Equifax Inc. (NYSE:EFX) Q4 2022 Earnings Call Transcript February 9, 2023
Operator: Greetings, and welcome to the Equifax Fourth Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the call over to Trevor Burns, Head of Equifax Investor Relations. Thank you. You may begin.
Trevor Burns: Thanks, and good morning. Welcome to today’s conference call. I’m Trevor Burns. 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 IR Calendar section of the News & Events tab at our IR website, www.investor.equifax.com. During the call today, we’ll be making reference to certain materials that can also be found in the Presentation section of the News & Events tab at our IR website. These materials are labeled Q4 2022 earnings conference call. Also, we will be making certain forward-looking statements, including first quarter and full year 2023 guidance. We hope you understand Equifax and its business environment.
These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from our expectations. Certain risk factors may impact our business forth in filings with the SEC, including 2021 Form 10-K and subsequent filings. We’ll also be making certain non-GAAP financial measures, including adjusted EPS for Equifax and adjusted EBITDA, which will be adjusted for certain items that affect the comparability of our underlying operational performance. These non-GAAP measures are detailed in reconciliation tables, which are included with our earnings release and can be found in the financial results section of the Financial Info tab at our IR website. In the fourth quarter, Equifax incurred restructuring charge of $24 million, or $0.15 a share.
This charge was principally incurred to reduce headcount in 2023 as we realign our business functions ahead of completing our technology transformation. This restructuring charge is excluded from adjusted EBITDA and adjusted EPS. Now I’d like to turn it over to Mark on Slide 4.
Mark Begor: Thanks, Trevor, and good morning. Equifax delivered another very strong quarter to close out 2022 with continuing execution against our EFX 2025 strategic priorities. Fourth quarter reported revenue of $1.2 billion was down about 4.5% and down 4% on an organic constant currency basis, both as expected against an unprecedented mortgage market decline, but above the high end of our October guidance from broad-based strength across Equifax and stronger NPI rollouts. Fourth quarter adjusted Equifax EBITDA totaled $371 million with an EBITDA margin of 31%. Adjusted EPS of $1.52 per share was at the upper end of our October guidance range of $1.45 to $1.55 per share, and John will provide more detail in a few minutes. Equifax US mortgage revenue was down 41% in the quarter, but outperformed the overall market by 27 percentage points with estimated US mortgage originations down 68%.
Our global non-mortgage businesses, which represented about 84% of total revenue in the fourth quarter, were very strong with 12% constant currency and 10% organic constant currency revenue growth, stronger than we expected when we provided guidance in October and at the top end of our 8% to 12% long-term growth framework. This strong growth was driven again by outstanding performance at Workforce Solutions with 17% non-mortgage revenue growth overall and 23% non-mortgage revenue growth in Verifier. As I’ll discuss more later, Government continued very strong in Workforce Solutions with growth at over 40%, and Talent and I-9 boarding delivered over 20% growth but were impacted by slowing US hiring in November and December. Delivering 20% growth in that vertical against a slowing hiring market was a very strong performance.
And second, USIS nonmortgage had an outstanding quarter, delivering very strong double-digit B2B non-mortgage growth of 10% total and 19% online, which was much better than our expectations. And last, International delivered another strong quarter with 9% constant dollar and 8% organic constant dollar growth, led by very strong performance in Latin America. We continue to make strong progress against the final chapter of our EFX cloud data and technology transformation in 2022. Currently, about 70% of North American revenue is delivered from the new Equifax Cloud. During 2022, we made the decision to increase capital spending by approximately $175 million to a total of $625 million to accelerate the completion of our North American cloud transformation.
The progress made in 2022 will enable the substantial completion of North America transformation and customer migrations this year, including decommissioning of applications in our major North America data centers. Capital spending will decline significantly in 2023 due to the strong progress at completing the cloud last year. Our new EFX Cloud infrastructure is delivering always-on capabilities and faster new product innovation with integrated data sets, faster data delivery and industry-leading enterprise-level security. We’re convinced that our EFX Cloud and Single Data Fabric will provide a competitive advantage to Equifax for years to come. New product innovation is also executing at a very high level. Our new product Vitality Index of 14% in the quarter is a record and a 500 basis point improvement from the 9% Vitality Index last year and 400 basis points above our 10% long-term new product vitality goal.
