Kount Inc. (EFX) Earnings Call Transcript & Summary

Good day, and welcome to the Equifax Investor Update Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Dorian Hare, Senior Vice President, Head of Investor Relations. Please go ahead, sir.

Thanks, and good morning. Welcome to today's conference call. I'm Dorian Hare. With me today are Mark Begor, Chief Executive Officer; John Gamble, Chief Financial Officer; and Sid Singh, USIS Business Unit Leader. Today's call is being recorded. An archive of the recording will be available later today in the Investor Relations section from the about Equifax tab of our website at www.equifax.com. During today's call, we will be making reference to certain materials that can be also found in the Investor Relations section of our website under events and presentations. These materials are labeled Account Acquisition Investor Update. During this call, we will be making certain forward-looking statements to help you understand Equifax and its business environment. These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from our expectations. Certain Risk factors inherent in our business are set forth in the filings with the SEC, including our 2019 Form 10-K and subsequent filings. Also, we will be referring to certain non-GAAP financial measures, including adjusted EPS attributable to Equifax, adjusted EBITDA and adjusted operating income, which will be adjusted for certain items that affect the comparability of our underlying operational performance. Our non-GAAP measures for completed periods are detailed in reconciliation tables, which are included with our prior period earnings releases and are also posted on our website. On this call, we will not be discussing Equifax's fourth quarter and calendar year 2020 financial results. Now I'd like to turn it over to Mark.

