Equifax Inc (EFX) — Q4 2020 Earnings Call Transcript

Thanks and good morning. Welcome to today's conference call. I am Dorian Hare. With me today 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 in the Investor Relations section in the About Equifax tab of our website at www.equifax.com. During the call today, we will be making reference to certain materials that can also be found in the Investor Relations section of our website under Events and Presentation. These materials are labeled Q4 2020 Earnings Release Presentation. During the call, we'll be making certain forward-looking statements including first quarter and full year 2021 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 inherent in our business are set forth in filings with the SEC, including our 2019 Form 10-K and subsequent filings. Also, we'll 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. These non-GAAP measures are detailed in reconciliation tables, which are included with our earnings release and are also posted on our website. In the fourth quarter, Equifax incurred a $31.9 million restructuring charge related to right-sizing the organization as investments in technology transformation are reduced in 2021 compared to 2020. Also in the fourth quarter, Equifax changed its method for accounting for pensions to recognize the measurement of benefit obligations and plan assets to earnings annually and cease delayed recognition of gains or losses caused by changes in discount rates or other value assumptions such as mortality and plan asset actual versus assumed returns. All prior period GAAP and adjusted financial information has been revised to reflect this change. For 2020, excluding the annual remeasurement impact, this benefit was approximately $17 million to net income or $0.14 per share. In the fourth quarter of 2020, this benefit resulted in an improvement to net income of $4.3 million or $0.35 per share. The annual remeasurement occurs in the fourth quarter of each year and is recorded in other income on the income statement. This annual remeasurement will be treated as a non-GAAP adjustment as it is non-operational in nature. Pretax mark-to-market adjustments resulted in a pretax gain of $4.8 million in 2019 and a pretax loss of $32.2 million in 2020. The details of this change in pension accounting are included in the fourth quarter 2020 earnings press release on slide 25 of the 4Q 2020 IR slide deck and will also be included in the 2020 report 10-K. Now I'd like to turn it over to Mark.