Our focus on new solutions, leveraging the new Equifax Cloud is paying off. As a reminder, our Vitality Index is the percentage of Equifax revenue from new products launched in the past three years. As our fourth quarter performance highlights, we continue to execute very well, driving strong non-mortgage growth across Equifax and record levels of new product revenue. In addition to accelerating long-term revenue growth, two critical goals of our EFX 2025 strategic framework are significant and consistent EBITDA margin expansion and the lowering of the capital intensity of our business to drive our free cash flow. In 2023, we are executing a broad operational restructuring across Equifax, reflecting both the acceleration of our cloud transformation and a broader focus on operational process improvements.
We will reduce our total workforce of over 23,500 employees and contractors by over 10% during 2023 as well as delivering cost reductions from the closure of major North American data centers as we complete the cloud and other broader spending controls. Total spending reductions from these actions in 2023 are expected to be about $200 million with about $120 million reduction in expenses and an $80 million reduction in CapEx. I’ll cover our 2023 plan in more detail shortly, but first, we’ll provide more detail on our strong performance in the fourth quarter. Turning to Slide 5. In the fourth quarter, we continued our strong non-mortgage performance with revenue growth up 12% in constant currency, led by EWS Verification Services non-mortgage revenue, which was up 23%, led by Talent, which was up 19% and Government up 43%; EWS, I-9 and onboarding, which was up over 40%; USIS B2B online mortgage was up almost 20%; and Latin America was up over 30%, all very strong performances.
Fourth quarter constant dollar non-mortgage growth of 12% was at the top end of our 8% to 12% long-term revenue framework despite some slowdown in the US hiring activity impacting our Workforce Solutions Talent vertical. Non-mortgage revenue growth continues to be very strong across Equifax. Turning to Slide 6. Workforce Solutions delivered another outstanding quarter. Mortgage revenue outperformed the overall mortgage market as measured by originations by about 30% in the fourth quarter and 38% for the full year. And verifier non-mortgage revenue was again very strong with organic growth of 23% in the quarter and 40% for the total year. During 2022, we signed 10 new agreements with US payroll processors, including four in the quarter that will be added to the TWN database during 2023.
Recently, we also signed a substantial direct relationship that added over 2 million new TWN records. These new partnerships, along with continued growth in existing partner records and the new direct contributors through our Employer Services business, are delivering continuing strong growth in our TWN database with current records of 6 million record sequentially, reaching 142 million records — 152 million records with 114 million unique and over 600 million total current historical records from over 2.6 million employers. Industry-leading data security and operational processes as well as our ability to provide substantial value to our direct contributors and revenue share to our payroll partners are delivering exceptional record growth for Workforce Solutions.
114 million unique individuals in TWN deliver high hit rates and represent almost 70% of the 165 million US non-farm payroll. Adding gig and pension records, we have the ability to almost double our TWN records in the future, which is a big driver of EWS revenue and margins. As a reminder, about 50% of our records are contributed directly by individual employers, with the remaining contributed through partnerships principally with payroll companies. Workforce Solutions also continues to lead Equifax and new products, delivering a Vitality Index at over 2x of our long-term 10% vitality goal, which is a great proof point for the power of the Equifax Cloud to drive innovation in new products. Workforce Solutions Vitality Index has expanded from low single digits a short four years ago to over 20% vitality in 2022.
Workforce Solutions, as you know, was the first Equifax business to be substantially complete with their cloud transformation over a year ago, allowing the team to fully focus on innovation and NPIs, leveraging their new cloud capabilities. The Work Number is also seeing accelerated expansion outside the United States in the UK, Canada and Australia. In January, Workforce Solutions signed an agreement with a leading UK payroll technology partner, obtaining access to over 40% of UK private sector employees. Workforce Solutions now has access to over 20 million active and historical records in Australia, Canada and the UK in addition to over 40 million active and historical alternative income records, including pension data and tax returns. Turning to Slide 7.
Workforce Solutions delivered revenue of $508 million, down 4% in the fourth quarter. Revenue was slightly weaker than expected driven by slower growth in talent and onboarding businesses from declines we saw in US hiring in November and December. Verification Services revenue of $399 million was down 7%, driven by the unprecedented 68% decline in US mortgage originations. As mentioned earlier, EWS mortgage revenue outperformed the overall market by a very strong 30 percentage points, driven by strong TWN record additions, penetration, pricing and new product revenue growth with the strong adoption of our new mortgage 36 solution that was rolled out late last year. Verification Services non-mortgage revenue, which now represents almost 70% of Verifier revenue, delivered strong 23% growth in the quarter.