Thanks, Dorian. I hope everyone had a great holiday and staying safe in the cohort environment. Thanks for joining us this morning to discuss our acquisition of Kount, which we announced on Friday. This is an important strategic step for Equifax as we accelerate the growth of our identity and fraud business. As summarized on Slide 3, Kount is a leader in providing digital trust through the digital customer journey, supporting e-commerce customers and partners by providing platforms, trust scores and data that allows customers to transact confidentially or confidently with consumers. Combining Kount's best-in-class digital identity platforms and data with Equifax's extensive consumer identity data, positions Equifax to expand and grow in the fast-growing digital identity and fraud marketplace. This SaaS growing market is estimated to have a TAM of about $20 billion with growth in the high teens annually. The identity and fraud market has become increasingly important with the macro trend we have discussed before of consumers completing more transactions digitally, including digital banking, bill pay, e-commerce and more. The move to digital and online has accelerated during COVID, which requires advanced identity and fraud capabilities across all industry verticals. For example, e-commerce is up over 20% in 2020 alone. Online banking was up 67% in 2020 with mobile wallet usage up from 38% in 2019 to 55% in 2020. Online card fraud hit nearly $6 billion last year with 40% of e-commerce merchants reporting an issue in chargeback fraud. And over 40% of merchants say that digital fraud slows their innovation and growth. Identity and fraud is clearly 1 of our customers' top challenges. The move to digital and online has been a macro for our customers for the past 5-plus years and was only accelerated by COVID. We expect consumer behavioral changes to digital to only expand in the future, which drives the market opportunity for Equifax by expanding in the identity and fraud space. Equifax's cloud data and technology investments and cloud-native platforms will enable a smooth and rapid integration of Kount and enable Equifax capabilities, accelerate new product rollouts and optimize the synergies from the acquisition. Adding Kount will significantly accelerate growth in Equifax's existing digital identity solutions driven by Kount's market-leading digital identity and fraud platform, their extensive data network that enables the linking of physical and digital identity and transactional data across 32 billion annual digital interactions. Their leading technology position, including advanced AI and machine learning, reinforced by a strong patent portfolio, their global digital footprint and capabilities supplementing Equifax's global reach that includes leading positions in Canada, U.K., Spain, Australia and India, and their deep e-commerce customer and partner relationships to leverage exist Equifax's existing relationships across financial services, telco and utilities. The Kount acquisition is aligned with our focus around expanding and strengthening Equifax with bolt-on M&A that brings new capabilities and unique data assets. Our strong outperformance in 2020 and strong balance sheet allowed Equifax to reinvest in Kount acquisition that will drive growth in 2021 and beyond. We expect Kount will add 100 to 150 basis points to Equifax's 2021 growth and will be neutral to EPS in '21 and accretive in 2022. The next few slides provide an overview account in its unique capabilities. As indicated on Slide 4, Kount provides AI-driven platforms and products focused on preventing fraud and digital payments and account creation and management as well as on the prevention of account takeovers. Their flagship product Kount Command, delivers the Kount Omniscore, along with robust capabilities for users to tune automated identity and fraud policies and manage exceptions with a robust case management system. Kount supports the protection of digital consumer journeys and transactions with over 9,000 brands worldwide. Kount's 2019 revenues were over 90% in the U.S., but Kount capabilities are utilized worldwide with strong global growth potential. Kount delivers through both direct partner and integrated partner channels. The direct channel targets enterprise and mid-market customers and is incorporated directly to their technology stacks. The integrated channel provides a differentiated value proposition for payment service providers, gateways, acquirers and other merchant aggregation points. Kount has built an extensive digital identity consortium, principally across e-commerce and payments, which has allowed them to create extensive identity data. Kount's extensive network of e-commerce and payments customers and partners provides them with a broad set of data assets against which to provide passive identity validation and fraud detection. Slide 5 shows that through both direct and partner relationships, Kount annually sees over 32 billion interactions with consumers, provides over 5 billion transaction verifications as a mass data covering over 1 billion IP addresses, 1 billion unique devices, 600 million e-mail addresses and 400 million physical addresses. As we'll discuss a bit later, Kount's data, when combined with Equifax's extensive identity data, creates a compelling competitive position for Equifax. Kount's unique consumer payment and location data, transaction data provided by customers and digital identifier data has allowed them to build and continuously improve through advanced data analytics, including patented AI and the Kount Omniscore. Based on data points derived from billions of historical transaction and Kount's identity trust global network database and unsupervised machine learning that detects emerging patterns, the Kount Omniscore optimizes approval rates by providing likelihood of new and existing fraud that become charge back events for e-commerce and retailers. It is these deep and broad data assets and advanced analytics, including the Kount Omniscore, that allowed Kount to deliver customers a basis for establishing a measurement of real-time identity trust with consumers. As shown on Slide 6, this capability, delivered through the Kount platform of services, allows it to deliver robust solutions across the customer digital journey, including an identity verification and fraud detection. Kount direct and partner customers rely on Kount solutions to increase real-time transaction validations, while minimizing both fraud and false negative. Slide 7 highlights why customers choose Kount, including they're the only end-to-end solution to protect the entire customer journey. Over 90% reductions in chargebacks and up to 83% reductions in manual reviews and 70% reductions in false positives. The scale of the Identity Trust network at Kount, combined with next-generation AI machine learning models with a sophisticated policy engine, automated and customizable use cases for large enterprises. Advanced analytics and data on demand, superior customer success with exceptional expertise and scalable architecture with superior performance and reliability. We've done extensive research on customer feedback as a part of our due diligence process, and this has come back very positively. And we've included some of the sample quotes on the right-hand side of this slide. It's important to emphasize that Kount serves as a growth platform for its customers' e-commerce activities while simultaneously enabling trust and confidence. Slide 8 highlights the power of the combination between Equifax and Kount will deliver even more comprehensive and predictable identity and fraud data assets and solutions. Looking specifically at combining Kount with Equifax U.S. differentiated data assets, creates a powerful basis to improve the real-time identity and trust fraud detection provided to our existing customers, Equifax, fi and telco customers as well as Kount's retail and e-commerce customers. The combination also creates a comprehensive set of capabilities and solutions across the digital journey with leading capabilities from account opening and registration through transaction and execution and payments. The combination of Equifax and Kount data will drive new products and solutions in the identity fraud space that will drive Equifax growth. As I mentioned earlier, the cloud technology and data transformation at Equifax has already substantially renewed and expanded Equifax's identity validation capabilities and enabled the acceleration of new products, as we discussed with you during 2020. Our new Luminate, identity and fraud platform, which uses advanced analytics, AI and machine learning and data orchestration provides risk managers with insight to help manage fraud decisions across the consumer account life cycle. It also includes bio document verification, synthetic fraud detection and other advanced services. Equifax's historic strengths and enhanced services have been an account opening, ID verification and credit ineligibility. Combining these capabilities with Kount's extensive data assets and strengths in ID verification and authentication and transaction of payments creates a compelling solution suite. The Equifax technology transformation also greatly enhanced our ability to -- will enhance our ability to quickly integrate the Kount and Equifax capabilities into the Equifax cloud on GCP. Kount's strong technology platform will, within the next 12 to 18 months, be migrated to the Equifax cloud platform to allow for the full integration of Kount and Equifax capabilities for new solutions, new products and growth. Equifax Ignite, our data analytics platform that includes advanced machine learning capabilities, including Equifax patented explainable neurodecision technology or NDT will integrate Kount's extensive data assets and AI capabilities to further enhance our ability to create new products and further accelerate new product introductions. The combined Equifax and Kount Global identity and fraud business we expect to be in excess of $200 million in revenue in 2021. With Kount revenue principally today in the U.S., about 2/3 of our combined revenue will be generated domestically. However, Equifax has strong identity in fraud businesses in both Canada, Australia and growing capabilities in the U.K., Spain and Latin America. Equifax's global scale and cloud investments will enable integration delivery account capabilities across our international platform, further accelerating growth and strengthening the combined Kount and Equifax data assets. The combined Equifax and Kount capabilities greatly enhance our ability to participate in the rapidly growing market, global market for digital identity and fraud solutions. This market is expanding with the macro trend from digitization, contactless engagement and e-commerce. As shown on Slide 9, this market is almost $20 billion with growth in the high teens. The current Kount solutions address only a fraction of this market opportunity. The combined Equifax and Kount with our combined data assets and the integrated solution set we'll leverage Equifax's strong capabilities and relationships across financial services as well as in the telco, insurance and government channels to accelerate growth. Now I'd like to turn it over to John to take us through the financial summary of the deal.

