Equifax Inc. (NYSE:EFX) Q3 2023 Earnings Call Transcript

Equifax Inc. (NYSE:EFX) Q3 2023 Earnings Call Transcript October 19, 2023

Operator: Hello and welcome to the Equifax Q3 2023 Earnings Conference Call. [Operator Instructions]. A question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder, this conference is being recorded. It is now my pleasure to turn the call over to Trevor Burns, Senior Vice President, Head of Corporate Investor Relations. Trevor, please go ahead.

Trevor Burns: Thanks and good morning. Welcome to today’s conference call. I’m Trevor Burns. With me today are Mark Begor, Chief Executive Officer; and John Gamble, Chief Financial Officer. Today’s call is being recorded. An archive of the recording will be available later today in the IR Calendar section of the News & Events tab at our IR website investor.equifax.com. During the call today we’ll be making reference to certain materials that can also be found in the Presentation section of the News & Events tab at our IR website. These materials are labeled 3Q 2023 earnings conference call. Also, we’ll be making certain forward-looking statements, including fourth quarter and full-year 2023 guidance to help you understand Equifax and its business environment.

These statements involve a number of risks, uncertainties, and other factors that could cause actual results to differ materially from our expectations. Certain Risk Factors that may impact our business are set forth in filings with the SEC, including our 2022 Form 10-K and subsequent filings. We will also be referring 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. Recently Equifax reached an agreement with the UK Financial Conduct Authority in relation to the 2017 cyber security incident. In connection with the agreement Equifax taken the charge in the third quarter of $14 million which is excluded from third quarter adjusted EBITDA and adjusted EPS.

These non-GAAP financial measures are detailed in reconciliation tables, which are included in our earnings release and can be found in our financial results section of the financial info tab at our IR website. Now, I’d like to turn it over to Mark.

Mark Begor: Thanks, Trevor and good morning. Turning to Slide 4, we continue to face a very challenging U.S. mortgage market that weakened substantially in August and September beyond our July framework with mortgage rates moving above 7% and now approaching almost 8% over a 20 year high. Revenue in the third quarter was 1.32 billion, was up 6% on a reported basis, 6.5% on a constant currency basis, and 3.5% on an organic, constant currency basis. An adjusted EPS of $1.76 per share was up 2% versus last year. In the quarter BVS, the Brazilian credit bureau that we acquired in August had revenue of 23 million and contributed $0.02 per share to adjusted EPS, which was not in our July framework for the third quarter. Overall, Equifax revenue of 1.32 billion was $34 million below the midpoint of the guidance we provide in July, which excluded Brazil, driven primarily by the weaker U.S. mortgage market and FX.

Together, these items impacted revenue by about $28 million and adjusted EPS by about $0.10 per share. Adjusting for the mortgage markets and FX impact, revenue in the third quarter would have been just below the midpoint of our July framework, and both adjusted EPS and EBITDA margins would have exceeded the framework we provided in July. Overall mortgage market volumes, measured based on our credit and TWN inquiry volumes, we are on the order of 650 basis points weaker than we expected in our July guidance. Mortgage rates increased substantially during the quarter, with a 100 basis point increase in the ten-year Treasury rate, driving mortgage rates to almost 7.5% in September. The mortgage volume decline negatively impacted mortgage revenue by about 22 million, and the strengthening dollar negatively impacted revenue versus our July expectations by about $6 million.

The U.S. mortgage revenue from EWS and USIS was down about 8%, reflecting the significantly weaker mortgage market conditions. Mortgage outperformance relative to the mortgage industry volumes I referenced remains strong in both USIS at over 30% and EWS at 22%. Non-mortgage constant dollar revenue was up a strong 11% in the quarter and was up 8% excluding revenue from BVS, against a strong 20% growth last year. Non-mortgage constant dollar organic growth was up 7% versus last year with our non-mortgage growth rate strengthening 300 basis points sequentially from the second quarter. Non-mortgage growth was led by EWS that was up over 11% and up 800 basis points sequentially. And USIS that was up almost 8.5% and up 50 bps sequentially. International organic non-mortgage revenue growth at 3% was slightly weaker than our expectations, principally due to lower revenue in our UK debt management business.

We had another very strong quarter in new product growth with a record 15% vitality index, which is well above our 10% long-term growth framework for NPIs. As I referenced earlier, despite the much lower than expected mortgage revenue in the third quarter, we delivered adjusted EPS of $1.76 per share and adjusted EBITDA margins of 33.1%. Excluding BVS we delivered adjusted EPS of $1.74 and adjusted EBITDA margins of 33.3%, up 60 bps sequentially, both in line with the guidance we provided in July, while absorbing the significant impact of the $22 million of lower mortgage revenue. The impact of lower mortgage revenue and FX negatively impacted adjusted EPS by about $0.10 per share. We delivered very good execution against our $210 million cloud and broader spending reduction programs, which allowed us to grow margins sequentially in the quarter despite the lower mortgage revenue.

We continue to expect to deliver spending reductions of $210 million in 2023, with 120 million benefiting operating expenses and over 65 million of incremental run rate savings in 2024. We also continue to make good progress on completing our cloud transformation with large North American customers migrating to the cloud during the quarter. We expect both USIS and Canada to complete their credit exchange cloud migrations in the first half of 2024. At the end of the quarter, about 75% of North American revenue was being delivered from the new Equifax Cloud. We are convinced that our Equifax Cloud single data fabric and AI capabilities will provide a competitive advantage to Equifax in the future. As we look to the fourth quarter, we expect revenue of 1.317 billion, adjusted EPS of $1.77, and adjusted EBITDA margins of 34% at the midpoint of our guidance ranges.

This includes about 38 million of revenue from BVS, which adds about 3% to our revenue growth. We expect fourth quarter revenue will be up 10% with organic constant dollar growth of 7%, adjusted EPS to be up over 16%, and adjusted EBITDA margins will expand about 300 basis points versus last year. Non-mortgage constant dollar growth is expected to be strong at about 13%, with organic growth of about 9% led by EWS which should deliver over 15% non-mortgage growth. However, excluding BVS, this framework is about $70 million below the implied fourth quarter revenue guidance of $1.35 billion at the midpoint we provided in July. The sharp decline in the mortgage market and FX drive the majority or about $60 million of this decline. Our guidance assumes that substantially weakening trends in the U.S. mortgage market that we’re currently seeing continue through the remainder of the year, and that we also see normal seasonal mortgage declines in November and December.

On this basis, we’re assuming U.S. mortgage credit inquiries will be down about 22% in the fourth quarter, driving a reduction in overall mortgage volumes of about 18 percentage points versus the guidance implied for the fourth quarter in our July framework. This negatively impacts mortgage revenue in the fourth quarter by about $47 million. At these levels, U.S. mortgage activity will be down an unprecedented more than 50% from 2015 to 29 averages, which we consider to be normal mortgage market levels. We expect FX to negatively impact revenue in the fourth quarter versus our July guidance by $13 million. The net impact of the $70 million reduction in revenue is driving the reduction in EPS and EBITDA margin from our original fourth quarter goals of $2 a share and 36%, respectively.

The second half of 2023 has clearly been very challenging as the accelerated decline in the U.S. mortgage market in August and September, as well as FX negatively impacted revenue by almost $90 million. Like many, we are struggling to forecast the bottom of the mortgage market in this unprecedented environment of fed rate increases, driving mortgage rates up over 2X to 20 year highs in such a short 20-month time frame. Outside the unprecedented mortgage market decline, we are executing extremely well. As I’ll cover in the remainder of my remarks, we are delivering accelerated non mortgage growth, executing on our cloud customer migrations and overall cost plans, outperforming our expectations for new products. and adding new EWS record partnerships and records at an accelerated pace adding over 25 million records since the beginning of last year.

In both our mortgage and non-mortgage businesses, we are continuing to outgrow our underlying markets. Before I cover our business unit results in more detail, I wanted to provide a brief overview of what we’re seeing in the U.S. economy and consumer. Outside of the challenging U.S. mortgage market, the U.S. consumer and our customers remain broadly resilient. Employment remains at record historic levels with low unemployment and about 10 million open jobs against about 5 million people who are looking for jobs. Excess consumer savings built up during the pandemic still exist, however, have declined to the lowest levels since the second quarter of 2020, particularly amongst lower and middle income households. Credit card utilization is increasing, credit card delinquency rates for prime consumers which represent about 20% of the market are stable but are above pre-pandemic levels in less than 1%.

However, subprime borrower delinquencies which have been increasing over the past year are now above pre-pandemic levels and approaching the levels we saw in 2009 and 2010. Auto delinquency rates for prime consumers, which represent about 20% of the market, are also stable but above pre-pandemic levels and still well below 1%. Delinquencies for subprime consumers are above pre-pandemic levels as well above levels that we saw in 2009 and 2010. And any customer credit tightening has largely been in fintech and subprime, which started over a year ago. Overall, still a solid market for Equifax outside of mortgage and hiring. When consumers are working, they largely have the capacity to keep current on their financial obligations. Turning to Slide 5, overall workforce solutions revenue was up 3% in the quarter, a return to growth, which is a very positive sign as we look towards 2024.

Strong TWN record growth, the positive impact of 2023 price actions, and strong NPI performance driven by the adoption of mortgage trended data drove a strong 22 points of mortgage outperformance again in the quarter. EWS had another very strong quarter of record additions with an incremental 2 million current records added to the TWN database. EWS closed the third quarter with 163 million current records on 121 million unique individuals or SSNs, which was up 12% and 9% respectively versus last year. Total records, both current and historic are now over 640 million and we now have current records on over 70% of U.S. non-farm payroll and over 50% of the 220 million people in the U.S. with employment and income records relevant to the TWN database.

