易速傳真 (EFX) 2004 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to the Equifax third-quarter earnings release investor relations conference call.

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

Later, there will be a question-and-answer session and instructions will be given at that time. (OPERATOR INSTRUCTIONS) As a reminder, today's call it is being recorded.

At this time, I'd like to turn the conference over to Jeff Dodge, Investor Relations.

Please go ahead, sir.

Thank you.

Good morning, everybody.

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, Chief Financial Officer;

Dave Gunter, Corporate Finance; and Nula Cain (ph), Corporate Controller.

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

The press release and GAAP reconciliation information may also be found in the investor center on our website at www.equifax.com.

We will also 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 '03 Form 10-K, and the subsequent filings this year.

Today's call is being recorded in addition to being Webcast live over the Internet.

The replay will be available on our website, again at www.equifax.com.

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

Thanks, Jeff, and good morning, everybody.

We just reported another strong quarter for Equifax, a quarter where our results were driven by solid gains in both financial and operational performance.

Revenue was a record 323 million, up 4 percent.

Excluding mortgage-related revenue and eMarketing, consolidated revenue grew 8 percent for the third quarter, which is in line with our guidance for the year that we provided you.

Earnings from continuing operations were 53 million and EPS was 40 cents.

But the numbers were only part of the story.

During the quarter, we made significant progress on critical strategic initiatives.

For example, we developed and launched some exciting new products, and our objectives and strategies continue to be enhancing customers' decisioning intelligence to more effectively interact with and serve their customers, broadening our service offerings to consumers via our Personal Solutions business, and moving our businesses further up the value chain from data to analytics and ultimately to decisioning technology, which is the real driver of growth and differentiation in our business units.

Let me put in another perspective for you.

At the core, Equifax is an incredible content company, with enormous information assets around the world.

Secondly, we enable our customers to navigate through these large volumes of information, not only ours but theirs, for both consumers and businesses with our Predictive Sciences expertise.

And then thirdly, we empower customers to access that information in real-time and act upon it with our decisioning technologies.

We are building honor Equifax brand in the consumer space.

We are continuing our consumer education efforts, and have just launched an exciting, innovative national advertising campaign for our Personal Solutions business.

Let me point out this is the first national advertising campaign in Equifax's history.

Our multimedia advertising campaign includes radio and direct response.

Syndicated radio spots will run through the end of the year in major markets and major programming.

We recently completed a consumer survey with Harris Interactive to better understand consumer product needs as well as new opportunities for credit education.

As many of you know, credit literacy has been a long-term commitment of this Company, and this survey indicates very clearly that there remain a lot of misconceptions, fears, misunderstandings and desires about credit and fiscal health.

Our suite of Personal Solution products will continue to enlighten, enable and empower the consumer, strengthening their ability to maintain and enhance their creditworthiness, thus providing our customers a better risk for their own growth.

Due to this proprietary research, our product suite additions and enhancements will be more precisely focused on the consumer needs.

We have continued our FACT Act initiatives, ensuring compliance and creating sales opportunities along the way, thus protecting our bottom line and the interest of our shareholders.

Now let me give you some highlights for our businesses.

North American Information Services continued to deliver rock-solid performance.

Core U.S. reporting volume was up 6 percent, driven by the financial, telco and utility verticals.

Small business, where Equifax has established a unique ability to provide intelligence in this market, delivered $2 million in revenues for the quarter.

The key solutions we bring to this equation are the ability to locate a small-business file in real-time, have relevant content in that file and be able to score and predict behavior based on that content -- based on content that only Equifax possesses.

We continue to enhance the small-business database with critical information.

For instance, of the small businesses in our database, 59 percent have four or more trade accounts. 57 percent of those businesses have both a financial account and a trade receivable account on their file.

And this year, we've increased the content of the database by almost 30 percent, while adding over 3 million new businesses, bringing our total database of small businesses to approximately 25 million small-business companies.