We saw continued very strong 43% growth in the Government vertical, which is almost 45% of Verifier non-mortgage revenue, driven by strong growth in our Center for Medicare and Medicaid Services volumes. The EWS government vertical is benefiting from penetration, pricing, record growth and leveraging a strong new product portfolio, including our new insights data at the federal state and local level. We expect to continue this strong growth in our government vertical in 2023 in a big $2 billion TAM. Talent Solutions delivered strong 19% growth in the quarter despite the impact of the weakening overall hiring, which is estimated to be down about 8% in the quarter. We outgrew this market decline by over 25 percentage points and delivered 19% growth, a very strong performance, driven by continued penetration of our digital solutions and background screening, strong new product growth, continued expansion of TWN records and favorable pricing.
In the first quarter, we will launch new products in the talent space targeted at the staffing and hourly segments designed to meet specific needs of background screeners in these high-volume segments, which will drive Talent growth. Employer Services revenue of $110 million was up 4.5% in the quarter due to strong growth in our I-9 onboarding and healthy FX businesses, which were up 17%. Our I-9 and onboarding businesses remained strong at 20% growth but were also negatively impacted by the declines in US hiring late in 2022. Our unemployment claims and employee retention credit businesses were down 11%, driven by lower jobless claims and lower ERC transactions as the COVID federal tax program expires. Despite the slowdown in hiring, we have not seen a meaningful increase in UC transactions yet.
Workforce Solutions adjusted EBITDA margins of 46.8% were lower than our October guidance, principally due to lower revenue growth in talent and onboarding related to the slowdown in US hiring. We expect EWS margins to return to about 50% in the first quarter and will be above 50% for all of 2023. The strength of EWS and uniqueness in value of their TWN income and employment data in Employer Services businesses were clear again in 2022. Rudy Ploder and the EWS team delivered another outstanding quarter, outperforming the mortgage originations by 30 points and delivering strong 17% non-mortgage revenue growth. EWS is expected to deliver a strong 2023 and continue above market growth in the future. As shown on Slide 8, USIS revenue of $406 million was down 6.5% and slightly better than our expectations.
USIS mortgage revenue was down about 46% and was in line with our expectations against an unprecedented 54% decline in credit inquiries compared to the 50-plus percent in our October guidance — 50-plus percent decline that we had in our October guidance. Revenue outperformance relative to credit inquiries was strong at 8%, driven by favorable new mortgage business penetration, new mortgage products and new mortgage pricing. Credit inquiry performance continues to be less negative than estimated originations, reflecting higher relative levels of mortgage shopping behavior that we talked about before. At $67 million, mortgage revenue is now about 15% of total USIS revenue. B2B non-mortgage revenue of $280 million — $288 million, which represents over 70% of total USIS revenue was up 10%, with organic revenue growth of about 6.5%.
This was a significant sequential increase and much stronger than the levels we expected in October. Importantly, B2B non-mortgage online revenue growth was very strong at up 19% total and up over 13% organically, reflecting pricing and product rollouts as well as stronger volumes in banking as lenders continue to drive new originations. During the quarter, we saw strong double-digit revenue growth in commercial, identity and fraud and auto with banking at just under 10% growth. Financial Marketing Services, our B2B offline business had revenue of $72 million that was down 9% and slightly above our expectations. As we discussed during the year, we expect FMS to return to growth in 2023 with revenue up low single digits in the first quarter.
USIS Consumer Solutions business had revenue of $50 million in the fourth quarter, up 8% from penetration and new product introductions. In 2023, we expect low single-digit growth from our US consumer direct business. USIS adjusted EBITDA margins were 35.3% in the quarter, up 120 basis points sequentially due to very strong double-digit B2B online non-mortgage revenue growth. EBITDA margins were down 400 basis points compared to prior year to declines in high-margin mortgage revenue. International revenue, as shown on Slide 9, was $284 million, up a strong 9% in constant currency and 8% organically. We’re seeing broad-based execution from our international businesses with particular strength in Latin America NPI rollouts. Europe local currency revenue was up 3%, principally driven by 9% growth in our debt management business.
We continue to see strong debt placements from the UK government as we have over the past several quarters. Our UK and Spain CRA business revenue was about flat in the fourth quarter and below our expectations principally due to lower new business penetration. Asia Pacific, which is our Australia business, delivered local currency revenue of 6%, driven by growth in our commercial, consumer, identity and fraud and HR identification businesses. Latin America, local currency revenue was up a strong 31% driven by very strong double-digit growth in Argentina, Uruguay, Paraguay and Central America from new product introductions and pricing actions. This is the fifth consecutive quarter of strong double-digit growth for the Latin American team. Canada local currency revenue was up 7% and above our expectations.
