易速傳真 (EFX) 2005 Q3 法說會逐字稿

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

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

Later, we will conduct a question-and-answer session and instructions will be given at that time. (OPERATOR INSTRUCTIONS).

As a reminder, this conference is being recorded and I would now like to turn the conference over to our host, Investor Relations, Mr. Jeff Dodge.

Please go ahead.

Thank you.

Good morning and welcome to today's conference call.

I am Jeff Dodge, Investor Relations, and with me today are Rick Smith, our Chief Executive Officer;

Don Heroman, Chief Financial Officer;

Dave Gunter, Corporate Finance and Nuala King, our Corporate Controller.

The financial information that will be discussed during this call and the reconciling information relating to certain 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 on 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 filings with the SEC, including our 2004 Form 10-K and the subsequent filings.

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

The replay will be available on our website at www.Equifax.com.

Now, I'd like to turn it over to Rick Smith.

Thanks, Jeff and good morning, everyone.

Third quarter extends our track record of performance here at Equifax with all business units delivering excellent results.

Revenue was a record $375 million, up 17%, with American Information Services, Personal Solutions, and our Latin American operations were again key contributors to this growth year-over-year.

Earnings from continuing operations were 63 million, up 17%, and EPS was $0.47 a share, also up 17%.

It's a great time for me to join a great company.

First, let me say that I'm excited to be here.

Equifax is a company with a great history, a great franchise and rest assured that Tom Chapman and I are committed to executing a smooth transition for our customers, our employees and our shareholders over the coming months.

My first 30 days here have been action packed to say the least.

I have concentrated on meeting all the key executives in the company as well as many employees around the business as I can.

While I still have a lot of learning, I can say this after 30 days; first, our business leaders are executing their strategy with good precision.

I am seeing that in how they operate, the decisions they are making and the way they lead their employees and obviously you are seeing it reflected in our numbers.

While each business has some unique challenges, I can tell you they are all committed to performance and delivering solid results.

Let me just touch for a minute on my background and who I am.

That might help.

I have a 22-year memorable experience with GE, very diverse set of experiences, a lot of fun.

I have learned a lot about how to manage and lead globally diverse teams and businesses through change.

At GE, I lead a variety of businesses in areas such as plastics, leasing, my last job in the insurance and reinsurance sector.

Over those 22 years, I have developed a management philosophy and approach and I summarize my philosophy as one that rewards for performance, a true meritocracy.

My style is committed to customers with a strong external focus, shareholders and ensuring that we have the best and most talented individuals in the organization.

A style that has been proven to work in a wide range of industries and also a wide range of environments, all of which I think provides a great foundation for transitioning to Equifax.

I am a performance driven individual.

I hold myself to a very high standard.

As you might guess, I expect the same of those around me.

I understand that growth is critical in any organization.

I'm always looking for opportunities to grow a business intelligently.

I'm comfortable operating in the areas of core organic growth.

I'm sure we've got the salespeople, process and value added products.

Also growing through new product development and innovation ensuring you've got an organization that is able to unleash creativity and innovation to drive growth.

I am also very comfortable operating in an M&A environment and have done so for years.

The key to me is making sure that your M&A strategy is clearly linked to your business strategy.

My background has depth of experience in all three areas of growth.

As for my management style, developing an outstanding team of leaders is first and foremost for me.

What I have seen so far in the first 30 days or so is in fact we do have an outstanding leadership team.

This team is driven.

They are accountable and they are committed to deliver and will not miss a beat as we transition over the next few months.

My observations after 30 days or so on the job may not surprise you.

The culture here at Equifax is both unique and stimulating.

In fact, I see many of the same traits here that I have used to describe my management style.

It is a performance-based culture.

Managers have very clear accountability and responsibility for delivering their numbers.

Their focus is on delivering results and finding new ways to grow revenue and they are all very shareholder and customer focused.

My 90-day plan, which is really now down to 50, 60 days left, includes a lot of listening.

I have planned, either have or will plan, to visit all of our major operating units, meeting with all key levels of management and developing a keen sense of our culture and our capabilities.

