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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
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. [Operator Instructions] 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.
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.
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% [ph] 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?
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.
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.
Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first questions come from the line of Manav Patnaik with Barclays. Please proceed with your questions.
Thank you. Good morning. Mark, you said you assumed a weakening economy pretty much globally but not a recession. But I guess my question is more the weakness that you've assumed, the magnitude of what you're seeing already today versus what you're assuming gets worse, if that makes sense?
Yes. So I think there's a couple of levels there, Manav. As you know, we've been living through a mortgage market recession here in the United States for the last nine months and that's going to continue. And it's really unprecedented. So I think you and our investors understand that pretty clearly. It's really a massive impact on our business. And what's positive is our non-mortgage businesses are performing exceptionally well.
We talked about where we've seen the impact of hiring declines in late in the year. We expect that to continue being down about 10% in 2023, and that impacts our Talent business and also our onboarding and online businesses. So that's certainly in our outlook.
And then we did factor in what we would characterize as an uncertain or slowing economic environment really more in the second half of 2023. It's hard to forecast where the economy is going to do, but it certainly feels like at these higher interest rates and higher inflation, and you've got the impact of mortgage and now in the hiring space that we're going to see slowdowns as we go through 2023.
Got it. Just to clarify on that. I guess, can you talk about what you assume more on the, call it, card and auto side because those things still find today that -- how much you're assuming? And then, John, just for you on free cash flow. Can you just walk us through what the working capital moves this year was and how we should think about what free cash flow will be in 2023?
Yes. So on your first half of your question, John can take the second. You're correct, Manav. In a lot of verticals, we haven't seen that economic impact yet. We're expecting to see that as we go through 2023. So that's a part of our guide and a part of our outlook in verticals like cards, like P loans, like auto, we've seen some limited economic impacts there. But as you point out, cards, for example, are still operating quite well. But given where interest rates have been and where they're going and where the Fed is signaling they're going to take them and the challenge of taming inflation, we think it was prudent to include in our outlook for 2023 a softening of the economy as we go through the year.
As you look around outside the US, right, we saw a weakening in the UK. That's already occurred, started to happen in the fourth quarter, and we saw relatively weaker performance in some of the other markets around the world as well. So to free cash flow -- so as we look through 2023, Manav, we're expecting to see expanding margins, as Mark talked about, and we're expecting to see, obviously, therefore, expanding EPS as well, and we're also expecting to bring down capital spending. So we expect to see very nice growth in free cash flow as we move through 2023 sequentially, as we go through the quarters.
In terms of working capital, as we've discussed in prior calls, as we were going through a significant billing system migration, we did see some increase in our accounts receivable. The bulk of that is now completed. We've completed all of North America, and there's just -- there's a little bit more to go as we go through 2023 in some of our international operations. Our internal metrics are showing a nice improvement in terms of our operational performance in those systems in terms of what we're seeing in terms of collections activity.
And so although we haven't really seen it yet in the numbers you would have seen in the fourth quarter, we're expecting to start to see some benefit as we move through 2023 in terms of AR, which would affect overall working capital. So net-net, I think free cash flow, we're expecting to see, obviously, expanding margins, improving profitability, lower CapEx and then improvements as we move through the year in working capital in general.
Got it. Thank you.
Thank you. Our next question is coming from the line of Andrew Steinerman with JPMorgan. Please proceed with your questions.
Hi. John, I just want to make sure I understand the $120 million of OpEx reduction on Slide 13. Is this $120 million for 2023 could be realized in year, or is that a run rate by the end of the year? And then I have a follow-up question.
So that's realized in year.
That's correct, yeah.
As John pointed out, those will be executed principally the actions of the contractors and attrition in some Equifax FTEs will be executed in the first quarter, so the benefits will accelerate as we go through second, third and fourth. And then as we said, we get a benefit -- positive benefit in 2024 from the full year impact of that.
Okay. And then on the $120 million of expense savings, OpEx savings, is this really an acceleration of the original plan, or does this add to total target cost savings of the cloud transformation?
Yeah. It's a combo of the two. We tried to be clear about that, Andrew, in our comments because of the extra efforts and additional work we did in 2022, it's allowed us to accelerate the cloud savings that we've talked to you about for multiple years. So a big piece of the $120 million is the cloud savings, but there's a meaningful increment to that of just a broader restructuring of the company to improve our efficiencies and how we operate the company. Some of that from the investments of the cloud that are outside of technology just allow us to operate more effectively. So it's a combo with the two.
Thank you.
Thank you. Our next questions come from the line of Kyle Peterson with Needham & Company. Please proceed with your questions.
Great. Good morning guys. Thanks for taking the questions. I wanted to dig into the Talent Solutions piece. It definitely seems like there was some softness there compared to what you guys were expecting. And I know you kind of mentioned that hiring was a headwind and became more challenging. But I guess, was the softer result in that sub-segment of EWS, was that purely a kind of quantity and kind of hiring volume headwind, or did you see any clients like trading down to kind of less expensive products or doing anything else in kind of that area that might have caused some pressure?
No. Our analysis of it is it's all Q and when we talk to our customers, meaning there's just less background screens happening. I think we were watching this as we went through the fourth quarter. I think all of us saw companies as we went through the tail end of the year and they've accelerated in the first quarter here, announcing layoffs, announcing hiring freezes. That all is going to impact the hiring market.
It's a bit bifurcated. I think we all know that the hiring at the, call it, the hourly wage area is still very strong. So that really wasn't impacted. This is more white collar impact, where companies are just tightening their belts and being more cautious around hiring. So we haven't seen any impact from our new product rollouts, the penetration that we have. And just as a reminder, this is a $2 billion TAM for us, is Talent. And we have a lot of penetration opportunities, meaning we're continuing to work in to bring new solutions and convert our customers from their manual work to digital, and that's what really allows us to outgrow a declining market, which we expect to continue to do in 2023.
