Equifax Inc. (EFX) Q4 2025 Earnings Call Transcript

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Overview

The earnings call summary and Q&A indicate a positive outlook with raised guidance, strong EBITDA margins, and strategic innovations. While there are hurdles in VantageScore adoption and economic challenges internationally, Equifax's focus on AI, government vertical growth, and maintaining high margins in EWS provide a robust growth framework. The positive guidance adjustments and strategic initiatives suggest a likely positive stock price movement.

Key Financial Performance

Revenue $6.075 billion, up 7% year-over-year on a reported and organic constant currency basis. Growth was impacted by a weak U.S. mortgage market (down 7%) and U.S. hiring market (down 2%).

Earnings Per Share (EPS) $7.65 per share, reflecting strong operational performance despite challenging market conditions.

Free Cash Flow $1.13 billion, up $230 million from February guidance, with a 120% free cash flow conversion rate, well above the long-term framework of 95%.

EWS Revenue Growth 6% growth with 51.5% EBITDA margins. Fourth quarter revenue growth accelerated to 9%, driven by Verification Services and strong performance in Government and new product innovation.

USIS Revenue Growth 10% growth with a 70 basis point margin expansion to 35.2%. Diversified Markets (non-mortgage) revenue grew 5%, the highest since 2021.

International Revenue Growth 6% constant dollar growth with nearly 100 basis points EBITDA margin expansion. Performance was strong despite weak Canadian and U.K. debt management markets.

New Product Revenue $900 million in 2025, driven by a record Equifax Vitality Index of 15%, 500 basis points above the long-term goal of 10%.

TWN Database Growth Active records increased by 11% to over 200 million, with total records surpassing 800 million.

Fourth Quarter Revenue $1.551 billion, up 9% year-over-year, driven by strong performance in Workforce Solutions and USIS, particularly in mortgage and Government sectors.

Workforce Solutions EBITDA Margins 51.3%, supported by operating leverage from higher-than-expected revenue growth.

USIS EBITDA Margins 36.3%, up over 100 basis points sequentially, driven by strong revenue growth and operating leverage.

International EBITDA Margins 31.6%, slightly above expectations, despite weaker performance in Canada and European debt management markets.

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Operating Highlights

New Product Innovation: Equifax launched new products leveraging the Equifax Cloud and AI, achieving a record 15% Vitality Index in 2025, equating to $900 million in new product revenue. Products like TWN Indicator and EFX.AI-powered models were introduced in mortgage, card, and auto markets, with plans to expand to personal loans in 2026.

AI Integration: All new models and scores in 2025 were powered by EFX.AI, delivering significant performance improvements. Equifax secured over 400 AI patents and launched Ignite AI Advisor, expanding globally in 2026.

Market Expansion in Government: Equifax expanded its Government vertical, launching solutions like continuous evaluation for SNAP, targeting fraud reduction. Contracts with several states were secured, with more discussions underway.

International Growth: International revenue grew 6% in 2025, with strong performance in Brazil and Australia, despite weaker markets in Canada and the UK. Cloud completion is expected by mid-2026.

Operational Efficiencies: Equifax leveraged AI and cloud technology to drive efficiencies, achieving $75 million in annual cost savings through initiatives like AI-enabled call centers. Free cash flow reached $1.13 billion with a 120% conversion rate.

Strategic Shift to AI and Cloud: Equifax transitioned 90% of its revenue to the Equifax Cloud, focusing on leveraging AI for innovation and operational improvements. This shift is central to its long-term growth strategy.

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Risk or Challenges

Settlement Charge: Equifax incurred a $30 million charge related to a settlement associated with inquiry disputes. This could impact financial performance if similar issues arise in the future.

Weak U.S. Mortgage Market: The U.S. mortgage market was down 7% in 2025, negatively impacting revenue growth by 100 basis points. This remains a challenge for future growth.

Weak U.S. Hiring Market: The U.S. hiring market was down 2% in 2025, affecting Talent Solutions revenue and related services.

International Market Weakness: Weak economic conditions in Canada, the U.K., and European debt management markets negatively impacted international revenue growth.

