Good day, and welcome to the Equifax First Quarter 2019 Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the call over to Trevor Burns. Please go ahead.

Thanks, and good morning. Welcome to today's conference call. I'm Trevor Burns, Investor Relations. With me today are Mark Begor, Chief Executive Officer; and John Gamble, Chief Financial Officer. Today's call is being recorded. An archive of the recording will be available later today in the Investor Relations section in the About Equifax tab of our website at www.equifax.com. During this call, we will be making certain forward-looking statements including second quarter and full year 2019 guidance, to help you understand Equifax and its business environment. These statements involve a number of risk factors, 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 filings with the SEC including our 2018 Form 10-K and subsequent filings. Also, we'll be referring to certain non-GAAP financial measures including adjusted EPS attributable to Equifax and adjusted EBITDA, which will be adjusted for certain items that affect the comparability of our underlying operational performance. For the first quarter of 2019, adjusted EPS attributable to Equifax excludes costs associated with the realignment of internal resources and other activities, acquisition-related amortization expense, the income tax effects of stock awards, recognized upon vesting or settlement, and foreign currency losses from re-measuring the Argentinian peso denominated net monetary assets. Adjusted EPS attributable to Equifax also excludes an accrual for legal matters related to the 2017 cybersecurity incident, legal and professional fees related to the cybersecurity incident, principally fees related to our outstanding litigation and government investigations as well as the incremental non-recurring project costs designed to enhance our technology and data security. This includes project costs to implement systems and processes to enhance our technology and data security infrastructure, as well as the projects to replace and substantially consolidate our global network and systems as well as the cost to manage these projects. These projects that will transform our technology infrastructure and further enhance our data security were incurred throughout 2018 and are expected to occur in 2019 and 2020. Adjusted EBITDA is defined as net income attributable to Equifax adding back interest expense, net of interest income, income tax expense, depreciation and amortization and also as is the case for adjusted EPS, excluding an accrual for legal matters related to the 2017 cybersecurity incident. Costs related to 2017 cybersecurity incident costs associated with the realignment of internal resources and other activities, and foreign currency losses from re-measuring the Argentinian peso denominated net monetary assets. These non-GAAP measures are detailed in reconciliation tables, which are included with our earnings release and are also posted on our website. In addition to the non-GAAP measures that we posted on our website, we will post after this call certain supplemental financial information on our website, to better help you understand our business. Included with the supplemental information is historical actual, and 2019 forecast U.S. mortgage market inquiries. Now, I'd like to turn it over to Mark.

Thanks, Trevor and good morning everyone. As you could see from our press release this morning this has been a busy quarter for us particularly during the past few weeks and days. We're pleased with our start to 2019 with strong progress on our strategic priorities and our financial results were within the guidance we provided in February, while we are continuing to return USIS to a growth mode, we're executing well against our EFX 2020 initiatives. Before I get into a discussion of our first quarter financial results and the business units, let me spend a few minutes discussing the $690 million charge we took this quarter related to outstanding litigation and potential fines related to the 2017 cybersecurity incident. We delayed our earnings discussion until this morning because we've made significant progress on our legal and regulatory settlements in the past few weeks. As you know we've been in active discussions for months related to the 2017 cybersecurity incident and those discussions accelerated in the past month. Importantly, the $690 million accrual we booked includes our estimate of probable losses associated with our global settlement discussions with certain federal and state regulators as well as the federal class action cases. We recently reached confidential settlement terms in the consumer federal class action cases, that upon approval by the court, will resolve and dismiss the claims asserted in the consumer cases. The proposed global settlement provides for the establishment of a single consumer redress fund which was our goal and certain other non-monetary terms. As we've discussed previously, we believe the consumers are better served through a single consumer fund and a global settlement of the federal and state government investigations together with the consumer class action litigation. We expect to complete definitive settlement agreements with the parties in…