Growth in consumer, commercial, analytical solutions and identity and fraud revenue were partially offset by mortgage volume declines and lower direct-to-consumer revenue. International adjusted EBITDA margins at 25.8% were down 100 basis points sequentially and below our expectations due to a greater mix of lower-margin debt services revenue and higher costs principally from purchase data. Turning to Slide 10. 2022 was an outstanding year for new product innovation, and as you know, NPIs are central to our EFX 2025 growth strategy. We delivered over 100 new products for the third year in a row and a record full year Vitality Index of over 13% and a fourth quarter Vitality Index of 14%. The 13% Vitality Index in 2022 was up over 400 basis points above our strong 2021 results and over 300 basis points higher than our 10% long-term growth framework goal for new products and our vitality.
New product revenue in 2022 was $650 million, up over 50% from about $420 million in 2021. And in 2022, over 90% of new product revenue was from non-mortgage products. Leveraging our new Equifax Cloud capabilities to drive new product rollouts, we expect to deliver a Vitality Index in 2023 at levels similar to the 13% we delivered in 2022 which is well above our 10% long-term NPI Vitality Index goal. And this equates to over $700 million of revenue in 2023 from new products introduced in the past three years. New products leveraging our differentiated data, our new EFX Cloud capabilities and Single-Data Fabric are central to our long-term growth framework and are driving Equifax top line growth and margins. Turning to Slide 11. 2022 was also a strong year for bolt-on acquisitions as we continue to focus on our strategic M&A priorities and growing our non-mortgage revenue.
Since 2021, we’ve completed 13 acquisitions that are delivering $450 million of principally non-mortgage run rate revenue. Our 8% to 12% long-term growth framework includes 1 to 2 points of annual revenue growth from strategic bolt-on M&A aligned around our three strategic priorities: number one, expanding and strengthening Workforce Solutions, our fastest-growing and most profitable business; number two, building out our identity and fraud capabilities; and number three, adding unique data assets. We expect these strategic acquisitions to deliver growth synergies in 2023 and 2024 as we complete their technology and product integrations. Last week, we announced the acquisition of the Food Industry Credit Bureau, leading provider of credit information for the Canadian food industry, with over 90% commercial data coverage.
This acquisition expands our commercial product offerings in Canada. We also continue to work closely with the Board of Directors of Boa Vista Servicos, the second largest credit bureau in Brazil on the proposed acquisition we announced in December. When completed, the BVS acquisition will add $160 million of run rate revenue in the fast-growing Brazilian market. The transaction is subject to Boa Vista shareholder approval and other customary closing conditions. To the extent we’re able to finalize terms with the Boa Vista Board, we expect the transaction to close in mid-2023. Turning to 2023 guidance on Slide 12. We ended the year with significant momentum in the underlying growth of our businesses and in the execution of our EFX 2025 strategic priorities.
However, we also entered 2023 with a continuing decline in the mortgage market and broader economic uncertainty impacting our underlying markets. Our assumption for US mortgage market originations is a further decline of 30% in 2023, which is more than 30% below the lowest level of originations in the past 10 years. For perspective, MBA is currently forecasting 2023 origination units down about 22% versus our 30% assumption — minus 30% assumption. Fannie and Freddie do not forecast units but are forecasting origination dollar volumes down 30% and 25%, respectively. In our planning, we’ve assumed the bulk of the mortgage declines in the first half with first quarter originations down about 55%. Secondly, in 2022, we saw hiring freezes and headcount constraints impact our background screening volume in November and December, and we expect these conditions to continue in 2023 with hiring down over 10% impacting our Talent Solutions and I-9 employee onboarding businesses.
Even with these market impacts or market declines, we expect both businesses to grow over 10%. Finally, in our planning, we’re expecting to see weakening in our key markets in the US, Canada, UK and Canada in 2023. We’re assuming slowing growth in the US as we move through the year, although at this point, we have not assumed the US recession. Similarly, we are expecting to see economic slowdowns in Australia and Canada with perhaps a more significant slowdown in the UK. The slow growth in these markets compares to the 2% to 2.5% underlying economic growth, we assume in our long-term growth model. As we enter 2023, we have strong underlying growth across our businesses with execution of our EFX 2025 growth strategies. Despite the significant decline in the US mortgage market and slower economic growth across our major markets, we expect to deliver revenue growth at the midpoint of 4% in 2023.
