易速傳真 (EFX) 2021 Q1 法說會逐字稿

Good day, and welcome to the Equifax First Quarter 2021 Earnings Call.

Today's conference is being recorded.

And at this time, I would like to turn the conference over to Dorian Hare, Senior Vice President and Head of Investor Relations.

Please go ahead, sir.

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 in the Investor Relations section in the About Equifax tab on our website at www.equifax.com.

During the call today, we will be making reference to certain materials that can also be found in the Investor Relations section of our website under Events and Presentations.

These materials are labeled Q1 2021 earnings release presentation.

During this call, we will be making certain forward-looking statements, including second quarter and full year 2021 guidance to help you understand Equifax and its business environment.

These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from our expectations.

Certain risk factors that may impact our business are set forth in our filings with the SEC under 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 also posted on our website.

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

Thanks, Dorian.

Before I address Equifax's very strong first quarter results, I want to again I'd like to again thank our 11,000 employees and families that supported them for the tremendous dedication they continue to show under the challenging COVID environment over the past year.

We continue to make the health and safety of our employees a top priority, and I hope that you and those close to you remain safe.

Turning to Slide 4, and as I will cover in a moment, Equifax delivered an outstanding first quarter with record revenue and strong sequential growth versus fourth quarter.

The tremendous progress we have made executing against our strategic priorities in building out our Equifax cloud capabilities is allowing us to outperform our underlying markets and deliver outstanding revenue growth and margin expansion.

In the U.S., where the economy is still recovering from the COVID pandemic more rapidly than we anticipated, we continue to outperform the overall mortgage market, which remains strong in the first quarter.

We're also seeing a real recovery and strong growth across our core banking, auto, insurance, government and talent business segments.

We delivered growth again in the first quarter internationally with continued challenging COVID restrictions in place in most of our global markets, and we expect to see acceleration in this growth as economies recover outside the U.S.

First quarter was a great start to 2021.

We are energized by our strong momentum and pivoting to our next chapter of growth with the launch of EFX2023, our new strategic growth framework that will serve as our company-wide compass over the next 3 years.

With our new Equifax cloud foundation increasingly in place, we're focused on leveraging our new Equifax Cloud Data and Technology infrastructure to accelerate innovation, new products and growth.

Innovation in new products will fuel our growth in 2021 and beyond as we leverage our new EFX cloud capabilities to bring new products and solutions and multi-data insights to customers faster, more securely and more reliably.

As you know, we ramped our investments in product and innovation resources over the past 12 months to accelerate our new product rollouts, leveraging the new Equifax cloud.

Our highly unique and diverse data assets are at the heart of what creates Equifax's differentiation in the marketplace.

We have data assets at scale that our competitors do not have, including TWN, NCTUE, DataX, IXI and more, and we are committed to expanding and deepening these differentiated data assets through organic actions, partnerships and M&A.

We're also relentlessly focused on a customer-first mentality, which moves us closer to our customers with a focus on delivering solutions to help solve their problems and drive their growth.

Another critical lever of our strategy is to reinvest our accelerating free cash flow in smart, strategic and accretive bolt-on acquisitions that both expand and strengthen our capabilities with a goal of increasing our revenue growth by 1% to 2% annually from M&A.

And data security is deeply embedded in our culture, we are clearly established Equifax as an industry leader in data security.

Working together as one aligned global Equifax team where we leverage our commercial strengths, our new products and our capabilities across our EFX cloud global platform will allow us to deliver solutions that only Equifax can bring to the marketplace.

We're energized around our new EFX2023 strategic priorities that will serve as our guide post over the next 3 years and support our new long-term growth framework that we plan to put in place later this year.

Turning now to Slide 5. Equifax performance in the first quarter was very strong.

Revenue at $1.2 billion was the strongest quarterly revenue in our history, and first quarter constant currency revenue growth was a very strong 25%, with organic growth of 23%, which was also an Equifax record.

As a reminder, we're coming off a solid 13% growth in first quarter last year.

All business units performed -- outperformed our expectations, and we are seeing positive signs of a COVID recovery beginning to accelerate, particularly in the U.S.

Our growth was again powered by our 2 U.S. B2B businesses, Workforce Solutions and USIS, with combined revenue up a very strong 38%.

Mortgage-related revenue remained robust and importantly, our nonmortgage-related verticals grew organically by a very strong 16%.

The adjusted EBITDA margins of our U.S. B2B businesses were 52%, up 400 basis points, with EWS delivering close to 60% margins.

As a reminder, Workforce Solutions and USIS are over 70% of Equifax revenue and 80% of Equifax business unit EBITDA.

First quarter Equifax adjusted EBITDA totaled $431 million, up 36% with over 250 basis points of expansion in our margins to 35.6%.

This margin expansion was delivered while including all cloud technology transformation costs in our adjusted results, which negatively impacted first quarter adjusted EBITDA margins by over 300 basis points.

Excluding cloud transformation costs, our margins would have been up over 500 basis points.

We are clearly getting strong leverage out of our revenue growth.

Adjusted EBITDA -- adjusted EPS at $1.97 per share was up a very strong 37% from last year, which was also impacted by the inclusion of cloud transformation costs.

Adjusted EPS would have been $2.20 and up 54% excluding these costs.

We continue to accelerate our EFX cloud data and technology transformation in the quarter, including migrating an additional 2,000 customers to the cloud in the U.S. and approximately 1,000 customers internationally.

Leveraging our new EFX cloud infrastructure, we also continued to accelerate new product innovation.

In the first quarter, we released 39 new products, which is up from 35 launched a year ago in the first quarter, continuing momentum from 2020 where we launched a record 134 new products.

And we're seeing increased revenue generation from these new products, leveraging our new EFX cloud.

For 2021, we expect our Vitality Index, defined as revenue from new products introduced in the last 3 years, to exceed 8%.

This is a 100 basis point improvement from the 7% guidance we provided in our Vitality Index back in February.

And in the first quarter, we completed 5 strategic bolt-on acquisitions with a focus on identity and fraud capability through our acquisition account and an accelerating growth in Workforce Solutions with the acquisitions of HIREtech and i2Verify.

Acquisitions that will broaden strength in Equifax are a strong lever for continuing to accelerate our growth and a big focus.

We're energized by our fast start to '21 and are clearly seeing the momentum of our only Equifax model, leveraging our new EFX cloud capabilities.

Our first quarter results were substantially stronger than the guidance we provided in February with over 90% of the revenue outperformance delivered in our 2 U.S. B2B businesses, Workforce Solutions and USIS.

Importantly, as we'll discuss in more detail shortly, over 60% of this outperformance in the U.S. B2B revenue was in our nonmortgage segments in both USIS and Workforce Solutions.

Nonmortgage revenue strengthened consistently during the first quarter, with March revenue up significantly versus February in both USIS and EWS.

This broad-based strength was above our expectations and gives us confidence about further strengthening in the second quarter and second half as the COVID recovery unfolds.

Mortgage revenue was also stronger than we expected despite the growth in U.S. mortgage market at 21% being slightly below our expectations from slowing mortgage inquiries in late March, which have continued into April.

Our continued strong mortgage results and outperformance was driven by Workforce Solutions with stronger market penetration, record growth and positive impact from new products.

USIS mortgage revenue also exceeded expectations slightly.

This stronger revenue delivered strong operating leverage with substantial improvement in our EBITDA margins and adjusted EPS.

The strength of our first quarter results in Workforce Solutions and in U.S. nonmortgage revenue across USIS and Workforce Solutions more broadly gave us the confidence to substantially raise our 2021 guidance for both revenue and adjusted EPS.

We're increasing our revenue guidance by $225 million to a midpoint of $4.65 billion and increasing our adjusted EPS guidance by $0.55 a share to a midpoint of $6.90 per share.

This includes our expectation that the U.S. mortgage market for 2021, as measured by credit inquiries, will decline more than our February guidance of down 5% to a decline of approximately 8%.

Our framework assumes that the mortgage market slows primarily in the third and fourth quarter, which is consistent with our prior guidance.

And John will discuss our mortgage assumptions in more detail in a few minutes.

Turning to Slide 6. Our outstanding first quarter results were broad-based and reflect better-than-expected performance from all 4 business units.

Workforce Solutions had another exceptional quarter, delivering 59% revenue growth and almost 60% adjusted EBITDA margins.

Workforce Solutions is now our largest business, representing almost 40% of total Equifax revenue in the fourth quarter and is clearly powering our results.

Verification Services revenue of $385 million was up a strong 75%.

Verification Services mortgage revenue again more than doubled for the fourth consecutive quarter, growing almost 100 percentage points faster than the 21% underlying growth we saw in the mortgage market credit inquiries in the first quarter.

Importantly, Verification Services nonmortgage revenue was up over 25% in the quarter.

This segment of Verification Services continues to expand its market coverage and benefit from NPIs, new records, new use cases and is a long-term growth lever for Workforce Solutions.

Talent solutions, which represents over 30% of verifier nonmortgage revenue, almost doubled, driven by both new products and a recovery in U.S. hiring.

Government solutions, which represents almost 40% of Verifier nonmortgage revenue, also returned to growth driven by greater usage in multiple states of our differentiated data.

As a reminder, we continue to work closely with the Social Security Administration on our new contract that we expect to go live in the second half and ramp to $40 million to $50 million of incremental revenue at run rate in 2022.

Our nonmortgage consumer business, principally in banking and auto, also showed strong growth in the quarter as well, both from deepening penetration with new lenders and from some recovery in those markets that I'll cover more fully in the discussion of USIS.

Debt management, which now represents under 10% of Verifier nonmortgage revenue was, as we expected, down versus last year but has stabilized, and we expect to see growth in that vertical as we move through 2021.

Employer Services revenue of $96 million increased 17% in the quarter, driven again by our unemployment claims business, which had revenue of $47 million, up around 47% compared to last year.

In the first quarter, Workforce Solutions processed about 2.8 million UC claims, which is up from 2.6 million in the fourth quarter.

EWS processed roughly 1 in 3 U.S. initial unemployment claims in the quarter, which was up from 1 in 5 that they have been processing in recent periods, reflecting the growth in Workforce Solutions' UC market position.

As a reminder, we continue to expect UC claims revenue to decline sequentially in the second quarter and throughout the balance of 2021 as the U.S. economy recovers and job losses dissipate.

We currently expect a decline in the second quarter UC revenue of about 45% versus last year and a full year 2021 decline in UC claims revenue of just under 30%.

Employer Services non-UC businesses had revenue down slightly in the quarter.

Our I-9 business, driven by our new I-9 Anywhere solution, continued to show very strong growth with revenue up 15%.

Our I-9 business is expected to continue to grow substantially to become our largest employer services business in 2021 and represent about 40% of non-UC revenue.

Reflecting the growth in I-9 and the return to growth of Workforce Analytics, we expect Employer Services non-UC businesses to deliver organic growth of over 20% in 2021.