I also plan to spend time meeting with our key customers around the world and truly understand their needs and expectations of Equifax.

Also to visit with investors and learn about their goals and objectives as our shareholders and most importantly, once I have that foundation, develop a clear roadmap for continued growth.

Again, a growth strategy based upon innovation and technology.

In summary, it is truly a great franchise with a great future.

I'm excited about the opportunities with our businesses such as our enabling technologies that you'll hear more as we take this franchise to the next level.

Our small-business opportunity is an outstanding example of how Equifax leverages its core business technology into new areas where strong, sustainable, competitive positions can be built and also our Personal Solutions business, which demonstrates how we can create and developed whole new industries in high-growth business opportunities.

There is a very good and capable management in team in place, a great history of delivering value to our customers and shareholders and a global franchise with great opportunities.

One final comment.

I would be remiss if I didn't stop here and thank Tom Chapman and the Board of Directors for a great opportunity and the confidence to allow me to lead this great company into the future.

I'd like to now turn it over to Don Heroman, our Chief Financial Officer, to give you some financial details.

Don.

Thanks, Rick and good morning, everyone.

Well as you probably have seen, the third quarter was yet another demonstration of solid performance across all of our business units.

In looking at the numbers this morning, I will discuss the non-GAAP equivalent information, excluding the financial impact of the FACT Act.

All other financial information will be presented on a GAAP basis.

A detailed reconciliation with the appropriate GAAP numbers is included in the common questions and answers that we attached to the press release issued earlier this morning.

So for the quarter, consolidated revenue was $365 million, up 14% and again that is excluding the FACT Act.

Earnings from continuing operations were $59 million, up 11%, and EPS was $0.45, up 11%.

In North America, U.S. consumer and commercial Information Services revenue was $160 million, up 19% compared to last year.

Adjusted for the regulatory recovery fee, revenue was $151 million, up 12% -- a very healthy number in the North American operations.

Online U.S. volume was up 11% driven primarily by financial services and resellers.

During the third quarter, 23% of U.S. online transactions were processed through one of our enabling technologies platforms.

Small-business reporting revenues were a record $3.7 million, up 102% from the third quarter of 2004.

Transaction-based revenue and small-business reporting now represents over 50% of total small-business revenues, up from 48% and again demonstrates a continued use in the ongoing decision-making of our customers not just in reviewing their portfolios.

Currently, 73% of small businesses in the database with loans or leases have at least two years of history and over 50% have over four years of history.

So the richness of the database continues to improve.

Mortgage reporting revenue of $23 million was up 21%.

Adjusted for the regulatory recovery fee revenue was $22 million, up 17%.

Canada's revenue was a record at $28 million, up 16% in U.S. dollars and a solid 6% in local currency.

In Marketing Services, Owen Flynn is refocusing the business units on delivering revenue, growth and sustainable competitive advantage and this is evidenced in the quarter with Marketing Services generating total revenues of $66 million, up 9%.

Credit marketing revenues of $40 million grew 9% representing the third consecutive quarter of strong growth for this business and direct marketing revenues were $26 million, up 10% compared to the third quarter of 2004.

This is the first time in over four years that both business units have contributed strong growth in the same quarter.

And we appreciate Owen's efforts in this arena.

Personal Solutions, revenue growth was 22% to $29 million. 98% of this growth came from monitoring products, including Credit Watch, Score Watch and 3-in-1 monitoring.

The operating margin was 9% for the quarter and visits to our website were up 74%.

Repeat buyers were at 54% of our third-quarter customer activity.

Total North American operating margins was 38%, which is flat compared to the third quarter of 2004.

Europe delivered revenue of $35 million, down 1% in U.S. dollars but up 1% in local currency and the operating margin was a record 25% for the quarter compared to 24% in 2004.

In our U.K. business, the account management services volume is up 63% and Personal Solutions unit volume was down 6% over the last year.

Latin America's performance once again was truly outstanding with record revenue of $35 million, up 47% in U.S. dollars and still an incredible 24% in local currency.

