易速傳真 (EFX) 2021 Q2 法說會逐字稿

Hello, and welcome to the Equifax Second Quarter 2021 Earnings Conference Call and Webcast. (Operator Instructions) As a reminder, this conference is being recorded.

It's now my pleasure to turn the call over to Dorian Hare, Senior Vice President, Head of Corporate Investor Relations. Please go ahead.

Thanks, and good morning. Welcome to today's conference call. I'm Dorian Hare. With me today are Mark Begor, Chief Executive Officer; and John Gamble, Chief Financial Officer.

Today's call is being recorded. An archive of the recording will be available later today on the IR Calendar section of the News & Events tab at our IR website, www.investor.equifax.com.

During the call today, we will be making reference to certain materials that can also be found in the Presentations section of the News & Events tab at our IR website. These materials are labeled Q2 2021 Earnings Conference Call.

During this call, we will be making certain forward-looking statements, including third quarter and full year 2021 guidance, to help you understand Equifax and its business environment. These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from expectations. Certain risk factors that may impact our business are set forth in our filings with the SEC, including our 2020 Form 10-K and subsequent filings.

Also, we will be referring to certain non-GAAP financial measures, including adjusted EPS attributable to Equifax and adjusted EBITDA, which will be adjusted for certain items that affect the comparability of our underlying operational performance. These non-GAAP measures are detailed in reconciliation tables which are included with our earnings release and are also posted on our website.

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

Thanks, Dorian, and good morning. Before I address Equifax's strong second quarter results, I want to recognize our 11,000 associates around the globe for their continued hard work and dedication in these challenging times. Our team members are our most important asset, and they play a vital role in helping millions of consumers around the world get access to credit.

On July 1, we opened all of our U.S. offices fully and rolled out our new Equifax flex program, a hybrid working environment that gives our team the opportunity to work from home 1 day per week. Our 4-1 program recognizes our learnings from the past year around remote work during COVID but maintains the core of our Equifax culture of collaboration and teamwork that is optimized by an in-person work environment. We've also resumed in-person meetings with our customers, and I've been energized with the conversations that have taken place so far. It's great to be moving back to a new normal.

We had a very strong second quarter and first half, which built off our strong outperformance in 2020. Our team has executed extremely well against the critical priorities of our new Equifax 2023 strategy, which is shown on Slide 4. We are accelerating new product introductions, beginning to leverage our expanding Equifax cloud capabilities and our highly differentiated data assets. We continue to expand our differentiated data assets, both organically and through acquisitions and partnerships. While still in the early days, our new Equifax cloud data and technology capabilities are providing competitive advantages and capabilities that only Equifax can provide.

And our customer-first initiatives are deepening our relationships with customers and delivering new products and solutions along with above-market Equifax growth. And as always, we remain focused on extending our leadership in security. Our EFX2023 growth strategy is our compass for the future and drives all of our growth initiatives as we move through the second half and into '22 and beyond. We expect this focus to drive our top line and bottom line in the future.

Turning now to Slide 5. Equifax's financial performance in the second quarter was very strong and outperformed our underlying markets. Revenue at $1.235 billion was the highest quarterly revenue in our history, breaking the record from last quarter. Local currency revenue growth of 23% and organic local currency growth of 20% were both very strong and some of the highest growth rates in our history.

Our U.S. B2B businesses of Workforce Solutions and USIS, which together represent over 70% of our revenue, again drove our overall growth, delivering very strong 25% total and 22% organic revenue growth despite the headwinds from the mortgage market that declined about 5%. The 5% decline in the mortgage market was about 500 basis points more than our flat expectation we shared with you in April. U.S. B2B organic non-mortgage growth of 20% accelerated sequentially from the 16% we delivered in the first quarter. The 20% organic growth is also a record and reflects the underlying strength of Workforce Solutions and USIS' return to a competitive position.

I'll cover the BU performance -- level performance in detail in a moment, but at a high level, Workforce Solutions again led Equifax growth with revenue up a strong 40%. And as a reminder, this is off growth of 53% in second quarter last year and a mortgage market that declined 5% in the quarter. USIS delivered another strong quarter with revenue up 11%, driven by non-mortgage total revenue growth of over 20% and strong organic revenue growth of 14%.

International delivered a very strong quarter of COVID recovery with revenue growth of 25% in local currency, and importantly, all regions internationally delivered growth above 20%. Slightly better than expected, GCS revenue was down 3% in local currency. However, our consumer direct revenue delivered 11% growth in the quarter, its second consecutive quarter in double digits.

Second quarter Equifax adjusted EBITDA totaled $431 million, up 20%, with margins of 34.9%. Margins were down 160 basis points versus last year due to the inclusion of the cloud technology transformation costs in our adjusted results in 2021, which were excluded last year. This negatively impacted second quarter adjusted EBITDA margins by 310 basis points. Adjusting for cloud transformation costs of $38 million in the quarter, our margins would have been up a strong 150 basis points.

We are getting strong leverage out of our above-market revenue growth. Adjusted EPS of $1.98 per share was up a strong 21% from last year. Again, adjusting for the cloud transformation costs, adjusted EPS would have been up a very strong 36%, reflecting the strong performance and operating leverage of Equifax.

During the quarter, we continued to make significant progress with the Equifax Cloud Data and Technology Transformation, including an additional 7,700 customer migrations to the cloud in the United States and more than 900 migrations internationally. We remain on track with our cloud transformation and are confident in our plan. We continue to expect the North American transformation to be principally complete in early 2022, with the remaining customer migrations completed by the end of next year. International transformation will follow North America, being principally completed by the end of 2023.

And as you know, last year, we started to ramp up our focus and resources on new products, leveraging the new Equifax cloud data and capabilities. In the second quarter, we released 46 new products, which is up almost 2x from the 24 products we released a year ago in the quarter. These new products are increasingly leveraging the new Equifax cloud to deliver better data and decisioning for our customers. Driving NPIs leveraging the new Equifax cloud is central to our EFX2023 growth strategy. And we continue to expect our Vitality Index, defined as revenue from new products introduced in the last 3 years, to exceed 8%, a big step up from the 5% last year and a reflection of the strong product focus across EFX.

Our first half performance exceeded our expectations, and we are clearly seeing continued strong momentum as we move into the second half. Based on our strong first half results and confidence in the future, we increased our full year revenue guidance by $155 million to a midpoint of $4.78 billion, which is up 400 basis points to 16% growth. We also increased our full year adjusted EPS guidance by $0.45 per share to a midpoint of $7.35 per share, which, adjusting for the technology transformation cost, is up 700 basis points to 19% growth. This includes our expectation that the U.S. mortgage market as measured by credit inquiries will decline approximately 8% in the year, which is consistent with the guidance we provided in April.

In the second quarter, Equifax core revenue growth, the green section of the bars on Slide 6, accelerated to 29%. This is up significantly from the 20% core revenue contribution we delivered in the first quarter and 11% in the fourth quarter and well above our historical core growth rates. While our outperformance in the mortgage market continues to drive significant core growth, the contribution from U.S. non-mortgage and international increased significantly in the quarter, reflecting approximately 50% of core revenue growth in the quarter excluding acquisitions and FX favorability.

Turning now to Slide 7. Our strong second quarter results were broad-based and reflect better-than-expected performance for all 4 Equifax business units. Workforce Solutions, our largest business, had another exceptional quarter, delivering 40% revenue growth and 58% adjusted EBITDA margins. Again, as a reminder, the 40% revenue growth is on top of 53% growth last year in the second quarter.

EWS is cementing itself as our largest and most valuable business and is powering our results, representing 40% of total Equifax revenue in the quarter. EWS Verification Services revenue of $395 million was up a strong 57%. Verification Services mortgage revenue grew 52% in the quarter despite the 5% decline in the mortgage market from increased records, penetration and new products. Importantly, Verification Services non-mortgage revenue was up over 60% in the quarter and up over 15% sequentially from the first quarter.

Our government vertical, which provides solutions to federal and state governments in support of assistance programs, including food and rental support, grew over 10% in the quarter. Government remains one of our largest non-mortgage segments, representing about 1/3 of non-mortgage verification revenue. We continue to expand our products and solutions in the government vertical and expect our new Social Security Administration contract to go live this quarter with revenue ramping to a $40 million to $50 million run rate in 2022.

Talent solutions, which provides income and employment verifications as well as other information for the hiring and onboarding process through our EWS data hub, had another outstanding quarter from customer expansion and NPIs, growing over 200%. Talent solutions now represents almost 30% of non-mortgage verification revenue. Building out the EWS data hub that leverages the work history in our TWN database with other unique data elements used in the hiring process is a priority for us. Over 75 million people change jobs in the U.S. annually, with the vast majority having some level of screening as a part of that hiring process.

Our non-mortgage consumer business, principally in banking and auto, showed strong growth of about 50% in the quarter as well, both from deepening penetration with lenders and some recovery in these markets. Debt management also returned to growth in the quarter.

Employer Services revenue of $101 million was about flat in the quarter, as expected. Combined, our unemployment claims and employee retention credit businesses had revenue of about $64 million, down over 15% from last year. Substantial declines in UC revenue in the second quarter were partially offset by new ERC revenue that began in the quarter as we support businesses in obtaining federal employee retention credit payments.

