The paragraph introduces the Equifax Corporate's Fourth Quarter 2024 Earnings Conference Call. The operator welcomes participants, noting the call will be in listen-only mode initially, followed by a Q&A session, and mentions the recording of the event. Trevor Burns, Senior VP and Head of Corporate Investor Relations, begins the call by introducing himself and other key executives present, including Mark Begor, CEO, and John Gamble, CFO. He notes that materials related to the call and certain non-GAAP financial measures are available on the Investor Relations website. Forward-looking statements about 2025 guidance are made, and associated risks are noted, referencing SEC filings for more details.

In the paragraph, the company announced changes to its upcoming quarterly earnings calls by shortening prepared remarks and providing additional content in the appendix. Mark Begor then highlighted the company's strong financial performance in 2024 despite challenges in the mortgage and hiring markets. Key achievements included an almost 8% revenue growth, an adjusted EPS increase to $7.29 per share, and significant improvement in cash conversion and free cash flow. The company also reduced its debt leverage and saw notable growth in revenue and EBITDA margins in the latter half of the year. These results align with the company's EFX 2027 strategic goals and lay a foundation for growth through acquisitions and returning capital to shareholders with dividends and a share repurchase program starting in 2025.

The paragraph highlights Equifax's significant progress in transitioning to a cloud-based infrastructure, with 85% of its revenue now in the new Equifax cloud after migrations in several regions, including USIS, Canada, and Latin America. This transition has resulted in substantial cost savings and is expected to provide a competitive edge from 2025 onwards. The company is actively leveraging its cloud capabilities for innovation, particularly in AI and machine learning, with a high percentage of new models being developed using these technologies in 2024. Equifax Workforce Solutions (EWS) achieved a record year with 188 million active records and 15 new strategic partnerships, including one with Workday, which is expected to boost revenue growth. Additionally, Equifax experienced a strong growth in new product revenue, surpassing its long-term growth goal and projecting further success in 2025 by utilizing its cloud infrastructure.

As we enter 2025, Equifax reports strong commercial momentum, innovation, and AI advancements despite challenges. The company achieved a fourth-quarter revenue of $1.419 billion, a 7% increase, although hindered by currency fluctuations and weaker U.S. hiring and mortgage markets. Organic constant currency revenue grew by 9% but fell short of expectations due to these market declines. U.S. mortgage revenue rose by 29% but underperformed forecasts due to rising mortgage rates. Equifax anticipates a 12% decrease in mortgage revenue credit inquiries in 2025. Despite these pressures, the company reported a record-adjusted EBITDA of $502 million with a 35.4% margin, marking its first quarter over $500 million. Adjusted EPS reached $2.12, consistent with guidance but below revenue expectations.

The paragraph discusses Equifax's financial performance, focusing on cost management and long-term growth. Workforce solutions revenue increased by 7% but fell short of expectations due to a weaker hiring market impacting talent solutions and I-9 onboarding revenue. Despite challenges, talent solutions exceeded market performance through new records, products, and data tools. Government revenue increased by 11%, though growth rates slowed compared to the previous year. Incarceration data sales saw strong double-digit growth. EWS mortgage revenue grew by 17%, outperforming TWN inquiries. However, employer services revenue decreased by 9%, impacted by the weak hiring market, which is expected to affect the first quarter's performance as well.

In the article paragraph, Workforce Solutions reported a solid increase in EBITDA margins despite weaker revenue growth, supported by cost management and focus on top-line growth. Record growth in active records was observed, and new strategic partnerships, including with Workday, are expected to boost future growth. USIS revenue increased significantly, driven by strong mortgage performance, although non-mortgage revenue slightly missed expectations. Mortgage revenue saw a 47% rise due to favorable pricing and increased demand for pre-approval and prequalification products, despite a decline in mortgage credit inquiries by the end of the quarter as interest rates rose above 7%. Other segments showed varied growth and decline trends, with notable declines in the telco and identity and fraud sectors.