Again, recognizing the great leadership of Rudy Ploder in our Latin American operations.

Our operating margin of 29% was up from 20% in the third quarter of 2004.

So incredible growth and outstanding margins both for Latin America.

As in Q1 and Q2, all six of our country markets delivered an increase in operating margin and local currency revenue growth.

For the corporation as a whole, the operating margin was 29% compared to 30% in 2004.

Free cash flow was $92 million from the quarter, up from $81 million in 2004 and during the quarter, we repurchased 1.2 million shares of our stock for a total of $40 million and have $144 million remaining under the current authorization.

DSO, days sales outstanding, were 54 days, down from the 55 days in 2004.

Total debt outstanding is down $55 million to $608 million compared to $663 million in the second quarter of 2005.

So in summary, an excellent quarter continuing the trend that we started in the first quarter of this year.

Now before I turn it back over to Rick, I'd like to take a moment to welcome Rick as our new CEO and Chairman Elect.

Rick brings a lot of energy and focus to the company as well as a true enthusiasm for the future.

We're very pleased to have him here leading the team.

So Rick, back to you.

Thank you, Don.

Hopefully, you can now understand why I am so excited about the opportunity to lead this great company.

We thank you for listening and now I would like to open it up to any questions that you may have.

(OPERATOR INSTRUCTIONS).

David Togut, Morgan Stanley.

Good morning.

Good to speak with you, Rick.

Likewise, David.

Couple of questions.

First, if you could drill down on the margin trends in North American Information Services in Europe.

It looks like NAIS operating margins were down about 130 basis points if we strip out FACT Act.

Europe was down about 90 basis points X FACT Act.

What were some of the underlying drivers?

In North America, I wouldn't read too much into it, David.

In North America, some of it is some duplicity of platforms.

We have two major new enabling technologies.

One is Accel and the other is InterConnect and both of those are transitioning from old technology to new.

So the duplicity is causing a little bit of an impact there.

And then in Europe, you are seeing positive trends there, which continues the expense control that has been demonstrated for actually the last couple of years there.

But weren't margins down 90 basis points in Europe year-over-year?

No, they --.

They are up.

It's up 1%.

There is no FACT Act in Europe.

Okay.

My mistake.

The margins there were up 1% from 24 to 25.

My mistake.

In Personal Solutions, it looks like your operating margins were down about 10 percentage points year-over-year.

Did you make some onetime investments in the quarter?

No, that's some of the continuing advertising that we have been doing their, David.

David, this is Rick.

Obviously, Personal Solutions is and will continue to be a very important growth area for us and we're investing in advertising for the future.

Can you give us some sense of what the margin structure of that business is with the advertising you see going forward because there has been a lot of movement on a year-over-year basis?

There has been and what I would tell you is we are really committed to making that a growth business still.

So we needed to increase our advertising.

Obviously, as the scale builds up, the advertising will be a lesser impact on it.

So we would see some recovery in margin over time.

We're not predicting where it will go.

Thank you.

Joseph Eichler, Stephens Inc.

Actually this is Brad Eichler.

Good morning, Rick and Don.

A couple of questions.

First of all, as it relates to profitability, on the income from continuing operations, you guys reported $0.45 a share, which excludes FACT Act expenses but going back to the release you guys did in October, wasn't there an employment agreement, Rick, that added about $0.03 a share in expense to this quarter?

That's exactly right, Brad.

So the number would have been 48 and 50 if we would have adjusted for that.

You broke out mortgage, obviously just a stand-alone mortgage but what was the total amount of mortgage exposure, including the amount that is in North America?

It's 15.1% of revenue.

So that is down a little bit from the second quarter.

Other income has been running a little bit over 2 million bucks.

It was 4.8 million in the quarter.

What was the increase there?

You know what that is?

I'm glad you asked that question.

RMA has been driving that.

That is a company we sold and had some residual benefit in.

RMA was actually sold during the quarter and in the process of that sale, we, in essence, settled out our position with them and so we would have had RMA benefit for the next five quarters but it would have been diminishing through the end of next year.