Employer Services non-UC and ERC businesses had revenue up over 50% in the quarter. Our I-9 business, driven by our new I-9 Anywhere product, continued to show very strong growth, up over 50%. Our I-9 business is now almost half of Employer Services non-UC and ERC revenue. Reflecting on the growth in I-9 and the return to growth of Workforce Analytics, we expect Employer Services non-UC and ERC businesses to deliver organic growth of over 20% for the year.

Reflecting on the power and uniqueness of the TWN data set, strong verifier revenue growth and operating leverage result in adjusted EWS EBITDA margins of 58%, a 160 basis point expansion from last year. Excluding technology transformation expenses, EWS margins would have been up over 240 basis points. Rudy Ploder and the EWS team delivered another outstanding quarter and are positioned to deliver a very strong 2021. Workforce Solutions is our most powerful and unique business and is powering Equifax results, would grow substantially above the rest of the company.

Turning now to USIS. They had another strong quarter with revenue up 11% driven by strong performance across the business. Total USIS mortgage revenue of $160 million was down about 2% in the quarter while mortgage inquiries were down 5%, below the flat expectation we shared in April. John will cover our updated view of the mortgage market shortly.

USIS mortgage revenue outgrew the market by over 300 basis points, driven by growth in marketing and debt monitoring products. Importantly, non-mortgage revenue performance was up 21% with strong organic growth of 14%. This performance reflects the commercial focus of Sid Singh and his team and their competitive position in the marketplace.

Importantly, organic non-mortgage revenue also delivered strong sequential growth acceleration of 250 basis points from the first quarter's 11%, an important indicator of the continued strengthening of the USIS business. Banking and insurance both grew over 20% in the quarter. Auto and direct to consumer were both up over 10%, and telco and commercial were just above flat in the quarter.

Financial Marketing Services revenue, which is, broadly speaking, our offline or batch business, was $59 million in the quarter and up about 14%. The strong performance was driven by marketing-related revenue, which is up over 20%; and ID and fraud revenue growth of over 15% as consumer marketing and originations ramped up coming out of COVID. In 2021, marketing-related revenue is expected to represent about 40% of FMS revenue; identity and fraud, above 20%; and risk decisioning about 35%.

The strong growth across our non-mortgage business is encouraging as we move into the third quarter and the rest of 2021. The USIS new deal pipeline remains very strong and comparable to the strong levels we've seen so far in 2021. We are seeing the highest growth in auto, financial services and mortgage.

USIS adjusted EBITDA margins were 40.3% in the quarter. The decline of 380 basis points from second quarter last year was principally due to the costs related to the cloud transformation, both the cost of redundant systems and the inclusion in our adjusted results of the technology transformation costs which were being excluded in 2020. Sales and marketing expenses also increased in the quarter and sequentially to leverage both the stronger U.S. markets and increased NPI rollouts to drive growth.

Shifting now to international. The revenue was up a strong 25% on a local currency basis, which is the third consecutive quarter of growth in our global markets. Revenue growth was up over 20% in all of our markets in Canada, Asia Pacific, Latin America and Europe.

Asia Pacific, which is principally our Australia business, had a very strong quarter with revenue up $91 million or up about 21% in local currency. Australia consumer revenue turned positive and was up 23% versus last year and up about 2% sequentially. Our commercial business combined online and offline revenue was up a very strong 26% in the quarter and almost 18% -- up almost 18% sequentially. Fraud and identity was up 30% in the quarter, following 15% growth in the first quarter.

European revenues of $68 million were up 27% in local currency in the quarter. Our European credit reporting business was up about 20% with strong growth in both the U.K. and Spain. In U.K., which is our largest European market, we saw growth of over 25% in consumer data analytics and scores and over 40% growth in commercial. Our European debt management business revenue increased about 30% in local currency, off the lows we saw in the second quarter last year during the COVID recession.

Canada delivered record-setting revenue of $47 million in the quarter, up about 26% in local currency. Consumer online was up about 26% in the quarter and an improvement of 12 percentage points from the first quarter. Double-digit growth in commercial, analytical and decision solutions and ID and fraud also drove growth in the Canadian revenue in the quarter.

Latin American revenues of $44 million grew 30% in the quarter in local currency, which was the second consecutive quarter of growth coming out of COVID. We continue to see the benefits in Latin America of the strong new product introductions the team has rolled out over the past 3 years.

International adjusted EBITDA margins at 27.3% were up 540 basis points from last year, driven by leverage on revenue growth and continued very good cost control by the international team. Excluding the impact of the inclusion of the technology transformation costs in adjusted EBITDA, margins were up over 750 basis points.

Global Consumer Solutions revenue was down 2% on a reported basis and 3% on a local currency basis in the quarter and slightly above our expectations. We again saw strong double-digit growth in our global consumer direct business which sells directly to consumers through equifax.com and which represents a little over half of GCS revenue. Direct to consumer revenue was up a strong 11% in the quarter, their fourth consecutive quarter of growth.

The decline in overall GCS revenue in the second quarter was again driven by our U.S. lead generation partner business. We expect the GCS partner business and GCS business overall to return to growth in the fourth quarter. GCS adjusted EBITDA margins of 22.5% were up just above 170 basis points, which was better than our expectations.

Turning now to Slide 8. Workforce Solutions continues to power Equifax and is clearly our strongest, fastest growing and most valuable business. Workforce Solutions revenue grew a very strong 40% in the quarter with core revenue growth of 46%. And again, the 40% growth in the quarter was on top of 53% growth in the second quarter last year. This above-market performance is driven by the uniqueness of the TWN income and employment data, the scale of the TWN database and the consistent execution by Rudy and his team.

At the end of the second quarter, TWN reached 119 million active records, an increase of 13% or 14 million records from a year ago and included 91 million unique records. At 91 million uniques, we now have over 60% of nonfarm payrolls, which makes our TWN data set more valuable to our customers by delivering higher hit rates. Beyond focusing on adding the over 50 million nonfarm payroll records not in the TWN database yet, we're also focused on adding data records from the 40 million to 50 million gig workers and around 30 million pension recipients in the United States marketplace to further broaden the TWN database. We have plenty of room to grow.

We are now receiving contributions from 1.2 million companies across the U.S., up from 27,000 employers a short 2-plus years ago. And as a reminder, over 60% of our records are contributed directly by employers that EWS provides comprehensive employer services to like unemployment claims, W-2 management, I-9, WOTC, employee retention credit, HSA and other HR and compliance-related solutions. These relationships have been built up over the past decade by the Workforce Solutions team.

The remaining 35% are contributed through partnerships with payroll providers and HR software companies, most of which are exclusive. The exclusive arrangement with a major payroll processor that we announced on our February call is still on track to become active later this year. We have a dedicated team with an active pipeline of record additions to continue to expand our TWN database in the future. And as you know, as we add records to the data set, they're monetized almost instantly with our customer system-to-system integrations interacting with our TWN database.

Workforce Solutions continues to grow penetration in key existing markets while expanding into new markets. We continue to increase our penetration in the mortgage market. As of the most recent data available at the end of 2020, Workforce Solutions received an inquiry in almost 60% of completed U.S. mortgages, which is up from 55% in 2019. This 500 basis point increase shows a continuation of growth in TWN mortgage penetration as well as the substantial opportunity for continued growth that exists in mortgage with only 60% of mortgages using TWN data today.

We're also seeing substantial growth in TWN in the noncredit markets of government and talent solutions as well as increased TWN usage within the card and auto verticals. As we discussed in the past, growing system-to-system integrations is a key lever in driving both increased penetration and the increased number of polls per transaction for Workforce Solutions. During the quarter, about 75% of TWN mortgage transactions were fulfilled system to system, which is up 2x from the 32% in 2019.

The Workforce Solutions new product pipeline is also rapidly expanding as our teams leverage the power of our new Equifax cloud infrastructure. We plan to roll out new products in mortgage, talent solutions, government and I-9 in the second half of the year. New product revenue will increase in '21 and '22 as we begin to reap the benefits of our new products introduced to the market by Workforce Solutions in the past 18 months.

Rudy and the Workforce Solutions team have multiple levers for growth in '21, '22 and beyond. Workforce is clearly our largest and most valuable business and will continue to power our results in the future. Workforce Solutions' growth rates and margins are highly accretive to Equifax now and in the future.

Slide 9 provides perspective on the tremendous growth workforce has delivered since 2017 and the increasing impact that the business has on Equifax with its highly accretive revenue growth rates and margins. In 2017, Workforce Solutions revenue and EBITDA made up 23% of Equifax revenue and 27% of business-unit EBITDA. For the first half of '21, Workforce Solutions revenue and EBITDA have increased to 40% of Equifax revenue and over half of Equifax business-unit EBITDA. In short 4 years, Workforce Solutions has more than doubled in size and is now almost 50% in the first half versus the same period last year -- is up almost 50% in the first half versus same period last year.

Our unique TWN employment and income assets and the continued expansion of employment-related assets within the Equifax data hub provides opportunities for both ongoing outsized growth in Equifax traditional financial markets of mortgage, banking, auto as well as a substantial growth in new verticals of government, talent solutions and others to come. We expect that Workforce Solutions will continue to be an increasingly large part of Equifax and power our top and bottom line with their above-market growth and margins.

