Equifax Inc. (NYSE:EFX) Q3 2024 Earnings Call Transcript

Equifax Inc. (NYSE:EFX) Q3 2024 Earnings Call Transcript October 17, 2024

Operator: Greetings, and welcome to the Equifax Inc. Third Quarter 2024 Earnings Conference Call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Trevor Burns, SVP, Head of Corporate Investor Relations. Thank you. You may begin.

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 and Events tab at our Investor Relations website. During the call, we will be making reference to certain materials that can also be found in the presentation section of the News and Events tab at our IR website. These materials are labeled 3Q 2024 earnings conference call. Also, we will making uncertainty forward-looking statements including fourth quarter and full year 2024 guidance as well as certain 2025 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 2023 Form 10-K and subsequent filings. We will also be referring to certain non-GAAP financial measures, included in adjusted EPS and adjusted EBITDA, which will be adjusted for certain items that affect the comparability of our underlying operational performance. These non-GAAP measures are detailed in reconciliation tables, which are included in our earnings release and can be found in the Financial Results section of the Financial Info tab at our IR websites. In the third quarter, Equifax incurred a restructuring charge for cost reduction actions aligned with the completion of the migration of significant data exchanges and applications in the United States and Canada in certain countries in Latin America to the Equifax Cloud as well as cost taxes to streamline our workforce globally.

These charges totaled $42 million and are expected to be — and expected to deliver ongoing savings when completed in early 2025 of over $70 million a year. We expect to generate greater savings as we complete cloud migration in Europe, the remainder of Latin America and Brazil and Australia and New Zealand, principally over ’25 and ’26. Now I’d like to turn it over to Mark.

Mark Begor : Thanks, Trevor and good morning. Before I cover our strong third quarter results, I want to update you on the strong progress of our cloud transformation. In the quarter, USIS completed the migration onto the cloud data fabric of the remaining customers and services for their consumer credit and telco and utilities exchanges, which is a huge milestone. Along with EWS, the work number exchange, which we completed migrating to the Equifax Cloud over two years ago, we now have our three largest data exchanges in the new Equifax Cloud. As of the end of September, we have about 80% of Equifax revenue in the Equifax Cloud and expect to approach 90% of our revenue in the Equifax Cloud by year-end. The cloud migrations have been a huge effort across Equifax over the past four plus years, requiring a ton of focus by the entire Equifax team.

We expect to have a significant competitive advantage as we fully deploy our new cloud capabilities and pivot from building to leveraging the cloud in 2025 and beyond that will allow us to fully focus on customers’ growth, innovation, new products and AI. Leaving the USIS consumer and telco and utility migrations to the Equifax Cloud allowed us to begin decommissioning legacy on-prem systems and software in USIS in the third quarter supporting our goal of cloud spending reductions in 2024, which expand our operating margins and are lowering the capital intensity of our businesses — our business in 2025 and beyond. In the third quarter, we also made substantial progress in our international technology transformation activities with Canada completing migration of all customers off of their consumer and commercial credit exchanges onto the new EFX Cloud Data Fabric.

This is another big accomplishment for the international team with cloud migrations in Argentina, Chile and the Dominican Republic completed earlier in the year, adding to Canada’s completion a few weeks ago. Our international cloud migration efforts will continue in ’25 and ’26, resulting in additional cloud savings as those migrations are completed. It is energizing to be approaching the finish line of our cloud transformation. We are entering the next chapter of the new Equifax as we pivoted from building the new Equifax Cloud to leveraging our new cloud capability to drive our top and bottom line. Turning to Slide 4. We had a strong third quarter with reported revenue of $1.42 billion, up 9% and at the top end of our July guidance. With organic constant dollar revenue up 10%, which is at the top end of our long-term growth framework.

Adjusted EBITDA margins at just under 33% were in line with our expectations and adjusted EPS of $1.85 per share was the top end of our July guidance. Our global non-mortgage businesses, which represent about 80% of total revenue in the quarter had strong 10% constant currency revenue growth which was in line with our expectations. Non-mortgage organic constant currency revenue growth was 8% in the quarter. The strong non-mortgage performance was driven by 9% growth in EWS and with very strong 19% non-mortgage growth in EWS Verifier, led by very strong 29% growth in government and talent that was up over 9% in EWS. USIS non-mortgage revenue growth of almost 5% was stronger than our expectations, principally from our consumer business and financial marketing services, our off-line batch business.

International delivered just under 18% constant dollar revenue growth and strong 12% organic growth, led by continued strong growth in Latin America and Europe. Total U.S. mortgage revenue was up 17% in the quarter and above our July guidance. U.S. mortgage revenue was 20% of Equifax revenue in the quarter. In late September, as mortgage rates declined to just over 6%, we saw modest mortgage inquiry activity increases. We believe this improvement was likely led by mortgage refi activity off the lower mortgage rates. New home purchase activity appears to have remained at the lower levels we’ve been seeing throughout 2024, reflecting continued low home inventory levels elevated home prices impacting affordability and prospective homebuyers waiting for further mortgage rate reductions.

As mortgage rates increased in early October to over 6.6%, we have seen mortgage activity reduced to levels closer to what we saw in July and August. John will cover our expectations for mortgage activity in the fourth quarter shortly, but we continue to believe that activity will improve towards 2015 and 2019 levels as mortgage rates come down in the future. In the third quarter, the growth in mortgage revenue was driven principally by USIS where mortgage revenue was up a strong 36% and slightly above our expectations. This strong growth was again driven by the benefit of strong vendor pricing actions and the performance of our new mortgage pre-qual products. The lower mortgage rates we saw in late September did drive a small increase in mortgage application activity, which benefited USIS in the quarter.

EWS mortgage revenue returned to growth with revenue up 4% and was also slightly better than our expectations. As a reminder, EWS mortgage inquiry volumes lagged USIS credit inventory volumes as credit is pulled earlier in the mortgage application cycle than income and employment, which is typically pulled in the middle and of course, the closing of the mortgage application. USIS typically sees the benefits of mortgage shopping behavior earlier and to a greater extent than EWS. As a result, EWS did not see the same level of incremental inquiry volume as USIS did from the slight increase in mortgage activity that occurred in late September. EWS mortgage revenue exceeded twin inquiry volume by about 9.5% in the quarter, up a very strong 300 basis points sequentially from second quarter, principally from strong twin record growth.

Equifax had another strong quarter of new product innovation with a VI or Vitality Index of 13%, above our 10% guidance for the year and our long-term framework of 10% Vitality. We saw strong broad based new product rollouts with double-digit growth in EWS and International and a VI of 9% in USIS, which was up 100 basis points sequentially from the second quarter. We expect our NPI revenue to grow — revenue growth to remain strong and are increasing our 2024 Vitality Index guidance to 11%, up 100 basis points from our prior framework for 2024, as we further leverage our new EFX Cloud capabilities in EFX.AI to drive new products into the marketplace. Turning to Slide 5. Workforce Solutions revenue was up about 7.5% and slightly below our July guidance, principally due to lower-than-expected employer services revenue.

Non-mortgage verification services revenue, again, delivered very strong 19% growth, which was in line with our expectations. Government had another outstanding quarter with very strong 29% revenue growth from continued penetration in their large $5 billion government TAM. Government revenue grew sequentially from strong growth in state penetration and insights incarceration data solutions. We expect continued strong sequential growth — sequential government revenue growth again in the fourth quarter. Growth rates in the fourth quarter are expected to continue to show strong double-digit performance, but will be lower than third quarter levels, principally due to comping against very strong growth we saw last year. We expect our government vertical to continue to deliver very strong double-digit growth in the future and outgrow both Equifax and EWS.

Talent Solutions revenue was up a strong 9% in the quarter. Talent Solutions continues to benefit from their new total verified data hub, which includes trended employment data as well as insights incarceration, education and licensing and credentialing data. Based on data through August, EWS Talent Solutions outperformed the BLS white-collar hiring markets by approximately 18 percentage points from additions of records, the rollouts of new products and penetration into the talent vertical during the quarter. We did see somewhat weaker volumes late in September, which we have assumed will continue and is expected to impact talent revenue growth in the fourth quarter. EWS mortgage revenue was up 4% in the quarter and slightly better than our July guidance.

Twin inquiries in the third quarter were down about 5.5% and slightly better than our July guidance. Total EWS mortgage revenue outperformed Twin inquiries by about 9.5% and again over 300 points sequentially from strong record growth during the quarter. We expect strong growth in twin records to benefit mortgage and our other EWS verticals again in the fourth quarter. EWS consumer lending revenue was up 16% from strong double-digit growth in P loans and high single-digit growth in debt management and auto. Employer Services revenue was down 19% in the quarter and weaker than we expected. Compared to last year, employer declined principally from lower ERC revenues and to a lesser extent, lower I-9 and onboarding revenues as the slower white-collar hiring we saw in late September impacting talent solutions also impacted our onboarding business.

There was also some onetime post-COVID related project revenue that benefited onboarding in the third quarter of last year. Third quarter I-9 and onboarding revenue was consistent with the first and second quarters, and we expect fourth quarter employer revenue to be down mid-single digits as the ERC comparisons mitigate. Workforce Solutions adjusted EBITDA margins were 51.6% and were slightly above our expectations and continued to be very strong, reflecting strong Verifier revenue growth and continued strong cost controls. Turning to Slide 6. The EWS government team continued their very strong performance in the quarter with revenue up 29%. The government team continued to focus on penetration of our unique VOI and VOE solutions for social services at both the federal level and across the state agencies.