Our Predictive Sciences unit, where we use analytical science to reduce large amounts of data into decisionable information and action, we completed custom risk modeling projects for two major telcos, beat out competition for a custom triggering project with a top five card issuer, and were selected by a large Canadian bank to develop custom risk modeling for their BASEL 2 compliance.

In fact, we see BASEL 2 as a significant international opportunity.

We are working on compliant modeling solutions for lenders in each of our geographies to better assess risk in their portfolios.

We believe the new BASEL 2 capital requirement test will be a way of life for many of our customers, and are working with them to address their needs for both commercial and consumer lending portfolios.

As for InterConnect, our modularized decisioning platform, we've got a lot underway here, including completing the contract with a top 10 bank for their demand deposit account opening processes, a unique project to isolate, identify and track potential fraud for financial institutions' direct and indirect lending channels.

When we introduced InterConnect earlier this year, we told you that the platform's faster.

Its more accurate decision-making capabilities would add customers and market penetration, and so far, overall market reaction continues to bear us out.

And as always, technology will continue to be an integral part of our strategies.

Recently Info Week recognized the top 500 companies for their innovative use of technology.

I'm proud to say that Equifax ranked 25th overall and third in the banking and financial services industry.

This is the third consecutive year we have ranked in the top 25.

Turning to Marketing Services, we continue to execute on the basics with our core product offerings and remain optimistic about the opportunities in this space.

Total Marketing Services' 36 percent operating margin is up from 30 percent in Q2 and up from 11 percent in Q3 of 2003.

Our direct marketing product revenue grew 3 percent, and credit marketing reversed its first half trends, delivering revenues of $37 million, up 3 percent compared to Q3 of 2003.

Turning to Personal Solutions, we've added almost 400,000 new customers during the quarter, bringing our total membership base to 7.8 million consumers. 40 percent of our total customer base purchased two or more products, up from 33 percent in Q2 of this year.

Average annualized revenue per customer for purchases during the quarter is over $30, up slightly from the previous quarter.

And renewal rates for Credit Watch, our idea theft alert product, again exceeded 50 percent.

We also launched our print delivery capability and introduced two new products -- Home Valuator is our first non-credit-based product, which provides consumers with access to critical property information, including valuation, comps, building records and other statistics.

This information further empowers consumers to more intelligently manage their financial well-being, particularly as they look for episodic real estate transactions, whether they are buying or selling a property.

And the other product, Credit Rankings, which helps consumers better interpret their financial health through comparisons with other consumers on ten different risk rating criteria.

We are glad to announce that recently Kiplinger's "Your Money" newsletter found Equifax's credit profile as the easiest to use of the three credit reporting agencies consumer products, further enhancing our mission to enlighten, enable and empower consumers.

The advertising campaign that I mentioned earlier incorporates a very unique and powerful message.

It clearly positions Equifax as the company which helps consumers better understand the power of a good credit score, for instance, by using a humorous approach to real-life consumer situations.

I hope that by now many of you have seen our ads or heard the spots.

The Equifax brand is a great one and a strong one, and you can expect us to continue to be aggressive in marketing innovative solutions for both consumers and business customers under this flagship.

Finally, our international operations continue to deliver profitable revenue growth.

Europe is having its best year ever.

In the United Kingdom, which represents the majority of our European businesses, consumer reporting volume was up 9 percent when compared to Q3 of 2003, driven by growth in telcos and financial services.

And we won yet another government contract for our I.D.

Authentication Services worth an incremental $1 million.

This is our second large competitive take-away in the government sector in the United Kingdom.

The Personal Solutions business in the UK, launched in the fourth quarter of '03, grew 50 percent over Q2 and continues to build momentum in the marketplace.

You know, we are just beginning to penetrate this market and have high expectations for its growth potential.

For instance, in the U.S., our penetration of the 220 million credit-active consumers is approximately 3.5 percent.

When we look to the UK, we've only penetrated about one-half of one percent of the 30 million credit active consumers.

