Equifax Inc (EFX) Q3 2019 Earnings Call Transcript

Equifax Inc  (EFX 1.26%)
Q3 2019 Earnings Call
Oct. 24, 2019, 8:30 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, everyone, and welcome to the Equifax Third Quarter 2019 Earnings Conference Call. Today's conference is being recorded.

And at this time, I would like to turn the conference over to John Gamble. Please go ahead, sir.

John Gamble -- Chief Financial Officer

Thanks, and good morning. Welcome to today's conference call. I'm John Gamble, Chief Financial Officer. With me today is Mark Begor, Chief Executive Officer. Today's call is being recorded. An archive of the recording will be available later today in the Investor Relations section in the About Equifax tab of our website at www.equifax.com.

During this call, we will be making certain forward-looking statements, including fourth quarter and full-year 2019 guidance, to help 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 inherent in our business are set forth in filings with the SEC, including our 2018 Form 10-K and subsequent filings.

Also, we will be referring to certain non-GAAP financial measures, including adjusted revenue, adjusted EPS attributable to Equifax and adjusted EBITDA, which will be adjusted for certain items that affect the comparability of our underlying operational performance. For the third quarter of 2019, adjusted revenue excludes one-time settlements in the third quarter of 2019 with commercial customers. Adjusted EPS attributable to Equifax excludes one-time settlements with commercial customers in the 3Q 2019, costs associated with acquisition-related amortization expense, the income tax effects of stock awards recognized upon vesting or settlement, the foreign currency losses from remeasuring the Argentinian peso-denominated net monetary assets.

Adjusted EPS attributable to Equifax also excludes legal and professional fees related to the 2019 cybersecurity incident, principally fees related to our outstanding litigation and government investigations, as well as the incremental non-recurring project costs designed to enhance our technology and data security. This includes projects to implement systems and processes to enhance our technology and data security infrastructure, as well as projects to replace and substantially consolidate our global networks and systems, as well as the cost to manage these projects. These projects that will transform our technology transformation and further enhance our data security were incurred throughout 2018 are expected to occur in 2019 and 2020.

Adjusted EBITDA is defined as net income attributable to Equifax adding back interest expense net of interest income, income tax expense, depreciation and amortization and also, as is the case for adjusted EPS, excluding one-time settlements with commercial customers, costs related to the 2017 cybersecurity incident and foreign currency losses from remeasuring the Argentinian peso-denominated net monetary assets. These non-GAAP measures are detailed in reconciliation tables, which are included with our earnings release and are also posted on our website.

Before Mark discusses our specific operating and financial results for the quarter, I wanted to address the $20 million in one-time commercial resolutions with two USIS commercial customers we recorded in the third quarter. These commercial resolutions related to issues that occurred prior to this year. As these settlements were to resolve commercial disputes, they were treated under GAAP as a reduction to revenue in the quarter. Due to the size and one-time nature of these commercial resolutions, we have excluded them in our adjusted results. As Mark and I discuss results for the third quarter of 2019, we will be discussing revenue excluding these one-time revenue adjustments.

Over the next couple of months, Trevor Burns, who leads the Equifax Investor Relations group, will be taking a medical leave of absence. In the interim, please direct any request for information or meeting request to Valerie Robinson at 404-885-8110 or to [email protected]. That's V-A-L-E-R-I-E dot R-O-B-I-N-S-O-N @equifax.com. Valerie will connect you with me or identify the appropriate Equifax resource to address your inquiry. Thank you for your patience in getting your inquiries resolved during this period of time.

Now, I'd like to turn it over to Mark.

Mark Begor -- Chief Executive Officer

Thanks, John, and good morning, everyone. We are very pleased with our financial results for the third quarter. The third quarter results were broad-based, showed sequential improvement, were above guidance and were another very positive step forward for Equifax.

Adjusted revenue at $896 million was up 9% in constant currency and up 8% on an organic constant currency basis and well above our guidance. We had strong adjusted revenue growth driven by our US businesses that were up 11% combined with Workforce Solutions up 19% and USIS up 9%, our strongest growth for both units in three years. Global Consumer revenue was up slightly, its first period of growth in two years. And International also showed 5% constant currency growth with Latin America, Canada and Asia Pacific all showing growth in the quarter but continue to be pressured by the slowdown in Australia and Brexit uncertainty in the UK. US mortgage revenue was much stronger than we expected in the quarter as US mortgage market inquiries were up almost 20% compared to the prior year. We also saw strength in our US non-mortgage businesses with USIS and EWS both showing accelerating year-to-year growth.

Our adjusted EBITDA margins advanced 90 basis points in the quarter, our first margin expansion in two years. And our adjusted EPS of $1.48 per share was also above the top end of the guidance we provided in July with those better business unit margins from stronger revenue growth as well as a lower tax rate.

USIS adjusted revenue was up 9% versus 2018 on a reported basis and 6.5% on an organic basis. Importantly, our non-mortgage revenue grew over 6% in the quarter and 3% organically compared to last year. The 3% non-mortgage organic growth was a positive sign of continued USIS strengthening versus the flattish performance we saw in the second quarter of 2019 but slightly weaker than we anticipated.

Online adjusted revenue was up a strong 11.5% on a reported basis and 8% on an organic basis, which results to a very positive sign of USIS recovery. In addition to strong growth in mortgage, we saw growth in ID and fraud, as well as auto, insurance and government.

Mortgage Solutions was down 6% in the quarter due to the mix shift we discussed previously with mortgage resellers, which occurred in the fourth quarter of 2018, partially offsetting -- offset by the positive impact from the stronger mortgage market. We expect the revenue headwind from this mortgage mix shift to decrease in the fourth quarter.

New product sales and implementations to mortgage lenders were also deferred as our customers focused on delivering the substantially higher mortgage volume that they had in front of them.

Financial Marketing Services' adjusted revenue was up 8% compared to last year and was better than our expectations. The growth in FMS reflects the growing pipeline that we discussed over the past couple of quarters. As we talked about last quarter, FMS growth is improving but still choppy with year-to-date growth of about 2%. As we look forward to the fourth quarter, we expect growth to be at or above the year-to-date growth rate.

Sid Singh and the USIS team are laser-focused on growth and in moving to a normal commercial mode with their customers. Their new deal pipeline is up 75% year-to-date with wins up 35% from 2018 positions then well for fourth quarter and 2020. Growth in key verticals like banking and lending also is a very positive sign. The third quarter was another positive step forward for the USIS team as they work to return to a normal growth mode. We continue to believe our differentiated data assets, coupled with our technology investments, will return USIS to its traditional and historic growth mode. We expect continued growth from USIS in the fourth quarter, but we still remain cautious on the pace of their recovery.

USIS EBITDA margins of 44.4% were down 180 basis points from third quarter 2018, primarily driven by increased royalty costs, as well as higher product development expense and investments in commercial resources we expect -- which we expect to benefit us in the future.

Shifting to Workforce Solutions. They had an extremely strong quarter with revenue up 19% compared to last year, which was better than our expectations. Verification Services was up a very strong 29% driven by broad-based, strong double-digit growth across mortgage, debt management, talent solutions, healthcare and government verticals. The strong Verification Services revenue growth also reflects continued growth in Work Number active records, as well as the roll-out of new products. EWS and Verification Services revenue growth excludes the benefit -- excluding the benefit of the mortgage market were up 13% and 20%, respectively, which we are very pleased with. As we've discussed in prior discussions, EWS has a strong -- has strong future growth potential as they continue to expand in existing verticals and roll-out new products.

As I mentioned earlier, EWS continue to substantially grow their TWN database. TWN now has over 100 million active records and about 80 million active unique individuals in the United States. These compare to the roughly 165 million individuals in US non-farm payroll. These TWN record additions are huge accomplishments for Rudy Ploder and the EWS team, which drive higher hit rates for our customers and benefits to US consumers. We expect to continue to grow the TWN records in the future.

Employer Services declined in the quarter 5%, slightly below our expectations, driven principally by Workforce Analytics, our ACA business, as well as unemployment claims businesses. Offsetting the decline in Workforce Analytics, we saw a slight growth in our I-9 and onboarding business. We expect Employer Services revenue to decline mid-single-digit percentages in the fourth quarter.

The strong Verifier revenue growth resulted in very strong adjusted EBITDA margins of 48.8%, an expansion in the quarter of 130 basis points. Margin expansion was dampened somewhat by incremental and costs incurred in the quarter by EWS to board some new TWN record contributors. We expect EWS EBITDA margins to continue to be very strong in the fourth quarter. Workforce Solutions is a franchise business for Equifax and continues to perform exceptionally well.

