Equifax Q2 2026 Earnings Call Transcript

Equifax (NYSE:EFX) held its second-quarter earnings conference call on Tuesday. Below is the complete transcript from the call.

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Summary

Equifax Inc reported strong Q2 2026 results with revenue of $1.7 billion, an 11% increase, and adjusted EPS growth of 13%, beating April guidance.

The company signed $300 million in state government contracts, indicating strong commercial momentum and a long runway for growth in government services.

Equifax plans to acquire Circulo de Credito in Mexico for $750 million, expected to be accretive in the first year and align with their strategic focus on international expansion.

Equifax's AI initiatives are expected to double cost savings from $75 million to $150 million by 2028, enhancing operational efficiency and margin expansion.

Management reaffirmed 2026 guidance, expecting over $1 billion in free cash flow and continued shareholder returns through buybacks and dividends.

Full Transcript

OPERATOR

Greetings and welcome to the Equifax second quarter 2026 earnings call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I'd now like to turn the call over to your host, Mr. Trevor Burns, Senior Vice President, Investor Relations.

Thank you, sir. Please go ahead.

Trevor Burns, Senior Vice President, Investor Relations

Thanks and good morning. Welcome to today's conference call. I'm Trevor Burns. With me today are Mark Begor, Chief Executive Officer, and John Gamble, Chief Financial Officer. Today's call is being recorded. An archive of the recording will be available later today in the IR Calendar section of the News and Events tab at our Investor Relations website. During the call we will make reference to certain materials that can be found in the Presentation section of the News and Events tab at our IR website.

These materials are labeled 2Q 2026 Earnings Conference Call. Also, we'll be making certain forward-looking statements including third 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 2025 Form 10-K and subsequent filings.

During this call we will be making certain non-GAAP financial measures including adjusted EPS, adjusted EBITDA, adjusted EBITDA margins and cash conversion which are adjusted for certain items that affect the comparability of our underlying operational performance. All references to EPS, EBITDA, EBITDA margins and cash conversion are references to non-GAAP measures. During the second quarter we recorded a $40 million charge, net of insurance proceeds, for a legal settlement associated with a resolution of claims related to a previously disclosed coding issue.

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

Mark Begor, Chief Executive Officer

Thanks, Trevor, and good morning. Turning to slide 4. Equifax delivered strong results in the second quarter with revenue of $1.7 billion, up 11% on a reported basis and 10% in constant currency, which was $5 million above the April guidance. Excluding FICO mortgage royalties, reported revenue was up about 7%. We also delivered very strong margin performance, driving strong EPS growth of 13%. Organic diversified markets constant-dollar revenue grew about 5.5% in the quarter and better than our expectations, principally in Workforce Solutions, benefiting from strong execution in Talent Solutions and consumer lending.

EWS government revenue declined slightly in the quarter as expected due to a tough 2025 comp. We were very pleased with the commercial execution in government during the first half, signing principally state government contracts that bring the total in the last four months to about $300 million — about $100 million of the new business that will principally benefit 2027 and $200 million of contract renewals. This is a strong indicator of the unique benefit our proprietary TWN data provides to government customers and the long runway for government against their $5 billion TAM.

USIS diversified markets revenue was slightly better than we expected, accelerating over 300 basis points sequentially, and International revenue was slightly lower than we expected at up 4%, principally reflecting market weaknesses in Canada and the UK. US mortgage revenue was up 25% in the quarter and up 7% ex-FICO. This was stronger than our expectations against a weaker than expected US mortgage market from higher interest rates. During the quarter, US mortgage rates increased meaningfully, with the current 30-year fixed rates up 30 basis points to about 6.6% versus the 6.3% when we gave guidance in April.

As a result, we saw overall industry transaction volumes run below our expectations that were offset with new products and some share gains. US macroeconomic conditions remain relatively consistent with the environment we saw in April. The ongoing Middle East conflict has resulted in continued higher levels of inflation that has disproportionately pressured the lower income or subprime consumer demographic. Despite these inflationary pressures, low unemployment continues to support overall consumer health.

Continued high employment levels have acted to limit more broad-based credit impacts which gives lenders the confidence to continue originating loans. We have not seen financial institutions increase their portfolio management reviews or decrease consumer credit lines which are actions they would typically take when they anticipate an economic downturn. The Equifax team is leveraging the power of AI to expand our margins and free cash flow through accelerating growth of high-margin proprietary database products and driving operational productivity through accelerated AI deployments across Equifax.

Second quarter EBITDA of $552 million was up about 10.5%, with an EBITDA margin excluding FICO of almost 35%, up a very strong 120 basis points year to year and 40 basis points above the midpoint of our April framework. EBITDA margin expansion was well above our 75 basis point target for 2026 and 70 basis points above our 50 basis point long-term financial framework goal. The strong EBITDA margins were driven by operating leverage and AI-driven cost productivity, principally in operations.

Equifax reported EBITDA margins, including the impact of FICO, were 32.5% in the quarter, flat with last year. EPS at $2.25 per share was up a very strong 13% and 5 cents above our April guidance midpoint. Equifax returned $366 million to shareholders during the quarter, including repurchasing almost 1.8 million shares, or over 1% of shares outstanding, for $300 million, taking advantage of the lower Equifax stock price, and Equifax paid $66 million of dividends in the quarter after increasing our dividend by 12% in February.

Over the last 12 months ended June 30, Equifax has returned over $1.6 billion of cash to our shareholders, or 100% of our operating cash flow. We continue to expect strong free cash flow in the future of over $1 billion in 2026 and cash conversion to continue at over 100%. With our financial capacity of over $1.5 billion, we can execute the Circulo de Credito acquisition while maintaining a strong balance sheet with debt leverage at under three times EBITDA and while continuing to repurchase shares in the second half, but at a slower pace than the first half.

Equifax continued its strong execution against our EFX 2028 strategic priorities, as listed on the right side of slide 4, with several big milestones during the quarter. We further accelerated our implementation of AI generative capabilities across our global analytical decisioning and operational platforms. In the first half of the year we launched 54 new products that have AI capabilities directly embedded in the product architecture, which directly benefit our customers and contributed to our strong 16% Vitality Index in the quarter.

