Equifax, Inc. (EFX)

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Equifax Inc. (EFX)

Q2 2013 Earnings Call

July 25, 2013 8:30 am ET


Jeffrey L. Dodge - Senior Vice President of Investor Relations

Richard F. Smith - Chairman and Chief Executive Officer

Lee Adrean - Chief Financial Officer and Corporate Vice President


Carter Malloy - Stephens Inc., Research Division

Jeffrey P. Meuler - Robert W. Baird & Co. Incorporated, Research Division

David Togut - Evercore Partners Inc., Research Division

Daniel R. Perlin - RBC Capital Markets, LLC, Research Division

Shlomo H. Rosenbaum - Stifel, Nicolaus & Co., Inc., Research Division

Paul Ginocchio - Deutsche Bank AG, Research Division

Andrew W. Jeffrey - SunTrust Robinson Humphrey, Inc., Research Division

Andrew C. Steinerman - JP Morgan Chase & Co, Research Division



Good day, and welcome to the Q2 2013 Equifax Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Jeff Dodge. Please go ahead, sir.

Jeffrey L. Dodge

Thanks, and good morning. Welcome to today's conference call. I'm Jeff Dodge with Investor Relations, and with me today are Rick Smith, Chairman and Chief Executive Officer; and Lee Adrean, Chief Financial Officer.

Today's call is being recorded. An archive of the recording will be available later today in the Investor Relations section in the About Equifax tab of our website at www.equifax.com.

During this call, we'll be making certain forward-looking statements 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 the filings with the SEC, including our 2012 Form 10-K and subsequent filings.

We will also refer to a non-GAAP financial measure, adjusted diluted EPS attributable to Equifax. Adjusted diluted EPS attributable to Equifax excludes acquisition-related amortization expense. This measure is detailed in our non-GAAP reconciliation table included with our earnings release and also posted on our website.

Also, please refer to our various investor presentations, which are posted in the Investor Relations section under the About Equifax tab on our website for further details.

Now let me turn it over to Rick.

Richard F. Smith

Thanks, Jeff, and good morning, everyone. Thanks for joining us this morning. As I typically do, I'll start off with a few comments financially for the quarter, second quarter, then we'll go through some highlights by BU. We'll turn it over to Lee for some detailed financials, and I'll come back and give you some color on the third quarter and fourth quarter, the second half of the year outlook.

Second quarter, if I look back, was the strongest and the most balanced quarter we've experienced in my 8 years here. We delivered double-digit revenue growth in each of the 4 U.S.-based businesses, along with double-digit constant currency growth in International. This performance was largely driven through our continued momentum across a broad range of strategic initiatives and high levels of execution, a theme we have talked about now for the last couple of years. We're also starting to see some modest signs of economic pickup.

Total revenue was $587 million, up 14% from second quarter of last year. Operating margin was 26.9%, up from 25.1% a year ago. Adjusted EPS was $0.92 a share, up 28% from $0.72 last year for first half of 2013. Total revenue was $1.2 billion, up 13%, and adjusted EPS was $1.79, up 27%.

Core organic non-mortgage growth rate accelerated from the 4.7% we reported in the first quarter to 7.5% in the second quarter, and that acceleration is expected to further as we go into the second half -- further expand as we go into the second half of 2013, enabling us to significantly mitigate the anticipated slowdown in mortgage originations over the balance of the year.

And now quickly go in each of the BUs for some highlights which are pretty fabulous in my opinion.

First, USCIS. They're aggressively pursuing market expansion and product penetration through their unique product offerings. A key client program, which we talked about now for, I think, 4 years has enabled us to significantly strengthen share in these accounts and grow our business with the 4 largest banks driven largely by new product innovation and strategic growth initiatives. That model of KCP, where we dedicate all resources across the company to driving share gain and incremental new spend, has been so successful. We've now expanded the program to now include 2 large credit card institutions and 2 large telcos.

Through our creative use of analytics-driven insights, we continued to deliver strong NPI performance in USCIS. During the quarter, we finalized the development and delivery of our analytical sandbox to one of our largest customers following their user acceptance testing. That's something we talked about in the first quarter. The pipeline for analytical sandbox projects now is robust as we further engage our large KCP accounts and develop new opportunities with many of our financial services customers. I expect great things from the analytical sandbox over the coming year or so.

So next, we will be launching trended data product in the USCIS business that will provide customers with a more granular understanding of consumer behavior through a richer, more robust portfolio of information. Through our Voice of Customer research, demand for this product is strong and crosses many of our end user markets. As a result, as you might guess, the pipeline for trended data is already very strong.

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