Overall, our European operating margins exceeded expectations last year, and, at 21 percent for the third quarter, are doing the same thing again this year.

Latin America has both opportunities and some challenges.

A 25 percent growth in online buying continues to drive strong local currency revenue growth.

Our Marketing Services and Predictive Sciences products are delivering double-digit growth compared to last year, as customers increasingly demand innovative solutions that contribute to their revenue and earnings growth.

I want to accentuate the point that in Latin America, our Predictive Sciences and our decision platforms are a unique differentiator for Equifax that our competitors do not have.

And then finally, we are expanding our Personal Solutions products throughout the Latin American region.

Latin American growth and margins are improving with one exception.

Growth in Brazil was slowed down a bit and as a result, margins have suffered.

Our new executive leadership has moved swiftly to restructure and refocus the management team in Brazil and develop stronger sales efforts around the decisioning and analytical sciences product offerings I just mentioned.

Also, we signed agreement with IBM to outsource our processing infrastructure, further leveraging the partnership we have with them, which we launched last year.

This agreement should further reduce our processing expenses, improve system time, enhance customer satisfaction and help margins.

In summary, we believe we had a solid quarter, with strong, broad-based performance and continued investment to position us for success in 2005 and beyond.

And now I'll turn it over to Don to drill down in more detail.

Thanks, Tom, and good morning, everyone.

I would like to review the third-quarter financial results with you.

For the quarter, consolidated revenue was $323 million, up 4 percent.

Excluding mortgage-related revenue and eMarketing, consolidated revenue grew 8 percent for the quarter.

Year-to-date consolidated revenue was $956 million, up 3 percent, and excluding mortgage-related and eMarketing revenue, was up a very solid 9 percent.

Earnings from continuing operations were $53 million.

We also recorded a $500,000 gain on the final disposition of our Spain commercial discontinued operations.

EPS was 40 cents, up 3 percent during the quarter.

During the quarter, we finalized our 2003 tax return.

As a result, our effective tax rate during the quarter increased, primarily due to limitations on our ability to utilize foreign tax credits.

This increase resulted in a 1-cent negative impact on our GAAP EPS for the quarter, as reflected in the GAAP/non-GAAP reconciliation section of our 8-K filing with the SEC.

We anticipate the effective tax rate to return to a normal range of 37 to 38 percent for the fourth quarter and into 2005.

Within North America, U.S. consumer and Commercial Information Services revenue was $134 million, flat compared to last year.

Mortgage Reporting Services again countered overall market trends.

Revenue of $19 million was up 3 percent and compares favorably by 24 percent decline in the mortgage application index for the market as a whole.

Refinancing as a percent of total applications was below 50 percent; however, purchasing activity continued to grow and was up 14 percent as the quarter ended.

Canada grew revenues 4 percent to $24 million.

They have now delivered 8 consecutive quarters of revenue growth and are posting very solid performances for us.

Marketing Services total revenue of $60 million was down 3 percent, driven entirely by the decline in eMarketing revenue.

Revenue from our direct-mail products was up 3 percent.

And our Credit Marketing Services revenue was $37 million, also up 3 percent.

This is particularly encouraging as it is the first quarterly revenue growth since the third quarter of 2000.

Personal Solutions delivered another solid quarter, with revenue of $24 million, up 26 percent, and a 19 percent operating margin, up from 12 percent in 2003.

Overall, North American margins were 38 percent, up from 35 percent in 2003.

Europe's revenue of $39 million was up 22 percent in U.S. dollars, or 9 percent, still a very strong, healthy number in local currency.

This is our best quarterly performance in four years, and as Tom mentioned, our European operations were particularly proud with the progress they have made.

Latin American revenue of $24 million was up 10 percent in U.S. dollars and 8 percent in local currency.

Now for the Corporation.

Cash provided by operating activities was $94 million for the quarter, up from $91 million in 2003.

Free cash flow was $81 million for the quarter, up from $78 million in 2003.

