易速傳真 (EFX) 2010 Q3 法說會逐字稿

Good day, everyone, and welcome to the Equifax third-quarter 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 am Jeff Dodge, Investor Relations, and with we 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 2009 Form 10-K and subsequent filings.

Also we will refer to a non-GAAP financial measure, adjusted diluted EPS from continuing operations attributable to Equifax, which excludes the impact of acquisition-related amortization expense.

Please refer to the non-GAAP reconciliation section included in the earnings release and posted in the investor relations section under About Equifax tab at our website for further details.

Now I would like to turn it over to Rick.

Thanks, Jeff.

Good morning, everyone.

Overall we had a very strong performance in the third quarter and it was broad-based, which was very important across all business units.

They met or exceeded our expectations that we outlined to you during our second-quarter call.

As I continue to meet with our customers, it's increasingly clear to me that our strength of our business model combined with the innovative solutions we are delivering and attraction we are developing as we leverage our unique and diverse data assets are enabling our customers to manage their business more effectively and profitably.

Each of our business units have strong leaders and deep commitment to executing on the strategic initiatives and the performance they delivered this year illustrates just that.

For some numbers, total revenue for the quarter was $473.8 million, up 11% from the third quarter 2009 on both reported and local currency basis and well ahead of our expectations.

Operating margin was 23%, up 30 basis points from the second quarter of 2010 on revenues that were up 3% sequentially as well.

Adjusted EPS was $0.60, up from last year and second quarter, driven by strong execution across all of our strategic initiatives.

All of our business units are executing well against our strategies.

They are delivering on key objectives, enhancing relationships with our customers through innovative and unique solutions.

On the business units, USCIS has accelerated its year-over-year growth each quarter this year.

In fact, all the business units with USCIS have improved on their quarterly year-over-year growth rates in 2010.

Along with this growth, USCIS has expanded its operating margin each quarter in 2010.

Our long-term opportunities in International continue to be very attractive.

We've developed aggressive and compelling strategies and continue to invest in all of our existing geographies to build a strong market position for long-term growth.

Obviously that investment has an impact on the margin in International short-term, short to medium term.

In The Work Number, healthy double-digit growth across each of the key customer sections enabled TALX to deliver solid growth -- solid double-digit growth.

The acquisition of TALX has been transformative for Equifax.

Even today, we continue to find new opportunities to expand our coverage and grow active records in our database as well as broaden our service offerings as an HR solutions provider, which further strengthens relationships with our data providers for The Work Number.

Our PSol business, North America Personal Solutions, continues to leverage new product development and sharpen its focus on securing long-term consumer relationships.

These relationships are based on high value-added services, educational content to help consumers become smarter in the management of their financial well-being, and better execution on the fundamentals, all of which drove increased conversion, lower churn, higher average revenue per user, and solid growth for the quarter.

PSol is also testing and evaluating various combinations of product messaging, offer types, pricing, and affiliate mix to drive increased growth in subsection customers.

Finally, double-digit growth in North America Commercial was driven by strong growth in our US operations, including both risk and marketing applications.

Shortly after the quarter closed, as you now know, we broadened our ID management product offering and expanded our presence in the government and healthcare sectors with the acquisition of Anakam.

One of the core product offerings in our technology and analytical services unit, we call it TAS, is ID authentication.

We were the innovators in this space and have developed a very strong presence with financial institutions and telecommunication companies in the US as well as some of our international markets such as the UK.

In addition to rigorous ID authentication, there is an increasing demand for risk-based verification solutions that support customers' needs for secure content delivery.

Anakam is the leading provider of large-scale cost-effective multifactor ID verification solutions.

Traditional to factor verification such as hard tokens, smart cards, USB devices, or even biometrics as you know are expensive to deploy and maintain particularly when the end user is a consumer making the Anakam offering very unique and cost-effective.

This acquisition enables us to offer a full lifecycle of ID management solutions while deepening our relationships with those market sectors which have the greatest needs for these solutions.

Also during the quarter, we added another significant digital marketing opportunity through a partnership between IXI and comScore, a leading provider of online audience measurement services for Internet advertising and e-commerce activities.

ComScore will be utilizing our data and technology to develop a new cobranded solution designed to optimize ad placement for the financial services sector to more effectively reach their target audiences based on estimated income assets, discretionary spending, or ability to pay.

