易速傳真 (EFX) 2011 Q4 法說會逐字稿

Good day, and welcome to the Q4 2011 Equifax earnings release conference call.

Today's call is being recorded, and 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 me today are Rick Smith, our Chairman and Chief Executive Officer, and Lee Adrean, Chief Financial Officer.

Today's call is being recorded.

An archive of the recording will be available later today in the investor relations section in 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 businesses are set forth in 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, a tax benefit in the fourth quarter, and the loss on a 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, to provide a clearer understanding of our revenue growth for the businesses, 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 other various investor presentations posted on the website 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, and good morning, everyone.

Thank you for joining us today.

I think you'll all agree 2011 was a pretty solid year for Equifax.

In fact, it was a year in which we saw accelerated organic growth as each quarter unfolded.

In the fourth quarter, organic non-mortgage revenue growth accelerated from 8% up from 7% in the third quarter, and 4% in the first quarter.

And by the way, total organic growth when you include mortgage was actually 9%, the strongest we've had in quite some time.

Throughout the year, we continued to invest in critical revenue growth initiatives, ending the year with $75 million in CapEx and $127 million invested in strategic acquisitions around the globe.

We also invested our shareholders, returning over $220 million in the form of dividends and share buyback.

Our investments in new product innovation continue to pay great dividends.

In 2011, we generated very strong double-digit growth in new products for risk services, verification services, fraud, technology and local services and marketing.

In fact, for the year, we launched a total of 69 products around the world, and that allowed us to expand into new markets and gain share with existing customers, as well as new customers.

Taking a quick look at some of the high-level financials for the quarter, obviously Lee will give you detailed financials later on.

Total revenue from continuing operations was $510 million, up 6% from a year ago.

When you exclude Brazil, total the revenue was up 10% for the quarter and up 11% in constant dollars.

Operating margin was just as we expected, 24.7%, up 190 basis points from a year ago.

Obviously benefiting from operating leverage that we get, as well as the deconsolidation of our Brazilian operations.

Finally adjusted EPS from continuing ops was $0.68 a share, up 10% from $0.62 a year ago.

And now as I normally do, I'll go through some business highlights.

Our internally-generated momentum in 2011 positions us very well for strong growth this year.

The environment of our customers is obviously very different than what was just a few years ago, before the recession.

Our strategy has enabled us to adapt extremely well to their emerging needs and provide high-value solutions that will help them be more successful in this challenging environment.

So here are the highlights.

I'll start with USCIS, and move through all five of them.

First, USCIS had an outstanding year, exiting with double-digit revenue growth, expanding its operating margin by 120 basis points over the fourth quarter of a year ago, and like their peers around the world, launched 13 new products as NPI becomes an integral part of their growth.

We exited the year with broad-based growth, and volumes across all sectors.

Including financial services, that's the large, financial services regional financial services as well.

Telco, mortgage, and our channel partners.

Really, truly broad-based volume growth across all entities for USCIS.

They also delivered $23 million, or 3 percentage points of their growth from NPI, and these are products that were built over the last three years.

So great success there.

Here's a few highlights, just so you have some sense for where that 3 points of growth is coming from for USCIS.

One is the launch of a new database, that includes positive payment informations from the telecommunications, utility and satellite video companies, we talked about that before.

That was a strong contributor for them in 2011, and will be stronger in 2012.

Number two.

Unique products such as personal income models and enhanced debt-to-income ratings, which obviously help our clients make more discerning credit and account management decisions.

Number three.

Digital marketing services, which utilize unique Equifax wealth data to better target Internet ads, we talked about that for the last couple years.

Great growth product for USCIS.

Number four.

Products like Undisclosed Debt Monitoring, which we launched a few years ago, helped mortgage lenders reduce fraud.

Five.

Products to help our clients comply with new regulatory requirements like Reg Z.

Number six, new applications for enabling technologies to help our clients manage account relationships more effectively.

And seven, services to help investors evaluate mortgage-backed securities using our consumer credit data and superior matching technology.

Giving the breadth and diversity of our data assets, we have also broadened our distribution channels.

For example, we launched a major growth initiative in the insurance sector, and the results are very encouraging.

We also increased our resources and strengthened our discipline and strategic pricing to ensure that our pricing reflects the value of our customers received and realized selected improvements where value is unique.

Our customers increasingly recognize the power of our analytical solutions for the year.

44% of the files we delivered to customers contained at least one Equifax Analytic product.

This is particularly impressive when you consider that we've increased our penetration in each of the last three years, starting from 28% back in 2008.

Customers in USCIS are very interested in our value-added offerings, that intensified throughout the year.

You've already witnessed it through our competitive wins and our NPI initiatives.

To further support growth in these high-value solutions, we continue to invest in our technology and analytical services, while broadening and deepening our analytical capabilities.

These investments will continue to contribute to the USCIS growth in 2012 and beyond.

So just a great year, a great ending, and great momentum for USCIS.

International, they successfully delivered on a number of important strategic initiatives last year.

They strengthened their market position, gained market share, made strategic acquisitions across their served markets, and they also obviously combined their Brazilian assets with our key partners in Brazil to become a strong and formidable competitor in a very important growth market for us.

A couple of highlights for international, the new management team in the UK achieved significant penetration, market penetration through intense focus on their customers' changing needs in what continues to be a very competitive environment.