Total mortgage revenue should decline about 8%, over 20 points better than the 30% reduction in mortgage originations, and non-mortgage revenue should grow over 8%, which is within our long-term growth framework despite the slower economic growth in our major markets. We expect Workforce Solutions to deliver revenue growth of about 6% in 2023. This reflects a mortgage revenue decline of about 8% or over 20 points stronger than the expected 30% decline in mortgage originations. EWS non-mortgage verticals are expected to grow about 13% overcoming the expected 10% plus decline in US hiring and about 15% decline in our ERC businesses as that COVID program winds down. TWN record growth, strong new product rollouts and continued strong growth in both pricing and penetration will continue to drive Workforce Solutions outperformance.
We expect USIS to deliver revenue growth of about 2% this year. Mortgage revenue is expected to decline about 7%, more than 20% — 20 points stronger than the expected 30% decline in mortgage originations. In 2023, USIS will begin to benefit from their new mortgage credit file that was rolled out late last year that includes telecommunications, pay TV and utilities attributes to help streamline the mortgage underwriting process and support loans with the secondary mortgage market. Equifax is the first and only in the industry to provide these insights, which will be available to Equifax customers in the first quarter and can help create greater home opportunities for consumers across the US. We’re also seeing the impact of pricing increases from one of our largest mortgage vendors that we pass on to customers at levels to maintain consistent margins.
Non-mortgage revenue is expected to grow about 5% despite the slowing growth. Non-mortgage revenue growth of about 5% will be driven by strong commercial, identity and fraud banking and auto growth. And Financial Marketing Services expect to return to growth in 2023 after a disappointing 2022. International had a very strong 2022 with revenue up 12% in constant dollars, but we saw some weakening end markets late in the year, particularly in debt services. We expect International growth of 5% in constant currency in 2023. This is below our long-term growth framework for International of 7% to 9%, principally due to the expected weakening economic conditions in our major markets of the UK, Canada and Australia and also a decline in debt services off a very strong 2022.
As we discussed last year, debt services revenue in 2022 was somewhat of a catch-up year as the UK government collections were put on hold during the COVID pandemic. We continue to expect international to operate within their 7% to 9% growth framework over the mid and long-term. NPIs will again be very strong, which is — and consistent with last year’s 13% Vitality Index, well above our 10% long-term vitality goal, and this will be led by Workforce Solutions in Latin America. As USIS and Canada complete their cloud transformation, we expect their NPI rollouts to accelerate as we exit 2023. As we complete our North American cloud transformation 2023, we will pivot to leveraging our differentiated data assets and new cloud infrastructure to drive new product rollouts and top line growth.
Workforce Solutions will accelerate its focus on leveraging their new cloud capabilities, and USIS and Canada will complete their consumer credit, alternative data and IFS transformation this year. These are big milestones in completing the cloud that we’ve been building towards for almost five years. We’re on track to deliver the cost and capital spending reductions from the cloud transformation that are central to our long-term growth framework. As I referenced earlier and as shown on Slide 13, our accelerated cloud transformation cost reductions and broader cost restructuring will deliver $200 million of cost and CapEx savings in 2023 that will expand our margins and free cash flow in the future. During 2023, we plan to reduce our total workforce of about 23,500 employees and contractors by over 10%.
As we complete our North American cloud transformation in 2023, we expect to close about 15 data centers, consolidate development centers and continue to reduce our software application footprint, and we’ll closely manage discretionary spending, including professional services. We expect these actions to deliver $200 million in spending reductions in 2023, representing $120 million cost and expense reductions or about $0.75 per share and $80 million in capital spending reductions. The savings in the first quarter are limited and accelerate in the second quarter and through the second half of 2023. In 2024, the run rate benefit of these actions will reduce our spending by over $250 million. The lower cost and capital spending accelerates as we move through 2023 from cloud transformation cost benefits and other costs and restructuring actions planned throughout the year.
As shown on Slide 14, adjusted EBITDA margins and adjusted EPS improved significantly as we moved through 2023. In the first quarter, revenue is expected to be down 6% due to the about 55% reduction in mortgage originations. EBITDA margins and adjusted EPS are at their lowest levels in 2023 in the first quarter, principally due to the higher incremental margins from the declining mortgage revenue and the timing of the recognition of the majority of our annual equity incentive plan expense in the quarter. Normalizing for this timing compared to the fourth quarter, first quarter EBITDA margins are slightly below fourth quarter margins of 31%. As revenue growth improve throughout 2023 and cloud and broader cost reductions accelerate, EBITDA margins and adjusted EPS improve sequentially with EBITDA margins expected to exceed 36% and adjusted EPS exceeding $2 per share in the fourth quarter.