We will become comScore's preferred data partner for its targeting and ad effectiveness solutions in the financial institution segment.

If you recall on the last earnings call, we talked about our presence expanding into digital marketing with a large provider, a very exciting marketplace for us long-term.

Relationships with our customers continue to be strengthened by the analytical tools and decisioning platforms delivered through TAS, Technology and Analytical Services.

Our analytics are increasingly used by customers for their decisioning needs.

During the quarter, scores delivered from Equifax models increased 23% from the same period in 2009 while at the same time the delivery of scores from models developed by other vendors declined 4%.

Over the past couple of years, we have seen our customers' decisioning become more complicated, driven by increased uncertainties surrounding the economic and regulatory environment.

These needs range from developing an overall portfolio strategy to decisioning each individual consumer transaction.

This creates enormous opportunities to leverage our diverse data assets and increase investment and technology and analytical services.

The acquisition of Anakam was a great example of how we can capitalize on these opportunities and further monetize our data and technology assets.

Innovation continues to be an important strategic initiative for us and is helping us win in the marketplace and with our customers.

Year-to-date, we have launched 55 new products and continue to meet our revenue targets and our vitality target that we have talked to you about now for four or five years.

As a thought leader, we are continuing to develop analytical tools and business intelligence to assist customers as they develop their strategies for addressing emerging challenges and opportunities.

These initiatives will give us greater insight into client strategies and priorities, while further leveraging our data and technology capabilities, including extensive integration of Equifax data alongside client data to develop a complete customer view.

With our technology we can link Equifax data assets now with a client's customer information to give them true one-on-one decision-making solutions.

We have also been investing heavily in developing unique customer or consumer keys that can be used to retrieve data consistently and accurately.

All of our databases will soon be linked via this proprietary key to ensure that all of our relevant information for specific consumers is accessible to all of our clients' decisioning needs.

That will allow us to develop more products faster and more cost effectively than we have ever been able to do in the past.

Finally, we are building new predictive modeling tools that significantly improve decision-making.

These new tools incorporate advanced analytics developed through our deep understanding of diverse data assets and the use of advanced statistical techniques to reduce risk in our clients' decisioning activities.

Clearly our investment in innovation and talent we have recruited, the investments we've made and the commitments to our customers during these difficult times has positioned us very well for new and exciting opportunities.

As we enter the final stretch of 2010, we expect the end of the year -- we expect to end with a strong quarter on the fourth quarter.

We have improved our strategic focus by divesting nonstrategic assets, which generated funds that were reinvested in new product innovation, strategic M&A, and return to shareholders in the form of share buyback.

I will give you a quick look at some of the business units expectations for the fourth quarter.

USCIS revenue is expected to be up at least 10% when compared to the fourth quarter of 2009, another strong quarter.

We expect International revenue when excluding any impact of foreign currency translation to be up in the low single digit range when compared to fourth quarter of 2009.

TALX in the fourth quarter, we expect to deliver low double-digit revenue growth year on year.

Personal Solutions growth should be in the mid single-digit range year-on-year and North America Commercial Solutions is expected to deliver high single to low double-digit growth in the fourth quarter, again when compared to the fourth quarter of 2009.

So we are expecting another strong quarter as we exit 2010.

Lee, take over and give the details please on the financials.

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 excludes all of our discontinued operations.

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

All of our business units delivered strong performance in the third quarter.

We are making good progress on our growth initiatives and continued effective expense management has allowed us to invest in future growth opportunities while continuing to earn attractive margins.

Now for the details.

Compared to the same quarter in 2009, consolidated revenue of $473.8 million was up 11% on a reported and local currency basis.

The acquisition of IXI and Rapid Reporting a year ago added approximately 4 percentage points of growth in the third quarter.

On a GAAP basis, the operating margin in the third quarter was 23.3%, compared to 23.5% in the third quarter of 2009.

Excluding the amortization of acquisition intangibles, adjusted operating margin for Q3 2010 was 28% compared to 28.2% for the same quarter in 2009.

Diluted earnings per share from continuing operations attributable to Equifax was $0.49 per share in the quarter, up 11% from $0.44 in the third quarter a year ago.

Excluding the impact of acquisition-related intangible amortization, adjusted earnings per share attributable to Equifax was $0.60, up 13% from $0.53 in the third quarter of 2009.

We reduced total debt by $60 million during the quarter at $167 million year-to-date.

