Equifax Stock

All right. Good afternoon, everybody. Thank you for being here at day 1 of our 24th Annual Financials Conference. My name is Manav Patnaik. I cover business and information services for Barclays. We're happy to kick off the afternoon session here with Equifax. We have Mark Begor, CEO; and John Gamble, CFO. So Mark and John, thank you for being here.

Thanks for having us.

Thank you. 2 weeks in a row with you.

Maybe, Mark -- yes, that's right. It's always a good time, a lot of information to digest.

Maybe just high level, let's just start off with the state of the consumer from the data that you're seeing. I think resiliency was a word you had used last week as well. But there are also concerns with oil that the gas is not cheap. Rates are challenged. So like how do you balance this for the rest of the year?

Yes. So we should probably separate what's happening in the mortgage market related to higher rates. Obviously, with where the 10-year went to touch 5 today, that's going to push mortgage rates up at 7 or north, and that's clearly having an impact on mortgage activity, particularly in refis, but also in the purchase side.

Your question is more around the consumer, which I always think about, and I think it's a great indicator of consumers are working, which they are, unemployment is low, which is very good. Employment is very high. That's always a good environment for the consumer. They have the capacity to repay and that means our customers are still out there originating. And I don't see a change in that.

Clearly, at the lower end, and you can go into kind of mid-market, as you point out, inflation, particularly fuel is having pressure. That lower-end subprime consumer has been challenged for quite some time. Really post-COVID, there's been an inflation that's been higher than anyone would like, which has clearly pressured that demographic. That is one where the subprime lenders 2 years ago kind of reset some of their originations, but it's fairly normal now. Clearly, with where inflation is, it's not good. It's not helpful for the economy. It's not helpful for interest rates. But broadly, with the consumer working, I think we're in good shape.

The other side is that our customers are still strong. Whether it's a bank or a financial institution or a fintech, they have strong balance sheets. They're managing themselves well. I think they're operating at a fairly strong level. They're obviously still originating as they would. That's what their business is. And we haven't seen any change of our customers changing cutoff scores, pulling back around thinking there's a change coming in the economy.

Now mortgage, clearly, with where rates are now, that's more challenging. That's one where we started the year expecting a slightly down mortgage market when we got to July, it was getting a little bit weaker through this first quarter and second quarter. And clearly, that has some pressure with where rates are now.

Got it. And John, maybe if you could remind us in the context of the guide that's there for the rest of the year, like mortgage rates have gone higher from the last time you spoke, gas prices. Is it still within the context of your guidance ranges that you had assumed?

Well, the guidance we gave in July is kind of what Mark indicated, right, that we were expecting to see -- overall, we're going to see a decline in the mortgage market in terms of originations, right? But obviously, we haven't updated our guidance since then, but obviously, you've seen rates move up meaningfully since when we gave guidance in July, right? So that will be -- and we've seen that impact on transaction volumes in the market over the last -- certainly over the last month.

Got it. Mark, maybe a little bit of a longer-term picture on mortgage. I mean we've been waiting for this recovery. It hasn't come. It sounds like it's at least delayed for the foreseeable future. Is -- can you meet your long-term guidance targets on the top line without a recovery?

Yes. I think we're all -- mortgage is down in the ZIP code of 50% from historic levels, mortgage activity. The good news is that even at these lower levels, there's still mortgage transactions happening. So we're building what I would call a population or a backlog of higher interest rate mortgages when there is -- when inflation does come under control, when rates do come down some, there's going to be a tailwind from mortgage activity. And we saw that you may remember pre the war in the Middle East. We saw that in the kind of the March time frame, rates came down slightly. We saw an uptick in refis. It only takes about 0.25 point. And John, there's what, 15 million mortgages now above 6%.

And there's almost 10%, right, over 6.5.

So there's a large population out there. And obviously, we'll see what the Fed is going to do on Wednesday. But I think the expectation is, clearly, the 10-year has moved up, expecting the Fed is going to do a rate increase. But at some point, the war has got to get resolved at some point, inflation from really fuel and oil should come under control, there should be an opportunity for rates to come down. We've been very clear that when there is a mortgage market recovery, it's all going to flow through to shareholders. And we've sized that, that at kind of today's levels, a normal mortgage market when it comes, and as you point out, it's harder to see today wi1th where the 10-year is.

But at some point, whether it's '27 or '28, there's $1 billion plus of incremental revenue available to Equifax and very high incremental margins. So I think $700 million plus of incremental margins, and that will flow through to our bottom line. That will flow through really to EPS, the dividend increase and the buyback, that excess free cash flow.

So to your question about do we deliver our long-term framework in a flat mortgage market? And the answer is yes. We've been very clear about that. We have a long-term framework to grow 7% to 10%. That includes a couple of points of GDP. So think about normal increases in economic activity across all of our verticals. We have a lot of confidence in our ability to deliver that 7% to 10% in a, call it, a flattish mortgage market, which we haven't seen in a long time. It's been on the other side. It's been declining really since COVID as rates continue to move up now with the impact from the war.

So we have a lot of confidence in that. With that comes 50 basis points of operating leverage in our margin expansion, which we think is quite powerful, very high cash conversion. And then our capital allocation plan that we put in place a year ago is our intention is to grow our dividend in line with the earnings, I think mid-teens excluding a mortgage market recovery. And then our excess free cash flow, we'll use for bolt-on M&A, but predominantly to buy back stock. And that's really our capital allocation model going forward.

Got it. Somewhat sticking to the mortgage market. Not a lot of activity on the mortgage industry side, but a lot of Twitter activity going on. So I want to touch on that a bit.

I think there's 39 tweets from Director Pulte in the last 10 days.

You can add on to today as well. So -- but just curious.

I did one on Friday. So I got to put a tweet out.

Maybe just to address that and just overall, like when do you think he's getting at and like what is -- I don't know if you've directly met him recently, but I know you said you were meeting the team broadly. So what is your kind of impression of what's going on here?

Yes. Our view and the dialogues that we've had with him and his staff is that he's been very frustrated around the FICO price increases. I think everyone knows it was a little over a year ago in July of last year when Director Pulte, the FHFA said they were going to allow lender choice around scores and adopt Vantage. Later -- really early this year, he and Secretary Turner said they were going to start accepting Vantage, which is owned by the 3 credit bureaus. And today's FICO price is roughly $10. We have a $1 Vantage price out there. So he's very positive around the Vantage adoption.

I think you saw really a week ago, Friday, he came out, I think it was Thursday night and said he was going to accelerate to full Vantage adoption. They had been phasing it in over time with lenders, and I think they were up to like 30 lenders were able to use FICO or Vantage for agency mortgages. As effective Friday, it's now all lenders.

So that's positive. That, from our perspective, is around driving that lender choice around using Vantage or FICO. I think as everyone in the room knows, the score is really used just in the prequal process to really give an early indication to the consumer in the marketing flow what their pricing would be off of the Fannie and Freddie pricing tables. And the score really helps deliver that. Once the application goes in, the score is not really used; the credit data is used from the 3 credit bureaus.

So there's been a big focus, I think, by the FHFA around driving to activate Vantage and now that's fully activated. And our dialogues with customers, the mortgage customers at $10 versus $1 is a huge difference. And we've gone to the industry and said we're going to maintain the dollar through 2027. So to give some visibility to drive adoption. But that delta, when you look at the cost of a credit file with the Vantage score versus a credit file with a FICO score, it's 45% lower. With Vantage, that's a ton of savings for the mortgage industry where somewhere in the neighborhood of 6, 7, 8 loans out of 10 don't close, right? They start in the process and don't close, so that's breakage and for the consumer. And the total is over $1 billion.

So our dialogues with the FHFA have been focused around how do we support the implementation of Vantage. That's continuing. I'll be in D.C. in a couple of weeks for more meetings with the regulators in Washington. I go there quite regularly, and we'll continue our dialogues with them.

Got it. And just on the pricing front, maybe a 2-parter. You're keeping $1 through '27. But longer term, how should we think about that? And then the second part is your beta file costs, how do you think about the pricing on that?

Yes. So the we don't give long-term guidance to our customers or to the Street. We have a long-term framework. But when I think about pricing of the credit score, the Vantage credit score, we're never going to have larger increases like FICO has been doing. It's just not our model. We're in this for the long haul. We're in this to support our customers. We don't think about pricing in that fashion. And when we think about pricing of the credit score, we're certainly going to keep it flat in 2027. We'll decide what we do post 2027, but we want to give real visibility to our customers so they can really drive adoption of the VantageScore in mortgage.

With regards to the credit file, we do modest price increases there. We'll continue those modest price increases, really reflecting our long-term framework, which is kind of mid -- a little above mid-single-digit growth, 6% to 8% growth in USIS. We're not in this to really drive price and price is not our only lever. We have lots of levers at Equifax around new products, around new solutions, going into new verticals. Price is only one, and it's not one that we use as a strong one.

Got it. And it seems like even though, as you said, it appears he's obviously not happy with FICO, it seems like you guys have been caught in the storm.

We're in the blast radius for sure.

Yes. And I guess he's now revisiting the idea of tri-merge to bi-merge. Just curious, I know we talked about this extensively last year as well.

Yes, I'm not sure if he's revisiting or if it's just still on the table for them to analyze. But we're collaborating. We have been and we're continuing to collaborate more so around why is tri-merge so important. And it's really quite basic because there's meaningful differences between the 3 credit bureaus credit files. And you look at the data, which is out there, there's 10 million U.S. consumers only on 1 of the 3 credit bureaus. So if you worry about bi-merge, they never get approved if you don't pull that file.

And then if you look at most of us in this room that are kind of near prime, prime -- I'm going to say prime. I'm going to say most of this room is prime as opposed to near prime. Most of us in this room, if you look at your credit score at Equifax, TU, Experian, it's likely 40, 50, 60 points difference to the average consumer. Like think about 60 million U.S. consumers that are in the core of financial services. Why? Because not every financial institution contributes data to all 3 credit bureaus. So you could have a bank or a fintech where it's only going to 1 of the 3, but not to the other 2, meaningful differences.

Now what does that mean in an application process? So if you were to go to a bi-merge, those consumers might not get approved. There's cutoffs. So if you only pull the 2 low credit scores for that consumer and not the higher credit score that has more data in it, they may not get approved. It will certainly result in price differences. If you're only pulling the 2, it's not going to cover the top 2 are typically used versus the bottom 2 if they were selected, that consumer could pay a higher price.

And when you think about federally guaranteed mortgages, the purpose of those is to promote homeownership in the United States and to provide access to government-guaranteed mortgages. If you're going to exclude people, that doesn't resonate well politically, and it's not a positive. The flip side is safety and soundness. If you're excluding some data from the underwriting, it results in having a more risky loan if some of those trade lines or data that's included is the bad trade lines. So you have a loan that's more risky than is realized because you don't have the full picture on the consumer.

Those are the reasons why we think tri-merge is so important and why we think it's here to stay. And when we meet on the Hill, we meet with treasury, we meet with all the constituents involved, they all understand that very clearly. So we'll keep collaborating with FHFA around why tri-merge is important.

The other point I'd make, Manav, is if you look at the most sophisticated lenders in the United States outside of mortgage or even in mortgage, if they're balance sheeting a mortgage loan, they're pulling tri-merge. Safety and soundness, approval rates. They spend a lot of money marketing. And then if you go in non-mortgage, where there's no requirements around whether it's 1B, 2B or 3B, the most sophisticated lenders pull tri-merge because they get a more complete picture on the consumer, they're able to approve more at lower losses because they have more data. So I think tri-merge is kind of fundamental because of the differences in the 3 credit bureaus data, and it's one we're just going to be a little more deliberate around sharing the facts around that, why it's so important.

Got it. And John, maybe if I could bring you in here. Just on the -- even last week, you talked about kind of the breaking down the mortgage revenues by the FICO pass-throughs and other items. But what's the real exposure here on tri-merge to bi-merge?

Sure. So if you take a look at the portion of the Equifax credit file that are sold into tri-merge, so our trended credit file, it's about 30% of total USIS mortgage revenue, which is think plus or minus $900 million, right? So substantial amount. But on Equifax that's $6.7 billion, it gives you some perspective on the size that you're talking about here.

I'd also add, and maybe we'll get to this in your questioning, but I just want to make the point, we're also investing heavily to make sure we differentiate our credit file when it is used in a 1 or a 2B environment. And I think we know that the mortgage credit file process has changed because of FICO pricing. If you go back 3 years ago, the pre-application or prequalification credit file pulls and score pulls were predominantly tri-merge. As FICO pricing went up, that's moved to more of a 1B pull. And then there's a 3B pull at application as required by the Fannie and Freddie and the FHFA.

Same thing in non-mortgage, most of that is a 1B pull in auto card and P-loan. I talked about the more sophisticated lenders. So we've been investing over the last 6, 9, 12 months to try to differentiate our credit file versus our competitors when it is used in a 1B pole. And we're adding -- I think everyone in the room probably knows, we're adding income and employment attributes that we have from the TWN data set to our credit file in mortgage. So we're adding that Mark's working, that Mark, in my case, works for Equifax, and we're adding an average of Mark's income last year.

Because remember, today, in a -- for 30 years, 40 years, in an application process in mortgage, all you're looking at is the credit score. You have no idea of the applicant's income during that marketing phase before application. All you know is Mark's credit score is 750, 680 or whatever. You don't know that he's working. You don't know if his income meets the debt-to-income DTI ratios that are requirement. There's no visibility in the historical process.

So we're adding that information, which we think is super valuable for the mortgage lenders to better manage their marketing funnel, like which consumer should I lean into or I'm spending money on to get to an application and then get to closing because I have confidence that they can close and open up that visibility around income and employment. So we're adding that information for free in order to drive share gains. We also have a very unique data set on cell phone, utility trade lines. So think about if you pay your streaming bill, your cell phone bill, your electric gas, water bills on time, those are very valuable attributes to add to the credit file because that data is not in the credit file. So we're adding that to our mortgage credit file, 54 different attributes, again, for free, to differentiate our credit file in that prequal process.

And then what I described around income and employment data, we're also doing on our auto, card and P-loan credit files in order to differentiate those going forward. And these are examples of things that we can do kind of post cloud that was super complex for us to do before we had really leading technology. And second, it's a great example of the differentiated data sets that Equifax has that really give us a lot of levers versus our competitors on how we go to market.

Got it. Just one more on this topic. I mean the MBA has been, I guess, pushing the idea of a single file and seems to be caught Director's attention as well. Is there anything to that? I mean, I guess it is quite common in the non-mortgage side of the equation, right, to do 1B, but just curious your thoughts there.

Yes. It's one where I would remind you that the MBA represents mortgage originators, not consumers. And consumers are the ones that are really impacted by this. There's no consumer advocates that are suggesting 1B versus the current 3B. I think you got to put it out at face of the MBA's view. And as a reminder, something like 6, 7 or 8 loans that are started in the pre-application process don't close. That's breakage costs for the lenders.

And that's predominantly been fixed in the prequal by going to a 1B. And then by the adoption of Vantage with the huge cost savings that come from Vantage, there's another lever where the industry is going to be able to pick up upwards of $1 billion worth of cost savings through that 45% cost savings of the credit file and score from Vantage versus FICO going forward. we think that answers the question for the mortgage industry.

Okay. Let's stick with government, but other aspects of it. Within your EWS business, your government business, last quarter, you gave us some new disclosures around ACV and renewals. Just can you just remind us of those numbers and just put it into perspective of how we should interpret that?

Yes. Just for everyone in the room knows, I think this is our Workforce Solutions business where we use our income and employment data for government social service delivery. As you know, there's almost 90 million Americans that get some form of social services. That's all needs-based, in income verified. So if you make less, you get more social services or you qualify. That's delivered by the states, but funded predominantly by the federal government. Almost $1 trillion a year is used in the delivery of social services. Think about Medicaid, Medicare, food stamp, SNAP TANF, rent support, child care support, all kinds of social services. The average recipient gets over 5 different services. So all income verified.

This is about an $800 million business for us. It's about a $5 billion TAM. Most of the states -- and I think as I mentioned earlier, the federal government pays for most of the social service dollars. The states distribute it and are responsible for doing the verifications under the requirements of each social service of each of the applicants around their income and employment.

So very attractive business for us, one that we've been growing quite rapidly. As Manav points out, we had a very attractive kind of 3, 4 months in the second quarter of commercial activity. And what's really changed in the last year or so is the big focus on the current administration around the integrity of government social services. I mentioned that there's about $1 trillion of payments that go out. The government has quantified just under $200 billion of improper payments. Improper payments being someone's receiving the social services that no longer qualify, and they shouldn't be getting those. That's the $200 billion.

And I think everyone knows last July, OB3 was passed. Inside of OB3, there was all kinds of tax stuff and everything else. There was also some additional requirements, principally around food stamps and Medicaid on the states to increase the income requirements of what you use to verify the eligibility. So we've seen a very large increase in our deal pipeline. And in February and again in July, we shared that our new business pipeline. So this is our commercial pipeline and our government vertical doubled year-over-year.

And then as you asked at the front end of your question, in July, we shared that we landed in -- really in the second quarter, principally, $100 million of new ACV, meaning new contracts with new customers. And think about that $5 billion TAM versus the $800 million, we're penetrating into states or at the federal level, in this case, principally states. So $100 million of new ACV that benefits principally 2027. That's when the contracts kind of start. There's some of that in the fourth quarter, but the vast majority is in 2027.

We also shared that we had $200 million of the existing business renewals. it was just a lot. And government can be lumpy. You can have -- I'll remind -- Manav knows this, but a year ago, April, in April of 2025, we had a large new contract with Social Security Administration that we landed. So that was a large contract. So those can happen kind of episodically throughout the year. I think the most important point is that our engagement at the federal and state level has never been higher and having a pipeline that's up 2x year-over-year, those are commercial opportunities that we're working on is a great indicator. And obviously, the $100 million of new ACV is a very positive setup for 2027.

So I guess two follow-ups. Is this something you would give us regularly? And then the $200 million of renewals, how should we think about just retention rates overall just to get some perspective on that.

Yes. So the $100 million -- are we going to give it to you regularly? You want everything. You're like most of our investors. So we thought it was large enough that we shared it. Whether we share it every quarter or not, we'll make the right decision on that. But $100 million is quite a bit given the size of the vertical, and we thought it was appropriate to share. And the retention is very, very high. Retention levels are very high. You get very sticky once you get into the workflows. It's unusual for us to have a state that either pauses for funding reasons or any other change like that.

Got it. And maybe, John, if you can just keep us grounded here on the numbers. I think you said second half government will be better than the second quarter, but second quarter was, I think, negative.

We also said back to growth of that.

So just some perspective on maybe some help on what that means. And then I think -- last week on the deck, you also said expect accelerating growth in '27. So just some framework before we get too carried away there as well.

Sure. I think you covered it in your question, right? So back to growth means exactly what it sounds like. We expect to see growth in the second half. And then we expect to see improvements in 2027 relative to what we've been delivering here in 2026 based on a lot of what Mark already described, $100 million is the $100 million and the renewals, right? So we're -- we expect to see a government business that's improving as we go through the rest of this year and then continues to improve in 2027.

But given the size of the TAM, we've said this quite consistently, I think everyone knows, I mentioned it earlier, we expect Equifax to grow 7% to 10%. We expect our USIS business to grow 6% to 8% is over the long term. So long term, this isn't this quarter, next quarter, isn't in next year. So over the long term, Equifax 7% to 10%, USIS 6% to 8%, international 7% to 9%; EWS low double digit. And we expect government to really be at the top end of that. Given the size of the TAM and the market opportunities, we expect government to be one of the larger and fastest-growing verticals inside of EWS and obviously helping power their growth. I don't know if you want to touch on like talent as well...

Yes. I mean, I guess mortgage and government, you're top 2, right? Talent mix. So, you've been posting some pretty good results there. So what's driving that? Because employment base seem to be that great.

Yes. As Manav pointed out, the hiring market is still strong, but down. I think it's a remarkable number. I think on a normal level, 70 million people a year change jobs. I think we're in kind of the mid-60s, probably something like that, million changing jobs every year. And then for us, in the background screening industry, each of those job changes result in some form of a background check.

And we have a business that I think everyone knows it's our -- I guess, our third largest vertical now is our talent vertical we call talent, where we sell data to background screeners to help them do their background checks. And one of the core data elements we have is everyone's job title. So when we get payroll data from a payroll company or from a directly from an employer, we have almost 6 million companies delivering data to us every pay period. We get over 50 attributes.

One of those attributes is an individual job title. So we have a digital resume on the average American. So we sell that. One of the things that's checked in a background check is your prior employment. So if a background check was being done on this room, you check 5 years or 7 years of employment to make sure your resume wasn't fabricated. Did you really work for Chase, Citi, whatever the company is. So 5 years' worth of -- 7 years' worth of job history. We can do that instantly because we have that digital record every pay period of the job titles.

We also sell incarceration data. You'll remember, I think, 4 years ago, maybe it's 5 now, we bought Appriss Insights, the only data set on incarceration. And one of the checks that's done in a background check is were you incarcerated previously, not to deny employment, but to allow the hiring manager and the HR manager to talk about that. So that's another valuable data set. That's been growing for us. We have education data. We have a partnership with National Student Clearinghouse, another thing that's checked in a background check is to make sure your education is accurate, that you're not rounding up or changing who you went to where you went to school. So we do that check in there.

And then we're also rolling out a bunch of new products. So we're adding a new hourly solution. If you think about this room, highly professional financial services jobs, a lot of data is used in your background check. If someone is an hourly worker at a warehouse, restaurant, retail, they might check last job work, they might check last 12 months. We've now got a product just for that. So we've seen some growth there. We've rolled out a product with our incarceration data set that will do monitoring of employee bases for incarceration after employment, right, to make sure that, that's understood if there was some kind of incarceration dependent upon what kind of -- what the job is. So that's been another positive.

Record growth, as you know, we've been growing our records. We were up 10% in the second quarter, 10% for the half. and more records result in higher hit rates. So that's benefiting the business. We had some element of price. What did I miss, John?

I think you covered them all.

And penetration just adding new clients, that's about a $5 billion TAM also, and we've got a business that's got a lot of room to grow.

Got it. And John, maybe just -- we get a lot of questions on the margins for Workforce Solutions and it's kind of been plus or minus 50 plus, but roughly there. I mean it sounds like...

What was it minus?

Not minus. That sort of changed from -- but I guess the point is, I think Mark pointed out a lot of partnerships, including the payroll providers, investments. Is that why there's a limit to those margins intentionally perhaps?

So we like the margins at just over 50%, and we've delivered them very consistently for a long time. And we're very specifically investing in Workforce Solutions to expand product sets. Some of them are through partnerships. Some of them are through expanding data. Much of the investment also is around expanding the work number database, so we continue to grow it effectively.

So we think holding the margins at that level while investing in new product, investing in new sales channels, investing to broaden the number of white label employer services products that we bring to our partners so we can expand those relationships and build increasing record contributions to Workforce Solutions, we think is the right way to manage the business so that we can deliver the growth rates Mark is talking about. So we like those margins. And I think we're being very specific to make sure we invest to be able to continue to deliver the growth at that margin level.

Got it. And I think just one more on talent, Mark. I mean you talked about reinvesting back into manual verification. I know a couple of years ago, you guys got out of that business. So just help us appreciate the difference.

What I'm referring to is that when you think about every one of our verticals, whether it's mortgage, auto card P-loan, we deliver dependent upon the demographic set, 50-plus percent hit rates. And just remember the data set we have. There's about 250 million income-producing Americans in the United States. We've got roughly 110 million of them in our data set. We're growing that every quarter.

So when a customer sends an inquiry to us for a mortgage application, an auto loan, a background screen, a government social service verification, we'll deliver back the TWN data set, but they may still have 30%, 40%, 50% of their transactions they have to do something else with to verify the income because we don't have the records. And we've had customers come to us and say, hey, can you do the whole thing? And we did it before. Now we've invested more in tech. It's a place we're investing more to make it more efficient.

And in mortgage, in background screening and government, we're rolling out solutions where we can do the complete verification. And we would, in essence, do the manual or use some of our AI technology to do it for those records we don't have. And we think that's a real positive value add. So we're in the marketplace talking to our customers about that.

Got it. One last one on workforce. Every now and then, the question around competition keeps popping up. I think since the government introduced that Fannie program and you have SteadyIQ making noise, [indiscernible] or you as a minority investment. Yes. So I guess just a question on -- are you seeing any changes? How do you...

Yes. We watch the competitors. Obviously, it's a competitive marketplace. I think it really starts with records. If you can maintain the records and keep growing your records, that's really a very valuable part of the equation. And any way you cut it, our 110 million, we have 170 million active. The delta is people with 2 jobs, really remarkable when you think about our data set, you've got 60 million people that have either -- have 2 jobs in our data set. It's really remarkable.

So records is really a very important area for us that we want to keep adding. We've added in the last 5 years, something like 50 partners. And remember, we get our records 2 ways. We get them through partnerships. Think about payroll, partnerships, payroll processors, HR software companies. New area for us is benefit administrators. A newer area for us is pension administrators because remember, when you break down the 250 million income-producing Americans, nonfarm payroll, which is W-2, is around 100 -- I'm rounding up a little bit, 170 million people. There's 50 million to 60 million, 1099 or self-employed individuals. And that's obviously a lot of gig workers, but it's doctors, dentists, lawyers, private equity executives, lots of really high-paid people, dentist, et cetera, that are self-employed. And then there's another 30 million defined benefit pensioners.

So think about legacy companies like IBM, General Motors, GE that have legacy pension payments to their prior employees. But also think state of New York, City of New York, fireman, teachers, police officers, federal government, federal employees still get defined benefit pensions. That's income. So we have a multifaceted strategy to go after the records. And I think our record additions speak for themselves that we just have a very scaled data set. We continue to add records. We have a dedicated team focused on it, and we're continuing to drive top line growth.

Got it. In the 5 minutes we have left, I guess let's touch on capital allocation. I mean there's definitely been a noticeable shift in the balance you've had. So maybe just remind us of your priorities today and how we should think of it in the context of leverage as well, please.

Yes. And just to be clear, the capital allocation plan is not new, but it's fairly new. We put it in place last April. Through last April, I think everyone knows we were putting most of our capital towards completing the cloud. We felt that to be a great data analytics company, we had to have the very best technology. We spent a $3 billion incremental on our tech. That's behind us. CapEx is coming down. And last April, a year ago, April, we announced our capital allocation plan going forward as we substantially completed the cloud and really laid out that our intention is to grow our dividend in line with earnings. So think about kind of mid-teens dividend growth going forward. That's going to be a use of our cash. And then our free cash flow and leverage from growing EBITDA, we're going to use for bolt-on M&A and to return cash to shareholders through buyback. And we've been doing a substantial amount of both.

As you know, about 2 months ago, we announced the Mexico acquisition, Círculo de Crédito. We're super excited about that, a $740 million acquisition, fast-growing Mexican market, very strategic in its connection in the United States, growing middle class, lots of fintechs. And this business has been growing that we're acquiring kind of 20-plus percent revenue growth rates at mid-40s EBITDA margin. So a very attractive acquisition. And so we intend going forward to do what I use very clearly, I call bolt-on. Bolt-on acquisitions is how John and I and the Board and the team talk about it to strengthen the core of Equifax.

And then our excess free cash flow and leverage that comes from growing EBITDA, our intention is to maintain a strong investment-grade balance sheet. That excess free cash flow is going to go back to shareholders. And in the last kind of trailing 12 months, we bought back $1.4 billion of stock. We did $500 million in the fourth quarter last year, where we've been told our investors, if we're not doing bolt-on M&A, which we're going to be measured about, we're going to buy back stock.

And then to make a last point on it from the capital allocation plan, we've also been clear, and I said it earlier in our comments, when that mortgage market recovery comes, that's all going to shareholders. Said differently, we're not underinvesting in Equifax because the mortgage market is constrained. We're investing the right amounts today. So when that mortgage market comes back, we're not going to add more people. We're not going to invest more in CapEx. We're going to really deliver that through dividend and buyback.

And I would add one more point. We think we're one of the few info services companies that now has an AI productivity goal out there. And maybe that was going to be one of your questions that relates to capital allocation because it's going to expand our margins. As we said earlier, our intention is to grow over the long term, 7% to 10% on the top line delivers 50 basis points of operating leverage.

We laid out in February as our first step, some of the AI productivity we expect to deliver inside of Equifax. So think about agents taking calls instead of people, think about agents doing paper processing from consumers, which we get a ton of. We have a couple of thousand people in our operations center. A lot of productivity there. Technology is our largest workforce. We have a lot of technology coders and operators. We're seeing a lot of productivity there. And then in July, we increased our productivity goal from $75 million to $150 million. And this year, against the 50 basis points operating leverage long-term framework, we set out a guide of 75 basis points, so 25 basis points higher, much of that from that AI productivity that we're delivering across Equifax inside of Equifax. And at the half, we're 110 basis points.

So we're really seeing a lot of momentum around the use of AI, not only for products, models and scores with our customers, but also inside of Equifax. And we believe the fact that we did the big cloud investment and that we have, we think, the most advanced tech in the marketplace, it's enabling us to deploy AI more quickly for growth but also for margins and productivity.

Got it. Well, we're almost out of time. So it's a great place to end. Thank you, Mark and John for being here, and thank you, everybody.

Thank you for having us.

Thanks.

Greetings, and welcome to the Equifax Second Quarter 2026 Earnings Call. [Operator Instructions]

As a reminder, this conference is being recorded. I'd now like to turn the call over to your host, Mr. Trevor Burns, Senior Vice President, Investor Relations. Thank you, sir. Please go ahead.

Thanks, and good morning. 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 and Events tab at our Investor Relations website. During the call, we will be making reference to certain materials, it can be found in the Presentations section of the News and Events tab at our IR website. These materials are labeled 2Q 2026 earnings conference call.

Also, we'll be making certain forward-looking statements, including third quarter and full year 2026 guidance, [indiscernible] and its business environment. These statements involve a number of risks uncertainties and other factors that could cause actual results to differ materially from expectations. Certain risk factors that may impact our business are set forth in our filings with the SEC including our 2025 Form 10-K and subsequent filings. During this call, we will be making certain non-GAAP financial measures, including adjusted EPS, adjusted EBITDA and adjusted EBITDA margins and cash conversion, which are adjusted for certain items that affect the comparability of our underlying operational performance. All references to EPS EBITDA, EBITDA margins and cash conversion or references to non-GAAP measures.

During the second quarter, we recorded a $40 million charge net of insurance proceeds for a legal settlement associated with the resolution of claims related to a previously disclosed coding issue. 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 with the Financial Info tab at our IR website.

Now I'd like to turn it over to Mark.

Thanks, Trevor, and good morning. Turning to Slide 4. Equifax had strong results in the second quarter with revenue of $1.7 billion, up 11% on a reported basis and 10% in constant currency, which was $5 million above the April guidance midpoint. Next FICO Mortgage royalties reported revenue was up about 7%. We also delivered very strong margin performance, driving strong EPS growth of 13%. Organic diversified markets constant dollar revenue grew about 5.5% in the quarter and better than our expectations, principally in Workforce Solutions benefiting from strong execution in Talent Solutions and Consumer Lending.

EWS government revenue declined slightly in the quarter as expected due to a tough 2025 comp. We were very pleased with the commercial execution in government in the first half signing principally state government contracts that total in the last 4 months to about $300 million, with about $100 million of the new business that will principally benefit 2027 and $200 million of contract renewals. This is a strong indicator of the unique benefit our proprietary twin data provides to government customers and the long runway for government against their $5 billion TAM.

UIS diversified markets revenue was slightly better than we expected, accelerating over 300 basis points sequentially, and international revenue was slightly lower than we expected at up 4%, principally reflecting market weaknesses in Canada and the U.K. U.S. mortgage revenue was up 25% in the quarter and up 7% at FICO. This was stronger than our expectations against a weaker-than-expected U.S. mortgage market from higher interest rates.

During the quarter, U.S. mortgage rates increased meaningfully with a current 30-year fixed rates up 30 basis points to about 6.6% versus the 6.3% when we gave guidance in April. As a result, we saw overall industry transaction volumes run below our expectations that were offset with new products and some share gains. U.S. macroeconomic in remained relatively consistent with the environment we saw in April. The ongoing Middle East conflict has resulted in continued higher levels of inflation that has disproportionately pressured the lower income or subprime consumer demographic.

[indiscernible] inflationary pressures, low unemployment continues to support overall consumer health. Continued high employment levels have acted to it more broad-based credit impacts, which gives lenders the confidence to continue originating loans. We have not seen financial institutions increase their portfolio management views or decreased consumer credit lines, which are actions they would typically take when they anticipate an economic turn.

[indiscernible] the Equifax team is to leverage the power of AI to expand our margins and free cash flow through accelerating growth of high-margin proprietary database products and driving operational productivity through accelerated AI and deployments across Equifax. Second quarter EBITDA of $552 million was up about 10.5% and with an ETO margin, excluding FICO of almost 35%, up a very strong 120 basis points year-to-year and 40 basis points above the midpoint of our April framework.

EBITDA margin expansion was well above our 75 basis point target for 2026 and 70 basis points above our 50 basis point long-term financial framework. The strong EBITDA margins were driven by operating leverage and AI-driven cost productivity principally in operations. Equifax reported EBITDA margins, including the impact of FICO, were 32.5% in the quarter, flat with last year. EPS at $2.25 per share was up a very strong 13% and $0.05 above our April guidance midpoint. Equifax returned $366 million to shareholders during the quarter, including repurchasing almost 1.8 million shares or over 1% of shares outstanding for $300 million, taking advantage of the lower Equifax stock price.

Equifax paid $66 million of dividends in the quarter after increasing our again by 12% in February. Over the last 12 months ended June 30, Equifax has returned over $1.6 billion of cash to our shareholders or 100% of our operating cash flow. We continue to expect strong free cash flow in the future of over $1 billion in 2026 and cash conversion to continue at over 100%.

With our financial capacity of over $1.5 billion, we can execute the Circular to Credit acquisitions while maintaining a strong balance sheet with debt leverage at under EBITDA and while continuing to repurchase shares in the second half, but it is a slower pace than the first half. Equifax continued its strong execution against our EFX 2028 strategic priorities as listed on the right side of Slide 4, and with several big milestones during the quarter. We further accelerated our implementation of AI and genic capabilities across our global analytical decisioning and operational platforms for new products. In the first half of the year, we launched 54 new products that have AI capabilities directly embedded in the product architecture, which directly benefit our customers and contributed to our strong 16% vitality index of water.

We also expanded the deployment of AI [indiscernible] and agents across Equifax in internal product and model development, operations, technology and our G&A support functions. The pace of AI adoption inside Equifax is accelerating rapidly, which allows us to double our AI for EFX productivity goal from $75 million to $150 million from 2026 to 2028. We know we are in the very early innings of our deployment of AI agentic automation inside Equifax, both on enabling new products based on our proprietary data and driving speed, accuracy and productivity across every corner of Equifax.

In the second quarter, we delivered a very strong $0.16 new product Vitality Index leveraging the Equifax Cloud and EFX.AI capabilities. New products based on differentiated proprietary data, including our twin indicator solution continue to drive strong new product growth and share gains. We energized to sign a definitive agreement 2 weeks ago to acquire Círculo de Crédito, the fastest-growing credit bureau in Mexico an enterprise value of $750 million with a very attractive EBITDA multiple of 9.4x, including run rate synergies.

Turning to Slide 5. Workforce Solutions revenue was up 7% and better than our expectations, principally in Verifier diversified markets, which grew 7%. EWS diversified market revenue growth driven by outstanding performance in Talent Solutions and Consumer Lending both up high double digits in the quarter. Talent Solutions continues to outperform the underlying white-collar labor market with strong growth in employment-based solutions and increased product penetration across our incarceration and education data, new solutions built co-interveting with background screeners and pricing.

Talent volumes were up mid-single digits in the quarter relative to an overall market decline in the first 2 months of the quarter. If the team continues to execute very well. Consumer Lending also had another very strong quarter with strong double-digit revenue growth across the portfolio in card, consumer finance and consumer finance, principally due to strong volume and new product rollouts. As mentioned earlier, the EWS government team delivered an outstanding quarter, signing about $300 million in principally state customer agreements in the last 4 months. including renewals, win backs and new customer wins.

This is a very strong performance reflects the unique twin position in government and strong commercial momentum post OB3 legislation that was signed last July. The contract signings were a positive and stronger than our expectations. Second quarter government revenue was down about 4% and reflects a challenging comp from a large win in 2025. EWS mortgage revenue was up 8% in the quarter and continues to outperform underlying market volumes by high single digits from record growth, new products and pricing. In Workforce Solutions EBITDA margins of 52.1% were consistent with the first quarter.

However, margins were higher than we expected, given strong rating leverage from better-than-expected diversified markets revenue performance. Win record additions continue to perform well again in the second quarter, with strong 10% growth in active records up to $217 million and $124 million total current active records, which was up 10%, which represents 108 million unique SSNs. EWS has a long runway for record growth against the $250 million income-producing Americans.

Turning to Slide 6. In the first half, we made outstanding progress with our government customers converting our record commercial pipeline with renewals, extending existing relationships and adding new principally state government customers. In the last 4 months, EWS signed agreements with state agencies for the provisioning of income and employment data from Equifax supporting CMS and Snap, totaling about $300 million in annual contract value including about $100 million in new business and $200 million in renewals, an extremely strong result that will deliver some benefits in the second half, but principally drive 2027 growth.

The substantial contract signings, along with our current deal pipelines up about 2x versus last year, reinforces our confidence in the medium and long-term growth opportunities for EWS government at the federal level and in supporting states and meeting a new OB3 requirements regarding accuracy and frequency of income validation in Medicaid and Snap.

On Slide 6, we provided examples of some of the recent government wins, including an almost $60 million annual contract value win back supporting a state in delivering CMS fits. The win back is a key proof point of the value of the twin data relative to other sources of income verification data, including state wage data and consumer permission data. We're also seeing expanding opportunities with multiple federal agencies in support of their big focus on reducing improper payments.

Equifax is serving as a key adviser at the federal and state level, leveraging our differentiated income and employment data to drive speed accuracy and productivity of social service benefits delivery. The EWS team is clearly on offense, supporting the states with the social service program requirements and have significant opportunities for long-term revenue growth supporting the federal and state programs in EWS' big $5 billion [TAM].

Turning to Slide 7. USIS' second quarter revenue was up a strong 17% and up 6%, excluding FICO and consistent with their long-term framework. This performance was delivered despite a weaker-than-expected U.S. mortgage market that I discussed earlier. Diversified markets revenue grew 6%, accelerating over 300 basis points sequentially and slightly stronger than our expectations. B2B revenue was up 5% and also up over 300 basis points sequentially. Within online, we saw high single-digit growth in FI from stronger volumes, new business and pricing and high single-digit growth in auto from pricing and new business wins.

The spin FI in auto was partially offset by weakness in third-party bureau sales from our sales to Experian and TransUnion. Consumer Direct, our D2C business delivered continued strong growth with revenue up a very strong 11%. USIS mortgage revenue was up 40% and up mid-single digits, excluding FICO, with hard mortgage inquiries up only 1%. As I referenced earlier, mortgage rates were up from the levels we saw in April throughout most of the quarter. And as a result, mortgage origination activity was lower in the second quarter than the levels we expected when we gave guidance back in April, partially offset by share gains in prequal and pre-approval products.

As a reminder, USIS has began to deliver significant share gains in the second quarter of last year from both pre-qual and pre-approval products that included both the twin indicator in our NC-plus data. USIS EBITDA margins were 32.8% in the quarter, excluding FICO, and USIS EBITDA margins were 40.5% and up over 140 basis points versus last year with a very strong performance. The improvement was driven by stronger diversified markets revenue growth and good cost management.

Turning to Slide 8. In April, the FHFA activated use of Vantage score for over 20 mortgage lenders. This was a big milestone to bring score competition to the mortgage industry. While the vast majority of these mortgage lenders have begun using Vantage score, we have also seen a groundswell of Vantage score adoption with about 1,200 additional mortgage lenders pulling our free vantage score alongside a paid FICO score from Equifax. On the left side of Slide 8, you can see that our second quarter vendor volume is up almost 3x compared to the first quarter. The vast majority of the 2.2 million transactions were pulled by the 1,200 lenders pulling a free score alongside a paid FICO score as they drive their adoption of the new Vantage score opportunity.

We also have 100 mortgage lenders, principally smaller non-GSE lenders and lenders underwriting HELOCs or home equity loans, we have moved exclusively utilizing Vantage score at our $1 price point for their mortgage originations. Although volumes remain low at about 10,000 transactions in the quarter, we saw significant acceleration as we move through the tail end of the quarter. And as a reminder, we make no margin on the sale of FICO scores. HEICO Mortgage Scores revenue is about 50% of USIS mortgage revenue and almost 7% of total Equifax revenue delivering 0 margins.

We continue to expect strong adoption of Vantage score given the substantial $1 billion annual cost savings opportunity for the mortgage originators and consumers. Equifax plans to maintain the $1 Vantage score price through the end of 2027 to continue driving Vantage score adoption with our customers. The FHFA decision in July -- last July to allow mortgage score choice between Vantage and go as a big win for consumers and for the industry.

Turning to Slide 9. International revenue was up 4% in constant currency. International saw a high single-digit revenue growth in Asia Pacific and mid-single-digit growth in Canada. Latin America and Europe delivered low single-digit revenue growth in the quarter. International saw market headwinds in both Canada and the U.K., which dampened their growth rates. In LATAM, we saw solid mid- to high single-digit growth in our largest markets like Brazil, Chile and Argentina, with lower growth rates in some of our other smaller Latin American markets. International EBITDA margins were 27.6% quarter, up a strong 120 basis points versus last year. EBITDA margin improvements driven by technology savings at the final stages of our cloud tech transformation gets a and strong cost management.

Moving to Slide 10. Two weeks ago, Equifax signed a definitive agreement to acquire Círculo de Crédito for an enterprise value of $750 million. This represents an 11.7x EBITDA multiple based on Círculo's expected 2026 EBITDA. With the addition of expected run rate savings, the EBITDA multiple is expected to be about 9.4x and which is attractive and significantly below our current EBITDA multiple. We expect the Círculo acquisition to be completed in the fourth quarter, subject to customary closing conditions and regulatory approvals and for the acquisition to be accretive in year 1.

Círculo is the fastest-growing [indiscernible] in Mexico and the only credit bureau licensed to operate both the consumer and commercial credit bureau service, with more than 1,700 bank retail fintech and small business lending microfinance and telecommunications customers. And importantly, 2 billion trade lines covering 80 million validated identities in Mexico. Círculo is a leader in alternative data or information not included in traditional credit reports in Mexico, including Giga transactions and utility payment history. This alternative data can responsibly expand access to credit and support a more inclusive economy critical in a country where nearly 33 million people are engaged in an informal employment, such as unregistered micro businesses or [indiscernible].

This acquisition will offer Círculo de Crédito customers access to Equifax's industry-leading cloud-native capabilities, decision in the analytic platforms and patented FX AI technology and award-winning identity protection and fraud prevention offerings for the development of solutions designed to help their customers grow and expand functional inclusion in Mexico. The acquisition fits perfectly in our balanced capital allocation framework with our focus on highly accretive bolt-on acquisitions while continuing significant undoing return of capital to shareholders and maintaining our strong investment-grade balance sheet.

Turning to Slide 11, Círculo's unique market position has delivered very strong financial results. Círculo's compound annual revenue growth rate was a very strong 23% from '23 to '25 in with revenue growth for the 12 months ended June 30, up a very strong 31%. Círculo revenue growth has been led by their unique [indiscernible] credit data advantage enabled by deep relationships with fintechs with over 40% of Circulo's 2025 revenue generated from fintechs with a growth rate of over 50%. Círculo's unique alternative data and the team's strong relationships with their fintech customers are a key driver of future Círculo revenue growth in a market where consumer credit is underpenetrated and growing rapidly.

Círculo delivered very strong mid-40s adjusted EBITDA margins in both 2025 and in the last 12 months through June 30. For the full year of 2026, Círculo revenue is expected to grow high double digits, maintaining very strong mid-40s adjusted EBITDA margins. The very attractive Círculo financial results are accretive to the Equifax long-term financial framework of 7% to 10% organic revenue growth, consistent with our capital allocation plan and drive shareholder returns.

Turning to Slide 12. Equifax is executing a broad AI and an genic strategy that leverages EFX.AI along with our cloud-native technology, our Ignite analytics platform and our scale proprietary data to deliver higher-performing EFX.AI-powered scores, models and products to our customers. Equifax has a strong AI data mode around Equifax's unique and proprietary data with over 90% of Equifax revenue generated from proprietary data sources included in over 100 unique data exchanges globally. These exchanges receive contributed proprietary data directly for data owners that is not publicly available, such as our income and employment exchanges, credit exchanges, alternative credit data exchanges and other unique proprietary data assets.

Said differently, only Equifax and our credentialed customers can access our data. The use and protection of our data has another layer of moat from both the national and laws that restrict the data's usage and by agreements with our contributors, including requirements regarding the accuracy and currency of this date and the requirement to provide consumers into 24 countries in which we operate these exchanges with the ability to review and dispute the data managed in these unique Equifax exchanges. For example, in the U.S., our EWS income and employment data, our broad credit and alternative credit data exchanges are not only governed by the agreements with the contributors, but also by the U.S. Fair Credit Reporting Act or FCRA.

The contributory nature of the factory data and the complex regulatory and contractual compliance requirements that govern our data, along with the coverage and historical data these exchanges contain created a strong data moat around Equifax's proprietary data. Through industry-leading technology, EFX.AI capabilities and proprietary data, Equifax is accelerating a strategy to utilize AI and ingenic capabilities to improve our customers' ability to utilize Equifax data and advanced technology to improve their decisions by incorporating more data and more effective AI defined algorithms using patented capabilities that deliver explainable results to our customers.

We are expanding from the provider of data analytics to be an essential partner for the AI-powered decision intelligence that our customers are driving. We are realizing this vision through a growing suite of global EFX.AI-enabled solutions. In the first half of the year, we rolled out 54 new products that leverages EFX.AI capabilities that over our strong 16% Vitality Index. This includes the commercial launch of IGNITE AI adviser and Equifax IQ on our integrated Ignite analytics and Intertek decisioning global platforms.

Ignite AI adviser is a multi-agent system that delivers AI-driven real-time personalized sites and actual recommendations delivered through our natural language user interface to our customers. Lender can ask questions through a generative AI chat with complementary visual dashboard illustrations and dynamic charts and grass. This enables our customers, particularly those with limited in-house data and analytics staff to easily compare information, discover new trends and drive more informed decisions to drive their growth and returns. For example, we have customers identifying missed opportunities to capture business from existing customers who have loans with another bank or FI, and customers comparing payoff and paydown speeds against competitors to determine if their rates and terms are competitive to drive application conversions and growth for their business.