We also expanded the deployment of AI tools and agents across Equifax in internal product and model development, operations, technology, and our G&A support functions. The pace of AI adoption inside Equifax is accelerating rapidly, which allows us to double our AI for EFX productivity goal from $75 million to $150 million from 2026 to 2028. We know we are in the very early innings of our deployment of AI and generative automation inside Equifax, both on enabling new products based on our proprietary data and driving speed, accuracy and productivity across every corner of Equifax.

In the second quarter we delivered a very strong 16% new product Vitality Index leveraging the Equifax Cloud and EFX AI capabilities. New products based on differentiated proprietary data, including our TWN Indicator solution, continue to drive strong new product growth and share gains. We were energized to sign a definitive agreement two weeks ago to acquire Circulo de Credito, the fastest growing credit bureau in Mexico, for an enterprise value of $750 million with a very attractive EBITDA multiple of 9.4 times including run-rate synergies.

Turning to slide 5, Workforce Solutions revenue was up 7% and better than our expectations, principally in Verifier diversified markets, which grew 7%. EWS diversified market revenue growth was driven by outstanding performance in Talent Solutions and consumer lending, both up high double digits in the quarter. Talent Solutions continues to outperform the underlying white-collar labor market with strong growth in employment-based solutions and increased product penetration across our incarceration and education data sets.

New solutions built co-innovating with background screeners and pricing. Talent volumes were up mid single digits in the quarter relative to an overall market decline in the first two months of the second quarter. The team continues to execute very well. Consumer lending also had another very strong quarter with strong double-digit revenue growth across the portfolio in auto, card, and consumer finance, principally due to strong volume growth and new product rollouts.

As mentioned earlier, the EWS government team delivered an outstanding quarter, signing about $300 million in principally state customer agreements in the last four months including renewals, win-backs and new customer wins. This is a very strong performance and reflects the unique TWN position in government and strong commercial momentum post OB3 legislation that was signed last July. The contract signings were a positive and stronger than our expectations.

Second quarter government revenue was down about 4% and reflects a challenging comp from a large win in 2025. EWS mortgage revenue was up 8% in the quarter and continues to outperform underlying market volumes by high single digits from record growth, new products and pricing, and Workforce Solutions. EBITDA margins of 52.1% were consistent with the first quarter. However, margins were higher than we expected given strong operating leverage from better than expected diversified markets revenue performance.

TWN record additions continue to perform well again in the second quarter with strong 10% growth in active records, up to 217 million total records and 124 million total current active records, which were also up 10%, which represents 108 million unique SSNs. EWS has a long runway for record growth against the 250 million income-producing Americans. Turning to slide 6, in the first half we made outstanding progress with our government customers, converting our record commercial pipeline with renewals, extending existing relationships and adding new principally state government customers.

In the last four months, EWS signed agreements with state agencies for the provisioning of income and employment data from Equifax supporting CMS and SNAP totaling about $300 million in annual contract value, including about $100 million in new business and $200 million in renewals, an extremely strong result that will deliver some benefits in the second half but principally drive 2027 growth. These substantial contract signings, along with our current deal pipeline up about 2.2x versus last year, reinforces our confidence in the medium and long-term growth opportunities for EWS government at the federal level and in supporting states in meeting the new OB3 federal requirements regarding accuracy and frequency of income validation in Medicaid and SNAP. On slide 6 we provided examples of some of the recent government wins including An almost $60 million annual contract value win-back supporting a state in delivering CMS benefits. The win-back is a key proof point of the value of the TWN data relative to other sources of income verification data including state wage data and consumer-permissioned data. We're also seeing expanding opportunities with multiple federal agencies in support of their big focus on reducing improper payments. Equifax is serving as a key advisor at the federal and state level, leveraging our differentiated income and employment data to drive speed, accuracy, and productivity of social service benefits delivery.

The EWS team is clearly on offense supporting the states with their social service program requirements and has significant opportunities for long-term revenue growth supporting the federal and state programs in EWS. Big $5 billion TAM. Turning to slide 7, USIS second quarter revenue was up a strong 17% and up 6% excluding FICO, inconsistent with their long-term framework. This performance was delivered despite a weaker than expected U.S. mortgage market that I discussed earlier.

Diversified markets revenue grew 6%, accelerating over 300 basis points sequentially and slightly stronger than our expectations. B2B revenue was up 5% and also up over 300 basis points sequentially. Within online, we saw high single-digit growth in FI from stronger volumes, new business and pricing, and high single-digit growth in AUTO from pricing and new business wins. The strength in FI and AUTO was partially offset by weakness in third-party bureau sales from our sales to Experian and TransUnion consumer direct.

Our D2C business delivered continued strong growth with revenue up a very strong 11%. USIS mortgage revenue was up 40% and up mid single digits excluding FICO, with hard mortgage inquiries up only 1%. As I referenced earlier, mortgage rates were up from the levels we saw in April throughout most of the quarter, and as a result mortgage origination activity was lower in the second quarter than the levels we expected when we gave guidance back in April, partially offset by share gains in Pre-Qual and Pre-Approval products.

As a reminder, USIS began to deliver significant share gains in the second quarter of last year from both Pre-Qual and Pre-Approval products that included both the unique TWN indicator in our NC data. USIS EBITDA margins were 32.8% in the quarter. Excluding FICO, USIS EBITDA margins were 40.5% and up over 140 basis points versus last year, which was a very strong performance. The improvement was driven by stronger diversified markets revenue growth and good cost management.

Turning to Slide 8, in April, the FHFA activated use of VantageScore for over 20 mortgage lenders. This was a big milestone to bring score competition to the mortgage industry. While the vast majority of these mortgage lenders have begun using VantageScore, we have also seen a groundswell of VantageScore adoption with about 1,200 additional mortgage lenders pulling our free VantageScore alongside a paid FICO score from Equifax. On the left side of Slide 8, you can see that our second quarter VantageScore volume is up almost 3x compared to the first quarter.

