易速傳真 (EFX) 2011 Q1 法說會逐字稿

Good day, everyone, andwelcome to the Q1 2011 Equifax 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.

Thank you, and good morning, everybody.

Welcome to today's conference call.

I'm Jeff Dodge, Investor Relations, and with me today are Rick Smith, 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'll 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 filing with the SEC, including our 2010 Form 10-K and subsequent filings.

We will refer to a non-GAAP financial measure, adjusted diluted EPS for continuing operations attributable to Equifax, which excludes acquisition-related amortization expense.

This measure is detailed in our non-GAAP reconciliation included with our earnings release and posted on our website.

Please refer to the non-GAAP reconciliation in our various investor presentations, which are posted in the Investor Relations section under the About Equifax tab on our website for further details.

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

Thanks, Jeff.

Good morning, everyone.

In the first quarter we continued to build on a momentum that recreated in 2010, and we delivered solid financial performance, which was in line with our expectations.

We also strengthened our global franchise to better position Equifax for sustainable long-term growth.

Each of the business units continued to make good progress on their strategic initiatives, including new product offerings, building and acquiring unique data assets, and improving the efficiencies of their operations for the quarter.

Total revenue from continuing operations was $472.6 million, up 7% from the first quarter 2010,very much in line with the outlook we provided in February.

Operating margin was 23%, down slightly from a year ago, but up subsequently from the fourth quarter.

And I will spend some time at the back end of my conversation talking about the margin outlook for the second half of the year.

And adjusted EPS from continuing operations was $0.58, up 9% from $0.53 a year ago.

Customer demand for our analytical solutions continues to increase.

During the quarter 37% of our online transactions included an analytical component of an Equifax model.

That compares with 31% in the first quarter of 2010 and 23% in the first quarter of 2008, so we're making great progress in embedding analytics into our business.

Our efforts around new product innovation continue to make strong contributions to our revenue growth.

Revenue from products launched in 2008 through 2010, which you by now know as our NPI vitality index, was up 4% compared to a year ago.

And this is really a noteworthy accomplishment, given that we dropped Settlement Services from the vitality index, because it was a product launched in 2007.

Very successful product with strong revenue growth.

That's now removed, and even with that being removed, still up 4% year-on-year and on track to meet our goals for the year.

Our Key Client Program, we call KCP, which is focused clearly on the largest US banks, something we launched a little over a year ago, as you'll recall.

It's making significant inroads in terms of customer penetration, share gain, and broadening our installed product mix.

A couple key points there.

For each client in the Key -- KCP program, the team has developed plans across business core product opportunities, Decision 360 product offerings and deepening our relationships strategically throughout the entire organization.

Second point on KCP.

For the majority of these clients, over 50% of the revenue is from product offerings that are unique to Equifax when compared to our primary credit reporting competitors, a strong statement supporting our strategy of integrating unique data assets and capabilities in helping our customers solve new problems and help us pursue new growth opportunities.

Third point on KCP.

With one particular client we have been selected as the sole source provide for instant real-time verification of income and employment, which will be integrated into their organization's decisioning platforms for home loan and card business units.

That's a huge home run for us to be integrated now into the decision platform for something as large as the card and home loan lines of business.

Last point is, for another very large client we're developing the framework for a project to analyze bank card transaction data.

The client's objective is to develop a new compelling insight into consumers' buying behaviors, utilizing transactional and credit data enriched by our analytical tools and capabilities.

We're excited about that opportunity.

We continue to make progress on our international initiatives, which we expect will be increasing contributions to our long-term growth.

in India we continue to grow our partnerships and increasing the number ofrecords in the database.

To date we have signed 153 contributing members and fully expect to reach our goal of over 200 members by year end.

We've also talked a lot about Brazil, and its important -- importance to our global growth strategy.

We're nearly complete on our increased staffing targets in investments, and I'm very encouraged with early results.

There are a number of other strategic initiatives underway in this geography, which we believe will measurably improve our market position for the long term.

Finally, we are starting to globalize our Decision 360 strategy with the acquisition of Workload, a UK company that has a very unique database of consumer deposit, savings, and investment information.

This acquisition should put us in a stronger position to offer customers better insights into consumers' ability to pay, and major focus of our customers' and the UK regulators.

