易速傳真 (EFX) 2004 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Equifax First Quarter Earnings Release Investors Relations Conference Call.

At this time, all participants are in a listen-only mode.

Later, we will conduct a question-and-answer session.

Instructions will be given at that time.

If you should require assistance during the call, please press star, then zero.

And as a reminder, this conference is being recorded.

I would now like to turn the conference over to Jeff Dodge, Investor Relations.

Please go ahead.

Good morning, everyone, and welcome to today's conference call.

I'm Jeff Dodge, Investor Relations, and with me today are Tom Chapman, our Chairman and CEO, Don Heroman, the Chief Financial Officer, and [Dave Gunter][ph], Corporate Controller.

The financial information that will be discussed during this call and the reconciling information relating to these non-GAAP financial measures is included in a press release that we issued this morning and filed in a Form 8-K.

The press release and the GAAP reconciliation information may also be found in the Investor Center at www.equifax.com.

We will be making certain forward-looking statements to help you understand Equifax and its business environment.

These statements, as you know, involve a number of risks, uncertainties, and other factors that could actual results to differ from our expectations.

Certain risk factors inherent in our business as set forth in the filings with the SEC, including our 10-K for 2003 and any of the subsequent filings.

Also, as we said earlier, today's call is being recorded, and in addition, is being webcast live over the Internet.

So a replay will be available on our website after the conclusion of the call.

Now, I'd like to turn it over to Tom.

Thanks, Jeff, and good morning, everybody.

We know this is a very, very busy earnings day for all of you, and we very much appreciate your being with us.

We're going to be complete, but we're going to be swift this morning with our call.

During '04's first quarter, virtually every business that Equifax contributed to -- excellent revenue growth.

In fact, our international business has had one of the strongest quarters ever.

We also closed some very significant customer wins and created yet another world-class strategic partnership.

We believe this is a very solid start for the year.

Revenue for the quarter was a record 314m, up 4 percent.

If e-marketing and mortgage-related revenues were excluded, our revenue grew an outstanding 12 percent.

Earnings from continuing operations were $51m, up 13 percent, and earnings per share was 38 cents, up 15 percent, exceeding analysts' average expectations.

Now, let's review some of the key highlights of our five businesses.

First, North American Information Services continued to grow and increase share, particularly with our largest customers.

But this morning, I want to focus on two very significant initiatives -- Interconnect, our new fully integrated real-time decisioning technology, whereby our customers can make decisions about their consumer relationships at the point of sale; and talk a bit about small business.

During the quarter, we signed two substantial customers to the Equifax Interconnect solution.

SBC, one of the largest telco companies and a customer of ours for many years, agreed to a multi-million-dollar, multi-year contract for Interconnect.

SBC requires the full range of capabilities, from initial application processing to data integration, scoring, and decisioning, to champion challenger, to date warehousing.

Interconnect does it all and more.

The second customer is JP Morgan's brokerage operation, and they'll install Interconnect to support new account application and ID verification.

Our Interconnect sales pipeline is increasing, with prospects coming from the larger banks in the U.S., telcos, and brokerages.

Most will be using Equifax scores in all of their decisioning processes.

Another highlight for North America is the strong performance in Small Business services.

The Small Business marketplace is our non-credit card lending customers' fastest-growing opportunity.

For example, the volume of business loans less than $100,000 has been growing by over 20 percent a year.

And the largest lenders, most all of whom are members of our Small Business Financial Exchange, make almost 50 percent of those loans.

We're in the right place at the right time with the right data and products and for the right customers.

In fact, during the quarter, we generated $2m in revenues in our Small Business operation, and in March, I'm proud to say we had our first $1m revenue month.

And the Small Business Financial Exchange Advisory Board -- some of its members are American Express, Amsouth, Bank of America, BB&T, Citigroup, Hibernia, JP Morgan Chase, U.S.

Bank, Wachovia, and Wells Fargo, to name a few -- wanted a longer-term commitment from Equifax, and therefore, we executed an early renewal, extending this relationship through 2009.

We also introduced two small business scores for risk-assessment activities.

And perhaps you saw the ads from our national marketing campaign on this subject.

During the quarter, we partnered with SBSS, a leader in business intelligence solutions, providing our customers a one-of-a-kind world-class tool for assessing and managing risk in their small business portfolios.

The ability to make real-time decisions using our unique data and tools creates yet another distinctive competitive advantage for our customers in the business-lending space.