The HIREtech and i2Verify acquisitions that we closed in March had a de minimis impact on revenue in the quarter, but will further add to Workforce Solutions growth during the rest of '21.

I'll discuss both HIREtech and i2Verify a little bit later.

Reflecting the power and uniqueness of TWN data, strong Verifier revenue growth and operating leverage resulted in adjusted EBITDA margins of 59.3%, an almost 800 basis point expansion from last year in Workforce Solutions.

Rudy Ploder and the Workforce Solutions team delivered another outstanding quarter and are positioned to deliver a strong 2021.

Workforce Solutions is clearly Equifax's largest and fastest-growing business.

USIS revenue was up a very strong 19% in the quarter, with organic growth also a strong 17%.

Total USIS mortgage revenue growth of $177 million was up 25% in the quarter, while mortgage credit inquiry growth, while up 21%, was slightly below the 24% expectation we shared in February.

As I mentioned, John will cover our updated view of the mortgage market for 2021 in a few minutes.

USIS mortgage revenue outgrew the market by 500 basis points in the quarter, driven by growth in marketing and debt -- new debt monitoring products.

Nonmortgage revenue performance was very strong with growth of 15% and organic growth of 11%, which is a record for USIS and got a fairly strong first quarter last year.

We view this outperformance by U.S. as meaningful and a reflection of the competitiveness and commercial focus of the USIS team.

Importantly, nonmortgage online revenue grew a very strong 16% in the quarter, with organic growth of almost 11%.

We saw nonmortgage revenue growth accelerate in February and March as vaccine rollouts increased and financial institutions gained confidence in the consumer and the economy.

Banking, auto, ID and fraud, insurance and the direct-to-consumer all showed growth in the quarter, which is encouraging as we move into second quarter and the rest of 2021.

Commercial was about flat, while only telco was down in the quarter as we expected.

Financial Marketing Services revenue, which is broadly speaking, our offline or batch business, was $53 million in the quarter, up almost 12%, which is also very positive.

The performance was driven by marketing-related revenue, which is up over 20%, and ID and fraud revenue growth of just under 10% as consumer marketing and originations ramped up.

In 2021, marketing-related revenue is expected to represent about 45% of FMS revenue with identity and fraud about 25% and risk decisioning, about 30%.

This strong growth across our nonmortgage businesses, including strong growth in marketing-specific off-line revenue is very encouraging for both the recovery of our underlying markets and our nonmortgage performance as we move into second quarter and the rest of 2021.

The USIS team continues to drive growth in their new deal pipeline with first quarter pipeline up 30% over last year, driven by growth in both the volume and the size of new opportunities and NPI rollouts.

First quarter win rates were also higher than levels seen in 2020.

Sid Singh and his USIS team continue to be on offense and are competitive in winning in their marketplace.

In addition to driving core business growth in the first quarter, USIS also achieved an important strategic milestone in closing the acquisition of Kount, an industry leader in providing AI-driven fraud prevention and digital identity solutions.

Integration efforts are now underway with a key focus on technology and product, leveraging the joint Equifax and Kount data and capabilities.

Kount's technology platform will migrate to the Equifax cloud in the next 12 to 18 months, which will allow for the full integration of Kount and Equifax capabilities for new solutions, new products and market expansion in the fast-growing identity and fraud marketplace.

USIS adjusted EBITDA margins of 42.9% in the first quarter were down about 180 basis points from last year.

About 2/3 of the decline was due to the inclusion of tech transformation costs in our adjusted EBITDA in 2021.

The remainder of the decline was principally driven by the higher mix of mortgage products and redundant system costs from our cloud transformation.

Moving now to International.

Their revenue was up 3% on a constant currency basis in the quarter, which is the second consecutive quarter of growth in our global markets but are still very challenged by COVID lockdowns and slow vaccine rollouts.

Revenue growth improved significantly in Canada, Asia Pacific, which is our Australian business, and Latin America.

This was partially offset by revenue declines in the U.K., principally due to continued U.K. lockdowns in response to the COVID pandemic.

Asia Pacific, which is principally our Australia business, had a very good performance in the first quarter with revenue of $87 million, up 7% in local currency.

Australia consumer revenue continues to improve relative to prior quarters and was down only about 2% versus last year compared to down 5% in the fourth quarter.

Our commercial business combined online and off-line revenue was up a strong 9% in the quarter, a solid improvement from fourth quarter, and fraud and identity was up 15% in the quarter, following strong performance in the fourth quarter.

European revenues of $69 million were down 5% in local currency in the first quarter.

Our European credit business was down about 5% in local currency.

Spain revenue was down about 1%, while the U.K. was down about 6% in local currency, similar to the fourth quarter from continued challenging COVID environments.

Our European debt management business revenue declined by about 4% in local currency in the quarter.

Both the CRA and debt management businesses were impacted in the quarter by actions taken by the U.K. government to curtail debt placements in response to the pandemic resurgence in the United Kingdom.

As the lockdown and other actions lift in April and May, we anticipate improvements in U.K. CRA revenue in the second quarter and improvements in debt management revenue in the second half of 2021 as collection activity restarts in the latter part of the second quarter.

Latin American revenues of $42 million grew about 1% in the quarter in local currency, which was an improvement from the down 1% we saw in the fourth quarter.

These markets also continue to be heavily impacted negatively by continued COVID lockdowns and slow vaccine rollouts.

We continue to see the benefit in LatAm of strong new product introductions over the past 3 years, which is benefiting their top line.

Canada delivered record revenue of $44 million in the quarter, up about 13% in local currency.

Consumer online was up about 3% in the quarter, an improvement from the fourth quarter.

Improving growth in Commercial, Analytical and Decision Solutions and ID and Fraud also drove growth in Canadian revenue in the first quarter.

International adjusted EBITDA margins at 28.2% were down 30 basis points from last year.

Excluding the impact of the tech transformation costs that we've included in adjusted EBITDA, margins were up about 200 basis points.

This improvement was principally due to revenue growth and operating leverage, partially offset by system -- redundant system costs from our cloud transformation.

Global Consumer Solutions revenue was down 16% on a reported basis and 17% on a local currency basis in the quarter and slightly better than our expectations.

We saw better-than-expected performance in our Global Consumer Direct business, which sells directly to consumers through equifax.com and myEquifax and which represents about half of total GCS revenue.

Direct-to-consumer revenue was up a strong 11% in the quarter, the third consecutive quarter of growth.

The decline in overall GC revenue in the quarter was again driven by our U.S. lead generation partner business, which has been significantly impacted from COVID beginning in mid-2020.

As we discussed, we expect the decline in total GCS revenue from our partner vertical to moderate substantially as we move into the second quarter and return to growth in the fourth quarter of 2021.

GCS adjusted EBITDA margins of 24.6% were up about 150 basis points.

We expect margins to be pressured to around 20% in the second quarter, reflecting planned costs to complete the migration of our Consumer Direct business cloud transformations in the U.S., U.K. and Canada to our new Equifax cloud platform.

Moving to Slide 7. This chart provides you an updated view of Equifax core revenue growth.

As a reminder, core revenue growth is defined as Equifax revenue growth, excluding, number one: the extraordinary revenue growth in our UC claims business in '20 and '21; and number two, the impact on revenue from U.S. mortgage market activity as measured by changes in total U.S. mortgage market credit inquiries.

Core revenue growth is our attempt to provide a more normalized view of Equifax revenue growth, excluding these unusual UC and U.S. mortgage market factors.

In the first quarter, Equifax core revenue growth, the green section of the bars on Slide 7, is up a very strong 20%, reflecting the broad-based growth across Equifax.

And this is up significantly from the 11% core revenue growth we delivered in the fourth quarter and well above our historic core growth rates.

Workforce Solutions and USIS have continued to strongly outperform the mortgage market.

The 16% organic growth in U.S. B2B nonmortgage revenue also drove our core revenue growth.

Importantly, our core revenue growth has accelerated over the past 5 quarters, from 5% in first quarter 2020 to 11% in the fourth quarter of last year and to 20% this quarter, reflecting the strength and resiliency of our broad-based business model, power of Workforce Solutions, the market competitiveness of USIS and benefits from our cloud data and technology investments and our increasing focus on leveraging the cloud for innovation in new products.

As you know, the strong growth is in the midst of a global market that is still recovering from the COVID pandemic.

Turning to Slide 8. Workforce Solutions continues to power Equifax and clearly is our strongest and most valuable and largest business.

Workforce Solutions revenue grew a very strong 59% in the first quarter, with core revenue growth accelerating to 46%.

As a reminder, the 59% growth is off 32% growth in first quarter of 2020.

The strong outperformance and sequential improvement reflects the power of the unique TWN database and Workforce Solutions business model.

At the end of the first quarter, the TWN database reached 115 million active users and 90 million unique records, an increase of 9% or 10 million active records from a year ago.

And as a reminder, over 60% of our records are contributed directly by employers that Workforce Solutions provides employer services like UC claims, W-2 management, I-9, Watsi and other solutions too, and we've built these relationships over -- with our customers and their contributors over the past decade.

The remaining 35% are contributed through partnerships, most of which are exclusive.

The major payroll processor agreement that we announced on our February call is still on track to go live later this year, which will add to our TWN database.

And we have a dedicated team, as you know, focused on growing our TWN database with an active pipeline of record additions to continue to expand our TWN database.

The Workforce Solutions team continues to focus on expanding the number of mortgage companies and financial institutions with which we have real-time system-to-system integrations, which, as you know, drives increased usage of our TWN data.

The team is also focused on extending our operations into car and auto verticals as well as across our growing government vertical.

And as I mentioned earlier, we continue to work closely with the SSA and expect to go live with our new solution in the second half of this year, which will deliver $40 million to $50 million of incremental revenue at run rate in 2022.

The Workforce Solutions' new product pipeline is also rapidly expanding as our teams leverage the power of our new Equifax cloud infrastructure.

We are anticipating new products in mortgage, talent solutions, government and I-9 in 2021.

New product revenue will increase in '21 and '22 as we begin to reap the benefits of our new products introduced to the market during last year and in 2021.

Rudy Ploder and the Workforce Solutions team have multiple levers for growth in 21, '22 and beyond.

Workforce Solutions -- Workforce Solutions is our most valuable business and will continue to power our results in the future.

Slide 9 highlights the ongoing exceptional core growth performance in mortgage for our U.S. B2B business -- mortgage businesses, Workforce Solutions and USIS.

Workforce and USIS outgrew the underlying U.S. mortgage market again in first quarter with combined core growth of 48%, up from 37% in 2020 and in line with the 49% growth they delivered in the fourth quarter -- 49% core growth.

This outperformance was driven strongly by workforce Solutions with core mortgage growth of 99%.

Consistent with past quarters, Workforce Solutions 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.

USIS delivered 5% core mortgage revenue growth in the quarter, driven primarily by new debt monitoring solutions with further support from marketing.

Our ability to substantially outgrow all of our underlying markets is core to our business model and core to our future growth.