In the quarter, the EWS government team signed an extension to their SSA redetermination contract to provide income and employment data for individuals applying for or currently receiving social security disability income and supplemental security income benefits with a potential contract value of about $500 million over the next five years. EWS services support program integrity for the SSA as well as reducing the administrative burden for consumers seeking these important services. Chad and the government team are on offense driving penetration in the big $5 billion government TAM. Turning to Slide 7. EWS had another outstanding quarter of new record additions. A few weeks ago, we announced a new strategic partnership with Workday to provide verification services to Workday’s large customer base.

Later in the fourth quarter, we’ll begin rolling out the free value-added EWS income and employment verification services to Workday’s U.S. customers and expect to onboard a sizable number of new records through 2025 from this new strategic relationship. Also in the quarter, we signed agreements with five additional new strategic partners that will contribute over 5 million records collectively to the twin database in the future. Through September, EWS has executed 12 strategic partnerships during 2024 and since the beginning of 2021, EWS has completed 45 strategic partnership agreements. We expect these five new partnerships signed during the quarter to come online and begin generating revenue late in the fourth quarter and substantially in the early parts of 2025.

In the third quarter, EWS added 2 million active records to the twin database, ending the quarter with $182 million active records, up a strong 12% on 134 million unique individuals. EWS now has 3.8 million companies contributing income and employment records to the twin database every pay period, a very strong 40% CAGR since 2020. Total records are now over $700 million and up 11% in the quarter, supporting our trended or historical solutions with about half of Verifier revenue from products, including historical records. At 134 million unique active records, we have plenty of room to grow the twin database towards the TAM of 225 million income producing Americans. Turning to Slide 8. USIS achieved a major milestone in the third quarter, completing the migration to the new Equifax Data Cloud Fabric of both the U.S. consumer credit and our cell phone utility databases.

This big milestone makes U.S. consumer credit, telco and utility data fully available across our new data fabric for use in advanced AI based solutions to enhance our identity and fraud solutions and to accelerate our only Equifax solutions leveraging both EWS and USIS data assets. It also allows our U.S. commercial product and technology teams to fully shift their focus to delivering these new advanced Equifax solutions to customers that will drive new product rollouts and top line growth for Equifax. USIS revenue was up 12% in the quarter and well above the July guidance of up 8.5% and their long-term revenue growth framework of 6% to 8%, despite the continuation of some weakness in the FI and auto end markets. This was driven by both strong performance in non-mortgage revenue as well as stronger mortgage revenue, reflecting the slight increase in mortgage activity that we saw in late September.

Total non-mortgage revenue was up 5% in the quarter and was also well above our July guidance of over 2% growth for USIS. We saw strong double-digit growth in Consumer Solutions and Financial Marketing Services which were offset by a less than 1% decline in USIS B2B online revenue from softer consumer and end market demand, which importantly was up about 300 basis points sequentially. We USIS B2B online saw double-digit growth in insurance and commercial, high single-digit growth in telco and low to mid-single-digit revenue growth in banking and auto offset by declines in third-party bureau sales and identity and fraud. We expect third-party bureau sales to be about flat in the fourth quarter as we lap the weakness that started in late 2023.

Identity and Fraud revenue was also down and weaker than our expectations, principally due to weakness in chargeback management volumes. Payment and transactional identity revenue grew in the quarter from penetration in large strategic accounts identity and fraud is starting to launch their new Kount 360 solutions platform and products, which will help strengthen growth in 2025, as these solutions take hold in the marketplace. Financial marketing services, our B2B offline business was up a very strong 14% in the quarter, reflecting substantial new wins and customer expansion across banking services and payments verticals and as well as continued strong growth in prescreen marketing and our unique IXI wealth data. USIS consumer solutions D2C business had another very strong quarter, up 17%, and from strong double-digit growth in our consumer direct channel and from strong customer acquisition trends.

We expect fourth quarter revenue to grow mid-single-digits as we start comping against very strong D2C growth last year. USIS mortgage revenue was up a very strong 36% and better than our July guidance. Mortgage credit inquiries were up 1% and were also better than our July guidance of down 7%, principally due to the slight increase in mortgage activity that we saw in late September. This was the first quarter of mortgage credit inquiry growth since the first quarter of 2021, which is a big milestone and reinforces for us that the mortgage market is clearly bottomed and poised for recovery in the future. Consistent with the first half, the strong pricing environment along with the strength in our new mortgage pre-qual products also drove the very strong mortgage revenue growth.

At $137 million, mortgage revenue was just under 30% of total USIS revenue in the quarter. USIS adjusted EBITDA margins were 33.9% in the quarter, up 70 basis points sequentially and in line with our expectations from higher-than-expected revenue growth, offset by higher technology costs to complete cloud customer migration activities. With the USIS consumer and our cell phone utility and data cloud transformation is complete, Chad and the USIS team are clearly focused on offense and growth. Turning to Slide 9. International revenue was a very strong 18% in constant currency and up a strong 12% in organic constant currency, excluding the impact of BVS due to continued very strong growth in Latin America and Europe. Europe local currency revenue was up a very strong 9% in the quarter with continued strong 7% growth in our credit and data businesses and 12% growth in our debt management business.

Latin America local currency revenue was up 58%, principally due to the acquisition of Boa Vista with very strong organic growth of 31%, led by 28% Vitality Index from new products in the region during the quarter. And as a reminder, we closed the BVS acquisition in August last year. Canada delivered 1% growth in the quarter, which was below our expectations from a softer economy. I previously mentioned that Canada completed their consumer and commercial credit exchange customer migrations to data fabric a few weeks ago. And similar to the U.S., we expect to see accelerating NPI and revenue growth going forward from the Canadian team. Asia-Pacific revenue returned to growth up 2% as expected. International adjusted EBITDA margins of 27.7% and were up 210 basis points sequentially from strong revenue growth and good cost execution.

Turning to Slide 10. We continue to make very strong progress driving innovation with 30 new products launched in the quarter that delivered a 13% vitality from broad based performances across all of our business units. EWS had very strong third quarter with Vitality Index of 16%, expanding solutions in the government vertical as well as incorporating incarceration education into new talent solutions products. USIS saw continued sequential improvement with a Vitality Index of 9%, up 100 basis points sequentially from the second quarter. We expect USIS to continue to show strong vitality improvement from the cloud completion as they leverage our new cloud native infrastructure for innovation in new products as well as free up their product and technology resources that previously were working on cloud transformation in key verticals such as identity and fraud, commercial and our new mortgage pre-qual products.

International also had strong 11% vitality in the quarter with a strong focus on identity and fraud solutions. We expect strong double-digit vitality in the fourth quarter, leveraging our Equifax Cloud capability to drive new product rollouts and we’re raising our full year Vitality Index guidance from 10% to about 11%, reflecting the strong innovation performance across all our businesses so far in 2024. AI and ML are changing the way we develop our new products in our single data fabric and build higher performing model scores and products for our customers. We are accelerating the pace at which we are developing new EFX models and scores using our advanced AI and ML capabilities in areas such as identity and fraud and consumer loan affordability, it will drive higher performance and predictability.

In the quarter, 100% of our new models and scores were built using Equifax AI and machine learning, which is up from about 89% last quarter and ahead of our 2024 goal of 80% and last year’s 70%. We’re clearly on offense deploying our proprietary EFX AI capabilities that will drive higher performing model scores and products for our customers. Now I’d like to turn it over to John to provide more detail on our third quarter financial results and to provide our fourth quarter framework. Our fourth quarter guidance builds on our strong third quarter performance from new products, penetration, record growth and pricing.

John Gamble : Thanks, Mark. Turning to Slide 11. As Mark discussed, we started to see an improvement in the run rate of USIS credit inquiries in late September as mortgage rates declined to just over 6%. We believe the improvement principally reflected higher refinance activity in late September. New home purchase activity does not appear to have increased meaningfully at this point, likely reflecting continued low home inventory levels, home prices at near all-time highs and respective homebuyers waiting for further mortgage rate reductions. As a reminder, the normal mix of mortgage originations and defined as the average over the 2015 to 2019 period is about 55% purchase and 45% refinance. In the first two weeks of October, we have seen mortgage inquiry volumes for both credit and twin slow versus September as mortgage rates have increased to above 6.5%.

The run rate over the last two weeks of both credit and twin inquiries is relatively consistent with the expectations we had when we provided guidance in July. Consistent with our practice in 2024 and the last several years, our guidance for credit inquiries is based on our current run rates over the last two to four weeks, modified to reflect normal seasonal pattern. This effectively assumes market conditions will continue for the quarter. Our fourth quarter guidance reflects mortgage credit inquiries to be up about 9% versus 4Q ’23 and down 16% sequentially. Calendar year ’24 mortgage credit inquiries are expected to be down about 7%. For the fourth quarter, we expect USIS mortgage revenue to be up over 4% and much stronger than the underlying mortgage market, reflecting both strong performance in mortgage pre-qual products as well as vendor pricing actions.

Our guidance reflects TWN inquiries in the fourth quarter to be up about 6% versus 4Q ’23 and down about 12% sequentially. For the full year, TWN inquiries are expected to be down about 11%. We expect EWS mortgage revenue to be up over 16% in the fourth quarter and much stronger than the underlying TWN inquiries, again, principally reflecting strong record growth in 2024 and as well as annual mortgage pricing that occurs early in the first quarter each year. As a reminder, the fourth quarter is historically seasonally the lowest quarter of the year for both credit and TWN inquiries. For perspective, as we look to 2025, carrying these current run rates with normal seasonality TWN ’25, mortgage credit inquiries would grow versus 2024, up just over 5% for the year and also just over 5% in the first quarter of 2025.

