Experian plc (EXPN) Earnings Call Transcript & Summary

Good day and thank you for standing by. Welcome to the Experian's Preliminary Results for the Year Ended 31st March 2023 Webcast and Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to Mr. Brian Cassin, CEO. Please go ahead, sir.

Thank you. Hello, everybody, and welcome to our full year results presentation. I'm here as usual with Lloyd, who will run you through the financials after my overview. And we also have Craig Boundy on the call, who will join us for the Q&A session. The first thing to say is FY '23 was a really good year for Experian. We delivered 7% organic growth against a difficult backdrop, which is a standout performance and a testament to the strength and depth of our business. Q4 organic growth for ongoing activities was 7%, which took us to 7% for the year. Acquisitions took total revenue to 8% at constant currency. And EBIT growth was stronger, underlying margins progressed, leading to a 9% uplift in Benchmark EPS. So good revenue progress and good drop-through. Our cash conversion, balance sheet position and liquidity profile are all very strong. Now let me pick out a few highlights of our performance. All 4 regions contributed positively. B2C revenue was double digit at 11%. B2B revenue was also strong at 6%. North America grew 7%, a very strong result despite mortgage headwinds and tightening credit conditions. And Latin America grew 16%, and we saw growth across the portfolio driven by Brazil with outstanding performances across B2B and Consumer Services. U.K. B2B had a good year with 7% growth overall and double-digit growth in our core consumer bureau driven by new business wins. EMEA/APAC improvement continues, and they had a very strong finish to the year in Q4. And I should highlight again the Q4 organic revenue growth of 7%, an improvement on Q3, which is really impressive despite tougher conditions as the year progressed. So you can see that our business outperformed market conditions substantially in FY '23. This reflects many years of development to diversify and strengthen our portfolio and position our business to address higher-growth opportunities. So what are we seeing right now? Well, as we said in our H1 and Q3 announcements, conditions were getting a bit tougher, and we expected this to continue through 2023. And that is actually what we have seen: a general tightening in lending criteria and a more cautious approach. Underlying credit metrics actually haven't worsened materially, and delinquencies remain under control. And metrics remain strong in a historical context, as does what is the key economic data point, which is employment. So we expect the overall impact to be contained. We still see good momentum across our business with good growth across many areas. And so while conditions might be a bit challenging, we continue to deliver outstanding performances, and we expect to continue to grow through this period of uncertainty. Let's spend a minute focusing on the factors that are driving our performance. Broadly, our growth is coming from a few things: new business wins, new products and expansion into higher-growth areas. Investments we have made in data, advanced analytics and other sophisticated software platforms all helped our performance in FY '23. And you can see the scale of this in the chart here across B2B and B2C with over $1 billion of new product revenues added since FY '18. Within that, we've had great success launching into new areas, such as marketplace, Consumer Services and positive data in Brazil and more recently, in verifications and Employer Services in the U.S. and the U.K., to name just a few. The growth has been built on a framework of an inclusive high-performance culture, relentless focus on client service and outstanding people engagement, allowing us to attract and retain the best talent. This slide also gives you a few data points to demonstrate the excellent progress we're making across all areas of our business. Alongside this is significant investment in technology. We recently signed an agreement with Amazon Web Services to be our preferred cloud supplier. Over the next few years, we expect to complete the migration of the remainder of our technology estate to the cloud. We're already well advanced on this. All new products and all refreshed versions of existing products are already built in the cloud. Our U.S. Bureau, Ascend, PowerCurve, for example, are already in the cloud as is the entirety of North America Consumer Services. Our approach has allowed us to continue focusing on new product build and revenue growth as we transition, and we're now deeply into legacy of estate transition, which we'll compete -- complete in the coming years. Now when we talk about expanding into new areas of client spend, we thought we'd include a graphic that we use internally to actually give you some idea of this. And so really, as consumer behaviors change, clients have to consider every stage of the customer life cycle. They also need to capture customers, minimize leakage, prevent fraud or loss, manage regulatory compliance and drive down costs. Improvements in these processes require a lot of reengineering. It needs new data, more data and crucially, better technology solutions. And we play across multiple parts of this value chain, not only for lending clients but for a wide set of customers. We look at all the products clients use and all the operational processes in and around our core activities, things like what fuels the client use to amalgamate data, what platforms are used to those scorecards, how they test them and so on. And we build products that closely integrate with our existing capabilities to address more and more of these needs. The objective is to provide more cost-effective, better and faster processes and position Experian further up the value chain. We've also had great success extending these capabilities into new verticals sort of listed on the right-hand side of the slide. Also in health are examples that are familiar to you, Targeting is another. In the past, our Targeting business would have seen declines in the current economic climate. But over the past 5 years, we expanded into higher-growth segments by extending Experian's data and identity assets more deeply into the digital marketing ecosystem. And we're now at the forefront of innovation in this market. So this gives you an idea of the process of how we assess our addressable markets. And we do have a very large or more accurately, a series of large addressable markets, and they continue to grow as we find new use cases. Consumer is a great example. This business used to be about access report and scores. Now we provide not only insurance, cards, loans, but also a range of financial products, such as spend management and savings. However, if you take our core credit markets, a chart here shows you the pure data alone, that is bureau data, accounts for some in the region of 20% of the opportunity. The rest actually made up of activities that require huge amounts of data but also a platform on site, and that could be for analytics, fraud, originations, identity resolution, and many others. And remember, these activities are not new, but the way they are done is constantly changing. And investment across all these areas is accelerating. And we also have a somewhat unique opportunity, which is linking more and more of these capabilities end to end to drive further growth opportunities. All of this fits within a clearly defined strategic framework. It starts with massive data sets and investments to improve data, adding more records, enhancing quality and depth. Superior data is a real competitive advantage that drives new client wins. We've also invested heavily to enhance platform solutions. Last year, we established a global group to bring all these solutions under a single structure to drive better integration and global scale. And these solutions address a wide range of client needs. Ascend is an example of this. This platform itself is driving growth, but it is also driving new client data wins. And we have many more platforms that either are already global or we have plans to make them so. These include fraud solutions, PowerCurve, Ascend Intelligence Services and many others. In short, we have an amazing breadth of capability. All of our platforms are cloud-based, and they all leverage advanced technologies, including incorporating AI. And linking these capabilities is going to drive further competitive advantage. This year, for example, we'll complete the work to make Ascend and PowerCurve, which are developed as separate products into one seamless interchangeable module platform. And clients will be able to go from model build, test and design to execution without the need to use different platforms. This has many benefits, cost, speed, accuracy and it's going to drive further benefits for us. The level of innovation we have in the business today is much more significant, and it's the successful execution of our strategy that has delivered these record results and which will help us sustain our long-term track record of delivering growth. So while elements of our business will always be impacted by the cycle, our business has