Just a banner year for the UK team.

Earlier this year we acquired Workload in the UK, it's an information solutions company, with investment data assets very similar to IXI here in the US.

We are leveraging the management team, products and analytics expertise in IXI to further develop the business opportunities and establish a unique capability in one of our larger international geographies.

I have got high hopes for that product over in the UK in 2012 and beyond.

In Brazil, we have fundamentally altered the competitive dynamics when combining our business assets in Brazil with Boa Vista.

Now a much stronger competitor, in a fast growing market.

The integration of our operations is well underway, we're making great progress and are now focused on developing new products and driving strategic growth initiatives in Brazil.

Boa Vista is benefiting from the overall market growth in Brazil, and we continue to be very excited about our venture and the opportunities that lie ahead.

We also closed on credit bureau acquisitions in Ecuador and Costa Rica last year, which will expand and broaden our revenue growth opportunities across the fast-growing Latin American geography.

Our investment we made a few years ago in Russia is generating very strong returns for Equifax.

During the year, we grew revenue in excess of 70%, and increased our ownership from 28% to 33%.

We'll continue to step up that ownership in 2012.

India is also progressing well, and in line with our expectations.

We now have 250 data contributors, over 149 million records loaded already into the database, and we launched 12 new products last year for our Indian customers.

We continue to make very good progress on our high-value solutions.

In 2011 we launched -- we strengthened relations with our customers, and realized further market penetration as revenue for our technology and analytical services product line, excluding Brazil, was up a nice 20% across international properties.

NPI activities in international, like everywhere else, contributed significantly to our revenue growth.

In 2011, 15% of our international revenue was driven by new products introduced since 2008, substantially above our corporate target of 10%.

Our competitive position in international could not be stronger.

In those markets where we have the largest share, we have strengthened our customer relationships through innovation and intense focus on customer service.

In markets where we do not have the largest share, we have gained share or improved our competitive position through innovation, strategic investments and strong management discipline.

On now to TALX.

TALX Workforce Solutions made great progress on their strategic initiatives, despite headwinds in the mortgage market.

The actively-employed record count in the work number database increased now to over 51 million records, up 5% as 280 new companies contribute over 5 million active records and inactive records for the year, the work number database now has over 210 million records, which is a great accomplishment.

TALX further expanded its ability to grow actively-employed records from mid-market employers through partnership agreements which provide access to a significant amount of new active records, and they'll be the benefactor of those partnerships starting in 2012 and beyond.

The acquisition of DataVision, a provider of low-cost manual verification and workflow management services and eThority, a provider of sophisticated HR analytics solutions, will significantly deepen our relationships with customers who purchase our employment and income verification solutions, and the employers who contribute records to the work number database.

Onto PSOL.

2011, I think you'll agree, was a record year for PSOL.

Record revenue, improved operating margins, rigorous management discipline and execution, and increased market penetration.

They delivered growth of 15% for the year.

That growth was driven in both subscribers for the year, driven by growth in both subscribers, which were up 6% and average revenue per subscriber, which was up 11%.

We've migrated to more of a feature-rich set of products.

Again, NPI is a big part of the story, in PSOL as well.

And with an intense focus on their critical operating metrics such as churn, conversion rate, cost per account acquired, and value-added pricing, operating margins improved by 160 basis points to 30%.

There's great momentum in PSOL, and the customer experience is getting better every day.

We fully expect to continue making market share gains in 2012 as we continue to introduce new products and further improve our customer touch points.

Finally, North American commercial solutions delivered double-digit revenue growth driven by US risk, which is continuing to take market share by leveraging both the quality of our data with analytics to deliver high-value solutions to our customers.

Our performance in 2011, underscores that even in a relatively mature business environment, new regulations and business challenges create new opportunities for us to deliver above-average growth, by meeting our emerging needs for customers with unique and powerful solutions.

Business model linking unique and diverse data assets, analytical innovation and capabilities and proprietary decision technology is in fact enduring.

Now as always, Lee, if you can go through the financials, that would be great.

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.

The resilience of our core business activities, along with continued execution of our long-term strategy, enabled us to deliver our strongest quarterly performance in 2011.

Compared to the same quarter in 2010, the fourth quarter of 2011 consolidated revenue of $510 million was up 6% on a reported basis, and 10% when Brazil is excluded from both years.

Excluding the impact of changes in foreign exchange rates, revenue was also up 6% on a reported basis, or 11%, excluding Brazil.

Operating margin was 24.7%, compared to 22.8% for the fourth quarter in 2010, and diluted earnings per share from continuing operations attributable to Equifax was $0.60 per share, up 20% from the fourth quarter of 2010.

Excluding a cumulative multi-year tax benefit and the impact of acquisition-related intangible amortization, adjusted earnings per share attributable to Equifax was $0.68 a share, up 10% from $0.62 in the fourth quarter a year ago.

Also, during the quarter we repurchased 1.9 million shares of stock for $67 million.

Moving to the individual business units, US Consumer Information Solutions revenue was $216 million, up 13%.

Online consumer information solutions revenue was $137 million, up 17%, driven by improved market demand, the addition of select new customers, new products, and certain pricing actions.

Fourth-quarter online volume was up 17%, significantly exceeding the 9% growth through the third quarter.

Mortgage Solutions revenue of $33 million was up 13%, compared to the fourth quarter of 2010.