The vast majority of the 2.2 million transactions were pulled by the 1,200 lenders pulling a free VantageScore alongside a paid FICO score as they drive their adoption of the new VantageScore opportunity. We also have about 100 mortgage lenders, principally smaller non-GSE lenders and lenders underwriting HELOCs or home equity loans, who have moved to exclusively utilizing VantageScore at our $1 price point for their mortgage originations. Although volumes remain low at about 10,000 transactions in the quarter, we saw significant acceleration as we moved through the tail end of the quarter.

And as a reminder, we make no margin on the sale of FICO scores. FICO mortgage scores revenue is about 50% of USIS mortgage revenue and almost 7% of total Equifax revenue, delivering zero margins. We continue to expect strong adoption of VantageScore given the substantial $1 billion annual cost savings opportunity for the mortgage originators and consumers. Equifax plans to maintain the $1 VantageScore price through the end of 2027 to continue driving VantageScore adoption with our customers.

The FHFA decision in July last July to allow mortgage score choice between VantageScore and FICO is a big win for consumers and for the industry. Turning to slide 9, international revenue was up about 4% in constant currency. International saw high single-digit revenue growth in Asia Pacific and mid single-digit growth in Canada. Latin America and Europe delivered low single-digit revenue growth in the quarter. International saw market headwinds in both Canada and the UK which dampened their growth rates.

In LatAm, we saw solid mid to high single-digit growth in our largest markets like Brazil, Chile, and Argentina, with lower growth rates in some of our other smaller Latin American markets. International EBITDA margins were 27.6% in the quarter, up a strong 120 basis points versus last year. EBITDA margin improvements were driven by technology savings as the final stages of our cloud tech transformation gets completed and strong cost management. Moving to slide 10, two weeks ago Equifax signed a definitive agreement to acquire Círculo de Crédito for an enterprise value of $750 million.

This represents an 11.7 times EBITDA multiple based on Círculo's expected 2026 EBITDA. With the addition of expected run-rate savings, the EBITDA multiple is expected to be about 9.4 times, which is attractive and significantly below our current EBITDA multiple. We expect the Círculo acquisition to be completed in the fourth quarter, subject to customary closing conditions and regulatory approvals, and for the acquisition to be accretive in year one.

Círculo is the fastest growing credit bureau in Mexico and the only credit bureau licensed to operate both a consumer and commercial credit bureau service. With more than 1,700 bank, retail, fintech and small business lending, microfinance and telecommunications customers, and importantly, 2 billion trade lines covering 80 million validated identities in Mexico, Círculo is a leader in alternative data, or information not included in traditional credit reports in Mexico, including gig economy transactions and utility payment history.

This alternative data can responsibly expand access to credit and support a more inclusive economy, critical in a country where nearly 33 million people are engaged in informal employment, such as unregistered microbusinesses or gig employment. This acquisition will offer Círculo customers access to Equifax's industry-leading cloud-native capabilities, decision and analytic platforms, and patented EFX AI technology, and award-winning identity protection and fraud prevention offerings for the development of solutions designed to help their customers grow and expand financial inclusion in Mexico.

The acquisition fits perfectly in our balanced capital allocation framework, with our focus on highly accretive bolt-on acquisitions while continuing significant ongoing return of capital to shareholders and maintaining our strong investment grade balance sheet. Turning to slide 11, Círculo's unique market position has delivered very strong financial results. Círculo's compound annual revenue growth rate was a very strong 23% from 2023 to 2025, with revenue growth for the 12 months ended June 30 up a very strong 31%.

Círculo revenue growth has been led by their unique alternative credit data advantage enabled by deep relationships with fintechs, with over 40% of Círculo's 2025 revenue generated from fintechs with a growth rate of over 50%. Círculo's unique alternative data and the team's strong relationships with their fintech customers are a key driver of future Círculo revenue growth. In a market where consumer credit is underpenetrated and growing rapidly, Círculo delivered very strong mid-40s adjusted EBITDA margins in both 2025 and over the last 12 months through June 30th.

For the full year of 2026, Círculo revenue is expected to grow high double digits while maintaining very strong mid-40s adjusted EBITDA margins. The very attractive Círculo financial results are accretive to the Equifax long-term financial framework of 7% to 10% organic revenue growth, consistent with our capital allocation plan and driving shareholder returns. Turning to slide 12, Equifax is executing a broad AI and agentic strategy that leverages EFX AI along with our cloud-native technology, our Ignite analytics platform and our scaled proprietary data to deliver higher-performing EFX AI-powered scores, models and products to our customers.

Equifax has a strong AI data moat around Equifax's unique and proprietary data, with over 90% of Equifax revenue generated from proprietary data sources included in over 100 unique data exchanges globally. These exchanges receive contributed proprietary data directly from the data owners that is not publicly available, such as our income and employment exchanges, credit exchanges, alternative credit data exchanges and other unique proprietary data assets.

Said differently, only Equifax and our credentialed customers can access our data. The use and protection of our data has another layer of moat from both the national and local laws that restrict the data's usage and by agreements with our contributors, including requirements regarding the accuracy and currency of this data and the requirement to provide consumers in the 24 countries in which we operate these exchanges with the ability to review and dispute the data managed in these unique Equifax exchanges.

For example, in the U.S., our EWS income and employment data, our broad credit and alternative credit data exchanges are not only governed by the agreements with the contributors but also by the U.S. Fair Credit Reporting Act, or FCRA. The contributory nature of this proprietary data and the complex regulatory and contractual compliance requirements that govern our data, along with the coverage and historical data these exchanges contain, create the strong data moat around Equifax's proprietary data.

Through our industry-leading technology, EFX AI capabilities and proprietary data, Equifax is accelerating a strategy to utilize AI and agentic capabilities to improve our customers' ability to utilize Equifax data and advanced technology to improve their decisions. By incorporating more data and more effective AI-defined algorithms using patented capabilities that deliver explainable results to our customers, we are expanding from being a provider of data and analytics to being an essential partner for the AI-powered decision intelligence that our customers are driving.