evolved substantially and will continue to evolve. And we expect to benefit from this in FY '24 and beyond. Now let me share our perspectives on generative AI, which has recently become very topical. We have wide-ranging expertise in broader artificial intelligence fields, and we've been leveraging these in our products and services for a long time. The use of artificial intelligence is already included in products and markets, such as Experian Boost, our Ascend Intelligence Services platform, Experian Lift and extensively in our fraud portfolio. Generative AI is an exciting progression and a big opportunity for us. The key point is that the data of these technologies rely upon trained models is not included in the OpenAI ecosystem. It is proprietary data. We have the tools and expertise to use these technologies, and we will be using them in our products and services and in our internal processes. We see significant product opportunities. One interesting product-specific example is the work our data labs and software solutions business have done to incorporate a user interface into our Ascend platform, which we started developing in 2021. It brings the power of these complex systems to nontechnical users and enables Ascend to users to perform natural language queries. We also see potential for many operational benefits by driving productivity and efficiency, some of which are already in place. One of the most popular applications to use the Python code generator, this technology holds the promise of significantly improving productivity of software engineers. Of course, we're also introducing additional quality control and compliance steps to scrutinize any auto-generated lines of code to prohibit unauthorized usage of any data elements. So we will continue to develop our capabilities in the space while fully respecting the established regulatory governance in place to protect consumers and to ensure fairness and decisions that affect their lives and well-being. So let's now turn to the FY '23 regional performance, starting with North America, where organic revenue growth was 7%, a very good result, particularly in view of the macro headwinds. Core CI and BI grew by 8% for the year when mortgage is excluded, and we can attribute this resilience to a number of factors. First, our market position is strong and has strengthened FY '23. While like-for-like bureau volumes have been under pressure in some areas, there's been strong resilience across many segments, such as prime, BNPL, Clarity and combined with new business wins and continued revenue growth in software platforms have driven a really strong performance. Ascend marketing is a good example of this, securing substantial new business from clients, one client in particular that we're seeking to enhance and simplify their solutions. And they did this by reengineering internal processes and reducing their reliance on other third-party suppliers and consolidating their spend with Experian. We've also seen some really outstanding performance such as in business credit, which really saw very little impact as a result of the strong new business wins, expanded data sets and new product capability. Adding to this is income employment verifications, which delivered over $160 million in revenue and was the fastest driver of growth in North America CI this year. We've established a robust data set with 47 million U.S. records, which rises to 152 million records when historical records are included. Experian Verify can now be accessed by mortgage lenders through Freddie Mac's, Loan Product Adviser and Income Modeler. And as this chart shows, we continue to add to our client count with 151 contracts signed, including 18 top mortgage lenders. Other areas of the portfolio grew strongly. Our Targeting business grew 14% organically and has more than doubled its EBITDA over the past 2 years. It's driven by growth in digital identity, advanced television and Ascend Marketing. And the result is that digital products make up about 60% of the revenue, up from 26% a few years ago. Our auto business also saw strong growth. We benefited from increased marketing activity by dealers, driving demand for affordability solutions and new risk models to react to changes in market conditions and underwriting. Our health business is the third largest segment in our North American business, and performance was also positive. And we're proud to have been recognized as best-in-class for claims management and contract management. And we're introducing more products such as PowerCurve Collections, directly leveraging core Experian capabilities to drive further growth. This segment is not strongly correlated with broader economic movements, and we expect to continue to grow well here. North America Consumer Services grew double digit in FY '23 driven by strong performance in marketplaces and membership products. We added to our free member count. It was up by 10 million to 62 million, and the frequency of member interactions continues to rise. Clearly, there is some pressure on card and loan originations, and this increased as the year progressed. However, we outperformed, some of which is due to Experian Activate, which leverages Ascend capabilities to help clients enhance performance, increase conversion rates and lower the overall cost of customer acquisition. Our auto vertical is also performing well. We're expanding the number of carriers in our insurance marketplace, improving the experience, and we expect to see a lift in policy sales as we move through FY '24. We continue to add new features. Boost with Rent reached over 100,000 unique users. Premium performance saw higher enrollments and increased revenues. BillFixer is helping premium members to save money and is part of an expanding cash flow and personal finance management suite. The personal privacy scan is performing well. And we're very proud that Experian is now a top 15 U.S. finance app with a 5.8-star rating. Moving to Latin America, which had a great year, up 16% organically with substantial margin uplift, and FY '24 looks set for another year of strong growth. Brazil is outperforming the market substantially. B2B and consumer grew materially. On the B2B side, growth is coming from all areas. SME had one of its best years ever. Our range of products in Brazil continues to expand with Ascend and PowerCurve growing strongly and positive data attributes and scores adding materially to growth. We're also growing in new verticals and market opportunities, such as open receivables, income verification and agribusiness. Agribusiness, for example, was up 66% this year, and we expect open finance to drive significant future growth. Spanish Latin America also delivered strongly as we leverage our global capabilities in this region. Consumer Services now addresses around half the Brazilian adult population. It grew over 30% this year and has moved into profitability. Free membership enrollments were up by 10 million to 81 million. Our credit marketplace and premium services are in the early phases of scaling, and Limpa Nome had a phenomenal year. Our brand is now the second most recognized financial app in Brazil, so we're making great progress. I'm also excited to share that we've made good progress establishing a consumer services presence in Spanish Latin America, which has been in an investment phase. We now have 13 million free members, which will add to our free members total going forward. The U.K. probably faced the most economic turbulence last year and yet delivered 5% organic revenue growth overall. B2B organic revenue growth was particularly strong driven by new business wins in our core bureau. For example, we added around 2 million Buy Now Pay Later records. We now have access to 70% -- 77% of U.K. PAYE employment records. We had over 473 new logo wins, which was a record, including material gains in several areas, such as utilities, telcos, public sector as well as in financial services. We also launched a lot of new products in FY '23, which we believe will drive our growth in FY '24. Lenders, while cautious about the economic outlook, they're well capitalized and they've continued to invest. Products like affordability suite, cost of living and expenditure models will really work very well in this environment. U.K. Consumer Services has been impacted by the pullback in credit supply, but we expect this to rebound quickly when the market comes back, and we're making progress through product enhancements and new feature introductions like CreditLock, all of which have been well received. It was a year of transition for EMEA/Asia Pacific. The result for the year was a stable picture improving towards the back end with margins on an improving trajectory. The next phase, we'll see a push on leveraging our innovation portfolio more widely. We already see the benefits in some countries, for example, in Italy, which has been a great example of how we make innovation really effective; India, where we've seen good bureau success; and South Africa, where new products have offset a challenging macro. More work to do, but we're firmly on the path towards more profitable and higher-growth trajectory. And with that, I'll hand over to Lloyd for the financials.