During the quarter, we also repurchased 1.7 million shares of stock for $51.7 million.

As of quarter end, our remaining Board authorization for share repurchase was $155 million.

Moving to the individual business units, our US Consumer Information Solutions revenue was $194 million, up 12% from the same quarter in 2009 and generously ahead of the expectations we communicated during our second-quarter earnings release, primary driven by success in the mortgage market.

Online Consumer Information Solutions revenue, which excludes discontinued operations, was $128 million, up 2% compared to 2009.

Consistent with our improving revenue trends, our year-over-year online credit decision volume trends have improved every quarter this year from being down 15% year-over-year in the first quarter to down 8% in the second quarter to down only 1% in our most recent quarter.

For the quarter, average revenue per transaction was up 1% primarily driven by sector mix shift.

Volume trends improved for the second consecutive quarter as online transactions were up 7% sequentially from the second quarter.

Mortgage Solutions revenue of $32 million was up 43% compared to the third quarter a year ago.

The Mortgage Bankers Application Index for the quarter was up 39% from a year ago.

Consumer Financial Marketing Services revenue was $34 million, up 30%.

IXI's performance exceeded our original acquisition assumptions during the quarter and our Credit Marketing Services unit delivered modest year-over-year growth for the first time since 2007, driven by growth in prescreening services and portfolio review.

The operating margin for US Consumer Information Solutions was 37.2%, up 100 basis points from the third quarter of 2009.

Our International business unit's revenue was $122 million, up 7% from the third quarter of 2009.

In local currency, revenue was up 5% from a year ago in line with our expectations.

By region, Latin America's revenue was $59 million, up 13% in US dollar terms and 8% in local currency when compared to a year ago.

Europe's revenue was $35 million, down 4% in US dollars but up 2% in local currency when compared to the same period in 2009.

Both the UK and Spain delivered positive local currency growth.

Canada Consumer Information revenue was $28 million, up 9% in US dollars and 3% in local currency when compared to the same period in 2009.

For International in total, softness in online Credit Services reflective of weak consumer loan activity in many of our geographies was offset by expanded sales in analytical, technology, and marketing services.

International's operating margin was 25.2%, down slightly from 25.4% in the second quarter and 27% in 2009.

The lower margin reflects the reduced proportion of online services revenue currently in our product mix.

TALX revenue was $99 million for the quarter, up 19% from the third quarter of 2009 and well ahead of the expectations we communicated during our second-quarter earnings call.

Growth in The Work Number continues with revenue at $55 million, up 49% over the prior year.

Double-digit revenue growth in collections, mortgage, pre-employment, and government sectors and our employment related transaction processing services plus the impact of our acquisition of Rapid Reporting all contributed to this strong performance.

Tax and Talent Management Services revenue was $44 million, down 5% compared to last year driven by double-digit declines in unemployment claims activity from the elevated levels a year ago, which was partially offset by double-digit growth in talent assessment.

The TALX operating margin was 22.1%, up from 21.4% in 2009.

North America Personal Solutions revenue was $40 million, up 7% and ahead of the outlook we gave during our second-quarter earnings call.

Direct to consumer subscription revenue was up 10% year-over-year, driven by an increase in average revenue per subscriber as well as lower churn.

New subscription-based products such as Equifax Complete with high-value features continues to drive up the average revenue per subscription and improves our overall operating effectiveness.

Operating margin was 31.9% for the quarter, up from 27.3% a year ago, driven by improved productivity and lower marketing expense.

Finally, North America Commercial Solutions revenue was $18 million, up 14% on a reported basis and 12% in local currency, driven again by strong double-digit growth in our US operations.

Revenue was also ahead of the expectations we communicated during our second-quarter earnings call.

Revenue growth in the US segment was primarily driven by transaction volume, which was up 12% for the quarter.

The operating margin for the quarter was 17.9%, up slightly from the year ago margin.

Overall, our growth this quarter as well as for each quarter this year reflects the progress we continue to make on our key strategic initiatives.

We continue to invest in and grow our revenue base while tightly managing expenses to deliver attractive operating margins and cash flow.

Now let me turn it back to Rick.

Thanks, Lee.

Hopefully you get the sense that we are continuing to win in the marketplace.

Our performance is broad-based across all business units and many product lines.

Our unique data assets are truly a differentiator for us allowing us to gain share, win customers, and build new products rapidly.

Our team is executing on our initiatives.