We are realizing this vision through a growing suite of global EFX AI-enabled solutions. In the first half of the year, we rolled out 54 new products that leverage these EFX AI capabilities that drove our strong 16% Vitality Index. This includes the commercial launch of Ignite AI Advisor and Equifax IQ on our integrated Ignite analytics and InterConnect decisioning global platforms. Ignite AI Advisor is a multi-agent system that delivers AI-driven, real-time personalized insights and actionable recommendations delivered through our natural language user interface to our customers.

Lenders can ask questions through a generative AI chat, with complementary visual dashboard illustrations and dynamic charts and graphs. This enables our customers, particularly those with limited in-house data and analytics staff, to easily compare information, discover new trends and drive more informed decisions to drive their growth and returns. For example, we have customers identifying missed opportunities to capture business from existing customers who have loans with another bank or FI, and customers comparing payoff and paydown speeds against competitors to determine if their rates and terms are competitive to drive application conversions and growth for their business. This solution is now being used by U.S. customers in auto, personal loan and credit card to pinpoint new opportunities to improve their portfolio performance, and is expanding to Canada in the third quarter with further global expansion through the balance of 2026. Complementary to Ignite AI Advisor, Equifax IQ is a multi-algorithm AI system that allows customers to transition policy management from a manual, rigid process to an AI-driven, multidimensional optimization engine.

Equifax IQ uses EFX proprietary data and customer-contributed data to help our customers better understand new market opportunities, grow their business with the right customers, reduce fraud and confidently extend more credit. It also delivers portfolio overviews, delinquency analysis, affordability assessments, fraud identification and policy adjustments, while streamlining workflows for a seamless user experience. Our first implementations of Equifax IQ are helping customers across Latin America.

In Argentina, we established an advanced origination risk policy for a global vehicle manufacturer's entry into the financing market, evaluating banked and unbanked populations. Equifax IQ will expand to the U.S. and other regions globally as we move through the balance of the year and early in 2027. Ignite AI Advisor and Equifax IQ are great examples of the advantages derived from our global cloud-native infrastructure, which is structured for the rapid expansion of AI and agentic advancements globally.

These optimizations improve customers' processes and outcomes by improving analytical outcomes and more effectively using the breadth of data assets available to customers from Equifax. We believe our investments in EFX AI will drive our new product rollouts, share gains, revenue growth and margin expansion. I'm super energized about the momentum and pace of change and the big performance lifts from EFX AI in our product models and scores development for our customers.

Turning to slide 13, in the second quarter we delivered a very strong 16% New Product Vitality Index, leveraging the Equifax Cloud and EFX AI capabilities, which is above our 2026 Vitality Index goal of 15% and our 10% long-term framework. In the first half, over 50% of our new products have AI capabilities embedded in the product architecture which the customer directly interfaces with using LLMs. New products based on differentiated proprietary data, including our Twin Indicator solution for mortgage, continue to drive strong new product growth and share gains.

As discussed over the last few quarters, our only-Equifax Twin Indicator solutions in card, auto and personal loans are starting to see early customer interest for these unique solutions. And as a reminder, we're providing the Twin Indicator solutions in all those verticals at no cost in order to drive differentiation of our credit file and deliver share gains to Equifax. Turning to slide 14, we're also rapidly expanding the implementation of AI- and agentic-based solutions across our internal Equifax processes to improve operational speed, accuracy and productivity.

Agentic and AI-assisted process redefinition and improvement is occurring across operations, technology, product development and support functions, including HR, legal and finance. The pace of adoption is ramping very quickly and delivering big productivity lifts in every corner of Equifax. As you can see from the chart on the left side of the page, total gross labor spending at Equifax on both expense and capital is currently about $2 billion, or about 40% of total gross spending.

Of this amount, about 60% of our gross labor spend is within global operations and technology organizations, where we are seeing early and big gains from AI adoption as we continue to rapidly drive rollouts and adoption of AI tools and agents that are delivering meaningful process improvement. We now expect run-rate spending savings from these AI for EFX efforts to be about $150 million from 2026 to 2028, which is double the $75 million of savings we discussed with you in February.

These AI efficiencies are expected to improve our financial performance while providing increased capability to reinvest and further accelerate our AI and agentic deployments for speed, accuracy and productivity. The foundation of our rapid AI deployment is our new Equifax cloud-native architecture and our agentic AI development and management platform that is now in production broadly across Equifax, which enables efficient AI agent process development and management that is designed to ensure our agentic processes and capabilities fully comply with our extensive security and compliance requirements.

In operations, we are executing a rapid rollout of operational AI across our business units in our call centers and document processing operations. In USIS, we are rolling out conversational AI in call centers and already seeing big lifts in customer authentication and fulfillment rates, and AI-assisted processes have delivered decreases in back-office dispute handle times, which are delivering productivity. In technology, we're seeing early but big benefits in our software development, IT operations, cybersecurity and cloud cost optimization functions.

With our agentic platform, we have moved beyond pilots to autonomous agents operating core internal processes, built and run on a standardized, secure, agentic platform, with governance, human-in-the-loop checkpoints and model risk evaluation built in. We are super energized about the pace of our AI adoption inside Equifax, but we know that we are in the very early innings of our rollout. We are confident there is significantly more opportunity to both grow revenue and reduce costs as AI and analytics capabilities become fully embedded across Equifax. Now I'd like to turn it over to John to provide our third quarter and full year framework.

John Gamble, Chief Financial Officer

Thanks, Mark. Slide 15 provides the specifics of our 2026 full year guidance. We are holding our full year 2026 financial guidance on a reported basis to be unchanged from our April guidance. On a constant currency basis, we raised our guidance consistent with our second quarter revenue beat. The impact of weakening FX on our full year results offset our 2Q beat. Our second quarter performance was stronger than our guidance driven by very good performance in both EWS and USIS diversified markets.

Diversified Markets revenue growth at the midpoint is expected to be up high single digits for the year. The US mortgage market was slightly weaker than expected in the second quarter and has shown further weakening over the last several weeks as long-term interest rates have again increased. Our guidance reflects improved share performance in mortgage as well as continued good performance in diversified markets, offsetting the weakness in the US mortgage market.

