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Wednesday, February 4, 2026 at 8:30 a.m. ET
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Equifax (NYSE:EFX) reported 2025 revenue of $6.075 billion with organic constant currency growth of 7%, finishing at the low end but within the company’s long-term 7%-10% growth objective. The Workforce Solutions and USIS segments notably drove above-consensus fourth quarter revenue, with the government and mortgage verticals significantly outperforming management’s guidance. AI-driven product innovation fueled a vitality index of 15% for 2025 and 17% in the fourth quarter, resulting in substantial new product revenue and measurable operating leverage. The company flagged significant pass-through revenue growth and margin dilution arising from zero-profit FICO mortgage score franchise expansion, an effect that is expected to double in 2026 without impacting EBITDA dollars but reducing reported margin rates. Management provided detailed 2026 guidance reflecting 10.6% reported revenue growth and 11% EPS expansion at the midpoint, with a baseline assumption of no VantageScore conversion and explicit scenario modeling for the outsized bottom-line benefits should a transition occur.
Trevor Burns: Thanks and good morning. Welcome to today's conference call. I'm Trevor Burns. With me today are Mark Begor, Chief Executive Officer, and John Gamble, Chief Financial Officer. Today's call is being recorded, and an archive of the recording will be available later today in the IR Calendar section of the News and Events tab at our Investor Relations website. During the call, we will make 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 4Q 2025 Earnings Conference Call.
Also, we'll be making certain forward-looking statements including first quarter and full year 2026 guidance, to help you understand Equifax and its business environment. These statements involve a number of risks, uncertainties, and other factors that could cause actual results to differ materially from our expectations. Certain risk factors that may impact our business are set forth in our filings with the SEC, including our 2024 Form 10-Ks and subsequent filings. During this call, we'll be referring to certain non-GAAP financial measures, including adjusted EPS, adjusted EBITDA, adjusted EBITDA margins, and cash conversion, which are adjusted for certain items that affect the comparability of our underlying operational performance.
All references to EPS, EBITDA margins, and cash conversion are references to non-GAAP measures. These non-GAAP measures are detailed in reconciliation tables which are included with our earnings release and can be found in the financial results section of the Financial Info tab at our IR website. Also in the fourth quarter, Equifax incurred a charge of $30 million related to a settlement associated with a resolution of inquiry disputes related claims. We expect costs associated with the settlement to be reimbursed by our errors and omissions insurers, with these insurance recoveries also included as one-time events when received. Moving forward, our non-mortgage results will be referred to as diversified markets.
This terminology change does not affect any change in reporting structure. Also, for your modeling, additional 2026 guidance will be posted after the earnings call in the appendix to the earnings slide presentation. Now I'd like to turn it over to Mark.
Mark Begor: Thanks, Trevor. Before I cover our results for the quarter, I want to spend a few minutes on our 2025 performance, a strong finish to the year, which gives us strong momentum for a strong 2026. Turning to slide four, Equifax delivered financial results well above both our February and October guidance with revenue of $6.075 billion, EPS of $7.65 a share, and free cash flow of $1.025 billion. Revenue was up 7% on a reported and organic constant currency basis at the low end, but within our long-term 7% to 10% organic revenue growth framework.
Despite a continued weak U.S. mortgage market that was down 7% and the U.S. hiring market which was down 2%, the mortgage market had about a 100 basis point negative impact on Equifax 2025 revenue growth. EWS delivered 6% revenue growth with 51.5% EBITDA margins, but exited the year with strong fourth quarter 9% revenue growth. This accelerating performance was led by verification services, which successfully navigated difficult U.S. mortgage and hiring markets to deliver 8% growth for the year and over 10% in the fourth quarter, with fourth quarter growth driven by both strong low double-digit revenue growth in government, which was above our expectations, and an NPI vitality index of over 20%.
The EWS team had another outstanding year adding over 20 million records to the Twin database. At the end of 2025, EWS had over 200 million active records, which were up 11%, and over 800 million total records, both big milestones for the business. USIS delivered 10% revenue growth and expanded margins 70 basis points to 35.2%. Diversified markets or non-mortgage revenue grew 5%, which is the highest USIS organic revenue growth performance since 2021 in our non-mortgage space. Mortgage revenue grew 22% and was up low double digits excluding the impact of FICO price increases as they gain share across both pre-qual and pre-approval solutions.
International delivered constant dollar revenue growth of 6% and expanded EBITDA margins almost 100 basis points. The international team made strong progress towards cloud completion, which we expect to complete by the middle of this year. International also delivered 12% vitality last year, which drove good revenue performance despite weak Canadian and UK debt management end markets. Driving new product innovation is the core to our long-term growth strategy. In 2025, with 90% of our revenue in the new Equifax cloud, we pivoted from building to leveraging the cloud and accelerating our use of AI in new products.
Equifax had another very strong year of NPI rollouts with a record 2025 Equifax vitality index of 15%, which was 500 basis points above our long-term 10% goal and equates to about $900 million of new product revenue during the year. USIS and EWS worked together to launch new products that deliver USIS credit files and leverage alternative data, including the twin indicator income and employment data in mortgage, card, and auto markets. With plans to launch similar products in the personal loan space early this year, these unique to Equifax products deliver credit, identity, and income and employment data in a single solution are gaining traction with mortgage and card lenders.
In 2025, we launched 100% of our new models and scores powered by efx.ai. These new AI models and scores drive strong incremental lift versus traditional non-AI models and scores. And we're leveraging AI to help our customers identify clear and actionable insights. In 2025, Equifax secured a spot in the AI FinTech 100 list for our new patented explainable AI technology. We now have over 400 AI patents either secured or pending, and we added over 40 new AI patents last year. In U.S. mortgage, we made great progress working with mortgage lenders and resellers towards the adoption of VantageScore 4.0, with over 200 mortgage lenders testing or in production with Vantage given the significant cost savings opportunity.
As we move through last year, we also leveraged our industry-leading cloud-native technology and efx.ai to drive operational efficiencies across Equifax through our new internal AI for Equifax initiative, which we expect to deliver cost savings, efficiencies, speed, and accuracy across Equifax in 2026 and beyond. And last, we delivered very strong free cash flow of $1.1 billion with very strong 120% free cash flow conversion. Flow was up $230 million from our February guidance. With our strong free cash flow, EWS acquired Vault Verify in the fourth quarter and also returned record amounts to shareholders.
As we move into 2026, I'm energized about our commercial momentum and our strong exit from the fourth quarter, our new product innovation, our AI capabilities, and the benefits of the new Equifax cloud. Slide five provides detail on the strength of our free cash flow and free cash flow conversion. Our growth in revenue and EBITDA and declines in CapEx as we complete the cloud are driving accelerated free cash flow. We generated $1.13 billion of free cash flow last year with a cash conversion record of 120%, which is well above our long-term framework of 95%. This is about $170 million above the midpoint of our October free cash flow guidance.
In 2025, Equifax repurchased over 4 million shares, returning $927 million to shareholders, including $500 million of purchases in the fourth quarter when our stock was weak and our free cash flow was strong. Further, we paid $233 million in dividends, resulting in a total cash return to shareholders last year of $1.2 billion. This was up 6x from 2024 and stronger than our plan for the year. In 2026, we expect to again generate significant strong free cash flow in excess of our 95% cash conversion long-term framework, which will allow us to continue to acquire bolt-on M&A and return cash to shareholders via dividends and share repurchases.
Turning to slide six, Equifax fourth quarter reported revenue of $1.551 billion was up a strong 9% and $30 million above the midpoint and $15 million above the top end of our October guidance. This strong outperformance was most significant in Workforce Solutions, where we saw strength in mortgage as well as in government, which was above our expectations, and also in USIS. The strength was principally in mortgage. Both USIS and EWS saw the stronger mortgage markets that were better than our October framework. USIS mortgage hard credit inquiries were down about 1% but were better than our expectations of down high single digits. For the quarter, U.S. mortgage revenue represented about 20% of Equifax revenue.
Diversified markets or non-mortgage constant dollar revenue growth grew over 6% in the quarter, slightly above our expectations and guidance. This was principally driven by broad-based strong execution in Workforce Solutions, driven by stronger auto, card, and debt services revenue growth, which was up low double digits, and talent, which was up high single digits. USIS diversified markets revenue was consistent with our expectations, while international was slightly weaker than expected, principally reflecting end market weakness in Canada and European debt management, despite very good performance in Brazil and Australia.
On an organic constant currency basis, revenue growth of 9% was over 200 basis points above the midpoint of our October framework, which gives us strong momentum as we move into 2026. Equifax delivered fourth quarter EBITDA of $508 million with an EBITDA margin of 32.8%, which was slightly below our October guidance. While EWS and USIS EBITDA margins were above expectations, international was at the top end of our October guidance range. Equifax overall margins were slightly lower than guidance due to higher incentive compensation, which impacts our corporate expenses. We expect incentive compensation to normalize to target levels in the first quarter as 2026 compensation targets are set at our plan for the new year.
EPS at $2.09 a share was $0.06 above the midpoint of our October guidance, and we returned $561 million to shareholders in the fourth quarter, including purchasing 2.3 million shares or about 2% of shares outstanding for $500 million to take advantage of a weaker Equifax stock price. Our strong fourth quarter revenue performance and business unit margins give us positive momentum as we move into 2026. Turning to slide seven, Workforce Solutions revenue was up a strong 9% and better than our October guidance and our expectations. Verifier diversified markets revenue growth was up 11%, which is a very positive momentum as we enter 2026.
Government had a strong quarter building off the third quarter performance with revenue up low double digits. Government revenue performed very well despite a tough comp with continued strong state-level penetration. And we had minimal impact on EWS revenue from the federal government shutdown in the quarter. Talent Solutions revenue was up high single digits in the quarter. In October, we discussed weaker hiring volumes that continued throughout the fourth quarter. Despite the weaker hiring macro, Talent Solutions continued to outperform their underlying markets driven by penetration pricing and higher hit rates from record additions and new products, including new solutions from the Total Verified Data Hub, which includes trended employment data as well as incarceration, education, and licensing data.
Consumer lending continued to perform very well with revenue up very strong mid double digits in the quarter from double-digit revenue growth in personal loans, auto, and card. EWS mortgage revenue was up about 10% in the quarter, delivering improved sequential trends from new products, record growth, and pricing. Employer services revenue was up two in the quarter despite continued weakness in our i9 and onboarding businesses from the weaker hiring market. In Workforce Solutions, EBITDA margins of 51.3% were driven by operating leverage from higher than expected revenue growth in the quarter. As mentioned earlier, Twin record additions continue to be strong again in the fourth quarter with 209 million active records up 11%.
Our 120 million total current records were also up 9%, which represented 105 million unique SSNs. 105 million individuals with current records in Twin, we have a long runway for growth towards the 250 million income-producing Americans. In the fourth quarter, EWS signed agreements with five new partners bringing our total to 16 new agreements signed during 2025. Turning to slide eight, we continue to see momentum in our discussions in Washington and with state agencies to support their plans to implement the new TITAN OB3 social service eligibility requirements.