Core mortgage reporting was up slightly, due to a favorable level of refinancing activity, when compared to the fourth quarter of 2010.

Settlement services benefited from further customer penetration and delivered strong double-digit growth during the quarter.

The Mortgage Bankers Application Index was down 6% to end the fourth quarter 2011, from a year ago.

Consumer Financial Marketing Services revenue was $46 million, up 2%.

We noted at the end of the year that while demand in our transaction-based businesses held up well, our project-based business like consumer financial marketing services experienced some softness as corporate buyers deferred discretionary projects in the face of global economic uncertainty.

The operating margin for US consumer information solutions was 37.5%, up from 36.3% in the fourth quarter of 2010.

Our international business units revenue was $116 million in the quarter.

Excluding Brazil, following our deconsolidation of that unit in the second quarter, reported revenue grew 10% and local currency revenue growth was 12%.

By region, Latin America's revenue was $45 million.

Excluding Brazil from the prior-year comparison, reported revenue grew 10% in US dollars, and 14% in local currency.

The analytics and marketing services product segments were particularly strong, although all major product segment delivered double-digit growth during the quarter.

Europe's revenue was $42 million, up 15% in US dollars, and up 16% in local currency.

Strong double-digit organic growth in the UK and the acquisition of Workload earlier in the year offset weakness in Iberia.

Our Canada consumer information revenue was $30 million, up 3% in US dollars and 4% in local currency.

Growth was generally consistent across all product lines.

Finally, international's operating margin was 28.7%, up from 23.6% in 2010, reflecting primarily the deconsolidation of Brazil in the second quarter.

Moving on, as many of you already know, we have changed the reporting format for TALX to be more consistent with how we're now operating that business unit.

As a result, we are reporting TALX Workforce Solutions, the new name for the business unit, along with two lines of business, verification services and employer services.

Verification services includes our employment, income, and Social Security number verification services, while employer services includes our tax and talent management services, as well as certain complementary payroll-based transaction processing services, which previously had been included with verification services.

For the quarter, TALX Workforce Solutions revenue was $106 million for the quarter, up 3%.

Verification services, with revenue of $55 million was up 11% for the quarter.

10% growth in non-mortgage verification revenue, and the acquisition of DataVision more than offset the double-digit decline in mortgage-related verifications.

Employer services revenue was $51 million, down 4%, reflecting a modest decline in unemployment claims activity and reduced hiring by the TSA, our largest client for talent management services.

The TALX operating margin was 23.2%, down from 24.4% in Q4 2010, largely driven by changes in mix within our employer services offerings, and the additional acquisition amortization from the acquisitions of DataVision and eThority.

North America Personal Solutions revenue was $46 million, up 21%.

New subscriber growth, and a significant improvement in average revenue per subscriber, as Rick described, were the primary drivers of overall growth.

Operating margin was 30.5%, down slightly from 30.9% in Q4 2010.

North American Commercial Solutions revenue was $26 million in the quarter, up 6% on both a reported and a local currency basis.

Strong double-digit growth in US transaction volume was partially offset by lower data management project revenue, again as economic uncertainty resulted in caution by corporate buyers relative to new client marketing programs.

The operating margin for our commercial business was 34.4%, up from 32.3% in the year-ago quarter.

Finally, corporate expense was up 6% when compared to the fourth quarter in 2010.

For the full year, consolidated revenue from continuing operations was $2 billion, up 5% on a reported basis and 8% when Brazil is excluded from both years.

Operating margin for the year was 24%, compared to 23.1% for 2010.

Our tax rate for the year was 37%, and we expect our 2012 tax rate to be roughly similar, although this can vary quarter-to-quarter.

Diluted earnings per share from continuing operations attributable to Equifax was $1.87, excluding the impact of the loss on the deconsolidation of Brazil, a tax benefit in the fourth quarter, and acquisition-related intangible amortization, adjusted EPS attributable to Equifax was $2.52, up 9% from $2.31 in 2010.

And during the year, we repurchased 4.2 million shares of stock for $142.3 million.

Net of shares issued for equity compensation plans, shares outstanding declined by 3 million over the course of the year, and our available share repurchase authorization at year-end was $112 million.

Now, let me turn it back to Rick.

Thanks, Lee.

As I look back in 2011, I think by any measure, it was a really solid year.

Our team executed at a very high level against the strategic growth initiatives that we set forth a few years ago.

That, combined with a modestly-improving economic environment in most parts of the world gives us great momentum as we leave 2011 and enter 2012, obviously ending with our fastest core organic growth rates in the fourth quarter we've had in years.

Now looking forward, the first quarter, assuming the current exchange rates and excluding Brazil, is expected to deliver revenue growth from continuing operations between 9% and 12%.

Every business unit is expected to deliver high-single to low double-digit revenue growth in the quarter.

Adjusted EPS from continuing operations is expected to be between $0.64 and $0.67 per share for the quarter, which will be up somewhere between 10% to 16% when compared to the first quarter of 2011.

Now, I'll look forward for the full year.

Our outlook for the full year is for solid growth from each business unit for 2012, when compared to 2011.

We're assuming no real economic improvement in the US.

In fact, our base case is around 2% GDP growth in the US, and a modest recession in Europe.

With that being said, I will now walk through some expectations for each of the five business units.