Data providers include life insurance companies, fund managers, pension providers and retail banks.

The database covers five years of historical information and is updated quarterly, and aggregates individual account information at the postal code level, which is analogous to what we call ZIP+4 here.

It's about a 14 to 20 household range.

This platform will allow us to build out a suite of products over time, similar to what IXI does in the US.

In fact, we have taken a very strong leader from our IXI business in the US and relocated him to the UK to help our team over there build out that suite of products.

For Equifax the first quarter continued to demonstrate the strength and resiliency of our business model; theability of our business units to funct -- and functional [leaders] to deliver strong performance, regardless of the business environment or the economic cycle; andthe increasing respect our customers have for a diverse data assets and analytical capabilities.

Our outlook for 2011 continues to be for good growth, as consumers gradually increase their -- customers gradually increase their marketing activities in this environment.

I continue to expect solid revenue growth for Equifax throughout the year and improving margins in the second half.

I'll go through each business unit quickly if I may.

First, USCIS.

We'll continue to leverage its many data assets and analytical capabilities, including the positive data Telcom & Utility Exchange, which we talked about in the past, along with the investment we've made in Keystone, which links the data from the different databases together, enabling us to develop and deliver unique Decision 360 products quickly.

For the second quarter we expect USCIS to grow in the mid single-digit range over 2010.

International is making very good progress in all three geographies, with solid, sustainable growth.

We will also continue our initiatives in Brazil to expand the sales force, [collecting our] data assets and develop innovative product solutions for our customers.

The second quarter, excluding the impact of foreign currency translation, we expect revenue growth in the second quarter to be the mid to upper single-digit range when compared to second quarter of 2010.

At TALX the core Work Number product verification of income and employment had another outstanding quarter in the first quarter, growing strong double digits when compared to the first quarter of 2010.

We expect that solid growth to continue in the second quarter as well.

The opportunity for us is to lessen the dependence of our IRS Form 4506-T product to the mortgage cycle by bundling it with other core Equifax products and taking that same offering into other verticals.

This strategy is performed well for the core Work Number product, as you know, and over time will do so for the 4506-T product.

It will take us time for that to unfold.

We're working on that aggressively now and expect those benefits to unfold as we exit 2011.

We expect TALX to be flat to low single-digit growth when compared to the second quarter of 2010.

Next one, Personal Solutions continues to make good progress in growing its subscriber base and increasing the average revenue per subscriber through higher value product offerings.

The second PSol is expected to continuing delivering low double-digit revenue growth as we increase our marketing spend with a TV ad campaign.

Last BU, revenue growth in North American Commercial Solutions again reflects solid double-digit transaction growth in the US.

For the second quarter, North American Commercial Solutions should deliver low to mid double-digit growth when compared to the second quarter of 2010.

Now I'll turn it over to Lee for some financials.

Lee?

Thanks, Rick, and good morning, everyone.

This morning I'll be referring to the financial results from continuing operations, generally presented on a GAAP basis.

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

Our performance for the first quarter was a reflection of a modest emerging recovery in US credit markets, aidedby a continuation of the momentum we developed in 2010 through our new product offerings and other strategic growth initiatives.

Compared to the same quarter in 2010, for the first quarter of 2011, consolidated revenue of $472.6 million was up 7% on a reported basis, and up 6% excluding the impact of changes in foreign exchange rates.

Operating margin was 23.1%, compared to 23.5% for the first quarter in 2010.

And excluding the amortization of acquisition intangibles, operating margin for the first quarter was 28.1%, continuing in the same range we have delivered in recent periods.

Diluted earnings per share from continuing operations attributable to Equifax was $0.46 per share, up 9% from $0.42 in the first quarter of 2010.

Excluding the impact of acquisition-related intangible amortization, adjusted EPS attributable to Equifax was $0.58, up 9.4% from $0.53 a year ago.

Moving to the individual business units.

US Consumer Information Solutions revenue was $181 million, up 5% from the same quarter in 2010 and in line with our expectations.

Online Consumer Information Solutions revenue was $120 million, flat compared to 2010.

Our year-over-year online credit decision volume trends continue to improve.

