易速傳真 (EFX) 2007 Q4 法說會逐字稿

Good day and welcome to the Equifax Q4 earnings release conference call.

Today's conference is being recorded.

At this time I would like to turn the conference over to Mr.

Jeff Dodge.

Please go ahead, sir.

Good morning and welcome to today's conference call.

I'm Jeff Dodge, Investor Relations, and with me today are Rick Smith, our Chairman and Chief Executive Officer, and Lee Adrean, Chief Financial Officer.

Today's call is being recorded.

An archive of the recording will be available later today during in the investor center of our Website at www.equifax.com.

During this call we will be make 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 2006 Form 10-K and subsequent filings.

You should also reference the risk factors included in TALX Corporation's March 31, 2006 Form 10-K and June 30, 2004 Form 10-Q.

In this call we will refer to several non-GAAP financial measures for Equifax Consolidated full-year 2007.

These measures include adjusted net income, adjusted diluted EPS and adjusted operating margin and adjusted operating income.

These measures exclude acquisition related amortization expense, the net impact of certain second- and third-quarter 2006 legal and tax matters and a fourth-quarter 2006 organizational realignment charge.

We also refer to EBITDA defined as operating income before depreciation and amortization and adjusted for the net impact of certain 2006 litigation matters and the organizational realignment charge.

We also refer to adjusted operating margins for U.S.

consumer solutions and North America Personal Solutions excluding net effect of certain litigation loss contingencies.

TALX's adjusted opera margin excludes the incremental impact of amortization from our acquisition.

For the fourth quarter of 2007, similar non-GAAP measures are used but the Equifax Consolidated adjustments only include acquisition related amortization expense and a fourth-quarter 2006 organizational realignment charge.

EBITDA is defined as operating income before depreciation and amortization and adjusted for the organizational realignment charge.

Please see the section of our earnings release entitled reconciliation of non-GAAP financial measures to the comparable GAAP financial measures for further details and the GAAP to non-GAAP reconciliations posted in the investor center on our Website.

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

Thanks, Jeff, and thanks for joining this morning.

You've heard me talk in the past about the resilient nature of our leadership team and the diversity of our business mix across the five businesses and I tell you both of those factors were tested like probably never in the second half of 2007.

Before I get into some of the details of the specific business unit performance and some outlook for 2008, let me just kind of walk through a few of the high-level highlights and high-level challenges that this leadership team met head on in 2007.

First on the diversity side, today less than 50% of our revenue comes from U.

S.

Consumer Information Solutions.

That is down from 65% in 2004 and that has helped us weather the storm in the U.S.

Also less than one-third of our global revenue now comes from traditional financial institutions compared to 50% three years ago.

The highlight that you've heard me talk about is our NPI, new product innovation and strategic price that we launched a little over a year ago.

Both those efforts combined generated 3 points of incremental revenue growth in 2007.

As you know, we are always looking for new data sources and we acquired TALX which added that database and we'll give you some updates on how TALX is performing in a few minutes.

U.S.

Consumer continues its penetration of Analytics and Enabling Technologies in all of our served markets which is making a big difference.

Our international business contributed strong incremental growth and margin improvement and North American Personal Solutions exceeded our expectations with an outstanding performance not just for the quarter but the entire year.

And North American Commercial Solutions completed its first year as a separate business unit with strong growth and a sharper strategic focus.

It was also obviously a year of some challenges.

The subprime lending excess drove liquidity crisis that we all know so much about far greater, far deeper than I think any of us would have thought as we look back maybe a year ago.

Consumer lending risk exceeded many financial institution's expectations.

We saw the papers obviously.

We track this data daily.

Retail sales slowed and consumer confidence declined and obviously the unemployment rate rose.

So we took on these challenges.

We invested in our future while still meeting our commitments that we made to our investors in 2007.

In short this team did deliver and I'm very proud of what we've accomplished.

Total revenue was up -- was $1.8 billion, up 19%; TALX contributed 12 points of that growth; and Equifax excluding TALX grew 7% in that environment.

Operating income was $486.2 million, up 11% and adjusted operating income increased 8%.

Diluted EPS was $2.02 a share, down 5% while adjusted EPS was $2.32, up 7%.

I will now go into some of the individual business units.

Throughout the year U.

S.

Consumer Information Solutions introduced a number of new products to help customers successfully address their business challenges.

For example, two of them that are highlights in the U.S., our Mortgage Settlement Services venture gained traction as the year progressed.

Our top three clients are the top 10 financial institutions in the U.S.

Volume in January is currently running 25% ahead of December.

As I mentioned when we were together at the New York Stock Exchange back in October, this Settlement Services probably launched a little over a year ago is a bright spot in the USCIS and I am confident this will become a significant revenue and profit contributor to this organization over the coming years starting in 2008.

In September, we introduced our ARM predictor.

It's a tool that helps financial institutions identify consumers who are likely to have an adjustable-rate mortgage.

Market interest has been very strong.

We completed a number of projects for large lenders to validate the score and incorporate into their portfolio projects and we are now generating revenue just a few months after it was launched.

Our flagship business, U.S.

Consumer Online Services, continue to drive volume growth and penetration of Analytics and Enabling Technologies.

For the year, Online Consumer Information Solutions grew 3%.

So in spite of a very difficult economic environment, they still grew 3%.

Regional telco customers contributed significantly to this growth while our large national accounts were down slightly.

Growth became increasingly challenged late in the year and as volume declined 1% in the fourth quarter with a progressive slowdown throughout the fourth quarter.