And then as we also mentioned, that same hiring impact where companies are tightening their belts around adding new resources impacted our onboarding or our I-9 business in the latter part of the year, we expect it to impact in 2022. As we said in the comments earlier, we expect both of those businesses to grow double-digit even with those market declines because of the new product capabilities, the new penetration opportunities that we have and, of course, our normal pricing that we rolled out on a 1/1, on January 1.
Got it. That's helpful. And then I guess just my kind of follow-up was on pricing. I know kind of last quarter, you guys mentioned that pricing would be a tailwind in 2023 to margins. And I know like the 1Q guide kind of implies a couple of hundred basis points of pressure on EBITDA margins. I get some of that's seasonality. But is some of this that compared to what you guys saw in 4Q that just volumes in mortgage and some of the other areas are just facing pressure that's offsetting some of those price effects that went into place on 1/1, or did you got temper in any of those?
Yes, I'll let John jump in. No change in what we told you we were going to do in October and price and what we actually did. Obviously, what's happened is the mortgage market -- first off, we have a very challenging comp in the first quarter and the second quarter versus last year. A year ago, the mortgage market was super strong. So you start with that, and that was as expected, although as we talked about, we've reduced our mortgage outlook for 2023 from what we thought in October. So that puts pressure on the quarter and on the year, from a margin standpoint.
There's some small pressure from the lower growth in talent and onboarding in I-9 because of the tightening belts around hiring taking place, but the bulk of the first quarter impact is what John described of, really, from a cost standpoint in 2022, our incentive compensation was well below target because of the decline in the mortgage market. As John said, we expect 2023 to be paying at target. So that's a higher expense to us. That flows through the year. And then we typically have in the first quarter when we make our retention equity grants to our team, an equity expense that takes place. And there, I don't know, what else would you add, John?
No. Just in terms of price and product, you can see the benefit of price and product in the fourth quarter, obviously, in USIS. Very strong performance in online. We saw volume in banking. But we had very strong performance in auto and in banking and lending and cards. So -- and some of that was product and some of that was price. And you're certainly seeing it in the first quarter in EWS, right? As Mark mentioned, pricing increases going in January, and we're seeing the benefit of both product and price and in EWS with their margins expanding in the first quarter. So no difference, and you're seeing it in the performance of the business.
I think, John, you also said in your comments that if you look at first quarter versus fourth quarter and isolate around these expense items around incentive and equity, our margins are basically flat, which means we're absorbing a weaker mortgage market than the fourth quarter and still getting the benefits of operating leverage and price and everything else to kind of offset that ex the cost items that we had that we talked about.
Thank you.
Thank you. Our next question is coming from the line of Kevin McVeigh with Credit Suisse. Please proceed with your questions.
Great. Thanks. Obviously, still a lot of volatility in the mortgage market. Is there any way to think about kind of purchase versus refinance? And as you get into 2024, I know 2023 is hard enough, but do you expect a little bit more recovery in refinance off of 2022, or just any way to think about kind of that base level of originations and how it trends over the course of the year?
I'll let John jump in. As you might imagine, refi is virtually gone, right? Refi really disappeared from the mortgage market, I don't know, six months ago as rates started increasing. We don't anticipate refi coming back until there's a change in interest rates, meaning that there's some interest rate decline. What's really very unusual, and we've never seen before is the meaningful decline in purchase volume at this level. I think as John pointed out, our outlook for 2023 as mortgage inquiries 30% below the 10-year average. And that's really -- the 10-year average includes purchase and refi. So you've got purchase down dramatically. So at some point, purchase volume should improve. There's no question. If it's 30% below a 10-year average.
Now we're assuming that doesn't happen in the second half. Should it improve in 2024, I think it's part of it's tied to what's happening in the economy. Are we stabilized around inflation and interest rates, if the interest rate increase has flattened out and consumers that are thinking about a home can have some confidence around where the economy is going. That should help purchase volume. But at some point, whether it's in 2024 or 2025, the mortgage market should move up on the purchase side as the economy stabilizes to get back to that, call it, 10-year average. It's never had this kind of an impact. Of course, we've never seen interest rate increases at this pace ever before. Add, John?
I think you covered it quite well, yes.
Great. And then just real quick, as you think about kind of -- you mentioned the gig and pension workers a couple of times. Is that aggregation process similar to the traditional kind of record aggregation, or is it -- how does that process occur? And is it at the same price point, or is it kind of less profitable?
Yes, no, they're very attractive records. We want them all. First, let me just make the point. We've got a long runway in traditional non-farm payroll. And I think as you saw a 12% growth last year in TWN records, was very, very strong. We signed, I think, 10 new partners that will come online in 2023.
I think we said before that in our existing partners, think about payroll partners, there's meaningful records that we still haven't brought onboard with them. And there's a lot of incentives to do that. So that's kind of the base records. And over the last couple of years, we've scaled up resources that are going after pension records. I think it was in the third quarter last year, we signed our first pension partner to bring pension records into our data set. And we've got a pipeline of those. And process-wise, that's quite similar.
If you think about pension records, they're probably in three different places, it's more than that, but three principal places. One is there are companies that are much like payroll processors that process defined benefit pensions for legacy companies that have those. So, going to those companies and developing those partnerships is strategy number one.
Number two is large legacy companies process their own pension payroll, lots of them. So we're already collecting their employee payroll, so going in and collecting their pension payroll as a part of that strategy. So we know how to do that in just a matter of executing it.
And then the third is in federal, state and local governments. Many of them have their own pension processing operations, so going to collect those records. So that's where we're going on the pension side.
