易速傳真 (EFX) 2005 Q4 法說會逐字稿

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

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

Later, there will be an opportunity for questions and comments.

Instructions will be given at that time. (OPERATOR INSTRUCTIONS)

As a reminder, this conference is being recorded.

I would now like to turn the conference over to our host, with Investor Relations, Mr. Jeff Dodge.

Good morning.

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, 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 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 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 '04 Form 10-K and the subsequent filings.

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

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

Now I would like to turn it over to Rick Smith.

Thanks, Jeff, and good morning, everyone.

Thanks for joining us this morning. 2005, both the fourth quarter and total year, was an outstanding year for Equifax as most of our businesses just delivered solid contributions throughout the year.

For the quarter, revenue was a record $361 million, up 10%.

Our North American Information Services, Personal Solutions and the Latin American businesses were key contributors to this growth, as they have been, as you know, throughout the year.

Earnings from continued operations were 63 million, up 14%, and EPS for the quarter was $0.48, also up 14%.

For the year, revenue was also record at $1.4 billion, up 13% over 2004.

Earnings from our continuing operations were $247 million, up 4%, and EPS was $1.86, up 5%.

As most of you probably recall, in 2004, we sold our investment in Intersections for an after-tax gain of $23 million, which contributed $0.17 to our EPS in 2004.

By almost any measure, 2005 reflects an outstanding performance by the management team here at Equifax.

First, we dealt with some very significant challenges to deliver that outstanding performance.

In the U.S., we had unprecedented regulation with FACT Act.

Although the regulation created new expense burdens, the team dealt with it in a manner that was fair and balanced, considering the consumer, our customer, and our shareholders.

In 2005, Dann Adams, our leader of North American Information Services business, addressed this challenge head-on and delivered yet another outstanding performance.

A rising interest rate environment began to affect the mortgage market, one of our highest growth markets over the past few years.

In 2005, that growth slowed, but the diversity -- you have heard us talk about this -- the diversity of our customer base and our product base continued to enable us to offset this pressure and continue to grow our mortgage business.

A new leader, as of midyear last year, Owen Flynn, in our Marketing Services business, refocused that team, reenergized that team, brought some new talent in, and that team delivered the best growth in our Marketing Services business over the last five years.

Their intense focus on driving profitable growth has paid off.

For instance in both credit marketing and direct marketing, our top 20 customers grew twice as fast as the overall growth rate for those two business units.

Secondly, in 2005 we continued to invest in our enabling technology platforms by acquiring superior product and management talent, both broadening our offerings and our capabilities.

In March, you will recall, we acquired APPRO Systems, a company providing value-added services to smaller regional operations and credit unions.

It brings us great technology platform, but as you have heard me say in the past, it also brings a great new skill sets and talent to the organization.

In August we acquired BeNow, which brings vital technology and customer relationships into our Marketing Services business.

Through unique technology and superior services, BeNow helps our customers market more effectively and efficiently in a very increasingly competitive environment.

Today we have over 1000 customers -- 1000 customers using one of our enabling technologies, including one-third of our strategic customers.

Great progress over the past few years.

Third, coming out of 2005, we have some very impressive opportunities that will continue to be key drivers of revenue growth in the near term.

In our core North American business, growth with our top 20 financial customers accelerated from 6% year-over-year growth in the first quarter to 16% year-over-year growth in the fourth quarter of 2005.

Small business is redefining how customers acquire, grow, and manage their small-business portfolios.

This year, we introduced the industry's first-ever blended score, incorporating both Consumer and Commercial information.

We also integrated our small-business services into our enabling technology platforms to facilitate customers' transition to a more highly automated and intelligent risk decisioning process.

We now have all ten of the top ten small-business lending institutions utilizing our small-business tools for their risk decisioning processes.

Personal Solutions, which is our business-to-consumer direct business, continues to grow, and we will continue to invest to create a long-standing brand and reputation that enlightens, enables, and empowers consumers to make smart financial decisions.

Last year, we introduced new subscription-based products that are expected to create a very sustainable and long-lasting relationship with our membership base.

Subscription-based revenue now represents over 35% of our total revenues for Personal Solutions.

In fourth quarter, over 48% of Personal Solutions revenue was from one of our subscription-based products, great progress throughout the year.

On a sidenote, kind of a fun note, tonight there is a premiere of a movie.

It is called Firewall.

It is a movie starring Harrison Ford, and in this movie they feature Equifax.com when Harrison Ford's character discovers that his identity has been compromised.