That investment has been accelerated and so we're out of RMA now.

So what is a good number to think about on an operating basis for that line on a go-forward basis?

There is not much of anything else in that line but RMA.

So it will be a fairly small number on a go-forward basis, Brad.

Like a couple of million?

Oh no.

Less than that?

Hundreds of thousands maybe.

For total other income?

Right.

Experian had some positive comments and so did TransUnion about pricing trends on just kind of core credit business.

You know demand is strong, pricing not seeing the degradation that you've seen in the past.

Could you all comment on what you are seeing?

Our pricing overall was down mid single digits.

About half of that was mix and half was pure price decrease.

So a similar trend.

Just two other quick questions.

Last quarter, you talked a little bit more about InterConnect.

It sounded like you had four projects underway.

You had 15, or excuse me, four projects that you just had completed, 15 that were underway.

Any update on where you are on some of these value-added initiatives?

We are further along in the implementation of some of those.

Some of them have come online and we've got more to implement during the fourth quarter.

So it is business as usual if you will.

And then final question, you all formed a partnership with Certegy to deliver third-party kind of private label credit products to financial institutions and what have you?

Can you just give us an update there?

Have you had any success with that product?

We have had some.

It has been on the modest side but that is a focus of Steve Ely, our new manager in Personal Solutions on a go-forward basis.

That particular area?

Right.

It's in the early stages.

I Understand.

Thanks again, guys.

Mike Vinciquerra, Raymond James.

Thank you.

A question on the international operations.

When we X out the currency effects, really not much growth quarter-over-quarter in either of those businesses and I'm just curious if there's some seasonality I should be thinking about in terms of those that may accelerate at various points during the year?

Yes, Mike.

This is Rick.

Are you referring to Europe or are you referring to Latin America?

Because Latin America is in fact growing nicely year-over-year.

Latin American revenue growth -- sorry -- Latin American revenue is growing significantly.

It is Europe that in fact is only up on a local currency basis, I believe it's 1% and on a U.S. dollars basis, it is down 1%.

Very difficult environment in Europe but I think Michael and his team have done a fabulous job of repositioning the business and managing cost to actually improve the margin.

I think we mentioned margin is up 1% year-over-year.

Mike, I would tell you Latin American local currency grew 24%.

No, I follow that exactly but I'm looking -- sequentially, I was talking specifically because I was trying to get to any seasonal effects because on a sequential basis, I think it was actually down modestly if you take out the currency effects.

Am I wrong there?

No.

Sequentially, Latin America grew 9% in local currency, 13% in U.S. dollars.

Okay.

My apology on that.

I'll go back and look at the numbers again.

Also want to just get a general sense, U.S. credit information, any particular segments of your customer base, whether it be mortgage, cards, auto, that are showing particular strength or weakness or changes on a quarter-over-quarter basis?

There are a couple that are really growing.

One is our finance and specialty area and then actually within North America, our decision power revenue has grown nicely as well.

Our revenue attributable to it.

And then lastly, the mortgage business within North America had similar growth to the mortgage business that we reported as separate line item.

I presume the decision power goes across a number of different segments; auto and so forth.

Yes.

And just the thing, on your share repurchase, your repurchased 1.2 million shares but the diluted share count changed only modestly.

It didn't look like the stock price was up during the quarter to increase dilution for outstanding options or anything.

What was going on there?

Should we expect that to drop next quarter because the purchases were late in the period or something like that?

Right.

Actually, what is happening and has happened throughout the course of this year is with the price run-up this year, we have had option exercises, which has contributed to this somewhat stagnation of our share count even though we continue to buy the stock back and then secondly, we did do one small acquisition of one of our affiliates this quarter and it was unusually for stock instead of cash.

So that contributed 200,000 additional shares outstanding as well.

That's helpful, Don.

Thank you.

Michael Meltz, Bear Stearns.

A couple of questions for you.

Can you talk about current trends into the fourth quarter?

Has momentum persisted at the core U.S. business?

That's my first question.