And then on the gig side, there's a lot of different strategies, individual companies, as you might imagine, going to get that and other entities that will have those gig records. And as we've talked before, it's the 114 million uniques that we have. There's about 220 million working Americans between non-farm payroll, gig and pension. So over the long-term, we've got the ability to double the scale of our records going forward.
So that's a big lever for growth from workforce. I think as you know, the day we add a new record, we're able to monetize it instantly, because we're already getting inquiries for the record we don't have, right?
With our 50-plus percent hit rates, as we add that 51st, 52nd set of data records, we're able to monetize instantly. So it's a very powerful part of the revenue engine and margin engine for Workforce Solutions, which is why we have such a dedicated team focusing on it. And if you think about the scale of our records, if you go back four years ago versus the 114 million uniques, we had something like 70 million and 300,000 companies. We ended last year with 2.6 million companies contributing their data to us. So the cloud has allowed us to really scale that, and there's a long runway for future growth.
Thank you.
Thank you. Our next question is coming from the line of Kelsey Zhu with Autonomous Research. Please proceed with your questions.
Hey, guys. On EWS margin, just kind of playing devil's advocate here. I want to understand a little bit better what's the biggest risk factors for margins to drop below your guide at 52%. Is this just mortgage market down more than 30%? Is it fields overachieving their targets again in maybe government the verticals? Just wanted to understand it a little better?
John, this was on EWS margins. And the question was, we've said that we expect them to be 50-plus percent in 2023. What are the risks of that?
Yeah. Let me talk about what's driving the margins to be at those levels, right? And it is heavily driven by what Mark talked about in terms of the record growth and therefore the outperformance relative to mortgage and the very, very strong non-mortgage growth. And then the cost actions that they're taking in order to not only maintain but enhance their margins as they go through the year, right? So EWS has been executing extremely well.
Obviously, if the mortgage market was to be substantially weaker, that's very high revenue and high margin -- very high-margin revenue, that would be a risk. To the extent that there is risk to revenue in general, obviously, that can be risk to margins. But overall, we think we've taken a very reasonable view in terms of what 2023 looks like for EWS. Their execution has been very strong. The record growth has been very good. They've already executed their pricing actions. Their performance in new product has been outstanding, as Mark said, growing at twice the rate of our 10% goal for Vitality Index. So we feel like we've given a very balanced view of EWS as we look into 2022.
Maybe I just add to that, John. I think John mentioned, we rolled out our pricing actions late in the year in effective 1/1. So we know what those are. So that's kind of baked in. So that gives you a lot of confidence. As I mentioned earlier, and John did too, we already know some meaningful record additions that we've signed agreements for that will come in, in 2023. That's revenue and margin. We've got new products in workforce that were rolled out in 2022 that gets full year benefit in 2023. And we know our pipeline of new products we're expecting to roll out in the first quarter and second quarter from workforce going forward.
So we think there's a -- we have a lot to give us confidence in our outlook there. And I think as John pointed out, to me, the factor would be if the economy is worse than we factored into this or if the mortgage market is significantly worse than we factored into this outlook, that would put pressure on that. And then we would take actions to respond to it.
Got it. Super helpful. And then just on Boa Vista, I think that would be a really nice addition to your LATAM portfolio. And I was wondering if you could give us a little bit more color on how you're thinking about their data assets and their strategy. On the merger -- on the acquisition call, you mentioned Boa Vista is very strong regionally. Is there a strategy to expand them kind of more towards nationally. Would appreciate any color you can share with us.
Yeah, sure. So first, we're working to try to finish the acquisition. We've been negotiating since December with the Board of Boa Vista. We're pleased with the progress, and we're -- we want to conclude that. So that's kind of priority number one. But everything we talked about in December, we're still quite energized about. First and foremost, we would bring all of the Equifax capabilities to Boa Vista, whether it's our new cloud technology our products from around the globe, our big platforms like Ignite and InterConnect, we'd really bring their capabilities up substantially versus what they have today as a standalone number two credit bureau in the market. So that is a real positive. And the underlying business is performing exceptionally well. They've got strong double-digit growth.
It's a big market in Brazil that's expanding. There's a lot of alternative data available there that we would want to focus on. We just see a bunch of potential. As we pointed out, they have some unique data outside of the normal banking data that's unique to Boa Vista, which is another element that we like about it. So we're focused on completing our negotiations, so we can try to move forward in closing it.
Thanks.
Thank you. Our next questions come from the line of Andrew Jeffrey with Truist. Please proceed with your questions.
Hi. Good morning. Appreciate you taking the question and all the details as usual guys. Mark, one of the things that happened, obviously, that drove your mortgage growth before the sort of collapse of the overall market was greater digital engagement. And I think you've talked to mortgage shopping a little bit today, too. Has -- given that mortgage volumes are down so much, purchase and refi, do you think there's anything that's structurally changed in the market such that your customers either want to engage more digitally with you or less digitally? So I guess what I'm asking is when mortgage recovers, is that lever, which was such a nice driver for you when volumes were booming, is that still there? Is it -- do you get more leverage, less leverage, about the same? Can we think about that structurally, if anything has changed?
Yes, it's a great question, and we believe that it's more leverage or more opportunity to really drive our digital solutions. And if you think about a mortgage originator, that clearly is under significant financial pressure now because of the reduced -- the reductions in volumes. They're looking to improve their productivity, and the only way to improve your productivity is through instant decisioning. And the goal that they always have and the leading players in the space are working to really shorten the time frame between application and closing.
As you know, it's a very long time frame and that time frame has cost involved in it. It also has risk involved in it around the consumer changing. It has risk involved in it, and the consumer deciding, I'm not going to buy the home, meaning you've spent a bunch of COGS on it. And you've heard us talk before, the average mortgage originators spending $5,000 of expense in a mortgage application if they can shorten the time and take labor out of it by using instant data. That's a positive.