For the full year, EBITDA will be up 4% or $70 million, in line with revenue growth, with margins flat to the 33.6% we delivered last year. Adjusted EPS is expected to be about $7.20 per share, down about 5% from 2022, principally reflecting higher depreciation and amortization of about $50 million as North American cloud system implementations principally completes, also from higher interest and other expense of about $60 million and a higher tax rate. Capital spending will decline by $65 million to about $545 million in the year, or about 10% of revenue as we move closer to completing our cloud transportation. We expect CapEx to decline again in 2024. We have a clear line of sight to executing these proactive actions that will expand our margins and drive our free cash flow.
In addition to cost benefits, completing our North American cloud transformation will enable significant commercial benefits to drive market share and revenue growth, including our always-on capabilities, better data quality, faster data delivery and faster new product innovation. And we’re beginning to see meaningful commercial benefits from our new Equifax Cloud technology transformation. And now I’d like to turn it over to John to provide more detail on our 2023 assumptions and guidance and also provide our guidance for the first quarter. Our 2023 guidance builds on our strong 2022 non-mortgage growth from new products, record growth, pricing and acquisition synergies. John?
Research, Investment, Finance
John Gamble: Thanks, Mark. Before we discuss 2023, I’ll share a little more detail on 4Q 2022. As Mark referenced earlier, Equifax EBITDA margins came in slightly lower than expected in the fourth quarter at 31%, principally driven by lower-than-expected margins in Workforce Solutions, as Mark discussed, and also in International. Capital spending in the fourth quarter was $156 million, as we maintained investments to accelerate completion of North American cloud transformation. Capital spending will decline in 1Q 2022 to 2023 about $150 million and then sequentially further in each quarter of 2023, as we complete significant US and Canadian customer migrations. Total capital spending in 2023 is expected to be about $545 million.
CapEx as a percent of revenue will continue to decline in 2024 and thereafter as we progress toward reaching 7% of revenue or below. Moving on to 2023 guidance. Mark provided an overview of our planning assumptions of a 30% reduction in mortgage originations in 2023. As shown on Slide 15, at these levels, and again, using credit inquiries as a proxy for the mortgage market, in 2023, the US mortgage market will be substantially below any level we have seen in the past 10 years. 1Q 2023 is expected to see the mortgage market down about 55% year-to-year. Sequentially, as we move through 2023, we’re planning on a more normal pattern of mortgage activity with mortgage originations increasing sequentially on the order of 15% in 2Q 2023 from 1Q 2023, 3Q 2023 being about flat with the second quarter and normal sequential decline in the fourth quarter versus 3Q 2023.
We expect with these sequential patterns, US mortgage originations would be up slightly in the second half of 2023 versus the first half of 2023, and the fourth quarter of 2023 would be up slightly year-to-year. And at least the first half of 2023, we are expecting USIS to benefit from mortgage shopping behavior with better performance than originations. Slide 16 provides a revenue walk detailing the drivers of the 4% revenue growth to the midpoint of our 2023 revenue guidance of $5.325 billion. The 30% decline in the US mortgage market is negatively impacting 2023 total revenue growth by about 7 percentage points. The mortgage revenue outperformance relative to the mortgage market is expected to offset about 5 points of the negative 7 percentage point impact of the mortgage market on overall revenue growth.
As a result, the expected 8% decline in Equifax mortgage revenue has a negative about 2 percentage point impact on overall revenue growth. Non mortgage organic growth is expected to exceed 7% on a constant currency basis and is driving about 5% of the growth in overall Equifax revenue. As Mark referenced earlier, the growth is broad-based across all three BUs and is within our long-term framework of 7% to 10%, despite the economic uncertainty across our major markets in the US, Australia, Canada and the UK. The acquisitions completed in 2022 and year-to-date are expected to contribute about 1% of growth to 2023. For clarity, this does not include revenue from the potential acquisition of Boa Vista. Slide 17 provides an adjusted EPS walk detailing the drivers of the expected 5% decline to the midpoint of our 2023 adjusted EPS guidance of $7.20 per share.
Revenue growth of 4% at our 2022 EBITDA margins of about 33.6% would deliver 5.5% growth in adjusted EPS. EBITDA margins in 2023 are expected to be about flat from the 33.6% we delivered in 2022. In 2023, the cost actions we are taking are expected to deliver about $120 million of expense reductions. These cost benefits are being principally offset by several factors. First, in 2022, variable compensation, including incentive and sales comp were at very low levels due to the substantial impact of the weak mortgage market on our performance. In 2023, our planning assumes we return to targeted levels of performance, and therefore, these compensation drivers. Royalties and cost for data and third-party scores are increasing as we continue to add new partners and broaden data sources.
