易速傳真 (EFX) 2009 Q4 法說會逐字稿

Good day and welcome to the Equifax fourth-quarter earnings release conference call.

Today's conference is being recorded.

At this time I would like the 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 in the Investor Relations section of the About Equifax tab of our website at www.Equifax.com.

During this call, we will be making certain forward-looking statements to help you understand Equifax and its business environment.

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

Certain risk factors inherent in our business are set forth in filings with the SEC, including our 2008 Form 10-K and subsequent filings.

During this call, we will refer to certain non-GAAP financial measures which are explained in the non-GAAP financial measures reconciliation attached to our earnings release, including adjusted net income, adjusted operating margin, adjusted diluted EPS, and operating results excluding the impact of foreign exchange.

These measures also exclude the restructuring charge and income tax benefit in the fourth quarter which is described in our press release.

The pretax impact of the restructuring charge is $16.4 million for the fourth quarter and $24.8 million for the full year of 2009.

The after-tax impact of the restructuring charge is $10.4 million in the fourth quarter and $15.8 million for the full year.

The tax benefit in the fourth quarter was $7.3 million.

Please refer to the non-GAAP reconciliation section in the earnings release and posted in the Investor Relations section under the About Equifax tab on our website for further details.

Now I would like to turn it over to Rick.

Thanks, Jeff, and good morning, everyone.

Obviously 2009 was an interesting year, a year filled with some uncertainty and challenges, but a year that also as we exited 2009 was a year in which we started to see some stability.

Our business model served us well, I think you would all agree over the past few years.

The leadership team, for that matter all the employees of Equifax, facing the challenges of 2009, they made some very tough decisions, while maintaining our focus on the long-term strategy and executing our short-term plans to manage our expense base.

We also accomplished two very strategic acquisitions in 2009 and delivered, I think, an impressive financial performance.

We're a stronger Company as we enter 2010, and I feel much better about the prospects for the upcoming year than I felt one year ago.

We have unique and significant data assets that are unmatched by our competition.

I will talk about that in great detail later on.

We have also streamlined our cost base.

We've institutionalized a LEAN operating model that will provide important operating leverage during the recovery.

We have many new products that address customers' emerging needs for their marketing and risk management decisions.

And we continue to deliver attractive financial returns, enabling us to reinvest in the business and return value to our shareholders.

Taking a look at the quarter, our fourth-quarter results were strong and exceeded the outlook we gave you on the conference call covering our third-quarter earnings release.

Total revenue was $464.3 million, up 1% in constant dollars from the fourth quarter of 2008 and up 2% in constant dollars from the third quarter of 2009.

Operating margin was 23.2% excluding the restructuring charge, down slightly when compared to the third quarter of 2009, largely due to mix.

Adjusted EPS was $0.61 a share, exceeding the guidance we gave during the third-quarter earnings release.

Also some noteworthy accomplishments that the team delivered during the quarter.

Number one, online consumer services is the core of our USCIS business.

Its operating margins continued to be strong.

For the fourth quarter 2009 the operating margin was up slightly from the fourth quarters of both 2008 and 2007, despite revenue being down over 9% during the quarter.

As a result, USCIS can continue investing in NPI while countering recent pricing pressures in our marketing business.

TALX Work Number revenue was up 17% excluding the contribution from Rapid Reporting, continuing a double-digit growth trend since the acquisition in May of 2007.

PSOL, Personal Solutions, grew its direct-to-consumer brand and subscription business by 5% while delivering strong double-digit margins, over 28% in the fourth quarter and 23% for the full year.

North American commercial grew revenue 11.4% in the fourth quarter with 34% operating margin, up significantly from fourth quarter 2008.

International delivered a solid quarter compared to the third quarter, as operating margin improved by 50 basis points.

In addition, year-over-year revenue growth improved in all three major geographies when compared to year-over-year growth in third quarter.

And we completed, as I mentioned before, two strategic acquisitions that will strengthen our franchise and broaden our opportunities for growth.

And again, I will talk about both those in a moment.

For the year, we delivered strong financial results in a very difficult environment, which Lee will report on shortly.

