易速傳真 (EFX) 2011 Q2 法說會逐字稿

Good day everyone, and welcome to the Q2 2011 Equifax earnings release conference call.

Today's conference is being recorded.

At this time, it is my pleasure to turn the conference over to Mr.

Jeff Dodge.

Please go ahead, sir.

Good morning, and welcome to today's conference call.

I'm Jeff Dodge, Investor Relations, with me 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 in the About Equifax tab of our website at www.equifax.com.

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

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

Certain risk factors inherent in our business are set forth in the filings with the SEC, including our 2010 Form 10-K and subsequent filings.

We will refer to a non-GAAP financial measure adjusted diluted EPS from continuing operations attributable to Equifax, which excludes acquisition-related amortization expense and the loss on the merger of our Brazilian operations with Boa Vista Servicos.

Since our Brazilian operations were merged with Boa Vista on June 1, we also present revenue growth excluding Brazil from both second quarter 2010 and the second quarter of 2011 to provide a clearer understanding of our revenue growth for those segments that will continue to be reported in our operating results.

These measures are detailed in our non-GAAP reconciliation included with our earnings release and posted on our website.

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

Now I would lake to turn the call over to Rick.

Thanks, Jeff.

Good morning, everyone.

Thanks for joining us.

As I typically do, I will start the conversation off by giving a high-level overview of the second quarter.

I'll dig into some details, some highlights, straight to the business units, and then I'll come back and give you some thoughts on an outlook for the third quarter.

Second quarter we continued solid, broad-based growth and expanded our operating margin, consistent with what we told you earlier this year.

The diversity of our strategic initiatives and the strength of our execution continue to pay dividends in what is largely kind of a sluggish economic environment in many parts of the world, as you know.

For the quarter, total revenue from continuing operations was $487.1 million, up 6% from second quarter of last year, excluding Brazil, which you know we merged, and I will talk about that later in the Boa Vista.

Excluding that, total revenue was actually up 7%, which is solidly in line with the outlook we provided in April.

Operating margin was 23.5%, up from a year ago, benefiting from continued operating leverage in many of our business segments, for the transaction and our strategic growth initiatives and, obviously, the merger of the Brazilian operations.

Finally, adjusted EPS from continuing operations was $0.61, up 9% from $0.56 last year.

Getting to some of the brief highlights, the business units, and we start with US CIS.

They continued to experience broad-based improvement in many sectors, which has enabled largest segment, Online Consumer Information Solutions, to deliver solid growth quarter after quarter.

Online Information Services' year-on-year volume growth has sequentially improved now 6 straight quarters from a negative 15% in the first quarter of 2010 to a positive 11% this last quarter, second quarter 2011.

Our TELCO positive database, which we have talked to you about in the past, launched earlier this year, is also generating very strong customer demand as both installations and commitments are ahead of our expectations.

We also launched a new scoring product based on this database.

At this point, we will exceed our original revenue targets for 2011 and, most importantly, create a very strong foundation for growth in that unit in 2012 and beyond.

Sticking with US CIS, our Decision 360 initiatives, where we leverage the multiple data assets that we have, is making a significant part of our new product activities and pipeline.

Through June, we are generating revenue from 13 different product offerings, many of which were just launched as recently as late 2010.

The mortgage sector, you know it, it was tough.

It was tough as we expected.

We told you it would be tough.

The difficult comparison started in late first quarter, will continue through fourth quarter 2011, but we obviously anticipate the that comps should improve nicely as we move into 2012.

Finally in US CIS, customers are increasing their usage of data analytics -- of our analytics solutions to enhance their decisioning process.

During the quarter, 39% of our online transaction volume included an analytical component from an Equifax model, and that compares from 32% in the second quarter of 2010.

Now on to International.

They had great results for the quarter.

When you exclude the merger of Brazil, International delivered solid double-digit revenue growth for the quarter.

Talk about Brazil for a second.

I mentioned this before, we are really excited about the merger of our Brazilian operations with Boa Vista and expect that this will create a powerful competitor for consumers and commercial companies and are very important in growing economy.