Great. Thanks, Brian, and good morning, everyone. As you've seen, we delivered strong financial results in FY '23, meeting our growth guidance despite the macroeconomic uncertainty. For the full year, organic revenue was up 7% with acquisitions adding a further 1%. FX was a 2% headwind to revenue growth. We grew Benchmark EBIT by 9% at both actual and constant rates to $1.8 billion. EBIT margins were up 30 basis points at constant FX rates, at the top end of our guidance. FX added a further 50 basis points, making total EBIT margin progression of 80 basis points to 27.4%. We converted that EBIT growth to EPS growth of 9% at both constant and actual rates. Operating cash flow remained very strong with 98% conversion. Return on capital employed was 16.5%, up from 15.7% last year. And we've announced a full year dividend of $0.5475, up 6% on the prior year. And finally, as Brian mentioned, we ended the year very strongly financed with our net debt-to-EBITDA leverage at 1.8x. Looking at this year's growth in a historical context. If you exclude the effects of the pandemic, you can see on the chart that we've delivered 5 years of consistently strong organic and total revenue growth. And even during the pandemic, we delivered differentiated resilience and recovered strongly. And as a reminder, we've grown in every 1 of the 17 years we've been a public company, including through the GFC and the pandemic. And this reflects the diversified nature of our business, the strong structural growth drivers and the innovation engine we've created. Turning now to the FY '23 revenue growth. North America delivered 7% of organic revenue growth for the quarter and the full year. For Q4, we saw 6% growth in our core bureau excluding mortgage. As expected, we've continued to see U.S. lending criteria trend tighter during the fourth quarter. We saw continued strength across Ascend and very strong double-digit growth from Verifications and Employer Services, where we continue to win share with customers hungry for alternative providers. Mortgage revenue was down 21% in Q4 and 33% for the year. Q4 included a benefit from score price increases, which helped offset some downside from volumes, which were down 45% in Q4 and 44% for the full year. For the year ahead, we expect mortgage volumes to continue to be down around 25% with revenue down single digit given the price increases. Given it now only represents 2% of the group, the headwind for the year ahead is expected to be minimal. Q4 saw continued strong growth in automotive as supply continues to return to the market. Our auto Ascend proposition also performed well during the quarter. In Targeting, our exposure to digital solutions is continuing to drive strong growth for us, particularly within digital activation and identity management. Health delivered double-digit growth in Q4 as the one-off COVID-related revenue in the prior year fell away. Excluding the prior year one-off, health would have grown 10% for the year as a whole. North America Consumer Services delivered double-digit growth in Q4 and for the full year, up 10% and 11%, respectively. Credit marketplace grew well in Q4. Increased personalization of customer journeys, the launch of new propositions and the adoption of Experian Activate all supported double-digit growth in an environment where credit suppliers continue to trend tighter as the year progressed. Membership continued to demonstrate its countercyclical nature. Our new sign-ups grew well across the second half as new features also helped to improve acquisition volumes. Our data breach business delivered strong growth in FY '23 following a number of one-off contract wins. Latin America grew 13% for the quarter and 16% for the year. Positive data remains a key growth driver for the region. Global platform initiatives like Ascend, which grew 72% for the year in Latin America, and Experian One continued to support revenue growth. And our plans in agriculture are progressing well, as Brian mentioned, and we now have 135 clients. Consumer Services in Latin America continued to scale rapidly in Q4 with a strong performance from our Limpa Nome debt renegotiation platform and a growing contribution from premium subscription services. The U.K. and Ireland region grew modestly in Q4, up 2% organically, taking full year organic growth to 5%. And whilst lending criteria continues to tighten in the U.K., our affordability and eligibility products have performed well. On the Decisioning side, fraud and ID continues to perform well, delivering double-digit organic revenue growth, while software stepped down from Q3 due to the large contract wins in that quarter. Consumer Services declined 7% in Q4, down 4% for the full year. The tightening of the lending criteria and reduction in product and marketplace impacted marketplace, which declined high single digits in the quarter. Premium subscription services declined as we see some attrition from the strong subscriber acquisitions we made during COVID. And our EMEA/Asia Pacific business performed well during the quarter, delivering organic growth of 5%, taking the full year to 3% against a weakening economic backdrop. We've made good progress through the year on refocusing the business on key strategic markets, and we expect to continue this momentum through FY '24. Turning now to EBIT margin. Starting on the left on this chart, you can see last year's reported EBIT margin was 26.2%. As we did at the half year, we've represented last year's margin for the businesses we have exited during the last 12 months, principally in EMEA/Asia Pacific. And this added 40 basis points to our prior year margin, bringing it to 26.6% on a like-for-like basis. North America organic margin was flat to the prior year, reflecting the mix of growth. Latin America margin increased 280 basis points during the year, reflecting the strong revenue performance across the region with increased profitability across B2B and profit and margin progressing nicely in our scaling B2C business. U.K. and Ireland margin was down 90 basis points. And as referenced at the half year, this was principally due to the investment in our income verification launch and the active choice we've made to front-load investment behind that opportunity. Excluding that investment, organic margin was up 20-basis points, reflecting mix and operating leverage across the B2B business. EMEA/Asia Pacific margin improved modestly by 40 basis points on last year on a like-for-like basis. Now we're largely through our portfolio review. Our focus is on optimizing and scaling the strategic markets and improving the profitability of the region. Central activities and positive regional mix added 20 basis points to the margin. So overall, this resulted in a margin of 27.1%, an increase of 50 basis points on the prior year organic activities. Acquisitions were a 20 basis point headwind and reflects the investments we're making behind the acquisitions. So including acquisitions, the constant rate EBIT margin was 26.9%, up 30 basis points at the top end of our guidance. FX was a 50 basis points benefit, reflecting a weaker pound sterling and a stronger Brazilian reais. As a reminder, around 65% of our central costs are in pound sterling. Overall, then our EBIT margin was 27.4%, an increase of 80 basis points against our restated position and 120 basis points up against our FY '22 reported margin. Moving on to EPS, where we delivered growth of 9% on an actual and constant FX basis. We converted 9% Benchmark EBIT growth from continuing operations into 9% EPS growth. Our interest rate -- interest expense increased modestly to $124 million despite the large increase in market rates, thanks to our forward rate