易速傳真 (EFX) 2025 Q2 法說會逐字稿

Greetings. Welcome to the second quarter 2025 earnings conference call for Equifax. (Operator Instructions) Please note, this conference is being recorded. I'll now turn the conference over to Trevor Burns, Senior Vice President, Head of Corporate Investor Relations. Thank you. You may now 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 and Events tab on our Investor Relations website.

During the call, we will make reference to certain materials that can also be found in the Presentations section of the News and Events tab at our IR website. Also, we'll be making certain forward-looking statements, including third quarter and full year 2025 guidance as well as our long-term financial framework to help you understand Equifax and its business environment.

These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from our expectations. Certain risk factors that may impact our business are set forth in our filings with the SEC, including our 2024 Form 10-K and subsequent filings.

We will also be referring to certain non-GAAP financial measures, including adjusted EPS, adjusted EBITDA and cash conversion, which will be adjusted for certain items that affect the comparability of our underlying operational performance. These non-GAAP measures are detailed in reconciliation tables, which are included with our earnings release and 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 had a very strong second quarter with revenue of $1.54 billion, up 8% in constant currency and 7% reported, nicely within our long-term framework and the highest ever quarterly revenue in Equifax's history.

Revenue was $27 million above the midpoint of our April guidance despite the weaker mortgage and hiring markets. The majority of the revenue outperformance was in US mortgage, principally in USIS from stronger pre-approval product growth and a slightly stronger market with credit inquiries down about 8.5% but better than our expectations of down 11%.

Non-mortgage was solid in all BUs with outperformance predominantly in Workforce Solutions, with stronger performance in government and consumer lending. USIS had another quarter of solid non-mortgage growth as they are operating in a post cloud mode.

FX negatively impacted revenue year-to-year by $6 million or about 40 basis points compared to last year. However, the US dollar weakened since we provided guidance in April, benefiting second quarter revenue by $9 million or about 60 basis points relative to our April framework.

Adjusted EPS of $2 a share was $0.10 above the midpoint of our April guidance range from operating leverage from stronger revenue growth and solid cost management, with an adjusted EBITDA margin of 32.5%.

During the second quarter, EWS had a strong performance with revenue up 8%, led by Verifier, government and consumer lending, which were both up double digits and mortgage that was up 9%. And EWS had a strong second -- strong 10% record growth in the quarter. USIS also had a strong performance in the quarter with revenue up 9%.

USIS is gaining momentum post cloud transformation with non-mortgage revenue growth of over 4% and a Vitality Index of 10%, their strongest Vitality ever and in line with our long-term Vitality goal across Equifax of 10%.

USIS's stronger focus on innovation of new products like the TWN indicator sets them up well for the second half and 2026. Mortgage revenue was up 20% in the quarter, reflecting expected benefits from annual price increases principally related to credit scores, and stronger-than-expected growth in pre-approval products.

In International, we saw a broad-based 6% constant dollar revenue growth, led by strength in Europe and Latin America. Revenue growth was slightly below our expectations due to overall economic weakness in Canada. The International team continues to deliver strong technology and product execution, completing customer migrations to our new cloud-based technology in the UK and Peru.

We made strong progress in new products in the quarter with an overall Vitality for Equifax of 14%, which was 400 basis points above our long-term framework. EFX.AI is powering our new solutions, leveraging our scale and unique Equifax data in our single data fabric.

We have our new TWN indicator mortgage credit solution in market and are on track to launch auto and P-Loan products powered by TWN later in 2025, and these will combine credit alternative data and TWN income indicators into a single solution.

Based on our strong first half NPI performance, we're increasing our Vitality outlook for 2025 from 11% to 12%, which sets us up well for the second half and for 2026. And in the quarter, we repurchased $127 million in shares under our new $3 billion share repurchase program. The Equifax team is executing very well, leveraging our new cloud capabilities to drive NPIs and growth.

Given the uncertainties in the economy, inflation and tariffs, we're holding our full year constant currency framework from April even with the strong first half performance, but we are increasing our reported full year revenue guidance by $35 million and adjusted EPS by $0.03 a share for the impact of FX. John will share more details on our third quarter and full year guidance shortly.

Turning to slide 5. Workforce Solutions revenue was up 8% in the quarter, driven by a strong 10% Verifier revenue growth. Government revenue grew 14% in the quarter and up 12 percentage points sequentially due to the ramp in SSA volumes and growth in state and agency penetration, TWN record growth and pricing.

The new SSA amendment with an annual contract value of about $50 million allows the Social Security Administration to continue ramping the use of a TWN solution that delivers monthly income and employment information or recertification of eligibility for individuals currently receiving disability benefits from the Social Security Administration.

Talent Solutions revenue was up about 4% in the quarter and was consistent with our expectations. Overall US hiring, and particularly white collaring hiring, continued to be relatively weak in the second quarter, with overall BLS data up only slightly in April and May compared to last year.

Underlying talent employment verification revenue was up low double digits in the second quarter, driven by new records, new products, penetration and pricing. This was partially offset by insights revenue related to criminal background screening that was below our expectations, principally related to share shifts between background screeners.

Overall talent revenue showed strong growth sequentially from the first quarter. However, we have seen hiring transactions slow over the past months from economic uncertainty, impacting both Talent Solutions and our Employer Onboarding businesses.

Mortgage revenue was up a strong 9% in the quarter despite the continued weakness in mortgage volumes. EWS mortgage revenue continues to benefit from record growth and pricing. Consumer lending revenue in EWS was up a very strong 19% in the quarter, with double-digit revenue growth in P-Loans and card as well as high single-digit revenue growth in auto from continued strong growth in records, new products, penetration and pricing. P-Loan saw particularly strong growth from increases in large customer volumes.

Employer services revenue was down 2% in the quarter, consistent with our expectations, with I-9 and Onboarding revenues still negatively impacted by the weaker hiring market. Workforce Solutions adjusted EBITDA margins of 53.3% were up 50 basis points compared to last year. Margins were better than our expectations, driven by both higher-than-expected revenue growth and solid cost management.

Turning to slide 5. We continue to engage in Washington around the new administration's focus on the estimated $160 billion of improper social service and tax payments, which is a positive macro for EWS. A couple of weeks ago, the President signed the new OBBBA legislation that provides several potential future growth opportunities for the EWS government business, including increasing the frequency of CMS redeterminations from annually to semiannually, adding community engagement or work requirements for certain Medicaid recipients, and in SNAP, tying federal funding to error rates and enforcing work requirements. These changes are all positives for our EWS government business.

We're continuing to ramp up our engagement in Washington in order to support new federal government programs, including the IRS Earned Income Tax Credit, the Do Not Pay portal, unemployment insurance, and Department of Education. We expect these new programs to be potential positive growth for Equifax in the future.

We also continue to have opportunities to expand 20 utilization at the state agency level as states implement stronger verification requirements aligned with these new government requirements. This includes our new Workforce Solutions integrated complete income solution that will support states' ability to validate income through the Work Number, and validate other sources of income, such as gig work, self-employed wages, and [non-earned] income through consumer permission bank transaction data. We're launching this new solution in the third quarter and are working with multiple states on evaluation and implementation.

While we have significant opportunities for the medium and long-term government revenue growth in supporting federal and state programs, the pace and extent of changes in federal program structure and funding from the prior administration is resulting in some continued near-term volatility, as agencies at the state level manage these funding changes on their operations. As a result, we expect our government revenue growth in the second half to be consistent with the first half.

We are working closely with our state customers as they operationalize the 2024 funding changes and remain confident in our medium and long-term EWS government revenue growth framework at above the EWS long-term revenue growth framework of 13% to 15%, as we grow into the large $5 billion government TAM.

Turning to slide 7. TWN record additions were strong again in the second quarter with active records up about 18 million or 10% over last year to 198 million, and total records were up 10% to 767 million records. Underlying those 18 million active record additions, EWS added about 1.3 million contributing companies in the past 12 months to 4.6 million companies contributing to TWN, an outstanding performance by the team, which would not have been possible without the Equifax cloud.

