Equifax Inc. (EFX) Earnings Call Transcript & Summary

All right. Good afternoon, everybody, in the U.S., and good evening to our U.K. and European listeners. My name is Manav Patnaik. I'm Barclays' business and information services analyst. And I'd just like to thank you guys for attending our Americas Select Conference. Unfortunately, it's virtual again for the second year in a row. But let's just -- fingers crossed, will be in-person next year this time. But either way, look, we're very happy that a lot of our companies have been participating, and we're especially happy today to have with us Mark Begor, who's the CEO at Equifax; and John Gamble, who's the CFO. So thank you, Mark and John, for being here.

Well, thanks for having us. I wish we were in London together next year.

Yes, for sure. Mark, maybe if I can just kick it off with a broad question. And look, a lot has happened over the last 15 months. There's been lots of ups and downs. But if you could just help us recap the -- what happened specific to Equifax then? And also despite that Equifax seems to be scaling new heights every quarter, so what's really driving that?

Yes. We entered the pandemic a little over a year ago with the goal of protecting and enhancing our franchise. We use the term offense. So I think when we talked last year, we used that term that we wanted to keep our teams on offense, supporting our customers. And it's obviously been an unusual time, but it's one that we wanted to make sure we kept investing for the future. And as you know, we were in the middle of our cloud investment when we came into the pandemic. It was important to keep that investment going, actually try to accelerate it in some spots and so we focused on that. We focused on accelerating our new product capabilities. So we added resources during the pandemic around new product and new people and really ramped up our new product capabilities. You know that we did 134 new products last year, up from 70 to 80 at run-rate. So in the midst of the pandemic, we're focusing on that. And we also focused on operating our businesses and continuing to grow them. The work from home worked well. We're anxious to get back. We're going to be reopening our U.S. offices for full capacity on July 1. We're open now. We have been since last June. But we're ready to get the teams back to operate in a collaborative environment. The other thing that we've done is really get further down the path on the cloud transformation. We'll be close to fully migrated in North America by the end of the year, but we're starting to really leverage that cloud capability commercially in the marketplace with new products that I've already mentioned. I suspect we'll probably talk a little bit more about. But we've also, over the past number of months, really ramped up our focus on bolt-on M&A. And I think you know, we got a fast start to the year with 5 acquisitions, the largest is Kount. We did 2 acquisitions to strengthen Workforce Solutions. M&A is central to our strategy. We use the term bolt-on M&A to strengthen or widen Equifax from a strategic and accretive standpoint where there's really strong synergies. In the cloud, with where we are in the cloud gives us the capabilities to really drive that. When we think about a cloud, we're really in the early innings of it, meaning leveraging it commercially and from around new products and of course, the cost benefits that will come through and the topline benefits that we expect to be a part of our long-term framework are all in front of us. And just maybe one last point. I think you know, we launched a new strategy internally and externally, we call it EFX2023. So our 3-year strategy we launched earlier this year. We talked about it on the earnings call a couple of weeks ago. But central to that is leveraging our cloud data and technology framework for innovation and new products. It's really where one of the big benefits we think we're going to have besides the cost and cash acceleration, cost reductions and margin and cash acceleration, really driving our topline, both from being more competitive with the capabilities from the cloud and from our focus on new products.

Got it. A lot of topics there I want to touch on later. But maybe just going back to where you guys think the macro is today compared to when you initially gave guidance to the last quarter? Obviously, a lot of things change and for the better, and I think that was reflected in the guidance. But perhaps, you could just talk us through what those changes were that allowed that significant upgrade?

Yes. First, there was 2 elements to it. First is, we keep a close eye on mortgage. We have a big mortgage business. Our competitors do, too. And there's been a real benefit in the last 12-plus months from the low interest rates driving refis, that's continuing. But when we saw interest rates tick up a bit earlier in the year, we revised our guidance for mortgage and took it from down 5 for the year to down 8 in our guidance that we put out a few weeks ago in our first quarter earnings and that had a big impact. And then at the same time, we've just seen our nonmortgage, which is the bulk of Equifax, 70% of it, performing very, very well, whether it's in Workforce Solutions, USIS or International and GCS. And we decided to guide up almost $250 million of revenue net of that lower mortgage framework that we had. And we think it's -- there's an element of macro there from the market, meaning the economy recovering more quickly than we anticipated. And kind of we talked about March and April, really seeing some real strength, particularly in the United States, but even in our Canadian business had a very strong first quarter. Australia business is going quite well. Workforce, we'll talk about, I'm sure, during this session, performing exceptionally well with more records and all the other elements and outperforming mortgage very strongly, but growing in the nonmortgage quite substantially. And so it was really those elements that gave us the confidence to do a meaningful guide up for the year a month ago when we did our first quarter earnings.