I don't think that's a surprise to anyone on the phone.

Despite this environment, we continue to make progress on our key strategic initiatives.

For the year, 29% of our online transactions were delivered through one of our Enabling Technology platforms, up from 27% in 2006.

On the analytic front, 19% of our U.S.

online transaction volume for 2007 included scores for models built by Equifax.

This compares to approximately 18% for 2006.

In Credit Marketing, over 45% of names listed included a score from an Equifax model compared to 38% in 2006.

VantageScore continues to meet our expectations as the market adoption rate increases and customers use it as a more effective risk measure for their underwriting guidelines.

Mortgage Reporting was down 8% in 2007 while the industry's value of closed loans was down over 16%.

In the face of this challenge, our Mortgage Settlement Services venture continued to gain traction, as I mentioned earlier, and will be a strong contributor for us in 2008.

Credit Marketing Services revenue declined 6% in 2007 reflecting the customers' focus on managing their existing customers for risk and revenue growth versus acquiring new customers.

That's a trend that we've talked about back in the second quarter of 2007 and really never improved at all throughout the year.

What is improving is the portfolio review element of Credit Marketing Services.

Our global operations team is developing a plan to integrate Lean, which is a statistically based process improvement tool, into CMS to restructure the fulfillment process and improve operating efficiencies and margins.

We expect to see meaningful results from these efforts beginning in the second quarter of 2008.

While Direct Marketing Services revenue was down 2% in 2007, really good progress was made in cross-selling their products to our core credit customers in addition to significantly expanding the operating margins of that business.

North America Commercial Solutions has fully integrated Austin-Tetra supplier and customer data management capabilities into its business.

It's fine-tuned the strategy and expanded its product offerings, for the year, revenue grew 37%.

Our U.S.

Consumer Commercial database continues to add depth and breadth to its files.

As of the end of December, almost 30% of the business folders have four or more trade lines with members of the small-business financial exchange and over 60% of the business folders contained at least one financial account and one trade account.

Great progress last year.

In 2007, the depth and breadth was added to the U.S.

commercial database by adding Secretary of State Business and Securities and Exchange Commission registrations.

We're also proud to say we have re-signed the Small Business Financial Exchange for another five-year term ending in 2012 and you know that is a very unique, highly differentiated exchange that we created.

We're also leveraging our analytical capabilities to drive stronger customer ties.

For example in 2007, almost 85% of our commercial transaction volume with U.S.

strategic customers included the proprietary business risk store that we have developed.

[With our] new product offerings, combined with market and customer penetration, we intend to build a business that will become a formidable competitor over the course of the next few years.

Next on Personal Solutions, Personal Solutions delivered an outstanding performance exceeding our double-digit revenue growth target and 20% operating margins as it repositioned the business for attractive and sustainable growth and operating performance.

In 2007, we provided services to over 350 data participants where sensitive information about consumers was exposed.

Approximately 69% of the revenue was subscription based, up from 53% in 2006.

In the fourth quarter, we reached 75% of all revenue being subscription.

If you remember, when we restructured the strategy of Personal Solutions, we set a target of 70% to 75% subscription base to balance transactions by the year 2010.

Steve Ely, the leader of that business and his team have done a phenomenal job and delivered those results two years ahead of time.

Subscription customers grew to 1.4 million by the end of the year, up from 1 million in 2006.

We're educating consumers on our Website and investing in the next generation of product offerings.

Our newest product, Credit Report Control, has been well-received by our customers and launched late in 2007.

Our international business delivered very strong performance in 2007 offsetting challenges in Brazil with outstanding performances in other geographies.

Revenues grew 17% and 10% in constant currency.

In 2007, 10 of the 11 geographies delivered double-digit revenue growth and seven of the 11 geographies delivered improved operating margins.

Our value-added solutions continue to drive growth, stronger customer relationships and improving market penetration in all geographies.

In Marketing Services for example, revenue grew almost 21% and Predictive Sciences grew over 18%.

We continue to strengthen our business in Brazil, which is critical to the success of our international business.

I'm working closely with our management team to ensure our long-term success there.

In fact, I'm down there next week with Rudy Ploder and his team meeting with customers, partners and our team to ensure that strategy is well at hand.

Recently we executed an exclusive partnership with ACSP, the largest Chamber of Commerce Association in Brazil.

This relationship not only expands our data coverage in Brazil with an important strategic partner but we expect it will also accelerate the achievement of our financial and strategic objectives for 2008.

I'm thrilled with that partnership.

During the quarter, two contracts were signed with a major telco and a large bank adding over 6 million new trade lines to our database in Brazil.

We're also broadening our penetration in the banking sector [though] revenues in 2007 were up some 40%.

And we're continuing to work aggressively on our initiatives in our four targeted geographies that we've mentioned in the past, India, China, Mexico and Russia.

Some new news for you.

Last year we filed an application for license to operate a credit information company in India and this morning we are announcing that we will be working in partnership with two of India's leading companies Crisil, C-r-i-s-i-l for those of you who don't know Crisil.

They are a leading rating agency research and policy adviser company, well respected and well regarded throughout the Indian market.

And Tata Capital, and I think everyone here knows Tata Capital.

We're excited about this opportunity and these premier partners will be joining us as we work through the improvement process and getting a license and the necessary regulatory approval in 2008.

Finally, our fifth business unit, TALX, fulfilled all of our most critical objectives for 2007.

Revenue was $179.4 million.