fixing program, meaning that the average interest rate on our net debt was broadly stable at around 3%. And the tax rate is 26%, broadly in line with the prior year. Moving on to our capital investment and shareholder returns. On the left-hand side of the chart, you can see our organic capital investment and acquisition spend. Net capital expenditure represented 9% of revenue for FY '23, and a growing share of our organic capital investment is towards innovation and product development, which has grown strongly over the past 5 years. We made almost $3 billion of acquisitions across a range of markets and verticals. More recently, we've made a number of acquisitions in employee services and verifications, and these businesses are now delivering strong organic revenue and profit growth. We've also moved into new verticals in Brazil through the purchase of our agribusiness, and we've acquired specific technological features like BillFixer in North America consumer space. And over the 5-year period, we've remained disciplined in our management of capital and continue to generate strong returns on our growing capital base, this year at 16.5%. and on the right-hand chart, you can see our shareholder returns. We've returned almost $3 billion to shareholders over the 5-year period through dividends and share buybacks. And today, we announced a full year dividend of $0.5475 for FY '23, up 6% on the prior year. And given that capital discipline, we end the year in a strong financial position robustly financed with long-dated funding and low near-term exposure to increases in interest rates on our existing debt. Over the past 5 years, our net debt has been stable, and we ended the year with net debt-to-EBITDA of 1.8x compared to our 2 to 2.5x net debt-to-EBITDA target leverage range. In the chart on the right, you can see we took advantage of the low interest rate environment to fix forward the majority of our debt. And around 90% of our total debt is fixed for the next 2 years, and around 60% is fixed for at least 6 years. And in addition, we have no bond refinancing required until September 2024. So given this position, our interest guidance for the year ahead is $125 million to $130 million, broadly in line with FY '23. And all this means, we have a very strong liquidity and funding position, and our program to fix forward interest rates has mitigated for some time the full impact on our current debt of rising interest rates. Taking a look at our usual reconciliation to statutory results. Our Benchmark profit before tax grew 9% at constant rates and 9% at actual rates driven by the strong revenue performance and margin expansion. Acquisition-related expenses were broadly flat. The increase in fair value of continued consideration payable on prior acquisitions was $45 million, and this was driven by TCC in North America, reflecting a strong performance since acquisition. Restructuring-related and other costs is largely made up of the restructuring charges related to EMEA and Asia Pacific, which we announced at the half year. Statutory PBT before noncash items was therefore up 2%. Amortization and acquisition intangibles was $192 million driven by the acquisitions in the current and prior year. And there were impairment charges of $197 million, principally related to the EMEA business, which increased slightly from the half year on changes in market interest rates. And changes to noncash finance remeasurements was driven principally by gains on interest rate hedging and the FX charges on intercompany financing, which leads to the statutory profit before tax of $1,174 million. So now if we look back on the longer-term performance of the business. The chart on the left-hand side shows our B2B performance over the last 5 years, where you see we've added almost $1 billion to revenue with compound EBIT growth of 7% and margins up 120 basis points, all at the actual exchange rates. And this growth has been broad-based, delivered from an acceleration of innovation and despite the FX headwinds during the period. On the right, you can see our B2C performance, where revenue and EBITDA has grown very strongly and almost doubled since FY '19. And like B2B, margins also grown, up 120 basis points, despite significant and broad investment in innovation. And as a reminder, our Consumer business pays an internal charge for its data used to our B2B business. So our B2C business today, including that intercompany charge, is accretive to group margins. Looking below our segments. As you've heard from Brian, our strategic investments have diversified and broadened the group and given us exposure to an increasing number of rapidly growing markets. To bring this to life, on this slide, you can see a number of our strong structurally growing markets across B2B and B2C, which are powering our growth with a chart showing reported revenue at actual exchange rates. Our North America bureau has grown 9% CAGR to 1.5 -- to over $1.5 billion. Inside this number, you can see how our strategic innovations of Ascend and Verifications and Employer Services' apparent growth with many years of structural growth runway ahead. Globally, Ascend is now live with 491 clients in 10 countries and has a TCV of $471 million and around $150 million of annual revenue, which grew strongly this year. And we exceeded our expectations for this year on Verifications and Employer services, where revenue was over $160 million, as Brian mentioned. And looking at our large and scaling verticals in North America of health, auto and targeting, you can see that we have together $1.1 billion of revenue in structural growth markets, which is together delivered double-digit compound growth across 5 years. In Consumer Services in North America, we've innovated and diversified the business, creating millions of new consumer relationships with revenues scaling strongly at 15% compound, including double-digit growth in subscriptions. We're continuing to make great progress in Latin America Consumer Services, where we've gone from having a small off-line Limpa Nome proposition in FY '19 to having credit marketplace and premium subscription products as well as a payments portal that allows online debt repayments to be reflected almost immediately in the consumer's credit score. And across all countries, we've scaled a material global marketplace business to over $400 million of revenue since FY '19. So overall, this growing exposure to structurally growing and diversified markets has ensured our resilient growth performance and underpins our forward outlook. So turning to FY '24 modeling considerations, which relate to our ongoing activities. As we said through this last year, we see a tightening credit market with a generally tougher set of macroeconomic conditions in the U.S. and U.K. in FY '24. And our guidance, therefore, assumes a tightening of lending markets consistent with this low U.S. and U.K. GDP growth for the year as a whole. We expect 4% to 6% organic revenue growth for the full year. We expect to deliver modest margin progression at constant currency. Based on current FX rates, we expect FX to add between 0% and 1% to both revenue and EBIT growth. We expect net interest for the year to be between $125 million and $130 million. The Benchmark tax rate is expected to be between 26% and 27% given the increase in the U.K. corporate tax rates. The weighted average number of shares are expected to be in the region of 914 million for the year. CapEx is again expected to be around 9% of revenue. We expect cash flow conversion to be over 90%. And we've announced a share buyback program of up to $150 million to be completed by June 2024. And with that, I'll now hand you back to Brian.