Thanks Dorian. Before I address Equifax's strong fourth quarter 2020 results, I want to take a moment to thank our 11,000 employees and their families for the tremendous dedication they showed under the challenging COVID environment during 2020. We continue to make the health and safety of our employees a top priority, and I hope you and those close to you remain safe. Turning to slide 4, I wanted to start with a review of our business model, growth strategy, and cloud investments that position us to win in the marketplace. Our unique and diverse data assets are at the core of Equifax's differentiation. We have data assets of scale that our competitors do not have. Our acquisition this week of Kount in global identity and fraud, and AccountScore for UK open banking and data categorization, are examples of accelerating focus and expanding our differentiated data assets and capabilities. Expanding our differentiated data assets through organic actions, partnerships, and M&A continues to be a priority. We and our customers are benefiting from our investment over the last three years in our new Equifax cloud-native technology footprint, which has enabled the creation of our single data fabric and rapid implementation of best-in-class cloud-based tools and capabilities. We accelerated our new product rollouts and revenue in 2020 by leveraging our new Equifax cloud and Equifax cloud-native footprint which has enhanced our ability to integrate new partners and acquisitions to speed the recognition of synergies, as we believe only Equifax can. Our cloud infrastructure will differentiate Equifax in the marketplace and drive our revenues and margins in the future. Data security is deeply embedded in our culture, and we have made tremendous progress toward our goal of being an industry leader in security. We will maintain a relentless focus on a customer-first mentality, which moves us closer to our customers by delivering solutions to help them solve their problems and grow their businesses. Lastly, with the acquisition of Kount and our investments in the Equifax Data Fabric, we've taken substantial steps forward towards building a leading identity and fraud business while expanding our market coverage to include retail, ecommerce, and transaction-based markets alongside our traditional financial institutions, telco, and insurance markets. Moving now to slide 5, we believe that key market macros positively impact the information services industry and Equifax. First, the dramatic acceleration of the digitization of consumer and commercial customer-facing transactions and our customers' internal infrastructure has clearly accelerated during COVID, driving rapidly growing requirements for data and insights around identity, authentication, and fraud. Second, the accelerating adoption of advanced analytics and machine learning is driving increasing needs for differentiated data. Third, fintechs and alternative lenders are driving innovation, growing their share of the market, and accelerating this digitization macro which drives data usage. Fourth, the increased need for robust identity validation and fraud prevention capabilities in digital transactions is also driving data requirements. Fifth, the explosion of data drives increased requirements for data governance by our customers and control of data by consumers. These macros clearly accelerate demand for broader differentiated data assets, alternative data sources, increased data recency, and integrated insights. Equifax is well positioned to address these trends as we build on the depth of our Equifax cloud data assets and our capabilities to deliver advanced Equifax cloud data management, continuing to leverage our Equifax cloud data and technology investments. In USIS, the depth of our assets across credit alternative credit with DataX, telco, and utilities with NCTUE, and consumer asset data with ISI have long been Equifax's strength. Workforce Solutions' TWN data is our most differentiated data asset with coverage of 90 million unique individuals in the United States. EWS is expanding between data sets while broadening their focus beyond W2 income to include 1099 and other income and employment data. At the same time, EWS is broadening beyond TWN income and employment data with partnerships delivering individuals' education, licensure, and other data to our customers to use in the hiring process. With the additional Kount broad and massive scale of digital consumer data assets, including phone numbers, email and IP addresses, Equifax's data assets extend substantially as our capabilities across identity and fraud globally. Moving now to slide 6, we believe the identity validation and fraud prevention markets will deliver strong long-term growth for Equifax and that the combined Equifax and Kount are very well positioned to deliver new and differentiated solutions to this large and fast-growing marketplace. E-commerce was up over 20% in 2020 alone, while online banking was up 67%, and mobile wallet usage increased by 56%. Fraud is a growing issue, with our customer transactions shifting from cash to digital, alongside increased real-time payments. Online credit card fraud hit nearly $6 billion last year, with 40% of e-commerce merchants reporting an increase in chargeback fraud, and over 40% of merchants stating that their digital fraud slows their innovation and growth. The digital market macro clearly accelerated during COVID, and we see it continuing to expand. The combination of Equifax and Kount can protect these new distribution channels while evaluating high-risk transactions in real-time. Balancing fraud with the user experience serves as a growth platform for customer e-commerce activities while simultaneously enabling trust and confidence. Both Kount and Equifax will leverage their extended predictability through our combined data. Kount brings Equifax into the fast-growing e-commerce and retail markets, while Equifax wins Kount into the banking, finance, FinTech, telco, and insurance markets. The scale of Kount's data assets, including 32 billion consumer interactions, 255 million identities, 400 million addresses, and a billion unique devices combined with Equifax's scale data assets is a powerful combination in this fast-growing market. Advanced data analytics, AI, and machine learning capabilities are more crucial than ever before in preventing fraud. The first suite of Kount products includes its next-generation AI and machine learning model combined with the cloud-based Equifax Luminate platform, which orchestrates multiple solutions with machine learning, and our patented NDT AI technology will provide risk managers with insights that only Equifax can deliver across the consumer account lifecycle. Kount also provides account takeover protection and transaction dispute management, two capabilities which Equifax did not have before to address heightened cyber security and fraud payment activity. We were energized to close the Kount acquisition yesterday, and we are excited to have the Kount team joining Equifax, along with the strong growth potential the combined Kount and Equifax have in the fast-growing identity and fraud marketplace. As you see on slide 7, while Kount is our most sizable transaction in recent years, we are ramping up our bolt-on M&A focus to expand and strengthen Equifax's capabilities, closing two other transactions in recent days focused on decisioning and alternative data. We acquired the minority position we did already own of CreditWorks in Australia. CreditWorks is a low-cost, flexible, modular trade credit decisioning platform that targets the SME segment, which is a key growth driver for activities in the region. In the UK, we acquired AccountScore, our partner in the UK open banking solutions and a provider of bank transaction data categorization, analytics, and consent technology. AccountScore also has a license in the UK where open banking is accelerating. Importantly, its capabilities will be integrated into our Interconnect and Ignite platforms. We're investing our 2020 outperformance and leveraging our strong balance sheet and cash generation, with bolt-on M&A being central to our future growth strategy. Our cloud data and technology platforms allow us to integrate acquisitions more quickly and drive synergies. Continued expansion of our data assets and capabilities through acquisitions is a priority for Equifax in 2021 and beyond. Turning now to slide 8, Equifax's performance in 2020 was very strong with sequential improvements in both total and core revenue as we exited the year. Our business model is resilient in delivering during the challenging COVID recessionary environment. We're energetic about our momentum as we enter 2021. Revenue in 2020 was $4.1 billion, up 17% with organic growth of 16.3%, which is the first time we've delivered over $4 billion in revenue, and the highest annual organic revenue growth rate in our history. Adjusted EBITDA was just under $1.5 billion, up 25%. EBITDA margin was 36.2%, up 240 basis points. Adjusted EPS at $6.97 was up 22%. We delivered double-digit revenue growth in all four quarters of 2020 with a 23% total and organic growth in the fourth quarter, a record for Equifax. We executed on our investments to accelerate and leverage our Equifax cloud data and technology transformation, including migrating more than 47,000 customers as of the end of the year onto our new Equifax cloud services. Leveraging our new cloud infrastructure, we delivered a record 134 new products while decreasing our NPI development time by one-third. 134 NPIs are well in excess of the 100 anticipated coming into 2020 and above the 120 we discussed with you in December. As we continue to leverage our new cloud capabilities, we expect to accelerate revenue growth for new products in 2021, a key driver of our long-term growth expectations. We're energized about our 2020 performance and we're already seeing the momentum of our unique Equifax model leveraging our new cloud capabilities as we move into 2021. Turning to slide 9, fourth quarter revenue at $1.12 billion was up 23% on both a reported and local currency basis, which is within our expectations in the framework of 17.5% to 20% that we shared with you in early December. M&A contributed just under 1% in the quarter. Our growth is once again powered by our US B2B businesses, USIS and Workforce Solutions, with combined revenue showing a very strong 36.6% and combined adjusted EBITDA margins of 50%. As a reminder, EWS and USIS now make up over 70% of Equifax revenue and 80% of Equifax business unit EBITDA. Their combined contributions to Equifax have grown 700 basis points in revenue and almost 750 basis points in EBITDA versus 2019, which is very powerful for the future of Equifax. Importantly, international also had a strong quarter delivering 3% revenue growth and over 34% adjusted EBITDA margins, outperforming our expectations in revenue while maintaining strong control over costs. Fourth quarter Equifax's adjusted EBITDA totaled $422 million, up 31% with a 215 basis point expansion in our margins to 37.8%. This margin expansion was delivered while making continued investments in our cloud transformation, new products, and data analytics that will drive future growth. Adjusted EPS at $2 per share was up a strong 28% versus 2019 despite incurring increased depreciation and amortization, and incremental cloud costs adding $0.16 a share, as well as increased interest expense of $0.05 a share from our second quarter bond offering. The $2 per share EPS exceeded our expectations within the framework of $1.75 to $1.85 shared with you in early December. USIS revenue of $387 million was up a very strong 17% in the fourth quarter with M&A contributing less than 0.5%. Total USIS mortgage revenue of $153 million was up 60% in the quarter while mortgage credit inquiries grew in line with our expectations, increasing by 55%. USIS mortgage revenue outgrew the market by 500 basis points driven by growth and share gains, marketing, and new debt monitoring products. Non-mortgage revenue performance strengthened substantially in the quarter, improving from down 6% in the third quarter and down 9% in the second quarter to just below flat improvement. Importantly, non-mortgage online revenue grew slightly in the quarter versus the declines of 5% and 11% we saw in the third and second quarters respectively. Banking, ID and fraud, commercial, insurance, and direct-to-consumer all showed growth in the fourth quarter, which is a positive sign for the future. Autos suffered a decline of 5% in the fourth quarter, an improvement from the 7% decline in the third quarter. Non-mortgage online revenue showed further improvement with growth of 5% in December and 6% in January. Banking, ID and fraud, insurance, and direct-to-consumer drove the growth in December and continued into January. We also saw autos returning to positive growth in January. Financial marketing services revenue, which broadly speaking, refers to our offline or data business, was $70 million in the quarter, down about 2% but a sharp improvement from the 9% decline seen in the third quarter. The relative improvement in the fourth quarter was driven by double-digit growth in identity and fraud-related revenue. We're seeing improving trends in marketing-related revenue, which was down under 10% in the quarter. As a reminder, marketing-related revenue represents about 40% of FMS revenue, identity 20%, and risk decisioning about 40%. The USIS team continues to drive growth in their deal pipeline with the fourth quarter up 15%, driven by growth in both volume and size of new opportunities. Fourth quarter win rates finished the year at 2020 times, switching to offense in both USIS and winning in the marketplace. USIS adjusted EBITDA margins of 43.5% in the fourth quarter were down 160 basis points from last year, which was principally driven by a much higher mix of mortgage revenue and mortgage products. Margins were also impacted by redundant system costs and investments in new products. Turning now to Workforce Solutions, they had another exceptional