The work number revenue was $72.6 million; as we expanded the database for both active and inactive employment records, 23.1 million records were added to the database bringing the total to 46.1 million active records and 165.9 million total records.

Significant progress in 2007.

We currently have 9 million total records in backlog which is down 33% from the first quarter of 2007.

If you will recall as we get that backlog down, our ability to yield revenue is enhanced and accelerated.

The diversity of the work numbers revenue mix continues to support growth even as revenues for the mortgage industry declined from 28% in the fourth quarter of 2006 to 20% of the revenue in fourth quarter 2007.

And the tax and talent management services businesses are obviously important for the strength and continued growth of the work number had an outstanding quarter, as new management in the tax business improved the focus and operating efficiencies and Doug Cole running our talent and management business also delivered outstanding fourth-quarter performance.

Tax management services accelerated its growth during the year reflecting a strong focus on executing the strategy that Keith Graves has brought to that business and Doug Cole over at talent management had one of its strongest quarters in the fourth quarter with double-digit revenue growth.

Throughout 2007, we analyzed and assessed our cost structure to identify opportunities to eliminate costs; converted fixed costs to variable costs and operate more effectively by leveraging shared service expertise.

All of this was designed to give us more predictable and responsive operating infrastructure.

Our Global Operations Center of Excellence has been -- has a very important role in this effort.

The organization is led by a new [SLC] member, Andy Bodea.

Andy has world-class experience in process improvement leading Lean and Six Sigma organizations and has taken on the challenge to deliver incremental cost savings in 2008.

The beauty of having a highly fixed cost business is when it grows like USCIS when you are growing, your incremental margin is significant.

When it slows or has negative growth as we had in the fourth quarter, it obviously puts pressure on our margin.

So we are all over taking cost out of Global Operations but most importantly the cost structure that supports our USCIS business.

A number of initiatives were launched in 2007, in the latter part of the year, and that will benefit the operating margins of USCIS and all of Equifax starting in the first quarter of 2008 and ramping up throughout the year.

Our Global Sourcing Organization led by Kent Mast and his team have put in place a number of different multiyear arrangements and agreements ranging from application development management outsourcing, business process outsourcing, IT outsourcing, that will save us some $36 million over the next few years.

We will continue to invest for the long-term growth.

We will also be aggressive on initiatives that will improve operating margins in the short term.

Rest assured, we saw the slowdown coming in 2007.

I know you'll have some questions around USCIS margin and we will talk about those during the Q&A.

We've taken actions to address those margins.

You'll see improvement starting in the first quarter and improving throughout the year.

Let me turn it over now to Lee who will give you some more specific financial details.

Thanks.

Thanks, Rick, and good morning, everyone.

This morning all financial information I will be discussing will be presented on a GAAP basis unless otherwise noted.

You should also refer to the Q&A and non-GAAP reconciliations attached to our earnings press release for additional financial information.

For the quarter, consolidated revenue was $490.9 million, up 26% over the year-ago quarter.

EBITDA, a non-GAAP measure, was $158 million, up 15% for the quarter.

Operating income was $120 million, up 9% from a year ago.

Adjusted operating income increased 3%.

The operating margin was 24.5% in the quarter.

On a non-GAAP basis, adjusted operating margin was 28.9% in 2007 compared to 31.8% in the fourth quarter of 2006.

This decline was caused by a decline in our U.

S.

Consumer Information Solutions which I will address further in a few moments.

Net income was $65.7 million, up 4% from a year ago.

On a non-GAAP basis, adjusted net income decreased 2%.

Diluted earnings per share were $0.49 per share, down from $0.50 in 2006 reflecting an increase in average shares outstanding as a result of the TALX acquisition.

Adjusted EPS was $0.59, up 4% from $0.57 in Q4 '06.

During the fourth quarter, we benefited from a lower than anticipated tax rate as a result of certain discrete tax items.

Compared to our average effective tax rate for the first three quarters of the year, this lower tax rate contributed $0.02 per share to our earnings per share.

We repurchased 2.6 million shares during the fourth quarter for $97.8 million.

We have now repurchased 17.9 million shares for a total of $718.7 million since the TALX acquisition against an originally announced objective to repurchase $700 million in stock.

Outstanding debt was $1.4 billion, up from $504 million at year-end 2006.

In our U.

S.

Consumer Information Solutions business, online consumer information revenue was $150.6 million, up 2% when compared to the same quarter last year.

For our core product, online transaction volume was down 1%, driven primarily by national and telco customers in addition to our channel partners, many of whom sell into the mortgage market.

Price compression for the core product was approximately 1.5%, consistent with historical trends.

Revenue increased at some of our ancillary online services allowing total online revenue to grow.

Mortgage Reporting Solutions revenue of $12.7 million was down 15% from the fourth quarter of 2006.

Credit Marketing Services revenue of $37 million represents a decline of 16% for the quarter.

Our prescreening revenue which is primarily directed toward new account acquisition was down 33% as financial institutions reduced new account marketing in this uncertain period.

Revenue from our portfolio review products which are used to manage and sustain existing customer accounts was about flat.

Direct Marketing Services revenue was $28.3 million, down 3% compared to the fourth quarter of 2006.

The operating margin for our U.

S.

Consumer Information Solutions business was 36.6% in the quarter, down from 41.4% in the fourth quarter of 2006.

The revenue decline during the quarter negatively impacted our margins in this business given that most of our costs are relatively fixed in the near term.