The EWS team has acquired over 11 million records so far in 2023 that are driving top line growth and will significantly benefit Verifier Revenue Growth when the U.S. mortgage and white-collar hiring markets recover. During the quarter, we signed agreements with four new payroll processors that will deliver records in the fourth quarter in 2024 and over the past three years, we’ve added partnerships with 27 payroll processors. As a reminder, about 50% of our records are contributed directly by individual employers from our employer services customer relationships. The remaining 50% are contributed through partnerships with payroll processors, HR software companies, pension administrators, and other relationships. Increasingly, more of our new products are incorporating both current and historical records with about 50% of our third quarter verification services revenue, as well as about 50% of our mortgage verification services revenue coming from products that include historical records.

Turning to Slide 6, Workforce Solutions delivered strong non-mortgage revenue growth of 11%, a return to double-digit revenue growth with a growth rate up about 800 basis points sequentially. And as a reminder, EWS non-mortgage revenue was up a very strong 40% in the third quarter last year, which of course, was a very tough comp. Verification services non-mortgage revenue, which represents just under 70% of Verifier Revenue, delivered 11% growth versus last year in the quarter. This was also against a very challenging 72% non-mortgage growth comp last year. In government, we saw a continued very strong growth with revenue up 23% compared to over 90% revenue growth last year in the third quarter. Government revenue was slightly lower than our expectations due to timing of Medicaid redetermination volumes.

We continue to expect that EWS will capture significant volume from these redeterminations as they complete prior to the end of the second quarter of next year. During the quarter, we signed a contract extension to provide income verification to the U.S. centers for Medicare and Medicaid services as a part of a contract valued at up to $1.2 billion over the next five years. This contract is the largest in Equifax’s history and extends our services via healthcare.gov for ACA related determinations while allowing workforce solutions to continue to work to penetrate the state level Medicaid verification services market. Also during the quarter, USDA’s Food and Nutrition Service awarded a national contract to Equifax Workforce Solutions to provide verification services in support of the Supplemental Nutrition Assistance Program, commonly known as SNAP.

The award is for $38 million in the base year, which we began on September 30th with a potential total contract value of $190 million. These large new EWS government contracts reflect the uniqueness of the TWN data supporting the delivery of social services at the U.S. federal, state, and local level. These new contracts give us confidence in strong future EWS growth in the large 4 billion TAM for our government vertical. We expect to see accelerating sequential growth in our government vertical in the fourth quarter, driven by growth from CMS Medicaid Redeterminations, ACA open enrollment volume, further state government penetration, and pricing from state contract renewals, as well as revenue from the new SNAP agreement with the USDA. Talent Solutions was up 6% in the quarter versus a very strong over 110% growth last year in the third quarter from record levels of U.S. hiring.

As a reminder, we are currently more heavily penetrated to white-collar workers, including technology, professional services, healthcare, and financial services, which has seen a greater reduction in hiring activity and broader hiring freezes and about 10% decline that the BLS reported in the third quarter through August. We outperformed the hiring market by about 20 percentage points in the quarter as we delivered new digital solutions and background screening, strong new product growth, continued expansion of TWN records and pricing. Employer services revenue of 118 million was up 13%, driven by growth in our I9 and onboarding businesses despite the negative impact of U.S. hiring, as well as growth in our ACA business. In the fourth quarter, we expect overall employer services revenue to decline slightly as growth in I9 and onboarding is offset by declines in ERC revenue as the U.S. government has suspended processing new ERC claims.

Earlier this year, we announced the launch of PeopleHQ, a workforce solutions cloud native solution that brings together multiple best in class employer compliance services and a single unified customer experience. PeopleHQ will help companies of all sizes access EWS employer services, including income verification, I9, and ACA from our new self-service portal. Since the launch of PeopleHQ in the first quarter, EWS has onboarded about 45,000 companies, which also delivers new records for TWN. Workforce Solutions’ adjusted EBITDA margin of 50.9% was up 140 basis points versus last year, but down 60 basis points from the second quarter from the mortgage market decline. The EWS team continue to perform very well despite the macro headwinds from mortgage and U.S. hiring, outperforming their underlying markets from strong TWN record growth, penetration, new products, and price.

As shown on Slide 7, USIS revenue of 426 million was up over 7% and down slightly from our expectations due to the impact of the much weaker mortgage market. USIS delivered strong non-mortgage revenue growth of about 8% in the quarter. USIS mortgage revenue was up 4% and outperformed the mortgage credit inquiries that were down 29% by 33 points. The strong pricing environment that we discussed in July drove very strong outperformance. At 101 million, mortgage revenue was 24% of total USIS revenue in the quarter. B2B non-mortgage online revenue growth was up a very strong 10% total and up 5% organically. During the quarter, online revenue had strong double-digit growth in commercial and banking and lending from strong identity and fraud revenue and mid-single-digit growth in auto and insurance, offset by declines in telco and direct-to-consumer.

USIS also saw a strong double-digit growth in count from very good new business and NPI performance. Financial marketing services, our B2B offline business had revenue of 51 million that was down just under 1%. In marketing, declines in pre-screen marketing revenue in the quarter that were consistent with declines in the first half, more than offset nice revenue growth from our IXI consumer wealth data business. In pre-screen, we continue to see weakness with the smaller FIs and Fintechs in the subprime space, offset by growth with larger FIs. Within risk and account reviews, we did see limited growth in our portfolio review business, but we have not seen a meaningful increase in risk-based portfolio reviews that are typical during challenging economic periods.

USIS consumer solutions D2C business had another very strong quarter with revenue of $56 million of 12% from very good performances in both our consumer direct and our indirect channels. USIS adjusted EBITDA margins were 34.2% in the quarter and slightly below the 35% we had guided from the impact of weaker mortgage market as well as higher technology spend as we migrate customers to the new cloud data fabric. Todd and USIS team are on offense as they work to complete their cloud transformation and pivot to leveraging their new cloud capability to deliver new products and drive share gains. In the third quarter, USIS onboarded a new large FI customer to our new cloud platform, which you expect to deliver share gains moving forward. Turning to Slide 8, international revenue was 316 million, up 12% in constant currency and up 3% in organic constant currency, and below the 4.5% growth we had guided to in July due to the greater decline in our European debt collection revenue than we expected.

Europe local currency revenue was down 2% in the quarter. Our UK and Spain CRA business revenue was up a very strong 8% in the quarter, a very good performance offset by the weaker than expected 17% decline in our UK debt management business. We expect Europe to deliver almost 10% growth in the fourth quarter from continued strength in the CRA business and a return to growth in our debt management business as we lacked difficult comps from last year. Latin America, local currency revenue, including Brazil, was up a very strong 21% comping off a very strong 34% growth in the third quarter of last year driven by double digit growth in Argentina and Paraguay and from new product introductions and pricing actions. We expect LATAM to deliver strong double digit revenue growth again in the fourth quarter.

Canada and Asia Pacific both delivered low single digit growth in the quarter as we expected. International adjusted EBITDA margins of 26.3% were up 210 basis points sequentially. Excluding Brazil adjusted EBITDA margins of 26.8% were up 260 basis points and in line with our expectations. The improvement was driven by revenue growth and good execution against their 2023 cost reduction plans by Lisa and our international team. Turning to Slide 9, in the third quarter overall non-mortgage constant dollar revenue growth grew a strong 11% with organic growth of 7%, both inside our long-term framework. Positively, this was up 300 basis points sequentially. The acceleration in organic revenue growth was driven by strong 11% EWS non-mortgage growth and improvement of about 800 basis points sequentially.

As we look to the fourth quarter, we expect non-mortgage revenue growth to be about 13% with organic growth of about 9% above the levels we delivered in the third quarter. The acceleration organic growth is expected to be led again by EWS with growth of over 15% driven by their government and talent businesses. Turning to Slide 10, new product introductions leveraging our differentiated data and new AFX cloud are central to our EFX 2025 growth strategy. In the quarter, we delivered a record 15% vitality again led by very strong performances in EWS and Latin America. EWS non-mortgage VI in the quarter was over 25%, a very strong performance. And in the third quarter, about 85% of new product revenue came from non-mortgage products leveraging the EFX Cloud.

Leveraging our new EFX cloud capabilities to drive new product rollouts, we expect to deliver vitality index of approximately 14% in 2023, which is about 400 basis points above our 10% long-term vitality index goal. Importantly second half USIS VI is expected to be up about a 100 bps higher than first half as we are closer to cloud completion and able to leverage our new cloud native infrastructure in USIS for innovation and new products. This is broadly positive momentum for 2024. On the right side of this slide we’ve highlighted several new products introduced in the quarter. These new solutions are a testament to the power of the Equifax Cloud and AI in driving innovation that increase — that can increase the visibility of consumers to help expand access to credit and create new mainstream financial products while driving Equifax’s top line.

Turning to Slide 11, we’re very excited to have closed the Boa Vista AC acquisition in early August and welcome the Boa Vista team to Equifax. We’re focused on driving growth in Brazil and expanding BVS’s capabilities by deploying our cloud-based decisioning and analytical products, as well as expanding in new verticals like identity and fraud. In the third quarter for the period after our acquisition closed on August 7th, EFX Brazil delivered revenue of $23 million and was accretive to adjusted EPS by $0.02 per share. Going forward, Brazil will be included in our Latin American region for reporting, and as a reminder, we expect Brazil to deliver approximately 160 million in run rate revenue to Equifax to be accretive to adjusted EPS in its first year.

