Executive Summary / Key Takeaways

• Cloud Transformation Fuels Innovation and Efficiency: Equifax has substantially completed its multi-year cloud transformation, with approximately 80% of revenue now in the Equifax Cloud by Q3 2024, expected to reach 90% by year-end. This shift is driving significant cost savings, enhancing operational stability, and accelerating new product development, particularly through EFX.AI.
• Strong Financial Performance Despite Headwinds: The company delivered robust financial results in Q3 2025, with operating revenue up 7% to $1,544.90 million and net income attributable to Equifax increasing 13% to $160.20 million. This performance, alongside strong cash flow generation, demonstrates resilience amidst challenging U.S. mortgage and hiring markets.
• Differentiated Multi-Data Solutions Drive Competitive Edge: Equifax is leveraging its unique data assets, including The Work Number (TWN) income and employment data combined with USIS credit files, to create "only Equifax solutions." These offerings, like the new TWN indicator for mortgage and auto, are designed to differentiate its products, drive market share gains, and provide superior value to customers.
• Accelerating Free Cash Flow and Shareholder Returns: With capital expenditures declining post-cloud transformation, Equifax expects to generate over $900 million in free cash flow in 2025, achieving a cash conversion rate exceeding 95%. This financial strength supports a new capital allocation framework, including a $3 billion share repurchase program and a 28% increase in its quarterly dividend, signaling a commitment to consistent shareholder returns.
• Strategic Positioning in High-Growth Verticals: The Workforce Solutions segment, particularly its government vertical, presents a substantial long-term growth opportunity within a $5 billion total addressable market (TAM), bolstered by new legislation and increased focus on program integrity. International expansion, notably in Latin America, also contributes significantly to the company's growth trajectory.

The Foundation of Progress: Equifax's Strategic Evolution

Equifax Inc. (NYSE:EFX), founded in 1899, has evolved into a global data, analytics, and technology powerhouse, playing a critical role in the global economy by enabling businesses, governments, and consumers to make informed decisions. The company's core business revolves around collecting, organizing, and managing vast datasets, including financial, demographic, employment, and criminal justice information. This extensive data forms the bedrock of its diverse product and service offerings, which span credit and service decisions, risk management, payroll-related processes, marketing strategies, and consumer financial health.

A pivotal chapter in Equifax's recent history has been its ambitious multi-year cloud transformation. This strategic undertaking has fundamentally reshaped the company's operational and technological landscape. By the third quarter of 2024, Equifax achieved a significant milestone, with its U.S. Information Solutions (USIS) segment completing the migration of its consumer credit and telecommunications and utilities exchanges to the Equifax Cloud. This followed the successful migration of The Work Number (TWN) exchange, completed over two years prior. By the end of September 2024, approximately 80% of Equifax's revenue was generated through the new cloud infrastructure, with expectations to reach 90% by year-end. This transformation is not merely an IT upgrade; it is designed to provide a profound competitive advantage by enabling a full focus on customer growth, innovation, new products, and artificial intelligence (AI), while simultaneously yielding substantial cost savings through the decommissioning of legacy systems. The company anticipates these cloud-related spending reductions to reach approximately $360 million in 2025.

Technological Edge: The Equifax Cloud and EFX.AI

Equifax's core differentiated technology lies in its cloud-native infrastructure, powered by EFX.AI and a single data fabric. This foundational shift offers tangible and quantifiable benefits over traditional, on-premise systems. The Equifax Cloud provides "always-on stability, faster data transmission speeds, and industry-leading security" for customers, directly enhancing operational reliability and efficiency. The integration of a single data fabric allows for seamless combination of diverse data assets, a capability that is critical for developing sophisticated analytical solutions.

The company's commitment to innovation is evident in its R&D initiatives, particularly in the realm of AI and machine learning. In 2024, 95% of Equifax's new models and scores were built using AI and machine learning, a significant increase from 70% in 2023. This focus on EFX.AI is accelerating the development of higher-performing models and products, driving enhanced predictability and performance in areas like identity and fraud and consumer loan affordability. The "Vitality Index," a measure of new product revenue, reached 14% in Q2 2025, significantly exceeding the company's long-term goal of 10% and its pre-cloud vitality index. This acceleration is a direct result of leveraging cloud capabilities for innovation.