In light of our cautious outlook for revenue in the near term for this business given the uncertain economic conditions, we have identified and have taken and are continuing to take steps to improve efficiency and reduce expenses which will result in steadily improving operating margins from the fourth-quarter level, beginning in the first quarter of 2008 and continuing through the year.

North America Commercial Solutions revenue was $21.2 million, up 26% from the fourth quarter a year ago.

Excluding the foreign exchange benefit relating to our Canadian commercial business, revenue grew 20% driven primarily by our marketing and data management product offerings.

U.S.

commercial transaction volume is $1.1 million, up 7% from the fourth quarter of 2006.

Transaction based revenue in the U.S.

commercial business now represents over 54% of total commercial revenue in the U.S.

In North America Personal Solutions, revenue grew 21% to $38.3 million continuing its strong performance of the last year and a half.

Operating margin was 26.1% for the quarter compared to 26.5% for the same period in 2006.

Our international business grew revenue by 23% in the quarter to $128.9 million; Canada Consumer revenue was $28.5 million, up 20% in U.S.

dollars and 3% in local currency; Europe delivered revenue of $48.8 million, up 18% in U.S.

dollars and a strong 10% in local currency; Latin America grew revenue 30% in U.S.

dollars to $51.6 million, in local currency, revenue growth there was a strong 18%.

Operating margin was essentially even with the year ago at just under 29%.

TALX delivered $73.8 million in revenue, up 14% compared to the same period in 2006.

The work number delivered revenue of $28.1 million, up 9% for the quarter from its result a year ago.

Total records in the work number database grew to 165.9 million, up 23 million or 16% from a year ago.

The tax and talent management services unit delivered $45.7 million in revenue during the quarter and TALX operating margin was 20% on a GAAP basis.

The adjusted operating margin, adjusted for incremental acquisition related amortization was in excess of 30%.

For the full year, consolidated revenue was $1.8 billion, up 19%.

EBITDA, a non-GAAP measure was $614 million, up 15%.

Operating income was $486 million, up 11% in 2006.

On a non-GAAP basis, adjusted operating income increased 8%.

The operating margin was 26.4% for the year; on a non-GAAP basis, operating margin before acquisition related amortization was 30.0% in 2007 compared to 31.2% in 2006.

Net income was $272.7 million, down 1% from a year ago; on a non-GAAP basis, adjusted net income increased 5%.

And diluted earnings per share were $2.02, down from $2.12 in 2006; on a non-GAAP basis, adjusted EPS was $2.32, up 7% from $2.16 in 2006.

In U.

S.

Consumer Information Solutions, Online Consumer Information Solutions revenue was $639 million, up 3% when compared to last year.

Online volume was up 6% driven primarily by telco and regional customers.

Mortgage Reporting Solutions revenue of $66 million was down 8% for the full year; Credit Marketing Services revenue of $156 million was down 6% for the year.

Year-to-date, our prescreening revenue primarily used for new account acquisition was down 18%, while our portfolio review products were up 5% reflecting financial institutions' increased focus managing their existing customers and portfolios.

Direct Marketing Services revenue was $108 million, down 2% compared to a year ago and operating margin was 39.6%, down from 40.9% in 2006.

North America Commercial Solutions revenue was $67.6 million, up 37% from 2006.

U.S.

Commercial transaction volume was $4.7 million, up 33% from 2006 driven primarily from growth with our large strategic customers.

Transaction-based revenue in the U.S.

Commercial business represented over 62% of total commercial revenue in the U.S.

In North America Personal Solutions, revenue grew a strong 22% to $153 million and operating margin was 22.1% for the year.

On a non-GAAP basis, the adjusted operating margin last year was 14.8%, so we saw very strong margin progression along with the strong revenue growth.

Our international business grew revenue by 17% to $473 million; Canada Consumer revenue was $106.5 million, up 12% in dollars and 5% in local currency as new pricing initiatives were implemented and Marketing Services continued its strong performance.

This is the strongest local currency growth we've seen in Canada in six years.

Europe grew revenue to $183.8 million, up 20% as core information services in both the UK and Iberia experienced strong volume gains.

Revenue growth in local currency was 10%.

UK's core consumer volume was up 21% with volume from their top 20 customers up 17%.

Growth from the top 20 was broad-based including banks, retailers and government.

Utilities and debt collection customers were the principal drivers of growth with our smaller regionally based customers.

Latin America revenue was $182.5 million, up 19% in dollars and 12% in local currency driven by double-digit growth in Predictive Sciences and Marketing Services.

Six out of seven country markets delivered double-digit revenue growth for the year.

Marketing Services, Analytics and Enabling Technologies represented 29% of revenue, up from 26% in 2006.

Finally TALX delivered $179.4 million in revenue in the 7.5 months since its acquisition in May.

The work number delivered revenue of $72.6 million with total records in the work number database growing to 165.9 million, up 16% from December of '06.

The tax and talent management services units delivered $106.8 million in revenue during that same period.

TALX operating margin was 16.3%.

Operating margin before incremental acquisition related amortization is approximately 30% for the year as this business shows the same strong margin characteristics as the rest of Equifax.

In summary, solid performance for the quarter and a strong performance for the year.

2007 clearly showed the resiliency of our business model as well as our ability to deliver on some very important strategic initiatives.

Now let me turn it back to Rick.

Thanks, Lee.

[When] we enter 2008 with a stronger more prepared management team, an energy level that is focused on turning challenges into opportunities and a strong belief in our ability to execute on our growth strategy again in 2008.

Many of you were with us during our investor day at the New York Stock Exchange where we provided deep insight into each of our businesses and their strategies for driving growth and operating performance.