quarter with revenue of $406 million, showing a very strong 62%. EWS finished the year with revenue of $1.4 billion, an extraordinary accomplishment compared to their 2019 revenue of $950 million. Customers found incredible value in Workforce Solutions' unique TWN income and employment data assets and new products. The team's focus on penetration, pricing, new verticals, and record additions drove growth. EWS remains our most valuable and differentiated business with revenue growth rates far exceeding the rest of Equifax and highly accretive margins. Verification service revenue in Workforce Solutions amounted to $330 million, up 70% versus the fourth quarter of 2019. Verification services mortgage revenue more than doubled compared to the prior year for the third quarter in a row, growing almost 100 percentage points faster than the 55% growth we saw in mortgage market credit inquiries in the third quarter. Verification services non-mortgage revenue increased by about 15% in the quarter, up substantially from the 4% growth in the third quarter. During the fourth quarter, we saw significant growth in talent solutions, primarily driven by new products introduced in the second half of the year. We also witnessed strong growth in cards and autos. In cards, we've added two major customers that now use the work number broadly in the origination process. In autos, we're seeing expansion in the use of the work number in subprime loan approvals. We again saw strong growth in government verification services. Revenue growth in January continued strong levels delivered in the fourth quarter. Product services revenue of $77 million increased by 35% in the quarter, again driven by Unemployment Claims business which generated revenue of over $50 million, up 73% compared to last year. In the fourth quarter, Workforce Solutions processed about 2.6 million initial claims, which was a decline from the 3.4 million in the third quarter. EWS continues to process roughly one in five US initial unemployment claims. As a reminder, we expect our UC claims revenue to decline in 2021 as initial unemployment claims reduce from record levels set in 2020. Employee services non-UC claims business and revenue declined by about 6% in the quarter. Strong revenue growth in I-9 and onboarding services, driven by the acceleration of our new online Anywhere solutions, is more than offset by declines in workforce analytics and our tax credits business. We're seeing a positive shift to our new online Anywhere product suite, with new customer wins at much higher price points. We expect employee services' non-UC business revenue performance in the first quarter to improve relative to the fourth quarter and return to growth in the second quarter, as we move toward a more normal environment. Strong EWS verifier revenue growth resulted in adjusted EBITDA margins of 56.2%, over a 900 basis point expansion from the prior year, reflecting the power and uniqueness of the TWN dataset. Turning now to international, their revenue of $242 million is up 3% on a constant currency basis in the quarter, a significant milestone as the business unit returned to growth after very challenging second and third quarters. Asia Pacific, which is principally our Australian business, showed very good performance in the fourth quarter with revenue of $77 million, up about 4% in local currency versus last year, and better than our expectations from early December. Australia's consumer revenue was down about 5% versus last year, a significant improvement from the down 10% we saw in the third quarter. Our combined online and offline revenue in Australia is up 3% in the quarter. Again, a nice improvement from the up about 1% in the third quarter. Fraud and identity were up almost 20% in the fourth quarter. European revenues of $79 million were up 4% in local currency in the quarter; our European credit business was down about 3%, a significant improvement from the down 7% we saw in the third quarter. The improvement was driven by Spain, which saw revenue growth of 7% in the quarter. UK revenue was down about 8% in the quarter, consistent with the third quarter. Our European debt management business grew about 20% in local currency in the fourth quarter as the UK government restarted collections activity in late September. However, following the COVID measures implemented late in the fourth quarter by the UK government to address the pandemic, debt collections were again halted late in the year. We expect debt management revenue to decline by about 10% in the first quarter, reflecting these actions but expect an improvement once vaccines are widely distributed and we return to a more normal mode. Latin American revenues of $46 million declined about 2% in the fourth quarter in local currency, which was a significant improvement from the down 6% we saw in the third quarter. Notably, Chile, the largest country in Latin America, delivered revenue growth in the quarter. Latin America continues to benefit from the expansions at Ignite and the migration of customers to our global cloud-based Interconnect SaaS decisioning platform. We're also seeing benefits from the strong new product introductions in the region over the past three years. Canadian revenue of $41 million was up about 3% in local currency in the fourth quarter, which was also positive. Consumer online was down just over 5% in the quarter, consistent with the third quarter, meanwhile, growth in analytic and decision solutions helped drive revenue in Canada during the quarter. International adjusted EBITDA margins at 33.8% were up 150 basis points sequentially, but down 260 basis points from last year. The decline versus the fourth quarter last year was principally driven by redundant systems costs stemming from cloud investments and low-income minority investments. Global consumer solutions revenue at $76.9 million was down 13% reported in local currency in the quarter as we expected. The global consumer solutions performance was very strong in our consumer direct benefits channel and event-based businesses, which grew over 10% on a combined basis in the fourth quarter. The decline in overall GCS revenue was driven by our US lead generation partner businesses. As we've discussed previously, our US lead generation partner revenue was significantly impacted by the COVID recession that began in the second quarter. The declines in this revenue increased through the fourth quarter. Accordingly, we expect declines in total GCS revenue in the first quarter to be just over 50%, similar to fourth quarter levels. We expect a moderation in total GCS revenue decline as we move into the second quarter. Our global consumer direct business, which we sell directly to consumers through Equifax.com, representing about half of total GCS revenues, showed solid growth of 9% in the fourth quarter, the highest growth rate since 2017. Our North American consumer direct business revenue was up a solid 10% versus last year, and we continue to see sequential subscriber growth in the US and Canada, our two largest markets. Our GCS consumer direct business will complete the migration of their customers onto the new cloud-based platform, Renaissance, in the first quarter. This will allow for a renewed focus on new product and service introductions to consumers in the second half of 2021. Our benefits channel and event-based businesses, now representing about 10% of global consumer solutions revenue, also delivered about 30% growth in the quarter. GCS adjusted EBITDA margins of 20.9% were down about 610 basis points, principally reflecting the increased platforms spend as they complete their cloud systems migrations, increased marketing spend to drive future direct revenue, and the lower lead generation partner revenue we talked about. Slide 10 provides an updated view of Equifax's core revenue growth. As a reminder, core revenue growth is defined as Equifax revenue growth excluding extraordinary revenue growth in our unemployment claims business in 2020 and 2021, as well as the impact of US mortgage market activity as measured by changes in total US mortgage market credit inquiries. In the fourth quarter, Equifax's core revenue growth was up a very strong 11%. This is up significantly from the 6% core revenue growth we delivered in the third quarter, driven by strong Workforce Solutions in USIS outperformance as they continue to deliver mortgage revenue growth rates well in excess of US mortgage market credit inquiries, alongside a significant improvement in revenue performance from our non-mortgage business in the US, as well as a return to growth in international markets. A critical level in our ability to deliver high levels of core revenue growth is our deep and broad array of new products and solutions for the US mortgage market, along with the ability to consistently outgrow the underlying market. Slide 11 highlights the strong core growth performance in mortgages for our US B2B mortgage businesses, Workforce Solutions and USIS. EWS and USIS outgrew their underlying US mortgage market significantly in 2020, with combined core growth of 37%. This outperformance was driven strongly by Workforce Solutions’ mortgage revenue core growth at 80% in 2020, which exceeded mortgage market growth rates by a staggering 80 points during the year. Key drivers of the strong EWS performance include increased market penetration, larger fulfillment rates, and new product records. EWS has a long history of outgrowing their underlying markets. USIS also delivered strong core revenue growth in mortgages in 2020, with growth exceeding the market by 8%, primarily driven by new debt monitoring solutions with further marketing support. Our ability to substantially outgrow underlying markets is core to our business model and is a significant strength that should continue to benefit Equifax in 2021 and beyond. Turning to slide 12; Workforce Solutions continues to deliver outstanding results and is clearly our strongest and most valuable business. Workforce Solutions total revenue grew sequentially during 2020 to 62% in the fourth quarter, and 51% for the year. More importantly, core revenue growth accelerated throughout 2020 with core growth at 37% in the fourth quarter, up from 30% in the third quarter and 27% for the year. This outperformance and sequential improvements reflect the uniqueness of the TWN data and the power of the Workforce Solutions business model. Rudy Porter and his team have built a business with strong, long-term growth levers, illustrating the value of their scale and differentiated TWN income and employment data, the depth, breadth, and scale of the TWN database, and then leveraging our verification network of over 20,000 customers is driving substantial growth in value. In 2020, Workforce Solutions aimed for 114 million active TWN records, an increase of 10 million active records during a difficult period of high US unemployment. Of these 114 million active records, over 60% are contributed directly by employers to Workforce Solutions which the team has built up over the past decade. The remaining 40% are attributed through partnerships, many of which are exclusive. Just last week, we signed a new exclusive partnership with a major payroll provider that we'll be integrating into Equifax with their work number later this year. As we monetize our record additions immediately through our strong network of over 20,000 verification customers, the uniqueness of the TWN data is clear. Rudy and his team continue to rapidly expand the number of mortgage companies and financial institutions with whom we have built real-time system integrations. For example, 65% of mortgage transactions are now processing through system-to-system integrations in Workforce Solutions. These integrations are now expanding into our verticals as well as across our growing government business. We also expect our new verification solution for the Social Security Administration to go online in the first half of this year, which will deliver incremental revenue for Workforce Solutions. The Workforce Solutions new product pipeline is also rapidly expanding with new products across mortgage, channel solutions, government and I-9, with new product revenue expected to increase substantially in 2021 and 2022. In 2021, Workforce Solutions verification service infrastructure will be fully cloud-native, providing the industry's leading cloud-native data and technology platform that will further accelerate data ingestion, massive additions of employee contributors to the clean database, and new product capabilities leveraging this unique and scalable TWN data asset. In slide 13, let's now discuss some of the favorable market and macro trends. Before COVID, the macro trends on the left side of the slide had already begun to manifest themselves. COVID has driven a rapid acceleration of digital and online consumer interactions, requiring improved real-time decision-making, which demands more complete and more recent information from a broader set of data assets, including alternative data sets that are critical for reducing friction in consumer transactions, ensuring certainty of identities, and minimizing credit and fraud risks. Effectively utilizing these expanded requirements for data decisioning has accelerated the need for advanced analytics, including machine learning, as well as the need for effective data governance ensuring the ability for consumers to acquire control, while the seamless delivery of these capabilities continues to advance. High performance has always been table stakes in our space. Given these accelerating trends, the implications for Equifax are that the demand for our unique datasets and integrated insights has never been stronger, including those involving our powerful TWN income, employment data, and our identity and fraud prevention solutions, including those acquired from Kount, targeting the e-commerce and retail space, our trust-enhancing solutions improving the overall digital experience for consumers. I'll now hand it over to John to provide our 2021 guidance, and I'll come back to wrap up.