Thanks, Mark, and good morning, everyone. I will generally be referring to the financial results from continuing operations represented on the GAAP basis, but will refer to non-GAAP results as well. As Mark covered our overall results, the business unit details, I'll cover overall margins, some corporate items, free cash flow, and our guidance. For all of 2019, U.S. mortgage market increase are expected to decline about 2% versus 2018 which is stronger than the down 5% we had expected in February. 1Q 2019 inquiries were down 10% versus the 13% we had expected in February increases in 2Q 2019 are expected to be down about 1% to be about flat in 3Q 2019 and slightly positive in 4Q 2019. In the first quarter, we extended the resource realignment activities, principally in Australia, the U.K., and GCS that we began in 4Q 2018 that further improve our cost structure. Related to these activities, we incurred an $11 million charge in 1Q 2019. Total savings from the two combined actions are expected to exceed $60 million in 2019 with second half 2019 savings exceeding the first half by about $10 million. In the first quarter, general corporate expense was $833 million excluding the non-recurring costs associated with the 2017 cybersecurity incident and technology transformation and the cost associated with the realignment of internal resources the adjusted general corporate expense for the quarter was $74 million, up $9 million from 1Q 2018. This was about $5 million better than we had expected. The increase versus 1Q 2018 predominantly reflects the increased investment in security and transformation and related technology as we ramp these costs in the first half of 2018 and increased variable compensation given the timing of hiring certain executives last year. Adjusted EBITDA margin was 30.5% in 1Q 2019, down…

Thank you. [Operator Instructions] And our first question will come from Manav Patnaik with Barclays.

Thank you. Good morning. Mark just first on the legal settlement. Can you just help frame for us the remaining cases? Like is this $690 million basically take care of I don't know 90% of the issues or so forth? Just wanted some color there.

Yes. Thanks Manav. As you heard me earlier mentioned we're not prepared to talk about which settlements are included here and which are not, but that we were trying to be clear that included the significant issues facing the company our expectation is in the coming weeks as I also mentioned earlier in the call, we'll have some real clarity around that once we finalize the discussions that are actively underway.

And Manav they'll be quite a bit of disclosure in the 10-Q that will be filed later today.

Okay, got it. And then John if I could just follow-up on some color on the guidance in terms of the total M&A contribution. I know Mark just called out PayNet, but what was that contribution from M&A this quarter and then for the full year I guess?

Yes, the contribution for M&A this quarter was relatively small, right? Really the most substantial contribution was DataX and it's less than $5 million in the period. And then we had some other very small acquisitions in international and very small acquisitions in EWS, none of which were material in any way.

And for the full year?

The full year we gave a view for PayNet. As you get into the second half, the substantial impact for Equifax of acquisitions is really just PayNet because we start to wrap around the period in which we bought DataX as we get into early in the third quarter.

I think I said Manav in my comments that we expect PayNet to add 1.5% to USIS in the second quarter.

Yes, got it. All right. Thank you guys.

Thanks.

We'll now hear from George Mihalos with Cowen.

Hey, good morning, guys. Nice to see the progress on the settlement side. I guess maybe Mark two things to kind of kick it off. First, you sounded upbeat about the pipeline, maybe you can provide a little bit of color if that's vertical -- anything vertical specific or if you're having a lot more success maybe leveraging the workforce and winning new business. And then understand that financial marketing is probably going to be a bit choppier. But it's nice to see the 6% growth. Should we expect that to be now be positive throughout the course of the year, or will there continue to be some variability?

Yes, I think on the last one that's one that I tried to be clear in my comments. First-off we were pleased to see that that growth which is really the first growth that we've had since the cyber incident in 2017. Those pipelines are building also, but I would still characterize the pipeline’s there and then broadly in USIS is still building, meaning they're not at full maturity. We've made great progress as you know go back a year ago we were on hold with many of our customers and that really improved as it went through the year. So, the pipelines broadly as well as in the financial marketing side really started building in the fourth quarter and into the first quarter and I tried to give some color that that pipeline is continuing. And I also highlighted our new leader is -- brought what I would characterize as a new level of energy and focus and accountability with that team as well as commercial engagements. I'm spending a lot of time with customers as does Sid, our new leader. And all the discussions are around growth. Help us with new products. Help us with new ways to grow our business. We want to access Equifax assets. So we're seeing good momentum there and -- but we still expect USIS and financial services to be what I would characterize as choppy, until they get the full maturity around their pipelines, which – it's hard to predict when that's going to be. We just haven't seen it yet.