First quarter online volume was up 7%, compared to 4% growth in the first quarter.

A 4% reduction in average revenue per report and some minor changes in nontransaction revenue held revenue flat with the prior year.

Mortgage Solutions revenue of $27 million was up 18% compare to the first quarter of 2010.

Both core mortgage reporting and Settlement Services contributed good growth in the quarter, outpacing the mortgage banker's application in debts, which is down 16% from the first quarter of 2010.

Consumer Financial Marketing Services revenue was $33 million, up 11%.

Both Credit Marketing Services and IXI delivered double-digit growth.

Pre-screening revenue had its third consecutive quarter of double-digit growth.

The operating margin for US Consumer Information Solutions was 34.1%, down 50 basis points from the first quarter of 2010 as a result of increased investment in our technology and the analytical services, including acquisition-related amortization.

Excluding these investments, margins improved.

International's revenue was $127 million, up 9% from the first quarter in 2010.

In local currency, revenue was up 6% from a year ago, in line with the outlook we provided in February.

By region, Latin America's revenue is $60 million, up 9% in US dollar terms and 5% in local currency when had compared to the same period in 2010.

Revenue performance during the quarter was broad-based, with solid double-digit growth in technology and analytical services.

Europe's revenue was $37 million, up 11% in US dollars and 9% in local currency when compared to the same period in 2010.

Both the UK and Spain contributed to this strong growth.

Canada Consumer Information revenue was $30 million, up 10% in US dollars and 4% in local currency, when compared to the same period in 2010.

Continuing strong growth with our fraud products, particularly Citadel, and high-value technology in the analytical services where the principle contributors during the quarter.

Internationals operating margin was 23.4%, down from 24.7% in 2010,continuing to reflect the increase investment in strengthening our franchise in Brazil.

TALX revenue was $99 million for the quarter, up 4% from first quarter of 2010, below our expectations for the quarter as mortgage activity grew less than we had expected.

The Work Number continues to deliver solid growth, with revenue of $53 million, up 8%.

Strong growth in pre-employment and government sectors, and employer-based verification of income and employment for mortgage, more than offset weakness in our 4506-T, government-based income verification related to mortgage activity.

Tax and Talent Management Services revenue was $46 million, up 1% compared to last year.

And the TALX operating margin was 29 -- 21.9%, down slightly from 22.6% in 2010.

North America Personal Solutions revenue was $44 million, up 12% and significantly ahead of the expectations we had communicating during our fourth quarter earnings call.

Direct to consumer subscription revenue was up, driven by double-digit growth in new subscribers and single-digit growth in average revenue per subscriber, offsetting a slight increase in customer churn.

Revenue from transaction products and channel partners also contributed to our double-digit growth.

Operating margin was 28.7% for the quarter, up from 25.2% in the first quarter of 2010, as fasterthan anticipated revenue growth, more than offset increased marketing spend.

North America Commercial Services revenue was $21 million, up 10% on a reported basis and 8% in local currency,driven primarily by strong double-digit transaction volume growth in the US.

The operating margin for the quarter a 24.9%, compared to 23.5% in the year-ago quarter.

Corporate expense for the quarter was up $1.5 million, or 8% compared with the year-ago quarter.

And finally, our corporate tax rate of 37.9% was up slightly from last year.

Now let me turn it back to Rick.

Great.

Thanks, Lee.

A few closing comments before we go to some questions you might have.

Reflect back to our February earnings call.

I talked about delivering a first-half performance with revenue growth in the range of 6% to 8% andoperating margins in the range of 23%.

I remain very confident in that outlook for the second quarter.

Assuming current exchange rates, we expect to be squarely in that range of growth of 6% to 8%.

I should also note, as you build your models, we expect our second quarter tax rate will be consistent with the first quarter.

When you look at it on a year-over-year basis, up by about 250 basis points versus 2010, andthat's because we had a favorable one-time tax settlement in the second quarter of 2010.

We expect EPS from continuing operations then to be between $0.58 and $0.61 a share.

We end with my views onoperating margins for the second half.

Underscoring the point I made last call, I fully expect our operating margins in the back half of the year to improve nicely, as we begin to benefit from investments in our strategic growth initiatives that we talked to you about, including technology and analytical services, Anakam, Brazil, UK, and some of the new mortgage products that we're building.