We will have more to say in the future quarters, but needless to say, we are active, we are aggressive, we are working very closely with Boa Vista to integrate these 2 businesses into one combined entity.

Our new management team over the UK has re-energized that organization.

They have brought innovation and new products and solidly improved customer relations.

As a result, they are delivering double-digit growth through the quarter and continue to increase their market penetration in what is a challenging economy.

Excluding Brazil, Latin America overall had a very strong double-digit growth, driven by strong performance across all geographies.

We have also increased our ownership stake in a important and growing economy and that is Russia, from 28% to 33%.

We are very excited about the growth prospects of Russia short-term and long-term.

Year-to-date in Russia, we are way ahead of plan and expect to have great momentum as we exit this year and go into 2012.

On to TALX now.

Strong performance in our online employment and income verification services, that's the old product we used to call The Work Number.

Very strong growth there, double-digit growth, and that helped offset mortgage head winds in what we call the 4506-T business.

I mentioned to you last time that we are moving on the 4506-T to diversify the revenue stream away from just mortgage, much like we have done over the years for the core of Work Number.

That's on track, and our plan is to have that diversification start to unfold as we exit this year, which should bode well for the 4506-T product as we go into 2012.

Sticking with TALX, also we continue to cross-sell, as we have been doing for a number of years, the Work Number product into our US CIS customer base, another highlight there as we just recently signed a very large telco customer who will be integrating the Work Number database into their point-of sale system to reduce manual reviews with individuals without a credit file.

TALX continued to execute on a number of strategic initiatives that could significantly increase the active record cap in the Work Number data base.

This will not only broaden the revenue opportunities for TALX but will also benefit the other businesses as we have a larger database from which to draw upon.

More to come on that in the coming quarters.

Moving on to Personal Solutions.

In the quarter, North American Personal Solutions had a strong double-digit growth in new subscriber sales, in addition to increasing the average revenue per subscriber.

With this quarter's performance, Personal Solutions has increased market penetration in each of the last 6 quarters.

We continue to have very good success with our new products and expect the continuation of market share gains as we have experienced in the past.

Finally, North American Commercial Solutions had another strong double-digit growth and improved operating margins.

They have now delivered 7 consecutive quarters of solid double-digit growth in spite of a sluggish economy.

That's it for the business highlights.

Let me go to some overview of the overall Company, and we start with something we talk a lot about, which is NPI.

You hear me talk a lot about the importance of investing capital in new product innovation.

It's one of our more strategic growth initiatives.

New products in their third year we call our vitality index, so in their third year, delivered approximately 2 to 3 percentage points of incremental revenue growth for the Company.

Through June, we are ahead of our revenue targets and have a couple of products that could evolve into very large revenue contributors soon.

We also have a very robust pipeline of new products.

Many of these access multiple data assets and leverage our analytical capabilities to create unique, high-value solutions for our customers.

The NPI process is being pushed deeper into all of our organizations and is becoming a part of our DNA.

With this unique data assets that we have, our analytical capabilities and our talent, robust decisioning platforms that we developed, we have a rich opportunity and a long runway to continue developing high-value product solutions for our customers that will make important contributions to our revenue growth.

Obviously, in addition to NPI, investing in strategic tuck-in acquisitions has been and will continue to be a part of our strategy to drive consistent long-term revenue growth.

We have built a strong financial and operating discipline to ensure these acquisitions contribute to improving our return on invested capital over time.

Based on the kind of acquisition opportunities we see in the marketplace today, we expect such acquisitions to continue to make an important contribution to our competitive positioning and long-term business success while adding incremental value to our shareholders.

Pipeline is as strong now as I've seen in quite some time, in fact, probably as strong as I've ever seen in my tenure here at Equifax.

Let's look forward a little bit now and talk about the balance of the year.

As we have demonstrated for a number of years now, the strength of our portfolio of businesses enables us to consistently deliver solid revenue growth and improved operating performance quarter after quarter.

Our success has also enabled us to continue investing in our key strategic initiatives, positioning us well for returning value to shareholders in spite of the economic uncertainty.