In the fourth quarter, USIS experienced a decline in mortgage pre-approval and prequalification inquiries, with mortgage revenue contributing to just over 24% of its total revenue. The financial marketing services segment remained stable, aligning with previous guidance. There was notable strength in identity-based businesses and payment segment partnerships. IXI wealth data revenue decreased compared to a strong previous year. The USIS consumer solutions D2C business saw a 9% increase, driven by customer acquisition. Adjusted EBITDA margins increased to 38.3%, aided by successful cost reductions and cloud transformations. International revenue grew 11% in constant currency, surpassing expectations, with strong performance in Latin America (notably Brazil), as well as growth in Canada and Australia, while Europe experienced mid-single-digit growth. International adjusted EBITDA margins improved significantly.

In the paragraph, Equifax highlights significant progress in innovation and product development, achieving a 12% vitality index in the fourth quarter and aiming for continued double-digit growth in 2025. They leverage their cloud capabilities and differentiated data, including TWN income and employment data, to introduce new solutions. These include a solution for mortgage lenders that combines credit and employment information and future solutions for the auto industry. Entering 2025, Equifax focuses on strategic priorities to enhance AI-powered growth and expects to boost cash flow as capital expenditures decrease and EBITDA increases.

Equifax anticipates strong free cash flow conversion, aiming for a long-term goal of 95%, and plans to return capital to shareholders through increased dividends and a share repurchase program starting in 2025. However, they face challenges in the U.S. mortgage and hiring markets. With mortgage rates above 7%, there has been a significant decline in hard mortgage inquiries, leading to a forecasted 12% decline in USIS hard credit inquiries in 2025 compared to the previous year. Similarly, weak hiring trends suggest an 8% decrease in U.S. hiring for 2025 compared to 2024. Additionally, a stronger U.S. dollar will negatively impact 2025 revenue by around 130 basis points, or $75 million. Despite these challenges, Equifax projects a 4.7% increase in 2025 revenue to about $5.95 billion, with constant currency revenue growth expected at 6%. The declines in mortgage and hiring markets are reducing overall growth by over 200 basis points, but without these declines, organic constant dollar revenue growth would align with their long-term target of 7% to 10%.

In 2025, Equifax anticipates over 7% revenue growth in Workforce Solutions, with verification services rising by 8% despite challenges in the mortgage and hiring markets. Mortgage revenue is expected to increase by 3%, while non-mortgage verifier revenue is projected to grow by over 9%, although both are lower than in 2024. Government revenue growth might face constraints in early 2025 but should rebound to double digits later. USIS expects over 5% revenue growth, reaching about $2 billion, driven by over 8% growth in mortgage revenue and 4% in non-mortgage revenue, aided by new products and market share gains. Internationally, Equifax projects a 7% constant currency revenue growth, aligning with its long-term goals.

The paragraph outlines the company's financial projections and strategic plans. It expects EBITDA margins to rise by 25 basis points and EBITDA to increase by 5% to over $1.9 billion. The adjusted EPS is projected to grow by 2% to $7.45 per share, with a free cash flow of about $900 million and a free cash flow conversion rate near the long-term target of 95%. With leverage below 2.6 turns, the company plans to pursue bolt-on acquisitions and enhance shareholder returns via dividends and share repurchases in 2025. John Gamble discusses assumptions and guidance for 2025, noting a decline in U.S. mortgage credit inquiries and its impact on revenue, EBITDA margins, and EPS growth, while acknowledging challenging market conditions that are offsetting potential revenue growth. A detailed guidance on BU adjusted EBITDA margins and specific P&L line items is also provided.

Equifax's EBITDA margins in 2025 are projected to be slightly below their long-term targets due to slower revenue growth influenced by market factors. The benefits from cost actions are expected to offset higher expenses, particularly in the USIS mortgage sector. EWS margins are projected to decrease to 50.5% in 2025, influenced by lower revenue growth and costs associated with onboarding new partners. USIS margins are expected to increase by 100 basis points, driven by cost reductions from decommissioning legacy systems. International margins are also expected to grow by 100 basis points, benefiting from previous cost actions and revenue growth. Corporate expenses are anticipated to rise due to increased variable compensation and ongoing investments in technology and compliance. Depreciation and amortization costs are expected to increase as new systems are implemented, while the tax rate is projected to rise due to higher overseas taxes and reduced U.S. tax credits. Capital spending is expected to decrease from $496 million in 2024 to $480 million in 2025.