We've also added four new partnerships this year, which is on top of the 10 added in the second half of last year, and expect those new agreements to contribute to record growth in the second half of 2025. At our Investor Day a few weeks ago, we shared a metric we've been using internally for several years, current records, which is defined as the number of people in TWN that have been paid within the last 35 days.

This metric more closely aligns with how we monetize TWN records. EWS ended the quarter with 113 million current records, which was up 9%. Our 100 million current SSNs, which was up 8%, are a great indicator of the long runway for TWN growth to 250 million income-producing Americans.

Turning to slide 8. USIS had a very strong quarter with revenue up 9% and much better than our expectations, principally led by mortgage revenue. Non-mortgage revenue was up over 4% in the quarter and also slightly above or slightly better than our expectations.

Mortgage revenue in the quarter was up a very strong 20%, principally from third-party vendor pricing and stronger pre-approval revenue and despite the about 8.5% decline in USIS hard mortgage inquiries. USIS is gaining share in PreQual and Pre-Approval products, which we expect to accelerate in the second half as we roll out our new mortgage credit file with the TWN indicator.

USIS has seen very strong interest in their new mortgage Pre-Approval and PreQual solutions that include the TWN income and employment information. We are supportive of the FHFA's recent announcement to support access to housing by maintaining the use of the Tri-Merge Credit Report.

We are committed to helping expand consumers' access to credit and helping lenders mitigate risk through data-driven decision-making. We have a long history of collaborating and supporting mortgage industry initiatives and applaud the FHFA's recent decision.

B2B non-mortgage revenue grew about 4% in the quarter as we continued to see a stable lending environment, although continuing at the levels below longer-term norms. We saw high single-digit growth in auto and low single-digit revenue growth in FI. All other B2B verticals in aggregate were up low single digits.

Financial Marketing Services, our B2B offline business, was up 6% in the quarter, and we saw a broad-based growth across all offline segments with strong double-digit revenue growth in prescreen marketing. We have not seen an increase in portfolio review spending that would be indicative of increased risk management activity in a weaker economic environment.

Consumer Solutions revenue remained strong at 8%. USIS adjusted EBITDA margins at 35% were consistent with our expectation and up about 180 basis points compared to last year. We're seeing the benefits of cost savings from our cloud migration, which we completed in the second half of last year, as well as operating leverage from revenue growth in the quarter.

The acceleration in USIS NPI Vitality to 10% and in line with our long-term goal is a clear indication of the benefits of our new cloud infrastructure and the team's ability in USIS to fully focus on leveraging our technology and product advantages to better serve our customers and drive growth through innovation and new products.

Turning to slide 9. International revenue was up 6% in constant currency and broad-based revenue growth across all regions. Strong 11% Latin American revenue growth was led by very strong growth in Argentina and Brazil. The Boa Vista business is performing very well, up 8% in the first half versus last year, as we bring new Equifax platforms like Ignite, InterConnect and the Equifax Data Fabric to Boa Vista and engage our Brazilian customers with new models and scores built using EFX.AI.

Europe growth rates improved nicely in the quarter at up 6%, and Asia Pacific performed well at up 4%. Canada's growth of 1% continues to be impacted by weaker economic conditions. International adjusted EBITDA margins of 26.4% were up about 80 basis points versus last year from revenue growth and cost improvements from our cloud migrations.

Turning to slide 10. In the second quarter, we delivered a Vitality Index of 14%, with over 100 new products launched in the first half, led by double-digit Vitality in all business units, led by Workforce Solutions Vitality at 18%.

As mentioned earlier, based on our strong NPI performance in the first half, we're increasing our Vitality outlook for 2025 by 100 basis points to 12%, which is 200 basis points above our 10% long-term goal and double our pre-cloud Vitality Index. We're energized by our post-cloud completion momentum in innovation and new products.

One of the cornerstones of our NPI program is developing multi-data solutions using our EFX cloud, EFX.AI, and scale proprietary data assets. These only-Equifax solutions provide greater value for our customers and will deliver revenue growth for Equifax. The ability to deliver information to our customers from the Work Number alongside a credit report provides value only Equifax can deliver. Our new mortgage PreQual credit file solution with a TWN indicator differentiates our credit file with incremental data, including work status, employer name and potentially some levels of historic income.

This unique solution will help lenders optimize their marketing processes and deliver more certainty around how they can automate consumer loan underwriting. We are seeing strong interest from the mortgage market as lenders begin to integrate the TWN indicator into their workflows, and we expect to launch similar TWN indicator solutions in Auto and P-Loan in the second half of this year. And as a reminder, we plan to deliver the TWN indicator alongside our credit file at no incremental cost in order to differentiate our credit file and drive incremental growth and share gains.

And now I'd like to turn it over to John to provide more detail on our 2025 guidance and third quarter framework.

Thanks, Mark. Turning to slide 11. As Mark referenced, hard mortgage credit inquiries were somewhat better in the second quarter than we had expected. However, they continued to decline year-to-year in the second quarter at down about 8.5% and were down about 9% for the first half of '25.

30-year mortgage rates remained consistently above 6.7% during the quarter. Housing prices remain high and inventories of available homes remain at low levels. These factors have kept both home purchase and refinance activity at historically low levels, with total hard credit inquiries down over 50% from 2015 to '19 averages.

Based on run rates from mortgage hard credit inquiries over the latter part of the second quarter and continuing volatility in both mortgage rates and volumes, our mortgage hard credit inquiry expectation included in guidance for second half '25 is down over 13%, generally consistent with levels we shared in April.

As we discussed last quarter, although current home mortgage activity is low, based on Equifax data, we believe there are almost 13 million 30-year mortgages issued since 2022 with an interest rate above 6%, and about 9 million with an interest rate above 6.5%. This creates a growing pool of mortgages available to refinance when mortgage rates decline.

As Mark indicated, we are holding our full year 2025 guidance shown on slide 12 on a constant currency basis to be unchanged from our April guidance. Even with our strong 2Q performance, there continues to be a heightened level of economic uncertainty, continuing to result in weaker levels of hiring, 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 April, increasing the midpoint of our reported revenue guidance by $35 million to about $6 billion, and adjusted EPS by $0.03 per share to $7.48 per share.

Consistent with our April guidance, non-mortgage constant dollar revenue growth at the midpoint of guidance is expected to be about 6% and over 6% for mortgage due to stronger 2Q mortgage results. FX is about 30 basis points negative to revenue growth.

At the business unit level, Workforce Solutions revenue growth in 2025 is expected to be about 5%, down from 7% in our April guidance. EWS delivered revenue growth of just over 5% in first half '25, and we expect second half '25 growth to be slightly below those levels.

Second half Verifier non-mortgage revenue growth is expected to be slightly below the 8% we saw in the first half of '25. Revenue growth in both talent and government in the second half are expected to be slightly below the levels we saw in the first half of '25 due to the weaker hiring trends and the near-term government volatility that Mark discussed. Second half '25 employer revenue should be down slightly year to year.

EWS mortgage revenue based on the slower run rates we have seen over the last several weeks and consistent with the market expectation for USIS hard credit inquiries should show limited growth in second half '25 at a much slower pace than the about 6% we saw in the first half.

EWS EBITDA margins in 2025 are expected to be about 51%, up 50 basis points from our April guidance despite the lower revenue guidance, reflecting strong cost management, and to a lesser extent, favorable mix.

USIS revenue growth in 2025 is expected to be about 7%, much stronger than our April guidance. We expect mortgage revenue to grow about 13%, up from our April guidance as the stronger performance in Pre-Approval solutions we saw in the first half of '25 continues through the second half of '25, and fiscal year '25 benefits from the better levels of hard inquiries we saw in the first half.

As I referenced earlier, our second half '25 mortgage hard inquiry expectation at down over 13% is generally consistent with the levels we shared in April. Reflecting this, mortgage revenue growth in the second half of '25 is expected to be about 10%, about 500 basis points weaker than we saw in the first half of '25.