Great. Thanks, Lloyd. So to summarize, we performed really well in FY '23. We continue to see great opportunities for our business going forward. We have a really strong financial position, and we have confidence that we're going to deliver good growth through FY '24. And with that, I'm now going to hand you back to the operator for your questions, for which we will join -- we will be joined by Craig Boundy. Operator, over to you.

[Operator Instructions] We'll now take our first question. And your first question today is from the line of Kelsey Zhu from Autonomous.

I have 2 questions. The first one is on the tri-Merge bi-merge implementation, which the regulators are estimating that process to be implemented in Q1 2024. I was just wondering if you can share with us what you're hearing in terms of whether this will be strictly implemented versus it's going to be a lender's choice and how you're thinking about pricing for VantageScore. And then I have a second question on Verification.

Okay. Thank you. Craig -- maybe I'll ask Craig to comment on that. There's a lot of changes going on in the mortgage market there, but they are going to take some time to play out. So Craig?

Yes. So I think it's -- there's still -- as Brian said, still a lot of uncertainty in how some of those changes are going to be played out. The most important thing is that we're able to make sure that everybody is able to be accurately scored based -- to allow them to get a mortgage. And we think that our data places us really very well with the breadth of coverage alongside that, the strength of the analytical capabilities that we've been able to build. I think it will take a bit of time for that implementation to work through arguably with some lender choice going on there. But we think we're very well position with the data coverage and the analytics that we've been building. And we understand how to price into that market with experience over time.

Got it. Really helpful. And my second question is on North America Verification services. Based on our [indiscernible] , you've made very impressive inroads into the background screening space as well. And I was wondering if you can talk about some of the latest progress across mortgage, background screening and governments for your verification services and kind of what your expectations are for FY '24.

Great. Craig, why don't you take that one as well? Just give a bit of color on that.

Yes. So for a couple of years now, we've been strengthening the quality of data assets, but continuous with the strategy we deploy everywhere in the company, also the excellent analytics that we bring and the ability for people to access our services, in this case, around verifications in a way that really helps them with their decision-making framework. And that can come into choices they want to make in both secured, I think, mortgage or other forms of unsecured lending. And we think the very strong growth that we've had in the data assets that we've got and the client relationships continues to set us up well for strong growth across, as you say, a diverse range of client sectors.

Great. Does that -- I think you had a question about the outlook for '24. Lloyd, do you want to just comment on that?

Yes. So this last year, we grew organically over 30% in the Employer and Verifications segment. So we previously said we would beat about $150 million, we're over $160 million, and we expect strong double-digit growth in the year ahead. And as I said, quite a number of years of runway ahead of us given the market position we find ourselves.

I'll take our next question. This is from the line of Suhasini Varanasi from Goldman Sachs.

A couple, please. The first one is on your guidance, which is a 4% to 6% organic growth for 2024. Can you please talk about the phasing of the growth through first half and second half? And second, last year, you mentioned in one of the calls that in a GFC-type scenario given the current business portfolio, you could expect growth to be in the range of 4% to 5%. And given you no longer have as much from mortgage, that could even move to 5% to 6% range. So I suppose the question is, are you effectively incorporating that kind of a scenario in your 4% to 6% outlook and why, I suppose?

Thank you. Lloyd, questions, so why don't you give a bit of detail on that?

Yes. Happy to. So if you think about the portfolio, we've talked about the number of verticals we have that aren't really exposed to short-term changes in U.S. lending sentiment. You look inside the core bureau and the consumer marketplace business, together, there's something like $1.1 billion of revenue that is most focused on shorter-term volumetrics. And so looking at that revenue, a downside scenario with that revenue across the years incorporated in our 4% to 6% guidance. What might upside look like a stronger recovery in sentiment, particularly across the second half. So we think the range captures the uncertainty that we see in some lending markets, particularly around some of the news flow in recent weeks. I'm pretty confident in that given, as you've seen, the strength of growth we have across quite a number of other verticals. And in terms of the phasing, given some of the trends that we talked about, we're probably more in the 4% to 5% in the first part of the year, strengthening as the year goes on. But we'll update, obviously, as we go. And I think you've seen over this last year, the resiliency of the portfolio to changes in macroeconomic performance. So we expect that to continue.