He logs onto Equifax's Personal Solutions website to determine what damage has been done to his personal well-being, and I am proud to say that we did not pay nor lobby for this opportunity.

In fact, someone from the production team -- we think the director -- wanted to use our services to add some reality to the movie.

We're going to leverage this.

We think it is a great way to showcase Equifax and the concerns around identity theft.

So you'll see a lot more from us in the marketplace leveraging the Firewall movie.

Again, it comes out tonight in Hollywood and premieres February 10th around the country.

In Latin America, we reported Rudy Ploder -- and we talked about he and his team throughout 2005 -- they have done an outstanding job.

They have just blown the doors off 2005.

While the team benefited from improving economies, there's no doubt, they delivered above and beyond.

They seized the opportunity to strengthen their management team across Latin America, some big moves in Brazil.

They focused on selling value-added services throughout the region to create stickier customer relationships.

And they developed their people to support the transition from a credit bureau to a real solutions provider for their customers -- just an unbelievable year for them.

In fact, in our two largest markets, Brazil and Chile, we had strong double-digit revenue growth in Decision Solutions and Marketing Services.

Again, reinforcing the transition away from a traditional credit bureau to a solutions provider.

Latin America is a great franchise and have created a model that will serve us well as we look to the future for international opportunities of growth.

Finally, we also had very real opportunities to invest for long-term growth, investing in new product innovation, enabling technologies, and our international businesses.

New product innovation has contributed to our growth in Personal Solutions and in Marketing Services in 2005.

It is an area where we can invest wisely and confidently to fuel growth in 2006 and beyond.

Our leadership in the enabling technologies for served markets has been well-received by our customers and continues to drive revenue in our business.

In 2005, we made two acquisition that we talked about to extend our capabilities in Information Services and Marketing Services.

I think those were the right things to do for our Company, to add value, differentiation, and we will continue to look for more of these in 2006 and beyond.

Finally, the international marketplace is developing rapidly and potentially offers new avenues of revenue growth for technology, Marketing Services and analytical capabilities.

We clearly have a great opportunity before us.

Delivering sustainable revenue and earnings growth that our shareholders expect is something I am personally dedicated to achieving with this fine team here.

Why don't we now turn it over to Done, who will give you some of the details on the financial performance for 2005?

Don?

Thanks, Rick, and good morning, everyone.

In looking at the numbers this morning, I will also discuss the non-GAAP equivalent information, as I have done the past, excluding the unusual events of 2004 and the financial impact of the FACT Act.

Let's get it on an apples-to-apples basis for everyone.

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 attachment to the press release issued this morning.

The fourth quarter continued the strong performance record we have set during the previous three quarters of the year.

For the quarter, consolidated revenue was $361 million, up 10%.

Earnings from continuing operations were $63 million, up 14%, as was EPS, which was at $0.48, up the 14%.

In North America U.S.

Consumer and Commercial Information Services revenue was $141 million, up 5% compared to last year.

Including the regulatory recovery fee, revenue was $150 million, up 11%.

Online U.S. volume was up 4%, driven primarily by financial services and resellers.

During the fourth quarter 24% of U.S. online transactions were processed through one of our enabling technology platforms, up from 21% in 2004 and 23% from last quarter.

Small-business reporting revenues were a record $5.8 million, up 182% from the fourth quarter of '04.

Transaction-based revenue in small-business reporting now represents over 52% of our small-business revenue, up from 50% in the third quarter, when normalized to exclude an adjustment for our bundled services contracts.

Said differently, what we are continuing to see there is more and more of our revenue there is coming from clicks, which is exactly what we want to see.

Mortgage reporting revenue up $19 million was down 2%.

Including the regulatory recovery fee, revenue was $19 million, up 2%.

Canada's revenue was $28 million, up 5% in U.S. dollars and 1% in local currency.

Marketing Services delivered another strong quarter, generating total revenues of $67 million, up 9%.

Our credit marketing revenues of $38 million grew 4%, while the direct marketing revenues were $29 million, up 16% compared to the fourth quarter of '04.

In Personal Solutions, revenues grew 15% to $27 million.

All of this growth was driven by the monitoring products, including Credit Watch, Score Watch, and 3-in-1 Monitoring.

Visits to our website were up 28%, and repeat buyers were 53% of our fourth quarter customer activity.

North American operating margin was 38%, flat from 2004.

Europe, revenue of $35 million was down 8% in U.S. dollars, but only down 1% in local currency, as we have seen that economy stagnate a bit.