Thanks, Mark. Now let's turn to slide 14 and our economic and market assumptions for 2021. In December, we provided you with a framework for revenue and adjusted EPS for 2021, as well as the basic assumptions underlying that framework. Our current view of 2021 and the guidance we're providing are consistent with that view, as are the basic economic and market assumptions underlying them. However, the progress with COVID-19 vaccines and expected substantial additional economic stimulus is promising for the 2021 economic recovery. There remain significant uncertainties regarding the timing and pace of economic recovery in the US as well as internationally. Consistent with our discussion in December, our 2021 guidance assumes that US mortgage market credit inquiries will remain strong in the first half of 2021 but decline in the second half. We assume 2021 credit inquiries overall to be down about 5% versus 2020. The first half will see credit inquiries up almost 15%, while the second half will see inquiries down over 23%. For perspective, we anticipate that US credit inquiries in the first half of 2021 will grow about 6% from the strong levels in the second half of 2020. January was strong and confirms this trend. Equifax US B2B mortgage revenue from EWS and USIS will continue to significantly outpace the overall mortgage market growth of over 10%. US economic recovery is expected to start early in the second quarter of 2021, with projected GDP growth of over 3.5% for the full year. We expect USIS and Workforce Solutions' non-mortgage businesses to outperform their underlying markets. EWS's talent solutions and government businesses should also significantly outperform. Workforce Solutions Unemployment Claims business is expected to be down over 35% versus 2020. And we expect that international economies will also recover in 2021, starting in the second quarter with estimated full-year GDP growth of about 2.5% in Australia, over 5% in the UK, and over 5% in Canada. Our international business is also expected to outperform its underlying markets. The US mortgage market has continued to be very strong, driven by both record refinancings and home purchases, as shown on the left side of slide 15. As of December, Black Knight estimates that about 16.5 million US mortgages could still benefit from refinancing based on the current record low interest rate environment. While down from September's record levels, there remains significant runway in the refinance market as refinance candidates continue to be markedly higher than previous refinance activities during the 2016 financial crisis and the global recession of 2008. Given the current pace of mortgage refinancing, which trends towards nearly 1 million per month based on data through August, we expect elevated levels of refinancing to continue well into 2021. On the right side of slide 15, the pace of existing home purchases further strengthened in 4Q, reaching an annualized rate of 6.8 million as of December, up from 6.5 million in September. The trend of families seeking more space for work-from-home arrangements is continuing, further supported by record low mortgage rates. Slide 16 provides specifics of our 2021 guidance, including the bridge between the midpoint of our 2021 revenue and adjusted EPS guidance and our 2020 results. Our 2021 revenue is expected to be between $4.35 billion and $4.45 billion, reflecting growth of about 5.4% to 7.8% versus 2020, with FX positively impacting revenue by about 1.5%. USIS revenue is expected to see mid-single-digit growth in 2021, which includes the benefits of the Kount acquisition. EWS will continue to deliver double-digit revenue growth, with continued strong growth in verification services. International revenue is expected to deliver constant currency growth in the upper single digits, strengthening beginning in the second quarter, reflecting the assumed economic recoveries I discussed earlier. GCS revenue will be down mid-single digits in 2021. Revenue is expected to decline over 15% in 1Q 2021, reflecting the weakness in US lead gen partner revenue that Mark discussed earlier. However, we expect improved performance as we move through 2021, driven principally by continued growth in our Consumer Direct business. As a reminder, in 2021 Equifax will include all cloud technology transformation costs, previously excluded from adjusted operating income, EBITDA, and EPS from 2017 through 2020. In 2021, Equifax will incur one-time cloud transformation costs of approximately $145 million, a reduction of about 60% from the $358 million incurred in 2020. The inclusion of these costs in our 2021 adjusted EPS is expected to reduce adjusted EPS by about $0.90 per share. Our 2021 adjusted EPS is projected to be between $6.20 and $6.50 per share, reflecting a decrease of approximately 7% to 11% from 2020. Excluding these transformation costs of $0.90 per share, adjusted EPS in 2021 would show growth of about 2% to 6% versus 2020. 2021 is also negatively impacted by redundant system costs of nearly $60 million compared to 2020, negatively affecting adjusted EPS by approximately $0.37 per share and negatively impacting adjusted EPS growth by about five percentage points. Additional assumptions included in the 2021 guidance are capital spending estimated to be around $400 million. Depreciation and amortization, excluding amortization of acquired intangible assets, is expected to approach almost $310 million, which includes about $10 million of D&A from acquisitions completed so far in 2021. Interest and other income net are expected to be slightly negative in 2021 versus 2020. Our tax rate is expected to increase from 2020, slightly above 24%. Combined corporate and corporate technology costs are expected to be approximately $485 million, with about three-quarters of the increase from 2020 driven by the inclusion of technology transformation costs, with remaining increases primarily in security and corporate technology. Slide 17 provides our guidance for 1Q 2021. We expect revenue in the range of $1.105 billion to $1.125 billion, reflecting growth of about 15% to 17%, including a 1.9% benefit from foreign exchange. We anticipate adjusted EPS in 1Q 2021 will be between $1.45 and $1.55 per share, compared to 1Q 2020 adjusted EPS of $1.43 per share. In 1Q 2021, technology transformation costs are expected to exceed $45 million or $0.28 per share. Excluding these costs, which were excluded from 1Q 2020 adjusted EPS, 1Q 2021 adjusted EPS would be between $1.73 and $1.83 per share, up 21% to 28% from 1Q 2020. Slide 18 provides a view of Equifax's total and core revenue growth from 2019 to 2021. The data provided for 1Q 2021 and full year 2021 reflects the midpoint of the guidance ranges we have provided. In 2021, we expect core revenue growth of over 10%, mirroring the strong levels delivered in 4Q 2020 and building momentum for 2022. Slide 18 also provides revenue growth from acquisitions for 4Q 2020, the calendar year 2020, and expected levels for 1Q 2021 and calendar 2021. For your reference in the appendix of this presentation, we've included slides that provide more detail on 2020 performance and 2021 guidance. They include 2020 revenue trend details for 2Q 2020 through 4Q 2020. Details on the pension accounting change we completed in 4Q 2020. Further detail on our 2021 guidance, including both our expectation for US mortgage market credit inquiries in 1Q 2021, Q2 2021, and the second half of 2021, as well as an update to the 2020 through 2022 Cloud transformation cost benefits framework we shared with you in December. With that, I'll turn it back to Mark.

