Equifax, Inc. (EFX)

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Equifax (EFX)

Q3 2012 Earnings Call

October 25, 2012 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


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

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

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

Georgios Mihalos - Crédit Suisse AG, Research Division

Eric J. Boyer - Wells Fargo Securities, LLC, Research Division

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

David Togut - Evercore Partners Inc., Research Division

Carter Malloy - Stephens Inc., Research Division

Manav Patnaik - Barclays Capital, Research Division

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

Paul Ginocchio - Deutsche Bank AG, Research Division

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



Good day, and welcome to the Q3 2012 Equifax Earnings Release Conference Call. Today's conference 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

Thank you, and good morning, everybody. 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.

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 business are set forth in the filings with the SEC, including our 2011 Form 10-K and subsequent filings. We will refer to a non-GAAP financial measure adjusted diluted EPS attributable to Equifax, which excludes acquisition-related amortization expense. These measures are detailed in our non-GAAP reconciliation tables included with our earnings release and also posted on our website. Please refer to the non-GAAP reconciliation in our various investor presentations 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 good morning, everyone. Our team posted yet another really strong performance in the third quarter. Our strong performance, again, reflects the breadth and the balance of our business model. Our customers increasingly value unique products and services we offer, and our team is always focused on driving sustainable organic revenue growth in what is a challenging economic times. Strength in the mortgage refinancing activity aided our results as well, but we're also seeing, for the first time, strength across the new home sales in the U.S., which is encouraging and, I think, bodes well going forward.

Even in our mortgage offerings, just as in the rest of the company, we're also gaining market share through introduction of new products and increased share of wallet from enhanced service delivery.

For the quarter, our core organic growth, including growth initiatives, was 7.2%, which is in the middle of our long-term organic growth range that we've communicated for quite some time now, being between 6% and 8%, so solid on the organic growth.

For the quarter, revenue was $544 million, up 11% in the third quarter of 2011. On a constant currency basis, revenue was up 12%, which is above the range we gave during our second quarter call.

Operating margin was 24.3% compared to 24.8% in 2011. When you exclude severance expenses in our International business, which was not anticipated at the time we gave our guidance for the third quarter, the operating margin was 25%. Finally, adjusted EPS was $0.75 a share, up 16% from the $0.65 we delivered last year.

And we transition quickly to each of the business units. Each of the business units continued to successfully address the needs of the markets with high-valued solutions. We've adopted our new product innovation, strengthened our strategic initiatives, streamlined our operation and strengthened our management teams to ensure we meet our commitments to both our customers and our shareholders, and the team continues to execute at very high levels across the board. It's been a constant theme now for the last couple of years.

Strong double-digit growth in USCIS was broad based. In addition to new relationships, we're developing and leveraging our unique data assets and our proprietary technology. We continue to compete based upon our track record of product innovation to secure long-term relationships and greater penetration, and do customers' business activities.

As an example, continuing our success in the insurance arena, we won a new multi-year deal with over $5 million. We've become more, more bullish in the U.S. around the insurance sector for our long-term growth.

In our traditional financial institution sector, we have been selected by a top bank, top 4 banks in the country, for a multi-year agreement to provide data for an enterprise-wide database platform to support their analytic and modeling development activities. This project will leverage many of our unique data assets, our proprietary data linking technology and many of our Decision 360 product offerings. This is really exciting. This will allow us to get in there and codevelop with our customers new products to solve new problems for them in the future and financially, very, very lucrative for us.

Sticking with USCIS, we continue to have great success with our proprietary ID and fraud management solutions, including Anakam's two-factor authentication solution. We signed 3 different contracts with the U.S. government in the quarter, and these 3 contracts represent over $5.5 million in first year revenue.

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