So we expect our conversations around using our Instant data, particularly around TWN, to accelerate in this environment, meaning we're going to become more embedded and more instant, which has been a trend, as you know, over the last couple three years, even in the stronger mortgage environment. Some of that over the -- in 2020 and 2021 was challenged by the -- just the pace of the volume they had. They didn't have time to really focus on changing their processes. Now they do.
So it's clearly a focus of ours, and we think a positive going forward that Instant is going to drive speed and drive productivity. And that doesn't only apply to mortgage, that applies to really all our verticals. Think about government, think about talent. If we're able -- they're under cost pressure today. And those verticals, whether you're a background screener or a government agency, improving your productivity and improving the speed of the service you deliver is very, very valuable to them. And the way to do that is to use instant data from Equifax like our twin data, our income and employment data.
That's very helpful. Thanks. I appreciate it.
Our next question is coming from the line of Andrew Nicholas with William Blair. Please proceed with your questions.
Hi. Good morning. Thanks for taking my questions. I wanted to first touch on a comment you made about a win for EWS and Verification Services within the U K, I believe. I wanted to ask, I think you said 40% of the private sector employee base, if I heard correctly, if you could clarify that. And then just curious, is that an exclusive relationship? And how important could that relationship be to getting a foothold or the pole position in the UK market, especially given a competitor of yours ambitions to build a similar business there?
Yeah. I think we've been quite clear that over the last couple of years, as we completed the cloud, we were looking for new international markets to take Workforce Solutions into. As we talked on the call earlier, we've been building out businesses in Australia and Canada, and then most recently, a year ago, really in the first quarter, we launched our UK business using our new cloud capabilities and started to go into the market and talk to both individual contributors and payroll processors around adding data records.
So we've made some positive traction over the last, I guess, four years in Australia and four years in Canada and over the last 12 months in the UK. We're looking to continue to grow and expand our capabilities there. We had -- I don't know the number, but we've had a handful of agreements signed in the UK, and we also signed an agreement with an entity that has tax data that is a proxy for income and employment. So that's been a positive addition in the UK. That gives us a lot of coverage so we can start rolling out solutions there.
In Australia, we've got -- had an agreement with a pension administrator that brought that kind of data in, which is -- and also has the equivalent of W-2 type data in it that's quite accretive also. So it's clearly part of our strategy to continue to build out and invest into international footprint for workforce.
Great. Thank you. And then for my follow-up, I just wanted to ask a question on margins. It looks like you're expecting 30% plus type margins exiting the year. Is there any reason not to believe that's a good starting point for 2024? And I know you're not going to give guidance for that year, but mostly asking about if there are kind of cost-saving actions that you expect to still be underway that late in the year or if that fourth quarter number is a decent run rate to think about kind of a stable base for out years? Thank you.
Yeah. So I think as we talked about in the presentation, we're expecting in the fourth quarter to get to 36% EBITDA margins, driven by some recovery in revenue but also really significantly by the acceleration of the cost actions. And the cost actions have a continuing benefit in 2024. So we're expecting additional benefit from the cost actions as we go into 2024. And we're also expecting to get additional cost benefits as we continue to complete the cloud transformation beyond North America, and we'll start to start to see some of those benefits occur in 2024. So we think we still have tailwinds on the cost side that will benefit our margins as we get into 2024. And then obviously, as we get closer to 2024, we can start talking about revenue. But there certainly are cost tailwinds that continue out of 2023 and into 2024.
Thank you.
Thank you. Our next questions come from the line of Shlomo Rosenbaum with Stifel. Please proceed with your questions.
Hi. Thank you for taking my questions. Hey, Mark, I want to ask you a little bit about the main functional areas for headcount reduction. And what I'm trying to focus on is NPI has been a big driver and driving particularly non-mortgage growth? And how do you make sure that you're going to not harm kind of the goose that's laying the golden eggs in terms of the ramp of revenue that we should expect over the next several years by reducing your headcount by 10%. And then I have a follow-up.
Yes. We're obviously quite thoughtful about that, as you might imagine, we want to make sure we're quite strategic about where we're doing it. Remember, the bulk of the actions are really related to the cloud transformation and accelerating those. So you've got a lot happening in technology. And the bulk of the actions are also in contractors.
We hired a bunch of contractors to do the cloud work, and we're taking actions now when we complete that and decommission the legacy infrastructure to take those out. The rest of the actions, I would characterize as kind of normal focus and thoughtful focus around where do we have opportunities to be more efficient and more productive while protecting our focus on growth. And growth includes our new products.
The only thing I'd add is as transformation completes the effort necessary to launch new products comes down substantially, right? It's one of the real benefits from cloud transformation that we've been talking about substantially. And as data is on fabric and everything is running through Ignite and InterConnect, then the level of investment necessary to launch those new products really starts to become something that we can do faster and cheaper.
So as Mark said, we do a very good job of making sure we understand who is working on what. So as we reduce resource, we take it out of specifically transformation. But also as we go forward, we expect to get a lot of leverage in product launches in terms of being able to launch them faster and cheaper because they're on the transform cloud infrastructure.
Okay. Thank you. And then…
And we've seen that in EWS by the way. It isn't something that we haven't seen. It's already happened in EWS.
I think it's a great point, just to add on that. I think we mentioned on the call today that EWS new product rollouts, kind of 2x our long-term goal, north of 20% last year. And as you know, they were in the cloud a year ago, 18 months ago, and it's really shown what we envisioned happening, that the ability to bring more new solutions to market more quickly and more productively, as John pointed out, and efficiently would happen when you're cloud native. And that's part of what we expect to happen as we go through 2023, and we expect to continue in 2024, meaning we're going to have additional cloud benefits, as John pointed out in 2024, and then we get the full year run rate impact of our actions in 2023.