I'd now like to turn it over to John to discuss current trends in the mortgage market and to walk through our revised second quarter and full year 2021 guidance.

Thanks, Mark.

As Mark referenced earlier, U.S. mortgage market inquiries remained very strong in 1Q '21 and up 21%, but that growth was slightly lower than the 24% we had expected when we provided guidance in early February.

As shown on the left side of Slide 10, as mortgage rates increased over the past few months and refinancing activity continues, the number of U.S. mortgages that could benefit from a refinancing has declined to about $13 million.

Although still very strong by historic standards, this is down from the levels we saw in 4Q '20 and early 1Q '21.

Based upon our most recent data from 4Q '20, mortgage refinancings were continuing at about $1 million per month.

As shown on the right side of Slide 10, the pace of existing home purchases continues at historically very high levels.

This strong purchase market is expected to continue throughout '21 and into '22.

Based on these trends and specifically, the reduction in the pool of mortgages that would benefit from refinancing, we are reducing our expectation for the mortgage market financing activity in 2021.

As shown on Slide 11, we now expect mortgage credit inquiries to be about flat in 2Q '21 versus 2Q '20 and to be down about 25% in the second half of '21 as compared to the second half of '20.

Overall, for 2021, we expect mortgage market credit inquiries to be down approximately 8%.

This compares to the down approximately 5% we discussed with you in February.

Slide 12 provides our guidance for 2Q '21.

We expect revenue in the range -- revenue in the range of $1.14 billion to $1.16 billion, reflecting revenue growth of about 16% to 18%, including a 2.1% benefit from FX.

Acquisitions are positively impacting revenue by 2%.

We are expecting adjusted EPS in 2Q '21 to be $1.60 to $1.70 per share compared to 2Q '20 adjusted EPS of $1.63 per share.

In 2Q '21, technology transformation costs are expected to be around $44 million or $0.27 per share.

Excluding these costs that were excluded from 2Q '20 adjusted EPS, 2Q '21 adjusted EPS would be $1.87 to $1.97 per share, up 15% to 21% from 2Q '20.

This performance is being delivered in the context of the U.S. mortgage market, which is expected to be flat versus 2Q '20.

Slide 13 provides the specifics on our 2021 full year guidance.

We are increasing guidance substantially despite the expectation of a weaker U.S. mortgage market.

2021 revenue of between $4.575 billion and $4.675 billion reflects revenue growth of about 11% to 13% versus 2020, including a 1.4% benefit from FX.

Acquisitions are positively impacting revenue by 1.7%.

EWS is expected to deliver over 20% 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 nonmortgage.

International revenue is expected to deliver constant currency growth in the upper single digits, and GCS revenue is expected to be down mid-single digits in 2021.

2Q '21 revenue was also expected to be down mid-single digits for DCS.

As a reminder, in 2021, Equifax is including all cloud technology transformation costs and adjusted operating income, adjusted EBITDA and adjusted EPS.

These onetime costs were excluded from adjusted operating income, adjusted EBITDA and adjusted EPS through 2020.

In 2021, Equifax expects to incur onetime cloud technology transformation costs of approximately $145 million, a reduction of about 60% from the $358 million incurred in 2020.

The inclusion in 2021 of this about $145 million in onetime costs would reduce adjusted EPS by $0.91 per share.

This is consistent with our guidance for 2021 that we gave in February.

2021 adjusted EPS of $6.75 to $7.05 per share, which includes these tech transformation costs, is down approximately 3% to up 1% from 2020.

Excluding the impact of tech transformation costs of $0.91 per share, adjusted EPS in 2021 would show growth of about 10% to 14% versus 2020.

2021 is also negatively impacted by redundant system costs of over $65 million relative to 2020.

These redundant system costs are expected to negatively impact adjusted EPS by approximately $0.40 a share.

Additional assumptions included in 2021 guidance are provided -- will be provided in the 1Q '21 earnings slide deck to be posted later this morning.

Slide 14 provides a view of Equifax total and core revenue growth from 2019 through 2021.

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 business within our EWS Employer Services business, and also the employee retention credit revenue from our recently acquired HIREtech 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 2Q '21 and full year 2021 reflects the midpoint of guidance ranges we provided.

In 1Q '21, we delivered very strong core revenue growth of 20% and expect to continue to deliver strong core revenue growth in 2Q '21 of about 20% and 16% for all of 2021.

This very strong performance, we believe, positions us well entering 2022 and beyond.

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

Thanks, John.

Turning to Slide 15.

This highlights our continued focus on new product innovation, which is a critical component of our next chapter of growth as we leverage the Equifax cloud for innovation, new products and growth.

We continue to 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.

In the first quarter, we delivered 39 new products, which is up from the 35 we delivered last year.

We're encouraged by this continued strong performance, especially following the record 135 new products we delivered last year.

We wanted to highlight some of these new products, which we expect to drive revenue in '21 and beyond.

First, Insight Score for credit card launched by USIS provides the credit card industry with a specific credit risk score created using credit and alternative data that predicts the likelihood of a consumer becoming 90 days past due or more within 24 months of origination.

USIS also launched a new commercial real estate tenant risk assessment product suite, which provides real-time and unmatched data analytics and risk assessment for tenants buildings and portfolio strength, delivered through an interactive, Ignite Marketplace app or as a stand-alone report.

And Workforce Solutions continues to expand its suite of products focused on the government vertical.

Their government enhanced solutions social services verification product gives the ability for the customer to choose the desired period of employment history with options ranging from 3 months, 6 months, 1 year, 3 years or the full employment history.

These products help government agencies quickly and efficiently administer federally -- federal supplement -- supplementary nutrition, child health insurance, Medicaid, Medicare benefits, managed child support and insurance program integrity.

In the first quarter, over 2/3 of our new products launched or in development leveraged our new Equifax cloud-based global product platforms.

This enables significant synergies and efficiencies in how we build the new products, our speed to bring the products to market and our ability to move the new products easily to our global markets.

Our new cloud-based Luminate platform for fraud management is a great example, which is launching in Canada and the U.S. simultaneously and will soon launch in the United Kingdom, Australia and India.

This would have taken much longer and been much more expensive in a legacy environment.

We're also rolling out our Equifax cloud-based InterConnect and Ignite platforms for marketing and risk and decisioning and management products throughout Latin America, Europe, Canada as well as the United States.

As we discussed on our call in February, we're focused on leveraging our new cloud capabilities to increase NPI rollouts and new product revenue growth in '21 and beyond.

As a reminder, our NPI revenue is defined as the revenue delivered by new products launched over the past 3 years, and our Vitality Index is defined as the percentage of current year revenue delivered by NPI revenue.

As I mentioned earlier, we've increased our 2021 Vitality Index guidance from 7% by 100 basis points to 8%, which as you can see from the left side of the slide, is a significant increase from about 500 basis points in 2020.

NPIs are a big priority for me and the team as we leverage the Equifax cloud for innovation, new products and growth.

Turning to Slide 16.

M&A plays an important role in our growth strategy and will be central to our long-term growth framework.

Our team is focused on building an active pipeline of bolt-on targets that will both broaden and strengthen Equifax.

Our M&A strategy centers on acquiring accretive and strategic companies that add unique data assets, new capabilities, deliver expansion into identity and fraud or expand our geographic footprint.

In the first quarter, we closed 5 acquisitions totaling $866 million across strategic focus areas of identity and fraud, Workforce Solutions, open data and SME.

We discussed 3 of these transactions with you in February, which were the acquisitions of Kount, AccountScore and Creditworks.

As I just discussed earlier, we're excited about expanding opportunities we see from the combined Kount and Equifax in the fast-growing identity and fraud marketplace.

In March, we closed 2 Workforce Solutions bolt-on transactions, HIREtech and I2Verify, which will further broaden and strengthen our Workforce Solutions business.

HIREtech is a Houston-based company that provides employee-related tax credit services as well as verification services.

HIREtech also has unique channel relationships to provide these services through payroll providers, consulting firms and CPA firms.

i2Verify is a new very important Massachusetts-based company that provides secure digital verifications of income and employment services.

The company has a unique nationwide set of record contributing employers with concentrations in the health care and education sectors.

i2Verify also brings unique records to the TWN database, all of which are contributed by direct relationships.

You should expect Equifax to continue to make acquisitions in these strategic growth areas that offer unique data and analytics to our customers with a goal of increasing our top line by 100 to 200 basis points annually from M&A.

Before wrapping up, I want to speak to you about an area of significant focus at Equifax and importance to me personally.

Slide 17 provides an overview of Equifax's ESG strategy and how it helps position us for long-term sustainability.

I hope you saw and had a chance to read our annual report letter that highlighted our increased focus on ESG.

First, Equifax plays an important role in helping consumers live their financial best.

A primary example of this is that our alternative data assets, such as utility and phone payment data, provide lenders with a better picture of the approximately 30 million U.S. individuals that do not have traditional credit files or access to the formal financial system.

I've also made advancing inclusion and diversity a personal priority since I joined Equifax.

Believing that diversity of thought leads to better decisions, we've taken clear steps to broaden diversity at Equifax, including the last 3 directors added to our Board are diverse, and all 7 individuals that have been added to my senior leadership team since I joined 3 years ago have also been diverse.

We're carrying out this focus on inclusion and diversity across Equifax.

We're also focused on environment -- on our environmental impact and greenhouse gas footprint.

Our cloud transformation will move our existing legacy technology infrastructure to the cloud, which will dramatically reduce our environmental impact as we leverage the efficiencies and carbon-neutral infrastructure at our cloud service providers.

Over the course of this year, we -- or over the course of last year, we decommissioned 6 data centers, over 6,800 legacy data assets and over 1,000 legacy applications.

We have a detailed program underway to baseline our energy usage and benefits from our cloud transformation as we work towards a commitment regarding carbon emissions and a net zero footprint.

We're also committed to being the industry leaders regarding security, with the leadership of our CISO, Jamil Farshchi, our culture quick security first.

All employees are required to take a mandatory security-focused training sessions every year.

And all of our 4,000 bonus-eligible employees have a security role in their annual MBOs.

We believe -- we also believe in sharing our security protocols and strategies with our partners, customers and competitors to collaborate to keep us all safe.

In 2020, we hosted our inaugural Customer Security Summit, where we detailed our progress on security transformation and discussed advancements in supply chain security.

As threats continue to evolve, we remain highly focused on continuing to advance our security efforts.

Wrapping up on Slide 18.

Equifax delivered a record-setting first quarter, and we have strong momentum as we move into second quarter in 2021.

Our 27% overall and 20% core growth in first quarter reflects the strength and resiliency of our business model while still operating in a challenging COVID environment.

We've now delivered 5 consecutive quarters of sequentially improving double-digit growth.

We're confident in our outlook for 2021.

And as John described, are raising our full year midpoint revenue by 500 basis points to $4.625 billion and our EPS midpoint by 9% to $6.9 a share.