We also made great progress on our most important strategic objectives, which are intended to redefine the competitive landscape as well as further diversify our revenue growth.

First, we've been talking about this for three years now, NPI -- new product innovation.

I'm very proud of the accomplishments we've made with NPI throughout the Company.

The process of idea creation, formulation, development, and implementation of new products is achieved through many of our employees.

It's a process that has become a very critical part of our DNA and delivered significant revenue growth for us in 2009.

For the year we launched 65 new products and generated $134 million in revenue from products launched in 2006, 2007, and 2008.

We call that, as you know, our NPI Vitality Index.

Our three largest business units, USCIS, TALX, and International, all delivered strong double-digit NPI growth versus 2008.

Our objective is to have over 10% of each business unit's annual revenue driven by their NPI initiatives.

Next is our Technology and Analytical Services; we call it TAS.

Today's environment has added significantly to the challenges our customers face in managing their lending risk and improving their underwriting decisions.

As a result, customers both domestic and international are increasingly demanding more innovation from our software and analytical solutions to address these challenges.

As you know, in 2009 we consolidated our enabling technologies and analytical services organization into our global Technology and Analytical Services unit to pursue markets not presently served by our existing business units and to develop solutions that access non-Equifax.

Now, that is an important deviation from us, whereas in the past that particular entity was viewed as only enabling data sales; now we are going to embark upon opportunities that are outside of the need for pulling through our data.

I would love to talk about that in the Q&A if you have got any questions.

Finally, customers continue to reinforce that our InterConnect platform is the platform of choice for their decisioning needs.

This platform has been very successful, as you know, in the US and most recently in Canada; and we've also introduced InterConnect in the UK and have received interest from some of our Latin American customers as well.

So that is a platform that will soon become a standard platform for us globally.

Our acquisition of IXI is already having an impact on our product offerings.

With our combined experience, unique data, and sophisticated analytical resources, Equifax is leading the industry with powerful ability-to-pay solutions.

Only Equifax can offer ability-to-pay solutions that leverage The Work Number database and incorporate models built with actual wealth and income data.

And these solutions can be delivered in real time or in batch, to best suit our customers' needs.

We are truly uniquely positioned there.

Our comprehensive set of data assets makes us the only source for a complete 360-degree view of the customers, including their propensity to pay and, with IXI and The Work Number, their ability to pay and their capacity to pay.

The data assets of IXI will broaden the understanding of our customers' wealth, income, and spending, which can further drive breakthrough decisioning and targeting solutions for our customers.

In short, the building blocks we have in our vast data arsenal, combined with our capabilities in the analytics and decisioning technology, provide us with a much broader set of differentiated solutions to serve our customers' business needs.

The acquisition of Rapid Reporting we made last year has significantly scaled our 4506-T services within The Work Number business segment.

Combined with our acquisition of Discover Source in 2008, TALX is the industrial leader for IRS tax return information and Social Security number verification services.

Rapid Reporting's 12-year relationship with the IRS has underpinned the evolution of these services for the industry.

We will continue to drive innovation, leveraging our close working relationship with the IRS and the Social Security Administration, anticipating various legislative proposals in Congress; and this is being undertaken at Fannie and Freddie, and more rigorous underwriting standards being adopted by many of the large mortgage lenders will lead to attractive growth and product development opportunities for these types of services in 2010 and beyond.

With our current scale of operations, we have the capacity to deliver a unique portfolio of products with a high quality of services at a competitive price.

Something I have been deeply involved in, as we shift gears, is something we launched just recently called our Key Client Program.

Equifax as you know has a long history of focusing on the needs of our customers.

Their need for innovation and new decisioning tools is more critical now than ever.

In 2009, we enhanced our commitment to a select group of our largest, most influential customers by dedicating some of our most talented professionals strictly to their needs.

In my meetings with CEOs of our major customers, it quickly became obvious that we needed to rethink how we best organize and serve their large and complex needs in this new environment.

For many of them we have had numerous initiatives underway throughout our Company.

They wanted a stronger coordination and cooperation across our enterprise, staffed with professionals who truly understand them, speak their language, and have the utmost integrity, and very collaborative and engaged in our operational excellence.

