Equifax, Inc. (EFX)

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Equifax, Inc. (EFX)

Q3 2010 Earnings Conference Call

October 28, 2010 8:30 AM ET


Jeffrey Dodge – SVP, IR

Richard Smith – Chairman and CEO

Lee Adrean – CFO and Corporate VP


George Mihalos – Bank of America

Carter Malloy – Stephens Inc.

Andrew Jeffrey – SunTrust Robinson Humphrey

Shlomo Rosenbaum – Stifel Nicolaus

David Lewis – JPMorgan

Daniel Perlin – RBC Capital Markets

Jaime Brandwood – UBS

William Warmington – Raymond James



Good day, everyone, and welcome to the Equifax Third Quarter Earnings Release Conference Call. (Operator Instructions)

At this time, I’d like to turn the conference over to Mr. Jeff Dodge. Please go ahead, sir.

Jeffrey Dodge

Good morning, and welcome to today’s conference call. I’m Jeff Dodge, Investor Relations. And with me today are Rick Smith, our 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 of 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 2009 Form 10-K and subsequent filings.

Also, we will refer to a non-GAAP financial measure, adjusted diluted EPS from continuing operations attributable to Equifax, which excludes the impact of acquisition-related amortization expense. Please refer to the non-GAAP reconciliation section included in the earnings release and posted in the Investor Relations section under About Equifax tab at our website for further details.

Now I’d like to turn it over to Rick.

Richard Smith

Thanks, Jeff, and good morning, everyone. Overall, we had a very strong performance in the third quarter. It was broad-based, which was very important across all business units. They met or exceeded our expectations that we outlined to you during our second quarter call.

As I continue to meet with our customers, it’s increasingly clear to me that our strength of our business model combined with the innovative solutions we’re delivering and the traction we’re developing as we leverage our unique and diverse data assets are enabling our customers to manage their business more effectively and profitably. Each of our business units have strong leaders and deep commitment to executing on the strategic initiatives, and the performance they delivered this year illustrates just that.

First, some numbers. Total revenue for the quarter was $473.8 million, up 11% from third quarter 2009 on both a reported and local currency basis and well ahead of our expectations.

Operating margin was 23%, up 30 basis points from the second quarter of 2010 on revenues that were up 3% sequentially as well.

Adjusted EPS was $0.60, up from last year and second quarter, driven by strong execution across all of our strategic initiatives. All of our business units are executing well against our strategies. They’re delivering on key objectives, enhancing relationships with our customers through innovative and unique solutions.

On the business units, USCIS has accelerated its year-over-year growth each quarter this year. In fact, all the business units within USCIS have improved on their quarterly year-over-year growth rate in 2010. Along with this growth, USCIS has expanded its operating margin each quarter in 2010.

Long-term opportunities in International continue to be very attractive. We’ve developed aggressive and compelling strategies and continue to invest in all of our existing geographies to build a strong market position for long-term growth. Obviously, that investment has an impact on the margin in International short term, short to medium term.

In The Work Number, healthy double-digit growth across each of the key customer sections enabled TALX to deliver solid double-digit growth. The acquisition of TALX has been transformative for Equifax.

Even today, we continue to find new opportunities to expand our coverage and grow active records in our database, as well as broaden our service offerings as an HR solutions provider, which further strengthens relationships with our data providers for The Work Number.

Our PSol business, North American Personnel Solutions, continues to leverage new product development and sharpen its focus on securing long-term consumer relationships. These relationships are based on high value-added services, educational content to help consumers become smarter in the management of their financial well-being and better execution on the fundamentals, all of which grow increased conversion, lower churn, higher average revenue per user and solid growth for the quarter.

PSol is also testing and evaluating various combinations of product messaging, offer types, pricing and affiliate mix to drive increased growth in subscription customers.

Finally, double-digit growth in North America Commercial was driven by strong growth in our U.S. operations, including both risk and marketing applications.

Shortly after the quarter closed, as you now know, we broadened our I.D. management product offering and expanded our presence in the government and healthcare sectors with the acquisition of Anakam. One of the core product offerings in our Technology and Analytical Services unit we call TAS is I.D. authentication. We were the innovators in this space and have developed a very strong presence with financial institutions and telecommunication companies in the U.S. as well as some of our international markets such as the U.K.

In addition to rigorous I.D. authentication, there’s an increasing demand for risk-based verification solutions that support customers’ needs for secure content delivery. Anakam is the leading provider of large-scale, cost-effective, multi-factor ID verification solutions. Traditional two factor verification, such as hard tokens, smart cards, USB devices or even biometrics, as you know, are expensive to deploy and maintain, particularly when the end user is a consumer, making the Anakam offering very unique and cost-effective.

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