2024-04-18 15:39:09 ET
Equifax Inc. (EFX)
Q1 2024 Earnings Conference Call
April 18, 2024 8:30 AM ET
Company Participants
Trevor Burns – Senior Vice President, Head of Corporate Investor Relations
Mark Begor – Chief Executive Officer
John Gamble – Chief Financial Officer
Conference Call Participants
Manav Patnaik – Barclays
Andrew Steinerman – JPMorgan
Kyle Peterson – Needham and Company
Heather Balsky – Bank of America
Owen Lau – Oppenheimer
Shlomo Rosenbaum – Stifel
Faiza Alwy – Deutsche Bank
Andrew Nicholas – William Blair
Surinder Thind – Jefferies
Kelsey Zhu – Autonomous Research
Jeff Meuler – Baird
Craig Huber – Huber Research Partners
Simon Clinch – Redburn Partners
Toni Kaplan – Morgan Stanley
Arthur Truslove - Citi
George Tong - Goldman Sachs
Presentation
Operator
Hello and welcome to the Equifax Inc. Q1 2024 Earnings Conference Call. [Operator Instructions] 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 Trevor Burns, Senior Vice President, Head of Corporate Investor Relations. Please go ahead, Trevor.
Trevor Burns
Good morning. Thanks. Welcome to today's conference call. I'm Trevor Burns. With me today are Mark Begor, Chief Executive Officer; and John Gamble, Chief Financial Officer. Today's call is being recorded. An archive of the recording will be available later today in the IR Calendar section of the News & Events tab on our IR website. During the call, we'll be making reference to certain materials that can also be found in the Presentation section of the News and Events tab at our IR website. These materials are labeled 1Q 2024 earnings conference call. Also, we'll be making certain forward-looking statements, including second quarter and full-year 2024 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 filings with the SEC, including our 2023 Form 10-K and subsequent filings. We will also be referring to certain non-GAAP financial measures, including adjusted EPS and adjusted EBITDA, which will be adjusted on 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 can be found in the Financial Results section of the Financial Info tab at our IR website.
Now I'd like to turn it over to Mark.
Mark Begor
Thank you, Trevor, and good morning. Turning to Slide 4, we're off to a strong start in 2024. First quarter reported revenue of $1.389 billion was up 7% at the high end of our February framework. Adjusted EBITDA margins of 29.1% were slightly above our expectations, and adjusted EPS of $1.50 a share was well above the high end of our guidance. Total U.S. mortgage revenue was up 6% in the quarter, stronger than expected. The strength in mortgage revenue was in USIS, where mortgage revenue was up 38% against credit inquiries that were down 19% and 700 basis points better than expected and continued strong performance in our new mortgage prequal products.
EWS mortgage revenue was down 15% and consistent with our expectations. Twin inquiries are down 22% was slightly better than expected, and this was offset by slightly lower than expected revenue per inquiry, principally driven by product and customer mix. Our global non-mortgage businesses, which represented about 80% of total revenue in the quarter, had strong 9% constant currency revenue growth, which is well within our 8% to 12% long-term revenue growth framework. This was slightly below our expectation of 9.5% non-mortgage revenue growth. Non-mortgage organic constant currency record growth was 5% in the first quarter.
At the BU level, EWS Verifier non-mortgage revenue was up a strong 15% and stronger than expected, driven by very strong 35% growth in government and good growth in auto and debt management, slightly offset by some verticals in talent. Employer revenue was down 10% and weaker than expected. This was principally driven by a more rapid decline in ERC revenue than we expected and delays in state government processing of WOTC claims.
ERC is now at a run rate of 103 million a quarter and should stay at about that level for the rest of the year. For WOTC, the federal requirement for states to validate WOTC claims changed late last year and most states have not yet completed the changes required to process claims, which dampened our revenue in the quarter. This impacted our WOTC revenue in the first quarter, but we expect this to be a timing issue as this essentially creates a backlog of WOTC submissions that will have to be completed by the states that will begin turning to revenue as state processing accelerates in the remainder of 2024.
Offsetting these declines in the quarter, we saw mid single digit growth in I-9 and onboarding revenue. And going forward, we expect employer revenue, including ERC, to be up low single digit percentages for the remainder of 2024. In total, EWS non-mortgage revenue was up 7% and overall EWS revenue was up 1% and adjusted EBITDA margins of EWS at 51.1% were over 50 basis points stronger than our expectations from strong operating leverage and strong performance. USIS had a very strong quarter with revenue up 10%, its highest quarterly revenue growth in three years, even against the 19% mortgage market decline. As I referenced earlier, mortgage revenue was up 38% and stronger than expected from mortgage and pricing pass-through and our new prequal solution.
Non-mortgage revenue was up 1% and was weaker than expected. Although we had very strong double digit growth in Kount and consumer solutions and mid single digit growth in banking and lending, we saw double digit declines in third-party bureau sales and low to mid single digit declines in Telco and Auto. In USIS, adjusted EBITDA margins were up – were 32.7% in the quarter and up about 70 basis points higher than our expectations. International delivered 20% constant dollar revenue growth and 6% organic constant currency revenue growth, excluding the impact of the BVS acquisition, both of which were above our expectations. Very strong growth in Latin America and Europe was partially offset by lower than expected growth in Asia Pacific.
International delivered 24.3% adjusted EBITDA margins, up slightly from our expectations. As you can see from the right hand side of the slide, we added a new strategic priority this year to focus on driving AI innovation. As mentioned in February, 70% of our new models and scores were built last year using AI and ML with a goal of 80% this year. In the first quarter, we exceeded this goal with 85% of our new models and scores being built with Equifax AI and Machine Learning. Equifax.ai, leveraging our proprietary data, Equifax Cloud and API capabilities, is a big area of focus and execution for Equifax in 2024 and beyond....
Read the full article on Seeking Alpha
For further details see:
Equifax Inc. (EFX) Q1 2024 Earnings Call Transcript