions outperformance broadly in all their markets, but we'll focus your question on mortgage. So, start with records. We have pretty good visibility around our record growth in we talked about the fact that we were up 19 in the first quarter. We talked about -- we've got three now four larger payroll processors coming online in 2022. So, as you know, that record growth translates into higher hit rates and revenue. So, that's kind of a big piece of that. Second is price. We did our -- we do our pricing actions late in the year, they go into effect in January and their effect through the year. So, we know what our prices on a year-over-year basis. That's pretty well nailed down. The new product rollouts, you saw our momentum in Workforce Solutions with our mortgage products that we rolled out in 2021. Those were rolled out during the year. We get the full year benefit of those, many of them are rolled out in the third and fourth quarter. So, we have kind of visibility on the take rate and the usage of those because they're solving specific solutions. So, we have pretty good visibility around that. There's visibility around customer wins that we're bringing online. Remember, 60% of mortgages are still done in paper pay stubs. We have visibility around system-to-system integrations that we're working with customers that are not system-to-system, they're web based. There's another element of visibility, around that element. And then, we have trended data around how often the twin datasets being pulled? As you know that's increased in recent years to two polls. We don't see any change in that. So, that's kind of in the [indiscernible]. What did I miss John, as far as our visibility?

I think you've covered it right. Plus, the fact is we were down, market was down 25% in the first quarter. And they outperformed by approaching 30% or 27%, right. So, we feel like even in a down market, we've already seen similar to the down markets we saw late last year, they perform very, very well. We know it's much deeper as we go forward. But as Mark said, the big driver is records and penetration, which they continue to deliver on.

Great. Thank you. And as a follow-up on the integration, you mentioned how much of your revenue is coming from system-to-system integrations? I'm curious, sort of on a penetration basis in the mortgage business. Kind of where you are in a customer bases and where you think it can go.

And that's -- your questions around what portion of our mortgage customers are in the cloud environment? I'm not sure I heard it, right.

Sorry, the system-to-system integrations that you talked.

Yes, yes, sorry. Hey, Heather, I think actually what we're going to post the deck here in about an hour or two, and on that there'll be an update to that number. So great. Thank you. 11 o'clock. Sorry about that. Yes.

Thanks. Great.

Thank you. Our next question is coming from Jeff Meuler from Baird. Your line is now live.

Yes, thank you. Just one for me. Want to see if you're willing to share any data around NPI uptake for clients that have completed their migration to your data cloud? It sounds like you have enough of the client base migrated at this point that we would start to have some data if that's seeing an explicit acceleration at NPI uptake or not. So, we'd love any data points on it. Thank you.

That's a great question, Jeff. One that I don't have and John shaking his head also that he doesn't have, but it's one that I'm going to run down. I definitely want understand it. I think intuitively we find it there's some list there, but let us run it down.

And given that the percentage of products that we're delivering are substantially above half as we talked about that are running on the new cloud infrastructure. I would expect it's probably a pretty good number.

Thank you.

Thank you. Our next question is coming from Shlomo Rosenbaum from Stifel. Your line is now live.

Hi. Thank you very much for squeezing me in over here. Mark, you mentioned when there was a question about some of the levers in USIS to offset mortgage, one of the things you mentioned was price. I don't usually hear that too much in USIS. I hear that much more about, the work number and things like that. Is there -- is there a consistent pricing uplift every year, like you get in other parts of the market of your business? Or is there pushback from clients over there, maybe you can just kind of touch on that a little bit.

I would say there's always pushback from clients when it comes to price. But we've been very clear, and we probably more often talk about price at Workforce Solutions, because they just have more pricing power. They're just more unique data asset than our -- than the credit file. But USIS, pretty regularly does price increases, meaning on an annual basis. And there's some element of price there, but it's not at the same scale, or leverages our workforce.

Okay. So, there's consistent price lift, even though -- even on the basic credit file type stuff is what you're saying.