Turning to Slide 10. This provides a perspective on the return to growth USIS delivered since 2018. USIS has delivered strong double-digit revenue growth over the past 6 quarters. Although the strong mortgage market has advantaged USIS, as shown in the bottom left of the slide, USIS has driven consistent sequential improvement in non-mortgage growth since second quarter last year, with the overall growth in USIS being driven by 18% non-mortgage growth in the first half of 2021.

The USIS team is also increasingly leveraging the Equifax cloud to design and implement new NPIs for customers. The Equifax cloud, new products and our unique data assets are making USIS teams more competitive in the marketplace. The USIS team is focused on integrating Kount into the new Equifax cloud, and we're seeing increased use cases and opportunities with our ID and fraud vertical from the Kount acquisition. We expect ID and fraud to play a large role in USIS growth in 2021 and beyond. I encourage you to review the ID and fraud slides in our broader investor presentation, which can be found on our Investor Relations website, following this call.

Turning to Slide 11. This highlights the core growth performance in our mortgage for our U.S. B2B businesses: Workforce Solutions and USIS. Our U.S. B2B businesses delivered a combined 25% revenue growth in mortgage in the second quarter, which was 30 points stronger than the 5% mortgage decline we saw in overall mortgage market. The strong outperformance was again primarily driven by Workforce Solutions with core mortgage growth of 57%.

Consistent with past quarters, EWS' outperformance was driven by new records, increased market penetration, larger fulfillment rates and new products, proof that lenders are increasingly becoming reliant on the unique TWN income and employment data when making credit decisions in the mortgage space. USIS delivered 4% core mortgage revenue growth in the second quarter, driven primarily by new debt monitoring solutions and further support from marketing. Our ability to substantially outgrow underlying markets is core to our business model and core to our future growth.

I'll now turn the presentation over to John to discuss current trends in the mortgage market and to walk through our third quarter and revised full year 2021 guidance.

Thanks, Mark. As Mark discussed, our 2Q results were very much stronger than we discussed with you in April, with revenue about $85 million higher than the midpoint of the expectation we shared. For perspective, all BUs performed well relative to the expectations we shared.

Performance in non-mortgage in our U.S. businesses, workforce and USIS, was very strong in absolute terms and relative to the expectations we shared. Our unemployment claims and employee retention credit businesses and Workforce Solutions declined in the quarter but much less than expected. International revenue performance was also very strong, again, both in absolute terms and relative to our expectations. And although the mortgage market was down 5% versus our expectation of flat, our mortgage revenue, principally in workforce, was not impacted to the same degree. This strong revenue drove the upside in adjusted EPS relative to the expectations we shared.

Now turning to mortgage. As shown on Slide 12, U.S. mortgage market credit inquiries declined 5% in 2Q '21, weaker than the about flat we had included in our guidance. Our financial guidance for 2021 assumes that the trend in mortgage credit inquiries we saw in late June and July continues in 3Q '21, resulting in a decline of mortgage market credit inquiries of about 23% in 3Q '21 versus 3Q '20. Although our second half 2021 market credit inquiry assumptions are down significantly from the second half of '20, they remain above the averages we saw prior to 2020.

As shown on the left side of Slide 13, mortgage market indicators remain above the peak seen in previous mortgage cycles. Despite the substantial refinance activity that has occurred over the past year, the number of U.S. mortgages that could benefit from a refinancing remains at a relatively strong level of about 12 million. Refinance activity continues to benefit from low and recently declining mortgage rates and the substantial appreciation in home prices over the past year. Based upon our most recent data from January, mortgage refinancings continue to run just under $1 million per month.

As shown on the right side of Slide 13, the pace of existing home purchases continues at historically very high levels. The strong new purchase market is expected to continue throughout 2021 and into 2022.

Slide 14 provides our guidance for 3Q '21. We expect revenue in the range of $1.160 billion to $1.180 billion, reflecting revenue growth of about 9% to 11%, including a 1% benefit from FX. Acquisitions are positively impacting revenue by 1.8%. We're expecting adjusted EPS in 3Q '21 to be $1.62 to $1.72 per share compared to 3Q '20 adjusted EPS of $1.91 per share.

In 3Q '21, technology transformation costs are expected to be around $40 million or $0.25 a share. Excluding these costs, which were excluded from 3Q '20 adjusted EPS, 3Q '21 adjusted EPS would be $1.87 to $1.97 per share. This performance is being delivered in the context of a U.S. mortgage market which is expected to be down 23% versus 3Q '20.

Comparing the midpoint of our 3Q '21 guidance sequentially to our very strong 2Q '21 performance, revenue is down about $65 million. The drivers of this decline are 2 main factors. The largest factor is a decline in mortgage revenue driven by the impact of the expectation we shared regarding the decline in the U.S. mortgage market. The other significant factor is our expectation that we'll see a significant sequential decline in unemployment claims revenue.

Our guidance for adjusted EPS decline is about $0.30 per share sequentially. The bulk of this decline is driven by lower gross profit on the revenue expectation I just discussed. In addition, we are increasing investments sequentially in sales and marketing, particularly in the U.S. as well as increasing investment in product and technology.

Slide 15 provides the specifics on our 2021 full year guidance. We are increasing guidance substantially, reflecting our very strong 2Q '21 performance. In the second half of 2021, we expect strong growth in our U.S. non-mortgage business and international and a return to growth in GCS. We also expect our U.S. mortgage business to grow about 15% in 2021, over 20 points faster than the expected approximately 8% decline in the U.S. mortgage market.

2021 revenue of between $4.76 billion and $4.8 billion reflects revenue growth of about 15% to 16% versus 2020, including a 1.5% benefit from FX. Acquisitions are positively impacting revenue by 1.9%. EWS is expected to deliver about 30% revenue growth with continued very strong growth in Verification Services. USIS revenue is expected to be up mid- to high single digits, driven by growth in non-mortgage. International revenue is expected to deliver constant-currency growth of about 10%. And GCS revenue is expected to be down mid-single digits in 2021. 3Q '21 revenue is also expected to be down mid-single digits with 4Q '21 returning to growth.

As a reminder, in 2021, Equifax is including all technology transformation costs in adjusted operating income, adjusted EBITDA and adjusted EPS. These onetime costs were excluded from adjusted operating income, adjusted EBITDA and adjusted EPS from 2017 through 2020.

In 2021, Equifax expects to incur onetime cloud technology transformation costs of approximately $155 million, a reduction of over 55% from the $358 million incurred in 2020. The inclusion in 2021 of this about $155 million in onetime costs would reduce adjusted EPS by about $0.97 per share. This estimate of onetime technology transformation costs is up $10 million from the $145 million we guided in April. Given our very strong performance in 2021, we are investing to accelerate our tech transformation globally.

2021 adjusted EPS of $7.25 to $7.45 per share, which includes these tech transformation costs, is up 4% to 7% from 2020. Excluding the impact of the tech transformation cost of $0.97 per share, adjusted EPS in 2021 would show growth of about 18% to 21% versus 2020.

2021 is also negatively impacted by the redundant system costs of $79 million related to 2020. These redundant system costs are expected to negatively impact adjusted EPS by about $0.49 per share and negatively impact adjusted EPS growth by about 7 percentage points. Additional assumptions included in 2021 guidance will be posted to the July Investor Relations presentation to be posted later today.

Slide 16 provides a view of Equifax total and core revenue growth that is included in our current guidance. Core revenue growth excludes the impact of movements in the mortgage market on Equifax revenue as well as the impact of changes in our UC claims and employee retention credit businesses within our Employer Services business. Employee retention credits are specific U.S. government incentives for companies to retain their employees in response to COVID-19, and the associated revenue is not expected to continue into 2022. The data shown for 3Q '21 and full year 2021 reflects the midpoint of the guidance ranges we provided.

In 1Q '21 and 2Q '21, we delivered very strong core revenue growth of 20% and 29%, respectively. We continue to deliver strong core revenue growth in 3Q '21 of 17% and 19% for all of 2021 in our expectations. As Mark mentioned earlier, the composition of our core revenue growth is becoming more balanced, reflecting substantially increasing contributions from U.S. non-mortgage, international and as we enter 4Q '21, GCS. And we continue to expect our mortgage business to grow at rates faster than the overall mortgage market. This very strong performance, we believe, positions us well entering 2022 and beyond.

And now I'd like to hand it back to Mark.

Thanks, John. Turning now to Slide 17. As I referenced earlier, Bryson Koehler and our technology teams continue to make very strong progress on our new Equifax Cloud Data and Technology Transformation, with the North American technology transformation expected to be principally complete in early 2022 and the remainder of North America transformation and customer migrations completing by the end of next year and our international transformation following North America, being principally complete by the end of 2023.

Equifax's transformation to a cloud-native environment delivers a host of capabilities that only Equifax can provide as the only cloud-native data and technology company. The Equifax cloud will deliver always-on stability, accelerated response time and built-in industry-leading security that will provide our customers with real-time access to data and insights that they can rely on to make decisions. The Equifax cloud, through our Ignite analytics platform, will allow customers and Equifax data scientists to work together, utilizing EFX unique data assets and customer proprietary assets to define attributes and models to improve customer outcomes. And we will continue to accelerate the time from analytics to production to bring new products and solutions to market faster and more efficiently, enhancing customer benefits and Equifax revenue. Already, the Equifax cloud has enabled us to produce new products designed and delivered on our cloud infrastructure 4x faster than the past.