Based upon the progress we have made with many of our initiatives this year, I am confident we will deliver revenue growth that is solidly in the range of 6% to 9% for the remainder of the year, versus the 6% to 8% revenue growth we indicated earlier in the year.

That is in spite of the fact that the economy is not going to improve in the second half of the year, in my opinion, and two, that our comps versus mortgage last year are much, much tougher in the second half of the year, which gives you a feeling for the core underlying improvement of the rest of our business non-mortgage-related.

We will do that while further expanding our operating margin for the balance of the year.

For the third quarter, specifically -- I go through each of the business units now -- for the third quarter specifically, US CIS will continue to execute on its growth initiatives, leveraging their unique data assets, which we call data 360, their strong customer franchise, and NPI.

And for the third quarter, we expect low single-digit revenue growth over 2010.

In 2010, our third and fourth quarters, as I mentioned before, were particularly strong for or mortgage business.

On to International.

Our market positions in each of our countries where we operate offer many opportunities, many opportunities for revenue growth and margin expansion.

For the third quarter, excluding the impact of foreign currency translation in Brazil, we expect revenue growth to be in the upper single digits to low double-digit range when compared to third quarter 2010.

In TALX, we continue to make good progress on increasing our data assets, broadening our product offerings, and diversifying our customer base.

Given the very strong mortgage activity we experienced last year, TALX is expected to grow in the low single digits when compared to third quarter of 2010.

PSol has been very successful in executing on its strategic initiatives and improving its market penetration.

I fully expect that to continue for the third quarter.

Personal solutions should deliver low double-digit revenue growth.

And lastly, before I turn it over to Lee, our North American Commercial Solutions team continues to drive innovation and really execute on a very high level and take market share.

I expect that to continue, and they will deliver very strong double-digit growth when compared to the third quarter of 2010.

Lee, if you would now walk through the financials.

Thanks, Rick, and good morning, everyone.

This morning, I will 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 information.

For the second quarter, our performance was in line with the expectations we outlined in April.

As in the first quarter, many of our business segments continued to deliver good revenue growth and margin expansion, which enabled us to offset continuing weakness in the mortgage sector.

Compared to the same quarter in 2010, for the second quarter of 2011, consolidated revenue of $487.1 million was up 6% on a reported basis and 7% when Brazil is excluded from both years.

Excluding the impact of changes in foreign exchange rates, revenue was up 4%, or 5% excluding Brazil from both years.

Operating margin was 23.5%, compared to 23% for the second quarter of 2010.

Diluted earnings per share from continuing operations attributable to Equifax was $0.28, down from the second quarter of 2010, due to the loss on the transaction in which we merged our Brazilian operations with Boa Vista.

Excluding the impact of acquisition-related intangible amortization and the loss on the transaction in Brazil, adjusted earnings per share attributable to Equifax was $0.61 per share, up 9% from $0.56 in the second quarter of 2010.

A pretax loss of $10.3 million was recognized during the quarter, related to the Brazilian transaction, which was included in Other Expense on the income statement.

In addition, tax expense of $17.5 million was also recorded in conjunction with the transaction.

Finally, during the second quarter, we repurchased a little over 800,000 shares of our stock for $31.3 million.

Moving to the individual business units, our US Consumer Information Solutions business revenue was $194 million, up 5%.

Online Consumer Information Solutions revenue was $128 million, up 6%, as online credit decision volume trends continued to improve.

Second quarter online volume was up 11%, marking 6 quarters of improved year over year performance, as financial institutions continue to grow their lending portfolios.

Since September of 2010, our online inquiry volumes have been up each month on a year over year basis.

Mortgage Solutions revenue of $27 million was down 6%.

Core mortgage reporting was down as mortgage application volumes continued to decline, while Settlement Services was up slightly, reflecting a continuation of our share gains in a challenging environment.

The mortgage bankers application index was down 13% from the second quarter of 2010.

Consumer Financial Marketing Services revenue was $40 million, up 11%.

Credit Marketing Services delivered mid single-digit growth, and IXI delivered strong double-digit growth in the quarter.

The operating margin for US Consumer Information Solutions was 36.5%, down 50 basis points from a year ago.

Our International business units revenue was $131 million, up 11%.