We shared with you the management philosophy that will underpin our ability to continue to deliver on our commitments.

While the environment continues to challenge us in the U.S.

and our customers here in the U.S., our priorities have not changed.

We will continue to add new products and services that our clients value and are willing to pay for.

We will accelerate our penetration of Analytics Enabling Technologies on a global scale.

We will identify and secure new unique data assets and we'll continue to expand into emerging markets that offer attractive long-term growth potential.

For 2008, we expect revenue growth to be in the range of 9% to 12% and adjusted EPS expected to be between $2.48 and $2.58 a share.

And EBITDA is expected to be in the range of $675 million to $710 million.

It's important that you understand that in that assumption there, we do not expect or anticipate an improvement in the U.S.

economic environment.

Our capital expenditures will be in the range of $125 million to $150 million as we continue some of our infrastructure investment and investing in our new product introductions.

To give you a bit more transparency in how we see 2008 unfolding, our investment -- or our outlook for the first quarter is revenue to be in the range of $488 million to $498 million, and adjusted EPS be in the range of $0.56 to $0.60 a share.

We'd now like to open up, operator, for any questions that you may have.

(OPERATOR INSTRUCTIONS) Mark Bacurin, Robert Baird.

Good morning, everyone.

Couple questions.

Just in looking at the fourth quarter expenses and margin performance, you talked about some of these costs initiatives you are putting in place.

Were there any one-time type charges that impacted Q4?

We traditionally, Mark, do modest amounts of restructuring, repositioning that would impact the P&L but it is absorbed within the P&L.

So that is not unusual for us to do.

We obviously we did not announce anything publicly of a large restructuring reserve but that is ongoing.

And at some points in time, like the fourth quarter where the revenue softens a little faster than we expect it, you may have larger investments in restructuring.

But it's normal due course.

And embedded in your '08 EPS guidance, are there any -- is that an adjusted number or does that also include any potential restructuring or severance type expenses may flow through?

It would be much like last year.

If we're going to invest in restructuring, it would be absorbed in that number.

Okay, great.

And then looking at the revenue guidance, you obviously have some incremental lift in '08 from the stub period of TALX in the first part of '08.

If I'm looking at the numbers correctly, does the core revenue growth at Equifax excluding TALX implied in the guidance roughly in the 3% to 6% range?

And if so, the implication there is that the U.S.

consumer piece might be flat to negative for next year, and I wanted to balance that in the context of the noticeable lift and refinancing activity, mortgage refinancing activity that's occurred here over the last month or so.

Mark, your analysis, first of all, is spot on.

It would say that the four growth businesses -- international, TALX, PSOL and commercial -- would have similar growth trends in 2008 that they had in 2007.

And then by default, the implication is that USCIS would be flat to slightly down.

Again, the comment I made in my closing comments when I gave the guidance was that it's based upon an assumption that there is no improvement in the U.S.

economic environment specific to refinancing.

We have -- and you read about it; I think everyone has -- is the mini refinancing boom that is taking place with the 125 basis point rate cuts that the Federal Reserve had announced.

There is no doubt that that is helping the mortgage business.

How long that lasts is hard to say.

Right now as we enter into 2008, that is a positive surprise that we are seeing in the U.S.

Can you comment on whether or not volumes from the month of January were actually positive?

On refinancing?

Well, I guess in total for the U.S.

Consumer business, with refinancing obviously being a big driver of that.

No, I don't have the exact numbers, Mark.

But again, I think if you look at it this way if you assume that the USCIS business is flat to slightly negative for the year, that is a good starting point.

And if we get improvement, so be it.

Okay, great.

And two more quick ones if I may.

In the Credit Marketing business, how much of the pullback you saw in Q4 and I guess over the back-half of '08 would you characterize as a knee-jerk reaction by the financial institutions as they are coping with their own earnings issues versus maybe a prolonged --?

I think it's a lot of it.

I mean, I think there is no doubt that they were -- rather than go out there and try to secure new risks, they want to say oh my God, have I got my underwriting standards right today because my portfolio risk well at hand today or not.

So yes, it is a knee-jerk reaction.

I think ultimately over time the credit card companies are going to have to go out there and grow their portfolios.

And on the CapEx side for '08, that is a little higher.

I think there was $30 million of [extra] expanding in '07 for technology facility and so stepping up to 125 to 150 seems a little higher.

Can you give us any color?

Are there specific projects that are driving that, any big projects in particular?

Sure.

I think we had indicated at our analyst meetings in each of the last two years that we thought CapEx would step up to a level that's around 7% of revenue in '07 and again in '08 and then would start coming down as a percent of revenue.

The specific in '07 and '08, we did purchase the building in which our datacenter is in '07 and we are spending roughly equivalent amount of money in '08 on upgrading the infrastructure.

It's approaching a point where it's appropriate to replace or upgrade much of the infrastructure in that building for the next generation.

So that is the reason kind of for the spike or the jump in CapEx as a percent of revenue.

Nonetheless we have stepped up from prior levels our underlying CapEx and that does represent increased investment in new product.

Great, thank you.

Kyle Evans, Stephens.

Good morning, guys.

Let me get my broken record mortgage question out of the way and then I have some other quick follow-up questions.

What was the total exposure to mortgage in the quarter and what do you think it will look like in 2008?

Well total exposure -- let me give you the total year.

Total year mortgage all in is slightly less than 10% of revenues come from mortgage.

And we don't expect -- by default the answer to the second part of your question -- it should be a smaller percentage in 2008 than it was in 2007 because it is going to continue to shrink and the other businesses will grow.