Given our strong value proposition from Twin on the speed of social service delivery, caseworker productivity, and accuracy of income verifications, Equifax is uniquely positioned with our differentiated twin data assets and new solutions to help state agencies increase efficiency and strengthen program integrity, particularly with SNAP and CMS. Partnering with our customers, we're already bringing new innovative solutions to federal and state agencies supporting the government's goal of reducing the $160 billion of social services fraud, waste, and abuse.
In the fourth quarter, we launched our new continuous evaluation solution for SNAP, which identifies changes in recipients' incomes above program levels, enabling states to reduce SNAP error rates where nearly 80% of states today are above the 6% federal threshold. Given the strong value proposition, we've already contracted with a few states in the first quarter on our new continuous evaluation solution, with many more actively in discussions to utilize this new product from Equifax. We expect this focus on programming integrity from OB3 will be a positive tailwind for our EWS government business in 2026 and 2027 and beyond.
While OB3 related deals and revenue will likely be in the second half of the year and in 2027, the increased engagement represents positive opportunities in the near term to penetrate states not using Twin today for social service delivery. We're also continuing our positive engagement in DC with multiple federal agencies to support their efforts to strengthen social service program integrity. There are several new incremental opportunities that would drive positive future growth for EWS. This current environment is a unique opportunity for our government vertical with the big focus on improper social service payments.
EWS has significant opportunities for medium and long-term revenue growth supporting government programs in the big $5 billion government TAM for Equifax, which gives us confidence in our ability to deliver government revenue growth above the EWS long-term revenue growth framework of 13% to 15%. Said differently, we expect our government vertical to be our fastest-growing business across Equifax going forward. Turning to slide nine, USIS revenue was up a strong 12% in the quarter driven by strong mortgage outperformance. USIS diversified or non-mortgage revenue grew 5% in the quarter and was in line with our guidance.
Within B2B diversified markets, we saw very strong high double-digit growth in auto from pricing and strong volumes in auto pre-products and low single-digit growth in FI. Given the stable lending environment, we have not seen changes in customer marketing or risk management behavior. USIS mortgage revenue was up a very strong 33% and better than our expectations. While hard mortgage credit inquiries were down 1% in the quarter, these volumes were better than our October guidance of down high single digits. FICO pricing, along with growth in mortgage preapproval products, with our new twin indicator drove mortgage revenue growth for USIS.
In 2026, we expect to see share gains in USIS mortgage pre-qual, pre-approval, and hard credit inquiry products from the adoption of our new mortgage credit file with Twin Indicator and Twin Total Income products. Financial Marketing Services, B2B offline business was up low single digits in the quarter. USIS' consumer solutions business had another very good quarter, up high single digits from strong customer acquisition trends in our consumer direct channel as well as strong growth in partner revenue. Our USIS B2C business remains on offense entering into an expanded relationship with Gen Digital providing our differentiated data their engine by Gen marketplace.
Later this year, we'll also leverage engine by gen to power to provide MyEquifax consumers in The U.S. with access to expanded and personalized financial solutions. USIS EBITDA margins were 30.3% in the quarter and up over 100 basis points sequentially above the top end of our guidance range from stronger than expected revenue growth and operating leverage. Turning to slide 10. International revenue growth was up 5% in constant currency and below our expectations principally in Canada and our European debt recoveries management business. Latin America growth of 6% was led by high single-digit growth in Brazil and Argentina. Brazil continues to be a big success story for Equifax with strong above-market revenue growth from share gains.
Canada, Europe, and APAC delivered 4% growth in the quarter. International EBITDA margins of 31.6% were slightly above our October framework. Turning to slide 11, proprietary data is the foundation of our highly differentiated products and analytical and decisioning capabilities through which our customers generate unique solutions to grow their businesses and mitigate risk. Only Equifax can access our unique and proprietary data sets. The application of advanced AI in traditional IT-based analytical techniques allows us and our customers to develop solutions that are reliant on our only Equifax proprietary data.
As AI advances, we are confident we are able to generate more effective analytical solutions based on our proprietary data at an accelerated pace as well as make these advanced analytical solutions available to more customers. Slide 11 provides more perspective on the percentage of Equifax global revenue that is based on data that's proprietary and not available or broadly accessible. In total, about 90% of Equifax revenue was generated through the direct sale or through derivative products generated from our proprietary only Equifax data.
Within The U.S., almost 90% of our revenue is generated from our proprietary datasets such as the credit file, and with our twin income and employment data database which is our most unique and valuable data asset. Within USIS proprietary data assets include the consumer credit file, along with our alternative consumer credit assets like NC Plus, DataX, Teletrack, and IXI Wealth Data Exchanges. These USIS assets are proprietary to Equifax and only accessible by Equifax. Within our international businesses, proprietary data includes consumer and commercial credit as well as other proprietary data exchanges like our financial services Broad Exchange in Canada and our Australia Income Verification Exchange with data approaching 50% of the employment market.
Over 90% of international revenue is generated from proprietary only Equifax data. The proprietary and unique nature of our data is a huge asset for Equifax in this new AI environment as only Equifax can utilize the data for customer solutions and new products using our advanced AI capabilities. Turning now to slide 12, AI is fundamentally changing how we operate from technology to data analytics, products operations, and across Equifax. Our $3 billion cloud investment provides the technology platform that enables us to leverage AI capabilities across every corner of Equifax. We're driving AI deep into the organization with almost 90% of our team leveraging Google Gemini AI in their day-to-day roles.
AI is not just an add-on at Equifax, it's now part of our DNA in how we operate every day. Our cloud transformation is now delivering measurable returns across software development, operations, and business processes from lowering operational risk from fewer service disruptions that increase customers' trust and capacity for innovation and creating predictable repeatable deployments and reducing human error with 90% of our infrastructure as code. We are also getting more software output from the same engineering investment with about 1,900 Equifax software engineers using AI coding tools that have generated over a million lines of code using AI.
As we scale adoption across our broader developer population, these gains compound translating to accelerated product delivery, faster response to market opportunities, and improved return and capacity inside of our R&D and technology spend. Our Angetic AI platform is accelerating and standardizing the development deployment, monitoring, and governance of AI agents across Equifax. This is a strategic differentiator for Equifax that reduces duplicative efforts and enables build-once deploy-everywhere leverage across Equifax. We're continuing to advance our state-of-the-art machine learning capabilities that allow our data scientists to rapidly build higher predictive models and deploy them quickly as well as develop capabilities to automate model deployment to make models available faster for our customers.
Our advanced model engine also allows our data to build models using Equifax's portfolio of proprietary and patented AI algorithms. AI is also extending into Equifax's operations or back office. The first part of 2026, we're focusing on improving our customer and consumer call centers with AI-enabled and AI-assisted call processes. Our AI call center transformation demonstrates our ability to fundamentally reimagine our labor-intensive workflows, which is a template for broader workforce productivity gains across Equifax. Over the next three years, we expect to drive towards $75 million of annual cost savings from our E3 AI operations initiative. The number of new products launched using efx.ai is up 3x since 2023.
We launched our new Ignite AI Advisor in the fourth quarter. This powerful platform includes new AI-driven conversational analytics for deeper customer insights and personalized recommendations that solve a real need for customers. Following the successful U.S. rollout, we are introducing our new Ignite AI Advisor in our global markets in 2026. All new models in 2025 were built using efx.ai. Our efx.ai models consistently delivered industry-leading performance, an outstanding nearly 30% lift over legacy models last year. This big level of performance improvement demonstrates that our AI strategy is not only scaling but providing the superior predictive value required to lead in the marketplace.
In USIS, we recently launched the credit abuse risk model, an adverse actionable model that leverages AI to help lenders identify first-party fraud and credit abuse behaviors like loan stacking, particularly where traditional credit scores indicate low risk of the consumer. With this score, lenders can identify pockets of prime consumer applicants with delinquency rates as high as 29 times greater than the overall prime delinquency rate. Our new EFX cloud foundation is giving EFX an AI advantage in innovation, new products, technology development, operations, and really across every corner of Equifax. It's not a vision for the future of AI at Equifax, it's broadly in motion across our business. Turning to slide 13.
Enabled by our proprietary data and our strong momentum with efx.ai, we continue to make outstanding progress driving innovation and new products, delivering a record 17% new product vitality in the fourth quarter from broad-based double-digit performances across all of our businesses and a record 15% vitality for the entire year. We expect strong double-digit VI to continue in 2026 and be above our 10% long-term goal, leveraging our cloud capabilities to drive new product rollouts using proprietary data and efx.ai capabilities.
Last year we launched new twin indicator solutions in mortgage, auto, and card delivering twin income and employment attributes at no cost to our customers, which is a huge leveraging our cloud data fabric to create powerful new solutions for our customers. In U.S. mortgage, these solutions were introduced first, we've seen strong adoption with over 1,400 customers accessing these new only Equifax products. We've already seen strong momentum in U.S. mortgage from Twin Indicator, with major mortgage lenders, which will benefit from our new solution in 2026. In auto, we have about 100 customers piloting the new twin indicator solution and we expect accelerating adoption in auto as we move through the year.
And in card, although earlier in the product launch, we expect to see customer wins in 2026. Slide 14 provides perspective on the impact on Equifax operating results from the increase in FICO mortgage pricing over the past few years. As a reminder, Equifax profitability is driven by the sale and the value of our unique data that we sell. The FICO mortgage credit scores pass through to our customers at cost and we earn no margin on the sale of the FICO score. In 2025, FICO mortgage represented only about 3% of our total revenue. In 2026, that number will increase to about 6% or double. This drives a substantial P&L impact on Equifax.
Last year, Equifax revenue growth excluding the impact of the FICO mortgage was about 6%. And in 2026, our guidance implies revenue growth on the same basis excluding the FICO score pass-through of about 7%, which is within our long-term financial framework. As shown on the right-hand side of the slide, the increases in zero profit FICO mortgage score revenue, which has no benefit to our EBITDA dollars, reduces the reported growth in our EBITDA margin percent. 2026 EBITDA margins are reduced by over 200 basis points by the FICO mortgage royalties we pass through to our customers, with 2025 EBITDA margins also reduced by over 100 basis points.
When we set our long-term financial framework in 2021, we did not anticipate that FICO would have these dramatic price increases benefiting Equifax revenue but negatively impacting Equifax reported EBITDA margin rates. As we look at 2026, excluding these FICO mortgage impacts, our mortgage revenue growth at about 7% is inside our LTFF. Our EBITDA margins are expected to expand 75 basis points, which is 25 basis points higher than our 50 basis point long-term financial framework for margin expansion. As we go forward, we plan to share our performance excluding FICO mortgage royalties given the substantial impacts on our reported results. Turning to slide 15, our guidance assumes U.S.