In local currency, revenue was up 4% from a year ago.

Excluding Brazil from both years, as we had only a partial quarter of revenue in 2011, reported revenue grew 18%, and local currency revenue grew 11%.

By region, Latin America's revenue was $59 million, up 5% in US dollar terms.

Excluding Brazil, reported revenue grew 21% in US dollars and 17% in local currency.

Local currency revenue growth was broad based, with healthy double-digit growth in Consumer and Commercial Information Solutions, Technology and Analytical Services, and Marketing Services.

In Europe, our revenue was $39 million, up 20% in US dollars and up 9% in local currency.

This performance was driven by strong growth in our core product offerings, as well as the contribution from Workload, an asset information company in the UK, which we acquired earlier this year.

Canada Consumer Information revenue was $33 million, up 12% in US dollars and 5% in local currency.

As in prior quarters, Citadel, our premier fraud product, and high-value technology and analytical services continue to be the principal contributors to our revenue growth in Canada.

International's operating margin was 26.1%, up from 25.4% in 2010, driven by margin expansion in Canada and many of our Latin American countries.

TALX revenue was $96 million for the quarter, down 3%.

The decline in mortgage activity largely contributed to this performance.

The Work Number, with revenue of $50 million, was flat for the quarter.

Double-digit growth in the instant verification of employment and verification of income product offset declines in our BPO activities, including the tax transcript 4506-T government direct services.

Tax and Talent Management Services revenue was $46 million for the quarter, down 5%, driven largely by a decline in our talent assessment services.

The TALX operating margin was 21.6%, down from 23.2% a year ago, driven by declines in our BPO services as a result of lower volumes and in talent assessment.

North America Personal Solutions revenue was $45 million, up 12%.

Product pricing, volume growth, and product mix all contributed to the strong growth during the quarter.

Direct to consumer subscription revenue growth was strong, up 16%, driven by double-digit growth in new subscriber sales and mid single-digit growth in average revenue per subscriber.

Operating margin was 27.7%, up from 25.4% in the second quarter of 2010, largely benefiting from improved pricing and mix.

North America Commercial Solutions revenue was $21 million, up 12% on a reported basis and 10% in local currency, driven by double-digit growth in Strategic Accounts and Data Management and Marketing Services in the US.

Operating margin was 20.9%, compared to 20.2% in the year-ago quarter.

Finally, corporate expense was down $1.4 million, or 5% year over year.

Now, let me turn it back to Rick.

Great.

Thanks, Lee.

Let me summarize where I think we are for the balance of the year and give you some comments and sine specific numbers on the outlook.

We continue to be very confident in our outlook for the full year that we communicated to you today.

However, the economic -- or the outlook for the remainder of the year, obviously, is predicated on the assumption that the resolutions of the US debt ceiling and deficit reduction issues occurs without material disruption of the economy or the credit markets, an issue that's much broader than just Equifax.

So assuming that is settled without massive dislocation, for the third quarter, assuming current exchange rates and excluding Brazil, we expect revenue growth from continuing operations to be up between 6% and 9%, with operating margins between 24% and 24.5%.

With that, adjusted EPS in continuing operations is expected to be between $0.61 and $0.65 a share.

We conclude with a look towards the fourth quarter.

While it is not our practice to give an outlook at this time for the fourth quarter, I want to provide you an early look into our expectations.

In the fourth quarter, we expect revenue growth to be in the upper half of that range of 6% to 9%.

Again, that is in spite of the fact and I -- mortgage comparisons will be very tough in the fourth quarter as well as the underlying growth is strengthening.

And at the same time, as I have committed to you in the past, we expect operating margins to continue to expand into the range of 25% to 25.5% for the fourth quarter.

So Operator, with that, I would like to turn it over to you to open it up for any questions that the participants might have.

Certainly, and thank you.

Ladies and gentlemen, the question-and-answer session will be conducted electronically.

(Operator Instructions).

Our first question will come from Georgios Mihalos with Bank of America.

Georgios, are you there?

We can't hear you.

Hi, can you hear me?

Yes, now I can hear you.

Sorry about that.