Also in 2023, we are also still incurring a level of redundant system costs as we continue to operate legacy North American systems prior to their decommissioning later in 2023. As we look beyond 2023, the impact of variable compensation moving to target and the cost of redundant systems in North America are behind us, and therefore, the benefits of our cost actions as well as accelerating high variable profit revenue growth are expected to drive significant improvement in EBITDA margins. Depreciation and amortization is expected to increase by just over $50 million in 2023, which will negatively impact adjusted EPS by about 4%. D&A is increasing in 2023 as we accelerate putting cloud native systems in production. The combined increase in interest expense, net other expense and tax expense in 2023 is expected to negatively impact adjusted EPS by just over six percentage points.
The increase in interest expense reflects the impact of higher interest rates and also the increased debt from our 2022 acquisitions. Our estimated tax rate of about 26% is up about 150 basis points from 2022 due to a higher mix of non-US revenue and lower tax benefits as we reduce capital and development spending. Slide 18 provides the specifics of our 2022 full year guidance that Mark discussed in detail. The slide includes additional detail on expected BU EBITDA margins as well as guidance on specific P&L line items. EWS EBITDA margins in 2023 of 52% are expected to be up from the 51.3% delivered in 2022, given the strong non-mortgage revenue growth from new products, penetration and pricing and the benefits of the cost actions Mark discussed earlier.
USIS EBITDA margins at over 35% are expected to be down from the 36.8% delivered in 2022. USIS is also benefiting from cost actions. However, revenue growth at 2%, again, due to the impact of the US mortgage market decline, is resulting in the year-to-year margin decline. International EBITDA margins at 27% are expected to expand versus the 25.7% delivered in 2022, driven principally by pricing and the 2023 cost actions. Corporate expense, excluding depreciation and amortization, is increasing in 2023 relative to 2022 due to the increases in incentive and equity compensation from the lower levels incurred in 2022 that I referenced earlier. Corporate functions such as finance, legal, HR and others are reducing costs in 2023, consistent with our cost actions.
We believe that our guidance is centered at the midpoint of both our revenue and adjusted EPS guidance ranges. Slide 19 provides our guidance for 1Q 2023. As Mark discussed earlier, 1Q 2023 is expected to have the largest year-to-year decline in the US mortgage market that we’ll see in 2023 at down about 55% as we compare to the relatively strong mortgage market in the first quarter of 2022. Despite the strong expected non-mortgage constant currency growth of about 9%, we will see a decline in 1Q 2023 revenue about 6% at the midpoint of our guidance. 1Q 2023 EBITDA margins are expected to be about 29%, down about 200 basis points sequentially. Overall, BU EBITDA margins in total are up sequentially from 4Q 2022 driven by Workforce Solutions delivering about 50% EBITDA margins in the quarter, which offsets declines at USIS and International.
The decline in EBITDA margins in 1Q 2023 sequentially from 4Q 2022 is driven by higher corporate expense, specifically the higher incentive and equity compensation costs referenced earlier. The bulk of the expense related to our equity plans occurs in the first quarter and is reflected in corporate. Excluding the impact from the sequential increase in equity compensation expense, EBITDA margins are approaching flat sequentially at just under 31%. Corporate expenses will decrease meaningfully sequentially in 2Q 2023 as the equity compensation was principally reflected in the first quarter. Revenue increases sequentially in 1Q 2023 relative to 4Q 2022. We’re not seeing the expected increase in EBITDA margin sequentially in the first quarter, driven by the same factors impacting all of 2023 that I referenced earlier and the fact that there is limited first quarter benefit related to our 2023 cost actions.
In the second quarter of 2023, we will see both the benefit of reduced corporate expense and increased benefits from our 2023 cost action supporting growth and EBITDA margins. Business unit performance in the first quarter are expected to be as described below. Workforce Solutions revenue growth is expected to be down about 8.5% year-to-year due to the about 55% decline in the mortgage market. Non-mortgage revenue will continue to deliver double-digit growth. EBITDA margins are expected to be about 50%, up over 300 basis points sequentially, driven by sequential revenue growth from new product and pricing actions. Workforce Solutions will represent just under 50% of Equifax revenue in the quarter. USIS revenue is expected to be down about 5.5% year-to-year, again, driven by the about 55% decline in the US mortgage market.