Okay, great. And just as a quick follow-up. If we look at mortgage, I think you talked about this sort of mix shift, if you will, to reseller. Is that secular? Would you expect that to continue over the long-term and is the right way to think about, sort of, a lower revenue per transaction, but sort of a de minimis impact on profitability? Thanks.

Yeah. So for your second question, that's correct, right? The revenue per transaction is lower, but the level of profit per transaction is relatively similar. Slightly higher in Mortgage Solutions obviously, but relatively similar. And in terms of whether it's a secular trend that's going to continue. No, I think it's really more market based, right? So it depends on competitive forces in the market. And you've seen our share of Mortgage Solutions go up and down within our portfolio over the years. That will probably continue to happen. Just, right now, we're in a situation where the competitive environment is such that we're better off having more of those sales go through the channel.

And there was really one big customer that drove this one situation, which I think we talked about in the fourth quarter and maybe some in the first quarter too, that really drove that change in the revenue. And I don't view it as kind of a secular change. It was really one customer who made that change and we focused on margin.

Thanks, guys.

Our next question will come from David Togut with Evercore ISI.

Thank you. Good morning. Could you provide an update on demand trends from the other major drivers of U.S. consumer credit services like auto and credit card, for example? And then, just as a follow-up. If you could update us on your progress with trended data. How you're doing in your existing verticals? And then, are there some new verticals that you could enter with trended data in the future?

Yeah. In terms of the overall market performance, we haven't seen much of a change really. I think you've probably seen that from what the banks have announced, right? Over the last several quarters, we're continuing to see the same trends that we saw in the fourth quarter continuing into the first quarter in the card market. In the auto market, you're seeing – you might be – you're starting to see delinquencies pick up a little bit in sub-prime, but that really tends to be relatively localized, we believe, and you are actually seeing the overall credit quality we think of the entire auto portfolio actually improving. So – but generally speaking, the trends in the markets we serve, as you mentioned, other than mortgage we think are relatively consistent with what we saw late last year.

And then trended?

Sure. Trended data, I think, what – trended data is a key part of what we're trying to deploy and we continue to expand our product focus on trended data. I think, probably the most important thing, as Mark indicated, is as we move more and more to the data fabric, you'll see an increasing number of products that are focused on trended information. We still think we're the only party out there with trended commercial products, which will certainly extend now that we've acquired PayNet and it's something that we continue to expand in our portfolio. It isn't the driver behind our NPI, but it is an option – it is something that we're focused on in NPI.

Understood. Thank you very much.

Thanks.

We will now hear from Andrew Steinerman with JPMorgan.

Hi. This is Andrew. I wanted to ask about visibility in the USIS. I definitely heard you talked about the new leadership and the growing pipeline and the new level of energy. But could you give us a sense of how much revenue visibility you have now versus six months ago in USIS? And I mean that separate from any mortgage dynamic.

Yes. Maybe I'll start John then you can jump in. Yes, Andrew, you put a great mark around there. You go back six months ago, it's probably good mark to look back on. There's no question our revenue visibility has increased dramatically in how we can look through in USIS versus where we were last summer. That visibility has improved as we went through the fourth quarter and certainly into the first. We are still trying to be clear with you and our other investors and analysts that while that visibility is getting stronger, which one metric for that is our pipelines and how they're growing and how they've been rebuilding, it's still not back to where it was before the cyber incident USIS. That's really the business where that's still moving forward. So I would say a lot more visibly that we had six months ago. And part of that is it gives us the confidence in our comments around guidance for both second quarter and as well as the second half. I think as you know, we're showing the second half of this year improving on a year-over-year basis at a faster rate than the first half and we're doing that based on our confidence and our visibility. Would you add John?

I think Mark covered it all, right? But the fact is I think we're starting to see more consistency in terms of delivery versus near-term forecast, right? And that gives us comfort that the visibility that we believe we have as we look forward is starting to improve. It's not what it was two years ago, but the accuracy of our forecast versus delivery is certainly getting better.