Shifting to International. Their revenue was up 5% in local currency but down on a reported basis by 2% and below our expectations. The majority of the weakness versus our expectations was in the UK, and we expect this to continue in the fourth quarter with some of the Brexit uncertainty.

Asia Pacific was up 2% in local currency in the third quarter as we begin to lap weakening in Australia consumer lending and consumer credit markets that began in the third quarter of 2018. Their third quarter performance was also weaker than we anticipated. In third quarter, we saw some nice growth in Australia in our commercial business. And our consumer business returned to nominal growth. Both of these we see as positive signs for the future. We continue to see weakness in our Australian Marketing Services business, which we expect to continue into the fourth quarter. Overall, Australia revenue was down slightly and slightly weaker than our expectation. While we are beginning to see stabilization in the Australia credit markets, we expect market growth to remain weak over the next several quarters. As a result, we expect Australia revenue to hover around flat over the next couple of quarters. We continue to make very good progress with positive data in Australia. And by the end of the third quarter, we had almost 80% of positive data from Australian contributors. We expect this additional data to be a new lever for growth for our team in Australia in the future.

Our European business was flat in local currency in the third quarter and was weaker than our expectations in both our credit and debt management businesses. Our European credit business was up over 1% in local currency, an improvement from the down 1% in second quarter but still weaker than the mid- to high-single-digit revenue growth we've seen over the past year. Consumer online and batch, which represents about half of the credit revenue, grew almost 4% in reseller and financial verticals. But this growth was offset by weakness in Marketing Services and insurance.

Our European Debt Management business declined 3% in local currency or less than $1 million, principally driven by declines in our business with the UK government, which was impacted by the continued Brexit uncertainty. We expect some limited improvement in our European business in the fourth quarter, principally in Spain. In the UK, our plans reflect continued slow growth from the continuing Brexit uncertainty and its impact on both our credit and debt management businesses.

Our Latin America business grew a strong 15% in local currency in the quarter. This has improved from second quarter growth of 8%. We saw double-digit constant currency growth in Chile, Argentina, Ecuador, Uruguay and Mexico and high-single-digit constant currency growth in Paraguay. We are seeing growth accelerate as our Latin American businesses benefit from the expansion of Ignite roll-outs and InterConnect SaaS roll-outs and strong NPI roll-outs from both 2017 and 2018 taking hold in that region.

Canada grew almost 6% in local currency in the third quarter, reflecting a continued focus on customer innovation and new products. We expect to see mid- to high-single-digit growth in Canada in the fourth quarter.

International adjusted EBITDA margins at 30.9% were up 150 bps in the quarter, principally reflecting higher revenue and margin in Australia and Latin America and from the cost actions taken in the fourth quarter of last year and earlier in 2019. Margins were lower than our expectations due to weaker-than-expected revenue performance. We expect International revenue growth in the fourth quarter to be at about similar levels to the third quarter. And we believe this positive revenue growth, along with the full benefit of the cost reductions taken in the fourth quarter of last year and during 2019, will continue to improve margins in the fourth quarter. That said, we're watching our International business closely, particularly as the UK Brexit process unfolds.

Global Consumer Solutions revenue was up about 0.5% on a reported basis and up 1% on a constant currency basis in the quarter, a substantial improvement from a 6% decline in the second quarter. This is the first quarter of GCS revenue growth since the 2017 cybersecurity incident. Our Global Consumer Direct business was down 5% and was just under half of our total GCS revenue. Our US Consumer Direct business saw revenue decline of 9% versus 2018. We are seeing subscriber additions from the restart of marketing in late 2018. However, at a lower rate, given our decision to slow advertising around our announcement of the legal settlements in July. Our Canadian and UK Direct businesses both grew revenue in the quarter.

Our GCS partner business, which is slightly more than half of GCS revenue, increased 6% in the quarter, which we were pleased with. We expect our partner revenue growth to continue in the mid-single digits in the fourth quarter. During December of 2018, we launched our new myEquifax membership program for US consumers. To date, we've registered over 2 million consumers, and we expect this base to continue to grow in the coming months, creating an attractive base to cross-sell products and services to those consumers.

Adjusted GCS EBITDA margins of 24.9% decreased 340 basis points as compared to the prior year. However, margins increased 200 basis points sequentially from the second quarter of 2019. As we expected in the third quarter, we saw the effect of revenue growth and the benefit of cost actions taken in the fourth quarter of 2018 and earlier this year. Margins were also negatively impacted in the quarter by some one-time setup costs incurred during the quarter related to a new multiyear GCS contract. Our GCS business is clearly turning the corner, and we expect continued revenue growth and margin expansion in the fourth quarter and into 2020.

Shifting now to our EFX2020 technology transformation. We achieved some significant milestones again in the third quarter. First, we achieved a major milestone as we began running two data exchanges in production in our new cloud data fabric on GCP. Our US Consumer Credit database replica, or ACRO, is in production on the data fabric. We're going to receive many benefits from having this database in a cloud format. One of the benefits of this cloud database structure allows us to deliver virtually streaming data and alerts to our customers. During the quarter, we rolled out this market-leading capability to one of our large US customers. This real-time capability is increasingly important to many customers and is only possible on a cloud infrastructure, one of the many benefits we expect to come in the coming quarters as we continue to advance our cloud initiative.

Second, an identity validation exchange that manages individual and household data using our identity products also moved to production on GCP this quarter. This was a full exchange migration with the legacy exchange being sunset in early 2020. We are expecting significant further data fabric and exchange progress in the fourth quarter as The Work Number, NCTUE and our auto databases in the US will be in production on our new cloud-based data fabric using standard, common, native data fabric structures. These are critical milestones for Equifax as the new data fabric capability allows us to easily access and build new products across these data assets with real speed and market-leading stability.

Also in the fourth quarter, Cambrian will be in production on our data fabric using cloud-native structures. We are expecting accelerating progress in the fourth quarter and first part of 2020 as our US consumer and commercial credit, IXI wealth and tax form's data exchanges will also be in production in our new data fabric using our cloud-native structures. We feel very good about our progress with data exchanges and data fabric as a part of our EFX2020 technology transformation. And we're clearly accelerating our migrations to our new cloud-based data fabric from legacy infrastructure.

Second, we continue to make very good progress in deploying our integrated online service platform that combines our Ignite analytics attribute management and modeling environments with our InterConnect interfaces and decisioning production platforms at AWS and shortly also at GCP. A number of new products for both consumer migration and new customers are available on this platform in the US and select international markets today. Product availability will expand continuously with broad product availability in the US expected to be -- expected in the first half of 2020.

Next, in the third quarter, we made substantial progress deploying our new network fabric in the US, Europe and Australia. This new network fabric allows us to move traffic securely and directly between Equifax, our customers and our virtual private cloud environments on GCP and AWS to substantially improve network performance and stability and strengthen our security. Network performance is critical to allowing our customers and partners to take full advantage of the expanded services I discussed earlier. Our new network will deliver industry-leading performance to our customers.

Finally, the strong progress across data fabric, Ignite and InterConnect deployment and product development and network fabric are the critical enablers that are supporting the migration of our customers from our legacy decisioning and interface systems on to our new native Ignite, InterConnect product suite. We are now seeing good progress in both collaborative planning of customer migrations, as well as executing those migrations. Customer migrations will continue in the fourth quarter and accelerate as we enter 2020. We expect to complete the majority of USIS and EWS customer migrations by the end of 2020. And year-to-date, we have decommissioned five data centers globally. And these decommissionings will continue through the balance of the year and into 2020.

As we've discussed previously, the benefits and savings we expect to deliver from our cloud technology transformation are driven by our move to a cloud-based infrastructure and the decommissioning of our legacy infrastructure. And as you can see, we're making progress there. I hope this gives you a sense of the positive progress we're making in our technology transformation that will deliver new cloud-based technology to our customers. We are laser-focused on execution and are making good progress with critical milestones achieved in the third quarter and good momentum as we move into fourth quarter and 2020.