Thanks, Mark. Slide 10 provides a financial summary of the Kount transaction and the impact on Equifax. The purchase price of $640 million or $618 million after considering the cash value of acquired NOLs. Kount annualized revenue in 2021 is expected to exceed $60 million with over 20% growth, consistent with their performance in 2020. Revenue synergies are expected to total over $50 million over the next 3 years as we integrate and scale Kount. We expect the impact on Equifax adjusted EPS will be negligible in 2021 and expect the acquisition will be accretive in 2022. As Mark discussed, the Equifax cloud technology and data transformation will accelerate the integration of Equifax and Kount as well as accelerate new products and geographic expansion. Our cloud investments give us more confidence to complete acquisitions like Kount. Kount CEO, Brad Wiskirchen, and his team will continue to run Kount and will lead the integration of Equifax and Kount. We're excited to have Brad joining our team and leading our identity and fraud efforts. As you know, our 2020 financial performance was very strong and above expectations, which allowed us to end 2020 with cash balances over $1.6 billion. The purchase of Kount will be funded from these existing Equifax cash balances. Our liquidity position will remain extremely strong following the closing of the transaction with substantial balance sheet flexibility in the future. Closing is expected to occur this quarter, and I'll now turn it back over to Mark to finish up his prepared remarks.

Thanks, John. Wrapping up on Slide 11. The count acquisition reflects the execution of our strategy, focusing on acquiring companies with strong technology and accretive data assets. We view identity and fraud as an important and strategic capability that Kount strengthens meaningfully. We've known the Kount business and team for over 5 years. The time was right for Kount to become a part of Equifax. Kount's strength in the e-commerce and transaction and payments markets broadens the Equifax's addressable market, both in the U.S. and globally. The combination of Kount's unique data generated through massive scale of their high velocity data assets and extensive e-commerce customer and digital partner network, combined with Equifax's best differentiated data assets, will position Equifax with market-leading capabilities in identity and fraud and accelerate new product generation across the combined business. As I mentioned earlier, our cloud technology and data investments will enable faster and more effective integration of Equifax and Kount capabilities, new product solutions and growth. As mentioned earlier, we expect the acquisition will add 100 to 150 basis points of growth for Equifax in '21 and be accretive to adjusted EPS in 2022. We view bolt-on M&A as central to our growth strategy in the future. Kount is a strike zone acquisition for Equifax. We will continue to look for similar strategic and accretive acquisitions in the future. We will discuss our fourth quarter results and outlook for 2021 and beyond in a few weeks. But our confidence in Equifax business and growth strategy continues to be high, coming off a very strong 2020. Our growth levers going forward include the momentum coming off a strong 2020 into 2021 and the expected COVID recovery. The cloud benefits, as we discussed in December, will grow through '21 and '22 as we complete our customer migrations and fully deploy our cloud capabilities. Workforce Solutions, which had a very strong 2020 and is positioned for above-market growth again in 2021. EWS is clearly our fastest-growing and most valuable business. Leveraging our cloud capabilities to accelerate new product rollouts. We delivered over 130 NPIs in 2020, up from the 125 we discussed in December and up from 90 in 2019 and the 70 to 80 we delivered historically. We have a big focus on innovation and NPIs to drive growth. And lastly, Kount, which will give us a big lift in our identity and fraud capabilities in a fast-growing market. As we discussed, we expect Kount to add 100 to 150 basis points of growth this year with strong synergies over the next 3 years. Kount is the kind of strategic, accretive, bolt-on deal we want to do more of with our strong cash generation in the future. With that, let me turn it over to the operator for questions. And as a reminder, given that we are in our reporting cycle, we plan to focus our questions on -- we plan to focus our conversation on the Kount acquisition during the question-and-answer period. Operator, if you could open it up for questions.

[Operator Instructions] And our first question comes from Andrew Nicholas with William Blair.

I was hoping we could start -- hoping you could expand a bit further on the different data sources Kount is leveraging today. How much is proprietary data collection versus third-party purchase data? I believe you also mentioned an identity data consortium earlier. So just trying to get a sense of which of the data assets are unique to Kount and how Equifax can be helpful to that?

Yes. And that's part of the reason that we were so interested in Kount, and we spent so much time focused on them is the vast majority, virtually all of their data assets are proprietary. And I think that's what's unique about it. And the scale of the data assets that they have, whether it's the interactions they have with consumers, the physical addresses, as we mentioned, over 400 million physical addresses, 280 million ship to addresses, 400 million phone numbers, IP addresses, 600 million email addresses. The scale of that data just creates more predictability in their environment. And then when you combine it with Equifax's extensive data assets, we think we have a really compelling synergies to not only strengthen their e-commerce channel, but also to strengthen the identity and fraud capabilities that we have in -- with our financial services customers, with our telco customers, utility customers and government customers. And that uniqueness of the data was central to our focus on the acquisition.