Slide 12 provides the details of our 4Q ’24 guidance. In 4Q ’24, we expect total Equifax revenue to be between $1.438 billion and $1.458 billion, up about 9% at the midpoint. Organic constant dollar revenue growth at the midpoint is about 10% and at the high end of our long-term financial framework. At the midpoint, mortgage revenue is expected to be up almost 30% and non-mortgage constant dollar revenue up over 7%. Equifax 4Q ’24 adjusted EBITDA margins are expected to be about 35.5% at the midpoint of our guidance. The sequential increase in EBITDA margins reflects revenue growth and cost management across Equifax, including the decommissioning of USIS legacy consumer and telco and utility systems and Canada legacy consumer and commercial systems.

This is our first ever quarter with EBITDA over $500 million. This would be a very strong performance. Adjusted EPS in 4Q ’24 is expected to be $2.08 to $2.18 per share, up 18% versus 4Q ’23 at the midpoint. The midpoint of our fourth quarter revenue guidance is about $15 million below the levels implied by the guidance we provided in July. The primary driver is lower revenue in EWS and in the employer business driven by lower revenue and onboarding as well as ERC. And this is consistent with the factors that impacted the third quarter and also the slower U.S. hiring Mark referenced earlier that is impacting both onboarding and talent solutions. We believe we are centered at the midpoint of our guidance. Business unit performance in the fourth quarter is expected to be as follows: Workforce Solutions revenue growth is expected to be up about 10%.

Non-mortgage revenue should be up about 8% year-to-year. Verifier non-mortgage revenue growth will continue to show strong double-digit growth, although below the levels we saw in the third quarter. Verifier non-mortgage growth will again be driven by strong growth in government and talent. Government revenue growth is expected to grow sequentially and year-to-year. However, year-to-year growth will be below the levels we have seen year-to-date in 2024, as we lap very strong 4Q ’23 revenue growth in government. Both Verifier mortgage and non-mortgage revenue growth should benefit from the continued strong growth in TWN records we are seeing throughout 2024. EWS adjusted EBITDA margins are expected to be up slightly from the third quarter at about 52%.

USIS revenue is expected to be up over 10% year-to-year. Non-mortgage revenue should be up about 3% year-to-year, slightly lower than the third quarter, principally due to lower growth in USIS D2C and as they begin to lap periods of strong growth that started in 4Q ’23 and financial marketing services, which is expected to be about flat in the year-to-year. Adjusted EBITDA margins are expected to be over 38%, up very strong sequentially as USIS decommissions legacy consumer and telco and utility systems. International revenue is expected to be up over 9% in constant currency. EBITDA margins are expected to be over 32%, up very strong sequentially, reflecting both revenue growth and good cost control. Slide 13 provides the specifics of our 2024 full year guidance.

Constant currency revenue growth is expected to be about 10%, with organic constant currency growth of 8% and within our 7% to 10% long-term organic growth framework. Total mortgage revenue is expected to grow about 12.5% despite the 7% decline in U.S. mortgage credit inquiries. Non-mortgage constant dollar revenue is expected to grow almost 10% with organic growth of over 7%, led by very strong non-mortgage growth in our Workforce Solutions verification services business and in international. This is within our long-term framework. FX is about 180 basis points negative to revenue growth. Adjusted EPS is expected to be $7.30 per share and adjusted EBITDA margins are expected to be 32.4%. Adjusted EPS and EBITDA are both expected to grow 9% in 2024, all at the midpoint of our guidance.

Capital expenditures in the third quarter are $123 million, down $8 million sequentially. We expect fourth quarter capital expenditures to be just over $105 million, as USIS has completed customer migrations to the U.S. consumer data fabric and Canada has completed customer migrations to their consumer and commercial data fabric. Capital expenditures for 2024 are expected to be about $485 million, which is a year-to-year reduction of about $100 million. As we accelerate our cloud migrations, we are seeing increasing levels of depreciation and amortization. In 2024, D&A, excluding acquisition amortization, is expected to be about $410 million, up about $50 million versus 2023. In 2025, we expect D&A to increase slightly above the $50 million increase we saw in 2024.

As of the end of the third quarter, our leverage ratio was 2.8x, and we expect to further reduce leverage in the fourth quarter. We believe this leverage is nicely within the levels required for our current BBB, Baa2 credit ratings. Turning to Slide 14. And as we discussed in July, the U.S. mortgage market is on the order of 50% below its historic average inquiry levels. As the mortgage market recovers towards historic norms that presents — represents over $1 billion of annual revenue opportunity for Equifax in 2025 and beyond at current product pricing, TWN records contracted and products. We expect this opportunity to increase as we enter 2025 from pricing actions, TWN records and new products. At current mortgage gross margins, this over $1 billion of incremental mortgage revenue would deliver on the order of $700 million of EBITDA and $4 per share that we would expect to move into our P&L as the mortgage market returns to normal levels in 2025 and beyond.

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

Mark Begor : Thanks, John. Turning to Slide 15. An important part of our long-term financial framework is delivering strong free cash flow and returning cash to shareholders. We’re adding a new cash conversion goal for our long-term framework of 95% or greater, with cash conversion defined as free cash flow as a percent of adjusted net income. During the cloud technology transformation over the last four years, we saw elevated cloud capital expenditures which impacted our free cash flow and cash conversion. Our cash conversion ratio is expected to improve significantly in 2024 to about 80% and as we reduce CapEx and drive higher relative levels of free cash flow. We expect our free cash flow to accelerate in 2025 post our cloud investments as CapEx reduces to 6% to 7% of revenue, supporting cash conversion of over 95%, while strong margin expansion and growth in net income from our underlying operating leverage and cloud cost savings.

This strong cash generation positions Equifax to continue to invest in growth with CapEx and bolt-on M&A and begin returning excess free cash flow to shareholders from dividend growth and share repurchases in 2025 and beyond. It’s energizing to be approaching this important milestone for our investors as we complete the new Equifax Cloud. Turning to Slide 16. We are entering the next chapter of the new Equifax as we pivot from building the new Equifax Cloud to leveraging our new cloud capability to drive our top and bottom line. We are convinced that our new Equifax Cloud differentiated data assets in our new single data fabric leveraging Equifax.AI and machine learning and market leading businesses will deliver higher revenue growth, expanded margins and accelerating free cash flow.

In the middle of Slide 16, we’ve added the new cash conversion metric to our long-term growth framework. And our long-term growth framework, as you know, is made up of strong revenue growth of 7% to 10% and is led by very strong 13% — 15% EWS revenue growth. EWS is clearly our largest and fastest-growing business led by strong double-digit non-mortgage verification services revenue growth from our government and talent solutions verticals. As a part of our long-term financial framework, we expect to add 1 to 2 points of revenue growth from bolt-on M&A aligned around strengthening the core of Equifax. Our bolt-on M&A strategy will continue to be focused on strengthening Workforce Solutions adding differentiated data assets across Equifax and growing in the big $20 billion identity and fraud space.

As John covered a few minutes ago, the pace of mortgage market recovery will add to our revenue growth as the market returns to normal 2015 to 2019 levels in 2025 and beyond. The mortgage market recovery will also drive our margins and free cash flow from the very high incremental margins from this incremental revenue that we expect to come into Equifax’s P&L in 2025 and beyond. We expect operating leverage off our strong 8% to 12% revenue growth to generate 50 basis points of annual EBITDA margin expansion and very strong cash conversion of 95% and above. As margins improve, CapEx declined to 6% to 7% of revenue with the completion of the Equifax Cloud transformation and leverage continues to progress towards 2.5 turns by year-end. We expect our free cash flow to accelerate and that will enable us to start returning cash to shareholders in 2025 and beyond through growing the dividend in a multiyear share buyback program.

We are energized to be pivoting from building the Equifax Cloud over the past four years to leveraging our new industry leading cloud and EFX.AI capabilities to drive revenue growth, margin expansion and free cash flow. Wrapping up on Slide 17. Equifax delivered another strong quarter with 11% constant dollar revenue growth, which was at the upper end of our 8% to 12% long-term revenue growth framework work, reflecting the power and breadth of the Equifax business model, strong execution against our EFX 2026 strategic priorities, the resiliency of the U.S. consumer and the strength of our customers. Our very strong 19% EWS non-mortgage Verifier revenue growth, 12% EWS active record growth, strong 13% broad based Vitality Index give us momentum as we enter the fourth quarter and move towards 2025.

And as we talked earlier, we took another big step in the quarter towards cloud completion with 80% of our revenue now in the Equifax Cloud, which will enhance our competitiveness, drive innovation and new product development. Entering 2025 with 90% of Equifax revenue in the new Equifax Cloud is a really big milestone, so the team can move towards fully focusing on innovation, new products powered by EFX.AI, customers and growth. I’m energized now more than ever about the future of the new Equifax that will deliver strong 8% to 12% revenue growth, 50 basis points of margin expansion lower capital intensity and expanding free cash flow to invest in Equifax and add bolt-on M&A. And in the future, growing our dividend and positioning to start a multiyear stock buyback program in 2025 and beyond.

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

Q&A Session

Operator: [Operator Instructions] Our first question today is coming from Manav Patnaik of Barclays.

Manav Patnaik : I just had a question around kind of the guidance philosophy. So in the prior years, every time you had lowered guidance, I guess, it was mainly due to the mortgage weakness, so we all got wrong but there were some other non-mortgage areas that were weak. And this year, even though mortgage is getting better, you’re still lowering guidance. So I’m just curious, is there something about the philosophy in not being conservative? Or is it execution? I was just hoping you could help us clear that up.