A prime example of this technological differentiation is the launch of "only Equifax solutions" that combine TWN income and employment data with USIS credit files. The new TWN indicator mortgage credit solution, for instance, provides lenders with incremental data, including work status, employer name, and historical income levels, alongside a credit report. This unique offering helps lenders optimize their marketing and underwriting processes. Equifax plans to deliver this TWN indicator with its credit file at no incremental cost, aiming to differentiate its credit file and drive market share gains. Similar TWN-powered solutions are slated for launch in the auto and personal loan verticals later in 2025, where income and employment verification are integral to credit underwriting. These multi-data solutions, enabled by the cloud and EFX.AI, are central to Equifax's competitive moat, contributing to higher value propositions for customers, potential for increased pricing power, and long-term growth.

Competitive Landscape and Strategic Positioning

Equifax operates in a highly competitive landscape, primarily contending with other major credit reporting agencies like TransUnion (TRU), Experian (EXPGY), and specialized analytics firms such as Fair Isaac Corporation (FICO) and Dun & Bradstreet (DNB). Equifax's strategic positioning is anchored in its diversified portfolio, robust international presence, and the unique integration of its vast data assets, particularly through its Workforce Solutions segment.

Compared to TransUnion, Equifax offers a broader geographic footprint and a more integrated ecosystem for business and government clients, leveraging its employment and income verification services. While TransUnion has demonstrated strong revenue growth driven by digital initiatives and may show faster adoption of new predictive modeling tools, Equifax's emphasis on comprehensive workforce solutions provides a unique value proposition in multi-sector applications. For instance, Equifax's Workforce Solutions segment, with its 4.6 million contributing companies to TWN and 198 million active records, is a distinct differentiator that rivals cannot easily replicate.

Against Experian, Equifax competes in credit information and identity management. Equifax's integrated services for employers and governments, coupled with its broader data sets, offer significant efficiency. Experian, however, often leads in marketing analytics and may exhibit faster processing in consumer credit checks due to specialized tools. Equifax's strength in international diversification, particularly with the strong performance of its Boa Vista business in Brazil, helps it capture market share in global segments. The Boa Vista business, for example, grew 8% in the first half of 2025, benefiting from the integration of Equifax's Ignite and Interconnect platforms.

In the commercial data space, Equifax's offerings overlap with Dun & Bradstreet. Equifax's broader scope, encompassing consumer and workforce solutions, provides a more comprehensive market positioning. While DNB excels in specialized business intelligence, Equifax's global reach and regulatory compliance expertise offer a unique value proposition in diverse industry applications.

Fair Isaac Corporation (FICO) is a key competitor in predictive analytics and credit scoring. FICO's proprietary technology in risk assessment and AI-driven scoring algorithms are formidable. However, Equifax's strategy of offering comprehensive information solutions, including identity and workforce services, provides a wider range of services. Equifax's multi-data asset solutions, combining traditional credit, alternative credit assets (from DataX and TeleTrac), and TWN indicators, are designed to drive share gains by offering a differentiated product that FICO, with its more specialized focus, cannot directly match. The company's commitment to delivering the TWN indicator alongside its credit file at no incremental cost underscores its aggressive strategy to gain market share.

Equifax's competitive advantages, or moats, include its extensive global network, proprietary data assets (especially TWN), and deep regulatory expertise. These factors contribute to stronger customer loyalty, recurring revenue, and enhanced pricing power. However, vulnerabilities exist, such as the ongoing risk of data security breaches and potential over-reliance on certain markets, which the company actively mitigates through continuous investment in security and diversification of its revenue streams.