Online, Equifax and SBSS customers will evaluate portfolios by geography, size of loan, type of loan, or SIC code, etcetera, and compare their portfolios with other portfolios using point-and-click technology.

So, in other words, the CEO or senior risk executives have just had their dreams come true.

Imagine this if you're one of them -- come to work, you boot up your PC, you bring up your own loan portfolio.

You measure it against many different metrics, against other lenders' experience in real-time.

That's what we do -- empower our customers with information and technology to provide real-time answers to increasingly complex questions.

Strategic partnerships continue to enable Equifax to quickly respond to growing customer needs with first-to-market solutions.

Quality partners plus unique technology and data equal increased customer satisfaction and, thus, revenue growth.

Turning to our Marketing Services business, we're encouraged by some improving trends.

Specifically, total Marketing Services' operating margin was up 1 percent to 24 percent as our investments in new technology and new leadership begin paying off.

The traditional direct marketing products continued making progress in March, with the revenues setting an 18-month high.

The sales pipeline is building, and we're beginning to see improving volume trends in our credit marketing business.

Third is our Personal Solutions group.

That's the new brand for what we previously labeled Consumer Direct.

This new brand better captures the essence of what this business is all about and further clarifies our business lines for you.

Through this business, Equifax is providing information that enlightens, enables, and empowers consumers to protect their identities and enjoy credit-related piece of mind.

And this business is focused more than ever on consumers' increasing information needs.

We've grown Personal Solutions into a very meaningful business in just five years, serving a customer base exceeding 6.5m consumers, of more than 220m credit-active U.S. consumers, so there's plenty of room for growth.

Personal Solutions achieved impressive milestones in the first quarter.

Revenue reached another record at 25m, up 69 percent in Q1.

We've added over 500,000 new customers in the quarter.

Twenty-seven percent of our total customer base purchased two or more products, and revenue per customer increased to $25.85, up 18 percent from the previous quarter.

Renewal rates for Credit Watch, our I.D. theft alert product, are 55 percent, and profitability continues to improve as margins in Personal Solutions reached 27 percent, up from 11 percent in '03.

Now, turning to our International operations, Equifax's European business built on the momentum established in '03.

Revenue grew 23 percent to 38m in the quarter.

In the United Kingdom, which represents about 80 percent of European revenue, consumer-reporting volume was up 17 percent.

And Personal Solutions, launched in the fourth quarter of last year, which uses the same technology and products as North America, is off to a very strong start.

Now, let's go south to Latin America.

I'm really pleased with the performance here and the prospects that lie ahead.

Latin American revenue grew as the economies in the region continued to strengthen.

Equifax's unique decisioning technologies and analytical tools, installed in every country where we operate in Latin America, are an important part of this growth.

These proprietary services strengthen customer relationships and enhance market position in this part of the world.

And, of course, we continue to deliver strong operating margins.

Now, let me turn it over to Don, who will drill down in more detail.

Thanks, Tom, and good morning, everyone.

For our first quarter performance, consolidated revenue was $314m, up 4 percent, and earnings from continuing operations were $51m, up 13 percent.

Earnings per share were 38 cents, up 15 percent.

Within North America, U.S. consumer and commercial information services set a new first quarter record, growing revenue 4 percent, with online reporting volumes up 21 percent.

Mortgage reporting services continues to outperform the general market, with revenue of $18m, which was up 10 percent, compared to a 29-percent decline in the market as a whole.

While the refinancing mix dipped below 60 percent, purchasing activity was up 24 percent for the quarter.

Canada added to the momentum it created in '03.

During the quarter, revenue grew 14 percent, while margins improved to the highest level in four years.

Within Marketing Services, total revenue of $56m was down 27 percent.

The major challenge is credit marketing, where revenue was down 17 percent, driven by weak customer demand.

However, there are some encouraging signs.

Revenue from our traditional direct mail products was up 4 percent, the second-highest quarter in the last two-and-a-half years.

More significantly, we had double-digit growth in the month of March.

Personal Solutions delivered yet another stellar quarter, with revenue of $25m, up 69 percent.

And overall, North American margins were 37 percent, up from 36 percent in 2003.

In this environment, a full point gain in margin for North America takes superb blocking and tackling.

Europe's focus on improving growth, revenue growth, and profitability produced revenue of $38m, up 23 percent in U.S. dollars and 7 percent in local currencies.

