Equifax (EFX) Q1 2026 Earnings Transcript

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Date

Tuesday, April 21, 2026, at 8:30 a.m. ET

Call participants

- Chief Executive Officer — Mark Begor

- Chief Financial Officer — John Gamble

- Vice President, Investor Relations — Trevor Burns

Full Conference Call Transcript

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

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

All references to EPS, EBITDA, EBITDA margins and cash conversion are references to non-GAAP measures. These non-GAAP measures are detailed in reconciliation tables, which are included with our earnings release and can be found in the Financial Results section of the Financial Info tab at our IR website. Now I'd like to turn it over to Mark.

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

USIS Mortgage also benefited from stronger revenue growth related to its new wins in pre-approval products driven by our TWN Indicator solution. These mortgage customer wins are a good proof point that our differentiated TWN Indicator solutions are resonating with mortgage customers. We also expect customer share gains this year in card, auto and P loan as we drive TWN indicator deployment more broadly. As a reminder, we are offering the TWN indicator as well as our cell phone utility and Pay TV attributes at no cost in mortgage to drive share gains. Organic diversified markets constant revenue dollar growth grew almost 6% in the quarter, consistent with our guidance.

This was principally driven by strong broad-based execution in Workforce Solutions. Importantly, first quarter EBITDA of $477 million was up 13% with an EBITDA margin, excluding FICO of 31.2%, up a strong 80 basis points and a very strong 110 basis points above the midpoint of our February framework. The 80 basis point expansion versus last year in EBITDA margin was both above our 75 basis point target for the year and 30 basis points above our long-term 50 basis point framework. The strong EBITDA margins were driven by strong operating leverage, mortgage flow-through and AI-driven cost productivity. Equifax reported EBITDA margins were 29% in the quarter.

EPS at $1.86 per share was also up a very strong 22% and $0.18 above the midpoint of our February guide. As a reminder, first quarter EBITDA margins and EPS are lower than the remainder of the year, primarily due to a large percentage of our employee equity plan expenses being recognized in the quarter. We returned $327 million to shareholders in the quarter, including repurchasing 1.3 million shares or about 1% of shares outstanding for 260 million to take advantage of a weaker Equifax stock price. And last month, we increased our quarterly dividend by 12% to $0.56 per share. Equifax paid $67 million of dividends in the quarter.

We continue to expect strong free cash flow of over $1 billion in 2026 with a cash conversion over 100%, which will deliver capacity of approximately $1.5 billion for bolt-on M&A and return of cash to shareholders while maintaining strong leverage levels. The team also continued to execute very well against our EFX2028 strategic priorities in the quarter by leveraging EFX.AI-based solutions built on our cloud-native infrastructure to drive innovation, new products and growth. In the first quarter, our Vitality Index of 17% was at record levels and reflects the focused execution of our teams in driving customer-focused growth through accelerated innovation based on advanced EFX.AI, leveraging our proprietary data assets.

As a reminder, we added over 40 EFX.AI-based patents in 2025 and 10 more AI-based patents in the first quarter for a total of 400 pending or granted AI-based patents as we continue to invest in differentiated explainable AI capabilities at Equifax. In the middle of the first quarter, we saw strength in diversified markets, U.S. credit and mortgage activity as overall economic activity remained robust, inflation expectations moderated in interest rates decline. In March, the Iran conflict drove market uncertainty and higher interest rates, and we saw a weaker overall U.S. transactional activity from higher interest rates impacting mortgage and, to a lesser degree, auto and banking. Broadly, the U.S. consumers is resilient even in these uncertain times.

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

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

We expect strong execution from EFX.AI-driven new products and customer share gains to allow us to deliver at the levels consistent with our February framework. We also expect to deliver strong full year margin expansion, excluding FICO of 75 basis points from operating leverage of strong top line growth, higher margin new products and AI-driven productivity. The 75 basis points is 25 basis points above our 50 basis point long-term margin framework. Turning to Slide 5. Workforce Solutions revenue was up over 10% and better than our expectations. Verifier revenue was up a strong 14% with diversified markets revenue growth of 14%, which is a great start to the year.

Within diversified markets, government had a very strong quarter, building off their fourth quarter performance with revenue up mid-double digits from continued strong state-level penetration. We expect government revenue in the second quarter to be about flat sequentially against a very tough comp from the SSA contract win last year and timing of state contract activations. We continue to see strong momentum in government from OB3 and the big $5 billion TAM that they operate in. Talent Solutions revenue was up almost 10% in the quarter. This is the second consecutive quarter of high single-digit revenue growth in a challenging white collar hiring market.