Our revised revenue estimate of 12% growth in 2021 at the midpoint of the range off of a very strong 17% in 2020 reflects the resiliency, strength and momentum of the EFX business model.

Our increased 2021 growth framework incorporated our expectation, as John discussed, that the U.S. mortgage market will decline about 8% in 2021 and while operating in a still recovering COVID economy.

Our expectation for core revenue growth of 16% in 2021 reflects how our EFX2023 strategic priorities are delivering.

Workforce Solutions had another outstanding quarter of 59% growth and will continue to power Equifax's operating performance throughout 2021 and beyond.

The Work Number is our most differentiated data asset and workforce Solutions is our most valuable business.

Rudy Ploder and his team are driving outsized growth by focusing on their key levers: new records, new products, penetration and expansion into new verticals with our differentiated TWN database.

USIS also delivered an outstanding quarter of 19% growth, highlighted by nonmortgage revenue growth of 15% and 11% organic nonmortgage growth.

We expect our nonmortgage growth to accelerate as the U.S. economy recovers.

The acquisition of Kount is providing new opportunities and products in the rapidly expanding identity and fraud marketplace and USIS continues to outperform the mortgage market from new products, pricing and increased penetration.

USIS is clearly competitive and winning in the marketplace and will continue to deliver in '21 and beyond.

International grew in the first quarter for the second consecutive quarter, overcoming economic headwinds from significant COVID lockdowns and slower vaccine rollouts in our global markets.

Our expectations are high for ongoing sequential improvement in international during 2021, and for accelerating growth as their underlying markets recover from the COVID pandemic.

We're also making strong progress rolling out our new EFX cloud technology and data infrastructure and remain confident, as John described, in the significant top line, cost and cash benefits from our new EFX cloud capabilities.

These financial benefits will ramp as we move through 2021 and continue to grow in 2022 and are enabled by our always-on stability, speed to market and ability to rapidly build and move products around the globe.

Our strong performance -- operating performance is allowing us to continue to accelerate investments in new products, leveraging our new Equifax cloud capabilities.

And we're off to a strong start in 2021 with 39 NPIs in the first quarter on top of the record 134 we launched in 2020.

And our strong outperformance is fueling our cash generation, which is allowing us to reinvest in accretive and strategic bolt-on acquisitions.

As discussed earlier, we closed 5 acquisitions in strategic growth areas in the first quarter and we have an active M&A pipeline.

We look for bolt-on acquisitions that will strengthen our technology and data assets and that are financially accretive with the goal of adding 100 to 200 basis points to our top line growth rate in the future.

I'm energized about what the future holds for Equifax.

We have strong momentum across all of our businesses as we move into second quarter.

We're on offense and positioned to bring new and unique solutions to our customers that only Equifax can deliver, leveraging our new EFX cloud capabilities, and our strong results and the increased guidance that we provided reflect that.

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

(Operator Instructions) We'll take the first question from David Togut with Evercore ISI.

Looking at the over 20% EWS revenue growth guide for this year, can you quantify contributions you expect from new unique record growth, pricing and new use cases?

Yes.

I think the answer is yes.

Those are all meaningful levers.

I would add the system integrations and our mortgage market and other solutions is also a lever for growth.

David, I think as you know, we don't break those out specifically, but it starts with records.

We've clearly had a real focus on some real momentum in adding records to the TWN database.

As you know we have a dedicated team that that's all they do.

And we've got active dialogues going with individual corporations to bring their data to us as we add new services like UC claims and Watsi and all the myriad of services that we provide and also with other payroll processors.

And as you know, in February, we announced that our plan, and we're on track to add one of the major payroll processors records to our database in the second half of 2021, which will add meaningfully.

And I think you know our business model, as we grow records, we're able to monetize those really instantly because of the inquiries that we receive just drive our hit rates up.

We clearly have the ability to use price, which we talked about.

I think you've seen a real increase in the focus on new products at Workforce Solutions, particularly as they're becoming cloud-enabled.

It's giving them the opportunity to bring new solutions to the marketplace, to really leverage their data sets.

And these new solutions are typically at higher price points and delivering more value to our customers.

So that's another big lever.

We've talked about in the second half that they're continuing to focus on systems-to-system integrations, and we just find higher usage when customers move from accessing the TWN database through the web to system-to-system integrations, we get, really, all of their volume, which is another big lift.

And as I mentioned a couple of times, we're still on track to launch our new agreement with the Social Security Administration.

It's a very meaningful contract that will go live in the second half, and we expect that to be $40 million to $50 million at run rate.

So there's a large amount of levers available for Workforce Solutions.

As you point out, it starts with records, and while we've grown records to 90 million uniques in the quarter.

As you know, there's 155 million non-farm payroll.

So there's a lot of room between 90 million and $155 million as we continue to grow towards having the full dataset.

And then we talked before that we're also widening dataset beyond W-2 income, including 1099 and other data sources as we look for other ways to include other portions of the U.S. population around are they working and how much do they make.

Just as a quick follow-up.

You closed 2020 at almost 60% EBITDA margin for EWS.

Can you quantify operating leverage in this business for 2021?

Well, there's a lot of leverage, as you could see in the first quarter results.

I think you're talking about Workforce Solutions.

We're continuing to invest in the business.

There's no question about that.

But with the revenue growth that we're getting on both the mortgage and nonmortgage side and Workforce Solutions, there's real operating leverage that we expect to continue through 2021.

(Operator Instructions) The next question is from Manav Patnaik with Barclays.

I was just hoping, Mark, you could talk about the comments you made towards the end of the call around acceleration of the nonmortgage business with this reopening.

And perhaps off that $225 million that you raised revenue by, like how much of that was just the strong performance in EWS you called out versus maybe some incremental M&A and this reopening benefit that you think you'll see?

Yes.

We don't have any incremental M&A in that guide.

We wouldn't include that acquisitions that we haven't completed yet.

I think we talked that we have a pipeline and a goal of increasing acquisitions.

Of course, we're off to a very fast start this year on M&A.

You know this, Manav, we took down our framework for mortgage inside of that revenue framework that we shared, which is quite significant.

We think that we've got mortgage in the right spot now at down 8% versus the down 5% for the year.

And as you know, that the way we frame that is most of that happens -- really, all of it really happens in the second half.

And an expectation that there will be a recovery in the economies as vaccine rollouts continue and lockdowns are reduced.

There's still some impact, we believe, of the COVID pandemic in the U.S. market.

Although, as we pointed out, we saw some real recovery by our customers.

And I characterize that as confidence, meaning they're starting originations in the latter part of the first quarter and into April, which we expect that to continue.

But you still have our international markets are still significantly impacted by the COVID pandemic, and we expect that to unfold at some pace during 2021, and that will be a positive as we move forward.

Would you add anything, John?

No, we've just said in the past, right, that increasingly, as we go through 2021, as the nonmortgage markets recover, increasingly, debt contribution to core growth is going up, right?

So we're -- we expect that to continue as we go through the year.

And the outperformance in the first quarter, as we said, more than half of it was driven in our nonmortgage segments.

And you're seeing that obviously flow through the rest of this year as well.

And then I would add to it, too, that I hope you caught our comments around we really feel like the Equifax cloud is providing benefits.

Our NPI focus is providing benefits.

That will benefit our mortgage business as well as our nonmortgage business.

And of course, the majority of Equifax is nonmortgage.

But the initiatives that we launched over the last couple of years, the investments that we've made over the last couple of years we feel are starting to pay off.

When you talk about USIS, we mentioned many times even over the last year on each of these quarterly calls that we feel a real strength in the marketplace by our USIS team competitively.

Commercially, how they're going to market, I think we've talked about we've rebuilt that team a year ago and there's some real momentum there.

And again, the focus on new products, those are driving revenue growth.

And we guided up 100 basis points in our Vitality Index.

The bulk of that is going to come in our nonmortgage business.

Okay.

Got it.

And Mark, I was hoping you could just help us also just appreciate the different moving pieces in the -- I think you talked about Workforce Solutions growing above 20% this year, but there's obviously a lot of moving pieces between Employer and Verification Services.

I was just hoping you could give us some guidance there on how they should end up in the year.

You want to try it on that?

Sure.

So yes.

I think in Mark's script, we tried to walk through what the real big drivers were, right?

Verifier is continuing to perform extremely well.

Obviously, mortgage is a bit of a draw -- a drag.

But as you go through the rest of this year, if you think about what we said in February, we'd indicated that for total mortgage for Equifax, that even though the market was down 5%, we expected revenue to grow more than 10%.

And even though we now have the market weaker at down 8%, we still expect mortgage revenue to grow more than 10%.

But some significant drivers of EWS in 2021 continue to be in the nonmortgage segment.

We talked about talent solutions growing very, very fast, almost doubling, I think we said in the first quarter.

1099, also growing very, very fast, and a recovery in WFA.

So what we think you're going to see is very nice growth across the nonmortgage segments, obviously, excluding UC, where we gave very specific guidance.

And then also continued good performance in mortgage despite the fact that the market is slowing, right?

We're not going to quantify each of those.

But directionally, that's what's going on.

The next question is from Kyle Peterson with Needham.

I just wanted to touch on EWS, particularly the momentum and increased adoption you guys are seeing in some of the nonmortgage.

Could you guys dive a little more into where the strongest area is at?

Is that in other lending products like auto or card?

Or where is some of the strength that you guys are seeing coming from right now?

Yes.

Nonmortgage is obviously more than Financial Services.

I'll come back to that, but we've talked a bunch about our government vertical, which is growing quite positively.

Our employer services is nonmortgage.

Our talent solutions business.

So we talked about the growth there.

And I think specifically, you're talking about nonmortgage Verification.

So I'll go back to that versus nonmortgage broadly in Workforce because we've got a bunch of levers that are outside of Verification that are growing quite positively, again, excluding the negative impact of UC claims on a year-over-year basis.

So in Financial Services, as you know, mortgage is our largest in Verification, for sure, and we're getting real leverage and outgrowing the market there.

So first, records helped everywhere.

Right?

So in whatever the solution is, as we grow our records, and of course, they're up 10% year-over-year, and we've got a clear path to increase them in 2021, and that's part of our framework.

Those hit rates are good in any vertical you're in, whether it's mortgage or auto or government, et cetera.

So records are #1.

We've had a real focus on new products, broadly in Equifax and in Workforce Solutions.

And then when you talk about some of the verticals, we're seeing increased usage in auto, where kind of a year ago or 2 years ago, it was more of a subprime usage along with the credit file.

Now we're seeing it more in near prime.

So there's just more usage in the auto sector and broader usage at those lower credit scores.

So that's helping there.

Personal loans has always been a pretty strong space for us in the fintech market for Verification, using it because if you think about a personal loan, it's $10,000, $20,000, $30,000, it's a very large transaction.

And verifying how much someone makes and are they employed at the time of the loan is a very important lift in the predictability.

And then we've talked really for the last, I think, 3 or 4 quarters about the fact that we're seeing a number of card issuers take our data and, of course, a sliver of our data.