I think we mentioned Andrew that in the first quarter USIS was slightly above our expectations, which those are the kind of signs we're looking to see. Meaning that the teams says they're going to deliver something and they deliver it that gives us more confidence that they have the visibility and we have it also.

Right. I appreciate it.

Yes.

Our next question will come from Toni Kaplan with Morgan Stanley.

Thank you. Good morning. A question for you John. You mentioned the $200 million free cash flow guidance for the year and you have a cash balance right now of $133 million. And so just looking at the size of the after-tax accrual you're making I guess what's the timeline for paying the cash for the losses? And are you planning on raising debt? I'm assuming maybe not because the interest expense incorporated in the guidance didn't go up. So I just wanted to hear about that. And also does the settlement mean that you'll resume buybacks at this point or you're going to wait until the litigation is in the clear? Thank you.

Yes. So in terms of the timing of any payments I think we need to complete the discussions as Mark mentioned. So when that's done, we'll have a lot more clarity on that. But the payments are likely some time in the future and our expectation is that we'll be borrowing to make any payments that we made. So that is our expectation.

And the second half of your question about buyback or dividend, we're not prepared to make -- have any discussions about what our plans are in that front yet. We need to finalize these discussions as John pointed out finalize the timing of the payments. We've been clear with you and other investors that we also want to see some clarity on the USIS recovery which is positive, but still not as predictable as we would like. And then the other leg on that chair about our capital allocation plan is around the EFX 2020 technology investment that we're in the middle of and we want to see a little more visibility on kind of schedule and delivery on that. So, a long winded answer around a question around stock buyback or dividend that's the discussion that we'll be having in the future with you. We're not ready to have that today.

Okay. Very helpful. And then just wanted to ask a bit about sentiments during the quarter. It sounds like you're happy with the growth and the new business starting to come back. Just wanted to also -- just sort of get a sense of a competitor of yours mentioned maybe some client caution after the fourth quarter market volatility. So, did you see that as well, and just wanted to hear about your sense on what's going on with the industry and the clients. Thank you.

Yeah. No, haven't seen those kind of dialogues around you characterized client caution. We have seen an increased dialogue with our customers around their work and we're partnering with them to do that about preparing for a potential economic slowdown. And what that really means, as you know, some of their focus around data assets changes to line management, credit line decreases, credit and collections a different focus on underwriting. So we've have got a number of customer dialogues going about wanting to work with us to be prepared for a potential economic slowdown. I don't think anyone is predicting it, but I would say that's a change for me in the last three, four, five months than it was kind of the middle of last year where that dialogue has been added to their kind of growth dialogue.

Perfect. Thanks, a lot, Mark.

We will now hear from Kevin McVeigh with Credit Suisse.

Great. Thanks. Hey, congrats on shifting that first Canadian customer to the cloud. Just any thoughts as to kind of the guidepost on that and what it can ultimately mean for the USIS business overall? And is there a way to maybe just frame that out within the context to the U.S. transformation?

Yeah. I assume you're referring, Kevin, to the like the benefits of speed to market and cost savings and all that stuff. If that's where you're heading we're working on that. We're going to be prepared to share that in the future with you and our investors. We're not ready to do that yet. But we try to be quite clear that we view this investment not only for USIS, but what we're doing around the globe as being transformational. We think it's going to differentiate us from our competitors. It's something that will be hard for our competitors to do at the same pace were doing. And we're seeing -- there is clear cost benefits of cloud versus legacy. There's clear stability reliability benefits. Meaning our focus is to move to always on versus 3 9s, 5 9s, 5 9s of stability. In today's world that's critically important. And then the speed to market, the ability to get products to market or in just data assets in weeks versus months is going to be another will benefit. So we continue to be energized about what it's going to deliver, and we know we've got a plan and the requirement to really share with you guys some clarity around those benefits. And I think that'll certainly come to the table when we're ready to put our long-term framework back in place. I think that's the time that we'll share some real visibility about not only our view of Equifax for the future, but the view of Equifax, including our investment in technology and security through EFX2020.