We repurchased 1.6 million shares of our stock for a total of $38 million.

In August, the Board authorized an additional $250 million for stock buybacks.

We now have a total of $274 million remaining under the current authorizations.

Days sales outstanding were 56 days, flat compared to last year, after significant improvement over the last couple of years.

During the quarter, we completed a new $500 million revolving bank credit agreement to replace an existing facility.

I might add that that's a five-year facility, so it's a very long-term facility, showing the confidence in Equifax in the market.

We also closed a $125 million trade receivables facility that should lower our overall cost of capital and add additional flexibility to our cash management process.

Current debt outstanding is $681 million; that's down $187 million compared to the third quarter of a year ago, demonstrating the strengthening of our balance sheet.

Now I'll turn it back over to Tom.

Thanks, Don, and now we will be happy to take your questions.

(OPERATOR INSTRUCTIONS) Fred Searby with JPMorgan.

It's Jason (indiscernible) for Fred Searby.

Congratulations on the good quarter.

Questions on Personal Solutions.

I notice there's a sequential decline in margins.

I was wondering if that's going to continue.

I was wondering -- I know it may be hard to estimate -- regarding the FACT Act, that there is 5.7 million in the quarter, but I was wondering if that's going to be -- what the run rate would be, if you have any estimate on that?

I'll take the first question, and then I'm going to have to get you to repeat the second question for me.

On the first question, Jason, the sequential decline.

As Tom highlighted in his notes, we have started advertising on a national basis for the first time in Personal Solutions to really start driving top-line revenue growth in that business.

And so the margins you are seeing there are a direct reflection of some of that advertising dollars.

We are reinvesting in the business to grow it.

Great.

And I was wondering if you had an idea on the run rate for the FACT Act cost.

I noticed it was 5.7 million in the quarter.

I was just wondering -- just looking forward, do you have an estimate on that?

The $5.7 million is capital expenditures.

We had disclosed in the Q from second quarter that we had about a $10 million capital spend run rate that we were going to incur. 5.7 million of it was incurred in the third quarter.

Okay, all right.

Great, thank you.

Brad Eichler with Stephens.

Good morning, guys.

A couple of questions.

First, could you spend a little bit more time going through the core U.S. business?

And I realize mortgage was down a little bit, but revenues were a little bit flat and margins were down.

I just want to make sure I understand exactly what is driving that.

I'll start on that and Dave may follow up with a couple of things as well.

The revenue is -- embedded in the U.S. operations and in North America Information Services is what we call specialty, which is purely mortgage-related.

And so when you look at our net mortgage numbers, you can see the other mortgage businesses growing.

So the specialty is where we are experiencing the decline, and that's what's a large part driving the revenue side on North America.

And the margins, while they are down from a year ago, they are really only down 1 percent from second quarter, and that really is driven by mix -- the shift away from the specialty business, where we had on the margin experienced slightly higher margins, Brad.

Okay.

And some of the folks we cover -- in fact really almost all the folks we cover that have reported so far have had pretty good Marketing Services numbers.

It looks like if you strip out the eMarketing, you guys were up about 3 percent.

Could you give a little more detail on what you are seeing from your clients there?

Marketing Services, yes it is performing pretty well.

And as we thought, we did have sequential growth even over the second quarter.

So in Marketing Services we had both, as you've heard, a 3 percent growth with the postal product and a 3 percent growth in the credit marketing product, and it's a broad overall growth.

It's pretty strong in all areas.

Primarily, if we look our credit marketing growth, it's strong in financial services, even more than telco.

And as Specialty declined, we still had strong financial and telco growth.

The products that are up for us are accounts acquisition and account management.

So again, pretty broad-based performance.

Thanks.

One final follow-up on the first set of questions was, on FACTA, did you have any operating expenses for that in the quarter?

And as we enter the fourth quarter, will more of those expenses, as you begin to hire people and what have you, transition from capital-type expenses to operating expenses?