Got it. A lot of the execution, I think, has been enabled by a lot of the tech investments that you've made. So for the benefit of the audience, maybe we can just rewind the clock a bit? And just if you could, high level. Just explain what that big kind of tech -- rebuild is an understatement, right? But just how -- what was the components of it and where we are today?

Yes. It was a substantial -- bold, if you want to use that term, commitment that we made in 2018 when I joined and shortly thereafter, we made the decision not only to spend money on security, which we had to after the cyber event, but also to transform our technology and our data. This is one, Manav, that I don't think is perhaps as appreciated as we want it to be about the substantial change in how our data is housed and managed in a single data fabric versus those silo data assets that we had and our competitors still have. And that really addresses the big macro of more data, and the challenge with more data is how do you manage it. And having it in a single data fabric, we think was going to allow us to deliver multi data solutions as a part of our new products much more effectively to our customers going forward. So that's the data side. The technology side was obviously taking our legacy mainframe server infrastructure and moving it to a cloud-native capability. We're way down the path on that. We still got work to do. But we think that's very different than our competitors who are either in -- still in legacy or combination of legacy and hybrid cloud, but heavily weighted to having big data centers that they own and operate with an element of hybrid cloud. We think that's going to change our capabilities dramatically. We're in the early innings of leveraging that, both commercially in a commercial dialogue and in new products. Those are kind of the 2 levers that we're going to have. Commercially, it makes USIS stronger, it makes EWS stronger. When you go into a bank CEO or Chief Risk Officer or Chief Marketing Officer and talk about the Equifax capabilities, it starts with our differentiated data that we believe is wider and stronger than our competitors. You could start with the work number and that's obviously, immensely strong as a differentiated data asset, which we'll touch on. But add to it our NC plus, our IXI wealth data, our DataX data. We have reams of data that the other guys don't have, and now the cloud transformation allows us to leverage that competitively. The capabilities we're going to deliver to our customers through the cloud capabilities as we migrate them whether it's on the speed of data delivery will be second to none, meaning we get it quicker and that plays the digital macro when you're trying to do in milliseconds, a decisioning, we'll be advantaged there. The stability of our infrastructure. It's very hard to manage an infrastructure where you have a mainframe that's going hot, hot 2 different mainframes. When one goes down, you got to move to the other. There is latency in there. We believe in a cloud environment that, that's going to be dramatically advantaged. That plays to the digital macro and what our customers are after. The deep single data fabric can be access to reams of data also plays. And the fact that we've invested $1.5 billion in 36 months, that's multiples of what our competitors have invested plays commercially. So that's the commercial benefit. The second side of it is product. You know that our industry is focused on new products. It was before our cyber event, before our cloud investment, our competitors do it, too. We think we're advantaged by leveraging the cloud to deliver new products. It's going to allow us to deliver new solutions we couldn't do before, and we think some that our competitors can't do. That's a positive for Equifax. It's going to allow us to do them more quickly, get them to our customers more quickly. So instead of months, you're getting them delivered to the customers in weeks. And you've seen us ramp our new products. So as you know, we're up from a 70 to 80 new product run-rate to 134 last year, 39 in the first quarter versus 35 last year. So we've got a real focus about adding resources and our new strategy that we rolled out earlier this year internally and externally of EFX2023, the headline for that or the theme of it is really leveraging the cloud to accelerate innovation in new products. And that's really where we're taking the company going forward. And of course, outside of the commercial revenue benefits that we've talked about from the cloud, both the technology and the data, you've also got the cost benefits. And we've been very transparent about how those are going to lay in. I don't know if you want, John, to touch those now or later. But we've got a lot of confidence in those enhancing our margins going forward along with what's going to happen to our margins from our topline growth.

Yes. Actually, that is a good segue. John, I was going to get to you next anyway. Could you just remind the audience of what you publicly disclosed in terms of the benefits of that spend as it will show up in the numbers?