We began to leverage these cloud benefits in 2020 as we more effectively develop new products and deliver them to market, leveraging the new EFX cloud, growing new product introductions by 44% last -- in 2020. These new improvements have further accelerated in 2021 as we are delivering the highest number of new products in our history and we are realizing higher revenue from new product introductions.

Slide 18 provides an update on NPIs, a key driver of our current and future revenue growth. As we just discussed, the new cloud transformation has significantly strengthened our NPI capabilities, allowing us to increase both the number of NPIs and the revenue generated from new products. We continue to expand our product resources and focus on transforming Equifax into a product-led organization, leveraging our best-in-class Equifax cloud-native data and technology to fuel top line growth.

As I've discussed earlier, in the second quarter, we delivered 46 new products, which is up about almost 2x from the 24 we delivered last year. Year-to-date, we've rolled out 85 new products, which is up 44% from the 59 that we delivered in the first half last year. We're energized as we continue to grow off an NPI record-setting 2020.

We wanted to highlight some of these products rolled out during the quarter, which we expect to drive revenue growth over the second half and the next few years. Our new Payment Insights products launched by USIS in April was delivered in partnership with Urjanet and uses consumer-permissioned utility and telco data to improve views of customers' -- consumers' financial picture and help credit invisibles. The cloud-based solution promotes greater financial inclusion regardless of the consumers' traditional credit score by empowering consumers to share utility and telco payment history with banks or lenders when applying for loans or other services. The product also allows lenders to seamlessly integrate data into review processes while meeting industry-leading standards for protection of consumer data security, confidentiality and integrity.

Workforce Solutions launched a new mortgage 36 product in May. This solution addresses income verification needs by enabling mortgage lenders to poll an extended set of both active and inactive income and employment data for more complex income mortgage applicants where additional history may be needed in the underwriting process.

EWS also launched a new Talent Report Employment Staffing product in April. This solution provides flexibility on the number of past employers polled to meet the employment verification needs of the employer. Staffing agencies leverage VOE as a reference track, often looking to verify only 2 employers, which this product helps deliver.

In the United Kingdom, we launched the Credit Vitality View app. This Ignite-based app visualizes key credit data trends across the U.K. versus a company's own performance. It uses a range of macroeconomic measures and includes filtering capabilities so our customers can focus on the performance of their own portfolio and product lines such as mortgages or credit cards. The app also can illustrate these company and market trends over multiple years.

Lastly, we introduced the Equifax Affordability solutions in Australia and New Zealand. These solutions deliver automated, categorized income and expense verifications in a way that delivers meaningful and actionable insights for our customers. Our customers can easily digest and act on these insights through the delivery of comprehensive consumer affordability reports, which are now required from a regulatory standpoint in these markets. This new solution will reduce loan application processing time and cost, improve conversion rates and maximize efficiency while fulfilling responsible lending regulatory requirements, delivering overall improvements to the consumer experience.

These are just some examples of the new solutions we launched during the quarter. We're focused on leveraging our new cloud capabilities to increase NPI rollouts and new product revenue in 2021 and beyond. Growing NPIs is central to our EFX2023 growth strategy.

As a reminder, our Vitality Index is defined as the percentage of revenue delivered by NPIs launched during the past 3 years. In April, we increased our Vitality Index outlook for 2021 from 7% to 8%, and we remain confident in this framework for 2021. As you can see from the left of the slide, our 8% vitality outlook for 2021 is a big step forward from the 5% vitality we delivered last year. NPIs are a big priority for me and the team as we leverage the Equifax cloud for innovation, new products and growth.

Slide 19 showcases the capabilities we've been building over the past 3 years that only Equifax can bring to the marketplace. We have unique market-leading differentiated data at scale that includes our 228 million ACRO credit records, 119 million TWN income and employment records and additional data at scale that comes from our alternative data sets, including Kount, NCTUE, PayNet, IXI and others.

Our advanced analytics allow us to build and test attributes faster, leverage artificial intelligence and machine learning and develop models in days and weeks where it used to take months. Our team of 320 data scientists located around the world are leveraging our advanced analytics and Equifax cloud-native infrastructure to define and deploy cloud-native products and solutions. And our cloud-native data fabric is allowing us to key and link our unique data asset in ways that we could never do before. Our data fabric stretches across the globe, and we are in the early innings of leveraging its global capabilities. Only Equifax can provide these capabilities, and we are on offense as we deploy these into the marketplace.

Wrapping up on Slide 20. Equifax delivered a record-setting second quarter, and we have strong momentum as we move into the second half. Our 26% overall and 29% core revenue growth in the quarter reflects the strength and breadth of our business model and early benefits from our Equifax cloud investments and of course, enhanced focus on new products.

We've delivered 6 consecutive quarters of strong above-market double-digit growth. Our strong performance reflects the execution against our EFX2023 strategic priorities. Equifax is on offense.

As we discussed earlier, we're confident in our outlook for 2021, and we raised our full year midpoint revenue guidance to $4.78 billion, increasing our 2021 growth rate by over 370 basis points to almost 16%. We also raised our midpoint EPS guidance to $7.35, increasing the growth rate by over 640 basis points.

As we discussed earlier, Workforce Solutions had another outstanding quarter, delivering 40% revenue growth and 58% EBITDA margins. EWS is our largest, fastest growing and most valuable business. During the quarter, Workforce Solutions delivered 40% of Equifax revenue, and we expect EWS to continue to drive Equifax's operating performance throughout 2021 and beyond as consumers recognize the value of our growing TWN database. Rudy and his team remain focused on driving outsized growth by focusing on their key growth drivers of adding new records, rolling out new products, driving penetration, driving their new talent solutions data hub, expansion into new verticals and leveraging their new EFX cloud capabilities.

USIS also delivered another strong quarter of 11% growth, driven by their 14% non-mortgage organic growth. We expect USIS non-mortgage growth to continue to be strong due to the economic recovery, the commercial focus of the team, new products and our unique alternative data assets. Sid and the USIS team are competitive and winning in the marketplace and will continue to deliver in '21 and beyond.

International grew for the third consecutive quarter, accelerating to 25% in local currency in the second quarter as economies reopen and business activity resumes. Our new international leader, Lisa Nelson, has high expectations for our team, and we expect continued strong growth through the rest of 2021.

We're beginning to realize the benefits of our EFX cloud data and technology transformation as we accelerate new product innovation with products designed and built off of our new EFX cloud infrastructure. We spent the last 3 years building the Equifax cloud, and we're now starting to leverage our new cloud capabilities. As we move through the rest of the year and into 2022, we will increasingly realize the top line, cost and cash benefits from these new cloud capabilities.

Accelerating new products, leveraging our differentiated data and the new EFX cloud capabilities is central to our EFX2023 growth strategy. We're beginning to see the benefits of our new product focus and resources leveraging the EFX cloud with the 85 NPIs completed in the first half, pacing well ahead of the record 134 we delivered last year.

As we discussed in the past, bolt-on acquisitions that expand our differentiated data assets, strengthening Workforce Solutions and broadening our ID and fraud capabilities are integral to our future growth framework. We reinvested our strong cash flow in 5 bolt-on acquisitions so far this year that will add 170 basis points to our revenue in the second half. We will continue to focus on accretive bolt-on acquisitions that strengthen Workforce Solutions.

I'm more energized now than when I joined Equifax 3 years ago about the -- what the future holds as we move from building the cloud to our next chapter of growth, leveraging the new Equifax cloud for innovation, growth and new products. We have strong momentum across our business as we move into the second half, and we're beginning to deliver on the benefits of the significant cloud data and technology investments we made over the past 3 years. Equifax is on offense and positioned to bring new and unique solutions to our customers that only Equifax can deliver, leveraging our new EFX cloud capabilities.

With that, operator, let me open it up for questions.

(Operator Instructions) Our first question today is coming from David Togut from Evercore.

Good to see the strong growth in NPI continuing and the 13% new record growth. Clearly, the first half outperformance versus your guidance continue to come from the strength in Workforce Solutions. So as we look at the second half guidance, what's embedded in terms of the outperformance of EWS core mortgage growth versus the mortgage market, 62 percentage points in Q2? How are you thinking about the back half in terms of EWS core mortgage outperformance?

Yes. So David, we don't give specifics by BU in terms of how we break down core. But as you can see from the detail we gave, we're expecting to have very good core growth in the third quarter of 17%. We're expecting EWS to continue to perform extremely well, and we're expecting them to continue to substantially outgrow the mortgage market.

And as we indicated for the full year, we expect our mortgage revenue to grow 15%. That's up from what we've talked about in April, and that's more than 20 points higher than the 8% decline that we're talking about for the overall mortgage market itself. So we expect EWS to continue to substantially outperform and continue to deliver very high core revenue growth.

As you know, David, there's multiple levers by the Workforce Solutions team to drive that outperformance, specifically in mortgage and of course, across all their other verticals. But the record additions help fuel that. The new product rollouts that the team did last year and are continuing this year in the mortgage space will drive that.