We'll now take our next question. This is from the line of Andy Grobler from BNP Paribas Exane.

Two questions from me as well, if I may. First one on Verification again. You're up to 47 million records in the U.S. Can you just talk to how many of those are unique in nature? And kind of related to that, for Verification, you've grown a lot in terms of your data assets in the U.K. Can you talk through what your expectations are for that market over the next few years? And then secondly, just going back to your guidance comments, are you seeing kind of tangible weakness in those end markets in U.S. already? Or is the expectation that, that comes over the next few months? And when you talk about tangible weakness, what are we talking? Is it down 5%, down 10%, down -- or down more than that in that 4% bottom-of-the-range guidance?

Thanks, Andy. I think that was actually more than 2 questions, but we'll give it a go. So let's deal with the Verifications in the U.K. first. Obviously, that market has not really evolved yet. But you can see the rapid progress we've made, particularly with coverage. So we think we're in a really great position. As I mentioned in my talk [indiscernible] I think one of the things that we're excited about in the U.K. in FY '24 is we have a lot of new products, and this is one of them. So we expect to make really great progress in that. Obviously, we'll update you as we go through the year. I think the second part or the -- actually, the first question was probably the split between unique records and total records. I'm not sure we've outlined that, Lloyd, but...

Not in that way. But within the 47 million, we -- you see we added about 5 million during the year. Inside the 47 million, we've got 10 payroll providers. We added 6 during the year. About 1/3 of that 10 is exclusive and 2/3 nonexclusive, and then the rest comes from the growing Employer Services business that we have.

And then I think your question on the guidance was really around kind of what are we seeing today in the kind of U.S. credit market, I think, it sounded like specifically. And I think the answer is we're not actually seeing anything really different. We called out in H1 and Q3 that we expected things to get a bit tighter. That has happened. As I said, nothing fundamentally kind of bad has happened from a credit metric perspective. We've outperformed in FY '23. Actually, our volumes increased overall because we saw really good pockets of strength. And I think you see it quite mixed, depending on which segment. So for example, obviously, sub-prime was a bit more challenging. Prime actually had a pretty good year in FY '23. And we also saw some strong growth in places like BNPL. So I think it remains kind of the same, and we're expecting that to kind of continue through FY '24. Lloyd, do you want to add anything to that?

Yes. I think, as you think about the confidence in the lending system, as Brian referenced in his remarks, employment remains strong. The credit metrics around risk aren't elevated and low by historical standards. So the question often comes down to short-term changes in sentiment. We saw in the U.K. around the mini budget some effects of that. And we saw across March and April some elements of short-term sentiment weakness around some of the news flow, and that's all encompassed in our guidance. Overall, for the year ahead, 4% to 6% encompasses a reasonable downside and a reasonable upside case. But of course, we're optimistic. But as the year progresses, perhaps we get beyond the rate tightening cycle, and we can start to see some upside out of this year into the following year.

We'll now take our next question. This is from the line of Justin Forsythe from Credit Suisse.

A couple from me as well, if you don't mind. So first, I want to hit a little bit on the countercyclicality, specifically in the subscriptions business. I fully understand that conceptually, and I know it's something you talked about, for instance, like GFC. But maybe you could push that a little bit. Like what is it about this that makes it so countercyclical? I know -- I would think that these types of solutions have maybe evolved a bit since the GFC. There might be a little bit more choice out there for consumers. So what makes people still want to pay perhaps if there are free applications out there that do something similar? Maybe you could walk through a little bit about that. And do people take into account, for instance, the savings they get as a result of some of your solutions when they make a decision to pay if you know any of that data? Secondarily, I wanted to parse a little bit into the Ascend growth. It seems like that platform is continuing to grow at quite a nice rate. I think TCV on like a mid-teens growth rate year-over-year. Can you maybe just parse through -- I know you did a little bit geographically. Like what is driving the wins there as you kind of expand that platform for other and also a little bit on top of that with the PowerCurve integration, it sounded like you thought that maybe could help, I don't know, accelerate revenues potentially in TCV going forward. And what is it that's going to improve as a result of that? I understand it's an integration, but maybe some tangible examples of how that can play out.

Great. Thanks, Justin. So maybe I'll start off add and ask Craig and Lloyd to chip in. So first of all, on countercyclicality. This is an absolute trend that we see every time when there is a bit of a downturn. And we've seen it now in the GFC, we've seen it in COVID and almost like clockwork, as conditions tightened, we started to see those membership products being taken up by more consumers. The answer is that there's still a tremendous amount of demand for credit out there. What's different is the supply has tightened. And as that happens, consumers -- and as a little bit more sort of concern comes into the financial outlook, consumers spend more time actually looking at what their credit score is, how can they improve it, what can they do to position themselves better. And we benefit from that. As you rightly pointed out, the product is not really comparable to what it was in the GFC or even in COVID because we've made so many substantial improvements to it. So alongside that, there's a tremendous amount more value in that membership product. And so I think all of those factors really play in. And we are absolutely seeing that both in the U.K. and in the U.S.

Yes. And just to add on the numbers, Justin. So during the second half of the year, as we saw some of the tighter macro conditions, we saw double-digit growth in sign-ups from new customers in North America. And we exited the year Q4 subscription revenue growth was 6%. So you're definitely seeing that flow through from the elevated sign-ups now into revenue growth, which, of course, is encompassed in the resilience of the consumer guidance for the year ahead.