Absolutely. So if you -- it's in multiple categories. So starting at cost of sales, right? If you use our 2019 cost base as a starting place, about 45% of our cash cost, so looking at this on an EBITDA basis, are tech based. And what we indicated is we expect to save north of 15% on that tech portion of our cost base, which putting it on our 2019 cost is north of $90 million. Second area of savings is in our development expense, right? And as you know, when you develop new products or new applications, a portion of the spending on that is development expense has to be expensed. And a big portion is capital, and we'll talk about capital in a minute. And we're expecting -- we'll see reductions in the level of development expense we need in order to deliver new products at a much higher cadence, moving back down towards, say, 3.5% of revenue, which is a nice reduction, again, versus what you were seeing back in 2019. And that's a savings of -- on the 2019 base on the order of another $35 million. And obviously, our revenue has grown since then. So as you look forward, that number is probably bigger, right? And then capital -- capital spending, which obviously was elevated back in 2019 because of the tech transformation at over 10% of revenue, we've indicated we expect to be down around 9% this year, around 8% in 2022. And then on a longer-term basis, moving back toward around 7.5%, perhaps slightly lower on an ongoing basis. So again, using that just against the 2019 cost base, where again -- sorry, 2019 cost and revenue base, where, again, our -- we've grown quite a bit since then. That would be an additional savings around the order of $115 million. So you add all that up in terms of cash that's on the order of $240 million. Just expense, it's around $125 million. Now of course, depreciation is also going up. So that's an offset to EPS, and we've disclosed the way our depreciation is increasing because of the higher level of CapEx over the past several years. But as you move out of '22 and into '23 and out through '23, obviously, that depreciation increase will start to normalize as CapEx has normalized. But -- and the savings that we're seeing from moving to the cloud, we think, are long term. So you'll see us get some of the savings in COGS in '22, and then we expect to have a full run-rate at some time in '23. So we're excited about the opportunities there. But as Mark just talked about, the real benefits of the transformation around revenue generation and how fast we can bring new products to market. And we started to see it this year, but in the first quarter, as we said, about 2/3 of the new products we launched were on cloud, were on our new cloud infrastructure, which is obviously critical to us. So as we move through this year, we expect that to move to 100%, which adds to the cadence, not only of new product development, but also how rapidly we can launch them, right? And you're seeing that now because our Ignite analytical platform that our customers can use is now fully on GCP, and we can make it easier for customers to access Ignite. And InterConnect, which is part of the Ignite family, which is all decisioning, is now there as well. So we cannot only define new products, but we can also launch them into production much, much faster. Now that all of this infrastructure is sitting on GCP and available to our customers through cloud-native APIs.

Got it. So maybe that helps explain it, Mark. We used to 60 to 70 new products a year. Even that for new investors is hard to imagine, but 134 is quite impressive. So can you maybe just help us appreciate how you define these new products, firstly, how broad-based they are? And is there a catch-up element going on? Or how sustainable is that number?