And additionally -- by the way, I have a clear line of sight to that margin strengthening, just [so] I can see that in the in the back half of the year.

It's not a hope or a prayer, it's a line of sight we have that'svery clear.

In addition, we're going to carry very strong revenue momentum in the second half of the year, as many of our growth initiatives start to click.

So with that, I'd like to turn it over, operator, if you could, to our participants to answer any questions they might have.

(Operator Instructions).

And we'll take our first question from Andrew Jeffrey with SunTrust.

Thanks for taking my question.

Lee, when you look at the USCIS investments you made in the quarter, can you quantify them for us or normalize the quarterly segment operating margin?

Go ahead.

We don't normally break out margins to individual components like that.

I think the acquisition amortization increase, as a result of our Anakam acquisition is broken out in the 10-Q, which we'll publish later today.

It's just a little bit over $1 million, if I recall.

That by itself is about 0.5% margin impact.

Let me add to that.

This is Rick.

Two thoughts as you think about the margin in USCIS.

One, I mentioned that we made some nice investments in TAS.

If you look at the core non-TAS element of the USCIS, the core credit piece, they actually showed very nice year-on-year margin expansion.

Secondly, when you look sequentially at USCIS, fourth quarter versus fourth quarter, and you see a slight downtick, one thing you have to make sure you remember is the IXI business is cyclical.

And it tends to be back-end loaded, with a big chunk of it becoming the second half of the year.

As a result you get a nice margin lift in the third and fourth quarter when you look at sequentially, andyou get a margin compression in the first quarter.

So that's some noise going on there.

Okay.

That's helpful.

So, Rick, I appreciate the conviction in the back-half margin story.

Is it safe to assume, both on a segment and on a consolidated basis, that when all is said and done in 2011, that full-year margins will be up versus 2010, with trajectory for further improvement as we go out in time

The answer is absolutely yes, andas I told our participants on the February call, it's my full expectation that we're in that 24% range as we exit the year.

Okay.

And then it -- I know one of the dynamics that's kind of shifting in the business as volume comes back is that mix is moving toward bigger issuers, with some adverse affect on price per report.

Is there anything -- if we were to see a real acceleration in volume, if the biggest issuers in this country got more aggressive for example, does anything change in the dynamic in the USCIS business?

Is there anything we should be worried about in terms of pricing or mix if there were a real acceleration in reporting volume?

The good news in there, which you alluded to, and thatis when we structured this team, whatever it was, maybe 18 months ago -- 15 months ago -- centered on large banks, because the large banks are going to be winners.

And the great news is that strategy is paying off.

We're growing at a faster rate in those large accounts.

I'm confident, to get to the heart of your answer, Andrew, that we can deliver accelerated growth because of that focus on the KCP accounts, and still deliver at the segment level and the company level the kind of margins we've talked about.

Okay.

And then one last one, if I may.

Share buybacks.

Noticed you didn't deploy any capital to buyback the stock this quarter.

Is that a function of share price or some other consideration?

No.

The first quarter is typically our lowest cash flow quarter, as a result of -- we made a small pension contribution, we pay out annual incentives, anda couple of other things that happen.

So cash flow in the quarter tends to be the lowest of the year.

With the $30 million of acquisitions that we did in the quarter and the higher dividend, we actually net borrowed, even without any share repurchase in the quarter.

We still continue to have a strong leverage -- strong level of capitalization.

I think what you can expect in the next couple of quarters, when the cash flow is traditionally stronger, that unless we see appropriate acquisitions that utilize that, that we would be in the market buying stock.

Great.

Thanks a lot.

Very helpful.

Thank you.

And our next question will come from Georgios Mihalos with Bank of America.

Hey, guys.

Nice job on the first quarter margins.

Just want to delve into a couple things.

As it relates to The Work Number, you mentioned getting impacted a bit by mortgage, but you also have exposure there to government.

And I'm just kind of wondering how that line of business has done within The Work Number, and how you feel about that going forward, giving potential cutbacks in entitlement programs and things like that.