Got it. And then I was hoping, as my follow-up, if you could speak to the revenue model. Our clients charged a standard fee on like a per transaction basis or is it a subscription agreement? And then I think I saw on the website, Kount offers some professional service type solutions or maybe consulting type solutions as well. So any color on kind of mix of those transactions or subscription fees versus consulting or anything like that, that would be helpful?

Sure. I'll pass that 1 to Sid Singh. I think as we mentioned, we plan to integrate this business into our USIS business, which Sid leads, and Sid do you want to take that one?

Yes. Andrew, thanks for that question. So think about Kount as a transactional revenue model. So while they offer professional services and consulting, it's obviously in line to support the overall relationship with the end customer. So it's primarily a transactional model. So every transaction that is generated on the Kount network, the charge fee for that transaction.

And we'll take our next question from Manav Patnaik with Barclays.

The first question, does Kount partner with you guys already? Like is there an integration with the credit bureau data itself or maybe they use some of your competitors? Just curious on if there already was an existing relationship here?

There's not, Manav. But as I mentioned earlier, counts company we've been watching for, gosh, way before I've been here, probably 4, 5, 6 years. It's a company that we've admired. We think they're quite unique. And 1 of the big synergies is what you just described is really taking our vast data assets across all of Equifax, both in the United States and globally and combining with their vast data assets. So that's really the opportunity. And no, they don't use data from any of our competitors today, but that's part of our synergies.

Got it. And just kind of a 2-part follow-up. Those synergies, is that just expanding into the other areas of fraud? I was just curious like what those synergies look like. And just on your existing fraud business, it sounds like it's about $140 million. How fast is that growing today?

Yes. The synergies are really from combining the data assets and just having a higher predictable solution and allowing us to bring new solutions to our customers. That's where we see the growth and I think we commented in the discussion, we expect the combined business to be growing faster than Equifax's kind of historical growth rate. So it's going to be accretive to Equifax's growth rate going forward. The identity fraud space, I think you know well, is 1 that's growing faster than, I'd say, the overall data industry for the credit bureaus, and it's 1 that we expect with Kount to be accretive to our growth rate going forward.

Okay. And just the $140 million of existing fraud, is that growing the same rate? Or just curious what the combined growth rate would be?

Yes. As I said, the combined growth rate we expect to be growing in excess of Equifax's historical growth rate. That's how it becomes accretive.

And next, we'll hear from Kyle Peterson with Needham.

So I just wanted to talk a little bit on the revenue, the model of Kount. Is there any seasonality that we should think about our model situated more towards e-commerce? I don't know if there's like a little bit of a kind of 4Q tilt towards that business? Or just how should we think about the cadence once this deal closes?

Yes. There's not really any seasonality that we've seen in their historical growth rates. And part of that's driven by their just strong growth rates historically, they're kind of outgrowing any limited seasonality that's in there. I think we've all seen, when you think about Kount specifically, that e-commerce is growing kind of sequentially and quite strongly. And then in our identity and fraud business, it's -- there really isn't any seasonality with that.

Okay. That's helpful. And then I guess just a follow-up on the margins. I know you guys mentioned that Kount's currently slightly profitable. Longer term, is there any reason that this business, once it's integrated into your overall identity and fraud business that you can't bring the margins up towards USIS averages once the business matures?

No, we fully expect that to occur, right? There's no reason why our fraud business shouldn't operate at, at least USIS margins. It's a data business. And our data businesses tend to have very high variable margins, and therefore, we expect to see these margins grow nicely.

Next, we'll take a question from Hamzah Mazari with Jefferies.

My first question is just on Kount, it's 90% U.S. Could you maybe talk about how easy is it to take this product globally? And whether that's baked into any of the revenue synergies?

Yes. It's clearly part of our strategy. Our focus early on will be to really leverage the integration between Kount and our U.S. business to really scale the data capabilities here in the U.S. and as you know, the U.S. is the largest market in the world, and it's 2/3 of our business roughly at Equifax. So that will be priority one. But we do have some -- we do have aspirations and plans to take it global. Kount's already in the U.K. as you know, we have a U.K. business. We'd like to take Kount to Canada, Australia and some of our other markets, and that will probably follow the integration here in the U.S. first.

Got it. And just my follow-up. From a competitive standpoint, Mark, who are you competing with on these assets? I know the bureaus do a little bit of fraud, but are you starting to compete with the payment names on these deals? And then as you look out to that $20 billion market, do you need to do more acquisitions just to kind of scale this platform? Or is most of the growth going to be organic as you look at the fraud business today?