This is now being used by U.S. customers in auto, P-loan and credit card to pinpoint new opportunities to improve their portfolio performance expanding to Canada in the third quarter with further global expansion through the balance of 2026. Complementary to Equifax AI adviser, Equifax IQ is a multi-algorithm AI system that allows customers to transition policy management from a manual rigid process to an AI-driven multidimensional optimization engine. Equifax IQ uses EFX proprietary data and contributed data to help our customers better understand new market opportunities, grow their business with the right customers, reduce fraud and confidently extend more credit.

It also delivers portfolio overdue delinquency analysis, affordability assessments, fraud identification and policy adjustments while streamlining workflows were seamless user experience. Our first implementation of FX IQ are helping customers across Latin America. In Argentina, we established an advanced origination risk policy for a global vehicle manufacturers entry into the financing market evaluating banked and unbanked populations. Equifax IQ will help -- will expand in the U.S. and other regions globally as we move through the balance of the year and early in 2027.

Ignite AI adviser and Equifax IQ are great examples of the advantages derived from our global cloud native infrastructure, which is structured for the rapid expansion of AI and agentic advancements globally. These optimizations improve customers' processes and outcomes by improving analytical outcomes and more effectively using the breadth of data assets available to customers from FX. We believe our investments in EFX.AI will drive our new product rollouts, share gains, revenue growth and margin expansion. I'm super energized about the momentum and pace of change in the big performance from EFX.AI in our product models and scores development for our customers.

Turning to Slide 13. In the second quarter, we delivered a very strong 16% new product vitality index, leveraging the Equifax cloud and EFX.AI capabilities which is above our 2026 Vitality Index goal of 15% and our 10% long-term framework. In the first half, over 50% of our new products and AI capabilities embedded in the product architecture, which the customer directly interfaces with using LMs New products based on differentiated proprietary data, including our twin indicator solution for mortgage, continue to drive strong new product growth and share gains.

As discussed over the last few quarters, our only Equifax twin indicator solutions in card, auto and P-loans are starting to see early customer interest for these unique solutions. And as a reminder, we're providing the twin indicator solutions in all those verticals at no cost in order to drive differentiation of our credit file and deliver share gains to Equifax.

Turning to Slide 14. We are also rapidly expanding the implementation of AI and agentic across our internal Equifax processes to improve operational speed, accuracy and productivity. Agentic and AI-assisted process redefinition improvement is occurring across operations, technology, product development and support functions, including HR, legal and finance. The pace of adoption is ramping very quickly and delivering big productivity to us in every corner of Equifax. As you can see from the chart on the left slide of the page, total gross labor spending at Equifax on both expense and capital is currently about $2 billion or about 40% of total gross spending.

Of this amount, about 60% of our gloss labor spend is within global operations and technology organizations where we are seeing early and big gains from AI adoption. As we continue to rapidly drive rollouts and adoption of AI tools and agents that are delivering meaningful process improvement, we now expect run rate spending savings from these AI for EFX efforts to be about $150 million from 2026 to 2028, which is double the $75 million of savings we discussed with you in February. These AI efficiencies are expected to improve our financial performance while providing increased capability to reinvest in and further accelerate our AI and genic deployments for speed, accuracy and productivity.

The foundation of our rapid AI deployment is our new Equifax cloud-native architecture in our engetic AI development and management platform that is now in production broadly across Equifax, which enables efficient AI agent process development and management that is designed to ensure our engetic processes and capabilities fully comply with our extensive security and compliance requirements. In operations, we are executing a rapid rollout of operational AI across our business units in our call centers and document processing options.

In USIS, we are rolling out conversational AI and call centers and already seeing big lifts in customer authentication and fulfillment rates and AI-assisted processes have delivered decreases in back-office dispute handle times, which are delivering productivity. In technology, we're seeing early but big benefits in our software development IT operations, cybersecurity and cloud cost optimization functions. With our agentic AI platform, we have moved beyond pilots to [indiscernible] agents operating core internal processes built and run on a standardized secure agentic platform with governments human in the loop checkpoints and model risk evaluation built in.

We are super energized about the pace of our AI adoption inside Equifax. We know that we are in the very early innings of our rollout. We are confident there is significantly more opportunity to borrow revenue and reduce costs as AI and in genic capabilities become fully embedded across Equifax.

Now I'd like to turn it over to John to provide our third quarter and full year framework.

Thanks, Mark. Slide 15 provides specifics of our 2026 full year guidance. We are holding our full year 2026 financial guidance on a reported basis to be unchanged from our April guidance. On a constant currency basis, we raised our guidance consistent with our second quarter the impact of weakening FX on our full year results offset our 2Q. Our second quarter performance was stronger than our guidance driven by very good performance in both EWS and USIS diversified markets. Diversified March's revenue growth at the midpoint is expected to be up high single digits for the year.

The U.S. mortgage market was slightly weaker than expected in the second quarter and has shown further weakening over the last several weeks as long-term interest rates have again increased. Our guidance reflects improved share performance in mortgage as well as continued good performance in diversified markets, offsetting the weakness in the U.S. mortgage market. U.S. mortgage revenue is expected to be up just above 20% with mortgage market originations weaker and down low single digits. For your perspective, as you determine your view of the 2026 U.S. mortgage market based on a review of Equifax data on mortgage home purchase issuances since early 2022. We estimate that there are over 16 million mortgages that were issued with an interest rate over $0.5 including almost $15 million with rates over 6% and over $9.5 million with rates over 6.5%.

This provides a perspective on the pool of mortgages potentially available to refinance as mortgage rates change. business unit revenue growth rates and EBITDA or expectations are unchanged from our April guidance. This slide also includes additional detail on revenue growth rates and EBITDA margins excluding FICO mortgage score royalty pass-through revenue and expected BU revenue and EBITDA margins. We expect to deliver revenue growth of 7.2% to 8.4% excluding the impact of FICO mode royalties in 2026 within our long-term financial framework. And we expect to grow EBITDA margins, excluding the impact of FICO mortgage royalties by a strong 75 basis points, which is 25 points above our long-term framework. In 2026, we expect to deliver over $1 billion of free cash flow and a cash flow conversion of at least 100%.

As we discussed in April, with EBITDA increasing to about $2.1 billion at the midpoint and strong free cash flow, this creates $1.5 billion in capital available in 2026 for M&A and return of cash to shareholders, while maintaining leverage at under 3x EBITDA. As referenced earlier, this provides the capability for us to complete the Circulo acquisition plan in 4Q '26, while still executing share repurchases in the second half of '26 although at lower levels than the $560 million and 3.1 million shares we repurchased in the first half of '26.

Slide 16 provides the details of our 3Q '26 guidance. In 3Q '26, we expect total Equifax revenue to be between $1.68 billion and $1.71 billion, up almost 10% on a reported basis year-to-year at the midpoint. Constant dollar revenue growth at the midpoint is up almost 9.5%. Excluding the impact of FICO mortgage scores, 3Q 26 reported revenue is expected to be up about 7% at the midpoint. Diversified markets revenue is expected to be up mid-single digits on a constant currency basis and up sequentially from second quarter, principally due to stronger EWS diversified markets growth.

U.S. mortgage revenue is expected to be up about 20%. EPS in 3Q 26 is expected to be $2.15 to $2.25 per share, about 8% versus $3.25 at the midpoint. Equifax 3Q '26 EBITDA dollars are expected to be $57 million to $564 million, up about 10% at the midpoint. EBITDA margins are expected to be about 32.8% at the midpoint of our guidance. And excluding the impact of FICO mortgage royalties, EBITDA margins in 3Q '26 would be 34.6% to 35% and up over 90 basis points at the midpoint from our 3Q '25 on the same basis.

We believe that our full year and 3Q '26 guidance are centered at the midpoint of both our revenue and EPS guidance ranges. As a reminder, our guidance for 3Q '26 and fiscal year '26 assumes Equifax will calculate and sell FICO scores for all mortgage credit transactions, and there will be limited Vantage score revenue. As we move through 2026 and their additional clarity on Vantage conversion and the FICO direct license program, we will update our guidance to reflect the shift and opportunity for the mortgage industry, consumers and Equifax.

Now I'd like to turn it back over to Mark.

Looking at Slide 17. Equifax had another strong quarter, executing very well against our EFX 2028 strategic priorities. The new Equifax is leveraging the Equifax Cloud, EFX.AI and proprietary data assets to accelerate innovation and help our customers grow. Our second quarter financial results are an excellent proof point of the broad-based Equifax operating model, including the strong from 20 basis points of EBITDA margin expansion in the quarter. We have strong momentum as we enter the second half of the year. EWS signed agreements principally of state agencies with a total ACV of about $300 million. We signed a highly accretive Círculo de Crédito acquisition and we doubled our AI for EFX productivity goal from $75 million to $150.

Our strong execution and momentum in '26 sets us up for '27 and beyond. Given our strong free cash flow generation and cash conversion over 100% in 2026, we're also delivering on our commitment to return substantial excess free cash flow to shareholders. In the first half of the year, we returned $56 million to shareholders, repurchasing 3.1 million shares or about 2.5% of shares outstanding. In the second half, we can complete the circular acquisition and continued ship purchases, although at a slower pace than we saw in the first half, while maintaining a strong investment-grade balance sheet with leverage below 3x EBIT I'm energized about our broad-based performance, but even by energized about the future of the New Equifax.

And with that, operator, let me open it up for questions.

[Operator Instructions]

Our first question comes from the line of Jeff Meuler with Baird.

So you were obviously calling out the tougher Twin government year-over-year this quarter in advance on the true-ups and the comping of onboarding of the large contract. The bookings figure is kind of a new figure. Obviously, we have the context of the overall size of the business, but it sounds good. Can you just comment maybe on if gross retention rates are still stable and high and if pricing integrity is holding as we think of kind of using the new business to kind of build on the future revenue?

Yes, Jeff, thanks. We telegraphed, I think, in the April call that our deal pipeline government had been growing rapidly. I think we've been talking about that really for the last year and change since the new administration came into Washington and with the OB3 passing on July -- in July last year, we just saw a real uptick in momentum around commercial activity, and that's continued. And our deal pipeline continues to be 2x over last year, and we're starting to convert some of that pipeline. Some of it faster than we thought, but we know that there was real momentum, which we talked about really in February and again in April. So we were pleased with the $100 million of new wins.

So these are new principally state contracts that hadn't been doing business with Equifax before or not in the last couple of years and then extensions and renewals of another $200 million. So great indicators of the real value of our solution in the marketplace, the commercial momentum in there around the value of our services be used. As you know, there's a huge TAM here. To your question around pricing and commercial terms and activity, really no change. We are continuing to have a really strong success in the government vertical.

We've got a long runway for growth. We've got the right solution. As you know, we're investing in new products like the gig solution we launched late last year that we're having some traction on and then some of the new solutions we're starting to bring to market to address some of the new OB requirements around Medicaid and Snap that principally benefit 2027. So we remain quite bullish about the government vertical. We have talked in a couple of calls over the last year and change that -- in some cases, we're using subscription agreements versus transactional agreements with some of our new customers.

That's been something that helps them with their budgets at the state level in particular. So that's been a positive for us. But we're quite enthusiastic and quite energized around the momentum in government and to land some large contracts. We thought it was meaningful to share those with you because they're really going to benefit principally 2027. So it gives us a great momentum as we move towards next year.

Very helpful. And then on the Vantage score only the 100 score only in mortgage lenders. I get it's only priced at all or at least through '27, so it wouldn't be big revenue dollars for you yet. But does that mean that those 100 are paying for Vantage score at this point? And can you contextualize if there's anyone sizable or what do they look like?

No, they're not sizable yet. All of the mortgage customers that we have, which is really every more customer are focused on Vantage because of significant cost savings. As you know, the FHFA is still gating the agency mortgages, a number of lenders that can be utilizing Vantage. We expect that to increase as time passes, meaning the lenders are all engaging with FHFA about their interest of accessing Vantage. So we expect that momentum to continue as we move into third quarter and into the second half.

And as we pointed out in the prepared comments, we intend to keep our pricing at $1 in 2027 to really continue to drive that engagement with our customers, but also giving them visibility now that they can count on as an attractive scoring solution along with our credit file for their mortgage underwriting going forward. But just maybe summarizing 1 more time, there's a lot of momentum here. by the mortgage lenders, and we expect that activity to continue as we move into second half.

Our next question comes from the line of Toni Kaplan with Morgan Stanley.

I wanted to start with the government business also. You talked about some win backs in the presentation. And so I was hoping you could maybe expand on the opportunity that you see for those win backs and basically maybe thinking about 3Q for government, how are you looking on that, especially based on you have this really good pipeline, but maybe some of that isn't flowing into the growth rate as quickly?

Yes. Yes. So again, we were pleased, Toni, I hope you are, too, with the commercial momentum in government. It was above our expectations, but we knew it was coming when you got a deal pipeline that's up 2x year-over-year, we've got a lot of discipline around our commercial pipelines. It was just a matter of time when those convert from pipeline into contracts. You'll remember that you go back to July of 2024, the bid administration changed some of the Medicare cost savings. And I think we were clear with you really in the second half of '24 and into '25 that we were able to work with many of the states to resolve the challenges they had with their budgets with that kind of unexpected sharing that happened in 2024, where the states had to pick up incremental costs for the data that was used.

And there were some states that couldn't manage it. And they had to turn our solution off. And I think you -- that's kind of well discussed best over the last year and change. and it was reflected in our P&L, we're winning back some of those states. And I think it's a great reflection of the value of the income and employment data that we deliver to social services at the state level, and there was a large 1 which you can see on the slide here that was included that's going to be on a run rate basis, net new revenue for us principally late in the year, but really in 2027 is where that will benefit.

As I said in my comments earlier, that kind of $100 million of ACV from new relationships and win backs is principally benefiting 2027. And then, of course, there's another $200 million of renewals, which meaning it stays in our run rate, which we are very pleased with. So the commercial activity is strong, and we're really pleased with the momentum and really set up we have for 2027 in government. Again, as a reminder, you've got a business that's approaching $800 million of revenue in government and Workforce Solutions, but it's operating against a $5 billion TAM.

And again, a reminder that the OB3 requirements that were put in place in the July bill that was signed last year, really go into effect late this year and in 2027, and we expect that to be a catalyst for growth, and you're seeing the $100 million is at least a piece of that which will be positive for us as we get into the new year in '27.

Great. And then I wanted to ask about the 1,200 lenders that are using Vantage score with FICO I guess, I know you're giving Vantage for free if someone is using FICO. So out of the 1,200, is there a way that you know that -- how many are testing? Or are they just getting it and hopefully, they're testing it and will convert it...

No, no, no, no. Now you should think about the 1,200 is all are testing their technology systems, their processes, their workflows as -- and we talked over the last year or so that this is a big change for the industry that's been using 1 credit score for 3 decades almost. So that technology and process flow change was important. That's why we made the decision last fall to offer a free Vantage score with ever repaid FICO score. So our customers could test their tech, their product as well as their other workflows. So you should think about and we think about that 1,200, meaning lots of mortgage lenders are really preparing to use Vantage.

As a reminder, the FHFA in April, they're in spent, I think it was 22 or 23 lenders that were approved, and that's only 22 or 23, we would expect that to increase moving forward because those 1,200 lenders using that example, they all want to take advantage of the value, get their share of that $1 billion worth of cost savings that's available to them by using the Vantage Score. So we would expect that adoption to continue to grow as the FHFA opens up more lenders to be able to utilize the Vantage Score and the actual origination versus FICO.

Our next question comes from the line of Andrew Steinerman with JPMorgan.

This is Alex Hess on for Andrew. Just a couple of points of clarification. On the government ACV number, I think it was asked earlier, but what was the associated retention dynamic? Like Were there churn...

$100 million is all new business for us versus think about 2026, meaning still additive to our revenue and principally in '27. The $200 million is renewals of existing contracts that's in our revenue in '26.

Understood. So no churn of note. Then just switching to mortgage, mortgage revenues in USIS were up 60% in 1Q, up 40 in 2Q. Can you just sort of walk us through the bridge of that come down, if you will?

Sure. The biggest driver, obviously, is the mortgage market weakens, right? If you take a look at what occurred year-over-year, and we talked about that, we saw weakening as rates rise as we went through the second quarter. And also in the second quarter of last year, we started gaining share in prequel. So we had a little more difficult comp because we had picked up some share that we had, had in place in the first quarter of 2025. So those are 2 big drivers that are impacting why the overall growth rate is lower in the second quarter, year-over-year growth rate is lower in the second quarter versus the first.

Understood. And final clarification, please. you say Vantage score transactions were up roughly 3x to $2.2 million. How are you defining a transaction in this case for the quarter? So what is the transactions?

This is a delivery of a vantage score, right? So that's effectively what they are. Yes.

Our next question comes from the line of Shlomo Rosenbaum with Stifel.

Mark, can you talk a little bit more about the Twin indicator in the progress seeing in auto and credit card? Are you seeing more evidence of volume shifts? And just anything maybe quantitative that you can point to that, hey, this is -- this could be a longer-term game changer?

Yes. It's still earlier days in those verticals were further deployed, as you know, in mortgage because we launched that really last summer/fall when we launched it in mortgage, and we really only launched an auto car he loan in the early parts of 2026. The response from customers is super strong. They see real value the same value we talked about in the marketing funnel in a mortgage application process where you're really blind to the income or whether the applicant is working because you only have credit data historically, now the addition of twin indicator that shows that Mark's working and what my compensation was in the prior year, the last 12 months that I work for, in my case, Equifax is really valuable.

It's the same case in an auto loan. An auto marketing funnel is quite similar. The auto dealer or the digital transaction auto, they're trying to figure out is this a that I'm going to be able to get to a closing auto loan and how can I differentiate from those that don't close versus the information that I'll have, including the income and employment data from Equifax with the Twin indicator really gives them leg up in managing their marketing funnel, same in a personal loan process that's typically digital, although some are physical, but the [indiscernible] digital same process.

And then in card it just gives the ability to give a larger credit line, which typically will result in a higher take rate from the consumer. And with the addition of income, you can actually do a lower interest rate, which will drive kind of pipeline conversion. So we're energized about that rollout. There's not a lot of share shift happening yet, but a lot of really strong commercial discussions happening in those all card and P loan verticals. So we're energized about that momentum, and we'll continue to drive that engagement with our customers in the second half.

Okay. And then just shifting back to the Vantage Score discussion, FICO is reducing the cost of like the $100 to like $1 but putting in a really big success fee at the other end of the transaction. And given your experience with the mortgage market, do lenders look at that as a straight-through pass-through that they don't care about that something that a success fee at the other end is something that weighs on the consumer, and they actually do care about that. I'm just trying to understand, does that make their -- the $1 comparable? Or does it -- is it really still not comparable in the eyes of the people that are going to be buying this?

I think it's the latter. We don't here or see any traction on that. It's one that a success fee thing is something FICO has been talking about for about a year. There's nothing really happening in the marketplace on it. And I think the point you raised around the consumer is an excellent one. because the consumer, there's a RESPA regulation that's mortgage originations, it's legislation in the United States that mortgage originators have to follow it. And basically, it means that they have to treat the consumer fairly with regards to services that they purchase for them and then charge the consumer for.

So the idea of charging that [indiscernible] $66 for a credit score, which is what FICO proposing with their closed loan pricing versus $1 with a Vantage Score or $10 with today's FICO score pricing just doesn't make a lot of sense, which is why there isn't a lot of traction there. And I know you know this but we don't see any path of where this really makes a lot of sense either commercially or a regulatory legislative legal standpoint and we just don't see any traction on it.

So we're focused on really supporting our customers with the $1 Vantage. I think as we said earlier, we're going to continue that pricing in 2027 to give our customers visibility around how we're trying to support them in credit scoring and driving credit score competition. And we think that's going to help drive adoption conversion to Vantage in the mortgage space as we go through the second half and move into 2027.

Our next question comes from the line of Manav Patnaik with Barclays.

I just -- I guess, we're just looking for a little more help on the way government kind of flows through for the rest of the year and into '27. I mean the pipeline and the backlog, all that mix sense for the growth in '27, but I guess you've grown about 5% in the first half of this year. So just trying to appreciate how it ends and then how quickly all this new business rolls into in '27 as well?

The '27 new business rolls in quite quickly as I think we said, much of it's driven off some of the OB3 changes, but it's -- the $100 million of new business is 2027 ACV run rate would be principally in that run rate early in 2027.

Yes. In terms of second half, we're expecting government to return back to growth, and we'll start to see some of the benefits, a small amount from these new contracts start to flow through. So again, the wins, as Mark said, are a really strong indicator of the strength of the solution and how we think it's going to drive growth as we get not so much through the back half of this year, although we will see growth in the back half of this year, but really as you get into 2027 and beyond.

And sorry, when you mean return to growth, are we saying similar to the 5% in the first half or less?

We didn't give us -- we haven't given a specific number, but you're going to start -- you'll see government growth again as we go through the second half.

Okay. Got it. And then, John, similarly on the mortgage inquiry assumption, I think low singles technically was unchanged. So just trying to appreciate if there's a range within which you want to guide us to on the low single digits. And I think you mentioned you offset that with share gains. Is that correct? Or did I miss or read that incorrectly?

So I think you're talking about originations. And yes, we continue to expect to see originations to be down low single digits. Obviously, that's a range. And effectively, we're indicating we're going to be lower in the range of low single digits than we indicated before. and we do expect to continue to win share gains principally in soft holes as we go through the rest of this year. We think the team is making great progress, Mark answered a question earlier about Twin indicator and the progress we're making there, and that's really driving the benefit.

But said differently, Manav, I want to make sure that we're getting the right response to you on the mortgage market. It definitely weakened from April as rates continue to stay high and actually increased a bit in May and June. And we expect that to continue. It's hard to see that what's happening in the Middle East is going to be resolved and then the inflation is going to come down and then rates are going to come down. So our guide in the second half is kind of at the very low end of that low single-digit kind of market outlook for the second half.

Our next question comes from the line of Faiza Alwy with Deutsche Bank.

I first wanted to ask about talent. You see really strong growth there in the quarter. And I'm curious is that sustainable sort of what's driving that growth?

Well, we saw very good growth in Talent in both the first and the second quarter, and they've an outstanding job both of continuing to grow penetration in VOE and also verification of employment, but also to continue to drive penetration in education. And then the other incarceration type of activities that we're also able to provide data on. So really good performance by the team, continuing to expand their presence and grow their penetration across background screeners generally. And we do expect them to consistently outperform the underlying hiring market, and we've obviously done that to a very wide degree in the first 2 quarters of this year.

I can't tell you that they're going to grow at this rate consistently going forward because obviously outgrowing the market by the amount we did in the second quarter is larger than our long-term guidance, but we expect them to continue to perform well and consistent with the strong outperformance relative to the market that we've indicated we should deliver long term.

Okay. Great. And then just a follow-up on the government vertical. So I think you talked about flat growth in the second quarter and it ended up being a little bit weaker than what you had indicated. So I'm curious what led to that? And I guess, relatedly, I'm assuming that it has to do with the usage. And so as you're signing these new contracts, are these all fixed subscription-based contracts? Or is there a usage element to this where you could have upside, downside based on what type of usage or hits you end up getting?

Yes. So in terms of the specific performance in the second quarter, the team, as Mark said, performed extremely well in signing new agreements and renewing agreements. The timing of those is sometimes hard to predict and some agreements that we had expected that would close in the quarter actually code just after the quarter ended, and it impacted some of the revenue delivery that would have occurred in the quarter. And that's really the big driver of what happened in the second quarter relative to our expectations, it's not material on a go-forward basis for the business. Again, they performed extremely well in signing new agreements.

As Mark already mentioned, we are seeing an increase in the percentage of time that customers want to go to subscriptions because it makes it easier for them to budget. But not all contracts certainly are for subscriptions. We still have a significant number of contracts that are signed that are usage-based. And you'll continue to see a mix of that, although we would expect to see probably the mix of contracts that are subscription-based to grow over time.

Our next question comes from the line of Andrew Nicholas with William Blair.

I wanted to circle back to the AI cost savings that you increased this quarter, obviously only been a couple of months since the $75 million number. So I'm just curious kind of what has specifically changed? Or what are you most kind of excited about or incrementally excited about versus last quarter? And relatedly, how much, if anything, of those savings are already in the expense base or the run rate now?

Yes. So back in February, we put out the $75 million of savings from AI. And you may remember, we talked about that being principally from our operations team. Think about our call centers and paper processing centers, which are a meaningful part of our cost structure. That was where we started with AI deployment. In that operation, we've had really strong success of accelerating some of the AI agent deployment, we've got AI agents starting to take calls.

We've got AI agents really managing a lot of the massive paper that we bring into the operation. So that pace of deployment and pace of productivity has really just moved rapidly. So that's a piece of the increase from $75 million to $150 million. And then we also said to you that we've been deploying AI capabilities across the rest of Equifax. Technology is a very large part of our cost structure and CapEx structure. We've had really strong momentum in deploying AI capabilities for coking or code development, where we have large portions of our code developed now being done by agents and managed by our team, the QC elements of that.

So that's been moving very, very rapidly, and that's a piece of that increase from $75 million to $100 million. And then in kind of G&A functions when you think about finance, legal, HR, we've also seen great deployment there in legal, finance, HR are seeing productivity opportunities there. So we thought time was right to increase it from $75 million to $150 million. As stated, it's between this year and '27 and '28. So it's multiyear in nature. You're seeing in 2026, a piece of that benefit in our performance, which is extremely strong.

If you look at the margin performance for the quarter, we were up 120 basis points. That's versus our normal kind of 50 basis operating leverage that we get from our 7% to 10% organic revenue growth, I think, 7% in the quarter. So you're seeing it was AI, productivity and cost savings benefits show up in '26. And we wanted to give some visibility that it's moving quite rapidly. AI is real at Equifax for sure. We've been talking for the last couple of years around how AI is changing the kind of product scores and models we bring to market.

Our investments that we're making in our AI technology or explainable AI technology to really advance our product innovation. We talked about in the call that over 50% of our products that we delivered in the quarter are now include AI capabilities or agents inside of them. And then back to the point of your question, really late last year, we started -- as we completed the cloud really started deploying AI inside Equifax. We call it AI for EFX. That's our kind of project team focus inside of the company.

And as I said, operations was the first focus, and now we're really seeing great momentum in tech in the rest of the company. So we're advised to see those benefits will come forward not only this year but also in '27 and '28.

And just specific. So on the $2 billion gross spend, labor spending, just so you have a perspective about is expense, about 20% is capital, so the savings would impact both expense and capital. And as Mark said, the savings for 2026 are in the guide.

Got it. That's helpful. And maybe just -- I'll stick with the team. I appreciate the operating expense efficiency. I appreciate kind of the embedding of AI and a lot of your products -- but I think I asked a similar question last quarter. I'm just curious, since it's all moving pretty quickly, have you noticed a change on the demand side? Like are your clients actively pursuing your data on a more frequent basis? Are they particularly interested in AI-infused products. Just wondering if kind of the maturation of the cycle at the lender level is impacting the way that they demand your data, how they get it and how often they use it?

Yes. It's all of the above. And I think you raised a really important point that every 1 of our customers are doing versions of what we're doing. Meaning, they're changing their operations, they're embedding AI in their workflows. And there's different pace of implementation with every customer. Some more advanced, some moving quickly, et cetera. I would make the point that like this is changing rapidly. And I think the productivity piece that we talked about inside of Equifax of just in a 6-month period, our outlook for the benefits from AI in our operations, I think operations tech and our support functions doubling in 6 months. That's kind of the pace of adoption is really quite remarkable to me.

From a customer perspective, there's no question that they're becoming more AI-enabled and how they want to take access our solutions is really driving our top line and really driving our competitive advantages, our ability to deliver higher-performing solutions using our AI capabilities. So think about a score that delivers higher performance. And we've talked about that before. And whether you're AI evolved or not, if you're a customer and you have the ability to approve more consumers at a lower loss rate because you've got a higher performing score that Equifax is delivering, which is powered by AI and generally includes a lot more data elements, which is part of the foundation that we have, meaning we have more differentiated data. That's a solution they want to buy, whether they're AI-enabled or not.

So I think that's kind of the commercial activity is we are investing to have higher-performing scores models and products. And remember, what we principally sell to our customers is ROI. So that's kind of the forefront of where we've been investing for the last couple of years in products. And then the kind of the enabler that comes with that is the investments we're making in Ignite our other enabling tools that our customers use to access our tools, AI enabling those with agents in them that make them conversation with our customers. That's kind of another year around the engagement with our customers.

But it starts with performance. Are you able to deliver a product that's going to deliver more to our customers. And that's where our AI focus is in our product models and scores.

And we are seeing rapid adoption, some in pilots, some more extensively of AI Advisor, right? And that it's our most advanced solution, and customers are starting to utilize it already.

Our next question comes from the line of Ashish Sabadra with RBC Capital Markets.

If you don't mind, I'll ask another question on government. Historically, except for last year, government revenues are sequentially flat from 2Q to 3Q. Is that a similar cadence that we should expect before we see a step-up in a sequential revenue into 4Q?

Yes. So again, I think we were asked earlier, do we expect to see growth in the second half in government, and we do, right? So -- and I think that's probably as far as we're going to go on specific guidance on government or specific guidance by line of business. But we're expecting to see growth in government in the second half. And as Mark said, with the $100 million new contracts and $200 million of renewals at some of which include expansions, we would expect to see accelerating growth as we go into next year.

That's very helpful color. And maybe just on the diversified market, the guidance for 3Q was up midsole digit. That's a modest slowdown compared to 2Q. I was just wondering is that just conservatism? Any particular puts and takes that you can call out as we think about the diversified market growth for the rest of the year?

No, I think diversified markets, we're expecting to be pretty much consistent with what we saw in the second quarter, right? So I think we're very happy with the performance we saw in diversified markets in the second quarter. We saw very good performance in particularly USIS as their diversified markets growth improved by 300 basis points. We're expecting nice performance by USIS again. We'll see good improvement, obviously, as government growth improves meaningfully as we go into the second half, and we're expecting to see a better growth out of international as well.

So no, I think we're expecting to see we're expecting to see good performance in the third quarter in diversified markets and at least consistent with what we saw in this quarter.

Our next question comes from the line of Jason Haas with Wells Fargo.

When you give us the ACV bookings for government of $100 million, are we supposed to take that and divide that by the $800 million of government revenue to like imply like, I don't know, it's low double digit growth for government for 2027. Is that like the right framework to show that you're confident getting back to that like low double-digit plus growth for government next year?

Yes. We're not obviously giving guidance for 2027, yet, we'll do that at the right time early next year. We thought it was prudent given the -- we told you on our last call in April that we saw the pipeline over the last year grew dramatically, which we expected, but it was stronger than we anticipated and having this meaningful pipeline conversion we thought it was meaningful to share with you. So we did that this morning. The $200 million of renewals are in the kind of base run rate. There are some expansions in there. The $100 million is new revenue versus 2026.

There will be some of that, a small amount in the skin half, but it will be principally in 2027, which is really how we thought about government unfolding as we move into and beyond. We still have a strong degree of confidence and that's actually reinforced by the commercial pipeline and by the pipeline conversion of the 100 and the 200 million when we think about government in '27 and beyond, there's just a long runway to grow into that big $5 billion TAM, and we're seeing some real success is reflected in the $100 million of new business.

Great. Got it. Okay. That makes sense. And then I want to follow up on the EWS margins. So I know nothing is changing and the volumes are guided flat for this year. But just conceptually, I'm trying to understand why that is? Because it sounds like you're getting some good AI benefits to your cost structure. We're certainly seeing that in the FICO USIS margins, which are to spend this year. So what's the offset? Is it investment in the business? Is it because you're selling more like in car generation and other records that maybe makes the business lower? Like just conceptually, why aren't those margins going higher this year?

Yes. So we've been clear that, look, 50-plus percent EBITDA margins are pretty unusual and quite attractive. And EWS has been delivering those for, I don't know, a decade as long as I've been at Equifax, they've had those kind of 50-plus percent EBITDA margins. And when we think about our long-term framework, we've always thought about maintaining that 50-plus percent EBITDA margin. And by doing that, we want to keep reinvesting inside of to really drive that above 7% to 10%, we think that they're going to grow over the long term, low double digits, driving that very high top line with those attract margins.

That's how we think about the business. It's a place we want to keep investing in. And yes, they are getting some of those AI productivity savings. We're investing those to keep that top line growth moving -- and then when you think about overall Equifax, they're growing fast than the rest of Equifax with those higher EBITDA margins. That's 1 of the drivers of the 50 basis points of kind of base operating leverage that we have over the long term. And then in 2026, you're seeing strong outperformance of that 50 basis point long-term frame for operating margin expansion, principally from AI productivity that we've already talked about, the $75 million, which is now $150 million accreting into that margin.

So that's how we think about the overall framework going forward. We should see strong margin expansions in USIS and international and corporate. And we want to maintain those 50 basis points -- I'm sorry, 50% plus EBITDA margins in the future in EWS.

Our next question comes from the line of Kyle Peterson with Needham & Company.

I wanted to start off on the consumer lending business. It seems like that was a notable area of strength you guys called out and good to see the momentum there. I want to see much of that is either strength with banks. I know some of the [indiscernible] and stuff has gotten a little more into that versus like are you guys gaining some share in FinTech? Or is it a little bit of both? Just wanted to get more color there.

Yes, it's really all of the above. And I think USIS had some strong momentum in the quarter. We talked about like Twin indicator, look at the Vitality mix. A lot of new products that USIS is above 10% vitality in the quarter. So that's a positive that we've got more solutions that they're bringing to market. The end markets are solid in -- outside of mortgage which is a positive. And then we talked to the fact that we had very strong growth in EWS where the twin data is used in auto car P loan performed very well. We're seeing a stronger adoption there because of the value of the combination of credit data with income and employment data. So that's been a positive momentum.

And with USIS online, I mean, we saw a very good performance. The good news is right across the portfolio, right? Very good performance in Auto, strong performance online and an FI, actually nice performance in telco as well, good growth there, and we're seeing increasing and improving growth in insurance, right? The only place we saw some weakness is in our sales that -- where we actually sell to our 2 competitors in our D2C business. But other than that, we had very strong performance across the board in USIS online.

Great. Really -- and then maybe a follow-up kind of shifting back to some of the AI discussions. It's good to see the savings and efficiency gains there moved up dramatically. So cash flow conversion, it seems like you guys are able to reiterate that. So maybe -- there's been a lot of discussion on kind of AI investments and paybacks and CapEx commitments and such. So how are you guys thinking about this conceptually in terms of initial investments, payback periods and such in terms of deploying AI within Equifax?

We're seeing very high returns and ROIs on our AI investments. So it's very positive. It's really -- I don't know how to describe it with enough enthusiasm, meaning the pace of adoption by a our organization is something I haven't seen before, meaning the ability to do it. So very high ROIs. And the $150 million really reflects our expectation of the investments we'll make in the AI tokens and tools and agents that will be used to deliver that. And that's still we're still optimizing that, meaning it's still early days. Think about it a year ago, we weren't talking about this. We weren't doing it.

So it's really quite remarkable about how rapidly we and I think the world are deploying these kind of capabilities. And we're being very disciplined as we are with all of our investments around returns and expectations on paybacks because we want make sure we're deploying it smartly, but we're also driving real engagement here across every corner of Equifax to look at the opportunities to deploy it. And I think as you pointed out, in a matter of 6 months to have our outlook really double on the capabilities is just a reflection of how we're rapidly deploying it.

And we think we're really benefiting heavily by the fact that we rebuilt onto a cloud platform over the past 5 years, right? So our data has already been built in a standard data fabric to make it easier for agents and AI to access. I guess, there's additional investments that have to be made to make it easier specific for AI but we had made a lot of progress on that just from the cloud migration. Same thing can be set around the way we built our Agentic platform that everybody can use, right? That effectively because we're working on standard Google tools, we can implement those capabilities. We think much more simply and rapidly than others can because our infrastructure is very modern and built on those cloud-based services already. So we feel like, yes, there's certainly been investment. We've been able to contain it inside the numbers that we told you we would spend in 2026. And we feel like we're progressing very rapidly, I think, specifically because of the fact that we have a very modern cloud-based infrastructure to start with.

Our next question comes from the line of Kevin McVeigh with UBS.

Can you give us a sense of what type of mortgage rates you've got embedded in the second half guidance relative to what it was in the initial 2016 guidance?

Yes. So right now, what we have embedded in the guidance is current mortgage rates, right? And we actually do that in every earnings release. So we would we use the February rates in February, and we would have used the April rates in April. I think they're up on the order of 30 to 40 basis points. We can get to that exact number between April and now. So that's really what we've seen occur while we're seeing a slowdown in mortgage and we're using current run rates and current rates.

Got it. And just when you talk about the AI implementation across the expense structure, going to I guess that Slide 14, is there any reason you're not looking at sales and marketing and G&A at this point? Or is there more incremental opportunity as the becomes more embedded in the expense and I guess, organization overall?

Yes. I think we're going to where we're seeing the momentum so far and where we have our largest cost bases, which is really in operations and tech is larger than operations. But I said earlier that finance, HR, legal, even the commercial team is using AI tools now to prepare for being with customers. We're definitely doing it across the board. Conceptually, we don't think about reducing our commercial resources. We think that, that's always going to be something when I want to invest in. But we want to AI enable them to be more effective on how they go to market. But we're seeing a really AI deployment across every corner of Equifax.

Yes. And the efficiencies in G&A are included in the just, as Mark said, not marketing and sales. That's an area we're investing in.

Our next question comes from the line of Surinder Thind with Jefferies.

Mark, when you think about the savings that you've been generating through the use of AI tools and reinventing some of those workflows -- are some of those costs sustainable if AI costs were normalized. There's a lot of debate out there about -- well, I guess what I would add here is, though, 1 of the disappointments, I think, with cloud has been that the hyperscalers have constantly been raising pricing such that I guess the users of cloud never truly realized the savings that they were promised. I'm just wondering if you get these...

We did. We clearly saw the cloud savings. Again, you think about cloud savings versus our legacy mainframe, we think that was a successful investment that we delivered the returns on that one. When it comes to AI, we are seeing the ability to really access the AI tools that are available that we're using and deliver very meaningful ROIs to drive the cost savings. And we're being very disciplined and deliberate around how we roll out the tokens, how we manage the tokens to deliver ROI and we're seeing returns.

So I think we wouldn't have gone from $75 million to $150 million, if we're not. And to your question, yes, we think they're sustainable, given the scale of the benefits that are going to be delivered there.

And cloud cost management is a discipline that we think we're very good at, right? So -- and we think it extends very directly into AI and token management, and we're already managing in that way, using the same discipline. So we feel good about our ability to manage this going forward. And it's not only a financial -- it's a technical discipline. It's how do you change your applications to make them more efficient. We think we'll be able to do the same thing around AI and the models we choose.

That's helpful. And then when -- I guess, just turning to mortgage and maybe when looking at prequal and kind of the ongoing movement from 3 bureaus to kind of 1 bureau poles by lenders. I guess I would suggest that they're quite sensitive to the current costs. So is the goal here that you think you can take the majority of the market share in prequal or given that your incremental cost of delivery are quite negligible, would you actually consider moving to like a loan closed fee where it's just all you can eat up front? I know you've talked about RESPA -- but what would be the downside of moving to that model?

Yes. We don't think that's the model we want to move to nor does the industry want to move to that, and we already maybe covered that earlier. I want to clarify, you said the move from 3B to 1B. There's no move underway there. And I think you may have seen maybe 45 days ago, the HUD statement that 3B is here to stay in their loan originations and we think the industry is very aligned around the power of 3 because of the differences in the credit files. With regards to prequal approval, we definitely want to try to grow our share there, and that's why we're trying to differentiate our solution.

And remember, we're using 2 unique levers to Equifax. One is the twin indicator for free on our mortgage pre-qual-eapplication credit file, and we want to do that to drive share. And we've seen some share gains in the second half of last year and the first half of this year, and we expect some of those to continue. And then we're also delivering with our mortgage credit file our cellphone utility attributes for free to differentiate. That's a big data set for us. It provides a lot more credit data in the mortgage credit file than our competitors can. So that's another advantage for Equifax. And those are all to differentiate ourselves going forward.

So we are super pleased to have the assets that we have and with the cloud behind us, we can deliver those to our customers in a way that can differentiate our credit file solution to drive those share gains.

Our next question comes from the line of Curtis Nagle with Bank of America.

Maybe John, just a quick 1 for you. Just talk about the flow-through of the EBITDA margin through the second half. I think there's a bit of a step down in 3Q and then a reacceleration sequentially implied for 4Q. So maybe just walk through the puts and takes there. And then I have a follow-up.

Yes. So for the full year, again, we're indicating that we're going to deliver EBITDA margin growth of 75 basis points or higher. We feel very good about that, much higher than our 50 basis point long-term model. And I think in the third quarter, we're still talking about growth even well above that 75 basis points on the order of 90 basis points. So we feel great about that we year-to-date. We feel good about the guide for the third quarter. And we believe we're being consistent with what we've talked about full year in terms of being able to deliver very strong EBITDA margin growth ex FICO again at north of 75 basis points for the full year.

So we feel good about our margin expansion. As Mark has already said, some of that is being driven by AI benefits but in 2026, those aren't that large yet, right? And they're going to accelerate as we go through '27 and '28 with the increased level of $10 million that we announced today.

Okay. And then just going back to the $200 million in renewals, I guess any stats you'd be able to give in terms of, I don't know, rate of improvement and change in renewal rate compared to some of the prior quarters...

The renewal rate, very, very high. Very, very high. So you think about that as something that is super high, and it's a big number. So we've made a decision to share the new business, which we typically don't do, but it's such a sizable number, we want to share the $100 million and we opted there also the renewal rate. Similar pricing, similar structure. There's not like changes happening there. It just reinforces the market presence in the market position that our unique twin solution has.

And again, as a reminder, I think investors sometimes forget this, there's a long runway here, meaning you got $5 billion of potential customer relationships and we're at $800 million and heading towards that $5 billion with $100 million of incremental new contract signings that we showed this morning.

Our next question comes from the line of Rayna Kumar with Oppenheimer Company.

Just I want to better understand just your appetite for more acquisitions here. And like if you do have an appetite, which areas do you expect your M&A efforts to be focused on going forward?

Sure. And I think we've been very clear since I've been at Equifax, that we're super disciplined around bolt-on M&A. We're looking for businesses like Circula is a great example, unique opportunity to enter the mid-market, really fast-growing market, fits with our international strategy, kind of a market leader, super attractive growth our financial criteria for bolt-on M&A is to buy businesses that are accretive to our 7% to 10% long-term growth rate, Circulo checks that box as an example, accretive to our margins. Their mid-40s EBITDA margins are clearly accretive. And then deliver shareholder value, meaning we bought it well. after synergies, the 9.5% or 9.4x multiple.

And when you think about where we want to buy, we're also very clear the international platforms is one. And as you know, a couple of years ago, we bought Boavista in Brazil. They entered the Brazilian market. We bought Círculo de Crédito, the leader in Dominican Republic and now circular -- I'm sorry, we bought the #1 player in Dominica and now Circulo in Mexico. So international platforms are a priority. -- strengthening Workforce Solutions is another one. And as you know, we're quite acquisitive there. We bought APRs Insights. It's been a really successful acquisition for us, high returning with the incarceration data.

So that was a real win there. And we've done, I think, 6 or so, maybe 7 over the last 5 years, acquisitions to strengthen our employer business, whether it's around [indiscernible] or i9 kind of solutions. Bulk Verify that we bought in November as an example of that. So number 2 is strengthening our fastest-growing, highest-margin business, Workforce Solutions. Number 3 is unique proprietary data assets that add to our data moat. We've done a number of acquisitions there, principally in USIS, with the acquisition of PayNet on commercial data DataX and Teletrac, so we want to continue finding unique data assets that are alternative to the credit file.

So that's a third priority. And #4 is identity and fraud. And you know our sizable acquisition we did a number of years ago was account. That's been a very positive acquisition for us in that fast-growing vertical. So those are the 4 kind of swim lanes that we think about both on M&A. And as you know, we were very clear last April when we rolled out our capital allocation after the cloud completion that we're going to use our excess free cash flow to do this bolt on M&A, like Boavista, like in Appersonsights, like Circulao or Credito in Mexico.

And then our excess free cash flow, we're going to use to buy back stock. And we've been very aggressive in our eyes, buying back stock, $1.6 billion over the last year, $500 million in the fourth quarter, $300 million in the second quarter. So with our growing top line, with our growing Mart expansion and our very high cash conversion. We have substantial excess free cash flow after CapEx and dividend to do the bolt-on M&A and return substantial amounts to our investors going forward. And as we said on the Circular call, we expect in 2027 to have a similar, slightly larger capacity of $1 billion plus of free cash flow, excess free cash flow after dividend and CapEx and then debt capacity or leverage because our EBITDA, we expect to grow another $1.5 billion, just like $1.5 billion we have this year for bolt-on M&A and returning cash to shareholders through buyback.

Our next question comes from the line of [indiscernible] with Autonomous Ridge.

Any thoughts around the time line for full-scale implementation, both Vantage Score and FICO? We also want to get your latest expectation around antiwar adoption rate in mortgage by the end of '26 and '27?

Yes. You should talk to FICO about. I don't think we have a really strong perspective on that. I think that's going to take time would be kind of my assessment. I think the Vantage conversion is probably a reflection that the 100 change is going to be challenging, meaning it takes time to do it. On Vantage, we're seeing strong momentum. Just as a reminder, it's only in really a few months ago that the FHFA opened up the gates for Vantage adoption, it's still being gated to 20-plus lenders, we would expect that to increase -- but the momentum is quite strong.

So it's hard to handicap how quickly the agencies are going to start allowing more lenders to deliver underwrite mortgages using agency mortgages using Vantage, but we expect that to continue going forward. The $1 billion cost savings is a big number. And when we meet -- when I meet with mortgage originators, they're well aware of that opportunity for them. They're under really meaningful margin and cost pressures in the current mortgage environment. So it's something that is on their screen. And I think a reflection of the growing number of lenders that are taking our free Vantage score to just make sure their process flows and technology is operating is a great indicator that there's going to be conversion going forward.

I would remind you and others that are still on the call, that whether it's Vantage full conversion or FICO stays forever, it doesn't change our business model. We get a small amount. It's not small, but on full Vantage just conversion, it's $40 million to $50 million of incremental margin. But if FICO stays there forever, it doesn't change our ability to grow our underlying business. It doesn't change our ability to deliver our long-term framework of 7 to 10 growth ex FICO because we make no margin on FICO, which is why we started to talk about our margin expansion ex FICO, which is really what you should care about because that generates the free cash flow that we're able to use for CapEx dividends bolt-on M&A and then importantly, returning cash to shareholders through buyback.