And as we go forward, and look at the fourth quarter, I would expect any improvement in the economic landscape but rather as we've shown over the last couple of years, we will win due to internally generated momentum.

For the fourth quarter, we expect again another strong quarter especially when you think about the grandfathering of IXI and Rapid Reporting and a slow down in the mortgage refinancing in the US business.

And we expect revenue to be up 8% to 10% from a year ago and adjusted EPS from continuing operations is expected to be somewhere between $0.58 and $0.61 a share.

So operator, if you could open up the lines for some questions?

(Operator Instructions) George Mihalos, Bank of America.

Nice job on the quarter.

A couple of questions here.

Just as you think of the mortgage business, are you guys winning share in that space on the Tri-Merge side relative to your competition?

How do you think about that from a grow-over standpoint looking out next year?

Great, great question.

The answer is yes.

We have shown you now for a number of years that our team has outperformed the index.

That has continued.

Secondly as you know, we invested in a new offering I think it's been four years ago which is our settlement services and that's a very large fragmented market and we continue to grow in that market environment.

So when you think of mortgage and I will get to your grow over in a second -- when we think of mortgage, think about it this way.

You had obviously some wind at the back with refinancing but beyond that, it's taking share and its ESSs continue to grow.

So it is that kind of a trifecta if you will that is helping our mortgage business.

As I think of year-on-year, what you are not going to get next year I don't think is the continuation of the refinancing but we will continue to win on Tri-Merge.

We will continue to win on ESS and more importantly than even that, we are going to continue to invest in other new products that have been launched this year which should give us nice growth in 2011.

So I don't view mortgage as an excuse for headwind overall for USCIS or Equifax in 2001.

Okay, understood.

Just looking at the operating margin for the USCIS, I was a little bit surprised it didn't go up little bit more just kind of looking at it sequentially.

You came in at about 37.2% given the topline growth.

Can you kind of talk a little bit about the puts and takes that went into that especially given the strong OCIS growth?

One, I look at it this way.

Think about the margin in USCIS.

First quarter was down significantly versus 2009, down again in the second quarter.

Third quarter up 90 basis points is a doggone good performance year-on-year and is trending in the right direction.

I would expect that leverage to continue as we go to the fourth quarter, so I am proud of what they've done.

At the same time, you have to remember that the mortgage business while it is a great growth engine for us, is not the same margins as our online business.

That is where you get a big lift.

It's a good margin.

I think any business would love to have that margin but when you compare it to the online, it's less.

Okay, thank you.

Carter Malloy, Stephens.

Congratulations on the quarter.

Looking at your organic growth this quarter versus next, it looks like there's an implied acceleration especially taking into consideration as you said, Rick, that there's -- there will be a slowdown in the mortgage market.

So can you help us understand where that topline acceleration is coming from and are you seeing volumes trend upwards in your core business or where do you really expect to see that growth come from?

I think it's obviously the new products we've developed, and those continue to gain traction, as I've mentioned before, which is good news.

We talked about in CMS our credit market business, we had significant growth in the third quarter which we expect to continue in prescreen as well as in the portfolio management.

Lastly, The Work Number continues to be strong growth for us.

So you put that all together, I expect this will offset the grandfathering of IXI, Rapid Reporting, and the fact that the refinancing business will slow down.

Okay, then looking at the bottom line guidance as well, it implies that we are not going to have a meaningful pickup in leverage in the business.

Are you guys spending more internally to launch new products for 2011 and 2012 or --?

Think about it this way.

And what we had -- if you go back to 2005, 2006, we had low CapEx because we are not investing in NPI at the rate we are now, so you have years of -- Carter, I don't have the exact numbers, maybe $50 million to $60 million of CapEx that are now rolling off.

They are grandfathering, and you've got higher CapEx years from 2007, 2008, and 2009.

We're investing $80 million to $100 million so we can invest in more new products.

So that's one impact.

Number two is, I think as either Lee mentioned or I mentioned, we are investing heavily internationally in key markets around the world to drive organic growth.

And I think it's important for us in the long-term.

So it is those combinations of things that don't allow maybe significant step up in margin.

But I'm convinced over time we will get that increase in margin.

I told you that our goal long-term is to get the margin up over 24% to 25%, and we are going to head in that direction.

You also had some noise, Carter, in the third quarter itself with some deal costs, some professional fees costs.