We don't -- given the depth of data that they would have in a mortgage application and using it in originations, in other applications in the card space.

And we've got now, I believe, 2 of the large card issuers that are using our data at origination along with the credit file, which is a big breakthrough.

We've been chasing this market for some time.

You know I'm an old card originator.

I did that for a decade before Equifax.

The predictability of adding is someone working and how much do they make to the credit file enhances every credit decision, period.

And it was really around getting our database to scale.

And we've talked the last couple of quarters that as we've gone over 50% hit rates in the database, as we get to that 90 million uniques versus the 155 million non-farm payroll, it becomes a data set that's more usable because you get more hit rates.

So that's another thing that we -- reason we think we're getting more new uses of it in things like cards.

And only thing I'd add, right, and as Mark said, our 2 biggest segments in Verifier are government and talent solutions, and they're growing very fast.

And both of those are highly benefited by the depth of the database, by the fact that we have over 450 million total records.

And being able to provide history in those market segments is very important.

So we're seeing very strong growth in the 2 biggest nonmortgage Verifier segments of both government and talent solutions.

Got it.

That's really helpful color.

And then I guess just a quick follow-up on the verification side of the business, like increased noise in the last few months with TransUnion and cloud, both making some splashes in that space.

Have you guys noticed any change in competition when you guys go to market either with users of the Verification Services or potential employers, pay providers, et cetera?

We have not.

We actually hear mostly about it from you, meaning the sell-side.

And we talked many times that we think we have a strong franchise.

The scale of our database is extremely large.

I think of the 90 million uniques at 115 million actives, the ability to get those kind of records is quite challenging, we believe, meaning to have a database that's usable.

And having a database that has 1 million or 2 million or 3 million or 10 million records is just very challenging for -- to take that to market.

When we can deliver over 50% hit rates, it just is quite challenging.

And I think you know 60% of our records come from individual companies.

And we get those records through long-term relationships.

We've been doing this for a decade.

We have a full suite of services.

We provide HR managers that allow us access to those records, and we provide that service, the income employment piece of that for free to the company and to their employees, and it's a real benefit to them.

So those kind of services are really required, we think, to have a database of our scale.

And as we've talked, the other 35% or so of our database comes from payroll partnerships.

And the bulk of those are exclusive, meaning we're an exclusive arrangement, they're not going to provide those records to someone else.

So we think that's quite challenging.

And you add on top of that, that we've been investing in this business for over a decade.

We've put about $2 billion into it, including a couple of acquisitions just in the last 30 days, the strengthened Workforce Solutions.

In the last 2 or 3 years, we've probably invested $200 million to $300 million in the technology of the business.

This is -- requires a massive investment.

And I'm not sure the competitor you reference is thinking about or is planning to have the kind of investments that we have.

And just to be clear, we intend to protect and grow our franchise.

And the next question is from Hamzah Mazari with Jefferies.

My question on the fraud and ID business.

You had mentioned e-commerce maybe retail as new verticals with Kount deal.

And at the same time, you talked about scale.

Could you maybe talk about whether the fraud and ID business is at scale today?

How do you define scale and just as part of that discussion, you've seen companies like Mastercard recently buy Ekata.

Mitek is doing some stuff around ID.

Is there a lot more M&A opportunity in this market?

How do you think about sort of when this business scales?

Or if it's at scale today?

Yes.

It's a great question.

It's one that's been a deliberate focus of ours.

You've heard us talk about it for the last couple of years that it's a fast-growing space.

The ID and broad space like globally is, I don't know, $18 billion, something like that, growing at 20%.

You've seen -- we've had growth there.

We've been in it for a long time.

We have a lot of existing differentiated data assets at Equifax around ID and fraud and the Kount acquisition was quite strategic for us.

They have real scale.

And I think as a reminder, they play in the retail e-commerce space.

Have real scale around their interactions.

I think it's 32 billion consumer interactions per year.

They've got 400 million unique e-mail addresses verified.

They got cellphone addresses are verified, IP addresses.

So just a wealth of data and the power is really combining their data with ours.

And that's really why we acquired Kount.

And as you point out, it also brings us into a new vertical.

We weren't in the retail e-commerce space, and that's where Kount plays.

And of course, we're going to bring Kount in their data financial services, banking, telco, insurance, where we play.

So that's why we acquired Kount?

The answer is yes.

You heard me comment earlier this morning on the call that when we think about new M&A or additional M&A, ID and fraud is a place that we want to continue playing in.

We see opportunities.

We have opportunities in our pipeline to continue to strengthen the combination of Equifax and Kount going forward.

And then when you -- your question of scale, from our perspective, the combination of Equifax and Kount gets us into kind of a strong market position, but it's a huge market at $18 billion.

So there's a lot of room to grow.

And we look at product introductions.

We're investing in like our new Luminate platform gets us more capabilities organically in this marketplace.

And as I mentioned earlier, we're rolling that out and then acquisitions like Kount really strengthen our data assets and the combination of Equifax and Kount is quite powerful.

So you should look for us over the coming years to find ways to grow.

Certainly, we're going to invest organically, but also to invest through M&A to strengthen this.

We like the space, and we want to be bigger in it.

Got you.

And my second question, I've asked this before, a couple of quarters ago, but I think I'm going to ask it a bit differently.

So if we exclude Workforce Solutions, and we just look at USIS and the margin differential, just between USIS and international, it's pretty large.

And then if you look at your international margin and you compare it to your competitors, there's also a big gap.

And so I realize that -- so we're taking Workforce Solutions out of the mix.

And so then maybe there's some mix differentials between USIS and international.

And I realize international has to get the revenue where you get the incremental margin and the op leverage, and that's maybe in earlier innings.

But could you -- how much of the gap can you close between international and USIS and how much of the gap is structural?

And we're excluding Workforce Solutions here.

And again, we don't exclude Workforce Solutions, but we'll just do that for your discussion and really focus on those other businesses.

Obviously, USIS has real scale, and that scale drives their margins.

And that's clearly a big difference when you think about our international.

International, we're in 25 countries.

We have some larger businesses like Australia, that's over $300 million and then some smaller countries that we plug in.

So that drives a difference in the margins between our USIS, which has really massive scale versus our International businesses.

We're always focused on improving our margins.

The cloud investments that we're making will benefit Workforce Solutions margins, USIS margins and International and GCS margins.

That's part of our strategy to improve our cost structure.

But there's no question the subscale nature of some of our International markets result in margins being lower, which I would characterize as structural, but we see opportunities to improve those margins going forward.

Would you add anything, John?

Yes.

As you look at the countries we're in, the countries that are more like USIS, where they're more specifically, like, for example, Canada, margins are much better, right?

And so as Mark said, it really depends on the size of the market, and then the diversity of the market that we're playing in.

And then -- and so we certainly expect to see improvements in margins as we go to the cloud.

But some of it certainly is structural just by the fact that we're in so many markets, and some of those businesses are very small.

So not to get into specific numbers, we do expect to see improvements in those margins over time.

But some of it is structural.

We have no expectation that they're going to reach the type of margins we see with USIS.

The next question is from Andrew Steinerman with JPMorgan.

It's Andrew.

I wanted to hear about the different areas of U.S. credit applications, meaning card and auto and personal loan.

with the pickup in nonmortgage USIS, online revenues accelerating to 16% in the first quarter, in particular.

I don't think we've heard the credit card issuers talk about loan growth picking up yet, and I just wanted to know if you anticipate that soon.

I think we said, Andrew, that it was fairly broad-based.

And some of the marketing spend is card issuers starting to, I would characterize, restart originations, but that's the marketing piece.

That doesn't necessarily result in loan growth yet.

I think that's the -- starting to spend money and starting to put new offers out in the marketplace that presumably would result in some loan growth either in second or third quarter, but there's a lag on that between the marketing spend and when those originations go on their books and become loans.

Broadly, I would say, what we hear from the U.S. customers is an element of confidence that wasn't in place certainly for most of 2020, certainly, the early parts of 2021.

And I think as we've all seen vaccine rollouts in the United States really accelerate.

And now really, everyone over age 16 can get one.

That's resulting in consumer confidence.

We've seen it in retail spending.

And you've seen banks in their earnings releasing reserves.

So I think there's an element of confidence of we're moving towards a more normal economy.

I would say we're not there yet, but we saw some real increases, what I would call, in confidence, and it's in our numbers in March and as we moved into April.

And what...

So auto was stronger than card, right?

So if you just kind of tier our structure, auto was stronger than card and identity and fraud was also very strong.

And your next question is from Craig Huber with Huber Research Partners.

I wanted to focus on cost, if I could, please.

Can you give us a sense what your hiring plans are this year in terms of full-time equivalent employees?

Are you thinking your plans should maybe pick up -- hire than other, say, 5% more employees in the U.S. That's my first question.

Another related question to that is, as we move through this virus, things hopefully get better, your employees are turned to the offices and stuff in the U.S. Should we expect your cost base to materially go up when that happens?

Yes.

First off, Craig, welcome.

I think this is your first Equifax call or at least in recent times.

So it's great to have you covering the company.

On the people side, I would say our employment will be fairly stable.

There's some areas where we're investing, like in product resources, in some technology areas.

But at the same time, I think you know we've got plans to reduce some of our technology costs as the cloud transformation unfolds.

So there'll be some reductions in that area, which is in our framework.

So I wouldn't think about big changes in our employment.

But you should think about Equifax being on offense, meaning we're investing with our strong performance.

And of course, our acquisitions that we talked about, the 5 acquisitions, bring incremental employees into our headcount, which is in our framework that we've shared with you.

With regards to the return to the office, we've been open since last June.

We've been very careful about that.

It's been really up to our team if they want to come in.

We've limited our occupancy to 50%, no more than 50%, and of course, exercising all those protocols.

And we've barely seen in the last, I don't know, 30 to 60 days as vaccine rollouts have increased -- an increase of people coming back to our office.

And what we've been telling our employees, when you're vaccinated, come back and start operating with Equifax.

We also announced post whatever our full reopening is, which is hard to see what that date is.

We're going to -- we introduced what we call an Equifax flex day where we're going to have some flexibility in our workforce that they can pick on 1 day per week with their managers approval to work remotely.

And it was really a reflection on that there are many benefits that we learned over the last year that we can be productive from working from home, but so-called 4-1, meaning we're going to work from the office at least 4 days per week.

Is a reflection that we're a collaborative culture, the teamwork is how we operate, whether it's doing NPIs or technology or new customer solutions, we think that happens best in the office.

And to your question about we don't expect our cost to go up.

We haven't changed our footprints.

We don't expect them to go down as a result of this return to office.

And just as you think about our cost structure, just for perspective, right, we're like most technology companies.

Obviously, a significant portion of our cost structure is our own employees.

We also have a very significant footprint of contract employees and contractors, right?

So we end up -- we move cost.

Obviously, the contractor workforce is more variable to us.

Then also if I could ask, guys, in the U.S., where do you think the biggest opportunity is to be able to raise price steady as each year goes on to at least in the U.S. operations?