Thanks.

The answer is, Brad, we did have some operating expenses.

We haven't disclosed those separately yet, but we are absorbing those right now in anticipation of the fourth quarter, when our recovery fee starts.

Brandon Dobel (ph) with CSFB.

It's actually Chris (indiscernible) for Brandon.

I wonder if I could follow up on the Marketing Services question.

Can you break down that growth further into volume and price for us?

You want that broken into price -- this is Dave -- price and what other component?

And volume for direct mail.

Volume, it's very, very strong; price is roughly flat.

What trends are you seeing in the Credit Marketing division that is driving that turnaround.

And it may be too early to say if it turned around, but do you see that trend continuing?

Very strong trends for us, primarily in the financial services sector.

And again, the products that are working so well for us are in accounts acquisitions and in account management.

We of course are continuing to work to grow that business.

Great.

One more question.

Do you have any updated thoughts on the surcharge of the recovery fee associated with the Free Credit Reporting Act?

Your question is on the recovery fee and the surcharge?

Right.

Well, as we have announced, we are going to begin that recovery fee in December, and I'll leave it there.

And it's still 11 cents?

It's still 11 cents?

Right.

That's our announced surcharge, is 11 cents.

Brandt Sakakeeny with Deutsche Bank.

It's Chris Maloney (ph) for Brandt.

Could you update us about your priority for use of your excess cash?

And number two, in the Personal Solutions space, are you seeing any new competitors spring up there?

Thanks.

We don't have a good connection with you.

You broke up during the question.

Sorry.

First question is could you update us as to your priorities for the use of your excess cash?

I think our priorities have been very consistent.

We are going to continue to managed actively our balance sheet and our stock position and pursue acquisitions as appropriate.

Profitable growth that optimizes long-term return to shareholders. (multiple speakers) and that is an underlying, ongoing, increasing commitment.

And then follow-up would be in the Personal Solutions space, are you seeing any new competition springing up there?

Not really.

We think over time there will be less.

We think that when you've got a brand like ours that now is going national with advertising, with this new piece of Harris Research, which is going to clearly help us set our marketing and product segmentation apart, we believe it's going to be a huge tool for our commercial customers to use to help them market.

This is the most inclusive piece of research done on consumer attitudes, consumer needs, their feelings about credit in years.

So we think it's going to be a real lever for us to continue to grow that business.

And consumers indicate clearly their awareness of brand, stability and those that help them in their fiscal health.

We feel very good about the ongoing aspects of that business.

Thank you.

Darupe Chopra (ph) with Morgan Stanley.

Just looking at the gross margins, they were down about 90 basis points year-over-year.

I was wondering if you could give us an idea on the general pricing environment?

As to the general price environment, we are finding that we have price declines in the single digits, say between mid and upper single digits.

One-half of that price decline is due to the decrease in mortgage-related products, as we expected.

The other half, we are pleased to say, is a very modest price compression.

And so we are finding that we are continuing to compete and win business at very, very modest price declines and often at price stability.

We are able to do that because we continue to add value in our decisioning products and in our platforms.

Okay, great.

Just a quick question on the capital expenditure, especially for the FACT.

It looks like 5.7 million was about 44 percent of overall CapEx.

I was just wondering what were the things that CapEx spending was reduced on?

The balance of it has been investing back in our platforms and services that we use to deliver our existing products and improving them.

(indiscernible), two platforms will interconnect that we talked about that's growing very well, and then our new marketing support platform XL.

Okay.

Just last thing is if you can give us an update on what potential delivery mechanisms are likely to be used once the FACT Act kicks off.

I know we (indiscernible) about e-mail and call centers etc.

But if call centers is the way to go, would you have the facilities to take that on or would you need to build out a dedicated call center?

We still believe that most of the requests and most of the fulfillment and most of the cross-selling will be done via the Internet.

We think that is a profile of Americans that will be most interested in that information.