USIS credit inquiries are expected to somewhat outperform the overall mortgage market due to consumer shopping. The mortgage decline is partially offset by growth in non-mortgage expected to be up mid single digits. EBITDA margins are expected to be about 32%, down sequentially due to negative mix from growth in core mortgage and higher overall mortgage royalties as well as the normalization of incentive costs that I referenced earlier. USIS is also incurring incremental costs from customer migrations to data fabric that are occurring principally in the first half of 2023. International revenue is expected to be up about 5% in constant currency. The weakness relative to the strong 4Q 2022 growth of about 9% is principally a decline in the UK debt management business as we are now comparing to the very strong 2022 revenue driven by catch-up in our UK government business in 2022 as the UK government suspended collections during the pandemic.
EBITDA margins are expected to be about 22%, down sequentially due to seasonally lower revenue in Canada and UK CRA and normalization of incentive costs as well as higher data costs. We’re expecting adjusted EPS in the first quarter of 2023 to be about $1.30 to $1.40 per share. Looking forward, we remain focused on delivering our midterm goal of $7 billion of revenue with 39% EBITDA margins. Market conditions are significantly different than when we first discussed in November of 2021, our goal of achieving these results in 2025. The US mortgage market is expected in 2023 to be down over 35% from the normal 2015 to 2019 average levels we had discussed is expected to deliver $7 billion of revenue in 2025. Our core organic revenue has grown over 300 basis points faster than we discussed with you in November of 2021.
However, recovery in the mortgage market around the order of two-thirds of the lost volume is still likely needed to achieve our $7 billion goal in 2025. We’re focused on driving above-market growth including — through accretive acquisitions and delivering the cost and expense improvements committed as part of our data and technology cloud transformation and needed to achieve 39% EBITDA margins. We’ll continue to discuss with you our progress toward our $7 billion and 39% EBITDA margin goals as the mortgage and overall markets evolve in 2023 and forward. Now I’d like to turn it back over to Mark.
Mark Begor: Thanks, John. Wrapping up on Slide 20. Equifax delivered another strong and broad-based quarter with above-market growth in 2022, more than offsetting the significant 55% decline in the US mortgage market originations. We delivered our eighth consecutive quarter of strong above-market double-digit core revenue growth and strong double-digit 12% non-mortgage growth, reflecting the power of the EFX business model and our execution against our EFX 2025 strategic priorities. At the business unit level, first, Workforce Solutions had another outstanding year, powering our results, delivering 14% revenue growth and strong organic non-mortgage growth of 24%. TWN current records reached $152 million, up 12%, and total records surpassed 600 million.
Workforce also delivered a Vitality Index of over 20% from innovative new products and solutions, leveraging their cloud capabilities while further penetrating the high-growth Talent and Government verticals. USIS had a very strong finish to 2022 with fourth quarter non-mortgage growth of 10% total and 7% organic, driven by online non-mortgage growth of 19% total and 13% organic. The USIS team remains competitive and is winning in the marketplace. International delivered 12% local currency growth, their second consecutive year of double-digit growth. And our 2022 Vitality Index of 13% was a record as we delivered over 100 new products for the third consecutive year in a row. And since 2021, we completed 13 strategic bolt-on acquisitions to strengthen Equifax and identity and fraud that we expect to deliver over $450 million of principally run rate revenue going forward.
And sixth, we made significant progress in 2022, executing against our EFX cloud, data and technology transformation with about 70% of North American revenue being delivered from the new Equifax Cloud. And we’re laser-focused on completing our North American migration in 2023 to become the only cloud-native data analytics company. We’re in the early days of leveraging our new cloud capabilities but remain confident that it will differentiate us commercially, expand our NPI capabilities and accelerate our top line. Our strong progress on the cloud allowed us to accelerate cost savings and launch a proactive restructuring across Equifax that will deliver $200 million of cost savings in 2023 that will expand our margins to 36% as we exit 2023 and position us for an uncertain economic environment.
As we look to 2023, we’re committed to completing our North American data and technology transformation, while delivering continued above-market revenue growth and a substantial and consistent EBITDA margin growth and a reduction in capital intensity that is a key benefit of our data and technology cloud transformation. As mentioned earlier, the cost actions were taken in 2023 reducing our spending by $200 million this year and over $250 million in 2024 will expand our margins and position us for a more uncertain economic environment. I’m energized about our strong above-market performance in 2022, but even more energized about the future of the new Equifax in 2023 and beyond. We’re convinced that our new EFX cloud-based technology, differentiated data assets that are now in our single-data fabric and our market-leading businesses will deliver higher growth, expanded margins and free cash flow in the future.
And with that, operator, let me open it up to questions.
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