Yes.

We don't talk a lot about price, but if you think about our U.S. businesses, which is really I'll leave our consumer business aside, GCS, but you think about USIS and Workforce Solutions.

We focus on new product rollouts that become incremental margin and many times at a higher price point because they're delivering incremental value to the customer.

So that's one way to get revenue pricing margins.

And Workflow Solutions is clearly our most differentiated business and differentiated data asset and has more ability to bring more value to our customers that we can monetize with different price points of the solutions we're delivering.

And if you think about it, if you look at our hit rates now that are over 50%, and you go back 2 years ago when they were, I don't know, pick the right number, 40%, 50-plus percent hit rate is more valuable to our customers.

Becomes a data asset that they can use more broadly in their solutions.

So workforce is clearly a business that has more ability to drive its topline through multiple levers that we've talked about a couple of times on this call.

And your next question is from Toni Kaplan with Morgan Stanley.

Just wanted to ask a bit of a different question on the guide.

My interpretation is that it seems like the vast majority of the increase is from the 1Qb.

And then the rest I'm expecting is maybe a better 2Q with 2H in line with your expectations previously.

Is that a fair assessment?

And I know your mortgage expectations are a little bit lower than before in the rest of the year.

It just seems like a lot of your nonmortgage trends are positive.

So I'm just hoping you could provide any extra color on how you're thinking about whether these positive trends continue through the year or not?

Yes.

I think, Toni, you got to remember, we have seen in the last 60 days, a weakening -- slight weakening of mortgage inquiries, which we rolled into our new framework.

So we took down mortgage by 300 basis points for the year, which we think is prudent, offsetting that and our ability to guide up is that our outsized and strong performance in nonmortgage in the quarter, and our expectation is that will continue.

John?

Look, we're looking at revenue, Toni, right, I mean, the over $200 million increase, right, only less than half of it was really out of the first quarter.

And then obviously, yes, the second quarter is stronger.

And then the -- as Mark said, third and fourth quarter are impacted somewhat by the much greater decline in the mortgage market.

But we are seeing very substantial growth, and we think, improvement in the nonmortgage segments.

And as you look at revenue, we think a significant amount of the improvement in the guide is from periods after the first quarter.

Okay.

And then looking at financial marketing, you mentioned the 20% marketing-related growth.

Just curious about why there's -- why marketing dollars are being spent there, but within the consumer indirect business, you're still seeing pressure.

Just wondering what the disconnect is between that and when you expect the indirect business and consumer to show signs of recovery?

Yes.

Toni, I think about it quite naturally.

What we saw and what I would have done when I was running GE Capital's credit card business is when you get in a tough economy, you tighten up originations and stop spending marketing money.

In the first place you stop spending marketing money is with third-parties, meaning lead gen companies.

Same thing when you come out of a difficult environment, the first place you'll start is your loan, you have more confidence in that.

It's generally lower cost.

It's more efficient desire predictability, and that's what we're seeing.

And we do expect our indirect to improve, but it's going to be lag some at least the framework we put together and happened later in the year.

And then we'll take the next question from Andrew Nicholas with William Blair.

You touched on it a bit in your prepared remarks, but I was hoping you could walk through the i2verify acquisition a bit further.

How should we think about it contributing to the TWN database in terms of record count?

And then relatedly, can you give us a sense for how many other assets like this are out there that could add records to the database in a meaningful way?

Certainly, it seems like these types of deals come with some pretty immediate revenue synergies.

So any additional detail on that opportunity set would be helpful.

Yes.

There aren't many of them.

We know who all of the -- they all are, and we talk to them all the time.

There are a handful of companies like i2verify and HIREtech and as you may know, you've followed us for a while that we've made acquisitions like this over the last couple 3, 4, 5 years.

So when they're available, we like to make them.

And maybe I'll just touch on HIREtech, first.

HIREtech has what we thought was a very attractive Watsi solution, particularly delivered through third-parties to companies.

And again, one of the ways to get records is to deliver value-added services like Watsi, like I-9, like Unemployment Claims, like W-2 management, like ACA, 2 companies.

And then in order to complete those services for them, which are regulatory requirements, you get access to records.

And in HIREtech's case, we have a Watsi business so today, but there was, we thought, very attractive in how they deliver those solutions through partners.

And we'd like to grow our partner Watsi business, which not only will bring the records they already have, but get access to records in the future.

And of course, there's a revenue stream just from providing those Watsi services.

As John mentioned, they also have an economic recovery credit, ERC, which is a very special and unique credit in 2021 that there's another way to gain access to records, which will benefit us this year.

In i2verify, a bit different in their approach to market.

They have a very attractive.

We like the team a lot.

As we do in HIREtech, the i2verify team was very advanced around relationships and how they went to market with nonprofit organizations, with the health care industry or hospitals -- and hospitals and the education or think universities.

And there's lots of employees in those kinds of organizations and companies, and they developed a very attractive go-to-market of how they built relationships and delivered those services.

And so we like that, which is why we were very attracted to i2verify, and we're looking for them to really expand our relationships through different services we provide to those kind of companies and then allow us to get records in order to grow our records.

And again, at 90 million uniques, we're very pleased with the scale of our database, but there's a lot of runway between 90 million and 155 million.

Great.

Makes sense.

That's all very helpful.

And then for my follow-up, you've mentioned 100 basis point improvement in your Vitality Index expectation a couple of times.

I imagine that's primarily a consequence of faster than expected adoption on the new product side.

So I was just kind of hoping you could talk about what's driving that specifically through the first couple of months of the year?

And then relatedly, what do you think that pickup in adoption means as you think about the Vitality Index in '22 and beyond?

And how NPIs are expected to contribute over a longer-term time frame?

Yes.

I think you know, we've been pretty clear that we've been talking for well over a year, maybe 2 years about the power of NPI, and that's not new to Equifax.

It's not new to our industry.

Our competitors are focused on new products.

And it really is the fuel for growth that allows us to grow multiples of GDP.

That's the inherent in the data analytics business.

And we talked a bunch about our investments in the cloud transformation over the last 3 years from 2018 through 2020, the $1.5 billion we invested in our new infrastructure, we did that for lots of reasons.

Please stand by.

Sorry, we're back.

We had a fire alarm go off here, and we just got to shut it off.

We're fine.

Andrew, sorry, could you repeat your question again?

No problem.

I can't -- not surprised if that would throw anyone off.

Yes.

My question was just on the Vitality Index and how you might look at 2022 and beyond on that metric, given the faster than expected adoption so far this year?

I think I was talking about the cloud investment.

We invested in the cloud because we knew it was going to give us cost benefits, security, a competitive advantage, but we really invested in the cloud to deliver new products and growth.

And we've been really focused on that over the last 12, 18 months.

We talked last year that we've been expanding our resources in new product capabilities.

And we think we're starting to see the leverage of the cloud, our ability to bring new solutions to the marketplace.

And our guide up was really -- we increased our NPI rollouts last year to 139, which was a record.

We're at 39 in the first quarter, which is up from 35.

So we've got more products in the marketplace.

And you've got a commercial team that's out there selling them.

So that's why we feel the confidence of increasing the guidance going forward, at least for 2021.

I don't want to get into 2022 guidance.

We'll include that in our long-term framework, which we intend to put in place later this year, and the Vitality Index of new products will be central and really important to us in how we grow the business going forward.

And the next question is from Shlomo Rosenbaum with Stifel.

Adam on for Shlomo.

Can you talk a little bit more about the Unemployment Claims strength?

Is it from better industry volumes than expected?

Or does it have more to do with product sales or more clients?

Yes.

We've been taking advantage of what's a strong Unemployment Claims market over the last year.

And looking for new customer relationships, the teams out there still selling and growing our space.

And I think we mentioned we've grown our share slightly to, we believe, 1 in 3 claims we process versus 1 in 5 maybe in 2020.

So it's just another area of growth we're focused on.

And as we also guided, we clearly expect our revenue in 2021 to come down kind of sequentially in the second, third and fourth quarter.

But this is a business that is important to Workforce Solutions, processing unemployment claims for companies.

It gives us a very nice revenue source long term.

We generally sell these on a subscription basis with limits if you go over a certain number of claims processed, which is why we've had such strong incremental revenue in the high unemployment market in the last couple of years.

But we have a very sophisticated solution that operates well in the marketplace.

And remember, the second benefit in processing these claims and having this as a business is it gets us access to records that we can monetize over in our TWN database in our verification business.

And your next question is from Georgios Mihalos with Cowen.

Congrats on the quarter and the outlook.

I wanted to start off on mortgage.

Again, if we look at verification revenues, it's up another 100%.

That's well higher than what you saw in the USIS revenue growth.

And as a matter of fact, the growth in EWS has stayed kind of consistent at 100% even if when sort of USIS volumes in mortgage have come down.

Can you maybe talk a little bit about that decoupling?

Is it as simple, a strong record growth?

Or is there something else that's allowing you to outperform that massively even when volumes come down a bit on the USIS side?

Yes.

I think if you -- we've shown you charts before that Workforce Solutions have been consistently outperforming all markets that they operate in, including the mortgage market.

And much more substantially than USIS.

They just have more levers.

So they'll use the same levers that USIS use, which is price.

So if you increase price in an up or down market, you're going to have more revenue.

New products is one where they just had more opportunities.

And you've heard us talk over the last, I don't know, 4 or 5 quarters about their increased focus on new products.

Things like, historically, we've had a single report that we'd offer, and now we're offering one with more history on it, 12 months, 24 months, 36 months.

And instead of having a report that we sell at $25, we've got price points at $150 and $200, and that provides real value to the mortgage originator.

And we rolled out a product that's for co-borrowers.

A lot of mortgages in the states that have a dual borrower couple underwritten -- underwriting the mortgage.

And so we have a new solution there.

And instead of having $225 reports polled, we've got a $200 solution.

We've got solutions and new products now that encourage more polls.

So we'll have a solution where we sell it at a higher price point that includes multiple polls.

So new products is a real lever for Workforce Solutions.

Of course, records we've talked multiple times in this call, adding records drive hit rates.

Because remember, we're getting inquiries on those mortgages or those credit cards or auto loans, but your question was around mortgage.

We're getting inquiries for the full database, the full set of consumers.

And I say, we only have 90 million uniques.

And as we grow that database, those hit rates go up automatically.

So records are a very central part of Workforce Solutions' ability to outgrow the mortgage and all their underlying markets.

There's also a large portion of mortgages we don't see still.

We only see, I think it's 65% of mortgages.

So we're out in the marketplace talking to those that are not doing business with Equifax and are using taste subs or some other mechanism.

For approving the income and employment elements of a mortgage application to use our solution.

The move from a customer, we saw a lot of our customers, I think, over 1/3 that access our data through the web.

Meaning they're actually keying in the mortgage applicants' social security number, date of birth, name, et cetera.