For the fourth quarter, we organized a global Key Client Program.

Each Key Client will have a dedicated team including a chief client officer as well as a specialist in each of our solution-oriented disciplines, including analytics, decisioning, and marketing.

Unlike many of these types of enterprise-wide initiatives, these teams have solid line reporting relationships to the chief client officer, not a more typical dotted-line structure.

So essentially what we have done is taken the best and brightest people we have across the entire organization; and they are now full-time dedicated to the health and well-being of select customers for Equifax.

Each team is going to be evaluated and measured solely on their success in driving product penetration and revenue growth with these specific clients.

The whole goal there is to disrupt the marketplace and gain share in these key clients.

I believe this approach will in fact disrupt the marketplace, driving deeper and longer-lasting relationships with our most important customers, and give us many new opportunities as we deliver superior solutions that leverage our unique capabilities and our unique data assets.

By now, I think you have all seen the press on our joint venture in India.

After many months, in fact years, of active preparation we have finalized and funded our partnership with six large public and private institutions in the banking and financial sectors.

We submitted our application to the Reserve Bank of India, and we expect to be granted a license sometime later in the first quarter or, at worst case, early second quarter 2010.

Later this year, we expect to have the IT infrastructure completed and operational.

Our global data service platform will provide key strategic differentiators such as the ability to host unique negative and positive data from a variety of sources.

I am optimistic and remain as optimistic as I have in the past that this is a great long-term growth opportunity for Equifax.

Moving on to global operations, they continue to be a critical driver of leverage across our business units.

In 2009 we accelerated our LEAN initiatives to further improve operating leverage and give us the ability to quickly scale operations consistent with our customer demands.

We completed 54 initiatives across the business and delivered over $10 million of incremental expense savings in 2009.

Over 1,200 individuals have been trained in LEAN methodologies and tools, further integrating the operational excellence culture into the management's DNA.

I expect the 2010 contributions and expense savings from LEAN to be even greater -- in fact, up double digit over the savings from 2009.

Let me just talk about the talent in the Company for a second.

It's a very important part of our culture here -- recruiting the best, developing the best, and retaining the best.

To that end we recently promoted two of our seasoned leaders to drive growth.

For our Personal Solutions and our Commercial business units, I think many of you know Trey Loughran.

Trey has led our corporate development effort now for three and a half to four years, and most recently promoted to lead and become President of our North American Personal Solutions business unit.

We've also promoted Alex Gonzalez, who was leading our strategic marketing activities.

He is now the President of our North American Commercial Solutions business.

I've got great expectations for both of these as they bring these business units to new levels of growth and profitability.

We've also hired a world-class Chief Technology Officer who joined us a few weeks ago.

I believe it was three weeks ago.

Dave Webb.

Dave is a very seasoned IT leader, comes with a broad and diverse set of experiences in the IT world.

I really look forward to having Dave join the organization.

We've accomplished a great deal over the past year, while not deviating from our strategy.

And our business model continues to deliver strong operating margins and cash flow for reinvestment into the business and returns to our shareholders.

Our balance sheet remains very strong.

Our access to capital is good.

Our operating leverage will enable us to improve those margins when growth returns, and I do expect that growth to return later on this year.

Clearly the environment and Equifax have begun to stabilize, which is good news.

A trend that I expect will continue throughout the first half of 2010.

I also expect our financial performance to increase in the second half of 2010 as the economy continues and begins to recover.

Let me talk briefly about the outlook for each of our business units for the first quarter.

For the first quarter USCIS revenue is expected to be down in the mid to upper single digit range when compared to the first quarter of 2009.

That is primarily driven by the decline in the volume of mortgage lending activity that we saw in the first quarter of 2009.

To refresh everyone's memory, we had a significant refinancing boom in the first quarter of 2009; I don't anticipate that will repeat for obvious reasons in the first quarter 2010.

But the underlying health of the USCIS business excluding mortgage is relatively stable.

In the first quarter we expect International revenue, excluding any impact of foreign currency translation, to be up modestly when compared to the first quarter of 2009 as growth in Canada and Latin America offset a slow UK economy.