And now I’d like to turn over to John to provide more detail on our fourth quarter and full year guidance. John.

John W. Gamble, Jr.: Thanks, Mark. Turning to Slide 12, as Mark mentioned, third quarter mortgage market credit inquiries were down about 29% weaker than the down 23% in our July guidance and EWS mortgage outperformance was about 22% from records and price product and mix, and consistent with the second quarter. For the fourth quarter, we are assuming the weakening trend in mortgage market volume estimated based on the change in our credit inquiries we have seen in October continues as well as further normal seasonal declines in November and December. On this basis, we expect mortgage credit inquiries to be down about 22% in the fourth quarter, which is an 18 percentage point reduction from our July framework for the fourth quarter.

For perspective, to the extent the mortgage market continues at the levels we’ve assumed for 4Q 2023, which is more than 50% below pre-pandemic averages, 2024 mortgage market credit inquiry volumes would be down approaching 15% versus 2023. Slide 13 provides the details of our guidance for 4Q 2023. In 4Q 2023, we expect total Equifax revenue to be between $1.307 billion and $1.327 billion with revenue up 10% at the midpoint. Non-mortgage constant currency revenue growth should strengthen to 13%. Mortgage revenue in the fourth quarter is expected to be below 15% of Equifax revenue. Business unit performance in the fourth quarter is expected to be as described below. Workforce Solutions revenue growth is expected to be up about 8%, which is lower than the implied fourth quarter framework we outlined in July.

The bulk of the $47 million mortgage market impact on revenue that Mark referenced impacts EWS. As we discussed in July USIS benefits from greater mortgage revenue in the early application phases, which should continue into the fourth quarter. EWS non-mortgage revenue will return to strong over 15% growth year-to-year in the fourth quarter. However, this strong growth is below our framework from July. Government growth should be above the 23% we saw in the third quarter, but is below our framework from July as state benefit redeterminations are occurring at a slower pace than we anticipated. Talent growth should be above the 6% we saw this quarter as well, but will also be below our July framework as overall hiring has decelerated from the levels we were seeing in July with BLS now down 10% with white collar verticals down significantly more.

And employer services revenue will be below our 4Q framework from July for both I9 and onboarding that should continue to deliver year-to-year growth but at levels below our July framework from weaker overall hiring and ERC with the IRS announcement that they would pause on new ERC claims. Adjusted EBITDA margins for EWS are expected to be about 50.5%. USIS revenue is expected to be up about 4% year-to-year despite the increased mortgage headwind. Non-mortgage year-to-year revenue growth of 4% should be down from the about 8.5% growth we saw this quarter as we lap 4Q 2022 pricing actions. This is somewhat stronger than we expected in our July framework driven by continued good growth in commercial, consumer solutions, auto, and across our account IB [ph] products.

Adjusted EBITDA margins are expected to be about 35%, up sequentially, principally due to revenue growth and cost actions. International revenue is expected to be up about 20% in constant currency due to the addition of BVS and as we lap headwinds in our UK debt management business. Revenue is expected to be up about 6.5% in organic constant currency, this is somewhat stronger than our July framework. EBITDA margins are expected to be about 30%, reflecting revenue growth and strong cost management, including the benefit of planned cost reduction actions. We expect Brazil to deliver revenue of about $38 million in the fourth quarter. Equifax 4Q 2023 adjusted EBITDA margins are expected to be about 34% at the midpoint of our guidance, an increase sequentially of almost 100 basis points.

And adjusted EPS in 4Q 2023 is expected to be $1.72 to $1.82 per share, up 17% versus 4Q 2022 at the midpoint. Both adjusted EPS and adjusted EBITDA margin are below the $2 per share and 36% targets that we set as goals as we entered 2023, principally due to the assumed further decline in mortgage market volumes and associated reduction of high-margin mortgage revenue that Mark discussed. Slide 14 provides the specifics of our 2023 full year guidance. 2023 revenue and adjusted EPS are being reduced consistent with our 3Q 2023 results and our 4Q 2023 guidance. We expect 2023 non-mortgage constant currency revenue growth to be strong at about 9% and organic revenue growth of about 7%. Total capital spending for 2023, including the addition of Brazil, which was not previously included in our guidance, is expected to be about $580 million.

Capital spending in the third quarter was about $145 million. We did see the expected decline in spending sequentially, however, the reduction was slightly less than the expected, principally due to higher spending related to customer migrations. We expect capital spending in the fourth quarter to decline sequentially by about $15 million as we continue to progress U.S. and Canadian migrations to Data Fabric. We remain focused on reducing CAPEX as a percentage of revenue to about 7% by the end of 2025. We remain focused on executing our long-term model, delivering 8% to 12% revenue growth with 50-plus basis points of margin expansion annually on average over a cycle. Although the unprecedented decline in the U.S. mortgage market in 2022 and 2023, pushes out our prior midterm goal of $7 billion in revenue and 39% EBITDA margins to beyond 2025, it does not change our focus on expanding our margins toward our 39% goal as we drive revenue higher.

We will continue to focus on delivering strong non-mortgage growth at or above our long-term revenue growth framework, outperforming our underlying markets, including the mortgage market, and executing our cloud transformation, including delivering ongoing cost improvements. As mentioned earlier, to the extent the mortgage market continues at the levels we have assumed for 4Q 2023, 2024 mortgage market inquiry volumes would be down approaching 15% versus 2023. Now I’d like to turn it back over to Mark.

Mark Begor: Thanks, John. Wrapping up, Equifax delivered on its earnings guidance in the third quarter with adjusted EBITDA margins and adjusted EPS within our guidance range despite the challenging U.S. mortgage market. While the mortgage market was down significantly again, our non-mortgage businesses delivered strong constant dollar organic growth of 7% and overall growth of 11%, including BVS. Importantly, EWS returned a strong 11% non-mortgage growth and USIS delivered a strong over 8% non-mortgage quarter. We expect our strong third quarter constant dollar non-mortgage revenue of 11% to accelerate in the fourth quarter to about 13%, including EWS, above 15% and international, including BVS at about 20%. The breadth and depth of our non-mortgage businesses, which account for about 81% of Equifax revenue in the third quarter and execution against our 2023 cloud and broader spending reduction program, allowed us to deliver against our earnings guidance despite the decline in the mortgage market.

While it’s early to provide 2024 guidance, I wanted to give you a perspective on how we plan to operate in 2024 in what could be another challenging year from a macro perspective as we exit 2023 with U.S. mortgage volumes at historically low levels with record mortgage rates. We remain committed to executing against our EFX 2025 strategy with a focus on things we can control. As we move towards 2024, we’re focused on: first, continuing above-market non-mortgage growth inside our 8% to 12% long-term framework and outperforming the underlying mortgage market. Second, substantially completing our cloud transformation in 2024 with revenue from our new cloud platforms approaching 90% by the end of the year, which will be a big milestone to allow our team to pivot to fully focus on innovation and growth.

Third, as we complete our cloud investments, we expect CAPEX to move towards our long-term goal of 7% of revenue in 2025 and our CAPEX spend to pivot from maintenance and cloud investments to innovation and new products. Aligned with our cloud technology completion, we will continue to execute against the cloud and broader spending reduction program we announced in February, which we expect to deliver $65 million of 2023 carryover next year with additional cost savings next year as we complete the cloud. Our 14% vitality performance in the second half of this year gives us strong momentum as we move towards 2024. We will continue our focus on new product innovation using our single data fabric, cloud capabilities, and AI to bring new models and scores to the market, including a focus on bringing EWS and USIS assets much closer together with a long-term annual vitality goal of 10%.

We’ll focus on adding new ERB records to further strengthen the TWN data set, including the acquisition of traditional W-2 pension and 1099 records. And last, we’ll continue to look for financially attractive bolt-on M&A aligned with our strategic priorities around differentiated data, strengthening EWS, and identity and fraud. Despite the challenges of an unprecedented decline in the U.S. mortgage market, Equifax demonstrated in 2022 and 2023 that we can grow revenue as we outperform our underlying markets over the last two years from above-market non-mortgage growth, outperforming the mortgage market, vertical penetration, new product innovation, adding new records to TWN, and pricing. We are committed to delivering on our long-term framework of 8% to 12% revenue growth and 50 basis points of annual margin expansion as well as our medium-term goal of 39% EBITDA margins.

And when the mortgage market recovers, we are poised to generate accelerated above-market growth and margin expansion from investments we have made in our cloud technology, new products, TWN record additions, and expanding our unique data assets. During the next chapter of the new Equifax as we pivot from building the new Equifax cloud to leveraging our new cloud capabilities to drive our top and bottom line. We are convinced that our new Equifax cloud-based technology, differentiated data assets in our new single data fabric, and market-leading businesses will deliver higher growth, expanded margins and free cash flow in the future. And with that, operator, let me open it up for questions.

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Q&A Session

Operator: Thank you. [Operator Instructions]. Our first question is coming from Manav Patnaik from Barclays. Your line is now live.

Manav Patnaik: Thank you and good morning. Mark, I just had a question, I think the negative 15%, I guess potential decline in mortgage increase next year based on I guess, your current run rate, seasonality, etcetera. If that is the case, you’ve obviously been outperforming the market consistently this year, but are there other initiatives you can put in place to potentially outperform further, or just curious on what the strategy in a longer — weaker for longer, I guess, mortgage market would be?