GDP growth consistent with our long-term financial framework of 2% to 3% and the U.S. mortgage market to be down low single digits in 2026 compared to last year. Internationally, we're expecting economic growth to be weaker than the U.S., particularly in Canada, the UK, and Brazil. And FX is a positive in 2026 versus last year, benefiting revenue at about 50 basis points in EPS about $0.02 per share. Our 2026 guidance also assumes that all mortgage scores that are delivered will be FICO scores delivered by the three nationwide consumer reporting agencies, consistent with our mortgage scores volume to date in January. There is still uncertainty around when the FHFA will formally accept Vantage for agency mortgage originations.
We felt this was a prudent guidance framework at this stage for 2026. We continue to see strong mortgage industry momentum to move to Vantage given the sizable cost savings to consumers and the mortgage industry. And we already have over 200 mortgage lenders in production or testing our free VantageScore that we deliver with a paid FICO Scored offering. Total Equifax revenue at the midpoint of guidance is expected to be up about 10.6% on a reported basis and 10% on a constant currency basis in 2026. As discussed previously, Equifax revenue at the midpoint ex FICO is expected to be up about 7%.
Mortgage revenue is expected to be over 20% of our total revenue and diversified or non-market revenue up high single digits on a reported basis and constant dollar basis. FICO mortgage royalties in our guide are up over 2x from 2025 assuming no Vantage conversion or FICO direct score calculation by mortgage resellers. Excluding these FICO mortgage royalties from both 2026 and 2025 revenue as shown on Slide 15, you can see our revenue growth at the midpoint is about 7% in 2026 on a reported basis and constant currency basis and up almost 8% excluding the low single-digit decline in the mortgage market. Equifax mortgage revenue growth excluding FICO mortgage royalties is up mid-single digits.
EWS mortgage will continue to outperform the underlying markets by high single-digit percent consistent with our long-term goals. And USIS mortgage excluding the impact of FICO scores will outperform the market by mid-single-digit percentages as we gain share from the introduction of the Twin Report Indicator, Twin Income Qualify, and our telco utility data in mortgage products. And again, this assumes no incremental revenue or margin from Vantage Score conversions in our 2026 guidance. Diversified markets or non-mortgage constant dollar revenue growth at the midpoint of 7% is up over 100 basis points versus 2025 driven by stronger growth in EWS and USIS.
With weaker overall market conditions in international markets, we are expecting revenue growth rates in 2026 to be about consistent with 2025. John will provide more detail in a minute on our revenue growth at the BU level in his more detailed comments around our 2026 framework. EBITDA dollars are expected to grow by almost 10% at the midpoint of our 2026 guide to about $2.122 billion, up from about 5.5% growth last year. And as a reminder, there is no profitability on the sale of FICO MortgageScore by Equifax, so EBITDA dollars are the same in both the with and without FICO mortgage score revenue views.
And given there's no profit in the sale of FICO scores and mortgage, we are indifferent to TriMerge resellers calculating FICO scores under the new FICO direct model. EBITDA margins, however, are impacted meaningfully by the zero margin FICO score revenue in our reported results. Including the revenue from FICO mortgage score sales, reported EBITDA margins in 2026 would be down about 30 basis points at the midpoint. However, ex FICO, EBITDA margins grow substantially, up 75 basis points in 2026. The 75 basis point margin growth shows the leverage we are driving as we deliver high-margin data sales as well as cost savings from technology and AI operational initiatives.
EPS in 2026 at the midpoint of $8.50 is up 11% versus last year and our free cash flow of over $1 billion will deliver free cash flow conversion of at least 100%, which is above our long-term framework. Turning to slide 16, the changes occurring in the U.S. mortgage market to provide lenders SCOR Choice Vantage or FICO in 2026 is very positive for consumers, the mortgage industry, and for Equifax. For lenders and consumers, VantageScore IV provides stronger score performance at least half the cost, which is a winning combination for the mortgage industry and consumers.
As a reminder, the consumer data from the credit file is the basis for mortgage approvals by lenders and the GSEs, not the scores. Equifax is a provider of not only credit data but also unique telco and utility data with income and employment data and remains well-positioned to continue to deliver value to mortgage industry participants. Interest in the mortgage industry to move to VantageScore is extremely high. We have over 200 lenders testing our free VantageScore with pre-qual and pre-approval products through mortgage hard pull products, with over 40 principally non-GSE lenders now in production with only the VantageScore.
We are already providing Vantage historical data going back to '08, '09 to market participants both directly and through advanced analytical capabilities via our Ignite for Mortgage platform to aid our customers in the conversion to Vantage. And we're providing a free VantageScore with the purchase of any FICO score across all industry segments, mortgage, auto, card, personal loans, and insurance. In mortgage, we believe that when the FHFA Fannie and Freddie clarify the requirements for using VantageScore, and begin full acceptance for mortgage pre-review and underwriting, we'll see migrations to Vantage accelerate. The conversion of Vantage is a significant opportunity to drive margin expansion and EPS growth for Equifax.
As a reminder, our 2026 guide assumes no conversion to VantageScore in the U.S. mortgage market. For perspective and provide data for your analysis, slide 16 includes our guidance for 2026 assuming no Vantage conversion and the impact of several Vantage conversion scenarios. For example, full conversion in mortgage to VantageScore from FICO scores in 2026 would reduce Equifax total revenue guidance of $6.7 billion at the midpoint by about $270 million, would increase Equifax EBITDA by about $160 million, and increase EBITDA margins by almost 380 basis points and increase our EPS by about a dollar a share.
As we move through 2026 and there is more clarity on Vantage conversion timing, we'll update our guidance to reflect this shift and the opportunity for the mortgage industry, consumers, and of course Equifax. As a reminder, the incremental about $160 million in EBITDA impact in 2026 is with the U.S. mortgage market still operating well below 2015 to 2019 levels. And now I'd like to turn it over to John to provide more detail on our 2026 assumptions and guidance and also provide our first quarter framework.
John Gamble: Thanks, Mark. Slide 17 provides the specifics on our 2026 full-year guidance that Mark discussed in detail. The slide includes additional detail on revenue growth rates and EBITDA margins excluding FICO MortgageScore royalty pass-through revenue and expected BU revenue and EBITDA margins. EWS in 2026 is expected to deliver revenue growth of high single digits and EBITDA margins at 51.2% to 51.7%, about flat at the midpoint with 2025. Verification services revenue is expected to be up high single digits to low double digits. Mortgage revenue growth is expected to outperform the market by high single digits against a market that is down low single digits compared to 2025.
Diversified markets verifier revenue is expected to be up about low double digits again consistent with 4Q 2025, government revenue growth, particularly in the second half, when new requirements begin to be implemented as well as in auto, card, and personal loans. Talent revenue is expected to continue to outperform an expected weak hiring market. Strong twin record growth, new products, and continued growth in both pricing and penetration, particularly in government, will continue to drive verification services. Employer services is expected to grow low single digits in 2026, again despite the expected weak hiring market. Employer services revenue is expected to decline in the quarter year to year.
USIS revenue is expected to be up mid-teens percent and EBITDA margins are expected to be 32.4% to 32.9%. Excluding the increase in FICO mortgage score pricing in 2026, USIS revenue growth would be up mid-single digits at the bottom of our USIS long-term framework of 6% to 8%. And USIS EBITDA margins would be 39.6% to 40.1%, up 100 basis points at the midpoint year to year, reflecting leverage on high-margin data sales and disciplined cost controls. USIS mortgage revenue excluding the benefit of mortgage price increase is expected to grow at mid-single-digit percent rates against a mortgage market that is expected to be down low single digits year to year.
The growth is principally from share gains as customers increasingly adopt our twin and NC plus-based solutions as well as price increases. Including the impact of FICO mortgage score price increases, USIS mortgage revenue is expected to be up over 35%. Diversified markets revenue is expected to improve versus 2025 and grow mid-single digits year to year, benefiting from accelerating NPI, including twin indicator and total income-based products and share gains as they accelerate leveraging Ignite AI capabilities. International constant dollar revenue growth is expected to grow mid-single digits at a lower rate than 2025 with EBITDA margins at 28.6% to 29.1%, up approaching 50 basis points at the midpoint from 2025.
Revenue growth is below the long-term financial framework for international and 2025 growth rates, principally from weaker economic growth in Canada and the U.K. Corporate expense in 2026 excluding D and A is expected to be up low single digits versus 2025. We believe that our guidance is centered at the midpoint of both our revenue and EPS guidance ranges. As Mark referenced earlier, we expect to deliver over $1 billion of free cash flow in 2026 and a cash flow conversion of at least 100%. With EBITDA increasing to about $2.12 billion at the midpoint, we are also generating over $400 million in debt capacity at our current debt leverage.
This creates about $1.5 billion in capital available in 2026 for M&A and return of cash to shareholders. We continue to look for attractive bolt-on M&A to strengthen workforce solutions, our differentiated proprietary data assets, as well as international platforms. And we have substantial capacity for share repurchases continuing the almost $1 billion we repurchased in 2025. Slide 18 provides the details of our 1Q 2026 guidance. In 1Q 2026, we expect total Equifax revenue to be between $1.597 billion and $1.627 billion, up about 11.8% on a reported basis year to year at the midpoint. Constant dollar revenue growth at the midpoint is up about 10.6%.
Diversified markets revenue is expected to be up mid-single digits on a constant currency basis and near the low end of our long-term financial framework and U.S. mortgage revenue to be up over 30%. EPS in 1Q 2026 is expected to be $1.63 to $1.73 per share, up about 10% versus 1Q 2025 at the midpoint. Equifax 1Q 2026 EBITDA dollars are expected to be $444 million to $459 million, up about 7% at the midpoint. EBITDA margins are expected to be about 28% at the midpoint of our guidance.
As a reminder, first-quarter EBITDA, EBITDA margins, and EPS are lower than the remaining quarters of the year in large part due to the structure of our employee long-term incentive and equity plans. Due to their structure, the disproportionately large percentage of the expense of these plans for the year impacts the first quarter. Excluding the impact of FICO mortgage scores, 1Q 2026 revenue would be up 7% to 9% nicely within our long-term financial framework and EBITDA margins in 1Q 2026 would be 29.9% to 30.3%, about flat with 1Q 2025 on the same basis. Turning to slide 19, the left side of the slide provides USIS hard credit inquiry growth rates for 2015 through 2025.
We have historically used our hard credit inquiry growth rates as a proxy for U.S. mortgage market growth as they have in general tracked together. For 2026, we will continue to provide you the USIS hard credit inquiry growth rate data each quarter. However, in 2026, we believe that USIS hard credit inquiries will likely significantly outperform U.S. mortgage market origination activity due both to significant Equifax wins that we believe will increase our relative share of hard credit inquiries and also the mortgage triggered lead legislation that goes into effect in March, which we expect will result in an increase in the use of hard credit inquiries by lenders in shopping.