But of course, we will have a central source that all of us will use initially, and then from, as I explained last time, that central source will route to each one of the three of us for fulfillment and there's where we'll handle the consumer directly.

We think there will be very little by mail.

There may be some telephonic and VRU activity, but we really believe that a big hunk of it is going to come from the more sophisticated consumers and specifically the Internet.

Great.

Thank you.

Have a good day.

Mike Vinciquerra with Raymond James.

This is Chris Smith (ph) for Mike.

One more question on the Personal Solutions business.

Revenues were down this quarter for the second consecutive quarter.

We're wondering if the FACT Act has had any impact -- the pending FACT Act has had any impact on the revenue growth there at Personal Solutions?

Actually, we really don't think so.

We think it's really more driven right by the fact that some of that business is episodic, specifically mortgage-related.

And with the decline in the mortgage activity, we've seen some decline in some of that kind of related activity.

So we still are optimistic about the growth rates (ph) from it.

We don't really think that the FACT Act has anything to do with it.

As we said, we think the FACT Act is going to deliver incremental revenue for us, ultimately, through this process.

Okay, thank you.

Lilia Kozicky with SunTrust Robin Humphrey.

Just a quick question.

Could you give us a little bit more quantification on Predictive Sciences and how much would you expect in terms of contribution in '05, and whether you expect to formally break this out of the segment going forward as it grows?

I'll try to take that question.

What we are willing to tell you right now about Predictive Sciences -- we are not breaking out separately, and please understand that that's a part of our business where we add great value to our customers, both in our analytics and in the way we add value to our platforms.

What I am willing to tell you, building upon what we've released in the past, we had told you previously in recent quarters that we've done deals in a range from 50,000 to 500,000.

What I can tell you, it's good news, and that is, in the recent quarter, we've continued a trend toward larger and larger deals.

And what I'm able to you release to you now is that the range of our deals now runs from 50,000 up to almost $1 million.

Again, not ready to release the full set of numbers as if it were a separate reporting unit, but you can give you the very good news that it continues to add to us.

That's great.

Two more very quick questions.

First of all, do you perhaps see any potential pricing pressure on surcharges or difficulties in passing these through?

I would say that the reaction that we've had with our customers across the board has been very understanding.

We are working on this together, as we have been for months and months and months.

We don't discuss pricing in a micro or macro sense, but we are very pleased with the reaction of our offerings and our approach to the marketplace.

Okay.

Finally, given your success with Europe operations and improving Latin America results, any thoughts on further expanding the business opportunities in the Asia-Pac region?

Yes, very much so.

We have been very interested in watching the dynamics in China and the China project that we have underway.

We are also very active in looking at development opportunities with quality partners in Korea as well.

We believe that our platforms, particularly InterConnect, which are easily coded and ported to different languages, as we have done in Latin America, have applications in Asia-Pacific.

So while we are not investing a lot of dollars, we are investing a lot of intellectual capital in looking and understanding the regulations and the legislation and really the cultures associated with these markets.

Let me point out that a few years ago, we were very smart not to go to and sink a lot of money in Mexico.

And our shareholders were the beneficiaries of that.

Because there was legislation that said there would be shared data.

There was legislation that said we will try to replicate a system in the U.S., which we understood, if you will just bring your technology.

We elected to have the data first.

And the same kind of discipline applies when we look at what is being said in Korea, what is being said in China.

If we do not have the data, Equifax will not go.

If there is data there that exists for customers, etc., then our analytics, our Predictive Sciences and our platforms will work.

So we are being very segmented and very careful as we look at those two huge markets.

We don't want to get into a 30-year growth spectrum unless there's a very clear model that shows relatively short-term growth and returns.

That is pretty much our philosophy as it relates to those other international markets.

Great.

Thank you very much and congratulations on your good operating results.

Thank you.

Have a good day.

Michael (indiscernible) with Bear Stearns.

Good morning.

Wait a minute.

Michael?

Yes.

Congratulations!