Mark Begor: Yes, Manav, we believe that we have multiple levers in both mortgage and non-mortgage. I’ll focus on mortgage because that’s your question, to continue to outperform the underlying market. And you’ve seen us do that over an extended period of time. And we’ll talk about USIS and EWS, if you want, because that’s a mortgage. In USIS, they obviously have the ability to deliver price, and we expect price to be a part of the levers for 2024. There’s new product rollouts inside of USIS. For example, if you recall earlier this year, we rolled out our new mortgage credit report that includes those NC+ attributes. That’s going to be a positive for us to outperform the underlying market. And then if you go to EWS, you’ve got the same two levers there plus more, obviously.

Price is an opportunity as we have more records, and we can deliver more value to the mortgage customers. We’ve got a big focus in more leverage in EWS around new products. You’ve seen us roll out new solutions like a year ago, mortgage 36 with 36 months’ worth of history. So new products will be a continued lever for us in the mortgage space. And of course, records growing records double digit in the quarter, the new payroll processors that we’re adding in the fourth quarter and next year that we signed up during the quarter, and of course, our pipeline of new records those drive higher hit rates in the EWS mortgage business, which we expect that to continue going forward. And then the last for EWS quite uniquely, is ability to drive penetration, meaning more usage of the income and employment data inside the mortgage process.

And as we’ve talked before, we don’t have — every customer doesn’t use our solutions. Some still use manual verifications and we’re driving them to using our verified solution. So yes, we’ve got confidence about our ability. I wouldn’t characterize that we have new levers, but we’ve got a lot of focus around them. And I think — when you think about EWS and USIS, and we mentioned it earlier in our prepared comments, as USIS completes the cloud, and of course, EWS is already there, we think the ability to have each business bring new products to market will continue, but the ability to bring solutions that combine the two businesses, data assets for mortgage and non-mortgage with USIS getting into the cloud is another year for us in the future.

Manav Patnaik: Okay. Got it. And then just on the margin front, the 34% for the fourth quarter, is that a right run rate to think about as you exit the year, I know you have a lot of, obviously, mortgage headwinds and then cost savings coming in to offset that. And if you could just remind us versus the 39% target that you had, how much of that is going to be a mortgage shortfall in terms of getting to that 39%?

Mark Begor: I think first on the 39, we tried to be clear, our goal hasn’t changed. As you know, for a couple of years, we carried a goal of 2025 for 39% against $7 billion of revenue. Clearly, that $7 billion is going to be pushed out with the mortgage market decline and we wanted to be transparent today that we view that as being post-2025. But our focus on 39% hasn’t changed. We have a path to 39%. In the future, it’s going to be beyond 2025 and then post 39%, we still see between operating leverage in the businesses, the strong margins in EWS, the ability to grow 50 basis points per year post that 39%.

John W. Gamble, Jr.: And as you’re specifically looking at 2024, right, we’ve already talked about the fact that we have significant cost reduction plans we put in place in 2023. They’ll drive an additional $65 million of savings as we get into next year. We also look at some savings as we continue to migrate to the cloud, which weren’t included in that $65 million. So we expect to have cost levers that will help drive our margins higher. Obviously, we’re not giving revenue guidance but again, for us, for 2024 but for us, as you know, our variable margin on new revenue is very high, right. So as we drive more revenue, that also is a way that we drive margins as we go forward. So just as a reminder, those people think about next year, first quarter margins for us tend to be lower, right, because a significant amount of equity and variable compensation expense hits in the first quarter as opposed to being spread throughout the year because of the structure of our plan.

So just as a reminder, first quarter margins tend to move down.

Operator: Thank you. Next question is from Andrew Steinerman from J.P. Morgan. Your line is now live.

Andrew Steinerman: Hi, two quickies. Well, actually, we’ll see if it is quick. The first one is, for third quarter, what was mortgage as a percentage of total revenues? And then the second question has to do with, could you just review with us the cadence of Equifax government revenues from the Medicaid redetermination fourth quarter to second quarter. I’m also assuming that it might be higher in total now because you talked about additional state penetration?

Mark Begor: I think the first question, John, it was 19%.

John W. Gamble, Jr.: 19%, yes.

Mark Begor: In the third quarter, that will be lower in the fourth quarter for obvious reasons on the percent of revenue, Andrew from mortgage. On the government one, maybe just a couple of comments on government, and I’ll get to redeterminations and John can jump in. We’ve got a lot of positive levers in government. I hope you saw Andrew had noted that those two large contracts, which we alluded to in July, meaning that we talked about some visibility that we had of new contracts, $1.2 billion and $190 million USDA contracts give us some visibility and momentum in our government vertical, not only in the fourth quarter but also for 2024. Those contracts as well as others also give us the ability to continue our expansion at the state level.

As you know, our government vertical inside of EWS is call it roughly $500 million run rate business, but in a $4 billion TAM. So there’s a lot of opportunity to add new states and new agencies at the state levels and you might imagine we have a deal pipeline of customers or agencies that we’re working on adding at the state level, which is a part of our visibility for fourth quarter and into 2024 for the government vertical. And in particular, the CMS contract is — and the USDA contract actually are both helpful in the addition of more state-level relationships. On redeterminations, it’s clearly been a very challenging forecasting about when will states actually activate those redeterminations. We saw a strong volume of that in the third quarter.

We expect that to continue in the fourth. And then as you point out, in first and second next year, there’ll be continued redeterminations because of the time line is to really complete those, I believe, at the end of the second quarter. So we work closely on those, but it has been a bit more challenging to forecast those. Anything you add, John?

John W. Gamble, Jr.: Just in terms of pacing, you covered it, right? It’s just it’s very difficult to forecast, right? So although we did see lift from redeterminations, it wasn’t to the level we expected, and we certainly saw that to a degree in the third quarter and the fourth quarter. But we still think we’re the best solution and expect to get the revenue related to redeterminations, as Mark said, by the time it completes at the end of the second quarter. But as we said, in the third quarter and certainly in the fourth quarter, a little lower growth than the level we’d expected.

Andrew Steinerman: Perfect, thank you.

Operator: Thank you. Next question is coming from Kelsey Zhu from Autonomous Research. Your line is now live.

Kelsey Zhu: Hey, good morning. Thanks for taking my questions. I think on the talent vertical, you talked about 20 percentage point outperformance if I heard that correctly. I was wondering, between the different factors that was driving that 20 percentage outperformance what is the biggest factor and how durable is this 20 percentage point outperformance over the next few quarters?

Mark Begor: Yes, the 20% we were pleased with the market — the business is up 6%, the talent vertical and from our measure, the BLS market was down 10%. We think the white collar market was down double that. So that’s how you get close to double that. So that’s how you get to the 20 points of outperformance. And there isn’t really — I wouldn’t characterize a single lever that’s really driving that outperformance. It’s really similar in all our businesses. In talent, we’ve got the ability to drive price, which we do every year. We expect to do that as we go into 2024 in the talent vertical like our others because of the value we’re delivering. In talent, quite uniquely, we have the ability to drive penetration. That’s a big multibillion dollar TAM in a business that’s roughly $400 million at run rate.

So there’s a lot of customers in talent that are still doing manual verifications of employment history that our 640 million jobs that we have in our database are just immensely valuable from a speed and productivity standpoint. So that’s a lever in talent that we think is quite durable along with price. Product is another big one. You’ve seen us roll out almost every quarter, a couple of new products from EWS and the talent vertical really to get more narrowly focused around products that match kind of job categories. We rolled out an hourly solution, I think, last quarter for hourly workers to try to drive some growth there. So new products are clearly a growth. And then the addition of records. And as you know, with the 50 attributes we get every pay period, we get job title and 75 million people a year or roughly that number change jobs in the United States.

So having those new jobs from our record additions every pay period is a very valuable asset that just drives higher hit rates, which drives revenue going forward. So we have a lot of confidence in our ability to outperform the underlying talent market, just like we do with the rest of our markets because of those levers.

Kelsey Zhu: Got it. That’s super helpful. Thanks so much. My second question is on mortgage. I was wondering if you can talk a little bit about the spread between kind of the increased trend versus origination and how you calculate the mortgage outperformance for EWS?

Mark Begor: Yes, I’ll start and let John jump in. We’ve been consistent really. There’s been a phenomena that’s a major change, a meaningful change in the mortgage market over the last, call it, 12 to 18 months, where when rates were starting to increase consumers did a lot more shopping and that benefited our USIS business. Meaning that the consumers would go to multiple mortgage originators and as you know, as a part of that process, when someone applies online, the first thing a mortgage originator will do is determine is that a consumer that can qualify for the loan they’re trying to get, meaning are they going to invest that 5,000 or 6,000 or actually 7,000 of COGS in that mortgage process. So there’s an inquiry that goes into or a pull on the USIS side.

And that’s why inquiries versus originations or closed loans have really separated. There’s been an increase in originations. And we expect that to continue with these high interest rates. Consumers, they’ll be more deliberate around their shopping behavior. And that’s why there’s a positive, if you will, for USIS in inquiries or credit polls in this environment where EWS typically in the back end of the mortgage process in — really around closed loans.

John W. Gamble, Jr.: Just broadly, right, we’re finding it difficult to get good market data that we can correlate across applications and other measures, including originations. So as you know, for USIS, right, we determine our outperformance based on our own internal volume data. And we share that internal volume data, obviously, with you every quarter. And then going forward, what we’re going to do is we’re going to provide outperformance for EWS also based on our internal volume data, which are actuals, which we can actually measure. And as we’ve been talking to you about for quite some time, right, our outperformance is driven by record growth, which is more specific to TWN, but then also product price and mix. And as we said in the script, those are things we can measure together, understanding the difference between our volume and our overall revenue.