And I think we said previously that in both cost of sales and then also our development expense that we would expect to see the type of savings that you've seen from other companies that have moved from the cloud. So, we've seen savings that are double-digits in percentages and we would expect to be able to deliver those types of savings.

Super, helpful. And then just any initial thoughts on the reception to the FICO partnership from a client perspective?

Yes. It's a great question. It's quite positive. We made the announcement back in March and we were working with FICO for about six months on this and start talking to customers really in the fourth quarter about it. And between us and FICO, we got a pipeline of I don't know a couple of dozen customers that are really energized about it. But the feedback is quite positive from customers about this is an option. Customer still want to buy from FICO directly. They want to buy from Equifax directly. But there's a set of customers that are really energized about the benefits that come from an integrated solution of FICO's software assets and Equifax' Ignite + InterConnect and differentiated data assets. So we're energized about it as we roll through the second quarter and into the second half.

Super. Congrats.

Thanks.

Our next question will come from Ashish Sabadra with Deutsche Bank.

Hi. Thanks for taking my question. Just a quick follow-up on an earlier comment about trends in regards to FMS. So FMS is essentially batch downloads both for marketing as well as decisioning. Have you seen a better demand on one versus another or any particular verticals where you have seen trend? Thanks.

So our Financial Marketing Services business is principally CMS. If I don't cover your question, sorry, but it's principally CMS. And we saw nice growth in CMS this quarter. CMS is really consistent with the normal type of products that you'd see go into credit marketing services of a financial institution. So we don't sell anything particularly different than that. We have seen an expansion into a new customer base. We started to start selling into consulting firms and some other firms that also can utilize our data for appropriate reasons. So we're starting to see an expansion of the customer base. But other than that no trends that are different than normal.

That's good. That's good. And then maybe just quickly on GCS. I understand the results, they have changed slightly below expectations. But as you look forward, are there anything on the strategic front that you're planning to do in order to improve the growth there?

Yes. There's really two efforts there. One is on our partner business. As you know, we've got relationships with Credit Karma Life Lock and others like that. So continued growth there and that's performing well that side of the business. On the core D2C business, direct-to-consumer, we're both accelerating our advertising. So that's going to help grow our subscriber growth there. But the real game changer for us is the big investment we're making in our technology, our Renaissance platform that's going to allow us to do things like cross-selling and other things with the business that we think will help later in the year and particularly in 2020. So that's some of the things that the team is working on in GCS.

Thanks. That's helpful.

And we will now hear from Tim McHugh with William Blair.

Yes. Just wanted to follow-up on some of the technology comments you made in the prepared remarks. One I think there's a comment that the move to the data fabric is slightly later than you thought. I guess, is that I guess elaborate on why that is? And then secondly, you talked about the target of trying to migrate half of the customers onto InterConnect the cloud version by the end of the year. How does -- as you plan for that I guess how disruptive is that to the clients? What's the approach you're using as you migrate people? And kind of what's the profile of people migrating this year versus next year? Thanks.

Yes. So maybe on the first one. Obviously this is a big project that we're doing and we're going to have slight delay. This was delayed by -- weeks or whatever. And that's going to happen and we just want to be transparent with you that we're working on it. And when we have something that's a little bit behind we'll share it with you. And when we're ahead we'll do the same thing. So we don't do that as a big issue. But it's just a level of transparency that we want to have because of the scale of the investment. With regards to the customer piece our goal and what we work on is to make this as easy as possible. But as you know these are never easy. Each customer has their own technology department. And we've done this before and we do it all the time and it's one that you just have to be open and transparent with the customer. You got to be visible with them. We got to work around their schedule make sure it works on where they want to do it. But our goal is to make it as frictionless as possible for them. But there's always work that they have to do when you make these transformations.