Yes, it's -- the nice thing about The Work Number is we've diversified the revenue stream to so many different verticals, government being one, collections being another.

We had good growth in the government.

We expect that growth to continue.

In fact, government was strong double-digit growth in the first quarter.

Collections was strong, pre-employment screening was strong.

So it's not any one segment.

And the whole goal is -- you can take The Work Number, by the way, [to] different verticals.

I mentioned in my comments that one of the large KCP banks that integrated The Work Number into their decisioning platforms for home loan and cards.

That's a huge win for us and a big diversification.

So I don't look at any one specific vertical and say how's it going to drive our growth.

It's a balanced portfolio in The Work Number, andI feel good about that.

George, one other thing to note on The Work Number is that we're still at a point where we're penetrating the market for employer records.

Our active records on file were up almost 6% year-over-year.

Our total records on file was up 10%.

So even if you see some up and downs in individual segments, but even if the total were flat in terms of end-market demand, by increasing our record account we can grow revenue.

Then we find additional penetration opportunities, and that's the strength of The Work Number business model.

Got you.

Okay.

Thanks, guys.

And then also on the -- as it relates to the OCIS, you kind of had a phenomenon here that we also saw in the last quarter, accelerating report volume, but the revenues kind of staying flat, just because of the revenue per report, how the mix breaks out.

When do you start to think we'll see more accelerated OCIS growth?

Is that something that we'll start to get over the back half of the year?

On the revenue side?

Yes, the expectation would be sometime in the back half of the yearyou might see some revenue growth there.

Okay.

Great.

And then last question for me.

Just on the PSol margins, should westill be kind of thinking going forward in the mid-20s?

Yes.

Yes.

Okay.

You'll see some fluctuation there as you -- as Trey and his team invest in advertising, but in aggregate, yes,you should think in the mid-20s.

Great.

Thanks, guys.

Sure.

We'll now take a question from Carter Malloy with Stephens Inc.

Hey, guys.

Thanks for taking my questions, and congratulations on the quarter.

The first question is just your confidence in guidance.

You guys typically approach guidance with a very conservative angle, and I was surprised to see the amount of upside implied, but top and bottom line relative to the street.

So can you just talk about the -- did you exit the quarter that much stronger of run rates versus when you entered it?

Just your general confidence in the business at this point?

No, it'sjust that all the things that the teams have been cog to execute their strategies over the past couple of years is really starting to click.

And it'sjust my confidence in our ability to execute.

Some exciting things that are on the horizon, Carter, that we didn't have maybe three to six months ago.

We talked about Keystone.

Keystone is live.

We talked about NCTUE Plus and building out that capability throughout 2010.

That's now live.

We talked about bringing The Work Number into large card portfolios.

Just a number of really neat things that the team is executing on that gives confidence not only in the second quarter, but that the back half of this year will be good from a revenue and a margin perspective.

Okay.

And on the Telco & Utility positive, is that a closed exchange, or are you guys going to be able to sell that to your telco and utility customer?

It's kind of a give to get model.

Okay.

So it is close.

But we're working with the board of the exchange to look at areas we might be able to take that to outside of telecommunications that in no way impedes or competes with the telcos, but adds value to other verticals.

So it will be both.

Okay.

And then on Keystone, obviously very exciting to see you guys integrating all the different data assets you have.

Can you talk about how meaningful you expect that to be, and how long it takes to become meaningful?

It's going to be a core in the next -- if you're thinking USCIS, it's going to be the cornerstone of the NPI growth for USCIS for years to come.

Okay.

And then lastly, just you guys talked about running some TV ads for PSol.

What is Trey and his team doing different this time?

I know you guys had a TV -- run at TV a few years back that didn't necessarily produce the metrics?

So what's the approach different this time, and howmany incremental growth are going to drive?

Stay tuned,because it comes out I think May -- what is it?

It comes out next week.

And it'sreally trying to take a crack at -- with the consumers' view of managing their credit and managing their identity andsimplifying that.

And it's a cute ad.

It's an impactful ad.

And we're convinced it's going to hit the hearts and the heads of our consumer in the right way, andhelp Trey drive more growth.

All right.

Great.

Thanks, guys.

Thank you.

We'll now take a question from David Togut with Evercore Partners.

