Equifax, Inc. (EFX)

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Equifax (EFX)

Q3 2013 Earnings Call

October 24, 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


David Togut - Evercore Partners Inc., Research Division

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

Andre Benjamin - Goldman Sachs Group Inc., Research Division

Manav Patnaik - Barclays Capital, Research Division

Paul Ginocchio - Deutsche Bank AG, Research Division

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

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

Matthew V. Roswell - RBC Capital Markets, LLC, Research Division

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



Good day, everyone, and welcome to the Q3 2013 Equifax Earnings Release Conference Call. Just a reminder, today's conference is being recorded. For opening remarks and introductions, I will now 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.

During this -- 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 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 and associated tax effects. 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, I'd like to turn it over to Rick.

Richard F. Smith

Thanks, Jeff, and thanks, everyone, for joining us this morning.

And third quarter was a really strong broad-based performance and largely came in as we had guided, not only early in the year, but reconfirmed in our last call for the second quarter. The third quarter performance was driven by a continued accelerated growth in our core non-mortgage products, along with solid execution on our strategic initiatives around the company, that offsetting mortgage market decline of over 34% for the quarter.

Revenue -- total revenue for the quarter was $572 million, up 10% from the third quarter 2012. Operating margin was an impressive 27.6%, up significantly from 25.1% a year ago. And adjusted EPS was $0.90, up 21% from 74% last year.

Year-to-date, total revenue was $1.7 billion, up 12%; and adjusted EPS, $2.69, up 25%. An important metric that we talked to you about routinely is something we focus on intensely here is the organic growth rate of our core non-mortgage market activities and the continued execution of strategic initiatives in our mortgage business -- across the company. The progress we are making on broadening and diversifying our revenue growth is critical to successfully delivering our long-term business model.

In the third quarter, the organic revenue growth in core non-mortgage market activities accelerated beyond the long-term range we have of 6% to 8%, to 9%, so a good execution across the business there.

As I always do, let me briefly cover a few key highlights from each of our business units. Starting with USCIS, they continue to leverage the Equifax's extensive data assets, analytical resources and technology capabilities to broaden and deepen our customer relationships and to deliver solid double-digit growth in the quarter. USCIS has made great progress with its enterprise selling initiatives, which we'll talk about routinely. And this has generated incremental core revenue growth for not only USCIS, but also for Workforce Solutions and our North American Commercial business. For example, in the quarter, we increased our revenue potential with a large bank by leveraging the full range of Workforce Solutions verifications offerings. This new contract represents a 15% increase in revenue over the life of the contract.

You heard us talk about our KCP program, key client program, which started off with 4 of the largest banks in the U.S. That team, they have great leaders, they executed extremely well. They've got great talent across that organization, and they've done a great job with our KCP clients. As a result of their success, we continue to add accounts to their responsibility. We've recently added 2 large telco customers that is integrated go-to-market strategy, along with 2 large credit card companies added earlier this year. We now have a total of 8 critical customers under the leadership of KCP. That model continues to bode well for us in the U.S.

A couple of points on USCIS, they worked very hard throughout the year to drive strong organic growth in its core non-mortgage activities. The rate of growth for these products and services increased each quarter this year. And we expect that rate to increase again in the fourth quarter, exiting 2013 at the highest level for the year.

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