Okay.

Lee, could you maybe give us a little bit of guidance around what you are looking for in terms of share count, tax rate, and acquired intangibles and the guidance range for the EPS?

Yes, share count will continue to drift down from the level in the fourth quarter.

With share prices where they are today, we would currently expect to devote a majority of our available free cash flow to continued share repurchase.

Tax rate for next year should be up some from this year, I would say a range of somewhere around 37% to 37.5% is probably a reasonable estimate.

That obviously can jump around quarter-to-quarter and year-to year, but that is probably roughly the right range.

I think you asked about acquisition intangibles.

I have a net of tax number for the add back for getting the cash EPS and that number should be in the $53 million to $55 million range for the year.

I think those are the items you asked about.

That is exactly what I was asking for.

Thanks.

Kyle, this is Rick.

And probably too, as Lee said, the share count will decrease throughout the year.

That obviously gives you -- gives us the EPS lift that you'd expect to see starting in the second quarter and going throughout the year.

Great, one last question.

On the TALX business, can you tease apart the paying business from tax management?

And then as a follow-up to that, the growth rate and work number has historically tracked the employee records and the database and right now obviously we've fallen off that pace.

Can you help tease apart the impact of mortgage and slower hiring in that 9% year-over-year work number business?

The first part of your question, we don't break that out.

Obviously we run it separately and so on and so forth, paying versus the tax but it has been and will continue to be reported as one number.

But I can tell you, my comments there, I meant what I said, if both those businesses finish the year very strong can carry nice momentum going into 2008.

Specific to the work number growth tracking to the database, it adds -- you are absolutely right, what you saw in the second half of the year is a slowdown in the mortgage business, not dramatic, nothing like what we saw in USCIS but a definite slowdown in the mortgage applications.

What we do see in TALX is a process that we're seeing actually the collection business ought to be smaller, much smaller but the collection business showing significant growth as we exit the year.

And did the collection business -- it's my recollection that that's got a prior price point to it.

Did that help with unit pricing in the work number business this quarter?

Yes, that is a great question, Kyle.

The price would depend upon the size of the debt that they are trying to collect.

That could have a very, very high price point, you're absolutely correct.

But your question was what other price point did it do what?

Just what was the unit pricing trend in the quarter?

On collections solid.

I mean there was no deterioration on unit pricing.

Okay, thank you.

Fred Searby, JPMorgan.

Hi.

Yes, thank you.

A couple of questions, Rick.

One, you know, the historic pricing pressures in CIS, I mean it has been about 1.5%.

I wondered if given the somewhat difficult and challenging environment whether that may accelerate, so what your pricing outlook baked into this forecast is?

Second is just to clarify in the 9% to 12%, that's basically pre-FX?

There's no FX assumption and if there is an FX assumption, what would it be?

And then given your first-quarter guidance, I just wondered with the easier comp in the fourth quarter, it looks like you are talking about back-end loaded year, but if you could just walk through that as well?

Thanks.

Sure.

How about if I take the first and the last and you jump in on the FX, Lee.

On the first, we saw no accelerated deterioration in CIS pricing.

You mentioned 1.5% which is accurate, the same number we mentioned in the earnings call.

And we're going to continue to find ways to add value by embedding Analytics and Predictive Sciences and manage to that level.

We actually have pockets, Fred, we're actually getting price increases.

We mentioned in my opening comments three points of organic growth coming from MPI in pricing.

We're going to continue to pull that lever and it all comes down to making sure we are adding value to our customers at a rate we are still paying incremental prices for.

So no.

The answer is no we do not expect and have not seen an acceleration of pricing compression, not by any means.

The last part of your three-point question was around back-end loaded on EPS.

Again, I don't -- it is not back-end loaded.

What you are going to see is if you peel back the onion is two things.

One is a lower share count beginning in the second quarter, actually starting in the first quarter and accelerating exhilarating throughout the year which helps EPS significantly.

And secondly, all the cost actions that we have taken in USCIS in the fourth quarter and continuing in the first quarter will yield a significant expansion in their margin which also adds to EPS.

So if you take those two factors out, you actually get a fairly logical flow of EPS first through fourth quarter.

And FX, Lee, you may want to address that.

Yes, we have assumed relatively little change in FX over the course of the year.

Obviously that is difficult to predict and the one thing I know it will turn out differently than we planned but we are not assuming either help or drag from FX.

All right, thank you.

Andrew Jeffrey, SunTrust.

Good morning.

Rick, you're expressing a lot of confidence in your ability to improve the USCIS operating margins sequentially throughout '08.

Could you maybe elaborate a little bit on the specific cost-cutting initiatives you have taken whether they are temporary in nature given the current market conditions?

And if in your mind you are comfortable with the fact that you are not cutting through fat into muscle and bone in that business?

So that last component of the question aimed at understanding whether or not should we see a V bottom in volume for example whether you are prepared to address that?

It's a great question.

Let me start with the very first part, my confidence.

I am very confident because most of the things that will yield a benefit have already been implemented.

So it's not like we are betting on future actions.

Yes, there are a few things we are doing in the first quarter but we have outsourced hundreds and hundreds and hundreds of application development and maintenance resources from high-cost countries to low-cost countries.

We've outsourced a number of business processing jobs, IT jobs to low-cost countries so those steps were taken in 2007 that will yield benefits going forward.

Secondly, is it -- I can't remember the term you used -- but is it systemic systematic change versus just one-time benefits?