In the first quarter of 2025, Equifax expects its revenue to range between $1.390 billion and $1.420 billion, representing a 1% year-over-year increase on a reported basis and nearly 3% on a constant dollar basis. Adjusted EPS is projected to decline by 8% compared to the previous year, mainly due to increased depreciation, amortization, and a higher effective tax rate. Adjusted EBITDA margins are also expected to decrease slightly. Workforce Solutions revenue is anticipated to grow by 1%, with verification services up by 2.5%, while mortgage revenue remains flat. Government revenue is expected to be stable in the first half due to comparisons to previous CMS redetermination volumes, but it is projected to rise significantly in the second half of 2025.

The paragraph discusses expected changes in various revenue streams and financial metrics for Equifax. Talent revenue is projected to grow modestly due to weakened U.S. hiring, while employer revenue will likely decline. EWS adjusted EBITDA margins are anticipated to decrease due to lower revenue growth and costs related to onboarding record contributors. USIS revenue is expected to rise by 3%, with mortgage revenue up by 5% and non-mortgage revenue by 2.5%. Despite declines in USIS hard inquiries, mortgage growth is supported by third-party vendor pricing actions. Adjusted EBITDA margins overall are set to increase due to system decommissioning benefits. International revenue should grow by 6%, although EBITDA margins will remain flat. The company's free cash flow is expected to improve, aiming for a 95% cash conversion by 2025, with plans for acquisitions and increased returns to shareholders. The U.S. mortgage market is predicted to be significantly below average levels, presenting a $1.2 billion annual revenue opportunity as it returns to historic norms.

The paragraph provides a financial outlook and performance summary for Equifax. It discusses expectations for 2025, citing challenges in the U.S. mortgage and hiring markets, with projected constant currency revenue growth at 6%, below their long-term target. Despite weak market conditions, they expect to achieve over $1.9 billion in adjusted EBITDA and significant free cash flow. They plan to expand EBITDA margins and increase shareholder returns. For 2024, Equifax's financial performance aligned with set goals, achieving nearly 8% revenue growth, $729 per share in adjusted EPS, and $813 million in free cash flow. The company made progress on strategic priorities, notably in cloud transformation, with 85% of revenue linked to the new Equifax cloud.

The paragraph discusses Equifax's advancements in its cloud-native infrastructure, which offer benefits like enhanced stability, faster data transmission, and robust security. Equifax is pivoting its resources towards leveraging its cloud for innovation and growth, using tools like EFX.AI and Ignite to create new credit solutions in sectors such as mortgage and auto. The company anticipates significant revenue in its cloud environment by the end of 2024. With strong cash flow and balance sheet, Equifax plans to return excess cash to shareholders in 2025. The speaker expresses enthusiasm for Equifax's future post-cloud transformation. The paragraph ends with transitioning to a Q&A session, beginning with a question from Jeff Muller about EWS margin guidance amidst revenue growth and macroeconomic factors.

The paragraph discusses the challenges faced by Equifax and EWS due to a declining mortgage market and increased onboarding costs for new partners, which are expected to be larger in 2025 compared to previous years. Despite these challenges, there is growth in education products, although they have lower margins than TWN products. Equifax continues to invest in EWS to drive future growth, impacting current margins due to lower revenue growth. They expect the business to remain strong, with margin growth anticipated as the mortgage market and hiring recover. There has been no change in payout ratios for TWN record partners.

In the paragraph, the discussion revolves around payout ratios with partners, which have remained unchanged and are not affecting margins. The conversation then shifts to a query about the impact of mortgage and hiring headwinds on EPS (Earnings Per Share). Mark Begor and John Gamble clarify that previously, the mortgage market was expected to rise by about 5% based on trends in October, but recent declines have altered that outlook. They note that the comparison is now between a flat and slightly positive market, with mortgage rates unexpectedly rising to 7%. The EPS impact was calculated assuming a recovery to a flat market.