That's very helpful. A while to get your thoughts on core gaming, based on your conversation with lenders and the data you're seeing? Are you seeing score gaming because the 2 scores are fairly similar and were running 0 score gaming right now?

You use the term score gaming, there's -- we don't hear anyone thinking about it that way. Why would they do it? And remember, in order to -- if they wanted to buy a credit -- 2 credit reports and Vantage and FICO score, they could do that, but it's just cost prohibitive and there's no value in doing it. Remember, the credit score in a mortgage origination is only used in the kind of pre-application pre-approval process for the mortgage lender to determine, is this a consumer that's going to qualify or an applicant that's going to qualify for the kind of mortgage they want to take out. It's not used in the underwriting -- it's actually -- the pricing is revalidated based on the credit file data and trade lines that come from the 3 credit bureaus. That's how the underwriting is done. So no, we don't hear or see a thing around so-called score gaming.

Just a quick follow-up. Are you seeing lenders that have set up a waterfall structure where they want to pull the core first to see if it hits the top [indiscernible] bucket. Is that works right now?

No, same comment, you'd have to buy 2 credit files. And there's just no incentive to do that. And the score difference is so small, and we should all understand that there'll be sooner versus later, there'll be LLPA tables that will incorporate both FICO and then will be a separate LLPA table. I would think for Vantage. So there's -- that's going to be a nonissue and it is a nonissue today in our eyes.

Our next question comes from the line of Scott Wartzel with Wolf Research.

Just 1 from me. I just wanted to touched on the government bookings that you disclosed. I'm wondering if there's any seasonality with those that we should be aware of? I think just in the context of a lot of state fiscal years ending maybe 2Q is a seasonal peak for the booking?

Now there's a bunch that ends in September, and there's no uniform kind of state budget windows. And no, I wouldn't think about contract signings as being seasonal sometimes the effective dates are as we should all remember, with a new contract, there's also an implementation process with some states as far as their technology and process flow. It doesn't happen immediately, meaning it takes time on their side, and we support that to happen. But no, I wouldn't think about seasonality of how government operates. It's really across the board.

Our next question comes from the line of Simon Clinch with Rothschild & Company. Redburn.

Mark, I was wondering if I could get your thoughts on 100 score 5.0. I know we're talking about 4.0, but I've seen some news out on 5.0 recently. And I'm just curious as to how that kind of fits into the picture over the next few years? What needs to happen to make that a reality to compete, I guess, more effectively we tend to?

Yes. We think Vantage 4.0 really competes very effectively with 10T. That's our perspective. And 10T is really catching up, if you will, from Classic, which is used in the marketplace, which is -- I don't know if directionally right. I think it's about 10 years old, maybe it's not quite 10%, but something like that is when FICO Classic was put in place. So Vantage 4.0, I think the industry in the marketplace understands it performs much more strongly in FICO Classic, I think 10 closes that gap.

And as you might imagine, we're encouraging Vantage, which we own, along with you and Experian to continue to invest in kind of the next level of sophistication around the score that they use in the market base and so they're making those investments. But we're very pleased with the Vantage 4.0 positioning and our expectations of its outperformance against classic and how it will compete against 10T. And again, I'll remind 1 more time that in mortgage, in particular, but more broadly in the other verticals the score is less relevant in the underwriting.

What's relevant is the credit data that's used underlying the creation of that credit score. So -- while it's important to continue to invest in the credit score, what's really used in the underwriting is the credit data that comes from our credit file and to human experience.

And just a follow-up on a slightly different topic. First of all, congratulations on the acquisition of Mexico. I noticed though in your commentary for that, that you were actually considering standing up a de novo credit bureau in Mexico, which took me by surprise. I was just wondering if there's anything that -- is that something you've always done in new markets and sort of consider that and actually done some work to do that? Or is there something technologically that's made it easier for you to do that this time because I always assumed it was incredibly hard to stand up a brand-new credit bureau in any market?

It's incredibly hard, and we've never done it. Mexico, as you may know, was I'll use the words was a closed market until recently. As you may know, the bank owned the only credit deal there that competed with Circulo. Circular was a privately held, owned by principally retailers and investors in Mexico. -- and it competed really against the bank-owned credit bureau that was a consumer commercial credit bureau. There was an ownership interest at TransUnion Ad, and I think FICO had an interest in D&B in the commercial credit bureau.

And then the banks decided to break that into 2 businesses: a commercial and consumer credit bureau, TransUnion because of their control position, bought the consumer bureau last year. And that really opened up the market. Until that time, we did decide because we really were attracted to the market to put an application in really about 5 years ago, for a credit bureau launch, I think we would struggle with the economics of doing that, but we thought strategically it would position us at least, I think that decision if we could get that approval to do with de novo credit bureau. It was really not our choice.

And then once the market opened up and TransUnion made their acquisition, it really gave us the opportunity to really spend time with Circula and make that acquisition. So we much prefer a path we're on with Circulo and we're super pleased to do it. And the fact that we're well known to the Mexican regulators because we've been in this application process for close to 5 years, we think it positions us well for the regulatory approval process, which obviously TransUnion went through and obviously navigated quite effectively, and we would expect to be saying, but we think we're advantaged because of our de novo application has been in there for quite some time, and we've been engaging with the regulators.

But our -- clearly, we're going down the path that we would have preferred, which is an acquisition. And as you pointed out, a de novo build is super hard, and we've never done it. Actually, I don't know, as long as I've been at Equifax, I don't think anyone's tried it because it's just super challenging to collect the data, and it would be quite expensive to build out the capabilities.

Our next question comes from the line of Ryan Griffin with BMO Capital Markets.

I know it's late. So I'll just ask 1 question on competitive dynamics in government, understand the work numbers record penetration opportunity. But can you elaborate just on the retail win against some of the consumer-based verification programs and then the open source providers like [indiscernible] in case we're missing?

Yes. I think that hopefully, for you, it certainly does for us that strong renewals on the $200 million that we shared and $100 million new business, I think it reflects really depth and how the market meeting our customers and new customers really view the twin solution. It's instant, it can be integrated very quickly. It has very high coverage. It delivers the ability to approve someone's social services instantly in that application process, which every social service administrator want to deliver services quickly. It delivers productivity the case worker if we're using consumer consented, there's a lot of change that back and forth between the applicant and the case administrator in order to do that.

And it also delivers the integrity. So we feel quite confident about the value that we deliver to our customers and the ability that we have to continue to drive higher kind of conversion or approval rates. I think we didn't talk about it, we talked about in our comments, but no 1 asked the question about it, but our records were up 10% in the quarter. So that delivers higher access rates for all of our customers, including government, which is a real positive. So we're quite pleased with the momentum by our government team. And as mentioned a couple of times on the call, our commercial pipeline is still up 2x from where it was a year ago. And we're just pleased to see meaningful conversion of that pipeline in the last number of months.

Our final question this morning comes from the line of George Tong with Goldman Sachs.

With respect to the AI productivity initiatives, can you talk a little bit about the timing of the savings utilization? Is it relatively linear over the next few years or more back-end loaded towards 2028?

Well, I think you're seeing it come through in 2026 from the $75 million we announced in February on our fourth quarter earnings call, hopefully, you're pleased, George, with our margin performance this year is, I think, above your expectation and certainly above our long-term guide. And even -- and we guided for 75 basis points ex FICO for the year and the first half were north of that. So you're seeing it crystallize in 2026, and we're not giving guidance for '27 or '28, but we've given you a good boundary. And obviously, with a much larger number doubling our expectation around those AI productivity benefits from $75 million to $150 million over the '26, '27, '28 time frame.

Got it. That's helpful. And of the $150 million in savings, how much do you expect to retain as margin expansion? I know some of it is flowing through this year versus reinvesting it back into the business?

Yes. I think we told you that we're going to make those decisions about reinvestments as we go through the calendar in the future, we'll give guidance in 27 around what we expect our margin expansion to be from operating leverage against our long-term framework of 50 basis points and how much incremental will be -- we'll give that guidance in February. But you should reflect, George, I hope you are on the fact that in a matter of 6 months, our kind of confidence in our ability to deploy AI inside of Equifax is growing really rapidly with the increase of our savings goal from $75 million to $150 million.

Thank you. SP1 Ladies and gentlemen, that concludes our question-and-answer session. I'll turn the floor back to Mr. Burns for final comments.

Thanks for everybody's time today. If you have any follow-up questions, please reach out to myself and Molly, and have a great day. Thank you.

Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.

Greetings, and welcome to the Equifax Investor Update Call. [Operator Instructions]. As a reminder, this conference is being recorded.

I would now like to turn the call over to your host, Trevor Burns, Senior Vice President, Corporate Investor Relations. Thank you. Please go ahead.

Thanks, and good morning. 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, and archive of the recording will be available later today in the IR Calendar section of the News and Events tab at our Investor Relations website.

During the call, we'll be making reference to certain materials that can be found in the Presentations section of the News and Events tab at our IR website. These materials are labeled Equifax to Acquire Mexico Credit Bureau, Circulo De Credito.

During the call, we'll be making certain forward-looking statements to help you understand Equifax and the Circulo De Credito 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 the Equifax business are set forth in filings with the SEC, including our 2025 Form 10-K and subsequent filings. During this call, we will refer to certain non-GAAP financial measures, including adjusted EPS, adjusted EBITDA, adjusted EBITDA margin, which are adjusted for certain items that affect the comparability of our underlying operational performance.

Now I'd like to turn it over to Mark.

Thanks, Trevor, and good morning. An exciting day for Equifax. Turning to Slide 3. I'm energized to announce that Equifax has signed a definitive agreement to acquire Circulo De Credito, the fastest-growing credit bureau in Mexico for an enterprise value of $750 million. This acquisition will expand Equifax into the fast-growing Mexico market, the second largest economy in Latin America and offer Circulo De Credito customers access to industry-leading Equifax cloud-native capabilities, decision and analytics capabilities, patented EFX.AI technology and award-winning identity protection and fraud prevention offerings for the development of solutions designed to help customers grow and expand financial inclusion.

Mexico is a market we've been focused on for the 8 years I've been at Equifax, actually longer than that. I think even Rick Smith focused on it during his CEO tenure. Until recently, 2 of the 3 credit bureaus in Mexico were owned by the banks. After TU acquired majority ownership in their bureau, Circulo was the most attractive entry for Equifax.

Circulo De Credito has delivered very strong financial results for the 12 months ended June 30 with revenue of $134 million, up a very strong 31% and adjusted EBITDA margins of 46%, both highly accretive to Equifax financial results. For the full year 2026, Circulo is expected to continue to deliver strong high double-digit revenue growth with mid-40s adjusted EBITDA margins and is expected to be accretive to Equifax adjusted EPS in the first full year of ownership.

Since 2020, Equifax has invested our strong free cash flow and strategic bolt-on acquisitions to drive our financial results and shareholder returns. Including Circulo De Credito, we will have invested nearly $5 billion in 17 bolt-on acquisitions since 2020 with a proven track record of integrating these acquired businesses like our recent acquisition of Boa Vista in Brazil.

We expect the Circulo acquisition to be completed in the fourth quarter of this year, subject to customary closing conditions and regulatory approvals.

Turning to Slide 4. We expect to acquire Circulo De Credito for an enterprise value of $750 million. The enterprise value represents 11.7x adjusted EBITDA multiple at closing based on Circulo's expected 2026 adjusted EBITDA. With the addition of expected run rate synergies to Circulo's 2026 adjusted EBITDA, the adjusted EBITDA multiple is expected to be about 9.4x at closing, which is attractive and significantly below the Equifax current EBITDA multiple of about 12 turns or 12x.

Equifax is delivering a strong 2026 with free cash flow expected to exceed $1 billion and continued strong growth in adjusted EBITDA, we have over $1.5 billion in financial capacity in 2026, while maintaining our leverage at under 3x that is consistent with our BBB and Baa2 credit ratings. This provides significant capacity to execute the Circulo acquisition while continuing share repurchases.

Over the past 12 months through June 30, we have purchased over 6 million shares of Equifax stock or over 5% of shares outstanding for almost $1.4 billion. And year-to-date, we have repurchased about 3.1 million shares for about $560 million. Given our strong financial capacity of over $1.5 billion in 2026, we can complete the Circulo acquisition in the fourth quarter while still executing share repurchases, although at a slower pace than we saw in the first half of 2026 and while continuing to manage balance sheet leverage at just below 3x. This allows us to enter 2027 with a strong balance sheet and consistent with 2026, with significant financial capacity for both acquisitions and share repurchases in 2027.

We expect the Circulo acquisition to deliver mid-double-digit returns well above the Equifax cost of capital, and we expect Circulo to be accretive to adjusted EPS in its first full year as part of Equifax. Accretion expands significantly given strong Circulo revenue growth and the mid-40s adjusted EBITDA margins as well as the significant synergies driven by both revenue expansion as Circulo implements Equifax global cloud-native technology and leading EFX.AI capabilities and delivers NPI and new product rollouts consistent with Equifax expectations and cost synergies delivered through the integration into our platforms.

The Circulo acquisition with its very strong revenue growth, margin profile and cash generation is accretive to the Equifax long-term financial framework as well as delivering returns well above our cost of capital, which delivers strong returns to our shareholders. This acquisition fits perfectly in our balanced capital allocation framework with our focus on highly accretive bolt-on acquisitions while continuing significant ongoing return of capital to shareholders and maintaining our strong investment-grade balance sheet.

Turning to Slide 5. Mexico is the second largest economy in Latin America and is one of the fastest-growing credit markets globally, expecting to grow very strong double digits over the next few years with continued strong growth in the future. Consumer credit growth in Mexico is expected to be driven by expanded access to credit, financial inclusion and digitization and Circulo De Credito has been a first mover in the market with the broadest set of data and innovative solutions. More than 25% of the Mexican population is without access to formal financial products and nearly 44% of the population does not have a bank account.

Equifax and Circulo De Credito have a shared commitment to helping more consumers live their financial best. And together, we will continue to offer deeper alternative data and unique insights that can help our customers deliver unique solutions to expand their consumer credit offer. Circulo is posed to capture significant share of the Mexican credit market growth given its unique proprietary data, strong relationship with the expanding FinTechs and strong synergies with Equifax.

Turning to Slide 6. Circulo De Credito is the fastest-growing credit bureau in Mexico and the only credit bureau licensed to operate both consumer and commercial credit bureau services with more than 1,700 bank, retail, fintech, small business lending, microfinance and telecommunication customers and 2 billion trade lines covering 80 million validated identities.

While traditional credit data is required by law to be shared between the credit bureaus, alternative credit data is not. Circulo is a leader in alternative data or information not included in traditional credit reports in Mexico, including gig economy transactions and utility payment history. This alternative data can be responsibly expand access to credit and support a more inclusive economy, critical to a country where nearly 33 million people are engaged in the informal employment, such as unregistered micro businesses or gig employment.

Turning to Slide 7. Circulo's unique market position has delivered very strong financial results. As you can see from the chart on Slide 7, Circulo's compound annual revenue growth was a very strong 23% from 2023 to 2025, with revenue growth for the past 12 months ending June 30 of 31%.

Circulo has delivered very strong mid-40s adjusted EBITDA margins in both 2025 and the last 12 months through June 30, 2026. For the full year of 2026, Circulo revenue is expected to grow strong high double digits while maintaining their mid-40s adjusted EBITDA margins. Circulo revenue growth has been led by their unique alternative credit data advantage enabled by deep relationships with FinTechs with over 40% of Circulo's 2025 revenue generated from FinTechs with a growth rate of over 50%.

Circulo's unique alternative data and the team's strong relationships with FinTech customers are a key driver of future Circulo revenue growth in a market where consumer credit is underpenetrated and growing rapidly. The very attractive Circulo financial results are accretive to the Equifax long-term financial framework of 7% to 10% organic revenue growth and 50 basis points of annual margin expansion.

Turning to Slide 8. Equifax expects to deliver strong synergies through the integration of Circulo De Credito. First, we plan to deepen Circulo's retail and FinTech data moat while simultaneously expanding their penetration with large financial institutions. By leveraging Equifax's global scale, we can take Circulo's market-leading position with FinTechs and extend that influence into the traditional bank and financial institution space where Circulo is not penetrated.

Second, we expect to leverage Equifax's scalability, technology and security to modernize Circulo's infrastructure to the new Equifax cloud-native architecture. By deploying our core data analytics platforms, we can ensure seamless integration and the rapid deployment of global Equifax products scores and solutions to Circulo's customers.

And lastly, we're committed to delivering deeper alternative data and unique insights to help our customers in Mexico grow. We expect to leverage our global footprint and specifically our established leadership across Latin America to introduce high-value products and services, integrating our patented EFX.AI, cloud-native technology and advanced decisioning platforms into the Mexico market.

Together, these initiatives form a comprehensive road map for enhancing Circulo's platform, ensuring we are not just acquiring a business, but we're actively elevating its capabilities across the Mexico market and for the new -- the Circulo customers.

Turning to Slide 9. Our recent acquisition of Boa Vista in Brazil has outperformed our expectations as well as outperformed other market participants from share gains and the deployment of new solutions to the market to help our customers grow. The acquisition of Boa Vista established our presence in the fast-growing Brazilian market 3 years ago and added unique retail data assets to our portfolio for that market.

The Boa Vista integration gives us significant confidence in our M&A integration playbook as we look forward to rapidly integrating the Circulo business into the new Equifax cloud-native platforms and technology after closing. Equifax will offer Circulo De Credito customers access to industry-leading Equifax cloud-native capabilities, decision and analytics capabilities, patented EFX.AI technology and award-winning identity protection and fraud prevention offerings for the development of solutions designed to help customers grow and expand financial inclusion. The Boa Vista integration serves as a great blueprint for the Circulo De Credito integration.

Turning to Slide 10. Circulo De Credito is a highly strategic asset and core to our international and Latin American growth strategy to invest in high-growth markets. Equifax is already a market leader in Latin America, holding leading credit bureau positions in Costa Rica, El Salvador, Honduras, Ecuador, Peru, Chile, Argentina, Uruguay and Paraguay.

By acquiring Circulo, we are firmly expanding our footprint into Latin America as a market leader, complementing the position we established 3 years ago in the large, fast-growing Brazilian market with Boa Vista. We plan to deploy the same proven global integration playbook that we use to accelerate Boa Vista's growth and share gains to Circulo.

Moving to Slide 11. The Circulo acquisition closely aligns with our broader strategic bolt-on M&A framework, and with the Circulo De Credito acquisition, Equifax has invested nearly $5 billion in 17 strategic bolt-on acquisitions since 2020, all of which are strictly aligned with our core priorities of adding differentiated data, strengthening our fast-growing Workforce Solutions business, expanding in fast-growing international markets and broadening our identity and fraud capabilities.

Circulo checks multiple boxes, specifically leveraging unique differentiated data and expanding our international footprint, much like our recent acquisitions of Boa Vista in Brazil and Data Credito in the Dominican Republic. We have a very strong history of integrating our acquisitions to deliver growth and shareholder returns. Because of our $3 billion investment in the new Equifax Cloud, we can integrate acquisitions more quickly than ever and move products and platforms quickly between our different markets.

By executing our disciplined bolt-on M&A strategy, we expect to add 100 to 200 basis points of revenue growth to Equifax annually beyond our 7% to 10% long-term organic growth framework while expanding our global data moat.

Wrapping up, the Circulo transaction is a perfect example of our global bolt-on M&A strategy at work and clearly aligns with our strategic and financial long-term, strategic and growth -- financial framework for the future. We are acquiring the second largest and fastest-growing credit bureau in the rapidly expanding Mexico market at an attractive multiple that will drive shareholder returns.

Circulo's strong adjusted EBITDA margins will be accretive to our international business and to the Equifax long-term financial framework, and we expect continued high double-digit growth with strong margin performance from Circulo in 2026 and strong growth in the future.

The acquisition fits perfectly in our balanced capital allocation framework with our focus on executing on highly accretive acquisition -- bolt-on acquisitions while continuing significant ongoing return of capital to shareholders via dividend and buyback while maintaining our strong investment-grade balance sheet.

We're incredibly energized to bring Juan Manuel Ruiz Palmieri, who leads Circulo and his team into Equifax and onto the Equifax Cloud to accelerate their product innovation and drive strong return for Equifax shareholders after closing.

And with that, operator, let me open it up for questions.

[Operator Instructions]. Our first question comes from the line of Jeff Meuler with Baird.

Congrats on the acquisition. Can you go through the 2025 acceleration in faster growth year-to-date '26? I guess how much of that is the fintech market? It sounds like that's a really good position and growing really well. And is it -- I guess, are there market inflection points or new products that are driving it? Anything beyond, I guess, cyclicality of that end market?

Yes. The underlying market, Jeff, is growing quite rapidly, particularly in the space that Circulo has been really growing and living in. I think as I mentioned in my comments, they don't do a lot of business directly with the traditional banks. Their focus has been on retailers. There's a lot of retail finance in Mexico with the telcos and as you point out, with the FinTechs.

And as we said in my prepared comments, they've seen like 50% growth in the FinTechs. And you've had a lot of new entrants, a lot of new companies being formed there and a lot of growth in that fintech market. And they're uniquely positioned with their large alternative data. They just have more data on that near prime, call it, subprime, call it, unbanked consumer.

If you think about a consumer in Mexico that doesn't have a bank account, doesn't have financial products, their first financial product likely is going to be financing at a retailer to buy an appliance, to buy a furniture and those trade lines become really the basis for their financial future until they do move into the formal financial environment. So they've just really been well positioned given their alternative data, their customer focus and approach to market. Their really alignment with the FinTechs is extremely strong, and they've just been riding that quite strongly. And we expect that to continue going forward. And one of the new levers for them is the opportunity now with the banks selling off their interest in their credit bureaus.

As you know, they sold their interest to TransUnion, and they've got a commercial credit bureau that may be something that they decide to monetize, but that opens up the door for Circulo to have direct relationships with the banks because they're no longer owners of the credit bureau.

And then obviously, you think about that what we're going to be able to bring like we did with Boa Vista, bringing down our products, our technology, expanding their score capabilities and our data analytics, our AI, we expect them to really be able to expand their product offerings going forward, which are part of the synergies that we see once we get them on the Equifax Cloud and into our platforms.

Our next question comes from the line of Toni Kaplan with Morgan Stanley.

I wanted to ask about the competitive landscape, particularly since your 2 biggest competitors are already in the market. Just wanted to understand if you think that the strategies are going to be similar or how you're expecting to get the different areas of synergies and things like that?

Yes. There's only one in the market, I think, as you know, TransUnion, I think, owned 20% of the bank-owned credit -- consumer credit bureau, and they acquired the rest of that or most of it, I believe. I don't think they have 100%, but they acquired the rest of that about a year ago. So TransUnion is in market. They own the previously bank-owned credit bureau.

There's a bank-owned credit bureau that's a commercial SMB credit bureau that's still owned by the banks, and then there's Circulo. So as of closing, when we close the deal, there'll be 2 of the global players, Equifax and TransUnion in market. We think we're super well positioned because of Circulo's unique data. They have data that's really much more expansive than TransUnion has in the bank credit bureau, just more trade lines because of the retail and fintech and telco contributors are just so much more expansive and there's just more consumers in that space. So we think we're extremely well positioned there.

And then like we did in Boa Vista, the opportunity where Experian obviously was well established for many, many years, almost a decade in Brazil as a stand-alone global player, bringing in our global platforms, putting Boa Vista and now Circulo on the Equifax Cloud, we'll be able to do that quite quickly.

And then we're going to run the same playbook that we've done in Dominican Republic that we've done in Brazil is bring in our new products, bring in our new AI capabilities, bring in our new technology capabilities. And our discussions -- we've been -- I said in my comments, we've been trying to enter Mexico, I think Equifax as a whole for probably 15 years, for me personally for 8 years. It's a great market. It's adjacent to the United States. There's a lot of synergies. For example, we have a product now a global credit report where we'll take trade lines from a consumer, in this case, a Mexican consumer in the U.S. and trade lines from a Mexican consumer that previously may have lived in Mexico and put those together. So that's a big opportunity for us.

But we've really been focused on entering this large market. It's the second largest market in Latin America. It's very fast growing. And Circulo as a business is just super attractive. The growth rates are obviously quite evident and super attractive. It's a great management team. And they've been really focused on innovation and new products, which is really driving their growth. And we just think we can help accelerate that by having a global partner there.

And again, as our comments with the customers there is they welcome Equifax coming in as a global participant because they know that we can be accretive or additive to an already great business in Circulo by bringing in all of our global capabilities, whether it's our Ignite analytics platform, our interconnect platform, all of our new products. It's going to bring more solutions for the Mexican customers, which we know is going to be attractive to them and also attractive to our Circulo investment.

Our next question comes from the line of Manav Patnaik with Barclays.

I just had a question. So at 30% growth and mid-40s margins, I mean, you got a pretty good price on this one. And so I'm just curious, like longer term, beyond '26, like what is the right growth framework to think about for this business in that context?

Yes, 30% is a very high growth rate, Manav. I think as you know that, it's one that they've been achieving over the last, call it, 18, 24 months, but even previous to that, they've had strong double-digit growth rate. I think our competitor, TransUnion has kind of low double-digit growth rate. So the market itself is underlying a very strong market. That large unbanked population that's moving into the bank population, the influx of global and local fintechs into the space because of the attractive opportunities there. Those are all kind of macros that, in our opinion, underlie a very strong underlying market. Think about low double digits.

And we think Circulo can be accretive to that going forward, given its unique data sets, which are really a strong asset in this acquisition that they have such a wealth of additional data that's accretive to what I would call the traditional credit file in Mexico. And as you know, when you add those additional trade lines and additional data, it results in a higher performing solution. So they're well positioned to drive that going forward. So we're not prepared to give long-term guidance on Circulo or the Mexican market. We don't do that typically, as you know. But for sure, we think about this as being accretive to our 7% to 10% organic and certainly accretive to the 7% to 9% international long-term framework that we have. It's clearly going to be above that 7% to 9% over the long term, given the underlying market and the opportunities that the business itself have with its unique data assets.

And then you have to add to it all the capabilities we're going to bring as a global participant to really expand the arsenal of tools and solutions that Circulo can bring to both their current customers, think fintechs, think retailers, which is a big space there in Mexico that Circulo participates in, think telcos, but then also think traditional banks where Circulo hasn't participated in the past, and that will be an opportunity for them going forward. So we're energized about the acquisition and the underlying market.

And as I said, Rick was after this 10 years ago, trying to get into Mexico, and I've been trying to get in there for 8 years. And we've really spent probably the past 5 years and more specifically the last 12 to 18 months, really focused on once the banks opened up the window, they decided they were going to sell the TU Credit Union. And obviously, TU was in a position to buy that because of their kind of control or minority position. We really saw this as an opportunity to get into Mexico, and we're super energized to be there.

And remember, very strong margins, accretive to both international margins and our margins, right? So it's not just driving revenue growth, very, very profitable revenue growth.

Yes, that makes sense. And I just wanted to follow up on the slide. I think you said that over 60% of the trade lines were unique to Circulo. So just trying to appreciate, I guess, just the market structure because I mean, I guess in the U.S. is [indiscernible] lap there. So just trying to appreciate that.

Yes, it's a great question. And today, the banks, think about the traditional banks, there's, I think, 7 large ones down there, and there's obviously a larger network. They contribute their trade lines to the bank-owned credit bureau, which is TransUnion and also to the commercial credit bureau. Those trade lines are not contributed to Circulo.

Circulo's trade lines are all from FinTechs all from retailers, which, again, I want to appreciate, we're not used to that in the United States where most of us on the call live that retail finance is still large, but it's more consolidated in the United States by the likes of Synchrony and Chase and Citi and others.

In Mexico, most of the retailers do their own retail finance. So they have their own finance arms. They finance furniture, appliances, other purchases there. So that's a very big market that's unique to Circulo, those trade lines. And then the telcos are also unique to Circulo. So that large array of trade lines, there's -- if you think about it, Manav, there's multiples of transactions, meaning many more transactions happening in that ecosystem of think about retail, fintech and telcos than there are in the banks. So that gives them the advantage.

It also gives the advantage in that unbanked and in our vernacular in the United States, think about subprime, near prime type consumers and unbanked is like there's no credit file on them. That large portion of the population is 30 million people -- 33 million people in Mexico without a bank account. They're doing retail finance and they're creating trade lines when they're financing that refrigerator that they're purchasing. So that's a huge asset for Circulo and was one of the many reasons we were attracted to the business.

Our next question comes from the line of Andrew Steinerman with JPMorgan.

I have 2 questions, Mark. The first one is, given how different the data is in the credit reports in Mexico, do Mexican lenders typically pull both of the top credit reports because just different type of data?

And then the second is when you talked about this kind of unique alternative data that you guys had, you mentioned telcos, you mentioned gig. My question is about data furnishing. Like are there any unique sources that Circulo has in Mexico, like the way Equifax U.S. has the telco utility exchange? And are there any ways Equifax could expand data furnishing, how it works in Mexico?

Yes. So on the first one, there's actually a law in Mexico that was put in place because of the unique structure of the banks owning the credit bureaus where -- the credit bureaus are required to share trade lines between each other when a credit report is pulled. So there's a financial ecosystem where, in essence, the bureaus buy data from each other and share it to deliver more a complete credit report, if you will.

The advantage Circulo has is all the inquiry data and the positive data that's shared. Only negative data is shared, positive data is not. So they have a real advantage in the wealth of positive data that they have around consumers that is really unique to them. And they just have more contributors. Think about 1,700 contributors. I don't know what the exact number is for TransUnion, but it's a different number and lower than that. That's the real asset that they have is that network of retailers, large and small, the network of fintechs where they had a presence there for a long time, it's very, very strong. that data advantage is a real positive for them.

And remember, it's both a consumer and a commercial business, right? So they have both licenses unlike our competitors.

That's one that -- as you know, we have a large commercial SMB business globally, particularly in the United States and other markets. So it's another reason, as John pointed out, we were attracted to Circulo is that not only can we offer that consumer solution, but we can grow and expand the commercial or think about small business or SMB type space.

Our next question comes from the line of Shlomo Rosenbaum with Stifel.

I just want to go back exactly to what Andrew was talking about. If there's a bank that's lending right now, are they pulling both from TransUnion and from Circulo because of what you have? And exactly what's shared and what's not shared, I just wanted to understand. I understand that they have positive data is not shared, but is the negative data from the bank shared? Is there also positive data in the TransUnion one that does not come to Circulo? Maybe you can just explain that to us and so you could basically explain how you have the ability or what you see the opportunity is to sell to the banks.

Yes. So it is a unique market. And unlike any other that I'm familiar with globally, because of the historical structure of the banks for many, many years, owned the credit bureaus. So the banks contribute their data to TransUnion and the commercial bureau.

There's a law in Mexico that if Circulo wants to get access to the trade lines, they're able to do that from TransUnion and vice versa. And these are the negative trade lines. And the positive trade lines, which are super accretive to a decision are really unique to both credit bureaus. So those are bureaus where TransUnion will deliver those to their customers, the positive trade lines that they have and then Circulo will deliver their unique positive trade lines to theirs.

The other positive that Circulo has is that many of their data contributors, the trade lines that they have are on a weekly basis versus monthly, where the bank trade lines are typically on a monthly basis. So those more frequent trade lines are another asset with Circulo.

And then Circulo just has more trade lines, meaning more consumers in its credit bureau, more trade lines in its credit bureau because it has the weekly versus monthly. And there's just much more transactions happening in a retailer. I mean retail finance is very large in Mexico and also with the FinTech. So it's one of the advantages that Circulo has and one that we look forward to taking advantage of.

Can you talk a little bit about the split of commercial versus consumer? And is commercial really growing much? And how is it that you have -- that this company has a commercial license, but the other one did not have a commercial license. Maybe give us a little bit of background on that.

Yes. More historical structure, which I don't know all of the reasons why. But way back when, I don't know whether it's 30 years ago or something like that, the banks created 2 credit bureaus, one consumer and one commercial. And they were run and owned by the banks. They were actually one entity.

When they sold the entity to TransUnion, they carved out the commercial credit bureau as a separate entity. So it sits there today and TransUnion acquired, and you could talk to TransUnion about this, the consumer credit bureau and the commercial credit bureau is still owned by the banks and whether they're going to continue to own that or not.

Obviously, you may know that the commercial credit bureau in Mexico is much smaller owned by the banks than the consumer credit bureau, which is TransUnion has already talked about how large that is. So those are one entity and then they were separated into 2 and the commercial credit bureau sits there. 20 years ago, when Circulo was formed, they got the license to do both consumer and commercial and that's why they have both bureaus.

The commercial credit bureau or the commercial business in Circulo is much -- is very, very small, but it's one that we believe is an asset to have the license. It's one that we would expect to invest and grow in. And we like the idea because we have it in other markets, the idea of having both the consumer and commercial. And as you know, what's really important in SMB is that much of the underwriting of a small business is done on what trade lines they have as a small business, but also the trade lines of the owner or entrepreneur, typically single entrepreneur and micro businesses, both of those trade -- sets of trade lines, the consumer and commercial are very valuable. So that's the playbook we run in the United States. We run that in other markets around the world, and we would do that here in Mexico also.

Our next question comes from the line of Kyle Peterson with Needham & Company.

Congrats on getting the deal done. I wanted to just ask if -- given the fintech presence here, it sounds like it's really scale in Mexico. I understand a lot of these fintechs in Mexico also have operations in other countries, whether it be in Latin America or Europe. So I just want to see like are there opportunities for you guys to potentially deepen some of these relationships once this deal closes? Or are these relationships you guys already have? Like is there a lot of customer overlap just with other divisions? Just wanted to get a sense of potential cross-selling opportunities in the fintech space in other geos.

Yes. It's actually a bit of all of the above. You got to start with Circulo has a very, very strong market position in Mexico with the FinTechs. So super strong. So that has been -- you think about where they've built their business, first, it was off retail finance. And I would remind you to recognize that retail finance is very big in Mexico. It is very big in other Latin American markets. We don't talk about it a lot, but meaning the retailer itself does their own finance of their products to their consumers. So that's a big -- and kind of how the business was formed 20 years ago was off retail finance.

And then over the last 10 years, 5 years, Juan Manuel and their team have done a great job of really positioning themselves with the fintechs. And why? Because they have the unique data. The FinTechs are typically financing around the globe and in Mexico, subprime, unbanked, near-prime consumers, there's better returns in those kind of loans. And it's why -- it's where the fintechs really spend their focus. So they've got an extremely strong market position with really all of the fintechs in the market. They've built their business to be responsive to the fintechs around how they deliver products and solutions. And they have the underlying data to really approve and deliver data on more of those consumers than others in the market can, the traditional credit bureaus in the market just because they have so much alternative data.

To your question, yes, there's a bunch of global players there that we have relationships with. For example, there's a large fintech that we have a large position in Brazil in that is growing in Mexico. And they're, I know, going to be very pleased that we're going to be helping grow Circulo with our global platforms and capabilities. So I think that will be another asset where we can take advantage. I would also make the point that our global banking relationships will also be an asset for Circulo as they work to enter the traditional bank environment, which they haven't participated in directly. So that's another opportunity going forward.

We have relationships with many of the global banks that are in Mexico. They could be Canadian banks or they could be, for example, a large bank, Santander or -- from Spain or Scotia from Canada. We have large global relationships there in Mexico. So that's another opportunity for us going forward. So we're really excited about the market position that Juan Manuel and his team have really built in the market, and we look forward to bringing our products, our capabilities, our tech, our AI, our DNA to really help Juan Manuel and the team accelerate that growth.

Our next question comes from the line of Jason Haas with Wells Fargo.

So I wanted to start just focused on margins. I'm curious if you talk about what drove the step-up in margins in 2025. And then bigger picture, I'm curious what enables this business that's smaller than your overall international business to run at such high margins? Obviously, a good thing, but just curious, what about the industry or the market in Mexico allows it to run such high margins?

Yes. The first question really is this operating leverage. Obviously, with that high kind of revenue growth, it drives a lot of operating leverage in the business. That's the beauty of Circulo. It's the beauty of Equifax. It's the beauty of the space that we participate in. Generally, we have fairly high fixed costs. And when you get incremental revenue growth that's very high, that drives margin expansion. And we have businesses in our international portfolio that are above our international average and some that are below.

So we have businesses that are north of our average that -- because of the unique positions that they have in certain markets. So it's not, I would say, unusual, but there are businesses that operate that way. So we're pleased with their margins, and we expect with the addition of our capabilities to help them continue to grow the strong top line growth and then some of the technology cost synergies that we'll have moving to our platform, those are going to be additive going forward.

And the margins we're talking about, I think, are not inconsistent with the margins of other players in Mexico.

Yes.

So I think we're seeing very strong margins, and they're consistent with market standards.

Got it. That's very helpful. And then just as a follow-up, can you just talk about your confidence in that 4Q close date? The reason I ask is when that largest competitor was recently acquired, I believe it took over a year since the announcement of that acquisition. Maybe it's not apples-to-apples, but if you could just talk to that.

No, it's a great question, actually. And I think the regulatory cycle time for TransUnion's acquisition was something like a year in that kind of neighborhood. We think we're better positioned. As I said, we've been trying to get in the Mexico market for 15-plus years. For the 8 years I've been here, we've been trying to get there. And for the last 5 years, we've had an application in with the Mexican government to form a credit bureau.

And we're well down that path and really at the final stages. So we've been engaging regularly with the regulator, which you have to be approved to be a credit bureau. This transaction has to be approved, which we expect it to happen. Obviously, they approved the TransUnion acquisition as a strong global player. We expect the same with Equifax.

We believe our approval process will be quicker because we're so deep after 5 years in the regulatory process as Equifax launching a de novo credit bureau. Now we'll be able to use that kind of engagement with the regulator over the past 5 years to, we believe, accelerate our approval process.

Our next question comes from the line of Scott Wurtzel with Wolf Research.

Just one for me. Just wondering if there are any sort of products or solutions that Circulo has that you would think about maybe deploying across the rest of your business?

Yes, for sure. And as you might imagine, it's both ways. We will spend more time, obviously, during the integration process after closing. But we see a lot of products going both ways, both from Circulo, super creative in some of the solutions they bring to their fintech customers that we'll take into Latin America.

Juan Manuel and his team are really a similar DNA to Equifax. I think that was another attraction for us in the business and the leadership team. They put customers first. They really understand customers' workflows and processes, very close engagement with customers. They're very innovative around new products and new solutions.

And I think as you know, we have a big part of our DNA is our vitality index. And when we talk with Juan Manuel and his team about the Vitality Index at Equifax, they nod their heads because that's how they operate. So I think there's going to be a very fast integration of products going both ways, particularly some of their fintech unbanked solutions. I think we'll be able to bring identity and fraud solutions in to help them.

We'll take our account data, which we're taking globally on identity and fraud, and we'll bring that in as an additional data asset into the Mexican market through Circulo. Obviously, the tech integration will be a super positive of moving them to the Equifax Cloud. We'll provide a lot of capabilities for them. They don't have an analytics platform like we have globally. There's -- that's one we're going to bring Ignite down there. And as you know, we've been investing heavily in the AI capabilities around Ignite, which we think will be purpose-built for a lot of the fintechs in Mexico. So we're excited about bringing that innovation into the Mexican market through the Circulo team.

And to the earlier question, the depth of their fintech relationships is something we think we can export, right? Some of their customers are doing business and moving into the U.S., right, and other parts of Latin America. So we think it provides a real opportunity for us to grow in other markets.

And I mentioned earlier in the comments that we call the global credit report, but the idea of combining trade lines for a consumer in Mexico with their U.S. trade lines, as you know, there's a lot of immigration back and forth, both formally and informally. Another opportunity to bring that solution to Mexico and bring the Mexico trade line to the United States. So a lot of exciting opportunities for us after we get the deal closed later in the year.

Our next question comes from the line of Curtis Nagle with Bank of America.

Yes. So maybe first question, just in terms of talking about the opportunity that now opens up with the traditional banks and maybe some of the more traditional credit consumers in Mexico opposed to the core offering to the lower tier and the unbanked. How large is this market? How complementary could this be to sort of forward growth above the sort of 7% to 9% framework you have for the international business stands now? Just -- yes, what's the opportunity there?

Yes. So I think we said earlier that we clearly believe Circulo will be positioned to be accretive to our 7% to 9% international long-term framework. They're growing multiples of that now. The market itself and our competitor is you can look at their numbers, is doing very well in Mexico with kind of double-digit growth. So we clearly expect over the medium term to see strong growth as they're really growing with the fintechs, the retailers and the telcos.

And as you point out, there is a large market with the banks. I think the TransUnion business is larger from a revenue standpoint than Circulo. So that sizes kind of the bank market in consumer is quite large. So there's opportunity that's accretive for Circulo to do penetration there with their unique data assets now that there's a more open market with the banks not owning. They're consumer credit bureau. They're going to be looking for solutions that will drive incremental growth for them. So we're excited about that opportunity.

But the core is what Juan Manuel and the Circulo team have built over the last decade and 20 years is they're very strong position with the fast-growing retail fintech and telco market. That's the core in the business that has a long runway in it. There's more fintechs entering both globally and locally. There's a very entrepreneurial fintech market in Mexico that Circulo has a very strong position with. And those are expanding and growing because of the underlying opportunity. I think that's one we also have to appreciate is that large unbanked population and the ability of those consumers now to have access to credit.

And I'd point out, again, everyone on the call probably remembers my background was at GE Capital when I ran Synchrony, which is the retail finance business. So I know that, that's in the United States for subprime consumers is a place where they generally do their first financial transactions in Mexico, that's clearly where they do it with a retailer. So there's just a lot of opportunity for them to continue to penetrate that space going forward.

Okay. Got it. And then maybe just a quick follow-up, just going back to Andrew's question in terms of kind of the data moat here. I understand the point you made in terms of the bread, the depth, right, the network of the data you're getting from the fintechs and the retailers. But in terms of, I guess, just is it exclusive aside from sort of the network effects, how walled off is that data?

Yes. There's long-standing relationships there that I don't think there's contractual exclusivity, but you think about kind of operational connections that are super strong. There's long relationships there. There's strong connections and there's kind of a give-get that's very positive. So we feel like there's a strong data advantage, a strong data moat that they have.

I'm sure TransUnion feels the same way around their bank data that they get from the banks, and we'll look to try to obtain some of that data directly as I suspect they'll try to obtain some of the fintech retail telco data that we have in Circulo today. But we think over the long term, our position in Circulo is very, very strong and very, very deep.

Our next question comes from the line of Craig Huber with Huber Research Partners.

You answered most of my questions. One data point you put out there earlier, if I heard you right, you said the fintech part of their revenue is over 50%. I think you said about 40% of the revenues come from that. Can you talk about the growth rate of the more traditional side, what they're doing? Those numbers sort of imply roughly 15% growth, so still quite good with the traditional part of the market. Just talk about that, if you would.

Again, traditional, I think you're talking about the kind of the retail and telco space, that's growing kind of double digits. So it's very strong growth on the underlying Mexico market. And when I think about kind of the credit market step back, think about the credit market for all of the credit transactions and the banking transactions in Mexico, it's a fast growing market. It's a fast-growing market and the second largest in Latin America after Brazil.

So there's just a lot of underlying growth for the participants in the market, which today are Circulo, the bank-owned and TransUnion and tomorrow will be Equifax and Circulo and TransUnion. So we're excited about the long-term growth potential there of the underlying market. And then as we said multiple times on this call, we're really energized about the unique position Circulo has outside of what I would call traditional banking in the fintech, retail and telco space, which is growing faster than the banking side.

Our next question comes from the line of Zach Vlacich with FT Partners.

Just one for me. You pointed to the Boa Vista integration as giving you confidence in this playbook in Mexico. What specifically transferred well in Brazil? And do you expect anything different this time around?

Yes. I think what -- and I talked about it in my comments earlier. What we're really energized about with our bolt-on M&A strategy. I think, as you know, we're super disciplined around acquisitions we want to do. We have the financial criteria that they have to be accretive to our long-term revenue and margin framework. So accretive to margins and accretive to revenue, and that generates accretion to cost of capital and it generates shareholder returns for our shareholders.

But now that we're post kind of cloud completion, we put the $3 billion into our tech stack. We found in Boa Vista that we could more rapidly integrate Boa Vista into our new cloud capabilities. We could more rapidly deploy new products from other markets into Brazil and Boa Vista. And we expect that playbook to continue and even more quickly in our Circulo integration.

The other lever that we've seen that's really accretive in our acquisition integration and of course, inside of our broader Equifax is just the AI deployment in our business. We talk a lot about what we're doing with AI around products, models and scores. So that will run that playbook -- all those capabilities, which we know will be additive to Circulo bring to Mexico just like we did to Brazil.

But our ability to use AI in operations, our ability to use AI and tech, our ability to use AI in the tech integration and accelerate both the timetable to move to the new tech, but also the cost to do it is more efficient. These are many reasons why we put the $3 billion into our tech stack.

Number one was to fundamentally transform Equifax going forward. But a very strong lever we have is the ability to integrate acquisitions. And it also gives us the ability when we look at a bolt-on acquisition to have more confidence around delivering the synergies because we can -- we have that confidence of the integration into our tech stack, the deployment of our platforms like Ignite into the new market and the deployment and the ability to move products, and as we pointed out in the call, move products both ways. Because we have a global infrastructure that's on one tech platform is a real advantage for us going forward, both in how we run our business, how we deploy AI for our customers in product models and scores, how we deploy AI for productivity and speed in our operations and technology and our support functions and also how we're able to do the integrations more quickly.

Our final question this morning comes from the line of Ryan Griffin with BMO Capital Markets.

Just one question for me. I was just curious how durable that growth trend is in the fintech market. I know the comparison to the U.S. fintech market with the higher interest rates at the tail end of the pandemic constrained that model. So just any way to think about the growth through the cycle?

Yes. And we're not intending to give long-term growth rates for Mexico or to the fintech subsegment inside of Circulo. The way we think about it, obviously, the current growth is super attractive. And -- but at the same time, you think about 30% compounded growth over the long term is a very high growth rate and it is not our expectation. But we do expect the underlying market to grow double digit over the medium and long term.

The underlying market has those fundamentals of that large unbanked population moving into the formal financial environment that results in financial transactions and credit data being required for that. So that's a very positive underlying macro.

And then Circulo's unique position in what I would call the fast-growing portion of the Mexico market, meaning fintechs, retailers and telcos that's really well positioned. So we think about this business clearly being accretive to our 7% to 9% international growth rate over the long term. It will be a fast grower for us as long as we can see, which is one of the many reasons we were energized to acquire the business.

Thank you. Ladies and gentlemen, that concludes our question-and-answer session. I'll turn the floor back to Mr. Burns for any final comments.

Yes. Thanks, everybody, for your time today. And please reach out to me, Mala, if you have any follow-up questions. We're around today, the rest of the week. Thank you.

Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.

All right. Good morning, everyone, and thanks for joining us today. My name is Andrew Nicholas. I'm the Business Services analyst here at William Blair. Before getting started, I'm required to inform you that for a complete list of research disclosures or potential conflicts of interest, please visit our website at williamblair.com.

With that out of the way, very pleased to welcome Equifax to the 46th Annual Growth Stock Conference. We have with us today CEO, Mark Begor; and CFO, John Gamble. We're going to spend the 30 minutes that we have with a fireside chat format with a wide array of investor familiarity in the crowd.

We'll try to keep it relatively high level. Obviously, I encourage you to come to the breakout in [ Maher ] after if there's anything a little bit more granular that you want to hit. So with that preamble out of the way, Mark and John, I wanted to maybe start with quasi-AI question just around data, where you get it, what makes it unique. I think people are generally familiar with the traditional credit bureau business, but maybe you can hit where that data comes from and then also the work number, just give us some sense for how unique it is.

First, thanks for having us. Great to be here. I know it's 46 years, so well done. I don't know if we've been here all 46, but we've been here the 8 years that I've been CEO. It's always a great conference. Obviously, we talk a lot with our investors around the AI data moat that we have at Equifax. Roughly actually slightly over 90% of our revenue comes from proprietary data.

And when we describe proprietary data is data that only Equifax can use, meaning it's not available on the worldwide web. It's not public market data, it's proprietary data from proprietary sources. And as Andrew points out, we've got multiple data sets that we have, most familiar to all of you would be our credit file. And there's over 10,000 financial institutions that contribute data to us every cycle.

That data is proprietary in their environment. It's proprietary in our environment. So said differently, someone else, meaning OpenAI or Anthropic or Microsoft, whatever, they can't access that data. So it's proprietary. The second kind of layer of protection around that data is the Fair Credit Reporting Act. Credit data, income and employment data, those are all governed by the Fair Credit Reporting Act, which puts regulations around how the data is used.

So we think about that as a secondary moat around the data from a proprietary perspective. Inside of USIS, I'll focus on the U.S., but our international markets are similar. We have a large data set that's unique to Equifax on cellphone utility data. We call it the NC+ data set, 190 million Americans in that one. Same thing as proprietary. So that's data that comes from telcos, from streaming services, from gas electric companies. None of that data is available on the worldwide web. It's only available in that company.

And then when they contribute it to us only at Equifax, and then we can only use it for permissible purpose, meaning we authorize who uses it. So very proprietary. Our income employment data is quite similar. I think everyone knows that unique to Equifax, we have Workforce Solutions. It's our largest business, fastest-growing, highest margin business. I'm sure we'll touch on that. That data is also proprietary and governed by the Fair Credit Reporting Act. So it's another layer of protection around that. And again, as I said already once in the comments, no one else can access that.

Only Equifax can deliver it to customers and a mortgage verification, and auto loan, a credit card, a government social services and a background screen. Those are all proprietary data sets that cannot be accessed by the worldwide web from other AI sources. And when you think about the contributors, 5 million companies now contribute data to us every pay period, every two weeks.

And if you think about it, your payroll is in a locked environment at your company or your payroll processor, -- no one can access it without permission. You can't get through it without credentials. So we think about that as having a data moat around it also. So we think about -- when we think about AI going forward, and maybe we'll move to that, Andrew, is that we think about AI as an enabler and as a lever for growth. When we think about it because we have proprietary data.

There are companies that I would say don't look like us, but live in different neighborhoods that rely on public market data and info services. That's not Equifax. That's not TU, that's not Experian. Our data is proprietary. And we really think about with AI now that we're deploying inside of -- and I'll focus on scores, models and products, the products we're delivering to our customers, we're really leaning into using AI to deliver higher-performing solutions for our customers.

And what AI enables us to do in our scores, models and products that we deliver our customers is ingest more data. And remember, what's super important with the Fair Credit Reporting Act and with the customers that we have, it has to be explainable. And explainable AI is super complex. Most of the public market AI is not explainable and can't really be used in financial services decisioning.

That's a place we've been investing heavily in. We added 10 AI patents -- Equifax AI patents in the first quarter. So it's just an example of we're investing in AI technology in order to deliver higher-performing scores, models and products. So the 10 we added in the first quarter, we added 40 last year.

We have roughly 450 Equifax unique AI capabilities through these patents. So it's a place we're investing in. And we're seeing really significant lifts in performance when we use AI in our models. So 100% of our models and scores are now using our unique Equifax AI capabilities. So if you think about what makes our solutions more unique now going forward, number one, we have more data than anyone else. You can't do AI without data.

So that's really kind of a fundamental building block. If you think about the credit file, cell phone utility assets, our alternative data assets, the income and employment data. So we have a wealth of data that's more than anyone else. We put it in the cloud over the last 5 years. I think you know we had a massive investment, $3 billion in our tech. We're now the only cloud-native data analytics company.

So that's behind us. That enables us to do AI with our solutions. We put all our data from siloed data assets as a part of that $3 billion investment into a single data fabric. That's behind us. That enables us to deliver those solutions. So we're now delivering scores and models to our customers that have bigger, higher performance. And as you know, we sell performance.

We're selling higher approval rates. We're selling lower losses, higher identity pass rates. So AI for Equifax is offense. AI for Equifax is an enabler to really drive our top line and our bottom line. And I'll wait to see if you want to touch on it, but we're also seeing big gains in productivity inside of Equifax in our operations centers, call centers, paper processing centers, technology.

We have a large technology organization because we're very much a data analytics technology company. So we're seeing real productivity building there and then in our support functions. And in 2026, we made AI deployment across Equifax for customers, which we've talked mostly about so far this morning and for productivity, one of our strategic priorities.

So that's something that we're seeing a lot of traction on. And I think as you know, just maybe to put one more point on it, we laid out in February as part of our guide for 2026, we laid out that in operations, kind of the first area we focused on, we're going to deliver $75 million worth of productivity over the next couple of years.

And we laid out a guide for this year where our margin expansion in our long-term framework is 50 basis points because of AI and the productivity we're getting just in operation so far, we increased that to 75 bps, which is a meaningful lift. And you can see we're just starting to get into the first chapter of the productivity benefits we expect to roll through Equifax from an AI perspective. So offense with customers, products, models and scores and then productivity inside of Equifax. It's a super exciting time for Equifax from an AI perspective.

Yes. I think the last couple of years, our operating thesis for Info Services, particularly companies that have proprietary data like Equifax has been kind of this threefold thing, many of which you just said, supply improves product innovation. Maybe you could talk a little bit about the hospitality score, demand, which we can get to and then efficiency, which you started to hit on. So maybe we'll start on the supply side, right? You mentioned the patents you mentioned your selling performance. Anything that you could quantify on that front?

Yes. So those of you who have been maybe close to financial services, you'll be familiar that a KS score is one of the metrics on performance of a score in a model. And historically, you would fight hard to try to get 50 or 100 basis points of improvement. Now with AI and being able to ingest more data, it's common sense.

If you have more data you're using, you're going to get a higher performing product or solution, meaning more predictive. And if it's more predictive, it's worth more to your customer. So instead of 50 to 100 basis points, we're seeing like 1,000 basis points of performance lift versus old model versus new.

And that just delivers a lot of performance for our customers and what that will deliver for Equifax is share gains, revenue, price margin. So really exciting. I think you touched on it. Equifax is very strong around trying to be a leader in innovation. We define the KPI that we use. We've used for, I think, a decade longer than I've been at Equifax, our Vitality Index. We talk to you about it, talk to our investors about it. We run ourselves internally. Each of our business teams has a goal around innovation every year.

And we really measure that quite strongly, and it's a big performance part of metric for our organization. So our vitality index is the percent of our revenue from new products. We measure the last 3 years. So it's kind of a rolling 3 years. It takes time for a product to scale and then it becomes another run rate.

So that's why we use that 3-year window and been quite consistent on that. Kind of pre-cloud, pre-our investments in the technology and the AI, we were running 5%, 6%, 7% of rev on our Vitality Index. We set a goal, I guess it's now 4, 5 years ago to be 10%. First quarter, we were 17%. Last year, we were 15%. We've been 13%, 14% in the last 4 years, so well above that.

And from our perspective, we believe a company that's innovating is a stronger partner to our customers. Our customers want ideas for growth. They want ideas how to improve their business. And it focuses on higher approval rates, which means more revenue for them, lower losses, obviously, higher margin for them, higher identity pass rates and everything we're doing around innovation really drives around how do we help our customers grow. And we're super excited to see the momentum really post cloud moving from that kind of 10% goal to be well north of it at the 17%. So a lot of momentum around innovation.

As we completed the cloud really a little over a year ago, it was a 5-year process, as I said, $3 billion, a huge lift to get everything in the cloud, to move all our data there. We rewrote all of our technology, all new platforms. We think that's a real competitive advantage in this AI world going forward and it also is enabling us to innovate more, which we think is really positive. And as you know, in our business, that next credit report that we sell, that next credit score we sell, that next dollar of revenue is very high incremental margins.

So it's very attractive to us, and that's what drives really our long-term framework that I think everyone in the room is aware of. We want to grow 7% to 10% organically on the revenue side, and we're kind of at the higher end of that this year, and we want to grow our margins 50 basis points. That incremental growth drives that operating leverage going forward. And of course, as we said, this year, we've got a guide of 75 basis points. And first quarter, we were stronger than that. So we had a very strong start to the year, which we're quite pleased with.

So one aspect, I believe, of the really strong Vitality Index most recently is the credit report getting the number flagged.

The income employment...

Together what you led with. So maybe just very briefly for the audience, talk a little bit about that development and why...

Yes, super exciting for us. We have this unique asset, and I'm sure we'll touch on it a bit this morning of our income and employment data set. And just maybe framing that for -- I think most of the people know, but for those that don't, it's approaching half of our revenue. It's growing kind of low double digit, has 50% EBITDA margins.

And the data set is income and employment data that we've been gathering over the last two decades. We get the data from companies and partners like payroll processors. There's about 250 million income-producing Americans in the United States, including everyone in the room here.

And we have on an active basis, about 105 million. And that was up 11% more people in our data set in the first quarter. It was up about 10% last year. So we're growing into that 250 million, but the point is we got a long runway for growth. We monetize that data in a mortgage. In a mortgage, for example, you verify credit, you verify income and employment.

Auto loans do the same thing, personal loans do the same thing. We monetize it in background screenings. One of the attributes we get is your job title. So we have a digital resume, so we monetize it there. And of course, government, which we'll probably touch on, we use it for the delivery of social services.

When I joined Equifax 8 years ago as CEO, the first thing I want to do, which took me 7 years because of technology was really to combine credit and income and employment. Because you think about the process, both are used in mortgage and auto loan and a personal loan and some of the other verticals.

And what's really important is, I think you understand this, is that your credit score is your propensity to repay your bills based on your past behavior. Did you pay your bills in the past? It's a score that says you're going to pay them in the future.

When you're doing it just off the credit score, which really happens in the marketing side of a mortgage and auto loan, you have no idea if Mark's working or what Mark's income is, but you have to verify it later in the process, and it's part of that underwriting.

So one of the things we wanted to do for quite some time, we're now executing in the marketplace is we're adding income and employment data to our credit report for free. And our goal is to drive share gains. In a 1B world where there's only one credit report pulled, which there is in the prequal and mortgage predominantly, in the application process, they pull 3, to Experian Equifax in a mortgage. In the prequal, they're only pulling one.

We want to differentiate our credit file. So we're adding this data at no charge. In the auto card and P loan world, they're principally a 1B world, meaning they're going to pull one credit report. So same thing. We want to differentiate our credit report for share gains. So we're rolling that out. We put it out in mortgage first, and we're getting some traction there.

You saw it in our first quarter results. We've had some share gains in that prequal, pre-application 1B portion of the mortgage environment because we're offering that data. We're also in mortgage, just as another example of that, we're adding our cell phone utility attributes trade lines to our mortgage credit file, which only Equifax can do to differentiate our mortgage credit file.

So we're adding 40 attributes from our cell phone utility data to make our credit file more valuable, again, at no charge because we want to drive share gains. Same model, obviously, is that, that next credit report we sell is very high incremental margin. And in a 1B world, we want to differentiate. So we're really excited about that.

The mortgage side is just getting going, but we've seen share gains that have showed up in our first quarter results. And those are in our guide for the year. We expect that to grow going forward. I was with a big mortgage originator on Monday in the Northeast, and they're very excited about using it because what it gives them in that marketing funnel is that additional visibility about that consumer who's applying.

They know what their credit score is, so that helps them think about what product will they qualify. But now they've got some visibility that Mark's working. We give them the employee name, Mark works for Equifax, which is really important.

And we're also giving them last year's income. So they know they're this kind of an earner, and that helps them in the underwriting, get them to the right product and do a better job really managing their funnel and bringing it through to a product, bringing it through to an application. So think about that same thing in mortgage, think about it in an auto loan. You have no visibility if Mark's working or whatever his income is, can Mark really get in that BMW new BMW? Or does he have to go into the use BMW.

So how do we position them in that marketing process? We think it's really powerful. And so we're rolling it out in auto card and P loan, and those are really just getting into market. But it's an example of what we can do now with the cloud. It's an example of what Equifax can do that our competitors cannot because we have scaled data assets to really differentiate our position going forward. So we're super excited about that. It's a great example.

Another area we're using AI is we now have this alternative data and advanced scoring. But historically, those were generally used by larger financial institutions that had large data and analytics organizations.

What we've now done with AI is we've launched AI advisers that would allow, for example, in auto for a midsized or a smaller financial institution to run analytics against our entire data set using their portfolio, so they can see how using different data assets from Equifax and modifying their scoring algorithms and approval flow will actually improve their approval rates as well and then help them implement that in their own decisioning system.

If they want to use ours, we're happy to provide it to them or also in the channel of decisioning system they may use, because for smaller financial institutions, often they go through distribution. So these capabilities, what artificial intelligence is allowing us to do is make these advanced capabilities that were generally only available to the larger financial institutions available to our entire customer base.

Very important in the U.S. When you get outside the U.S., most financial institutions are smaller, right? So it helps us really also accelerate what we're doing outside the U.S. The same technology is available there because of the cloud investment we made. We have common data fabric, common analytical systems, common decisioning worldwide. And we think that's something that we're highly differentiated in is the consistency of our systems around the world, and they're all cloud-based, and they're all cloud native.

Yes. So that's perfect. We hit supply, we hit demand modernization. Maybe just to wrap up, you mentioned it briefly just on the AI topic specifically, operational efficiency. You have the cost savings initiatives. Can you speak maybe more to specifically what you're doing more efficiently, where the savings are coming from and maybe what they're running.

Yes. And I got to tell you, the pace of change here is amazing to me. If you think about it, when we were at this conference last year, we didn't talk about AI productivity. Was just starting to ramp. It was early days. It's like exponential. And our teams are just adopting it so strongly.

As I said earlier, important to us is like you set strategic priorities for the organization. We made in '26, a big move to say, AI in product scores and models and in productivity is going to be a strategic priority. So really important. Each of our teams have KPIs, and we're just seeing exponential adoption across Equifax. So when you think about our operations side, we have a large team that is call centers. We take calls from consumers.

We take calls from businesses. We're adding AI there. We're putting agents as the front line taking the calls, massive productivity. The calls are better. They're more interactive. We can resolve the kind of first call resolution much more effectively and obviously, it drives massive productivity.

The cost -- there's a lot of stuff in the Wall Street Journal, there was an article this week about the cost of tokens or very challenging, we're not seeing that. So we're seeing massive ROIs when we're deploying AI from what it's delivering. And the first step for us, which we laid out in Feb was in our operations center, where we have 3,000-plus people of our 15,000 fielding calls are managing lots of paper.

People -- consumers send paper into us about freezing a credit file or they send paper into us about they think there's an error on their credit report that we have to fix. So managing that, you think about that purpose-built for AI. And that's the kind of first step that we put kind of pencil to paper and said we're going to take $75 million of cost out in '26 and '27.

And we put that in our guide for the year, the 75 basis points versus 50, so 25 basis points of incremental margin lift. So really, really a big deal. Our next place that we're making a lot of traction is in technology. Not quite half, but a little less than half of our workforce is technologist coding.

As you know that we're a technology company, every time we talk about a product that gets coded into our technology environment, and that's the team that's doing that. And we're deploying all the AI tools like Claude and others to really have the AI do the coding. So you can just do the math on the kind of potential productivity and speed of our ability to get products to market more quickly, but do them more efficiently.

So really ramping that in a very, very strong fashion. I think that's kind of the next chapter for us is really getting into what kind of productivity can we deliver from our technology team from the use of AI. So we're super energized around how that's ramping and the adoption of it is very rapid. And then the last piece is really all the support functions, think finance, HR, legal, just really great deployment happening there.

So I'm super energized. I think it's going to change companies. Every company is going to benefit from us from it. We think we're a fast mover in the space. And it's really month-to-month, it's just scaling so rapidly as our teams get more comfortable using the tools and really deploying them. So I'm really super energized, first and foremost, about what we're going to be able to do with our customers. around higher-performing scores, models and products built off our data and the cloud.

But then second is the productivity because it's going to drive not only productivity, it's going to drive speed of decisioning. It's going to drive accuracy. It's going to drive higher compliance. All these benefits are just going to be much stronger because you're able to really digitize a lot of the manual processes and get to more of a decision-making mode versus an accumulation mode of data. So super exciting.

And the teams have done an outstanding job of building privacy, security and all of the requirements that we have because of the confidential type of information, the proprietary data Mark talked about, we need those types of controls before agents can deploy and scale. and they've been built and they're now available. So we can now deploy agents at scale while knowing that we're meeting all of our privacy requirements, all of our security requirements and not putting any of the data we have at risk. So we're in a very good place to see this start to accelerate.

Again, I would like -- if you compare the journal article to like our world, very different. Like we're not seeing tokens going out of control. We're seeing massive ROIs on each kind of implementation of the AI agents in our operations and just massive productivity. So we're excited about it.

Very helpful. Maybe switch gears a little bit with the time we have left and talk about the current environment. I feel like it's been several quarters, maybe even years in a row now of a stable, but muted environment maybe outside of mortgage. Can you just describe what you're seeing today and how the consumer moves?

Yes, I think it's the same. Obviously, things changed in the last 60 days since the Middle East conflict and what's happened with oil and energy and the impact on inflation. And that's obviously impacted really all demographic classes, but it's had a more significant impact on the lower-end subprime kind of lower income consumer base. What's positive about the environment is unemployment is very low.

So when people are working in our world, our customers are comfortable to do new originations and continue running their business. And I think broadly, that's how our customers think about it and we do, too. So unemployment being low is really a good thing.

And so when we look through the balance of the year, it feels like that, that's going to be fairly stable. How long is this Middle East conflict going to go on, probably longer than we'd like, but -- it's got to get resolved at some point. I think most people believe once it's resolved, oil prices will come down, that will have a positive impact on inflation.

And then the second is our customers, whether it's a fintech, the big banks, the credit unions, the medium-sized banks, they're very strong. So they're operating in a very, I would call it, normal. You used the word muted, which I think is fair kind of environment. But it's kind of maybe a better way to put a bow on it. It's a good environment for us. You said outside of mortgage.

Mortgage obviously has been significantly impacted over the last 3 years around where rates are. Andrew would remember, but some of the room may remember in kind of in February, rates kind of came down pre the conflict, we saw an uptick in mortgage activity. It only takes 25, 30, 40, 50 basis point change in rates for refi activity to pick up for someone to be in the money on a refi. And we saw that lift in the first quarter.

We beat the first quarter. Part of that beat was from that February kind of bump up in mortgage. It's just a reminder, though, that there's a backlog that's quite significant from the last 3-plus years now at these higher interest rates of consumers that are at the -- there's like 15 million consumers that have mortgages now or homeowners that have mortgages over 5% -- there's 10 million over 6 and 8 million over 6.5 pretty much.

So big backlog that are ready for refi when it comes. And then, of course, we got into March and April, rates went up. And obviously, that dampened back down. So we're looking for that window for when rates do come down and know that we're building every -- people are still taking out mortgages just at a lower rate.

It's down about 40%, 50% from normal levels, but they're still taking them out now at the 6.5%, roughly percent. That's a great tailwind for us sometime in the future. And as you know, we size that for you and our investors that a return to normal would be somewhere around $1 billion of incremental revenue to Equifax and describe normal. Is it like a 4.5% rate, something like that.

There's a lot of mortgages in there that could stimulate on the purchase side and on the refi side. And then, of course, it's very high incremental margin. So that's like $600 million of incremental margin that would come through. And what we've also been clear about, Andrew, and you know this, is that when that happens, and we did it in the first quarter, we're going to pass it through.

When that mortgage recovery comes, which we view as inevitable at some point in the future that these kind of 20-year high rates will come down once inflation is under control, we're going to pass that through in higher dividend and higher buyback. We're not going to invest more in Equifax. We're investing the right amount. We're not going to do more M&A. We're doing the right amount of M&A. It's going to go to our shareholders. And we've been very clear about that, and we did that in the first quarter.

Only have a minute or 2. So I'll maybe ask a quicker one since you mentioned M&A and maybe circling back to the start of our conversation around AI. Does AI, the ability to leverage it for new product innovation, does it change the types of assets you would be looking at? Does it make them more attractive, less attractive? What -- is there a switch?

I think it's a great question. The answer is yes. I won't tell you the company, but we were looking at an acquisition last fall that we had kind of a new lens on it, which the market has put on us about could this business be disintermediated by AI.

And we looked at this business, and it wasn't -- the businesses we like to buy, and I'll give you a couple of examples. Appriss Insights, we bought the incarceration data set. It's the only incarceration data set in the United States. is proprietary, and we own that now. That's like Strike zone kind of acquisition.

We bought Kount, which had very unique identity data. Buying businesses that have data moats was always important to us. It's more important now to what's happening with AI. So this company that we looked at is a super interesting company, liked it a lot. We're not going to go forward because it felt like it could be disintermediated by AI.

So I think that's a lens that we have. But there's still a lot of footprint for us to look in M&A. And I think as you know, we're quite disciplined around what we want to do in M&A, whether it's international platforms. As you know, we bought Boa Vista in Brazil, the #2 credit bureau that's growing kind of high singles, low doubles for us.

We bought that 3 years ago, doing great. Those are the kind of acquisitions we'd like to do, but there's definitely a lens around it. to make sure it meets our strategic priorities that, that defensible AI data moat is maintained around what we're adding to Equifax. And Vault Verify, the acquisition we bought in the fourth quarter met that. It was an EWS acquisition. So we're excited. We're going to be very disciplined around bolt-on M&A.

Great. We'll wrap it up there. Thank you both for being here. And we'll move to Maher for the breakout if anyone interested.

Great. Thank you.

All right. We will get going. I'm Jeff Meuler, Baird's Information Solutions analyst. Pleased to introduce Equifax as the next presenting company. Equifax is by far the #1 provider of employment and income verification across a range of end markets and one of the big 3 global consumer credit bureaus and a broader information solution provider. With me on stage is the CEO, Mark Begor; and CFO, John Gamble.

With that, I want to start with a high-level question. Investor sentiment for the sector is very different than it was a year ago. I think a lot of investors are bucketing information solutions companies into AI loser and AI at risk buckets. And I think a lot of the management teams view AI as a benefit to the business. So just what do you view as the biggest AI-related opportunities for Equifax? And then are there any AI-related risks that you're looking to insulate from or manage the business in a different way to prevent from becoming negatives.

Yes. Thanks, Jeff. Great to be here. Thanks for having us. We think about AI as an enabler and really a growth opportunity for Equifax quite broadly. We've talked over the last year and change about the AI data moat that we have around Equifax. Over 90% of our revenue comes from proprietary data. And I think everyone knows you can't do AI without data. So I think we are one of the winners in this AI environment because we're going to be able to deploy AI in our scores, models and products, but also deploy AI for productivity in our operations and technology. On the AI data moat, if you think about our proprietary data assets, whether it's the credit file, our income and employment data, all the other data elements we have, none of that's from public market data. So it's all from proprietary data from contributors. We have over 10,000 financial institutions that contribute data to us every cycle, about every month...

Sorry about that. This one working? That's better.

So you think about our data, whether it's the credit file or the income and employment data, it all comes from proprietary data sources. And if you're OpenAI or Anthropic, you can't go out to the worldwide web and get to our data. So that AI data mode, I think, is very significant and differentiates Equifax from others in the info services space that really others rely more on public market data. So I think that's an important element. The AI offense, I think, is really a big deal. We've been investing in explainable AI capabilities. And as you know, our customers typically can't use in decisioning black box AI. So explainable AI is super important. The Fair Credit Reporting Act in the United States requires that. Most other regulatory environments require the explainability of the decision as well as the explainability of the decision process.

So we've been investing for a long time around explainable AI. Just in the first quarter, we added 10 new Equifax patents on explainable AI. That's on top of 40 last year, a total of like 450. So you should think about that the way we do that one of the places we're investing is to differentiate ourselves in how we deliver our product scores and models to our customers using AI capabilities. And what we're seeing on the product score and model standpoint is a real lift in performance when we use AI to calculate and deliver that score or that product or that model. And historically, you think about kind of performance in financial services and risk underwriting using that as an example, like 100 basis points, 50 basis points would be a meaningful lift. Using AI, we're seeing 1,000 basis points. So really big performance lifts.

And what underpins that is, number one, the technology investments we're making. Number two, our cloud investment. I think people in the room know that we've completed substantially our cloud investment, which was a long and expensive process. We invested an incremental $3 billion over the last 6 years. That's behind us now. That enables us to really deploy AI. But the fundamental piece is that proprietary data we have. We have more data than our competitors. We have more data and you need data to calculate scores, models and products. So that's a big opportunity for us. The other areas that we're really focused on, and we're seeing some of that lift in 2026 and '27 and beyond is deploying AI inside of Equifax. We call it AI for EFX. We're deploying it in operations and technology as well as our support teams, and we're just seeing big performance lifts.

So think about we have a multi-thousand call center and operations people. We're deploying AI there to make that more efficient. We're using AI agents to take that first call from consumers. So seeing big productivity there. And we size that piece from operations is $75 million worth of cost savings over the next couple of years. That's inside of our guide for 2026, where over our long-term framework, we want to grow our margins 50 basis points a year on top of our -- driven off our 7% to 10% revenue growth from operating leverage. This year, we have a guide of 75 basis points. So another 25 basis points of margin expansion, and that's principally from this operations cost savings like the first phase of that.

What's next is technology. We're seeing like amazing capabilities now. Our largest workforce, we have 15,000 employees, a little less than half of our workforce is technology. We're a technology company, and we're using AI to do coding. And we're seeing big lifts there. So that's kind of the next chapter of AI capabilities. And then all our support functions, John's finance team, legal, HR, we're seeing a lot of capabilities with AI. So back to your question, we think we're well positioned with our customers to deliver higher-performing scores, models and products, leveraging all of the AI capabilities to bring those to market. That's going to drive share gains. It should drive revenue growth and margin expansion. And then on the productivity side, deploying it in operations, technology and our support teams, we'll see margin expansion and productivity growth like the 75 basis points we're guiding this year.

And just AI advisers are now in market for Equifax that allow midsized and small banks and small customers, even moving to small governments have an opportunity to understand how to use more of our alternative data in their solutions to get better scores. So we could always do that effectively with a large financial institution. We're now putting small financial institutions in a situation where they can understand how they can perform much better by using alternative assets, which again drives our growth.

I think super important, you can't do AI without data. Only Equifax can do AI with its data. And our data is proprietary.

So you did a really good job of summarizing the potential AI benefits. And I think investors over time have gotten more comfortable with AI risk mitigants on the credit bureau side. One question that does seem to be coming up more from investors is what are the risks to the employment and income file from Agentic AI or AI lowering the friction that currently exists in manual or consumer permission and those becoming a tougher competitor? Why do you not worry about that, if not?

We think about it, but frankly, we don't worry about it. It's quite similar. When you think about the credit file data we get from 10,000 financial institutions, that's in a walled environment. It's not available on the worldwide web. Same with payroll data. The payroll data is -- we have 5 million companies now contributing data to us every pay period, every 2 weeks. That data from them is in a walled environment. So you can't get to the worldwide web. And then the incentives, how is AI going to make it easier for someone to go through consumer consented? You still have to get their user ID and password for their HR system in order to access their payroll. What's the incentive for the consumer to give that data out.

Remember, we do it friction-free. When a consumer applies for a mortgage or they're applying for social services, we'll deliver their income verification in a nanosecond and the consumer doesn't have to do anything, same as the credit file. The idea of what's the incentive for consumer to do consumer consented, a lot of friction. And that's why it is really fairly nascent. AI will make it more easier to do? Maybe. But why would the consumer want to do anything there when they can have their mortgage process happen instantly. So that's -- I think that's the challenge of where AI -- we really don't see it as a threat in that side of the business or the other parts of the business with regards to the data moat that we have. And I think the other...

And I think the other point to remember, we offer income and employment verifications for free, right? And they get all the regulatory requirements fully covered by Equifax. All this data that we're talking about is governed by the Fair Credit Reporting Act, whether it comes to us or comes from the employer directly, and they're obligated to those same requirements. And again, we provide all of that service to the employer at no cost.

And payroll partners get that regulatory compliance and governance and data security along with revenue share, so they're absolutely benefiting.

Correct.

So within Workforce Solutions or TWN, principally employment and income verification accounts for the majority of consolidated EBITDA, fastest-growing segment over the intermediate term. TWN governance over time has been a real bright spot, grew at 53% CAGR through 2024, slowed in '25. We came into '26 optimistic for reacceleration in that business. It felt like there were some puts and takes in your government messaging on the last quarterly call. So give us a broad view of what's going on, including address why a growing pipeline is maybe converting at a slower rate.

Yes. So just to size for the room, I think you know that's one of our verticals. It has been our fastest-growing vertical. We still expect it to be our fastest-growing vertical. And what we do in our government vertical in Workforce Solutions is we help in the delivery of social services to Americans that are on either food support, rent support, medical support, child care support, et cetera. There's almost 100 million Americans that receive some level of federal and state and local social service support. All of it's income verified, and we have a unique solution to deliver that data.

Our business is about $750 million roughly in 2026. As you point out, very fast grower until 2024 -- I'm sorry, 2025. There was a change in CMS with the Biden administration around cost sharing that impacted a number of states that didn't have budget dollars at the time that reduced the growth rate last year. Going forward, the big change is the OB3 bill that was signed last July that puts more teeth into the state's requirements around government social service delivery. And I think everyone knows the vast majority of government social services are delivered by the states and paid for by the federal government. So that's why the federal government puts requirements in place on how do you verify that income. And remember, you're verifying the income because if you make less, you get more social services or you qualify for those social services.

The federal government has sized the improper payments being $160 billion a year in government social service delivery. So there's a lot of incentive to use more data. We size the TAM if the principally manual verifications, which is what most agencies and most states do today were to move to our solution of being $5 billion versus our $750 million. So there's a lot of white space for us to grow. And remember, we're principally competing against manual verifications, where they've been doing it manually for 20 years or whatever. There's a lot of complexities with doing business with federal and state government. You've got contracting processes, you've got approval processes. You've got budgeting processes in the case of the states, many times, they have to go to their individual legislatures in order to get budget dollars, in order to do something new.

There's a lot of process flow change. Remember, if you've been doing -- an agency has been doing manual income verifications for 20 years and then they're going to switch to using our solution, that has to be integrated into their tech and it also has to be integrated in their workflows with the case workers. They can have thousands of case workers that are doing the adjudication for those that are applying for those specific social services. So it's something that is more complex, but we know how to do it. And as you pointed out, 2026 is a year that we still think is going to be a solid one for the government vertical.

We have a tougher comp in the second quarter from a large contract we won last year with the SSA, Security Administration that's really in our run rate now. That was a positive for parts of last year. But we're really energized around the growing engagement at both the federal and state level around using our solution broadly, but also using our solution for the new requirements that come through OB3 that was put in place last July. And we shared on the call in April that if you look at our pipeline in April versus a year ago, April, it's up 2x. And that's a really strong indicator, one that typically doesn't happen in pipelines unless there's a lot of commercial activity.

So we remain energized. When we think about the long term, we still expect government to be our fastest-growing Workforce Solutions vertical to grow above that long-term growth rate. We expect a lot of the OB3 kind of new requirements that are going to go on states to really come into our revenue in '27. That's when the really effective date is for a lot of those requirements. But we're just seeing broadly really strong commercial activity, both at the federal and at the state level. And again, just to put a point out one more time, remember, we have a large business, but we have a large white space between the $750 million and $5 billion roughly TAM of opportunity for us.

But given that white space, given the legislative catalyst, given the change in administration, I would have thought that you have a lot of shots on goal because you sell at the state agency level. And the pipeline sounds really strong, but it doesn't seem to be closing at the historical rate. You don't give that exact data. But is there like a root cause as to why things in all of these different state agencies maybe aren't closing?

All the states are different. Every agency is different. They're all individual customer relationships and their tech is all different. So it's all timing elements to this. It doesn't change how we think about the business. And I think as you know, we reconfirmed our guide for the year in April. There's no change in how we think about the year for the business. We're going to have a very strong year at Equifax and really our strongest margin expansion in probably the last 5 years. So we're really excited about that. So we're -- we don't really have a change in how we think about the business.

Okay. And then I want to be clear, I'm sounding like I'm conflating 2 issues when I'm going to ask about Emmy after asking about the government trajectory. But there's been more investor questions about CMS, Emmy eligibility made easy. Is it an opportunity for Equifax? Is it a risk for Equifax? And has it had any impact on your business thus far?

So one question 3, no. It's really early days for that. It's something that is a platform that CMS developed. It's an option for states to use. We haven't seen any real traction of states wanting to use it now. We continue to have direct kind of pipeline with states around Medicaid. It is really where this is focused on. And this is really a solution that we would integrate into if there is any traction on it. We would expect to be really at the top of the waterfall in that solution just because we have the instant access to data in order to deliver on it. But it's really just another way to get into that TAM. I would say it's really early days for this solution and really hasn't penetrated the market in any manner yet.

One of the other big use cases for the employment of income data is the talent vertical. Talent returned to high single-digit growth the last couple of quarters, and I don't think it's been a great white-collar hiring environment. That follows a few years of slower growth for you. So what's driving the reacceleration? Or how sustainable is the faster growth?

Yes. So just sizing that and maybe framing for everyone in the room, one of the unique elements, we get 50 attributes every pay period on an individual payroll. So we have gross pay, net pay, hours worked, et cetera. And we also get the job title. And we maintain all those data elements. So we have a digital resume on the average American. And as you know, a background screener, one of the things they have to verify is work history. So we can deliver that to our customers. So that's the principal product. We also have our incarceration data, we sell there. That's growing nicely in the talent space. We bought a company called Appriss Insights, the only incarceration data set. Another data check that's done on individuals applying for jobs is your past incarceration history.

So we're able to do that verification for them. What's driving the growth is really all of the above. It's a business that's roughly $400 million of rev in a $3 billion TAM. We've been growing penetration into the background screeners, like not every background screener uses us. Not every background screener uses us first. They still do manual operations, background screeners on employment verification are principally historically BPO shops. They'll have teams in the Philippines or India. When they get a background screen, they'll do many things. One of them is they would historically send it to their BPO shop and they get on the phone and try to verify, hey, did Mark work at General Electric? Yes, I did.

Tracking someone down to do that takes time and energy and everything else. What we deliver is an instant digital resume. We deliver productivity because we can do it more quickly. And we also deliver speed. And for a background screener -- in every vertical, whatever you're doing, speed is important. But remember, in a background screen, a company's desire to hire that individual, they're doing the background screen before they can start work and the chair is empty. So speed is a really important element. So we've been rolling out new products. That's been a real positive there. We've been driving penetration, some element of price, but price is a smaller part of that. And then record growth also helps. As you know, we're adding records every quarter. We were up 11% in the first quarter of records. When you add more records, you just have higher hit rates where you're able to deliver a verification to the background screeners.

We've also been expanding into other data elements, and we have aspirations of acquisitions or partnerships to really get all of the data that's used in a background screen. We want to be the data provider. And the incarceration data was a great example. In that acquisition, we got some medical credentialing data for the health care space. That's one that we'd either through partnership or acquisition, like to grow into. That's a very data-rich background screen that also has annual kind of rechecks on the credentials in the health care space. So we like that business and like that space, and we've been investing in new products in order to continue to drive the growth.

And like you said, it has not been a great hiring environment. We skew as does the background industry to white-collar jobs because they're generally more detailed background screens, going back 5 years' worth of employment history versus an hourly might be last job worked. But we've rolled out products to try to penetrate the hourly space to have more of a solution that fits that kind of a background screen.

Got it. Your U.S. mortgage revenue was plus 24% in Q1, excluding FICO mortgage royalty revenues and TWN Mortgage was plus 14% for your revenue. You reported a hard inquiries figure of plus 2%. I think there's a lot going on with like a shift to soft inquiries and 1B activity, some other market indicators suggest a faster growth rate. Like do you have another estimate for what you think the market did as we think about bridging your outperformance? And then can you talk through the factors driving your outperformance in terms of revenue relative to market for each -- the credit file, USIS and the employment and income business.

And I hope you'd agree there were strong numbers.

Yes.

Yes, yes. So do you want to touch market first?

Sure. The big driver of our growth is all around market share gain, and it's around growth in soft pulls, right? And our growth in soft pulls, which we believe is much faster than the market overall because of market share gain, driven by the fact that we've now added work number or employment and income indications on our credit file, and we're also adding now telco and utility data onto our pre-qual, pre-approval and credit file, which we think are differentiated assets, which are driving share. And we're adding those additional data assets at no cost to allow us to drive share, right?

Overall, the market indicators we gave, I think I don't have any other comment on how the market is growing. We gave hard inquiries. That's our best current view. We are moving toward just disclosing originations, and we'll continue to do that as we go through this year and shift toward more of a discussion of originations on a trailing basis. But really, the driver for us is the share gains that we started talking about last year related to adding more assets, TWN and telco and utilities to our pre-qual and hard pulls, and we think we're starting to see that flow through, and that's why this has performed...

This is something that we wanted to do for a long time. It was really hard to do until we completed the cloud. The idea of leveraging our credit file data and our income and employment data, 2 valuable data sets and then add to it our cell phone utility data. Putting those together was really hard. And last summer, we started down the path post cloud of really adding some of those income and employment indicators to our credit file. And why is that important? In the prequalification stage of a mortgage, historically, a mortgage originator would pull a credit file to see, hey, does John or Mark look like someone that we can move through the application process for the kind of loan they want to get. And remember, in mortgages and auto and P loans, not only do you verify credit, you also verify income and employment.

So in that early stage of that application process before it's put in, you don't have the visibility is Mark working? You don't have visibility of how much does Mark make, but you have to verify it later in the process. And uniquely, only Equifax has credit data and income and employment data. So the idea of putting some income and employment indicators that Mark is working on our credit file, adding it to our credit file that Mark works in my case for Equifax. Mark's income is this range last year really differentiates our credit file. And as you know, in the mortgage process, the pre-application or prequalification file has really moved to more of a 1B market, meaning one credit worth is the application process of 3 because of FICO pricing. We want to differentiate our credit file, and we've seen some share gains there.

And if you think about it, we're really focused on -- we're not charging additional cost for that. So we want to drive share gains. And that next -- if we get one more credit file, it's very high incremental margins. So we saw the starts of that in the first quarter. We expect that to continue going forward where we can get some share gains there. And as a reminder, we're doing the same thing in card, auto and P loan. We're going to add income and employment indicators to our credit file. And card, auto and P loan is principally a 1B world. So if we can get some incremental share in auto, card and P loan credit file pulls, big lift.

And obviously, the art of this is to make sure that we don't cannibalize in the verticals that do income and employment verifications at closing principally, where we have a large business in Workforce Solutions. We want to maintain that, but add enough value to differentiate our credit file. And we think we have a path that's working well. We've actually kind of a surprise to us, we've actually seen in mortgage, those customers that are starting to use our TWN indicator in the credit file are pulling more TWN at closing because they know we have the record, right? So that's been another kind of byproduct to this that we've had a small lift there. But really unique to Equifax is that we have these differentiated data assets post cloud, we can start really leveraging our whole platform of data assets and differentiation.

John mentioned that we're also doing the same thing with our cell phone utility attributes. So we have a large cell phone utility data set on payment records around cell phone payments, streaming service, water, gas, electric bills. Only Equifax has it. It's about 190 million Americans. So we're taking 40 attributes from there, adding it to our mortgage credit file at no charge to differentiate our mortgage credit file much like the TWN indicator. And it's just an example of some of the things we can now do in the cloud environment. And it's kind of early days both in mortgage as far as adoption there because it takes process flow change for our customers.

And then earlier days in auto card and P loan, but if you think about it, if you're a customer, the idea of someone's visibility around credit and are they working in their income and employment, you can make a better credit decision. You can deliver a higher credit line, higher approval rates at lower losses by having more information on that consumer, particularly upfront in the marketing process, and you can optimize really that marketing flow.

And you referenced 3 bureau or tri-merge as part of the underwriting process in mortgage. That's a requirement in the agency market. Director Pulte, who has an expanding resume for you to verify has made some references to potentially changing or the credit bureaus being next on considering some changes for mortgage underwriting policies. There was also an announcement from HUD last week. So go into what you think could be under consideration for changes that could impact the credit bureaus. And then maybe double-click on the HUD announcement in case anyone hasn't seen it.

Yes. So HUD put out an announcement last week that tri-merge is something they're going to continue, which is not news to us, but maybe to the investment community. The reason there's a tri-merge pull is because of the significant differences between the 3 credit bureaus on the data that's in there. Not every bank, financial institution, fintech contributes their data to all 3 credit bureaus. And the numbers are really substantial, which is why in mortgage, because it's federally guaranteed and the government is on the hook for the loan after it's originated, that's why it's been a tri-merge market in our view and what we hear from the regulators, it's going to continue to be a tri-merge market, which is what HUD said last week an announcement they made. The reason is, is that there's upwards of 10 million U.S. consumers that are only on one credit file.

So if you only pulled 1 or 2, you might not pull the one that, that consumer is on. 10 million is a big number. Most of us in this room, if you ever look at your credit score between TU, Equifax, Experian, it's likely different by 40 to 50 basis points. And that can mean a different pricing tier if you only pull one, let's say, you pull your low credit score, not all 3, where they really average them, you're just -- you're going to really impact that consumer negatively. And then from a safety and soundness standpoint, if you pulled the good credit file, meaning the higher credit score, but not the lower one because maybe someone has a missed payment on their lower credit score from one of their banks or financial institutions, you now have a riskier loan.

Those are all the reasons why tri-merge is going to stay. I also use the example. If you look at the most sophisticated lenders outside of mortgage that don't have to pull tri-merge, they do because they get a more complete picture on the consumer, meaning that incremental cost of pulling three gives them the ability to approve more people at lower losses because they're seeing all of the financial information on that consumer. So long-winded, we think tri-merge is something that is going to be here to stay. We don't think about it as a threat or a risk going forward. And I think HUD, their announcement was quite clear last week.

From a consumer perspective, mortgage is obviously rate sensitive, other categories of lending a little bit less so. I know you often lead with employment, but it felt like a more dynamic macro and consumer environment in March with increasing gas prices and everything else. Just what's your current view on consumer and end market health? Or where do you see potential risk?

Yes. So I think you got to -- we think a lot about consumer health, small business health to a lesser degree, we have small business, and then our customer health. So start with the consumer, they're still working. I think it's really important to -- while there's pressure, particularly at the lower income bands, the subprime bands from energy inflation over the last number of weeks for sure, and then inflation broadly in that demographic over the last number of years, really post-COVID, the fact that people are working is really strong for a consumer's ability to still repay. Even though there's pressure on delinquencies, what most of our customers look at, we think a lot about if unemployment ticks up and employment ticks down, that's going to be a challenge going forward for the economy.

It's hard to see that still, at least in 2026. And then if you look at our customers, the financial institutions, they're super strong. They're operating well. They have strong balance sheets. Their consumer commercial data businesses, underwriting businesses are important to them. Really no change in how they're originating. We haven't seen them. For example, when our customers think there may be a downturn coming, they'll want to do more portfolio management reviews. What's my portfolio look like? Do I have to do credit line decreases? We don't see that activity happening.

All right. And that's all the time we have for questions in this room. Please join me in thanking Mark and John for their insights on Equifax. They will be available for a breakout now in Astor Suite 1A. The next presenting session in this room will be all about Agentic, debating the future of e-commerce and search, it's panel. Also at this time, Simpson Manufacturing, Paymentus, ServiceNow and BlackRock.

Greetings, and welcome to the Equifax Q1 2026 Earnings Conference Call Webcast. [Operator Instructions] As a reminder, this conference is being recorded. [Operator Instructions]

It's now my pleasure to turn the call over to Trevor Burns, Senior Vice President, Investor Relations. Trevor, please go ahead.

Thanks, and good morning. 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 and an archive of the recording will be available later today in the IR calendar section of the News and Events tab at our Investor Relations website. During the call, we will be making reference to certain materials that can be found in the Presentations section of the News & Events tab at our IR website. These materials are labeled 1Q 2026 earnings conference call.

Also, we will be making certain forward-looking statements, including second quarter and full year 2026 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 2025 Form 10-K and subsequent filings.

During this call, we will be referencing certain non-GAAP financial measures, including adjusted EPS, adjusted EBITDA, adjusted EBITDA margins and cash conversion which are adjusted for certain items that affect the comparability of our underlying operational performance. All references to EPS, EBITDA, EBITDA margins and cash conversion are references to non-GAAP measures. 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.

Thanks, Trevor. Turning to Slide 4. Equifax delivered very strong first quarter results with reported revenue of $1.649 billion, up 14%, which was $37 million above the midpoint of our February guidance. On an organic constant currency basis, revenue growth of 13%, which was over 200 basis points above the midpoint of our February framework. Ex FICO, revenue growth was up about 10% and at the top end of our 7% to 10% long-term growth framework. The revenue outperformance was principally in U.S. mortgage, which was up 38% and better than our February guide from stronger mortgage activity in the middle of the quarter before rates increased due to the Iran conflict.

USIS Mortgage also benefited from stronger revenue growth related to its new wins in pre-approval products driven by our TWN Indicator solution. These mortgage customer wins are a good proof point that our differentiated TWN Indicator solutions are resonating with mortgage customers. We also expect customer share gains this year in card, auto and P loan as we drive TWN indicator deployment more broadly. As a reminder, we are offering the TWN indicator as well as our cell phone utility and Pay TV attributes at no cost in mortgage to drive share gains.

Organic diversified markets constant revenue dollar growth grew almost 6% in the quarter, consistent with our guidance. This was principally driven by strong broad-based execution in Workforce Solutions.