A couple of quick questions here.

Just your thoughts on your capital deployment here.

Given where the stock price is relative to your M&A plans, are you favoring one versus the other over the near to immediate term?

When you compare share repurchase acquisitions -- in acquisitions, you have to take the opportunities that present themselves which were there.

I think our investors know we are very selective in making sure the things we do are a good fit with our business and that we are going to be able to give value, but if they fit the strategy and complement what we do, near-term fluctuations in our stock price are not going to have a significant impact on that.

Having said that, our debt-to-EBITDA ratio is a little bit below our longer-term objective.

And as Rick pointed out, barring significant dislocation in the capital markets from what is going on in Washington these days, you can expect that that's going to tend to move back up, both because of acquisitions and share repurchase.

Okay.

Maybe you guys can talk a little bit about some of the strength that you are seeing, specifically in that Lat Am region.

Obviously, the 17% comes from currency growth.

How broad-based is that, and what is your confidence level that you are going to be able to continue over the back half of the year to grow that business at that type of a level?

Georgios, it's very broad-based.

Every platform we have in Latin America continues to execute on a very high level.

We have a great leadership team down there.

Paulino Barros, who leads our International operations, is bringing a new level rigor to folks who run NPI, and with that, I am highly confident that the growth rates we are seeing will continue.

Okay, great.

Just a last question for me.

Lee, the corporate expense was a little lower than what I had modeled for this quarter.

Should we be looking on a year-on-year basis for a mid single-digit increase there?

Thank you.

Yes.

Yes, you should.

That will tend to fluctuate some quarter to quarter, because we do have various projects in our corporate expense line that can come and go.

So you can see some fluctuation.

But I think something in the mid single-digit range is probably still appropriate for the year.

Our Next question will come from Reina Kumar of Evercore Partners.

This is Reina.

I would like to ask a question on behalf of David Togut.

What factors are driving the continued slowdown in TALX, both in The Work Number and in Talent Management?

Well, Work Number we just talked about a fair amount beyond the call.

That is the core number, which is the Holy Grail within The Work Number itself, is the instant verification online.

That is growing strong double-digit.

It has grown now for 4 or 5 years.

The slowdown is driven by what we call the 4506-T product, which is a product that we bought maybe 18 months ago.

I'm maybe off a little bit, but I think about 18 months ago.

That product is only focused today on the mortgage sector.

You know what is happening in the mortgage market, right?

Right.

The whole plan there, what Dan Adams and his team are doing is, just like we did with the instant verification work number, diversifying the applications and revenue streams beyond mortgage.

And as I said, in the second quarter, that will take us some time.

The pipeline is there, the activity is there, and it's my plan as we exit 2011, we will have a far broader diversification revenue stream from 4506-T which will bode well.

And Talent Management should have a very strong second half of the year.

There was slow down in TSA in the first half of the year.

They diversified the revenue stream away from the TSA, and we expect good growth year-over-year in the second half of the year.

Okay.

Thank you.

Carter Malloy with Stephens has our next question.

Hi, guys.

Thanks for the color on 4Q.

Just curious what the -- if we are going to have more of a mortgage drag on year-over-year basis, what are the incremental drivers there to accelerate us out of the third quarter?

As far as margin?

Both on revenue and margin, actually.

Well, on revenue, with all of the things that we are talking about, it's I think a very, very high level of execution across the Company, number one.

Number two is NPI.

We have talked about this now for a number of years, and NPI truly is a huge part of our DNA.

I mentioned in there that just the products that were launched in the last 3 years are giving us 2 to 3 points of growth.

That's driving the revenue growth.

With that, you get expanded margins, as I promised you we would have in the past, really good margin expansion.

We started this year at 23.1%.

We told you we would get about 100 basis points of improvement ex-Brazil.

That gets you to 24%, and work we are going to commit to 25% to 25.5% for the fourth quarter.

So, as you know, this model is highly leveragable.

In the tough years we went through, we have a high fixed cost that's a drag on your margin.

Now that we are starting to execute and grow, incremental margin should flow through the bottom line.

That's the plan.

Certainly impressive and great to see that.