In the paragraph, Mark Begor discusses challenges and expectations in the government sector for their business. They experienced high growth rates but face difficult comparisons in the fourth quarter and into 2025 due to changes in the CMS reimbursement program, which now requires states to cover 25% of data costs. This change impacts state budgeting and could affect the company's government business in the near term, although they expect a return to double-digit growth in the second half of the year. Additionally, a significant contract extension with the SSA will positively impact growth in 2025, and their contracts include pricing escalators that take effect at various times.

The paragraph discusses a conversation involving John Gamble, from Equifax, and Andrew Steinerman, from JPMorgan, focusing on mortgage revenues. John Gamble explains that in the fourth quarter of 2024, mortgage revenues constituted 17.7% of total revenues. He clarifies the difference between hard inquiries, which affect a credit file, and soft inquiries. Equifax reports on hard inquiries, which are tied to the process of closing loans, as opposed to soft inquiries, which do not impact the credit file. This differentiation is contrasted with MBA mortgage reports, and Equifax considers hard inquiries to have a stronger correlation with loan originations.

In the paragraph, Andrew Steinerman inquires about USIS's 2% non-mortgage growth compared to a 5% increase last quarter. John Gamble notes that while the auto and financial industries performed reasonably well with low single-digit growth, there was a significant boost in their FMS (batch business) in the third quarter due to successful sales and new customer relationships within the payment industry. This accounted for the primary difference between the third and fourth quarters. Online performances in auto, financial services, D2C, and insurance showed moderate consistency and improvement. Toni Kaplan then asks about opportunities in the government sector, which the paragraph does not further address.

The paragraph discusses the opportunities and challenges for Equifax in providing services to government programs. Despite concerns about potential program cuts, Equifax sees a significant market opportunity due to the current administration's focus on accurately delivering social services and reducing improper payments. Equifax believes social services will remain a priority and is actively engaging with Washington to demonstrate how its programs can help. The company views the manual verifications market in government, valued at around $5 billion, as a promising area for growth, particularly since many states still rely on manual methods. Equifax has a strong commercial team to navigate this market.

The paragraph discusses Equifax's confidence in the future of their government business, focusing on the potential growth in the $5 billion total addressable market (TAM) and efforts at the state and agency levels. The paragraph then shifts to a conversation with Faiza Alwy from Deutsche Bank who inquires about pre-qualification products and the distinction between soft and hard credit pulls. It's clarified that roughly 70% of inquiries are hard pulls, with soft pulls being a significant trend, especially post-COVID when more people were shopping for mortgages. However, there has been a decrease in mortgage shopping as interest rates have risen recently.

The paragraph discusses changes in consumer confidence and how mortgage originators are adjusting their credit file pulls, which impacts revenue. Equifax is responding by enhancing its data differentiation through features like TWN indicators and NC plus attributes in mortgage and auto credit files. This differentiated data aims to add value for originators and maintain Equifax's competitive advantage, as they are uniquely positioned with exclusive TWN data. The paragraph also highlights that over 70% of Equifax's revenue comes from hard pulls, with a smaller percentage derived from batch jobs and other data types.

The paragraph involves a conversation between Faiza Alwy, Mark Begor, and Kyle Peterson regarding mortgage revenue and future inquiries. Faiza Alwy asks about TWN inquiries and potential outperformance in 2025, noting improvements in the fourth quarter. Mark Begor anticipates that TWN inquiries might perform better than mortgage inquiries in 2025, particularly regarding hard inquiries, but does not provide specific details. Kyle Peterson asks about capital allocation, specifically around increasing dividends and starting stock buybacks. Mark Begor explains that with their cloud transformation nearly complete, generating excess free cash flow from reduced CapEx will allow them to consider both increasing dividends and initiating buybacks.

The speaker discusses the need for more clarity on the economy, mortgage, and hiring markets before making certain decisions. They were surprised by recent rapid changes, such as mortgage rates rising to 7% and the market declining by 12%. They express confidence in their 2025 guidance, supported by expectations for strong free cash generation and EBITDA expansion. The plan includes leveraging increased margins for bolt-on M&A and returning cash to shareholders through dividend growth and a multi-year stock buyback program from 2025 to 2027, depending on market recovery and cash generation over the next three years.