The operating margin was 26% in the quarter compared to 24% in 2004.

Again in Latin America, we have seen record revenue of $36 million, up 42% in U.S. dollars and still a very healthy 24% in local currencies.

Operating margin was 25%, up from 19% in the fourth quarter of 2005.

And five of our six country markets delivered an increase in operating margin and all six had double-digit local currency growth in revenue.

For the Corporation as a whole, the operating margin was 29% as compared to 30% in 2004, and that 1% decline is entirely attributable to corporate expenses.

If you look at our business units, their operating margins were exactly flat to last year.

Free cash flow was a very healthy $93 million for the quarter, up from $87 million in 2004.

During the quarter, we repurchased 1.3 million shares of our stock for a total of $49 million and have $95 million remaining under the current authorization.

Days Sales Outstanding were up very slightly from 53 to 54 days, and total debt outstanding is down $52 million to $556 million as compared to $608 million in the third quarter of '05 and just under $1 billion three years ago.

Shifting now to the performance of the entire year, 2005 was simply an outstanding year for the Company and our shareholders.

Consolidated revenue was the $1.4 billion, up 13% for the year, and earnings from continuing operations were $247 million, up 4%.

Earnings per share were $1.86, up 5%.

That is on a GAAP basis.

Obviously, those numbers were greater when you take out the onetime gains in 2004.

In North America, Dann Adams and his team delivered an exceptional performance with U.S.

Consumer and Commercial Information Services -- revenue of $575 million for the year, up 8% compared to last year.

And if you include the regulatory recovery fee, revenue was actually $610 million, up 15%.

Online U.S. volume was up 8%, driven primarily by financial services and resellers, and for the year, 23% of our online transactions were processed through one of our enabling technology's platforms.

Small-business reporting revenues were a record $15.9 million, doubling that of 2004.

Mortgage reporting revenue of $82 million was up 9%.

Including the regulatory recovery fee, revenue was $85 million, up 13%, both quite stellar numbers in what was an otherwise relatively flat market for the mortgage business.

Our Canadian revenues were a record $111 million, up 12% in U.S. dollars and 4% in local currency.

Marketing Services generated total revenues of $254 million, up 7%. 2005 was an outstanding year for Owen Flynn and his team, both for its results and the foundation they have built for future growth.

Credit Marketing revenues of $151 million grew 8%, reversing a declining to stagnating trend over the last few years.

And Direct Marketing revenues were $103 million, up 7% compared to 2004.

For the year, Personal Solutions revenue grew 19% to $115 million.

And again, almost all of that growth came from our monitoring products.

For the year, visits to our website were up 53%.

Total North American operating margin was 38%, up from 37% in 2004.

Europe delivered revenue of $142 million, flat in U.S. dollars, but up 1% in local currency.

The operating margin was a record 24% compared to 21% in 2004.

In Latin America, we had record revenue of $127 million, up 38% in U.S. dollars and 22% in local currency.

Their operating margin increased a substantial 7 basis points, from 19% to 26% for 2005.

For the Corporation as a whole, the operating margin was 29% as compared to the 30% that I mentioned earlier in 2004, and again, the decline was entirely driven by corporate expenses.

Free cash flow was $292 million, up from $262 million in 2004.

And during the year, we repurchased 4.2 million shares of our stock for $144 million.

Total outstanding debt is down $98 million over the course of the year, from about $654 million to $556 million.

And that is taking into consideration the two acquisitions that Rick mentioned, both APPRO and BeNow, which were for slightly under $100 million.

In summary, 2005 was one of the finest years in the history of Equifax and the Company enters 2006 with momentum and strength.

We are optimistic for the future.

Thanks for your continued support of our Company and now I'll turn it back over to Rick.

Thanks, Don.

By now, hopefully you've gotten a sense that 2005 was in fact a great year for this Company.

You have a management team here who understands how to deliver.

Facing into a lot of challenges, be it regulatory or economic challenges in 2005, they stepped up and delivered in a big way.

In order for us to take this Company to the next level, it is clear to me we've got to do a number of things.

And for those of you (indiscernible) met in the past, you've heard me talk about this.

First and foremost, we've got to protect our core business at all costs.

We've got to leverage a number of the great growth initiatives we already have underway.

We've got to expend more energy around innovating new products and we have to develop a new platform for long-term profitable growth.

We're reenergizing ourselves for this long-term with an extensive strategic planning effort, and I will just spend a minute and talk about that.