We are very pleased to see the growth coming out of our European operations, where margins were 13 percent, up from 9 percent in 2003.

We also finalized the sale of our commercial operations in Spain.

Latin America delivered strong revenue growth in operating margins during the quarter.

Revenue grew 33 percent in U.S. dollars and 13 percent in local currency, reflecting the continued improvement in those economies.

For the corporation, free cash flow was $23m for the quarter, up from $16m in 2003.

We repurchased 1.5m shares of our stock for a total of $30m and have $97m remaining under the current authorization.

We made a $20m contribution to our pension plan, the same as in 2003, and our DSO, day sales outstanding, were 55 days, compared to 58 days at this time last year.

Again, an outstanding quarter and a great start for the year.

We continue to be encouraged about the opportunities in 2004 and look forward to reporting on our progress as the year unfolds.

Now, I'll turn it back over to Tom.

Thank you very much, Don, and before we open the call, I just want to say one more time on behalf of the 5,000 employees of Equifax that deliver these great results that we're very proud of the first quarter and look forward for the remainder of the year.

And now I'll open it up for your questions.

Thank you. [Caller instructions]

And our first question will come from the line of Brad Eichler from Stephens, Inc.

Please go ahead.

Don, nice looking results.

Thank you, Brad.

Couple of questions.

You guys were nice enough to break out the impact of mortgages and e-marketing in the quarter, but you put those two numbers together.

What was the composition of mortgages and e-marketing?

I'm trying to get at what's going on with that [Polk][ph] business.

Brad, it's Dave Gunter.

I won't break out the numbers for you, but you can pick up the piece parts.

You heard that -- in our presentation that in that direct marketing business, those products grew 4 percent, and then with mortgage, we did have a strong quarter.

I can give you the guidance, and it's similar to what you've heard before.

Our mortgage revenues as a percent of our total corporate revenues are a little bit stronger than 15 percent this quarter, with roughly one-third of that coming from the 3-in-1 product.

But, no, we don't break out those numbers in any greater detail.

Okay.

Credit marketing -- the decline in the Credit Marketing business?

Is there a question or--?

Well, what exactly is driving that?

I mean is it lower sales of prescores?

I mean what--?

Hey, Brad, this is Jeff.

As you know, the pre-screen market or the credit card mailings peaked in 2001.

It's come down in 2002.

It was down again in 2003.

Response rates have been declining, and we've seen some pick-up early this year, but it's still down year over year, and it's just overall demand.

[Inaudible].

No change from prior years.

And in this Small Business division relative contribution, if I'm a customer buying data from you and that, what is the relative contribution that I would pay, you know, for the scores that you guys are going to be selling?

So if I buy -- what are the economics to me as a customer of adding those four as a purchase?

Well, you buy a report, first of all, from the system, which would be significantly less than the competition that offers business reports, and nobody has the Small Business one.

You get a score attached to it.

We also market out of this portfolio a consumer report on the principal.

There's another add-on feature.

And the other thing that our customers are buying is portfolio review, where they're submitting their entire commercial loan portfolio, and we're analyzing them against this database and then comparing to the others.

So there's sort of a bundling of products and services that are really occurring.

We've now got a full menu from simple scores to principal data.

If I was just buying the core data component -- let's just say it cost a dollar -- if I was to add on the score on the business and the score on the proprietor, how much would that increase that dollar price just roughly?

I don't know, Brad.

I'd have to dig into that.

Brad, we don't talk about the pricing on those products.

Let me -- it's just -- you know, we've got a lot of our competitors on this line, and we're not going to talk about specific pricing.

That's just not smart.

Okay.

Thank you.

And our next question will come from the line of David Togut from Morgan Stanley.

Please go ahead.

Hi.

It's [Charlie Murphy][ph] calling in for David Togut.

Hey, Charlie.

How're you doing?

Good.

Could you just quickly talk about the margin improvement year over year in North American information services?

What were the key drivers of that, and how sustainable do you think that type of margin's going to be for the rest of the year?

Hi, this is Dave Gunter.

Yes, we can address that, the margin improvement.

First of all, we've been telling you that in North America in previous quarters, you've heard us talk about driving that margin up towards 40 percent.

We're continuing to do that, and we do that as we're not a price leader.

We're not taking price down in the market.

And so we're looking carefully to balance our growth in the consumer and commercial business.

