Mark Begor: Thanks, John. The unprecedented 50% decline in the mortgage market from normal 2015 to ’19 levels had a significant impact on Equifax moving close to $1 billion of revenue over the past 24 months from our P&L. Against that unprecedented mortgage market decline, EFX’s diverse mix of businesses delivered strong growth through outperforming the mortgage market by over 20 percentage points, strong 10% to 20% constant dollar non-mortgage growth, a 13% vitality index from new products and the addition of bolt-on acquisitions. As shown on Slide 19, based on our 2024 guidance, the U.S. mortgage market is on the order of 50% below its historic average inquiry levels. As the market bottoms and moves from a headwind to tailwind and the mortgage market recovers towards its historic norms, that represents over $1 billion of annual revenue opportunity for Equifax, none of which is reflected in our current 2024 guidance.
At our mortgage gross margins is over $1 billion of mortgage revenue, we delivered over $700 million of EBITDA and $4 per share that we would expect to move into our P&L in ’24, ’25 and ’26 as the market recovers. Wrapping up on Slide 20. Equifax delivered another strong and broad-based quarter with 14% constant dollar non-mortgage revenue growth, reflecting the power and breadth of the Equifax business model and strong execution against our EFX 2026 strategic priorities. We have strong momentum as we move into 2024. As we look at 2024, we expect to deliver 9% revenue growth and 110 basis points of adjusted EBITDA margin expansion from the revenue growth and our cost savings plans despite our expected about 15% decline in the mortgage market.
As discussed on the prior slide, with the mortgage market bottoming, we expect mortgage to move from — move to a tailwind over the next several years as the market returns to normal inquiry levels. A big priority for 2024 is to complete our North American cloud transformation as well as significant portions of our global markets, which will result in continued margin expansion and reductions in our capital intensity that is a key benefit of our data and technology cloud transformation. Exiting 2024 with 90% of Equifax revenue in the new Equifax cloud is a big milestone, so the team can move towards fully focusing on growth. 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 EFX AI and ML and market-leading businesses, will deliver higher growth, expanded margins and free cash flow in the future. I’m energized by our strong performance in 2023 and the momentum as we enter 2024, but even more energized about the future of the new Equifax. And with that, operator, let me open it up for questions.
Operator: [Operator Instructions] Our first questions come from the line of Manav Patnaik with Barclays.
Unidentified Analyst: This is Brendan on for Manav. I just want to ask real quick on your — you guys gave some more detail on the inquiries versus — USIS versus twin. It sounded like you were saying next year, actually twin will be a little bit better because USIS is actually comping, I guess, better shopping activity. So it will actually be a little bit better than that down 16%. Just want to confirm that. And then why because obviously, this year, the inquiries on TWN have been quite a bit worse than the USIS side?
John Gamble: Yes. So in your question, you gave a big chunk of the answer, right? So we do think what’s happening is USIS is comping off of 2023 where shopping activity was extremely high. so that their growth — their decline rate in 2024 will be less relative to that very high 2023 year because of the shopping activity. And we think that’s probably the biggest driver that we’re seeing. Also, quite honestly, as we talked about what we do is we take a look at current run rates in the market, what we’re seeing in terms of growth rates year-on-year, and we just run them throughout the year. That’s when we say we’re using run rates. That’s what we mean. And we’re kind of seeing that as we take a look through the January and the latter part of December. So we think it’s both consistent with what we’re seeing and also with the description I gave.
Unidentified Analyst: Okay. And then just one more on — could you walk through some of your assumptions on talent like the volume assumptions that you’re using?
John Gamble: So I think what we indicated in talent, right, is that we’re looking at BLS and BLS currently for the segments that we support is down about 10%. And we’re just expecting that we’re going to significantly outperform the markets we indicated by — on the — well over 10 points, right? So we feel very, very good about our ability to continue to grow talent despite the fact that we’re going to see a hiring market that we think is probably going to be down in the order of 10%, which, again, is kind of what we’re seeing so far this year. And in the — sorry, and in the back half of the fourth quarter.
Operator: Our next questions come from the line of Andrew Sternerman with JPMorgan.