Starting with USCIS, where we expect for the year now, USCIS to deliver solid mid-to upper single-digit revenue growth, both will be higher in the first half of the year when compared to the second half of the year as we anniversary certain products and some pricing initiatives and customer penetration wins we had in mid-2011.

We'll also continue our aggressive investment in NPI, to significantly enhance the long-term value of our products and services to our customers in USCIS.

TALX workforce solutions is expected to deliver upper-single-digit growth for the year as they continue to drive NPI market segmentation and expand a record count for the work number database, somewhat like USCIS, maybe a slightly higher first-half growth for TALX, versus the second half for the same reasons.

Third, on the PSOL, we'll leverage the momentum from 2011 to deliver double-digit revenue growth again, in 2012.

We will continue to invest more in marketing to support our long-term growth outlook for that business.

Our commercial solutions business made great progress in 2011, developing stronger market position, growing revenue and expanding their operating margin.

For 2012 we expect solid digit double-digit revenue growth, once again.

International, excluding Brazil, is also expected to deliver low double-digit growth for the year, leveraging its number-one market positions in Canada and Latin America, along with further market penetration in the UK.

So solid, solid growth across all five business units again in 2012.

Overall, our operating margins for the year should expand approximately 50 basis points as we benefit from the leverage we get from accelerated growth.

For the year, we expect internal investment in CapEx to be once again in that range of $75 million to $95 million.

Now, we haven't done this in a while, but we will also provide a framework for you to think about as we think about the next three years, and what kind of growth we expect the business to have.

And obviously, that model I'm about to lay out will include 2012.

As I said before, we've got a great team, a team I'm very proud of, they're executing a high level that will continue.

We're going to continue to capitalize on our unique assets of data and as a result of that, I do see a clear path to sustainable, 7% to 10% top line growth over the coming years, adjusted EPS should grow 3 percentage points faster than the revenue, due to a combination of operating margin expansion, year-over-year and our financial leverage.

Combine that with our dividend, that represents a 12% to 15% for our shareholders, as we look forward for the next three or four years.

So a solid model, and good returns for our shareholders.

So with that, operator, we'd like to open the phone line to any questions our audience might have.

Thank you.

(Operator Instructions).

We'll go first to Carter Malloy with Stephens.

Congratulations on a great quarter, and some very clear momentum here in 2012.

First off, you talked about growth before Brazil, but can you talk about core Equifax organic growth if we skin out mortgage?

How that looked in the fourth quarter vs the third quarter and if we saw any pickup or deceleration there?

I thought I broke that out.

If I didn't --

Sorry.

If you take out inorganic and you take out mortgage, the core growth was 8%.

If you just look at total core organic growth, including mortgage, it's 9%.

Okay.

And that 8% ex-mortgage, compares to I think it was 7% in the third quarter?

Correct.

Okay.

Great.

Great.

And then can we talk a little bit more about mortgage, the mortgage environment, three-part question here.

So first of all, just overall mortgage environment and the impact on you in your 2012 outlook and guidance?

Second part of that is within mortgage, it sounds like work number is a lot more origination-related than refi, so I want to clarify that.

And then third, bigger picture as we're looking at an AG settlement that's likely imminent, and a flood of work on behalf for the banks for principal reductions and modifications, what type of work, if any will you guys gain there, and how does that benefit, if it does, Equifax?

I call that a run-on sentence, Carter.

A lot of questions.

Let me see if I can -- overall, when we think about mortgage for the Company for 2012, we have built a business plan that is assuming about a 20% decline in the mortgage market.

So obviously, if there's any increase or pickup beyond that 20% forecasted decline that's a benefit for us, and conversely if it declines at a faster rate, it's going to be negative.

If anything, that 20% is solid if not so.

That answered the first part of your question.

By the way, if you read some of the reports that came out recently, the refinancing is fairly strong in the month.

It was fairly strong in the month of January and is continuing in February.

So rates are obviously at historic lows.

That's helping.

And we benefit from that.

But specific to work numbers, you made a statement about the more origination-focused, rather than refinancing.

They benefit from both, and the refinancing they also did get a pick up as well.

So if refinancing picks up, that does benefit the work number.

And the last question you had was basically a regulatory change with California I think you're referring to New York coming in.

It's uncertain right now.

If anything, that's a potential upside for us, we have not factored any of that upside into our business plan.

It sounds like you're sort of agnostic towards refi versus origination, but both of those things are positive or negative?

Correct.

Thanks so much, and congratulations again.

Next up from SunTrust, we'll go to Andrew Jeffrey.

Question on USCIS top and bottom line this quarter, and looking forward.

Seems like pricing in light of the accelerated volume growth was pretty stable.

Just wondering about what the one-time contributions were to the extent there were any?

And then as a corollary, when I look down to the EBIT line, given the strength in revenue growth, might have expected a little more leverage in this segment, operating leverage.

Can you, Rick, just talk about whether this is a structurally-different business than it was pre-financial crisis, in terms of the sustainability of the operating leverage?

Yes.

One, I alluded to it a little bit in my comments, and Lee may have as well, the performance you saw in the fourth quarter at USCIS was extremely broad-based, which helps -- it's as broad-based as I've seen, probably dating back to 2005, where you had great growth in our large FIs, great growth in our regional banking customers, great growth in telco, auto was up, channel partners, up, and just everything we had was strong growth.

I mentioned somewhere in my comments the fact we continue to invest heavily in pricing, resources and discipline, and we've been doing that for years.