I can also tell you if you're looking at the total overall North American business, that we're driving good margin improvement, and we'll see it in the line that we call Personal Solutions.

Looking forward, the next margin improvement that you'll see from us in North America will come in the Marketing Services business.

Okay, and maybe just as a follow-up to that, I mean the 21-percent rise in volume in consumer and commercial, could you talk about, I guess, what were the key drivers of that volume increase, what vertical?

Simply over time, we see that we're becoming very, very strong at financial services.

We have good, solid growth in telecommunications and utilities, and then we have good growth against a smaller base growing rapidly and insurance and the brokerage business.

So those three are hitting very, very well for us, and we continue to stay strong in our other verticals.

Okay, thanks very much.

Thank you.

Thank you, and our next question will come from Frederick Searby from JP Morgan.

Please go ahead.

Thank you, gentlemen.

Nice quarter.

Thank you.

Congratulations.

Just, first, you know, your guidance, I didn't catch you saying anything.

Can you just give us -- are you -- is this implicitly reiterating your prior guidance?

And specifically drilling down, there was some up side on the free cash flow.

Obviously, you pared back capex, and operating cash flow grew nicely.

You were giving us a two forty-five to two sixty-five, off the top of my head.

Do you think you're coming in at the high end of the range?

Should these kind of produce capex?

I mean should we expect that to continue?

I know the first quarter is seasonally light relative to the rest of the year.

That would be one question to drill down.

And the second is, you know, credit card was weak for you, and yet, you know, we probably have a -- if interest rates go up, it looks like a steepening yield curve here, which historically has resulted in some pick-up there, and then some of your counterparts, who were early on the infrastructure, are talking about it.

Can you give us a sense -- is that picking up?

And then Small Business Exchange, again, you're really seeing nice growth there, and it sounds like -- I mean it sounds like generally March was a better month, and if you adjust for season, did you see a pick-up sequentially, you know, January/February, building momentum in March for your whole business?

And then this Small Business Exchange on a sort of sustainable run rate, where can we be next year or, you know, or even -- I mean I guess for this year?

A lot of questions, but those are some of the principal ones.

Okay, Fred, you've got a lot of questions in there.

We're going to try to tackle all of them here.

In terms of our guidance, as we said before, we're going to come out at the beginning of the year to give guidance for the year and stick to it.

Clearly -- clearly -- the first quarter is a good start for us, and so we are optimistic about where the year is headed.

In terms of your free cash flow, historically, the first quarter is our weakest quarter.

It builds over the course of the year, and we would anticipate it to continue doing that.

So we did have a strong --

But do you think that -- you know, if you had to lean -- I'm correct, right, it was two forty-five to two sixty-five was your guidance?

Correct.

Looks to me like you're coming in -- you bested our number, and I would -- it looks like you're coming to the high end of the things here.

Fred, it's Dave.

Let me clarify for you.

Inside that free cash flow number -- which we provide a reconciliation in the back for the GAAP to non-GAAP -- inside that free cash flow number, you'll notice that our capital spend for the first quarter 2004 was $8.5m.

That's lower than the same quarter a year ago that was just under 13m.

So we can tell you that in the second quarter, we're going to continue our plan that capital spend is for certain software platforms.

We will have a heavier capital spend in the second quarter, and therefore, we'll stick with our guidance for the year, and we gave you capital spend that approximated 55m.

If you go back and look at cash provided by operating activities, that growth is about is about 11 percent first quarter 2004 compared to first quarter 2003, and that would be right in the bracket of the total year guidance that we gave to you that leads to the numbers two forty-five to two sixty-five.

So, just so you know, that's how the capital spend is working here in the second quarter, and we're not changing that guidance.

Fred, on the market stuff, credit marketing, we're seeing similar kinds of experiences in the marketplace in the first quarter '04 as some of our competition.

But the point I tried to make earlier is that --

So you're seeing a pick-up in the latter part of the quarter?

In the early -- yeah, we saw the same things that our competition in the marketplace were seeing.

So I mean is it continuing into April?

You're starting to see, you know, your pre-screen business starting to pick up?

Because it was down and --

Wait, Fred, what we've said is the mailings were down in 2002, they were down in 2003--

Sure, I follow [inaudible].

They're still down year over year, but, yes, we saw some pick-up early in the quarter.

So when should we start to see a pick-up year on year?