We gave some visibility around our growth in the mortgage market itself. As you know, we don't see every mortgage. So the team is focused on adding income and employment from Equifax. The large portion of mortgages, we still don't see. And of course, we're continuing to drive the system-to-system integration. So all of those levers are what Rudy and his team are deploying to continue to drive that outperformance of not only the mortgage market but all of their markets.

Appreciate that. Just as a quick follow-up, looking at the 14% USIS organic non-mortgage growth in Q2. In which verticals are you gaining significant market share? And if you could maybe kind of compare where you are today in kind of non-mortgage USIS versus where you were a year ago.

Yes. I would say, first, we're certainly benefiting from the economic recovery. We've seen that in card issuers, and really, all of the financial institutions are doing more marketing. You've seen strong performance there. And the consumer is back in accessing credit products. So you've seen that both on the mortgage side, but I think you're focused more on the non-mortgage, of course.

The new product rollouts are benefiting. Sid and his team is -- they're focused on bringing new products to market. And really broadly, we've got a strong focus. We've been very clear over the last really almost 24 months about the focus that the team has on building out their deal pipeline, they're focused on their customers. We've rebuilt and enhanced our commercial team with more coverage. We've added more resources. We've relevered the commercial team. So all of those are benefiting from -- us. And we've got a lot of confidence in our ability to be competitive in the non-mortgage market in USIS going forward.

Our next question today is coming from Kevin McVeigh from Crédit Suisse. (Operator Instructions)

I'm going to ask one question because it's got a couple of parts to it. But Mark, you've got -- EWS is 40% of revenue today, 53% of EBITDA versus about 23% in 2017, somewhere around there. It feels to me like what's happening with the TTI is you're accelerating the shift to EWS. So can you help us understand kind of the dynamics of how the cloud transition impacts EWS versus the core business?

And then within the context of that, if my math is right, the average client size was about 4,000 contributors in terms of employees in '18 versus about 100 today. So how do those dynamics kind of impact EWS? What I'm trying to get at is it feels like there's going to be a structurally higher level of growth looking beyond the volatility with just mortgage overall. And again, it feels like that's something structural. So just maybe trying to frame that, to the extent you can help us.

Sure. Just broadly, as you know, we're focused on growing all of our businesses, all 4 business units. And clearly, Workforce Solutions is very unique and really driven by the uniqueness of the income and employment data that it has at scale and the value of that. And we've talked, I think, Kevin, in the past that there was an element of catalyst from our perspective when the data set got over 50% of nonfarm payroll, call it, a year ago. And it just made the data set more valuable. And when you think about someone's credit history, did they pay their bills is very valuable, but are they working and how much do they make is equally valuable. And really, only Equifax has that data set.

The Workforce Solutions business has levers, as we've talked a couple of times on the call already, that are really quite unique. And I think it starts with records. Most data businesses have all the records. Workforce Solutions has shown a history of building out their data set and is -- I've talked in my comments we added 14 million records year-over-year basis. So we're continuing to add records.

As you know, we've got visibility for a significant addition or meaningful addition from a large payroll processor in the second half of the year. And we're out there talking to individual companies to grow the data set, which we do through our Employer Services business by providing those services. And then, of course, the other payroll processors or -- that we don't have now with Equifax, we're working to add.

So records is a very important lever for that business. And there's a long runway not only with nonfarm payroll, where we're at 91 million uniques versus the 150 million-or-so total nonfarm payroll. But we're focused on the gig economy, which is another 40 million to 50 million individuals that have either first or second jobs or self-employed, outside of the nonfarm payroll; and then, of course, pensioners. So records are a big opportunity for workforce to grow.

And then you've seen a lot of growth over the last couple of years beyond mortgage. Mortgage was always a place that this business focused on, and we've been able to grow very, very strongly in the government vertical. And of course, you know we've got the large SSA contract that's going live in the second half and will ramp to $40 million to $50 million of incremental revenue in 2022. So that's an example of the data set being used in another use case.

And the other area that we've been focused on outside of just kind of the core growth of products, penetration, more usage in records is around strengthening the business through M&A. As you know, we've done 2 acquisitions so far this year. HIREtech and i2verify to strengthen our Employer Services business, which delivers records. And of course, that's just a good core business. We talked about some of the solutions we have in the market, like I-9 Anywhere, that are growing outside of some of our traditional financial markets.

So that focus on the hiring process where 75 million people are hired every year or change jobs and most of them have to have some kind of background screen done that relies on work history, along with other data elements. And today, we're building out the Equifax data hub or Workforce Solutions data hub that includes our TWN data but also other unique data elements. And we'd like to do more M&A in that space to strengthen Workforce Solutions, as I mentioned in my comments, that we're focused on building that out.

And just maybe closing on workforce. The business has a long history of outperforming its underlying markets. And I think if you look back a couple of years, you've seen a step up in that outperformance in the last couple of years that we link to the scale of the data set. The cloud has allowed us to ingest more data more quickly. Think about it 2 years ago, maybe 3 years ago, we had 27,000 contributors or companies contributing. Now we have 1.2 million. And there's different numbers out there around how many companies there are in the United States, 3 million, 4 million, 5 million, but we're really scaling that data set quite substantially.

So it's a very unique business. It's one that we're investing in organically. The cloud is allowing them to ingest more data, and you've seen a ramp up in new products coming out from Workforce Solutions as they start to leverage the new cloud capabilities. And of course, that's happening across Equifax.

Our next question today is coming from Manav Patnaik from Barclays.

Mark, I apologize. Just what you said on the workforce M&A, did you say that background screening was an area you were interested in? Or did I not understand the comment?

No, I didn't say that. What I said was that the real interest has been -- and we've talked about it before, is number one, strengthening the core of Workforce Solutions. It's our strongest business. It's our largest business. It's our fastest growing business. And doing acquisitions like HIREtech and i2verify is clearly a priority for Equifax.

The other area that we've talked before with you and others about is the talent solutions data hub. We want to be in the data business around the hiring process. We are now -- as you know, with our work history, we have an average of 4.5 jobs on the average American in our database. And that work history is very valuable in the hiring process. And beyond work history, as you know, other data elements like where did you go to school, what licenses did you have, have you ever been incarcerated before, have you been arrested before, all those data elements are very, very valuable, and we're building now a data hub of partnerships. If we could find a way to do M&A in that space, we'd like to do it.

Okay. That makes sense. That's what I thought. And just, John, I don't know if I missed it, but I was hoping you could help us just how to think about what you've baked into your guidance for just the growth in verification and Employer Services for the back half of the year.

Yes. So I think what we talked about is we gave a good view, I think, of what we expect the growth to be for the full year. And as we indicated, we expect Workforce Solutions to grow over 30% in the year. So obviously, that's up substantially from what we talked about in April. So it reflects the much stronger performance in the second quarter but also continuing very strong performance in the third and fourth quarters.

And we're expecting to see continued strong performance across really all the businesses, as we talked about. I think effectively, we held or increased our expectation for growth in all of our businesses in the second -- in the full year and therefore, the second half. So we're feeling very good about the trend.

Next question today is coming from Hamzah Mazari from Jefferies.

This is Mario Cortellacci filling in for Hamzah. Just a quick question on your international business and I guess, specifically Australia. Could you just walk us through how margins in that business differ from other international markets? And then maybe you could also just talk about your view on the recovery there. I think they just went into lockdown again, so I just wanted to get your outlook.

Yes. International still is broadly kind of lagging the United States. Maybe Canada is quite similar as far as the vaccine rollouts. But other markets -- I guess U.K. is similar, but it's been choppier internationally than it has in the United States for sure. And as you point out, Australia has got another lockdown because the vaccines are really lagging there.

The market has adjusted in a lot of international markets, like it did in the United States, quicker, meaning customers and consumers figured out how to live their lives and operate their businesses in more of a virtual environment. And I think that's what we're seeing in Australia with -- and our international markets that are still lagging in some regards, particularly in Latin America, around the COVID lockdowns being relaxed.

The margins, John, they're not really dramatically different on a global basis. I wouldn't characterize them differently by market. And we really don't talk about them on a market basis.

We don't talk about them on a market basis, right? What we've indicated historically is markets that look very much like the U.S., so we talked about Canada, tends to run at higher margins than some other businesses. Australia looks probably more like international averages than you think about. And Canada, that would be stronger.

Understood. And then just my follow-up. Can you just comment on the fraud segment of the business and how much further scale can you gain there through more M&A post the Kount deal? Obviously, it's a highly fragmented market there. And then any initial views on synergies that you're seeing as you're integrating Kount?

Yes. I commented earlier that we're quite encouraged by that. We're really very energized and pleased with the acquisitions and the team we brought onboard from Kount. ID and fraud is a very strategic growth area. It's also an area, as you point out, if we could find more M&A, we'd like to do it to broaden. It's a very big space, and as you also point out, it's very fragmented.

We think we've got very unique data assets to play in identity and fraud, and Kount really augments that. And that's really the power of the Kount combination and synergies with Equifax, is really leveraging their data at scale from the e-commerce world. They have something like 32 billion interactions every year with consumers. They have really scaled data assets around e-mail addresses, IP addresses, cellphone numbers, over 400 million verified elements. And with e-commerce, you're interacting very quickly because a lot of people are doing e-commerce, so the data is very current.