Mark Begor : Yes, Manav. So there’s no change in our philosophy. Our goal is to be super transparent with you and our investors about what we’re seeing in the marketplace and what the growth levers are and where we’re taking the company. We work to provide guidance that we know how to meet and beat. That’s our — no change in that goal. I’ve been here six years. And I think as you point out the mortgage decline in ’22 and ’23 was really quite unusual. But if you look around that, I think we’ve been pretty consistent about meeting and beating. And if you look through our non-mortgage performance during that ’22 and ’23 time frame, we think we were pretty consistent. With regards to the third quarter, I think — I don’t think that’s your question.

I think it’s more around the fourth quarter. And we highlighted in our earlier comments that there is some volatility in the marketplace that we’re certainly dealing with in some of our verticals. We’re really pleased with our third quarter performance. We’re pleased with the guidance that we have for the fourth quarter, which is super strong. And as you point out, it’s slightly below the guidance that we had last quarter. principally from the EWS employer business. I think we’ve talked for the last couple of quarters about the impact of the employee retention credits that were really stopped by the IRS earlier this year. We thought there’d be some activity there. There’s none. So that’s obviously impacting that business inside of Workforce Solutions.

And then we also talked over the last couple of quarters about the change the federal government made around work opportunity tax credit and the state’s response to getting that in place, we thought the states would be responding a little bit quicker. They haven’t, which is pushing some of that revenue likely out of the fourth quarter and into 2025, it’s not going to go away. And then to a lesser degree, I think we talked about — I won’t touch mortgage because I don’t think that’s your point. I’ll touch non-mortgage. We talked about some of the slowdowns we saw the background screeners late in September. That was unexpected on our part. I think you’ve seen a number of corporations across the United States announcing layoffs, whether Boeing is 10% or companies like that.

But I think coming into the election, it feels like companies are being a little more prudent about new hiring which is we saw in the background screening volumes late in the month. These are, from my perspective, fairly small impacts when you look at the strong performance in the third quarter and the strong guide we have for the fourth quarter, as John pointed out, in the fourth quarter, we’re going to be in the neighborhood of $500 million EBITDA and over $2 a share, which we’ve never done before. So I think that’s strong performance earlier in the year. I think some questioned our ability to deliver the kind of performance we’ve laid out in the fourth quarter, both from a top line and a margin expansion. I think we’re in that direction, admittedly a bit below that but still very, very strong numbers.

But just really to the point of your question, no change in our philosophy. We want to put out numbers that are super transparent. We’re going to give you what’s behind those numbers. And our goal is to have numbers that we can meet and beat. And that has never changed and it won’t change in the future.

Manav Patnaik : Okay. Fair enough. And just on the tech transformation, I think we’re all looking forward to the benefits that can provide to USIS. Can you give us some maybe early signs or examples of what maybe you did with tech transformations in other divisions that give you confidence that we should see some outperformance outside of just the macros on the USIS side?

Mark Begor : Yes. it’s a great question. We talked about in the last quarter, we did this much on this call, but it’s obvious that USIS was clearly impacted in ’23 and in the — really through the third quarter in many regards around all the effort they had to put in the cloud transformation. Canada is in the same boat. These are big, big projects, very intrusive with our customers. The good news is it’s done. What we’re really encouraged by when we think about USIS, even with that in the second quarter and third quarter, you saw their vitality go up, meaning they were able to start taking advantage of being in the cloud to start moving forward on innovation in new products. That’s going to benefit USIS in the fourth quarter, but really principally in 2025.

And as you know, they increased their vitality in the second quarter, 100 bps and then again in the third quarter, 100 bps. So we would expect them to move towards that 10% vitality as we get into 2025 and which is really going to be a positive. The cost savings, John already talked about, you saw the charge we took that was expected. That’s — we’re executing that, and that’s a real positive for our margins, which we’ve committed to and we’re executing on. And the other benefit is two other benefits actually, we’ll start to see now that they’re in the cloud, as those share gains that we expect to have, we have the close in flight. Those will start showing up in the P&L, some in the fourth quarter, but I think principally in 2025 of being always on and being a cloud-native provider.

And then the last one is one that we’ll talk more about in February during our fourth quarter call and in 2025 is what we’re internally calling only Equifax initiative where we’re focused on solutions that combine TWM, our income and employment data with the credit file to make our credit file more valuable. When we talked on the last call about new solutions that we’re piloting in the marketplace as we speak around a flag on our credit file that someone’s working for mortgage shopping to make our mortgage shopping credit file never valuable, a flag on our auto credit file, same thing that someone is working. That will differentiate our credit file. We think it will drive share gains with our credit file. It should make our credit file more valuable.

And I think as you know, we’re also adding to our credit file solutions, including our differentiated data from DataX, Teletrack and NCTUE, our cell phone utility data. And these are all solutions only Equifax can do. Our competitors don’t have these data assets, so we can strengthen the underlying credit file, which arguably can be commoditized in some solutions and make our product more differentiated. Those are the things that you’re going to see going forward. It’s what we’ve been talking about for four years. The good news is now is we can actually execute on it because we’re in the cloud with USIS. And I can’t really reinforce enough about the impact of the distraction. You could say over the last four years, but your question is around USIS really over the last 18 months, 24 months, of all the efforts that went into complete is really massive technology transformation.

The good news is it’s done. So that whole team now can take all their energy and effort it was balanced between growing the company, rolling out new products, executing our AI solutions and doing the cloud migrations to just focus on growth. And that gives us a lot of energy as we look to the fourth quarter and then as we move into 2025.

Operator: The next question is coming from Kelsey Zhu of Autonomous Research.

Kelsey Zhu : Have you sized the incremental record additions from the Workday partnership? And can you talk a little bit more about the time line for those new records to come online? Is it more towards kind of Q1, Q2 next year? Or is it towards second half of next year?

Mark Begor : Yes. So maybe a couple of points on that. I’ll respond to your specific Workday question, but maybe just make it a little bit wider because Workday is one of many partners we added during the quarter. I think we added a total of six in the quarter. Workday, obviously, a very significant one, a very strategic partnership, but all six of them are. I think we sized that we expect from the other $5 million to something like 5 million records coming on over the coming quarters. It takes time to make those integrations. They’re super complex for really our partners side. You’ve seen very record growth. We’re up 12% in the quarter. So you can see that we’re executing. We talked about the sizable number of partners we added this year as well as last year and over the last couple of years.

And with every partner we have is they add new clients and they’re all growing their business every quarter, if you think about an HR software company or payroll processor, when those new clients come on board, they’re typically boarded to TWN. So there’s growth that’s happening with one of our clients. Most of our clients have records going back to clients we added even two, three, four years ago that we haven’t fully deployed into Equifax, meaning we’re working with them through their technologies through the different databases they have, they’re typically not a single tech stack to bring those records in. So we have a lot of opportunity both with current new partners use Workday and the others we added this quarter as well as those we’ve had over the last couple of three years to add records.

And Workday specifically, we haven’t sized that except to say it’s sizable. I think it’s well known that they’re a very big company and a big partner, and we’re super excited to have that move on board. We expect some records to come on in the fourth quarter, but really the substantial growth from Workday and the other partners we added in the third quarter and those that we expect to add in the fourth quarter to come on in 2020. And I think the other point to remind everyone on the call about, as you know, we talk — tend to talk a lot about our partner record additions, but we also have a very sizable direct record approach where our employer business is adding new clients. And when we bring those new clients on, we offer that free value added evasive income and employment verification and those become records that become a part of Equifax.

And one last reminder, and I think you’re seeing the benefits of that in December last year, we changed the organize in EWS. So we have one leader and one team that is solely focused on record additions from HR software companies from payroll processors for 1,099 records and pension records, so really the whole gamut. So we’ve got a very large focus because you’re seeing that pay off. We’re really pleased that record additions to 12% are way outgrowing our long-term framework for record additions, which are more in the single-digit range is admittedly, we’ve been doing that for five plus years. So we’ve had a lot of really positive momentum there. And I think you know the power of adding a record. The day we add a record, we monetize it across all of our verticals because we’re already getting inquiries for that record because our customers send us every query.

And then the breadth of our ability to monetize is just scale so substantially from even three, four, five years ago when you go across the spectrum from, call it, higher income consumers, mid-market consumers that are doing mortgages and through auto and auto and P loans and cards and then go to the other end of the spectrum, those that are going after social services at the federal and state level is a very — there’s over 100 million people a year that are getting social services and we’ve got a big opportunity to grow there. You’ve seen the growth in Workforce Solutions government vertical that’s been, obviously, impacted positively by record additions. So records are a big focus of ours, and we see a lot of momentum going forward. We still have a lot of records to go after with the 225 million working Americans, there’s close to 100 million of records we don’t have yet.

So that’s why we added resources and people to keep growing this valuable data set.

Kelsey Zhu : Also curious to hear a little more about what’s driving the reacceleration of growth in consumer lending vertical within Workforce Solutions, especially because of against the backdrop of a pretty soft end market. So just curious, is it really to new product launches? Is it the pricing? Is it increased customer penetration? Yes, I appreciate your thoughts on this.

Mark Begor : Yes, it’s really the value of the data set. When you think about consumer lending and I’ll use P loans, you could use auto, the value of someone’s credit score is super important. It’s really, as you know, is a reflection of their past payment behavior of other loans they have and it’s really a prediction where they keep paying going forward. So very valuable. When you add to that someone’s ability to pay, which means their income and their employment, meaning they’re working. Because remember, if you pull a credit report, you have no idea if that individual is actually working today. Did they lose their job last week? Did they retire? What’s changing? So the combination of income in employment from EWS with the credit file is very, very valuable.