You know what I would say, Michael, that we -- obviously the third quarter is a very strong quarter but we are still very positive on the year and we think there is wind at our sails here.

The domestic U.S. business has been strong all year long.

It is has just been continuing that trend.

Into Q4?

There is no reason to expect that trend would not continue.

Second question has to do with corporate expense.

I understand why it was up in the quarter.

Can you isolate for us the '05 impact -- estimated impact of sort of incremental management compensation expense?

I think it's about $0.12 share.

Can you just talk about what won't recur in '06?

Let me speak to several issues around that.

First of all, there really are three major components to it.

One is Tom's transition agreement, which has already been disclosed in an 8-K.

The second one was Rick's agreement, which has also been disclosed in an 8-K and then the third one that we haven't really talked about but is an impact is AIP and because we have had such a good year and because the third quarter was particularly strong, the accruals for the incentive comp stepped up incrementally a sizable number in the third quarter as well.

So the two that won't repeat themselves would obviously be Tom and Rick's package and I think we all hope that the third one does repeat itself.

Can you quantify those three?

I mean I have seen the 8-Ks.

I think Tom's is running $0.02 a quarter and Rick's, you've said, is $0.04 in the aggregate?

So there you go.

You pretty much know.

Some of Tom's you have to remember is based and Rick's base will come in as well.

So it might ameliorate that number slightly, Michael.

In terms of regulation or legislation, can you give us an update on what you are hearing and timing of any new data security type regulations and how do you think it would impact your business?

Michael, this is Rick.

We have got Kent Mast, our General Counsel.

Kent will give you a quick response.

Great.

Thank you.

We don't see -- there is a good bit of activity in interest in Congress this year but we think that the legislation will probably be next year.

Impact on us will be, if anything, negligible and that most of what is contemplated we are already prepared to do.

Okay.

And last question, at Personal Solutions, I don't think I quite understood the answer to the margin question that was previously asked.

Before, you had talked about this as close to a -- I think close to a 20% business.

Can you just talk about the reasons why it wouldn't be there over time?

And then secondly, I think revenues did slow sequentially.

I just want to know -- maybe talk about some of the factors there.

Michael, this is Rick.

Let me see if I can answer the first part of your question.

And that is we are continuing to invest in that business.

We do think, without giving you an exact number, this business over time when we get to scale can in fact be a very attractive margin business in that 20% range.

But we are investing heavily in people, some process improvement, as well as advertising new products and so on and so forth.

Steve Ely, who is the new leader of that business, is doing a great job of energizing that team.

So it's just in that startup phase.

We will continue to build brand awareness, a stable of products and advertising.

We do think that the business can in fact return attractive return in that 20% range over time.

And then the second part of your question is the quarterly trends and you are correct, that is a trend that we have seen actually for some time now.

The big spike comes in the first quarter and then the balance of the year tends to be plus or minus flat, Michael.

So there was a little bit of sequential decline from the second quarter to the third quarter but nothing out of the ordinary in terms of what we have seen for instance last year as well.

Thank you very much.

Sorry for the laundry list there.

No problem.

Bruce Simpson, William Blair.

Two questions.

First in the North American business, can you talk a little bit more about what you're seeing in mortgage?

Is there any indication whatsoever of a slowdown in demand for credit products there?

Bruce, this is Jeff.

Mortgage was a combination of things and it's been a similar story throughout the year.

No customers, some marketshare gains with existing customers and then in the third area that we have seen a pretty good pickup year-over-year is the sale of prescreening services in the mortgage space where you're getting a lot of prescreened offers for home equity loans and refinancing and things like that.

That activity has picked up fairly significantly year-over-year.

So it is a pretty broadbase contribution on revenue growth.

And so overall, it sounds as if the level of activity in unit demand in that business is pretty steady.

There is no sign that slightly higher rates are putting a crimp in that.

Well actually yes, correct and it actually has picked up a little bit in September as rates edged down a little bit and so the mortgage activity actually picked up a little bit in September.

And then the second question has to do with Latin America.

Congratulations on all your success there (indiscernible).