Good morning, Lee and Rick.

Hi, David.

Do you expect 4% decline in revenue per unit in Online CIS to persist

I'm not sure if it's 4%, but here'swhat I do expect.

I expect us to continue to drive accelerated growth at the large banks.

And so for a period of time there's going some out of balance between the rate of revenue growth and the rate of volume growth.

I'm not sure if that's 2%, 4%, butyou'll see some pressure there continuing.

What are directed --

David, one thing I would add , if you go back over the last couple of years, in 2009 our average revenue per unit was actually up 5% or 6% for the year.

In 2010 it was flat, and we've started this year down 4%.

And I think what you're seeing to some degree is some fluctuation around a moderate long-term trend as the mix of our customers shifts as we go through the economics cycle.

So to me the 4% is no more -- doesn't change my long-term view about very modest, long-term rate of decline than the 5% or 6% of 2009 -- increase of 2009 changes that point of

And when you're servicing the large banks, is your cost to serve less than it is to serve small banks?

Certainly the sales cost is probably slightly less.

Although obviously with a large bank, more sophisticated, we have more expert resources, but we probably more than make up for that with scale.

The scale of the relationship.

I think [if you] think it through, the incremental margin is significant.

And it's significant for a small account, it's significant for a large account.

Okay.

And then just finally, Rick, you highlighted significant investments in Brazilto boost your market share.

What were the market share trends for your Brazilian business, both in consumer credit and business credit, in the first quarter?

I don't have that off the top of my head, butin general terms, David, the Brazilian business wasn't performing at the level of expectation I had for the past 18 months or so, on both the consumer side and the commercial side.

So we hired a new leader.

Weinvested significantly on getting back on the offense, on getting more SME clients, on the commercial side as an example, getting more consumer data.

And all the metrics, as I mentioned in my comments, are heading in the right direction.

Thank you.

Thank you.

We'll now move to a question from Bill Warmington with Raymond James.

Good morning, and congratulations on a strong quarter.

Thanks, Bill.

A question for you on pre-screen activity.

Looked like that had another strong quarter, andI wanted to ask if you're seeing a change in the mindset of the US banks as it relates to marketing activity?

Yes,I think we are.

We're seeing the banks wanting to get back in the market, andobviously start to grow.

That's why you see the pre-screen rise.

Banks know that long-term they need to grow their portfolios now that they've got the underwriting under control.

And as always, we hope that eventually will lead to an increase in the online over time as well.

Which we have yet to see.

Are you noticing that they're becoming more aggressive toward doing these programs?

It sounded like initially they were very -- they were trying it, but they were just dipping their toe in the water, so to speak --

No, no --

Doing very high --

No, they are more focused and more aggressive now.

Absolutely.

Okay.

And then it looked like the Mortgage Solutions saw some pretty strong growth, despite a pretty weak residential mortgage origination market.

Just want to know if you could comment on what was driving that.

Yes.

We're uniquely positioned in the mortgage market, as you're probably aware.

We have a full suite of offerings, which puts us in good shape from the front end of verifying employment, verifying income, deploying the credit file, to doing ESS.

So as a result of that, we will continue to -- we expect to continue to outgrow the mortgage index, as we have for a number of years.

Bill, if I can add to that, one of the things in our US mortgage reporting is the benefits of some of our new product innovation initiatives.

Our capital markets offering was up nicely.

Our undisclosed debt monitoring product, which is a new product, was up nicely.

So the -- our pure volumes weren't up as much as our revenue, because we're seeing the benefits of expanding our service offering.

Got you.

And then final question was, if you could comment on how the acquisition market is looking right now, how your own pipeline is looking, and if you feel that there are any segments that you need to fill in at this point?

Yes,I'd say the focus really, Bill, is on the mid-sized acquisitions.

And that pipeline is extremely strong.

It's strong in all the business units around the world.

It's probably as balanced and as deep as far as list of opportunities as we've had since I've been here.

We'll always be thoughtful and strategic in that nature andacquire the ones that make the most sense.

All right.

I Appreciate it.

Thank you.

Thank you.

We'll now take a question from Jaime Brandwood with UBS.

Good morning, Rick.

Good morning, Lee.

Good morning.