And the combination of that data from Kount with Equifax is really the power. And ID and fraud, we believe, starts with data, and that's why we think we have a license to play. And if we could find more and we're looking for more M&A in the ID and fraud space to further strengthen our position, it's a huge TAM. The market is, I think, close to $18 billion globally for ID and fraud, and it's growing at 20% with the large digital macro, meaning more consumers interacting in really every aspect of their lives, whether it's financial services, insurance, telco or of course, e-commerce and retail, digitally.

And with that digital interaction, the requirement to verify that Mark is really Mark is critically important, and that's where the data assets come in; and also to do it seamlessly, meaning where the consumer doesn't feel it. And the way to do that is to power with more data. So we're quite energized about the integration with Kount, the progress so far, and it's an area we'd like to be bigger in going forward, both organically through new products and the synergies of the Kount acquisition, but also inorganically, if we could find some M&A that would strengthen us.

Next question today is coming from George Mihalos from Cowen.

Congrats on another strong quarter. Wanted to ask a broad question to kind of start things off. Obviously, there's a lot of debate going on looking at the bond markets and the like, but to the extent we enter a more inflationary period going forward, is that something that could be a catalyst for you guys, both in terms of people relying more on credit and obviously, potentially the health of some of your FI customers in an environment where rates go up? I'm just curious how you guys are thinking about that, if you are thinking about that at all.

Yes. No, we think about it. It's obviously something that is hard to forecast. But when you think about interest rates going up or inflation going up, I think you got to step back and look at the consumer itself. The consumer coming out of COVID is very strong. But at the same time, they're coming out of COVID with some pent-up demand. And we think that holds well for the credit environment, meaning that the consumers are healthier, meaning they can access more credit and there is an underlying desire to go on vacations, expand your home, buy a new car. All those elements I think are a catalyst for the economy, which we're already seeing, obviously, quite strong.

And for the credit bureaus and Equifax, that means our customers are going to be spending more in marketing, spending more on originations and looking for new solutions to identify the consumers. If you think about our customers, they're very healthy. They really managed the pandemic much more strongly because their consumer was stronger. Their -- the losses were not anywhere near what were anticipated.

So our customers are strong and they're looking to grow. And if you've got a consumer that's been paying down balances in lots of areas like cards and others during the pandemic because of stimulus and their broad financial strength, our customers need to build up their balance sheets by getting more loans on their books, whether it's credit card or personal loan and auto loan or a mortgage. And of course, the other area that we watch is what impact higher interest rates may have in the future on the mortgage market.

The one counter to that is there's still, at least in current rates, a long pipeline, and John talked about it, of consumers that will still benefit from a refi. And then the other element that we're watching is home price appreciation is up dramatically. And that home price appreciation is an asset for consumers that historically, they'll access, through either home equity loans or a refi of their mortgage, a cash out refi. So that's another catalyst that we keep an eye on. So there's a lot of variables there, which -- but when we think about our guidance for the second half, we've got a lot of confidence in the underlying Equifax business and our ability to perform, which is why we raised guidance.

Okay. Great. Appreciate that color. Obviously, there are a lot of puts and takes there.

And then, John, just a housekeeping question. And forgive me if you've answered this, I may have missed it. But the margins in USIS, I think you called out several factors, some related to the inclusion of some of the tech expenses and then some additional sales and marketing as you invest more in the segment. Is there a way to think about what the margins would have been on a year-over-year basis, apples to apples, so basically excluding what the contribution to expenses were from increased tech costs?

Yes. I think what we said is that the biggest drivers were the tech-related costs in the decline of about, I think it was, 380 basis points year-on-year. We also definitely invested more in marketing and sales, given new NPI rollouts and the improving economy. And that certainly impacted year-on-year, and that would have been more impactful if you think about sequential. But we didn't give specifics, but we did indicate that the biggest driver of year-on-year decline is the tech-related cost.

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

It's Andrew. So 2 questions. One, John, could you tell us the percentage of revenues in mortgage for just the second quarter just reported?

And the second question is I wanted to get back to a comment in Mark's prepared remarks about growth in Employer Services. I'm pretty sure, Mark, that you said 20% growth this year outside of UC and ERC. Just, again, correct me if I heard it right. And is that an organic number? And how much would we think that UC and ERC would change that number when thinking about ES growth for the whole year?

Andrew, mortgage was about 32% of revenue in the quarter.

And on the Employer Services, we did say that we expect it to be up 20% for the year. And that's really driven by a lot of the new product rollouts that we have, the I-9 Anywhere solutions. We're just seeing real traction in the hiring process that's really driving that.

Our next question today is coming from Simon Clinch from Atlantic Equities.

I wanted to follow up again with Verification Services in particular because I've been quite staggered by the step up in growth rates for the non-mortgage portion in the second quarter. And this is before you've got the Social Security contract, before you've got the new records coming in. So I was wondering if you could help me understand or give me some color around how to think about that pace of growth as we move through the next year or 2 because I'm sort of struggling to work out why there was such a big step-up quarter-to-quarter.

Yes. There's an element of COVID recovery in there in some of the markets like cards and auto and P loans. So there's an element of that. Records are a piece of it, for sure. As you add records, our hit rates go up. So that's clearly an element, a real focus on new products in that space.

And as you point out, the SSA contract that will go live in the second half will really ramp in -- somewhat in the second half of the year but it's really a 2022 benefit as it gets to the full run rate. There's just a lot of opportunities for us in the non-mortgage space. In talent solutions, we talked about very strong growth there. And then some of the other non-mortgage financial verticals are performing well.

Yes. As Mark mentioned, huge growth in talent solutions and government, which are the 2 biggest segments by far in Verification Services.

Okay. Understood. And just a follow-up. I was wondering just more broadly with some of the fintech start-ups growing in the market today that are effectively using multiple alternative data sets, just like you are yourselves, but also using the credit reporting data as well to sort of improve models for risk assessment and decision making in the credit process. As they are your partners today, as that kind of market opportunity grows, you become -- I'm assuming you become more competitive longer term. I was wondering if you could talk about that sort of longer-term competitive dynamic and how you're planning to navigate that.

Yes. I wouldn't think about them as competitors. They are customers and partners. The bulk of the data they use in their processes comes from us or our competitors. They have some of their own data from historical interactions with consumers.

But whether it's identity and fraud data to verify that the consumer is who they say they are in a BNPL transaction or -- a lot of the fintechs are in P loans and subprime auto and mortgage and of course, in cards. They're using our credit file. They're using our NC Plus. We sell quite a bit of -- in fintech of our TWN income and employment data. It's used in some of the larger-ticket transactions there.

So they're very data savvy, very data sophisticated. And as you point out, they look for more data to enhance the crediting decision, which plays well for us because as we continue to build out our differentiated data sets, we can bring real value in enhancing the credit decision or the decision they're making with the addition of more data.

So we view it as a positive. I think as you know, we weren't as focused on fintech 3, 4 years ago. We changed that and really have expanded our resources and capabilities there. And we think our cloud investment plays well for fintech, our differentiated data plays well for fintech and our new product focus plays well for fintech. So it's a place we want to be larger in.

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

My first one, I wanted to ask another one on international. You mentioned in your prepared remarks and it's noted on a few of the slides that you're outgrowing underlying markets. So I was wondering if there's any region in particular or country in particular where your share gains are outsized internationally? And then to the extent that's the case, what is specifically driving your gains in those markets?

Yes. Our -- all the markets really were quite strong in the second quarter with every region really up over 20%. So it was broad-based. There's definitely an element that's meaningful in the quarter from the COVID recovery. I think all the international markets, after a year of COVID, have really figured out how to operate because they all have a different flavor of COVID challenges that they're still operating with, like the Australia lockdown or U.K. opened up on Monday but there's still some hesitancy, I think, for some consumers to go out. But they've learned how to operate, so I think that's a big driver.

I wouldn't really highlight any market differently than the other. We have a very strong market position in Australia. In Canada, we have a very strong market position and we do in Latin America and a lot of the markets that we operate in. I think broadly, our international markets are very NPI focused. They always have been, really leveraging new products created in the United States or unique to their markets and getting those out. Those are a big fuel for growth going forward. And in a lot of our markets, we're continuing to grow our data assets. You heard, I think, either 1 or 2 of the new products I highlighted are new solutions in our international markets.

Got it. And then for my follow-up, I know it's been touched on a few times already, but to flesh out Kount solutions a little bit further. I think you said 200%-plus growth there. Is there any additional color you could give on specific products that are contributing? And maybe more importantly from my perspective, how should I think about how much of that strength is tied to better hiring volumes, to the extent that it is, particularly relative to second quarter of last year?

Yes. So there's been a really substantial focus on new products in talent solutions, and they're generally built around allowing the party that's purchasing the product, right, whether it be a background screener or somebody else, to buy specifically the information they need for the duration they require it. And we've launched a series of products that allow them to do that in ways, and they tend to be at very attractive price points for Equifax.