Importantly, first quarter EBITDA of $477 million was up 13% with an EBITDA margin, excluding FICO of 31.2%, up a strong 80 basis points and a very strong 110 basis points above the midpoint of our February framework. The 80 basis point expansion versus last year in EBITDA margin was both above our 75 basis point target for the year and 30 basis points above our long-term 50 basis point framework. The strong EBITDA margins were driven by strong operating leverage, mortgage flow-through and AI-driven cost productivity. Equifax reported EBITDA margins were 29% in the quarter. EPS at $1.86 per share was also up a very strong 22% and $0.18 above the midpoint of our February guide. As a reminder, first quarter EBITDA margins and EPS are lower than the remainder of the year, primarily due to a large percentage of our employee equity plan expenses being recognized in the quarter.

We returned $327 million to shareholders in the quarter, including repurchasing 1.3 million shares or about 1% of shares outstanding for 260 million to take advantage of a weaker Equifax stock price. And last month, we increased our quarterly dividend by 12% to $0.56 per share.

Equifax paid $67 million of dividends in the quarter. We continue to expect strong free cash flow of over $1 billion in 2026 with a cash conversion over 100%, which will deliver capacity of approximately $1.5 billion for bolt-on M&A and return of cash to shareholders while maintaining strong leverage levels.

The team also continued to execute very well against our EFX2028 strategic priorities in the quarter by leveraging EFX.AI-based solutions built on our cloud-native infrastructure to drive innovation, new products and growth. In the first quarter, our Vitality Index of 17% was at record levels and reflects the focused execution of our teams in driving customer-focused growth through accelerated innovation based on advanced EFX.AI, leveraging our proprietary data assets. As a reminder, we added over 40 EFX.AI-based patents in 2025 and 10 more AI-based patents in the first quarter for a total of 400 pending or granted AI-based patents as we continue to invest in differentiated explainable AI capabilities at Equifax.

In the middle of the first quarter, we saw strength in diversified markets, U.S. credit and mortgage activity as overall economic activity remained robust, inflation expectations moderated in interest rates decline. In March, the Iran conflict drove market uncertainty and higher interest rates, and we saw a weaker overall U.S. transactional activity from higher interest rates impacting mortgage and, to a lesser degree, auto and banking. Broadly, the U.S. consumers is resilient even in these uncertain times.

We've seen mortgage activity decline in the last 6 weeks from elevated levels in February from the higher interest rates and we expect these lower levels of inquiries to continue until the Iran conflict is resolved and interest rates moderate. Current mortgage run rates are slightly below the levels reflected in the 2026 framework we shared in February. Despite our very strong first quarter results and given the significant uncertainty related to the current Iran conflict, we felt it was prudent to maintain our 2026 guidance we put in place in February until there's more clarity on the direction of the economy and importantly, inflation and interest rates.

Absent the uncertainty in economic conditions related to the Iran conflict, we would have raised our full year guidance based on our strong first quarter results. We are maintaining our 2026 guidance for mortgage revenue growth of over 20%, consistent with the framework we provided in February, as a stronger-than-expected first quarter mortgage revenue growth is offset by our expectation of current trends of slightly slower growth over the remainder of the year versus our February guide.

For the full year, we continue to expect our diversified markets revenue to be up high single digits, consistent with the guidance we provided in February. We expect strong execution from EFX.AI-driven new products and customer share gains to allow us to deliver at the levels consistent with our February framework. We also expect to deliver strong full year margin expansion, excluding FICO of 75 basis points from operating leverage of strong top line growth, higher margin new products and AI-driven productivity. The 75 basis points is 25 basis points above our 50 basis point long-term margin framework.

Turning to Slide 5. Workforce Solutions revenue was up over 10% and better than our expectations. Verifier revenue was up a strong 14% with diversified markets revenue growth of 14%, which is a great start to the year. Within diversified markets, government had a very strong quarter, building off their fourth quarter performance with revenue up mid-double digits from continued strong state-level penetration. We expect government revenue in the second quarter to be about flat sequentially against a very tough comp from the SSA contract win last year and timing of state contract activations. We continue to see strong momentum in government from OB3 and the big $5 billion TAM that they operate in.

Talent Solutions revenue was up almost 10% in the quarter. This is the second consecutive quarter of high single-digit revenue growth in a challenging white collar hiring market. In February, we discussed weaker hiring volumes in January that have begun to improve later in the quarter. Despite the overall weaker hiring macro in the first quarter, Talent Solutions continued to outperform their underlying markets, driven by client penetration, higher hit rates from record additions, pricing and product penetration, including data incarceration and education solutions. The team is doing a great job delivering new solutions to the market, enabling employers to make the right hires with speed and confidence.

EWS mortgage revenue was up a strong 14% in the quarter from better-than-expected volumes, new products, including TWN Income qualified for mortgage, record growth and pricing. Consumer lending continues to perform very well with revenue up strong mid-double digits from double-digit revenue growth in P loans and auto. This is the seventh consecutive quarter of double-digit revenue growth in these verticals. Consumer lending is increasingly becoming a larger portion of Verifier revenue.

Workforce Solutions EBITDA margins of 52.3% were very strong and up 200 basis points versus last year from operating leverage from higher revenue growth and AI-driven productivity, while continuing to invest in new products, government and record additions. TWN record additions continue to be very strong again in the first quarter with 211 million active records, up 11% and 120 million total current records, up 9%, which represents 105 million unique SSNs. The record growth drives higher hit rates and revenue growth and outperformance against underlying markets across our EWS Verifier verticals. In addition to payroll provider partnerships, EWS continues to expand relationships outside of the traditional payroll processing space, including HR software companies to obtain additional sources of income and employment data. We have a long runway for record growth against 250 million income-producing Americans.

Turning to Slide 6. We remain energized about the mid- and long-term growth opportunities for EWS government at both the federal and the state level in meeting new federal requirements regarding accuracy of income validation in Medicaid and SNAP as well as work, education and community engagement requirements and Medicaid benefits. We are seeing strong interest with our pipelines for new and existing expanded government services up over 2x versus last year. As is typical in government, we are seeing some timing issues in new deal closures and activations as states-managed technology implementations and challenging budget frameworks.

We continue to expect to see the benefit of the new OB3 opportunities later in '26 and in '27 and beyond. As state agencies implement required validations of expanded work requirements and increased redeterminations for certain Medicaid populations and take actions to reduce SNAP error rates, Equifax is serving as a key adviser leveraging our differentiated income and employment data to drive speed, accuracy and productivity. Our new products such as continuous evaluation for SNAP built using EFX.AI that we launched in the first quarter have already delivered strong results for a few states by identifying errors within their beneficiary population.

We also see expanding opportunities with multiple federal agencies in support of their focus on reducing improper payments. Given our strong value proposition from TWN on speed of social service delivery, case worker productivity and accuracy of income verifications, we are uniquely positioned with our differentiated TWN data assets and new solutions to help state agencies increase efficiency and strengthen program integrity, particularly with SNAP and CMS. EWS has significant opportunities for long-term revenue growth supporting government programs and their big $5 billion TAM.

Turning to Slide 7. Before discussing USIS results, I'd like to welcome David Smith, our new USIS President, to the team. David's broad consumer finance experience, proven executive leadership, customer focus, innovation capabilities and regulatory depth will be a big asset for USIS as they drive innovation and revenue growth for their customers. It's great to have David on the Equifax team.

In the first quarter, USIS revenue was up a very strong 21% and 8% excluding FICO, driven by significant mortgage outperformance. The 8% growth is strong and at the high end of our 6% to 8% long-term framework for USIS. USIS mortgage revenue was up 60% and up a strong 24% excluding FICO and better than our expectations. USIS saw meaningful share gains in mortgage pre-approval, soft pull products with our new TWN Indicator, contributing to mortgage revenue outperformance in the quarter. And as mentioned previously, USIS saw increased mortgage activity in the middle of the quarter before rate increases from the Iran conflict reduced activity over the past 6 weeks.

USIS diversified markets revenue grew 3% in the quarter and were slightly below our expectations with B2B up 2% and B2C up a strong 9%. While B2B delivered low single-digit growth rates, core online auto and FI transaction revenue delivered solid mid-single-digit growth. Off-line batch was about flat, principally related to a tough comp due to the strength in offline batch jobs last year. We did not see changes in customer marketing or risk management behavior in the quarter. And we expect USIS diversified markets revenue growth to be up mid-single digits in the second quarter.

USIS EBITDA margins were 30.3% in the quarter, excluding FICO, USIS EBITDA margins were 37.9% and down slightly compared to last year. Absent some onetime costs incurred in the quarter, margins would have grown at levels consistent with our expectations. We continue to expect USIS EBITDA margins ex FICO to be almost 40% in the year up over 75 basis points versus 2025.

Turning to Slide 8. As a reminder, we make no margin on the sale of FICO scores. FICO Mortgage Scores revenue is about 50% of the USIS mortgage revenue and 6% of total Equifax revenue, delivering zero margin. To be conservative, our 2026 framework continues to assume Equifax will calculate and sell only FICO scores this year, and there will be no vintage conversion in 2026. However, we are seeing strong momentum from mortgage originators on using Vantage. We expect conversions to VantageScore to accelerate once FHFA activates VantageScore and indications are that we're getting closer to FHFA formally activating VantageScore for Agency mortgage originations. A few weeks ago, we lowered our Vantage mortgage pricing from $4.50 to $1 to further incent conversion by the industry. We believe this pricing change will further accelerate mortgage originator conversions to Vantage, given the substantial $1 billion of annual savings opportunity for originators and consumers by using Vantage. The FHFA's decision last July to allow mortgage score choice between Vantage and FICO is a win for consumers and for the industry. We currently have over 240 mortgage originators ingesting our free VantageScore with a paid FICO Score offering, and we have over 50 principally non-GSE mortgage lenders using Vantage for their mortgage originations. For perspective and to provide data for your analysis, we have included a chart in the appendix of our earnings deck that provides details on the annual $35 million margin upside from full conversion of VantageScore at current mortgage run rates. As we move through 2026 and there is more clarity on Vantage conversion timing or the FICO direct license program, we will update our guidance to reflect this shift and the opportunity for mortgage industry, consumers and Equifax.

Turning to Slide 9. International revenue was up 4% in constant currency and consistent with our expectations of mid-single-digit growth. International saw strong high single-digit revenue growth in Canada and ANZ in LatAm and the U.K. and Spain CRE businesses delivering mid-single-digit revenue growth in the quarter. International EBITDA margins were 25% in the quarter, up a very strong 80 basis points versus last year.

Turning to Slide 10. As we discussed in February, there's a strong AI moat around Equifax' unique and proprietary data. 90% of Equifax revenue is generated from proprietary data sources, including our income and employment exchanges in the U.S. U.K., Canada, Australia, our U.S. and international consumer and commercial credit exchanges and our alternative data sets, including our NCTUE, telco and utility exchange in the U.S. This proprietary data has contributed to Equifax and its uses managed by Equifax and is subject to significant regulatory and privacy controls. To be clear, the data is not available on the web and only Equifax can access this data. Equifax' scale and proprietary data along with our cloud-native global technology platforms that include implementation of leading AI and ML capabilities is at the center of our momentum on new product innovation that has delivered accelerating NPIs and driven our NPI Vitality Index to almost 14% over the past 3 years. The application of advanced EFX.AI-based and traditional IT-based analytical techniques allows us and our customers to rapidly develop new solutions that are built off our only Equifax proprietary data.

Turning to Slide 11. Our cloud-native technology and EFX.AI capabilities have accelerated our innovation cycle over the past 5 years since we moved to the cloud. Last year, over 90% of our products were built on our new global cloud-based platforms. With more efficient cloud-native technology, leveraging global platforms and EFX.AI, we have quadrupled the number of products in our innovation funnel and reduced product development life cycles by half resulting in a record level of new products launched in 2025, which is up 2x over historic levels. 100% of our new models and scores in 2025 were built using EfX.AI. We're building more complex products generating higher performance for our customers with about 50% of our new products now powered by multiple EFX data assets. And last, we're seeing higher performing products with year 3 NPI revenue up about 70% in '25 over historical levels. We are just getting started leveraging the power of our proprietary data, the new Equifax cloud and EFX.AI to deliver higher-performing products, models and scores to help our customers grow and deliver higher growth and free cash flow to Equifax.

Recently, we launched Ignite AI adviser for auto, an AI platform that provides lenders with instant plain English analytics, benchmarking and automated insights alongside conversational agents for deeper exploration by our customers. We expect to launch similar solutions in cards and personal loan portfolios this year while integrating advanced synthetic and credit abuse fraud detection. As EFX.AI advances, we'll leverage our new global cloud infrastructure, combined with our [ agentic ] AI and Google Vertex AI capabilities and proprietary data to deliver higher-performing analytical solutions at an accelerating pace, positioning these advanced analytical solutions for more customers. Equifax is on offense with AI.

Turning to Slide 12. As I previously mentioned, USIS is gaining traction with their TWN indicator solutions in mortgage that supported our strong mortgage revenue growth in the quarter. In April, we were energized to launch The Work Number Record Indicator or TWN indicator for auto lenders and personal loan originators, which are additive to our suite of TWN indicator solutions for mortgage, auto dealers and card. These solutions deliver income and employment insights from the Work Number alongside the Equifax consumer credit report at the prequal or marketing stage of the auto or personal loan application process. The TWN indicator returns a response indicating whether a verification of income or employment is available for an applicant from the EWS Work Number. This immediate visibility gives lenders the ability to instantly segment their workflows, fast-tracking appropriate borrowers through an automated paperless path while proactively identifying those who may require manual documentation. By reducing guess work from the start of the application process, lenders can offer appropriate loans while borrowers can benefit from a faster approval process. We expect continued share gains from our TWN indicator suite as we move through 2026. And as a reminder, Equifax is delivering TWN income and employment attributes at no cost to our customers to drive credit file share gains in TWN VOI and VOE growth in the future.

Now I'd like to turn it over to John to provide our second quarter and full year framework.

Thanks, Mark. Slide 13 provides the specifics of our 2026 full year guidance. As Mark indicated, we are holding our full year 2026 revenue guidance on a constant currency basis to be unchanged from our February guidance. Even with our strong first quarter performance, there continues to be a heightened level of economic uncertainty as well as uncertainty in the direction of interest rates and therefore, mortgage volumes. We increased our guidance to reflect the impact of FX changes since February, increasing the midpoint of our reported revenue guidance by $25 million to $6.745 billion and adjusted EPS by $0.04 per share to $8.54 per share. FX is about 90 basis points favorable to revenue growth for the year. Diversified markets revenue growth at the midpoint is expected to be up high single digits and U.S. mortgage revenue to be up over 20% with mortgage market originations down low single digits. For your perspective, as you determine your view of the 2026 U.S. mortgage market based on a review of Equifax data on mortgage home purchase issuances since early 2022, we estimate that there are over 15 million mortgages that were issued with an interest rate over 5%, including about $13.5 million with rates over 6% and over $9.5 million with rates over 6.5%. This provides a perspective on the pool of mortgages potentially available to refinance as mortgage rates change. Expectations for EWS overall performance in 2026 are unchanged from the levels we discussed in February, with EWS expected to deliver revenue growth of high single digits and EBITDA margins at 51.2% to 51.7%, about flat at the midpoint with 2025. We continue to expect Verification Services revenue to be up high single digits to low double digits. In Employer Services, revenue is now expected to decline slightly in 2026 as work opportunity tax credit legislation has not been extended by the federal government. Historically, when the renewal occurs, it has been retroactive, and we would expect to recover the revenue. USIS and International business unit revenue growth and EBITDA margin guidance expectations are unchanged from February.

The slide also includes additional detail on revenue growth rates and EBITDA margins, excluding FICO mortgage score royalty pass-through revenue and expected BU revenue and EBITDA margins. We expect to deliver growth of 7% to 9%, excluding the impact of FICO mortgage royalties in 2026 within our long-term financial framework and we expect to grow EBITDA margins, excluding the impact of FICO mortgage royalties by a strong 75 basis points, which is 25 basis points above our long-term framework. In 2026, we expect to deliver over $1 billion of free cash flow and a cash flow conversion of at least 100%. As we discussed in February, with EBITDA increasing to about $2.1 billion at the midpoint, we are also generating an additional $400 million in debt capacity at our current debt leverage. This creates $1.5 billion in capital available in 2026 for M&A and return of cash to shareholders. We continue to look for attractive bolt-on M&A to strengthen Workforce Solutions, our differentiated proprietary data assets as well as international platforms and we have substantial capacity for share repurchases, continuing from the $260 million we repurchased in the first quarter.

Slide 14 provides the details of our 2Q '26 guidance. In 2Q '26, we expect total Equifax revenue to be between $1.680 billion and $1.710 billion, up 10.3% on a reported basis year-to-year at the midpoint. Constant dollar revenue growth at the midpoint is up 9.4%. Excluding the impact of FICO mortgage scores, 2Q '26 reported revenue is expected to be up about 6.5% at the midpoint. Diversified markets revenue is expected to be up mid-single digits on a constant currency basis and down sequentially from first quarter given the more difficult EWS government comparison that Mark discussed. U.S. mortgage revenue is expected to be up over 20% and high single digits, excluding FICO royalties. EPS in 2Q '26 is expected to be $2.15 to $2.25 per share, up about 10% versus 2Q '25 at the midpoint. Equifax 2Q '26 EBITDA dollars are expected to be $537 million to $554 million, up just over 9% at the midpoint. EBITDA margins are expected to be [ about ] 32.2% at the midpoint of our guidance. And excluding the impact of FICO mortgage royalties, EBITDA margins in 2Q '26 would be 34.3% to 34.7%, up over 80 basis points at the midpoint from 2Q '25 on the same basis. We believe that our full year and 2Q '26 guidance are centered at the midpoint of both our revenue and EPS guidance ranges.

In the supplemental information to this presentation, which will be shared after this call, we have added a slide that provides a 5-year view of U.S. mortgage originations by quarter. The data is determined based on submissions to Equifax' U.S. consumer credit file. Going forward, we will update this slide to provide originations data 90 days in arrears. So today, we are providing data through December 2025. As full contributor mortgage origination data can take up to 150 days, we will update this slide each quarter based on any updated data we receive.

As we did in February, going forward, our guidance will include our expectations for U.S. mortgage originations for the current calendar year. As a reminder, this mortgage detail and more analytical detail based on the Equifax U.S. credit files are published monthly in our credit trends reports and can be found on our website under business trends and insights. Historically, Equifax has provided USIS hard mortgage credit inquiries as a measure of U.S. mortgage market activity. Given changes that have occurred over the last several years and how mortgage originators use hard and soft mortgage inquiries, during the loan origination process, hard inquiry volumes have become less correlated to changes in the U.S. mortgage market originations. As such, we will stop disclosing USIS mortgage hard credit inquiries beginning in 2027.

Now I'd like to turn it back over to Mark.

Thanks, John. Wrapping up on Slide 15, Equifax is off to a strong start in 2026, executing very well against our EFX2028 strategic priorities in a challenging economic environment. The new Equifax is leveraging the Equifax cloud EFX.AI and proprietary data assets to accelerate innovation and help our customers grow. With the EFX cloud transformation substantially complete, we are focused on leveraging the new cloud capabilities and focusing our team on EFX.AI and NPI initiatives to deliver innovation to our customers, resulting in record levels 17% Vitality Index in the quarter and driving operational efficiencies inside of Equifax. We are using our single data fabric, EFX.AI and Ignite, our analytics platform to develop new credit solutions powered by TWN indicators in verticals like mortgage, auto, card and P loan that only Equifax could provide, which is leading to share gains and incremental growth. Our first quarter financial results are a strong proof point on the broad-based Equifax operating model, including the strong 80 basis point of EBITDA margin expansion in the quarter.

Given our strong free cash flow generation with cash conversion over 100% in 2026, we're also delivering on our commitment to return substantial excess free cash flow to our shareholders. In the first quarter, we returned $327 million to shareholders. And in 2026, we expect to have $1.5 billion available to invest in both bolt-on M&A and return cash to shareholders through share repurchases and dividends.

I'm energized about our strong start to 2026, but even more energized about the future of the new Equifax. And with that, operator, let me open it up for questions.

[Operator Instructions] Our first question today is coming from Jeff Meuler from Baird.

How are you thinking about the timing of the revenue from the expanded government opportunity? I get the tough Q2 comp, but Q1 was really good. So to what extent did the expanded opportunity drive that strength? And then just help us understand what you're trying to signal when you're talking about timing factors related to system integration and budget challenges.

Yes, Jeff. We remain very bullish about our government vertical, given the big TAM and also OB3, we've talked about that a bunch. We've been clear since really last July when OB3 was passed that we expect the substantial portion of that to be later in the year, but really principally in 2027, when that takes effect, whether it's the Medicaid or the SNAP benefits or the more frequent 6-month redeterminations. We said in our prepared comments that our pipelines for government are very robust, up 2x over where they were a year ago. So we feel good about the pipelines. But government can be bumpy, both on when deals not only close and sign, but also when they activate. And then there's always budget pressures at the government level. And as you point out, we had a big win with SSA a year ago in April. So that's a comp that's challenging in the second quarter, and we just wanted to highlight that.

Okay. And then for USIS diversified markets, what dragged it down in Q1? Because I think the online growth was slower overall than card and auto was. So what dragged it down in Q1? And then maybe it's because of whatever that factor is, but what drives the acceleration in Q2 because it sounded like there was also a little bit of softening ex mortgage related to rates and macro volatility later in the quarter?

Yes. I'll jump in, and John can also chime in also. First, on the -- what happened in the first quarter is we had some larger batch volumes, which can be choppy on when they land during the year and one quarter to another quarter last year versus this year. So I think that's the principal impact on the first quarter. As we look forward, we've got a lot of new products that we're rolling out. I think we talked a bunch on our prepared comments around the TWN indicator that we have in market. We just launched it for auto, lenders and also for card, and we've seen good progress there. We expect that to help as we go through the year.

Anything else you'd add, John?

Not just what we have in our comments, right? We saw weakening as we went into the March period, and that affected not only online but to a degree as we indicated [ by batch ], right, and it was in auto, it was to a degree in FI and across some other verticals as well. So I think the general economic situation that we ran into in March just resulted in a little slower volumes, not just in online, but as we all know, oftentimes [ batch ] is repetitive, right? So some of the batch jobs that occur very frequently just slowed.

Our next question today is coming from Andrew Steinerman from JPMorgan.

I wanted to ask about EWS mortgage revenue outperformance. What did you see in the first quarter? And what are you assuming in the guide in terms of EWS mortgage revenue outperformance?

Mortgage had a strong first quarter at EWS. I think we talked about some new products that we've rolled out that we're getting some traction on. Anything else you'd add on that, John, for the first quarter?

Yes. I think we consistently said we expect to see high single-digit type of outperformance relative to transaction volumes, and we saw a very good performance in the first quarter, and that continues to be our expectation going forward.

Your next question today is coming from Toni Kaplan from Morgan Stanley.

I wanted to go back to CMS and basically, when you think about competition, we saw an article a couple of months ago about one of your private company competitors who uses connectivity for verification and winning a contract on the Medicaid and SNAP eligibility side. So I was just hoping you could frame for us how you see your product versus maybe a cheaper product like because of the state budgets, always seeming to be challenged. Like does that lead to a cheaper solution gaining traction? or -- and then also the friction point you always mentioned, does that resonate as much in this market as in the lending market? Just wanted to understand the sort of go-to-market strategy and positioning between your products, which is maybe more premium and very good accuracy versus maybe a cheaper connectivity product.

Yes. When you say cheaper connectivity, I think you're referring to consumer consent and data. And there's clearly a place for that. As you know, we rolled out last summer, our own solution called Complete income that we've seen traction on. And with this demographic, there's a lot of W-2 income in here, but there's also a lot of gig income, which we have less of in our database. So our large coverage is still a big asset for us, having over 150 million current records is a big asset in our data set that we can deliver instantly. When you go down the consumer consented path, it adds friction to the process, both for the case worker and for the recipient. They have to do things to participate in it. Where we've seen why we invested in it and we launched our solution that's integrated between hitting our TWN database first and then water falling to our own consumer consented solution. that integrated solution, we think is a superior one, delivers that same benefit. And what the states we're after is more coverage. It's really hard to get that income verification. And that consumer consent, it really covers a lot of the records that we don't have, and that's why we've invested in the solution, and we've already landed a handful of states that are now using that solution in the marketplace.

Yes. Great. And wanted to ask just on VantageScore. I guess, what's taking so long with the grid? And I guess, when -- how is the reception to your lowering the price of the score? And does that sort of lead to FHFA maybe to sort of be less concerned about pricing in the industry?

Yes. That's a hard question. These kind of changes take time. As you know, FICO was used for 30 years, it's the only score in mortgage. And last July, Director Pulte introduced score competition. It takes a lot of technical time. Our view is that the integrators, meaning the software systems are ready for Vantage. They've built that out over the last number of months. Our customers are ready. We talked about 250 customers ingesting the free VantageScore. We felt that there would be an advantage for Equifax and our competitors did the same thing by lowering the price to $1 versus $450 to create a real price advantage for customers to really incent them in the industry to really move forward with Vantage. And the feedback has been very positive. And I think as you've seen in various publications. If you use that $1 versus the $10 FICO score, that's $1 billion worth of run rate annual cost savings for the industry. That's a big incentive to change. So all indications are we're getting closer. We had the same indications last time we talked in February, but we're certainly closer now that we're in April. And the industry is clearly ready for it. They want to take advantage of it. So we expect it to move forward. But as you know, in our guidance, we laid out that we don't know when that timing is. So we really can't forecast Vantage conversion. So we assume that FICO stays there through the year.

But just to be clear, and I know you know this, Toni, that it doesn't impact our P&L if FICO stays there long term. There's an advantage to our P&L with the margin we make on the VantageScore, if there is Vantage conversion. So we think Equifax is well positioned because, as you know, you can't calculate a credit score without our credit file, and that's the data that's used there. So we think we're well positioned, whether it is FICO or Vantage, but there's definitely a lot of energy and enthusiasm about moving to Vantage once it gets activated by the agencies.

Next question today is coming from Manav Patnaik from Barclays.

I think we all saw the mortgage data kind of taper off in March. But Mark, I think you mentioned there was some impact to a lesser degree in auto and banking. I was hoping you could just elaborate on that just to appreciate the sensitivities and how you think that could be impacted?

Yes. It was really -- I mean not more in auto. We saw a little bit in banking, but it's probably harder to find in the rounds. Auto is a big ticket transaction. When rates went up a little bit. We saw some tail off. It's typically a very -- a larger auto financing market around tax season and there was some dampening of that. Part of it's auto prices, for sure, have increased, and then you add to it, auto rates have increased, but it was still a positive market for us, but we just thought we'd highlight that.

Anything you'd add, John?

No, I think you covered it. Yes. And we saw it run through March, and I think it's kind of continued into April.

Okay. Got it. And I think your point on reemphasizing the proprietary data, that's well understood. You also mentioned using Ignite and some of your other analytical tools. I was just wondering how connected or packaged is those Ignite and analytic tools to the data? Just trying to appreciate if you -- how you think of the potential disruption risk to the software side of things, which is the big market talk right now?

Yes. As you know, the so-called software is a small part of our business. It's one we certainly invest in, particularly for our -- broadly our mid-market customers that don't have larger tech platforms that they can use to ingest our data. But we sell data. We sell scores, we sell models, we sell products. That's the vast, vast majority of our revenue. We're very, very small in the revenue from software sales. And we really have our investments in Ignite and interconnect really to facilitate the sales of our data. We don't really view it as a way that we deliver our data to market.

Yes. Ignite AI Advisor is to allow smaller customers to ingest more of our data by seeing the value in the scores and the lift they get by using not just credit data but also alternative data and other data sources. So that's what it's intended to do. We are very excited about the fact that it's going to drive more data sales, but it isn't a licensing play. That isn't what we do. Yes.

Next question today is coming from Shlomo Rosenbaum from Stifel.

Mark, can you talk a little bit more about The Work Number indicator? And is there some way to quantify some of the market share gains? It really looks like a unique position that you guys can kind of wedge in there and gain some more share. So I'm wondering if there's some way to quantify it. Since you've rolled it out, where have you seen the share shift? You noted one large client last call, I think, in the mortgage space, but -- if you can talk about what's happened since then? And then has there been any reaction with any of the unique data from the other bureaus that they've been putting in for free aside their own credit reports? And then I have a follow-up.

Yes, sure. We think, obviously, we have a unique asset in the TWN data set. By adding the TWN indicator, we think it benefits both our credit file, but also benefits pull-through of our TWN data in underwriting process because the originator now knows that we have a record. So it's a benefit really on both sides. And we've seen really positive response. As you know, it's still early days. We really only launched this in the second half of last year and initially in mortgage. And as we talked in February and again today, that's where we're seeing the most interest. And when you think about it, if you're a mortgage lender and then as you know, we're rolling it out in auto, cards and P loans, if you're underwriting a consumer, you typically, for 20, 30 years, have done that off the credit file, the credit score and credit data, but you are really invisible in that marketing process, the early stage in your funnel when you bring a consumer into your application process or pre-application process about whether they're working or not or what their income is. And number one, it's kind of binary if you're not employed, but you're applying that generally is going to be more challenging with credit. But if you're working and then dependent upon your income levels and your ability to pay, it allows the lender to give that consumer a larger loan at a lower interest rate and really drive approval rates. And it really is getting the consumer into the right products. So it's very unique solution that we have and one that we're super energized about. I think you can see in our mortgage results for the first quarter, versus the underlying market, you can do the math. There's clearly some lift in there that we're seeing with share benefits in the prequal and we attribute that to one of the factors, for sure, is the fact that we're offering the TWN indicator there at no charge. I think I talked about on the February call that some of the early customers that are using that were seeing not only that they're using more of our credit file because it has that attribute with it, it's very valuable in that mortgage funnel. But we're also seeing a lift in some of the TWN poles because they know we have a record and they're able to access that record later in the process when they're doing the VOE and VOI full verification versus the thinner set that we have in the TWN indicator. So we're very energized about it. And then the feedback we're getting from the other financial services verticals is very positive. Obviously, getting that kind of rich data for free is very valuable and a differentiator for us. And then beyond just the TWN indicator, I think you know that we're also working to offer in the mortgage space, our cellphone utility attributes in the mortgage file. That's another very unique Equifax data set, one that only we have. It's got real scale. It covers most Americans so it's got a lot of data in there, and we're adding those attributes to the mortgage file really same basis at no charge, but to differentiate our mortgage credit file for share gains. So we're energized, but kind of -- I think the encapsulated it's early days, meaning we're still in the -- we just launched literally this week, some of the solutions in card and auto lenders. So we're getting in that marketplace, but the response is very positive.

In the first quarter, a very meaningful part of that 24 points, excluding FICO was share gains, right, so it was a significant contributor.

And then just as a follow-up, can you talk about where you are in terms of completing the cloud platform in the international markets?

Yes. We finished the year a few months ago, 2025 at about 90% of our revenue in the new cloud. That's substantially all of the United States. As you know, that was our strategy. And what we have left to finish is Australia, a couple of Latin American countries and a few other in India, so a few other pieces. And most of that will be complete this year. It's really a game changer for us to have the cloud behind us. As I talked in my prepared comments, having that cloud capabilities, our scaled differentiated data, we're really purpose-built now with the investments we've made to really activate our AI initiatives and our multidata solution initiatives to really differentiate Equifax in the marketplace. And you're seeing that in our vitality index, the 17% Vitality in the quarter in the large pipeline we have of new products that we're planning to roll out, like we just talked about TWN indicator in really every financial services vertical, that's really exciting and stuff we couldn't do before the cloud. So it's really energizing time for us, having the cloud at this stage and substantially behind us, particularly in our large and most profitable and EBITDA generating market in the United States, it's an exciting time.

Our next question today is coming from Kyle Peterson from Needham & Company.

Great. Just one for me. I wanted to touch on talent. Great to see you guys performing. It's been a pretty tough hiring market. But I wanted to see if you guys could unpack a little bit what kind of the bigger drivers are? Obviously, it seems like records is helping a lot with hit rates and stuff, but maybe between like whether it's record price, bigger package density like longer background screening. Just any more detail or color there would be really helpful for us.

Yes, I think you've hit on it. Clearly, records are real positive. And as you know, we had strong record growth again in the quarter which is super attractive for all of our Workforce Solutions verticals. Chad and the team are doing a great job on continuing to expand our data set. We have price in their prices. One of the elements we took price up [ 11 ], so that's definitely benefiting all of our verticals in Equifax and AWS, including talent. We've got a bunch of new products that the team is rolling out. So really a lot of innovation coming there. And remember, not only are we selling -- helping the background screeners by delivering that work history from our data set because we get the job title with every payroll record and we have that digital resume but increasingly, we're delivering education data incarceration data and other data elements to the background screeners and then in different formats. We're getting more sophisticated in delivering on our customers really requirements around the different job categories and what data is required in a white collar, in your world, financial services job, there's a lot of more history job history and education history than there is in a blue-collar job. So we've rolled out some more blue collar, which think about it as a last job worked kind of solution versus the last 5 years of employment. So just being more deliberate around having a suite of products to help our background screening customers.

Your next question today is coming from Jason Haas from Wells Fargo.

I'm curious, why did our government verification business declined quarter-over-quarter. I think historically, you typically see like that revenue go up from 4Q to 1Q. And then I also had a question just on 2Q. Why is that flat year-over-year just because historically, that typically increases also from 1Q to 2Q?

Yes. So it went up in 1Q. We shared that earlier. So we had a very strong quarter, and we're very pleased with the momentum, not only in the quarter, but in particular, more the long-term pipeline, which we shared was up kind of 2x year-over-year. Second quarter, as we talked about in our prepared comments and one of the earlier questions, is we got a tough comp because we had a large win last year with SSA that we're comping that activated in April of last year. So that's a tougher comp, which is really driving the performance in the second quarter.

Yes. And seasonally, we're expecting to see revenue up in the second quarter versus the first, which is not unusual, right? [indiscernible] I don't think there's really anything unusual in the trends that we saw this year.

Okay. So that SSA contract, was that like a onetime benefit? I thought that, that's launched in 2Q, but then that becomes an ongoing benefit.

It does, but it's -- we're comping against it because it was a new contract in 2Q. And as you point out, it does go on in the future beyond 2026. But the comp is one that is -- one we have to overcome, and it was a big contract.

Okay. That's fair. And then just on the margins were really strong for EWS. The guidance now implies it looks like they're going to be down in the rest of the year. So yes, what drove the [ beat ]? And why does that not continue going forward?

Yes. And I hope you saw that Equifax margins were also quite strong in the quarter. And as you know, we've got a guide for 75 basis points of margin expansion for the year, which is well above our 50 basis point long-term framework. So we feel really good about the operating leverage for EWS in particular, they had a very strong first quarter and then that operating leverage flow through. And that's why we're still investing heavily in EWS. We're -- it's our fastest-growing business over the long term, and we're continuing to invest in the government vertical. We're investing -- Chad is investing in a bunch of new products, and we're also investing in capabilities and record additions. So it's one that we're continuing to invest in the business, and you just had the strong operating leverage flow through.

The next question is coming from Ashish Sabadra from RBC Capital Markets.

The CMS recently launched Emmy, an income verification tool. How is this expected to change any competitive landscape for the Government Verification Services?

Yes. I think it's still early days on that solution. It's one that we think we can be complementary with. As you know, our scale data set provides an instant verification. It has large coverage. It provides a lot of productivity for the case workers at the state level. We think that's -- their solution looks a lot like our complete income. Obviously, it's not integrated in there to go after either records we don't have or to go after some of the gig income that we may not have in our data set. But we think it's -- our data set is just so much more comprehensive and instantly available. We think there's still a large position for us to continue to grow with CMS. And then you add to it some of the new requirements with OB3 on work requirements, education requirements or volunteering requirements. We're rolling out a solution that will really deliver those capabilities, but it's going to be integrated with our core TWN dataset income offering that we think will be quite beneficial for the Medicaid, Medicare verifications.

And it would just be another distribution channel for us. Obviously, we'll make sure our customers can get to our data in the way they want to.

Yes.

That's very helpful color. And if I can ask a question around agentic AI, one of the concerns that we've heard is agentic AI could potentially displace manual verification. And just given that manual verification is one of the key competition in your verification business, how does -- one of the questions that we get is how does the technology shift, if any, Equifax, again, positioning in the verification business?

Yes. We think it's pretty hard because, as you know, that's all proprietary data. You're talking about income and employment data is proprietary in our data set, and it's all permissioned by permissible purpose because of the Fair Credit Reporting Act solution. And then the contributors, we have almost 5 million companies now contributing data to us every pay period, it's proprietary in their data set or with their payroll process or HR software company. So it has to be consumer permission. There's a lot of friction with that. I don't -- we don't see how AI can really facilitate that consumer permissioning to access that data because the data is not available anywhere in the worldwide web. It's all in proprietary house environments, including Workforce Solutions at Equifax. So we just don't see that as a threat, which is really part of that AI data moat that we highlighted in one of the charts in our deck this morning, and we did it again in February that the work number as well as our credit data and our other data sets really are quite unique because AI can't access them. Only Equifax AI can access them or when we deliver it to our customers on a permission basis, they can access it, but it's just not available on the worldwide web.

The next question today is coming from Faiza Alwy from Deutsche Bank.

First, I just wanted to clarify on the government business. I think you said earlier in the call that you expect sort of second quarter revenue to be flat versus first quarter. And then I think you just said in response to a question that you expected to be up. So maybe if you could just sort of...

No. I did not say that. My intention was to say it was -- we had a strong first quarter, which we were pleased with. We also talked about our pipelines, which when we think about pipeline, you'd think about later in the year in 2027, that's generally how the kind of deal cycle is in government. It's longer term. But we did say that we expect the second quarter to be flattish because of the tough comp versus last year.

Got it. And then just to put a finer point on the year. I think previously, we are expecting that you can grow sort of in line with your long-term growth rate for EWS this year, which is up 13% to 15%. Do you think that we sort of do that this year? Or is that more -- are you expecting more of that benefit in 2027?

Go ahead, John?

To be clear, we had only provided guidance for EWS and Verification Services in total, right? And EWS and the Verification Services guidance were not. They were below the long-term framework. We think they were very good and nice growth from 2025, right, but no, they weren't at the long-term framework yet, right, part of it due to mortgage, part of it due to other factors like weaker hiring market. So I think what Mark covered in his remarks and already is that our expectation is we're going to continue to see improved performance in government as we move through this year, but that the major opportunities that we have regarding the new programs that were passed by the government, et cetera, that Mark covered in detail, we expect that really to start benefiting us in 2027.

Understood. Makes sense. And then I just wanted to ask, have you seen any impact on mortgage volumes from the trigger lead legislation? I think, John, you'd previously said that it might -- you might shift more towards hard inquiries. So just curious if there's been any impact on overall volumes or any kind of shift that we should watch out?

Not yet. Now admittedly, it's very new in the quarter, right? So not yet. And I think our guidance doesn't assume much in the second quarter will occur either.

Our next question today is coming from Kevin McVeigh from UBS.

Great. I guess obviously, the big focus on mortgage, but I wonder if you had any thoughts as to how the VantageScore could impact auto, consumer and some of the other areas from a kind of share perspective? And then just from a regulatory perspective as well?

Yes, I think it's a great question. As you know, there's already a large penetration in non-mortgage or diversified markets. You've got large lenders that have been using Vantage for many years. Number one, because of the performance of the score is more predictive because it includes more data than the current Vantage Classic score. Vantage 10T will close some of that gap. But it has a performance element. And then there's just a cost element. It's a less expensive score. We charge much less than FICO does over there.

I think the other element that we think about is that if you're a multi -- if you're not a [ monoline ] and your financial institution that's doing mortgage, auto, card, p loan, you're doing multiple products, you're likely going to be incented to move your mortgage volume over because of that significant cost savings and the fact that with an agency mortgage, if it's approved, they're going to take that loan and take it into the pools that they've purchased from the mortgage originators but if you're using Vantage in mortgage, you're likely going to use the Vantage when you rescue your portfolio. And we see the same opportunities over the medium and long term to drive more Vantage adoption in the diversified markets or non-mortgage spaces. And there already is a lot of adoption there. There's, as I said, large lenders that are entirely vantage outside of mortgage because as you know, there's never -- there's no regulatory requirement in non-mortgage, there only was in the mortgage space by the agencies that require the FICO score up until last July for 25-plus years. So we see it as an opportunity for sure.

That's helpful. And then just from a pricing perspective, I know you adjusted the VantageScore pricing for mortgage, any thoughts around auto?

Same. Yes. We're going to offer the VantageScore. We're already in the market doing that at a discount to FICO. Again, we sell the credit file plus the score when we sell the FICO score in mortgage or auto or any other market, we don't make any margin on that score sale. When we sell Vantage, we make some margin on it. So we're obviously incented to deliver that to our customers, and we see that as an opportunity going forward. Obviously, much smaller given the significant $10 price in mortgage versus it's much less the FICO score in auto, cards and P loans, but there's still a performance and a margin opportunity for our customers. So we're certainly going to take advantage of that. And I think as you know, last summer, we rolled out the free VantageScore with every paid FICO score, not only in mortgage but also in diversified markets or non-mortgage. So we've got lenders that are taking -- that are using FICO, that are taking Vantage to make sure they understand it and understand the performance and evaluate it. So as I said a couple of times, we see that as an opportunity going forward.

Our next question is coming from Curtis Nagle from Bank of America.

Terrific. So maybe just sticking on the subject of Vantage, how soon you could provide a little more detail and I think you said 50 mortgage lenders are currently in production with Vantage. I guess just to confirm, so I think these are non-GSE mortgages? Are they being underwritten? Are they being held on the books? Securitized? Any sense of kind of the nationals? Just trying to get a size of sort of where things sit before we get kind of full acceptance with GSEs.

Yes. These are admittedly smaller lenders, but they are lenders that a year ago were not using Vantage in the mortgage space. They're non-GSE, as you point out, they're some of the other federal agencies that don't fall under FHFA as well as other lenders. And it's just reassuring to us to see that they're taking these loans, in many cases, balance sheeting them, but see the power and the performance of the VantageScore and obviously, the cost opportunity of buying it at a lower price than what FICO is currently charging. And we see that as another indicator that the industry is going to be ready. I think a more powerful one is the 240 GSE lenders. Many of them also have some element of balance sheet for the non-agency loans or securitizations on their own, but the fact that they're taking the VantageScore, ingesting it in their system, and obviously, we talk to them all the time. There's a lot of interest around using Vantage once it gets activated by the agencies.

And for lenders that are non-GSE and are exclusively non-GSE, we think the share of Vantage is very high, right? So where the opportunity exists the movement has occurred. The volumes are very low, but the share is very high.

Okay. Understood. And then maybe just a quick one just on -- I think, at least at a high level, you pointed out some cost productivity from AI. Maybe just a little more detail. Is that some, I guess, output of higher throughput? Is it raw expense takeouts, some combination of the two? Something else? Just any more detail there would be helpful.

Yes. So maybe I'll be a little broader on it. Obviously, we were pleased with our margin expansion ex FICO in the quarter, and we're also pleased and I hope you are too with our guide for the year to be up 75 basis points. You think about that as being -- the first big piece there is operating leverage, having our strong revenue growth that is at the kind of higher end of our long-term framework delivers that incremental margin. So that's a positive. We also have in the quarter, which was substantially higher than our guide in the first quarter, you had that mortgage lift that we had kind of in the middle of the month before rates went up, that kind of pass through and went through to the bottom line. I think that is indicative of when mortgage markets recover, we've been very clear with you that margin is going to drop through and you certainly saw it drop through in the first quarter.

And then last, as you point out, we're really getting some traction, and I would characterize it as still early days, meaning the runway we have around deploying AI across our operations inside of Equifax. We call it AI for EFX operations, think about call centers and our paper processing centers is kind of the first frontier there. We're making a bunch of progress of using agents to start taking calls from consumers using agents in AI to process hundreds of thousands of paper documents we get every month from consumers here in the United States and around the world. There's a lot of productivity there. And then we see productivity opportunities going forward in technology where we have a large workforce. We're seeing real momentum around using some of the AI tools to do coding which we're very energized about is the opportunity of that going forward. And then broadly, in our kind of support teams, whether it's finance, HR, legal, all of the support teams are deploying AI to increase their efficiencies. So I would expect kind of AI-driven productivity to be a multiyear lever for Equifax going forward. And I think it is going to be for all companies. We all read about it, but it's really real. And the acceleration tools. We're using things today that we weren't using 6, 9, 12 months ago inside of Equifax to drive our speed, efficiencies and accuracy. So it's really exciting. So I think those 3 together are really what's driving our above long-term framework margin expansion for the year, and we're very pleased with that kind of operating leverage. And then obviously, it generates incremental free cash flow that we can return to shareholders or use for bolt-on M&A.

Our next question today is coming from Surinder Thind from Jefferies.

John, can you maybe talk about just the hard inquiries versus the overall mortgage originations? Thinking about it from a lender behavior perspective, just any changes that you're seeing in hard versus soft and what the implications this is from a revenue perspective here, is just more usage of soft equals less revenue? Or how should we think about the pending changes here [ around the party ]?

I think what we've seen over the past several years, right, is a significant acceleration in the use of soft early in the mortgage process to give lenders a better view in terms of who they're working with, who are submitting the applications or who are they marketing to, right? So I think it's both -- there has been some shift of activity from hard to soft, that's certainly true. But there's also been an expansion of opportunity as lenders utilize these lower-cost soft pulls in order to get a better view of how they want to sell and market in the business. So overall, what we think has happened is you're just -- you have seen more activity over the time period if you combine hard and soft together, right? Also, we think what has happened is that hard inquiries, therefore, have become less indicative of just the trend that's occurring in originations, as we mentioned in the prepared remarks, right? So that's why we're going to start sharing with you the origination data that we have from the credit file. Yes, it's a little bit in arrears, but we think it's very valuable information that we can share. And we'll continue to guide as we go forward based on our expectation on annual origination volume for the industry so we can get a perspective on what our expectation is for the year.

Got it. And just to clarify, is the idea here that we're going to continue to see the mix shift changes? Or are we kind of approaching some point of stabilization?

I think we're going to continue to see changes in the mortgage industry based on the new products we launch, right? So -- and we're continuing to see that occur. So for example, we're very excited about the growth that we're seeing in our soft pulls based on TWN indicator and the other data we're providing, right? So we're continuing to offer richer products on the front end, which drive more volume. Exactly how the market shifts as we go forward. I think we're going to see it together. But at this point in time, what we're seeing is we're seeing ourselves drive more growth in soft as we believe we're taking share by offering more value on the front end.