Non-mortgage revenue is expected to grow over 4.5%, up about 50 basis points from our April guidance, with the second half growth slightly lower than the first half given uncertainty around the economy and interest rates. USIS EBITDA margins are expected to be about 35.5%, up about 100 basis points year-to-year.

We expect 2025 International constant currency revenue growth to remain about 7%, consistent with our April guidance. We expect second half revenue growth to be just over 7%, compared to the 6.4% we delivered in the first half.

We expect to see strengthening growth in Canada as they begin to benefit from cloud infrastructure, which they fully migrated to in the fourth quarter of last year, as well as improving growth trends in Europe and Asia Pacific. EBITDA margins are expected to be about 28.5%, up about 100 basis points from 2024.

I also want to briefly discuss 2Q '25 corporate expense, which at $152 million was about $7 million above the guidance we shared in April. This increase was principally driven by higher consumer litigation costs which are generally related to resolving single plaintiff litigation cases and other litigation costs, as well as certain nonrecurring costs. We expect higher levels of litigation costs will also impact 3Q and 4Q.

As a result, we expect full year corporate costs to be about $590 million, up from our April guidance. These higher corporate costs will be partially offset by lower interest and other expense and a lower tax rate of about 26.5%, down from 26.75% in our April guidance.

The increase in corporate costs in 2025 versus 2024 is due to higher litigation costs, higher variable compensation, higher depreciation and amortization, and certain nonrecurring costs incurred in 2025. Adjusted EBITDA margins are expected to be about flat versus 2024. This is down from our guidance in April, principally reflecting the impact of FX and the increase in corporate expenses related to litigation, partially offset by the increase in EWS margins.

Slide 13 provides the details of our 3Q '25 guidance. In 3Q '25, we expect total Equifax revenue to be up over 5% on a constant dollar basis year-to-year at the midpoint with minimal impact from FX. As a reminder, the third quarter has a very difficult comparison against 3Q '24, which had 10% organic constant dollar revenue growth, one of our strongest quarters in the last couple of years, led by 19% Verifier non-mortgage revenue growth.

Adjusted EPS in 3Q '25 is expected to be $1.87 to $1.97 per share, up over 3.5% versus 3Q '24 at the midpoint. Equifax 3Q '25 adjusted EBITDA margins are expected to be about 32.5% at the midpoint of our guidance, down slightly from 3Q '24. Adjusted EBITDA margins at the BU level are up year-to-year, driven by solid margin increases in USIS and International. The increased BU margins are offset by higher corporate costs, principally the higher litigation I discussed earlier.

Business unit performance in the third quarter is expected to be as follows: Workforce Solutions revenue growth is expected to be up over 3.5% year-to-year. Verification Services revenue growth is expected to be about 4.5%.

Mortgage revenue is expected to be up about low single-digit percent, with the growth in records and pricing offset by the expected continued mortgage market decline. Verifier non-mortgage revenue is expected to be up over 5.5%, again, against a very difficult comp.

Talent revenue is expected to be up at levels consistent with or slightly above the second quarter year-to-year growth rates, reflecting continued weak overall US hiring. Government revenue is expected to be up mid-single digits, reflecting the near-term headwinds Mark discussed earlier.

EWS EBITDA margins are expected to be above 51% and down slightly year-to-year. USIS revenue is expected to be up about 7% year-to-year. Mortgage revenue is expected to be up about mid-teens percent; and non-mortgage revenue is expected to be up about 4%.

Mortgage revenue growth is still being impacted by significant declines in USIS hard inquiries, which are being more than offset principally by third-party vendor pricing actions as well as strengthening revenue in pre-approval and prequalification products.

USIS adjusted EBITDA margins are expected to be up about 130 basis points year-to-year at about 35.25%, again reflecting the benefits from USIS decommissioned legacy systems and revenue growth. International revenue is expected to be up about 7% in constant currency. Adjusted EBITDA margins are expected to be up about 180 basis points year to year, at about 29.5% in 3Q '25.

Our guidance assumes economic and market conditions do not change meaningfully from current levels, US interest rates at levels also about consistent with current levels, and reflects the uncertainty in global economies and US interest rates both in direction and volatility.

Turning to slide 14. In April, we laid out our new capital allocation framework with a $3 billion share repurchase program, and a 28% increase in our quarterly dividend to $0.50 per share. During the second quarter, we returned about $190 million to shareholders, repurchasing about 480,000 shares for $127 million, and paying dividends of $62 million.

As we complete the Equifax Cloud, we are accelerating free cash flow while lowering the capital intensity of our business. 2Q '25 free cash flow was solid at $239 million, up over $100 million from 2Q '24, driven by increased income and lower capital spending. We expect to generate over $900 million of free cash flow in 2025 with a cash conversion of over 95%, which aligns with our long-term framework. We are energized to be entering this new phase of Equifax as we return cash to shareholders.

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

Thanks, John. Turning to slide 15. At our June Investor Day a few weeks ago, we reconfirmed our 7% to 10% long-term organic growth framework and provided a 2030 Equifax financial scenario that included a base case where the mortgage market grows about 2% to 3% annually, in line with long-term GDP growth, with US mortgage pricing growing at mid-single digits.

As we discussed at our Investor Day, this is not guidance, but a scenario showing how Equifax can deliver our long-term financial framework without a recovery in the US mortgage market and without outsized pricing increases in mortgage scores.

This scenario reflects organic revenue growth at an 8.5% CAGR with revenue growing to about $9.6 billion in 2030, EBITDA margins exceeding 35%. and adjusted EPS of about $15 per share. In this scenario, Equifax were to turn about $2.5 billion to shareholders in 2030.

Adjusting this scenario to reflect the mortgage market recovering to 2015 to '19 average volume levels by 2030 as measured by hard credit inquiries at current pricing, records and penetration, 2030 revenue would grow to about $10.8 billion or an 11% CAGR with an adjusted EPS of about $19 a share, and Equifax would return an incremental $1 billion or $3.5 billion to shareholders in 2030.

To clarify, the 2030 mortgage market recovery scenario assumes current mortgage pricing, products, share and records with no growth from 2025 levels, which is clearly a conservative assumption. As we have shared consistently, we are investing at the right levels in Equifax and any mortgage market recovery will drop through to margin and EPS growth for return to shareholders via dividend growth and increased buybacks. We believe Equifax can deliver our long-term financial framework without a mortgage market recovery with significant potential upside when that mortgage market recovery improves.

Wrapping up on slide 16. We had a strong first half financial performance with organic constant dollar revenue growth of 7%, led by strong 8% EWS Verifier and 8% USIS revenue growth, despite the weaker mortgage and hiring markets. Both first and second quarters were above our expectations and guidance, reflecting the resilience of the new Equifax business model even in a declining mortgage market and uncertain economy.

As we've outlined, we felt it was prudent to hold guidance in the second half even with our strong first half performance given the high uncertainty from tariffs, on inflation, rates and economic growth. Our strong free cash flow generation and the strength of our balance sheet positions us well to return cash to shareholders.

In the second quarter, we returned about $190 million to shareholders through share repurchases and increased dividend, and we expect to continue to repurchase shares in the second half of the year. We're entering the next chapter of new Equifax with our cloud transformation substantially behind us as we pivot our entire team for leveraging the Equifax cloud for innovation, new products, and growth. We're using our new cloud capabilities, single data fabric, EFX.AI and Ignite, and our analytics platform to develop new credit solutions, leveraging our scale and unique data assets.

We're accelerating multi-data asset solutions, including those that combine traditional credit, alternative credit assets, and TWN income and employment indicators in verticals like mortgage, Auto and P-Loan that only Equifax can deliver that will drive share gains and growth. I'm energized by our strong first half performance, but even more energized about the next chapter of the new Equifax. This is an exciting time to be at the new Equifax.

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

(Operator Instructions)

Jeff Meuler, Baird.