FICO Mortgage Pricing Impact: Increased FICO mortgage pricing has no margin benefit for Equifax but inflates revenue, reducing EBITDA margin percentages.

Regulatory and Compliance Risks: Engagement with federal and state agencies for social service programs introduces potential regulatory and compliance risks.

Economic Uncertainty: Weaker economic growth in international markets, particularly Canada and the U.K., poses risks to revenue and operational performance.

Operational Efficiency Challenges: Higher incentive compensation costs impacted margins in Q4 2025, indicating potential challenges in cost management.

Dependence on U.S. Mortgage Revenue: U.S. mortgage revenue represents over 20% of total revenue, making the company vulnerable to fluctuations in this market.

Delayed Adoption of VantageScore: Uncertainty around the adoption of VantageScore for agency mortgage originations could delay expected revenue and margin benefits.

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Guidance & Outlook

2026 Revenue Growth: Equifax expects total revenue growth of approximately 10.6% on a reported basis and 10% on a constant currency basis. Excluding FICO mortgage royalties, revenue growth is projected at about 7%, aligning with the company's long-term financial framework.

2026 EBITDA and Margins: EBITDA is expected to grow by almost 10% to approximately $2.12 billion. Reported EBITDA margins are expected to decrease by 30 basis points due to the impact of FICO mortgage royalties. Excluding these royalties, EBITDA margins are projected to expand by 75 basis points.

2026 EPS Growth: Earnings per share (EPS) is projected to grow by 11% to $8.50 at the midpoint of guidance.

Free Cash Flow in 2026: Equifax anticipates generating over $1 billion in free cash flow with a cash conversion rate of at least 100%, exceeding the long-term framework of 95%.

U.S. Mortgage Market Outlook: The U.S. mortgage market is expected to decline by low single digits in 2026. Equifax anticipates outperforming the market with high single-digit growth in EWS mortgage revenue and mid-single-digit growth in USIS mortgage revenue, excluding FICO royalties.

VantageScore Adoption: Equifax expects significant interest in VantageScore adoption, with over 200 lenders testing or in production. However, the 2026 guidance assumes no conversion to VantageScore for agency mortgage originations.

International Revenue Growth: International revenue is expected to grow at mid-single digits, consistent with 2025 levels, but below the long-term financial framework due to weaker economic conditions in Canada, the U.K., and Brazil.

AI and Operational Efficiencies: Equifax plans to leverage AI for operational efficiencies, targeting $75 million in annual cost savings over the next three years. AI is also expected to accelerate product delivery and improve customer solutions.

Government Vertical Growth: The government vertical is expected to be the fastest-growing business for Equifax, driven by new social service eligibility requirements and program integrity initiatives. Revenue growth is anticipated to exceed the long-term framework of 13%-15%.

New Product Innovation: Equifax aims to maintain strong double-digit new product vitality in 2026, leveraging its cloud capabilities and proprietary data. The company plans to expand its TWN Indicator solutions across mortgage, auto, and card markets.

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Shareholder Return Plan

Dividends Paid in 2025: Equifax paid $233 million in dividends in 2025.

Increase in Dividends from 2024: The total cash return to shareholders, including dividends, was up 6x from 2024.

2026 Dividend Plans: Equifax plans to continue returning cash to shareholders via dividends in 2026.

Share Repurchase in 2025: Equifax repurchased over 4 million shares, returning $927 million to shareholders, including $500 million in the fourth quarter.

Total Cash Return to Shareholders in 2025: Equifax returned a total of $1.2 billion to shareholders, including share repurchases and dividends.

2026 Share Repurchase Plans: Equifax plans to continue share repurchases in 2026, supported by strong free cash flow.

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Key Q&A

Q:How does Equifax view the applicability of agentic AI to the employment and income business?

A:Equifax sees significant opportunities in using agentic AI for their employment and income business. They believe their proprietary data, which constitutes over 90% of their revenue, provides a strong moat. AI is being applied to improve productivity, speed, and accuracy in processes like I-9 validations, unemployment claims management, and work opportunity tax credits. They estimate $75 million in productivity gains over the next 2-3 years from AI-driven efficiencies.

Q:What is Equifax's perspective on the EWS margin outlook?