So we're seeing very good improvement in NPI and Talent Solutions. Really, it's a real strength for EWS. But obviously, we've also seen a very substantial increase in hiring as we get into the second quarter relative to last year. So I can't give you a breakdown, but what I can say is and I think we've been talking about this consistently since at least the third quarter, that new products have driven a substantial amount of growth in talent solutions really starting about midway through last year.

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

Just wanted to start on EWS, particularly on the Employer Services. It looks like the momentum has been really strong there on the talent, W-2 side. How should we think about some of the puts and takes in that business as things open up between growth on that side of the business versus like some of the excess UC claims kind of declining as long as things keep improving?

Yes. We've been very clear that we expect UC claims to decline from their extraordinary levels of a year ago, and that's a part of our guidance. And when you think about some of the other solutions we have, the hiring process is generally good news for a lot of those, whether it's I-9s, onboarding an employee. The employee resource credit is one that's really still a COVID benefit that we expect to benefit through the rest of the year. But that's an area that we're focused on and expanding.

And as you know, we did 2 acquisitions. Particularly HIREtech, that we acquired in the first quarter is helping us get stronger in work opportunity tax credits, which is a space that we've been growing in going forward.

You're looking at Employer Services excluding UC and ERC, right, which is what we exclude from core growth. The 2 biggest businesses there are I-9 and our business that supports ACA. And our I-9 business, as we talked about, is growing very fast, right? And that's new solutions and using our new commerce platform to get to much smaller customers so they can access us more quickly and directly. And then also, obviously, with the changes in what's occurring in the ACA, we're seeing that return to growth. So I think those 2 factors have been very beneficial in the growth of the businesses excluding, obviously, UC and ERC, which Mark already talked about.

Super helpful. And then maybe just a follow-up. You guys have mentioned the large payroll partnership that's planning on going live later in the year. Maybe if you could give us any color on potential size and the rate of monetization once that goes live and how that could influence the back half of the year.

Yes. I don't think we want to get into the exact size of it, but we've tried to be clear it was one of the top payroll processors. And we're pleased to be adding them to the TWN database. And we factored this into our framework or guidance for the second half, and obviously, as it's added, it will benefit us in 2022, benefit Workforce Solutions as those records are added, those turn into revenue in our system-to-system integrations.

Our next question is coming from Toni Kaplan from Morgan Stanley.

You mentioned the buy now, pay later in a recent question, and that's seeing a lot of growth right now. Can you just talk about your position in that market? Any sort of current revenue contributions and growth rates you're seeing there and how you view the opportunity a little bit more generally, like in terms of future potential for that market?

Yes. We're participating in the BNPL space in the States and other markets around the globe. We're -- Australia and U.K. and Canada, I think, are markets that also have -- we have BNPL relationships. We provide identity data to them. They have to verify who the consumer is. And some of the BNPL players are starting to move to larger-ticket transactions and looking to do more of an underwriting of the consumer.

If you're doing a BNPL on a $100 pair of blue jeans, there's a risk profile that you can do less underwriting, if you will. Maybe just verify the identity of the consumer to make sure it's not a fraudster when you start doing a refrigerator or a couch or larger-ticket transactions. So in all of our BNPL discussions, we're talking to them about their desire to move into bigger-ticket transactions and leveraging Equifax data to do that, including the credit file, some of our alternative data like NC Plus or income and employment data from Workforce Solutions.

Great. And then for my follow-up, consumer indirect got slightly better in the quarter but was still down. I know you said you expected it to return to growth in 4Q. But we did see that one of your clients -- one of the larger players in this space reported a very strong quarter. Just wondering, is there just sort of a lag to get to -- basically to get to you? Or I guess why isn't that better yet?

Yes. I don't know which competitor you're referring to. But as you might imagine, we all don't have the same customer relationships. And there is a different level of COVID recovery, I think, with that space. When you think about lead gen players, if you're a bank, you're going to restart your own lead gen first before you start buying third-party leads from a lead gen player. So I think there is some lag in that, that we expect to improve as we go through the second half.

Our next question is coming from Andrew Jeffrey from Truist.

Lots of terrific information here. Appreciate it. Mark, I'm wondering if you could talk a little bit about, within EWS verifier in particular, volume, which I assume is being driven nicely by NPI as well as the TWN database, but also price. And I'm thinking about price to value around some of your newer solutions but also the impact of more digital verifications in mortgage, for example. Is there a dynamic you can call out sort of between price and units when you think about yield in that business?

Yes. We don't talk about specific price, but we try to exercise price in all of our businesses, as you might imagine, through our uniqueness of the solution or the data set. And of course, Workforce Solutions is, for sure, our most differentiated data asset, so we do use price.

But product is also a very strong way to enhance revenues. We talked in the past about, historically, we'd have a single poll solution that we might sell for $15, $20, $25, $30 at Workforce Solutions. And some of the newer products we've rolled out in the last 12 to 18 months deliver more value to our customers, whether it's more historical data at a $150 price point or it's allowing a co-borrower solution called -- we call Mortgage Duo, where you can poll a husband and wife that are both applying for a mortgage in a single poll. That's priced more at the $150 solution.

Multiple poll alternatives in order to incent usage, all of those, you can decide -- define whether you want to call it price or product, but it all results in higher revenue and higher margins. And that's definitely in line with the strategy, is to leverage the new cloud capabilities around the use of our data in Workforce Solutions to bring new solutions to market.

And then as you referenced earlier, records are obviously -- result in higher hit rates. Remember, we're getting -- in system-to-system integrations, we get a hit on our database for every customer -- or every consumer that our customer has. And now we're in that kind of 60% hit range on nonfarm payroll. As we add records and go to 61%, 62%, 63%, that drives revenue, of course.

And the system-to-system integrations that we have, which are growing, we're now at 75% in mortgage, continuing to grow that. We only see 60% of mortgages, meaning there's a lot of customers out there that we still have to add to our relationship. So that's another growth lever. So there's just a lot of plays here in growing that business, which is why it's had the outsized growth that you've seen for really a decade. But the stronger growth in the last couple of years is from the scale of the data set where it just becomes more valuable to integrate into our customers' workflows because of the higher hit rates that it delivers.

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

My first question, on fraud and ID, can you potentially size that for us in the U.S.? I'm just -- I know it's across multiple products you have there. Just what the growth rate is, if you could break that out for us, please.

Yes. I think we've talked about this in the past, right, that as we look at 2021, we're expecting to see our total fraud and ID business, we didn't necessarily break out the U.S. separately, to be over $200 million. So that includes the addition of Kount. But in total, we're expecting our fraud and ID business to exceed $200 million in 2021.

And that's a space, as you know, we want to grow. That's why we did the Kount acquisition. And we're still in the early days of that integration and really driving the synergies and combining the data assets and rolling out the new solutions that the combination of Equifax data and Kount data is going to deliver principally in the U.S. But Kount's also got global capabilities, so it will benefit some of our global markets, too.

What sort of revenue growth would that imply for the full year? And then my follow-up question, if I could ask, please. In USIS, can you just hit on a little bit on autos, credit card, personal loans in your core credit bureau business, how well that did in this last quarter? And what's your sort of outlook, more importantly, for the second half of the year there?

I don't think we've given an identity and fraud growth rate. I think we have shared broadly, and you know the market. The market itself is growing 20%. So that's underlying why we invested in Kount and why we're still very open and looking -- it's a priority area for us to do more M&A because the size of the TAM is $18 billion growing at 20%. The digital macro of more consumers doing things online, on their phone, on their tablets, on their computers is really driving that space, which is why we want to be bigger in it.

As far as in USIS, auto has been impacted by some of the inventory issues. So that's clearly dampened some of their growth. We've seen strong growth in card as marketing and broadly originations have come back and same with the P loans.

And as Mark mentioned in his comments, right, FI grew over 20% and auto grew double digits so -- in the quarter.

Our next question is coming from George Tong from Goldman Sachs.

Two questions. Within your non-mortgage USIS business, how does revenue in 2Q 2021 approximately compare with 2Q 2019 levels? And then secondly, how is your non-mortgage USIS business performing relative to the broader industry from a growth perspective?

George, what was the first question? I'm sorry. How did we compare to -- how does our second quarter in USIS compared to 2019?

Yes. So we haven't given specific detail, but what we've indicated is we're seeing growth relative to 2019 really across most of the businesses, right?

And the second one is versus the -- I think your second question, George, is versus the industry, which I assume means versus our competitors. One of our competitors hasn't reported yet. And I think versus the other that did, I think we're in line and quite pleased with our performance and competitiveness in the marketplace. And we're seeing that with the kind of core growth that we're delivering in non-mortgage.

Our next question today is coming from Jeff Meuler from Baird.

For employment and income verification, do you have a sense of how often the costs are borne out of the profit pool of the originator versus passed through to the consumer and their closing costs? And on the 60% metric that you gave us, any sense if you over- or under-index to the purchase versus refi market relative to broader inquiries, specific on the Verification Services?

Yes. And I think you're talking about mortgage, Jeff. In mortgage, the credit file is used in virtually 100% of mortgages, and that's a pass-through cost to the consumer. We're starting to have some originators move the income and employment data to the closing statement. And it's early days on that, and we think that's an opportunity going forward. It's going to take some time.

In terms of whether our penetration is different in refi versus purchase, we don't think so. We think it's relatively consistent. It's basically driven more by the underwriter or the provider of the mortgage than it is by refi versus new purchase.