Yes. Thank you. Can you give some more perspective on the TWN state agency headwinds? Is this more headwinds tied to the programs that are impacted by the Federal government data expense subsidization changes? Or is it something else? And just any reason why now mid-calendar year there's incremental headwinds?

Yes, Jeff, that is the challenge that we're still feeling from the changes the Biden administration made in 2024 around some of the data reimbursements. We've talked about that probably now for three or four quarters.

And it's a little bit dynamic as the states are dealing -- we're dealing with states that has kind of contract timing that happened throughout the year. And some states were able to sort through it with their budgets and funding it on their own. Others are just taking longer to get that sorted out. So that's some of the pressures we're seeing in that business in the very near term.

We talked a bunch about kind of the momentum that we have, I would call it, over the more medium term. For example, some of the waivers that were put in place by the prior administration are now expiring as we speak, meaning in the middle of 2025, that were done by the Biden administration, and have to go back to the more stringent requirements. So we're seeing momentum in commercial discussions there, which we hope will be fruitful in the second half, but obviously, those aren't contracted yet.

And then the other thing that obviously is a positive as we think about later in the year, but more in 2026, is the new OBBBA bill that is in place and some of the changes that are taking place. We're already having extensive dialogues at the state level around actions they've got to start putting in place when those requirements take hold later next year and into 2027, whether it's work requirements or the 6-month, 12-month redeterminations.

And there are some states that are putting in work requirements already, meaning in advance of that, which they're able to do because, as you know, they're on the hook for some of those social service payments. So we're seeing some increased activity there. But the impact in the second half, for sure, is around still absorbing the changes that took place in the prior administration around cost sharing and just working through state budgets, which are very complicated.

Okay. And then on what's driving the -- what are the new mortgage pre-qual products that are already driving strength for share in the quarter, I asked because it sounds like the TWN indicator product is still pretty early ramping. And then any other callouts that's leading to the step-up in USIS Vitality? Thank you.

Yes. So we've been in the marketplace with the TWN indicator now for, call it, 6 months of discussions. We got it embedded with some of the aggregators. So it's available. The discussions are super positive on it. There isn't a single mortgage originator that isn't interested in the solution.

I think that's helping us commercially, until they can adopt that new solution, it's just helping us commercially win some share in that pre-qual, pre-approval stage where customers might be doing a 1b or a 2b [pull] instead of a 3b, because of our innovation and our kind of close relationships now, because we're talking about the new solution with the TWN indicator.

And as a reminder, we're also adding NC+ attributes, telco -- cellphone -- utility telco attributes to our mortgage credit file. And I think that's just helping us from a share perspective. As you point out, we really expect the TWN indicator to take hold as we get into the second half in 2026. You have to change the process flow inside of a mortgage originator in order to absorb it.

But just as a reminder, and as I said earlier on the call, our intention is to offer that TWN indicator as a differentiator for our mortgage credit file in order to drive more value in the Equifax credit file with that TWN indicator, to drive share gains. I mean we're not going to charge a higher price for it. We want to use it to differentiate in that kind of pre-application stage when there is many originators that are doing 1b or 2b [pulls].

Generally, on NPI in USIS, I think we're just seeing more traction on multi-data solutions, right? They're being more effective at delivering more multi-data solutions. It's occurring in commercial. It's occurring in our consumer businesses. And they're also seeing more traction on helping customers use Ignite around marketing and advanced marketing solutions and analytics. So I think generally, what we have been talking about for a long time where we can deliver more data more quickly through standard pipes is occurring and the team is seeing growth.

Okay. Thank you.

Andrew Steinerman, JPMorgan.

Hi. I have two questions. First one is, just what is mortgage revenues as a percentage of total revenues in the second quarter that just reported? And then looking at the beginning of this third quarter that we're in right now for USIS, what are you seeing in terms of non-mortgage lender and consumer credit activity?

So to the first question, is 22% flat. And in terms of non-mortgage, I think what we're seeing right now is it's continuing to be relatively good, like we saw in June, right? Generally speaking, what we're seeing is auto has remained relatively strong and it's continuing to perform pretty well.

I think FI strengthened a bit. We expect FI to be stronger in the third quarter, sorry, than we saw in the second quarter. Second quarter growth rate was down a little bit in FI, but that was simply a grow-over. We had very good sequential performance in FI in the second quarter, and we're expecting to see nice growth in the third, right?

And then broadly speaking, I think we're expecting the other businesses, which aren't as large, to also continue to perform relatively well, with some improvements across commercial and some of our -- in some of our payment spaces. So generally speaking, I think we're expecting third quarter to look okay.

Good. Thanks, John.

Manav Patnaik, Barclays.

Hi. Thank you. Good morning. I just wanted to revisit the government business again. Maybe it's a question just more on the visibility and assumptions there for the second half of the year. Because in the last several years, I guess, you have assumed the ramp in the second half and you've always had to lower it. But this time around, it felt like you had more visibility. So I was just wondering what exactly changed. Like, was there like a state that you had to cancel or had to step out because of budget reasons? Or is this just a little bit of all your different states?

Yes. It's not a single state. It's really -- I don't know if you heard the question earlier that Jeff asked, but similar to that, is it's a bit dynamic and it's quite challenging from what the changes that were made last year in the prior administration around the cost sharing between the federal government and the state government.

And these are different contractual periods. When we get to that end of the contractual period, we don't always know how a state is going to respond, what impacts they're going to have from a budget standpoint. I think you read enough to know that most states are quite challenged around their budgets, meaning they're in deficit positions. So that creates an impact when they have to come up with additional dollars.

And we've solved that in lots of states. We're solving it in others. And as we handicap our outlook in the second half, we thought it was prudent to put handicaps as far as where we think some of those discussions are going to land that are still in flux in the second half in a way that we thought was prudent as we look forward.

We still see lots of positives, but the timing of those, if whether they're going to hit in the second half or likely more in 2026. For example, the waivers that were in place, the COVID waivers, that were extended by the Biden administration through the end of June, have all come off. That's created a lot of dialogues with states that now have to respond with more stringent income verification requirements. That's good news for EWS.

So we expect that to be a positive. But when those come in, when they have budget dollars because they have to pay for more of it, we handicapped that in there. And as I mentioned earlier, the new changes in Washington, really strengthening the verification requirements at application and then strengthening the redetermination requirements, meaning every 6 months, and then adding the work requirement, those are all going to be positives, which we're in dialogue on all three of those at the state level as far as implementation, principally in '26.

But that's why we still have a lot of confidence in the growth in this vertical as we go into '26 and beyond, and particularly in this current administration's focus around the $160 billion of improper payments. We're just dealing with kind of the aftermath of what was done in the prior administration. So we've got to work through that in the second half.

Okay. And then just on the talent segment, on the criminal data. I think you mentioned something around share shifts between background screeners. I was hoping you could just elaborate on that, and also what the alternative is to Appriss, I guess?

Yes. So we deliver court records, right? And the alternative is to get court records through another source. One of the customers that we have a large relationship with happened to lose one of their large customers, and they went to someone else where that background screener doesn't happen to use Equifax for court records. And that's all it was.

So it's a revenue impact, but it's not really a material operating profit impact. Obviously, obtaining court records directly from a court, this is the more manual process, is something that is relatively low margin for us. It's a business that we certainly want to grow, but it's not a strategic business for us, and it's one that we'll continue to invest in, but not one that we consider as important as TWN, for example.

And just remember, on the Appriss Insights business, the core business we have is the data set we have on all incarceration records that are used as that indicator, it's the first stop background check. And that's one where we have a very strong business, and we continue to grow that.

As John pointed out, the second step that takes place when you find out someone has been historically incarcerated is there's a verification of that actual court record. We do some of that. Some background screeners do that on their own. There are some other competitors that only do that step of the process. And as John pointed out, that's a lower margin.

In many cases, it's actually a manual operation. In some cases, it's digital. Some states have a digital portal to get those court records where you pay for them. But many states, in many courts, you actually have to send in what's called a court runner to actually go in and pull the document. So that's a lower-margin business, and we just saw a little bit of change there.