I'm wearing my jersey right now.

I'm tell you what -- I know there's a lot of folks on both sides of that equation, but I'm looking forward to getting some sleep tonight.

But for you, particularly, I would imagine you've got your jersey, your bat, your long hair, everything going this morning.

But congratulations for the Sox.

I'll see you at Fenway on Saturday.

Absolutely.

Sorry about the Yankees, but great series.

Couple of question for you.

First off, what was driving the lift of corporate expenses in the quarter?

Really, there's a couple of things.

A lot of it is regulatory related.

And then some of it is benefits related.

There is also -- the comparison that's somewhat distorted in that our expenses from third quarter of '03 were a little bit below average, so it sort of accentuates things.

What I would also tell you, Michael, is that we think both of those ameliorate on a go-forward basis as we get fully prepared for Sarbanes-Oxley, 404 and then some of the benefits as well.

So the run rate is what?

I think it was 16 million for the quarter, but I think it should drop back down in sort of the $14 million range.

Okay.

Two questions on Consumer Direct.

Your comment on the advertising spend.

Do you have a targeted percent of revenues that we should be thinking about?

And secondly, given your promotion, given FACT Act, given Capital One, do you think you can grow this business in 2005?

Let me take the latter one.

Absolutely.

Because of the product line, because of broader distribution, because of the residual of the advertising.

Again, this is -- one of the things that I don't want to go unnoticed is we have grown this business at this threshold as a complete Internet business.

We have now take, through a partnership with our good friends at Certigy, and we've manufactured print and distribute out of their fully-secure card center a total line of print products.

That is a brand-new offering, because we are learning that while a huge portion of the market likes the Internet activity, there is still some that want it the old-fashioned way, mailed to them.

And that is a brand-new offering which we think will help our redistribution.

So that will feed growth even though it may be the same products; it's a different type of deliver.

And we really haven't set yet a target as a percentage of anything for advertising, because, as you know, historically, we just haven't been a company that advertised.

We have been more of an event type of sponsor, whether it's the Direct Marketing Association or certain banking activities.

And I think we'll just have to let this run for a while and our advertising experience unfold for us before we can set any specific percentage of revenues.

Just (indiscernible) sale.

Last question for you, have you seen a pickup at Credit Marketing with the MBNA and AMEX agreement, and do you expect to hear more agreements in the coming months?

As we've said, we've seen a pickup in CMS for the quarter.

I think the banks, the issuers are continuing to assess that situation.

I think there is some concerns about the confidence in and around this election.

There is clearly a lot of confusion, but I think it is a little too early to tell when the marketing will likely pick back up.

Our sense is that there's a lot of pent-up interest in marketing, but trying to see a little bit better macroeconomic environment.

The war, the way this election debate, this whole campaign has been handled, and the slight decrease in consumer confidence, a little bit of concern over jobs, even though unemployment is lower than it was some time ago.

I think that those are the things that are probably holding back the traditional marketing activity and we still believe that that will return.

Thank you.

Thank you.

Have a good day.

Brad Eichler with Stephens.

Two questions.

First of all is on scoring.

Could you update us a little bit -- when you sell the small-business product, do you sell that with a score or is the score an optional purchase?

We sell it with the score, but we have scoring algorithms that we sell totally separately as in portfolio review for valuations, etc.

So you can buy it as attached to part of the product, if you will, or we can do it for acquisition analysis, where we will do total portfolio review.

So we really use it both ways, based on what the customer's looking for, Brad.

Are you seeing some pretty good interest on the stand-alone score side?

Yes.

I think what you're going to see is as our score, because of the uniqueness of the data, continues to outpace other scores that do not have this data, I think you're going to begin to see small commercial lenders and financial institutions and others begin to understand that that can act just like the consumer lending that they used for a long time.

We are beginning to see a tendency to plug it in their decision tools and utilize that score just like they have consumer scores.

So I think we are on the leading edge.