We stepped that up dramatically in the last 18 months, in USCIS.

Probably missing about bundling their products, segmentation of products, positioning the products, making sure we understand our customers get, the ROI they have against the pricing we should have.

And that's helped Rudy and his team, at least in the fourth quarter, negates some of what we typically see as price compression.

As far as sustainability, yes.

I think that the path we're on in USCIS of leveraging these unique data assets to expand the pie and gain share is in fact sustainable, and that was represented in my comments.

With virtually no more help from the broader market in 2012, I expect USCIS to have another really good year.

On leverage, there's always mix that plays in, Andrew.

If my memory is correct, jump in Lee, I think their margin expansion was 120 basis points fourth-quarter 2011 over fourth quarter 2010.

That's great leverage.

And you always have some mix.

Mortgage had a nice little uptick in the fourth quarter.

Mortgage tends to not be as high margin as other products like OSIS, so all in all, I'd say it's a very, very good performance, top to bottom.

Andrew, the thing I would add is that one of the ways we are driving growth is not simply waiting for the traditional bank customers to order credit reports for issuing credit cards.

We're expanding, we're doing more with analytics, we're expanding our position in telco, we're expanding our position in insurance, but to do that, we have to scale the organization.

We're adding some salespeople, we're adding marketing people.

So to drive the kind of growth that we're driving does require some added resources to expand our footprint, both from a product perspective, as well as a customer perspective.

Is there anything -- that all makes good sense.

Is there anything structurally, Lee, that you think would prevent this business from being a 40% plus EBIT business the way it was in the last cycle, or has the world just shifted a little bit and that's not an attainable long-term goal?

I'm just trying to frame up in the context of Rick's long-term outlook.

The segment profitability.

I think this business continues to have great profit characteristics.

We've also tended to say that people should think about steady margin improvement, not big pops, because we're also investing in the growth opportunities to drive higher growth.

So we have to get there over some period, yes, but it may be longer than if you simply think about incremental fall through on traditional business, we're not going to get there at the rate that would imply.

But we do think there's good runway.

Okay.

That's helpful.

And then, Rick, I'm very encouraged to hear you -- your willingness to comment on the long-term view.

Is it safe to assume that, as you look at the broad -- at least domestic financial institution landscape, that we're back to a more normalized environment?

Because you've been somewhat circumspect with regard to giving longer term guidance since I think for almost five years now.

Four or five years.

That's a great question and worth clarification.

No, I don't think we're back to normalized.

If normalized is the 2002, 2003, 2004, 2005, 2006 time frame, we're not there.

But it definitely is an improving, modestly improving environment in the US, versus the last three years, Andrew.

So my bullishness on the future is predicated upon that modest improvement in the US economy, modest recession short-term in Europe, but then it is really predicated upon the team's ability to execute.

I have said this to a number of our investors and analysts over the past six to nine months.

We've invested heavily on the ability to execute as a Company.

We've invested heavily in bringing in some great talent for the Company.

And as a result, that team has executed at the highest level I've seen in my 6.5 years here.

So it's really that, that gives me the confidence to be able to give you a multi-year outlook.

I would reemphasize, it's not just executing on the things we've always done and squeezing a little bit of incremental growth, it's expanding our footprint with new -- it's the kind of revenue growth addition we can get from new products and expanding in some market segments.

Okay.

Thank you.

Next up, we have Michael Meltz with JPMorgan.

Hi, good morning.

This is Nadia Lovell in for Michael Meltz.

I just have a couple questions.

Personal solution accelerated throughout the year.

What's behind that?

Have you changed marketing strategy at all?

Oh, yes.

There's been a top to bottom, new leadership -- we think it's been 18 months ago or so since we've hired Trey Loughran, he's brought a new team with them, a new focus on -- got some background noise -- heavy focus on -- operator, we've got some background noise, maybe you can figure out where that's coming from.

But heavy focus on churn, heavy focus on conversion, heavy focus on new product innovation.

We're more aggressive in the market place in advertising as well.

Driving our subs, increasing our ARPU so top to bottom kind of overhaul of that PSOL product.

Thank you.

And then I have another question.

In Brazil, are you getting to a point where you can start to increase your ownership stake beyond the current 15%?

We have the vehicle, as you know, we announced this -- what was that mid last year, there were a series of triggers that allowed us to do so.

We have not done so yet.

We are actively involved in the process of integrating the two companies, driving new product to market, gaining market share, so on the operational aspect, for the ownership for a second, operationally, we're doing everything we set out to do, and maybe slightly ahead of pace.

Okay.

My last question, how should we think about your free cash flow priorities in 2012 in terms of acquisition versus share buybacks?

Certainly.

Lee?

Yes.

I think they continue to be what we said before, it's hard to plan for acquisitions because we try to be extremely disciplined in the ones we pursue.

But acquisitions, when the right ones present themselves, that will always be a priority in comparison to share buybacks.

Share buyback, the rewards are probably more immediate.

But acquisitions, if they help us expand our footprint in logical ways, where we can bring leverage through our skills and capabilities, or those bring assets to us that leverage into our base, create more long-term value.

Thank you so much.

That's all.

Next, from Evercore Partners, we have David Togut.

Rick, you were pretty explicit in terms of your revenue growth assumptions for each of your five business units for 2012.