And therefore a reduction in prequal and preapproval usage. We will continue to use the trends that we are seeing in hard credit inquiries, which drive the bulk of USIS mortgage revenue as well as soft credit inquiries to forecast USIS mortgage revenue. The right-hand side of this slide shows the potential incremental mortgage revenue available should the market recover to average 2015 to 2019 levels. For this view, we have continued to use our historical USIS hard mortgage credit inquiries as a basis. We have also revised this slide to show Equifax mortgage revenue excluding FICO mortgage royalties and have updated the market recovery column to include the benefit of a full transition from FICO to VantageScore in mortgage.
As you can see on this basis, with a full mortgage recovery and a full shift to VantageScore at 2020 pricing levels and EWS records, Equifax mortgage revenue, which would include no FICO mortgage royalties, could increase by $1.2 billion. At our very high variable margins, this would deliver incremental EBITDA of over $950 million and adjusted EPS of over $5.75 a share. For your perspective, you determine your view of the 2026 U.S. mortgage market based on a review of Equifax data on mortgage home purchase issuances since early 2022.
We estimate that there are over 13 million mortgages with an interest rate over 5%, including about 11 million with rates over 6% and almost 8 million with rates over 6.5%. This provides a perspective on the pool of mortgages potentially available to refinance as mortgage rates change. Now I'd like to turn it back over to Mark.
Mark Begor: Thanks, John. Turning to Slide 20, as I mentioned earlier, our strong 2025 execution sets us up very well to deliver on our long-term framework in 2026. With constant dollar revenue growth of 7% ex FICO, which is inside our 7% to 10% long-term framework. Achieving our long-term revenue framework allows us to deliver EBITDA of $2 billion, up high single digits with a margin rate up 75 basis points ex FICO, which is well above our 50 basis point long-term framework. And deliver over $1 billion of free cash flow from cash conversion of at least 100% and 11% EPS growth.
We are confident in our ability to deliver organic revenue growth in our 7% to 10% long-term target range, continue expanding EBITDA to maintain cash conversion above 95%, and to execute on bolt-on M&A. And in 2026, we expect to maintain a strong return of capital to shareholders. On the left side of the slide, you see our updated EFX 2028 strategic priorities, which are principally consistent with our prior framework. However, we've updated our EFX 2028 priorities to reflect our drive to accelerate our use of AI both internally and externally to drive efficiencies and cost savings for Equifax and bring new and improved products to market quicker that deliver greater lift and performance for our customers.
Wrapping up on slide 21, Equifax executed very well last year against our EFX 2028 strategic priorities inside a challenging economic backdrop with a stronger second half and fourth quarter, which gives us some momentum as we enter 2026. Our new cloud-native infrastructure is already providing competitive advantages of always-on stability, faster data transmission speeds, and industry-leading security for our customers, and importantly, Equifax resources and technology product DNA are leveraging the new Equifax cloud for innovation, new products, and growth.
We're using our new single data fabric efx.ai and Ignite our analytics platform to develop new credit solutions powered by clean indicators like verticals like mortgage, card, and auto that only Equifax can provide, which is leading to share gains and growth. We're also broadening our product sets in key verticals like government, talent solution, and identity and fraud. The Equifax team is fully focused on growth and innovation. Given our strong free cash generation, we are also delivering on our commitment to return substantial excess free cash flow to shareholders.
As mentioned earlier, in 2025, we returned $1.2 billion to shareholders, which was well above our guidance for the year, and in 2026, we expect to have $1.5 billion available to invest in bolt-on M&A like our 2025 Vault Verify acquisition and return substantial cash to shareholders through share repurchases and dividends. The new Equifax is investing in technology, efx.ai, and proprietary data assets to help our customers grow and deliver returns for our shareholders. I'm energized by our momentum as we enter the New Year, but even more energized about the future of the new Equifax. And with that, operator, let me open it up for questions.
Operator: Thank you. We will now be conducting a question and answer session. Our first questions come from the line of Jeff Meuler with Baird. Please proceed with your questions.
Jeff Meuler: Yes, thanks. Good morning. Mark, loud and clear, you've been front-footed on AI, both from a product and productivity perspective, and it sounds like you also have an AgenTeq AI platform in-house. Obviously, you have a massive data advantage in employment and income today. I know it's still relatively early on AgenTeq AI, just how do you think about the applicability of AgenTeq AI to the employment and income business given that a lot of the market is still manual, I guess, both from an opportunity or a potential risk perspective?
Mark Begor: Yeah. Thanks, Jeff. First off, the Equifax moat around data is very high. Whether it's our twin income unemployment data or our other credit data, our data is proprietary and over 90% of our revenue comes from proprietary data. What that means is no one else can access it. You know, when you think about credit data or in your question, income and employment data, the income and employment data comes from either payroll processors or individual companies, and that's also walled off. So the only way to access that is on a permissioned basis or in an aggregated basis like we have that's proprietary. So we think that there's a real moat around it from a data perspective.
With regards to using AI in workforce solutions, we're doing a lot around our employer business where we, as you know, deliver regulated services to HR managers, things like i9 validations for new employees, unemployment claims management, work opportunity tax credit. We see big opportunities both in how we deliver those services from an AI perspective to the HR managers and their teams, but also how we actually complete the processes, you know, using AI in the paper processing to really drive productivity, speed, and accuracy. We're seeing a lot of opportunities there. And we talked, you know, in my comments earlier, between AWS and USIS.
This has really happened in the last six months as we've been applying AI off of our new cloud platforms inside of Equifax. We're seeing big opportunities for productivity, speed, and accuracy in our operations by using AI call centers, paper processing, in workforce solutions as you referenced. To really drive efficiencies and productivity really quite substantially. And we talked about over the next couple of three years in the neighborhood of $75 million of productivity from those efforts on internal operations. So we're quite energized around the use of AI. The investment we made in the cloud gives us a platform now across Equifax where we can really deploy it inside of Equifax.
And back to the first point I made in obviously a topical point with what happened in the markets yesterday, you know, we have a lot of confidence around the moat that's around our data broadly. That really protects us from someone else using AI to try to disintermediate us. You know, we have the data, and as you know, you can't do AI without data. And when you have proprietary data, you've got the ability to really protect that and really deploy it in a very effective way.
Jeff Meuler: Very helpful. And then overall margin, let's good to me normalized for FICO, but any additional perspective on the EWS margin outlook just any specific investments or headwinds things like the rev share on data partnerships or anything like that? Thank you.
Mark Begor: Yeah. And we're pleased. I'm pleased, Jeff, that you are. I hope others are that we're gonna try to be transparent around the increasingly large impact that the FICO pass-through has on our reported results. And that's why going forward, we'll share with you what our particular margin rate impact is, which is quite substantial. And we're pleased with our guide of 75 basis points of margin expansion. I think that's a big number. You know, it's 50% above our long-term framework. It reflects the operating leverage in the business and, you know, some of the cost actions that we're taking, you know, driven by AI inside of Equifax.
With regards to workforce solutions, you know, those EBITDA margins north of 50% are very attractive. You know, we think a lot about continuing to invest, and we are, in workforce solutions to maintain those margins because they're so accretive broadly to Equifax with our long-term framework, EWS growing faster than the rest of Equifax. And with those 50 plus percent EBITDA margins, you've got a lot of accretion, you know, to our margin rate, and they generate a lot of EBITDA dollars. So we are continuing to invest there. We talked a little bit in our comments about some of the new products we're investing in, particularly in government. Like the continuous monitoring solution.
Twin Indicator is a new solution that's a product between AWS and USIS. So, you know, investing in new products, investing in new tech, investing in some of the AI capabilities inside of Equifax and workforce solutions on how they deliver solutions like in the employer business as part of the investments. And, you know, we continue to invest in the acquisition of records and investing in our commercial team. So maybe a long-winded answer to say, we like our 50 plus percent EBITDA margins.
Our goal is to maintain those, which we've been doing quite consistently, you know, while continuing to invest in the business to drive that kind of double-digit long-term framework revenue growth that is, as we all know, quite attractive at the 50 plus percent EBITDA margins.
John Gamble: And as Mark covered, just in the total Equifax long-term plan. Right? Again, it's to hold those EWS very high margins and have them outgrow the rest of the company to add accretion, continue to drive USIS margins up, which you're seeing in our guide, continue to drive international margins up which you're seeing in our guide. And then also to get leverage corporate expenses that are outside the BUs, which again, I think you're seeing in what we guided for 2026. So I think 2026 is very consistent with our long-term model and something you should expect to see from us consistently going forward.
Jeff Meuler: Got it. Thank you.
Operator: Thank you. Our next questions come from the line of Toni Kaplan with Morgan Stanley. Please proceed with your questions.
Toni Kaplan: Thanks so much. And thanks for all the information around the FICO impacts and spelling out the different scenarios in the slides. I was hoping I know your guidance is assuming 100% FICO score sourced through the bureaus. Just maybe flush out sort of the hurdles that sort of get you like, get the lenders and resellers to being able to use Vantage. What are what's still remaining and what's the timing on what those could be to get resolved?
Mark Begor: Yes, that's a great question, Toni, and a tough one to answer. The timing element of it. As you know, the real hurdle that's left, the significant hurdle that's left is the FHFA as well as Fannie and Freddie, you know, completing their work, you know, from a technology and, you know, planning process in order to allow for the adoption and the implementation of the VantageScore. That's really the big hurdle. Our intel is that it's, you know, underway, meaning it's gonna be imminent. It's hard to handicap when that is. And we just thought it was prudent, you know, for given that's uncertain when that's going to happen to put the guide out that we did.
We also talked about there's a lot of energy in the marketplace with our customers, you know, number one, adopting our free Vantage Score for doing their own testing internally about VantageScore versus the FICO score, which is actually well known. You know, as you know, Vantage is widely adopted in the non-mortgage space. So we've got good adoption there. We've got a couple of lenders that are non-agency, you know, a handful of lenders that have made the conversion because of the cost savings and performance and gone to full Vantage. They're smaller mortgage lenders for sure, but they're not the Fannie and Freddie, you know, conforming mortgages.
So it's really a matter of when does that work complete, you know, by both agencies, you know, we're collaborating with them, you know, around that. And as it unfolds, we think there's energy in the marketplace to drive conversions once that gets green-lighted and you're available to submit a mortgage, you know, using Vantage.
John Gamble: Also wanted to be clear in the presentation around in terms of the FICO direct model, which I know there's a lot of discussion around that. And, again, to us, we're indifferent in terms of operating profit. Right? Our level of operating profit generation is the same whether we sell the score or not. Because as Mark made clear that there is no margin pass-through to us. So should that occur, it doesn't affect our operating result our operating profit, yes, revenue would be lower. But it's, again, it's zero margin revenue. So we think we're in very good shape for that transition as it occurs or if it occurs.
And then obviously we're in very good shape when Vantage transition occurs.