So, looking back over to talent management, TSA is obviously a very large customer there.

In general, how much are your government-related customers as a percent of that business, and what is the expectation for that to accelerate in the back half?

If you take a look at the entire talent management -- the entire tax management business, which is the talent management and tax.

On the tax side, obviously a very low concentration on government.

On the talent management, it's still dependent, highly dependent upon the government where they are diversifying every day, getting corporate customers up.

At the end of the day, though, Carter, the ebbs and flows, the ups and downs of this, specifically the talent management piece of that business, on the overall enterprise of Equifax, is negligible.

Okay.

And then just lastly I wanted to return back to the margins.

I mean, this is a very impressive fourth quarter we are looking at putting up.

Is there any reason that shouldn't moderate and pull back in 2012?

Yes, you've got cyclicality in our business, so you can't simply take that.

What you should take to the bank is our commitment to get this margin up in that 24% to 26% range, when you exclude Brazil, 25% to 27% range.

We're executing against that.

You can't take any one quarter, because of the cyclical nature of our business and say that is the one right for the next year.

Carter, If I can pick up on that, several of our businesses tend to have a bit of a seasonal peak in margins in the fourth quarter.

PSolve, historically, we have found is not as fruitful an advertising market because of competition with holidays and what the customers are really buying at that time of year.

Our IXI business tends to have a bit of a spike in the fourth quarter just because the timing of when they sign many of their contracts, and couple of other businesses.

The fourth quarter does tend to be seasonally high, but I think Rick's comment about committed to being in the 24% to 26% range is absolutely appropriate.

Okay, great.

Thanks for the color.

Great.

Our next question comes from Dan Leben with Robert W.

Baird.

Thank you.

Good morning.

Just to follow up on Carter's question on the margins.

On the US CIS business, NPI is obviously a driver of a lot of the growth we are seeing there.

What point do we hit the inflection where we start seeing a year-over-year expansion of margins in US CIS as the growth from NPI kind of offsets some of the incremental costs?

I think as you look at -- one, we just, Dan -- I don't give a whole lot of credence or focus quarter-to-quarter at the BU level.

You can have anomalies and changes there.

The fact that US CIS had a 50 basis point margin compression is not a concern to me, nor should it be to you or investors.

In general terms, as you see US CIS going forward, I expect their margins, like the rest of the Company, to continue to expand as we exit this year and going into 2012 as well.

Great.

And then one of the comments that Lee made on the marketing side at Commercial Solutions, could talk a little bit more about that business?

I think it's one that we don't talk about very often, just some of the trends you are seeing there.

The team is executing very well.

Alex Gonzalez and his team have done a very nice job there.

They have restructured the organization.

And because of that, focus in execution and innovation is allowing the marketing piece of their business, as well as the risk piece of their business, to deliver nice growth now for 7 consecutive quarters.

Thank you.

Yes.

Our next question comes from Bill Warmington with Raymond James.

Good morning, everyone.

Good morning.

Congratulations on the new Telco client win on TALX.

One of the push backs we've heard about TALX has been that its relative high price point has limited its market opportunity.

But it sounds like that new Telco win disproves that.

And are you guys using a new strategy on that product?

Bill, that's a great question.

The answer is, if you think of the core Work Number product, it is made up of a product that has many different attributes, in fact, over 50 different attributes.

As you think about the problem you are trying to solve, in some cases you may need all 50 attributes, i.e.

the mortgage space.

In other applications, i.e., Telco, credit card, or others, you don't need all 53 attributes.

So, I can give a different cut of The Work Number, if you will, a modified Work Number, at a different price point employing a much higher volume transaction.

That's a modification we have made to The Work Number a year or so ago, trying to reposition it into higher growth, lower value and lower price areas, while still protecting the great margin, the great value of the true Work Number with 50-some attributes.

Okay.

I see.

One more question for you then on the new product side.

What about new product opportunities at IXI?

Have you been seeing any success there and any opportunities on the digital side?

The answer is yes on both sides.

The IXI, if you think of the data 360 strategy, which is taking the core credit file with employment data, with income data, the IXI data and soon to be this positive Telco data, we're building out new solutions.

