Release Date: October 17, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Equifax Inc (EFX, Financial) reported strong third-quarter revenue of $1.42 billion, up 9% year-over-year, reaching the top end of their guidance.
- The company achieved significant milestones in its cloud transformation, with 80% of revenue now in the Equifax Cloud and expectations to reach 90% by year-end.
- Equifax Inc (EFX) saw strong growth in its non-mortgage businesses, with a 10% increase in constant currency revenue, driven by 19% growth in EWS verifier and 29% growth in government services.
- The company reported a Vitality Index of 13%, indicating strong new product innovation, and raised its 2024 Vitality Index guidance to 11%.
- Equifax Inc (EFX) achieved a major milestone by completing the migration of US consumer credit and utility databases to the new Equifax Cloud, enhancing its competitive edge and operational efficiency.
Negative Points
- Equifax Inc (EFX) incurred a $42 million restructuring charge related to cloud migration and workforce streamlining, impacting short-term financials.
- The company's Workforce Solutions revenue was slightly below expectations due to lower-than-expected employer services revenue.
- There was a noted slowdown in hiring within the white-collar sector, impacting the talent solutions revenue growth in the fourth quarter.
- Employer Services revenue declined by 19% in the quarter, affected by lower ERC revenues and slower state responses to federal changes in work opportunity tax credits.
- The company's guidance for the fourth quarter was slightly below previous expectations, primarily due to lower revenue in the EWS employer business and slower US hiring impacting onboarding and talent solutions.
Q & A Highlights
Q: Can you explain the philosophy behind your guidance, especially given the changes in mortgage and non-mortgage areas?
A: Mark Begor, CEO: Our philosophy hasn't changed. We aim to be transparent with our investors about market conditions and growth levers. We provide guidance that we believe we can meet and exceed. The mortgage decline in '22 and '23 was unusual, but we've been consistent in our non-mortgage performance. The slight adjustment in our fourth-quarter guidance reflects some volatility in certain verticals, particularly in the EWS employer business due to IRS changes and state responses, which have been slower than expected.
Q: What are the early signs or examples of benefits from the tech transformation in USIS?
A: Mark Begor, CEO: The cloud transformation has been a significant effort, but it's now complete for USIS. This allows us to focus on innovation and new products, which will benefit USIS in 2025. We've seen vitality improvements, and we expect share gains and cost savings to positively impact our margins. We're also working on unique solutions that combine TWN data with credit files to differentiate our offerings.
Q: Can you provide more details on the Workday partnership and its impact on record additions?
A: Mark Begor, CEO: The Workday partnership is significant, and we expect it to contribute a sizable number of records over time. While some records may come online in the fourth quarter, the substantial growth will be in 2025. We have a strong focus on record additions, both through partnerships and direct approaches, which is crucial for our growth.
Q: What is driving the reacceleration of growth in the consumer lending vertical within workforce solutions?
A: Mark Begor, CEO: The growth is driven by the value of combining credit scores with income and employment data, which allows lenders to approve more consumers with lower loss rates. This combination is very valuable, and we're seeing increased customer penetration and new product launches that enhance our offerings.
Q: How do you view the potential for capital return, including dividends and buybacks, in 2025?
A: Mark Begor, CEO: As we complete our cloud transformation, we expect to have more free cash flow available for capital return. We plan to grow the dividend in line with earnings growth and use buybacks as another mechanism to return cash to shareholders. Our strategy includes disciplined bolt-on M&A, but we also aim to return excess free cash flow to shareholders through dividends and buybacks.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