We had to shore up our [AFE], our incentive plan.

We get some equity grants.

They will be more expensive for us in the fourth quarter than they were a year ago.

So you've got some unusual things if you will that also create some headwind.

But think about it, really in the area of growth it's CapEx at a much higher rate and core investments and salespeople, marketing people internationally.

Okay, and so because of those sort of one-time if you want to call them equity grants and deal costs or whatnot, are we going to see the corporate expense line above $30 million again this quarter?

Yes, the principle driver in the fourth quarter is our equity grant for the general management population occurs in the fourth quarter.

We take an immediate P&L hit for anyone who is retirement eligible as we expense the entire cost of that portion of the grant.

That grant was made October 1.

Other than that, we would be about flat but as a result of that, we will probably be up a couple of million dollars.

Okay.

Actually going back to International, Rick, sorry, are you talking about investing in the existing databases and growing those or are you actually talking about moving into -- obviously you are building on in India and several other countries but are you talking about expanding geography further or investing within the countries you are in?

Investing in the countries we are in, adding a lot more salespeople, adding more marketing people, adding more TAS, Technology and Analytical Services people, just reinvesting.

Okay, thanks.

Andrew Jeffrey, SunTrust.

Thanks for taking my question.

Rick, you know, you have obviously -- you have made a lot of strategic moves both from an acquisition standpoint and internal technology development and it looks like they are starting to pay off.

The one thing as we look out to '11, I would love to be able to understand and maybe quantify a little more is how much organic revenue growth, incremental revenue growth do you think you can get from the integration of some of the data you've bought, some of the analytics you've bought?

Generally the efforts to cross-sell your solutions, you've obviously had a lot of success on proprietary scores.

Is there a way to think about given no sort of fundamental change in the demand environment, the rate at which kind of the base Equifax business grows and then the amount by which you think new initiatives can augment that growth next year?

Yes, it's a good question.

Let me answer it two ways.

As I think about our model, let me go with the financial model because I'm not going to give guidance at this juncture for 2011.

But think about our model and as we talked about, which is I think one, I don't expect the economic landscape to be marginally better than 2010 at best probably toward the back end of the year, you'll see some improvement.

So with that I think our core growth will be in the low single-digit, 2% to 3%.

And then I think on top of that you are going to get our strategic initiatives, which will give us 3% to 4% growth.

And then as we've always talked about acquisitions adding maybe one or two points on top of that, giving us that 6% to 9% kind of topline growth (inaudible) leverage beyond that.

Okay and so you think that is really a sustainable underlying growth rate for the business?

Absolutely.

Okay.

And you've bought a lot of proprietary data.

To the extent that you can deliver 3% to 4% revenue growth from those data, that's pretty impressive and it would certainly be a rationale to make more acquisitions.

Where do you think you might have holes in your solution set?

Generally sort of directionally, what types of acquisitions do you think would be the most accretive top and bottom line strategically?

Good question.

I think it's in two areas.

There's still some data assets that we want to get our hands on.

We've been consistent in the last five years.

That's the core of who we are, so we continue to look at data assets around the world.

There's data assets in the US I'm interested in and there is data assets in almost every country that we operate in outside the US.

Secondly in TAS, Technology and Analytical Solutions, there's some great opportunities there.

This Anakam deal, while it's small, doing more deals like that, they build out a suite of analytical products for Rajib Roy and his team in TAS is a big area of focus for us as well.

Let me go back to one point you made though, Andrew, which I jumped over briefly on the data.

We have been investing now for a couple of years in this keying concept that I mentioned in my opening comments, which now allow us to take all these disparate databases and key the consumers as one.

When you can do that across an IXI database, a TALX database, an [NCC-Plus] database, the Credit File, your ability to build products faster and more cost effectively is greatly enhanced.

And that is going to go live pretty soon and that will give us additional growth in 2011.

In fact, it will go live in the fourth quarter this year.

Okay, and it sounds like risk management might be a place you're focused?

Absolutely.

And you think that's a structural growth area?

In other words, given what we have come through in mortgage and general consumer finance in this cycle, has it changed in structural demand?

Absolutely.

In areas like our debt to income and enhanced debt to income where we help banks understand and risk teams understand the ability to pay an obligation.

Obviously fraud is a big area of focus for us as well.

So yes, risk is a -- it's core to who we are and a growing area as well.

Okay, thank you very much.