I think another thing that really plays here is if you take our consumer data, you add this unique commercial data together, you have a very interesting blended score to assess the credit strength of that small business.

I believe that's a huge differentiator for Equifax.

I would agree.

You guys had a neutral score that was going to roll across all three bureaus.

Any update on that on the consumer side?

I'm not aware of any -- we certainly have not participated in a neutral score that runs across all three bureaus, and I really don't have any intentions to do that.

There has always been a lot of conversation around customers that said, why don't we just have one bureau score, sort of like we do in our 3-in-1.

But there is really not any activity going on underway to do that.

But we certainly have the capabilities.

I think the three of us are doing our own thing as far as I know.

On the central website for the FACT deal, how far along are you guys?

Are you to the point where you might be in a position to launch this deal before December 1?

We are not going to launch before December 1, but we are ready to go.

And just to give us a feeling of what the site's going to actually look like, will it just be a switch with three names on the site or will there be any marketing material on that main site or how will that work?

There will be -- essentially, it's a switch first and foremost.

There is disclosure information that tells them what they can do, but there's absolutely no marketing on that central site.

None whatsoever.

The consumer will make their choice, it will be switched to, let's say in this case us, and then we will handle whatever marketing is appropriate there on our own site or in our own presence.

Have you all heard anything back from the FCC -- any additional clarification on pricing of credit scores, or is it going to be a fair and reasonable market price?

We have not heard anything.

We certainly hope that in America, it can be a market-driven price.

You've heard me say that before, Brad, but we haven't heard anything to the contrary.

Thanks much.

Yes, sir.

Have a good one.

David Saunders with Legg Mason.

My question is related to the Marketing Service profit margin --.

We can't hear you.

Is that better?

The top margins for the quarter in the Marketing Service and Personal Solutions, what was the driver there and what do you see trending going forward?

I understand your question to be what is the driver in the change in margin in -- I'm sorry, in Marketing Services and then also in Personal Solutions.

Is that right?

Yes.

Let's start with Personal Solutions and reiterate some things that we have discussed.

With Personal Solutions, we did invest in advertising and we did invest in the launch of new products, as you heard earlier in our discussion.

That advertising and that release of products will drive up the margin in the future.

We won't pinpoint the number for you because that is prospective.

If you look back at Credit Marketing, the improvement that we have there is broad-based -- I'm sorry, in Marketing Services.

We have improvement in Credit Marketing.

As we have told you, we've had great strength in the financial services arena and great strength in two particular products which we have named in this call.

And then I might also mention that we no longer have to continue the eMarketing impairment that we had a year ago.

So in sum, the poster (ph) product is doing well, Credit Marketing is doing well, and we have been able to size up, get down to the right point our eMarketing business, and therefore good margins.

We expect good margins to continue, but again, we won't pick a margin point for you.

Thank you.

Our last question for the morning comes from the line of Asheesh Pant (ph) with Perline (ph) Capital Management.

Quick question on the opportunity to private-label these reports as an alternate channel to reach consumers via the bank relationships.

Clearly, we've seen intersections (ph) being a significant beneficiary of that, considering that you no longer have an investment benefit.

Is that a feasible opportunity longer-term, to also reach the consumer, given that consumers have a significant relationship of trust with their financial services provider?

Absolutely, and that is principally the reason why we have enabled a print solution, so that it can be private-labeled easily, it can be branded, it can be cobranded, it can be customized for the institution.

Website design can also be customized.

You could have an individual from one of our customers or redistributors that could come on the Website and welcome their customers and then talk about Equifax products.

There is a lot of interest in a lot of affinity groups, and interestingly enough, across a broad spectrum and being able to place, as they see as a benefit, our product suite on their site.

So there is an increasing opportunity there that we intend to capitalize on.

Thank you.

At this time, I would like to turn the conference over to the speakers for any closing comments.

Thanks.

We appreciate all of your attention.

We will be around this afternoon to answer any questions or follow-up on anything with any of you on the line.

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