On a reported basis, revenue is expected to be up in the mid teens due to a weakening of the US dollar over last year.

In first quarter, TALX, the revenue is expected to be up in the mid teens when compared to the first quarter of 2009, driven primarily by the growth in The Work Number.

In PSOL, we expect revenue to be down modestly when compared to the first quarter of 2009, but at a much better rate when compared to what we experienced in the first quarter of 2009 versus the first quarter 2008.

And North American Commercial Solutions first quarter, revenue is expected to be up modestly in local currency when compared to the first quarter of 2009.

So now let me turn it over to Lee who will give you more financial details.

Lee?

Thanks, Rick, and good morning, everyone.

This morning all financial information I will be discussing is presented on a GAAP basis except as otherwise noted, and will exclude the restructuring charge described in our press release.

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

For the quarter compared to the same quarter in 2008, consolidated revenue of $464.3 million was up 3.9%.

Changes in foreign exchange rates favorably impacted revenue by approximately $13.6 million.

In constant dollars, revenue was up almost 1%.

The acquisition of IXI and Rapid Reporting, two significant strategic investments made during the quarter, added approximately 2 percentage points of growth in the fourth quarter.

On a GAAP basis, the operating margin in the fourth quarter 2009 was 19.7%.

After adjusting for the restructuring charge, the operating margin was 23.2% in the quarter compared to 26% in 2008 and 23.5% in both the second and third quarters of 2009.

Excluding the amortization of acquisition intangibles and the restructuring charge, the adjusted operating margin was 28.2%.

Diluted earnings per share for the quarter was $0.47.

Excluding the impact of acquisition-related intangible amortization and tax benefit related to foreign tax credit carryforwards and the restructuring charge, adjusted earnings per share was $0.61, flat when compared to the fourth quarter of 2008.

Even excluding the foreign tax credit carryforward benefit, we still had an unusually low tax rate in the quarter.

At a tax rate excluding discrete items that would be closer to 36%, our adjusted EPS would have been lower by approximately $0.04, but still in line with our guidance.

Total debt increased during the quarter by $105 million.

During the quarter, we invested $196 million in the two acquisitions we completed, of which a little under half was funded with cash from operations and the remainder from a net increase in debt.

In contrast to most of 2008 and 2009, when in most quarters we saw a modest sequential decline in constant currency revenue, as activity in many of our end-use markets continued to soften, we are somewhat encouraged by the most recent quarterly performance.

Fourth-quarter revenue was essentially flat when compared to the third quarter on a constant currency basis and excluding the impact of acquisitions, reflecting a more stable operating environment and continuing traction from our NPI initiatives.

Now for the individual business units.

U.S.

Consumer Information Solutions revenue was $199 million for the quarter.

Excluding the contribution from IXI, revenue was in line with the expectations we communicated during our third-quarter earnings release in October.

Online Consumer Information Solutions revenue was $122.2 million, down 9.6% compared to 2008, primarily driven by a 14% decline in our online credit decision volume.

Average revenue per transaction was flat as price compression was offset by the mix of transaction volume.

Mortgage Solutions revenue of $23 million was up 27% compared to the fourth quarter of 2008.

Mortgage reporting revenue was up 22% over the prior year, and settlement services was up over 40% compared to the same quarter in 2008.

Consumer Financial Marketing Services revenue, which is comprised of credit marketing services and our newly acquired IXI, was $30.9 million.

Excluding the contribution from IXI, revenue was down in the high teens from last year due to lower prescreen and portfolio review volumes with our larger customers and to pricing pressure.

Compared to Q3 of 2009, revenue was down approximately 2%, excluding the contribution from IXI.

Although our primary banking customers have continued to test and analyze various marketing strategies, they have been hesitant to launch large campaigns until they can ensure full and complete compliance with the CARD Act.

Direct Marketing Services revenue was $22.9 million, down 5.7% from the fourth quarter of 2008, but up 8.4% compared to the third quarter, reflecting normal seasonal patterns.

The operating margin for our U.S.

Consumer Information Solutions segment was 33.2%, down from the third quarter due to lower total revenue and shift in product line mix toward lower-margin mortgage solutions and Direct Marketing Services.