Shifting now to new product innovation. This continues to be a key component of our EFX2020 strategy and a strong long-term muscle for Equifax. We have an active pipeline of new products at various stages in the funnel and we expect to launch about 70 products in 2019, which is up about 15% from last year and up from the guidance we gave you a few months ago. Importantly, USIS product launches are expected to double in 2019 from 2018. We have prioritized our focus and resources on driving NPI roll-outs in 2019 and plan to continue this focus in 2020. This is a very good sign as we collaborate with customers to bring new products to market. NPIs continue to be an important growth lever for Equifax.

Across both USIS and Workforce Solutions, we are seeing good progress with our new identity validation and fraud identification products, InstaTouch ID, TWN ID and eligibility advisor are helping commercial and government customers validate the identities of parties with whom they are interacting with through mobile and other digital devices. Our capabilities in identity and fraud will expand substantially in the fourth quarter with the launch of our new Luminate fraud and identity platform.

Shifting to the M&A and partnership front. In September, we announced a new strategic partnership with Urjanet, a leading aggregator of utility data, deliver data from over 6,500 utilities, telcom and cable providers. This new global partnership empowers consumers and businesses to share their payment data for a more complete picture of individual payment history, easier identity verification and the potential for expanded access to credit. An average US consumer has three to five relationships with their electric, gas, cable, satellite and telco providers, which adds rich payment data to that provided in the existing credit file. This alternative data partnership builds on our leadership in this space, incorporating Urjanet's consumer-permissioned data into our differentiated data assets. Strategic partnerships like Urjanet are an important growth lever for Equifax, and we continue to look for new opportunities to expand our data sets around the globe.

The PayNet acquisition we executed earlier this year is performing very well with revenue growth accelerating to 15% since the acquisition. We are also seeing the improved coverage and predictability of the combined PayNet and Equifax commercial databases, allowing us to win new business with commercial lending, credit card and fintech customers.

Wrapping up. The third quarter was a very positive step forward for Equifax as we move back to our normal -- as we work to move back to our normal growth mode. We delivered broad-based growth with very strong double-digit growth at Workforce Solutions, improved sequential growth at USIS, a return to growth at Global Consumer and stabilization in International while they operate in some challenging markets. This was the first in over two years that we delivered -- a first also in over two years where we delivered margin expansion while continuing to invest in our technology, security, new data assets, new products and expanded commercial resources.

Overall, we were very pleased to not only meet but exceed our financial commitments. And importantly, we achieved several critical milestones in our EFX2020 cloud technology transformation. We know that we still have a lot of work to do. We are energized about the positive progress of the business and the momentum behind our EFX2020 initiatives. We expect continued positive progress during the balance of 2019 and into 2020. I'm more excited than ever about our future as a market-leading data analytics and technology company.

And with that, let me turn it over to John.

John Gamble -- Chief Financial Officer

Thanks, Mark. I will generally be referring to the financial results from continuing operations represented on a GAAP basis but will refer to non-GAAP results as well. First, some perspective on 3Q 2019. 3Q 2019 adjusted revenue and EPS exceeded our guidance range and expectations substantially. Stronger-than-expected mortgage market inquiry growth benefited overall Equifax adjusted revenue by about $25 million. Partially offsetting this adjusted revenue benefit were: International revenue was weaker than expected, principally in the UK and to a lesser extent, in Australia; Global Consumer revenue in US Consumer Direct was weaker-than-expected, reflecting the impact of the recent settlements; and USIS showed continued progress and improved non-mortgage revenue growth, however, saw some weakness in Mortgage Solutions and other areas. FX movements in the quarter were negative to revenue by about $4 million more than expected.

Adjusted EPS was also strong, about $0.05 per share stronger than the midpoint of our guidance or about $0.04 per share, excluding the net of the $0.02 benefit of the lower tax rate and $0.01 more negative FX. Increased mortgage revenue did drive a meaningful benefit to income in the quarter. The offsets to adjusted revenue that I just referenced also acted to partially offset this income benefit. In addition, negatively impacting costs were: Global Consumer and Workforce Solutions incurred a significant onetime start-up and implementation cost that Mark referenced earlier; development and implementation spend increased at both USIS and Workforce Solutions as we invested to reaccelerate NPI; and in the second half of 2019, we were seeing increased depreciation in cloud costs as our transformed systems move into production.

In the third quarter, total non-recurring or one-time costs related to the cybersecurity incident and our transformation were $77 million and consistent with expectations. This includes $65 million of technology and security, $10 million for legal and investigative fees and $2 million for product costs. We expect 2019 one-time costs related to the cybersecurity incident and Equifax 2020 technology and data security transformation, exclusive of any legal accruals, to be about $350 million. For all of 2019, US mortgage market inquiries were expected to be up about 7% for -- versus 2018, which is stronger than the down 1% we had expected for July -- for 2019 in July. 3Q 2019 inquiries were up almost 20% versus the up 3% we had expected in July. Inquiries in 4Q 2019 are expected to be up over 20%.

We are on track to deliver the savings from the resource realignments we executed in 4Q 2018 and 2019. Total savings from the combined actions is expected to exceed $60 million in 2019. Savings were generated across Equifax but were most substantial in corporate International and net workforce.

In the third quarter, general corporate expense was $114 million. Excluding non-recurring costs, adjusted corporate expense for the quarter was $70 million, up $3 million from 3Q 2018, which is more than explained by increases in security and related technology and incentive comp accruals. This was in line with our expectations. We expect 4Q 2019 corporate expenses to be higher than 3Q 2019.

Adjusted EBITDA margin was 33.9% in 3Q 2019, up 90 basis points from 3Q 2018. As we discussed in July and as Mark covered in his remarks, the increase in overall adjusted EBITDA margins year-to-year is principally driven by growth in margins at Workforce Solutions and in International as well as leverage on corporate costs as revenue grows. Margin declines in GCS and USIS partially offset these increases.

For 3Q 2019 the effective tax rate used in calculating adjusted EPS was 21.2%, below the guidance we provided in July. The 3Q 2019 rate reflects discrete benefits in the quarter. The lower tax rate in the quarter benefited from -- benefited adjusted EPS by about $0.02 per share. We expect our 4Q 2019 and 2019 tax rate used for adjusted EPS to be over 23%.

In 3Q 2019 and year-to-date, operating cash flow of negative $165 million and positive $83 million were down $318 million and $424 million, respectively, from 2018. For both periods, these declines were more than driven by the following non-recurring items. In 3Q 2019, Equifax made payments of $341 million against the $701 million accrual for the consumer settlement announced in the second quarter. No such payments were made in 2018. The timing of the remaining $360 million is subject to court approval and therefore uncertain but not expected to be made until at least 1Q 2020.

Payments in 3Q 2019 and year-to-date related to the $57 million of restructuring charges taken in 4Q 2018 and 1Q 2019 were $7 million and $28 million, respectively. In the first nine months of 2018, Equifax received $80 million of insurance proceeds all in the first half, offsetting costs incurred related to the cybersecurity incident. Equifax received no proceeds in 2019.

Capital spending or the incurred cost of capital projects in 3Q 2019 and year-to-date were $88 million and $286 million, down $14 million and up $36 million, respectively, from 2018. We expect capital spending to be about $385 million for the full year, in line with our July guidance. Due to the increased capital spending, depreciation excluding acquisition of acquired intangibles is expected to be about $190 million in 2019, up $35 million or about 23% from 2018. As we look to 2020, depreciation will likely increase more on a percentage basis than in 2019.

As we accelerate the movement of our systems to our new cloud infrastructure, cloud production cost will increase ahead of the savings from legacy system decommissioning. As we have discussed previously, cloud replaces owned assets and related depreciation. As we exit 2019, cloud production costs will be at a rate of approximately 5% of depreciation and we expect as a percent of depreciation this to increase significantly in 2020. Excluding payments related to settlements of litigation or regulatory actions, as we look forward, we expect full year free cash flow in 2019 to exceed $200 million.

Interest expense for the quarter was $28 million and is expected to exceed $30 million in the 4Q 2019 due to financing of the $341 million of consumer settlement payments made to date.

Now, turning to our guidance. For 4Q 2019, we expect revenue to be between $885 million and $900 million, up 7.5% to 9.5% in constant currency. Mortgage inquiries are expected to be over 20% and FX is expected to negatively impact revenue by about 1.5%. Adjusted EPS is expected to be between $1.47 and $1.52 per share. FX is expected to impact adjusted EPS negatively by $0.02 per share. And lower tax benefits in 4Q 2019 are expected to negatively impact adjusted EPS versus 4Q 2018 by about $0.03 per share.