And that’s our outperformance. And I think going forward, we’ll use that measure because it’s all based on internal data that we can validate each quarter. And again, what we — our internal volume data is transaction volume data, it’s the transactions that are related directly to mortgage application approvals, doesn’t really include things around batches or monitoring so that the data stays pure. And we feel like that’s a much better measure of the level of outperformance driven by record growth, product, pricing and mix that we can deliver each quarter, and we’ll continue to share that with you.

Mark Begor: Maybe just one more point, John, as a reminder, as you know, we get mortgage originations because we have the credit file on every consumer. So we see the actual new mortgage originations, but they’re typically on a what five to six-month lag. So between that five to six-month lag, we’re forecasting based on MBA data, based on our own tracking, based on our own run rates, we use multiple inputs to try to forecast those originations. We obviously have been challenged by that in this current environment with interest rates increasing. But we have a lot of data around mortgage originations.

Kelsey Zhu: Got it, thanks so much.

Operator: Thank you. Your next question is coming from Andrew Jeffrey from Truist Securities. Your line is now live.

Andrew Jeffrey: Hi, good morning. Appreciate you taking my questions this morning. Mark, I mean, I get there a lot of moving pieces here outside of mortgage, especially I’m thinking about EWS verifier government, a little bit weaker maybe than you thought and you enumerated the reasons. I guess my question overall is do you think that, that EWS non-verifier — sorry, non-mortgage verifier business has perhaps gotten a little more difficult to forecast as you do more business with the government and all these different programs, appreciating the new contract wins and do you think you’re going to take that into account when you start to think about guiding for 2024?

Mark Begor: Yes, for sure. There’s no question. Look, it’s a big business. It’s dealing in multiple verticals. In some regards, these — like talent in government or I would still characterize them as fairly new verticals for us at scale, we’ve only been large in those verticals in the last couple of years. And you’ve got some macro impacts certainly in talent, leave mortgage side, which we talked about a bunch, but the hiring market is obviously under some pressure, particularly in white collar in the U.S. And we’ve tried to forecast that, and we’re going to try to be more conservative or more balanced whatever word you want to use around that vertical. Same with government. There’s a lot of moving parts there. I would say the most complex for us or the one we’ve been challenged by is the redeterminations.

Outside of that, we have pretty clear visibility about adding new customers, adding new clients, new product rollouts, pricing actions and government, that is pretty dialed in. And I think the other — if you think about 2023, both of those businesses had really, really, really strong 2022. So we’re comping off very strong years, which is great because we’re driving more penetration, more product, more price, and we had to look forward to where we’re going to take those businesses. And while we’ve been off a little bit, we’re really pleased with the growth of those businesses. Those are — they both delivered strong growth in the quarter. You’ve seen accelerated growth in non-mortgage and EWS from second quarter. We expect that non-mortgage verifier growth to accelerate again in fourth quarter, which gives us really positive momentum going into 2024.

But short answer to your question about, are we going to be more balanced around how we forecast there, for sure.

Andrew Jeffrey: Okay. Yes, I think the market would welcome that. And then if I could just ask, it feels like obligatory competitive question in EWS. There are a couple of pieces of business that you characterize as manual and low margin that kind of let go last quarter. Can you just sort of reiterate your thinking, especially in mortgage Verifier in terms of the competitiveness of your solution?

Mark Begor: Yes. No change from what we talked about in July. In July, we tried to talk about the manual work we were doing for customers when we didn’t have records. And that got I think somewhat misconstrued in the marketplace. We’re not seeing an impact from competition in our mortgage business or any other businesses. We tried to be clear about that in July, and I’ll be clear again today. We’re well aware of what our competitors’ data records that they have and what they don’t have. To me, a big proof point about our competitiveness is our ability to continue to add new partnerships. We added four in the quarter. We added, I think, 27 in the last couple of years. We’re growing our records. That’s really, I think, a proof point of the strength of our ability to deliver solutions to our partners and execute for them. And they want to be partnered with Equifax. So I think that’s a really important metric for us going forward.

Operator: Thank you. Your next question is coming from Kyle Peterson from Needham & Company. Your line is now live.

Kyle Peterson: Great, thanks, good morning guys. And appreciate you taking the questions. I wanted to touch on the consumer lending volumes within EWS. Looks like that was down a bit year-on-year. Just wanted to see, is that fairly broad based or was there any more concentration, whether it’s card or personal loan or auto, just any more color would be helpful?

Mark Begor: Yes. Maybe at the kind of the macro level about a year ago, we talked about and we continue to talk about subprime really got tightened up. So that happened over the last, call it, three, four, five quarters. That’s starting to bottom out because we’re comping off really sharp declines from last year as we go into fourth quarter. But subprime has clearly pulled back. A combination of concern around that consumer base being more challenged, not from unemployment, but really from inflation. And we talked earlier that we’ve seen some delinquencies increase there. And as an old card guy from my prior life, when delinquencies go up, you typically will pull back on originations or be more deliberate around originations, meaning you want to make sure you’re finding the consumers that can really afford that financial product.

Prime is still fairly strong. The consumers are working, they’ve had some wage growth, while they’ve been impacted by inflation. We haven’t seen much impact there. And would you add anything, John?

John W. Gamble, Jr.: No, just as Mark said, our — it tends to be in our consumer finance business, right, is that we tend to be more concentrated, we tend to be more concentrated in subprime and more concentrated on specific lenders. So the fact that that we’re seeing subprime week, and we’re seeing some fintechs week is driving it. And because we have more concentration other than the extremely broad coverage that USIS has, we tend to be — we tend to move around a little bit more in EWS and our revenue for consumer finance.

Kyle Peterson: Got it. That’s really helpful. And then just a follow-up, I know you guys have talked a bit about some of the previous spending reductions and kind of the benefits that will be in the 2024 numbers based on the actions taken this year. I just want to see, are there any other funding plans or things you guys are looking at if you guys are — if we’re going to be in kind of a lower-for-longer kind of mortgage inquiry market, I just want to see, are there any more levers you guys can push on the cost side of things if volumes don’t come back next year?

Mark Begor: Yes. I think as John mentioned, and we did earlier, we had the $65 million of carryover from our $275 million program this year. The bulk of that, as you know, is from cloud completion and cloud cost savings. And as we go through 2024 we mentioned, and we’ll give guidance in Feb on that, but we’ll have additional cloud cost savings as we complete migrations next year. As we said, we expect to complete USIS and Canada and other of our international platforms. And as a reminder, we’re carrying double cost today in those environments where we have a cloud environment we’re paying for, and then we also have a legacy environment. When we complete the migrations, we shut down the legacy. So that will be the incremental savings which we expect to have in 2024 and 2025, and we’ll give guidance on that.

Beyond those kind of savings, we’re going to keep our belt tight in 2024. We’re going to want to continue to invest in the right places, but I’d characterize that as we’re going to be balanced around it given the environment.

Operator: Thank you. Our next question today is coming from Simon Clinch from Redburn. Your line is now live.

Simon Clinch: Hi, thanks for taking my questions. A lot of my questions have been asked already, but maybe we could zero in again on EWS mortgage. And I just wanted to — just going back to your — the way you’re measuring the outperformance this time and the implied decline in origination volumes this quarter that you’ve seen versus what the sort of industry forecasts have been for third quarter. And there’s quite a wide gap. And I just wanted to make sure that there’s nothing else at play here in terms of I don’t know, maybe sort of just you’re not seeing all the volumes that you would otherwise be seeing or for any sort of color you can give around that sort of divergence would be useful?

Mark Begor: We try to forecast what the originations are as mentioned earlier. We know what actual originations are like, a five to six-month lag. Between that time frame, we try to forecast. If you’re referring to like NBA and some of the other forecasts, if you look back over the last two years, three years, four years, five years, they’re consistently long. It’s a hard thing to forecast, and we just try to use our best data on it. And then we also factor in our current run rates on originations. So that’s the way that we’re forecasting to try to get more current because MBA is done on a survey basis. I think they survey like half of the mortgage originators in order to get that data. Ours is actual originations on a lag and then our current forecast based on what we’re seeing in current time frame.

John W. Gamble, Jr.: And again, going forward, what we’re going to try to make sure we do is we’re going to make sure we’re providing you with actual data, right. So I mean we’ll be able to give you the benefit we’re seeing from records, product, price and mix which are really the big drivers of our outperformance. And we’ll be measuring that against our actual volumes across USIS and TWN separately so that we can validate the information. We know what the actuals are and we can explain how we’re performing and driving those levers, which we think is what’s really important to make sure we explain because that’s what we’re driving and delivering outperformance through.

Simon Clinch: Great, thanks. And just as a follow-up. I mean if we want to talk about or think about a tougher mortgage market for longer sort of current levels, does that in any way change the I guess the pricing power, the competitive dynamics for EWS and mortgage going through a period like that, a prolonged period like that. Just wondering if you could help us think about the puts and takes in that regard?

Mark Begor: We don’t think so. The power of instant data, and in this case, we’re talking about income and employment data is super valuable to every mortgage originator. They want to make sure that they have accurate data. We get it directly from the company every two weeks on the consumer. We deliver it instantly. In this environment of more shopping, a mortgage originator that’s investing in a consumer, they want to make sure that they close that loan as they get down the path of delivering it. So we don’t see a change in our ability to deliver new solutions, meaning products to the industry. Obviously, with more records, we’re going to drive higher hit rates that happens really because we’re getting the inquiries from our customers for all their applicants.