Andrew Steinerman: John, could you just tell us how much mortgage revenues was as a percent of revenues in the fourth quarter? And also, could you just give us a sense of how much mortgage revenues have in terms of incremental margins in the ’24 guide?
John Gamble: So mortgage revenue in the fourth quarter was 15% of total. And for the fiscal year was 19%, right? And just for perspective, in the first quarter, it’s going to be on the order of 20%, we think. A little under 20% based on the guidance we provided. That’s driven by our outperformance in both EWS and USIS, that we talked about, Andrew.
Mark Begor: Can you ask the second question again?
Andrew Steinerman: Yes. What’s the incremental margin on mortgage revenues assumed in the ’24 guide?
John Gamble: Generally speaking, we’ve talked about this in the past, right, is that our variable — let’s say, our gross margin on mortgage blended. And obviously, it’s heavily dependent on mix because our margin on mortgage solutions, our tri-merge business is very different than our margin in the USIS business overall, which is obviously very different than our margin in EWS, right? With EWS having the highest margins, obviously of the three in general versus the blended USIS margins. But generally, what we’ve indicated is you think something like 65% gross margins for the mortgage business.
Operator: Our next questions come from the line of Seth Weber with Wells Fargo.
Seth Weber: Just on the guidance for 8.5% non-mortgage growth for 2024. Can you just talk to how we should be interpreting that in maybe just any areas where you think there could be some upside in your mind as we go through the year?
Mark Begor: Well, we think the 8.5% is quite good. It’s obviously inside of our 8% to 12% range, which is how we want to grow the company. We’ve talked about some of the pressures on our non-mortgage really in the talent market. And then second is the ERC impact, which that program has been curtailed by the IRS. And John talked about the impact that, that’s having, which is on Equifax is a meaningful amount on a year-over-year basis. As far as upsides, I don’t think we think about any upsides to that 8.5% because we think it’s a pretty good growth rate.
Seth Weber: Okay. Fair enough. And then can you just maybe talk to how much is left on the Medicaid determination here for the second quarter? How much is that like or — sorry, through the first half of ’24, how much that’s going to contribute?
John Gamble: Yes. So we haven’t given specific dollar amounts. What we’ve indicated, right, is that it continues to be a benefit for us, it was in the fourth quarter, and we expect it will continue to be in the first and the second quarters. But then again, just as a reminder, right, redetermination is something that occurs consistently as part of benefits programs that are funded by the federal government. So yes, there was an accelerated redetermination program following the end of the pandemic freezes that occurred. But the fact is, as we go forward, we’ll continue to see redetermination revenue across our government business, and it is — it will be an ongoing driver of growth once we get through ’24 and we get past the accelerated redetermination activity we’re seeing right now.
Mark Begor: And that’s only one lever, obviously, for government vertical growth inside of Workforce Solutions, as we’ve talked about. As you know, that business was up super strong last year and again in ’22, ended the year at over $500 million. So a very big business for us with big growth potential at the state level of continuing penetration. We’ve got a TAM there that’s $3 billion plus against that $500 million. So there’s a lot of opportunities to get the states that are not using our solution today. They’re still using manual verification of income and employment, which is required for government social services. As you recall, we — a couple of months ago, we landed a big extension to our CMS contract. It was $1.2 billion.
That rolls into 2024. And then the new USDA contract that we signed in September was a new contract that obviously rolls into 2024. So there’s a meaningful number of growth levers at government, and we’re quite bullish as we talked about. We expect that business to be a big growth contributor to Workforce Solutions and outgrow Workforce Solutions 13 to 15 long-term growth rate, significantly outgrow that again in ‘24.
Operator: Our next questions come from the line of Kyle Peterson with Needham & Company.
Kyle Peterson: Great. I appreciate you taking the questions. I wanted to touch on the non-mortgage growth that you guys called out in the guide. I think you guys have walked through some assumptions on kind of volume on mortgage and talent really well. I just wanted to see if you could provide any color for your volume assumptions around some other areas such as whether it’s auto or cards, auto, consumer just to try to kind of figure out the delta between pricing and share versus volume trends in those markets?