Thanks, John. Turning to slide 19; we made significant progress on our cloud data technology transformation in the second half of last year. Progressing through the data product and customer migration stages of our North American technology transformation. The pace of product and customer migrations continues to accelerate, and as of year-end 2020, USIS completed over 12,000 customer migrations onto cloud-based services including our Interconnect, Ignite, and API capabilities. Workforce Solutions also completed over 26,000 customer migrations in verification services onto its cloud-based portals and online fulfillment platforms. This represents over 95% of the Workforce Solutions verification services customer base. As we discussed earlier, global consumer will complete the migration of all Consumer Direct customers onto its transformed Renaissance platform over the next several months. Across North America, we remain on track to have our US customer migrations completed principally during 2021. Our North American exchange migrations also continue to progress well toward our 2021 goals, including our major North American exchanges for US and Canadian consumer risk, the work number, and NCTUE exchanges. In 2021, we're accelerating the migration strategy to the data pack in Europe, LATAM, and Asia Pacific. Europe and Latin America have already made substantial progress in deploying Interconnect, Ignite, and our API frameworks in the cloud. As of the end of the year, international had migrated over 9,000 customers onto cloud-based services. In 2021, our focus will be on product and customer migration to accelerate the decommissioning of legacy systems and data centers to deliver customer benefits in Equifax cost savings. We will continue to ramp our focus on delivering new products, and NPI revenue by leveraging our new cloud-native data and technology infrastructure. 2021 is a critical year as we drive toward completion of our North American transformation. We remain committed to achieving the substantial top and bottom line benefits from the cloud we discussed previously. The Equifax cloud-native data InTech infrastructure is providing meaningful benefits in the marketplace today and that will further differentiate Equifax as we complete the transformation. Turning to slide 20; this highlights our continued focus on new product innovation, which is a key component of the next chapter of growth at Equifax as we leverage the Equifax cloud for innovation and new products. We continue to focus on transforming our company into a product-led organization powered by the best-in-class cloud-native data technology to fuel our top-line growth. In 2020, we further invested in NPI resources while leveraging our new Equifax cloud capabilities to deliver 134 new products above the 120 we discussed in December and our historical 70 to 90 NPIs annually. Importantly, in 2020, over 50% of the new products were delivered leveraging our cloud-native data and technology. In our December investor update, we shared several products introduced in 2020 that will have the opportunity to drive significant revenue in 2021 and beyond. Response Confidence, launched by USIS, offers tools that empower our customers to enable consumers to share alternative data currently available in credit reports. USIS also launched OneView, a configurable consumer report that will allow consumer credit data to be combined with any other Equifax consumer data asset to create an easily consumable and configurable multi-data asset report. In the first quarter, OneView will incorporate TWN income employment data along with consumer credit and our other differentiated Equifax data assets. Workforce Solutions continues to expand its suite of new products focused on the hiring process. Our new Talent Select suite of VOE solutions provides easy access to all or a subset of Workforce Solutions data on a candidate across varying price points with fulfillment-based pricing. In mortgage, Workforce Solutions has launched new products to support lenders' needs to combine TWN employment and income data to tax return data. The new product simplifies lenders' processes by providing individual or multiple borrower information per loan via a single transaction from Equifax. In Employer Services, our I-9 Anywhere product creates a more efficient and low-touch onboarding experience. The product allows a new hire to initiate their application from any device, such as a phone, tablet, or computer via our I-9 app. The new hire then schedules the completion of their application from a nationwide network of over 1,300 locations at a convenient time and location of their choice. The I-9 Anywhere product improves accessibility for employees and off-site locations, streamlining paperwork and speeding up the onboarding experience for the employee, hiring managers, and human resource professionals. With our strong new product launches in 2020, we expect to accelerate our NPI revenue growth in 2021. Many of our NPI revenues are defined as the revenue delivered by new products launched over the prior three years. Our vitality index is defined as the percentage of current year revenue from new products. In 2021, we expect NPI revenue to increase by over 75%, with our vitality index exceeding 7%, which is a substantial improvement from the past three years. Continued expansions of innovation products leveraging the Equifax cloud are central to our strategy and future growth priorities. Wrapping up on slide 21, Equifax finished a challenging 2020 in the COVID environment with record revenue and earnings and strong momentum as we enter 2021. Our 11% core growth in the fourth quarter reflects the strength of our business model. Our estimated 6.6% growth in 2021 at the midpoint of our range, while still in the midst of the COVID recession reflects the resiliency, strength, and momentum of the Equifax business model. We are delivering this growth given our expectations that we will see an economic recovery in the second quarter, and that US mortgage market activity will decline by 5% in the second half. Core revenue growth of over 10% in 2021 reflects the strength of our business model as new products and expansion of our data assets allow us to outperform in a still uncertain global environment. Workforce Solutions will continue to power Equifax as our operating performance in 2021. The work number is our most differentiated data asset and Workforce Solutions is our most valuable business. It's likely that Workforce Solutions will become our largest business in the very near future. Rudy and his team are driving outsized growth by focusing on their key levers, including new records, new products, penetration, and expansion into new verticals. We also expect our USIS mortgage business to continue to outgrow the underlying mortgage market. Additionally, we are energized by the outlook for USIS's non-mortgage performance and the momentum from the fourth quarter from both organic growth and new products, and the growth we expect from Kount. USIS is competitive and winning in the marketplace and will deliver in 2021. The return to growth in the international sector in the fourth quarter is also a positive sign, and we expect that to continue in 2021 as their underlying markets recover. We are encouraged by improving conditions across our international portfolio and expect international to outperform these underlying markets. We are also transitioning from building our cloud capabilities to leveraging our new Equifax cloud data and technology to drive innovation, new products, and growth. We remain confident in the significant top-line cost and cash benefits from our new cloud capabilities. These financial benefits are expected to ramp up in 2021 and be enabled by our always-on stability, speed to market, and the ability to rapidly build and move products around the globe. Our strong operating performance, robust balance sheet, and Equifax cloud data and technology platforms position us to enhance our capabilities through M&A. We are building our acquisition pipeline while pursuing accretive bolt-on transactions that will strengthen the core of Equifax and meet our stringent criteria. Given our very strong financial performance, strong cash generation in 2020, robust balance sheet, and our confidence in Equifax's future, we are restarting our share repurchase program at an expected level of over $100 million in 2021 to offset dilution from employee benefit plans. We view this as a positive step forward in returning cash to shareholders. While the COVID recession and recovery still presents uncertainties, we have high confidence in our business model and ability to perform. We are seeing strong momentum on all fronts as we move into 2021. Equifax is outperforming in this challenging COVID recessionary environment. We are in a strong position to leverage the Equifax cloud for innovation of new products to drive future growth, margins, and cash generation as a market-leading data analytics and internet technology company. With that, operator, let me open it up for questions.