Shlomo Rosenbaum, Stifel Nicolaus.

Thank you very much for taking my questions.

Rick, you have done a very good job of growing revenue.

I just wanted to key in a little bit more about some of the questions that people have been asking.

Specifically about the SG&A, can you just give us kind of a walk-through quarter-over-quarter?

Maybe this is for Lee as to where the investments came in and where subsequently we should start to see some leverage down the line?

In other words, was there anything -- can you quantify some of the one-time like deal-related costs and other items that you consider more one-time-ish?

Sure, I will let Lee take that one.

In general in SG&A, as Rick mentioned, we are expanding our salesforces particularly in some of the international geographies.

We have expanded our -- some of our marketing activities associated with new product innovation, product development, and just market examination as we are working to drive more of the organic growth that Rick was just talking about.

In terms of some of the one time -- I'm not even sure I'd call it one time, but we did have a step up compared to year-over-year in terms of deal costs of about $1 million primarily related to Anakam.

But we will have step ups and that will tend to come in periodic pieces.

We are always looking at acquisition opportunities as a way to complement what we are doing in our strategy.

So you will see a little bit of fluctuation in that particular piece.

Deal cost will tend to shop up on the corporate line.

SG&A is obviously much more broadly distributed.

And as I said, as we work to drive greater organic growth, what you've seen is very good leverage on the cost of sales line over the last couple of years as we have really worked on LEAN and other cost initiatives.

And more spending, more growth on the SG&A line as we work to translate that into market revenue growth.

Is there any way to isolate the impact of mortgage activity year-over-year on your business versus, say, regular growth in the ESS and some of the other things?

Just so someone could give a quantitatively think about it in terms of going forward how much that aspect will make it a tougher comp and how much we are expecting some of the NPI to kick in?

Sure, we talk about the mortgages in total across all of our entities as a percentage of total revenue and it does implode as you know over the years at different rates.

But think about this being in the teens right now and that could be 17% for example this quarter but it will ebb and flow from low teens to high teens.

We expect to continue to gain share in ESS.

We continue to outperform the index in the Tri-Merge as well.

As I mentioned in a prior question, we don't expect the refinancing uplift that they experienced in the third quarter to continue in the fourth quarter or next year, but again, I expect to offset that by gaining share in ESS and Tri-Merge.

Can you just quantify for us what was mortgage last year this quarter and also can you talk about ESS just on an annualized basis?

Roughly the mortgage, as a total percent of our total revenue 2009 was 13%.

It's about 17% this quarter.

And then ESS, how much is that annualized versus last year?

We don't break that out, but think of it this way.

We built it back in -- well 2007 and it was nothing then and it's going to be a nice sized business.

And I had mentioned when we first launched it, I expect that business to be over $100 million at some point in time in the future.

Great.

thank you very much.

Michael Meltz, JPMorgan.

Good morning, guys.

It's Dave Lewis for Michael.

I was just wondering if you could touch on -- just give us a little more color on credit cards and banks and what you are hearing from your customers there.

I know Lee touched on a couple of the dynamics specific to TALX but just more broadly again more broadly for the Company.

Thanks.

Sure.

Maybe think about it this way.

What you hear from the banks now is obviously -- we mentioned this I think in the second quarter -- is a desire to get back out there and start growing their credit card portfolios cautiously.

And when I say cautiously, leveraging some of our data assets that are unique, our debt to income assets to make sure they are targeting the right client.

So they're getting their feet back in the water.

You saw it with prescreen up 14% in the quarter versus I think it was 6% in the second quarter.

So consequentially accelerating growth on prescreen, which is obviously a good indicator.

We are winning across all of our different product lines there.

Again TALX, IXI, and the Core Credit file.

Ultimately as you know, Dave, when prescreen takes off, there is a lag period of 30 to 60 days but eventually you see the online benefiting from prescreen.

So that's kind of what we see.

Great, and then I think The Work Number is approaching about 50 million active records and it's up I believe mid single-digits this year.

What's the opportunity to increase that going forward?

It's significant.

One benefactor of the active file increasing is a stability and an improvement in unemployment because obviously as unemployment rose, you went from active to inactive because you are unemployed.

So that's one thing.

So as you think of it -- the landscape over the next five years or so, an improving economic environment will help grow The Work Number database by itself.