International's revenue was $117.7 million compared to $105.8 million in the fourth quarter of 2008.

In local currency, revenue was down 0.9% from a year ago and 0.8% from the third quarter, consistent with the expectations we communicated during our third-quarter earnings release in October.

By region, Latin America's revenue was $55.1 million, up 19% in US dollar terms and 3.2% in local currency when compared to the same period in 2008.

This marks a return to year-over-year growth after declines in the second and third quarters of this year, when Latin American economies temporally weakened.

Europe delivered revenue of $35.9 million, flat in US dollars and down 5.7% in local currency when compared to the same period in 2008.

While still reflective of the year-over-year weak economic conditions, this is an improvement from year-over-year local currency comparisons in the first three quarters of this year.

Our Canada Consumer revenue was $26.7 million in the quarter, up 13% in US dollars but down 1.5% in local currency when compared to the same period of 2008.

Again, the best year-over-year local currency comparisons this year.

International's operating margin was 27.5%, up from 27.0% in 2008 and up approximately 50 basis points from the third quarter.

Operating margins were up in eight of the 11 country geographies.

TALX revenue in the fourth quarter was $89.4 million, up 18.5% from the fourth quarter of 2008 and approximately 12% excluding the contribution from Rapid Reporting.

The Work Number continues to deliver broad-based growth with revenue of $41.6 million.

Tax and Talent Management Services delivered $47.8 million of revenue, up 8% compared to last year.

And the TALX operating margin was 21.1% compared to 19.9% in the same period in 2008.

In North America Personal Solutions, revenue was up $36 million, down 3.2% from the prior year and generally in line with the expectations we communicated during our third-quarter earnings release.

Direct-to-consumer subscription revenue was up 5% year-over-year but was more than offset by double-digit declines in breach and transaction revenues, which have been more economically sensitive.

Operating margin was 28.1% for the quarter, which is up from 27.3% in the third quarter, though down from 33.9% in the prior year.

During the fourth quarter, advertising expense was up 20% compared to the fourth quarter last year, as we continued to promote various subscription products with TV advertising.

North America Commercial Solutions revenue was $22.2 million, up 11.4% on a reported basis and up 7.5% in local currency.

Compared to the third quarter, revenue was up 38%, substantially ahead of our expectations communicated during the third-quarter earnings call.

Our data management product revenues delivered healthy double-digit growth as several new and existing customers initiated projects to support their revenue growth initiatives.

The operating margin in our Commercial business was 34% compared to 28.3% in the fourth quarter a year ago.

In summary, our fourth-quarter performance was solid and very much in line with the expectations we communicated last October.

For the year, compared to 2008, consolidated revenue of $1.8 billion was down 5.8%.

Changes in foreign exchange rates unfavorably impacted revenue by $48.9 million.

In constant dollars, revenue declined 3.2%.

Operating margin was 22.3% for the year compared to 24.7% in 2008.

On a non-GAAP basis, adjusting for restructuring charges, adjusted operating margins were 23.7%.

Excluding acquisition-related amortization, comparable to the reported metric of one of our public competitors, adjusted margins were 28.5%.

Diluted earnings per share for the year was $1.83, down from $2.09 in 2008.

Excluding the impact of acquisition-related intangible amortization, the restructuring charge, and the income tax benefit previously noted, adjusted earnings per share was $2.33, down from $2.48 in 2008.

With the fourth-quarter adjustments we have now fully recognized our foreign tax credit carryforwards.

As a result, looking forward our effective tax rate in 2010 is expected to increase to a range of 37% to 38%, more than 2 full percentage points higher than 2009's adjusted tax rate.

This will negatively impact earnings per share in 2010 by approximately $0.07 to $0.08 when compared to 2009.

Finally, we reduced debt during the year by $45 million while financing the acquisitions that we described.

Throughout the year, we worked hard to position ourselves for a recovery.

We accelerated the operating cost initiatives in our traditional businesses to protect our operating margins, achieving a $60 million reduction in expense, excluding the impact of foreign exchange in our expense base for those businesses.

We also invested in our growth businesses, such as TALX and mortgage reporting, expanding operating margins in those businesses by almost 400 basis points collectively.