The paragraph features a discussion on forecasting within a company's business, particularly in relation to the U.S. mortgage market and other segments. Kyle Peterson and Craig Huber address the challenges of predicting trends in the U.S. mortgage market, which has been difficult for many years. Mark Begor explains that while the mortgage sector and, to a lesser extent, the hiring market are influenced by macroeconomic factors, the rest of the business has more predictability due to factors such as pricing adjustments, subscription agreements, multi-year contracts, and new business deal pipelines. He mentions that these elements, along with the visibility on new partners in the Employment and Workforce Solutions (EWS) segment, provide a reliable basis for their business forecasts.

The paragraph discusses the company's approach to revenue generation and forecasting. They add partner records to drive inquiries and revenue, and aim for accurate forecasts with a conservative balance to meet and exceed expectations for investors. The auto market is expected to remain flat or slightly improve, with consumer confidence showing some signs of decline. International markets are anticipated to grow at a long-term average rate, with slower growth in the UK and Europe. Additionally, there's interest in specific products linked to long-term growth, as mentioned by Craig Huber's question about the Vitality Index.

Mark Begor discusses Equifax's strategic innovations, emphasizing the benefits of moving USIS and EWS to the cloud, which allows the combination of data assets to create powerful solutions. He highlights the rollout of a mortgage credit file with unique TWN indicators and the integration of cell phone utility attributes, aiming to differentiate their credit files in various sectors, including auto and personal loans. Begor also mentions the success of OneScore, which integrates non-credit file data, expanding consumer insights. Additionally, he underscores the role of AI in enhancing scores and models, contributing to Equifax's strategy of innovation and product development.

The paragraph discusses Equifax's focus on innovation and partnership with customers, highlighting the importance of the Vitality Index in their operations, especially as they continue to move their services to the cloud. John Gamble clarifies a previous statement about international growth rates, emphasizing they were related to economies rather than Equifax's specific growth. Jason Haas from Wells Fargo asks about talent verification performance compared to the white-collar hiring market in the fourth quarter. Mark Begor responds, noting the outperformance was about eight points, although slightly weaker than the third quarter, and explains that historically, they perform better than the market by high single to low double digits. The performance was affected by the timing of annual price increases, with part of the 2024 adjustments made in the fourth quarter of 2023 and more in the first quarter of 2024.

In the discussion, Jason Haas asks about the expected USIS mortgage outperformance for 2025, noting a reduction compared to 2024. John Gamble explains that the significant growth in 2024 was driven by new products like pre-qualification and pre-approval, which had substantial growth because they were new in late 2023. For 2025, while these products will continue to perform well, their growth rate will be lower due to a larger existing base. He notes that the difference in growth rate is the main factor for the change in outperformance. Jason Haas also inquires about the impact of supplier price increases, and John Gamble clarifies that the dollar amounts for these increases are similar between 2024 and 2025.

The paragraph discusses the company's international revenue growth, which was 11% year-over-year in the fourth quarter, with future projections of 7% in 2025 and 6% in the first quarter. John Gamble emphasizes that the long-term model targets a 7% to 9% growth rate, indicating satisfaction with the current projections despite economic headwinds in the UK and anticipated slower growth there. Brazil showed strong performance in the fourth quarter and is expected to continue performing well in 2025, though not necessarily at double-digit growth rates. Regarding mortgage rates, Mark Begor notes that while no rate changes have been assumed, a potential 25 to 50 basis point rate cut in 2025 could lead to increased mortgage activity, as evidenced by past trends when mortgage rates dropped.

The paragraph discusses the impact of rising interest rates on the housing market and Equifax's business. It highlights how rates surpassing 7% in late 2023 significantly affected the market, reducing mortgage inquiry activity by 50% compared to historic levels. Consumer confidence is also low due to economic uncertainty, affecting major purchasing decisions. Equifax anticipates rates will eventually decline, which would positively impact their revenue and margins, potentially adding over a billion dollars in revenue. While the company doesn't plan to increase investments immediately if the mortgage market recovers, they focus on long-term growth and anticipate improved financial performance with a market uptick.