Financial Performance and Operational Details

Equifax demonstrated robust financial performance in the third quarter and first nine months of 2025, underscoring the benefits of its strategic initiatives despite a challenging macroeconomic backdrop. For the three months ended September 30, 2025, operating revenue increased by 7% to $1,544.90 million, and for the nine months ended September 30, 2025, it rose by 6% to $4,523.90 million. This growth was broad-based across all three business units. Net income attributable to Equifax saw a 13% increase for both periods, reaching $160.20 million in Q3 2025 and $484.50 million for the nine months. This was primarily driven by increased operating income and lower interest expense, partially offset by higher income tax expense. Operating income for Q3 2025 grew 7% to $264.30 million, and for the nine months, it increased 8% to $811 million. The total company operating margin remained flat at 17.10% in Q3 2025 and increased by 0.20 percentage points to 17.90% for the nine months ended September 30, 2025.

Workforce Solutions (WS), Equifax's largest segment, reported a 5% revenue increase for both Q3 and the nine months ended September 30, 2025, reaching $649.40 million and $1,930.10 million, respectively. This growth was primarily fueled by non-mortgage verticals within Verification Services, including strong performance in government, talent solutions, and consumer lending. The segment's operating margin stood at 43.80% in Q3 2025, up from 43.20% in the prior year, reflecting increased revenue and solid cost management. WS continues to expand its TWN database, adding 1.3 million contributing companies in the past twelve months to reach 4.6 million, and ending Q2 2025 with 198 million active records, up 10% year-over-year.

U.S. Information Solutions (USIS) experienced an 11% revenue increase in Q3 2025 to $530.20 million and a 9% increase for the nine months to $1,551.60 million. This was driven by growth in Online Information Solutions (both mortgage and non-mortgage) and Financial Marketing Services. The USIS operating margin improved to 23.20% in Q3 2025 from 20.60% in the prior year, benefiting from cloud migration cost savings and operating leverage. The segment's vitality index reached 10% in Q2 2025, its strongest ever, indicating successful post-cloud innovation.

International revenue grew 6% in Q3 2025 to $365.30 million and 4% for the nine months to $1,042.20 million, with local currency growth across Latin America, Europe, Asia Pacific, and Canada. The International operating margin increased to 15.80% in Q3 2025 from 13.90% in the prior year. Foreign exchange rates had a negative impact on total revenue, reducing it by $2.60 million in Q3 2025 and $28.50 million for the nine months.

Liquidity and capital resources remain strong. As of September 30, 2025, cash and cash equivalents were $189 million, and the company had $1.40 billion available under its $1.50 billion revolving credit facility. Cash provided by operating activities increased by $145.20 million for the nine months ended September 30, 2025, primarily due to increased net income. Capital expenditures decreased by $41.20 million for the nine months, reflecting lower capitalized software costs and reduced technology infrastructure spending. The company's debt profile is predominantly fixed-rate (98%), and it remains in compliance with all debt covenants.

Outlook, Guidance, and Capital Allocation

Equifax's outlook for 2025 reflects a balanced perspective, acknowledging strong internal execution and strategic advancements while factoring in persistent macroeconomic uncertainties. The company's full-year 2025 reported revenue guidance midpoint has been increased by $35 million to approximately $6 billion, with adjusted EPS guidance midpoint rising by $0.03 per share to $7.48 per share, primarily due to favorable foreign exchange impacts. On a constant currency basis, the full-year framework remains consistent with prior guidance, anticipating about 6% revenue growth for both non-mortgage and mortgage segments.

Management's guidance is underpinned by several key assumptions. U.S. mortgage credit activity in 2025 is expected to remain below 2024 levels, with hard mortgage credit inquiries projected to be down over 13% in the second half of 2025 due to sustained high interest rates (consistently above 6.7%) and low housing inventory. U.S. hiring is also expected to be weaker, projected to be down about 8% in 2025 compared to 2024. International economic activity is generally assumed to grow at rates below those experienced in 2024. These market headwinds are estimated to impact overall revenue growth by over 200 basis points and adjusted EPS growth by approximately 7 percentage points.

Despite these challenges, Equifax expects to deliver strong segment performance. Workforce Solutions revenue growth in 2025 is projected at about 5%, with Verification Services revenue up approximately 8% (non-mortgage verifier up over 9%, talent up mid-single digits). Government revenue growth is anticipated to return to double-digit levels in the second half of 2025, benefiting from a new $50 million SSA amendment and increased state agency penetration. USIS revenue growth is expected to be about 7% in 2025, with mortgage revenue growing approximately 13% and non-mortgage revenue over 4.5%. International constant currency revenue growth is forecast at about 7%. Overall, adjusted EBITDA margins are expected to be around 32.5% in Q3 2025, with full-year 2025 EBITDA margins projected to increase by about 25 basis points to over $1.9 billion.