4Q 2019 revenue and adjusted EPS are benefiting from the much stronger mortgage market. We expect a number of items to partially offset the expected stronger mortgage results, including certain trends impacting revenue and operating income in 3Q 2019 will continue in 4Q, specifically in International; principally continued weakness in the UK and Australia; and in GCS, the impact of recent settlement slowing GCS revenue growth. We will also see some increased costs in 4Q from both: first, our accelerating progress in the tech transformation will have the near-term impact of increasing both depreciation and cloud production costs; and second, the continuation of customer-focused investments, principally in Workforce Solutions and USIS.

EBITDA margins in 4Q 2019, despite these cost headwinds, are expected to exceed 35%, up about 200 basis points from 4Q 2018 and up 100 basis points sequentially. For 2019, based on our 4Q 2019 guidance, our adjusted revenue guidance of between $3.507 billion and $3.522 billion is at the top end of our previous range. Our adjusted EPS guidance range of $5.55 to $5.60 per share is at the low end of our prior guidance. The impact of FX is a negative $75 million to adjusted revenue and $0.15 per share to adjusted EPS and $10 million and $0.02 per share, respectively, more negative than at the time we provided guidance in July. Both our updated adjusted revenue and EPS guidance are consistent with the commentary we provided in July. This guidance reflects US Mortgage inquiries up about 7% year-to-year.

And with that, operator, please open it up for questions.

Questions and Answers:

Operator

Thank you. [Operator Instructions] And we will take our first question from Manav Patnaik with Barclays. Please go ahead.

Manav Patnaik -- Barclays -- Analyst

Thank you. Good morning, gentlemen. My first question was just in the USIS non-mortgage piece, you talked about the sequential improvement. But you also said it was weaker than what you expected. So I just wanted to see if you could give us more color on which area it fell short of your expectations.

John Gamble -- Chief Financial Officer

Yeah. So as you saw, we did very well, I think, in terms of improving the growth of our non-mortgage. And generally speaking, it wasn't any specific area. We had just expected we'd see slightly better improvement, a little bit higher than the 3% growth that we saw, so we thought we would call that out.

Mark Begor -- Chief Executive Officer

Yeah. And Manav, we're pleased with the performance. We're pleased with the sequential growth. I think we've been pretty clear with you and others that, that was our expectation. We feel very strong commercial momentum with USIS. And we may have had an internal bar that was a little bit higher, but we're very pleased with the performance.

Manav Patnaik -- Barclays -- Analyst

Got it. And then just on the tech front, clearly sounds like you guys have made a lot of progress, sounds like you have a lot more visibility into it. So, I guess, could you just remind us again on the kind of savings -- cost savings that you've talked about before and if there's any update on timing and how we should be thinking about that?

Mark Begor -- Chief Executive Officer

Yeah. No change in what we've talked about the last couple of quarters on the benefits we expect from the tech transformation. And, as you know, we expect that to come in a couple of different vectors. One is, we expect it to enhance our competitiveness in the marketplace, ability to roll-out new products, the stability benefit to deliver the speed. And the example that I shared earlier of our ability now to deliver real-time streaming of alerts and inquiries is something that wasn't impossible before. So those are the benefits that should come from the top line. And we're starting to see some of those as we roll-out new products.

On the cost side, we've talked about a 15-or-so percent benefit in our tech costs from a run rate standpoint. And that comes, as you know, from the benefits from a simpler and new cloud-based infrastructure and the one that's consolidating a lot of disparate systems. There's no change in our outlook for that. As we've talked previously, both the revenue and the savings will start to feather in as we move forward. And I talked about in my comments five legacy data centers coming off so far in 2019. Those are cost benefits. And, of course, we've got duplicate costs in some cases, in a lot of cases now where we're running duplicate exchanges on legacy and in the cloud. And that will continue in 2020. And as we prepare 2020 guidance, we'll reflect that in the guidance. But on a run rate basis, when we complete the tech transformation, we expect to get those kind of savings.

And then the third leg on this is, as we talked about, is the cash conversion through -- should improve through lower development costs going forward, which we expect -- still expect in that kind of 20% to 25% range, that will allow us to have a more efficient technology infrastructure and allow us to have more cash for acquisitions, for -- in M&A work, as well as our dividend and stock buyback when we decide to make the decision on that.

Manav Patnaik -- Barclays -- Analyst

Got it. Thank you, guys.

Mark Begor -- Chief Executive Officer

Thanks, Manav.

Operator

We'll take our next question from Toni Kaplan with Morgan Stanley. Please go ahead.

Toni Kaplan -- Morgan Stanley -- Analyst

Thank you. Good morning. On the Employer Services business, I guess, growth has been a little bit slow and a little below your expectations this quarter. Can remind us of the synergies you got from having that business under the Equifax umbrella? And would you ever consider pruning it from the portfolio? Or do you like the diversification it provides, just given the workaround unemployment claims and things like that? Thank you.

Mark Begor -- Chief Executive Officer

Yeah. No, the answer is a clear N-O that we would -- we view it as integral to the value proposition that Workforce Solutions delivers to companies and employers around the United States and in other markets that we're going into. And it really provides a full suite of capabilities to the HR organizations in our partner companies. And we believe that it's quite integral. And during strong economic times, there's less unemployment, so there's some pressure on that business. In other economic times, when the economy is slower, we see benefits from the unemployment. But it's really integral to the value proposition that we provide to our partners and allows us to provide real services to the HR teams and are contributors and then also, of course, get the contributed data records from them, that is a part of our verification business.

Toni Kaplan -- Morgan Stanley -- Analyst

That's great. And then you mentioned that USIS product launches were double in 2019 from 2018. And I know we don't know the size of the particular products. But should we think of that as implying maybe a double new business level in 2020 from 2019? Or how should we think about the NPI product level as well in 2020? And if I could just sneak this in, John, you said that 3Q exceeded expectations pretty substantially. Why not raise the guidance then? Thank you.

Mark Begor -- Chief Executive Officer

I'll leave that one to John and I'll take the first one, Toni. On the new product, as you know, that's a real engine for growth for us and for the industry. And we've had a pretty good track record and a real muscle around NPI, doing in the neighborhood of 60 NPIs in 2017 and 2018. And as we telegraphed here three months ago when we had our second quarter earnings call, we talked about being flat year-over-year on NPI launches in 2019. And one of the areas that we made some discretionary investments in to lean into in the second half of 2019 is around NPIs, which is why we've increased the number that we're planning to roll-out by about 10 new NPI launches. And part of that is coming from USIS.

When you think about USIS in 2018, they were really focused on winning back the confidence and trust of our customers and there was less focus on NPIs. And now that they are returning to a more of a normal operating and commercial mode, they're really focusing on that. And as you know, USIS is one of our larger businesses and markets. So, the team under Sid Singh is just putting more of a focus on NPIs, which we'll definitely benefit in the future, there's no question that an engine for growth for the Company and for USIS. So, we'd expect that to be another positive lever for them as they go into the fourth quarter and into 2020 and beyond. I wouldn't attribute that to a doubling of their growth rate or any aspect of that. It's just another lever for them in the marketplace with more new products to sell to their customers, along with the products that they've currently got in marketplace.

John Gamble -- Chief Financial Officer

Yeah. And just on NPIs, just as you know, just remember that the bulk of the revenue from new products we counted over three years tends to occur in the second half of year two and year three, right? So in the first year, there doesn't tend to be that much revenue from a new product.

Mark Begor -- Chief Executive Officer

And then maybe just adding one more point on that. We did make a deliberate decision in the second half of this year to put some more resources behind NPI because we saw the ability inside of our financial structure to kind of lean into more future growth. And so, we look at this as an investment, as John pointed out, in the future, there will be probably de minimis benefits in the fourth quarter from those kind of investments. But these are benefits that are going to be bearing fruit in 2020 and 2021 and beyond.

John Gamble -- Chief Financial Officer

And in terms of your question around our guidance and the forecast we provided. So again, I think we provided a lot of context in our prepared remarks. I think right now, if you take a look at our fourth quarter, we think it's really -- it would be a very strong quarter for us, very nice revenue growth, margins up over 35%, up 200 basis points, is a big improvement, despite the fact that we're seeing these increased costs, increased depreciation, increased cloud costs as well some of the investments Mark is making. So I think we feel good about what we provided. Also, if you take a look sequentially what third quarter to fourth quarter now looks like, it looks like a very much more normal seasonal pattern, which again gives us confidence as we look through the rest of the year.