In conjunction with the acquisitions we made in the fourth quarter, we issued $275 million of five-year notes at very attractive rates, due in large part to the strength of our balance sheet and strong operating cash flow.

Delivering this performance in 2010 reflects very much on our balanced focus of aggressively managing our expenses while investing in our strategic growth initiatives.

Now let me turn it back to Rick.

Great.

Before we get to Q&A, let me just give you a few closing thoughts.

One, I expect that GDP around the world will be some growth, but it will be modest and improving throughout the year.

I think that employment, specifically in the US, is going to remain at high levels -- unemployment at high levels throughout most of the year.

You may see a slight improvement towards the very end of the year.

Home prices will continue to face pressure due to foreclosures rising.

On the positive side, we are starting to see increased interest from credit card issuers, begin soliciting new customers.

That should drive growth for our business in the second half of the year.

As a result, I think 2010 will be a year we return to growth.

With this outlook and given the current foreign exchange rates, we expect operating results to be stable at their current levels during the first half of the year and then pick up nicely in the second half of the year.

For the first quarter, assuming the current exchange rates, we expect revenue to be up in the low single digit range from a year ago; and adjusted EPS is expected to be similar, between $0.53 a share and $0.57 a share, including the negative impact of a higher effective tax rate.

For the full year, we intend to give you CapEx guidance.

This year we expect CapEx to be in the range of $75 million to $100 million.

2009 we delivered what I call solid financial performance in that economic environment.

As we enter 2010 I feel much better than I did a year ago.

We got a strong balance sheet, we got great data assets, we've got unique product offerings.

And most importantly, we also have an improved economic environment which should bode well for the Company.

Operator, we will stop there and we would like to open it up now to any questions that the team might have.

(Operator Instructions) Michael Meltz, JPMorgan.

Thank you.

I think I have three questions.

I appreciate you have mentioned the currency impact a few times.

Just to clarify one last time, in the first quarter implicit in your guidance, what is the contribution?

Is that about $10 million?

It's about $13 million to $15 million at today's exchange rates.

Okay.

Secondly, Rick, in terms of CARD Act and what you are doing now with the ability-to-pay products, how are you pricing some of these?

And have you actually closed deals on some of the products?

Or how does the selling process work?

Yes, let me answer the middle of your three questions first.

Have we closed some?

Yes.

We have built very unique scores, income scores which give the underwriters of risk a sense for how much debt they have versus their income, so their ability to pay.

We are offering a suite of products, Michael, not just any one product depending on what the customers need.

I'm not going to mention those particular clients.

But we have closed a number of accounts.

The pricing on a score would be a premium to a traditional score, as you might guess, because of the KS lift we are getting.

But the intent is to build a suite of products depending on the individual customer's needs.

And is this leveraging VantageScore?

Or this is Equifax custom scores?

That's a great question.

No, it is taking -- it's a custom score.

It is leveraging The Work Number data.

It is leveraging the IXI wealth data.

And it's leveraging the data we have in the credit file itself.

We call it the debt-to-income score.

All right.

You had mentioned in your prepared remarks something about potential for more government action to -- I took it to mean embed your product offerings.

Are you talking about will the -- like the FHA or similar will require income assessments?

Or what were you talking about there?

Yes, what I'm referring to in general terms is regulation mounts towards the desire or need to actually verify someone's ability to pay off any kind of obligation.

We're uniquely positioned.

We're trying to help write language that puts us in a very unique position, because we're the only ones that have income data, wealth data, combined with the credit data.

So it's broad-based.

It's not just FHA.

It's not just credit cards.

All right.

Last question for me.

Lee, what is the thinking on cash flow priorities?

Is there -- I know we saw a couple acquisitions in the fourth quarter.

Where does buyback stand on the list?

Yes, I think we continue to drive that off a view of where we want to see our debt-to-EBITDA leverage over the last several quarters.

And I think we continue to feel targeting the range of 1.75 to 2 times debt-to-EBITDA positions us effectively to absorb acquisitions like the ones we did in the fourth quarter.

We ended 2009 with a debt-to-EBITDA at about 2.1 times.