Fred --

It's too early to tell on that, Fred.

We're just starting to see the pick-up.

I think -- Fred, this is Tom.

You know, the consumer confidence indices are jumping all over the lot, and I think that's what the big marketers are looking at is to try to determine the best window in which to market, and it's damn tough for them.

I mean hasn't the -- I mean with the steepening in the yield curve we've seen, I mean isn't that traditionally actually -- I know the market doesn't always understand that, but doesn't that [always][ph] traditionally lead to, you know, some increase in credit card marketing?

Well, yes, and I hope that's the case, but I don't think with the war raging, with unemployment like it is, in the middle of all the mess surrounding an election year, I don't know whether that's going to happen.

But I'm going to tell you, Fred, I certainly hope it does.

All right.

And just -- you know, can you just comment on was March a better month than January and February?

Was there a momentum build as there was in the Small Business Exchange and some of your other businesses?

Are you talking about the [tech][ph] marketing?

No, I really was talking about just generally what it looked like, and then on the Small Business Exchange, it looked like, you know, you mentioned that you jumped to $2m.

Fred, this is Dave.

I'll just say it very briefly, and to answer your question directly, in Marketing Services, in particular, we see that March was stronger than earlier in the year, and so, therefore, we expect -- if you think of credit marketing sequentially, quarter over quarter, Q2 2004 will be stronger than this quarter.

So, yes, we do see that pick-up, and it is broad based.

Okay, thank you very much, gentlemen.

Thank you.

And our next question is from the line of [Scott Kessler][ph] from Standard & Poors.

Please go ahead.

Hi, thanks very much.

A lot of my questions have been answered, but I was wondering if you could talk a little bit about your plans in terms of your using your strong balance sheet and cash flow to pursue acquisitions?

And, also, how much money remains with respect to your stock repurchase plan, and do you have any designs on potentially a dividend in the future?

Thanks very much.

You bet.

A couple of things.

One is acquisitions, as we've always said, we are going to look at anything that makes sense for us to look at, and we'll continue to do so.

Two is on our remaining balance on our stock repurchase, we have $97m available, and as a reminder, we purchased $30m in the quarter.

And then on the dividends, we always look at dividends.

We always look at what we pay out.

And we will continue looking at that and monitoring it on a regular basis.

Thank you.

Thank you.

And our next question is from the Mike Vinciquerra from Raymond James.

Please go ahead.

Thank you.

Good morning.

I wanted to clarify one thing on the buyback.

I think you said you bought $30m back, and it was 1.5m shares, which only gives me an average price of 20 bucks.

Is that the execution price you guys were able to achieve in the quarter?

No, no, and those were rounded numbers.

Okay.

But it was actually 1.1m shares.

Okay.

I was going to say I want to get in touch with your broker if they got you that price.

Oh, no, no, not at all, Mike.

[Don't call!][ph]

The second thing, on the Personal Solutions side, I just wanted to flush out a couple things there.

First of all, who are you seeing as your key competitors?

You guys are obviously doing very, very well in that sector.

I'm assuming that the market, in general, is doing well, but who do you generally bump up against?

And then also was curious -- I assume you're doing both direct through your website, indirect, where you're kind of outsourcing the solution to other providers.

Can you give us some sense as to where the -- if the growth is stronger on one side or the other?

Well, there's a lot of people, you know, in the space marketing various type of consumer-related products.

I think our focus has been not to lure people to a website by any free offers and then sell them something.

The difference in our marketing, which consumers recognize and demonstrate to us in research, is we actually bring them to our site and sell them a whole array of products.

So a good bit of our activity comes through the Web.

I don't know, it's close to half of it, give or take.

We've got a great conversion rate when people come to the website.

We're doing a better job in developing our website, so -- and we're doing a good bit of Web advertising.

We've got some distribution partners, which are important in this business, and we're also marketing directly to companies.

We have a broad-based program going right now to use our ID protection as, in fact, an employee benefit.

And it's really beginning to be a major factor in the space.

We not only do it online, Mike, but we also are producing a comprehensive offline product.

I guess the best way to describe that is you get it the good old-fashioned way with paper and in the mail because a lot of people like to retain this information.

So, you know, 70 percent of the consumers buy due to an event.

I mean it could be education.

It could be auto.

It could be, you know, a housing situation.

So we're learning what those events are, and enough said about that, as part of our strategy.