Yes. And maybe I'll just jump back and just add that the other -- when you talk -- your first question around global, obviously, the cloud investments that we've made that we think will really facilitate broadly the integration. It gave us a lot of confidence in doing an acquisition like this because we have the technology stack that we've invested in over the last 3 years also help us globally. With regards to our competitors, there's a lot of them. It's a big space. Obviously, our core competitors have identity and fraud businesses. [indiscernible] has an identity and fraud business, and there's some other players out there. In the e-commerce space, Kount is one of the market leaders. So that was really attractive to us given their scale and their positioning in the marketplace. With regards to future growth and M&A, we're going to be on the lookout. I think we've talked in the past, in 2020, about our expectation that our cash generation will continue to grow as we go forward in '21, '22 and '23 following the cloud transformation. And our intention is to put that cash to work where we can identify attractive, strategic and highly accretive acquisitions like Kount. So if we can find acquisitions that can add to our identity and fraud space, we would certainly do that. That said, we're also going to really lever our NPI capabilities. That's a big focus of ours and a big part of putting Kount's and Equifax together is to roll out new solutions in the financial services market, in the telco market, utilities, government, our core verticals are really going to be leveraged by innovation in new products, which, as we've talked about extensively over the last year or so, is really facilitated by our cloud investments. And as you heard me mentioned earlier, we ended up the year at 130 new products, which is up a few from what we talked about in December, but up dramatically from our historical run rates, and growing new products through leveraging the cloud is clearly central to our strategy, and that will be a part of what we do with Kount in our identity and fraud vertical as we go into '21 and '22 and beyond.

And up next, we'll hear from Andrew Steinerman with JPMorgan.

It's Andrew. I just wanted to get a little sense better on the percentage of revenues by vertical, how much are e-commerce clients versus banks or payment companies? It sounds to me, and this is my understanding of Kount before today that the banks and the payment companies that chases and the visas of the world are more data partners, where the e-commerce, the retail companies are the larger customer base today?

That's correct. That's correct. Yes, for Kount business yes. For Kount's business, of course, our Identity and Fraud business is primarily oriented to our financial institution, telcos, utilities, et cetera, Kount is oriented towards retail and e-commerce, as you point out.

Okay. That's what I was asking. Wait, can I ask 1 more question? Is it a give to get model? Is it -- for the banks and the payment companies, is it a give to get data policy?

Go ahead, Sid?

Yes. So yes, it is. So basically, the way the Kount network works is that different retailers will obviously work with Kount to develop very specific rules that work for their businesses. And then there's going to be analysts that sit inside of these retailers to help them with the actual reviews of the cases. And the overall aggregation of all these transactions actually benefits the system. So from that perspective, all of those retailers benefit from Kount. So the more we add to the network, the more everyone benefits.

And up next, we'll hear from Toni Kaplan with Morgan Stanley.

Just wanted to ask a follow-up on the competitive question. I guess when looking at iovation versus Kount, can you talk about maybe what Kount does differently or what iovation does differently, just so we get a sense of how that compares?

Sure, Sid do you want to take that?

Sure. Great question. So think about Kount as a company that's embedded in the online transaction flow. So they collect 4 different buckets of data, as we pointed out earlier. So for example, they're truly collecting all aspects of the payments data. So think payment type, think where the card is issued from or what country, what currency amounts, et cetera, they also collect unique customer data, which is unique to Kount. So what's inside of the shopping basket? Are there coupon codes? Are there loyalty numbers, any specific user defined elements. So all of those 2 buckets, payments and unique customer data are, we believe, quite attractive and unique about Kount. In addition to that, we also talked about how they collect location ID data, how they collect digital identifier data. So think about time of the day, shipping address, verification as well as device ID, IP addresses, billing and shipping addresses. So it's this holistic end-to-end collection across these 4 buckets that really makes Kount differentiated in the marketplace.

That's great. And then just looking at Slide 9, you talked about there being a $35 billion total fraud and risk and authentication market and you're attacking right now about $19 billion of that market. With the combined products. Is there an opportunity to go after the full market? Or what's in that full market that you're not interested in going after? Or is that an opportunity for you?

Yes. Look, there's absolutely an opportunity to go after the full market. Let me also just add some additional color here. So Mark talked about the macro of the consumer trends, et cetera. Our customers have a variety of issues to deal with on the other side of that equation, right? So think about a credit card lender or a financial services provider, many of whom just launched or in the process of launching a digital bank. I mean they're dealing with identity and fraudrings that are becoming more sophisticated, customers are seeing an increase in synthetic IDs and bot-based attacks. They're trying to figure out is this account compromised or not. Is this e-mail or phone number, a high-risk number or not. Do I send this for a manual review or do I approve this transaction, which might or might not impact my bottom line. And these questions cut across, as Mark noted, a variety of different verticals pretty much everyone who's now selling online is trying to figure out the answers to these questions. So we believe that with our investments in cloud and with this investment in Kount, we're well positioned to cover the entire market.

And up next, we'll hear from Shlomo Rosenbaum with Stifel.