So, IXI is a integral part of the data 360 strategy.

It has been for the last year and will continue to be.

Digital marketing, yes, we launched that, as you know, Bill, about a year ago, very bullish on that.

Takes us into a whole different dimension, an area of growth with different market characteristics than the core credit business would.

It's already delivering, and I'm very optimistic long-term for that as well.

All right.

Thank you very much.

Andrew Jeffrey with SunTrust has our next question.

Hi.

This is Rich Cheever on for Andrew.

Just a couple of questions.

First of all, on Europe, you mentioned -- can you say again what the local currency growth was for the year?

I think 9%, but let me -- Yes, 9%.

Okay.

And you mentioned a lot of that or some of that came from the addition of Workload.

Is there an organic number?

We don't break that out, but as I think Lee said in his comments, think of Workload in total terms of Equifax de minimis, specific to Europe, it does contribute.

But the core organic growth was strong in Europe.

So it's -- by no means is Workload covering up a slow growth or no growth core business.

Core business in Europe is strong.

Okay.

Excellent.

And you alluded to, I guess, our collective leadership playing chicken with our economy.

But can you talk a little bit more about the FX hedges that you have in place and is there a, I guess, a threshold or a fat tail risk in the currency hedges?

We don't hedge, Rich, here at Equifax.

Okay.

Rich, most -- each of our country operations has both their revenue and their expenses in the local currency, and it's very hard to effectively hedge profit flows and have an acceptable accounting treatment at the same time.

Our results will tend to move somewhat with foreign exchange, which is why we are very transparent about the local currency growth versus the nominal growth.

Okay.

I appreciate that clarification, and I will jump off.

Thanks, Rich.

Thank you.

Next question comes from Jaime Brandwood with UBS.

Good morning, Rick.

I just wondered if I could ask two or three questions.

I was slightly confused by an earlier answer.

Just wondered if I could ask again, with regard to the US CIS margin.

I'm just going back over my notes at the Q1 stage, and I seem to recall an indication that we should start to expect to see the US CIS margin expanding year-on-year in the second half of this year.

I didn't know if by that guidance you already meant Q3 or not.

But are you now saying today that we shouldn't expect year-over-year margin expansion in US CIS until 2012?

No, I did not say that.

So sorry.

When exactly are you expecting the US CIS margin to show year-on-year expansion?

Back end of this year.

Back end of this year, okay.

And then just on the Personal Solutions business.

I know it's not a metric that you disclose, but maybe you could give us a bit of a feel around your churn rates in terms of subscribers?

Is part of the reason for the strong growth that you are seeing in subscription revenue, because you are bringing down the churn rate or is it mainly just because you are winning lots of new subscribers?

There are multiple things that we are doing to improve the overall financial model of PSolve and have been for a couple of years now.

The churn rate in general terms over the past couple of years has absolutely trended down, and that has benefited us.

But that benefit is now a second-quarter benefit.

That benefit started back in, I think, probably 2009, if I'm speaking from memory.

So, new subscribers are up, ARPU is up, and we have been able to manage churn at a very good level.

Okay.

Lastly, we have seen Experian making some interesting moves into the healthcare vertical via acquisition over the last couple of years in the US.

Just wondering what your own views on the healthcare vertical are and how you are addressing it.

I looked at a few firms in the past, and put in a few of the firms that they've looked at, and I couldn't get my head around those.

That doesn't mean it's a bad deal for them.

It's probably a great deal for them.

Obviously, healthcare is a interesting market.

It's a fragmented market.

It's a market that's here to stay.

I have just not found the right deal for Equifax to play in it.

Do you do much indirectly in the health care segment in terms of selling data into those kind of providers?

It's small, Jaime.

Okay.

Thanks very much, Rick.

Sure, thank you.

It appears there are no further questions at this time.

I would like to turn the call back over to our speakers for any additional or closing remarks.

Thanks, operator.

Thank you all for participating in the call.

We will be available if you have any additional questions.

With that, we will terminate the call.

Thank you.

Thank you.

That will conclude today's conference.

Thank you all for your participation.

You may now disconnect