Got it. And then as a follow-up, on the whole VantageScore-FHFA debate, I mean when we think about -- like do lenders actually care about the performance of the credit scoring model as the current the market system works, meaning that I feel like the debate has been in VS4 versus classic FICO, but I also think there's 10T in the mix. And the preliminary data suggests that there may be differences in performance model and which would be perhaps another consideration in addition to price here, like how do we think about that?

Yes, I think that it's a great question. I think broadly, lenders will use scores that are approved by the agencies. You have to. So I think you got to start with that. And remember that the lenders are broadly originating the loan and then selling it to the government. So they want to follow the specifications that they have. But I would make sure that we both think about and we do too, is that in that mortgage prequal and application process, if you've got a mortgage score or data that's going to allow you to either approve more customers or put the customers, the consumer, the future homeowner in the right loan because there's more data. In the case of Vantage 4.0, there's just more data used in that score. So it should allow for a more accurate picture on that consumer. And then we believe allow them to originate more, which is a good thing and put them in the right loans because what you don't want to do is have someone going through the application process, and then they get disappointed because either they have to have a higher down payment or the interest rate is higher than they think because of not having as much data information. But -- so I think both are true. And from our perspective, I think it's broadly recognized, although some maybe would disagree with this, but Vantage 4.0 is a score that has more data in it than FICO Classic. I think 10T closes that gap once it's rolled out than Vantage 4.0. But what's approved by the agencies is what the originators are going to use, and that's what's important. And I think we're all -- I don't think there's a debate. I think we're all just waiting for when will the agencies be ready to accept the VantageScore, and we just think we're getting closer to that stage. And again, from an Equifax perspective, we're advantaged either way. Our guide for 2026 assumes no Vantage conversion. We've laid out for you what the upside is, if there is Vantage conversion, it's only upside. And there's really not a downside to Equifax because both of these scores are calculated using our credit data. and you can't calculate the score without the credit data. So it's -- we think we're well positioned going forward, and we're trying to be responsive to our customers by offering the VantageScore that delivers performance and certainly significant economic value with $1 versus $10.

The next question is coming from Andrew Nicholas from William Blair.

Just one question for me on maybe the AI front. You talked about operating efficiency from AI, product funnels, development life cycles, patent generation, all the benefits you're seeing in the way that you use the technology. Could you speak more to how clients are interacting with you and the data differently, if at all? Are you seeing any changes in usage patterns or evolution in how often clients are interacting or [ why did they ] interact with your data? Any insights there would be great.

Yes. So I think there's long been a macro and it's still -- we're still in that macro about our customers want more data. They want more alternative data. They want more differentiated data and that's one that's a macro that's still, in my opinion, in early innings, meaning there are large lenders that only use the credit file today and aren't using alternative data. And they know that they're going to get a lift with alternative data. What AI is allowing us to do, and again, Equifax has more alternative data than our competitors, which we think is an advantage for Equifax in an AI world, because it allows you to really ingest that differentiated and additional data that's going to drive a more predictive or higher-performing solution for either underwriting or identity or whatever the process is. So we're super energized around, number one, having the cloud substantially complete. We put all our data in a single data fabric. We've got large-scale differentiated data that's proprietary. We have an AI moat around it. And now we're really investing in delivering that data to our customers, either the individual data sets or for lots of customers, scores and models that incorporate more data in it. I mean you can't do that without the explainable AI that as you point out, we've been investing in from a technology standpoint and with our patents, around the ability to deliver that explainable AI that our customers require for their regulators and for their own internal processes and the Fair Credit Reporting Act requires. So really, both of those become another area that is an important differentiator in our space and for Equifax to make sure we're delivering solutions that have that higher performance. And AI is -- we're really seeing a lot of momentum there. I think we pointed out that 100% of our scores last year were using our AI capabilities, and that means higher performance. Our products now are increasingly using AI and we talked about some of our platforms that are having conversational AI, so our customers can use them more readily inside of their operations. So it's still very much early innings between the ability to deliver more differentiated data to our customers and then the ability to do that with AI.

The next question is coming from Scott Wurtzel from Wolfe Research.

Just one for me. We've been getting a lot more questions around just whole kind of tri-merge to bi-merge dynamic and the potential of that move taking place, I guess, given some of the rhetoric we've heard from industry participants. So just kind of wondering what -- if there's anything you guys have heard from whether it's your conversation with regulators or other industry participants just around that whole dynamic and the potential for that...

Yes. Our conversations are quite broad that it's well understood that there's large enough differences between the 3 credit files, that a tri-merge provides performance, meaning it includes more people, provides a more complete picture. If you think about it, most consumers have multiple bank accounts, not every bank will contribute to all 3 credit bureaus. And we've shared stats before. There's 10 million roughly consumers, they're only on one credit bureau. So if you're pulling one or two, you're never going to approve or even see that. And then if you ever look at your credit score between the 3 credit bureaus, it's going to be different by 30, 40, 50 points. And that's because not every bank contributes to all. So our view is that there's a broad understanding that the Tri-Merge delivers both access to credit, meaning having a more complete picture on the consumers, and it also delivers the same in safety and soundness, meaning you're seeing every trade line that a consumer has, both the good and the bad trade lines. So you've got a complete picture. So we think that there's broad support on the Hill with the regulators and with our customers about the power of tri-merge and I think I've shared before on other calls. If you look at the more sophisticated, in my opinion, lenders outside of mortgage, think about cards or others there's many that pull a tri-merge because they get a more complete picture about the consumer for approvals, meaning they can improve more. And they see all the trade lines, so they make sure that they're managing their losses, and they're not missing a trade line that might be a negative trade line in one of the bureaus if they're only pulling a [ 1 or 2B ]. So we think there's a lot of support for it.

The next question is coming from Ryan Griffin from BMO Capital Markets.

I was just wondering what percentage of your volumes are soft versus hard pull? And I was wondering where you see that mix evolving over time with some of the new products benefiting in prequal?

Yes. So we don't specifically disclose soft versus hard and I think what we've indicated is over the last several years, what we've seen is soft pulls obviously grown meaningfully as a percentage of total pulls.

And I would point you to our revenue is quite strong in hard and soft pulls, which we were very pleased with.

Appreciate it. And then just on the lenders onboarded thus far, testing the VantageScore. I was wondering if you could give any information on that group in terms of the customer size or type of lending institution, whether it's banks or independent mortgage brokers?

All of the above. 240 is a lot and includes smaller ones, but a lot of the big ones. So it's broadly, our customers understand how Vantage operates. They understand that it's a performing score. They understand that Fannie and Freddie are going to activate it. It's just a matter of time. It feels like we're getting closer. And then they also understand the cost advantage, which is significant to them. And remember, 1 in 8, 1 in 9, 1 in 7 loans close, the others don't. And that's breakage for the mortgage lenders and at $1 of breakage versus $10 times 3, it's a significant cost savings. As you know, it's been quantified for the industry. It's over $1 billion of cost saves by moving to Vantage. So that gets the attention of the lenders.

Our next question is coming from Kelsey Zhu from Autonomous Research.

Could you maybe talk a little bit more about your expectation around VantageScore market share gains and future pricing policy and the mortgage vertical over the medium term?

Yes. It's hard to put numbers on it and I don't know how far medium term is, but let's say, over the next couple of years, in my opinion -- I think in our opinion, once Vantage is activated by the agencies, there will be adoption and that will be positive for Equifax. It's not in our guide. So that will be incremental margin. Our revenue will go down because we're selling a $1 score versus a $10 score, but our margins will go up because we're going to make a buck instead of making zero and over the medium term, I think there's going to be substantial conversion. Why would a lender if the agencies are approving Vantage, why would they pay $10 versus $1. It's one that's kind of common sense. As far as pricing, we're going to be certainly intended to be very competitive. I think the dollar reflects that versus the current FICO pricing. I don't think any of us know what FICO is intending to do in January of 2027, which is not that far away, whether their price is going to go up, down or sideways, but we're going to be very competitive going forward. And we don't need a lot of price to deliver our long-term framework. That's not how we operate. We're multifaceted in our ability to grow our business. Price is one element. But more important for us is share gains, new product rollouts. In the case of Workforce Solutions, record additions, new verticals that we're penetrating. We've got multiple levers for growth. And in the case of Vantage, it's really going to be a margin opportunity for us to grow our margins going forward.

Got it. Second question, I was wondering if you can talk a little bit more about your outlook for volume growth across card, auto, personal loans for the rest of the year?

So I think we gave guidance for our diversified markets for the second quarter. We gave some perspective on the full year, and I think that's kind of consistent...

There's really not a lot of change. Yes.

But not a lot of change, right? It's pretty consistent across the rest of the year. Yes.

The consumer is still broadly resilient. Delinquencies are still managed well. Our customers are strong, meaning the financial institutions. I think one variable is how long does this conflict go on in the Middle East? And what is the impact on oil prices? What's the impact on inflation? What's the impact on consumer spending and does that impact financial services? That's hard to handicap how long this is going to go. I think we all hope it gets resolved fairly quickly, and the market seem to reflect that kind of bias. And I think you heard last week and to a lesser degree, this week from the large banks reporting that they're having good originations and managing their delinquencies broadly quite well. So I think that's a good outlook for us in FI when you look through the rest of the year.

Our next question is coming from Craig Huber from Huber Research Partners.

I think a few people could probably blame you guys for not raising your guidance after the very strong first quarter, just given the macro issues out there. But my very specific question is in the month of March with this war starting, this Iran war starting at the end of February, is there any areas in your business that you saw material movement down in the revenue growth rates given this Iran war that you can attribute to?

Mortgage.

Anywhere else though that you can talk about?

It was meaningfully mortgage for sure meaning mortgage, we saw an uptick kind of in the middle of the quarter as rates came down before the Middle East conflict started. And then we saw I think a combination of rate increases and probably consumer psyche about something like that happening in the Middle East, things -- mortgage slow

[Audio Gap]

And then we talked about -- we saw a little bit in auto, slowdown from probably higher rates. There's also the higher prices of cars from the flow-through of tariffs and other impacts. But we shared earlier that where mortgage is kind of running over the last 4, 5, 6 weeks is kind of back down in line with our February guidance for the year. So that's why we -- it's slightly below that actually, but that's why we held the year. And we're hopeful that if the conflict gets resolved and inflation comes down from the oil impact that there will be some rate reduction. And John pointed out, and I hope you saw that the significant, I would call it, pipeline mortgages at these higher rates that continues to build because mortgage hasn't stopped, but you've got a large pipeline or portfolio consumers that have mortgages at these higher rates of 5, 5.5 and over 6 that will be ready for a refi as soon as rates tick down 25 basis points, 30 basis points, 50 basis points, that creates an opportunity for a refi that's going to be good news for us when that happens. And again, we saw a small piece of that in the middle of the quarter.

And then my follow-up question, if I could. On the securitization market for mortgages, how important is that market there? Any feedback there, et cetera, for getting VantageScore up and rolling and moving along here with market share gains on mortgages?

We don't see it as a real event because there's a lot of securitization that's done in the non-mortgage space. In auto and cards, there's large lenders that are exclusively Vantage that have been securitizing auto portfolios and card portfolios for years, 5 years, 6 years, 7 years. So it's well understood. We don't think it has an impact. It's really more getting the agencies to get their technology and their pricing tables set up to take in that VantageScore. And the indications we're getting is that they're getting close to being ready for that.

The next question is coming from Zachary [indiscernible] from FT Partners.

This is [ Zach ] [indiscernible] on for Zachary [indiscernible]. Just a couple of questions on employer. Since the macro is causing some deceleration there. Can you just talk about the underlying trends you're seeing? Is it just the tax credit legislation? Are there other factors maybe between blue-collar versus white-collar, maybe geographically?

The employer, the big impact is the Work Opportunity Tax Credit, or WOTC, not being -- expiring and not being approved. I think we're -- we and lots of others are lobbying to get that through Congress. There's, I think, broad support to do it because it promotes the employment of certain individuals that really benefit from that. Just as a reminder, we're continuing to process the WOTC applications, even though they're not being accepted for the tax credit [ same ] meaning that we're building a pipeline when it does get activated. And it's hard to handicap when that's going to happen. But that's a meaningful impact in that vertical and employer because it's a larger business for them that we're not able to generate any revenue today, but we're building a pipeline once it does get activated to submit those WOTC applications for approval.

Our next question today is coming from Owen [indiscernible].

I just have a quick clarification on that $35 million margin upside from VantageScore conversion. Could you please talk about the assumptions behind how can we get to this [ map ] by $35 million and the margin profile of VantageScore at $1 per score?

Yes. The margin profile on a dollar is 100% margin. Think about it that way. It's zero with our FICO score. And it's really just taking that dollar current mortgage activity. And the $35 million assumes full adoption at today's run rate of mortgage transactions. Obviously, if the mortgage market improves, that becomes a bigger number.

Would you have anything, John?

No. It's just based on -- its adoption at our 2026 guidance for the mortgage margin, right? It's just consistent with our guidance. If there was no FICO and 100% Vantage, that's how you get to the $35 million.

And again, just to reclarify, our guide for the year assumes 100% FICO delivery and no Vantage conversion. So this is an upside for us. And again, if there is FICO to Vantage conversion, our revenue would come down, but our margins would go up by that run rate of $35 million.

Got it. So that conversion is 100% conversion from zero to...

The next question is coming from Simon [indiscernible] from [ Wolf Child & Company Redburn ]

Just wanted to change subject a little bit. And just going back to the discussion you had on consumer permissioning within the verification business. I note that the current friction we have with consumer [indiscernible] are I think that the consumer just has to put in their own -- offer their login details and passwords. And obviously, that creates a huge amount of friction in the whole process. Is there a world in which the requirement actually input passwords and log-in details goes away where just actually giving permission allows access to that data via those providers. I'm just curious about your thoughts around that kind of the legal pathway to that kind of environment.

Yes. It's hard to see that happening. I don't know where they would -- I think you're going down the path of like an AI agent somehow would have to get access to that user ID and password from that individual consumer because they're all individualized by every individual for every account they have and everyone's got lots of accounts. So it's hard to see that happening. What we see in consumer friction, and we participate in it, is that there's a lot of friction with it. And our customers typically don't want to use it because in an application process, too many consumers drop out when they're asked to do more, meaning they want a friction-free, very smooth process, which means instant decisioning and you can't do instant decisioning with consumer permission. So there's a place for it. And that's why we've rolled out our complete income solution for government, and we've had some wins in the government space that where that consumer is willing to invest the time, I think that's where you really get to. And as far as the AI element, it's hard to see.

Okay. That's helpful. And just one quick follow-up. Really from a sort of technical perspective here, when you talk about your ex FICO revenue growth, how are your reseller revenues treated [indiscernible]? Are you stripping the FICA revenues out [indiscernible] group as well...

All the way through.

All the way through? So that includes the FICO revenues from the [ resold ] FICOs from the other bureaus within that?

We have a tri-merge business. This really assumes the Equifax piece.

So what we assume is just any revenue that we paid to FICO or any revenue that would be paid to FICO by Experian and TransUnion has effectively passed through to us by the price that they charge us, right? So this is to try to cover as best we can all of the FICO score revenue that we are paying either directly or indirect.

Our final question today is coming from Arthur Truslove from Citi.

Sorry, Arthur, can you get closer to the phone? We can't hear you.

Sorry about that. So for me, you obviously mentioned earlier that AI is contributing to your margin development, and that's very positive. Obviously, your sort of midterm margin guide has always been 50 bps since I've been involved covering the stock. I guess my question would be, like in what sort of set of circumstances could you see that midterm margin guide being bumped up to 75 or 100 basis points? So I just wondered what might bring that about?

Yes. It's a fair question. We're obviously pleased with our guide for the year and super pleased with our performance in the quarter. And as you know, the margin expansion really has two big levers. One is the core operating leverage from the business and the strong top line growth with the operating leverage you get from that generates some of that margin lift, which is directionally that 50 basis points with our long-term framework for revenue growth. And if we're able to grow revenue faster, that's going to be attractive for us as far as operating leverage. On the AI side, it's kind of early days. We're only months into this as far as deploying it. And I think as we get further into it, we see some of the further benefits in operations, which think about that as our call centers and operation centers, which are quite substantial. As I mentioned earlier, as we start getting into the technology side and our ability to use to really accelerate our coding capabilities, which we're seeing some early progress there. I think as that unfolds and then across the rest of the organization, we see some of the benefits, we'll certainly, at the right time, take a look at our long-term margin goal. Today, we feel very comfortable with the 50 bps. We're very pleased with our outperformance guide for 2026 and at 75 bps, and then we'll certainly look at it in the future as we get further into the AI journey.

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

Thanks for everybody's time today. If you have any follow-up questions, please reach out to Molly and I. Thank you, and have a good day.

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.

Good morning, and welcome to the Equifax Q4 2025 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded.

I will now turn the conference over to Trevor Burns, SVP of Investor Relations. Thank you. You may begin.

Thanks, and good morning. 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 at our Investor Relations website. During the call, we will make 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 4Q 2025 earnings conference call.

Also, we're making certain forward-looking statements including first quarter and full year 2026 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 may impact our business are set forth in our filings with the SEC including our 2024 Form 10-K and subsequent filings.

During this call, we will be making -- we'll be referring to certain non-GAAP financial measures, including adjusted EPS adjusted EBITDA, adjusted EBITDA margins and cash conversion, which are adjusted for certain items that affect the comparability of our underlying operational performance.

All references to EPS, EBITDA, EBITDA margins and cash conversion are references to non-GAAP measures. These non-GAAP measures are detailed in reconciliation tables, which are included in our earnings release and can be found in the financial results section of the Financial Info tab at our IR website.

Also in the fourth quarter, Equifax incurred a charge of $30 million related to a settlement associated with the resolution of inquiry disputes related claims. We expect costs associated with this settlement to be reimbursed by our errors and omissions insurers, with these insurance recoveries also included as onetime events when received.

Moving forward, our nonmortgage results will be referred to as diversified markets. This terminology change does not affect any change in reporting structure. Also for your modeling, additional 2026 guidance will be posted after the earnings call in the appendix to the earnings slide presentation.

Now I'd like to turn it over to Mark.

Thanks, Trevor. Before I cover our results for the quarter, I want to spend a few minutes on our 2025 performance and strong finish to the year, which gives us strong momentum for a strong 2026.

Turning to Slide 4. Equifax delivered financial results well above both our February and October guidance with revenue of $6.075 billion, EPS of $7.65 a share and free cash flow of $1.13 billion. 2025 revenue was up 7% on a reported and organic constant currency basis at the low end, but within our long-term 7% to 10% organic revenue growth framework, despite a continued weak U.S. mortgage market that was down 7% and the U.S. hiring market, which was down 2%.

The mortgage market had about 100 basis point negative impact on Equifax 2025 revenue growth. EWS delivered 6% revenue growth with a 51.5% EBITDA margins, but exited the year with strong fourth quarter 9% revenue growth. This accelerating performance was led by Verification Services, which successfully navigated difficult U.S. mortgage and hiring markets to deliver 8% growth for the year and over 10% in the fourth quarter, with fourth quarter growth driven by both strong low double-digit revenue growth in Government, which was above our expectations and an NPI Vitality Index of over 20%.

The EWS team had another outstanding year, adding over 20 million active records to the TWN database. At the end of 2025, EWS had over 200 million active records, which were up 11% and over 800 million total records, both big milestones for the business. USIS delivered 10% revenue growth and expanded margins 70 basis points to 35.2%. Diversified Markets or non-mortgage revenue grew 5%, which is the highest USIS organic revenue growth performance since 2021 in our non-mortgage space.

Mortgage revenue grew 22% and was up low double digits, excluding the impact of FICO price increases as they gained share across both prequal and pre-approval solutions. International delivered constant dollar revenue growth of 6% and expanded EBITDA margins almost 100 basis points. The international team made strong progress towards cloud completion, which we expect to complete by the middle of this year. International also delivered 12% Vitality last year, which drove good revenue performance despite weak Canadian and U.K. debt management end markets.

Driving new product innovation is the core to our long-term growth strategy. In 2025, with 90% of our revenue in the new Equifax Cloud, we pivoted from building to leveraging the cloud and accelerating our use of AI and new products. Equifax had another very strong year of NPI rollouts with record 2025 Equifax Vitality Index of 15%, which was 500 basis points above our long-term 10% goal and equates to about $900 million of new product revenue during the year.

USIS and EWS worked together to launch new products that deliver USIS credit files and leverage alternative data, including the TWN Indicator income and employment data in mortgage, card and auto markets with plans to launch similar products in the personal loan space early this year. These unique to Equifax products deliver credit, identity and income and employment data in a single solution and are gaining traction with mortgage and card lenders.

In 2025, we launched 100% of our new models and scores powered by EFX.AI. These new AI models and scores drive strong incremental lift versus traditional non-AI models and scores. And we're leveraging AI to help our customers identify clear and actionable insights. In 2025, Equifax secured a spot in the AI Fintech 100 list for our new patented explainable AI technology. We now have over 400 AI patents either secured or pending, and we added over 40 new AI patents last year.

In U.S. mortgage, we made great progress working with mortgage lenders and resellers towards the adoption of VantageScore 4.0 with over 200 mortgage lenders testing or in production with Vantage given the significant cost savings opportunity.

As we move through last year, we also leveraged our industry-leading cloud-native technology and EFX.AI to drive operational efficiencies across Equifax through our new internal AI for Equifax initiative, which we expect to deliver cost savings, efficiencies, speed and accuracy across Equifax in 2026 and beyond.

And last, we delivered very strong free cash flow of $1.13 billion with very strong 120% free cash flow conversion, which was up $230 million from our February guidance. With our strong free cash flow, EWS acquired Vault Verify in the fourth quarter and also returned record amounts to shareholders. As we move into 2026, I'm energized by our commercial momentum and our strong exit from the fourth quarter, our new product innovation, our AI capabilities and the benefits of the new Equifax Cloud.

Slide 5 provides detail on the strength of our free cash flow and free cash flow conversion. Our growth in revenue and EBITDA and declines in CapEx as we complete the cloud are driving accelerated free cash flow. We generated $1.13 billion of free cash flow last year with a cash conversion record of 120%, which is well above our long-term framework of 95%. This is about $170 million above the midpoint of our October free cash flow guidance.

In 2025, Equifax repurchased over 4 million shares, returning $927 million to shareholders, including $500 million of purchases in the fourth quarter when our stock was weak, and our free cash flow was strong. Further, we paid $233 million in dividends, resulting in total cash return to shareholders last year of $1.2 billion. This was up 6x from 2024 and stronger than our plan for the year. In 2026, we expect to again generate significant strong free cash flow in excess of our 95% cash conversion long-term framework, which will allow us to continue to acquire bolt-on M&A and return cash to shareholders via dividends and share repurchases.

Turning to Slide 6. Equifax fourth quarter reported revenue of $1.551 billion was up a strong 9% and $30 million above the midpoint and $15 million above the top end of our October guidance. The strong outperformance was most significant in Workforce Solutions, where we saw strength in mortgage as well as in Government, which was above our expectations and also in USIS, where the strength was principally in mortgage. Both USIS and EWS saw stronger mortgage markets that were better than our October framework.

USIS mortgage hard credit inquiries were down about 1%, but were better than our expectations of down high single digits. For the quarter, USIS -- I'm sorry, for the quarter, U.S. mortgage revenue represented about 20% of Equifax revenue.

Diversified Markets or non-mortgage constant dollar revenue growth grew over 6% in the quarter, slightly above our expectations and guidance. This was principally driven by broad-based strong execution in Workforce Solutions, driven by stronger auto, card and debt services revenue growth, which was up double digits.

Government, up low double digits; and talent, which was up high single digits. USIS Diversified Markets revenue was consistent with our expectations, while international was slightly weaker than expected, principally reflecting end market weakness in Canada and European debt management, despite very good performance in Brazil and Australia.

On an organic constant currency basis, revenue growth of 9% was over 200 basis points above the midpoint of our October framework, which gives us strong momentum as we move into 2026. Equifax delivered fourth quarter EBITDA of $508 million with an EBITDA margin of 32.8%, which was slightly below our October guidance. While EWS and USIS EBITDA margins were above expectations and international was at the top end of our October guidance range, Equifax overall margins were slightly lower than guidance due to higher incentive compensation, which impacts our corporate expenses.

We expect incentive compensation to normalize to target levels in the first quarter as 2026 compensation targets are set at our plan for the new year. EPS at $2.09 a share was $0.06 above the midpoint of our October guidance, and we returned $561 million to shareholders in the fourth quarter, including purchasing 2.3 million shares or about 2% of shares outstanding for $500 million to take advantage of a weaker Equifax stock price. Our strong fourth quarter revenue performance and business unit margins give us positive momentum as we move into 2026.

Turning to Slide 7. Workforce Solutions revenue was up a strong 9% and better than our October guidance and our expectations. Verifier Diversified Markets revenue growth was up 11%, which is a very positive momentum as we enter 2026. Government had a strong quarter, building off the third quarter performance with revenue up low double digits. Government revenue performed very well, despite a tough comp with continued strong state-level penetration, and we had minimal impact on EWS revenue from the federal government shutdown in the quarter.

Talent Solutions revenue was up high single digits in the quarter. In October, we discussed weaker hiring volumes that continued throughout the fourth quarter. Despite the weaker hiring macro, Talent Solutions continued to outperform their underlying markets driven by penetration, pricing and higher hit rates from record additions and new products, including new solutions from the TotalVerify data hub, which includes trended employment data as well as incarceration, education and licensing data.

Consumer lending continued to perform very well with revenue up very strong mid-double digits in the quarter from double-digit revenue growth in P loans, auto and card. EWS mortgage revenue was up about 10% in the quarter, delivering improved sequential trends from new products, record growth and pricing. Employer Services revenue was up 2% in the quarter, despite continued weakness in our I-9 and onboarding businesses from the weaker hiring market. And Workforce Solutions EBITDA margins of 51.3% were driven by operating leverage from higher-than-expected revenue growth in the quarter.

As mentioned earlier, TWN record additions continue to be strong again in the fourth quarter with 209 million active records, up 11%. Our 120 million total current records were also up 9%, which represented 105 million unique SSNs. At 105 million individuals with current records in TWN, we have a long runway for growth towards the 250 million income-producing Americans. And in the fourth quarter, EWS signed agreements with 5 new partners, bringing our total to 16 new agreements signed during 2025.

Turning to Slide 8. We continue to see momentum in our discussions in Washington and with state agencies to support their plans to implement the new [ titan ] OB3 social service eligibility requirements. Given our strong value proposition from TWN on the speed of social service delivery, case worker productivity and accuracy of income verifications, Equifax is uniquely positioned with our differentiated TWN data assets and new solutions to help state agencies increase efficiency and strengthen program integrity, particularly with SNAP and CMS.

Partnering with our customers, we're already bringing new innovative solutions to federal and state agencies supporting the government's goal of reducing the $160 billion of social services fraud, waste and abuse. In the fourth quarter, we launched our new continuous evaluation solution for SNAP, which identifies changes in recipients' incomes above program levels, enabling states to reduce SNAP error rates, where nearly 80% of states today are above the 6% federal threshold.

Given the strong value proposition, we've already contracted with a few states in the first quarter on our new continuous evaluation solution with many more actively in discussions to utilize this new product from Equifax. We expect this focus on program integrity from OB3 will be a positive tailwind for our EWS Government business in 2026 and 2027 and beyond. While OB3 related deals and revenue will likely be in the second half of the year and in 2027, the increased engagement represents positive opportunities in the near term to penetrate states not using TWN today for social service delivery.

We're also continuing our positive engagement in D.C. with multiple federal agencies to support their efforts to strengthen social service program integrity. There are several new incremental opportunities that would drive positive future growth for EWS. This current environment is a unique opportunity for our Government vertical with a big focus on improper social service payments. EWS has significant opportunities for medium and long-term revenue growth supporting Government programs in the big $5 billion Government TAM for Equifax, which gives us confidence in our ability to deliver government revenue growth above the EWS long-term revenue growth framework of 13% to 15%. Said differently, we expect our Government vertical to be our fastest-growing business across Equifax going forward.

Turning to Slide 9. USIS revenue was up a strong 12% in the quarter, driven by strong mortgage outperformance. USIS diversified or non-mortgage revenue grew 5% in the quarter and was in line with our guidance. Within B2B diversified markets, we saw very strong high double-digit growth in auto from pricing and strong volumes in auto pre-approval products and low single-digit growth in FI. Given the stable lending environment, we have not seen changes in customer marketing or risk management behavior.

USIS mortgage revenue was up a very strong 33% and better than our expectations. While hard mortgage credit inquiries were down 1% in the quarter, these volumes were better than our October guidance of down high single digits. FICO pricing, along with growth in mortgage preapproval products with our new TWN Indicator drove mortgage revenue growth for USIS.

In 2026, we expect to see share gains in USIS mortgage prequal, pre-approval and hard credit inquiry products from the adoption of our new mortgage credit file with TWN Indicator and TWN Total income products. Financial Marketing Services, our B2B offline business was up low single digits in the quarter. USIS' Consumer Solutions business had another very good quarter, up high single digits from strong customer acquisition trends in our consumer direct channel as well as strong growth in partner revenue.

Our USIS D2C business remains on offense, entering into an expanded relationship with Gen Digital, providing our differentiated data to their engine by Gen Marketplace. Later this year, we'll also leverage engine by Gen to power -- to provide my Equifax consumers in the U.S. with access to expanded and personalized financial solutions. USIS EBITDA margins were 36.3% in the quarter and up over 100 basis points sequentially and above the top end of our guidance range from stronger-than-expected revenue growth and operating leverage.

Turning to Slide 10. International revenue growth was up 5% in constant currency and below our expectations, principally in Canada and our European debt recoveries management business. Latin America growth of 6% was led by high single-digit growth in Brazil and Argentina. Brazil continues to be a big success story for Equifax with strong above-market revenue growth from share gains. Canada, Europe and APAC delivered 4% growth in the quarter. International EBITDA margins of 31.6% were slightly above our October framework.

Turning to Slide 11. Proprietary data is the foundation of our highly differentiated products and analytical and decisioning capabilities, through which our customers generate unique solutions to grow their businesses and mitigate risk. Only Equifax can access our unique and proprietary data sets.

The application of advanced AI and traditionally -- and traditional IT-based analytical techniques allow us and our customers to develop solutions that are reliant on our only Equifax proprietary data. As AI advances, we are confident we are able to generate more effective analytical solutions based on our proprietary data at accelerated pace as well as make these advanced analytical solutions available to more customers.

Slide 11 provides more perspective on the percentage of Equifax global revenue that is based on data that is proprietary and not available or broadly accessible. In total, about 90% of Equifax revenue is generated through the direct sale or through derivative products generated from our proprietary only Equifax data. Within the U.S., almost 90% of our revenue is generated from our proprietary data sets such as the credit file and with our TWN income and employment database, which is our most unique and valuable data asset.

Within USIS, proprietary data assets include the consumer credit file, along with our alternative consumer credit assets like NC+, DataX, Teletrack and IXI wealth data exchanges. These USIS assets are proprietary to Equifax and only accessible by Equifax.

Within our international businesses, proprietary data includes consumer and commercial credit as well as other proprietary data exchanges like our financial services Fraud Exchange in Canada and our Australia income Verification Exchange with data approaching 50% of the employment market. Over 90% of international revenue is generated from proprietary only Equifax data. The proprietary and unique nature of our data is a huge asset for Equifax in this new AI environment as only Equifax can utilize the data for customer solutions and new products using our advanced AI capabilities.

Turning now to Slide 12. AI is fundamentally changing how we operate from technology to data analytics, products, operations and across Equifax. Our $3 billion cloud investment provides the technology platform that enables us to leverage AI capabilities across every corner of Equifax. We're driving AI deep into the organization with almost 90% of our team leveraging Google Gemini AI in their day-to-day roles. AI is not just an add-on at Equifax, it's now part of our DNA and how we operate every day.

Our cloud transformation is now delivering measurable returns across software development, operations and business processes from lowering operational risk from fewer service disruptions that increases customers' trust and capacity innovation -- capacity for innovation and creating predictable, repeatable deployments and reducing human error with 90% of our infrastructure as code.

We are also getting more software output from the same engineering investment with about 1,900 Equifax software engineers using AI coding tools that have generated over 1 million lines of code using AI. As we scale adoption across our broader developer population, these gains compound, translating to accelerated product delivery, faster response to market opportunities and improved return and capacity inside of our R&D and technology spend.

Our agentic AI platform is accelerating and standardizing the development, deployment, monitoring and governance of AI agents across Equifax. This is a strategic differentiator for Equifax that reduces duplicative efforts and enables build once, deploy everywhere leverage across Equifax. We're continuing to advance our state-of-the-art machine learning capabilities that allow our data scientists to rapidly build higher predictive models and deploy them quickly as well as develop capabilities to automate model deployment to make models available faster for our customers.

Our advanced model engine also allows our data scientists to build models using Equifax portfolio of proprietary and patented AI algorithms. AI is also extending into Equifax's operations or back office. In the first part of 2026, we're focusing on improving our customer and consumer call centers with AI-enabled and AI-assisted call processes. Our AI call center transformation demonstrates our ability to fundamentally reimagine our labor-intensive workflows, which is a template for broader workforce productivity gains across Equifax. Over the next 3 years, we expect to drive towards $75 million of annual cost savings from our E3 AI operations initiative.

The number of new products launched using EFX.AI is up 3x since 2023. We launched our new Ignite AI Advisor in the fourth quarter is powerful customers. Following the successful U.S. rollout, we are introducing our new Ignite AI Advisor in our global markets in 2026. All new models in 2025 were built using EFX.AI. Our EFX.AI models consistently delivered industry-leading performance and outstanding nearly 30% lift over legacy models last year. This big level of performance improvement demonstrates that our AI strategy is not only scaling, but providing the superior predictive value required to lead in the marketplace.

In USIS, we recently launched the Credit Abuse Risk Model, an adverse actionable model that leverages AI to help lenders identify first-party fraud and credit abuse behaviors like loan stacking, particularly where traditional credit scores indicate low risk of the consumer. With this score, lenders can identify pockets of prime consumer applicants with delinquency rates as high as 29x greater than the overall prime delinquency rate.

Our new EFX Cloud foundation is giving EFX an AI advantage in innovation, new products, technology development, operations and really across every corner of Equifax. This isn't a vision for the future of AI at Equifax. It's broadly in motion across our business.

Turning to Slide 13. Enabled by our proprietary data and our strong momentum with EFX.AI, we continue to make outstanding progress driving innovation new products, delivering record 17% new product Vitality in the fourth quarter from broad-based double-digit performances across all of our businesses and record 15% Vitality for the entire year. We expect strong double-digit VI to continue in 2026 and be above our 10% long-term goal, leveraging our cloud capabilities to drive new product rollouts using proprietary data and EFX.AI capabilities.

Last year, we launched a new TWN Indicator solutions in mortgage, auto and card, delivering twin income and employment attributes at no cost to our -- no additional cost to our customers, which is a huge differentiator, leveraging our cloud data fabric to create powerful new solutions for our customers.

In U.S. mortgage, where these solutions were introduced first, we've seen strong adoption with over 1,400 customers accessing these new only Equifax products. We've already seen strong momentum in U.S. mortgage from TWN Indicator with major mortgage lenders, which will benefit from our new solution in 2026. In auto, we have about 100 customers piloting the new TWN Indicator solution, and we expect accelerating adoption in auto as we move through the year. And in card, although earlier in the product launch, we expect to see customer wins in the first half of 2026.

Slide 14 provides perspective on the impact on Equifax operating results from the increase in FICO mortgage pricing over the past few years. As a reminder, Equifax profitability is driven by the sale and the value of our unique data that we sell. The FICO mortgage credit score is passed through to our customers at cost, and we earn no margin on the sale of the FICO Score.

In 2025, FICO mortgage royalties represented only about 3% of our total revenue. In '26, that number will increase to about 6% or double. This drives a substantial P&L impact on Equifax. Last year, Equifax revenue growth, excluding the impact of the FICO mortgage royalties was about 6%. And in 2026, our guidance implies revenue growth on the same basis, excluding the FICO Score pass-through of about 7%, which is within our long-term financial framework.

As shown on the right-hand side of Slide 14, the increases in 0 profit FICO mortgage score revenue, which has no benefit to our EBITDA dollars, reduces the reported growth in our EBITDA margin percent. 2026 EBITDA margins are reduced by over 200 basis points by the FICO mortgage royalties we pass through to our customers, with 2025 EBITDA margins also reduced by about -- by over 100 basis points.

When we set our long-term financial framework in 2021, we did not anticipate that FICO would have these dramatic price increases, benefiting Equifax revenue, but negatively impacting Equifax reported EBITDA margin rates. As we look at 2026, excluding these FICO mortgage impacts, our mortgage revenue growth at about 7% is inside our LTFF, and our EBITDA margins are expected to expand 75 basis points, which is 25 basis points higher than our 50 basis point long-term financial framework for margin expansion. As we go forward, we plan to share our performance, excluding FICO mortgage royalties given the substantial impacts on our reported results.

Turning to Slide 15. Our guidance assumes U.S. GDP growth consistent with our long-term financial framework of 2% to 3% and the U.S. mortgage market to be down low single digits in 2026 compared to last year. Internationally, we're expecting economic growth to be weaker than the U.S., particularly in Canada, the U.K. and Brazil. And FX is a positive in 2026 versus last year, benefiting revenue at about 50 basis points and EPS about $0.02 per share.

Our 2026 guidance also assumes that all mortgage scores that are delivered will be FICO Scores delivered by the 3 nationwide consumer reporting agencies, consistent with our mortgage scores volume to date in January. There is still uncertainty around when the FHFA will formally accept Vantage for agency mortgage originations. We felt this was a prudent guidance framework at this stage for 2026.

We continue to see strong mortgage industry momentum to move to Vantage given the sizable cost savings to consumers and the mortgage industry. And we already have over 200 mortgage lenders in production or testing our free VantageScore that we deliver with a paid FICO Score offering. Total Equifax revenue at the midpoint of guidance is expected to be up about a 10.6% on a reported basis and 10% on a constant currency basis in 2026. As discussed previously, Equifax revenue at the midpoint ex FICO is expected to be up about 7%.

Mortgage revenue is expected to be over 20% of our total revenue and diversified or non-mortgage revenue up high single digits on a reported basis and constant dollar basis. FICO mortgage royalties in our guide are up over 2x from 2025, assuming no Vantage conversion or FICO direct score calculation by mortgage resellers. Excluding these FICO mortgage royalties from both 2026 and 2025 revenue, as shown on Slide 15, you can see our revenue growth at the midpoint is about 7% in 2026 on a reported basis and constant currency basis and up almost 8%, excluding the low single-digit decline in the mortgage market.

Equifax mortgage revenue growth, excluding FICO mortgage royalties, is up mid-single digits. EWS mortgage will continue to outperform the underlying markets by high single-digit percent, consistent with our long-term goals. And USIS mortgage, excluding the impact of FICO Scores, will outperform the market by mid-single-digit percentages, as we gain share from the introduction of the TWN Report Indicator, TWN Income Qualify and our telco utility data in mortgage products. And again, this assumes no incremental revenue or margin from VantageScore conversions in our 2026 guidance.

Diversified Markets or non-mortgage constant dollar revenue growth at the midpoint of 7% is up over 100 basis points versus 2025, driven by stronger growth in EWS and USIS. With weaker overall market conditions in international markets, we are expecting revenue growth rates in 2026 to be about consistent with 2025. John will provide more detail in a minute on our revenue growth at the BU level in his more detailed comments around our 2026 framework.

EBITDA dollars are expected to grow by almost 10% at the midpoint of our 2026 guide to about $2.12 billion, up from about 5% -- 5.5% growth last year. And as a reminder, there is no profitability on the sale of FICO mortgage score by Equifax, so EBITDA dollars are the same in both the with and without FICO mortgage score revenue views. And given there's no profit in the sale of FICO Scores in mortgage; we are indifferent to tri-merge resellers calculating FICO Scores under the new FICO direct model.

EBITDA margins, however, are impacted meaningfully by the 0 margin FICO Score revenue in our reported results. Including the revenue from FICO mortgage score sales, reported EBITDA margins in 2026 would be down about 30 basis points at the midpoint. However, ex FICO, EBITDA margins grow substantially, up 75 basis points in 2026. The 75 basis point margin growth shows the leverage we are driving as we deliver high-margin data sales as well as cost savings from technology and AI operational initiatives. EPS in 2026 at the midpoint of $8.50 is up 11% versus last year, and our free cash flow of over $1 billion will deliver free cash flow conversion of at least 100%, which is above our long-term framework.

Turning to Slide 16. The changes occurring in the U.S. mortgage market to provide lenders score choice, Vantage or FICO in 2026 is very positive for consumers, the mortgage industry and for Equifax. For lenders and consumers, VantageScore 4 provides stronger score performance at, at least half the cost, which is a winning combination for the mortgage industry and consumers.

As a reminder, the consumer data from the credit file is the basis for mortgage approvals by lenders in the GSEs, not the scores. Equifax is a provider of not only credit data, but also unique telco and utility data with income and employment data and remains well positioned to continue to deliver value to mortgage industry participants.

Interest in the mortgage industry to move to VantageScore is extremely high. We have over 200 lenders testing our free VantageScore with prequal and pre-approval products through mortgage hard pull products with over 40 principally non-GSE lenders now in production with only the VantageScore. We are already providing Vantage historical data going back to '08, '09 to market participants, both directly and through advanced analytical capabilities via our Ignite for mortgage platform to aid our customers in the conversion to Vantage. And we're providing a free VantageScore with the purchase of any FICO Score across all industry segments, mortgage, auto, card, personal loans and insurance.

In mortgage, we believe that when the FHFA, Fannie and Freddie clarify the requirements for using VantageScore and begin full acceptance for mortgage pre-review and underwriting, we'll see migrations to Vantage accelerate. The conversion of Vantage is a significant opportunity to drive margin expansion and EPS growth for Equifax. As a reminder, our 2026 guide assumes no conversion to VantageScore in the U.S. mortgage market.

For perspective and provide data for your analysis, Slide 16 includes our guidance for 2026, assuming no Vantage conversion and the impact of several Vantage conversion scenarios. For example, full conversion in mortgage to VantageScore from FICO Scores in 2026 would reduce Equifax total revenue guidance of $6.7 billion at the midpoint by about $270 million, but would increase Equifax EBITDA by about $160 million and increase EBITDA margins by almost 380 basis points and increase our EPS by about $1 a share.

As we move through 2026 and there is more clarity on Vantage conversion timing, we'll update our guidance to reflect this shift and the opportunity for mortgage industry, consumers and, of course, Equifax. As a reminder, the incremental about $160 million in EBITDA impact in 2026 is with the U.S. mortgage market still operating well below 2015 to '19 levels.

And now I'd like to turn it over to John to provide more detail on our 2026 assumptions and guidance and also provide our first quarter framework.

Thanks, Mark. Slide 17 provides the specifics on our 2026 full year guidance that Mark discussed in detail. The slide includes additional detail on revenue growth rates and EBITDA margins, excluding FICO mortgage score royalty pass-through revenue and expected BU revenue and EBITDA margins.

EWS in 2026 is expected to deliver revenue growth of high single digits and EBITDA margins at 51.2% to 51.7%, about flat at the midpoint with 2025. Verification Services revenue is expected to be up high single digits to low double digits. Mortgage revenue growth is expected to outperform the market by high single digits against a market that is down low single digits compared to 2025. Diversified Markets Verifier revenue is expected to be up about low double digits, again, consistent with 4Q '25 from Government revenue growth, particularly in the second half when new requirements begin to be implemented as well as in auto, card and personal loans.

Talent revenue is expected to continue to outperform an expected weak hiring market. Strong TWN record growth, new products and continued growth in both pricing and penetration, particularly in government, will continue to drive Verification Services. Employer Services is expected to grow low single digits in 2026, again, despite the expected weak hiring market. Employer Services revenue is expected to decline in the first quarter year-to-year. USIS revenue is expected to be up mid-teens percent and EBITDA margins are expected to be 32.4% to 32.9%.

Excluding the increase in FICO mortgage score pricing in 2026, USIS revenue growth would be up mid-single digits at the bottom of our USIS long-term framework of 6% to 8%. And USIS EBITDA margins would be 39.6% to 40.1%, up 100 basis points at the midpoint year-to-year, reflecting leverage on high-margin data sales and disciplined cost controls.

USIS mortgage revenue, excluding the benefit of FICO mortgage price increase, is expected to grow at mid-single-digit percent rates, against a mortgage market that is expected to be down low single digits year-to-year. The growth principally from share gains as customers increasingly adopt our TWN and NC+-based solutions as well as price increases. Including the impact of FICO mortgage score price increases, USIS mortgage revenue is expected to be up over 35%. Diversified Markets revenue is expected to improve versus 2025 and grow mid-single digits year-to-year, benefiting from accelerating NPI, including TWN Indicator and total income-based products and share gains as they accelerate leveraging Ignite AI capabilities.

International constant dollar revenue growth is expected to grow mid-single digits at a lower rate than 2025 with EBITDA margins at 28.6% to 29.1%, up approaching 50 basis points at the midpoint from 2025. Revenue growth is below the long-term financial framework for international and 2025 growth rates, principally from weaker economic growth in Canada and the U.K. Corporate expense in 2026, excluding D&A, is expected to be up low single digits versus 2025. We believe that our guidance is centered at the midpoint of both our revenue and EPS guidance ranges.

As Mark referenced earlier, we expect to deliver over $1 billion of free cash flow in 2026 and a cash flow conversion of at least 100%. With EBITDA increasing to about $2.12 billion at the midpoint, we are also generating over $400 million in debt capacity at our current debt leverage. This creates about $1.5 billion in capital available in 2026 for M&A and return of cash to shareholders. We continue to look for attractive bolt-on M&A to strengthen Workforce Solutions, our differentiated proprietary data assets as well as international platforms. And we have substantial capacity for share repurchases, continuing the almost $1 billion we repurchased in 2025.

Slide 18 provides the details of our 1Q '26 guidance. In 1Q '26, we expect total Equifax revenue to be between $1.597 billion and $1.627 billion, up about 11.8% on a reported basis year-to-year at the midpoint. Constant dollar revenue growth at the midpoint is up about 10.6%. Diversified Markets revenue is expected to be up mid-single digits on a constant currency basis and near the low end of our long-term financial framework and U.S. mortgage revenue to be up over 30%.

EPS in 1Q '26 is expected to be $1.63 to $1.73 per share, up about 10% versus 1Q '25 at the midpoint. Equifax 1Q '26 EBITDA dollars are expected to be $444 million to $459 million, up about 7% at the midpoint. EBITDA margins are expected to be about 28% at the midpoint of our guidance. As a reminder, first quarter EBITDA, EBITDA margins and EPS are lower than the remaining quarters of the year, in large part due to the structure of our employee long-term incentive and equity plans. Due to their structure, a disproportionately large percentage of the expense of these plans for the year impacts the first quarter. Excluding the impact of FICO mortgage scores, 1Q '26 revenue would be up 7% to 9%, nicely within our long-term financial framework. And EBITDA margins in 1Q '26 would be 29.9% to 30.3%, about flat with 1Q '25 on the same basis.

