Equifax, Inc. (EFX)

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Equifax (EFX)

Q1 2011 Earnings Call

April 28, 2011 8:30 am ET


Jeffrey Dodge - Senior Vice President of Investor Relations

Lee Adrean - Chief Financial Officer and Corporate Vice President

Richard Smith - Chairman and Chief Executive Officer


Vincent Lin - Goldman Sachs Group Inc.

William Warmington - Raymond James & Associates, Inc.

David Togut - Evercore Partners Inc.

Carter Malloy - Stephens Inc.

Shlomo Rosenbaum - Stifel, Nicolaus & Co., Inc.

Daniel Perlin - RBC Capital Markets, LLC

Jaime Brandwood - UBS Investment Bank

Andrew Jeffrey - SunTrust Robinson Humphrey, Inc.

Georgios Mihalos - BofA Merrill Lynch



Good day, everyone, and welcome to the Q1 2011 Equifax Earnings Release Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Jeff Dodge. Please go ahead.

Jeffrey Dodge

Thank you, and good morning, everybody. Welcome to today's conference call. I'm Jeff Dodge, 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 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 our filings with the SEC including our 2010 Form 10-K and subsequent filings. We will refer to a non-GAAP financial measure, adjusted EPS from continuing operations attributable to Equifax, which excludes the acquisition-related amortization expense. This measure is detailed in our non-GAAP reconciliations included with our earnings release and posted on our website. Please refer to the non-GAAP reconciliation in 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 Smith

Thanks, Jeff. Good morning, everyone. In the first quarter, we continued to build on the momentum we created in 2010 and we delivered solid financial performance, which was in line with our expectations. We also strengthened our global franchise to better position Equifax for sustainable long-term growth. Each of the business units continue to make good progress on the strategic initiatives, including new product offerings, building and acquiring unique data assets and improving the efficiencies of the operations.

For the quarter, total revenue from continuing operations was $472.6 million, up 7% from the first quarter of 2010, very much in line with the outlook we provided in February. Operating margin was 23%, down slightly from a year ago but up sequentially from the fourth quarter.

Now I'll will spend some time at the back end of my conversation talking about the margin outlook for the second half of the year. And adjusted EPS from continuing operations was $0.58, up 9% from $0.53 a year ago. But customer demand for our Analytical Solutions continues to increase. During the quarter, 37% of our online transactions included an analytical component of an Equifax model. That compares with 31% in the first quarter of 2010 and 23% in the first quarter of 2008, so we're making great progress in embedding analytics into our business.

Our efforts around New Product Innovation continue to make strong contributions to our revenue growth. Revenue from products launched in 2008 to 2010 which, you, by now know is our NPI Vitality Index, was up 4% when compared to a year ago. And this is really a noteworthy accomplishment given that we dropped Settlement Services from the Vitality Index because it was a product launched in 2007, very successful product with strong revenue growth. That's now removed and even without being removed, still up 4% year-on-year and on track to meet our goals for the year.

Our key client program we call it, KCP, which is focused clearly on the largest U.S. banks that we launched over a year ago, as you will recall, is making significant inroads in terms of customer penetration, share gain and broadening our installed product mix, a couple of key points there. For each client in the KCP program, the team has developed detailed plans across business core product opportunities, Decision 360 product offerings, and deepening our relationships strategically throughout the entire organization.

Second point on KCP, for the majority of these clients, over 50% of the revenue is from product offerings that are unique to Equifax when compared to our primary credit reporting competitors. A strong statement supporting our strategy of integrating unique data assets and capabilities in helping our customers solve new problems and help us pursue new growth opportunities.

Third point on KCP, with one particular client, we have been selected as the sole source provider for instant, realtime verification of income and employment, which will be integrated into the organization's decisioning platforms for Home Loan and Card business units. That's a huge home loan force to be integrated now into the Decision platform, where something as large as the card and home loan lines of business.

Last point is for another very large client, we're developing the framework for a project to analyze bank card transaction data. The Client's objective is to develop a more compelling insight into consumers' buying behaviors, utilizing transactional and credit data enriched by our analytical tools and capabilities. We're excited about that opportunity.

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