And then just moving on to your Ascend question. I think there are a few parts to that. The first one I'd say is the U.S. still accounts for the majority of the TCV, but we're seeing very strong growth, particularly in Brazil and also in the U.K. So I think that's really good progress. The growth is coming because there's more usage on the platform, and there are actually extensions to what the platform does. So you've heard us talk about modules like Ascend Marketing, which actually drove strong growth in North America last year. You've heard us talk about things like Ascend Ops. But all of these things are really of the capability of the platform to do more things. If you think back to the slide I had in my presentation, which showed you the sort of the life cycle of the customer, we really believe that this gives us the opportunity to really capture more areas of client spend by making the processes more efficient, making things like the use and amalgamation of data across multiple platforms into one single platform. All of these things drive efficiency and cost at our clients and give us opportunities. So really good. I think on the -- we're very excited about the Ascend. And in fact, we're very excited, full stop, about all of the integration that we can do across our products. But when you think about the life cycle of a credit model, it gets tested, people pull together, they need a platform to actually develop that, they test it, it goes through compliance, and then they want to put it into production. Well, we actually have products that do all of those things. And we believe there's an opportunity that if we have combined platforms, that can actually take that process from concept design, tests through to execution. That's another step forward in the kind of the sophistication and efficiency of the solutions that we can provide. So we're pretty excited about that. Maybe I'd ask Craig to see if you have anything to add to that.

Yes. I think -- I mean, I think you've covered it very well, Brian, with explaining how it fits in the credit life cycle. Like the most basic, the Ascend products are big data analytics products. And in the current environment, the demand for analytics continues to grow up -- continues to go up as people are using more and more analytics. But what they want to do is seamlessly deploy their analytics into production, and that's where the integration with our PowerCurve suite of products comes. And as that integration grows, as Brian said, the use cases go up and the growth potential goes up as well. So that's why we're so excited for what bringing together analytics and deployment into production can allow us to help our clients do effectively in their businesses.

We'll now take our next question. This is from the line of Andrew Ripper from Liberum.

Well done on the numbers. A couple of questions from me as well. Starting off with one for Lloyd. Lloyd, just wondering if you can revisit the medium-term margin outlook for the U.K. and Asia Pac businesses. Are your expectations the same as they were sort of 1 to 2 years ago? And just on the U.K., obviously, it dropped down a little bit. You've got, I think, quite an important stage of addressing the legacy technology estate. Maybe you can touch on that and how that might impact the P&L going forward.

Yes. Sure. So no change to our long-term position. So we aim to get the U.K.-scaled market to around 30% margin and the EMEA/Asia Pacific to mid- to high teens. The thing that gets us there is slightly different. So for EMEA/APAC, it's scaling of the markets, the strategic markets that we're focusing in on. And you'll continue to see us talk about that, and you'll see that flow through into margin progression. For the U.K., it's principally in the next phase around the technology transformation. So you saw margin this year was really a story about the investment that we're making in income Verification segment and the access to records that we've secured a market-leading position on. From here on, we've got a few years to work through the technology transformation in the U.K. So to some extent, you see benefit of operating leverage offset a little bit with some dual running costs on the technology side, but then that starts to pay off in the back end of that period. So no change to the guidelines. We've got lots of detailed plans underway to get us to about 30%.

And the time line in terms of getting to 30% for the U.K., is that a sort of a 3- to 5-year ambition?

Yes. I don't want to be tied down, I think, on an individual year, Andrew, but it's medium term. So it's kind of around that range that you talked about. But the exact year that we landed in, there's a lot that happens between now and then. So it depends on our mix of growth and the investments that we're making, but it will be around that level.

Sure. Okay. And then just thinking about growth, obviously, it's quite an unusual year -- this year in terms of the rate cycle, potentially everything from tightening to loosening. And market expectation is for rate cuts over the second half. When you've sort of thought about your guidance for the year and, Lloyd, you were talking about the potential phasing of growth over the year, have you factored in any benefits from sort of changing macro towards the back end of the financial year? Are you assuming things broadly stay as they are?

Stay as they are. The thing that -- if you push up the upside sensitivity for a second, the key thing isn't really what happens in the macro. It's how macro feeds through into sentiment. So we see that the sentiment is really important on both sides of the scenario. So that's really what could push us towards the top end of the range, but no change in the macro assumptions for the year as a whole.

And then just finally, thinking longer term, a long list of sort of strategic highlights in the statement today. You've touched on quite a few of them over the course of the call. When you get beyond the low in the credit cycle, how do you think or maybe you can revisit what you think the medium- to long-term organic growth potential of the business is?

Well, Andrew, I think, obviously, we think that the growth potential of the business is substantial. And I don't think that's just a sort of a reflection. I think you saw that really actually this year and in previous years. So of course, when conditions get a bit tougher, some of the volume businesses, growth comes off a little bit of that, but countercyclicality really came into play this year. The secular trends that we outlined in the presentation and on many occasions previously all play into long-term growth opportunities. So we expect that once we sort of get into a better macro environment that our growth will accelerate.

We'll now take our next question. This is from the line of Oscar Val Mas from JPMorgan.

I have 3 questions. The first one is going back on the guidance but thinking about it by region. So you talked a lot about the U.S., but could you talk about Brazil and also the U.K. in 2024? It sounds like organic growth has improved. It looks like organic growth has improved in Q4 and you've won some contracts. So could you talk about Brazil and the U.K.? That's the first question. And then the second question, I guess, is going back on income verification. And in the U.K., it sounds like you have a market-leading position. Could you just explain, is the business similar in the U.K. to the U.S.? And are you seeing competition come up in the U.K.? Or would you expect that to be aggressive? And then the final question is a bit more, I guess, strategically on M&A. What's -- how is the pipeline looking? Are we -- have we seen multiples come down still? What areas are we -- should we be focused on in terms of M&A?

Great. Thank you for that. Lloyd, why don't you respond on the guidance point, and then I'll come back on the Verifications and the M&A.

Yes. Sure. So starting in Brazil, the backdrop in Brazil to our business, the secular growth that we're seeing is really strong. You can see across our B2B business how that's been driven by the introduction of positive data, which is a multiyear tailwind to growth in the B2B business. And the B2C business, you saw on my chart, we've grown from a standing start to over $160 million of revenue, growing very strongly in the -- in any quarter in the 25% to 35% organic growth. So we expect that to continue. So strong double-digit growth in Brazil for the year ahead driven by those strategic growth drivers. In the U.K., a bit of a mix. Clearly, in the first half, we have, I think, weaker lending conditions. We start to lap that position earlier in the U.K. because of the effect we saw about the middle of the year from the mini budget. So softer maybe in the first half, improving in the second half.