US mortgage revenue is expected to be up just above 20% with mortgage market originations weaker and down low single digits. For your perspective as you determine your view of the 2026 US mortgage market, based on a review of Equifax data on mortgage home purchase issuances since early 2022, we estimate that there are over 16 million mortgages that were issued with an interest rate over 5%, including almost 15 million with rates over 6% and over 9.5 million with rates over 6.5%.

This provides a perspective on the pool of mortgages potentially available to refinance as mortgage rates change. Business unit revenue growth rates and EBITDA margin expectations are unchanged from our April guidance. This slide also includes additional detail on revenue growth rates and EBITDA margins excluding FICO Mortgage Score royalty pass-through revenue and expected BU revenue and EBITDA margins. We expect to deliver revenue growth of 7.2% to 8.4% excluding the impact of FICO mortgage royalties in 2026 within our long-term financial framework.

And we expect to grow EBITDA margins excluding the impact of FICO mortgage royalties by a strong 75 basis points, which is 25 points above our long-term framework. In 2026 we expect to deliver over $1 billion of free cash flow and a cash flow conversion of at least 100%. As we discussed in April, with EBITDA increasing to about $2.1 billion at the midpoint and strong free cash flow, this creates $1.5 billion in capital available in 2026 for M&A and return of cash to shareholders while maintaining debt leverage at under 3 times EBITDA.

As referenced earlier, this provides the capability for us to complete the Círculo de Crédito acquisition as planned in 4Q26 while still executing share repurchases in 2H26, although at lower levels than the $560 million and 3.1 million shares we repurchased in 1H26. Slide 16 provides the details of our 3Q26 guidance. In 3Q26 we expect total Equifax revenue to be between $1.68 and $1.71 billion, up almost 10% on a reported basis year to year at the midpoint.

Constant dollar revenue growth at the midpoint is up almost 9.5% excluding the impact of FICO mortgage scores. 3Q26 reported revenue is expected to be up about 7% at the midpoint. Diversified Markets revenue is expected to be up mid-single digits on a constant currency basis and up sequentially from second quarter, principally due to stronger EWS Diversified Markets growth. US mortgage revenue is expected to be up about 20%. EPS in 3Q26 is expected to be $2.15 to $2.25 per share, up about 8% versus 3Q25 at the midpoint.

Equifax 3Q26 EBITDA dollars are expected to be $547 to $564 million, up about 10% at the midpoint. EBITDA margins are expected to be about 32.8% at the midpoint of our guidance and, excluding the impact of FICO mortgage royalties, EBITDA margins in 3Q26 would be 34.6% to 35%, up over 90 basis points at the midpoint from our 3Q25 on the same basis. We believe that our full year and 3Q26 guidance are centered at the midpoint of both our revenue and EPS guidance ranges.

As a reminder, our guidance for 3Q26 and fiscal year 26 assumes Equifax will calculate and sell FICO scores for all mortgage credit transactions and there will be limited VantageScore revenue. As we move through 2026 and there is additional clarity on Vantage conversion and the FICO Direct License program, we will update our guidance to reflect the shift and opportunity for the mortgage industry, consumers and Equifax. Now I'd like to turn it back over to Mark.

Mark Begor, Chief Executive Officer

Slide 17. Equifax had another strong quarter executing very well against our EFX 2028 strategic priorities. The new Equifax is leveraging the Equifax Cloud, EFX AI and proprietary data assets to accelerate innovation and help our customers grow. Our second quarter financial results are an excellent proof point of the broad-based Equifax operating model, including the strong 120 basis points of EBITDA margin expansion in the quarter. We have strong momentum as we enter the second half of the year.

EWS signed agreements principally with state agencies with a total ACV of about $300 million. We signed the highly accretive Círculo de Crédito acquisition and we doubled our AI for EFX productivity goal from $75 million to $150 million. Our strong execution and momentum in '26 sets us up for '27 and beyond. Given our strong free cash flow generation and cash conversion over 100% in 2026, we're also delivering on our commitment to return substantial excess free cash flow to shareholders.

In the first half of the year, we returned $560 million to shareholders, repurchasing 3.1 million shares, or about 2.5% of shares outstanding. In the second half, we can complete the Círculo de Crédito acquisition and continue share repurchases, although at a slower pace than we saw in the first half, while maintaining a strong investment grade balance sheet with leverage below 3x EBITDA. I'm energized about our broad-based performance, 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. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. To offer as many questions as possible, we ask that you each ask one question and one follow-up.

Thank you. Our first question comes from the line of Jeff Mueller with Baird. Please proceed with your question.

Jeff Mueller, Analyst at Baird

Yeah, thank you. So you were obviously calling out the tougher government year over year this quarter in advance of the true-ups and timing of the onboarding of the large contract. The bookings figures are kind of a new figure. Obviously we have the context of the overall size of the business, but it sounds good. Can you just comment maybe on if gross retention rates are still stable and high and if pricing integrity is holding as we think of kind of using the new business to kind of build on the future revenue.

Mark Begor, Chief Executive Officer

Yeah, Jeff, thanks. You know, we telegraphed, I think, in the April call that our deal pipeline in government had been growing rapidly. I think we've been talking about that really for the last year and change since the new administration came into Washington. And with the OB3 passing, you know, in July last year, we just saw a real uptick in momentum around commercial activity. And that's continued. And our deal pipeline continues to be 2x over last year.

And we're starting to convert some of that pipeline, some of it faster than we thought. But we know that there was real momentum, which we talked about really in February and again in April. So we were pleased with the $100 million of new wins. So these are new principally state contracts that hadn't been doing business with Equifax before or not in the last couple of years, and then extensions and renewals of another $200 million. So great indicators of the real value of our solution in the marketplace, the commercial momentum in there around the value of our services being used.

As you know, there's a huge TAM here. To your question around pricing and commercial terms and activity, really no change. We are continuing to have really strong success in the government vertical. We've got a long runway for growth. We've got the right solution. As you know, we're investing in new products, you know, like the GIG solution we launched late last year that we're having some traction on. And then some of the new solutions we're starting to bring to market to address some of the new OB3 requirements, you know, around Medicaid and SNAP that principally benefit 2027.