Turning to Slide 19. The left side of the slide provides USIS hard credit inquiry growth rates for 2015 through 2025. We have historically used our hard credit inquiry growth rates as a proxy for U.S. mortgage market growth as they have, in general, tracked together. For 2026, we will continue to provide you the USIS hard credit inquiry growth rate data each quarter. However, in 2026, we believe that USIS hard credit inquiries will likely significantly outperform U.S. mortgage market origination activity due both to significant Equifax wins that we believe will increase our relative share of hard credit inquiries and also the mortgage triggered lead legislation that goes into effect in March of this year, which we expect will result in an increase in the use of hard credit inquiries by lenders in shopping and therefore, a reduction in prequal and pre-approval usage.

We will continue to use the trends that we are seeing in hard credit inquiries, which drive the bulk of USIS mortgage revenue as well as soft credit inquiries to forecast USIS mortgage revenue. The right-hand side of this slide shows the potential incremental mortgage revenue available to Equifax should the market recover to average 2015 to '19 levels. For this view, we have continued to use our historical USIS hard mortgage credit inquiries as a basis.

We have also revised this slide to show Equifax mortgage revenue, excluding FICO mortgage royalties and have updated the market recovery column to include the benefit of a full transition from FICO to VantageScore in mortgage. As you can see on this basis, with a full mortgage market recovery and a full shift to VantageScore, at 2026 pricing levels and EWS records, Equifax mortgage revenue, which would include no FICO mortgage royalties, could increase by $1.2 billion. At our very high variable margins, this would deliver incremental EBITDA of over $950 million and adjusted EPS of over $5.75 a share.

For your perspective, as you determine your view of the 2026 U.S. mortgage market, based on a review of Equifax data on mortgage home purchase issuances since early 2022, we estimate that there are over 13 million mortgages with an interest rate over 5%, including about $11 million with rates over 6% and almost $8 million with rates over 6.5%. This provides a perspective on the pool of mortgages potentially available to refinance as mortgage rates change.

Now I'd like to turn it back over to Mark.

Thanks, John. Turning to Slide 20. As I mentioned earlier, our strong 2025 execution sets us up very well to deliver on our long-term framework in 2026 with constant dollar revenue growth of 7% ex FICO, which is inside our 7% to 10% long-term framework.

Achieving our long-term revenue framework allows us to deliver EBITDA of over $2 billion, up high single digits, with a margin rate up 75 basis points ex FICO, which is well above our 50 basis point long-term framework. and deliver over $1 billion of free cash flow from cash conversion of at least 100% and 11% EPS growth.

We are confident in our ability to deliver organic revenue growth in our 7% to 10% long-term target range to continue expanding EBITDA to maintain cash conversion above 95% and to execute on bolt-on M&A. And in 2026, we expect to maintain a strong return of capital to shareholders.

On the left side of the slide, you see our updated EFX2028 Strategic Priorities, which are principally consistent with our prior framework. However, we've updated our EFX2028 priorities to reflect our drive to accelerate our use of AI, both internally and externally to drive efficiencies and cost savings for Equifax and bring new and improved products to market quicker that deliver greater lift and performance for our customers.

Wrapping up on Slide 21. Equifax executed very well last year against our EFX2028 Strategic Priorities inside a challenging economic backdrop with a stronger second half and fourth quarter, which gives us the momentum as we enter 2026. Our new cloud-native infrastructure is already providing competitive advantages of always-on stability, faster data transmission speeds and industry-leading security for our customers. And importantly, Equifax resources and technology product DNA are leveraging the new Equifax Cloud for innovation, new products and growth.

We're using our new single data fabric, EFX.AI and Ignite, our analytics platform to develop new credit solutions powered by TWN Indicators like -- in verticals like mortgage, card and auto that only Equifax can provide, which is leading to share gains and growth. We're also broadening our product sets in key verticals like Government, Talent Solutions and Identity and Fraud. The Equifax team is fully focused on growth and innovation.

Given our strong free cash generation, we are also delivering on our commitment to return substantial excess free cash flow to shareholders. As mentioned earlier, in 2025, we returned $1.2 billion to shareholders, which was well above our guidance for the year. And in 2026, we expect to have $1.5 billion available to invest in bolt-on M&A like our 2025 Vault Verify acquisition and return substantial cash to shareholders through share repurchases and dividends.

The new Equifax is investing in technology, EFX.AI and proprietary data assets to help our customers grow and deliver returns for our shareholders. I'm energized by our momentum as we enter the new year, but even more energized about the future of the new Equifax.

And with that, operator, let me open it up for questions.

[Operator Instructions] Our first questions come from the line of Jeff Meuler with Baird.

Mark, loud and clear, you've been front-footed on AI, both from a product and productivity perspective, and it sounds like you also have a agentic AI platform in-house. Obviously, have a massive data advantage in employment and income today. I know it's still relatively early, but on agentic AI, just how do you think about the applicability of agentic AI to the employment and income business given that a lot of the market is still manual, I guess, both from an opportunity or a potential risk perspective?

Yes. Thanks, Jeff. First off, the Equifax moat around data is very high, whether it's our TWN income and employment data or our other credit data, as you know, our data is proprietary and over 90% of our revenue comes from proprietary data. And what that means is no one else can access it.

When you think about credit data or in your question, income and employment data, the income and employment data comes from either payroll processors or individual companies, and that's also walled off. So the only way to access that is in a permissioned basis or in an aggregated basis like we have, its proprietary. So we think that there's a real moat around it from a data perspective.

With regards to using AI in Workforce Solutions, we're doing a lot around our employer business, where we, as you know, deliver regulated services to HR managers, things like I-9 validations for new employees, unemployment claims management, work opportunity tax credit. We see big opportunities both in how we deliver those services from an AI perspective to the HR managers and their teams, but also how we actually complete the processes, using AI in the paper processing to really drive productivity, speed and accuracy. We're seeing a lot of opportunities there.

And we talked in my comments earlier between EWS and USIS, this has really happened in the last 6 months for us as we've been applying AI off of our new cloud platforms inside of Equifax. We're seeing big opportunities for productivity, speed and accuracy in our operations and using AI, call centers, paper processing in Workforce Solutions, as you referenced, to really drive efficiencies and productivity, really quite substantially.

And we talked about over the next couple of 3 years in the neighborhood of $75 million of productivity from those efforts on internal operations. So we're quite energized around the use of AI. The investment we made in the cloud gives us a platform now across Equifax where we can really deploy it inside of Equifax. And back to the first point I made and obviously, a topical point with what happened in the markets yesterday, we have a lot of confidence around the moat that's around our data broadly that really protects us from someone else using AI to try to disintermediate us. We have the data. And as you know, you can't do AI without data. And when you have proprietary data, you've got the ability to really protect that and really deploy it in a very effective way.

Very helpful. And then overall margin looks good to me normalized for FICO. But any additional perspective on the EWS margin outlook? Just any specific investments or headwinds, things like the rev share on data partnerships or anything like that?

Yes. And we're pleased -- I'm pleased, Jeff, you are, I hope others are that we're going to try to be transparent around the increasingly large impact that the FICO pass-through has on our reported results. And that's why going forward, we'll share with you what our, in particular, margin rate impact is, which is quite substantial.

And we're pleased with our guide of 75 basis points of margin expansion. We think that's a big number. It's 50% above our long-term framework. It reflects the operating leverage in the business and some of the cost actions that we're taking driven by AI inside of Equifax.

With regards to Workforce Solutions, those EBITDA margins north of 50% are very attractive. We think a lot about continuing to invest, and we are in Workforce Solutions to maintain those margins because they're so accretive broadly to Equifax with -- in our long-term framework, EWS growing faster than the rest of Equifax. And with those 50-plus percent EBITDA margins, you've got a lot of accretion to our margin rate, and they generate a lot of EBITDA dollars.

So we are continuing to invest there. We talked a little bit in our comments about some of the new products we're investing in, particularly in government, like the continuous monitoring solution. TWN Indicator is a new solution. It's a product between EWS and USIS. So investing in new products, investing in new tech, investing in some of the AI capabilities inside of Equifax and Workforce Solutions on how they deliver solutions like in the employer business as part of the investments. And we continue to invest in acquisition of records and investing in our commercial team.

So maybe a long-winded answer to say, we like our 50-plus percent EBITDA margins. Our goal is to maintain those, which we've been doing quite consistently, while continuing to invest in the business to drive that kind of double-digit long-term framework revenue growth that, as we all know, is quite attractive at those 50-plus percent EBITDA margins.

And as Mark covered, just in the total Equifax long-term plan, right? Again, it's to hold those EWS very high margins and have them outgrow the rest of the company to add accretion, continue to drive USIS margins up, which you're seeing in our guide, continue to drive international margins up, which you're seeing in our guide, and then also to get leverage on corporate expenses that are outside the BUs, which again, I think you're seeing in what we guided for 2026. So I think 2026 is very consistent with our long-term model and something you should expect to see from us consistently going forward.

Our next questions come from the line of Toni Kaplan with Morgan Stanley.

And thanks for all the information around the FICO impacts and spelling out the different scenarios in the slides.

I was hoping -- I know your guidance is assuming 100% FICO Score sourced through the bureaus. Just maybe flesh out sort of the hurdles that sort of get you -- like get the lenders and resellers to being able to use Vantage. What are -- what's still remaining? And what's the timing on what those could be to get resolved?

Yes, that's a great question, Toni, and a tough one to answer, the timing element of it. As you know, the real hurdle that's left is -- a significant hurdle that's left is the FHFA as well as Fannie and Freddie completing their work from a technology and planning process in order to allow for the adoption and the implementation of the VantageScore. That's really the big hurdle.

Our intel is that it's underway, meaning it's going to be imminent. It's hard to handicap when that is. And we just thought it was prudent for -- given that that's uncertain when that's going to happen to put the guide out that we did. We also talked about there's a lot of energy in the marketplace with our customers number one, adopting our free VantageScore for doing their own testing internally about the VantageScore versus the FICO Score, which is actually well known. As you know, Vantage is widely adopted in non-mortgage space.

So we've got good adoption there. We've got a couple of lenders that are non-agency, a handful of lenders that have made the conversion because of the cost savings and performance and gone to full Vantage. They're smaller mortgage lenders for sure, but they're not the Fannie and Freddie conforming mortgages. So it's really a matter of when does that work complete by both agencies. We're collaborating with them around that. And as it unfolds, we think there's energy in the marketplace to drive conversions once that gets greenlighted and you're available to submit a mortgage using Vantage.

We also wanted to be clear in the presentation around in terms of the FICO direct model, which I know there's a lot of discussion around that. And again, to us, we're indifferent in terms of operating profit, right? Our level of operating profit generation is the same, whether we sell the score or not because as Mark made clear that there is no margin pass-through to us.

So should that occur, doesn't affect our operating profit, yes, revenue would be lower, but it's -- again, it's 0 margin revenue. So we think we're in very good shape for that transition as it occurs or if it occurs. And then obviously, we're in very good shape when Vantage transition occurs.

Great. And looking at government, I think there's a big opportunity there with OB3 in this year as well as next year. Could you just talk about the momentum that you're seeing there versus prior quarters? Like if the -- getting closer and closer to having to hit those error rate targets is impacting the state's behavior? And is there a large season -- like a large quarter for you for Government? Like is there seasonality that we should be aware of? And just anything in terms of momentum in that part of the business?

Yes. It's a great question, Toni. It's one that we're quite energized about and we're putting a lot of effort into given this unique environment that really started a year ago when President Trump came in and there was a large focus or an increased focus at the federal level and now at the state level around the improper payments. And OB3 that was passed in July last year is a big catalyst for that.

And what it's resulted, I think we've been clear that a lot of the OB3 specific requirements will have, we believe, revenue impact for us, meaning positive revenue in the second half of the year and into '27 when some of those requirements actually have a start date in the states.

But what the OB3 has driven in this focus on improper payments and some of the focus on error rates or the increased focus and penalties from the error rates above the federal thresholds is a very, very broad-based engagement with each of the states that we haven't seen really in the history that I've been here, meaning the states are focused on it. They know that they have challenges if they don't take actions to drive some of the integrity in the programs, and we've just seen an uptick in commercial activity.

And I think you've seen the business really have some sequential improvement in the third and again in the fourth quarter, which we're pleased with. It was above our expectations of what we characterize as kind of normal state penetration, commercial activity that is probably driving some increased commercial discussions or commercial engagement because of the focus on improper payments that's so strong and because the states know that there's these new requirements coming later in the year and in 2027. So we're really pleased with the engagement at the state and federal level.

And the federal level is a very -- obviously, a big, big opportunity for us with the IRS and some of the other agencies who aren't using our data today, which we think there's real opportunity. So we expect this business to be stronger in 2026 than '25. As you know, '25 was impacted by some of the changes made in the Biden administration. around cost sharing of data. That was challenging for some of the states. That air pocket that we had is behind us really from a comp standpoint, which I think is positive. And then you just got some real commercial momentum.

And the other thing we talked in our comments and with Jeff a minute ago is that EWS is investing increasingly in new products to aid in -- broadly in the delivery of social services like continuous monitoring and things like that, that we weren't doing before. So that's another catalyst for us as we move into 2026.

Our next questions come from the line of Andrew Steinerman with JPMorgan.

I wanted to think a little bit more about Slide 11 in proprietary data. When you look at your most sophisticated clients in terms of their use of AI, are these clients consuming more or less data from Equifax and why?

Yes. It's -- first off, it's more. And we're the only place you can get scale data in a proprietary basis and the set of data sets that we have. You think about our credit file is proprietary to and Experian also have one they're proprietary. No one else has the scale of that data and no one else can get to it. Obviously, a bank is going to have or a financial institution, their own internal data for their clients. But when they're trying to acquire new clients and they're also trying to understand what kind of debt does their consumer have in other financial institutions, you have to come to 1 of the 3 of us for that.

Add to it, the cellphone utility database that we have is only Equifax. DataX, Teletrack, only Equifax, the IXI data set is proprietary only Equifax. And then, of course, the TWN database, if you want to get payroll data, you're going to come to Equifax or you're going to have to go to an individual on a consumer consented basis. Companies don't share payroll data just broadly in a way that scales. So that's another proprietary data set.

To your question around the data macro, there's no question that this is for years, there's been a macro of all of our customers wanting more data in order to broaden their decisioning. And as you point out, some of them are using their own AI and ingesting our proprietary data assets, but we're increasingly using our AI to deliver those solutions because we have the scale data assets.

So the moat around our data is very high. It can only be accessed by Equifax or by our customers when they're buying the data from us. It's just -- it's got a very high moat around it. And we think the combination of that moat around the data and our investments in Equifax AI capabilities. We mentioned on the call; we've got 400 explainable AI patents. We added 40 more in 2025. So we're expanding our capabilities to leverage our proprietary data assets with AI in order to deliver those higher-performing scores, models and products.

And even with smaller and midsized financial institutions, we've delivered technology that lets them ingest our data easier, right? So OneScore, right, integrates a substantial amount of our credit and alternative data, which -- and it makes it easy for a midsized financial institution to access more information using our scores and to drive greater usage. And we're seeing that absolutely occur.

And the AI Advisor that Mark talked about now being launched is supposed to make that even easier because we'll be able to help them create new credit policies more rapidly using our agentic capabilities that will again help them ingest more data more quickly using AI Advisor as well as OneScore.

Our next questions come from the line of Shlomo Rosenbaum with Stifel.

Mark, I just wanted to ask you a little bit more about the mortgage lenders that are testing or in production with VantageScore. Are you able to discuss what are the size of some of those mortgage lenders? And FICO talked about their direct lender, they're the top 5 of the resellers. Where are you with the really heavy users of like resellers and lenders in that?

And then just in general, are you planning to spend a lot more money this year just marketing that VantageScore and helping your clients test it? Is that an item that you're absorbing into your margins?

Yes. So on the first half of the question, there's clearly given the cost difference between FICO and Vantage, there's a lot of energy around the testing and utilization of Vantage. As we've said, we've got a number of large as well as a large number of customers that are taking advantage of the free VantageScore delivery, so they can work on their systems on how you would bring in a second score and also looking at the performance of that VantageScore.

And we mentioned that there are a number of smaller recognizably, but smaller lenders that have made the conversion, but they're not in the Fannie and Freddie space, but they've gone from FICO to Vantage. So there's no question that there's real interest in it. And we think it's just a matter of when does the FHFA authorize the ability, which they said they're going to do last July to bring the VantageScore in, and we think there will be a conversion. And it will obviously take time, but there's definitely a lot of enthusiasm there.

With regards to marketing and costs, we're obviously working with our customers to support them. I think part of the marketing effort was to offer the free VantageScore with every paid FICO score, not only in mortgage but in the other spaces. So that's one that we're putting commercial effort behind as well as marketing effort. And of course, any of our expenses associated with that, which are -- I would characterize as not meaningful, but are in our P&L and in our guide. You wouldn't -- you shouldn't expect us to do like TV advertising or something.

But we're clearly incenting our commercial teams to work with our customers around this opportunity to use the VantageScore at half the price of the FICO score and really drive that conversion as soon as it becomes available and working hard to prepare our customers.

We're also delivering data on VantageScore performance going back to '08, '09 to our customers. So the risk teams can look at the performance, which is very clear in the data sets that we have. So that's another element that we're doing to help support our customers as they evaluate the Vantage.

As John pointed out, from a guide perspective, we put guidance in place assuming there's no conversion. We thought that was prudent because we don't know when it's going to be greenlighted by the FHFA. And if there is conversion, it's only upside to us. There's not any downside to it. And fundamental to that is that we sell the credit file that's used to calculate the FICO score, and we sell the credit file that's used to calculate the VantageScore.

And of course, as we said a couple of times on this call, and it's well understood, when we sell FICO, that $10 is a full pass-through with no margin on it, but we make full margin on the credit file that we sell because you can't calculate the FICO or VantageScore without our credit data.

Just a question, if I can follow up with John. Just on that selling the credit reports, it seems like from the guidance that you're taking the full hit of a pass-through from the FICO score, not marking that up, but it doesn't look like there's much of a change in the cost of the credit reports to offset that. Am I understanding that correctly?

So you're talking about -- we indicated excluding the pass-through of the FICO revenue, we would be up mid-single digits. So you should compare that against a market that's down low single digits. So doing that math, that's high single digits-ish, right, type of outperformance relative to the market, which we think is relatively good and relatively good relative to the other segments in which we operate.

So that reflects certainly some price increase. It also reflects share gain that we're driving, and we expect to see from TWN Indicator and the other only Equifax products that Mark would have already talked about. And there is also a little bit of a headwind built in there related to what's going on with triggers, right? So as trigger legislation comes in, our expectation is you'll see increase in hard pulls, but some reduction in soft pulls, and that could have a slight impact on our revenue. So we did the best we could to bake all those things in, but we think growing in that mid- to high single-digit range ex the FICO score is a really nice outcome for our mortgage business.

Well, it's also our long-term framework.

Yes.

Our long-term framework is to grow organically 7% to 10% and in USIS, 6% to 8% in there. So we have our mortgage business ex FICO kind of in that range, which we feel good about, and we think you should, too.

Our next questions come from the line of Manav Patnaik with Barclays.

This is Brendan on for Manav. I just want to follow up on some of the mortgage market commentary. Because obviously, in the last couple of years, we kind of saw the opposite trend where there was a lot of shift to prequal and you guys have taken some share there as well. So -- but it sounds like you think there will be a reversal of that. So I guess just clarify what's going on in the ground there.

And then also the -- just to be clear, it sounds like you're saying the originations will be down low single digit. That's not the inquiries -- the hard inquiries you actually think would be better than that?

Sure. So on your last point, generally, we're talking about hard inquiries, and that's generally the way we guide. Now admittedly, we did indicate that we think we're gaining share there, so that we have to kind of net out the share gain when we're coming up with a view of the market, but our down low single digits kind of reflects what we think inquiries would be doing absent the share gain that we're driving and absent some of the shift related to trigger legislation.

And you know what's going on with trigger legislation, I'm sure you're familiar with it, right? We just -- we think we're going to see some customers choose to purchase a hard pull earlier in the marketing cycle as opposed to purchasing soft pulls since those hard pulls now cannot be shared with other lenders so that they have an opportunity to market to the customer that's applying for the loan.

So we don't think every customer is going to do it. We still think there is -- we've seen growth continue in soft inquiries in prequal and pre-approvals. But we think this legislation is probably going to result in some incremental adjustment where you might see a little more hard pull relative to soft pull for certain customers who choose to move to purchasing hard pulls earlier in the mortgage cycle.

Okay. And then on the TWN Indicator, you're launching that kind of across the board. And obviously, it's already in market in some areas. But I guess, where should we think of the biggest incremental opportunity across your different product lines?

Certainly, in mortgage. Mortgage is the largest FI vertical. It's one where income and employment is used in every origination along with credit. And we've talked many times that the way the market historically worked is you pull a credit file upfront, but you don't have any visibility if that applicant is working or what their income and employment characteristics are because that's typically done later in the process. And that's why we launched the TWN Indicator really last summer.

We're seeing great traction with mortgage originators. We're offering it, I think, as you know, for free with our credit file, not only in mortgage, but auto and card, and we'll do it in P loans this year also because it's really going to differentiate, we believe, our credit file and drive some credit file share, particularly in the mortgage space and that prequal application space that will aid lenders in their kind of marketing funnel to really differentiate what kind of loan or will a consumer close because they'll now have visibility around their employment, a range of income for them that they didn't have before.

So we're seeing some really good traction there. And what it should result in, and we're seeing some beginning traction there is share gains. When there's a 1B pull, in the mortgage prequal area, we want it to be an Equifax file because we're offering that differentiated data at no charge, which we think will advantage us from a share perspective.

And think about that same opportunity in auto, which would be kind of the next big vertical. And then we're also seeing some traction in card. Same reasons. Historically, card originations have always been done just on someone's credit profile. But you don't know if that credit profile supports someone with the capacity to repay or if they're employed. By adding the TWN Indicator, it just drives that decision higher.

So as a card originator, you can approve more at a lower loss rate. And if we're doing it for free, which is our business model to drive share gains, we're seeing some traction there, too. So we're super energized around the TWN Indicator, which is a great example of the kind of solutions we can bring because of the breadth of our proprietary and scale data.

Our next question has come from the line of Faiza Alwy with Deutsche Bank.

I wanted to follow-up on the government vertical. So one is, it sounds like you're saying the Verifier business for Diversified Markets will be up low double digits. So one, I'm curious what you're embedding for the government vertical growth.

And then I guess as you're having these conversations with various states and agencies, like what are some of the factors that they're focused on? Sort of how important is pricing as a consideration? And if some of the funding issues that we saw with some of the states seem to have resolved?

Yes. Government, as you know, has had a long track record of very strong growth through 2024, kind of the 5 years prior, it had a CAGR of over 20%. So it's been penetrating into that large $5 billion TAM, which is principally at the state level. And as you know, what we're delivering to states is speed of social service delivery because it's done instantly versus a manual verification of income eligibility. We're delivering productivity for the case workers at the state level, which is a very strong value prop. Then we also deliver integrity, meaning it's very current. It's data that's from last week's paycheck. So it's a very current data set.

And that growth penetration is really because of those 3 value props. And that hasn't changed at south of around $700 million of run rate revenue, a little north of that in our government vertical, versus the $5 billion TAM, our commercial team's focus is on those states and agencies. It's really agencies that are still doing it fully manually. And when you think about a $5 billion TAM in our business at less than 20% of that, there's a long runway for growth as we work with the states.

To your question around what are -- why isn't it a $3 billion business? We think it will be over time. There are challenges around technology around process flow change. And as you point out, there can be challenges around budgets in states. We deliver a very, very high ROI. We deliver a big ROI on case worker productivity, meaning they can cover more individuals that are coming after social services, but we also deliver a huge ROI payback on the improper payments.

And as you know, the federal government pays for social services with the states delivering it. And over the last year, they've really quantified the improper payments as being a massive number of $162 billion. So that's the incentive at the federal and state level.

And what changed in the last, call it, 12 months is the passing of the OB3 bill that put more teeth into the requirements that the states have to deliver those social services, meaning they have to use more verified data. They've got to do it more frequently. Today, there's 12-month redeterminations. It goes to 6 months in 2027. All those actions are really putting teeth around addressing the $162 billion, and it creates opportunity for Equifax and Workforce Solutions.

So we were pleased to see the kind of above expectation revenue growth from, call it, state penetration. That's where it happened in the fourth quarter. There was some of that in the third quarter, and we expect that to continue in 2026. And then you've got kind of the macro of the OB3 requirements that go into place later this year and into 2027 and beyond.

A lot of those conversations are happening now about how do I get prepared for that. because of the incentives or penalties, perhaps you want to call it, that are embedded in OB3 for states that don't take these actions, they're now going to have massive cost sharing or cost shifting from the federal government to the states where the states are going to be required to pay for a large portion of the social services if they don't get their error rates down. So that's been a real catalyst for an increase in conversations, which gives us confidence in this vertical going forward.

And as we've said a couple of times on this call, it's our expectation that this vertical government will be our fastest-growing business, not only in workforce, but across Equifax going forward because of the uniqueness of our data set and our solutions and because of the ROI and value we deliver to the agencies when they utilize our data.

Great. And then just a follow-up on mortgage. And correct me if I'm wrong, I think you're guiding mortgage to low double digits ex FICO in the first quarter and mid-single digit for the year 2026. So just curious, like is that conservatism? Are you assuming higher rates for the remainder of the year? Or what's behind that assumption?

It's really related to the way the mortgage market and overall mortgage revenue moved in 2025, right? You saw improving levels as you move through the year. So when you do year-over-year growth rates, they just look a little different than a flat level of performance relative to a consistent level of performance in each quarter. So that's all that's happening.

So the run rates that we're seeing today relative to where the first quarter was last year actually results in a little better mortgage performance in the first quarter. As you move through the year, if that run rate is maintained, then what you'll find is that you'll see the growth rates decline as we go through the year, and that's what it reflects.

Our next question has come from the line of Ashish Sabadra with RBC Capital Markets.

This is David on for Ashish. Just following up on the government vertical. I was wondering if you could talk about some of the pricing trends you've seen or expect to see in that vertical. I understand the 3 value prop that you're providing, which seems strong, but there was some letter sent by some senators regarding pricing. And then as a follow-up, was there any update to the Tri-Merge to Bi-Merge?

Yes. On the first question, we have modest price increases at the government vertical. We don't -- price is not really a lever for us. We really think more about penetration. In the last year, we've gone to more subscription models in Government in order to help a new state get used to using the service and really help them in the adoption of our solution. So we don't think about price as being a big lever for us, and it's not one that is central.

We have multiple levers in Workforce Solutions. It's -- when you think about Government, penetration is such a huge one. We focus on delivering the right value and return for our customers. Product is a big one as we roll out new solutions. Last year, we rolled out a consumer consented solution in Government to go after some of the gig individuals who are going after social services that might have a W-2 job and be in our data set, but we don't have the gig income. So we've got that in market now. And we talked about our new monitoring solution that we're rolling out, and we're seeing some real traction with that. So product is a big one.

And of course, record additions are a big positive in this business and unique to Workforce Solutions. When we add new records, and we added 5 more partners in the fourth quarter and 12 last year in Workforce Solutions, that really drives higher hit rates. So you've got a lot of levers for growth.

With regards to your second question of the Bi-Merge, Tri-Merge, obviously, there's still some noise around that. Everyone we talk to understands whether it's the mortgage industry, our customers or on the Hill or with the agencies, they understand the large differences between the 3 credit files from TU, Experian and Equifax and why a Tri-Merge is so important, number one, around access to credit. For example, there's 10 million consumers in the U.S. roughly that are only on one credit file. So if you don't pull all 3, you might not be able to approve that consumer in a mortgage, which is federally guaranteed with the intent of expanding access to housing with the federally guaranteed support.

So from an access to credit and getting a complete picture on the consumer, the Tri-Merge is super important. And there's all kinds of studies that have supported that. And then from a safety and soundness, same thing. If you went to pulling 1 or 2 of the credit files instead of 3, you may not pick up all the trade lines, and there could be trade lines that are either positive that help the consumer or negative that say there's a more risk with that consumer. And that's why we think Tri-Merge is well embedded as an important tool for the underwriting of consumers in mortgage.

And frankly, the most sophisticated lenders in the United States outside of mortgage, pull Tri-Merge for cards, they pull it for auto, they pull it for personal loans for that same reason because they get a more complete picture on the consumer, and it really drives their ability to approve more at lower losses, but also make sure that they're managing their loss profile from an underwriting standpoint.

Our next questions come from the line of Jason Haas with Wells Fargo.

I'm curious if you could talk about your philosophy on how you're thinking about pricing the credit file. I guess, we know the price for this year, but for next year and going forward, curious how you're thinking about that? And I guess, particularly for mortgage.

Yes. I think it's the same in mortgage and non-mortgage. We do price increases every year in all of our products and across -- whether it's Workforce Solutions or USIS or across our international business. We generally do those on 1/1. We think about those as being reasonable and modest compared to what FICO has done. It's obviously public doubling their price. We don't do doubling of price. And we have lots of relationships with our customers, which is why I would characterize it we're balanced around price, and we'll continue to be balanced going forward.

Got it. That makes sense. Very helpful. And then I wanted to focus in on talent, which I thought was a bright spot even despite the soft hire market. Can you just reiterate what drove the strength there and how you expect that to trend going forward?

Yes. So our talent business is really heavily driven by not only our TWN data, which continues to perform well, and we continue to increase penetration, but we also have a broader set of products, including in education around incarceration, right, that are also expanding.

So I think the way we continue to outperform that market, which, as you saw, BLS was down low single digits. We grew obviously much stronger than that, up mid- to high single digits. So very good performance in our talent business is really driven by continued performance on the team of continuing to build penetration with our income-based products, and then also expand consistently our education and other products, including incarceration, which also continue to grow. So nice -- very nice performance by the team in a very tough market.

Our next questions come from the line of Kevin McVeigh with UBS.

Great. And congratulations on the execution. So obviously, a lot of moving parts out there. I guess just a little bit higher level. I mean it seems like there's really no changes to the longer-term framework, right, despite a pretty meaningful shift from FICO. So is the offset you're able to lean into the AI a little bit more to drive more -- I mean, you see it in the Vitality Index. Is that driving more revenue and expense management or other parts to the business are helping offset that? And obviously, there will be some shift as VantageScore starts to kind of season a little bit. But just any thoughts on the model overall, just given a pretty dynamic shift in FICO?

Yes. FICO is one that obviously is just a no margin pass-through for us. And it's very sizable now, which is why we opted to spike it out, and we will going forward because it's such a big piece of our revenue and 0 calories. When we sell a FICO score, we just passed that through and we're going to do that.

The performance of the business, we're pleased with. We're pleased with our revenue guide for 2026 with a mortgage market that's down slightly again. We had hoped that inflation would come under control and the rates would move down. Obviously, they've ticked back up, which has put some pressure on the mortgage market.

But to have a 7% ex FICO guide, which is at the lower end of our long-term framework, ex the mortgage market, I think we're something closer to 8%. We feel good about that. And when you look at the 3 businesses versus their long-term framework against the 7% to 10%, having EWS in that low double digits, we think, is a big, big positive moving forward as they return to their long-term growth rate. USIS performing well, both mortgage and diversified markets are non-mortgage. And then same with international.

So what's driving that? I think it starts with our unique and differentiated data. And as you point out, we've had a big focus, obviously, investing in our technology, but our technology is now enabling us to deliver more innovation and more new solutions. We think that's accretive and supports our growth rate. And the fact that we have our Vitality Index last year, 50% above our long-term framework of 10% is really good because that's momentum as we go into '26, those new products.

And you look at new -- some of the new products we're rolling out that a year ago, we weren't talking about with you, we weren't doing because we are still finishing the Cloud, like the TWN Indicator. That is, we think, a really powerful solution. We're offering it at no charge to our customers to drive share gains for our USIS credit file. And as you know, the next credit file we sell is very high incremental margins. So we're pleased about that.

With regards to the margin ex FICO of 75 basis points, you should be pleased about that. We are -- that's 50% above our long-term framework of 50 basis points. That's really positive. It's going to drive double-digit EBITDA growth and EPS growth, which is going to drive our free cash flow. We're really pleased about that. And that's really driven by the pure operating leverage that we have with very high fixed cost structure. So our next product sale, our next credit file sale or TWN Indicator sale or TWN data sale is very high incremental margin. So that operating leverage is very high on revenue growth.

And then as you point out, we're driving really in the last 6 months, the second half of last year, a big focus on using AI inside of Equifax to drive productivity, speed, accuracy, customer service. But on the productivity side, we laid out that we've got a plan for $75-odd million of cost saves over the next couple, 3 years from a lot of AI deployment inside of our back office. So I think that's a real positive. So we're excited about the execution of the business and really the performance and momentum coming out of last year. But then our kind of outlook for 2026, we're pleased with.

Our next questions come from the line of Kelsey Zhu with Autonomous Research.

Some of your peers have called out the improvement in the underlying consumer credit supply-demand dynamics. I was wondering if you can talk a little bit more about what you're seeing there in terms of volume growth outlook for card, auto and personal loans?

Yes. The market is still quite solid. We talked about the mortgage market. We tend to talk about that from a market standpoint because it's so impactful, and it's been a negative for quite some time because of the high interest rates. Going to the other verticals and they're solid. There -- some of the activity is kind of below still pre-COVID levels, but there's still attractive originations.

And then there's a question earlier around kind of the data macro. That's a positive for us as well as our ability to use AI to deliver higher-performing products and solutions. Our customers from an origination standpoint, are still originating. There's no change. We don't see any kind of behavior around people thinking about slowdowns or recessions, but they're after more data, which is a positive for us. They're after higher-performing scores and models. And we talked about some of the big lifts we're delivering now with our AI-generated scores and models, and those become positives for us to penetrate in with our customers because we're delivering higher-performing solutions.

But to your question on the markets, like our customers are strong, meaning financially, the banks and financial institutions. And broadly, the consumer is in good shape because they're still working in spending. So that's a positive for us.

So we're seeing -- FI for us has been good. If you look at online, we're seeing nice mid-single-digit type of performance. Auto really strong, which I know Mark talked about in his comments. Insurance was very strong. We're seeing double-digit type of movements there as well. So very, very strong.

And for us, really across these segments, fintech is performing extremely well. So that's an area of real growth for us, where we're seeing very good performance that's helping us across each of those segments that I referenced. So overall, we think our performance in USIS, especially as you look at online is very good.

Got it. So second question, understanding that you are EBITDA agnostic on the FICO Direct program, but it does impact revenues. So just curious to hear what you're seeing in terms of Tri-Merge resellers adoption or pick up for the FICO Direct program? And your guidance, I think, implies 0% penetration rate for this program. So just want to get more of your thoughts behind that assumption?

Yes. I think we said in our comments, there's 0 CRA reseller score calculation so far this year, meaning in January. We know there's dialogues going on between the CRA resellers and Equifax and the CRA Tri-Merge resellers and FICO. I think FICO talked about that on their call maybe last week. I believe they said that they didn't see this happening until maybe the second half, but meaning that the resellers being prepared to do it, going through the approval process, et cetera.

But really, we tried to say in our comments earlier that we're kind of agnostic whether we calculate the score or the Tri-Merge reseller calculates the score because if they calculate the score, we're going to sell them the credit file at our full price. And then presumably, they're going to have to pay FICO $10 for the score. Whether they pay the $10 to FICO and calculate the score or we do it, we're kind of agnostic because it has no margin impact to us, meaning we don't get any margin when we sell the FICO score. We get the margin when we sell the FICO credit -- sorry, the Equifax credit file.

So how that will unfold is tough to handicap. What the incentives are, why a reseller would want to calculate the score is, I think, something they're trying to figure out, meaning how are they going to make incremental margin for investing in the score calculation if they're paying a full price to FICO and a full price to Equifax, I think that's challenging.

But we're agnostic. And we're going to be collaborative with our customers, which are the Tri-Merge resellers to help them in ways that make sense if they decide they want to do it because there's really no P&L impact to us, meaning -- and we think about P&L as our EBITDA, our EPS and our free cash flow, it's neutral to us, whether we calculate the score or not.

And again, because of that uncertainty, we opted to have a guide that said there's going to be no CRA score calculation in 2026. And there's going to be no Vantage conversion. I don't think either of those are true, but it was the kind of the best guide that we could put together. And we thought putting those scenarios in place for you helps you think about if there is a conversion, what it means to Equifax. And we'll be super transparent every quarter on what activity we're seeing or not seeing on both of those fronts so we can share with you. And then you've got enough information, so you can make your own assessments of how you think it's going to unfold going forward.

But between the FHFA and Fannie and Freddie's decisioning and timetable being uncertain and the same with the CRA Tri-Merge resellers, we thought that was the right guidance to put in place for Equifax.

Our next questions come from the line of Scott Wurtzel with Wolfe Research.

I just wanted to go back to the EWS margins. And just with sort of this assumption around new kind of government revenue from these benefits coming in, in the second half of the year, should we assume that there could be like a ramp in EWS margins as we move throughout the year?

Yes. So I think John said it and I said it in a different version. We like our 50-plus percent EBITDA margins in EWS. Our goal is to maintain them in our long-term framework because they're so accretive from a free cash generation as well as to overall Equifax margin rates, which are so powerful.

And we're making investments to keep that top line at EWS, which is also accretive to Equifax going, whether it's around new products, new technology. We're investing in AI. I talked about from some of our product delivery in the employer business, new products that we're rolling out. So we're going to keep that balance of investing in EWS to keep their top line -- double-digit top line growth over the long-term going, while still balancing, maintaining those 50% plus EBITDA margins.

For overall Equifax, obviously, if they're growing faster, that's part of the accretion that's in our 75 bps expansion this year. And then the operating leverage in the rest of Equifax helps drive that 75 basis points, which we're very pleased with. That's well in excess of our 50 basis point framework over the long-term.

That's helpful. And then just a quick follow-up just on sort of your outlook on international and sort of your assumptions around the macro in key geographies. I know you called out some weaker economic growth prospects, I think, in Canada and the U.K., but I know there's also been some macro volatility in Brazil as well. So just wondering if you can kind of give sort of high-level macro assumptions in your key international geographies that's sort of underpinning guidance this year?

Yes. I think it's well recognized the Canadian and U.K. economic kind of macro challenges. Just to contrast in the U.K., we performed well in our CRA business, very strong performance even in a weak market. The debt management business, where we do a lot of -- debt recovery analytics was under pressure in the U.K. Canada is clearly has got a challenge from the tariff conversations that's happened really over the last year. We expect to see that be a pressure for that business, but we expect better performance in '26 and '25 out of Canada.

Australia, fairly stable, and we've seen good performance in our business there. Latin America broadly in good position. There are some Brazil economic conditions, but we've had very strong performance in Boa Vista, our acquisition we made a couple of years ago, is where we're gaining share there. So we would expect that business to perform well again in 2026. So international, we've got kind of framed out at the lower end of their long-term guidance of 7% to 9%, principally for some of the underlying economic weaknesses in some of the markets.

Our next questions come from the line of Craig Huber with Huber Research Partners.

My first question, you said several times today and in the past that you're agnostic if a FICO Score was sold through Equifax or the resellers and so forth. Obviously, you're agnostic because you've raised the price of your credit file for mortgages and the associated fees to offset that, which is fair. I mean it must have data if you want to originate a mortgage out there and stuff.

I'm curious on 2 fronts there. What has the reaction been to the price increase to your credit file, significant price increase there in the mortgage market? What's been the reaction out there? And is there any learnings there about that reaction there that you could potentially think about raising prices more aggressively in other markets, credit cards or maybe auto more importantly. That's my first question.

Yes, Craig, your comments really aren't accurate around what we've done with the credit file. And I think there's some misconceptions out there about what was marked up or what was not marked up.

From our perspective, we've always been selling a credit file and a credit score for years. And that credit file included the FICO score where we passed through the cost of the FICO score. So from our perspective, we haven't had a large increase in the credit file in 2026, and we haven't in the past. And we've shared that in prior investor meetings. We passed through the FICO credit score.

And I would tell you that there's a lot of consternation in the marketplace, meaning with mortgage originators around a FICO credit score going from $4.95 to $10. That's just a reality. That's not -- we didn't take our credit file price up anywhere near in -- 100 miles away from that kind of a price increase. So that's really been the focus of the conversation. And what's the learning for us is we're going to continue to have very modest increases on our credit file going forward. We would not do those kind of large price increases, and we're -- we've not done them in the past.

And as a reminder, we added a TWN Indicator and we added NCTUE data to our credit file, right, with that modest price increase. So we not only had a modest price increase, we also made the information we're delivering more rich, right? So a better product with a modest price increase.

Sorry, just to be clear on my end. So where did you exactly get the extra money to make up for the loss that you're no longer getting a margin on the FICO score that you were selling...

We never -- again, this is a narrative that was created by -- really FICO. We never had a margin on the FICO score. And I think we've been very clear on that. We sell a credit file, and that credit file cost is what we've been delivering to our customers. And then we pass through a FICO score. Last year was $4.95, and we passed that through. It was very clear to our customers. And this year, it's $10, and we're very clear to our customers on that period.

Okay. And my last question, like could your Vitality Index of 15%, just talk real quick, if you could, about the AI enhanced products or new products that you're very excited about here as a big number 15...

Yes, there's a bunch. I had it in my prepared comments earlier. And a lot around scores and models around risk underwriting, credit underwriting, where we're seeing big 10-, 15-point kind of lift in performance, which is massive. So those higher-performing scores using more data from our differentiated data sets deliver higher performance for our customers.

So we're seeing share gains. We call that OneScore is one of our products that pulls together all of our differentiated data that we rolled out last year, and we're seeing a lot of take there. We're also seeing in identity and fraud, really the same thing by ingesting more identity and fraud data assets. We're seeing higher hit rates or higher performance rates on our identity solutions, our higher pass rates. So that's been a real positive.

So scores and models, really big deal. We talked about some of the additions we're making in our adding AI capabilities to our Ignite analytics platform to make that more functional, more usable for large, but particularly medium and smaller lenders. So it's easier to use agentic AI around those product solutions. It's really quite broad-based on the energy we have around AI.

And as you point out, our 15% Vitality last year or 17% in the fourth quarter, obviously, we ramped through the year. A lot of that is being driven by our differentiated data that's really proprietary to Equifax. And then second, our use of AI. And as I mentioned on the call, we continue to invest in our explainable AI capabilities with 40 more AI-related patents that we filed in 2025. I think that's a great kind of indicator of our investments to drive our industry leadership around using AI to deliver our differentiated data to our customers.

Our next questions come from the line of Zach [ Lassage ] with FT Partners.

Despite no impact to EBITDA or EPS, is there an assumption built into the revenue guidance on what percentage of mortgage volumes will move to the direct model for FICO? And any color on how the brokers have been thinking about the direct model and the option for the performance pricing would be greatly appreciated.

Yes. I think we said earlier in our comments, and there was a question a couple of minutes ago on that one that our assumption in our guide is that there's no Vantage conversion. There's also no CRA reseller or Tri-Merge originator, so-called direct model using FICO's term score calculation. And we haven't seen any of that in the first -- so far in the first quarter, meaning in January.

And our conversations with those kind of Tri-Merge resellers is there's no dates we can see, call it, like in the first quarter, I don't see any of that happening. And just as a reminder, again, for probably the fourth or fifth time on this call, we're agnostic to that because there's no P&L impact to Equifax, or benefit for the customer for the Tri-Merge resellers calculating the score. We're going to sell our credit file at the full price to them. And then they'll buy the FICO score, presumably for $10 from FICO and then sell that once they start doing it.

It's hard for me to see what the benefit is of a reseller doing it, but that's why we put our guide together because there's no indication that, that has any certainty about when it's going to happen. There's also some questions about what kind of approvals would have to be completed by the regulators around someone else calculating the score, and that likely is means time. But again, just to be crystal clear, we're agnostic. If the Tri-Merge resellers and FICO decide they want to calculate the score, we're cool. It has 0 impact on Equifax P&L, meaning EBITDA, EPS and free cash flow. It will clearly impact our revenue because someone else will calculate the score. But when the 0-calorie revenue, we're agnostic to that.

So we'll see how it unfolds, and we thought we gave the right guide of assuming none of that happens. I think that guide is likely wrong because there will likely be some activity at some point, but it's impossible for us to handicap when that will happen. But the Equifax bottom line is not impacted by that change.

Our next question comes from the line of Arthur Truslove with Citi.

So just sort of following on from that. I just wanted to clarify in simple terms. What we're seeing is that you are calculating the credit score for mortgages using the FICO algorithm, are you able to say whether the sort of contribution in dollars per mortgage inquiry is going to be higher, lower or the same in 2026 relative to 2025?

It's higher. Yes, there's no question. We'll make more margin dollars because we took up the price of our credit file, and John kind of gave a framework of what that increase looked like. So we'll have higher margin dollars.

Our revenue obviously is impacted by the FICO score going from $4.95 to $10 because that's the pass-through that we have. But our margin dollars on mortgage by selling the FICO credit score are clearly going to go up.

Now the margin rate is impacted just by the math. But the margin dollars are what you and I should care about. And we've given a framework for overall Equifax margin dollars being up low double digits broadly in the business, and this is one of the elements that drives that.

Yes, just to reiterate. And just the -- if the score -- if there's a -- if the score is sold by the CRA or the score is sold by Equifax, our EBITDA, EPS and cash flow are unchanged, right? It doesn't matter, right? Yes.

Yes. And then the second question I had, just sort of following up from that. When you produced your long-term framework for USIS, did you assume that you were going to benefit from an organic growth perspective from FICO very significantly raising prices every year...

It's not.

Or not? Okay.

Of course, not. No. This was done back in 2021. When we put that long-term frame in place, I think the FICO score was like $0.55. And we expected which they had for kind of the decade before that to them, they would do modest price increases, which was in our long-term framework.

Think about kind of mid- to high single digits, something like that was in our long-term framework. Obviously, that changed dramatically, and that's why we've opted to spike out the FICO impact because it's so significant in our reported results and give you better visibility around the underlying performance, which was always there.

You could always look at our EBITDA dollar change. And of course, we set as a framework a margin rate of 50 basis points per year, but that clearly did not assume that there'd be this kind of FICO price increase, which is why going forward, we'll show it to you with and without FICO. And again, you should, and we're really pleased with the operating leverage of 75 basis points ex the FICO pass-through, that's quite strong and one that we're really pleased with.

Our final questions will come from the line of Simon Clinch with Rothschild Redburn.