Toni Kaplan -- Morgan Stanley -- Analyst

Thanks a lot. Helpful.

Operator

We'll take our next question from Kevin McVeigh with Credit Suisse. Please go ahead.

Kevin McVeigh -- Credit Suisse -- Analyst

Great. Thanks. Hey, first off, best wishes to Trevor, a speedy recovery. I wanted to talk a little bit about the $20 million charge. Is that just kind of one-time? Or is there any potential we could see that again, I don't know, maybe just given the size of it? Or is it a type of thing that it recurs, it's just normally not this size?

Mark Begor -- Chief Executive Officer

Yeah. We view this as a one-time, which is why we've accounted for it in that fashion. You always have commercial issues and commercial disputes. Generally, they're not of this size, and it was with two customers. And we opted to have the kind of resolution that we did. It's the right solution for us and for our customers going forward. And we do view it as a one-time.

Kevin McVeigh -- Credit Suisse -- Analyst

Got it. And then the boost of the new products, the 70 from the 60 I think it was, there's a margin impact on that. Was that just ability of maybe taking some of the overperformance from the Q3 to drive some incremental revenue? Or just was it more an opportunity to maybe capture some incremental share in USIS?

Mark Begor -- Chief Executive Officer

Well, the increase in new products was a deliberate decision. I think John highlighted a number of areas where, like any business, we make trade-offs about where we're going to invest and how much. And as we've gotten into the second half of the year and we see some visibility of USIS continuing its move back to what I would call more of a more normal commercial mode. And, obviously, we had a bit of a tailwind from the mortgage market. We make decisions around the future. And NPIs are one. We're also investing in the second half some more commercial resources and feet on the street. John talked about accelerating some of our tech investments, moving some of our exchanges to the cloud a little bit quicker perhaps than we anticipated.

And we also highlighted that whether it's new data assets that we're adding, like Urjanet or some of the TWN additions, we looked at as being investments that are good for the future. Those are real benefits that aren't going to as much help us in the near-term but more going forward. And then we also had a couple of large customer wins that has some costs associated with it, which again is good news. And in the umbrella on top of that, we were pleased with the top line growth either with or without the mortgage tailwind. And then the mortgage -- the margin enhancement that we had and the margin momentum we expect going into the fourth quarter, there was the ability to make these kind of investments for the future, which we think is smart.

Kevin McVeigh -- Credit Suisse -- Analyst

Super. Congrats again.

Mark Begor -- Chief Executive Officer

Thanks.

Operator

Our next question will come from Greg Mihalos with Cowen. Please go ahead.

Greg Mihalos -- Cowen and Company -- Analyst

Hey, guys. Good morning and let me also add my best wishes to Trevor for a speedy recovery.

Mark Begor -- Chief Executive Officer

Thanks.

Greg Mihalos -- Cowen and Company -- Analyst

Wanted to start off in USIS. Mark, if we look at the performance in FMS, and I understand that it's been choppy, but it definitely feels like there's more momentum there. When do you think you will kind of get to the point where you feel you'll be able to have more confidence in that pipeline conversion? Is that a quarter away? Two quarters away? Any way you can kind of think about that part of the market?

Mark Begor -- Chief Executive Officer

It's a great question. We think a lot about it, and we've been pretty transparent with you and others as we talk about it. When you think about USIS and where they were a year ago. As you know, a year ago, we were still in a security freeze with a lot of our customers. And we're now, pick your date, three quarters in of kind of a normal mode with customers. And as we talked about in prior discussions, the rebuilding of our pipelines takes time. We're very pleased with the rebuilding of the deal pipelines. But those pipelines are not mature, meaning that they're built up over, call it, a nine to 12 months' time frame from where we were kind of in the summer of 2018 following the cybersecurity breach. So, that's the element of uncertainty that John and I and the senior leadership team still have. And FMS is a great example inside of USIS where we've had very good result this quarter, little less than we thought in the first -- in the second quarter, but little better than we thought in the first, but it's choppy.

And how many more quarters? I think is a great question. We were deliberate about talking about -- that we still see some choppiness in USIS recovery, but directionally, quite positive. And it certainly -- from our perspective, getting into fourth quarter and first quarter, only being three quarters into, what I would characterize, kind of a recovery in normal commercial mode, we need a couple more quarters to kind of see that with some more clarity.

Greg Mihalos -- Cowen and Company -- Analyst

Okay. Thanks for the color. And just as a follow-up, I think you mentioned that some mortgage-related NPI was pushed out given how strong the volumes were. I'm assuming that now would be more of a driver for 2020. Is there any way to kind of quantify that for us? And then on the margin front for USIS, were there any sort of a one-time costs there that might not recur as we think about the fourth quarter?

Mark Begor -- Chief Executive Officer

Yeah. In the first one, the mortgage discussions, as you might imagine, our customers right now with this kind of mortgage inquiry growth, they're flat out. And we've got, like others probably in our space, we've got a number of NPIs that we've either been working on or were working on with those mortgage customers. And those have to go on hold. Our -- we suspect that there won't be a lot of activity in the fourth quarter either as inquiries continue to be quite strong, meaning they're really focused on operating their businesses versus adding some of the new features and ideas that we have. So, we're going to keep working on that. But my expectation is that, those will probably be some deferral of that activity into early 2020 when things perhaps calm down in the mortgage origination side.

John, do you want to touch the margin one on USIS?

John Gamble -- Chief Financial Officer

Sure. Look, on the cost -- was your question specific to USIS or Equifax broadly?

Mark Begor -- Chief Executive Officer

I think it was USIS.

Greg Mihalos -- Cowen and Company -- Analyst

USIS.

John Gamble -- Chief Financial Officer

Yeah. So again, USIS is -- I think Mark mentioned, right? We did have an uptick in development spend, right? And the focus on development spend in other areas. And overall, that is occurring. And as we mentioned in the script, right? Royalties are higher, and that's also impacting margins. But in terms of one-time, I wouldn't call them one-time, I'd say our -- the uptick in development spend is something that we intend to continue, perhaps not at quite this level, but we intend to continue going forward, and we continue to invest in the commercial teams there.

Operator

And caller, does that answer your question?

Greg Mihalos -- Cowen and Company -- Analyst

It does.

Operator

We'll take our next question from Gary Bisbee with Bank of America Merrill Lynch. Please go ahead.

Gary Bisbee -- Bank of America Merrill Lynch -- Analyst

Hi, guys. Good morning.

Mark Begor -- Chief Executive Officer

Good morning.

Gary Bisbee -- Bank of America Merrill Lynch -- Analyst

I wanted to dig in a little bit more into this concept of duplicate technology costs beginning to emerge as you're paying for usage on the cloud but you still got the legacy tech costs. First, I just wanted to, John, clarify your comment. When you said $190 million of depreciation, 5% as you exit the year, so you're talking $9 million or $10 million of cost in 2019, is that right? And that number grows as a percent of a higher depreciation number significantly next year? Was that what you're trying to say?

John Gamble -- Chief Financial Officer

That was about it. It's a run rate. I'm not saying it's for the whole year of 2019, but the run rate we're exiting at is that level. Yeah.

Gary Bisbee -- Bank of America Merrill Lynch -- Analyst

Run rate? Okay. All right. That's what I wanted to confirm. And then just how -- is there any color, I realized -- depends on migrations and a lot of factors, but how we should think about the growth of that duplicate cost or the growth of the cloud cost relative to the fall off? Are there any big step functions down as you retire legacy things in the next 12 months or just any other color to think about that? And then maybe [Speech Overlap]. Yeah. Go ahead.

Mark Begor -- Chief Executive Officer

Yeah. Gary, as you know, the step functions come when we unplug one of our data centers, and we've gone from three unplugged up to five this year. That's going to continue in 2020. And our plan is to give you some visibility of that when we share guidance on 2020 in the next couple of months. And we'll include the duplicate costs we expect to incur in there and as well as the benefits that we expect to incur as we decommission our legacy data centers.

John Gamble -- Chief Financial Officer

We also referenced in the script, right, that we moved an exchange -- an identity exchange we sent to the cloud and that that will be decommissioned in the first quarter. So decommissioning one quarter out after migration is quite fast, but generally speaking, we expect to see that the decommissionings would occur probably for a very large exchange, hopefully, within plus or minus a year, right? So, I think what you're going to see is slowly ramping cloud costs as volume moves to the cloud. The nice thing about cloud, right, is that as you move volume the cost increases slowly. So you'll see slow increases in cloud costs as we move volume from a large exchange, and then you'll actually see us as we bring down portions of the infrastructure, bring down those costs related to the legacy.