There's a lot of friction there, meaning it doesn't happen in every mortgage application for that originator or we don't get multiple polls.

So going to system to system integrations is a big part of our strategy, and we're increasing those system integrations every quarter.

We've got a dedicated team that works with mortgage originators to have them do system to system integrations.

Another lever is the number of polls in a mortgage application.

In a credit application -- on the credit side, there's 4 to 5 polls in many mortgage applications of the credit file.

Historically, there was more like 1 to 2 in the income employment data, we're seeing the more sophisticated originators pull our data more often on every mortgage application.

And remember, you think about a couple of elements.

Number one, it's a big ticket transaction, $250,000, $300,000, $400,000 or more is the loan.

And then second is the mortgage originator that's spending $4,000, $5,000 in the application process, they want to make sure that they're spending time on an applicant that they can close on.

So not only verifying their credit, multiple times in the process, but making sure that applicant is still working and how much they make as a part of the application process is another big opportunity.

So there's just a half dozen of very strong levers that all have dedicated teams on it, and they've been executing very strongly on those levers.

Another kind of overriding macro, if you will, for Workforce Solutions is just really the scale of the database.

Now if you go back at our last economic crisis in '08, '09 or pick your year, go back 3, 4, 5 years ago, our database in TWN might have been having hit rates of 30% or 40%.

Now that we're well over 50%, it becomes a very valuable data asset and all of our customers know that you enhance the credit decisioning of an applicant if you add, is someone working and how much do they make, to their credit file.

That drives predictability.

And so when you have a database that almost is at a catalyst or at inflection point of going over 50%, we think that's another positive factor.

Of course, we've got a lot of opportunity and a lot of work to do in workforce.

And we're quite optimistic about the long-term impact of our fastest-growing business with margins and revenue growth rates that are highly accretive to Equifax.

Okay.

That's super comprehensive.

So really appreciate that.

And just really quickly, Mark, maybe going back to Andrew's question, on the FMS side, the increase that you're seeing in marketing for card solicitations and the like.

Is it too early to know if the success rate or the hit rates for the banks are in line with what they saw historically as they rolled out those programs?

Yes.

We wouldn't have visibility to that.

But what -- I'll tell you what we do find is that all of our finance -- this is a macro that started before COVID, is that all applications, all uses of data, whether it's in banking, credit cards, mortgage, auto, lending, telco, all of our customers want to use more data.

And they want to use more differentiated and alternative data because it enhances the predictability of the decision they're making.

And let's use originations.

And that's why you're seeing more alternative data being used.

We think our cloud transformation is going to differentiate us and the ability to house that data to -- and as well as surface and deliver that data to our customers.

And then, of course, TWN, we talked earlier in this conversation in the call this morning about the power of that data set in that credit decisioning, meaning, is someone working, how much are they making added to the credit file and the other alternative data is very, very powerful.

And the next question is from Simon Clinch with Atlantic Equities.

I just wondered if -- first off, so apologies, I was actually dropped off on my internet connection during this call.

And I was wondering if you could just refresh me on the growth targets for 2021 for the segments that you laid out, please?

Sure, Simon.

We have dropped off, too.

We had a fire alarm go off, but there was not a fire.

So we were off for a few minutes, too.

Do we will determine -- we used out the growth rates -- used just the growth rates by segment that we raised earlier?

Yes.

Okay, sure.

So we indicated that we expected Workforce Solutions to be up over 20%.

We indicated we expected USIS to be up mid- to high single digits.

We indicated we expected international to be up constant currency high single digits and that we expected GCS to be down mid-single digits and also expected GCS to be down mid-single digits in the second quarter.

Okay.

Great.

So I was wondering if I could follow-on from that, just on the International business then.

I mean, this is -- obviously, with what happened through the pandemic because the comparisons are incredibly easy.

And given sort of where we're expecting the framework you provided for a recovery out of the pandemic at the back end of this year.

I'm curious as to sort of how sensitive you think about that sort of high single-digit number is?

Because it seems to me it should be fairly easy in some ways to drive significantly higher growth for this -- for the International segment.

I'm just wondering if you could give a little bit of color around that.

Yes, I would say, Simon, we're counting on a recovery of the International markets, but I think there's still a pretty decent amount of uncertainty in those markets.

And you follow it, too, but Canada's vaccine rollout is really slow.

And they've got locked down back in place in other markets.

Australia's vaccine rollout is like really slow, like, not happening.

I'm not sure when they're going to get a vaccine rollout.

So they're kind of lockdown.

There's still pressure on that economy.

U.K., they've got the vaccines out there, but they've still got high COVID cases.

So we've got lockdowns in the U.K.

With some other markets, a big market for us like Chile, they used, I think, the Chinese vaccine that turns out to be not effective.

So it rolled out.

So they've got lockdowns in place.

So I think the -- we expect them to recover.

We expect the vaccines to get in place during 2021, but I think there's still some uncertainty there.

And in our framework, we do -- we are counting on and expect to see some improvement.

And you saw in our numbers, we've got some markets that are adapting to COVID, like the U.S. did.

I think some of the international markets took longer to adapt, meaning the U.S. in some markets like auto and others in second and third quarter last year figured out how to sell cars virtually and other things.

That happened more slowly from our perspective in International markets, but you're starting to see that.

Canada had a very strong quarter for us in the first quarter.

Australia did too, even notwithstanding these COVID lockdowns.

So we expect International to improve, but I'd say that we're watching it because there's still some uncertainty there.

And remember, our fourth quarter of '20 in International was okay.

We grew in the fourth quarter of '20, right?

So...

Yes.

Of course.

Okay.

I was wondering if I could just have a quick follow-up as well.

And maybe just one more for you, John.

Just when I think about the push and pulls for the years uses margins going forward.

Because I know you don't break out the tech transition cost by quarter.

But when I think about the underlying incremental margins of this business.

I mean, could you give me a little color how to think about that?

And then layer on top, the potential dilution from acquisitions to margins and how we should think about that beyond -- once we move beyond that sort of the year post those deals?

Yes.

So we did give some perspective, right, on USIS this quarter.

We indicated kind of the negative movement in their margins was up 2/3 driven by tech transformation.

So to give you some perspective.

And what we said is over the longer term, we expect to see improvements in margins, driven by the fact that we're going to drive substantial cost benefits related to the tech transformation.

But we wouldn't start to see those benefits occur until late '21 and then really kicking in, in earnest in 2022.

So as we think about the movements in margins, the drivers of the margin, obviously, will be as tech transformation spend start to decline as you move through '21 and into '22, really moving into '22.

And then as we start to get savings related to those decommissionings that will occur as tech transformation completes, and that doesn't really start to have a net savings of decommissioning more than cloud costs until very late in '21 and then obviously accelerating in '22.

Okay.

And so incremental costs from acquisitions that you've already made are really going to be minimal?

So we expect acquisitions we make to move to USIS type margins over a reasonable period of time, right?

So certainly not in the first year.

But then as we move into year 2 and certainly year 3, we expect them to deliver margins like the rest of the business.

And the acquisitions are all accretive to generally, our revenue growth rates in each of the businesses.

For example, Kount, we're really excited about the space they play in and the -- their historical growth and the opportunities with the synergies between USIS and Kount on both the topline and some of the cost synergies.

And the next question is from Andrew Jeffrey with Truist Securities.

Just very high level, Mark.

What I'd like to try to understand if you can help is just simplistically, how much do you think of your nonmortgage strength, in particular, is being driven by a snapback in share gain?

Obviously, there was a period of time over the last few years where Equifax was focused internally.

And you've clearly righted the ship and accelerated NPI and are making what is apparently a very effective cloud transition.

Are we seeing normalization in share?

How much of that is playing a role in this growth, nonmortgage and mortgage for that matter, just broadly?

Yes.

I think we tried to be clear and we used this phrase last year for I think all 4 quarters last year that we feel like based on the wins, the USIS and Sid Singh landing in the U.S. marketplace in USIS space that we're competitive.

And we're winning in the marketplace.

We've talked about the deal pipeline.

We shared some metrics earlier in the call that it's up 30%.

And so what are the factors there?

There's no question, we were pressured in 2018 and '19.

And after the cyber event competitively.

We were in the penalty box with a lot of customers.

It took us a while to get out of them, meaning through the end of 2019.

And 2020, we were on what I would characterize in the first quarter kind of a normal competitive footing and then COVID hit, which created some visibility challenges, perhaps for you.

But in that timeframe, we kept a consistent dialogue with you that USIS was winning and was competitive in the marketplace.

So you've got the commercial -- the post-cyber event is clearly behind us.

We're on our strong footing commercially, we think we're advantaged commercially with the cloud transformation.

When you think about it, it's actually quite logical.

If you're a commercial leader and you're out talking one of your customers and say, "hey, Equifax just invested $1.5 billion in our technology to support you." That creates a very positive dialogue.

And then you add to it Equifax's differentiated data assets that we have, data assets, our competitors don't, which we think helps us commercially.

And you can lead with TWN, obviously, which, as you know, USIS sells in the marketplace for us as one commercial team.

They sell TWN to all our financial customers.

And but add to it, NCTUE, IXI, now DataX.

So we think that's advantaging us.

The leveraging of the cloud for new products is clearly taking hold.

USIS is, with the rest of the business, rolling out these new cloud-based products that we think are giving us an ability to bring new solutions to drive incremental revenue with our customers in the mortgage and nonmortgage space, which is quite positive.

So we think there's a lot of momentum is still more to do.

But the team is really focused.

I think the last point I'd raise is that we brought in, no longer a new leader 2 years ago, Sid Singh, he used 2019 to rebuild the business and the team and continue that in 2020, they're hitting on their strides.

We relevered the team.

We've got a new Chief Revenue Officer.

We've got Sid, who's a very commercially oriented leader.

I think that's benefiting USIS also in how they're operating in the marketplace.

Okay.

That's helpful.

And then maybe for John, just quickly.

Any kind of unusual timing items we should be thinking about, John?

I mean, just it seems like EWS mortgage is holding up really well as the mortgage market kind of weakens.

Is there any sort of timing vis-à-vis your growth versus the market as a whole?

The timing to be aware, of which I'm sure you're aware of because it happens every year, right?

In EWS and Employer Services, the Employer Services revenue was strongest in the first quarter substantially because several of the services they provide to think, W-2, think Workforce Analytics are directly related to tax filings.

And since that's the case, their revenue is much higher in those segments in the first quarter.

And during that period, obviously, the margins are very strong in those businesses.

So you see stronger margin in Workforce Solutions.

And it also obviously benefits Equifax in the first quarter.

And generally, there's a negative trend sequentially going into the second quarter for that reason.

The other thing that just timing related to Equifax is our annual salary increases, our merit increases are generally pretty much uniformly at April 1. So you tend to see a cost increase occur in the company in the second quarter, okay?

And that brings margins down, okay?

So those are 2 things that are just timing related.

But other than that I think we're just what we're seeing in EWS and really across the business is just good execution.