A:Equifax is focused on maintaining EWS EBITDA margins above 50%, which are highly accretive to the company. They are investing in new products, technology, AI capabilities, and record acquisitions to sustain these margins while driving double-digit long-term revenue growth. They also aim to leverage corporate expenses and improve margins across other segments like USIS and international.

Q:What hurdles remain for lenders and resellers to adopt VantageScore, and what is the timing for resolution?

A:The main hurdle is the completion of work by FHFA, Fannie Mae, and Freddie Mac to allow for the adoption and implementation of VantageScore. Equifax believes this process is imminent but cannot predict the exact timing. They are collaborating with agencies and supporting customers with free VantageScore testing and performance data. Equifax has guided conservatively, assuming no VantageScore adoption in 2026.

Q:What is Equifax's outlook for the government vertical and its momentum?

A:Equifax sees strong momentum in the government vertical, driven by the OB3 bill and increased focus on improper payments. They expect revenue impact from OB3 requirements in the second half of 2026 and into 2027. The company is engaging with states and federal agencies, emphasizing the ROI of their solutions in reducing error rates and improper payments. They anticipate the government vertical to be their fastest-growing business.

Q:How are Equifax's most sophisticated clients using AI, and how does it impact data consumption?

A:Sophisticated clients are consuming more data from Equifax as they use AI for decision-making. Equifax's proprietary data, including credit, income, and employment data, is essential for these processes. The company is also using AI to deliver higher-performing scores and models, which are integrated into solutions like OneScore and AI Advisor to make data more accessible and actionable for clients.

Q:What is the status of mortgage lenders testing or adopting VantageScore?

A:There is significant interest in VantageScore due to its cost advantage over FICO. Some smaller lenders have adopted it, but larger adoption depends on FHFA's authorization. Equifax is actively supporting customers with testing and data on VantageScore performance. They have guided conservatively, assuming no major adoption in 2026.

Q:What are the pricing trends and considerations in the government vertical?

A:Equifax has implemented modest price increases in the government vertical, focusing more on penetration and delivering value. They have introduced subscription models to aid adoption and emphasize the ROI of their solutions in reducing improper payments and increasing productivity for caseworkers.

Q:What is Equifax's perspective on the Tri-Merge to Bi-Merge transition in mortgage credit reporting?

A:Equifax supports the Tri-Merge model, emphasizing its importance for access to credit and safety and soundness in underwriting. They highlight that Tri-Merge provides a complete picture of a consumer's credit profile, which is essential for federally guaranteed mortgages. Equifax believes the Tri-Merge model is well-embedded and critical for the industry.

Q:What is Equifax's approach to pricing its credit file for mortgages?

A:Equifax has implemented modest price increases for its credit file, which now includes additional data like TWN Indicator and NCTUE. They aim to balance pricing with delivering value and maintaining strong customer relationships. The company does not plan to implement large price increases like those seen with FICO.

Q:What is Equifax's outlook for the international segment?

A:Equifax expects the international segment to grow at the lower end of its long-term framework of 7%-9%, citing economic challenges in Canada and the U.K. However, they see strong performance in markets like Australia and Latin America, particularly in Brazil, where they are gaining share.

Q:Review of Unclear Management Responses

A:Management avoided providing a direct answer on the timing of VantageScore adoption by FHFA, Fannie Mae, and Freddie Mac, citing uncertainty and prudence in their guidance. They also did not provide specific details on the potential impact of the Tri-Merge to Bi-Merge transition, emphasizing their agnosticism to the change.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

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Equifax's earnings call summary indicates a positive outlook with increased full-year revenue and EPS guidance, despite some challenges in Workforce Solutions. The Q&A section reveals strong growth in EWS non-mortgage lending and positive government vertical momentum. Although there are uncertainties, such as the federal shutdown and VantageScore adoption, the company's strategic initiatives and product innovation are well-received. Adjusted EBITDA margins are stable, and the long-term growth framework is reaffirmed. Overall, these factors suggest a positive stock price movement over the next two weeks.

EFX Slides

Equifax Q4 2025 slides: Revenue beats estimates amid AI-driven growth strategy

2026-02-04

EFX Report

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