And we have increasing numbers of our customers. As you point out, we roll out new products as well as we drive penetration of customers understanding the value of pulling the credit report with income and employment, they can approve more consumers and approve more consumers with lower loss rates. So that’s a really strong combination and very positive for our customers. So that’s what we’re really seeing in the outgrowth of the underlying market. As you point out, there is in some of those verticals, some end user, meaning consumer demand pressures primarily because of higher APRs, particularly in bigger ticket transactions, think about P loans or cards, we have a solution between — by combining credit with income and employment that allows our customers to approve more of those applicants with a higher degree of confidence around their ability to repay the loan when you add the income and employment data to it.

John Gamble : Those segments are also benefiting substantially just by record growth, right? So since records are up over 10% that drives their hit rates higher, so it’s a direct benefit to those segments.

Operator: The next question is coming from Andrew Nicholas of William Blair.

Andrew Nicholas : I wanted to first ask on SSNs really good order. And I’m just curious if there’s anything for us to read into that. It sounds like it was primarily batch. Is that kind of customers thinking about being more aggressive with marketing is that portfolio review? Just help me understand if there’s anything to read into that strength?

John Gamble : Sure. It was a very strong quarter. And stronger than we expect to see when we gave guidance part of it was because we signed — we executed a couple of large transactions with new customers in the payments industry. And we think that’s very important to us, not just in the fact that it delivered a strong quarter, but also because we think it’s an ongoing revenue source, not just in batch but increasingly in our mind. So we’re very excited about the fact that we signed those partnerships and delivered revenue in the quarter, but also we think it bodes very well for us across the payments industry as we continue to grow the use of our data in payments.

Andrew Nicholas : So it doesn’t sound like anything major sort of like a macro read-through perspective, more often?

John Gamble : No, not a read through at all. It was really just great execution by the team on winning new customers and delivering in period.

Andrew Nicholas : And then maybe changing gears a little bit on the mortgage business and the mortgage business within EWS in particular. If I heard you correct, John, you said you expect 16% growth in mortgage there in the fourth quarter on 6% growth in inquiries, 10% outperformance, certainly better than what you saw in the first half, but I think a little bit lower than what you had messaged earlier this year. So just curious about the puts and takes there, what if anything, has changed in terms of record growth relative to your expectations, pricing, new product development, anything like that, that would help bridge that gap?

John Gamble : Look, I think the big thing we were talking about as we started the year, we were expecting very good progression in terms of the outperformance with EWS mortgage that would happen as we went through the year. And I think we saw it consistently every quarter. We saw improvements in second, third and now we would expect to be stronger in the fourth than we were in the third. So we feel very good about that progression. And again, it is driven by records. So record growth has been extremely strong. And given the partnerships that were signed this quarter, and I’m sure more they’ll be signed in the fourth quarter. And then boarding those partnerships, we would expect to see very good record growth again next year.

So I think overall, a really nice job by the team in driving that number back into the long-term framework that we expect, which is around 10%, right? That’s kind of a level we talked about 10% to slightly above 10% as the long-term growth algorithm or the way we should outperform the mortgage market at EWS, and I think we’re back to delivering in that level.

Operator: The next question is coming from Faiza Alwy of Deutsche Bank. Please go ahead. We’ll move on to the next question. Our next question is coming from Surinder Thind of Jefferies.

Surinder Thind : Following up on the mortgage question here. Any color on how important the mix is in terms of the revenue recovery when we think about the $1.1 billion in terms of purchase versus refinance? Do we have to kind of get back to the historical average? Or are there other considerations that we should be thinking of?

Mark Begor : Yes, that really assumes historical averages in that 2015 to ’19 level. As you know, purchase is generally a very large part of the underlying market and it was in that 2015 to ’19 level. That’s super depressed now. As we pointed out, there’s a lack of inventory. People are sitting on those lower interest rate loans and not upgrading from the condo to the three bedroom home with the yard that should. We believe that’s going to loosen up and there’ll be more activity on the purchase side. And then we should see both a combination of rate refi and cash-out refis as rates come down. We saw just that blip, I would call it, for a couple of weeks until the 10-year went up, where I think John mentioned in his comments that the bulk of that increase was rate refi.

So you can see just a very small think about 20, 25, 30 basis points change, some consumers that had taken out mortgages, say, a year or two years ago, at higher rates, and now are looking at picking up that rate arbitrage. So there’s clearly pent-up demand that as rates come down, gives us still a lot of confidence in the framework of that $1.1 billion plus of kind of tailwind in the mortgage market. And I think as John said in his comments, just as a reminder, we’ll reset that number in February next year, but the $1.1 billion is based off today’s pricing, meaning 2024, ‘24 product mix, ‘24 record hit rates. That will be a higher number likely when we get to 2025 and kind of reset what that opportunity is going forward in 25, 26, 27 as the market moves back with rate declines.

Surinder Thind : And then as a follow-on to that I believe in the prepared comments, you mentioned that additional pricing benefits in 2025. And any color you can provide there in terms of the strength of the pricing benefits that you expect maybe next year relative to what we’ve got — what we saw this year?

Mark Begor : Yes, it’s really early for that. We’re not providing any ’25 guidance. We tried to give you some kind of what we’re seeing that we would expect to happen where we maybe have some confidence in it for next year. But I think it’s too early on that. Just as a reminder, we will be doing increases on January 1. And we’ll give some visibility to that when we have our February call and we laid out a framework for 2025, but you should expect price increases for EWS and from USIS as we’ve done over the last number of years. We think that there’s a lot of value in the solutions we deliver. And you should expect and we plan to increase prices.

Surinder Thind : Just as a clarification, I think is the commentary that you’ll try and do pricing consistent with historical without talking about guidance. Is that the idea that pricing?

Mark Begor : I think we’re trying not to give any framework on what the level of pricing is, but just reinforcing that there will be price increases as this customary in our industry, given the value of the data we have. And we’ll give you real clarity on that when we get to February and our 2025 guidance.

Operator: The next question is coming from Kyle Peterson of Needham & Company.

Kyle Peterson : Just wanted to see if you guys had any color I know on kind of some of the thoughts on purchase mortgage still being pretty subdued kind of partially due to rates and pursuing prices and affordability. Do you guys have any thoughts on how much rates would need to fall before purchase starts to improve? I know I know some of the inventory and home price issues are a little tougher to piece together. But at least on the rate side, I guess how much do you guys think rates need to fall before there would be some relief at least from that end of the market.

Mark Begor : That’s a tough one. As you know, we’ve never — I’ll say it in our lifetime, maybe it’s a little shorter than that. But we haven’t seen in 20 years a rate increase at this pace and at this level ever. So the shock of the where mortgage rates have gone from the, call it, super low levels during COVID timeframe to where they are today is unprecedented. So I think it’s hard to correlate that back. I think what we saw in late August is just a great indicator of even a very small change in rates down, stimulated the market. In this case, our view principally in refi but there’s clearly some purchase activity. There’s purchase activity even at these higher rates. People are buying homes at either variable or a 30 year fix rates.

It’s just that there isn’t a lot of inventory. The real question, I think, is when will it stimulate those that are, call it, 3% or 4% mortgages that want to upgrade to a larger home. That’s a normal part of the housing economy. And when — how — what’s the gap have to be from where they are today at call it 3% to 4% versus 6% plus, is it 50 bps? Is it 100 bps? It’s clearly lower. And I think we’ll see that as it goes forward, we’ll be super transparent with you. But I think you should be encouraged that when rates come down, the market responds pretty quickly, which we saw in late September, yes.

Kyle Peterson : And I guess just a follow-up on capital return. You guys can tease the potential for buybacks and dividends — potential dividend increase in 2025. How do you guys think about priority and balanced between the two whether it’s the firms you guys kind of want to do some of both. I know it’s been a while since you guys have raised the dividend. But yes, just some more thoughts on how you guys are thinking about capital return and what the relative priority is?

Mark Begor : Yes. And no change to how we’ve communicated since I’ve been here. We’ve always been working towards a goal to return cash to shareholders. And as you know, the last four, five years, we’ve invested really substantial parts of our excess free cash flow in CapEx with the cloud transformation, we’re getting at the finish line on that. So that’s really good news. And our CapEx is going to come down meaningfully, which will free up more cash for available to return to shareholders. We’ve also, as you know, as a part of our long-term framework, plan to continue a bolt-on M&A strategy, very disciplined on the financial returns and very disciplined around the strategic swim lanes that we’re focused on, whether it’s differentiated data, strengthening EWS or growing in identity and fraud.

And I think as you know, we’ve done a sizable amount of bolt-on acquisitions, while we were doing the cloud. And we would expect to continue to do those bolt-ons. Most recently, we did Boa Vista last August. We’re continuing to build a pipeline of strategic and financially attractive acquisitions, but we try to frame for you that we would expect over the long term to have 1 to 2 points of revenue growth from that bolt-on M&A. So you think about 1 to 2 points of revenue growth annually, that’s $50 million to $100 million, Boa Vista delivered north of that. But in that kind of a range, and if you think about the cash required for buying the kind of companies that would be financially attractive to us that fit that $50 million to $100 million of revenue, obviously, at attractive margins and returns that’s somewhere in the $500 million a year roughly of capital or cash bolt-on M&A.