Toni Kaplan: Great. And looking at government, I think there's a big opportunity there with OV3 and this year as well as next year. You just talk about the momentum that you're seeing there versus prior quarters? Like if the getting closer and closer to having to hit those error rate targets, is impacting the states' behavior? And is there a large season like, a large quarter for you for government? Like, is there seasonality that we should be aware of? And just anything in terms of momentum in that part of the business? Thanks.
Mark Begor: Yes. It's a great question, Toni. It's one that we're quite energized about and we're putting a lot of effort into given this unique environment that really started a year ago when came in and there was a large focus or increased focus at the federal level and now at the state level. Around the improper payments. And OB3 that was passed in July is a big catalyst for that.
And what it's resulted, I think we've been clear that a lot of the OB3 specific requirements, you know, will have, we believe, revenue impact for us, meaning positive revenue in the second half of the year and into '27 when some of those requirements, you know, have a start date in the, you know, in the states. But what the OB3 is driven and this focus on improper payments and some of the focus on error rates or the increased focus and penalties from the error rates above the federal thresholds is a very, very broad-based engagement with each of the states that we haven't seen really in the history that I've been here.
Meaning, the states are focused on it. They know that they have challenges. If they don't, you know, take actions to drive some of the integrity in the programs, and we've just seen an uptick in commercial activity. And I think you've seen the business really have some sequential improvement in the third and again in the fourth quarter, which we're pleased with. They were above our expectations of what we characterize as kind of normal state penetration commercial activity that is probably, you know, driving, you know, some increased commercial discussions or commercial engagement, you know, because of the focus on improper payments that's so strong.
And because the states know that there's these new requirements coming later in the year and in 2027. So we're really pleased with the engagement at the state and federal level. And the federal level is a very, you know, obviously, a big, big opportunity for us with the IRS and some of the other agencies. Who aren't using our data today, which we think there's real opportunity. So we expect this business to be stronger in 2026 and 2025? As you know, '25 was impacted by some of the changes made in the Biden administration. Around cost sharing of data.
You know, that was challenging for some of the states that air pocket that we had is behind really from a comp standpoint, which I think is positive. And then you just got some real commercial momentum. And the other thing we talked in our comments and with Jeff a minute ago is that, you know, AWS is investing increasingly in new products, you know, to aid in broadly in the delivery of social services like continuous monitoring and things like that we weren't doing before. So that's another catalyst for us as we move into 2026.
Toni Kaplan: Great. Thank you.
Operator: Thank you. Our next questions come from the line of Andrew Steinerman with JPMorgan. Please proceed with your questions.
Andrew Steinerman: Hi, Mark. I wanted to think a little more about Slide 11 and proprietary data. When you look at your most sophisticated clients in terms of their use of AI, are these clients consuming more or less data from Equifax and why?
Mark Begor: Yeah. It's first off, it's more. And we're the only place you can get scale data. At a proprietary basis in the set of datasets that we have. Think about our credit file's proprietary. TU and Experian also have one. They're proprietary. No one else has the scale of that data, and no one else can get to it. Obviously, a bank is gonna have or a financial institution their own internal data for their clients when they're trying to acquire new clients and they're also trying to understand what kind of debt does their consumer have in other financial institutions. You have to come to one of the three of us for that.
Add to it the cell phone utility database that we have is only Equifax. DataX, Teletrack, only Equifax. The IXI dataset is proprietary at only Equifax. And then, of course, the Twin database, you know, if you wanna get payroll data, you're gonna come to Equifax or you're gonna have to go to an individual on a consumer-consented basis companies don't share payroll data. Just broadly in a weighted scale. So that's another proprietary dataset. To your question, you know, around the data macro, there's no question that this is for years. There's been a macro of all of our customers wanting more data in order to broaden their decisioning.
And as you point out, some of them are using their own AI and ingesting our proprietary data assets but we're increasingly using our AI to deliver those solutions because we have the scale data assets. So, you know, the moat around our data is very high. It can only be accessed by Equifax. Or by our customers, you know, when they're buying the data from us. You know, that's just it's got a it's got a very high moat around it and, you know, we think the combination of that moat around the data in our investments in Equifax AI capabilities. We mentioned on the call, we've got 400 explainable AI patents. We added 40 more in 2025.
So we're expanding our capabilities to leverage our proprietary data assets with AI in order to deliver those higher-performing scores, models, and products.
John Gamble: And even smaller and mid-sized financial institutions we've delivered technology that lets them ingest our data easier. Right? So one score, right, integrates a substantial amount of our credit alternative data, which and it makes it easy for a mid-sized financial institution to access more information using our scores and to drive greater usage. And we're seeing that absolutely occur. And the AI advisor that Mark talked about now being launched is supposed to make that even easier because we'll be able to help them create new credit policies more rapidly using our agent to capabilities that will again help them ingest more data more quickly using AI Advisor as well as OneScore.
Andrew Steinerman: Makes sense. Thank you.
Operator: Thank you. Our next question has come from the line of Shlomo Rosenbaum with Stifel.
Shlomo Rosenbaum: Hi, thank you very much for taking my questions. Mark, I just want to ask you a little bit more about the mortgage lenders that are testing or in production with VantageScore. Are you able to discuss what are the size of some of those mortgage lenders and FICO talked about their direct to lender, they're a, you know, the top. It top five of the resellers. Where are you with the really heavy users of, like, you know, resellers and lenders in that? And then just in general, are you planning to spend a lot more money this year just marketing the Advantage score and helping your clients test it?
Is that you know, an item that you're absorbing into your margins?
Mark Begor: Yeah. So on the first half of the question, you know, there's clearly given the cost difference between FICO and Vantage, there's a lot of energy around, you know, the testing and utilization, you know, of Vantage. As we've said, you know, we've got, you know, a number of large as well as a large number of customers that are taking advantage of the free VantageScore delivery so they can, you know, work on their systems on how you how you would, you know, bring in a second score and also looking at the performance of that VantageScore.
And we mentioned that there are a number of smaller recognizably, but smaller lenders that have made the conversion, but they're not in the Fannie and Freddie space. But they've gone from FICO to Vantage. So there's no question that there's a, you know, real interest in it, and we think it just a matter of when do when does the FHFA, you know, authorize the ability, which they, you know, said they're going to do last July to bring the VantageScore in, and we think there'll be a and it'll obviously take time, but there's definitely a lot of enthusiasm there.
With regards to, you know, marketing and costs, you know, we're obviously, you know, working with our customers to support them. I think, you know, part of the marketing effort was to offer the free VantageScore with every paid FICO score not only in mortgage but in the other spaces. So that's one that we're putting commercial effort behind as well as marketing effort.
Of course, any of our expenses associated with that which are I would characterize as not meaningful, but in our P&L and in our guide, you shouldn't expect us to do, like, TV advertising or something, but you know, we're clearly incenting our commercial teams to work with our customers, you know, around this to use the VantageScore at half the price of the FICO score and really drive that conversion as soon as it becomes available and working hard to prepare our customers.
We're also delivering, you know, data on VantageScore performance, you know, going back to '08, '09 to our customers, so the risk teams can look at the performance which is very clear in the datasets that we have. So that's another element that we're doing to help support our customers as they evaluate the Vantage. As John pointed out, you know, from a, you know, a guide perspective, we put guidance in place assuming there's no conversion. We thought that was prudent because we don't know when it's gonna be greenlighted, you know, by the FHFA. And if there is conversion, it's only upside. To us. There's not any downside to it.
And fundamental to that is that we sell the credit file that's used to calculate the FICO score. And we sell the credit file that's used to calculate the Vantage score. And of course, as we said a couple of times in this call and it's well understood, when we sell FICO, you know, that $10 is a full pass-through with no margin on it. But we make full margin on the credit file that we sell because you can't calculate the FICO or VantageScore without our credit data.
Shlomo Rosenbaum: Just a question if I can follow-up with John. Just on that selling the credit reports, it seems like from the guidance that you're taking the full hit of a pass-through from the FICO score, not marking that up it doesn't look like there's much of a change in the cost of the credit reports to offset that. Am I understanding that correctly?
John Gamble: So you're talking about we indicated excluding the pass-through of the FICO revenue, would be up mid-single digits. So you should compare that against the market that's down low single digits. So doing that math, that's high single digits ish, right, type of outperformance relative to the market. Which we think is relatively good. And relatively good relative to the other segments in which we operate. So that reflects certainly some price increase. It also reflects share gain that we're driving and we expect to see from Twin Indicator and the other only Equifax products that Mark would have already talked about.
And there is also a little bit of headwind built in there related to what's going on with triggers, right. So as trigger legislation comes in our expectation is you'll see an increase in hard pulls, but some reduction in soft pulls, and that could have a slight impact on our revenue. So we did the best we could to bake all those things in, but we think growing in that, you know, mid to high single-digit range, x the FICO score is a really nice outcome for our mortgage business.
Mark Begor: Well, it's also our long-term framework. Yep. You know, our long-term framework is to grow organically seven to 10 and in USIS, six to eight, you know, in there. So, you know, we have our mortgage business ex FICO kind of in that range, which we feel good about, and we think you should too.
Shlomo Rosenbaum: Thank you.
Operator: Thank you. Our next question has come from the line of Manav Patnaik with Barclays. Please proceed with your questions.
Brendan Popson: Hey, this is Brendan on for Manav. I just want to follow-up on some of the mortgage market commentary. Because obviously, in the last couple of years, kind of saw the opposite trend where there is a lot of shift to prequal, and you guys have, you know, taken some share there as well. So it sounds like you think there'll be a reversal of that? So I guess just clarify, what's going on in the ground there. And then also just to be clear, it sounds like you're saying the originations will be down low single digit. That's not the inquiries you the hard inquiries you actually think would be better than that.
John Gamble: Sure. So on your last point, generally, we're talking about hard inquiries and that's generally the way we guide. Now admittedly, we did indicate that we think we're gaining share there. So that we have to kind of net out the share gain when we're coming up with a view of the market. But our down low single digits kinda reflects what we think inquiries would be doing absent the share gain that we're driving and absent some of the shift related to trigger legislation. And you know what's going on with trigger legislation I'm sure you're familiar with it. Right?
We just we think we're gonna see some customers choose to purchase a hard pull earlier in the marketing cycle as opposed to purchasing soft pulls since those hard pulls now cannot be shared with other lenders, so that they have an opportunity to market to the customer that's applying for the loan. So we think every customer is gonna do it. We still think there is we've seen growth continue. In soft inquiries and prequal and preapprovals. But we think this legislation is probably gonna result in some incremental adjustment where you might see a little more hard pull relative to soft pull for certain customers who choose to move to purchasing hard pulls earlier in the mortgage cycle.
Brendan Popson: Okay. And then on the twin indicator, you're launching that kind of across the board obviously, it's already in market in some areas. But I guess, where should we think of the biggest incremental opportunity across your different product lines?