So it would be a little bit more leaning towards debt reduction until we're back into that range.

But I would expect to see some balance between share repurchase and debt reduction over the course of the year.

All right.

Thanks for your time.

Carter Malloy, Stephens.

Hey, guys.

Thanks for taking the questions.

Looking at this great quarter and then out on your guidance for Q1, are you just employing some conservatism here around the CARD Act?

Or are there other specific impacts there, for the reason for conservatism?

No, I wouldn't say it is -- we're talking about revenue, Carter, being up year-on-year, and that's good to news.

Number two is, you look at the EPS versus 2009.

If you strip back some of the numbers and you look at some other income, we had some other income benefit in 2009 in the first quarter that doesn't repeat in the first quarter 2010.

In fact, we have -- go from a positive other income, so there is actually some negative as we have some investments coming through as we launch India.

So that is just some noise, if you will, in the numbers.

And secondly there are some mix changes in the business that create a little bit of headwind when you look at EPS quarter-on-quarter comparisons.

But as far as the credit card reform act, yes, that is launched in February.

I think you will see some positive benefit.

But truly think that happens in second quarter, third quarter, and fourth quarter not necessarily the first quarter.

Okay, great.

Then on North America Commercial and your growth there, is that all in the B-to-B marketing, the data management side of the house?

Or are you seeing strength in SBFE in the more traditional risk?

There is no doubt that the data management piece of it -- a business we used to call Austin-Tetra as we bought it -- had great strength in the fourth quarter.

But the core US risk business had strength as well.

Okay.

On those contracts you won inside of the data management part, were those in-house clients already, or were those competitive wins?

Or were those actually wins where you took them away?

Or was that kind of greenfield opportunity created by that Austin-Tetra product?

Combination of both, Carter.

Okay.

Thanks.

Shlomo Rosenbaum, Stifel Nicolaus.

Hi, thank you very much for taking my questions.

I just wanted to ask you how you envision the Credit CARD Act, once that becomes implemented and your clients feel comfortable with more mass marketing campaigns.

How should we see that flow through your numbers?

In other words, should we see the credit marketing first take a bump, and after certain lag for the OCIS to follow?

And how should that impact the margins in that business?

I wanted to start with that.

Yes; you have hit it on the head.

It will start with what we call CMS first -- and CMS including the IXI business will be the first indicator that there is activity in credit card solicitation; followed quickly by online growth.

And then you'll also see it, after that you will see a series as Michael Meltz had asked earlier on.

A series of other scores that we will be offering as well.

the debt-to-income scores, ability-to-pay scores, things of that nature.

And then ultimately, you will see it come back into the portfolio reviews, account management.

Okay.

Then just kind of moving around a few other questions over here.

If I assume the acquisitions are maybe $10 million to $11 million of revenue in aggregate, how should we think of the contribution from these acquisitions for the next quarter?

And then again, what will the intangible amortization number -- what are you guys expecting for the next quarter as you have a full quarter of those acquisitions?

Let me tackle the first piece and let Lee tackle the second piece.

As you think about just kind of sequential performance on the acquisitions, you think about the IXI business as having a seasonality that is heavier back-end loaded than front-end loaded.

So fourth quarter would be the stronger of the quarters you'd typically see throughout a year -- albeit still growing, but the fourth quarter is a stronger quarter.

On the Rapid Reporting business, you tend to see that as kind of evenly distributed throughout the year.

And yet a growth business.

But no seasonality per se versus the IXI.

So --

Amortization?

In other words, should we -- what percentage of revenue would you say?

Would you expect it to be kind of flattish, if I'm just taking that all together?

Because you will see some core growth, but sequentially might see a little seasonality from IXI.

Are you saying flattish first quarter versus fourth quarter as a percent (multiple speakers)?

Yes.

The one thing, Shlomo, the Q4 results included two months of those acquisitions.

In Q1 you will see three months.

Other than that, they will be relatively level in terms of run rates.

One is a little stronger run rate in the first quarter.

The other is a little weaker.

Yes, I expect (multiple speakers) first quarter.

Just because each has a different pattern within the year.