Okay. Thank you.

Toni Kaplan, Morgan Stanley.

Thanks so much. I was hoping you could talk about VantageScore and what you're expecting in terms of price competition in the mortgage market. Are you expecting VantageScore to be priced at a level that could lead to share gains versus FICO? Thanks.

Yes. I think it's early, Toni, on that whole point. As I said earlier in my comments, we're very pleased with Director Pulte's support of Tri-Merge because we think that provides access to credit. And I think it's the right approach to have really strong underwriting because of the differences between the three credit files.

How the Vantage or FICO is going to unfold is certainly going to take time. That's kind of a complex change for the industry. It's one that will certainly take time. As you know, we have access to the VantageScore as (inaudible) and Experian as a part of our joint venture. That's a score that we have full access to, meaning we don't have any COGS when we use that. So we'll certainly work with our customers around that as an option. And I think those conversations, while very new, will unfold as we go through the second half of the year.

Perfect. And I wanted to ask also, John, about the EBITDA margin, raised your revenue but lowered EBITDA touch on the margin side. Is that from investing? Or is there a mix element there? I just wanted to hear all the drivers. Thanks.

Sure. So for full year margin -- for full year guidance, again, the increase in guidance was really principally related to FX, right? So revenue went up about $35 million and EPS about $0.03 a share. So I think the reason why our EBITDA margins fell a bit, one is just FX is generally positive FX is obviously very beneficial to our revenue, but it's a little dilutive to our margins based on the numbers that I just shared.

And then also, we're seeing some higher corporate expenses and specifically related to those litigation costs, and then also some onetime costs related to some employee exits that occurred in the second quarter. So those two items are driving the EBITDA margin down for the year.

But BU margins are actually performing nicely. We're seeing very nice growth in USIS and the International margins in the second half. And as we talked about in the second quarter, we saw very good performance in EWS margins, and they remain nicely over 50%. So it's -- the reduction in our EBITDA margin and full year guidance is really specifically related to those corporate cost increases related to litigation and onetime actions and then also FX.

Very clear. Thank you.

Faiza Alwy, Deutsche Bank.

Yes. Hi, thank you. John, just to follow up on those litigation costs. Can you give us a bit more color on what's going on there and if this is something that might continue into 2026?

Yes. So it's effectively two significant portions. Some of it is just general litigation costs related to outstanding lawsuits that we're dealing with, some of which are public, and they're generally disclosed in our financial filings.

The other is the volume that we're seeing of small claims from individuals that come into Equifax, and quite honestly, come into all three bureaus. And what we're seeing is just a higher volume of those, we believe, across the industry. So there's a cost to obviously settling or resolving those cases, and we're seeing that that cost has gone up in 2025 relative to 2024, actually more than we expected.

And that's a cost probably that we're going to work to try to manage effectively, but that's a cost that probably is going to remain high for a little bit of time. Some of the costs related to larger, some of the larger cases that I referenced, those costs we may be able to mitigate as we go forward. But in terms of some of the costs related to the small claims and the smaller consumer cases, those will probably see elevated levels certainly through the second half, as we mentioned in our prepared remarks.

Alright. Understood. And then I wanted to follow up on the talent business. You mentioned slightly weaker talent market. So I'm curious if you could give us a bit more color on some of the trends, like when did things start getting worse? And it sounds like you're not assuming an improvement there.

So maybe just a finer point on how much of the lower guidance on talent is related to the criminal data that you talked about versus the market. And also if that is what is driving the lower guide on employer services broadly.

So we've definitely seen, through our customers being the background screeners, continued corporate confidence nervousness. Companies we see are still being cautious around what's going to happen with the tariffs, what's going to happen with inflation, what's going to happen with the economy. So we're being cautious around new hires. And that's not new. That's really been in place for the last six plus months.

And we saw maybe a slight weakening, I think, in June as far as new hire activity, perhaps when there was a renewed discussion around tariffs as we got into kind of the middle of June. My personal view is that corporate confidence is going to continue to be shaky until there's some clarity on a path towards closure of the tariff issue, because of its broad-ranging impact.

You saw this morning, General Motors' announcement and Stellantis, the Jeep manufacturer, having huge impacts from tariffs and a financial standpoint. Companies like that, I'm sure, have very tight hiring in place when they're having those kind of hits from raw material costs and so on.

So I think until that's sorted out, we expect to see, certainly in the second half, that's reflected in our guide, a continued kind of softer hiring environment. There's still a lot of job changes take place, that's just the reality the US kind of workforce economy, but there's just a dampening of that that has an impact on our rev.

Great. Thank you.

Ashish Sabadra, RBC Capital Markets.

Thanks for taking my question. I have a two-part question on the USIS non-mortgage, One was on autos. We've seen some pretty strong growth there in the first half. Some of it is FICO pricing. But we were wondering if you have also seen any pull forward there, or have you seen any slowdown on the Auto front?

And then the second part is just around the off-line business. Again, we've seen some good momentum there in the first half. What's driving it? And how do we think about B2B offline going forward in the second half? Thanks.

Now auto has performed nicely in both the first quarter and the second quarter, and it's continuing to perform relatively nicely. Yes, some of its pricing. But overall, we think we're performing relatively well. And we're happy with how Auto has performed in the first half, and we expect to see relatively good performance going forward.

You've also seen off-line or our batch business has performed relatively well as well. We've seen good performance really across prescreen and across marketing businesses. We've seen a little bit of also benefit across some of the header data we sell into companies that provide fraud and other types of services as well. So those businesses have been relatively good.

We haven't seen a substantial increase in account reviews, which would generally be an indication that you're starting to go into some -- into a weakening economy, or at least that our customers believe they are because they're ramping up account reviews. We've seen some growth there, but not really material.

So overall, quite honestly, this is also an area where we're seeing some of the benefits from NPI. Some of the newer solutions that are being launched are being -- are benefiting this line item in our P&L and our marketing business. So we're seeing some benefit there as well, and that we would expect to continue.

That's very helpful color. Thank you.

Owen Lau, Oppenheimer.

Hi, good morning. Thank you for taking my question. So going back to VantageScore, Mark, I understand that it may be too early to talk about the pricing, but what's the goal for VantageScore longer term? I mean if you have an opportunity to make a push, would you push for higher market shares? Thanks.

Yes. We -- this is not new. We have Vantages, I don't know, 20-plus years old, maybe 30. It's been around for a long time. And we, Equifax, have been taking that to market along with Equifax Score to help support our customers.

And we've been working to grow that, and we'll continue to do that, not only in mortgage, but in all verticals. That's a part of our approach to market. It's very clear that that's a -- in some places, it's a tough sell. There has to be a catalyst in order to create that kind of change from traditionally the wide -- the vast majority of the industry uses the FICO score for the reasons of longevity and the depth of that score from its history. But we're always in the marketplace trying to support our customers with solutions that help them. But I just think it takes time to displace something that's embedded as deeply as the FICO Score is.

Got it. That's helpful. And then maybe quickly on consumer lending. It was pretty strong, up 19% year over year in the second quarter, up from 11% last quarter, and P-Loan was very strong. Could you please give us more details on that strength and also the sustainability? Thanks a lot.

Yes. I think you're referring to EWS consumer lending. And we are pleased with some of the penetration of new products and new customers that we're adding there. That's just really taking advantage of that income and employment data, principally in personal loans where there's a verification done of both credit as well as income and employment because of the larger ticket nature of that, meaning they're $10,000, $20,000, $30,000 unsecured loans. So there's additional underwriting there. That's really been the driver, which we're pleased with.

This is an area where record growth is really, really helpful, right? As we continue to build out the record base, then more and more customers in consumer lending want to use The Work Number.

Thanks a lot.

Andrew Nicholas, William Blair.

Hi, good morning. Thanks for taking my question. First one is just on the International business broadly. In the US, you kind of characterized the consumer backdrop as stable, but subdued relative to historical trends. I'm just curious, in your major International markets, would you describe kind of the data score there as similar? Or where would it be, maybe running above or below averages compared to maybe what you would expect over a full cycle?