So we remain quite bullish about the government vertical. We have talked in a couple of calls over the last year and change that, you know, in some cases we're using subscription agreements versus transactional agreements with some of our new customers. That's been something that helps them with their budgets at the state level in particular. So that's been a, you know, a positive for us. But, you know, we're quite enthusiastic and quite energized around the momentum in government and to, you know, land some large contracts.

We thought it was meaningful to share those with you because they're really going to benefit principally 2027. So it gives us a great, great momentum as we move towards next year. Very helpful.

Jeff Mueller, Analyst at Baird

And then on the VantageScore-only, the 100 VantageScore-only in mortgage, the lenders—I get it's only priced at a dollar at least through '27, so it wouldn't be big revenue dollars for you yet. But does that mean that those hundred are paying for VantageScore at this point? And can you contextualize if there's anyone sizable or what do they look like?

Mark Begor, Chief Executive Officer

No, they're not sizable yet. All of the mortgage customers that we have, which is really every mortgage customer, are focused on Vantage because of significant cost savings. As you know, the FHFA is still gating the agency mortgages, the number of lenders that can be utilizing Vantage. We expect that to increase as time passes, meaning the lenders are all engaging with FHFA about their interests of accessing Vantage. So we expect that momentum to continue as we move into third quarter and into the second half.

And, you know, as we pointed out in the prepared comments, we intend to, you know, keep our pricing at a dollar in 2027 to really continue to drive that engagement with our customers, but also, you know, giving them visibility now that they can count on Vantage as an attractive, you know, scoring solution along with our credit file for their mortgage underwriting going forward. But, you know, just maybe summarizing one more time, there's a lot of momentum here, you know, by the mortgage lenders, and we expect that activity to continue as we move into second half.

OPERATOR

Thanks, Mark. Thanks, Jeff. Thank you. Our next question comes from the line of Tony Kaplan with Morgan Stanley. Please proceed with your question.

Tony Kaplan, Analyst at Morgan Stanley

Thanks so much. I wanted to start with the government business also. You talked about some win-backs in the presentation. And so I was hoping you could maybe expand on the opportunity that you see for those win-backs and basically maybe thinking about 3Q for government. How are you looking on that? You know, especially based on—you have this really good pipeline but, you know, maybe some of that isn't, you know, flowing into the growth rate as quickly.

Mark Begor, Chief Executive Officer

Yeah, yeah. So again, we were pleased, Tony—I hope you are too—with the commercial momentum in government. It was above our expectations, but we knew it was coming when you’ve got a deal pipeline that’s up 2x year over year. We’ve got a lot of discipline around our commercial pipelines. It was just a matter of time when those convert from pipeline to contracts. You’ll remember that if you go back to July of 2024, the Biden administration changed some of the Medicare cost savings.

And I think we were clear with you, really in the second half of ’24 and into ’25, that we were able to work with many of the states to resolve the challenges they had with their budgets with that kind of unexpected cost sharing that happened in 2024 where the states had to pick up incremental costs for the data that was used. And there were some states that couldn’t manage it, and they had to turn our solution off. And I think that’s kind of well discussed by us over the last year and change, and it was reflected in our P&L. We’re winning back some of those states, and I think it’s a great reflection of the value of the income and employment data that we deliver to social services at the state level. And there was a large one, which you can see on the slide there, that was included, that’s going to be on a run-rate basis, net new revenue for us—really principally late in the year, but really in 2027 is where that will benefit. As I said in my comments earlier, that kind of $100 million of ACV from new relationships and win-backs is principally benefiting 2027.

And then of course, there’s another $200 million of renewals, which means it stays in our run rate, which we were very pleased with. So the commercial activity is strong and we’re really pleased with the momentum and the setup we have for 2027 in government. And again, as a reminder, you’ve got a business that’s approaching $800 million of revenue in government in Workforce Solutions, but it’s operating against a $5 billion TAM. And again, a reminder that the OB3 requirements that were put in place in the July bill that was signed last year really go into effect late this year and in 2027.

And we expect that to be a catalyst for growth. And you’re seeing the $100 million is at least a piece of that, which will be positive for us as we get into the new year in 2027.

Tony Kaplan, Analyst at Morgan Stanley

Great. And then I wanted to ask about the 1,200 lenders that are using VantageScore with FICO. I guess I know you’re giving Vantage for free if someone is using FICO. So out of the 1,200, is there a way that—how many are testing, or are they just getting it and hopefully they’re testing it and will convert it?

Mark Begor, Chief Executive Officer

No, no, no, no. You should think about the 1,200 as all are testing their technology systems, their processes, their workflows. And we talked over the last year or so that this is a big change for the industry that’s been using one credit score for three decades almost. So that technology and process flow change was important. That’s why we made the decision last fall to offer a free VantageScore with every paid FICO score so our customers could test their tech, their product, as well as their other workflows.

So you should think about—and we think about—that 1,200 meaning lots of mortgage lenders are really preparing to use Vantage. As a reminder, as you know, the FHFA in April—their announcement, I think, was 22 or 23 lenders that were approved, and that’s only 22 or 23. We would expect that to increase moving forward because those 1,200 lenders, using that example, they all want to take advantage of the value—to get their share of that billion dollars’ worth of cost savings that’s available to them by using the VantageScore.

So we would expect that adoption to continue to grow as the FHFA opens up more lenders to be able to utilize the VantageScore in the actual loan origination versus FICO.

Tony Kaplan, Analyst at Morgan Stanley

Terrific. Thank you.

OPERATOR

Thank you. Our next question comes from the line of Andrew Steinerman with JPMorgan. Please proceed with your question.

Alex Hess, Analyst at JPMorgan

Hi, this is Alex Hess on for Andrew. Just a couple points of clarification on the government ACV number. I think it was asked earlier, but what was the associated retention dynamic like? You know, were there—

Mark Begor, Chief Executive Officer

$100 million is all new—new, new business for us versus think about 2026, meaning additive to our revenue and principally in ’27. So no, the $200 million is renewals of existing contracts. That’s in our revenue in ’26.