We are engaging a broad cross-section of the talent in this Company with some external thinking, working with some of the best consultants in the industry, to help us really think broadly about what the future of Equifax can be, protecting the core of the growing new platforms, as I just mentioned a minute ago.

This is just underway.

We launched it a few weeks ago, and I am looking forward to having a very clear strategic road map for this Company in the next few months.

A great way to energize the entire organization.

You can expect this growth plan to include both organic and inorganic growth initiatives.

It will leverage the tremendous talent we have in this organization, but will also leverage world-class talent that we will bring into the Company as we strengthen this business going forward.

And it will continue to deliver attractive returns to our shareholders.

While we have built a long-term vision for the Company over the next few months.

I can assure you everyone on this management team is ready to deliver again in 2006.

Our outlook for 2006 builds on that successful performance we had in 2005.

We expect EPS in 2006 to be between $1.90 and $1.99 on a GAAP basis.

That includes a negative effect of adopting the stock-based compensation rule 123R.

Revenue growth is expected to be in the range of 7% to 10% on a GAAP basis.

Cash flow from operations is expected to be approximately 360 to $365 million, and capital expenditures are targeted at between 60 and $65 million.

Gives you a quick snapshot of our outlook for 2006.

Thanks for listening, and now I would like to answer any questions you may have of Don or I or the team.

(OPERATOR INSTRUCTIONS) Mike Vinciquerra, Raymond James.

A question the first on the Direct Marketing side.

Could you just discuss which products are you having the most progress in that category?

Also, was the jump from Q3 to Q4 revenues, how much of that had to do with the BeNow acquisition you mentioned?

Mike, this is Rick.

Let me address the first part of the question and Don will address the second part.

In general, the success there has been a broad-based success across most of our product lines here.

CMS has had great success for a number of years, but accelerated growth in 2005, while DMS in the second half of the year really, with new leadership, new focus of Owen Flynn and his team, has driven growth in the second half of 2005.

So great broad-based growth.

On BeNow, it was a small number, but Don will give you the specifics.

The BeNow contributed about $4 million to the fourth-quarter revenue.

So without that number, the growth in the Direct Marketing side would be about 5%.

I appreciate that.

Thank you.

Did you also say the revenue from small business -- I think you said it was at 4.8 million for the quarter?

5.8.

Okay.

Thank you.

Just one last thing.

Looking at the balance sheet, a couple of your liability lines jumped pretty substantially, and I looked and it looks like you've restated for the previous year as well.

I'm specifically referring to deferred income taxes and deferred revenues.

Did it have anything to do with the acquisition or is there something we should be aware of there?

No, there's another item -- I'm glad you asked that question, Mike -- and that is that under our pension plan, our pension plan accounting, the biggest single item on the movement on the balance sheet was we rebooked the asset.

This asset was written off back in 2003.

It's based on pension plan accounting.

We booked an asset of about $165 million, and associated with that are some deferred liabilities, which is the movement that you are seeing there on the deferred liability, for a net increase of about $100 million in equity value.

And that is because our accumulated -- the value of our assets in our pension plan now exceeds the accumulated benefit obligation.

That is another way of saying that our pension plan is extremely well-funded.

Thanks very much, guys.

Fred Searby, JPMorgan.

A couple questions.

You guys do a great job with the press release.

Sometimes I miss it if it's in here.

But Personal Solutions decelerated, but it looked like profitability was up nicely.

So I'm wondering whether that was -- in the past, that has probably been advertising, whether you cut back or what explains that -- what your thoughts are there.

Secondly, Small Business obviously is a huge opportunity for you, and I wondered just if you could give us some thoughts of how that is tracking, sort of growth rates and where you think that's going.

And just finally if you could comment on the slowdown in Credit Marketing.

If that's too many questions, just answer one or any of them.

But thank you.

Let me see if I can address at least the first two.

You have to refresh my memory on the credit marketing piece.

The Personal Solutions continues to grow.

As the business becomes obviously bigger year-over-year, the (indiscernible) growth becomes a somewhat irrelevant number.

But it is a growth business for us still.

We are still investing in advertising.

Advertising -- you're right -- is down year-over-year, but we will continue spend money on building that brand recognition in the marketplace.

On Small Business, I tell you, I'm excited about that.

Everywhere I have gone -- I have gone out and met with the financial institutions who participate in the exchange there.

It is, I think, fantastic opportunity for us to continue to grow.

It adds a lot of value.

The barriers to entry are high.