Yes. I don't want to give long-term guidance on sustainable, but I've been clear about our intent is to increase our new product rollouts. That's clearly why we invested in the cloud, was to enhance our competitiveness and to accelerate our ability to roll out new solutions, both the data and technology side, as we talked about it, along with the cost benefits and the security benefits that come. But you didn't -- you wouldn't spend $1.5 billion just to get the cost benefits. You wouldn't spend $1.5 million just to get the security benefits, it was really to transform Equifax competitively and around new products. It is broad-based. You're seeing, for example, Workforce Solutions, which historically, had great revenue growth, go back 2, 3 years, without a lot of new product focus. The cloud really expanded their capabilities around different solutions. And we've got -- you go from like mortgage to credit cards now, and we now have a solution for credit card originators. And we've got one in production and one coming of the big card issuers. They're using our income and employment data. And as you know, on the mortgage side, our solution generally delivers a lot of attributes, different elements, 50 different data elements come in the Workforce Solutions mortgage report. It will be my job title, what's my gross pay, net pay, what are my individual deductions. Am I deducting for 401(k) is very valuable versus am I just doing health care deductions. Is -- how many hours did I work? Am I an hourly or salaried employee. So a lot of data elements that are very valuable. If you're a credit card issuer you can't afford all those, and you don't need them. All you need is [indiscernible]. And having that flag that we sell instead of for $30, sell it for nickels in the card side is a way to have a new solution. Conversely, you probably know we have -- you know well that we have and talk about our 90 million unique records that we have every pay period -- active records and 115 in total million -- we've got 450 million total records. And history is very valuable. Our trended data in the credit file, but also in income and employment. So we've rolled out new solutions in Workforce that have more historical data. So it is wide-based. USIS very actively bringing new solutions, particularly around the credit file during COVID in the last year of a consumer might be current on their credit file, but might have accommodations, meaning they've gotten waivers for payments. And so looking through that to find out more detail on that credit file is an example of new solutions that we're bringing out. A lot of focus on identity and fraud. That's a space that we want to grow in. As you know, we bought Kount back in the first quarter to broaden our identity and fraud capabilities. Identity and fraud is an $18 billion TAM, growing at 20%. Very dispersed as far as who the players are, the 3 credit bureaus, LexisNexis, others participate there. We'd like to be bigger in that because of the space. Because we think we're advantaged with our data assets and with the cloud. Kount brings a lot of capabilities in there. So new products from there like our Luminate, identity and fraud platform that our old solutions were more single data point use kind of capabilities. Now with Luminate, we're bringing 50 different -- I think it's close to 50 now, different data elements into that platform. And as you know, in identity or really in any decisioning element, if you have more data, you're going to have a better decision because you just got more predictability, the statistics go up. And so that's an example in identity and fraud. The other benefit from us in the cloud transformation around new products is the ability to move them globally. And back to your question about how we define that. We're very rigorous about it because we disclose it externally, and it has to be new-new, so a new-new solution. And we're also reinstating our Vitality Index that you know from following us that we've used in the past. We define our Vitality Index as new products introduced in the last 3 years, the revenue from new products. As you know, new products take a period of time to ramp. So our Vitality Index, so we're going to be disclosing the number of new products 134 versus, as you said, the 70 to 80 historical run-rate. But also our Vitality Index, we started the year with a goal of 6% -- I'm sorry, 7% on Vitality Index, and now we've increased that to 8%. So 8% of your revenue from new products introduced in the last 3 years, we think is a very healthy metric. We'd like to grow that. And we'll give more guidance on that when we put the long-term framework back in place later this year.

Got it. And maybe just on that note on putting the long-term framework back into the picture, there are several components you needed, visibility, the tech investment and so forth before you put that out. So I guess, maybe just some thoughts there, like is the -- do you have everything in place you feel like to be ready to do that?

We do. Yes, we do. And I've been at -- I don't know, I guess, 2 of your conferences in London and the virtual one last year, and we always talked about the things we wanted to check-off. We checked them off really a year ago. Coming into COVID, we were quite ready to put the long-term framework back in place. When COVID hit, we thought it was prudent to see where this was going to go. And like a year ago, not a lot of us knew. We certainly didn't appreciate how strong our performance would be over the last 12 months. So we thought it was prudent to wait. We wanted to see a few more months of the COVID recovery to see where that's going as well as where mortgage is maybe going to normalize to. That's still a little bit harder to see, but we've been trying to update our outlook as we have a new point of view. But we're ready, all the boxes are checked. It's something we're intending to do in the latter half of this year, and we'll do it in concert with an Investor Day.

Got it. All right. Well, looking forward to that. Maybe just to switch gears in M&A. You alluded, you've already done 5 acquisitions. You're really picking up the pace there. What is your philosophy on how you think about M&A fitting with this massive new product organic pipeline that you have?