Thank you. Good morning, and I appreciate the detailed business and guidance update. Could you maybe dig into the outlook for EWS a bit more? You called out double-digit revenue growth expected. Can you be a little bit more precise there? Is that approximately 10% or something potentially much higher? And is it possible to drill down a bit into growth expectations for employer services and verification, and finally close on your expectations for record growth in 2021?

Yes. We believe and we've discussed that Workforce Solutions is clearly our most differentiated business. When we talk about strong performance in 2020, it follows from their performance in 2017, 2018, and 2019. They have a long history of growth and a variety of levers for growth. Our specific guidance around workforce revenue growth isn’t something we want to go into detail on except to say we expect it will again outgrow their underlying markets in 2021 and that will be in double digits. Workforce Solutions has a range of levers at their disposal for growth, especially their ability to add records is a powerful lever. We added records throughout 2020, and those are monetized right out of the gate as soon as we add them to our database. We expect to grow records quite confidently in 2021. Additionally, we signed a significant agreement just last week with a large payroll processor for exclusive record contributions, which will drive our record growth going forward. Regarding verification, it's among the strongest and largest parts of Equifax and it's also a very high-margin business. We anticipate solid growth in that area as the market improves and the economy stabilizes post-vaccine. Specifically, we have impressive growth expectations around our I-9 solution, which has been gaining substantial traction. Overall, we feel very encouraged about the government segment, which we expect to grow nicely, supported by new contracts and continued solution development for federal, state, and local governments.