We think we've got a very unique position in the marketplace, the ability to blend both the consumer and commercial score give us a very unique position.

So I am thrilled with that.

I think will continue to be a bigger and bigger piece of our growth story over the next three to five years.

How much was Small Business in the quarter -- I was curious -- in revenues?

5.8 million.

Okay, thanks.

Mark Bacurin, Robert W. Baird.

A couple things.

First of all, can you quantify for us at all what impact within the U.S.

Consumer and Commercial group you think a decline in mortgage activity had on the year-over-year growth trend?

I would be happy to take that one, Mike, and that is our mortgage as a percent of total revenues, which is how we quote it, was at a long-time low of 13%.

Now, what I'd tell you is it's really two factors going on there.

Because for the quarter, our mortgage revenues -- it's the highest it's been in the last three years.

It was higher this year than in '04 and '03, so we are seeing absolute growth there.

But what you're seeing happen is actually the rest of the Company is growing so nicely, mortgage is becoming a lesser percent of the aggregate.

So you're seeing sort of a combination of two factors.

Okay, that's helpful.

Don, I think you gave us the organic growth excluding BeNow.

Could you also give us what the U.S. or North American organic growth would have been also excluding APPRO?

You know, I don't have that number off the top of my head.

We can come back to you with it.

No problem.

Within Personal Solutions, you did mention that you had a slowdown there.

I think historically you've quantified for us what the specific advertising charges were for the quarter.

So number one, could you give us that?

And the number two, is there any way to look at, of that subscription revenue you're seeing, how much of that is individuals buying it for themselves versus plans being purchased for them by institutions where there have been security breaches?

This is Rick.

That is a great question.

First of all, on advertising, we don't have the specific numbers for the quarter on advertising.

But the point is, we will continue to invest.

My goal there is to make that the most recognizable brand in that space, so we are going to continue to invest; as we have in 2005, we will do it again in 2006.

As it relates to institutions buying subscription products versus the individuals, I don't have the exact data, but I tell you -- most of it is the individuals continue to buy.

However, you are onto something.

As there are breaches and concerns, corporations are stepping up.

We are prepared to respond, and that is a growth area for us, which is something that the corporations would then in turn sell to their client.

But the vast majority of the growth still comes from individuals versus corporations.

Okay, great.

Just one final one.

Rick, you talked about hiring some consultants, looking at new growth opportunities.

You had mentioned international is a big opportunity.

Just curious, are the things that you're looking at business lines that would leverage your existing data assets or are you talking about potentially even moving into new business lines for Equifax?

No, this is a whole process of how we do two things.

One is leverage the core strength of each business as we have today, finding new ways to think, new tools.

As you know, consultants have the ability to bring in great thinking and great tools, help maximize the growth within our current business structures today.

It gets very risky if you get, in my view, too far outside of your core competencies.

But there are multiple ways to leverage our core competencies of managing data, adding analytics, and embedding with technology to drive growth.

So we're going to stay fairly close to those core competencies as we think about growth over the next three years.

Great, thank you.

Brad Eichler, Stephens Inc.

A couple of questions.

First, on your guidance of 7% to 10% revenue growth, does that include FACTA and foreign currency, or is that pre-FACTA and foreign currency?

It includes FACTA and foreign currency.

So go off your GAAP revenue number then?

Right.

Second, in looking at U.S.

Consumer and Commercial Services, it looked like we saw a little bit of a slowdown in that business.

It was still up year-over-year, but the absolute dollar amount adjusted for FACTA was slightly above first-quarter levels and down from second and third.

Can you give a little bit of detail as to what is going on in that business in the fourth quarter?

Let me start -- this is Rick -- and Don, if you want to jump in, please do so.

There is no doubt if you look at the quarter, within the quarter, Brad, we had a slower start to the quarter, driven by I think a lot of factors -- obviously hurricanes and natural disasters was a contributor.

The good news is, though, as we exited the year in November and December, we saw a pickup.

So we're trying to digest that.

Was it a trend or was it driven by a series of events?

At this juncture, I think it is a series of events as opposed to a trend.

That makes a lot of sense.

On mortgage trends, maybe just following along that thought, can you talk about what were the trends intra-quarter?

Did mortgage start out strong and deteriorate throughout the quarter, or was it pretty much linear on a month-by-month basis?

I would say two things, Brad.

One is, it is important to keep it in context; again, it's a small piece of the total pie, which was the good news.

So it's not 13% of revenue, down from historical levels which were much higher than that.