In February, we discussed weaker hiring volumes in January that have begun to improve later in the quarter. Despite the overall weaker hiring macro in the first quarter, Talent Solutions continued to outperform their underlying markets, driven by client penetration, higher hit rates from record additions, pricing and product penetration, including data incarceration and education solutions. The team is doing a great job delivering new solutions to the market, enabling employers to make the right hires with speed and confidence. EWS mortgage revenue was up a strong 14% in the quarter from better-than-expected volumes, new products, including TWN Income qualified for mortgage, record growth and pricing.

Consumer lending continues to perform very well with revenue up strong mid-double digits from double-digit revenue growth in P loans and auto. This is the seventh consecutive quarter of double-digit revenue growth in these verticals. Consumer lending is increasingly becoming a larger portion of Verifier revenue. Workforce Solutions EBITDA margins of 52.3% were very strong and up 200 basis points versus last year from operating leverage from higher revenue growth and AI-driven productivity, while continuing to invest in new products, government and record additions. TWN record additions continue to be very strong again in the first quarter with 211 million active records, up 11% and 120 million total current records, up 9%, which represents 105 million unique SSNs.

The record growth drives higher hit rates and revenue growth and outperformance against underlying markets across our EWS Verifier verticals. In addition to payroll provider partnerships, EWS continues to expand relationships outside of the traditional payroll processing space, including HR software companies to obtain additional sources of income and employment data. We have a long runway for record growth against 250 million income-producing Americans. Turning to Slide 6. We remain energized about the mid- and long-term growth opportunities for EWS government at both the federal and the state level in meeting new federal requirements regarding accuracy of income validation in Medicaid and SNAP as well as work, education and community engagement requirements and Medicaid benefits.

We are seeing strong interest with our pipelines for new and existing expanded government services up over 2x versus last year. As is typical in government, we are seeing some timing issues in new deal closures and activations as states-managed technology implementations and challenging budget frameworks. We continue to expect to see the benefit of the new OB3 opportunities later in '26 and in '27 and beyond. As state agencies implement required validations of expanded work requirements and increased redeterminations for certain Medicaid populations and take actions to reduce SNAP error rates, Equifax is serving as a key adviser leveraging our differentiated income and employment data to drive speed, accuracy and productivity.

Our new products such as continuous evaluation for SNAP built using EFX.AI that we launched in the first quarter have already delivered strong results for a few states by identifying errors within their beneficiary population. We also see expanding opportunities with multiple federal agencies in support of their focus on reducing improper payments. Given our strong value proposition from TWN on speed of social service delivery, case worker productivity and accuracy of income verifications, we are uniquely positioned with our differentiated TWN data assets and new solutions to help state agencies increase efficiency and strengthen program integrity, particularly with SNAP and CMS. EWS has significant opportunities for long-term revenue growth supporting government programs and their big $5 billion TAM.

Turning to Slide 7. Before discussing USIS results, I'd like to welcome David Smith, our new USIS President, to the team. David's broad consumer finance experience, proven executive leadership, customer focus, innovation capabilities and regulatory depth will be a big asset for USIS as they drive innovation and revenue growth for their customers. It's great to have David on the Equifax team. In the first quarter, USIS revenue was up a very strong 21% and 8% excluding FICO, driven by significant mortgage outperformance. The 8% growth is strong and at the high end of our 6% to 8% long-term framework for USIS. USIS mortgage revenue was up 60% and up a strong 24% excluding FICO and better than our expectations.

USIS saw meaningful share gains in mortgage pre-approval, soft pull products with our new TWN Indicator, contributing to mortgage revenue outperformance in the quarter. And as mentioned previously, USIS saw increased mortgage activity in the middle of the quarter before rate increases from the Iran conflict reduced activity over the past 6 weeks. USIS diversified markets revenue grew 3% in the quarter and were slightly below our expectations with B2B up 2% and B2C up a strong 9%. While B2B delivered low single-digit growth rates, core online auto and FI transaction revenue delivered solid mid-single-digit growth. Off-line batch was about flat, principally related to a tough comp due to the strength in offline batch jobs last year.

We did not see changes in customer marketing or risk management behavior in the quarter. And we expect USIS diversified markets revenue growth to be up mid-single digits in the second quarter. USIS EBITDA margins were 30.3% in the quarter, excluding FICO, USIS EBITDA margins were 37.9% and down slightly compared to last year. Absent some onetime costs incurred in the quarter, margins would have grown at levels consistent with our expectations. We continue to expect USIS EBITDA margins ex FICO to be almost 40% in the year up over 75 basis points versus 2025. Turning to Slide 8. As a reminder, we make no margin on the sale of FICO scores.

FICO Mortgage Scores revenue is about 50% of the USIS mortgage revenue and 6% of total Equifax revenue, delivering zero margin. To be conservative, our 2026 framework continues to assume Equifax will calculate and sell only FICO scores this year, and there will be no vintage con