Can you give us a little more granularity on your expectations for margins for each of the five?

And perhaps in conjunction with that, give us a sense of where you have more investment versus less investment for the year ahead?

We don't break out -- at least at this juncture, the margin book.

I can tell you in general terms, PSOL is a very, very high level of margin.

I think the margin last year was 30%.

I don't think you'll see much expansion there.

You see that this is like commercial, at a very high level, modest upside in commercial, Lee, you jump in here as well.

I would expect in 2012 similar margins in TALX, expanding margins in USCIS, and some expanding margins in international.

Yes.

I think that's right and I would emphasize, at a total Company level, we are very committed to delivering moderate but steady improvement in margin.

But business by business, we'll have some businesses where we're investing in a given year.

We do not try to manage consistent, steady improvement margin for every business every year.

That becomes too constraining.

But at a total company, very committed to improving.

Lee, you touched on a unit volume versus price and online CIS.

I apologize, I didn't catch the numbers.

What were they again in the quarter?

Our unit volume and our revenue were up about the same.

Okay.

So price flat?

Yes.

Then just finally, Lee, the tax rate in the quarter was toward the low end of your guidance, I believe.

Can you give us some insight into tax rate for 2012, in terms of what's embedded in your outlook?

I think what we've said for the year, the tax rate was 37%, and give or take -- I would say 36% to 38%.

That can float around a little bit, states are taking various actions frankly, the government is taking various actions.

They tend to work against us, not help us.

Not surprisingly, but we are always looking for things that we can do.

So I would simply say 37% plus or minus for the year, and it will tend to fluctuate by quarter.

Very patriotic.

And very just finally, Rick and Lee, you significantly increased the dividend about a year, year and a half ago.

What are your thoughts for the dividend for the year ahead?

Good question, David.

We remain committed to that 25% to 35% of net income being redistributed back to our shareholders in the form of dividends.

We in fact have a Board meeting tomorrow, we'll discuss that tomorrow, but our anticipation would be we'll make and move up a little bit this year.

Good.

Thank you very much.

Next up, we have Julio Quinteros with Goldman Sachs.

Congratulations.

One quick question.

If you go back through the pieces of the model, and I guess I'm mostly focused on the USCIS, to a comment you made, Lee, about the discretionary spending environment, if you think about the business against volume sensitivity, discretionary spending, versus recurring spending, is there a way to think about how much of your business is potentially discretionary versus volume sensitive versus recurring?

Just trying to get a sense for the stability of the business obviously is pretty strong, so as we go forward from here, will be the potential exposure to any continued sort of sluggishness on the discretionary side?

Yes.

It's really what I would describe as discretionary or project-oriented spending.

Tends to be concentrated in our consumer financial marketing services line within USCIS and even that, some portion of that is subscription-based and some portion are the one-time marketing studies or more discretionary types of product projects.

I haven't looked at it closely lately, but if you take even half of those being discretionary and half is locked in subscriptions, probably more subscription than that, and CMFS is 20% of USCIS, 20% -- USCIS is predominantly transaction-based.

And as I said before, we have seen transaction activity performing very well.

The only thing I'd add there, Julio, if you think about the marketing piece of USCIS, which Lee just mentioned was 20%, a big chunk of that was actually -- was solid in the fourth quarter.

Our triggers were solid, portfolio views were solid, it was just a piece of the 20% that was, I would call discretionary, that was slightly down.

And as I think about that, even if that is a little volatile, our discretionary spend, the market demand is starting to strengthen, and our execution on growth initiatives is executing at a very high level as well.

So I think you think about that in context.

Definitely.

And maybe just to think about the FI environment over the last couple of days, whether it's consumer spending, consumer loan volume, even the transaction volume data that we have see out of the Visas and the MasterCards of the world suggest that credit as a product continues to be doing well, obviously for you guys that has some implications.

Can you just help us frame about the FI conversations coming out of the cArd Act now and post-Durbin world, what is the FI attitude and view about new credit, new account on file growth and continued to drive that expansion as we go into 2012 from there?

I'd describe it as improving.

We spent a lot of time out there with our banking clients, it's not euphoria, but it's improving, cautiously optimistically improving.

It feels that are, if I categorize the tone today, it feels better today than it's felt in a number of years.

Auto lending feels pretty good.

Credit card loans and issuance feel pretty good.

Refinancing's strong.

Obviously home origination and new mortgages, still sluggish.

Small business lending, still a little sluggish.

Mid-size and large corporate lending, improving.

So the overall tone would be one of modest improvement.

Okay.

Great.

Thanks, guys.

Next up with Barclays Capital, we'll go to Manav Patnaik.

Congrats on the quarter.

And thanks for all the details on the 2012 outlook.

I was wondering if you could add to that in terms of what your free cash flow expectations are.

I know you gave the CapEx range of $75 million to $95 million.

I was just wondering if you could provide a little more color on what your expectations are for free cash flow?

Lee, take that one.

I would expect free cash flow to be relatively consistent.

Obviously we get a little bit of bump because our earnings are higher.

The D&A will be a little bit higher.

The cash from operations should be up some.

Look at CapEx in the middle of the range, would be up a little bit.

Rick indicated dividends are likely to be increasing, more or less in line with earnings.

that will lead to free cash flow, i.e.

cash from ops less CapEx and dividends in that $250 million, give or take range.