Two, speaking from recollection, I think what we saw is slower start, stronger finish in mortgage.

Don, you may have those specific numbers.

But again, the note you should take is that we have a balanced business model now that is able to absorb slowdowns in things like mortgage and still deliver what we expect.

The good news is, by the way, if you think outside of 2005, mortgage picked back up in January of this year.

I think the other thing that I might add to it is that the fourth quarter, as we all know, historically it is a slow quarter for the mortgage business.

People are not moving around and having as much activity.

But again, as I mentioned earlier, the fourth quarter of this year was the highest quarter that we have had in the last three years; so we're seeing absolute growth year-over-year.

Right.

Rick, you mentioned new opportunities in the international marketplace in your comments today.

Is that something new or what are your thoughts there?

No, it is not new at all, and no one should misinterpret that, that we're going to go out and triple the size of our international business in the next year.

There are market opportunities beyond the countries in which we currently operate, and there are ways to grow our business base within the countries in which we do operate.

I think Latin America will continue to grow at a good rate, making that a bigger piece of our pie.

UK is a tough market right now, but that will turn at some point in time, so our current platform in UK, Spain and Portugal will become bigger.

We will, in a very cautious manner, with data, look at opportunities outside of those current footholds that we have for ways to grow.

But we will do it in a very methodical manner, well thought through and linked to strategy.

So, Brad, there's nothing (technical difficulty) at this juncture.

Very consistent with what you and I have talked about in the past.

Okay.

Final question.

In your guidance, what is the assumed tax rate that you use, please?

We are consistent in that with about 37 to 38% tax rate.

That is the range, without discrete items.

Okay.

Thank you, Don.

Andrew Jeffrey, Robinson-Humphrey.

Don, you mentioned percentage of transactions that are associated with an enabling solution, and the number sort of growing sequentially relatively slowly.

Can you talk about where you think ultimately that can go, either in '06 or long-term, and what the implications are for pricing?

It looks like pricing has held pretty flat in the U.S.

Consumer and Commercial Services business.

Can you start to see some pricing leverage by virtue of enhanced solutions and how should we think about that business?

Let me take a crack at that.

This is Rick.

One, enabling technology in general is a huge piece of our strategic initiatives and objectives going forward.

And as it relates to price, I am convinced the more we can embed technologies into our clients to help make them more productive and make better decisions, we can offset the price compression that we may see on the core pricing of the data itself.

I like to see -- you talked about the numbers -- Don gave you some numbers -- 23% in the third quarter, 24% in the fourth quarter versus 21% -- '04 versus '05.

I would like to see that continue to grow at a faster rate.

There is no reason -- we gave you some statistics which clients are using it; those are great numbers.

But there is no reason we can't have far greater penetration of technologies into all of our clients, which will facilitate faster growth and protect the core pricing.

Is there anything specific you can point to in the near-term that might help you achieve that goal?

Yes, I think it's the basics.

We just bought APPRO, as you know, in March, and integrating APPRO into the Company, making sure that the teams understand what APPRO can do and can't do, making sure we have aligned goals.

We have spent a lot of time in the fourth quarter of 2005 educating our teams, exposing the technologies, getting the streamlined product plan in place, making sure the core team that Dann Adams has out there is rewarded and measured against leveraging and installing that technology.

The basics, I think, will take us a long way.

I think one thing I might add is that the interconnect platform, which is the legacy Equifax platform, is one that is still evolving mightily.

And that is the lead time to get on that platform, because it is highly customized, is a lot longer, but it is our bigger customers.

And we have a full pipeline for the entire year for interconnect conversions.

One last thing again, Rick.

I think the other thing to facilitate long-term growth there is not just penetrating existing clients with current technologies.

But that team, the enabling technology team, which I spent a lot of time with, has got a very robust productline, thinking through new technologies we can bring to existing customers and new customers that we don't even have today.

So the combination of both will drive long-term growth.

Great.

Thanks a lot.

Michael Meltz, Bear Stearns.

I have two questions and then a follow-up.

The 7% to 10% guidance for '06, can you talk a little bit more about what is built into that number, particularly the high end?

And maybe talk about segments, segment type performance, what you are expecting.

On top of that, Rick, you made a comment about trends strengthening toward the end of the quarter.

Has that persisted into the first quarter here?

Don will take the first part;

I will take the second part, Michael.

On the guidance, I would say nothing unusual is built into it.

I think we're looking at a fairly consistent economic environment, both here and in our foreign operations.

So we don't see anything particularly unusual going on there, Michael.