And your model, I’m sure looks like ours, when we get into 25,26, 27 our free cash flow really accelerates well in excess of what we would use for CapEx. It’s 6% to 7%, that’s south of $500 million. if you think about $500 million on the average, some years, it will be lower. Some years, it might be a bit higher on bolt-on M&A, there’s substantial excess free cash flow to grow the dividend and buyback — we’ve talked on the last call and we’ve talked, I think, on most of our earnings calls and when we’re out with investors, when we think about returning cash to shareholders, we believe growing the dividend in a consistent way is a great way to return cash to shareholders and very disciplined. We frame that and this isn’t — we haven’t made decisions, but we framed that in the direction of growing the dividend in line with our earnings growth.

I think that’s where we’re working towards at the right time to do that. And then the excess free cash flow, which is meaningful, we would do in a buyback. And we’d be in the market kind of every day with that and use the buyback as another mechanism to return cash to shareholders. This has been our strategy since I joined Equifax is to complete the cloud transformation. We’re getting towards that stage at 80% now and 90% by year-end and then bring CapEx down, bring our margins up off of the strong revenue growth rate we had that excess free cash flow to return to shareholders. And I think you caught in our comments earlier this morning, we shared with investors that we’ve added to our long-term framework structure, which is how we run the company and how we measure our teams a cash conversion metric.

That’s always been in our plan to do that. We thought it was the right time now to put that into our long-term framework. And I think it shows to you the discipline that we’re going to have in running the company to generate that excess free cash flow to invest in Equifax, but as importantly to return cash to shareholders. And we look forward to getting to the stage to do that as we move into 2020.

John Gamble : And just as a reminder, free cash flow is strengthening and very strong but also we’re delevering. So we had to not only execute what Mark’s talking about through free cash flow we generate, but also we’ll have significant leverage available to us. given the substantial growth we’re seeing in EBITDA.

Operator: The next question is coming from Kevin McVeigh of UBS.

Kevin McVeigh : I just want to circle back to the mortgage revenue opportunity. It’s been pretty consistent in framing $1 billion plus, but that’s based on kind of current pricing more to your point penetration and TWN records, things like that. if I go back, right, to kind of the ’15 to ’19 time period, you had 71 million records as opposed to 182 million today. So what I’m trying to understand is, is there any way to think about kind of what your yield is to get to that number today as opposed to what the inquiry or interest rate number has to be? So I guess said another way, you’ve got a lot more product and higher records, things like that. So do you need the same level of interest rate to kind of drive that revenue? Or is there any way to think about that aspect of it?

Mark Begor : Yes, that’s a tough one. We’ve worked hard to try to model that. It’s just so unprecedented what’s happened in the last three years with rates we’ve never seen it before. And we’ve picked you can agree or disagree with what we’ve been using, but we pick 2015 to ’19 as being a normal level. But if you go back like a decade, go back the last time there was really a kind of an unusual mortgage environment was ’07, ’08, ’09 during the global financial crisis, and that was more an underwriting crisis from a consumer mortgage standpoint versus a rate on. And I think it’s just — it’s been very consistent. There’s just so much scale in the United States of consumers that want to move from an apartment to that first condo that apartment to a home.

They want to upgrade their home and then there’s a flip side when consumers age out and they start retiring, they sell their big home, they buy a smaller home on the mortgages with all that. So it’s just such a large market, and we’ve never seen a 50% decline. So we’ve tried to just lay out that’s the anomaly in the market. Our view is that as rates come down, we’ll move into that $1.2 billion of market opportunity, as we pointed out, will be a larger number next year. And we’re just convinced that it’s going to happen over time, which will be additive to our P&L and our framework. In our long-term framework, of 8% to 12% revenue growth, we really just have GDP in there. And think about a couple of points of market expansion underlies our 8% to 12%.

And we’ve also been very clear that there’s going to be very high incremental margins as that mortgage market comes back, meaning we’re not going to reinvest those dollars in more people. We have the right cost structure in Equifax today grow our business and really to make the right investments. So as that market tailwind flows into our P&L, we would expect it to be incremental, which obviously will drive our top line but also our margins and our free cash flow and give us more free cash to return to shareholders.

Kevin McVeigh : And then just real quick on the ERTC, ERC rather. What percentage of the revenue was at today? And where was that? Maybe at peak? Just trying to dimensionalize what that headwind has been?

Mark Begor : John can jump in on that. Equifax quite small, but in the employer vertical, it was a large number and now it’s going down to nothing.

John Gamble : But you can just give you orders of magnitude right now, ERC is think on the order of $1 million a quarter. And it was probably in the order of 10-ish, maybe a little higher $1 million per quarter as you go back two and three quarters, right, even the third quarter last year. So that’s the type of change you’re talking about. And in an employer business that’s $95 million a quarter. Obviously, that can be a significant change.

Operator: The next question is coming from Scott Wurtzel of Wolfe Research.

Scott Wurtzel : Just wanted to ask on the government vertical. I know we’ve talked about sort of the penetration story in terms of the amount of state local federal agencies that are out there. But I guess I would love to kind of hear your thoughts on when we look at sort of the different buckets of benefits of security, SNAP, ACA, Medicaid like where you kind of see most sort of white space for penetration over the near to medium-term here?

Mark Begor : Yes, it’s a great question. Thanks for bringing it up. A 29% growth, you’re the first analysts to bring up that vertical. So we appreciate that. And as a reminder, government is moving to be our largest vertical in Workforce Solutions. And as you know, you’ve got that large $5 billion TAM against around a little bit, roughly an $800 million run rate business now. I wouldn’t think about specific services. I’d really think about the TAM itself and the biggest opportunity in the TAM is penetration at the states and the state agencies. An agency deploys typically not a state. And if you think about, call it, $800 million versus $5 billion that $4 billion plus of potential revenue for us in the government vertical, are social service verifications that are still being done manually.

So that’s really the focus. We’ve been adding resources and people. We’re investing in new products and technology to enable our ability to penetrate those states. There’s — when you meet with a director of an agency at a state there’s — they all want to use it because it’s accurate. It adds productivity to them. They’re always challenged with how do we deliver the specific services, whether it’s food stamps or health support how do we deliver that more quickly. And as you know, the federal government that pays for the bulk of those social services requires the states to verify eligibility. And that’s where we come in, eligibility is around income and verifying the source of that income, which is the employment. So for us, the big opportunity is really at the state level.

As you now know, we have some large federal contracts. Last year, we extended our CMS contract, which was a big $1 billion plus contract extension. We announced – we shared in this call that we just extended our SSA contract, which is $500 million over five years. So you see the scale of those federal contracts. But the opportunity to continue to drive that strong double-digit growth in government going forward is really penetration in the states. That’s the bulk of that $4 billion untapped TAM. And as I said, more people more feet on the street. We have Equifax people, Workforce Solutions people that live at the state capitals that work with each of those agencies. We’re working with partners. We’re adding on new products. As you know, we have more data now incarceration data from our APRs Insights acquisitions is used in that vertical.

We’re working to put those data elements together in a single transaction. Today, they’re all delivered individually. So there’s just a lot of opportunities and the scale of the workforce allows us to invest in that. And I think as we said, in many calls that we expect the government vertical over the long-term to outgrow the 13% to 15% growth in Workforce Solutions. We just think there’s so much opportunity for us because of the value it delivers at all of the agencies at the state level.

Scott Wurtzel : And just as a follow-up on the mortgage side. I guess when looking at some industry data, it looks like maybe the gap between sort of USIS mortgage inquiries versus some of the application data in terms of kind of maybe widened during the quarter. I’m just wondering if there were anything to sort of call out with that? Was it due to maybe mix dynamics between purchase and refi? Any information on that would be helpful.

John Gamble : No, I don’t think there’s anything specific, right? I think it continues to be. We still think we have the same penetration and share that we have consistently. Obviously, with hard inquiries, it’s still required to pull a tribunal. So I’m not sure what you’re specifically looking at, but no, we don’t see any changes that are meaningful in hard inquiries in the industry.

Mark Begor : And I think as you saw, we expected that to happen. We told you in July, we thought it would happen, but you saw the outperformance from record growth that really moved up positively in EWS. So that’s — we were pleased with that.

John Gamble : Pre-quals continues to be a big part of our business. And obviously, that’s something that is shared amongst the three players. So sure could move between those. But overall, we’re happy with the way the business is performing.

Operator: The next question is coming from Jason Haas of Wells Fargo.

Jason Haas : Maybe sort going back to talent verifications. I’m curious if you have any insight into which industries you’re seeing that slowdown in hiring. Then I’m also curious if you’re seeing any increase in competition or any more in-sourcing by some of the large background screeners.

Mark Begor : Yes. I think we — what we heard from the background screening customer base that we have is that they saw some slowdowns kind of in mid late September in white-collar. Even though we had a good quarter, there were some slowdowns there. So we took that run rate rolling forward. And I think you’ve seen enough layoffs over the last announcements over the last month or two from different companies that perhaps tightening up, you’re waiting to see where the election goes and what’s going to happen in Washington. So I don’t think it’s anything different than that, John.

John Gamble : No. And we haven’t really seen any movements in share. We continue to work well with our partners, and we just think it’s a matter of we happen to be focused in white-collar and you’ve seen some slowdown in white-collar specifically in September.

Jason Haas : And then as a follow-up question, I was curious if we look at the EWS mortgage increase versus USIS, they’re still under pacing. My understanding is that the function of people shopping around by not closing. So I’m curious what’s your expectation for when that gap closes looks like what you said maybe probably a little bit of a narrower in fourth quarter. Does that — do you expect that would converge in next year, sometime next year?