Got it.

I think Jeff, there's a difference in number of polls on the credit side versus the income and employment, and we've been closing that gap on income and employment. There's an average of 4 to 5 credit polls for a mortgage. And now we're in kind of the 2-plus range on income and employment data, which is up from a number of years ago, where it was closer to 1. And that's one we want to continue to grow, and we think there's opportunity there.

Yes, I hear you. And then on Slide 11, the mortgage outgrowth within Verifier relative to end market inquiries, where do you expect it to level off in coming years? And maybe, at least if you'd say, do you expect it to be higher than this kind of 11% to 21% range it was in pre 2020 because of all of the structural growth drivers you're talking about?

Well, I don't think we want to get into guidance at that level given it's outside of 2021. If you think about the opportunities we've laid out and what the cloud benefits are, we believe there's a lot of opportunity for Workforce Solutions broadly and in mortgage. When you -- adding records obviously allows you to outgrow the market, whether it's up, down or sideways. So -- and that's a big focus of ours, and we still have a lot of runway on records.

And the scale of the data set, more system-to-system integrations, we get a 25% lift in polls when we're system-to-system integration versus coming to our website. The number of polls, we're closing that gap with the 4 to 5 on the credit file. New products is another way to continue to outgrow the market, which we're focused on. Pure price obviously allows you to outperform the market. So we're confident in the scale of the levers there, but I don't think we want to give any guidance on what it's going to look like over the long term.

But those levers are increasing relative to prior periods, correct? That's the right interpretation?

100%.

Our next question today is coming from Ashish Sabadra from RBC Capital Markets.

Just a quick -- wondering if you can provide a quick update on your FICO partnership and the Data Decisions Cloud. Have you seen better traction there particularly as consumer marketing and consumer lending picks up?

Yes. It's an important relationship for us. I do have a quarterly review with Will Lansing, the CEO of FICO, and myself and the team. We've -- actually, it's not quarterly, it's monthly. So we're excited about that. And besides the Data Decisions Cloud, which is the integration of their solution with Ignite, we're also in market with a joint solution on AML, KYC that we're very pleased with, and we're looking for other solutions going forward.

So we're pleased with the progress. We're in the market commercially and looking to benefit both of us where it makes sense. And of course, we go to market independently where it makes sense, too.

That's very helpful color. That's great. And then maybe just a quick question on -- any update on the regulatory front? Again, I know you've spoken about this in the past, but just there was a financial services committee hearing in June. And then there were certain things around -- regulators are talking about changing the CRA. I was just wondering if you can talk about how that can potentially -- any impact to the business but also how we think about increased demand for alternate data as there is more focused on unbanked and underbanked customer.

Yes. I think there's a couple of levels in that question. I think maybe the first one you were focused on is that -- some discussions around a public credit bureau. We don't think there's a lot of traction on that. There never was. And we don't think that there's a real path for that. It doesn't make sense. There's 3 large credit bureaus. There's another 30 CRAs underneath the 3 large credit bureaus. So I think there's plenty of competition and investment to support consumers.

The second half of your question around real desire in Washington and with -- we've heard the CFPB talk about it, around access to credit for those that are challenged in getting to credit and really drive around alternative data. That's clearly a big focus of ours. You've heard us talk about it on this call and others, around expanding our alternative data using the Equifax cloud to combine our differentiated data assets and really open up credit, using things like utility bills, payment records -- cellphone payment records, income and employment data to expand access to credit. It's clearly a focus of ours and it is of our customers, the financial institutions and banks, and that is aligned with the push that Washington has.

That's very helpful. Congrats again on the solid results.

Our next question today is coming from Shlomo Rosenbaum from Stifel.

Maybe John, maybe you could help me out with this just a little bit. Just sequentially on the Online Information Services, it was down about 4 million despite the fact that we're getting more opening up, a little bit of Kount in there. Is the whole difference really the impact of mortgage, just the decline sequentially in mortgage applications and how that hit it? Or is there anything else I should be thinking about there?

No. I mean as -- we talked about the fact that we saw very good organic and total growth obviously, which includes the acquisitions and our non-mortgage business. Actually, non-mortgage growth was a little bit stronger in total obviously because of the acquisitions in online. And so what you're seeing obviously is the negative impact on mortgage from the decline in mortgage, and that would be the negative impact that you're seeing in OIS. So I don't think it's anything more complicated than that.

Okay. Great. And then just as a follow-up, I'm not sure if there's a qualitative way to answer this but maybe quantitatively. Particularly internationally and maybe some of the other locations, very strong growth, but there's been generally a very big difference in terms of the reopenings. And is there any way for you -- or how do you view this internally in terms of how much are you getting from Equifax really returning to being on offense with all the efforts you've made versus just, hey, the markets are opening up? Is there some way for us to think about that?

Yes, it's challenging. I would say that we're still cautious in the second half around some of those recoveries. And even in the United States, the Delta concerns, is that going to impact things is something obviously we watch.

I think the thing that John and I keep an eye on is kind of deal pipelines. Where are we winning in the marketplace? Where are we adding new customers? Where are we rolling out new products? Those are kind of the above-market kind of growth that -- and we're pleased with the momentum. We talked a bunch about USIS and Workforce, but also what the teams are doing internationally on that front.

And we're accelerating NPI, as Mark talked about in his comments.

The new product rollouts really, as you know, we're doing this to bring new solutions to our customers, but it's -- we're also doing it to grow our top line. And those new product rollouts generate revenue as they come into market in a very positive way.

Our next question today is coming from Caroline Conway from AllianceBernstein.

So I wanted to ask about the split of new product introductions between USIS and EWS at this stage and specifically when we might expect to see USIS revenue contribution from NPIs that are on par with EWS. And then my second separate question is on capital allocation. I just noted that there's a few decisions that are being made based on the business outperformance to accelerate the tech transition. There seems to be a hint that share repurchases could exceed $100 million. So just wanted to get an update on the prioritization of different capital allocation choices as you see this excess strength this year.

Sure. On your first question about NPIs, all our teams, all 4 business units are intently focused on NPIs. It's a priority that's really central to our EFX2023 strategy. So I don't think there's a real difference of activity.

The pipelines that John and I have a monthly review with the teams on -- with the product teams around how they're working to leverage our new cloud capabilities to bring new solutions to market, and they all have very robust pipelines. And we're seeing revenue -- I don't think -- we don't disclose the Vitality Index by business unit, but it's broad-based as far as everyone's focused.

As far as capital allocation, we're clearly committed to completing the cloud. We're obviously spending the dollars there, and we've been quite consistent. Those dollars are coming down as we go through '21 into '22 but were quite significant in the last 3 years. And we're starting to really pivot to leveraging the cloud and getting the benefits from the cloud, which are quite meaningful.

There was no intended hint around changing our stock buyback. So I don't know how you picked that up from the comments, but that wasn't an intent. We were quite clear in launching a buyback earlier this year to offset dilution from employee plans that, that was a step forward but nothing more than that.

The third leg on capital allocation that you didn't mention is M&A. And we've tried to be very clear that we see meaningful opportunities to enhance Equifax through M&A, whether it's differentiated data solutions, which Kount checked that box; identity and fraud, a fast-growing space that we want to be bigger in and we think we've got a ticket to play there because of our data. Kount checked that one.

Second is -- or third really is strengthening Workforce Solutions. It's our fastest and strong -- fastest growing and strongest business. And strengthening the core workforce through HIREtech and i2verify is key to our strategy. And as we've mentioned earlier, we're really focused on widening Workforce Solutions really in the talent solutions space through data assets, data that would be additive to our income and employment, work history that we have in the database.

And then I mentioned earlier differentiated data assets. We're always looking for unique data assets that we can combine to existing Equifax data assets. So M&A is a priority of ours. And as we mentioned earlier, we've done 5 transactions this year, Kount being quite significant. But we're on the lookout for acquisitions, what I would characterize as bolt-ons that will really check those 3 areas of differentiated data, identity and fraud and strengthening and broadening Workforce Solutions.

Our next question today is coming from Gary Bisbee from Bank of America Securities.

Just one quick clarification question, if I could. Mark, you commented when talking about employer about the employee retention credits, which I see in your Slide 23, I think it was, you lumped in with the unemployment. And so did I hear right that effectively those are credits that you're getting that you think will end at the end of this year?

And is it right to think that, that sort of pushes off a little bit when you face the real severe declines from unemployment normalizing? Or was there something else this quarter that allowed the combination of that and the unemployment claims to do exceptionally well relative to the brutally tough comp you had?

Yes. Actually, this quarter, ERC was a little stronger than we thought. Obviously, it's a new credit, so difficult to forecast. And UC was a little stronger than we thought, right? So the unemployment claims filings were a little higher than we expected when we gave guidance initially. And yes, as we move through the rest of this year, ERC does tend to offset a little bit the decline in UC. But as we said, the ERC credits will be -- are something that we'll only see this year and will be gone as we get into next year.

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

Thank you for joining today. Mark, John and I look forward to engaging with you in individual meetings and in conferences and other forums throughout the summer. This does conclude today's call.

We've reached the end of our call today. You may disconnect, and have a wonderful day. We thank you for your participation today.