The team has done a nice job of putting the customers in categories. We have some customers where the impact on them will be relatively minor because they use gateways more than anything else. So that's a relatively small lift for them and quite straightforward. Other customers that use our decisioning very heavily we actually manage the decisioning system for them. So in that case we can do most of the work. And for them it's mostly testing which isn't a nothing lift. But it's -- but we can try to take a lot of the heavylifting ourselves. And then with the kind of the rest of the customers which is a large group of customers, the team has done a really great job of building out standard solution architecture sets that they can help the customers deploy more rapidly and that should actually give them more functionality than they have today. So it's not just the migration per saying, it's the migration that gets them more and gets them on to a standard product set that will allow them to actually extend the usage of the product and we're going to build on that as we go forward and that's a promise we're making to the customer. So I think they have a very good plan that's structured well and that they're progressing on.

Those customers that you're starting, or you mentioned, should I think of those as the simpler ones that you want to start with? Or are they bigger or smaller customers? Anything about the kind of the initial cohort?

Actually it's done as Mark said based on when the customer's ready to engage. So a lot of the smaller ones occurred that's certainly true because that's more within our control, but there's also substantial customers where we're also working on migration already. So it's really depending on when the customer is ready to receive the work.

Okay. Thank you.

Your next question will come from Andrew Jeffrey with SunTrust.

Hi. Good morning. Appreciate taking the question. I wondered if I could just drill down a little bit on the commentary in USIS about visibility. Mark, you mentioned, I think you referenced delivery timing from sort of customer engagement to delivery. What about close rates? I mean when you start your sales cycle I guess to close rate from engagement to actually getting the customer to commit I mean has that changed at all? And mean how much of the improvement that you're anticipating as a function of customer behavior versus Equifax’ ability in timing and delivery?

John, you want?

Sure. So I think what I -- Mark kind of mentioned timing which is certainly important right? And that's really what's going on now. As we continue to build in the funnel and there's more opportunities available, our comfort with our ability to close within the funnel which is now larger is improving, right? So to us timing of closure and rate of closure are very similar, because they're just separated in time, right? And we continue to focus and Sid and team has done a great job of focusing on just building the funnel, so that if the timing is variable which it has been and continues to be and is more variable than it used to be. That's all still true. But as we continue to build the funnel to have more opportunities, we're getting more comfortable that we're able to deliver our forecasts, because we have greater opportunities to deliver. So, I really -- I don't think it's really in any more complicated than that. And as the funnels continue to feel better, we get more comfortable with delivery. And quite honestly, as months pass and we deliver on the numbers that we commit to ourselves, we get more comfortable as well. And that's really what's going on. And you're still choppy.

And you go back to fourth quarter, like USIS was kind of where we thought they are where we should be and where they committed to be. And we saw that again in the first quarter. They were actually a little bit ahead of our expectations. So that kind of a track record gives us confidence that all the things you're talking about are happening. Close rates are getting more predictable and pipelines are building. But it's -- we still remain cautious. It's only a couple of quarters in here of that kind of a track record.

And the choppiness is still there. We don't want to -- have you think that it's not. It's still there. And certainly there could be period where things that don't occur the way we expect, because the pipeline isn't as big as normal. We could still end up with an unexpected outcome. So it's better, but it's not different than what we said a quarter ago.

Okay. I appreciate that. And then, with regard to sort of your broad FinTech facing solutions and position in the market. Could you just sort of characterize where you think you are competitively and whether there's -- whether you'd anticipate a ramp sort of generally speaking in FinTech end market?

I think we've talked in -- yeah, I think we've talked in the past that this is a space that you go back as recently as a year ago or late 2017, we weren't as focused on FinTech as we should have been. I think that's an understatement. I think it's clear our competitors are much stronger. We have a great market position with the FinTechs with Workforce Solutions. A lot of the FinTechs are using The Work Number. So that's a strong market position. But if you look at our overall share in FinTech, it's quite small. And we talked last year -- I think mid-last year we doubled our commercial team in FinTech. We've got real pipelines now of dialogues with FinTechs. I've met with a bunch of them personally. And the dialogues with them are really quite positive about the fact that we had differentiated data. Work Number is one. Our credit file is another one. NCTUE, the utilities cellphone database. So the dialogues are quite positive. And we would expect to see FinTech grow from a fairly small level where it is today as we go through the rest of this year and into next year. We are really focused on getting into FinTech and being a bigger player there.

Right. Appreciate it. Thank you.

We'll now hear from Gary Bisbee with Bank of America.