Beyond that there's a lot of things we -- meaning Dan Adams and his team out at TALX -- are doing to grow that active database from partnering with individuals, to hiring more salespeople, to creatively adding different value propositions for small sized firms to give us that database.

So I am bullish on our ability to continue to grow that database midterm and long-term.

Thanks, Rick.

Last one for me, it looks like you guys are playing to the core US Credit Report Union up sequentially in Q4.

Usually it declines due to seasonality.

What do you expect it to grow in Q4?

I gave you the forecast.

I forget what the heck it was, I thought I said it was at least 10% growth for US IS in the fourth quarter.

Great.

Thank you.

Dan Perlin, RBC Capital Markets.

Thanks guys.

You talk about revenue per transaction up about 1%.

I'm wondering if you could just give us a sense of what transaction growth was.

If I look at the second quarter, it looks like it was down about 8%, so I'm wondering based on your commentary, it sounds like it improved a little bit.

So what kind of year-over-year growth do you see in transactions in the third quarter?

Or decline I should say?

Down 7% or 8% in the second quarter.

It was down 1% from the prior year in the third quarter.

It represented sequential growth from Q2 to Q3.

Still down just a hair versus the prior year, but obviously much better.

Right, but transactions it looked like from second and third quarter last year were about the same, so that's about -- it is a pretty meaningful pickup it looks like sequentially.

What kind of update can you give us from what the GFCs are saying in terms of reviewing loans for you guys?

And is that expected to be a key driver as we think about fourth quarter?

I missed that last part of your question.

Does it do what for the fourth quarter?

Is it part of the reason for an acceleration into the fourth quarter?

Obviously the GFCs are inflicting new standards for all the underwriters of these mortgages which benefit us and we are out there trying to help them with using our data assets like TALX, like IXI, as will as our analytics to help them determine in fact which mortgages are good and which ones are bad.

So it has been a benefit in the third quarter, to be honest with you, and I expect it will be a benefit for us in the fourth quarter as well.

Is there any opportunity for you guys to take advantage of this kind of foreclosure debacle with all these robo signers and the big mortgage companies going back and having to review those documents?

Absolutely.

The foreclosure debacle, it depends on which debacle you are referring to, (multiple speakers) debacle -- improper documentation or alleged improper documentation not necessarily.

On the ability to help the GFCs and the banks determine which mortgages should be put back to the banks, absolutely we can help them there.

Okay, so not specific to what they call these robo signer issues recently?

No.

Okay, and then, Rick, part of the strategy going forward and obviously historically has been the build up of new products.

Your goal has been to get to 10% of revenues.

I'm wondering can you shed some light on how you think about the growth rates of really the new products relative to core legacy?

And then also where do you guys think you are relative to kind of outpacing what I would consider to be kind of permanently lost revenue from the recession?

It's a very interesting question.

Let me see if I can tackle them one by one.

On the vitality, we are there now.

We have reached -- we will reach our 10% vitality in 2010, which I'm extremely proud of.

And we will rebase signing that and set new targets now for the next three years, which obviously will go up.

As far the growth rate of the core versus the NPI, think about the model I just described, I think it was to Andrew.

Think of the core business of growing a couple percent to get the total business growing 6% to 9%, take out one and two points of M&A, the delta which is three to four points is really our strategic initiatives, which is largely NPI.

So you are taking a maybe 2% growth business and making it 5% growth, if you will, due to NPI.

Got it.

Last piece -- repeat that last question again?

Well, I was just thinking about that in the same context of how much you've kind of permanently lost.

There's a certain percentage of your revenue that will never come back because of kind of subprime applications.

I think Lee has indicated in the past that it was maybe somewhere around 25% or so of USCIS.

I'm just wondering as we look at it kind of the new growth initiatives outpacing that permanently lost revenue is what appears to us to start to support a more sustainable organic growth model.

Yes, think about it this way.

Think about it in the context of the financial model we've tried to describe to you.

Think about -- I don't think we're ever going to go back to the days of consumer spending or consumer lending that we had back in the 2001 to 2005 era.

Having said that, you should count on us building a sustainable business model that grows 6% to 9% with organic and a little bit of inorganic and then some margin expansion beyond that through productivity.

Great.

Thank you very much.

Jaime Brandwood, UBS.

Good morning.

Thanks for taking my questions.

I just wanted to start by asking about online Consumer Information Solutions.

I think you specifically gave us the quarter-on-quarter transaction volume increase as being 7%.