Mark Begor : We actually don’t. If you go back to really in history, there’s always been more mortgage pulls for the credit file than income and employment. On average, we get five plus credit file polls, a closed loan, where there’s two to three income and employment pulls per closed loan. So that hasn’t changed. We don’t expect that to change. What did change as rates went up, was there was a consumer behavior of just more shopping to try to find another 25 bps off on the loan, meaning they’re going to multiple mortgage originators for either their refi or for their purchase loan and every time they go to a different originator, there’s a credit file fold. That’s a shopping process because the originator wants to figure out is someone that has the credit score that would support the kind of loan they’re going to pull.

They typically don’t pull income and employment there. Now we’re trying to innovate to help that shopping process. And I think you heard us talk earlier on this call in July also. That we’re piloting in the marketplace in Equifax credit file with an income and employment flag on it to really indicate that this consumer not only has this credit score, but they also are working today, you don’t know that in the shopping process if you’re an originator. We think that should advantage our credit file, which should drive some credit file share. And in the shopping process, where three credit reports are universally pulled in the application process in shopping, many originators pull three, some pull two, simple one. So we want to differentiate ourselves in the shopping process on the credit file side.

But no, we don’t expect them to converge. And as John said earlier, I think on an earlier question, they’ve been fairly consistent in ’24 and ’23.

John Gamble : Earlier this year, we had thought perhaps shopping might start to slow. And when we gave guidance back in February, what we indicated that we thought we might see that start to narrow or shopping might slow or said another way, the percentage of applications that are initiated would actually result in a loan but we just haven’t seen it happen, right? And so the pattern that we’ve seen over the past two to three years just continues to occur. And so I think as Mark said, we — at this point, our expectation is it will just continue to occur.

Operator: The next question is coming from Jeff Meuler of Baird.

Jeff Meuler : I just want to circle back to the Q4 guidance. I get it, $15 million is not that great in the grand scale of Equifax. But if I also consider the 9 point better mortgage market assumption, which impacts almost 20% of your revenue run rate, it does seem like a fairly sizable adjustment. So just, I guess, any other callouts of size beyond the industry gross hiring volumes? And maybe if I could just hit it head on, like, was there any sort of sizable client loss or meaningful reduction in client relationships that also contribute just so we don’t have to wonder about.

Mark Begor : Yes, you don’t have to wonder about that. Go ahead, John, and I’ll jump into.

John Gamble : First, on mortgage, right? The difference in the — change in guide in the implied guide in the fourth quarter from back in July to the actual guide now, the change in mortgage isn’t very substantial at all, right? What you’re talking about is credit inquiries. I’m not quite sure it’s 9 points. I think that’s an estimate that you’re providing. But yes, credit increase are slightly stronger and that’s making USIS revenue slightly stronger, but that read through for the question we just got doesn’t really apply to EWS because of the fact that what we’re seeing is shopping behavior not closing behavior. So the impact on our mortgage revenue between the guidance we provided in October and the implied guide back from July is really relatively small, right?

So that’s why what we’re talking about here is specifically related to non-mortgage revenue. And as Mark said in his remarks and I reiterated the biggest trucker is employer, right? And also, there is some impact from talent because we saw weakness in talent in September that we carried through in our run rates in terms of our guidance. But the biggest driver is employer and that’s really the driver, but mortgage wasn’t a substantial improvement in the guidance in October relative to the expectations in July.

Jeff Meuler : And then sorry to get the weeds on this. I get the typical methodology in terms of run rating forward recent mortgage. But just given the volatility in the last few weeks, I want to know what period specifically you’re run rating forward because you’re calling out the late September improvement. And then I think you said subsequently it reduced back to maybe like July, August levels in October. So just what period are you extrapolating forward given the recent.

Mark Begor : Yes, Jeff, no change in how we do it. We always do it through like early this week, right? So we’re kind of in the mid-October. So this is no change from last quarter to the quarter before that, whether it’s mortgage or any other parts of our business. But to your point, mortgage or in this case, we saw the hiring impact late in September that continued in October, same with the impact of mortgage. So we try to use the most current run rates we typically use the last — we’ll look at how is it the last week. How is it the last two weeks, how is it the last three weeks, four weeks, something like that and try to see where are those trends? Is it stronger in the last week than the last weeks. Is it weaker in the last week and try to put that together and use our best estimate around where that — we think that trend is and use that for the current quarter guidance. That’s no change, right? John.

John Gamble : No change at all. What we’ve seen in October, right, is obviously inquiries came down and they kind of stabilized in October, right? So that’s kind of the basis that we’re using going forward.

Operator: The next question is coming from Owen Lau of Oppenheimer.

Owen Lau : Could you please add more color on insurance and commercial vertical? It grew double-digit and looks pretty strong there. What are you seeing there?

Mark Begor : Yes. John, you can jump in, too. So the commercial vertical is our small business — data business that is had — if you look at ’22 and ’23, actually ’21, ’22 and ’23, that business was up very strong, high singles and for many quarters, double digit. We had some execution issues earlier this year, but it’s not back to that similar levels, which we’re really pleased with. We would expect that business to grow at the high end of the USIS 6 to 8 range over the long term because of the unique data that we have. And remember, we made the PayNet acquisition with the leasing trade lines. We’re onboarding now merchant data to enhance the picture around small businesses and obviously bringing in the entrepreneur from our consumer data set. So we think that’s a business that will continue to have positive growth going forward, and we’re pleased to see it back in that range where we expect it to be.

John Gamble : Insurance for us is relatively small in the broader scheme of USIS, but we did see nice growth, and it was principally online. So we just saw higher online transaction volume across the insurance vertical.

Owen Lau : And then going back to your cloud migration, could you please give us an update on how we should think about incremental top line revenue contribution in 2025 and maybe 26%. Any time line of product launches you can share over the next few quarters or so?

Mark Begor : Yes. We talked earlier, you’re seeing already some of the impacts of the cloud transformation. If you go back, our long-term framework for Vitality is 10%. We increased it from 5 to 7 pre-cloud. We’ve been delivering north of that 10% for the last couple of years, including in 2020 4. As you know, we increased the guide for this year. And we think that’s directly attributable to our cloud investments, the benefits from the cloud investments are focused on innovation products as well as our focus on AI. So that innovation, we think, is a very good metric around the benefits of cloud. We think we’ll also see share gains in USIS in some of our international markets as we complete the cloud and deliver always on stability and move into either secondary or primary positions when we’re below that today.

So that should get into the P&L. And specifically, I think maybe your question is around USIS since we talked about the USIS cloud completion. We would expect their vitality, which has been increasing this year from 8% in third quarter — second quarter into 9% and the third, you had to move towards that $10 million. And we would expect to allow them to deliver solidly inside of that 6% to 8% long-term framework going forward.

Operator: The next question is coming from Craig Huber of Huber Research Partners.

Craig Huber : You talked about a long-term outlook for your vitality index at 10%. I think you said you’re 11% right now. Can you give us some examples that you’re quite positive with new products out there today, but particularly outside the U.S., I’d like to hear something you have already touched on today. That’s my first question.

Mark Begor : Yes. That’s a — there’s a lot of them. I guess you’re asking me to tell you something we’re excited. But I think broadly, you should be excited and we are too about vitality. International vitality is still below 10%, but I think it was 9% in the quarter. So very, very strong. We would expect them to move towards that trend, as they complete cloud like in Canada in some of the other markets. So that’s a real positive. We’ve got some identity solutions in the marketplace internationally and in the U.S. that we’re excited about, some new solutions using alternative data that it has real traction that adds to the credit file that we think are quite positive. We talked about earlier on this call, some of the solutions we’re doing here in the U.S. between EWS and USIS that are really unique that we think will benefit both USIS and EWS using the income flag on some of our credit files, which we think is very positive.

We’ve rolled out in the U.S. someone score solutions that combine our cell phone utility data as well as our other alternative data that’s having big lifts in performance. It differentiates really our score using our credit file and other alternative data versus our competitors. So we’re excited about that. Did you add anything, John?

John Gamble : I think we have some USIS solutions on the FMS side where we have customers usually Ignite to generate analytics that they can use to improve marketing campaigns and conversion, all of those driven by fabric.

Craig Huber : My other question, if I could. When you think about costs for next year, I know you want to give formal guidance at this stage when we think about costs for next year given all the cost savings initiatives you guys have put in place here. You’re going to be at 90% through the cloud transformation at the end of this year. And so for the cost next year that you guys can control and assuming the economy holds together, mortgage rates come down as you’re talking about and stuff. I’m assuming you have a very strong flow-through down to the EBITDA line if you have strong revenue growth here. But I’m curious on your cost side, do you have to step up any investment spending next year? I mean how should we just broadly think about your cost outlook for next year in your two main segments?

Mark Begor : I think you saw we took a charge this quarter that was planned to execute the cloud cost savings, principally from USIS and some of that from Canada that will benefit the fourth quarter, but that also benefits 2025. So that benefit is a positive. As you point out, we’re at 90% cloud complete, which is a big milestone at year-end but we still have 10% to go. So as we complete those last pieces of the cloud, there’ll be additional decommissioning of the legacy infrastructure for that tail of our cloud completion. So that’s going to benefit ’25 and ’26. And John, you also not cost, but it’s — depreciation, you talked about being higher next year because we’re bringing on more of the new platforms into our operating mode and starting to depreciate those. So we framed for you that depreciation will be up next year. But I think you said it’s — we’re kind of peaking in depreciation in 2025 with CapEx coming down.

John Gamble : And in terms of — you mentioned investment, right? So investment is actually coming down on capital. So we’ve talked about the fact that we’re moving down substantially on capital spending in 2024 versus 2023. You’ll probably see us continue to drive down as a percentage of revenue, our capital spending in 2025 relative to 2024 as we move toward our 6% to 7% long-term framework. And as you know, investment spend in terms of capital expense move together. So we don’t see an increase in investment spend that would be expense because we’re continuing to bring down our investments and spend as capital.