Yes. Broadly, it's quite similar. As you know, we see stronger growth in Latin America, just because of the dynamics of that consumer base, there's just a lot of unbanked consumers in all Latin American countries, including Brazil, moving into the bank sector.

So that's why we expect Latin America, and it's been performing that way, to be at the higher end of that 7% to 9% range for International. Canada has clearly been impacted by the tariff discussions in 2025. We've seen a slowdown in consumer confidence up there, and really quite meaningful.

We were only up 1% in the quarter, which was clearly below our expectations. And we expect that to continue, I guess, because of the -- maybe it's the neighborly rhetoric, but the rhetoric is so much stronger up there around the Trump tariffs and perhaps is more uncertain in that market. It clearly has had an impact economically, meaning less consumers buying cars, less consumers taking out a new credit card, just being kind of conservative in this uncertain time frame.

If you go around the rest of the globe, into like Australia, which is a big market for us; UK, Spain, normal, kind of nothing different that we would see there as far as what's impacting from an economic activity or consumer and corporate confidence.

Very helpful. Thank you. And then for my follow-up, just on the guidance broadly. Obviously, two really strong quarters start the year, above guidance on both of those. Your decision to kind of maintain the full year guide. I'm just curious, how much of that would you characterize as conservatism versus the macro deterioration, maybe you've seen a little bit in talent or delays in the government business? If there's a way to kind of frame the different factors and what ultimately led you to maintain the full year guidance.

Yeah, I'll take a shot at that and John can jump in. When you think about macros, clearly, the mortgage market as defined by us by hard inquiries was better than we expected in the second quarter, but that declined as we exited June and came into July.

So we've got back down to that kind of negative 12% mortgage market is we're running today. So that's what we guided out for the second half. So that's clearly an impact. The hiring market has been weaker than we expected kind of going through the year. So that's clearly had an impact that we carried through in the second half.

We talked about some of the state issues we're working through due to the prior administration's funding changes. So there's an element of that. And then I think broadly, there's enough uncertainty with what's happening with tariffs. I think the whole tariff narrative in Washington spooled up again kind of in late June and into July, and it's more topical now, and it's unresolved. And it just feels quite uncertain.

We've seen the impact on the 10-year, we've seen the impact on mortgage rates. And then you see consumer confidence, which a few months ago was very weak, now it's a little bit better. But we don't have a new read on how consumers feel about this latest tariff discussion.

To me, the big variable is when our corporations in the United States around the globe going to have some clarity around what the new tariff game is. And I think until that happens, there's going to be enough uncertainty that we wanted to be prudent. We want to be balanced. You used the word conservative. I don't know if I'd necessarily use that. I'd use the term balance. But our intention was to be balanced in our guidance for the second half given the uncertainty that we've seen.

We're super pleased with our first and second quarter performance, and you should be too. I think you are. And hopefully, you appreciate that we're intending to provide guidance that is balanced around everything we know and factoring in enough of the uncertainties, which I just rattled on about, that are still out there, that are unresolved principally in my eyes, in our eyes around what's going to happen with tariffs, how that's going to impact interest rates, how that's going to impact the economy in the second half. We want to be balanced on that.

The only thing I'd add is its uncertainty and its also volatility. We've seen lots of meaningful movements in the level of mortgage activity even within a quarter, right? We saw increases in mortgage activity early in the quarter and then substantial decreases and lots of movement as we went through periods. And so certainly, direction is uncertain, and it's also very volatile. So your ability to put a band around it becomes more difficult. So that's really why we decided to be what we believe is prudent, but probably also conservative in terms of the way we guided.

Thanks, Mark. Thanks, John.

Surinder Thind, Jefferies.

Thank you. I'd like to start with the talent business and just kind of the big picture overall here. As you think about just timing trends and generally how they've consistently been weaker for some time now, are there secular considerations here as we kind of -- the narrative of AI continues to kind of take hold in terms of hiring plans and especially within the white-collar environment. How have you taken that into consideration as you think about the big picture here?

I think everything you just talked about is right. It starts with when corporations are nervous around the future, they tighten their belts. And the first place they tighten their belts is on hiring. They leave jobs open longer and they take time to fill them, or they do hiring freezes. So I think there's clearly an element of that going on.

I think your point on AI is also right on. I'm not sure there's a lot of near-term impact from AI on certainly white-collar jobs or even blue-collar jobs. But we know what we're doing inside of Equifax. We're going to be more productive through operational AI going forward, and that's clearly a big effort of ours internally. And I think every company is doing that.

And I think over time, you think over the long term, I think that's a macro that will result in less hiring going forward, meaning less jobs. And again, you described long term. Is it five years? Is it three years? But directionally, that's clearly going to take place.

And I'm sure there's some companies out there that are keeping a tight belt around bringing new people in until they see what kind of traction they're getting out of AI that's going to improve operational efficiency. So I think all of the above. But I would just caution all of us that there's a lot of churn in the US workforce. You think about there's still 70 million-plus people a year changing jobs, both in blue and white collar. So there's a lot of churn.

That isn't going to go away. Is it going to be dampened? Sure. But is it still a massive amount of change takes place that our customers are in the middle of, meaning the background screeners, and we're going to be providing data for? It's not going to go away.

Currently, right now, what we're seeing in our own data is the level of churn is just down, right? So leaving and hiring is down, right? People are staying in roles longer and hiring is also down. So the longer-term trend, as Mark described, is one we'll certainly -- we're watching closely. But currently, it just -- it appears, given the uncertainty in the economy, people aren't leaving jobs either, so churn is just way down.

That's helpful. And then just as a follow-up, just regarding all of the headlines and the news around the FHFA. When we actually think about the timeline for implementation of what the FHFA would like with the introduction of VantageScore 4 followed by FICO 10T, any color that you can provide that would help us understand what a timeline might look like from a complexity perspective?

Meaning that assuming the FHFA goes ahead, and we get the infrastructure in place from their perspective to be able to accept VantageScore 4, then the lenders come in and they got to update everything in their systems. So what is a realistic timeline, or how should we think about when you guys might realistically be able to start selling or the banks start incorporating Vantage scoring into the originations process?

Yeah. I think it's still early to give any kind of a concrete time line, except to say it's, as you pointed out, it's super complex. There's a lot of different -- most mortgage originators have their own platforms, the large ones, and then there's just all kinds of technology work that would have to go into that process in order to put it in place.

So I think it's safe to say it's very complex. It's safe to say that it's going to take time. I wouldn't think about anything in the second half of this year like a meaningful change that we're going to be able to see or you're going to be able to see. It's one that clearly will take time to implement.

And then obviously, the originators are going to have choice based on what the director has put in place. And there's lots of originators that may decide that they want to stay with what they've been using for 30 years.

So I think that's something that the industry will have to sort through. And it will be driven by the individual originators in how they think about the risk profile, how they think about change, the investments they want to make in their process flows, in their technology. But it's clearly going to take time.

Thank you.

Kevin McVeigh, UBS.

Great. Can you give us a sense, has the mortgage pricing been fully seasoned so far? And what is the pricing dynamic across the rest of the business? So what's pricing contributing to kind of the overall revenue embedded in the guidance?

Yeah. So pricing broadly for Equifax goes in place on a calendar basis, broadly on 1/1, both mortgage and non-mortgage, and generally around the globe. So using your word seasoned, it's what we have in our guide is pricing that we put in place early this year in our different products, in all the different business units.

So when we talk about the impact of price in like second quarter versus second quarter last year, the vast majority, meaning most of our businesses had some level of price increase on 1/1. So that's clearly in place. I think as you know, because of the credit pricing in mortgage, the credit score pricing, that is one where there's been a larger price increase this year, also last year. So in USIS mortgage, you've seen that in our results, there's a big impact from that pass-through of the credit score pricing.