Got it, got it. And then just as a follow-up, I want to ask a little bit more about the competitive environment on The Work Number. You have a competitor in the market that's talking about signing more contracts with mortgage processors, and the vast majority of those are being -- putting them at the top of the waterfall. I'm just trying to square what they're talking about and some of the growth that they're trying -- they're communicating to the analyst community with kind of the market position and what you're seeing. I mean, are you seeing increased threats to your market position and the volumes that are coming through?
We're not. I'd clarify with them if you want to try to understand better the top of waterfall comment. We don't know where that is or how that happens. We haven't seen them as a competitive threat in the marketplace. I think as you know, our record additions are quite substantial. We're -- we added in the quarter more records -- more unique records than they have. So we've clearly got an ability to attract new partnerships and individual relationships given the scale of the company.
And then on the commercial side, our integrations are so deep and so substantial, we haven't seen an impact from a revenue standpoint. As you can see, the numbers are super strong in Workforce Solutions across all of our verticals, including mortgage. Their outperformance is exceptionally strong and hasn't slowed down.
And just please remember, our historical record base is incredibly valuable to our customers, certainly in Talent, certainly in Government, increasingly in mortgage, we talked about mortgage 36 on in the conference call. And that's a place where we have tremendous strength in general and Verification Services and an even stronger position in historical records.
Got it. Thank you.
Thank you. Our next question is coming from the line of Toni Kaplan with Morgan Stanley. Please proceed with your questions.
Thanks so much. First, I was hoping you could talk a little bit about the bearishness within the mortgage forecast. The 30% inquiries decline I think would imply that originations are even lower than that. And I think just -- I know sometimes the third-party forecasts are a little bit optimistic. But I just felt like there was a pretty big delta there. And so if you could just go into maybe why your mortgage forecast is so bearish? Thanks.
Yeah. It's -- first off, it's very difficult to forecast. And I think we've shown over the last year that it's a hard thing to do. We've been pretty good about forecasting inside of a quarter, meaning out for a couple of months because the trends are pretty clear on what we're seeing on a daily and weekly basis. But as you get out a couple of quarters in this uncertain environment, it's much more challenging.
And John, correct me if I'm wrong, I believe for the last year we've had our outlooks south of the other forecasts, like MBA and stuff consistently. So that's not a new approach for us. And Toni, as you know, we have real visibility to originations that are actually happening on a near-term basis, which is what we try to factor into our forecast. And you could call it bearish or conservative or, in our case, we tried to put it the most realistic outlook in place, that's what we put out there.
Just a reminder, EWS, which is the bulk of the mortgage business, right, their transactions tend to look a lot more like originations, right? USIS does have that shopping behavior, which is better. But EWS now it's really much closer to originations. It's a much better proxy. And so also, as we talked about, I mean, what we did is we looked at run rates and then it just assumed kind of normal seasonality. I think what you're hearing from some of the third-party forecasters is an expectation of some type of substantial recovery in the mortgage market. That could occur, and if it does, we'll benefit, okay? But right now, what we're assuming is we're going to see a market that looks a little more normal in terms of its seasonality versus this year, and we're going to wait to see that recovery before we start saying it's going to happen.
Terrific. And I wanted to ask a little bit more broadly on consumer spending. When you think about your -- what are you seeing, I guess, in year-to-date trends and how are you expecting that to play out throughout the course of the year? Thanks.
Yes. Toni, really not a lot of change from the consumer from October, meaning they're still strong. They're working -- like unemployment being so low, unemployment being so high and all the open jobs, that's a good thing for the consumer. They've clearly -- we've seen they spent down some of their COVID pandemic savings, but there's still positive savings from where they were in 2019. So that element is quite positive.
Obviously, at the low end, inflation is still pressuring the subprime consumer, and we've seen some uptick in delinquencies there. But broadly, we would characterize the consumer as being quite strong. Now when we look out for 2023 here in February, that's where we talked about and we factored into our outlook a more uncertain economy, which should impact the consumer, call it, in the second half perhaps in the way we're thinking about it with these continued rising interest rates. And every day, you see another company announcing layoffs or hiring freezes. And that's going to have to have an impact at some point, and that's part of our outlook.
On the B2B side, I think we talked at length about what we're seeing in the hiring space that we've already -- I just talked about. But that's impacting our businesses in background screening and talent and then an I-9 and onboarding. We still expect to grow over 10% in those two businesses because of pricing and product and penetration. But the actual volume, we expect to be down on a year-over-year basis. So that's going to have an impact.
Perfect. Thanks so much.
Thank you. Our next questions come from the line of Seth Weber with Wells Fargo. Please proceed with your question.
Hey, guys. Good morning. Maybe for John, is there any way to quantify what the delta is from -- on the compensation side where you're going from below plan last year to plan this year? Is there any way to just quantify what that represents as a year-over-year change?
I think in the quarter, you talked about -- in the first quarter, if you exclude that in the equity impact, margins are basically flat.
And just really the equity impact were pretty close to flat. So we didn't -- so we tend to try to list things in order of importance. So what you can take from the listing we gave is it's fairly substantial. No, we haven't quantified our -- the total incentive and sales incentive difference year-on-year. But we're saving -- the $120 million savings is obviously quite substantial. And the most substantial area we're offsetting is that change in overall sales compensation and incentive compensation as well as equity compensation. So it's the biggest factor.