And we're also going to launch very soon a product that, from an ID theft protection standpoint, ensures and covers the entire family.

We think this is going to have a huge impact because if you've got a sister or a brother or a child off at school or you've got an aged parent or whatever that's not living with you and you want to make sure that nobody's compromising their identity, we have developed a crackerjack product that's an extension of our single ID theft-protection product that allows the whole family to be covered, just like a group insurance policy, if you will.

So we're just very, very proud of that.

And I tell you, we're also doing some things that I believe separate us from the others that's in this marketplace because we're spending a heck of a lot of time trying to educate consumers about how the credit system works, how they need to be a part of it, who's responsible for ID theft, what they can do to help protect themselves, and that's the difference between Equifax and a lot of others.

It's our intent to educate and then appropriately sell based on need.

So we're really proud of the development of this business, and it's going to continue to be a big, big part of our franchise, and I'm pleased with the way things are moving around the world -- Canada and now into U.K. -- I just think that this is going to be a big business for us.

Great, great.

And just one thing on that.

Have you guys talked about what you thought your target margins would be in that business, say, just North America, once you get to maybe even a larger scale?

I think you have always said that they'll probably be lower than your core business.

I'm just -- I can't remember what the number was.

This is Dave.

We won't give you a hard number, but we can tell you in that today, at 27-percent, that we're at least going to drive towards that number.

Okay.

Thanks very much, guys.

Good quarter.

Thank you.

It may not be like, by the way, North America, but that's a pretty strong margin.

Thank you, and our next question is from Craig Peckham from Jefferies and Company.

Please go ahead.

Good morning, everybody.

I wanted to ask, I guess, maybe some longer-term questions.

First, Tom, I'm curious -- your perspective on China as a new market for credit reporting, credit issuance.

A lot of larger issuers starting to place some bets there.

How is Equifax looking to participate in that market's growth?

We're going to be very active and are already doing so in China.

I mean, my goodness gracious, it's the largest consumer market in the world.

They are becoming more and more interested in the use of information.

Our lead customers, like Citi and Amex and others are there.

They want us there with them.

We believe that we have technology that allows them to create if they want, you know, a traditional credit bureau, if you will.

We've got platforms that allow them to make decisions using their own information within their banks or their retailers or whatever, and we've got analytics that allow us to just take their data, even if there's not a traditional bureau configuration, and help them make decisions.

We have people on the ground in China.

We're very active with our partners at IBM and what's going on over there, and I just think it's going to be, you know, longer term, a significant market for us to explore.

And so will the model there be one really centered upon partnerships with U.S. issuers, or should we look to see you make alliances with Chinese government and financial institutions?

I think the latter.

I mean anybody that's in the lending businesses has data on Chinese consumers or businesses are contributors to data, just like our model here, so certainly if we've got U.S. companies doing business there, we would want their data; as well as the Chinese lenders, we would want their data in the database as well.

So the answer is both.

And we don't know yet whether this model's going to be the same here, but I do know that they understand fully that the credit reporting system in this country's the envy of the world, and they're, I think, inquisitive enough and certainly smart enough to know why try to reinvent a different kind of model.

So it's our hope that we can be flexible but also develop a model that we're able to plug and play and get rolling.

Okay.

And I guess turning to another matter, which is shorter-term in nature, last month, the FTC released for comments the processes and such surrounding free credit report distribution.

As you've looked at that and gotten a better handle on how this is going to be put into place, what do you think the impact will be on Equifax?

And I wondered if we could talk about maybe the cost, which I don't think is currently in your guidance for 2004.

No, it's not.

Let me tell you what I can tell you.

We're involved -- you know, I almost feel like we're employees of the Federal Trade Commission.

We're involved with them daily, and we're all over their deliberations.

And part of it, we're in a comment period now on the rules, the regs, the procedures, how consumers can request, what securities are associated with that.

None of that is conclusive.

They've laid out some initial thoughts, and the entire industry, as well as financial institutions, are responding to that.

So it's the final, really, adjudication of how this game will play out will be sometime in June, and it's very, very, very risky, as some have done, to speculate on the specific outcome.

So I think it'll be June, and [well][ph] after the comments before we know exactly what's happening.

By the way, at last count, we understood that there were almost 2,500 comments that had come into the FTC, so I think it goes without saying that we don't think they've got it right, and neither do the rest of the people in the industry.

So that's an ongoing debate.