But basically you'll be up 50% because you have three months instead of two months versus the Q4 revenue rate.

On amortization, acquisition-related amortization will be up about $1 million.

And again, that's just three months instead of two months.

Okay.

Then in Latin America, it seems to be -- it has done well, has resumed growth.

Are we out of the woods over there now?

And should we -- are you guys sort of seeing -- or expecting that that growth should continue?

Yes, I think obviously if you look at the economic stability in Latin America, you had some turmoil in the first half of 2009.

It's starting to stabilize.

We got more new product transfers going on across most of the properties in Latin America.

The simple answer is Latin America is a growth area for us.

We are going to continue investing and growing each of our properties in Latin America.

All right.

Thanks.

I'll jump back in the queue.

(Operator Instructions) Den Leben, Robert W.

Baird.

Thank you.

Looking at -- as the card companies get in compliance with the CARD Act, is the approach they are taking out of the gates kind of -- we just have to meet the bare minimums and then we will try to figure out what to do longer-term?

To maybe potentially have a second leg of growth for you guys, as you have some very leading solutions, as they try to expand and get more intelligent about those decisions.

Absolutely, Dan.

That's a fair characterization.

So help us understand where we're at in that process.

Are some of the companies that are going over now doing more than the minimum?

Or is it pretty much just the minimums?

Yes, I think someone asked the question.

It was Michael I thought earlier asked the questions early on -- are we actually monetizing something as a result of the CARD Act?

So yes, there are a handful of clients who have come to us who are going beyond the minimum and buying and testing some new scores that we have.

So your characterization is accurate.

However, there are some exceptions, which are a handful of clients who are out ahead of the game.

Okay.

Then help us understand within the IXI business how much of that is kind of prescreen work and will kind be driven by marketing, versus going through in the actual typical scoring and looking around issuance?

Well, the model as you think about how we bought it, and what their background was, we bought them as, one, a unique data asset of $10 trillion of wealth data.

It's at the ZIP-plus-4 level as you know.

So its natural model was leaning towards prescreening or marketing.

However, as we get to know these guys and their data, we are finding additional uses of the data more towards the risk side.

Not at an individual level, but at an aggregate level.

And scoring is going to be a nice opportunity for IXI data as well.

Okay.

Then could you just finally give us an update on a couple of the new product introductions that we have talked a little bit less about on the call?

Specifically ESS and the asset-backed securities products.

They both are getting great traction.

ESS continues to expand at very nice rates.

We are winning customers across-the-board.

We are shifting the model from predominantly or heavily skewed towards on the appraisal side, more towards the title and close side.

We've got a top-notch operator now running the factory, if you will, for us.

So very pleased with the progress there and continue to grow.

We expect significant growth in ESS again in 2010.

Capital markets continued to gain great traction.

We're winning new clients each and every day.

Great.

Thanks.

Nat Otis, KBW.

Morning, gentlemen.

Just a little bit more follow-up on that ESS.

You say you are moving from appraisal more to the title.

Is that from an underwriting standpoint, an agent underwriting standpoint?

And are you then moving into more of the other services that are right at the front end?

It's typical.

When you start to do business in the settlement services arena with clients, they tend to test your capability and get to know you on the appraisal side.

So it's a very natural flow for us.

You start off an appraisal; you prove your ability; they scale you up in appraisal; and then you eventually move to the title and close part of the settlement services.

So a very natural transition for us, and we expect to see much more in the title and close piece of it in 2010.

Great.

Other than the partnerships that you started out with, are there any others that you are planning on or thinking of moving in direction within that space of -- that could add to the breadth of what you cover?

If you are talking partners and clients that we do business with, the answer is absolutely yes.

More along the line on companies that might already -- providing something there that you don't but helps you say bundle a larger solution.

Yes, that's a good question, Nat.

We are looking at different offerings to provide to that customer base beyond just the traditional ESS stuff we do today.

I'm not going to go into any more detail than that.

But yes, we're always looking at different value offering to our clients.

All right.

Great.

Thank you.

Okay.

We want to thank everybody for their participation and we will be available this afternoon if there are any additional questions.

Thanks again.

This does conclude today's conference.

We thank you for your participation.