Also, we are seeing increases in royalty costs. It's both in mortgage. We talked about one of our mortgage vendors, increasing prices. We do get some benefit from that on the revenue side as a pass-through, but it also significantly increases our expenses. And then also as we continue to substantially grow in Workforce Solutions, our partners, which we had an outstanding year, growing 10 new exclusive partners for in the fourth quarter, we do see royalties go up. But EWS is able to outgrow that and drive their margins higher. So anyway, those are the biggest things that we're offsetting with the -- that are offsetting the $120 million in cost savings.
Got it. You actually anticipated my follow-up question. Just you mentioned this higher royalty and data costs to you. Is that kind of just a catch-up do you feel like, or is this more of the new normal going forward that these costs are going to be higher -- structurally higher going forward for you guys?
So the specific comment around mortgage, I think that was probably -- there was a large increase from a vendor, and everyone knows that. So that was a onetime effect or we'll see what happens in the future. On EWS, we've seen an increase in their royalties over time as they continue to grow partner records, and that's just part of the business model. And we think they can deliver 50% plus margins even as that grows. So it's just -- it's a cost that we have to incur in the business, but it's an extremely beneficial cost because the variable margin on those -- on the revenue that those records generate continues to be high, but those costs are increasing.
The other costs I didn't mention, right, that we're offsetting is we are continuing to see duplicate costs because we're continuing to run the major US systems in credit and the major Canadian systems in credit through the middle of this year or into the third quarter. And so that duplicate cost is something we're still incurring, and that's also something that's partially offsetting the cost savings we're generating.
Got it. Okay. Thank you very much. I appreciate the color.
Thank you. Our next question is coming from the line of David Togut with Evercore. Please proceed with your questions.
Thank you. Good morning. Looking at Slide 13 with the $250 million total spending reduction for 2024, how much of that is a CapEx reduction versus OpEx? And then of those two numbers, particularly the OpEx reduction, how much will flow through to earnings versus being offset by additional expenses?
So in terms of the split of capital and expense, we didn't give specifics, but it's probably reasonable just to use the same split that you have in 2023. And I think I'm going to have to ask you to wait until 2024 before we talk about -- we give -- we talk about 2024 guidance. But what we did talk about, right, is there's substantial expense savings that we expect to see not just from this but also from continuing to execute on our transformation. And we do expect our margins to grow, right?
So we're going to get margin enhancement through revenue growth because it's obviously -- we have obviously a high -- very high variable margins as the mortgage market even just normalizes at these levels, our revenue growth starts to accelerate. And then also, we'll get cost savings. So how do you decide to decide what goes where? It's up to you. But we do expect to see margin enhancement with a better revenue growth environment and a more stable mortgage market.
Got it. And just as a quick follow-up, if you could quantify the EWS price increase at the beginning of this year?
Yeah. I think you know, we don't -- for competitive reasons and commercial reasons, we don't talk about any price increases. I think we've been clear that we have more pricing leverage in EWS than our other businesses. We've also been clear that we generally do our price increases effective 1/1 and roll them out in the fall or fourth quarter to our customers. And so price for EWS, USIS, International, we got real clarity because it's in the marketplace and already negotiated with our customers. So that gives us a lot of confidence in that element of our margin and revenue levers for the year.
Understood. Thank you.
Thank you. Our next question is coming from the line of Ashish Sabadra with RBC. Please proceed with your questions.
Hi. This is John Mazzoni fill up for Ashish. Thanks for taking the question. Maybe just building more on this new Equifax theme and in terms of the kind of restructuring efforts, could these tech layoffs benefit the company in terms of hiring engineering talent? Your comments suggest that kind of the white collar layoffs are really concentrated in that type of kind of high-growth, high-tech area and maybe that had to go into investor session could actually help you in-source tech talent. Any color there would be appreciated. Thanks.
Yes, I'm not sure I understand the question. Could you just clarify that? About -- tech is an important function for Equifax for sure. As you know, we're a data analytics technology company. It's actually our largest number of employees and, by far, the largest number of contractors. Most of the cost savings have always been planned, and that's what we're executing in 2023 come from completing the cloud and then exiting the plan -- the contractors that we're working on that are principally contractors and exiting those out. Go ahead.
Were you asking if the tech layoffs by some other large tech companies may benefit us in hiring?
Correct, yes. So if you could in-source those jobs that might have been done by contractors.
Yes. We're always looking to improve our talent and upgrade it. I think we've got a very strong technology team today, but for sure. Maybe I'll answer the question a little bit differently. If you asked the question a year ago about what's it like to hire tech talent a year ago, 18 months ago, 24 months ago, it was very hard. Today, when we're hiring tech talent, which we do all the time with -- in the environment as you described, where a lot of tech companies are pulling back, that is a positive for Equifax. We're able to get great talent and it's just shorter time frames between opening a job and finding great people to come onboard in this current environment. So for sure.
Great. Very helpful. And then maybe just building a little bit on that question but in a different lens. Layoffs are broadening out across different industries that are non-tech in nature. Is any of that baked into the unemployment claims assumptions in 2023? And maybe due to the lag effect of severance, could there be a potential upside in the back half of the year as these unemployment claims could pick up?
I think you've seen before at Equifax, if you follow it closely, that in a rising unemployment environment like in 2020, we get substantial upside from our unemployment claims business. Today, we don't have that really baked in, in 2023 because we just haven't seen that yet. But if it comes forward, that will certainly be a positive.
Great color. Thanks again.
Thank you. Our next questions come from the line of George Tong with Goldman Sachs. Please proceed with your questions.
Hi. Thanks. Good morning. You provided assumptions for industry mortgage volumes for 2023. Can you discuss your expectations for card and auto origination volumes for this year as well?
Yes. We haven't disclosed those in the past, George. As you know, we've -- in the past, we've been very transparent around mortgage just because of the volatility, if you will, in that space and the impact it's had in Equifax.