But I will tell you this.

Despite what we think is bad and unnecessary in election-year legislation, we have been and are developing both cost and revenue mitigants.

There is a host of those that I don't want to talk about specifically at this time, but there's a host of those that we have and will continue to develop.

One other thing that I think you ladies and gentlemen on the line ought to understand.

We're doing a yeoman's job of trying to communicate with the customers impacted here.

They need to begin thinking of this from a programming IT standpoint as Y2K.

If our volumes multiply, so do the volumes of every single customer that we all have.

So do their call center volumes and expenses go up.

So they need to be ready to engage with us electronically as an industry instead of the paper.

There'll just be no more paper accepted.

And we're going to move and automate this system as an industry, and we're working real hard right now to make sure CEOs understand full well what the impact of this legislation and their free report will have on their back rooms, on fraud, and on their portfolio, and on possible increases in their expenses, because as I've said before, it will be our intention to ensure that all the appropriate parties pay their fair share, and that's really all I can tell you right now, [Brandon][ph], on that subject.

Okay, and I wanted to also clarify the pricing trends in North America.

I believe you'd said earlier that you had 20-percent volume growth in North America information services.

Is that right?

You heard 21-percent volume growth.

This is Dave.

Okay.

And just so I can get my arms around the pricing trend, it looks like revenue in North America information services, excluding credit marketing and direct marketing and Personal Solutions, about 6 percent?

Yes, that's correct.

Can you talk about what's happening there in terms of pricing?

Obviously, there's a mix issue in there as well, and I'd like to get a better delineation between the two.

There are two things.

I'll give you a sense for the trend without revealing pricing information.

One is if you looked at the mix, yes, that mix continues, and there are certain areas that we were driving growth very, very quickly.

The second thing that I can tell you is that the actual pricing movement, if you eliminate the mix, is only in the low- to mid-single digits.

Okay.

And what would be your kind of longer-term expectation, I don't know, say over the balance of the next year or two in terms of apples to apples [mild] pricing pressure in that business?

Well, listen, obviously, we are in a very competitive business, but all we'll tell you is that we're going to continue to drive up margin and leave it at that.

I only add that, you know, what would we hope would happen here is that this industry's undergoing a sea change based on legislation, etcetera, and the value of our products and services are increasing.

And, therefore, it's our intention, as it's always been at Equifax, to have reasonable pricing based on the value of products that we sell.

So it's our intention every single day to minimize or stop pricing erosion.

And that's what I guess every company's trying to do, but that will continue to be a key objective for us in the future.

Do you get the impression that the competition is getting less rational pricing-wise more recently?

No -- this is Tom -- the pattern has continued, and well, we're seeing nothing particularly chang.

Okay.

Thanks for the answers.

Thank you.

Next?

And the next question is from [Brandon DeBell][ph] from CSFB.

Please go ahead.

Good morning, guys.

Good morning.

Morning, Brandon.

Just one quick one because most of mine have been, thankfully, answered already.

In the Marketing Services business, as you think about that going from '04 to '05 with the economy helping you out, what's kind of the longer-term profile for that business from a top-line growth and perhaps a margin perspective?

Just given what you guys have gone through the last couple of quarters and where you're starting from kind of low base in terms of [expenses][ph], how do we think about that business in the next 18 months or so?

I think it's still a little bit tough to tell.

We're beginning to see, as we say, spurts of marketing, particularly in the postal arena.

I think so much depends on consumer attitudes.

I think right now that with -- all you've got to do is turn on the tube, and there's nothing but bad news about Iraq.

It looks as if the election process is going to be very hostile, which does not help consumer confidence.

I think, you know, one little comment from Greenspan, Wall Street goes berserk about the fact that rates are going through the roof -- which is not what he said at all -- impacts consumer confidence.

And then they get reports the next day that, "Well, we didn't really mean that rates were going up," and the market goes up.

That tends to dilute and confuse consumers.

It's just a wacky environment for marketers of all types to play in, and I think our hope is that America can stabilize somewhat as we move through these tough times, and I believe marketers have still got to sell their goods and services.

They're going to do it via the phone, they're going to do it via the Internet if they can, and they're going to do it through postal.

I still think that a huge opportunity is for financial services and card-related customers -- I mean institutions -- to cross-sell and work on retention.

Retention is going to be the key; particularly, as someone asked earlier, as rates go up, consumers will have more choices as it relates to the liability and deposit side of the business.