We want it to be complementary, obviously. As you think about the new product focus -- and the cloud plays into this, too. So the cloud gives us, I would characterize it as more confidence around M&A, meaning we can integrate our acquisitions much more quickly in a cloud environment than a legacy environment and deliver the synergies with more confidence. So that's a real positive for us. The acceleration of new products and the focus on new products also plays into that. And I think of myself, and I hope you do and our investors do, both John and I as being disciplined and being focused on what I use the term bolt-on. Different than tuck-in. Tuck-in sounds small, but bolt-on is the kind of acquisitions that we think about that make Equifax stronger, whether it's an identity and fraud with Kount. A clear strike zone acquisition, really unique capabilities that strengthen Equifax's identity and fraud business. We strengthen Kount's business with our unique identity data assets. So it's an example of the kind of bolt-ons that we'll do. The 2 acquisitions we did for Workforce Solutions strengthen our employer services business. That's a good business for us where we deliver different services to HR managers at companies, whether it's on work opportunity, tax credit, W-2 management, unemployment claims, as you know, is a big business for us. Those capabilities, we want to grow in because they also deliver records. So we get closer to the HR manager, and both higher tech and i2verify hit that strike zone. The third area from M&A that I think we're quite interested in is differentiated data assets. You know we bought DataX in 2018. We bought PayNet in 2019 and the commercial data assets, really unique data assets for USIS, but other businesses. If we can find those kind of unique data assets, that's a focus that we have, and it's very highly leveragable. We can integrate them quickly with our single data fabric in the cloud. We can bring broader solutions, and it plays to the macro of more data. And the last area would be international platforms. Those are harder. There aren't many of them out there, but finding -- Veda was a big acquisition for us, and obviously, gave us a very strong market position in Australia. There just aren't a lot of Vedas out there, but we look for them. And that would be the kind of fourth area. But you should think about Equifax as being disciplined. You should also think about Equifax of being more focused on M&A. We had a lot to work on over the last 3 years, whether it was the gaining trust with our customers, that's behind us. They trust us. Executing the cloud transformation, clearing our legal settlements, that was all behind us in 2018 and '19, and 2020, we were starting to be able to leverage the cloud. And of course, when we think about our performance going forward, our CapEx is coming down, that's going to drive our free cash flow, and our -- we expect our revenue and earnings to increase going forward, and that's going to drive free cash flow and we think M&A is a really smart way to drive shareholder value through this bolt-on strategy in those 4 areas that I pointed out of where we want to strengthen Equifax. You shouldn't think about Equifax is using, what I would use the term, which I hear sometimes a transformational M&A, meaning some big bet that's maybe a fourth or -- I'm sorry, a fifth or sixth business unit. That's not on our screen. That's not how we're thinking. We want to make Equifax broader, stronger in the businesses we're in.

Got it. And just to follow-up there. You talked about geographic assets. What characteristics in the geography do you look for? Because I think there is obviously one in Brazil that you guys know of and then there is Germany. So I'm just curious, how do you make that decision?

Yes. First off, it's availability. The German one you're talking about, I think all 3 credit bureaus have been trying to figure out how to get the banks to monetize that and sell it for quite some time. There's just -- first off, there aren't many. It's really around availability. When they come to market, we try to build relationships with all of them, as you might imagine, and try to be in front of a deal process. There just aren't a lot of those out there. When they become available, we'd be interested. You mentioned Brazil, we have a 10% ownership in Boa Vista. There is a complicated ownership structure there, but if there was a way for us to be bigger in Brazil, we'd like to. It's a good market. Experian has a very good business there, as you know, in Brazil. And other markets, we'd like to expand in, if we could. We -- last year, we bought out our partner in India. So we have 100% control in India. India is a strategic market for us that we'd like to grow in. So that's an example of us investing internationally. And then we do some small more tuck-ins, probably use the term, but bolt-ons in some markets. One of our first quarter acquisitions was in Australia. We made an acquisition, 12, 18 months ago in Canada to bring some consumer residential property data into our Canadian business to expand their mortgage capabilities. So those kind of bolt-ons or tuck-ins are interesting to us internationally.

Got it. John, maybe you can just remind us on the balance sheet, the current leverage and how you think about how much leverage you're willing to take on for the right deal? And how quickly you think you can delever there?

Sure. So we're actually rapidly delevering, but it's really based on EBITDA growth, right? So our EBITDA is growing so nicely. We're delevering. We're well under 2.5x right now. And even -- it's even with the acquisitions we closed in the first quarter. So we think our balance sheet is very strong and strengthening. What we're focused on is trying to maintain the credit ratings we have, and we think we can take on really substantial leverage and do that. And quite honestly, to the extent that we had a very large important acquisition that we wanted to take on, we think we could probably lever up well above the type of metrics that you'd see for our current ratings, which are BBB, right? And work closely with the agencies to just have a clear path to delever again, which we did with Veda, right, which we did years ago with TWN, which we did years ago with CSC. So I think we have a lot of credibility with the agencies. Again, obviously, we did what we promised following the -- with the major investments we just executed around the tech transformation, all of which we required leverage. And -- but we've, in every case, brought ourselves back into this BBB type of leverage level. So we think we have a lot of flexibility to do acquisitions within our ratings category, and then a lot of flexibility to go above those levels to the extent that there was something strategic that was important for us to acquire.

Got it. Mark, if I can ask about the FICO partnership. You were on the Board of the company before so you obviously know them really well. But we haven't heard much about it recently. I'm just curious how important is that in your long-term strategy? And what role does that partnership play for you guys specifically?