Just want to feed back, I guess, a little -- for my first question on the last question. Do you think it's as differentiated as well from like the ThreatMetrix platform as well and some of the other ones like Signifyd and Sift? Do you think that it's holistically that much better than what you're seeing out there?

We do think we're going to be very differentiated. With the scale of the consumer interactions that Kount brings, combined with Equifax's very deep and broad differentiated data, we think we're going to have a compelling solution in the marketplace that is really unrivaled for most of the other solutions. When you think about some of the other players out there, they really have data around whether it's card fraud or different verticals. In our case, we're knitting together a very broad set of capabilities from both the financial services guys that we have as a credit bureau. And with the e-commerce and retail side that Kount brings in. So we're really energized around the leverage that will come from that.

Okay. Great. And then can you just -- maybe this is for John. Is the $50 million in revenue synergies you're expecting from '21 to '23 kind of on top of that 20% or so top line growth in Kount. So that's like if I extend the 20% on kind of $60 million over the next 2 years, I should be adding like $50 million on top of that, and then taking kind of an expected Equifax margin to kind of get an EBITDA multiple forward 2 years?

I don't think I'm going to give a growth rate in '22 and '23 specifically. But in terms of the $50 million in revenue synergies, the bulk of them occur beyond 2021. So there are some synergies, certainly in 2021, but the bulk of the revenue synergies really kick in in '22 and '23.

So it's on top of that. Is that what we're talking about because it was already growing at 20% and the $50 million is on top? Or is that included in kind of the growth rate that the company is already having in '21?

Yes. We didn't give a growth rate. We didn't give a growth rate for the underlying account business beyond '21. So we're going to have to ask you to estimate that. But the -- but in terms of synergies the bulk of the synergies, as I said, will occur in '22 and beyond, right? There are certainly some revenue synergies this year, but the bulk of the $50 million is in '22 and beyond.

But by definition, synergies are on top of the inherent growth rate of the business. And as John pointed out, we were quite attracted to the strong growth that the business has had over the last year, 2 years, 3 years, 4 years, coming into the Equifax acquisition and the synergies really are the combination of Kount and Equifax and by the definition, they're additive to the equation.

And our next question will come from George Tong with Goldman Sachs.

You talked about the combined business improving in margins and reaching USIS margins over time. Can you discuss any explicit cost synergies and timing of realization of such cost synergies over time?

Yes. The bulk of the opportunity between Kount and Equifax is around new products and growth. There are some cost synergies around data assets. And as, I guess, we mentioned, our intention is to move the Kount infrastructure into the Equifax cloud capabilities. So that'll have some level of cost synergies. But the vast majority of our synergies are around growth.

Got it. That's helpful. And as a follow-up, I wanted to dive deeper into the competitive landscape. You talked a little bit about some of the competitors. Who do you, I guess, mostly, directly compete with today with Kount and the Equifax business combined, fraud business combined? And how do you expect that competition to evolve going forward, especially as you go into newer areas of fraud and ID management and as you go internationally? How do you expect the competitors set to evolve from today to next several years?

Yes, I'll start and I'll ask Sid to jump in. But just as a reminder, Kount brings us into a vertical we're not in today, retail and e-commerce. So we're playing in a different space. And we believe the Equifax capabilities will be additive to what Kount does in retail and e-commerce. And then, of course, conversely, the scale of their data assets are going to enhance our existing identity and fraud business in financial services, in telco, utilities, government and others. So part of the strategic benefits of this is the scale of the data assets. And then second is for Equifax to enter into a new vertical. Sid what would you add to that?

Yes. No, that's exactly right. So e-commerce, we all know, is a $9 trillion to $10 trillion market that generates just tremendous amounts of data, right, the consumer data. Our ability to offer that data, those digital signals, combined with our existing identity data, and offer it in a way which is cloud native, leverages the data fabric that we have, is going to be unparalleled. So we truly believe that from a competitive positioning perspective, the market today, which is quite fragmented, and everyone has a variety of point solutions, is going to evolve towards a few players and players that make the investments in both the data and the tools. And this actually allows us to do both, not just in that large e-commerce market, but our core markets also, including financial services, telco, government, utility, et cetera.

And our next question will come from Brett Huff with Stephens Inc.

Good morning. Happy New Year. Sounds like a really cool acquisition. One question is that hasn't been asked that we've been thinking a little bit about is this move towards thinking more holistically about digital identity. It seems like you guys have a bunch of data that gets you there already plus additional Kount data. Is that how we should think about the evolution of your thinking on this? And maybe where the product goes or additional acquisitions to fill out more of an identity graph? Or is that a different business altogether?