In the paragraph, John Gamble outlines the company's long-term framework, which anticipates modest overall market growth, including a 2% to 3% annual growth in the mortgage market. The company expects to achieve substantial revenue and earnings growth of over 10% without needing a full recovery of the mortgage market, just stability and slow growth. Andrew Nicholas from William Blair inquires about margin expansion, noting a lower margin guidance for the year due to lighter mortgage activity. Mark Begor explains that despite weaker revenue, the team effectively managed costs to meet margin commitments and aims to continue cost management for future margin growth. John Gamble adds that significant cloud cost savings implemented in the third quarter will benefit 2025, providing clearer financial visibility.

The paragraph discusses the completion of cloud transitions that are expected to bring cost savings by 2025, particularly with operations in Spain and Paraguay. Andrew Nicholas asks about the strategic approach for new products with TWN data flags in mortgage and auto sectors. Mark Begor explains that Equifax aims to capture market share and increase pricing by delivering more value with additional data, such as income verification, which is important for credit and auto loan processes. Equifax's goal is to be the primary credit file used by customers for more accurate eligibility evaluations.

The paragraph discusses a federal contract extension with the Social Security Administration (SSA) related to verifying eligibility for disability benefits by monitoring changes in income. This contract, unlike those managed at the state level, operates directly at the federal level. The company extended this contract in September with increased pricing, which is expected to yield financial benefits in 2025.

Mark Begor explains that while they typically avoid discussing specific partnerships, they highlight their collaboration with Workday due to its public announcement. Equifax added 15 partners last year, boosting their record additions by 12% to 20 million records, which is above their long-term expectation of 3-4% growth. For 2025, they anticipate strong record growth due to ongoing record onboarding from new partners and older partnerships that continue to generate records. Additionally, Equifax is in talks with potential partners to grow their network further.

The paragraph details the strategies and expectations for growth in EWS (Employer Services) at Equifax. It highlights that nearly half of their records are sourced from direct employer relationships, along with growth in I-9 and UC clients, which contribute to their multifaceted approach. A focused leadership team has driven record additions, contributing to success in 2024, and there is an expectation for strong record growth in 2025. In response to a question from Scott Wurtzel, Mark Begor explains that while they don't discuss specific pricing, they consistently increase prices across all businesses, leveraging their unique offerings in EWS and TWN. He also mentions that record expansion, new products, and increased market penetration will be key growth drivers for 2025.

The paragraph discusses the company's growth opportunities in various large verticals, particularly in areas like manual verifications for employment, income, and the auto industry. Scott Group and other analysts, such as David (standing in for Ashish Sabadra), inquire about competitive shifts following a merger between First Advantage and Sterling. Mark Begor responds by emphasizing strong partnerships with those companies and others in the industry, without commenting on specific customer impacts. Matt O'Neill then asks about trends in talent and labor, specifically about verticals and employer types experiencing conservatism or weakness.

In the paragraph, Mark Begor discusses the impact of hiring trends and economic uncertainty on the company's business. He notes that a conservative approach to hiring, influenced by concerns about political, economic, and tariff-related issues, has led to decreased hiring activity, which affects their services like background checks and I-9 solutions. This downturn was particularly noticeable after the election as companies act cautiously regarding their 2025 budgets. In response to a question about a supplier pricing increase, Begor states that while such increases are challenging and generally not welcomed, they have been received as expected in the market.

The paragraph discusses changes in the mortgage shopping process, specifically the shift from pulling three credit files from all three credit bureaus to a single or dual pull initially, likely due to the cost of credit files. The focus is on differentiating credit files with the addition of TWN indicators, which is expected to boost market share and revenue. Simon Clinch from Redburn Atlantic poses questions about the outperformance of EWS Mortgage over the past four quarters, noting weaker pricing and mix but asking about future expectations. John Gamble and Mark Begor respond, indicating that their ability to add records has strengthened their performance, and they feel confident about the year's progress.