And I wondered if you might be able to do two things.

One, talk about to what extent that was driven by mortgage.

I understand that mortgage impacts on different parts of your business, but I am guessing some of that 7% must have been mortgage-related.

Two, given what you said about prescreen being a lead indicator, a one to month lead indicator for OCIS, how confident you are of a pretty good quarter-on-quarter pickup in Q4 in that transaction volume?

Yes, the first part -- Lee, jump in, too -- the first part of your question on the online, yes, obviously mortgage is reflected in online but we saw kind of a broad-based performance on online, not just mortgage.

Secondly, your question on prescreen, it's hard to predict.

What we saw, though, is sequentially a pickup in third quarter -- substantial pickup in fact in third-quarter prescreen versus the second quarter.

Again, it went from 6% to 14%.

So -- and if you take the comments I just gave kind of anecdotally and you talk to the heads of the cards division or the monoline guys, they are all interested in continuing to expanding it back in selectively in the credit card market.

Remember, it's off horrific lows so still I think some juice left in the credit card marketing arena.

And again, think about this.

I think we are uniquely positioned because of our data assets to help them target the right customers for a credit card offering.

Of that 7% quarter-on-quarter increase, would it be fair to say that more than half was mortgage a low single-digit amount was kind of genuine underlying ex-mortgage?

Yes, I don't have that number.

I could do some math for you and get back to you but it's not -- it truly is broad-based.

Don't think about it as 50-50.

If you want, get back with Jeff off-line, we can get the exact numbers for you.

But it is (multiple speakers), it's not just mortgages.

No problem.

You helpfully gave us the average revenue per transaction as being up 1% year-over-year in Q3.

I wondered if you might have that statistic quarter-on-quarter, what happened to average revenue per transaction quarter-on-quarter?

I'm guessing with a 7% volume increase you must have seen a bit of an average revenue per transaction quarter-on-quarter decline.

Relatively flat.

Relatively flat, okay.

That's helpful.

Then lastly if I may, just on Brazil, I know you don't break it out but I wonder if you could give us a little bit of a sense for within your Lat Am business how Brazil was doing, how your partnership with ACSP is going?

And any sense at all that positive data might be one year around the corner or is it kind of still a sort of sometime in the distant future story?

Sure, couple thoughts.

We have a new international leader as you probably recall, which is -- who is Brazilian, Paulino Barros, and so he is very active in Brazil.

We have hired a great seasoned Brazilian leader, to run our operation down there who Paulino has known now for a number of years and that is going to make a huge difference in Brazil.

One of the countries that -- when I was alluding to investing internationally and one of the countries, we're investing heavily in is Brazil to drive organic growth.

As it relates to ACSP, they continue to be a great partner.

We've spent a lot of time with ACSP and we've got a lot of neat things going on and I see that continuing.

We'll have to break out the financials.

It's an important country for us.

We are growing in Brazil and invest in Brazil.

Would it at least be fair to say that it was growing faster than the Lat Am average?

Or is even that a little bit too much to say?

No, we don't break that out.

Okay, thanks very much anyway.

Thank you.

Bill Warmington, Raymond James.

Good morning and congratulations on a very strong quarter.

A couple questions for you.

First, I wanted to ask about the competitive environment in the commercial credit market.

Dun & Bradstreet talked about introducing a new entry-level product I think and trying to come down market, whether you guys have seen any impact from that?

We have not.

Our commercial business is a great business, a growing business.

It's got great new products and thinking, a great leader there and we will continue to take market share.

Albeit we are small, but we are taking market share in commercial.

Okay, and then on the bank side, it seems like the US banks are facing some real profit squeezes in terms of revenue loss from the interchange fees, mortgage, credit, and then higher costs from new regulations.

I wanted to ask what you thought the greatest opportunity was for Equifax in terms of helping banks replace that revenue and profit?

Obviously it is helping them find the right kind of clients to underwrite accept as risk versus those that are not.

Secondly, is to help in the area if they already have risks, how do we help them manage those portfolios more effectively?

So our whole story has been about building these unique databases that no one else has to help banks solve problems today that they couldn't solve yesterday.

There's plenty of upside.

Okay, all right, thank you.

I think with that, we will conclude the call, operator, and we will be able to answer any other questions throughout the course of the day.

Thanks, everybody, for participating.

That does conclude today's conference.

Thank you for your participation.