A significant aspect of Equifax's forward-looking strategy is its new capital allocation framework. The company expects to generate over $900 million of free cash flow in 2025, with a cash conversion rate exceeding 95%, aligning with its long-term goal. This robust cash generation, coupled with a strengthened balance sheet (leverage ratio of 2.8x at Q3 2024, targeting 2.5x by year-end), provides substantial flexibility. On April 21, 2025, the Board of Directors authorized a new $3 billion share repurchase program and approved a 28% increase in its quarterly cash dividend to $0.50 per share, effective Q2 2025. The company expects to return approximately $1 billion annually to shareholders over the next four years through these initiatives, with returns growing as the business expands. This framework also prioritizes continued high-return capital investments (CapEx at 6-7% of revenue post-cloud) and bolt-on M&A, targeting 1-2 points of revenue growth annually.

Risks and Challenges

Equifax operates in an environment subject to various risks and challenges that could impact its investment thesis. The most prominent is the economic uncertainty in the U.S. and global markets, particularly concerning inflation, interest rates, and tariffs. Management explicitly states that these factors will influence demand for its services, and that 2025 planning assumes lower GDP growth globally compared to 2024. The U.S. mortgage market remains a significant headwind, with hard mortgage credit inquiries continuing to decline year-over-year (down approximately 8.5% in Q2 2025). High 30-year mortgage rates (consistently above 6.7%) and low housing inventory keep purchase and refinance activity at historically low levels, over 50% below 2015-2019 averages.

The U.S. hiring market also presents a challenge, with overall white-collar hiring remaining relatively weak and hiring transactions slowing due to economic uncertainty. This impacts the Workforce Solutions segment's talent and employer onboarding businesses. Furthermore, the government business faces near-term volatility due to changes in federal program structure and funding from the prior administration, requiring state agencies to manage these shifts in their operations.

Litigation expenses are another notable risk. Corporate expenses in Q2 2025 exceeded guidance due to higher consumer litigation costs, including resolving single plaintiff cases and an elevated volume of small claims from individuals across the industry. Management expects these higher litigation costs to persist through Q3 and Q4 2025. The Consumer Financial Protection Bureau (CFPB) is also conducting an investigation into data accuracy and dispute handling within the Workforce Solutions business unit, with an unpredictable outcome.

Finally, while Equifax is making significant strides in its cloud transformation, the complexity of integrating new technologies and managing ongoing migrations in international markets (e.g., Australia, some Latin American countries) could present operational challenges. The competitive landscape, particularly the strategic moves by rivals like FICO to offer credit scores directly to mortgage lenders, could also exert pressure on Equifax's market share and pricing power in certain segments.

Conclusion

Equifax stands at a pivotal juncture, having substantially completed its transformative cloud journey. This strategic shift, coupled with its deep data assets and advanced EFX.AI capabilities, positions the company for a new era of innovation, efficiency, and differentiated growth. The strong financial performance in Q3 2025, marked by robust revenue and net income growth, alongside accelerating free cash flow, underscores the resilience of its business model even amidst persistent macroeconomic headwinds in the U.S. mortgage and hiring markets.

The core investment thesis for Equifax is rooted in its ability to leverage its cloud-native infrastructure and unique multi-data solutions, such as the TWN indicator for credit files, to drive market share gains and enhance customer value. While external uncertainties, including interest rate volatility, tariff impacts, and elevated litigation costs, present ongoing risks, the company's proactive capital allocation strategy, including increased dividends and a substantial share repurchase program, signals confidence in its long-term financial trajectory. Equifax's leadership in Workforce Solutions, particularly its expanding government vertical, and its strategic international growth further solidify its competitive standing, promising sustained value creation for discerning investors as it fully capitalizes on its technological leadership and diversified market presence.