Mark Begor: Well, certainly in mortgage. You know, mortgage is the largest FI vertical. It's one where income and employment is used in every origination. Along with credit. And we've talked many times that the way the market historically worked is, you know, you pull a credit file upfront, but you don't have any visibility of that applicant, you know, is working or what their income employment characteristics are because that's typically done later in the process. And that's why we launched the Twin Indicator really last summer. We're seeing great traction with mortgage originators.
We're offering it, I think, you know, for free, you know, with our credit file, not only in mortgage, but auto and card and we'll do it in personal loans this year also because it's really gonna differentiate, we believe, our credit file and drive some credit file share particularly in the mortgage space and that prequal application space that'll aid lenders in their kind of marketing funnel to really differentiate, you know, what kind of loan or will a consumer, you know, close because they'll now have visibility, you know, around their employment, a range of income for them that they didn't have before.
So we're seeing, you know, some really good traction there and what it should result in and we're seeing some beginning traction there is share gains. You know, when there's a one b poll, you know, in the mortgage prequal area, we want it to be an Equifax file because we're offering that differentiated data at no charge. Which we think will advantage us from a share perspective. And think about that same opportunity in auto, which would be kind of the next big vertical then we're also seeing some traction in card. You know, same reasons, you know, historically, you know, card originations have always been done just on someone's credit profile.
But you don't know if that credit profile supports someone with the capacity to repay or if they're employed. By adding the twin indicator, it just drives that decision higher as a card originator, you can approve more at a lower loss rate. And if we're doing it for free, which is our business model, to drive share gains, you know, we're seeing some traction there too. So we're super energized around the twin indicator, which is a great example of, you know, the kind of solutions we can bring because of the breadth of our proprietary and scale data.
Brendan Popson: Alright. Thank you.
Operator: Thank you. Our next question has come from the line of Faiza Alwy with Deutsche Bank. Please proceed with your questions.
Faiza Alwy: Yes, thank you. I wanted to follow-up on the government vertical. So one is, it sounds like you're saying the business for diversified markets will be up low double digits. So one, I'm curious what you're embedding for the government vertical growth. And then I guess as you're having these conversations with various states and agencies, what are some of the factors that they're focused on? Sort of how important is, you know, pricing as a consideration, and if, you know, some of the funding issues that we saw with some of the states, you know, seem to have resolved.
Mark Begor: Yeah. Government that, you know, as you know, has had a long track record of very strong growth through 2024. Kind of the five years prior, it had a CAGR of over 20%. So it's been penetrating into that large $5 billion TAM which is principally at the state level. And as you know, what we're delivering to states is, you know, speed of social service delivery because it's done instantly versus a manual verification of income eligibility. We're delivering productivity for the caseworkers at the state level, which is a very strong value prop. Then we also deliver integrity meaning it's very current. It's dated, it's from last week's paycheck, you know, so it's a very current dataset.
And that growth penetration is really because of those three value props and that hasn't changed. It's south of around $700 million of run rate revenue, a little north of that in our government vertical versus the $5 billion TAM, our commercial team's focus is, you know, on those states and agencies. It's really agencies. That are still doing it fully manually. And when you think about a $5 billion TAM, in our business, you know, at, you know, less than 20% of that, there's a long runway for growth as we work with the states. To your question around, you know, what are why are why isn't it $3 billion business?
You know, we think it will be over time. There are challenges around technology around process flow change. And as you point out, there can be challenges around budgets, you know, in states. We deliver a very, very high ROI. We deliver a big ROI on caseworker productivity, you know, meaning they can cover more individuals that are coming after social services. But we also deliver a huge ROI payback, you know, on the improper payments. And as you know, the federal government pays for social services, you know, with the states delivering it, and, you know, over the last year, they've really quantified the improper payments as being a massive number of $162 billion.
So that's the incentive at the federal and state level. And what changed in the last, call it, twelve months is the passing of the OB3 bill that put more teeth into the requirements that the states have to deliver those social services. Meaning they have to use more verified data, they've got to do it more frequently, today, there's twelve-month redeterminations, it goes to six months. In 2027. All those actions are really putting teeth around addressing the $162 billion and it creates opportunity for Equifax and workforce solutions. So we were pleased to see the kind of above expectation revenue growth from call it, state penetration that's where it happened in the fourth quarter.
Was some of that in the third quarter and we expect that to continue in 2026. And then you've got, you know, kind of the macro of the OB3 requirements that go into place later this year and into 2027 and beyond. A lot of those conversations are happening now about how do I get prepared for that.
Because of the incentives or penalties perhaps you wanna call it, that are embedded in OB3 for states that don't take these actions they're now gonna have massive cost sharing or cost shifting from the federal government to the states where the states are going to be required to pay for a large portion of the social services if they don't get their error rates down. So that's been a real catalyst for an increase in conversations which gives us confidence in this vertical going forward.
And as we've said a couple of times on this call, it's our expectation that this vertical government will be our fastest-growing business not only in workforce but across Equifax going forward because of the uniqueness of our data set and our solutions and because of the ROI value we deliver to the agencies when they utilize our data.
Faiza Alwy: Great. Thank you. And then just to follow-up on the mortgage, and correct me if I'm wrong, I think you're guiding mortgage to low double digits ex FICO in the first quarter. And mid-single digit for the year 2026. So just curious like is that conservatism? Are you assuming higher rates? For the remainder of the year? Or what's behind that assumption?
John Gamble: It's really it's really related to the way the mortgage market and overall mortgage revenue moved in 2025, right? You saw improving levels as you moved through the year. So when you do year-over-year growth rates, they just look a little different than a flat level of performance relative to a consistent level of performance in each quarter. That's all that's happening.
So the run rates that we're seeing today relative to where the first quarter was last year actually results in a little better mortgage performance in the first quarter as you move through the year if that run rate is maintained what you'll find is that you'll see the growth rates decline as we go through the year and that's what it reflects.
Faiza Alwy: Understood. Makes sense. Thank you.
Operator: Thank you. Our next question has come from the line of Ashish Sabadra with RBC Capital Markets. Please proceed with your questions.
David Paige: Hi, good morning. This is David on for Ashish. Just following up on the government vertical I was wondering if you could talk about some of the pricing trends you've seen or expect to see in that vertical? I understand the three value prop that you're providing. Seems strong. There was a letter sent by some of them senate senators regarding pricing. And then as a follow-up, was there any updates to the tried merge to buy merge?
Mark Begor: Yes. On the first question, we have modest price increases at the government vertical. We don't price is not really a lever for us. We really think more about penetration. In the last year, we've gone to more subscription models in government in order to, you know, help a new state get used to using the service, you know, and really help them in the adoption of our solution. So we don't think about price as being a big lever for us and it's not one that, you know, is central, you know, where we have multiple levers in workforce solutions. It's when you think about government penetration is such a huge one.
We focus on delivering the right value in return for our customers. Product is a big one as we roll out new solutions. Last year we rolled out a consumer-consented solution in government to go after some of the gig individuals who are going after social services that might have a w two job and be in our data set, but we don't have income. So we've got that in market now and we talked about our new monitoring solution that we're rolling out and we're seeing some real traction with that. So product is a big one. And of course, record additions are a big positive in this business and unique to Workforce Solutions.
When we add new records and we added five more partners in the fourth quarter and 12 last year. In workforce solutions that really drives higher hit rates. So you've got a lot of levers for growth regards to your second question, of the buy merge, try merge, obviously, there's still some noise around that. Everyone we talk to understands whether it's the mortgage industry, you know, our customers, you know, or, you know, on the hill or with the agency they understand the large differences between the three credit files from TU, Experian, and Equifax, and why a tri merge is so important.
Now number one around access to credit, you for example, there's 10 million consumers in The U.S. roughly that are only on one credit file. If you don't pull all three, you might not be able to approve that consumer, you know, in a mortgage which is federally guaranteed. With the intent of expanding access to housing with the federally guaranteed support. So from an access to credit and getting a complete picture on the consumer, the tri merge is super important. And there are all kinds of studies that have supported that.
And then from a safety and soundness, same thing, you know, if you went to pulling, you know, one or two of the credit files and instead of three, you may not pick up all the trade lines, and there could be trade lines that are either positive that help the consumer or negative that say there's more risk with that consumer and that's why we think TriMerge is well embedded as an important tool for theMark Begor: underwriting of consumers' mortgages.
And frankly, the most sophisticated lenders in The United States outside of mortgage, you know, pull TriMerge for cards, they pull it for auto, they pull it for personal loans for that same reason because they get a more complete picture of the consumer and it really drives their ability to approve more at lower losses, but also make sure that they're managing their loss profile from an underwriting standpoint.
David Paige: Thanks so much.
Operator: Thank you. Our next question has come from the line of Jason Haas with Wells Fargo. Please proceed with your questions.
Jason Haas: Hey, good morning and thanks for taking my questions. I'm curious if you could talk about your philosophy and how you're thinking about pricing the credit file. I guess, we know the price for this year, but for next year and going forward, can you talk about how you're thinking about that? And I guess, particularly for mortgage.
Mark Begor: Yes, I think it's the same in mortgage and non-mortgage. We do price increases every year in all of our products. And across whether it's workforce solutions or USIS or across our business. We generally do those on one-one. We think about those as being reasonable and modest, you know, compared to, you know, to what FICO has done, it's obviously public, you know, doubling their price that we don't do doubling a price and we have lots of relationships with our customers which is why, you know, I would characterize it we're balanced around price and will continue to be balanced going forward.
Jason Haas: Got it. That makes sense. Very helpful. And then I wanted to focus in on talent, which I thought was a bright spot. Even despite the soft tire markets. Can you just reiterate what drove the strength there? I mean, how you expect that to trend going forward? Thanks.
John Gamble: Yes. So our talent business is really heavily driven by not only our twin data, continues to perform well and we continue to increase penetration but we also have a broader set of products including in education around incarceration, right, that is that are also expanding. So I think the way we continue to outperform that market, which as you saw BLS was down low single digits. We grew obviously much stronger than that up mid to high single digits.
So very good performance on our talent business is really driven by continued performance on the team of continuing to build penetration with our income-based products and then also expand consistently our education and other products including incarceration which also continue to grow. So nice very nice performance by the team in a very tough market.
Jason Haas: That's great. Thank you.
Operator: Thank you. Our next question is come from the line of Kevin McVeigh with UBS. Please proceed with your questions.
Kevin McVeigh: Great. And congratulations on the execution. It's obviously a lot of moving parts out there. I guess just a little bit higher level. I mean, seems like there's really no changes to the longer-term framework, right, despite a pretty meaningful shift from FICO. So is the offset you're able to lean into the AI a little bit more to drive more rev? I mean, see it in the vitality index. Is that driving more revenue and expense management or other parts to the business you're helping offset that? And, you know, obviously, there'll be some shift as VantageCore starts to kind of season a little bit.
But just any thoughts on the model overall just given you know, pretty dynamic shift in FICO?