On the talent solutions side, we anticipate notable improvements along with our I-9 Anywhere. As Mark mentioned, our I-9 solution is uniquely positioned and gaining traction because of its value proposition. Overall, we feel very good about Workforce Solutions and the positive outlook across all segments.

I appreciate that. Just as a quick follow-up, do you see any ceiling on operating margin expansion for EWS? Can this business get above 60%, or will reinvestment keep it around mid-50s?

I don't think we need to invest simply to maintain margins at a certain level. Our investment decisions are primarily based on where we see accretive returns for our shareholders. We've been reinvesting significantly in the workforce sector and in USIS over the last few years, including investing in cloud transformation over the last year as well as new product innovations. There is, though, a long growth potential ahead for Workforce Solutions. Our expectation is that Workforce Solutions will eventually become our largest business unit, which we believe is very beneficial for Equifax and our shareholders, given its highly accretive revenue growth and margin profile.

Moreover, Workforce Solutions will also focus on acquisitions, making it a prime target area for potential growth investments across various parts of the business.

Hi there. Just for clarity, could you state what the organic revenue growth is assumed for the 2021 guidance at the midpoint? Has this estimate changed since the December call, particularly regarding Kount revenues?

Yes, on slide 18, our guidance includes about 1.2 points from acquisitions, which includes Kount revenues. Kount's revenue isn't included for the entire year, as it just closed recently, so that contributes a bit to the inorganic growth. We still believe our organic growth is around 10.5%, and that guidance remains in line with where we set the bar in December. There are still uncertainties around recovery from COVID, so we must consider that in our forecasts as well.

To provide more context, between our frameworks in December and today, we are observing an increase of about $75 million on both the top and bottom ends. This reflects the Kount contributions, as well as some foreign exchange benefits. It also represents the fact that our outlook assumes some risk concerning the timing of the recovery in the US and other economies.

Great. Thanks. Can you provide a sense of how the shift to the cloud is impacting both the pace and cost of new product innovation? From the end of the year with 134 products launched, how should we think about that pace in 2021? And can this lead to a faster growth rate for organic revenue?

Yes, that's a fantastic question. We truly believe that leveraging our cloud investments is fundamental to our strategy and will significantly enhance both our technology and data capabilities for innovation and new products. Throughout 2020, we increased our investment in product resources to capitalize on our cloud investments and ensure we effectively deliver new products to the market. As you mentioned, the delivery of 134 new products is a major increase from our historical rates, and these products are now available for our commercial teams. Regarding core growth assumptions for 2021, NPIs will play an important role, along with expected improvement in our business model linked to our cloud capabilities. The expectation for our vitality index for new products is set at 7%, which will drive organic growth significantly over time.

Keep in mind, new products tend to deliver the majority of revenue in their second or third year of existence. So we are excited about our strong new product introductions in 2020, which will benefit both our vitality index and revenue contribution notably in 2021 and beyond.

Got it. That’s a helpful overview. As for the buyback, can you pinpoint how quickly you can be back in the market?

We typically start the buyback quite rapidly and plan to scale it throughout the year. This move reflects our confidence in Equifax's future and signals a positive step forward in returning cash to shareholders.

Thank you. Assuming that your mortgage market outlook is correct and slows in the second half, how do you see the delta between your mortgage performance and the market? Will that delta change in a slower market? Or will it remain roughly similar due to your capabilities?