Alex Hess, Analyst at JPMorgan

Understood. So no churn of note, then. You know, just switching to mortgage. Mortgage revenues in USIS were up 60% in 1Q, up 40% in 2Q. Can you just sort of walk us through the bridge of that come down, if you will?

John Gamble, Chief Financial Officer

Sure. The biggest driver—obviously the mortgage market weakened, right, as you take a look at what occurred year over year. And we talked about that. We saw weakening as rates rise as you went through the second quarter. And also, in the second quarter of last year, we started gaining share in prequal. So we had a little more difficult comp because we had picked up some share that we hadn’t had in place in the first quarter of 2025. So those are two big drivers that are impacting why the overall growth rate is lower in the second quarter year over year—growth rate is lower in the second quarter versus the first.

Alex Hess, Analyst at JPMorgan

Understood. And then final clarification, please. You say VantageScore transactions were up roughly 3x to 2.2 million. How are you defining a transaction in this case for the quarter? What is a transaction in this?

John Gamble, Chief Financial Officer

This is U.S. delivery of a VantageScore. So that’s effectively what they are.

Alex Hess, Analyst at JPMorgan

Yeah, thank you so much.

OPERATOR

Thank you. Our next question comes in line of Shlomo Rosenbaum with Stifel. Please proceed with your question.

Shlomo Rosenbaum, Analyst at Stifel

Hi, thank you very much for taking my questions. Barr, can you talk a little bit more about the twin indicator and the progress you’re seeing in auto and credit card? Are you seeing more evidence of volume shifts and just anything maybe quantitative that you can point to that, hey, this could be a longer-term game changer?

Mark Begor, Chief Executive Officer

Yeah, it’s still earlier days in those verticals. We’re further deployed, as you know, in mortgage because we launched that really last summer/fall when we launched it in mortgage. And we really only launched in auto, card, and P-loan in the early parts of 2026. The response from customers is super strong. They see real value—the same value we talked about in a marketing funnel in a mortgage application process where you’re really blind to the income or whether the applicant is working because you only have credit data historically.

Now the addition of that twin indicator that shows that, you know, Mark’s working and what my compensation was in the prior year, the last 12 months, and that I work for—in my case—Equifax, is really valuable. It’s the same case in an auto loan. An auto marketing funnel is quite similar. The auto dealer or the digital transaction in auto—they’re trying to figure out, is this an applicant that I’m going to be able to get to a closing of an auto loan and how can I differentiate from those that don’t close versus the information that I’ll have, including the income and employment data from Equifax with the twin indicator really gives them a leg up in managing their marketing funnel. Same in a personal loan process—that’s typically digital, although some are physical, but the bulk is digital—same process. And then in card, it just gives the ability to give a larger credit line, which typically will result in a higher take rate from the consumer. And with the addition of income, you can actually do a lower interest rate, which will drive pipeline conversion. So we’re energized about that rollout.

There’s not a lot of share shift happening yet, but a lot of really strong commercial discussions happening in those auto, card, and P-loan verticals. So we’re energized about that momentum, and we’ll continue to drive that engagement with our customers in the second half.

Shlomo Rosenbaum, Analyst at Stifel

And then just shifting back to that VantageScore discussion, FICO is reducing the cost of, like, the 10T to like a buck by putting in a really big success fee at the other end of the transaction. And given your experience with the mortgage market, do lenders look at that as a straight-through pass-through that they don’t care about, or is that something that—a success fee at the other end—is something that weighs on the consumer and they actually do care about that?

I’m just trying to understand, does the $1 make it comparable, or is it really still not comparable in the eyes of the people that are going to be buying this?

Mark Begor, Chief Executive Officer

I think it’s the latter. We don’t hear or see any traction on that. It’s one that—the success fee thing is something FICO has been talking about for about a year. There’s nothing really happening in the marketplace on it. And I think the point you raised around the consumer is an excellent one because the consumer—there’s a RESPA regulation around mortgage originations. It’s legislation in the United States that mortgage originators have to follow.

And basically it means that they have to treat the consumer fairly with regards to services that they purchase for them and then charge the consumer for. So the idea of charging that consumer $66 for a credit score, which is what FICO is proposing with their closed-loan pricing, versus a dollar with a VantageScore, or $10 with today’s FICO score pricing, just doesn’t make a lot of sense, which is why there isn’t a lot of traction there. And I know you know this, but we don’t see any path where this really makes a lot of sense, either commercially or from a regulatory, legislative, legal standpoint.

And we just don’t see any traction on it. So we’re focused on really supporting our customers with the $1 Vantage. I think, as we said earlier, we’re going to continue that pricing in 2027 to give our customers visibility around how we’re trying to support them in credit scoring and driving credit score competition. And we think that’s going to help drive adoption and conversion to Vantage in the mortgage space as we go through the second half and move into 2027.

Shlomo Rosenbaum, Analyst at Stifel

Thank you.

OPERATOR

Thank you. Our next question comes from the line of Mana Patnaik with Barclays. Please proceed with your question.

Mana Patnaik, Analyst at Barclays

Thank you. Good morning. I guess we’re just looking for a little bit more help on the way government kind of flows through for the rest of the year and into ’27. I mean, the pipeline and the backlog, all that makes sense for the growth in ’27. But I guess you’ve grown about 5% in the first half of this year, so just trying to appreciate how it ends and then how quickly all this new business renews, rolls into in ’27 as well.

Mark Begor, Chief Executive Officer

The ’27 new business rolls in quite quickly, as I think we said—much of it’s driven off some of the OB3 changes. But the $100 million of new business is 2027 ACV run rate and would be principally in that run rate early in 2027.

John Gamble, Chief Financial Officer

Yeah. In terms of second half, we’re expecting government to return back to growth, and we’ll start to see some of the benefits—a small amount—from these new contracts start to flow through. So again, the wins, as Mark said, are really a strong indicator of the strength of the solution and how we think it’s going to drive growth as we get not so much through the back half of this year, although we will see growth in the back half of this year, but really as you get into 2027.