As you know, we don't give guidance at the individual business unit level, but we have had a history and a pattern of operations that in aggregate do well.

Sometimes some of them perform a little better than we expected.

Sometimes some of them not quite as well.

But in aggregate, we think it is going to be a solid year for us in 2006.

Michael, Rick.

Your second question -- yes, we are.

The momentum we saw towards the end of the fourth quarter 2005 in fact did continue into January of 2006, so that is encouraging for us.

Don, one quick follow-up here.

Are you -- while not getting into specifics of line item by line item -- are you anticipating growth out of your mortgage-related businesses in '06?

Probably some more modest growth like we've experienced in the past.

We think we will still win marketshare there, Michael.

Last question.

At the corporate expense line, there were several -- I don't know if they were anomalies, several items in '05 that spiked up that line.

What type of run rate should we expect there throughout '06?

We're not giving specific guidance, but I think we have given you some information to help you get somewhat there in the disclosures about the CEO transitioning, both Tom's and Rick's package.

So we would certainly see that number ameliorating as we move into '06.

Thank you.

Brandon Dobell, Credit Suisse.

Maybe for both Don and Rick, CapEx guidance is up a touch from where we saw '05 finish out.

I want to get a sense for the thought process behind the bigger CapEx number, where it might be going, just sort of get a sense of how you prioritize some of those numbers.

And you also mentioned, I think at the outset, that the North American top 20 financial customers saw some acceleration in Q4 in terms of revenue growth.

I want to get a little sense for what kinds of products are driving that acceleration and is that more of a temporary thing based on some easy comps from last year or do you think there's a continuation that we can extrapolate out into '06?

Brandon, this is Rick.

Let me see if I can take a crack at that.

In 2005, I think our CapEx expense was a bit short of $50 million.

We gave you some guidance -- 60 to $65 million in 2006.

Nothing unusual there.

It's just investing in the future.

Rob Webb, our CIO, and his team have laid out a very thoughtful road map for reinvesting some; it's just make sure the ship's run better.

Some is in the area of privacy; some is in the area of growth.

So it's across the board, but nothing unusual.

I don't have the exactly numbers right off the top of my head, but 2005 was actually budgeted at a higher number than we actually spent at the $50 million range.

So it's, again, just some of the basics.

Nothing unusual, but facilitating those three areas I just mentioned.

As far as the top accounts growing, it is really just broad-based.

There's no one single product that has been a trend we've seen happen all year.

Credit Marketing is growing.

The Information Services is growing.

It's across the board, so it is good, sustained growth, the kind we saw happen in the first quarter, second quarter, third quarter, continuing in the fourth quarter.

One quick follow-up, Don.

For the '06 assumptions, any share repurchases built into your plans as you think about the bottom-line numbers?

I don't know that we give out specific guidance on our share repurchase, but not much of anything in essence built into the plan right now.

Great.

Thanks, guys.

Bruce Simpson, William Blair.

Just as a note for this call and future calls, you have very different and distinct voices, so you can probably save us from identifying yourself before each answer.

Thanks, Bruce, for the feedback.

I wanted to drill down a little bit into the core businesses.

You have given us some very nice detail about mortgage.

But outside of that, what are you seeing in terms of the unit demand trends in your Financial Service business?

What is driving growth?

What might be accelerating or decelerating by particular verticals, whether that is the card issuers or big or small banks?

Yes, a couple of things.

First of all, in '05 we saw pretty healthy growth in Financial Services sector, and we expect that to continue into '06.

We saw some weakness in our telco area, but actually we are optimistic that that might pick back up a little bit in '06.

So those would be the two sectors, the two verticals that I would specifically bring up.

The only reason I would maybe add on to Don's comment on telco, why we think '06 is better.

We think there was some distraction as a number of the telco companies were integrating themselves as they had acquisitions.

That is hopefully going to be a smaller issue in 2006.

Drilling down into that Financial Services piece a little bit, is it driven by card issuers soliciting for new business or are you feeling changes from the changing interest rate environment or credit unions or big or small banks a particular growth area right now?

Nothing in particular.

We've seen, as you saw with our CMS business, we've seen pick back up actually in the card activity, and a lot of that has been new account solicitations.

Okay.

I wanted to follow up on that.

In contrast to your parent, who was talking about a pretty tough overall climate in marketing, discretionary dollars allocated to marketing spending, you seem to be having good strength there.

When you say our parent, what do you mean -- our parent?