Hi, guys. Good morning. I guess, the first question. Just how should we think about the risk of customers pushing out signing your business until after the tech transformation is complete? And are you hearing that feedback, hey, it sounds good. But like let's wait and see you get your house in order before we sign on rather than coming on board amid the migrations and everything?

Yeah. Zero. Don't hear anything on that. The term house in order, we look at it our house is in order. Meaning, our technology is sound. It works and I don't have to remind you. You go back to last year, before the cybersecurity breach, our technology was working fine. It still does today. We're taking advantage of our big investment in security to really transform our technology. And the dialogues of customers is really -- they're quite positive. They look at it, well this is the partner I want to be with, if they're going to make this kind of investment in their technology. And you couple that with our differentiated data assets, the discussions are very positive. So we don't have any customers saying well we're going to hold off. They are really quite energized. When I sit with them and talk about the commitment we have to them through this technology investment, the dialogue is we want to be partners with you guys. So that's kind of how -- what I'm hearing in the marketplace.

We have customers who want to work with us to help us do this faster, so we can help them, right?

Totally.

It's a very positive thing.

Well the other thing is most of our customers, we have a few that are quite advanced on the cloud but very few. And those customers see what we're doing, the amount of investment we're making. And our technology teams are increasingly engaging with their technology teams about their own cloud transformation. And they want to learn from us. They want to follow what we're doing. So that's another element of the dialogue. And the same thing happens to security. We’re obviously have a commitment to be an industry leader in security. We made massive investments in the last 18 months in security and that's another dialogue with the technology teams about what are you guys doing around security so we can learn from that.

Great. Thanks. And then just the second, the follow-up. You talked a lot about the savings you expect to get from the transformation over the next several years. I guess at this point, do you have a view on how much you'd likely let fall to the bottom line versus is there maybe a view that stepping up innovation spending or some other to drive the top line would be a way to reinvest meaningful portion of the savings?

Yes. It's hard for me Gary to talk about the technology savings. I think we'll get to that when we put our long-term framework back in place. But I think you see us making decisions now and we have in the last six, 12 months around investment decisions. We did our fairly significant restructuring in the fourth quarter and took some of those cost savings to the bottom line. But we also plowed savings back into more commercial resources. We plowed savings back into more DNA resources. We're obviously investing a ton in technology. We're very visible on that in security. And then NPI and new products has been and continues to be a priority for us where we're continuing to make significant investments. And we give you visibility on the new products we're rolling out to the marketplace. And some of that new product work is coming through our technology transformation. So we're investing in the future today. And what we do with the benefits from our technology and security investments I think we'll talk about that when we get to our long-term financial framework.

Great. Thank you.

Our next question will come from Bill Warmington with Wells Fargo.

Hi, Bill.

Good morning, everyone. So first congratulations to Mark on hitting the one-year mark and on settlement. So first question for you is on the price increase that FICO put through this year starting January 1. They -- that's going to phase in throughout 2019. Equifax is a big player in auto. And I was hoping you could help us understand how that could potentially help USIS in the second half.

John, you want?

Yes. So, obviously, the FICO price increase impacts us. It impacts our customers. We pass it through to our customers and it will impact both revenue and margin. It's kind of a very similar story to what we had last year with the price increase related to mortgage. So, it's really no different than that. In terms of magnitude, we don't give specific numbers in terms of the magnitude of dollars of that occur with the partner. But it'll be very similar in concept to what happened with mortgage, just much smaller.

Got it. And then you mentioned in your prepared remarks that there was potential for you to work with FICO in some new ways in the near future. I was hoping you could expand on that.

Yes, I don't think we're ready, Bill, to talk about those. We've got -- because of those partnership kind of structural umbrella that we created. We're in kind of constant dialogues with Will Lansing and his team in different ways that we might work together. We're seeing some new things that were kind of percolating on that could be beneficial for us and FICO. I'm a big believer in leveraging our strengths with another companies through partnerships. And this is an example of where we're trying to exercise that muscle and find ways to do things that are going to benefit us FICO and our joint or new customers. So, stay tuned, I guess, is the right answer.