So that's embedded in our guide for the year, and we have real visibility around that. And then our non-mortgage pricing is typically much lower than what you see in that pass-through of the credit score in mortgage. And then EWS has their own pricing algorithms or structures that they put in place on 1/1, and those are embedded in our outlook and guide for 2025.

Great. Thank you.

Kyle Peterson, Needham & Company.

This is Brandon Barron on for Kyle. Thanks for taking my question. Just one for me. I'm just wondering if you can dig in on the international growth in the quarter and the rest of the year, particularly in LatAm and Europe cloud adoption and new products, and maybe how margins could shape up for that side of the business in the back half of the year? Thank you.

Yeah, we're pleased with the International performance. I talked about Canada. Canada is obviously lagging because of the economic situation up there from the concerns around tariffs. We expect that to be better in the second half with some new product rollouts, and some share gains we think we're going to land in the second half in Canada. And broadly, we expect the second half to be similar to the first half for International as far as our revenue performance.

I talked earlier in some of the Q&A around some of the regions like LatAm and Brazil and Boa Vista that are performing at the higher end of our kind of outlook because of the dynamics in those markets. We're really pleased with our progress in Brazil and Boa Vista, which we acquired now two years ago, performing very, very well, and we're adding our new solutions on InterConnect, Ignite, the identity products down there that we think will enhance our competitiveness versus Experian and Serasa. So we're pleased with how that's performing. Latin America is performing well.

We still have cloud completion work to do in International. As you know that North America is done, US and Canada, and some of that's in Latin America. So we expect some incremental -- it's in our guide, but incremental cloud cost savings in the second half as we complete some of the cloud migrations in '25. And there'll be a tail of International cloud completions in '26, principally in Australia. I don't know, would you add anything else, John?

International NPI tends to be very high, so they deliver a lot of new products. I think as we guided, right, we expect something around 7% for the year, so a little better than 7% in the second half. You asked about margins. I think we already -- we gave guidance on margins. We expect to see nicely increasing margins in the third quarter, and nicely increasing margins for the full year.

So as International completes cloud migration, they're also being very diligent on cost. And as they're growing, obviously, that flows through at a very high variable rate. So they've delivered nice margin growth, and we expect them to continue to deliver nice margin growth in the rest of the year.

Okay. Great. Thank you, guys.

Arthur Truslove, Citi.

Thank you very much. Thanks very much for taking my question. I guess one for me, really. I was just wondering how you think about the kind of midterm outlook for FICO pricing. Obviously, mortgage revenues have significantly exceeded volumes in USIS, and a decent chunk of that is clearly as a result of FICO.

Obviously, as you say, the FHFA boss has been -- talked about this. How do you think FICO will price as we look forward? And what sort of impact do you think that's going to have on your growth rates? Thank you.

Yeah. I think with regards to FICO pricing, you should call FICO or join their earnings call, which I think is next week, and see what Will has to say about that. I'm sure he's got a point of view. And we don't have visibility to that. Generally, we'll get inputs from them on what they're thinking about for the next calendar year as we get into later in the year, typically September, October, November, somewhere in that time frame.

We clearly had a positive impact from that pass-through in '24 and '25. If you were a part of our Investor Day and you saw I put in the slide we used in Investor Day, where we provided a kind of a scenario for 2030, where we showed Equifax growing well within our long-term growth framework, 8% between now and 2030, without any mortgage market growth or with very modest mortgage pricing increases in it.

So we're not counting on that to deliver our long-term framework kind of substantial mortgage pricing pass-through. We believe we have, in the mortgage business and in our broader non-mortgage business, which is the bulk of Equifax, lots of levers for growth to deliver a very strong framework going forward. And as we think about the kind of medium, longer term, we've got a lot of confidence in our ability to grow the business going forward without that kind of a pass-through.

Great. Thank you.

Kelsey Zhu, Autonomous Research.

Hi, good morning. Thanks for taking my question. I have two questions on the government vertical. So the first one being, we saw that you recently won an RFP with the State of Maine as part of your contract renewal. And judging from the cost proposal, it looks like the contract value saw significant improvement from, I think, it was $1 million to $2 million a couple of years ago, and the proposal would suggest $9 million a year with the recent renewal.

So just curious to hear your perspective on what's driving the significant growth there. We did see one of the main attributes that they ask for is hours worked. So maybe you can just talk about the traction you're gaining with state Medicaid programs after the One Big Beautiful Bill has been passed.

First, I would say, super impressive to have that level of detail on one of our contracts in Maine, and you actually got John and I both beat on any details on that contract. As you know, we've got contracts with many of the states, but there's many states where we don't. And typically, the contracts are with specific agencies in the states as opposed to the state itself. So we'll have to follow up with you with some details on that.

But I suspect it's an example of a state using more of our services for their social service delivery because of the accuracy and speed and productivity that it delivers to them. So we'll follow up with you on that one. Kind of broadly, we're not seeing any impact now in our revenue around the changes that were made in the bill that was signed around July 4 by President Trump that included a lot of the work requirements, as you pointed out, the six-month redeterminations and some of the more stringent income verifications.

As I commented earlier, we do -- we are having conversations now with states about their implementation of that, but it's not going to happen until, in my view, later this year or probably, more accurately, in 2026. But that planning has started. It's not going to show up in the revenue. But it gives us a whole bunch of confidence as we think about '26, '27, '28, there's a lot of positive macros in government for us at the federal and state level.

You didn't ask about it, but we commented in our comments on it, there's also a number of federal programs, which we're spending time in Washington quite strongly that would be net new programs for us. Like with IRS and Earned Income Tax Credit, we think there's an opportunity for them to use our data to verify eligibility, and the IRS identified $16 billion a year of fraud from those payments that we think we could help mitigate. The Do Not Pay portal, is something that we're working to get TWN embedded in that, which would also be a new program.

There's relationships with Department of Labor, Department of Education and SSA of kind of new programs that we think would help in that $160 billion of improper payments. And so a lot of focus there. Those will likely not impact the second half. But as we are hopeful and we're focused on making progress there, those will be positive for us in '26 and beyond. So big focus on government, both at the state and federal level, given the current administration's heavy, heavy focus on that $160 billion of improper payments.

Got it. Super helpful. And just more broadly, Mark, I was wondering if you can help us think through the OBBBA's impact on EWS. Because on the positive side, you've highlighted some of these drivers, the working hours requirement, the double redetermination, will obviously all present tailwinds for Equifax. But then on the flip side, there are some studies that would suggest that something like [8 million] fewer people will be able to prove that they're eligible for Medicaid enrollment, as an example, which could present a headwind to EWS. So just curious to hear your perspective on all of this.

Yeah. I think you point out with the increased redeterminations, with the work requirements, the increased income verification requirements, that will likely mean there's less people that are receiving the services, and the intention is, is that you're not receiving services if you don't deserve them and you don't qualify. So I think that's the intent.

But we think about the tailwinds as being way overwhelming that impact. Because remember, we characterize, and I think you support it, a $5 billion TAM if our services were used fully at the state and federal level for all social service delivery. And we think we have the right solution in order to deliver social services to those that qualify for it in a very accurate way.

And against that $5 billion, our revenue is roughly $800 million. So the tailwinds to go into that $4 billion-plus of market opportunity for us are just massive. And we've never -- I've only been at Equifax for seven years and change, but you can go back multiple administrations, there's never been a focus around eligibility accuracy and never been a focus on the improper payments.

You can go back to four, five, six administrations, than even Trump 1.0. There's just a real focus around getting social services to people that qualify and deserve it because they need it, but those that no longer qualify not receiving it.

And we shared before the income demographics of individuals receiving social services are very dynamic. The individuals have life challenges where maybe they're not working and qualify for social services and should get them. But then a few months later, they may work out their life challenges and be back working again and perhaps no longer qualify. That's what drives those improper payments.

So the use of our data, which is every pay period and is so broad-based now with the expansion of the network we have of 4.6 million companies and 197 million active records, we just have so much coverage that we're very optimistic around the future of our government business. And I think we've said in Investor Day and we said it consistently, we believe government will be our fastest-growing vertical across all of Equifax for as long as I can see.