Yes, there's always some one-time which is discretionary spend, cut your [T&L] a little bit here and there.

But the most of it is systematic systemic long-term benefits that this Company will benefit from.

I mentioned a guy named Andy Bodea.

Andy is steeped in Lean and Six Sigma and while we are going to go full-fledged into Six Sigma, I mentioned that to you guys in the past, Lean is a wonderful quick hit tool you could use to improve process and take cost out.

And we have challenged Andy with leading that effort for us in 2008 and beyond giving us the skill set we didn't have before.

Lastly, your point of cutting into the fat.

No, we will not cut into the fat.

And I always tell Dan and all the centers of excellent that support Dan, that in these times you must be prudent with expenses and keep margins at that 39% to 40% range, at the same time, you have to invest in the future because the market will rebound.

And I'm going to be positioned for that.

So we will not cut into the fat of sales training, innovation, new products, service level to our customers.

We will continue to make those investments.

Okay and then one follow-up if I may.

Lee, you had mentioned that free cash flow will be largely directed toward share repurchases where it seems prudent with the stock at this level.

What about given the balance sheet today following TALX and share repurchase acquisition, I mean, is there a pipeline?

Do you still remain nimble and ready to do deals?

Yes, absolutely.

And Lee and I are in lockstep here.

We will buy back shares if it is the right thing to do at this share price.

We believe in the stock.

And we also will continue to execute on our growth playbook which includes from time to time tuck-in acquisitions.

So we will definitely be nimble and do both.

All right, thanks a lot.

Dhruv Chopra, Morgan Stanley.

Good morning, gentlemen.

If I could just ask one more detailed question on the USCIS margins, one of the things that has been a drag somewhat through '07 has been the conversion of Banc of America onto interconnect.

Can you help us just quantify what the impact was in '07?

If I remember correctly it was about 40, 50 basis points of drag.

And then will that lift?

Is that done now as we go into 2008?

I forget the exact impact -- do you remember, Lee?

Lee is nodding yes, it is in that range.

While we have the full commitment from B of A, to move onto interconnect and off the current platform as we discussed before, due to their distractions, if you will, it has become -- it's been a little bit less than priority for Banc of America.

So what we had hoped to get done in late 2007 is going to drift into 2008 and I can't even tell you exactly when it will be done.

But the numbers I talked about when I painted the landscape from proved margin performance in USCIS contemplates the exact timeline that Dan and his team have for Banc of America.

I just can't recall when it is.

It's maybe second or third quarter of 2008.

Okay.

And then a quick question on the tuck-in acquisition you made in Peru I guess in early October.

Can you give us a sense on when that closed and how much revenue it added for Latin America?

It closed, Lee, is December some time -- it's de minimus as far as revenue.

It's more of a -- it's a nice add-on to a property that will renew the market.

There were some synergies there but as far as revenue, it is small.

Okay, great.

Thank you.

Jaime Brandwood, UBS.

Good morning.

I had a few questions if I may.

I just wondered if you could talk a little bit more -- I think you said that in Credit Marketing Services, your prescreen business was down 33% year-over-year in Q4.

Just wondering what the momentum there was like through the quarter?

And what you are baking into your Q1 guidance on prescreen whether things are getting even worse or how you see that?

Yes, do you remember the exact trend --?

Yes.

I think it did not really change a lot during the quarter.

Of course the prescreening tends to precede the holiday season so that people can get cards and credit lines out there in advance of holiday shopping.

So you don't -- it tends to soften at the end of the year anyway.

And we are seeing Q1 looking similar to Q4, not dramatically different either up or down.

Jaime, I don't expect too much of 2008 that to change.

We see data routinely by major card issuer on delinquencies and that trend is not a good trend.

So I think until they get that fixed they are going to be a little cautious but again, I do think at some point in time they will have to find ways to grow those credit card portfolios or they are in trouble.

Just on your UK business, I mean it's been evident that you've been growing faster than your main competitor there for awhile now.

I think you mentioned your UK transaction volumes were up 21% for the whole of 2007.

Clearly we've seen that for your main competitor, the volume trend has been weakening throughout the year.

Can you talk about the patterns that you saw in that 21% volume growth through the year in the UK?

It was fairly consistent throughout the year.

And we expect it to be a consistent grower in 2008 as well.

That team is doing all the right things.

We talked about adjacency transfers of products; we talked about strategic pricing and the telco markets growing for us; the government business is growing for us; mortgage, we are lucky that mortgage is a small piece of overall exposure in the UK.

So the trends were fairly uniform throughout 2007.

You should expect the same in 2008.

Okay, that sounds pretty robust.

And just on the U.S.

Online Consumer Information Solutions division, you obviously talked about volumes being down 1%, prices being down 1.5% at the offset in terms of the revenue being up 2% being some of the growth that you saw in ancillary services.

Could you elaborate a little bit more on where that growth was coming from?

We have some smaller business lines that are included in that line of business in total that include some loan origination software applications as well as some compliance applications for the brokerage industry.

And both of those performed very well in the quarter.

Okay.

And very lastly, just on your Personal Solutions business, again, you are probably are aware that your competitor may be sort of put forward a slightly more cautious growth forecast for that what they call the consumer direct business or specifically the industry as a whole.

They were talking about a consumer direct industry growth rate of around 6% to 8% per annum going forward.

Is it fair to say you guys see it a little bit more optimistically than that?

Or how would you classify your own aspirations in Personal Solutions?

No.