The paragraph discusses the strong performance and growth driven by the successful acquisition of new records, highlighting the importance of continuing this strategy moving forward. John Gamble notes the success in boarding new records, even as the mortgage market fluctuates. Mark Begor emphasizes that not all new records are related to mortgages, pointing out the value in subprime and lower-income consumer records for sectors like auto loans, personal loans, and government. The value of these records enhances Equifax's business model across various verticals. New products are also mentioned, with those rolled out in EWS in the past year and more coming in 2025, such as the TWN indicator, which could boost revenue. Simon Clinch inquires about the availability of the TWN indicator for EWS verification customers and how its release will be managed.

John Gamble discusses the strategy of balancing the disclosure of useful employment and income information from The Work Number (TWN) credit files during the mortgage and auto shopping processes, while protecting the comprehensive data available during the full verification stage. He highlights the value of providing important but limited details upfront, such as employment status and average income, to aid in decision-making during initial consumer interactions, without compromising the depth of information available later. This approach helps mortgage originators and auto dealers better qualify consumers and tailor suitable product options for them.

The paragraph discusses a conversation during a financial call, focusing on credit scores and their limitations in assessing an individual's ability to repay loans. It highlights a company's intention to provide more comprehensive credit files that offer better insights into borrowers' circumstances, beyond just past behavior. The conversation shifts to questions from Arthur Truslove of Citi about the company's financial margins and forecasts. He questions the modest increase in margins despite potential cloud-based cost savings and seeks confirmation on the company's recent downgrade of mortgage volume forecasts amidst deteriorating mortgage and hiring conditions, which factor in current mortgage rates. Mark Begor confirms the understanding of the mortgage forecasts.

The paragraph discusses a recent sharp decline in activity due to interest rates exceeding 7%, impacting consumer confidence. The company plans to update on these changes in April with their first quarter earnings report. Historically, they have not forecasted interest rate changes but have noted that rate improvements expand revenue and margins. They observed increased activity when rates previously fell into the sixes. John Gamble mentions that USIS margins are improving due to cost reductions from moving to the cloud, though their growth rate in 2025 is lower than their long-term model predicts. Despite gaining revenue from a mortgage supplier price increase, this also dilutes margins.

The paragraph discusses the impact of price increases and onboarding costs on the company's margins. Price increases benefit revenue and margin dollars but not the margin percentage. Onboarding TWN partners incurs one-time costs that initially dilute margins, but these costs will eventually disappear. The company has added 15 partners, leading to increased onboarding activity. They provide incentives for faster onboarding, affecting margins temporarily. In response to a question, John Gamble mentions internal drivers to boost revenue growth and improve the 2025 EBITDA margin guide, despite external challenges.

The company anticipates a long-term margin expansion of 50 basis points annually, driven by high variable margins and accelerated product introduction. Integrating AI and ML into products boosts growth and customer engagement. Key strategies include speeding revenue growth and reducing costs, notably through cloud migrations. The impact of improving mortgage and hiring markets might enhance their financial metrics, like revenue margin and free cash flow, by 2025. Future cloud transformation savings are expected to be smaller, with a significant portion of savings already realized through substantial cloud migrations by 2024.

The paragraph discusses the macroeconomic outlook and credit performance as assessed by banks and fintechs. With low unemployment and high employment, consumers generally can pay their bills, although inflation remains high. Subprime consumer delinquencies have increased, prompting some adjustments in underwriting, particularly among fintechs. Despite this, subprime originations are growing, and banks and fintechs remain financially strong. Higher interest rates have impacted consumer confidence, influencing buying behaviors, particularly in the mortgage and auto sectors, where consumers are opting for used cars or maintaining older vehicles rather than purchasing new ones.

The speaker predicts that there will be no significant changes in customer or consumer behavior in 2025, except for the mortgage segment in fixed income, which has already been discussed as being down by 12. The operator then hands the closing remarks to Trevor Burns, who invites any follow-up questions to be directed to him or Molly, and concludes the conference, thanking participants.

This summary was generated with AI and may contain some inaccuracies.