Equifax, Inc. (EFX)

EFX 
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Equifax (EFX)

Q4 2011 Earnings Call

February 09, 2012 8:30 am ET

Executives

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

Analysts

Carter Malloy - Stephens Inc., Research Division

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

Nadia Lovell - JP Morgan Chase & Co, Research Division

David Togut - Evercore Partners Inc., Research Division

Julio C. Quinteros - Goldman Sachs Group Inc., Research Division

Manav Patnaik - Barclays Capital, Research Division

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

Georgios Mihalos - Crédit Suisse AG, Research Division

William A. Warmington - Raymond James & Associates, Inc., Research Division

Unknown Analyst

Daniel R. Leben - Robert W. Baird & Co. Incorporated, Research Division

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

Richard Cheever

Presentation

Operator

Good day, and welcome to the Q4 2011 Equifax Earnings Release Conference Call. Today's call 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

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 will 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 businesses are set forth in 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, a tax benefit in the fourth quarter and the loss on the merger of our Brazilian operations with Boa Vista Serviços. Since our Brazilian operations will merge with Boa Vista on June 1, we also present revenue growth excluding Brazil to provide a clearer understanding of our revenue growth for the businesses and will continue to be reported in our operating results.

These measures are detailed in our non-GAAP reconciliation, included with our earnings release and posted on our website. Please refer to the non-GAAP reconciliation and our other various Investor Relations presentations posted on our website 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 good morning, everyone. Thank you for joining us today.

I think you'd all agree 2011 was a very solid year for Equifax. In fact, it was a year in which we saw accelerated organic growth as each quarter unfolded. In the fourth quarter, organic non-mortgage revenue growth accelerated from 8%, up from 7% in the third quarter and 4% in the first quarter. And by the way, total organic growth, when you include mortgage, was actually 9%, the strongest we've had in quite some time.

Throughout the year, we continued to invest in critical growth -- revenue growth initiatives, ending the year with $75 million in CapEx and $127 million invested in strategic acquisitions around the globe. We also invested our shareholders, returning over $220 million in the form of dividends and share buyback.

Our investments in new product innovation continue to pay great dividends. In 2011, we generated very strong double-digit growth in new products for risk services, Verification Services, fraud, technology and local services and marketing. In fact, for the year, we launched a total of 69 products around the world, and that allowed us to expand into new markets and gain share with existing customers as well as new customers.

Taking a quick look at some of the high-level financials for the quarter. Obviously, Lee will give the detailed financials later on. Total revenue from continuing operations is $510 million, up 6% from a year ago. If you exclude Brazil, total revenue was up 10% for the quarter and up 11% in constant dollars. Operating margin was just as we expected, 24.7%, up 190 basis points from a year ago, obviously benefiting from the operating leverage that we get as well as deconsolidation of our Brazilian operations. Finally, adjusted EPS from continuing ops was $0.68 a share, up 10% from $0.62 a year ago.

And now, as I normally do, I'll go through some business highlights. Our internally-generated momentum in 2011 positions us very well for strong growth this year. The environment of our customers is obviously very different than what it was just a few years ago before the recession. Our strategy has enabled us to adapt extremely well to the emerging needs and provide high-value solutions that help -- will help them be more successful in this challenging environment.

So here are the highlights. I'll start with USCIS and move through all 5 of them. First, USCIS had an outstanding year, exiting with double-digit revenue growth, expanding its operating margin by 120 basis points over the fourth quarter of a year ago and, like their peers around the world, launched 13 new products as NPI becomes an integral part of their growth.

We exited the year with broad-based growth and volumes across all sectors, including financial services, that's the large financial services, regional financial services as well, telco, mortgage and our channel partners, really, truly broad-based volume growth across all entities for USCIS. They also delivered $23 million or 3 percentage points of their growth from NPI, and these are products that were built over the last 3 years, so great success there.

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