I don't think that the actual market growth dynamics that Experian has alluded to of 6% to 8%, 8% to 10%, in that range are any different than ours.

The business plan that we built our business on in 2007 and again in 2008 contemplate that.

However, it is my expectation that Steve and his team continue to drug differentiation in that space with new products, with new ideas and grow at a multiple of that.

And I think that -- I've said this from the day I asked you guys to trust me as we repositioned PSOL a year and a half or so or two years ago, that business would be a 20% plus margin business growing at the midteens.

And I am still convinced it will be that going forward.

And this is partly about your migration from transaction to subscriber, right?

Correct.

Okay, thanks very much.

Michael Meltz, Bear Stearns.

I have a few clarifications.

You talked a bit about repurchase.

It sounds like you are hoping to be aggressive.

Can you actually quantify what is in the plan as of now?

Michael, hold on one sec.

We can't hear.

There you go.

Can you quantify, Lee, you said you expect shares to trend down quantify your repurchase plan as of today?

No, I'm not going to be that precise because it is always a function of market conditions and things that we may be doing.

But our free cash flow will typically run between $250 million and $300 million.

And as I indicated, I felt based on current market conditions, our intent was to spend -- focus the majority of that on share repurchase.

That should give you the parameters to make some assumptions at a reasonable range.

Okay.

And your guidance for U.S.

Consumer Info margins, understanding you expect sequential improvement as the year goes on.

What is the actual expectation for the full year?

I would expect significant improvement starting in the first quarter, Michael, and getting back to levels that we have historically seen.

If you did 39.5 in '07, relative to that what do you expect in full year '08?

I think at this point early in the year I would say we are going to be in the upper 30s and our aspiration is clear to go beyond that.

But for this year, we should be in the upper 30s.

Yes, that 36.6, which is a fourth quarter -- is in my view a thing of the past and we've taken the steps to improve that starting in the first quarter, Michael.

Okay.

And last question on this, I know you've gotten ten questions.

I won't ask about competitors.

But on USCIS margin, your revenue decline in Q4 versus Q3 was essentially equivalent to your EBIT decline quarter versus quarter.

And I understand it's a high fixed cost business but that is still higher leverage than I would have expected.

So you answered a question earlier saying there was nothing unusual in the quarter.

However it still seemed like pretty high flow through given the revenue drop.

So can -- I don't want you to restate what you already said, but was there anything -- was it just a mix issue perhaps that impacted the quarter in terms of which revenue growth came from versus --?

Let me clarify my point and then Lee will add on.

When I said not unusual, what I meant to say there is we have since I've been here from time to time restructured, right sized the business without announcing to the public a restructuring reserve.

So when I said not unusual, that is what I am referring to.

There was no public announcement that we establish a reserve for X number of dollars to restructure it.

We just let it flow through the P&L.

Other than that, Lee, is there anything else unusual in mix?

Nothing in particular, there were a couple of small items that are timing but that total might be a couple of million dollars.

Obviously we are focused on the longer-term cost structure and pretty confident that we are going to drive margins back in the right direction.

Okay, last question for me.

That affiliation with the Sao Paulo Bureau there, is there any potential to extend that partnership or perhaps acquire that business over time?

You know, that's a -- no.

It's a well-run company.

If you look at the business, Michael, they do multiple things down there.

As a Chamber of Commerce, that would get a big messy.

I think we can accomplish strategically and financially what I want to do, what Rudy wants to do in Brazil with the steps we've taken in December which is a strategic partnership.

It's a wonderful alliance.

I like that team down there.

They bring a lot of value to us on allowing us to acquire more data, get our hands on more data, compete more effectively against Experian, win in that marketplace, getting Brazil back to growing without having to acquire them.

Okay, thank you.

Operator, we have time for one more series of questions, please.

David Togut, First Manhattan.

Could you give us a global sense of the consumer walking through the major parts of the world in which you do business?

And then I have a quick follow-up.

Sure, start with Latin America first.

Obviously in all the major markets down there we operate in, continue to see a strong consumer behavior of spending and expanse around the credit markets, use of credit, credit granted, starting off with credit cards and going to auto, auto going to mortgages.

So really pretty strong as far as I can see in Latin America good consumer growth.

Then you go over to Europe, starting with Continental Europe where we have concentrations in Spain and Portugal, same kind of behavior.

We are very small exposure to the mortgage market in Spain and Portugal which is good but the consumer behavior there feels much like that of Latin America.

I'd say the -- obviously the UK consumer is a little different, maybe a lot different.

They feel, act and look more like the U.S.

consumer, heavy debt burden, trade of mortgage products, under constraint and have been by the way, for quite some time.

That is not necessarily a new phenomenon, though the mortgage obviously is a newer phenomenon in the UK.

We've talked about the U.S.

consumer in Canada.

I'd say feels more like the U.S.

though.

They don't have the burden of the credit mortgage products that the U.S.

consumer was exposed to.

Thanks.

And then just a quick follow-up around your consumer credit services joint venture with Computer Sciences.

If you could give us a sense as to how you value that JV and have there been any talks recently about -- with CSC about perhaps buying them out?

The valuation of the CSC put and call option is spelled out in our K and our Q so it's probably more beneficial to have you -- to guide you toward that, David, than me give you an answer here.

As far as talks, there has been nothing new there.

While I'd love to have that property in our portfolio, I have from day one been a skeptic that it would happen in my lifetime and kind of have the same view today.

Thank you very much.

Thank you, David.

Thank you, operator.

Thanks everyone for joining us.

Thank you for participating in today's call.

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