Mark Begor: Yeah. FICO is one that obviously is just a no-margin pass-through for us, you know, and it's very sizable now, which is why we to spike it out, and we will do going forward because it's such a big piece of our revenue. And, yeah, it's zero calories. You know, when we sell a FICO score, you know, we just pass that through. And, you know, we're gonna do that. You know, the performance of the business, we're pleased with. We're pleased with our revenue guide and, you know, for 2026 with a mortgage market that's, you know, down slightly again, you know, we had hoped that inflation would come under control and the rates would move down.
Obviously, they've ticked back up, which has put some pressure on the mortgage market. But to have a 7% ex FICO guide, which is at the lower end of our long-term framework ex the mortgage market, you know, I think we're something closer to 8%. We feel good about that and when you look at the three businesses versus their long-term framework against the seven to ten, having EWS in that low double digits think is a big, big positive moving forward. As they return to their long-term growth rate. USIS performing well both mortgage and diversified markets are non-mortgage and then same with international. So, you know, what's driving that?
I think it starts with our unique and differentiated data. And, you know, as you point out, you know, we've had a big focus obviously investing in our technology, but our technology is now enabling us to deliver more innovation and more new solutions. We think that's accretive and supports our growth rate. And the fact that we have our vitality index last year 50% above, you know, our long-term framework of 10% is really good. Because that's momentum as we go into '26 those new products. And you look at some of the new products we're rolling out that a year ago we weren't talking about with you, we weren't doing because we were still finishing the cloud.
You know, like the twin indicator. You know, that is a we think a really powerful solution. We're offering it at no charge to our customers to drive share gains for our USIS credit file. And as you know, the next credit file we sell is very high incremental margins. So we're pleased about that. With regards to the margin, ex FICO of 75 basis points, you should be pleased about that. We are that's 50% above our long-term framework of 50 basis points. That's really positive. It's going to drive double-digit EBITDA growth and EPS growth which is going to drive our free cash flow.
We're really pleased about that and that's really driven by the pure operating leverage that we have with a very high fixed cost structure. So our next product sale, our next credit file sale, or twin indicator sale or, you know, twin data sale is very high incremental margin. So that operating leverage is very high on revenue growth. And then as you point out, we're driving really in the last six months, the second half of last year, a big focus on using AI inside of Equifax to drive productivity, speed, accuracy, customer service.
But on the productivity side, we laid out that, you know, we've got a plan for 75 odd million of cost saves over the next couple of three years from a lot of AI deployment inside of our back office. So I think that's a real positive. So, you know, we're excited about the business and, you know, really the performance in momentum coming out of last year. But then, our kind of outlook for 2026 we're pleased with.
Kevin McVeigh: Very helpful. Thank you.
Operator: Thank you. Our next questions come from the line of Kelsey Xu with Autonomous Research. Please proceed with questions.
Kelsey Xu: Hi, good morning. Thanks for taking my question. Some of your peers have called out the improvement in the underlying post-consumer credit supply-demand dynamic. I was wondering if you can talk a little bit more about what you're seeing there in terms of just volume growth outlook for card, auto, and personal loans? Thanks a lot.
John Gamble: Yeah. The market is still quite solid. We talked about the mortgage market. We tend to talk about that from a market standpoint because it's so impactful and it's been a negative for quite some time because of the high-interest rates. Going to the other verticals and they're solid. Some of the activity is kind of below still pre-COVID levels but there's still attractive. And then there's a question earlier around kind of the data macro, that's a positive for us as well as our ability to use AI to deliver higher-performing products and solutions. Our customers from an origination standpoint are still originating. You know, there's no change.
We don't see any, you know, kind of behavior around people thinking about slowdowns or recessions, but they're after more data. Which is a positive for us. They're after higher-performing scores and models and we talked about some of the big lifts we're delivering now with our AI-generated scores and models and those become positive for us to penetrate in with our customers because we're delivering higher-performing solutions. But your question on the markets, like our customers are strong, meaning financially, the banks and financial institutions. And broadly, the consumer is in good shape because they're still working and spending. So, you know, that's a positive for us.
Mark Begor: So we're seeing FI for us has been good. You look at online, we're seeing nice mid-single-digit type of performance. Auto really strong, which I know Mark talked about in his comments. Insurance was very strong. We're seeing double-digit type of movements there as well, so very, very strong. And for us really across these segments, fintech is performing extremely well. So that's an area of real growth for us where we're seeing very good performance that's helping us across each of those segments that I referenced. So overall, we think our performance in USIS, especially as you look at online, is very good.
Kelsey Xu: Got it. So second question, understanding that you are EBITDA agnostic on the cycle direct program, but it does impact revenues. So just curious to hear what you're seeing in terms of TriMerge resellers' adoption or pickups for the FICO direct program? And your guidance, I think, implies a 0% penetration rate for this program. So just once again, more of your thoughts behind that assumption.
Mark Begor: Yeah. I think we said in our comments, there's zero CRA reseller score calculation so far this year, meaning in January. We know there's dialogues going on between the CRA resellers and the CRA TriMerge resellers and FICO. I think FICO talked about that on their call maybe last week I believe they said that they didn't see this happening until maybe the second half, but meaning that the resellers being prepared to do it, going through the approval process, etcetera. But, you know, really, we tried to say in our comments earlier that we're kind of agnostic whether we calculate the score or the TriMerge reseller calculates the score.
Because if they calculate the score, we're gonna sell them the credit file. You know, at our full price. And then, presumably, they're gonna have to pay FICO $10 for the score. Whether they pay the $10 to FICO and calculate the score or we do it, we're kind of agnostic because, you know, it has no margin impact to us. Meaning, we don't get any margin when we sell the FICO score. We get the margin when we sell the FICO credit, I'm sorry, the Equifax credit file. So, you know, how that'll unfold is tough to handicap. What the incentives are? Why a reseller would want to calculate the score?
Is, you know, I think something they're trying to figure out, meaning, how are they gonna make incremental margin for investing in the score calculation. If they're paying a full price to FICO and a full price to Equifax, I think that's challenging. But we're agnostic, you know, and we're gonna be, you know, collaborative, you know, with our customers, which are the TriMerge resellers to help them in ways that make sense if they decide they want to do it because there's really no P&L impact to us, meaning, and we think about P&L as our EBITDA, our EPS, and our free cash flow, it's neutral to us whether we calculate the score or not.
And, again, because of that uncertainty, we opted to have a guide that said there's gonna be no CRA score calculation in 2026, and, you know, there's gonna be no vintage conversion. You know, I don't think either of those are true, but it was the best guide that we could put together, and we thought, you know, putting those scenarios in place for you helps you think about if there is a conversion, what it means to Equifax. And we'll be super transparent, you know, every quarter on what activity we're seeing or not seeing, you know, on both of those fronts. You know, so we can share with you.
And then you've got enough information so you can make your own assessments of, you know, how you think gonna unfold going forward. But, you know, between the FHFA and Fannie and Freddie's decisioning, and timetable being uncertain and the same with the CRA TriMerge resellers. We thought that was the right guidance to put in place for Equifax.
Kelsey Xu: Super helpful. Thanks a lot.
Operator: Thank you. Our next question is coming from the line of Scott Wurtzel with Wolfe Research. Please proceed with your questions.
Scott Wurtzel: I just wanted to go back to the EWS margins. And just with sort of this assumption around new kind of government revenue from these benefits coming in, in the second half of the year. Should we assume that there could be like a ramp in EWS margins as we move throughout the year? Thanks.
Mark Begor: Yeah. So I think John said it, and I said it in a different version. We like our 50 plus percent EBITDA margins in EWS. Our goal is to maintain them. In our long-term framework, because they're so accretive from a free cash generation as well as the overall Equifax margin rates, which are so powerful. And, you know, we're making investments to keep that top line at EWS, which is also accretive to Equifax. You know, going, whether it's around new products, you know, new technology, we're investing in AI. I talked about some of our product delivery in the employer business. New products that we're rolling out.
So we're going to keep that balance of investing in AWS to keep their top line double-digit top line growth over the long term going. While still balancing maintaining those 50% plus EBITDA margins. For overall Equifax, obviously if they're growing faster that's part of the accretion, it's in our 75 bps expansion this year. And then the operating leverage in the rest of Equifax helps drive that 75 basis points, which we're very pleased with that's well in excess of our 50 basis point framework over the long term.
Scott Wurtzel: That's helpful. Then just a quick follow-up just on sort of your outlook on international and sort of your assumptions around the macro and key geographies. I know you called out some weaker economic growth prospects, I think, in Canada and The UK, but I know there's also been some macro volatility in Brazil as well. So just wondering if you can kind of give sort of high level, you know, macro assumptions in your key international geographies that's sort of underpinning guidance this year. Thanks.
Mark Begor: Yeah. I think it's well recognized the Canadian and UK economic macro challenges. Just to contrast in The UK, we performed well in our CRA business, very strong performance even in a weak market. The debt management business where we do a lot of debt recovery analytics, you know, was under pressure in The UK. Canada is clearly has got a challenge from the tariff conversations that's happened really over the last year. We expect to see that be pressure for that business, but we expect better performance in '26 and '25 out of Canada. Australia, fairly stable, and we've seen, you know, good performance in our business there. Latin America broadly, in good position.
There are some Brazil economic conditions, but we've had very strong performance in Boa Vista our acquisition we made a couple years ago. Is where we're gaining share there. So we would expect that business to perform well again in 2026. So, you know, international, we've got kind of framed out at the lower end of their long-term guidance of seven to nine. Principally for some of the underlying economic weaknesses in some of the markets.
Operator: Thank you. Our next question has come from the line Craig Huber with Huber Research Partners. Please proceed with your questions.
Craig Huber: Great. Thank you. My first question, you said several times today and in the past that you're agnostic if a FICO score was sold through Equifax or the resellers and so forth. Obviously, you're agnostic because you've raised the price of your credit file for mortgages and the associated fees to offset that, which is fair. I mean, it's must-have data if you wanna originate a mortgage out there and stuff I'm curious on two fronts there. What has the reaction been to the price increase to your credit file significant price increase there in the mortgage market? What's been the reaction out there?
And is there any learnings there about that reaction there that you could potentially about raising prices more aggressively in other markets credit cards or maybe auto more importantly? That's my first question. Thank you.
Mark Begor: Craig, your comments really accurate. Around what we've done with the credit file. And I think there's some misconceptions out there about what was marked up or what was not marked up. From our perspective, we've always been selling a credit file and a credit score, you know, for years. And that credit file, you know, included the FICO score, you know, where we pass through the cost of the FICO score. So, you know, from our perspective, we haven't had a large increase in the credit file in 2026, and we haven't in the past. And we've shared that in prior investor meetings.
You know, we passed through the FICO credit score, and you know, I would tell you that there's, you know, a lot of, you know, consternation in the marketplace, meaning with mortgage originators around a FICO credit score going from 495 to $10. You know, that's just the reality. You know, that's not, you know, we didn't we didn't take our credit file price up anywhere near, you know, in a 100 miles away from that kind of a price increase. So that's really been the focus of the conversation. And, you know, what's the learning for us?