We think our platforms, like Interconnect and some of those other analytics and predictive sciences tools, are going to help there.

So I'd like to say, boy, I really feel robust about that, but I think those are the real drivers that we see that affect the market and really addresses your question as best I can.

Okay.

And then one quick follow-up there.

Have you seen any of your customers, especially the financial services guys, start to think about shifting dollars from outbound telemarketing over to different vehicles?

Not demonstrative enough to say that there's a trend.

I mean there's a lot of that going on in balancing to try to see where they get the best response and the least cost per acquisition.

And we've got some ideas of how to help them with that as usual, but I don't see a trend occurring yet.

Okay, thanks, guys.

Thank you.

Have a great day.

Operator, we'll take one more question and then cut the call off.

Thank you.

And our final question will come from the line of Kevin Gruneich from Bear Stearns.

Please go ahead.

Thanks.

A few questions.

I was wondering, first, on Personal Solutions, it was seeming like you were getting toward critical mass and would have a margin pivot up.

But moving up to 27 percent is a bit surprising to us.

Now, Dave, I think, responded that that's kind of the in-game, that you hope to keep it at 27 percent.

What was so special about Q1, and why are you at a point of critical mass that won't improve?

This is Dave.

To finish that thought, I'm not saying that we won't improve, but we're in new territory here, having moved from 18 percent up to 27 percent.

And, simply, the products that we have with the highest revenue value and margin value to us are the products that we're moving very successfully.

The second thing that you see here inside the trend -- and you heard us talk about 6.5m customers -- is we're driving revenue and customers very, very rapidly.

So this is one where we're watching the trends as carefully as you are, but obviously, this is growing very, very fast.

This is Tom, Kevin.

Good morning.

How're you doing?

I'm fine.

Thanks, Tom.

I think the other thing that's important is the new products.

I mean when we start looking at a different mix of product, as I mentioned, particularly on the Web, as you know, we've got great flexibility to find the right pricing points based on the right demand, and I think one other thing that's happening in our margins and the growth is we're just getting smarter.

We really have got a bunch of very smart people in running this business.

We're better at managing the cost of acquisition on the Web.

We understand better how to do it.

We understand what the right return is on advertising dollars, and I just think it's -- even though this is sort of a baby business, that we brought in some real talent that understands how to optimize the return, and I think those are the dynamics working here.

Okay.

So just going back to Dave's earlier answer, are you planning to dramatically accelerate marketing and development expenditures to the point that you continue to see excellent revenue growth but that margins stabilize around the high 20s?

Kevin, the answer is we're looking at steady and solid marketing efforts there.

They will continue.

We feel good about where we are.

We feel good about the momentum.

We expect that to continue through the year.

Kevin, this is Tom again.

Sorry to jump back in, but one of the things that research is proving over and over and over in this Personal Solutions business is the Equifax brand is rock-solid, and people trust it, they understand it, they know we're going to keep this information and the interchange with them private, and I believe that is a huge differentiator for us.

Okay, thanks.

Tom, you can't argue with double-digit revenue growth in the Latin American side of the business in saying that's a great performance.

I was wondering what's -- on the profit side, if you strip out currency, it looks like profits were actually down, and I was wondering what would cause that in such a strong revenue environment.

Are you speaking to Latin alone?

Yes.

Kevin?

I am speaking to Latin America alone.

We have some new business in one of our countries where we have a very large government contract, and we are ramping up.

That's going to kick in very soon here.

We already see the turn, and that's going to lift our margins there.

So we are making an investment to further our growth on that continent.

Terrific.

And, finally, could you provide an FTE count at the end of Q1?

Roughly 4,500, just a notch over 4,500 all in.

Thank you very much.

Thanks, Kevin, and have a good one.

Operator, at this point, we'd like to shut down the call.

We'll be available this afternoon and later this morning for anybody that has any additional questions.

Thank you.

And ladies and gentlemen, this conference will be available for replay after 12:00 today through April 29.

You may access the AT&T Teleconference Replay System at any time by dialing 1-800-475-6701 and entering the access code 725755.

International participants can dial 320-365-3844.

Again, the numbers are 1-800-475-6701 and 320-365-3844, with an access code of 725755.

That does conclude our conference for today.

Thank you for your participation and for using AT&T Executive Teleconference.

You may now disconnect.

Thanks, everybody.