Drill down a little bit and let us know what is driving that, what particular products there are driving that strength in revenue growth?

Bruce, what we are actually seeing there is great progress on pricing.

What we have seen just across the board down there, Rudy has just really done a nice job of going in there and convincing our sales force there that we can actually -- we have a value- add product.

We are pricing.

We are introducing new products and as we do that, we have been able to get better pricing on it and we are sunsetting the old products to migrate people to those new products.

So for this year, we have seen quite a bit of the growth driven by better pricing.

And is the mix of business down there sort of core large financial services or what else -- what are the mix?

Bruce, the growth down there is broadbase.

We are seeing good growth in Information, in Marketing Services, in the analytics and the decisioning technologies that we sell.

So it is really across the board.

All six countries or all six geographies had double-digit local currency growth.

So it is just broadbase.

It's really a strong testament to what Rudy and his team have done there.

Rudy has rebuilt the team and focused the team in the last year on pricing and it is paying off.

How about from a vertical industry of customer served?

Does it tend to be sort of big financial services or are you doing anything in utilities or telco down there?

Financial services and telco are the two big ones.

We're also doing some stuff in the retail sector.

Kevane Wong, JPM Securities.

Two things.

One, just to dig in a little bit on the particular segments that are driving U.S. credit info.

You mentioned finance and specialty.

I was just wondering if you could talk a little bit about vertical markets.

We touched on mortgage, but auto, credit cards, can you give us a little since there and particular looking at auto with the new car sales having sort of dropped off.

What are you seeing as far as demand in the auto segment?

This is Jeff.

Credit cards are contributing a lot.

Auto is a little sluggish. telco is a little sluggish as well but in the financial space, you have got that, you've got mortgage and then of course the mortgage reporting activity as well.

And as far as sort of looking at the areas that are sluggish, what's sort of driving the telco to be sluggish and also as far as looking at auto?

Are you seeing evidence that that's a near-term problem?

Any sort of evidence that might improve?

What are you sort of saying as far as outlook there?

Well the auto really ties to what the new car sales are and that has been pretty tough from a competitive standpoint.

The same situation in telco.

But we have also been able to offset that a little bit with some of the midmarket activities that we have picked up over the course of the year in our small-business stuff.

And then lastly if you can dig in a little bit on the marketing area.

Obviously that is beginning to see some nice movement on both pieces of it.

Direct marketing, obviously just looking at the growth, had a nice pop in the quarter.

Was there some particular thing behind that pop in the quarter?

Is it sort of the change in trend that you're seeing that's helping drive that?

Just wanted to get a little bit more understanding as far as what is driving the marketing.

It really is a combination of things, Kevane, and that is first of all, we're having nice solid growth within the business units.

But also we did a small acquisition in the quarter.

BeNow, it's a database management company that will actually, on a go-forward basis, nicely complement both our DMS and CMS business.

It will better allow us to be a one-stop shop if you will.

So that contributed a little bit but X that, we still had 6% growth, strong 6% growth in the DMS arena.

Mark Bacurin, Robert W. Baird.

A couple of things.

I didn't hear you comment on what the actual revenue contribution was from your small-business database product.

If you did, I apologize.

Could you give us that?

I did.

It is just under 4 million.

Under 4.

And that is up from about three last quarter?

Yes.

Anything you would like to share in terms of -- Personal Solutions went from a zero business to now over $100 million.

Is the small-business product following that same growth curve in its early stages relative to where Personal Solutions was?

Well, we're certainly very encouraged by it.

The statistics that we quoted you at the front end of the call are what is really important to us.

That the depth and breadth of the data is increasing significantly and more and more of our customers are using it for transactions, which is exactly the two trends we needed to see in that business.

Mark, to your point, this is Rick.

We do see small-business being a business that will follow a growth path hopefully similar to that of Personal Solutions.

It is definitely one of our growth areas.

And who are the primary users of that database today in terms of where that $4 million of revenue is coming from?