In particularly a mortgage. Yes, that's a place where we have historically done kind of consistent price increases in USIS. In some of the other verticals, we may take price up, but then have concessions that happen. So, the pricing power is not as strong, in some of the other verticals.

Got it. And then one of the things that this is kind of a competitive type question, but one of the things I have heard out in the market is that there's competitors trying to get in terms of building their own databases, excuse me for income information, but you are incenting clients to keep Equifax at the top of the waterfall. And I'm wondering, like, how do you go about doing that if someone else was coming in with a lower price point?

Yes. Your question is more around customers versus obtaining records or is it both?

No, it's really like -- if you have a customer that can potentially use a much less effective database, but at a much lower price point, right. So, the strategy from the competitor is to go ahead and say use us first and then if you can't get it at the lower price, then move on to Equifax. So, I've heard from some customers that Equifax is aware of that obviously has some kind of strategy where you can incent the customer to keep Equifax at the top of the waterfall and I was just wondering how that works.

Yes, I guess, our view of the marketplace is that our solution in the verticals we participate in for income and employment data is, price competitively meaning there, there aren’t what we see in posted market prices, we don't see prices that are lower than Equifax. So, I don't think there's a price advantage there. What we do with some customers, when we tap top of waterfall, it's really to have them hit our database in a system-to-system basis versus doing manual efforts. So we've had some commercial incentives to move customers from doing manual searches around income and employment data to hit Equifax first. And part of that is, is that we've really had a very significant increase in our coverage over the last couple, 3 years. You go back, 3-years ago, we were below 50%. Now we're at 65%, approaching 70%. So, it was really more -- some commercial incentives to get customers to understand that they can get a hit very quickly from Equifax, but we haven't seen, what you described as, us having to commercially get in front of someone else who has a different solution to Equifax.

Okay.

Because there really aren't any other solutions at scale.

Right now, I mean, pre-realistic [multiple speakers]. I know they're small, but I mean, some of those, that's what I was talking about -- some of them being out there. And they are very small, but that's how they're trying to get tested into the marketplace. And so, I was wondering about that.

And again, we haven't seen any commercial pressure from that. They're very, very small. And it would surprise us that a customer would want to change a waterfall, [indiscernible] the system effort involved in the very low hit rates, and again, there's not a pricing advantage or cost advantage for [indiscernible].

Okay, great. Thank you very much.

Thank you. Our next question is coming from Faiza Alwy from Deutsche Bank. Your line is now live.

Great. Thank you and good morning. I just, I know we've covered a lot of ground. But I just wanted to ask about EWS EBITDA margins, because just given the strong growth that you're seeing on the top line, I would have expected a little bit more flow through on the margin side. And I know you've talked about acquisitions, but I was hoping for a bit more color, maybe you can give us what organic margins were in that business, or if there's like a mix impact as it relates to various verticals, like are the new products at a lower margin. Just a little bit more color around how we should think about the drivers of margins there.

Yes, so we had really nice margin improvement, right, from fourth to first. And we are and we are certainly incurring some of the impact from the recent acquisitions, which the acquired businesses generally just want to have margins that are as accretive as ours. So, you are seeing that in the first quarter. We don't really disclose an inorganic and organic EBITDA margin, but we feel very good about almost 55% margins that we're seeing. And we think it's really an outstanding performance, we indicated. I think we expect them to be 54% for the full year. So, we feel very good about the trend in EWS margins, and obviously they are investing in new products to drive faster growth. So, we certainly encourage that. But we think operating at this range of 54% to 55% margins is outstanding.

Okay. So, there's no mix impacts that we should think about by vertical or product?

We certainly have different margin levels for different products. Generally speaking, most of the Verifier products have relatively similar margins. There are different margin profiles between Verifier and Employer. But again -- I think generally speaking, 54% to 55% margins very, very strong. We feel very good about them.

Understood. Thank you.

Thank you. We reached the end of our question-and-answer session. I'd like to turn the floor back over to management for any further closing comments.

We just wanted to thank everyone for participating. If you have more questions, please reach out to Investor Relations.

Thanks very much.

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.