I think what we have talked about is we were seeing -- we saw a nice growth in card in the fourth quarter in terms of volumes, not just -- our revenue was very good in banking, but also we saw a nice growth in banking and volumes in general. So that trend continues to be positive. Auto was kind of flattish, right?
We think we performed well because of product, pricing and some penetration gains. So we think we did very well in online auto. We didn't see substantial market growth in auto in terms of transactions in the fourth quarter. So -- and as Mark said, as we go through next year, we've assumed a general weakening of the economy relative to where we are today.
Got it. That's helpful. And related to the trends that you're seeing on the card side, can you discuss growth trends you're seeing with credit card marketing and prequalification volumes?
Yeah, that was fairly strong in 2022 and in the fourth quarter. And we would expect that to continue at a fairly strong level in certainly the first quarter, which we gave you guidance on. And I think in our broader guide for 2023, we expect kind of a broad softening in the economy in the second half, and that's factored into our outlook for the year.
Just as a reminder, our Financial Marketing Services business was weak last year, right? And we talked about that throughout the year. And what we expect is we expect to see it kind of flatten out in 2023, part of it just because we're lapping a weak year and part of it because we think we're improving some of the product offerings we have. But -- so overall, for us, our Financial Marketing Services business was generally not strong in 2022, but we're expecting a little better performance and some growth in 2023.
Great. Thank you.
Thank you. Our next question is coming from the line of Surinder Thind with Jefferies. Please proceed with your questions.
Thank you. Hi, Mark, just following up on the questions from the last analyst. Just big picture-wise, I mean, does the relative strength of kind of what you're seeing in like auto card, P loans, at this point in the economic cycle both from like a marketing spend perspective and as well as volumes, does that kind of surprise you at this point? And maybe how should we generally think about the cyclicality of the business? I mean, if the economy was to maybe fall into a recession late 2023, is that when we would maybe expect to see lenders pull back a bit more? Just trying to gauge if there's structurally anything different that we should be thinking about this time around?
I think this is a different economic event than we've ever seen before, right? You've got interest rates increasing rapidly. You've got inflation at a level that it hasn't been in 40 years, but you also have people working. That usually doesn't tie together. Normally, you see unemployment increase as there's an economic event. And I think the real question is that -- I'm not an economist, but the real question is that -- is there going to be the so-called soft landing with interest rates and inflation? With the labor report from last Friday, it doesn't feel like that, meaning there's going to be continued interest rate increases to try to tame inflation.
But the variable on all the verticals you described in financial services, where financial services companies, I ran a credit card company for a decade, where a credit card company or a financial service company will start tightening up is when people aren't working. And when they're not working, they can't pay their bills or they slow down their payment of their bills. So that's the dichotomy that we have in 2022 and I call it the early parts of 2023, is you've got an economy that clearly is seeing pressure. You've got companies that are tightening their belts, which is impacting some of our B2B volume. But you got a consumer that's still fairly healthy. Their consumer confidence is down, but they're working so they're still paying their bills.
Our assumption for 2023 is that doesn't continue, meaning there's some weakening of that in the second half is kind of how we laid it out. And then, of course, on top of that, we're disproportionately impacted versus some of our peers by the massive mortgage market decline that we've had. We've been living in a mortgage recession for six-plus months, and we've got another six months until we get the first half strength of 2023 behind us. But last year, the mortgage market decline impacted us -- just the market impact of that was close to $0.5 billion, a little over $0.5 billion. So we've been living in a usual economic environment. And from our perspective, quite positively, Equifax has continued to grow through that.
And just as a reminder, as you think about USIS, right, two of the areas that are performing extremely well that are driving a lot of our growth are commercial and identity and fraud, right? So segments that are not necessarily embedded within the consumer, but where we think we have differentiated capabilities and benefits that should allow us to grow nicely in markets that may even weaken.
Thank you. That was my question.
Thank you. Our next questions come from the line of Heather Balsky with Bank of America. Please proceed with your questions.
Hi. Thank you for taking my question. I'd love to ask about the -- on workforce, the non-mortgage verification side of things and how you're thinking about those businesses into the year, especially given sort of the macro backdrop that you're layering into your guidance and both on the Talent and Government side, how you see those businesses shaking out?
Yes. I think we talked about that, and John can jump in. But we expect those businesses to still perform very well. Remember, the underlying levers that verification has, it starts with records. So our 12% increase in records last year benefits 2023. And then we've got 10 new processors that we're going to be adding records in 20 -- during this year in 2023.
So records were positive in all the different verticals that we sell into, whether it's government, talent, auto, cards, P loans, the non-mortgage verticals in verification. We've got price increases in the marketplace. We're rolling out new products in every one of those verticals that really benefit growth going forward. So that's a positive.
And then just underlying penetration. Remember in every one of those non-mortgage verticals for verification, we have fairly low penetration in cards, in auto, there's a lot of penetration opportunity. P loans is pretty high. Like mortgage, we do a lot -- we have -- we cover a lot of the ground in P loans. But then you go into talent and government, there's just a lot of market penetration opportunities.
So then the flip side of that is the underlying market for those. What's happening to the economic impacts in there? And the one place that we've highlighted is talent and around verification where there is some reduction in hiring, but we said that we expect that business to still be up over 10% for 2023.
Government is also a vertical that if there is an economic event, there's going to be more people going for social services, which will be a positive for that vertical. We expect that to grow positively through 2023.
Yes. And just as a reminder, and Mark already mentioned that we're expecting total non-mortgage for EWS next year about 13%. So still very, very good and that even reflects weakness that we're going to see in ERC, right? ERC was very strong. And now with the end of that program, that pandemic-based program, you'll see a significant reduction there, which is non-mortgage, and we'll still grow 13% through that, so.