Obviously, we're working through some transitions from the prior administration in 2025, but we like the macro a lot around government. And we're pouring more resources into it: product resources, product capabilities. I think you heard on Investor Day, we're rolling out our new total income solution in the third quarter.

It's going to expand and be integrated with our TWN solution to really add consumer-consented bank transaction data around gig income, that will just provide even more complete picture on that applicant that will help them get the services quickly but also help identify the improper payments. So we're pretty bullish around government going forward.

Thanks so much. Appreciate this.

Scott Wurtzel, Wolfe Research.

Hey, good morning, guys. Just one for me. Going back to the margin guidance, specifically on USIS. You raised your revenue growth guidance, but kept the margin guidance pretty flat or maintained it for the year. Just wondering what the dynamics are that are driving that. Thanks.

Sure. Again, as a reminder, their margins are increasing very nicely year-on-year. So I think they're delivering very, very good margin performance. Some of the outperformance, what you're seeing is in mortgage, right, because we took up the mortgage revenue guidance more than we -- more than the non-mortgage revenue guidance.

Mortgage has a lower margin profile because of the FICO costs and then the Tri-Merge costs that are embedded in there, so end up with a little bit of negative mix. And then also, obviously, they're continuing to invest aggressively to drive NPI faster.

So we think they're going to be able to deliver that -- they're going to deliver better revenue performance, hold the margins and then put themselves in a very good position to continue that growth as we get into '26 as they invest in new products.

Great. Thanks, guys.

George Tong, Goldman Sachs.

Hi, thanks. Good morning. Given the variability in state-level funding, are you considering any alternative pricing strategies to reduce revenue volatility in the EWS government segment?

Yeah, it's actually a good question. I don't know if I would answer it the way you asked it. But we're working to be super flexible, George, around helping states navigate this current period of, as you describe it, budget challenges. And I think we talked on the April call about where we're offering some subscription-type solutions for a time frame to help them bridge through their next budget calendar year.

As you might imagine, we want to support our customers, we want to be flexible around helping them navigate this, I guess, call it, 2025 window where the funding requirements changed by the prior administration. And we've had a lot of success with that. But governments and state governments are complex. They have lots of budget challenges.

There, as I said earlier in the call, most states are operating at deficit positions, meaning they're spending more than they're taking in. And that creates challenges when there's a new requirement for funds in order to continue a program like income verification for social services. But we've had a bunch of success, and we expect that to continue. And for sure, we're being super flexible around product, structural contract in order to help our customers through this period.

Very helpful. Thank you.

Ryan Griffin, BMO Capital Markets.

Hey, thanks so much. You previously called out deepening penetration and broadening the solution set with the background screeners at your recent Investor Day. I know it's early now, but any updates worth sharing your client feedback? And how does that mesh out with the price you take there as you look ahead? Thank you.

Yeah. I think we continue to -- Mark just talked about the way we're structuring contracts within government. We're doing something very similar in talent, right? We're putting contracts in place that provide them with access to all of our products, right, where we can drive revenue growth and we can help them drive higher usage of our products and more efficient usage of our products, which actually can improve their cost structure.

So we're doing this across multiple large customers in talent. It's something we expect to continue to expand. As you said, it's only been about a month. So I can't tell you there's been a lot of progress in the last 30 days. But I'd say directionally, that's something that we're moving forward with. And we've actually had some success already with some very large customers. So we feel good about that direction and the broadening product base that we have in town.

Great. Thank you.

Matt O'Neill, FT Partners.

(inaudible) just squeezing me in. Most of my questions were asked and answered, but I thought I would ask one. Recently, there's been some headlines and announcement that JPMorgan would be rolling out fees for API data pulls. I was curious if this would impact Equifax directly. And to the extent to which other banks were to follow suit, is that something that you would sort of become a potentially larger dynamic to think about for you guys? Thank you.

No, we don't expect that to be an impact on the kind of data we get from financial institutions for sure.

Great. Thanks.

Simon Clinch, Rothschild & Company Redburn.

Hi, thanks for taking my question. Maybe I could go back just the question previously about the challenges you're facing, I guess, at the state level, budgetary level, the headwinds that we're facing on the government side. What exactly are those states doing with their verifications? What data are they ending up using? Are they just doing -- just electing to do lower volumes? How is that actually mapping out? And then how do we think about, in the context of the OBBBA bill and the potential doubling of verifications, how do the budgetary constraints today manifest in that kind of environment as well?

Yeah. So on the first side, it varies by state on what they're doing. In some cases, they're relaxing income requirements. They're using state wage data that they get on a lag basis, and it's not as complete as certainly the TWN data.

In all cases, they want to go back to using the TWN data because of the speed of execution of the process, the productivity it delivers, as well as the accuracy from improper payments. And then with the federal government putting more stringent income requirements on the states, they really have to have more accurate process as what TWN delivers.

So that's something we're going to work through. And states just are complex, more complex probably than companies, around how rigid their budgets are from their calendar year process. And some of them have September calendar years, some of them have January calendar years.

So there's varying elements there. And we're working through it, but it's complex. And we think we will navigate through it. When you think about the future, obviously, when there's more stringent requirements from the federal level, they're going to have to put in their budgets in the future, whether it's in the '26 budget or '27 budget, the kind of expenditures in order to deliver that level of verification that's going to be required, whether it's going from 12 months to 6 months redeterminations, whether it's the more stringent upfront income requirements, whether it's the addition of work requirements.

That's the dialogues we're having now about our solutions to help support that. And then working with them in order to get this into their, number one, budget plans, but number two, for the future, but also into their workflow plans because they're going to have to change their processes, whether it's 6 months versus 12 months.

Adding a work requirement is super complex because, I think as you know, it includes not only employment, but also includes some volunteer work or other elements that can be used as evidence of your attempt to have activity when you're receiving social services.

So it's going to require a bunch of work. But when we think about the macro for Equifax with the $5 billion TAM, we think that's good news for us. And that's why we're putting so much effort into supporting our customers as they navigate through these changes.

That's really useful. Thanks, Mark. And just does this bill, do you consider the new policies as expanding that $5 billion TAM opportunity?

Yes, it's a great question. And it certainly does, and we haven't updated the $5 billion TAM. The way we think about it, $5 billion is a big number. It's a ton of opportunity. It's one of the biggest TAMs we have versus our $800 million.

But it's one -- obviously, that only went in place a few weeks ago. It's a great reminder that we should take a fresh look at the $5 billion around the impact that's going to have on us, and we'll do that. But look at it, you think about $800 million versus $5 billion, $4 billion-plus of potential growth, there's plenty of growth for us in the government sector, which is why we're energized about it, and that's why we're continuing to put more resources into it.

Great. Thanks so much.

Craig Huber, Huber Research Partners.

Great. Thank you. You may have touched on this as I missed part of the call earlier, but can you just give us your outlook for credit cards in your auto business for the second half of the year? And maybe also just touch on the volume levels that you've seen in those two areas now, say, pre-COVID, how they stack up versus history?

Yes. So we didn't give specific volume levels. What we did indicate was auto had been very strong through the first half of the year. And our expectation was we continue to see good auto performance as we move through the rest of this year. And that's what we've seen, even later in the -- as we move through the second quarter.

And around -- we didn't give credit card specifically, but our FI business in general, right, we had nice performance in the first quarter. It was a little weaker year-on-year in the second quarter. I think that was mostly related to just the grow-over. Second quarter of last year was very, very strong. Sequentially, we saw nice growth in our FI business versus the second quarter. And we expect to see good performance in FI in the back half of the year.

Okay. Great. Thank you.

Thank you. At this time, this concludes the question-and-answer session. Now I'll turn the floor back over to Trevor Burns for closing comments.

Yes. Thanks for your time today. And if you have any follow-up questions, you can reach out to myself or Molly. Thank you.

Thank you. This will conclude today's conference. You may now disconnect your lines at this time. Thank you for your participation, and have a wonderful day.