No, I think that's directionally right, Brett. This clearly brings scale of data assets that were incredibly attractive to Equifax. 1 billion unique IP addresses, 1 billion unique devices, 600 million e-mail address. I just -- and I could go on, the scale of the data assets around an individual. Having physical address, 400 million physical addresses it brings in, 200 million ship to addresses. So there's just so many data elements that really, as you point out, create more of an identity graph around an individual and combine that with all the identity information we have at Equifax from our credit file, from our income and employment data, from our NGTV database. The scale of those data assets really combined, just allow you to drive predictability through more signals around is Mark really Mark when he's applying for credit card? Is Mark really Mark when he's buying something online from an e-commerce perspective and really ferreting out identity and fraud, which, as you know, because of the digital macro is just exploding. And that's been accelerated by COVID. We think it's only going to continue. There was a strong trend towards digital and online interactions coming into COVID that's been accelerated. I saw a quote over the weekend that 1 analyst said that we've accelerated 10 years in just 9 months of digital interactions with consumers across the globe around digital. So it's a big macro that we think plays well for Equifax. Given the scale of our data assets that we have and Kount really differentiates us now with the scale of the data assets they bring into our portfolio.

And if you look at the existing Equifax around and this area, the bulk of it is actually an identity validation. So we're already a participant in that market.

Got you. A quick follow-up, does this change how you all think about approach to direct-to-consumer? Is there a future where consumers can help view their data, either on account or maybe a digital identity basis? Or is it still -- are you guys still mostly focused, I know, so far on the partner channel or does that change?

Yes. I think that no change in how we think about our direct-to-consumer business. We're -- we've got an attractive business. We like it. We've, as you know, invested in it as a part of our cloud transformation in the last couple of years. As we talked in prior calls in the fourth quarter in December, we've seen that business improving post the cyber event many, many years ago when we stopped advertising, but no change in how we think about our direct-to-consumer business.

Next, we'll hear from George Mihalos with Cowen.

Congrats on the deal. Just wanted to ask 1 question really. If we look at the 20% growth rate, is that divergent at all amongst the direct partners versus the integrated partners? Just wondering where you're seeing more channel growth?

No, it's pretty consistent in what Kount is been. Again, this is Kount's growth rate over the last number of years has been very, very strong, and it's quite broad-based and pretty consistent.

And next, we'll hear from Kevin McVeigh with Crédit Suisse.

You mentioned a couple of times, it seems like you've been around it for about 5 years. Why now? Is it COVID? Is it kind of the integration of TTI? Just why now as opposed to 3 years ago?

Yes. I can't speak too much longer than 3 years ago because I've only been here for 3 years, but I can tell you it's been a business we've admired for many years since I've been a part of Equifax, and I'm told it's a business that we've been familiar with for many, many years. And acquisitions, as you know, are sometimes situational. Is the company ready to sell? Are their owners ready to sell? And is Equifax in the right position? When you think about the last 3 years for Equifax, we've been investing heavily in the cloud transformation. We've done a handful of bolt-on acquisitions. Obviously, nothing at the scale, but the combination of timing of the attractiveness of the space, meaning the identity and fraud space, the cloud transformation, where we are in that in that journey? I mentioned earlier that quite intentional for Equifax was the fact that we're able to reinvest some of our outperformance from 2020 and into an acquisition like this. We had a very, very strong year, as we talked about in December. And that outperformance generated incremental earnings and cash for us that we're able to invest in a deal like this. And as I also said, it's our expectation that we're going to continue to make strategic and accretive bolt-on acquisitions like Kount going forward. It's a part of our plan for the future.

Makes a lot of sense. And then just in the deck, it talks about kind of 90% reduction in chargebacks, 83% reduction in manual review, 70% reduction in false positives. What's driving that experience? Is it just from a client perspective? Because obviously, those are pretty strong numbers relative to if you're not using the data?

Yes. This is Sid. I'll take that question. So it really -- it really is a combination of all of the things we talked about, right? So it's the extent of the identity network, the graph, the sheer volume of transactions that comes in, supplemented by cloud-native capabilities and there's a lot of patents in AI and machine learning that's been infused over a number of years. Remember, Kount's not a new business. They have been at it for a few years. And when you combine that expertise and their technology capabilities along with the kind of data they generate, it really creates an end-to-end experience for the customers. And we've done data studies, and we've seen how well their scores perform, and we've spoken with customers as well, and it's been very, very positive.

And up next, we'll hear from Gary Bisbee with BoA Securities.

I wonder if you could just explain a sort of a generic e-commerce transaction and that a retailer whoever is offering and exactly how the Kount platform and data is used in that?

Sid, do you want to take that one?

Sure. So think about a consumer putting stuff in their online shopping card checking out. At the point of checkout, depending on how the technology is configured, that retailer will actually ping Kount systems and will supply Kount with a lot of the information that we talked about, right? So there's 4 buckets. There's the actual payment data, there's the customer-specific data, there's digital identifier data, and then there's all of the location ID data. So all of that comes across through APIs into Kount and Kount's system along with what the retailer has set up in terms of rules, seasonality or anything that's specific to their business would kind of kick in and along with the AI and the patterns that we talked about, they would give a score back to the customer where they can say, it's a yes or no or a manual review, et cetera. There's -- I'm obviously simplifying it just to kind of put it in perspective, but they're actually in the flow of that e-commerce transaction before the actual checkout takes place.