You know, is we're gonna continue to have very modest increases on our credit file going forward, we would not do those kind of large price increases and we're we're we've not done them in the past.
John Gamble: And as a reminder, we added a twin indicator, we added NCTUE data to our credit file. Right, with that modest price increase. So we not only had a modest price increase, we also made the information we're delivering more rich. Right? So a better product with a modest price increase.
Craig Huber: Sorry. Just to be clear on my end. So where did you exactly get the extra money to make up for the loss that you're no longer getting a margin on the FICO score that you were selling before?
Mark Begor: We never we did again, is a narrative that was created by, you know, really FICO. We never had a margin on the on the FICO score. And I think we've been very clear on that. We sell a credit file and that credit file cost is what we've been delivering to our customers and then we pass through a FICO score. Last year was four ninety five, and we passed that through. It was very clear to our customers and this year it's $10 and we're very clear to our customers on that period.
Craig Huber: Okay. And my last question if I could, your vitality index of 15%, just talk real quick if you could about the AI-enhanced products or new products that you're very excited about here. That's a big number.
Mark Begor: There's a bunch. I had them in my prepared comments earlier. And a lot of around scores and models around risk underwriting, credit underwriting, we're seeing, you know, big 10, 15 kind of lift in performance, which is massive. So those higher-performing scores using more data, you know, from our differentiated datasets deliver higher performance for our customers. So we're seeing share gains. We call that, you know, one score is one of our products that pulls together all of our differentiated data that we rolled out last year, and we're seeing a lot of take there. We're also seeing in identity and fraud really the same thing.
By ingesting more identity and fraud data assets, we're seeing higher, you know, hit rates or higher performance rates on our identity solutions or higher pass rates. So that's been a real positive. So scores and models really big deal. We talked about some of the additions we're making in our adding AI capabilities to our Ignite analytics platform to make that, you know, more functional, more usable, you know, for large, but particularly medium and smaller lenders. So it's easier to use Angetic AI around those product solutions. It's really quite broad-based on, you know, the energy we have around AI.
It as you point out, our 15% vitality last year or 17% in the fourth quarter, obviously, we ramped through the year. A lot of that is being driven by our differentiated data that's really proprietary to us. And then second, our use of AI. And as I mentioned, you know, on the call, we continue to invest in our explainable AI capabilities with 40 more AI-related patents that we filed in 2025. I think that's a great kind of indicator of our investments to, you know, to drive our industry leadership around using AI to deliver our differentiated data to our customers.
Craig Huber: Great. Thank you.
Operator: Thank you. Our next questions come from the line of Zach Lasich with Feet Partners. Please proceed with your questions.
Zach Lasich: Hi, thanks for the question. Despite no impact to EBITDA or EPS, is there an assumption built into the revenue guidance on what percentage of mortgage volumes will move to the direct model for FICO? And any color on how the brokers have been thinking about the direct model and the option for the performance pricing would be greatly appreciated. Thanks.
Mark Begor: Yeah, I think we said earlier in our comments and there was a question a couple of minutes ago on that one that our assumption in our guide is that there's no Vantage conversion and there's also no CRA reseller or tri-merge originator so-called direct model using FICO's term score calculation. And we haven't seen any of that in the first so far in the first quarter, meaning in January. And our conversations, you know, with, you know, those, you know, kind of TriMerge resellers is, you know, there's no dates we can see, you know, call it in the first quarter, don't see any of that happening.
And just as a reminder again, for probably the fourth or fifth time on this call, we're agnostic to that. Because there's no P&L impact to Equifax. Or benefit for the customer. You know, for the TriMerge resellers calculating the score, you know, we're gonna sell our credit file at the full price to them, and then they'll buy the FICO score presumably for $10, you know, from a FICO and then sell that once they start doing it. It's hard for me to see what the benefit is of reseller doing it, but, you know, that's why we put our guide together because there's no indications that's, you know, has any certainty about when gonna happen.
There's also some questions about what kind of approvals would have to be completed by the regulators. Around someone else calculating the score and that likely means time. But again, just to be crystal clear, we're agnostic. You know, if the TriMerge resellers and FICO decide they wanna calculate the score, we're cool. It has zero impact on Equifax P&L, meaning EBITDA EPS, and free cash flow. It'll clearly impact our revenue because someone else will calculate the score but when, you know, the zero calorie revenue, we're agnostic to that. So, you know, we'll see how it unfolds, and we thought we gave the right guide of assuming none of that happens.
I think that guide is likely wrong because there'll likely be some activity at some point. But it's impossible for us to handicap when that'll happen. But the Equifax bottom line, you know, is not impacted by that change.
Operator: Thank you. Our next question comes from the line of Arthur Truslow with Citi. Please proceed with your questions.
Arthur Truslow: Hi there. Thank you very much for taking my question. So just sort of following on from that. Just wanted to clarify in simple terms. If what we're saying is that you are calculating the credit score for mortgages using the FICO algorithm, are you able to say whether the sort of contribution in dollars per mortgage inquiry is gonna be higher, lower, or the same in 2026 relative to 2025? Thank you.
Mark Begor: It's higher.
John Gamble: Yeah. There's no question. We'll make more margin dollars because we took up the price of our credit file, and John kinda gave a framework of what that increase looked like. So we'll have higher margin dollars. Our revenue obviously is impacted by the FICO score going from four ninety five to $10 because that's the pass-through that we have, but our margin dollars on mortgage by selling the FICO credit score are clearly gonna go up. Now the margin rate is impacted just by the math, but the margin dollars are what you and I should care about.
And, you know, we've given a framework for overall Equifax margin dollars being up low double digits broadly in the business and this is one of the elements that drives that.
John Gamble: Just to reiterate, just if the score if there's a if the score is sold by the CRA, or if the score is sold by Equifax, our EBITDA, EPS, and cash flow are unchanged. Right? Doesn't matter. Right?
Arthur Truslow: No. Thank you. And the second question I had just sort of following up from that. When you produced your long-term framework for USIS, did you assume that you were gonna, you know, benefit from an organic growth perspective from FICO very significantly raising prices every year. Of course not. Or not?
Mark Begor: Of course not. No. This was done back in 2021. When we put that long-term frame in place, I think the FICO score was like $0.55 and we expected which they had for kind of the decade before that to them, they would do modest price increases. You know, which was in our long-term framework. You know, think about, you know, kinda mid to high single digits, something like that was in our long-term framework. Obviously, changed dramatically and that's why we've, you know, opted to spike out the FICO impact because it's so significant, you know, in our reported results. And give you better visibility around the underlying performance, which was always there.
You could always look at our EBITDA dollar change. And, of course, we set as a framework a margin rate of 50 basis points per year, but that clearly did not assume that there'd be this kind of FICO price increase which is why going forward, we'll show it to you with and without. FICO. Again, you should and we're really pleased with the operating leverage of 75 basis points ex the FICO pass-through. That's quite strong and one that we're really pleased with.
Arthur Truslow: Brilliant. Thank you very much.
Operator: Thank you. Our final question will come from the line of Simon Clinch with Rothschild Co. Redburn. Please proceed with your questions.
Simon Clinch: Hi, thanks for fitting me in. Mark, I was wondering if you could help us think about quite an important question today, all the ruptures we've seen in the market. With the application of AI, to alternative datasets, beyond your own proprietary sets, is there any situation where the value extracted from that data reduces the relative value that you extract from your proprietary data sets. And thus, make some marketing more competitive in that front. That's definitely a question that, you know, I think a lot of people ask these days. Thanks.
Mark Begor: Yeah. It's clearly we've been swept into a neighborhood we don't think we live in, you know, where AI could disrupt or disintermediate our business. I think the scaled data assets we have are unmatched. You know, there's no way to, you know, get to the kind of credit data we have or something that has the same predictive elements of our proprietary credit data. Our alternative data, the income and employment data we have, and the fact that it's not publicly accessible, you know, by third parties through any kind of AI tool. You know, pick the dozens out there that are creating very sophisticated that can access public market data, they can't get to ours.
So I think that's a big part of the Equifax moat around data. To your question, I think you were heading towards is, you know, what other kinds of data that might be accessible from a public standpoint, you know, could replicate, you know, what we do today, and we don't see any. You know? You can't get credit data in the public market. You can't go out to the web and, you know, really aggregate that kind of data. You can't get payroll data. You can't get, you know, income and employment data.
It's just that those kinds of datasets are proprietary to proprietary, the contributors that are giving us that data, you know, that data is a proprietary environment in their world. Think about the 20,000 financial institutions that contribute data to us, you know, every month, you know, they've got a walled garden, you know, around their data. It's not accessible, you know, same with income and employment data, you know, the 4.8 or 9,000,000 companies delivering payroll data to us either directly or through a payroll processor or HR software company, you know, that's a walled dataset that's not accessible from an AI tool in any way.
So, you know, we think obviously what happened in the last twenty-four hours in the broader industry around AI concerns of disintermediating businesses that principally, in my view, you know, rely on public market data. We're not in that neighborhood, but we've been swept into it. So we'll work to continue to communicate to our investors around the Equifax moat around our data, which we think is big and tall. And one that, you know, we think is gonna be long-term sustainable. And only Equifax can use the data for our customers when we authorize them to do it. In order to use that data in any way.
Simon Clinch: Really useful. Thank you, Mark. And I think just as a follow-on to that, I mean, as I'm thinking particularly long-term here, but do you see the value of a credit score maintained in an environment where AI is producing a lot more value and insight from even your own proprietary data? I mean, is there a situation where VantageScore, the value of VantageScore to the market as a whole goes down while the value of your underlying data goes up?
Mark Begor: Well, we think the underlying data is always the linchpin. You can't calculate a score without the data. And remember, like, Vantage only can calculate the score because we own Vantage along with TU and Experian. We use that Vantage algorithm on our data. So like a third-party AI algorithm can't calculate a score because it has no data. You know, the only way to do that is to have access to the data and obviously, we control, you know, who uses our data and how it's delivered. So in my view, with all the data we have only gets more value.
And as you know central to our strategy is to continue to add more data, either organically or through acquisitions and we've done acquisitions of, like, PayNet, DataX, Teletrac, you know, we've done a number of acquisitions to add more data into our proprietary dataset. And, you know, to me, I think what's fundamentally missing in the market today is that, you know, investors need to understand you can't use AI without data. And if you fundamentally believe that Equifax data, in our case, is proprietary, that's a pretty big mogul. Because the only ones who can use AI on our data is Equifax.
Simon Clinch: That's great. It's really good to hear you say that. Thank you.
Operator: Thank you. We have reached the end of our question and answer session. And with that, I'd like to turn the floor back over to Trevor Burns for some closing comments.
Trevor Burns: Yes. Thanks, everybody, for your time today. Appreciate it. If you have any follow-up questions, you can reach out to Molly and I. Otherwise, have a great day. Thank you.
Operator: Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. Please disconnect your lines at this time and enjoy the rest of your day.
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