That’s a great question, Toni. We should separate USIS and EWS because both can leverage new products effectively amidst market changes. Workforce Solutions has more flexibility because its data usage is distinct from that of credit filers. If we look historically, they have been able to adapt and outperform, illustrated by consistent share growth even during less favorable conditions. We anticipate similar growth despite inevitable market fluctuations because of unique data offerings and ongoing innovations we've implemented.

You’re correct that lower activity levels can impact growth rates; however, as Mark pointed out, our strong performance relative to the underlying market has consistently shown resilience, and we expect continued outperformance moving forward.

Good morning. About the fraud business, could you elaborate on what's different about your offering? Regarding Kount's strong patent portfolio, how can you repurpose some of those standards across your current portfolio?

Equifax has a considerable identity fraud business and we see lots of potential for growth moving forward. The market macro is attractive as digitization grows, leading to increased demands for identity verification and authentication. The acquisition of Kount is central to this, and their data combined with ours greatly enhances our capabilities to provide insights and security solutions. Kount's data includes 32 billion interactions, significantly expanding Equifax's data portfolio. This makes our offerings much stronger, especially in the retail and ecommerce sectors where Kount has existing traction. Additionally, we will leverage Kount's patent portfolio alongside our technology to enhance our capabilities in fraud prevention.

Thank you for the clarity on growth expectations. In looking at your historical core growth of around 8% pre-breach and then lower figures in 2018 and 2019, how do you view a normalized level of core growth moving forward? Is it around 8% or perhaps lower?

We're not ready yet to set specific long-term framework growth targets but I hope to provide guidance sometime in 2021. We feel confident in the core growth capacity we see in 2020 and are looking to ensure that momentum is sustainable through this coming year.

Good morning. A question on the EWS segment. Have you noticed any changes in the competitive environment or new business wins due to a recent offering from one of your big competitors? Any momentum change in recent months in the sector?

We've not witnessed any significant commercial traction from competitors thus far. Our confidence lies in the scale and unique data-driven models we have built in the Workforce Solutions business. Our database strength—anchored on a decade of expansions—gives us an edge despite external challenges. Recently, we've also executed an exclusive agreement with a major payroll processor, which further emphasizes the increasing value of Equifax's capabilities.

Thanks. As a follow-up on the GCS business, can you discuss what it would take for your partners to start increasing their marketing spend to help drive improvements in this segment?

You're spot on; it hinges on economic recovery and confidence at the issuer level, specifically the card issuers who dominate our lead generation space. While we see promising improvements in revenue, the cautious nature of these issuers is reflective of uncertainty surrounding the economic landscape. Our sentiment is improving going into 2021, especially with the fundamentals of the non-mortgage business showing promising growth.

Exactly. We are keen on seeing that Consumer Direct business grow as well because it continues to show positive momentum.

Thank you. Good morning. Just regarding the organic growth, could you clarify, as it appears your December guidance suggested around 6% organic growth? Now it seems to be suggesting a range of around 2.5% to 5%. Is this due to the tough comparisons created in Q4 or is it reflective of a shift in expectations?

To clarify, our strong performance in December has substantiated our growth overview for the year ahead. We have pulled in a strong performance through 2020, as noted and expect solid performance throughout this year; thus, we believe 10.5% organic growth is achievable.

Additionally, from a performance standpoint, between our frameworks in December and today, we noted an uptick of approximately $75 million on top and bottom lines, which is due to Kount factors, FX benefits, and overall expectations of recovery which we continuously reassess.

Good morning, guys. Could you elaborate on your thoughts regarding new payment products like 'buy now, pay later'? How are your FI issuer customers responding to this shift? Could it potentially impact your business?

The conversations with our customers have been largely centered around opportunities created by these new payment products. We see it as a positive market dynamic, as it leads to more lending opportunities. However, it requires them to authenticate and underwrite accurately, which gives us a chance to assist in that process. In essence, we believe we'll see growth in our services for these issuers, allowing them to compete effectively.

Thank you. Mark, you’ve shared insights on the revenue share partnership dynamics with contributors in the past. Could you clarify if exclusivity is the key ask and the rationale behind these relationships?

You hit important points; exclusivity is significant, especially for our larger partnerships. They view having a single partner is easier for them to navigate, and they value our long-standing reputation in the market. We also extend a strong value proposition because we drive customer benefits efficiently. In essence, our scale, fundamental business model, and data resources provide a compelling reason for them to engage with Equifax exclusively.

Thank you. Can we discuss USIS margins in the recent quarter, John? What were the mixing issues or impacts on the margins? How do you expect to project incremental margins excluding tech transition costs for 2021?

Certainly! Margins were negatively impacted in the mortgage segment due to reselling costs and the associated expenses. As mortgage volumes increase, it puts downward pressure on our overall margins. Conversely, as mortgage volumes decrease this should improve the margin but there are many other factors to consider for 2021 growth metrics.

I appreciate that. As a broader strategy, do you anticipate this market will avoid dual sourcing as we've seen in other parts of the credit market, or is that potential?

We believe the market dynamics will remain most effective with single sourcing. Our track record and scale provide a good basis for competitive advantage here. The complexity of building these partnerships takes significant time and investment, which further bolsters our position. Our recent exclusive deals reflect the preference for single sourcing by industry participants.

Hi, thanks. Can you clarify whether you expect core revenue growth to reach 10.5% in 2021? How much of that growth will come from outperforming the mortgage market vs. other segments? Can you break down these expectations?

We anticipate core revenue growth will reach the target of 10.5% in 2021. We predict the non-mortgage revenue growth is expected to significantly contribute to that. As the year progresses, we expect non-mortgage revenue to drive more of our growth as it improves due to underlying economic conditions and recovery.

Thanks everybody for joining today's conference call. We look forward to engaging with you again in April when we release our first quarter of 2021 results. In the interim, myself, Mark, as well as John, look forward to engaging with you in different forums throughout the quarter. This does conclude our conference call. Thank you.