So, I know it's not a complete answer for you, but unfortunately, you're going to have to wait until we give guidance so we can lay out for you in a little more detail how these costs ramp in and move down. But I think, in general, what you're looking at is slow ramps for new systems as they board to the cloud, and then decommissioning of those older systems and, therefore, those cost reductions probably somewhere between one quarter, which will be very fast and then on the order of a year for something, which is very large, OK? For the very large systems, they don't all come down in one big lump, right? They do come down in pieces as portions of the infrastructure can be taken down.

Mark Begor -- Chief Executive Officer

And Gary, it's not lost on us that we've got work to provide some visibility around this transformation. And our thinking is to enhance that visibility in how we're sharing kind of the old versus new with you as we get into 2020. So that's on our to-do list as we prepare our guidance for next year and how we'll talk about the Company in 2020 as this becomes an increasingly meaningful part of our cost structure.

Gary Bisbee -- Bank of America Merrill Lynch -- Analyst

Great. Thanks. And then just a quick follow-up. You mentioned higher royalty expense. I think you mentioned that in another quarter earlier this year, things like the Urjanet partnership, revenue sharing with payroll providers to get their files and The Work Numbers. Should we think of that strategy and those types of things as having sort of a meaningful and noticeable impact on the margin dynamic of the business looking forward? Or is that really just the timing of a couple of things, along with all the other moving parts you're dealing with is why you've called it out recently? Thank you.

John Gamble -- Chief Financial Officer

Sure. So we called it out specifically in USIS because some royalties from specific providers that we work with frequently went up in 2019. And so, it was a specific cost in USIS. But in general, you're going to see royalty costs continue to go up, and they'll probably go up as a percentage of revenue, but not dramatically.

Mark Begor -- Chief Executive Officer

Yeah. It won't have a dramatic impact on our business. It's a -- as you know, we own most of our data assets. We'll continue to own most of our data assets. But increasingly, we see real value in the incremental revenue and incremental margins we get through some of these relationships, which as you point out, we will share some margin with them in a royalty scheme, but it's -- for a long, long time -- it's hard to even envision. It's going to a de minimis element in the business.

Gary Bisbee -- Bank of America Merrill Lynch -- Analyst

Great. Thank you.

Operator

Moving next, we'll go to Jeff Meuler with Baird. Please go ahead.

Jeffrey Meuler -- Robert W. Baird & Co. -- Analyst

Yeah. Thank you. Maybe, Mark, some more details on Ignite, beyond your comments in the prepared remarks. But, I guess, the bigger question is competitors have made a lot of inroads with clients with trended data beyond mortgage. And over the last two years, it seems like they have made some inroads with their advanced analytics platforms as well. Just it seems to me like that might position them better for clients for core credit file business, as well as cross-sell generally, but would love your reaction to that view. And maybe if you could kind of talk about the Ignite process -- or progress in that contact? Thanks.

Mark Begor -- Chief Executive Officer

Sure. And Jeff, you raised a great point. We believe that the decisioning systems, in our case, Ignite are a really critical capability and a really important element to have with our customers. And that's why we're investing so heavily in Ignite and also our integrated Ignite InterConnect platform because we believe that today Ignite has a market-leading capability. Embedded in Ignite is things like our patented NDT AI technology. And we're have really good traction in the United States and around the globe of rolling out Ignite and embedding it with our customers. We believe we have a very competitive product. And it's one that we're continuing to invest in to advance our lead in the capabilities that we have. I was with a customer yesterday actually here in Atlanta who is looking at doing an Ignite installation with us. They don't have any of our competitors' products in there, decisioning tool in there, and are very attracted to what the Ignite capability will deliver. But it's a really quite strategic to us and important to us.

Jeffrey Meuler -- Robert W. Baird & Co. -- Analyst

Okay. And then the TWN records add, just quickly. Was that a large employer? Or was that some new partnership that's coming on board?

Mark Begor -- Chief Executive Officer

The combination of the two. It's one, we're -- we had a large partnership that we added in the quarter, and then we also continue to add large individual employers. It's a dual strategy, as you know. And the partnership strategy is one that we've put more focus on in the last couple of years, but core to our strategy is going out to individual companies. And we're, obviously, getting real scale there in that business, which is driving hit rates, and with the non-farm payroll at $165 million, there's still a long road for the EWS team to continue to add records, which will be one of many levers to drive their top line.

Jeffrey Meuler -- Robert W. Baird & Co. -- Analyst

Thank you.

Operator

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

William Warmington -- Wells Fargo Securities, LLC -- Analyst

Good morning, everyone. So I was going to ask for an update on the partnerships with FICO. How the pipeline is? Any deals closed? And we noted that you guys are going to be presenting at FICO World in a couple of weeks.

Mark Begor -- Chief Executive Officer

Thanks, Bill. Yeah. I neglected to talk about that this morning. Probably should have. We were -- we had a -- our quarterly joint session with Will and his team -- Will Lansing and his team at -- actually at FICO a couple of weeks ago. We've got great momentum on our combined cloud data decisions product, it combines our Ignite, our data assets and their DMS platform. And then we've got a number of other products rolling. We've actually had our first customer win. We're -- it's not -- you wouldn't talk about one customer win, but again, that's momentum in that relationship. And it's a partnership that we're energized about. And Will and I will be at FICO World. We're going to jointly give some updates on some of the newer -- new products that we're working on together. We continue to see more opportunities to partner, and we're energized about that.

And just shifting from FICO, you're at Urjanet and others we're working on, I think you -- I hope you see an Equifax that's looking for ways to, not only own things and acquire them like PayNet, but also to look for strategic relationships like FICO, like Urjanet and others where we can take advantage of Equifax' assets with someone else's and bring real value, not only to us but also to that partner. So, good progress with FICO, Bill.

William Warmington -- Wells Fargo Securities, LLC -- Analyst

Then a follow-up question for you. On the myEquifax product, you mentioned 2 million customers -- or 2 million consumers. Just wanted to ask, what's the critical mass you need to get to begin doing the cross-selling? And when should we start to think about seeing some revenue contribution from that?

Mark Begor -- Chief Executive Officer

Yeah. It's a great question. So first off, getting from zero in December of 2018 to 2 million, we feel pretty good about. And we're adding them at, I don't know, 15,000 to 20,000 a week. They continue to come in, so there's a lot of consumer positives about having that relationship with Equifax. And the teams' plans in GCS are to begin some of that cross-sell effort. We're doing some pilots in the fourth quarter, and that will continue into 2020 and really go into production mode in the first half of 2020. And we just use this as another lever for GCS, in their direct business, to deliver products to customers and expand the kind of products that we offer to US consumers.

William Warmington -- Wells Fargo Securities, LLC -- Analyst

Okay. Well, thanks a lot and a shot out to Trevor to get well soon.

Mark Begor -- Chief Executive Officer

Thanks, Bill.

Operator

Moving next, we'll go to Andrew Steinerman with J.P. Morgan. Please go ahead.

Andrew Steinerman -- J.P. Morgan -- Analyst

Hi. Mark, a comment here on your prepared remarks is that you expect USIS to return to historic growth rates. This is the first time I remember you saying that we are going to get to historic organic revenue growth rates. Do you think Equifax is now at a point where you could comment about the medium-term algorithm, the previous 6% to 8% organic revenue growth? And maybe make a comment about current USIS visibility because that was one of the things you wanted to think about when reintroducing the organic?

Mark Begor -- Chief Executive Officer

Yeah. Thanks, Andrew. I guess, from my perspective, I've been consistent since I joined April 18 months ago that it was my view, and it's shared by the team here. It wasn't -- It's not a matter of if, it was only when, not only USIS but of course, Equifax because of the impact that USIS has on the overall enterprise would return to its historic growth rates. I tried to be consistent on that. So it wasn't a new comment on my part today or wasn't intended to be one. I've been quite consistent about that.

And as you also pointed out, we've also discussed that USIS' recovery, our confidence in that recovery, our confidence in that path back to the historic growth rates was one of the factors that John and I and the leadership team are watching for before we put a financial framework back in place. And we're still in that mode. As I mentioned a couple of minutes ago with one of the other sell-side analysts, we're -- from my perspective, we're only three quarters in -- you want to -- you could pick how many quarters we're into. USIS, showing what they can and will do, 2018, they were in more defense mode. We're clearly back in offense. And third quarter was a positive step forward. We expect fourth quarter to also be a positive step forward. It's still hard for us to handicap how many more quarters we need before we're going to have the confidence that they're on the path back to their historic growth rates.

