Equifax: Equifax Inc (EFX) Q1 2025 Earnings Call Highlights: Strong Revenue Growth and Strategic ...

In This Article: Revenue: $1.442 billion, up 4% reported and 5% in constant dollars. Adjusted EPS: $1.53 per share, $0.15 above the midpoint of February guidance. Debt Leverage: Ended March with debt leverage of 2.5 turns. Free Cash Flow: Expected to generate about $900 million this year with a cash conversion approaching 95%. Adjusted EBITDA Margins: 29.3%, up 20 basis points from last year. EWS EBITDA Margins: Over 50%. USIS Revenue Growth: 7%, with non-mortgage growth at about 6%. International Revenue Growth: Almost 7% constant currency. Dividend Increase: 28% increase to $0.50 per share. Share Repurchase Program: New $3 billion four-year share repurchase program. Workforce Solutions Revenue: Up 3%, with Verifier revenue growth of 5%. Government Revenue Growth: Expected about 10% in the second half of the year. USIS Mortgage Revenue: Up 11% in the first quarter. International Adjusted EBITDA Margins: 24.1%, down 20 basis points versus last year. Warning! GuruFocus has detected 3 Warning Sign with EFX. Release Date: April 22, 2025 For the complete transcript of the earnings call, please refer to the full earnings call transcript . Positive Points Equifax Inc ( NYSE:EFX ) reported a strong start to 2025 with revenue of $1.442 billion, up 4% reported and 5% in constant dollars, exceeding the midpoint of their February guidance by $37 million. The company achieved an adjusted EPS of $1.53 per share, which was $0.15 above the midpoint of their February guidance, driven by higher revenue growth and improved margins. Equifax Inc ( NYSE:EFX ) launched its first-ever only Equifax solution in the mortgage sector, providing key employment and income information, which has seen strong customer demand. The EWS team delivered EBITDA margins of over 50%, surpassing expectations, and continued to expand its use cases in the federal government. Equifax Inc ( NYSE:EFX ) announced a 28% increase in their quarterly dividend to $0.50 per share and authorized a new $3 billion four-year share repurchase program, reflecting confidence in their business model. Negative Points Despite strong Q1 performance, Equifax Inc ( NYSE:EFX ) maintained its 2025 guidance due to significant economic and market uncertainty, particularly around tariffs and their impact on US inflation and interest rates. The company noted a decline in mortgage activity due to higher interest rates and expects continued impacts on mortgage activity until there is stability in Washington. Employer Services revenue was down 8% in the quarter, impacted by a weaker hiring market. Equifax Inc ( NYSE:EFX ) faces challenges in penetrating the large $5 billion government TAM, with growth expected to accelerate only in the second half of the year. The company is cautious about the potential impacts of a recession, maintaining a conservative outlook despite strong Q1 results. Q & A Highlights Q : Can you provide more color on the TWIN federal government discussions and any risks involved? A : Mark Begor, CEO, explained that the current administration's focus on improper payments is a tailwind for Equifax. The government estimates $160 billion in improper payments annually, and TWIN is seen as a solution. Equifax is increasing its presence in Washington to engage with agency heads and sees opportunities in existing programs to enhance income authentication and redeterminations. The SSA contract amendment is a proof point of TWIN's value, and there is significant potential at the state level for further penetration. Q : How did you come up with the estimate that recession-impacted businesses would be down only 3% to 5%? A : Mark Begor, CEO, stated that the estimate is based on historical performance during past economic events like '08-'09 and COVID. The company has increased its subscription-based revenue, which is less impacted by recessions. Additionally, more data is used in originations during economic events, which benefits Equifax. John Gamble, CFO, added that the estimate is directional and reflects a substantial reduction in growth compared to their long-term framework. Q : Can you explain the free cash flow conversion in Q1 and expectations for the rest of the year? A : John Gamble, CFO, noted that Q1 free cash flow is typically lower due to variable compensation payouts from the prior year. The payments in Q1 2025 were larger than in 2024 due to a more challenging 2023. Normalizing for variable comp payments, free cash flow growth would be over 20% year-over-year. The company is on track to achieve its $900 million free cash flow target for the year. Q : What level of visibility do you have for Q2 trends in mortgage and non-mortgage categories? A : Mark Begor, CEO, mentioned that they have good visibility into Q2 trends, except for mortgage rates, which are influenced by Washington's actions. Auto lending has been stronger, possibly due to pre-tariff buying. Overall, there has been no negative impact on other business lines, and the company is maintaining its guidance based on current trends. Q : How is the TWIN indicator for mortgage being received, and what is the expected adoption timeline? A : Mark Begor, CEO, stated that the TWIN indicator has been in the market for about 60 days and has received positive feedback. It provides mortgage originators with additional confidence by indicating employment status and income history during the shopping process. The adoption timeline varies, but the company expects penetration to accelerate throughout the year and plans to introduce similar solutions in auto and personal loans. For the complete transcript of the earnings call, please refer to the full earnings call transcript . This article first appeared on GuruFocus .