There really are two and they are both the financial sector, which is really new for them because this is financial information that no one else has had before and telco is using it but we are also starting to see new customers who can come in and use this because we also have trade data and the people who are contributing to the trade data are starting to take data out of this as well.

So those are some new verticals for which we are encouraged by.

Great.

And on the surcharge, you're getting to the point where I think you are pretty close on finally recouping the CapEx you spent on building the portal.

But obviously there is some ongoing OpEx.

Any thoughts on when we might see a reduction or a change in that surcharge amount?

Mark, this is Rick.

You will see a change in that surcharge amount in 2006 and it could be some time in the first half of the year.

And will you provide -- I think you guys are at $0.08 or so per transactions a day.

Will you give us some sense of where that drops to when that occurs?

Our actual stated fee is $0.11 not $0.08.

I'm sorry, $0.11.

Yes.

So we will talk more about that as we go forward.

Nothing has been decided right now.

I think you commented that Personal Solutions in the U.K., you actually saw a year-over-year decline there.

What is going on with the weaker trends?

It's a small decline and as you know from what we said earlier, that is just a tough economy right now.

Consumer debt over there is extremely high and so the overall demand for the product has been stagnant.

And then I guess there's been a lot of questions about are you seeing continuing strength into October, and I think probably it would make some sense that as rates start to bounce back, people think they have missed the curve and so there is a surge maybe in refinancing activity.

But is there any historical data that would show that after an interest spike you maybe get a month or two of strength followed by a period of cooling off as rates stabilize at the higher amount?

There is not a lot of good economic data that we can leverage to understand that.

As you know, this is one of the lowest interest rate cycles we have ever been in.

We are sort of learning as we go.

We have got good health in that business.

We have got good customer relationships.

So the strength of our customers are really what is contributing to the growth.

And then actually one final one, Fair Isaac is talking a lot about the thin file opportunity and the opportunity to basically sell data for people where there is not a lot of credit information.

What do you guys have in the way of the ability to resell that product or a competing opportunity?

They seem to think it's a pretty large revenue opportunity longer-term.

The notion of thin file has been around for a number of years.

We have developed thin file models and things for our customers for a number of years and we are always looking for other types of data that can help enrich and make those models stronger.

So that's an ongoing activity for us.

Are you seeing good customer demand for products in that arena?

Absolutely.

Is there any revenue number you can put on that in terms of --?

No, we don't break it out that way.

I mean it depends on the credit policies of our customers and they all have different credit policies and it is not broken out separately.

Thatcher Thompson, CIBC.

Don, you mentioned that 90% of the growth in Personal Solutions is from credit monitoring product.

Right.

And we've seen all these announcements from large companies of privacy issue disclosures and they kind of offer free credit monitoring for a year as a peace offering to their customers.

Has that been a driver of revenue and is it possible to break out how much of that revenue is kind of institutionally paid versus consumer paid?

We have seen some of that.

That has helped a little bit but that has not been the biggest part of the driver of that business.

But we do participate in that business.

And then another question.

In the notes to your financial release you kind of have a cumulative FACT Act cash flow impact that shows the regulatory recovery fee of 19.7 million from January 1st of '04 through the end of the third quarter.

How does that match up against year-to-date FACT Act recovery fee of 28.8 million?

It is after-tax.

After tax.

Okay.

Thank you.

Operator, we have got time for one more question and then we will conclude the call.

Certainly.

Nat Otis, KBW.

Most of my questions have been answered.

So I just wanted to see if you could give a little bit of color on how the advertising campaign in Personal Solutions is going to date and maybe what your thoughts are on going forward are?

Well we have been encouraged by it.

We continue it.

As you well know, advertising is not something that you can get a tangible necessary correlation with.

We really do it in two areas.

We do online advertising and we do media advertising.

Media is the one that we have really expanded some this year.

The online advertising we're very encouraged by and we are lining up our buys for next year already.

The media is the one that we will continue to look at on an ongoing basis in terms of the level of that.

No more questions.

Go ahead.

We will be available this afternoon for any calls.

So if you have any additional questions or you want clarification you can give us a call.

With that, we will conclude the call.

Thank you.

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