I'm sorry -- not your parent, but rather your child, in the form of ChoicePoint.

ChoicePoint in particular talked about a fairly difficult discretionary spending environment in marketing.

You guys are seeing some growth and I understand that lot of that is due to the good efforts of Owen Flynn and so forth.

But could you comment on where within Direct Marketing or whether it is DMS or the credit side you see particular growth opportunities for '06?

I think, Bruce, CMS has had now a couple years in a row of just good, solid execution.

DMS has not.

It's get new leadership in there -- not only Owen, but the leader who actually runs the DMS business for us.

And that was [open] and a good turnaround back-end 2005.

And I fully expect both to deliver in a nice way in 2006; so it's both.

If I might tack onto that a minute, Rick, the other factor for us that we are excited about is the capabilities BeNow can bring to us as well.

Good point.

Because that is a function that we did not even have before and an important one to be able to process the data for our customers.

So do you think strength there is coming from incremental unit volume of credit files or is it coming from winning new projects?

Both.

Clearly both.

The last question has to do just with the extent to which your '06 revenue guidance integrates any change in the per-unit FACTA surcharge.

I know that you have talked in the past about how that over time will diminish to only reflect the operating expense, rather than amortizing the CapEx.

So is that built into the revenue guidance for '06, some decrease in the per-unit charge?

No, our plan remains the same; we have been very consistent there.

We have not recouped our expenses yet that we have had to build to actually offer this product.

So 2006, we will contemplate continuing to charge regulatory recovery fees until we recoup that expense.

At the same rate we saw in '05?

Currently, we have not announced any guidance or any decisions in terms of doing anything differently right now, Bruce.

Okay, thanks a lot.

David Togut, Morgan Stanley.

Historically, or at least going back some 15 years, Equifax was one of the early EVA companies.

And historically, you've aggressively used your cash flow to buy back stock and reduce your cost of capital.

My question, Rick, really, is how are you thinking about the balance sheet over the next few years?

Do you expect to pull back from share repurchase and make acquisitions a much bigger part of the Company's strategy?

I think the strategy is pretty clear.

It's deploy that great cash flow that we throw off every year into vehicles that can facilitate profitable, smart growth.

I think the team historically has done a great job of buying back shares, paying down debt.

We're comfortable with the debt level right now.

We may continue to buy back shares if that is a prudent thing to do.

But I think there are great ways to deploy that capital on an annual basis -- it could be technology that drives organic growth, it could be M&A, it could be new products.

So we're working all those levers and pull the ones that foster, facilitate profitable growth.

How do you look at acquisitions in particular?

Are you thinking more about tactical acquisitions or more strategic?

We'll look at both, obviously.

We are spending a lot of time on two fronts -- one making sure we have a good M&A process built in-house; two, that it's linked to the strategy I talked about earlier; three, we've spent last four months developing an integration team and road map, leveraging best practices that exist across multiple industries.

So I'm comfortable we now have the mechanics to acquire.

We'll work towards the tactical acquisitions, tuck-ins, as well as strategic.

The strategic will be born out of the strategic planning process, not before.

David, the thing I might mention to you, if you go back to our two levers we've been using for our free cash flow, which is the share repurchase and debt reduction, I would suggest you should anticipate a slowdown in the debt reduction before you would see a slowdown in the share buyback.

I see.

Thank you.

[David Saunders], Stifel Nicolaus.

I just -- I don't want to beat a dead horse, but I want to make sure I understand the decline or the sequential decline in Information Services business.

If you back out the benefit from the FACT Act, was that mostly a slowdown in mortgage activity?

What is going on there?

David, just clarifying the question -- are you referring to the fourth quarter?

Yes.

And the question was what were the main drivers to the slowdown in the fourth quarter.

Is that correct?

Yes, that is correct.

I have for the Information Services business for year-over-year at mid single digits, compared to low teens for the third quarter.

I was wondering was -- you talked about mortgage being a smaller part of the overall business there.

What drove that sequential decline?

Let me take a crack, but I don't have all the product split -- auto versus telco versus mortgage memorized here.

But again, I'd go back and say, in my view, in our view, it was an event driven on the heels of the natural disasters that struck the U.S. in the third quarter and fourth quarter last year.

We did see a pickup in all lines of business as we exited 2005, and that momentum has continued into January of 2006.

So hopefully, that gives you some flavor.

Sure.

I appreciate that.

Thank you.

Thanks, everybody.

We will be available this afternoon if there are any follow-up questions.

So at this point I would like to conclude our call.

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