And the next question is from George Tong with Goldman Sachs.

Your guidance for 2021 core revenue growth was upwardly revised from 10.5% previously to 16% at the midpoint.

Approximately how much of the increase in core revenue growth the estimate is coming from nonmortgage compared to outperformance within the mortgage market?

Remember, we took our mortgage guidance down so you should think about that.

That clearly is a negative impact on that.

And the whole offset is from nonmortgage.

It's why we're raising a ton.

Yes.

So George, we've said pretty consistently, right, that as we move through '21, you're going to see an increasing contribution to core revenue growth from nonmortgage relative to mortgage.

Obviously, in the first quarter, we saw really good outperformance relative to the mortgage market across EWS as well as USIS, and we indicated, I think, in an earlier answer to a question that even though the mortgage market is going to be weaker by 3 points in the year, we'll still grow faster than 10%, right?

So we're going to see better performance, better outperformance relative to the market than we had previously guided.

So there is some benefit to core revenue growth from better out performance in the mortgage market.

But obviously, also, you're seeing a substantial contribution now that's starting to occur as you move through '21 from the nonmortgage market.

Got it.

Very helpful.

And then secondly, Equifax hasn't yet reinstated its long-term financial framework.

What do you need to see in the business before you feel comfortable reinstating long-term target?

Yes, George, as we talked to you before.

And I was clear earlier in the discussion this morning that we're intending to put that in place in 2021.

We said in February and kind of same comment to you now is that we want to see a few more quarters -- a few more months perhaps of the COVID recovery, things are still -- evolved is the wrong word, but still evolving, the mortgage market from just, I don't know, less than 90 days ago is -- has softened.

And of course, the COVID recovery, I would say, is stronger than we anticipated in the last 60 days in the nonmortgage side.

So we want to see a few more months of that, but we know what we want to do.

We're ready to do it.

We've given, hopefully, you a lot of indications of how that's going to be framed.

And it's our intention to put that in place in concert with likely an Investor Day.

In -- before the end of the year in 2021.

And the next question is from Jeff Meuler with Baird.

Yes.

So my question is on Slide 9 and the middle chart, EWS core mortgage growth.

So it was 99%.

And I think you have 9% records growth.

So it's a 90% core ex records growth, mortgage growth and Verification Services.

If I look back to 2020, it also had this massive step up, 80%, maybe high 60s or 70 ex records growth.

It used to be in this, I guess, in this 11% to 21% range and probably half or more than half of that was record.

So there's a much bigger contribution starting in 2020 from those ex records factors.

And Mark, you repeated several times, all of the factors that go into that.

So I don't need you to repeat that.

But what is so different about 2020 and going into 2021 in terms of -- like I don't know if it's the inflection, if it's the tech transformation, like if it's a specific factor, just what's so different about 2020 and 2021 in that regard?

I think there's a couple of things there, Jeff.

And we've said to you and others repeatedly, there is a degree of inflection point.

When you're north of 50% kind of hit rates, we think it becomes a more valuable asset in so many other cases.

And I'll just use my example, 10 years ago, when I was at GE Capital, we didn't use the data asset because the hit rates were, I don't know, 25%.

It just didn't make sense to put it in your workflows when you can only hit 1 in 4 customers.

Now that you're over 50%, we believe there's an element of inflection here.

We also believe that cloud transformation is a big deal.

And that's across Equifax, but workforce is benefiting from that.

For example, ingesting the amount of records, but even more complex is ingesting the amount of employers that we now have in the data set.

If you go back 18 months ago, we may have had 150,000 employers or 200,000, something like that.

And now we're well over 1 million companies contributing a data set.

We couldn't have done that without the cloud.

And remember, when we get those data records, they're generally in different formats, and your cloud capabilities allow you to normalize those and then put them in a format that you can bring them to your customers.

And then I won't go through all of the other levers that workforce has.

But you know they're pretty wide and broad.

And with the scale of the business, meaning the infrastructure we have, the people.

We have the resources to invest in really dedicated teams.

And I don't mean to repeat this, but we have a dedicated team focused on records, period.

That's hard to do.

And this is a multi-person team.

We have a dedicated team focused on working with our mortgage customers on system to system integrations.

That's all they do on the benefits.

We have another team that's focused on convincing the mortgage originators that aren't doing business to go forward with us.

The scale of our business almost becomes a flywheel that allows us to invest in the business.

So I think there's all those, just going back up, what are the bigger macros.

It's, I would say, the inflection point of being north of 50% and the cloud transformation taking hold.

And if you followed us for a long time, you know that on a new product front, you didn't hear a lot out of Workforce Solutions in 2015, '16, '17, '18, '19 around new products.

Now with the cloud, we can really take advantage of this data asset.

And you know the power of coming up with a new way to monetize a data asset that you've already paid for, meaning the dual borrower mortgage solution.

The mortgage solution that allows a mortgage originator to have multiple polls.

The mortgage solution that has 36 months of history in it at a higher price point.

Those are all opportunities that we've started to deploy in 2020 when we had the EFX cloud really taking hold inside of workforce and across Equifax.

And those are the kind of solutions, you should see.

And as you know, central to our EFX2023 strategy is really leveraging the cloud around innovation and new products.

And we're excited about our progress there.

But we're in early innings on this.

And Jeff part of this is kind of -- we talked about 3 years ago, for every 4 credit polls, there was 1 or less than 1 employer pole, right?

Verifications poll.

Now for every 2, there's more than 1, right?

So the level of penetration is up dramatically in the time period you're describing.

Which substantially adds to growth, right?

And then you also know, obviously, in a period of very rapidly growing market benefit, all variances improved, right?

So we're certainly benefited across the business by the fact that the market is so large, right, but the -- and grew so much faster this year.

But the increase in penetration is a huge driver in the past 3 years.

And your next question is from Kevin McVeigh with Crédit Suisse.

Mark or John, can you give us a sense, just given the new product innovation, how are you thinking about this more from a longer-term subscription perspective versus transactions.

And I think there's always been a historical view that this is much more transaction-oriented, given the incremental cloud shift, it seems like you're going to be more embedded in your clients, you're introducing more products that become more monitoring.

So how are you thinking about subscription versus transaction growth maybe historically?

And where that can be in the business longer term?

Yes.

So I think our business continues to be heavily transaction focused.

And likely will continue to be.

What -- increasingly, you see minimums in our contracts, but generally not subscriptions, right?

We do have some products that are subscriptions, like you said, monitoring services tend to look more like subscriptions.

But the vast majority of our revenue generation continues to be driven by transactions.

And we benefited from that, obviously, very substantially over the past several years.

Businesses where you can -- where you see more things that look like subscriptions are, certainly the Unemployment Insurance Claims business, you see things that look like subscriptions with minimum -- with volume caps in them.

So we have businesses that are structured like that.

And we have some businesses that are somewhat more software focused, where you see more subscriptions.

But generally speaking, we're still heavily transaction based.

And that will likely continue.

That's helpful.

And then can you just remind us, if you think about the pool of records within EWS.

I know that the target is, as I remember, has kind of been about 158 million.

But as you think about alternative income sources, things like that, what's the total addressable market you think that's potentially out there based on the capabilities that you have today?

Yes.

You talked about the nonfarm payroll.

There's a lot of runway there.

And as you know, a lot of economic value as we grow the database in the traditional nonfarm payroll or W-2 income.

1099 is a very big market.

I think it's 30 million or 40 million people that have 1099 type income.

That's a space that we're adding data records.

We don't talk about those because it's not in our 90 million or 150 million in total.

Another data set that we're starting to add, and we have some records now is pensioner income.

I think there's 20 million or 30 million defined benefit pensioners in the United States that receive monthly pension checks, either at the state, federal or corporate level.

They're applying for credit products.

So that's another data set that we're out there chasing.

It just goes back to the power of the scale of our business, we have those relationships.

For example, a company that we're collecting their active employees from many of those companies also process their pensioner income.

So it's an opportunity for us to bring that income into our data set.

Same thing with a payroll processor that's doing primarily W-2 income, they're also, in some cases, can have 1099 income.

So it's another way for us to build those out.

So we've got a very clear focus of not only building out W-2, but going beyond that.

Another focus that's in early stages is really just getting data around someone logging in or checking in and checking out of their employment, whether it's a restaurant worker logging in through their software that they use to operate in the restaurant, getting that data asset.

We might not know how much they're making, but we'll know they're working.

So it's another element of data.

So we've got a broad focus there around going beyond W-2.

And our last question is from Gary Bisbee with Bank of America Securities.

Just one on the nonmortgage acceleration, which was impressive across the businesses.

When I look at USIS, in particular, I don't think that's grown meaningfully in a couple of years.

And if I heard you right, ex the acquisitions, it was nearly 11% year-to-year growth in the quarter.

Would it be reasonable to think a decent portion of that is an easy comp in March?

And -- or is this much more momentum that's really picked up?

And if so, what are the key 1 or 2 drivers of that sequential improvement in the nonmortgage growth in USIS?

Gary, you know this and just remember is that USIS had a decent quarter in first quarter last year.

I think was up 3.5%.

It was certainly -- it was low single digit.

Yes, something like that in the first quarter last year.

And the COVID pandemic really didn't hit them or us until the last 2 weeks of March.

And that 3.5% was inside of the 2 weeks of March, which really were significantly impacted.

So we felt quite good about the progress we have really all through 2020, that the team is really delivering.

We got a lot of factors there.

We've already talked about it a bunch in the call about the commercial focus by the team.

We think that's real.

We think they're getting benefits already from the cloud transformation competitively, meaning wanting to do business with Equifax because we have a different technology infrastructure than our competitors.

So that's a positive for them, whether it's on share.

You can think about other factors like the NPIs.

Those are -- a reminder, we were building NPIs in 2018 and '19.

We really couldn't sell them because we were in the penalty box.

We started selling them in 2020, but that's really benefiting them, and we're continuing to accelerate our NPI rollouts.

So I think that's a benefit for the business.

And then there's an element of COVID recovery.

I think we were clear that in March and April, we've seen some of their verticals move back much more strongly than they were earlier in the quarter and certainly stronger than they were in 2020.

So I think that's part of that, too.

So would it be safe to say that the step function element of just dramatically better looking growth has more to do with -- you've been making progress, but the COVID impact through much of last year sort of offset that or we couldn't see it through because of...

Correct.

I think that's fair that the COVID environment masks their performance, which is why every quarter, we talked about their deal pipeline to at least give you a metric that we look at on what their commercial activity looks like.

And I think as Mark mentioned on the call, right, it got better each month, right?

So March was certainly by far the strongest month of the 3.

All right.

There appears to be no further questions at this time.

Mr. Hare, I'd like to turn the conference back to you for any additional or closing remarks.

Thanks, everybody, for your interest in Equifax and for joining us today.

This does conclude our First Quarter Earnings Call.

We look forward to joining you later on this summer to review our Second Quarter Results.

This concludes today's conference.

Thank you for your participation.

You may now disconnect.