Just wondered if I could start by asking about the USCIS growth trends.

Can you just start by letting us know in terms of the Q1 growth of roughly just on the 5% year-on-year compared to the Q4 growth of closer to 12% year-on-year, ispractically all of that slowdown down to the much lower levels of mortgage application activity?

No.

And the annualization?

No, it's like -- I do the math on the mortgage in a second, butremember when I just said to someone earlier, is the IXI business has a --

Annualized, yes.

It's back-end loaded.

So they have a very strong fourth quarter compared to a much lower first quarter.

That's normal in their cycle.

So as I eyeball this very quickly, that'sa big piece of it.

But that wouldn't have much of an impact on the year-on-year trend, would it?

I mean, it was weak in Q1 last year as well.

Yes.

I thought you said sequentially fourth quarter versus first quarter.

But looking at the year-on-year trends.

As I say, I think in the fourth quarter you were up almost 12%, or slightly over 12% in USCIS.

And that was just under 5% in Q1 year-on-year.

Again --

And I was just wondering if that --

Again, that's driven by a very strong fourth quarter in IXI in 2010 versus a slow first quarter, which is normal.

The mortgage business quarter on quarter sequentially is relatively flat.

I mean in terms of your overall commentary of USCIS growth in the mid-single-digits, I think you said, for Q2, what are you baking in for mortgage application activity in Q2?

Are you assuming something similar to Q1?

A reasonably big level of year-on-year decline?

No, theassumption is that the second quarter index will look much like -- in the second quarter will look much like the first quarter did.

Okay.

All right.

And then thinking about your PSol business, Personal Solutions, what relationship, if any, does Equifax have with Affinion, who I guess to some extent are a competitor in that space?

They are a competitor.

That's the relationship.

You don't have any kind of relationship to them as a customer of yours, in terms of requirements on your data or use of your data, so to speak?

I mean, not that I can think of.

But if we do, it's the minimus.

I can't think of any.

They're a competitor right now.

Okay.

That's fair enough.

And very lastly, your UK business.

You mentioned that was a contributor to your 9% growth -- constant currently growth in Europe.

And I guess, therefore, that means that the UK accelerated in Q1 versus Q4, which we're not hearing from many UK businesses at the moment.

What was driving the acceleration in your UK activities?

Your point is accurate, that we are seeing accelerated growth.

We've seen that now for a few quarters, which is great.

It has to do with whole new energized leadership team over there and a lot of new NPI.

All right.

Thank you very much.

Thank you.

Next we'll here from Shlomo Rosenbaum with Stifel Nicolaus.

Hi, thanks a lot.

Rick, could you just over some of the puts and takes of the TALX growth expectation for Q2?

Is it a lot of it just a tougher comp from year over year because the mortgage business?

Yes.

The outlook for the second quarter really, as I mentioned for the year, is as I expect continued strong growth in the core Work Number, the traditional instant verification Work Number, that we have, andthat we're going to spend time to diversified direct 4506-T product, bundle it with another core Equifax products, and take it to new verticals.

So mortgage business has slowed dramatically.

And The Work Number has been able to offset that through diversification.

4506-T was a one-trick pony.

It's a great product, and I'm confident with bundling it and diversifying it we will get that back to growth as well.

So long way of saying the mortgage headwinds is squarely in the face of 4506-T, and far less so in the core Work Number.

Shlomo, let me add on the Tax side, Tax and Talent Management, that is a tough compare to last year.

So we do expect upper single-digits growth on The Work Number side of our TALX business.

But Tax will you be down in Q2, and that's the reason for flattish to very slight growth for TALX as a whole, is really more of a tough compare on the Tax side.

Okay.

And we, after six quarters of basically flat ARDSO, you saw a spike this quarter.

Can you just talk a little bit about what's behind that.

Yes, DSO.

Oh, DSO.

The [54 day thing].

Yes, I don't think there's anything truly systematic.

It's obviously something that we're watching closely.

We actually some very strong collections from the very beginning of April that if we kind of normalized it, it was probably up two and a half days rather than four days.

But still something that we're just staying very close to and engaging our sales teams with our larger clients, and just making sure that we maintain the gains that we actually had during the very weak economy.