And then we still believe that we have pricing power going forward because of the uniqueness of our data set, the alternative for our customers is to do it — the mortgage customers to do the verification manually, which is very challenging, meaning getting a company on the phone to verify the income is very hard to do and it takes time, and that’s labor and also time. So speed and productivity and accuracy is the value we deliver.

Operator: Thank you. Next question is coming from Shlomo Rosenbaum from Stifel. Your line is now live.

Shlomo Rosenbaum: Hi, good morning. Thank you for taking my questions. Hey Mark, just my first question, I just wanted to talk a little bit more like how we should be thinking about the future with some of the items that you were talking about, the increase in subprime delinquencies. We talked about auto for a while, we’re talking about credit cards, cash being used up, like how does that impact the business over the next 12 months, I mean I know the employment has been fairly good at the lower end of the spectrum, but like there’s a lot of parts of the spectrum where there’s open jobs. They’re not really filling those open jobs. And so I guess the first question is, how are you thinking about this on a go-forward basis? And then I have a follow-up.

Mark Begor: Yes. Go forward, you got to kind of talk time frames. When you think out the next couple of quarters, it doesn’t feel to us or to me like there’s going to be a lot of change, meaning it’s a fairly — outside of the mortgage market, obviously, let’s leave that aside. That’s obviously super challenging and really unprecedented what’s happening with interest rates. But when you have people working and very low unemployment rates, generally, they’re able to pay their bills. When they pay their bills, delinquencies stay generally low, and then you have the ability — our customers have confidence in continuing to extend credit through loans and other solutions to those consumers. Subprime has been challenged for a year.

That’s generally subprime is with the fintechs. Most of the big banks don’t do subprime business. And that’s been challenged for a year. And we’re actually, as I mentioned earlier, starting to comp against fairly low levels. I would expect subprime to stay high as we go through 2024 because those consumers are really more challenged, not around being unemployed, but around inflation is still pressuring them. But the big metric that I always think about and you should, too, in my view, is unemployment. So back to your question about 2024, give me your forecast for unemployment next year. Is it going to go up, down or sideways, if you think unemployment is going to spike or go up, which I don’t think it will in this environment with 10 million open jobs and only 5 million people looking right now, that’s a pretty good environment to go into 2024 in kind of the core elements of our business outside of mortgage.

Shlomo Rosenbaum: Okay, thank you. And then just going back to those government redeterminations, can you talk about like how does that work exactly, like once they get done, let’s say they get done by June of next year. Is this something that the government is going to be doing annually or is this kind of a big onetime bang and then we’re going to end up with tough comps on that after we’re done with it?

Mark Begor: Yes. Remember that the redeterminations were suspended during COVID. So they didn’t happen over the last couple of years. Once President Biden lifted the COVID pandemic rule or requirement, these redeterminations went back into place. So it’s really the completion of the annual verifications are happening in this 12-month time frame in third, fourth and first and second quarter next year. Post second quarter, they’ll have the requirement to do the annual redeterminations that are a requirement of the programs. So there may be some elements of comp that from a timing standpoint, but we don’t expect it to be meaningful.

John W. Gamble, Jr.: And these redeterminations apply across multiple government subsidized programs, it’s not just Medicaid, Medicare. And so it’s more broad and we participate in many of those.

Operator: Thank you. Next question is coming from Jeff Meuler from Baird. Your line is now live.

Jeffrey Meuler: Yeah, thank you. Sorry to keep pulling you back to this, but just given that it’s a new metric you’re going to be providing on an ongoing basis. So on the footnote and you said this as well, you’re looking at internal data and then you’re doing a Calcon [ph] records product, price and mix. It’s not clear to me, like I know you said you don’t think there’s any change in share dynamics relative to a quarter ago. But if there are share shifts, is that accounted for in your market estimate, is it accounted for an outperformance, it’s just — it’s not clear to me if you’re looking at internal data based upon what volumes you’re seeing how you would account first year…?

Mark Begor: First off, we don’t see any share shifts, Jeff. If there were, they would be in the outperformance. And remember, we still have a grounding in originations. As I mentioned, you have to forecast originations. And there’s MBA which a lot of you look at and we look at it, too, is really diverge from what we’re seeing in originations. And remember, we see originations on two sides of our business. We see it in in the credit business in USIS, and we see it in EWS and then we get actual originations on a five to six-month lag when they actually get posted to the credit file after the mortgage is closed. So we have really meaningful data. I think we were trying to highlight that the divergence we’re seeing from some of those industry forecasts have just become larger in recent times, my view is my personal view because of the rapid change in rates.

I think rates went up overnight or the last 48 hours by 50 bps. That’s not in a forecast that MBA did a month ago, but we can see what’s happening this afternoon.

John W. Gamble, Jr.: And so what we’ll be disclosing — so what we’ll disclose every quarter, again, is the outperformance with records, product, price and mix. And then over time, obviously, you’re asking — and we’re comparing that against our volume, obviously. So over time, to the extent anything was to occur, which we’re not seeing, okay, but then we would obviously talk to you about whether we’re seeing differences between our own volume, and what we think is happening broadly in the market. But the metric we’ll disclose every quarter really is driven by records, product, price and mix, which compares effectively our revenue to our volume. Because that’s what we can actually measure. So when we talk about — and it’s what we’ve been doing in USIS for a very long time, right, as long as I can remember.

Mark Begor: 15 to 20 years.

John W. Gamble, Jr.: More than 10 years. So what we’re talking about doing for EWS now is the same thing we’ve been doing for USIS for a very long period of time comparing revenue and the drivers against our volume metrics.

Jeffrey Meuler: Understood. It’s just been uses share shift now the dynamics I wanted to make sure I understood it. And then just can you just give us what the assumption is in the guidance for Q4 mortgage origination unit volumes? And can you comment on the number of TWN pulls per closed mortgage. It took a step up, I think, to like 2.5% in the pandemic. Has that been stable since, is it still going up, has it come down at all?

John W. Gamble, Jr.: Yes. So in terms of again, we’re not forecasting mortgage originations. What we’re using is our internal volume data. So we gave you in the guidance what we’re assuming for credit inquiries in the fourth quarter. And that’s the basis we’d ask you to consider if we are going to see, I think, credit increase down 22%, which is about 18 percentage points worse than what we expected back in July. And so we think that’s an indication of the direction of the market. And it’s the basis on which we’re calculating our volumes for USIS. We have a similar metric we use internally with EWS on their own volumes. And that’s the basis on which we generated our forecast. We didn’t try to come up with a mortgage originations forecast because we’re going to focus on using the internal volume that we can actually measure.

As Mark said, we can’t measure originations at the end of the fourth quarter, in the fourth quarter. It’s something that we want to have visibility to for quite some time following.

Operator: Thank you. Your next question is coming from Andrew Nicholas from William Blair. Your line is now live.

Andrew Nicholas: Hi, good morning. Thanks for taking my questions. First, wanted to touch on Boa Vista. I know you had given originally like $165 million revenue run rate. I think it was $160 million when you cited it in the second quarter, and you’re holding that here today post close. Just kind of curious if you could bridge the performance there over the past nine months with how that end market is doing, how the business is doing, just kind of an update as it’s now under your official ownership?

Mark Begor: Yes. We’re only, I don’t know, 60 days in of having it under the ownership, but pleased to have it in. The market from our perspective is growing kind of high single digit. That’s why we like the market down there in Brazil. We’re very active in driving the integration of getting our new products and solutions there. We’re going to move them to the Equifax Cloud over the next number of quarters to get them on our new cloud environment. We’re going to bring down our large platforms like Interconnect, which they don’t really have a version of that as well as Ignite, our analytics platform, which will really drive some strong competitiveness with Serasa Experian in the marketplace. The business performance, I would say, is probably lagging a bit that market performance, primarily through the integration.

This is — it was a complex integration for a small publicly traded company to go through the process. It was a long process to go through. Gosh, it was almost seven to eight months of the process to do the take private, but we’re energized around the future of the business and focused on getting this integration complete and getting into new solutions and to help them drive their top line.

Andrew Nicholas: Great, thank you. And then if I could ask just a clarifying question for my follow-up. In terms of the mortgage market outperformance in EWS, I think, first, I want to clarify that the 15% decline for 2024 that you talked about if conditions persist. I want to make sure that I understood that that’s an inquiry estimate, or is that an origination estimate? And then also, when we think about the gap between those two numbers, is there any reason to believe that, that gap would — and this is just kind of a question around the market itself, not your guys’ performance. Any reason of that gap to narrow or widen in a prolonged weak environment, just kind of thinking about the different levels, levers if you can?

Mark Begor: I’ll jump in, and John can dive in behind me. First, on the last half of your question, we would expect the inquiries to be stronger than originations in this high mortgage rate environment. You call it weaker, but if you’re a consumer and in many cases, stretching to get a mortgage for a home that you want to buy because prices are still very high you do a lot of shopping around when there’s a high interest rate environment. I don’t think that’s going to change next year. I think we’re still going to see that environment, which certainly will benefit USIS with more credit pulls in that shopping environment. You want to add, John, on the forecast.

John W. Gamble, Jr.: Sure. So the first question, yes, the down 15% was a statement specifically about to the extent the run rate we’re talking about in the fourth quarter of 2023 for mortgage credit inquiries continues, then we would expect 2024 to be down 15%, if that’s the level that the market stays at, right. So…

Mark Begor: From origination?