Great. Thank you. And on -- in terms of your sort of overall non-mortgage business, so you talked about the fact that you're assuming a weakening economy in the back half. Can you just help us -- I know you don't necessarily guide the individual quarters, but how to think about the cadence from 1Q to 2Q and then into the back half? And just sort of what's baked into your outlook.
It's tricky to do without getting into the quarter. I think we've given you an outlook for the year and an outlook for the first quarter and then -- which we don't typically do. We also gave you some visibility around what we expect margins to do because of the unusual -- the acceleration of the cloud cost savings and the broader restructuring of the company, that kind of 30% to 36% EBITDA margins gives you a lot of visibility around the profitability side. What else would you add, John?
I think it's about all we can add, right? So I mean, we gave fairly good visibility on how we expect margins to substantially enhance through the year, going from about 30-ish, right, to 36% by the end of the year. And we said we'll start seeing those cost savings really kick in, in the second quarter. So beyond that, not much more to say.
Thank you.
Thank you. Our next question is coming from the line of Faiza Alwy with Deutsche Bank. Please proceed with your questions.
Yes. Hi, thank you. First, I just wanted to follow up on the USIS B2B online growth that looks like it accelerated in 4Q. I'm curious how you expect that business to trend in 2023. Like was there something specific that drove the acceleration, or was it just a matter of comps? And maybe if you can comment on what type of pricing benefit you expect to see in that business in 2023?
Yeah. So what we -- what Mark mentioned is that the way the planning was built is we assumed about a 5% non-mortgage growth. And overall, you were referring to acceleration in online, right? I'm referring to overall non-mortgage growth of about 5%, which is a little lower than it was in the fourth quarter but still very, very strong. And I think the decline from the fourth quarter is principally driven by the fact that we've assumed that we're going to see weakening economic conditions as we move through the year, right?
And I think what we're doing is just reflecting that in the 2023 guidance we provided. So we think that 5% growth with a US economy that weakens through the year, we think is a very nice outcome, and it shows very good performance and continued good performance across banking across auto, across other verticals and then also a return to some level of growth -- not high, but some level of growth in our Financial Marketing Services business.
Okay. I guess is the cycle price increase that you mentioned, is that primarily in mortgage, or is that you think going to positively impact the B2B online business, the nonmortgage business as well?
Yeah, we take price up generally in all our products every year, varying amounts dependent upon our market position and our commercial position, et cetera.
Yeah. Mortgage has a very defined price change. On January 1, it's pretty much industry wide, right? So across other verticals, generally speaking, price increases do happen early in the year but that isn't always the case, right? So they tend to be more distributed throughout the year. So it isn't as unified an event outside of mortgage. But yes, we do expect to continue to get price. We certainly had a price benefit in the fourth quarter, and we expect to continue to have price benefits as we move through 2023.
Got it. Thank you.
Thank you. Our next question is coming from the line of Andy Grobler with BNP Paribas. Please proceed with your questions.
Hi. Thank you very much for taking my questions. Firstly, just one on the compensation. Just to clarify, you've noted that it's going to come back in 2023 relative to 2022. Where would that stand versus 2021? In other words, it was just 2022 kind of artificially are unusually low, and we're going back to a more normal level now?
Yes. I think that's the right way to think about it. In 2022, we set out a plan for the year at this time last year, where we didn't anticipate a mortgage market change or interest rates going up or inflation where it was. And we missed that plan. And the way our compensation structures are aligned, as you might imagine, are tied to the performance against our plan for the year, and we underperformed that. So our compensation was substantially down in 2022. In 2023, we're assuming we get back to target levels, which would be more like 21%.
2021 was a very good year, right? So our comp was strong in 2021 because 2021 was a strong year overall.
Yes. Yes. And just to kind of follow-up on the costs and so forth. You had cost savings plans from the cloud transformation baked into expectations anyway. And now you've talked about the $120 million of savings next year. What is the increment versus your previous expectations within the $120 million?
Yes. You said the $120 million next year, it's actually this year, which I think you meant is 2023.
Yes, this year, sorry.
Yes. And we didn't break that out for you, but the $120 million is a combination of accelerating some of the cloud cost savings that we had planned. So the -- I think we said in the call earlier, no change in what we expected to deliver from the cloud savings. We're accelerating some of that into 2023.
We also said we expect additional cloud cost savings in 2024 and likely some in 2025. And then on top of that, in 2023, inside the $120 million is at a broader restructuring and efficiencies across the company to deliver additional cost savings that are incremental our long-term cloud savings that we've talked about for the last couple of years.
I suppose that's the question. In terms of your incremental savings on that longer-term plan. How much is baked into this year's guide?
Yes. We haven't broken that out as a part of our conversation this morning. We really just highlighted that, obviously, it's a sizable number. It's going to have a very positive impact on the company, and its -- there's an incremental piece to the accelerated cloud savings.
Okay. Thank you. And if I may, just one more. Just from the EWS perspective, when you're having discussions with clients and data providers, now that there is a fairly determined competitor in play, are those conversations changing at all?
They're not. We still have a very effective ability to add new relationships. I think we talked about adding 10 that will come online this year during 2023. And we have the scale of workforce solutions, the scale of their technology, the scale of our security and capabilities and the longevity we've had in the business. So we've been in this business for over a decade, and then the ability to deliver a rev share immediately at scale for those records from a partner gives us a lot of power to continue to grow our record base. And there's a long runway in front of us of records that we'll be adding to the TWN data set.
Okay. Thank you very much.
Thank you. There are no further questions at this time. I would now like to hand the call back over to Trevor Burns for any closing comments.
Thanks for everybody's time today. And if you have any questions, you can reach out to me and Sam. We'll be around, and have a great day.
Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time, and enjoy the rest of your day.