Did you -- maybe an example is you're online buying something, and it's a big ticket transaction. Let's say, you're buying $1,000 TV. And for the first time, you're shipping it to an address that's different than your billing address. And it's an unusual address that's never been used before. That would be flagged in some fashion by their algorithms and would require either some additional verifications or it might be blocked. That's an example of some of the things they do. And as you know, if someone steals your credit card and then goes online to try to buy stuff, they generally don't ship it to your home, they're going to ship it to their home. Those are the kind of things that Kount's trying to ferret out and much more sophisticated than that. They're verifying the same e-mail address that's used historically in the account is the 1 you're using. The same IP address, the same cell phone number is used. So there's all these data points that are used. And of course, we'll take that data and then bring that over on the financial services side and the telco utility side to provide an addition to the extensive data we have, which we think is really quite powerful.

That's very helpful. And on that last point, that was going to be my follow-up. Sort of what's the application of this e-commerce and transaction-based capability for your core customer sets, financial utility...

I think -- yes, as you know, there's just an explosion of consumers interacting and use the financial institutions one digitally with their bank. You apply for a credit card for the first time, you're a new customer with a bank, you're applying online and digitally. That happens every second in the United States and there's a lot of identity and fraud efforts that go on there. And for us, we have solutions today that we sell in the marketplace that are quite effective based on the data we have inside of Equifax. Think about what it does, and obviously, we did in doing this acquisition, when you add the just massive amount of data that Kount brings to the equation around an individual. It just really strengthens the predictability that you're really you when you're applying for that financial transaction, when you're applying for that new credit card, that P loan or whatever it is, and it really just plays into the digital macro, which is so large. So it's really quite exciting to us. The combination of our extensive data with Kount's even more extensive data around individuals.

Our next question comes from Jeff Meuler with Baird.

So I heard the comment about combined -- or integrating it with Ignite and neurodecisioning capabilities. Just fully recognized ID and fraud is a big and growthy TAM. But I guess my question is are you limited to fraud and ID use cases? Or can you extend it to other use cases? So I'm thinking of things like targeted marketing solutions using this data or at the scale level, maybe there's interesting things you can do, marrying the spend data with the income data you have in fully recognized with these types of data models, first and foremost, you need to preserve the relationship with the data contributors. But can you take it to those types of use cases?

Yes. And some of the use cases you described, we wouldn't go to, and it's not part of our plans like marketing for the reasons you described. The focus is going to be an identity and fraud where there's a permissions in place to be able to do that, and that would clearly be our focus. And is 100% of where our synergies are and everything we've talked about so far in the call this morning. And part of all the work we're doing around integrating it and new product solutions.

Got it. And then what needs to happen for share repurchases to return to the capital allocation mix at this point? I recognize you're calling this a tuck-in, but it's a pretty chunky 1. That's it.

Jeff, as you might imagine, I'm going to defer that question to maybe our fourth quarter earnings call in a few weeks.

[Operator Instructions] And our next question, we'll take a follow-up from Shlomo Rosenbaum with Stifel.

I just want to ask about some of the partners that are in there. There's a presentation where you have Kount's orchestration hub, and you have some of the other suppliers that are in there like Newstar and Whitepages Pro and [indiscernible] LexisNexis. You've also got like Experian. And I'm trying to understand, where do some of these other players come in, in terms of your ability to, say, supplant and experience that's already in there and Kount's actually owning -- where does Kount's ownership comes, point, where does it get the point where it actually owns it versus aggregating data that might come from other suppliers?

I think as we mentioned, the vast majority of the data that Kount has is Kount originated. You want to add to that, Sid?

Yes. So think about Kount as the originator of all of that e-commerce data through the retailer side that comes into their network that allows them to -- give them, the retailers a decision. Now they also, as part of that, provide orchestration or software capabilities or case management capabilities to the end customer. And it's a very flexible platform. So if a customer says, "I want to bring in some additional data, third-party data, they can pipe it into the orchestration platform. But it's truly Kount's own proprietary data that makes them differentiated in the marketplace. I'd also add, you talked about partners. They rely a lot on very strong partnerships. They have a partnership with Barclays. They have a partner with Chase Paymentech with the like Monales, et cetera, which -- and PayPal, which really allows them to distribute their product in the e-commerce space quite extensively.

We have no further questions in the queue. I'll hand the call back to Dorian Hare for any additional or closing remarks.

Thanks, everybody, for dialing in for today's call. This does conclude the call for today. Investor Relations and myself will be around to answer any questions, particularly relating to this transaction. We do look forward to discussing our fourth quarter results in the next few weeks as Mark indicated.

And ladies and gentlemen, this does conclude today's call. We thank you for your participation, and you may now disconnect.