Yes. It's -- importance is a relative term. It's something that we're energized about. We're still investing in it. Will and I have a regular cadence with our teams as we work on some of the products we're bringing to market as well as new things we're thinking about. We'd like to do more collectively with FICO, and I think Will would say the same thing. We got a lot of levers at Equifax, and we talked about some of the big ones, whether it's cloud or Workforce or new products or USIS, et cetera. But this is something that we're committed to. And when I think about business, we want to drive our organic growth. That's very high return. When you can do things internally inside of Equifax like new products, leveraging the cloud. We want to focus on widening Equifax through M&A. But where we can't buy someone and we can't do it ourselves perhaps as effectively, we want to partner. And I think that's a smart way to approach business, and FICO is a great example that we got a bunch of partnerships. We'd like to do more where, in some regards, we compete with FICO on scores. We also partner with them, in some cases, on scores, but we don't really compete with them on software, and they don't have data. So the idea of leveraging their software with our data. Now we'll still go-to-market with our own solution. Will goes to market with his own solutions. But collectively, we think there's some use cases with certain customers, where of a more turnkey solution, using the integration of their data -- I'm sorry, our data with their decisioning platform and embedding Ignite in there is a differentiated solution versus others and will advantage both of us going forward. So it's something we're still working on.

Okay. Got it. Let's talk about Workforce Solutions. Obviously, since TALX was acquired in 2007, it feels like maybe 5 to 7 years, it picks up another level and gain some more speed. Can you just talk about, on a high level, how you see the growth outlook for that asset?

Yes. I don't want to get into long-term framework. We'll give you that outlook in the coming months when we do that, but a couple of perspectives on it. For the first time ever in our history, Workforce is our largest business. USIS has always been our largest business really forever. Workforce, as you know, has been accelerating its growth, coming into COVID and certainly through COVID. We think some of that's driven by the inflection of the scale of the data set and our ability to take the data set, the uniqueness of that data to the marketplace in multiple verticals. Obviously, mortgage we're expanding, and there's a lot of levers for growth there. But into things like cards and bigger in auto and P loans or into talent solutions, leveraging the 450 million records we have for work history. It can be used with background screeners, in government for social services. So Workforce is clearly our largest business. It's growing faster than the rest of Equifax. We expect that to continue. So we expect it to be highly accretive to our overall growth rate and highly accretive to our margins. Their margins are well in excess of Equifax's, and it's a business we continue to invest in. We've got a sizable chunk of the cloud investments. We think their cloud capabilities allows them to ingest data more quickly and more fully. We've invested a couple of billion dollars in this business over the last decade plus. Just in the last 3 years, north of $200 million in bringing their tech into the cloud capabilities. And there really is, we believe, some level of catalyst now that we're over 50% of nonfarm payroll. Now we tend to talk about nonfarm payroll as being the universe, and we both know it's not. We're widening, if you will, our lens to be gig economy, which is another 40 million employees in the United States, many of them have 2, 3 jobs. So we want to collect that data. We also want to get into retirees that have defined benefit pension payments even widening it. But there is just a lot of room for growth in records, and we think there's some real momentum there. As you know, we get records from 2 sources. We go individually to companies by delivering these services from our Employer Solutions business, whether it's I-9 or Unemployment Claims or HCA or W-2 or Watsi or other services, and then we get records in return. And we provide the records income and employment verification for free to that company and to their employees, and then we monetize it on the other side. And then the other 40% of our records we get through payroll partnerships, and we're actively adding those. We've got over 30 relationships in their -- where partners are delivering records to us generally on a revenue share and generally or more -- the vast majority or on an exclusive basis, which is the commercial relationship we prefer. And that's one we do with a revenue share. So growing records is a big lever. And I don't know if you want to touch on some of the other levers for growth, but pure price, the uniqueness of the data set, it becomes more valuable as the hit rates go up. Product is a big deal. We already talked about going from just the $30 report into $150, $200 solutions that have more data into more verticals, more pulls in some of the verticals like mortgage, driving penetration -- in mortgage, for example, our biggest competitor still is pay stubs. 40% roughly of mortgages are still originated without our data, and we're always working to add those customers. We've got all the bigger mortgage originators, but as you work down the tail, some of them are still using pay stubs or calling a company to get those verifications. So there's just a lot of levers for growth in this business, and it's really benefiting from the cloud investments that we've made going forward. We think it's the most differentiated data business out there and is a powerful part of Equifax.