John W. Gamble, Jr.: For mortgage credit inquiries, down 15%.

Mark Begor: And then against that, and we’ll give guidance in February. But against that down 15%, we would have our levers in both businesses around price, product penetration to deliver the outperformance against that market.

Operator: Thank you. Your next question is coming from Craig Huber from Huber Research Partners. Your line is now live.

Craig Huber: Hi, good morning. First question, can you quantify for us the revenue performance in the U.S. for credit cards and autos and what the outlook is there for the fourth quarter?

Mark Begor: Yes. I don’t think we give the actual revenue numbers, John.

John W. Gamble, Jr.: We do not. What we indicated is we thought that FI performed well in the quarter that auto performed well in the quarter. We had very good performance in commercial and we had really nice performance in counts identity and fraud business. So auto and FI were two of the strong performers that showed very good growth in the quarter for us, but we don’t actually disclose the specific revenue levels.

Mark Begor: And I would say we don’t expect real change in the fourth quarter from that third quarter run rate.

John W. Gamble, Jr.: No, we’re expecting business. We’re expecting fourth quarter to continue to be good in those businesses really.

Craig Huber: So is your argument then with the much higher interest rates out there, obviously impacting mortgages, as you’ve talked quite a bit about here. You’re not seeing significant impact to the rest of your business with a much higher rate. Obviously, the 10-year rate is approaching 5% here, has been at that level for many, many years are you not seeing an impact from much higher rates anywhere else in your business?

Mark Begor: We haven’t. But again, let me just be a little more deliberate for example, like in subprime auto, there’s been some pressure there from originations because they’re more deliberate around that subprime consumer being challenged. And then that subprime consumer at that higher interest rate even in parts is sometimes challenged to qualify for that. But broadly, no, when you think sometimes a small portion of the financial services industry, most of it is near in prime. And higher interest rates have not impacted auto originations or card originations in the near prime and prime space like they have in mortgage. Mortgage is just a big ticket item that had a massive impact on the rates over such a short time frame.

Craig Huber: Great, thank you.

Operator: Thank you. Next question is coming from Faiza Alwy from Deutsche Bank. Your line is now live.

Faiza Alwy: Yeah, hi, thank you. So I wanted to ask about mortgage again and really inquiries. So I know that the MBA forecast changes quite a bit. But I’m curious how you think about the MBA index and the application data that comes out every Wednesday morning because that showed that 3Q applications were down 29%, which is in line with your inquiry decline. So I would have thought that inquiries because you’re talking about higher shopping, I would have thought inquiries would have done better than that. So just give us some perspective into how we should think about that data and really what’s going on with inquiries relative to applications?

John W. Gamble, Jr.: Yes. So I think to our earlier commentary, I think what we’re finding is there’s lots of pieces of market estimates that are being disclosed by various third parties that I think in this current environment, our difficult — estimates are difficult to make. And admittedly, they’re difficult to correlate. So that’s why — honestly, we’ve shifted to trying to use our own internal actual volume data so that we can try to track it over time. We’ll certainly have a perspective as we look back historically, and we look at our volume data on inquiries relative to actual applications and actual originations they occur, and we’ll be happy to talk about that. But trying to do it real time right now, I think it’s just is very difficult given the movements in the environment.

And that’s why we think it’s better for us and better for you, quite honestly, if what we talk to you about is our actual volume data and then the things that are driving our performance to be better than our actual volume data.

Faiza Alwy: Okay. Understood. And then maybe just give us some perspective, again, on this inquiry question sort of where we were maybe pre-pandemic and what happened during the pandemic in terms of number of inquiries per whether it’s application or for origination sort of how far ahead are we, was it three or four inquiries back in 2019, did that fall down, are we at seven or eight now. Just some perspective on how much higher inquiries are now would be helpful?

Mark Begor: And versus what time frame, they’ve grown over the last three, four, five years really because of consumer behavior as well as more — the majority of mortgage applications happen online today, which is a phenomenon that is very different from what it was five years ago, which drives more credit polls. Over the last year, they’re fairly consistent, meaning it hasn’t changed in the last year, but they’re clearly up from five, four years ago, even three years ago.

John W. Gamble, Jr.: And again, and I know you know this right, but we disclosed — we provide every quarter what the actual inquiry numbers look like, how the — sorry, what the actual movements in inquiries were so you can see how that’s trending over time.

Faiza Alwy: Okay, understood. Thank you.

Operator: Thank you. Your next question is coming from Toni Kaplan from Morgan Stanley. Your line is now live.

Toni Kaplan: Thanks for taking my question. Historically, pricing wasn’t really a big contributor to growth for the bureaus overall, but it seems like it’s more of a driver in recent years for you and especially now. Obviously, work number has been an area you’ve been able to increase price. I think you’ve also talked about introducing new products at higher price points in other parts of the business, too. So I guess when we think about like a 7% to 10% normalized organic growth rate for Equifax, how much of that should come from price increases and maybe help us out with regard to like the segments as well?

Mark Begor: Sure. First, I’m not sure when you talk about history, I’ve only been here five years, but over the past five years, price has always been a lever for Equifax and, I believe, for our competitors. I think it’s one of the things that data analytics companies have is if you have more valuable data, you’re able to charge more for it. Price, as you point out, we really execute two ways, pure price, meaning we do annual price increases. And we also get price through delivering new products with either more historical data or data combinations that deliver more value to our customers. And remember, our sale is an ROI sale. So with regards to the 7% to 10% organic, which is the subset of our 8% to 12%, if you go back to our Investor Day from a couple of years ago, there’s charts on each business where we talk about the levers to deliver that 7% to 10%.

And as a reminder, the 7% to 10% is really driven by EWS being north of that and International and USIS being south of that. And if you think about we have levers that are fairly balanced to deliver that 7% to 10%. You’ve got a few points over the long term of market in GDP. You’ve got a few points of price. You’ve got a few points each of these are kind of a couple — 2 points to 3 points, a couple of points of product driving that top line. And then you’ve got penetration in new verticals that we move into. And that’s kind of how you walk up. And then in EWS uniquely, we get a couple of points from records. So I think 2, 3, 4 points from record additions over the long term that drive our revenue. And as you know, on the records is because we’re already getting inquiries and when we add a new record to the data set we monetize.

So that drives the revenue growth. So I wouldn’t characterize price as being disproportionate in — versus the other levers that we have, and it’s been fairly consistent over the time I’ve been here about how we’ve executed it.

John W. Gamble, Jr.: And then we’ll publish a supplemental deck here in the next couple of hours. And then in that deck for each of the business units, we’ll provide a walk kind of for the long-term model that gives you price and depending on the business unit records, etcetera, that can provide perspectives on how we expect to be able to drive benefits for the drivers between — the drivers of our revenue growth on a long-term basis. So hopefully, that will help as well.

Toni Kaplan: Yes, terrific. And then if I caught your comments earlier correctly, you mentioned that 50% of your revenue is coming — within EWS is coming from products containing historical records. Has that mix meaningfully changed versus like a year ago, just wanting to understand?

Mark Begor: It’s probably up slightly from a year ago, but it’s up meaningfully from three, four, five years ago. And it’s really — as you may recall, Toni, and we talked about it, as we’ve moved EWS to the cloud, call it 18 months ago almost, it really opened up the window for them number one, to deliver new products; and number two, a lot of those new products are using trended or historical data, which was more challenging to do pre-cloud. So — and you’ve seen EWS’ Vitality Index, which kind of pre-cloud was in the 3% to 5% range, something like that, probably at the low end. And now as we talked about earlier this morning is north of 20. And all those products, either our data combinations or predominantly our trended historical data.

And if you think about it, just quite — it’s common sense, Mark’s income today is very valuable as a data element, but Mark’s income over the last 36 months is even more valuable if it’s going up. It’s a very important indicator if it was going down. And then if it’s stable, it’s an important indicator. So that’s the value that we’re able to deliver in that massive historical data set we have. And we would expect that 50% to move up, but it’s probably up 20 points in the last three or four years.

John W. Gamble, Jr.: It’s up certainly significantly, right. And I think if you just look at it by line of business, mortgage has grown substantially, as Mark’s talked about, because of mortgage 36 and the use of trended data across mortgage very broadly now, and that’s moved up towards 50% of transactions. The government is less, right, in terms of trended information. It tends to be more point in time. Talent is virtually all trended information. And then so as the mix of our business moves, that ratio can mix a bit, it can change a bit. But generally speaking, in all of our verticals, we’re driving the mix to trended data from the levels they’re at today.

Operator: Thank you. Our next question is coming from Ashish Sabadra from RBC Capital Markets. Your line is now live.

Ashish Sabadra: Thanks for taking my questions. I just wanted to drill down further on Toni’s question on pricing. And particularly, FICO price increases was a significant tailwind for mortgage revenues within USIS or OIS this year. How should we think about those tailwinds going into next year and offsetting some of the mortgage inquiry headwinds for next year? Thanks.

John W. Gamble, Jr.: Yes. I don’t know if you follow FICO or you talked to the FICO team, but I would expect that they’re going to do a price increase in 2024. You should talk to them. And if they do, we’re obviously the conduit along with you and Experian to deliver that to the marketplace, and that’s something that we would execute on.

Ashish Sabadra: That’s very helpful color. And maybe just on the Boa Vista earnings accretion. So that was pretty positive $0.02 accretion in the quarter. Is that the run rate that we should think about going into 2024 or can you talk about the puts and takes from an earnings accretion perspective in 2024? Thanks.