But my comments from a year ago April, and what I've tried to be consistent since then is it's not a matter of if, it's only when. And that's really driven by the differentiated data assets that the business has, the role it had in the marketplace, it's driven by the new team we have, which is really energizing, and it's also driven by the technology investments that we're making. We believe that this is going to take not only USIS but Equifax to another level.

Andrew Steinerman -- J.P. Morgan -- Analyst

Thanks, Mark. Appreciate it.

Mark Begor -- Chief Executive Officer

Thanks, Andrew.

Operator

Our next question will come from Brett Huff with Stephens. Please go ahead.

Brett Huff -- Stephens Inc. -- Analyst

Good morning, Mark and John.

Mark Begor -- Chief Executive Officer

Good morning.

Brett Huff -- Stephens Inc. -- Analyst

Two questions. One just to dig down a little bit into the USIS. I want to make sure that I'm getting the comparisons right. I think that the 3% sort of ex mortgage inorganic compares to a 1% last quarter, and so it's a nice acceleration. Is that the right way to think about that?

John Gamble -- Chief Financial Officer

It's up over 200 basis points. Yeah.

Brett Huff -- Stephens Inc. -- Analyst

Okay. Great. And just digging down in that a little bit, it obviously had great strength both in the online and in the FMS. And I know you -- FMS kind of goes up and down. It's a little more project-driven. So I wanted to dig in and see that 200 basis points acceleration. How did that kind of shake out in terms of was it more of the online stuff, which I think we think of as more kind of sustainable or long-term versus the FMS? Just wanted to understand how you guys thought about that sort of quality if you will of that acceleration.

John Gamble -- Chief Financial Officer

Yeah. Again, I don't think we broke down the details between both but what we did is we saw growth, obviously, in both. So, I mean -- and that was very important to us. And continuing to be able to continue to see that growth rate improve across those businesses, both online and batch, is important to us. But in the third quarter, we certainly saw online non-mortgage growth as well.

Mark Begor -- Chief Executive Officer

And as you pointed out, Brett, that's very important as is FMS. Our project or financial marketing business is also important. But we see positives in really all corners of USIS as they continue to march forward.

Brett Huff -- Stephens Inc. -- Analyst

Thanks. And just the follow up is, it was really helpful, John, when you talked about sort of the chunky things that can happen with expense benefits from decommissioning big databases and exchanges. Is there a way to give us -- are there five big ones and 10 small ones? And how many are we done with? And have we decommissioned already? Can you give us just rough kind of macro view on that so we can -- as we start to try and phase in the cost savings of the deduplication, if you will? Can just give us any thoughts on how to think about that?

John Gamble -- Chief Financial Officer

So we certainly will, but I think we're going to have to ask you to wait until we give guidance for next year, right? I think as we get to that point, a lot of transitions will be well under way and our timing will be very specific. We'll be able to give you a lot better detail on what that might look like.

Mark Begor -- Chief Executive Officer

And Brett, let me add to that, look, as I mentioned a few minutes ago, we know we have to give you more visibility on that, and we plan to. Part of us waiting to do it as part of our 2020 guidance is that's when the rubbers really going to hit the road, meaning we're going to have a lot of these migrations and a lot more moving to the cloud, and we'll have more of the duplicate costs. Our intention is to make sure that that's crystal clear for you both on when the benefits should be kicking in, as well us when the costs are being incurred. And we also are learning as we go in getting more knowledge about how quickly customers will move, and how these migrations will take place.

John Gamble -- Chief Financial Officer

And we'll try to cover broadly how margins will move, so we had earlier questions on royalties, we'll discuss how they're growing as a percent of revenue to give people detail on how to think about those things.

Brett Huff -- Stephens Inc. -- Analyst

Great. Fair enough. Thanks for the detail guys. Appreciate it.

Operator

Moving next to Andrew Nicholas with William Blair. Please go ahead.

Andrew Nicholas -- William Blair & Company -- Analyst

Hi, good morning. I believe you mentioned a comment about the press around the settlement news impacting your consumer segment a bit more than you had expected in the quarter. I'm just wondering if that pressure has abated at all thus far in Q4. And if not, how long would you expect that to be a headwind?

Mark Begor -- Chief Executive Officer

Yeah. It was a small headwind, Andrew, and we actually made a proactive decision. We thought there would be more consumer noise, if you will, around the settlement that would result in our paid search efforts being less effective. So we made a decision around that time frame to dial back our paid search, which, of course, when you do that, it results in acquiring less customers, and we've since started that up quite quickly because it really didn't have the impact we anticipated. So we just wanted to spike out that there was a small bump from that. It wasn't significant but it was -- it did have an impact on GCS.

Andrew Nicholas -- William Blair & Company -- Analyst

Got it. Thank you. And then one more for me. Obviously, Verification growth was really strong. 29% is a great number. I know mortgage was a tailwind, and you talked a little bit about partnerships but just wondering if there's anything else to call out on the strength, and maybe, a little bit of guidance or a little bit of color on how we should be thinking about growth rates on a go-forward basis?

John Gamble -- Chief Financial Officer

Yeah. So I think in the script, we basically indicated every segment grew very nicely, right? So Mark listed the segments that grew very, very well. We added [Speech Overlap]

Mark Begor -- Chief Executive Officer

Let me add to record growth. Andrew, as you might imagine, growing records is a really important lever for that business. It drives hit rates immediately as soon as the records hit our database, and of course, the record growth is another lever there that benefited strongly in the third quarter. We expect that to benefit going into fourth quarter and in the future.

John Gamble -- Chief Financial Officer

You should keep in mind 29% for Verification Services is a very high number, right? So expecting things to continue like that is probably a little high. But they had very good performance, and we expect very good performance in the fourth quarter.

Andrew Nicholas -- William Blair & Company -- Analyst

Great. Thank you.

Operator

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

David Togut -- Evercore ISI -- Analyst

Thank you. As you look to the major macro drivers of USIS, mortgage, auto, credit card, what are your thoughts about the sustainability of current trends, at least at a macro level into 2020, especially if 10-year treasury yield stays as low as it is, 1.7%, 1.8%?

Mark Begor -- Chief Executive Officer

Yeah. This is outside of our skill set. I can give our perspectives. When you think about kind of the macros, it's hard for us to predict interest rates. But the mortgage activity in the last 90 days, we expect to stay strong in the fourth quarter. It's hard to forecast. Going into 2020, we'll do that as we get closer.

Outside of mortgage, which, obviously, has had a big bump with interest rates coming down and mortgage rates coming down. The core consumer finance market is very strong. Whether it's credit cards or auto, they're still very strong. You got a number of macros in there that are helpful, interest rates as you point out are one, employment and unemployment being low, or another one, people are working, they've got discretionary income. Those are all quite positive. So, our discussions with our customers, they are still focused on growth and originations.

There's also a dialogue I talked about in the last quarter of getting ready for when that slowdown comes. And so, we're having dialogues around kind of back book management and some of the great tools that we have to help with that, but we are expecting the economy to be kind of where it is now going into 2020. We don't see anything different. It's hard to forecast what some of the political uncertainties here and around the globe or how that's going to impact, but the core consumer is quite strong.

David Togut -- Evercore ISI -- Analyst

Appreciate that. Just as a sort of a follow-up on macro. Australia was such a strong growth market for Equifax for a while post the Veda acquisition. I'm just curious what your view is on the credit market in Australia. When you think that might turn? And to the extend it doesn't, are there any actions you intend to take there just from a pure cost management standpoint?

Mark Begor -- Chief Executive Officer

Yeah. On the market, there was a -- the slowdown in Australia started in the third quarter last year. We thought we saw some signs of positives after the election in the second quarter. That hasn't flowed through as much as we thought but as we pointed out in our comments earlier, we are starting to see some online volume in both consumer and commercial. It's more positive in the third than it was in the second, so we're watching that.

Actions we're taking -- we did some cost actions in the first half of the year. We think we've got the cost rightsized. Most importantly, we've got a new leader there. One of our best international leaders who was running our Canadian business, Lisa Nelson, is on the ground there. She started in late August. And she took Canada from a slow growth business into the kind of high-single digits. And we've got great confidence in her leadership capabilities and her focus on customers and NPIs and growth. So that was a deliberate step on our part to put a new leader on the ground there. And she's one of our best, so we're optimistic about that.