Okay.

And then there was a big sequential decline in corporate costs.

I know it's up a little bit year-over-year.

Can you just compare sequentially what was there last quarter, that's not there this quarter in the corporate costs?

Yes.

Yes, there is a little bit of a seasonable pattern to our corporate costs.

As you noted, last year at the same very low first quarter, and then higher in subsequent quarters.

If I look at the sequential from Q -- the fourth quarter of last year to the first quarter of -- one is equity compensation costs.

We have two times during the year where we make equity grants, and there's a certain one-time hit from those equity grants for anyone who is retirement eligible.

So you get a pop in expense in the quarters where we do equity grants.

Those are the second and fourth quarters.

You have a couple of million dollar fall off there.

We ended the year strong, which affected our management incentive expense in the fourth quarter, andstarting out the year at a more normalized level.

Our professional fees are a little lower; justthe timing of certain projects that we're undertaking.

So there are a number of things like that that cause there to be a fairly significant step down from Q4 to Q1 this year, just as we had last year.

And the second quarter we'll step back -- step up just like last year did.

Okay.

So the seasonality is Q2 and Q4 is what we should expect?

I would say the first quarter tends to be light.

The patterns for Qs two, three and four, a little bit less predictable.

But Q2 and four definitely have an added expense due to equity compensation.

Okay.

Great.

Thanks very much.

Thank you.

And we'll take a question from Julio Quinteros with Goldman Sachs.

Great.

Thanks a lot.

It's [Vincent] sitting in for Julio.

I apologize, because I jumped on the call late, andI missed some of the earlier commentaries.

But I think on the margin side, you're still committing to approaching 24% exiting the year.

I want to focus on the revenue side in this back half of 2011.

First of all, are you expecting or is there any room for revenue growth acceleration to -- maybe toward the top-end of the 6% to 8% range?And then secondly, if you are going to see some modest revenue acceleration, which area should we expect?

Is it the CIS, or is it more the International, kind of Latin America area, where you -- I think you cited some investments that you expect to push for additional market share in the back half of the year?

Thanks.

Yes, sure.

Couple points.

I just want to clarify the margin.

It's not -- I committed that we will get the margins to 24% or higher in the back half of the year.

So just want to make that clarification.

Number two, we've talked about an environment of revenue growth of 6% to 8%.

I'm still committed to that.

I also in my commentary earlier said we're going to carry good momentum going into the back half of the year on both margin and revenue.

We don't give guidance that far out.

But I think that gives you enough right there.

6% to 8% is the kind of model we see for the year while carrying strong momentum into the back half of the year.

Okay, one more question.

Okay.

We'll take our final question from Dan Perlin with RBC Capital Markets.

Thanks.

So the -- I guess the last couple of questions I have are this.

If we adjust for the amortization on USCIS margins this quarter, margins are flat roughly year-on-year, maybe down 10 basis points.

And so that's going to be with us for the remainder of the year.

So I just want to make sure, Rick, when you provide this level of conviction for back-half margins, that it's consistent that USCIS margins will be up as well as International margins, as well as TALX margins, and not just kind of throttling back on International investments.

No,absolutely.

Let me be very clear.

The margin guidance I gave you was the entire Company, first of all; 24%.

Tobe specific to your question on USCIS, which is the cash cow for this Company, I clearly expect accelerated and expanded margin growth in the second half of the year for USCIS as well.

And that means year-on-year growth, not just acceleration from the margin we just had?

Correct.

Okay.

Semantics, but it's important to me.

And the last quarter's of organic growth was very strong.

I didn't hear you guys actually give the organic growth this quarter.

If you did, I apologize.

If you could just give it again.

We did not give it out.

Oh, okay.

Acquisition added 0.5%.

Everything else was organic.

Okay.

So acquisitions were 0.5%, and currency added how much, I'm sorry?

Approximately --

Yes,FX was about 1%.

Okay.

So 1.5% netted.

Okay.

That's all I've got.

Thank you, guys.

Great.

Thank you.

Thanks, everybody, for participating, and we'll be around today if you've got any additional questions.

At this point we'll terminate the call.

Thank you, sir.

That does conclude today's teleconference.

We do thank you all for your participation.