Mark, I was wondering if you could help us think about quite an important question today given all the disruptions we've seen in the market.

With the application of AI to alternative data sets beyond your own proprietary sets, is there any situation where the value extracted from that data reduces the relative value of -- that you extract from your proprietary data sets, and thus makes the market even more competitive on that front. That's definitely a question that I think a lot of people ask these days.

Yes. It's clearly, we've been swept into a neighborhood that we don't think we live in where AI could disrupt or disintermediate our business. I think the scaled data assets we have are unmatched. There's no way to get to the kind of credit data we have or something that has the same predictive elements of our proprietary credit data, our alternative data, the income and employment data we have.

And the fact that it's not publicly accessible by third parties through any kind of AI tool, pick the dozens out there that are creating very sophisticated tools that can access public market data, they can't get to ours. So I think that's a big part of the Equifax moat around data.

To your question, I think you were heading towards is what other kinds of data that might be accessible from a public standpoint could replicate what we do today, and we don't see any. You can't get credit data in the public market. You can't go out to the web and really aggregate that kind of data. You can't get payroll data. You can't get income and employment data. It's just that those kind of data sets are proprietary to proprietary.

The contributors that are giving us that data, that data is in a proprietary environment in their world. Think about the 20,000 financial institutions that contribute data to us every month. They've got a walled garden around their data. It's not accessible. Same with income and employment data, the 4.8 million or 9 million companies delivering payroll data to us either directly or through a payroll processor or HR software company, that's a walled data set that's not accessible from an AI tool in any way.

So we think, obviously, what happened in the last 24 hours in the broader industry around AI concerns of disintermediating businesses that principally, in my view, rely on public market data. We're not in that neighborhood, but we've been swept into it. So we'll work to continue to communicate to our investors around the Equifax moat around our data, which we think is a big and tall and one that we think is going to be long-term sustainable. And only Equifax can use the data for our customers when they -- when we authorize them to do it in order to use that data in any way.

That's really useful. And I think just as a follow-on to that, I mean, I'm thinking particularly long-term here, but do you see the value of the credit score maintained in an environment where AI is producing a lot more value and insight from even your own proprietary data? I mean, is there a situation where VantageScore -- the value of VantageScore to the market as a whole goes down while the value of your underlying data goes up?

Well, we think the underlying data is always the linchpin. You can't calculate a score without the data. And remember, like Vantage only calculates a score because we own Vantage along with TU and Experian. We use that Vantage algorithm on our data. So like a third-party AI algorithm can't calculate a score because that's no data. The only way to do that is to have the access to the data. And obviously, we control who uses our data and how it's delivered.

So in my view, all the data we have only gets more valuable. And as you know, central to our strategy is to continue to add more data, either organically or through acquisitions. And we've done acquisitions of like PayNet, DataX, Teletrack. We've done a number of acquisitions to add more data into our proprietary data set. And to me, I think what's fundamentally missing in the market today is that investors need to understand you can't use AI without data. And if you fundamentally believe that Equifax data, in our case, is proprietary, that's a pretty big moat because the only ones who can use AI on our data is Equifax.

Thank you. We have reached the end of our question-and-answer session. And with that, I'd like to turn the floor back over to Trevor Burns for some closing comments.

Yes. Thanks, everybody, for your time today. I appreciate it. If you have any follow-up questions, you can reach out to Molly and I. Otherwise, have a great day. Thank you.

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. Please disconnect your lines at this time, and enjoy the rest of your day.

All right. Good morning, and welcome. I'm very pleased to be joined by John Gamble, CFO; and Mark Begor, CEO of Equifax. Very pleased to have you both with us today.

Thank you, George. Great to be here.

Yes. Okay. So to begin, if you look at the broader U.S. consumer credit environment, it appears relatively stable. You're seeing some modest growth in lending volumes. Given these conditions, how would you overall describe the health of the U.S. consumer from a credit perspective? And are there any emerging risks or shifts in consumer credit quality that you're watching?

Yes. I think no change from third quarter when we had our earnings discussion a few weeks ago. There's a, I would call it, a bifurcation of consumer kind of credit strength Broadly, the fact that consumers are working, that's a good thing. As you know, the low unemployment and high employment is a real positive. I've been around financial services for a long time. And that's the indicator I watch very closely, and I think our customers do, too. When you see unemployment changing, that's one you want to watch quite quickly. You've written about for quite some time, and we've talked about for quite some time, the impact of inflation and lower wage growth on the lower-end consumer has clearly been more challenging.

So you've seen delinquencies increase in that area. We haven't seen that really impact our business, meaning our customers are still investing, whether it's a fintech or some of the institutions that are focused on that demographic are still investing to grow their business. in some cases, spending more money on data because of the complexity of that consumer. And the other thing that is one that we watch a lot outside of employment is consumer confidence. And what's that going to do to the consumer spending and the consumer spending generally has an impact on how they think about credit and what they're going to do with credit.

And the other thing that I think is a positive and no change from the third quarter, and we don't see a change going forward is our customers are broadly quite strong. The banks are obviously well organized, well run. They've got strong balance sheets. They've got strong regulations now around the capital they have to maintain. And so you've got strong customer base focused on broadly a solid consumer base because they're working. But you've seen in some asset classes like auto because of the higher prices of auto as well as some consumers in the subprime and near prime being impacted by inflation pressures, some delinquency increases there. So that's an area that we continue to watch. But again, overall, I would say it's an environment that's much like the first the first 3 quarters of 2025. And as we look forward to 2026, we see a similar environment.

Right. Makes sense. And if you drill into the subprime piece, any shifting trends, any changes in the second derivative that you're noticing with respect to delinquencies or charge-offs?

I think same thing, no. We haven't seen any real change in our customers' behavior around how they're approaching, except they continue to focus. And generally, the consumer base you're talking about is generally addressed by fintechs, and they're continuing to accelerate their use of data. They are focused on more data in order to do a better decision, meaning approve more at lower losses is clearly a focus. And we're trying to respond with a lot of solutions that take our differentiated data set versus our competitors where we have more alternative data and really surfacing that for our customers to help in their higher-performing underwriting, meaning higher approval rates at lower losses. And I think you know we're also rolling out the twin indicator on our credit file.

We started in mortgage. We're rolling it out in auto, and we intend to use it in other asset classes because we think that differentiates our credit file first against TU and Experian. But as importantly, it adds more value to our customers in the underwriting process because if you're just using the credit file and a credit score, you have a visibility around Mark's credit score, but you don't know if I'm working. And if you add that Mark's working with that twin indicator, we have some other attributes we're adding there. We think that helps in the underwriting process. meaning having a more complete picture on that consumer. And then it also differentiates Equifax. We can offer that as a unique solution.

Right. Makes sense. If you look at white collar hiring, the trends appear somewhat squishy and weak, which has an impact on background screening volumes in the Talent Solutions business. What are your expectations for hiring volumes over the next couple of quarters? And what would be required for a more meaningful recovery there.

Yes. It's a loaded question. It's a complex one. There's a lot of factors there that are playing in. And I think the group here knows that the hiring market is quite large. In a good market, there's 70-plus million people a year change jobs. And most of those require a background check. And then as George knows, and I think everyone in the room knows, we provide data to the background screeners around employment, job history, education data, incarceration data, some other data elements. So in a good market, you're in that kind of [ 70 million ]. In a softer market, you'll be below that, which is where we are now.

And what we've seen is the blue collar element, which is, frankly, most of the [ 70 million ], has been fairly strong, meaning there's more open jobs than people looking for them. So that's a good environment for the background screeners. But the white collar jobs, you've got a number of factors taking place. I think, one, you've got most corporations being prudent around hiring while they're waiting to see where is the economy going to go, where the Trump tariff is going to go, how is that going to be sorted out.

So I think there's that element that's taking place. And you've seen large companies making some pretty large layoff announcements, principally of white-collar jobs. Amazon and others that you've seen quite deliberate, others saying that they're going to have flattish headcount going forward. And then -- so you've got that element of the uncertainty around the global kind of environment. And then you've got the whole AI push. And what's going to happen with AI, and we're seeing it in our company, it's going to deliver, we think, real productivity first in the more hourly areas.

We've got multi-thousand people in what I would call the back-office call centers in operation centers, managing paper that comes in from consumers in our businesses. We think we're going to get some real productivity there. But I think there's also going to be white collar productivity. And you've seen announcements from some prominent CEOs saying, hey, we're going to have flat headcount going forward with AI, even though we're going to keep growing. So that impacts the hiring market. I don't think we're going to change that one.

But when you say what could change is getting the tariff thing resolved. And again, that's outside my pay grade of what President Trump is going to do and how fast he's going to do it. But getting that resolved, I think, would be beneficial. And then bringing inflation down, I think, would be beneficial, which would come with that and then some rate reduction might stimulate investment and activity in the hiring market. For us, in our business, which is about $400 million, our data business that we sell to the background screening space. We don't do background screens. We sell the data to the background screeners, and that's our intent is to be the data provider to them.

We really -- the biggest asset we have is the job we get every pay period, the job title from all of our payroll records. And one of the things you verify in a background screen is work history. So we have a digital resume on the average American. So we monetize that. And it's real value for the background screener. They get it instantly. They can complete the background screen more quickly versus calling around the Goldman and saying, "Hey, does George work there and getting someone in HR to confirm that, we can do that instantly. So we've been able to outgrow the underlying market. But I think as you point out, the market is clearly softer in that white collar area.

And most of our business and most of the background screeners business is in white collar background screens because you're just doing a lot more data. It's a much more valuable space to be in. And although we're investing in new products in what I would call the blue-collar hourly space because we see an opportunity to maybe penetrate down. The TAM for us of the data to background screeners is $3 billion, $4 billion versus our $400 million. So we have room to grow by penetrating more of our customers using our different solutions.

As I said, we have the work history, we have education data, we have incarceration data. These are all used in background screens. We also have medical credentialing data that's very important in the health care space, and that's done kind of annually as opposed to just on job change. So we're working to either partner or through our M&A strategy, acquire more data around this business.

Consistently outperform the underlying market substantially strength. We did in the third quarter. We did all this year. We expect to do that going forward, right, as Mark said, new products from new data and then also continuing to broaden our coverage within background screeners. And then also, we've increasingly built contractual relationships with them, where they're almost like subscriptions in some cases, right? And that incents them to purchase more of our products, but it also gives them an opportunity to get better pricing on all of our products so we get to grow together. And we think that's something that's beneficial to both of us. So we're seeing nice outperformance relative to the underlying hiring market, and we've seen it pretty consistently over the years.

Yes. Makes sense. Staying at a high level, if you look at your long-term target for organic growth, it's 7% to 10%. What macro conditions are most conducive to landing in that target? And how do you think about the sensitivity to that outlook versus consumer credit health and various macro drivers?

Yes. The 7% to 10% is intended to be a long-term framework in a normal economic environment. Frankly, we haven't been in one in the last 3 years. because what's happened with mortgage. So I'll come back to that one. But in the 7% to 10%, we think about a couple of points of GDP growth underlying that. So a normal economic environment. And as you know, and George, you know well, and I think the group here knows that, that's not been the case in the mortgage market over the last 3 years. While the rest of the market has been, I would call it, fairly normal from an economic standpoint, the mortgage market is down 50%, meaning there's less originations, there's less purchase homes, there's less refis from what we would call a normal market.

So we've been going through what I would characterize as a mortgage recession over the last almost 4 years. Mortgage is down kind of high single digits this year. and 50% from kind of 2015 to '19 levels. And as we look forward to the future, we would expect that mortgage, even though it's down this year, we expect that we're in kind of a bottoming mode. If you don't think rates are going up and if you think rates are either flat or down kind of in a base case scenario, we've got a flat mortgage market. kind of going forward. But we also have really a very large opportunity or optionality in the Equifax stock because we're kind of double weighted to mortgage versus our peers.

We have the credit file that we sell, just like to and Experian, but we also have the income and employment data that we sell. So combined, it's roughly 20% of our revenue that's down 50%. So we've incurred about $1 billion over the last 3 years of revenue decline while still growing the business because the rest of the business has been growing. So as we look forward, we see a very large opportunity as rates tick down. I'm not an economist. I'm not sure anyone in the room is. I think if we were calling interest rates, we'd probably be sitting somewhere else than at this conference.

But if you believe inflation is going to come down at some point to where the Fed wants it to be, you can see a scenario where rates are going to come down 50, 100 basis points and then mortgage rates would come down with it. We think that will stimulate demand. And we've seen that. You may remember the 10-year got just under 4 for a while a few -- 1.5 months ago, we saw an uptick in refis. And we saw an uptick in purchase activity. So there's no question that there's a pent-up demand from the consumer that wants to upgrade or downgrade their home on the purchase side. And then on the refi, you've got ARMs that are maturing. And then you also have, John, what's the number, what, $15 million?

Yes. About, yes.

Consumers that are at...

5.5%...

5.5% or higher over the last 3 years because mortgages are still happening, even though they're down 50%, there's still a lot of mortgage activity even in this environment that as rates come down 50, 100 basis points, they'll want to refi. And we -- George knows this, we've quantified for our investors that the opportunity as the mortgage market recovers towards that normal level of 2015 to '19. And again, if you look at 2015 to '19 mortgage activity and go back 20 years, it's fairly flat. It goes up a little bit with population growth and with GDP, but it's fairly flat. It's never gone down 50%.

So I'm a big believer from my economics 101 classes that you revert to the mean over time. And so we've quantified that as the mortgage market recovery, there's an incremental $1.2 billion of revenue that could come back to Equifax at today's pricing. We'll update that $1.2 billion in Feb when we give guidance because it's a bigger number in '26 with price increases and everything going forward and $700 million of EBITDA and $4 a share.

And just going back to your 7% to 10% long-term framework, I wanted to make the point that 7% to 10% doesn't assume mortgage market recovery. It just assumes a couple of points of GDP growth and then what we do on price, product, record additions, penetration in all our different verticals get you to that 7% to 10% organic. A mortgage market recovery would sit on top of that and obviously accelerate that quite substantially. So we're obviously prepared for that when it happens. And it's just a matter of time when inflation comes under control.

Yes. Big drivers for us, obviously, are new product innovation, right? So we -- our vitality index, which is how we measure new product innovation has been very high this year, running well over our target of right? So if you think about 10%, that's defined as the amount of revenue we get from products introduced over the last 3 years. So you're looking at 300 basis points plus or minus of growth per year that adds to the 200 to 300 basis points of GDP. We get price every year.

We're adding records in EWS every year, which drives higher growth as we continue to build out our Work Number database, right? And then obviously, we continue to drive penetration. We haven't talked about government really yet, but we have real opportunities in government and background screening and as we look around the world in other markets. So we think we have a very clear path to delivering that 7% to 10% in a normal market, as Mark said, with all of our markets, including mortgage, only growing 2% to 3%.

Right. Okay. Makes sense. Sticking with the mortgage market, the FHFA now allows Lenders choice. So VantageScore is in the mix. You've suggested in the past that Vantage Score adoption could be slow to start. What are the main hurdles to adoption? And what are some of the things that you're doing to help accelerate managed score adoption?

Yes. It's one -- and just maybe a little context. I think everyone is probably versed in it. It seems like our one-on-one meetings are 70% FICO Vantage. So thank you, George, for saving us to your fifth question versus your first. But I think as everyone knows, for 50 years, FICO had a mandate that their only score that could be used in federally guaranteed mortgages. That ended in July. And then FICO today charges 495 to us for the algorithm that we deliver the FICO score. [indiscernible] Experian does the same thing. They announced about 1.5 months ago, they were going to go to $10. So take it from $5 to $10.

And for the industry, that delta is multi-hundred million dollars of costs in '26 versus '25, higher costs. So very substantial. We came out pretty quickly after the FICO announcement and said we were going to offer the VantageScore, which for everyone in the room knows the bureaus on independently distribute it. It's a score that's been around for 20 years. It's one that's broadly used outside of mortgage because you weren't allowed to use it in mortgage for federally guaranteed loans, but it's broadly used in auto cards, and there's big lenders who have been using it for a long time because the view is it performs better at a lower cost.

And we believe, I believe that there's a catalyst now that doubling of price on 1/1 from FICO, we came out and said we're going to offer the VantageScore at 450. So think about half of the $10. We're also going to really fix the price for a couple of years. So our customers know that we're not going to increase it in '27, the way the FICO score has been increasing. And then we are also offering a free VantageScore with every paid FICO score. So our customers can -- in mortgage, they understand it outside of mortgage because it's been adopted in many places. But in mortgage, they really understand the performance is quite similar, the VantageScore.

So to your question, the complexity is around change. And what's the catalyst for change? Until July, there was no option because the FHFA only allowed the FICO Score to be used with the 3 credit files. That was relaxed and is using your words, lender choice was assumed allowed in VantageScore. So the big milestone now is when the FHFA and Fannie and Freddie open up their underwriting engine from a technical standpoint to take in the VantageScore. That's not ready yet. That's one it's one that's going to be sooner versus later, we think months, but that's certainly a milestone.

The dialogues with our customers are quite active. Customers have the option now in mortgage to use whatever score they like in shopping. Historically, they've used FICO just for the consistency, but we have a lot of dialogues with customers that are thinking about using Vantage because of that cost differential. And as you know, that's where all their breakage is, 1 in 7, 1 in 8, 1 in 9, 1 in 10 loans close in that shopping funnel, meaning consumers will go to multiple originators to try to shop their rate and shop their mortgage or their refi.

So having a cost advantage there is something that could be attractive. But the momentum of dialogues is very, very strong, really because of the big cost impact. And remember, my earlier comments, the mortgage industry is down 50%. Mortgage originators are struggling broadly and have to take on this incremental cost is quite challenging. we think it's just a matter of time. We think there's a real catalyst of 10 versus 450. And as you know, TU and Experian came out similar places, kind of around that 450, not identical. They also kind of committed to the same kind of program we had of fixing it for a number of years and offering a free VantageScore with the FICO score.

So we think it's just a matter of time. And for Equifax, if there's no conversion, we're not disadvantaged. We're still going to deliver our credit file, which is really the data from the credit file is what's used in the mortgage origination. That's what goes into the underwriting system of our mortgage originators and our customers and the Fannie and Freddie systems is the mortgage trade lines are used for the origination, not the score.

The score is really an indicator for early shopping behavior of what kind of consumer we have. Is this someone who's going to qualify for the kind of loan they're thinking about? And then also for pricing. But we think it's just a matter of time for that conversion to unfold going forward. And from an Equifax perspective, if there's no conversion, we'll still have a higher price credit file in '26 than '25. We've already rolled that out to our customers.

We have modest price increases that really align with that 7% to 10% long-term framework, and we'll continue to do that going forward. If there is conversion of Vantage, we obviously get the benefits of $450 of profit from the Vantage score because we own it with no COGS versus a $10 cost with a FICO score. And at current mortgage rates, that's about $100 million of incremental margin to Equifax in a full conversion.

And then in the mortgage market recovery, that $100 million is $200 million in a full mortgage market recovery. So my view is that there's a catalyst that has been created with a $10 price versus our $450 million that's going to drive change. Change takes time in financial services. You've been around it for a long time, and you know that well. But there's clearly momentum because of the big dollar impact that the originators really are going to absorb in 2026.

We're providing a lot of resources to the industry to let them do the evaluation faster. We have data panels back before the pandemic. We have analytics that they can use right? And as said, we're providing the score for free if you buy a FICO score. So we have a very large number of customers in the evaluation process today.

And maybe I'll just add, George, just to complete kind of the FICO Vantage. There's broad adoption in non-mortgage using that term, auto cards and P loans, although FICO is still very prominent there in that vertical. We're offering the same kind of benefits to our customers, a fixed Vantage price that's below the FICO price, free Vantage score reports or scores with every FICO score. And then the other thing that I think about is that if you're a -- as you know, in mortgage, there's a lot of pure-play mortgage originators. But then also most of the big banks have mortgage operations.

And they're predominantly FICO, meaning like 99% in the mortgage space. Once a bank moves their mortgage business to Vantage, they're likely going to move if they haven't already, their non-mortgage business to Vantage because if you're a CRO and you don't have to -- you're not going to run 2 different scoring systems inside of your environment. So I think that's another positive for us over time is the ability to drive non-mortgage card, auto P loan kind of Vantage penetration. And the VantageScore is very high performing. That's one we, as an industry and Vantage probably need to do a better job of talking about the conversions. You look at some large auto originators, card originators that moved to Vantage years ago, they did it because the score performs better for them at a lower cost. That's a pretty good equation.

Yes. In the mortgage space, in addition to Lenders Choice, FICO is changing things up by going direct to resellers and bypassing the credit bureaus. Can you help frame what the impact to USIS growth might be given this change?

Yes. It's one that we don't see a lot of traction there. There's a lot of complexities, and I don't know if the group understands well enough that a reseller is -- when you do mortgage, you have to use all 3 credit files. So there's a group of organizations like Factual, [ IR ], Xactus, [indiscernible], which used to be CoreLogic, and Equifax actually has a mortgage CRA or reseller business, where we take our credit file, we buy from TU Experian, we put it together in a tri-merge and sell it into the marketplace. As part of FICO's announcement, they said they were going to authorize not only Equifax, Experian TU to calculate the FICO score. Remember, it's an algorithm.

We code it in our environment. They validate it, but that's how we create the FICO score. As a part of their announcement, they said they were going to allow these other resellers to also calculate the FICO score. There's a lot of tech involved in doing it. There's a lot of incremental liability that goes really from the 3 CRAs to the -- sorry, the 3 credit bureaus to the CRAs, if they're going to calculate the score. They're going to be responsible for disputes. They're going to be responsible legally for the calculation of the score. And they're also going to invest a bunch of costs. And I think the industry is struggling to find out what's the incremental margin. Like how are they going to make incremental money for taking on risk. That's how business works.

If you're going to do something new, you got to get a return on it because we have to sell them the credit file to calculate the score just as TU and Experian do today when they sell us -- deliver to us the credit score and the credit file for Tri-merge. It's hard to see where there's going to be incremental margin to be created. So I think there was -- at some point, FICO was saying that they're going to be -- this is going to happen in the first quarter. I don't think that's going to happen in the first quarter. I think that's broadly understood.

And I think the industry is still thinking through why would I want to do this? Why would I want to calculate the score? What's the advantage for me commercially to do that? Am I going to make more money or not? Or am I going to take on disproportional risk for what return? So I guess I would say stay tuned. From an Equifax perspective, if that happened, we still -- they can't calculate the credit score without our credit file. And we're going to sell our credit file to them at, I'll use words, full price, meaning we're not going to discount it to them if they're going to calculate the credit score.

We would sell it the way we sell it to others. It's not going to -- there's no reason we would want to discount it. So said differently, we're somewhat indifferent because today, when we calculate the FICO score, we have $10 -- it's $5 today, next year, $10 of incremental revenue, but there's no margin on that. And if tomorrow in a scenario, which I don't think is going to happen, but in tomorrow in a scenario where the CRA resellers calculate all the FICO credit scores, they have that $10 cost, we have high margins on our credit file, right? So our margins would go up from a percentage standpoint. Our revenue might come down a bit, but it wouldn't change our margin dollars.

Right.

And that's what you and I all care about is margin dollars and free cash flow and growth rates.

Makes sense. Let's touch on government, which we touched on a little bit earlier. Big catalyst next year in terms of the OB3 bill that requires really cracking down on fraud and higher recertifications. Can you talk about the opportunity and where you see Equifax benefiting from that?

Yes. And just for the room, I think you know this in Workforce Solutions, our largest and until this year, our fastest-growing business has been our government vertical. And so remember, we have payroll data on roughly 60% of the working population in the United States, and we use it in mortgage. We use it in auto loans to verify income and employment. I talked about how we use it in background screeners. We use it in personal loans. It's also used in the delivery of government social services. So there's roughly 100 million people in the United States that get some kind of government social service, think about rent support, food support SNAP, TANF which has been in the news lately with the shutdown, Medicaid, Medicare is income verified, fuel support.

There's about -- it's actually like 100 different social services at the federal, state and local level that are all needs-based income verified. It's about, by our calculation, a $5 billion TAM for us if the manual efforts that are done predominantly to verify income employment were moved to our solution. Today, we have roughly an $800 million business. Over the last 5 years, it grew 20% CAGR. There was a bit of an air pocket in the last 12 months when the prior administration changed the cost sharing for Medicaid and Medicare data usage.

It used to be the federal government paid 100% of the cost. Last July, the Biden administration moved that to 75-25. So some of the states struggled with budget dollars, which impacted our revenue in 2026 predominantly as they kind of got to their new budget cycles where they could get the dollars reauthorized. We expect this business in that $5 billion TAM to grow strongly. We expect Workforce Solutions to grow double digits -- we expect this business in Workforce Solutions to outgrow that double digit, meaning being at the high end of that kind of teens growth rate over the long term. So that's kind of the underlying $5 billion TAM, $800 million business.

We deliver speed, we deliver accuracy, and we also deliver productivity to the case worker because they can do it more quickly. What George was highlighting was the current administration passed OB3 on July 4, and they put a lot more teeth into the delivery of social services. There's been a big focus by the Biden administration. It started really with DOGE right as the administration came into form earlier this year around lower government spending. And one thing they identified was the $160 billion of improper payments that are made to social service recipients. And you read every week, there's another story around some version of that, the improper payments.

And I think there's -- whether you're a Republican or Democrat, you want to give social services to those that deserve it and meet the requirements. And broadly, I think what happens is someone goes in and applies for social services, they qualify, but then their income changes, meaning it goes up and they no longer qualify, but they keep getting the benefits. So OB3 put a lot of new requirements in. One of them is an error rate threshold for the states. And they put teeth into it for the first time is if the state is above the error rate, they're going to have to pay for a portion of the social services.

Today, the government -- federal government pays for all that. And in our third quarter earnings call, we talked about there's roughly half of the states today are above the error rate, and there'd be roughly a $14 billion transfer really in 2027 from the federal government to the state budgets if they don't get the error rates down. And so post July 4, we've seen a real uptick in dialogues, conversations with the states. It was always very active, right? Remember, we were growing this business 20%. And we expect it to grow with or without OB3 very strongly going forward into that $5 billion TAM.

OB3 just put a lot more teeth into it. So one is that error rate. They also changed the redeterminations from 12 months to 6 months. So the way social services work is if you get social services today, you get authorized, they'll use our data or manual verifications. Think about for the most of those verifications will be done with paper pay stubs or state wage data. That will be done today. The current law is that 12 months from now, you check again to see you to still qualify. And because that income variability, they're moving that to every 6 months.

That's another transaction for us. So instead of 12-month redetermination, now it's every 6 months. And then for some of the health care services, they've added a work requirement for certain individuals, which we've never had before. That's been something the Republicans have wanted to do for quite some time that you have to try to work if you want to get social services in the case of Medicaid, they've added that. And we have hours worked in our database. And the work requirement is you have to either work 20 hours a week to get those -- that social service. You have to go to school 20 hours a week, be enrolled in school or you have to volunteer 20 hours a week.

But we have the hours worked. We have the education data so we can verify someone's enrolled in an institution. And then we also have the ability -- we're building a product we're going to roll out next year, so you can upload that data. And we also have some interesting programs at the federal level, like the earned income tax credit is done centrally by the IRS. That's a $15 billion a year fraud that's quantified by the IRS. So we're in dialogues with them to use our data to check the income before you make that payment on an income tax credit. So we're quite optimistic about government as a vertical. We believe it will be our fastest-growing vertical in all of Equifax and certainly EWS, as I mentioned earlier, going forward, given the big TAM and the big value we deliver. And as you point out, George, OB3 just puts more teeth into it.

Right. Okay. We're just out of time. Mark and John, thank you so much for the great insights and discussion. Please join me in thanking them both.

All right. Hello, everyone. I'm Andrew Steinerman. This is the Ultimate Services Conference. This is the [employee] services track. This is the Equifax team, John Gamble, Mark Begor. I'm also going to point out for those nerds in the room, my information services data book, which is my industry primer that we update quarterly since 2013. You can pull that up on the way out.

Mark, why don't we just start by talking about the government segment and EWS. You've been excited about it. Do you feel like this is still a large opportunity ahead? How do you feel like kind of revenue has done so far in government? And what sort of needs to happen in terms of kind of maybe usage ahead driving more revenues for EWS?

Yes. Thanks, Andrew, it's great to be here. I appreciate you hosting us at the conference. So Andrew is referring to the government vertical inside of our Workforce Solutions business, which many of you are familiar with. It's the largest business in Equifax, a little over $2.5 billion this year. It's the fastest-growing business over the long term for Equifax, and it's got very attractive EBITDA margins at 50%.

So it's a unique business. And this is a business where we have a data set of income and employment data that we collect from, at the end of the quarter, almost 6.5 million companies giving us data in the United States every pay period around their employees.

We use the data in many verticals in financial services and mortgage to verify income and employment when someone is applying for mortgage and an auto loan. It's used somewhat in credit cards. It's also used very heavily in personal loans. It's used in the background screening space. One of the data attributes we get is someone's job title. So we have a digital resume on individuals. So we sell it there. And what Andrew is referring to is the fastest-growing part historically in the future of Workforce Solutions, which is the government vertical.

The government vertical is where the data is used in social service delivery. I think as everyone in the room knows, close to 100 million people in the United States get some level of social services generally from the federal government, whether it's food support, rent support, child care support, health care support, Medicaid, Medicare, et cetera. And that's all needs-based. So that delivery of that social service is based on your income. If you make less, you get more social services.

When we define the TAM for the business, we define it as about a $5 billion TAM for the income and employment verification of those social services. And that's done principally at the state level is where social services are delivered across all 50 states, but also in some cases, at the federal government level. It's a business that's about $800 million today inside of Workforce Solutions.

Over the last 5 years, it's grown kind of 20% CAGR until the last 12 months. There was a pause in the growth because of a change in CMS data costs with the states, where the states had to start picking up some of those costs. But going forward, we expect it to be a business that will be our fastest-growing vertical inside of Workforce Solutions and faster than the rest of Equifax, meaning we expect it to grow double digits because of that large TAM that we have inside of the space.

Today, less than half of the agencies across the United States use our data. If they're not using our data, they're doing either manual income verifications of an applicant that comes in or they're using state wage data, which they have or they're using IRS data, which is typically aged, our data is more accurate, going forward.

The big change in 2025 is really around the current administration, the Trump administration's focus on improper payments on social services and you're seeing the same reports that we've seen is that the federal government characterize because as you know, the federal government pays for the social services, principally that are delivered by the state. So think about health care support, Medicaid, Medicare, SNAP, TANF, food support and some of the other social services.

The federal government characterizes that as $160 billion a year of improper payments. And there's a real focus in this administration to really address that. On July 4, the President signed the OB3 bill, which had all kinds of things in it. There was relevant to Workforce Solutions, our business, there was a lot more teeth put into the requirements for the states to deliver social services.

So we think that's going to drive even more engagement by the states around social services using our solution, that delivery. We deliver really 3 value props to the states. One is speed. If someone is applying for social services, they generally need them today, and we deliver kind of an instant verification. So that's a real value prop of using our solution versus manual where the applicant might have to go home and get more pay stubs, more paperwork.

Second is we deliver productivity to the state from an agency standpoint. So you have a case worker that's going to do the adjudication of someone's paperwork to see if they qualify for that social service. When it's done using our instant data, it's done very quickly. So we deliver productivity.

And then, of course, we deliver the accuracy. With OB3, there was a lot more teeth put in, as I mentioned, around the requirements for social service delivery to try to bring down that $160 billion of improper payments. And some of those, for example, include stricter requirements about the data validation that's done when it's delivered. There's also an element in the health care costs around an audit threshold for the verifications.

And if a state is over that threshold, in late next year, they'll be subject to paying for a portion of the social service costs. And we quantified at current levels of verification, about $14 billion would move from the federal government to the states if they don't improve their audit error rates. And we're working collaboratively with all the states around using our solution to deliver that.

There's another new change that happens in some of the health care service delivery where you have to show that you're willing to look for work or go to school or volunteer -- in certain age categories and certain types of households, typically single households, there's now a work requirement and we have hours worked in our data set. So we're collaborating and that is a new product where we provide, in essence, a monitoring solution for someone's on that social service and use our data to verify are they working 20 hours a week.

We have access to education data in our partnership with National Student Clearinghouse, so we can validate that someone's going to school part time, which would allow them to qualify to continue to get those social services. And then we're going to build a solution that integrates those 2 data elements along with an ability to upload volunteer documentation because you can also volunteer for 20 hours a week. So that's a new solution that we're working on, and we expect to roll out in 2026, in advance of the new requirements from OB3.

As far [indiscernible] what's the timing of Equifax in benefiting from OB3 -- that's one beautiful bill?

Yes. So first off, we expect to have continued kind of core growth in the government vertical into that $5 billion TAM. What Andrew is referring to is a lot of these requirements go into effect late next year. But the states are now having to prepare for that in the federal government going forward.

So we just see opportunities in kind of our core growth in government social services from income and verification because of the value prop we deliver. And then we see new product opportunities and new revenue opportunities for us around the delivery of some of the requirements with OB3. The other change that they made is today, there's 12-month redeterminations of someone's eligibility. That now moved in certain services to 6 months. So it's going to be done more frequently going forward.

And then the last vector and I'll pause, Andrew, is we see a lot of opportunities at the federal government level on programs we've been working on for many years, whether it's with the IRS, Department of Labor on unemployment claims, we're using our data that can just reduce error rates that happen in those services.

One large one that we're focused on, and we have been for many years is the earned income tax credit with the IRS. And this is where if you make under a certain amount of income, you get a payment from the IRS as an earned income tax credit. There's -- the IRS characterizes about $15 billion a year of improper payments there. So we think using our data can bring that $15 billion down.

OB3 also has a new requirement where tips and overtime for certain individuals are not taxable. We think we can deliver a solution that can help in really validating that for the IRS. So we just see a whole bunch of opportunities and going back to that $5 billion TAM that we've got to really resize because it's larger now post OB3 against our $800 million of revenue today, we just see a lot of opportunity for growth. And just again, we expect this to be our fastest-growing vertical going forward because of that big penetration opportunity and the value we deliver in the social services delivery around speed, productivity and accuracy.

And '26 will be a good year for this, right?

We expect the government to be much stronger in '26 than certainly in 2025. And over the long term, we expect our government vertical to outgrow EWS and outgrow Equifax.

So now let's talk about Talent Solutions, which is another vertical in EWS. I'm surprised that more background screeners don't use EWS. I think it's only about 1/3. You could tell me if that's about right, use Equifax for verifications. Are they not doing VOEs? Like, I don't quite know what they're doing. And my question is, is a lot of the talent solution growth going forward going to be new client acquisitions for you guys?

Yes, it's really all of the above, Andrew. So just putting a size on it, this is one of the verticals that's a fast-growing vertical for us where we deliver verification of historical employment. And as I pointed out earlier, every payroll record we get, we get a job title with it, and we keep all those records. So you think about it, we have a digital resume on the average American going back 20 years.

And obviously, as we add records, we build out that even further. And one of the thing that background screener does is verify past employment. Dependent upon the job, it might be verify last job worked. It might be where did you work in the last 12 months? In jobs in this room, it might be verifying your last 5 years of employment.

So we're able to deliver that instantly versus the background screener doing that more manually by calling a company to validate did Mark work at Equifax? In my case, did I work at General Electric? We can do that instantly. So our goal is to be the data provider to the background screening space around all the data they use in a background screen and to deliver that really on an instant basis.

We have a partnership with National Student Clearinghouse. Another verification that's done is where did you go to school? Is it part of your resume, an employer wants to validate that, that's accurate. So we're able to do that with our partnership with National Student Clearinghouse. Andrew remember that we made an acquisition, I guess, it's 4 years ago of a company called Apriss Insights that's the only data set on incarceration data.

Another verification that's done as part of employment process, not to deny employment, but to allow the hiring manager to have a conversation with the prospective employee is around where you incarcerated in the past. That's very common. More than 90% of background screens do that. We're the only data set on incarceration data. We also have health care credentialing data.

So if you're a doctor, nurse, dentists, health care professional, that's another data set that has a lot of verifications and then also reverifications that happen every 12 months. So our goal is to continue to build out the data sets. To Andrew's question about growth, that's about a $4 billion TAM of the data requirements for background screening.

We don't want to be a background screener. They do other things like drug tests and other verifications that take place, but we want to be the data provider. So a $4 billion TAM, our business now is about $400 million. The growth levers, as Andrew points out, is penetrating to more of the background screeners and converting them from doing manual verifications of those kind of elements on the background check to using our digital instance solution.

It's also adding more data assets, either through partnership or acquisition like our Apriss Insights and incarceration dataset acquisition to add more data elements to our data set. And then it also products, developing new products that really meet the requirements. For example, we're working now on a product for the hourly workforce that's usually a thinner background check than one that would be for white collar and trying to get the right data elements that really meet the requirements of those employers. That would be an example of a new product that we would roll out that would drive really penetration into the TAM.

Do you add anything, John?

We also drive growth by growing records, right? Records across Workforce Solutions. We've had tremendous success in growing our record base, not just of current and active records, but also of historical records. Obviously, historical records are critical in background screens. We have a record on almost everybody in the United States, not quite, but pretty close in terms of current or historic.

And we've done a very good job of continuing to grow our current records up about 10% this year. And historically, we've been growing consistently over 10%, and we're making tremendous strides in filling out that database. And probably it's probably the most consistent long-term driver of growth in Workforce Solution is really record growth.

And maybe just, Andrew, to put a point on records. I think everyone in the room knows there's roughly 250 million income-producing Americans in the United States and think income-producing, that could be pension retirement income, defined benefit pension income. It's W-2 income. There's about 170 million W-2 nonfarm payroll employees in the United States. And then there's about 40 million, 50 million self-employed 1099 employees in the United States.

So I think doctors, dentists, lawyers, but also think Uber drivers, DoorDash drivers, self-employed landscapers, et cetera. Against the $250 million, as John said, we've been growing our records about 10% a year. It's not our long-term growth rate. It's been quite strong in the last 4 or 5 years as Andrew knows.

But against the $250 million at the end of the quarter, we had about $100 million. So we have a lot of growth potential to add more records either directly with employers. As I said earlier, about 6.5 million companies today don't contribute payroll records to us every pay period. So that's growing. There's a lot more companies to go and a lot more individuals.

And what's unique about our business model is, obviously, we have integrations with mortgage lenders, auto lenders, credit card issuers, personal loan lenders. We talked about background screeners and government social services. When we have that commercial relationship, they send us every inquiry to Equifax, and we fulfill the records that we have. So when we add records at any point in time, we're able to monetize them immediately because we're already getting the inquiries from all those different sources. So that record growth is very valuable to us in growing our top line and bottom line. And we have a dedicated team that that's really all they do is add records.

It's definitely the gift that keeps on giving. So I'm going to ask a more annoying question, John. This is about EWS mortgage volumes, which in the third quarter were still down. Other non-Equifax data, industry data about mortgage suggests mortgage is up.

I know there's been a gap for a while and all these data sets, if we look at MBA or Fannie, they're all particular, let's call it that way. I really don't know which data set I should be looking at, but there does seem like there's a gap. And my question is, what do you think of it?

Well, we focus very hard, obviously, on the data we have ourselves. So we look very closely USIS hard mortgage credit inquiries. And they were down in the quarter, right? We disclosed that every quarter and we provide long-term trends. And we gave a perspective on what we expected to occur with USIS hard mortgage credit increase for the full year, indicating they would be down high single-digit percentage rate.

I think if you take a look at USIS hard mortgage credit inquiries and try to correlate it to TWN increase, they're not exactly the same, but they're generally in line, right? And we think those are 2 pieces of information that are current and real, right, that we can correlate together to try to see perspectives. Correlating to MBA data or other survey type data, we think is very difficult to do, and they don't include full market coverage.

And so we don't think it's that relevant to compare, and that's why we focus so heavily on the data we can see every day. And again, as a reminder, to close a loan, you need to pull credit, right? So hard credit inquiries, we think, are a very relevant measure of what's really occurring in the industry.

As you know, for 10 years plus, we've used hard mortgage credit inquiries from USIS is our definition market. We think that's the best indicator we have because, as John said, every mortgage pulls all 3 credit files. So we're seeing every mortgage and...

That's right. I agree with that point.

And we think that's a good indicator. And the reason USIS revenue in 2025 is up even with the mortgage market down is really because of the FICO pass-through. And we're pleased with the EWS performance versus that market that is down year-over-year as they roll out new products and bring penetration and record growth in pricing to the marketplace.

So this is a thesis that I have had about the gap that more of it's getting done manually because mortgage lenders aren't so busy, let's call it, yet, so they could do it manually.

There's probably some element of that, but I think it's small. We track very closely our customers' utilization and there's very high utilization of the TWN. And maybe just so everyone knows is what we're talking about is that in a mortgage or process, you pull credit and you also verify income and employment. That's required for all conforming federally guaranteed mortgages. And you can do that verification either manually with paper pay stubs or you can do it using our verified solution.

The vast majority of the market uses our verified solution, instant solution because it provides speed, productivity and accuracy versus a paper pay stub. So we've seen very high adoption in the mortgage market of using our solution because of really the value it delivers.

Okay. Looking into next year in '26, I wanted to talk about USIS mortgage business. I see there's basically 3 subjects to talk about. One is lower mortgage rates, the second one is the potential commercialization adoption of vantage in mortgage. And then the third is anything going on around prequalification period, a pre-approval period and is that increasingly being used by 1B or 2B and as Equifax's solution for that with income flag, move the needle. So how do we feel about '26 mortgage market with across those 3 points?

I think we need another half hour in our meeting for that question, Andrew, it's a loaded one. Let me try to do it quite quickly. I think those that are close to the space know there's a lot going on in the mortgage space, particularly around credit file. So first on the market, I think everyone knows the market has been down substantially over the last 4 years of rates that more than doubled from where they were during the COVID time frame.

In the case of Equifax, that's over $1 billion of revenue that came out of our P&L as the market down over the last 4 years. And as John mentioned earlier, in 2025, as we define the market, the market is down kind of high single digits in 2025. As we look forward to 2026, we would expect and we were seeing signs kind of in the second half of the year that the mortgage market will bottom. If you believe rates are going to be stable or down from here versus going up, that's really where that -- that's really where you think about the mortgage market bottoming.

We've sized for our investors when we look forward, we look at 2015 to '19 inquiries as being normal, kind of pre the COVID refi boom that happened, and we're 50% below that day. So we believe there is a very sizable mortgage market recovery, not with rates going back to 2.5 but with rates coming down from what would be 20-year highs of where they are today once inflation comes under control. And I'm not going to handicap that. What we tried to size for our investors is the opportunity at Equifax when rates come down is very substantial.

We've sized it at being over $1.2 billion of incremental revenue with a mortgage market recovery coming back to normal, about $700 million of incremental EBITDA and $4 of incremental EPS going forward. So when we look at the future, we're not going to handicap when that's going to happen. We want to size for our investors that when that does come through, we're not going to invest that incremental EBITDA, free cash flow or EPS in more people. We're not going to invest in more CapEx. We're not going to do more bolt-on M&A. We're doing the right amounts today of investing in Equifax that incremental revenue from a mortgage market recovery in EBITDA is going to show up in free cash flow and it will end up in dividend and buyback. That's where that's going to go from a market standpoint.

I think your second question was around what's going to happen with the change in the conforming mortgages with Fannie and Freddie. FICO had a 30-year monopoly, I think, as people know, in July that was removed and Vantage was accepted as a credit score. I think the room knows that the 3 credit bureaus own VantageScore, and we see a real opportunity to migrate the mortgage industry from using FICO to using Vantage. FICO came out about a month ago with pricing for 2026, and they doubled their price from $5 to -- it's actually $4.95 to $10.

And about a week later, we announced that we're going to sell the VantageScore for $4.50, meaning half of the FICO pricing. So we think that there's an opportunity with that pricing umbrella to drive conversion of FICO to VantageScore that's going to provide value for the mortgage industry, meaning real cost savings and hundreds of millions of dollars across all 3 credit bureaus and then also for the consumer with the lower price.

USIS '26 question. So is it going to move the needle on '26?

Yes, I think that's harder to handicap. It's going to take time for that to roll into '26. Over the long term, we size for our investors that it's a new $100 million to $200 million profit pool for Equifax. We'll give guidance in February when we do our fourth quarter earnings of what we think '26 might look like. It will also provide some scenarios of upside, downside versus that.

But we're seeing quite a bit of momentum in the industry because of that shock of the costs of $5 going to $10 around the desire for an alternative. And I think as many of us in the room know, Vantage is used in other verticals quite substantially. And we just think there's a real opportunity. I think your third question is about what are we doing around differentiating our credit file.

And Andrew highlighted in mortgage and prequal. A few months ago, we rolled out a plan to add an income and employment, we call it TWN, The Work Number as TWN, indicator on our credit file that's used in the prequal process. So if you're applying for a mortgage today, generally, frankly, because of FICO pricing, there's only 1 credit file pulled by a mortgage originator to check your credit score in that shopping process.

So they've got a very large digital funnel and they're trying to evaluate Andrew versus mark versus John, about which mortgage do I put them in? Is this someone who's going to qualify or are they not going to qualify from a credit standpoint? That's why they pull a prequal or shopping credit file. They're blind to is Mark working, and they're blind to my income levels.

So we're adding to the Equifax credit file to drive share gains at no cost to the mortgage originator, some indicators on our credit file that Mark's working, who Mark works for, which is quite important in a mortgage process. That's one thing that has to go into the mortgage application process. And then an indication of Mark's historical income. That is actual income, but Mark's a $150,000 a year employee.

And we believe that's going to differentiate our credit file when they're only pulling one versus our competitors who don't have the ability to add that income and employment indicator. We're going to do the same thing in auto and cards and P loans to differentiate our credit file going forward. And we think that's going to drive share gains because we're not going to charge for it. We really want to differentiate our credit file when there's a 1B pull. John, go ahead.

And just real general comments around 2026. Just to give some people some perspective on some items that it's hard for them to predict, right? So just looking at some below-the-line items, looking at depreciation and amortization, excluding acquisition amortization, we expect our D&A to be up about $50 million in 2026 versus 2025.

And that's really from our big investments in the cloud transformation that we're now substantially complete with.

Absolutely, yes. in terms of interest and other expense, as we continue to execute acquisitions and then also execute our share repurchase program that we started in the second quarter, we would expect interest expense to probably be up on the order of $25 million. And as we look at our effective tax rate in 2026 relative to 2025, likely higher by on the order of 50 basis points.

So again, I'd say interest expense is higher, consistent with what we -- if you take a look at what we did in the second quarter and third quarter, very significant share repurchases that we executed, buying back, for example, in the third quarter, over $300 million worth of stock, about 1% of our outstanding. So we're going to continue to execute against that capital return program that we indicated, which is what's driving interest expense higher.