Operator: The next question is coming from Toni Kaplan of Morgan Stanley.

Toni Kaplan : My first question actually picks up on the last part of the last one. You mentioned the 6% to 7% CapEx in the long-term framework. This year, obviously, a really big move with USIS going on to the cloud there. So a lot of I imagine a lot of spend being spent on that. So I guess, should we see a big step down in ’21 on the CapEx side or should we expect the move towards the 6% to 7% to be more gradual since you still have 10% of revenue left and maybe there are some other things that you’re working on? And maybe just a follow-up, what’s the next step in the technology plan from here now that you have most of this done.

Mark Begor : Yes. So a couple of different questions there, Tony. First, we’re not intending to give ’25 guidance this year, but we’re happy to give some kind of indication. So I think we said we expect CapEx to come down next year again. You use the term big — it’s hard to find big. You may think about differently than I do, but CapEx, we will bring CapEx down next year as we move closer to cloud completion. What’s left to be done is outside the U.S., principally Australia, a few Latin American countries. We’re partially through on U.K. We’ll finish a lot of the U.K. next year. Spain will be done by year-end. So it’s really those kind of elements so you should expect to see a reduction in CapEx as a percent of revenue again in 2016, as we get kind of that next stage.

We framed the 6% to 7% over the long-term is what we expect to do. And as a reminder, as we move into kind of a post cloud environment, that CapEx is increasingly used for innovation in new products versus cloud transformation or maintaining legacy infrastructure. So we think we’re going to be advantaged in having what I would call growth as we move into ’25, ’26, ’27 versus kind of building cloud CapEx we’ve had for the last number of years, which we think will be a positive.

John Gamble : In terms of the benefit to cash conversion, I think certainly as we get into 2026, you’re going to see depreciation probably likely be higher than capital spending. So again, helps cash conversion significantly.

Toni Kaplan : And this one sort of touched on a few times, but just hoping you could give any sort of update on like green shoots that will make you more optimistic in the consumer credit environment about 2025, if you’re seeing any, if you’re not, that’s fine, too. But just anything that makes you more or less optimistic about 2025 with regard to consumer credit?

Mark Begor: I think we talked about consumer credit, some end market consumer demand softening like in auto, but it’s still okay. It’s not like it’s depressed. You go back to two years ago, we had the fintech kind of was really impacted. That’s now normalized, I think it’s a positive, meaning and we’re growing in fintech. So as we — with cloud and new products going forward. So when I think about green shoots, from where we sit, 2025 feels like certainly the first half of ’25 going to be much like we’re seeing today. I think the green shoot really would be in rate reductions. We talk a ton around the impact of rate reductions in mortgage, but rate reductions in auto for auto loans are going to be helpful to that end market, in my view, and in P loan, lesser degree in cards, consumers tend to be less sensitive to rates and cards because most consumers don’t think they’re going to revolve with a credit card.

But when you’re taking out a P loan, you’re taking out an installment loan when you’re buying a car on credit and those rates are higher, too. So if there is any potential green shoots that we haven’t seen yet, is does the Fed take rates down? Does the 10-year come down? And does that not only benefit mortgage but also benefit a couple of the other end-user markets.

Operator: Our next question is coming from Ashish Sabadra of RBC Capital Markets.

Ashish Sabadra : I have two clarifying questions. First one was on that $70 million savings in 2025 from cost actions. Just wondering, is that all OpEx? Or does it also have CapEx saving and does that include all the cloud savings? So that’s my first question.

John Gamble : Yes. So the $70 million is total spending savings, so it would have some CapEx as well.

Ashish Sabadra : That’s helpful color. And then maybe just a clarification on the inquiries for 2025 expectation for a 5% growth. I was just wondering, is that largely just based on as Mark explained, the near-term dynamic? Or are you also baking in the Fed rate cuts going in 2025 or those could be incremental upside?

John Gamble : Yes. So we weren’t trying to give that as an expectation for 2025. We were just trying to provide it as a piece of information. But if you take the current run rate we’re seeing now in the first half of October, and you just assume that they don’t really change and then apply seasonality to them for 2025 that we would end up with inventories up something over 5% in 2025 and inquiry something up over 5% in the first quarter. We weren’t trying to indicate that was guidance from us in any way. We were just trying to give people perspective on what the current run rates would look like. We know you and many investors have their own perspectives on what the mortgage market is going to do and how it will change over the rest of the year. And we weren’t trying to indicate we expect it to be flat. It’s just — that’s where it is right now.

Mark Begor: And we don’t forecast rate changes. We never have. We try to find for you what the impact of a potential rate change could be like in mortgage, but we don’t forecast rate changes. That’s just not our guidance philosophy.

Operator: The next question is coming from George Tong of Goldman Sachs.

George Tong : Mark, can you talk a bit more about what you’re seeing broadly with consumer credit health, particularly across prime and subprime consumers, data seems to suggest that delinquency rates are continuing to go up year-over-year across lending categories.

Mark Begor : Yes. I think it’s still, in our view, a pretty good market. That’s what our customers are saying. There’s — I don’t think there’s any alarm, George from our customers around where delinquencies have gone. I think most of our customers believe with the low unemployment or high employment rates, meaning consumers working that even with delinquencies up that’s manageable and they’re generally at delinquency rates that are inside of how our customers think about growing their business. So we haven’t seen that impact — we haven’t seen delinquencies be a reason that people are tightening up outside of subprime. Subprime that’s already happened. Subprime tightened up a couple of years ago. But from our perspective, if employment is going to stay at this fairly low level, we don’t see that impacting our volumes in the fourth quarter in the early parts of 2025 unless there’s a change in the employment levels — and unemployment goes up.

George Tong : And then, John, can you talk about the puts and takes with your updated EBITDA margin outlook for the year, 32.4% at the midpoint compared to 32.6% previously.

John Gamble : Yes. So obviously, we gave our revised guidance for the full year. We gave a for the first time for the fourth quarter. And I think what you’re just seeing is the — is a very strong improvement in EBITDA margin in 4Q versus 3Q, which we’re very happy with, a 4Q adjusted EPS and an EBITDA dollar level, which are at record levels, as we said in the call, and Marc reiterated over $500 million in EBITDA in the fourth quarter. So I think what you’re seeing is very strong delivery in the fourth quarter. A lot of the improvement in EBITDA driven by cost reductions and actions that are being taken now that we’ve completed cloud transformation — sorry, customer migrations on the consumer side in USIS and then obviously, Canada as well. So we feel good about the improvements we’re talking about, about the higher margins we’re talking about in the fourth quarter and we think that bodes well for next year.

Operator: The next question is coming from Andrew Stein of FT Partners.

Andrew Stein: So my first question, I just wanted to shift to the international segment. I realize the Boa Vista acquisition lapped its one year marker in , I guess, and LATAM had a really strong quarter. So can you help us understand the run rate organic growth trends between Boa Vista and LATAM ex Brazil? And then what is Boa Vista’s market share now compared to the 15% at the time of acquisition. I’m just wondering what opportunities you have to gain market share over the next year.

Mark Begor : Yes. So we’re still excited — very excited about Boa Vista. As you know, we just lapped the one year mark of ownership of the business. We’re still in the thick of integrating the business and bringing our new products and technology down there. Serasa Experian has a very strong business that they’ve executed very well on. But the feedback we’re getting from all the big banks and customers there is that they welcome a global competitor and that’s where we’re going to. We’re pleased with the performance of Boa Vista through 2024, and we expect it to be continued strong and we do expect some share gains going forward. It’s too early to see that in the business after just 12 months. And we haven’t really fully deployed a lot of the Equifax technology of Ignite and interconnect, but those are getting in place as we exit the year and into 2025.

So we’d expect some more traction there going forward. Latin America had a very good quarter. We’re performing well in that market, really in all geographies, all the countries that we participate in and really big focus by that team as well as the international team on innovation and new products, which is really helping their effectiveness in the marketplace.

Andrew Stein: And then just a follow-up on the international margin expansion. That was also a really strong this quarter. And just wondering if you could help us understand the remaining potential for margin expansion in LATAM and Europe as the cloud transformation is completed for those segments?

John Gamble : Yes. We’re expecting, obviously, very good margin expansion again in the fourth quarter. And then we’re expecting them to continue to grow margins as we get into 2025. Part of it obviously driven by continued good revenue growth, organic revenue growth in international with again very high variable margins. And they do — and we do have more opportunities, as Mark talked about, because we’re completing cloud transformation in the U.K. in 2025. You’ll see it more in Australia, New Zealand in terms of 2026 and pieces as we go through 2025 in Latin America. So we expect to see that be beneficial to margins in Latin America as we go through 2025. But again, just a general trend of improving margins in LATAM — sorry, in international as we look over the next several years.

Mark Begor : And John, we also — we just completed Canada two weeks ago or 10 days ago. So those benefits will roll into the fourth quarter and into 2025 and then we complete Spain later this year in a couple of other Latin American countries. So that cloud completion, as you point out, which is principally that 10% we have left to go is going to benefit principally international because that’s where the work of the cloud complete is going to take place.

Operator: Thank you. At this time, I would like to turn the floor back over to Mr. Burns for closing comments.

Trevor Burns: Yes. Thanks, everybody, for your time today and if you have any follow-up questions, please reach out to myself or Molly and look forward to interacting with everybody throughout the quarter. Thank you.

Operator: Ladies and gentlemen, this concludes today’s event. You may disconnect your lines or log off webcast at this time and enjoy the rest of your day.