Got it. The verification side of that business, obviously, is pretty clear. I think everyone gets it. The Employer Services side, you obviously had a nice spike because of the unemployment claims. But can you just help us understand the strategy there? You recently made an acquisition, HIREtech.

HIREtech.

That gave you the Watsi benefit opportunity. So just how should we think of -- what's going on there? It feels a lot more manual and maybe we're wrong.

Yes. No, there is a lot of technology in it. There is some element of BPO, but it's a good business. We provide these services to HR managers. They're generally regulatory requirements, which we like that because that means they have to happen. It is a business that we want to keep expanding into organically, and we have real scale in some of these businesses. As you know, like with unemployment claims, we're now doing 1 in 3 unemployment claims in the United States. So we're connecting to a lot of big companies. And all of these services get us closer to the HR manager. They're good businesses, and they deliver records that we can monetize. So that's the real kind of 2-sided model that we have, which is why we want to keep growing in that. So we're expanding organically, meaning investing in capabilities to be more efficient. We've got our own commercial teams that are out there going door-to-door to different companies to sell these services. And then where we can find M&A, like HIREtech is a great example, that we had a Watsi business. Their -- our Watsi business is oriented more to individual companies. So it's that suite of products we deliver to the companies. HIREtech's was more oriented through partnerships, like payroll processors and others, where they were doing the Watsi for the company through a payroll relationship or other third parties. So that was one that was attractive to us because it brought a new capability in. i2verify that we acquired was really a pure income and employment verification business, but they were very strong in their capabilities with nonprofits, with hospitals and like universities, and these are high-income jobs. So those records are very valuable and they had a really attractive way to develop those relationships and acquire those records. So we want that team to grow the record acquisitions in that space for us. But back on Employer Services, we like the business a lot. We want to expand our capabilities in it. Equifax is actually quite unique in that, given our scale versus the biggest competitor here is companies that still do that themselves. And we can deliver a real value prop in, meaning the outsourcing delivers one that's got more rigor around it, a higher regulatory level of excellence, cost benefits and we can deliver this income and employment verification for free to their employees, and they can shut down their call center. So we're out there actively growing our capabilities around Employer Services organically and inorganically.

Got it. All right. We're almost out of time. So maybe I'll just ask one last question, and that's the opportunity to take your Workforce capabilities internationally. And I think pre-pandemic, at least, there was this view, it will take 3 to 5 years, maybe longer, it's a slow process. But you've -- since then, not only has everyone accelerated digital effort, your tech investments are well along the way. So could international Workforce be a line item to call out sooner than later? Or how should we think of that?

Yes. It's one that we're focused on. As you know, pre the cloud transformation, we launched -- in a legacy environment, Workforce Solution builds, de novo builds in Canada, Australia and India. So those are underway, and they're still progressing. And we're building some scale there. We have capabilities in those markets, and we're starting to build connections and customers as we add records. And it is a slow build. Remember, it took us a decade to build Workforce in the United States to what it is today. You get advantaged with the payroll processors, but you still have to do a lot of that individual company. Remember, 60% of our database in the states is from individual companies that we built those connections to. So we have those 3 countries. We paused with the cloud transformation because we knew that it was going to allow us to have a tech stack that will be just much more portable. We can take it into other markets much more readily. So you should look for us to be expanding Workforce into other markets. Now when will it become a line item that will be as visible, the scale of Workforce is, it will probably be a while when it's going to move the needle in Workforce or at Equifax. But we're investing in it. And our intention is to expand Workforce more broadly on a global basis with the cloud capabilities and with the scale. And our customers want it. And actually, our contributors do, too. Like a multinational company that we do, an IBM, a GE, a General Motors, pick a big multinational company, they like us delivering that service for them in the United States. They want us to do it for their international employees. So there's kind of a natural connection there, and it's similar with a payroll partnership that we have. If they're global, they'd like to do the same thing in an international market, get the revenue share, deliver that service to their customers. So we're really energized around Workforce broadly and where its growth potential going forward.

Got it. Well, we're out of time, but it sounds like a lot of exciting stuff going on. So I'm looking forward to Investor Day, and you guys reinstating your growth plan. But thank you so much, Mark and John, for your time.

Thanks, Manav. Appreciate you having us.

Thank you.

Thank you, everybody.

London next year.

For sure.