Equifax, Inc. (EFX)

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Equifax (EFX)

Q2 2011 Earnings Call

July 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


William Warmington - Raymond James & Associates, Inc.

Daniel Leben - Robert W. Baird & Co. Incorporated

Carter Malloy - Stephens Inc.

Jaime Brandwood - UBS Investment Bank

Georgios Mihalos - BofA Merrill Lynch

Rayna Kumar - Evercore Partners Inc.

Richard Cheever - SunTrust Robinson Humphrey



Good day, everyone, and welcome to the Q2 2011 Equifax Earnings Release Conference Call. Today's conference is being recorded. At this time, it is my pleasure 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 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 2010 Form 10-K and subsequent filings. We will refer to a non-GAAP financial measure adjusted diluted EPS from continuing operations attributable to Equifax, which excludes acquisition-related amortization expense and the loss in the merger of our Brazilian operations with Boa Vista Servicos.

Since our Brazilian operations were merged with Boa Vista on June 1, we also present revenue growth excluding Brazil from both second quarter of 2010 and the second quarter of 2011 to provide a clearer understanding of our revenue growth for those segments that will continue to be reported in our operating results. These measures are detailed in our non-GAAP reconciliations included with our earnings release and posted on our website. Please refer to the non-GAAP reconciliation and our 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 the call over to Rick.

Richard Smith

Thanks, Jeff. Good morning, everyone. Thanks for joining us. As I typically do, I'll start the conversation off by giving a high-level overview of the second quarter. I'll then get into some details, some highlights according to the business units, and I'll come back and give you some thoughts on an outlook for the third quarter.

Second quarter, we continued our solid broad-based growth and expanded our operating margin, consistent with what we told you earlier this year. The diversity of our strategic initiatives and the strength of our execution continue to pay dividends in what is largely kind of a sluggish economic environment in many parts of the world as you know.

For the quarter, total revenue from continuing operations was $487.1 million, up 6% from second quarter of last year, excluding Brazil, which lurks and I'll talk about that later in the Boa Vista. So excluding that, total revenue was actually up 7%, which is solidly in line with the outlook we've provided in April.

Operating margin was 23.5% up from the year ago, benefiting from continued operating leverage in many of our business segments for the transaction and our strategic growth initiatives and obviously, the merger of the Brazilian operations. Finally, adjusted EPS from continuing operations was $0.61, up 9% from $0.56 last year.

Getting into some of the brief highlights, the business units. When we started with USCIS, they continued to experience broad-based improvement in many sectors, which has enabled its largest segment, Online Consumer Information Solutions, to deliver solid growth quarter-after-quarter. Online Information Services year-on-year volume growth has sequentially improved now 6 straight quarters from a negative 15% in the first quarter of 2010 to a positive 11% this past quarter, second quarter of 2011.

Our telco positive database, which we talked to you about in the past, is launched earlier this year, is also generating very strong customer demand, as both installations and commitments are ahead of our expectations. We also launched a new scoring product based on this database. At this point, we'll exceed our original revenue targets for 2011, and most importantly, create a very strong foundation for growth in that unit in 2012 and beyond.

I'll stick in with USCIS, our Decision 360 initiatives, when we leverage the multiple data assets that we have are making a significant part of our new product activities and pipeline. Through June, we're generating revenue from 13 different product offerings, many of which were just launched as recently as late 2010.

The mortgage sector, you know it, it was tough. And it was tough as we expected. We told you it would be tough. It started -- difficult comparisons started in late first quarter and will continue through fourth quarter 2011, but we obviously anticipate the costs should improve nicely as we move in 2012.

Finally, in USCIS, customers are increasing their usage of our data analytics -- of our analytics solutions to enhance the decisioning process. During the quarter, 39% of our online transaction volume included an analytical component from Equifax model, and that compares to 32% in the second quarter of 2010.

Read the rest of this transcript for free on seekingalpha.com