And then on the Verification, the U.K. market looks very different from the U.S. I suppose the most significant point is that U.S. and the mortgage market, Verification income is needed as part of the process, where that's not mandated in the U.K. And so you've had for a number of years affordability assessments and income modeling in the U.K., which have been proxies for that. So lenders are actually quite sophisticated in how they do this. And so this is really a new push into sort of moving towards Verification over and above those solutions. So the market's still really evolving. In terms of competition, what I would say is I think we have the leading position. We've got the biggest record coverage. We've obviously got the most extensive relationships into the industry, and I think we're really well positioned. But we expect that there will be competition. I think there's quite -- a fair bit of investment going into this area from a number of different players, as you also see in the U.S. But very optimistic about how much progress we can make in this and very confident in the position we've developed. And then I think on M&A, I think -- generally speaking, I think we feel reasonably optimistic about the opportunities that are ahead this year. There has been some moderation in multiple expectations. We obviously talked about this last year. And I think last year, it was quite difficult because I don't think expectations really changed very much. But we do seem to sort of -- now that that's extended a bit longer being to a slightly different environment. So we're going to continue to look for opportunities. We have got a healthy pipeline, we always do, whether we can meet the buyer and seller expectations, as always, where these things land. And they will be -- none of these will be a surprise being areas where we strengthen our core business would be in the core capabilities that we have, such as our core credit business, data assets, fraud, identity, those sort of areas are the areas that we're all focused on.

We'll now take our next question. This is from the line of James Rose from Barclays.

I've got 2, please. The first is on product capabilities. You've given revenues from new products adding over $1 billion since FY '18. What your expectations are? What make a contribute to FY '24 from new product development? And then also in the marketplace businesses in the U.K. and the U.S., could you touch on what you're seeing in the fourth quarter and also into the first quarter and perhaps your assumptions for those businesses throughout FY '24?

Okay. I'll go on maybe start with the marketplace. So we saw through the fourth quarter in the U.S. strong growth in marketplace, strong double-digit growth. When you look within the quarter, some of the sentiments that we saw that started around mid-March around regional banks, that did -- we did see some pullback, which is in line with the guidance that we talked about, and we've seen that continue into early April. So we start the year, I think, with more modest growth in that marketplace business, but it is the area that recovers very quickly and very strongly as sentiment moves around. In the U.K. business, that marketplace business has been weak since the mini budget around the half year. So we've seen that weak and stable. We expect that probably to continue through the first bit of the year, but we start to lap that around the half year because of the timing that we have in there. On the new product, I won't give guidance on new product revenue, but I think you can see the shape of the chart, and you can see the accelerating investment and really the breadth of market positions we're taking. You can see on that chart; I outlined here from our exposure to quite a number of fast-growing vertical across our markets is increasing. And as they begin to scale, they provide obviously a good profit trajectory as well.

We'll now take our next question. This is from the line of Karl Green from RBC.

I think you sort of partially answered this question, but I'll just maybe ask it a slightly different way. I mean you have talked about sentiment there and how it's impacting various parts of the business. I mean just specifically in terms of your range of organic growth outcomes for the full year, have you specifically factored in any changes in employment conditions over the next 12 months? I mean, yes, we can talk about interest rate cycle potentially pivoting, but employment is going to be a key dynamic in things like the [ SLOTS ] survey, et cetera. So just anything more granular on that? Or maybe you are just taking it from more of a high-level view?

Yes. I think we start with GDP growth. And now as we look out, it's a modest growth environment in the U.K. and the U.S. So forecasts move around from a slight recession to slight growth. But if you say modest growth across the year as a whole, that's where we bedded our forecast. Clearly, there can be some scenarios around that, and employment and how employment is all part of that. But that's all encompassed in the 4% to 6% range.

We'll now take our next question. And this is from the line of Anvesh Agrawal from Morgan Stanley.

Most of my questions have been answered. Just a couple. First on Spanish Lat Am and the membership growth you have seen there. Wondering sort of what's driving that investment? Do you -- does that market -- any similarities to, let's say, Brazilian business and it can develop a similar way longer term? So just curious to know what was the growth runway there. And secondly, you have sort of outlined the benefits from generative AI and how you can use it going forward. Are there any some -- could there be some challenges? Or if the way you deliver the service can change or improve upon because of generative AI, so just thinking on the other side.

Yes. Great. Thank you. So let's deal with the Lat Am question first. So Spanish Lat Am, yes, we -- this is one of these things that we take some time build before we talk about it. And actually, they've done a great job. But it is the same kind of approach that we've used in Brazil. It's primarily in Colombia, and it's actually quite a substantial membership base now when you consider the population of that country. And it will be a full range of products primarily focused on free marketplaces, which will evolve. And of course, in economies like that, you do have the opportunity for products like -- similar to the Limpa Nome kind of proposition that we have in Brazil, so exciting. Obviously, scaled in the context of that market, very interesting and good development. Going back to the AI question. And your question was specifically on challenges. I suppose there's one angle to think through all of this, which is really the regulatory challenge around that. And of course, we -- the provision of credit is heavily regulated in most of these areas. And there will be a lot of scrutiny on this as we go forward. But actually, this really is part of the strength of our propositions because we've incorporated all of that into the products where we already use AI. And so I think there's going to be some limitations actually on what can be done with this, particularly in a political context. And we don't really see any challenges from -- to our core business because I think the key point is that for these models to be effective, they need to work on the data sets. And our data sets are proprietary, and that actually gives us a tremendous competitive advantage. And so as we think about that, we think very much this is a great opportunity as opposed to there's some sort of lurking threat there.

And we have no further questions at this time. So I will hand the conference back to the speakers.

Okay. Well, great, thank you very much for all your questions. That concludes today's session. Thanks for joining us. I hope you have a good day, and we look forward to speaking to you again in July for our Q1 trading update.

Thank you. This does conclude the conference for today. Thank you for participating, and you may now disconnect. Speakers, please stand by.