Mana Patnaik, Analyst at Barclays

And beyond and sorry, when you mean return to growth, are we saying similar to the 5% in the first half or less?

Mark Begor, Chief Executive Officer

We haven't given a specific number, but you're going to start, you'll see government growth again as we go through the second half.

Mana Patnaik, Analyst at Barclays

Okay, got it. And then John, similarly on the mortgage inquiry assumption, I think low single digits technically was unchanged. So just trying to appreciate if there's a range within which you want to guide us to on the low single digits and I think you mentioned you offset that with share gains. Is that correct or did I misread that incorrectly?

John Gamble, Chief Financial Officer

So sir, I think you're talking about originations and yeah, we continue to expect to see originations to be down low single digits. Obviously that's a range and effectively we're indicating we're going to be lower in the range of low single digits than we indicated before and we do expect to continue to win share gains, principally in soft pulls as we go through the rest of this year. We think the team's making great progress. Mark answered a question earlier about twin indicator and the progress we're making there and that's really driving the benefit.

Mark Begor, Chief Executive Officer

Said differently. Manav, I want to make sure that we're getting the right response to you on the mortgage. Our view of the mortgage market, it definitely weakened from April as rates continued to stay high and actually increased a bit in May and June and we expect that to continue. It's hard to see that what's happening in the Middle East is going to be resolved and then inflation is going to come down and then, you know, rates are going to come down.

So, you know, our guide in the second half is kind of at the very low end of that low single digit, you know, kind of market outlook for the second half.

Mana Patnaik, Analyst at Barclays

Okay. Thank you. Appreciate that.

OPERATOR

Thank you. Our next question comes from the line of Afaiza Alweit with Deutsche Bank. Please proceed with your question.

Afaiza Alweit, Analyst at Deutsche Bank

Yes, hi. Thank you. Good morning. I first wanted to ask about talent. Like you've seen really strong growth there in the quarter, quarter and I'm curious, sort of is that sustainable, sort of what's driving that growth?

John Gamble, Chief Financial Officer

Well, we saw very good growth in talent in both the first and the second quarter and they've done an outstanding job both of continuing to grow penetration in VOE, and so verification of employment, but also to continue to drive penetration in education and then the other incarceration type of activities that we're also able to provide data on. So really good performance by the team, continuing to expand their presence and grow their penetration across background screeners generally.

And we do expect them to consistently outperform the underlying hiring market and they've obviously done that to a very wide degree in the first two quarters of this year. I can't tell you that they're going to grow at this rate consistently going forward because obviously outgrowing the market by the amount we did in the second quarter is larger than our long term guidance. But we expect them to continue to perform well and then consistent with the strong outperformance relative to the market that we've indicated, we should deliver long term.

Afaiza Alweit, Analyst at Deutsche Bank

Okay, great. And then just to follow up on the government vertical. So I think you talked about flat growth in the second quarter and it ended up being a little bit weaker than what you had indicated. So I'm curious what led to that and I guess relatedly, I'm assuming that it has to do with the usage. And so as you're signing these new contracts, are these all fixed subscription based contracts or is there a usage element to this where you could have upside downside based on what type of usage or hits you end up getting?

John Gamble, Chief Financial Officer

Yeah. So in terms of the specific performance in the second quarter, the team, as Mark said, performed extremely well in signing new agreements and renewing agreements. The timing of those is sometimes hard to predict and some agreements that we had expected that would close in the quarter actually closed just after the quarter ended and it impacted some of the revenue delivery that would have occurred in quarter and that's really the big driver of what happened in the second quarter relative to our expectations.

It's not material on a go forward basis for the business because again, they performed extremely well in signing new agreements. As Mark already mentioned, we are seeing an increase in the percentage of time that customers want to go to subscriptions because it makes it easier for them to budget. But not all contracts certainly are for subscriptions. We still have a significant number of contracts that are signed that are usage based. And you'll continue to see a mix of that, although we would expect to see probably the mix of contracts that are subscription based to grow over time.

OPERATOR

All right, thank you. Thank you. Our next question comes from the line of Andrew Nicholas with William Blair. Please proceed with your question.

Andrew Nicholas, Analyst at William Blair

Hi, good morning. Appreciate you taking my questions. I wanted to circle back to the AI cost savings that you increased this quarter. Obviously only been a couple months since the $75 million number. So I'm just curious, kind of what has specifically changed or what are you most kind of excited about or incrementally excited about versus last quarter and relatedly, how much, if anything, of those savings are already in the expense base or the run rate now?

Mark Begor, Chief Executive Officer

Yeah. So back in February we put out the $75 million of savings from AI. And you may remember we talked about that being principally from our operations team. Think about our call centers and paper processing centers, which are a meaningful part of our cost structure. That was where we started with AI deployment. In that operation, we've had really strong success of accelerating some of the AI agent deployment. We've got AI agents starting to take calls.

We've got AI agents really managing a lot of the massive paper that we bring into the operation. So that pace of deployment and pace of productivity has really just moved rapidly. So that's a piece of the increase from 75 to $150 million. And then we also said to you that we've been deploying AI capabilities across the rest of Equifax. Technology is a very large part of our cost structure and capex structure. We've had really strong momentum in deploying AI capabilities for coding or, you know, code development, where we have large portions of our code development now being done by agents and managed by our team, you know, the QC elements of that.

So, you know, that's been moving very, very rapidly. And that's a piece of that increase from 75 to 150 million. And then in our kind of G&A functions, when you think about Finance, Legal, HR, we've also seen great deployment there in Legal, Finance, HR, so we're seeing productivity opportunities there. So we thought the time was right to increase it from 75 to 150 million. As stated, it's between this year in 27 and 28. So it's multi-year in nature.

You're seeing in 2026, you know, a piece of that benefit in our margin performance, which is extremely strong. You know, if you look at the margin performance, you know, for the quarter we were up 120 basis points. That's versus our normal, you know, kind of 50 basis point operating leverage that we g