John W. Gamble, Jr.: Yes. So we’ll give you that detail when we give guidance, obviously, for 2024. But in the fourth quarter, it’s similar to what it was in the third.

Operator: Thank you. Next question is coming from Seth Weber from Wells Fargo. Your line is now live.

Seth Weber: Hi, good morning. I just wanted to follow up on Boa Vista for a second. The footnote on Slide 4 seems to suggest the margins were higher excluding Boa Vista, but I thought at the time of the acquisition, EBITDA margins for that asset were running like in the high 30% range. So were there some kind of like onetime costs there that impacted the results or is there something — I’m just trying — I’m just looking at the footnote on Slide 4? Thanks.

John W. Gamble, Jr.: Fair enough. The EBITDA margin was — for Boa Vista was slightly below, it was below the Equifax average margin. And what we’re expecting over time, as Mark talked about, through the investments we’re making through integrating them into Equifax processes that will work to drive that margin higher. But yes, for what you saw in the footnote, the BVS margins were below the Equifax margins for the third quarter. Now as a reminder, we’ve owned them for about six weeks, so we’ll see what happens as we move through the fourth quarter and then into 2024.

Seth Weber: No, that’s fair. I just — I thought that the acquisition, the margins were high 30s. That was the frame and spirit of the question. But — and then just another follow-up. Sorry if I missed this, but are there any more details on this, the new $1.2 billion contract, when that starts, how that rolls in, is that ratable over the term of the contract or just how we should start thinking about filtering that into our forecasts? Thanks.

Mark Begor: Yes. Remember, that’s an extension of an existing contract. So we’ve had a contract for five-plus years and maybe longer with CMS. It’s certainly larger and it will roll in both at the federal and then at the state level as we go through fourth quarter in 2024 and 2025 and beyond.

John W. Gamble, Jr.: I think it’s an outstanding, as Mark said, largest contract we’ve ever signed. Just as you take a look at over the next five years it doesn’t mean you’re going to — we’ll generate all the revenue up to the maximum amount of the contract. So what it does is gives us the opportunity to work with states and obviously with the federal government to drive increasing revenue under the auspices of the agreement, which is extremely positive, but it is certainly in no way a guarantee of revenue at that level.

Seth Weber: Got it, okay. Thank you guys, I appreciate it.

Operator: Thank you. The next question is coming from George Tong from Goldman Sachs. Your line is now live.

George Tong: Hi, thanks. Good morning. You’ve previously seen evidence of mortgage insourcing of their verification needs within EWS. Can you provide an update on some of those trends and in-sourcing activity outside of the mortgage vertical?

Mark Begor: So George, I’m not sure what you mean by in-sourcing or I think you used the terms we provided evidence. Are you referring to our comments in July about the manual work we were doing for customers that was where we did not have records?

George Tong: No, it’s where mortgage originators because volumes are down so much and because they apparently had so much time on their hands they were just doing it themselves rather than…

Mark Begor: And that was the discussion we had back in July, and it was around where we were doing the manual efforts for our customers and a very small operation in Iowa, where we did not have the records. And we talked about the fact that I was moving in house. We haven’t seen any evidence of mortgage originators shifting from using our instant solution to doing it themselves. So that has not been a dialogue from Equifax.

George Tong: Got it. And assuming that the same holds true outside of the mortgage vertical.

Mark Begor: Yes, for sure. That’s how we’re growing our business because they’re using more of our solutions. We deliver productivity and we deliver speed and accuracy. So that’s fundamental. We see no trends in any of the verticals of where they’re going back to manual what you’re seeing in the business. That’s how we’re delivering the double-digit growth in the quarter and the double-digit growth we expect in the fourth quarter of — one of those levers is more conversions of existing manual effort to using our instant solution.

George Tong: Got it, thank you for that. And then sticking with EWS. Workforce Solutions, non-mortgage, nongovernment, can you discuss some of the trends that you’re seeing there and the sensitivity of customers to pricing trends in the Verifications business?

Mark Begor: Yes. Do you want to talk about talent or exclude talent from that, too?

George Tong: Focus on verifications.

Mark Begor: Well, okay. So you’re talking about like in — and you want to leave mortgage out and focus on card and P loans and auto or do you want to talk mortgage to, I’m just trying to figure out which part of verification you want to cover.

George Tong: Yes, non-mortgage, non-government.

Mark Begor: Non-mortgage, nongovernment talent.

George Tong: Yes. Talent, I guess.

Mark Begor: Yes. So we haven’t seen sensitivity to our customers around pricing in any of those verticals. Because of the value that it delivers, you got to be obviously clear that we’re balanced around pricing, but the customers are using our solution because of the productivity and accuracy and then the instant access to the information as well as the scale of the data set. We didn’t talk much on the call about our ability to continue to add records. And we’re approaching 70% of nonfarm payroll and over 50% of kind of working Americans, including 1099 and income-producing Americans, including pension, that data set is super valuable in all those verification markets. And — as you know, we also have a big focus on adding new products, which is exhibited by the Vitality Index, which a lot of that vitality — actually, most of that vitality is in verification, is really delivering new solutions that help our customers expedite or complete the transactions using our Instant data.

John W. Gamble, Jr.: And talent, I know we’ve said this many times, no one likes price increases. But for example, in talent, one of the things we do in other segments as we provide incentives for people to be able to get better pricing from us by moving to top of waterfall, or by selling additional products to drive growth across the broader sweat — I’m sorry, broader suite of our entire group of products that’s talent solutions like our education solutions and other solutions, and we’re launching now products that support health care directly. We have staffing products. We have other products that allow people to get better pricing from Equifax while helping us drive volumes through the system. So again, we — just like we don’t like price increases, we know no one likes price increases, but we try to be balanced, and we try to structure them so that people have the opportunity to purchase the products that they want at price points that are effective for them.

George Tong: Got it, thank you.

Operator: Thank you. Your next question is coming from Heather Balsky from Bank of America. Your line is now live.

Heather Balsky: Hi, thank you for taking my question. I wanted to touch on the cloud migration. So first part, it sounds like it’s lagging a little bit from what you said last quarter. I’m curious if you can help us kind of understand what’s going on with that transition and where, I guess, the headwinds have been? And then with regards to your plans with the transition, when do you think we could start seeing the benefits of that on the USIS side? Thanks.

Mark Begor: Yes. Look, cloud transformations are hard. This has been super complex and the most complex cloud transformation that we’re executing is in USIS given the age of the legacy infrastructure and formats that we had. And we’re clearly a few months behind, but we can see the finish line in completing it. As we said earlier, we’re migrating large customers, as we speak, in the fourth quarter. Those will continue in the first quarter, and we’d expect to be complete with USIS as well as many of our international platforms in the early parts or first half of 2024. And that’s a big pivot point, as you point out. When are we going to start seeing the benefits? We’re starting to see it. And what we saw in EWS is what we would expect to see in USIS.

And we talked earlier about EWS’ ability to drive new product rollouts at a very rapid pace, well above our 10% goal at the 20% plus. We would expect USIS to grow their vitality index, which today is south of 10 and move towards 10. And I think we mentioned they’ve grown their vitality about 100 basis points. We also mentioned, and we’ve talked about it on calls really for the last four years, but in the last couple of calls, that in USIS in particular, because of the ability to deliver always-on stability, the ability to have faster data transmission and then obviously leveraging our differentiated data, we do expect in USIS to get some share gains. And that really comes forward, where we move from a tertiary position to a second or primary position.

And we had one large FI in the U.S., which is where USIS is, obviously, that’s making that move with us because of the cloud. So we would expect more of those to come forward as we complete the cloud in 2024 and then really between share gains and new product rollouts that to help drive USIS’ growth rates in 2024 and 2025 and beyond.

Heather Balsky: And can I ask a follow-up. Just when you talk about share gains, how should we think about it, are you taking business from other creditors or is it expanding the wallet and benefiting that way?

Mark Begor: No. When you talk about share gains, it’s what you would think a share gain is, is where we’re moving from secondary to primary or tertiary to secondary because of the cloud. And having the most advanced technology, we think, is an advantage. That’s one of the reasons we embarked on this is at our gut, we believe, to be a great data analytics company, a great technology company. And when you overlay the digital macro of our customers doing the vast majority of their transactions with their consumers online, you have to delivered 99 [ph] to stability. You can’t do that in the legacy environment. You can only do with cloud, and you have to have that for data transmission. So we think that’s going to advantage Equifax going forward.

And then you lay on top of it, you’d be able to roll out new solutions more quickly and more of them. That’s going to be advantaged to Equifax to become a more important partner that will drive us up from those secondary positions that could be 20% or 30% of the volume to the primary positions, which could be 60%, 70%, 80%. And that’s really what we have in front of us from the cloud investment, and we would expect those benefits to roll the USIS. And one last point that we mentioned is getting USIS cloud native will also allow us to do more between EWS and USIS. That was hard pre-cloud in two legacy environments with different data sets that are in different data environments. As you know, we went to a single data fabric and having them both in the cloud, that’s going to be another gear for us going forward to have data combination solutions between USIS and EWS that was really hard to do before.

And of course, only we can do that between credit data and the other differentiated data in USIS in combination with the income and employment data that’s really only Equifax.

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

Trevor Burns: Yes, it’s Trevor Burns. If you have any follow-up questions, please reach out to me and Sam. Otherwise, have a great day. Thank you.

Operator: Thank you. That does conclude today’s teleconference and webcast. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.