And that's what we've got available for acquisitions or share repurchases.

Okay.

And the other question I had was relative to -- I guess another way to ask what your subscription base is, but relative to the balance sheet deferred revenue item, how should we -- there is a lot of other subduction companies obviously we tend to focus on that item, but how should we tie that item on your balance sheet to your revenue trends?

It clearly seems to be going in different directions.

The decline in deferred revenue really resulted from the deconsolidation of our Brazilian business, which had some deferred revenue.

I think our subscription business is not a large part of what we do.

But the deferred revenue on the balance sheet will generally tend to perform with our business.

This year, really a function of the deconsolidation of Brazil.

Okay.

Fair enough.

And then I guess just some housekeeping for the quarter, in terms of -- what was the acquisition contribution?

I think it was 1.6% last quarter.

What was that this quarter?

This quarter -- the first quarter?

Q4?

No, fourth quarter, sorry.

Just under 2%.

And the expectations in this 9% to 12% guidance for the first quarter?

Is your question how much of that 9% to 12% is--?

I guess -- correct.

Yes.

I don't have that broken out.

Lee, do you?

I don't recall.

It's going to -- probably a little bit less than that just because I think that something was falling off the 12 month anniversary --

Okay.

Roughly will be -- somewhere close to 1%.

1.5%, 1%.

Fair enough.

All right.

Thank you, guys.

We'll now go to Dan Perlin, with RBC Capital Markets.

So back in early December, Latin America obviously had a good quarter, but you had mentioned that you were seeing some modest slowdown there.

And with the 14% local currency growth this quarter, I'm just wondering, did that reverse from what we saw, or were October and November just really strong months, December kind of played out as it was?

Or are we starting to see a reacceleration back there?

I don't actually recall the discussions saying we're slowing.

The growth in Latin America was broad-based.

It was across all countries like we've seen now for quite some time.

Not just all countries, but mostly all products across all countries.

So as I look at Latin America and I look at 2012 first quarter and total year, I think the growth we're seeing there is definitely sustainable.

And I would add, second and third quarters excluding Brazil, Latin America was growing 16% for us, it's slowed slightly.

The GDP growth generally in Latin America is slowing slightly.

But with the broad range of our products, our revenue is holding quite well.

Okay.

Super.

And then with Brazil's integration going well, and I think you mentioned that your focus now is on new products, can you comment on the areas of new product development where you think you have a competitive advantage to that market?

Yes.

I think it's obviously leveraging the size and scale that both these companies bring together, and that's taking the products that have worked for us in other parts of Latin America, other parts of the world, down to Brazil.

And that could be things like analytical solutions, decisioning, so on and so forth, fraud products that we have that have worked very well in other parts of the world.

That was really the value that the partners saw in the us, is a good leadership team that understands how to innovate and bring new product from one part of the world to Brazil, so that's exactly what we're doing.

Okay.

And then on the long-term plan, the three-year horizon, the 7% to 10%.

I'm wondering, does that assume that you're bringing in some of these minority interests relationships?

Or is that -- is the message there that, that is kind of what we are going to see out of the existing structure of the business?

I'm not sure what you're referring to is a minority interest.

You may be thinking of Russia or something.

That's the existing companies we see today.

Okay.

Super.

Thanks, guys.

Next up from Credit Suisse, we have George Mihalos.

Just wanted to dig in a little bit more on the OCIS revenue growth, obviously you guys have had the two large competitive takeaways ramping.

Can you give us a sense as to when those contracts will be fully ramped?

And maybe what their contribution was in this quarter?

Yes.

Both of them were -- Lee, I'm think from memory here, both of the ones we refer to I think was the last earnings call, should anniversary.

It was late third quarter, early fourth quarter last year.

I think one that may have been October, one was maybe a month or so prior to that.

And as far as the contribution of those two, to the overall growth, I've not done the calculations.

My instinct is it's not significant, because the growth we're seeing in USCIS is so broad-based.

Again, across multiple products and almost every single vertical that we play in.

So it truly is broad-based and not driven by one or two takeaways.

Got you.

Okay.

That's good to hear.

And just looking at your outlook in 2012, for the TALX business, I think you said you're looking at upper single digit revenue growth.

Can you talk about your confidence in achieving that number, given the sensitivity there to mortgage?

And I think you had said that you're kind of forecasting the mortgage business being down 20%?

Yes.

It's high.

The team is executing very nicely.

They had massive headwinds, as we said last year, in starting late second quarter through the fourth quarter, those headwinds have abated.

We have built a plan that's assuming a 20%-ish decline in the mortgage market.

Dan is diversifying the work number well beyond the mortgage partners we talked about, we're increasing the work number of records which obviously gives them great leverage on the top line and bottom line.

We talked of partnerships, we got to go down market so highly confident.

Got you.

And last question for me, just looking at Europe, you guys are looking for a modest recession there.

But on a constant currency basis, you continue to push really strong growth in the European market.

Is that really just new products hitting the market, or is there anything more to the that's really driving the outsized growth?

It's largely that.

NPI is allowing us to go into new markets that we didn't serve before.

It's allowing us to take share with current customers where we are serving, we're leveraging the IXI-like database over there, the wealth database to create new products, this thing called Decision 360.

So it's really great execution by the leadership team in the UK.

Thanks, guys.

Good job.

Next up is Bill Warmington, with Raymond James.