All right. Well, thank you very much.

Our next question will come from George Tong with Goldman Sachs.

Hi thanks. Good morning. You've indicated that you're still cautious around the pace of recovery of USIS, but are confident that the business will get back to traditional growth levels over the long-term. Can you discuss any structural factors that may be holding you back from formally reinstating your long-term growth targets?

You got two different questions in there. I think George, on the long-term growth targets, we've been very clear with you and others that we certainly intend to put long-term growth framework to move back in place. We've been clear that there were a number of things we wanted to see some clarity on. One was our legal and regulatory settlement which we made progress there but that's not complete yet. Second was on our technology transformation. And again we're making progress on that and we want some more visibility there. And third was on USIS which may be a part of your question, we want to see some stability in the recovery. And we're kind of a couple of quarters into say due meaning they're delivering where we thought they were going to deliver. And we want to see some continued performance as well as sequential growth there. And those are kind of the three things that John and I in the leadership team think about before we're going to put a long-term framework in place. And we continue to be confident that not only USIS, but Equifax will recover to where it was pre-breach and that confidence comes from our discussions with customers, our growing pipeline, our differentiated data assets, all those we think are going to allow us to return. I don't see anything structural. It's just a matter of time. And we're seeing some positive progress in the first quarter. We expect that to continue in the second quarter and as well through the rest of the year.

Got it, that's helpful. And turning to the pipeline, specifically in USIS, it sounds like the pipeline is still building and not yet back to full maturity. Can you talk about how quickly the pipeline is growing and what changes to the salesforce you may have made to drive better and faster close rates?

Well, on the salesforce, we continue to energize our sales team or incenting them and there are some new talent coming in. Obviously, we have a new leader in the business now, which I'm quite energized about the last 60 days, under Sid's leadership. In regards to the pipeline building, I don't have any metrics, John?

We don't disclose pipeline metrics, so.

But we try to give visibility and just maybe more anecdotally here that John and I are seeing those pipelines build and the evidence for you is USIS delivering what they -- what we commit that they're going to do, and we've done that for couple of quarters and we want that to continue.

Got it. Thank you.

We'll now hear from Brett Huff with Stephens.

Good morning, guys. Thanks for taking the question. Two questions for me. One, can you talk a little bit about PayNet? I want to make sure I understand that it's 150 basis points in 2Q on USIS help or total company help? I guess that's just a housekeeping question.

USIS.

Okay. And then was that originally in the guide? I don't think it was. So is there something else in the guide, is it Australia that's a little bit more muted? Is there an offset to that inorganic help that we didn't raise our overall guidance for? Or is it just kind of conservatism?

Yeah. So for the full -- you wanted the full year?

Yes.

So the full year, PayNet was a plus, exclusive with the mortgage market would be better, would be less bad than we had indicated initially. And then with the weakness is GCS is a bit weaker than we said and initially back in February than we thought. And FX was quite a bit more negative than we thought, right? We said 0.5 point of growth were being impacted by FX, and probably the smallest of the three is -- Australia is a bit weaker but that isn't the driver.

Okay. And that's super helpful. And then on the migrations that are happening congrats on the remarkable pace you guys are going to take up on that with half, I think the USIS being done in 2019. Once that starts and -- have we done a couple of trials? Or are we right in the middle of that? Or kind of what -- do we have early results on smaller clients be moved over or how do you kind of feel about that?

So we currently have moved -- we're not going to give numbers as we go. But we're well into the migration. It's still early days. So -- but the team has moved to substantial number of clients on to cloud fabrics. So that's -- we think that's going well. And the migrations are going on to InterConnect SaaS. And initially things move on to the -- to our private cloud and then they'll move on to the public private cloud as things move forward. But that migration is going well and that last step is simple. So we feel very good about how things are progressing and that the team is working really well.

Great. Appreciate the insights.

Ladies and gentlemen, that does conclude our question-and-answer session. I would now like to turn the call back over to management for closing remarks.

No further comments. Just thanks everybody for participating in the call and appreciate your time. Thank you.

Again that does conclude our call for today. Thank you for your participation. You may now disconnect.