David Togut -- Evercore ISI -- Analyst

Thank you. Appreciate all the insights.

Mark Begor -- Chief Executive Officer

Thanks.

Operator

And we will take our next question from George Tong with Goldman Sachs. Go ahead, sir.

George Tong -- Goldman Sachs -- Analyst

Hi, thanks. Good morning. I wanted to dive deeper into your tech savings. You mentioned 15% in expected savings in the technology portion of cost of goods sold and 20% to 25% savings in development capital and expense. Can you quantify how much of cost of goods sold is technology spend? And talk about how much of the development savings will be CapEx versus OpEx?

Mark Begor -- Chief Executive Officer

Go ahead, John.

John Gamble -- Chief Financial Officer

Yeah. So on -- so the technology portion of COGS, we said it's on the order of half to slightly below half, right? So that's generally what we've indicated.

And in terms of development expense and capital, it's really difficult to split those for you specifically. So, I think we're going to have to hold off, and we'll give you some more perspective on that as we get into 2020. But in general, what we're saying is the spending we're making on new product and new development should go down by 25%. The bulk of it is capital, but the exact split is not something we're going to -- we can break out right now.

George Tong -- Goldman Sachs -- Analyst

Got it. That's helpful. Your EBITDA margins expanded for the first time in two years this quarter. Would you see that going forward, we should continue to see margin expansion? And what are the two or three factors that could potentially cause EBITDA margins to return to contraction?

John Gamble -- Chief Financial Officer

So in terms of fourth quarter, we guided -- we expected to see EBITDA margins to go up over 35%, which would be a substantial increase from 2018, right? So that's up on the order of 200 basis points. So, again, I think what's driving the improvement in margins is the return to growth of the business and the improvements we're seeing, obviously, in USIS, the tremendous performance on Workforce Solutions and -- which is driving their margins higher. But then also we're seeing some improved margins in international, much of that driven by cost actions, as well as some return to growth. So what we're focused on is how do we continue to drive those margins higher, and that's where we're going to be spending our time.

Mark Begor -- Chief Executive Officer

And George, I would add, I think you know this. We talked a couple of times this morning already about it, and you and I've talked in prior sessions that technology investments we're making are all focused on driving our top line and our cost structure. You already talked about the operating cost benefits we have. So those are all going to be positive to our margins in the future, which is why we're making these investments.

George Tong -- Goldman Sachs -- Analyst

Very helpful. Thank you.

Mark Begor -- Chief Executive Officer

Thanks.

Operator

And we'll take our next question from Shlomo Rosenbaum with Stifel. Please go ahead. Caller, please check your mute function.

Shlomo Rosenbaum -- Stifel -- Analyst

Can you hear me now?

Mark Begor -- Chief Executive Officer

Yeah. We got you.

Shlomo Rosenbaum -- Stifel -- Analyst

Okay. Sorry. The last time the Company went through a big change in interest rates of mortgages, the Company split out the mortgage-related growth versus the non-mortgage-related growth and given that we're trying to track the Company as a whole and how the growth is doing, are you able to do that on a total Company basis, just saying, hey, if I strip out mortgage over the last couple of quarters or three, this has been the growth of the business so that we can just kind of get a beat at what's going on really ex-the-mortgage business and really track that?

John Gamble -- Chief Financial Officer

So Shlomo, we try to do that in the individual businesses. So in the commentary today, we tried to lay out what the growth -- what the non-mortgage growth rates look like in USIS, what they look like in EWS. In terms of supplemental reporting, I don't think we're headed in that direction, but we are trying to provide some visibility in terms of the impact that the mortgage market changes had on us. For example, we gave the total dollar value impact of the growth in the mortgage market versus our expectations, right, which we said about $25 million.

Mark Begor -- Chief Executive Officer

So we talked about USIS and EWS, both with and without the mortgage impact.

Shlomo Rosenbaum -- Stifel -- Analyst

So if I -- I'm just saying like if I took out mortgage, would I say growth of the whole Company was more like 5%, like is that the right way to look at it up from 2% or 3%? What's the right way to look at it?

John Gamble -- Chief Financial Officer

We understand the question, and we just -- we don't at this time have an intention to go back to try to create separate reporting publicly for mortgage and non-mortgage. So, I think we've provided some pretty good detail in terms of -- to understand the impact of the mortgage market on our major businesses, and I think that's probably the extent we're going to go to now.

Shlomo Rosenbaum -- Stifel -- Analyst

Okay. And then, Mark, can you just talk a little bit more about what's going on in the UK? Your major competitor that also has a business in the UK that posted double-digit organic growth despite what's going on with Brexit. Is there a mix issue going on over there? Is there a market shift issue going on over there? Is it -- you don't compete in the same areas. Can you just give us a little background on that?

Mark Begor -- Chief Executive Officer

Yeah. Their business -- and again, I don't spend a lot of time on their business. I just focus on mine. But we saw their numbers. And as you probably know, they operate in some different markets than we do. We've got the debt management business. They don't. We both compete in the core credit business. They've got a consumer business that's different than ours. So, yeah, there are different businesses there. I don't know enough about their financial results, but I know about mine. I was there two weeks ago meeting with some big customers. And there's no question. What we're seeing is big customers delaying new product kind of decisions around Brexit uncertainty. That started in the second quarter and continued into the third and from what I saw two weeks ago, it's going to be here in the fourth. That's just a reality. There is no change in competitive. We're not winning less and losing more or anything like that. It's just that decisions around new products. And as you know, that's one of the fuels for growth in our business and is not only the UK, in other markets. So it's nothing more than that from my perspective.

Shlomo Rosenbaum -- Stifel -- Analyst

Okay. Great. And then if could just squeeze in one last one. Are you -- do you have any tangible areas where you've made small migrations, and you're really seeing a new product development where you're able to get something out really quickly? I mean, is there anything where you have something in hand where you'll be able to say, yeah, we made this, and now we've come across some stuff that we've been able to do in a much accelerated pace?

Mark Begor -- Chief Executive Officer

Well, I spiked out intentionally, one, that we moved our US credit file to the new Google Cloud data fabric in the quarter. And during the quarter, we've rolled out a new product that we couldn't do before, and our competitors, from what we understand, can't do today, of a virtual streaming of information from that data exchange. And the speed of the data historically was done in overnight runs or every three hours or with certain limitations on how quickly it could be delivered out of the file is now done in hundreds of thousands of data records every second.

So just the velocity and the latency of that is something that we anticipated. And what we've found is that there's a customer demand for that. And as I said in the call, we've got a customer live with this new product from the Cloud Exchange that couldn't have been done before. And this is one customer. And we've got a pipeline for this one new product of delivering virtually streaming alerts and inquiries and data to the customer that there's a pipeline of a handful of other customers who wanted to do the same thing. So that's one example of what we think will be a whole bunch more, which is, as you know, one of the reasons we're making this significant investment in our technology because we think it's going to make us differentiated in the marketplace.

Shlomo Rosenbaum -- Stifel -- Analyst

Got it. That's very helpful. Thank you very much.

Operator

And this does conclude today's question-and-answer session. I'd like to turn the call back over to John Gamble for any additional or closing remarks.

John Gamble -- Chief Financial Officer

That's it. Thanks, everyone, for participating, and we look forward to speaking with you during the quarter.

Operator

[Operator Closing Remarks]

Duration: 87 minutes

Call participants:

John Gamble -- Chief Financial Officer

Mark Begor -- Chief Executive Officer

Manav Patnaik -- Barclays -- Analyst

Toni Kaplan -- Morgan Stanley -- Analyst

Kevin McVeigh -- Credit Suisse -- Analyst

Greg Mihalos -- Cowen and Company -- Analyst

Gary Bisbee -- Bank of America Merrill Lynch -- Analyst

Jeffrey Meuler -- Robert W. Baird & Co. -- Analyst

William Warmington -- Wells Fargo Securities, LLC -- Analyst

Andrew Steinerman -- J.P. Morgan -- Analyst

Brett Huff -- Stephens Inc. -- Analyst

Andrew Nicholas -- William Blair & Company -- Analyst

David Togut -- Evercore ISI -- Analyst

George Tong -- Goldman Sachs -- Analyst

Shlomo Rosenbaum -- Stifel -- Analyst

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