Let me add my congratulations to the strong momentum.

A question for you on the longer-term revenue guidance framework that you gave.

In the past, you've given a little bit more detail in terms of the split there, as it breaks down between organic and acquired, and then also what's coming from some core growth markets, new products, some strategic initiatives, and then finally acquisitions as part of that?

Great question.

You're referring back to the 2006 timeframe?

Correct.

We don't expect, in that model I just gave you, any improvement from the core market environment, which hopefully will try to be conservative.

We assume back from 2006 or 2007, 2% or 3%, we're assuming the same here.

We assumed 1 or 2 points of M&A.

We're assuming the same thing here.

What's really happening is because of our ability to execute the growth initiatives now at a much higher level than we were when we first launched things like 4G and NPI and so on and so forth.

We're stepping that up, and we're going to get more from our core organic growth initiatives, and that will now be 4% to 5%.

Okay.

And Rick, you also mentioned adding some resources in sales and marketing.

I just wanted to ask in terms of headcount of sales at the end of 2011, how that compares to the end of 2010, and then where do you think it'll be when you exit 2012?

I have no clue.

That's an honest answer.

Each business is at a different point in their growth -- what you should know is this.

Over the last five or six years, we've invested heavily in the growth levers for the Company, so marketing has been a significant investment and new product innovation, product management, pricing segmentation, branding, sales has invested heavily, coming out of this downturn.

So I have no idea what those numbers are.

By business or in aggregate.

Okay.

Thank you very much.

Dan Leben with Robert W.

Baird is next.

Just wanted to first ask about the online CIS business.

Historically, the last eight or nine years, the seasonality in that segment is down in about $10 million versus the September quarter.

Was this quarter primarily just new customer wins, or has something changed in the underlying seasonal dynamics of that business?

Let me jump in there, I don't think there's any change as far as cyclicality.

I go back to, it was such a broad-based performance, that's what's different.

Every vertical through our NPI initiatives, we're able to grow year-on-year.

Okay.

And if you look at those volumes on a same customer basis, would the same theme be in place?

Yes.

It's a combination of growing with our current customers and expanding the customers that we serve.

And thirdly, even with the customers we serve, it's not just taking share but it's solving problems with the data assets we couldn't solve before, so it's spending more money with us.

Okay.

Great.

And then with the new regulator now officially up and running, what have you heard from them?

I assume you guys are not the focus for them in the near term?

We've intentionally reached out to them, we went up handset down with the team in DC, or Kent I think it was back in December.

Had a very good conversation with them.

They have been here to talk to our team.

So we're taking a proactive approach with them, and at this juncture, feel we are well prepared.

Great.

Thanks, Rick.

Shlomo Rosenbaum with Stifel Nicolaus is next.

Thanks for squeezing me in at the end here.

I just want to ask you a little bit about the growth, everyone is asking about USCIS but I'm asking more in terms of comparing to some of your peers that are out there, the growth really exceeds what we're seeing from some of the other competitors.

I'm wondering are you expanding the market, or are you getting a sense that you have -- you are taking market share and I'm asking just beyond the few competitive takeaways that you guys have highlighted in the last quarter?

That's a good question.

As a clarification, we are -- because of our unique data assets, able to solve problems for customers that they were serving before, so hence they're spending more money.

That's a growing of the pie.

Number two is, we're able to take our products to different verticals we couldn't service as robustly in the past, i.e., insurance.

And you take share there, or expand the pie.

And third, we are clearly taking share from either existing customers, we have X share, X is going up, or taking share where we had no share before from new customers.

It's a combination.

You have a definite sense that you are taking some share from the other existing participants?

Clearly.

I think I've given you examples over the last year or so.

So absolutely.

Okay.

And then in the consumer financial marketing segment, IXI seemed to have been on a tear for a year and a half.

And then the last two quarters, it's slowed down.

Is there anything different that's been going on in IXI?

Is it really that they had a really high level of project-based work over there?

Can you give us a little more clarity?

I think, two things, and Lee, jump in.

One was towards the end of last year, especially the fourth quarter of 2010, I should say, not 2011, they had an unbelievable run-up in some project-based work that did not repeat.

So comps were tough, and then they had a couple of large projects as Lee mentioned in his commentary that were viewed labeled discretionary spend that did not materialize.

The underlying growth of the company, the value proposition of the product to the customers, is still strong.

There really is project -- tough comps and project works for some reason is just slowing down right now?

Correct.

Okay.

And then lastly on the commercial solutions, again, you had a very, very strong string of quarters in terms of year-over-year growth.

And then this quarter was fine, but not like the double-digit growth.

Was there some deferrals that ended up happening that are slipping to 1Q that's going to make that a particularly strong quarter?

If you look at the core US risk business, which is the core of that BU, I forget the number, Lee, it was strong double-digit growth in the fourth quarter.

And much like IXI, they have a piece of the business, we call it MBM, which is the marketing -- which is the project-based business that is somewhat discretionary, and it was that piece of business in the fourth quarter that didn't pop like we hoped it would pop.

But if you go back to my commentary, I think my concluding comments, I talked about the forecast of 2012, first quarter and total year, and I told you I expect good, strong double-digit growth from that.

Okay.

And so we're not seeing -- that's not indicative of any slowdown in the core markets that they're serving right now?

No, sir.

Okay.

All right.

Very good.

Thank you.

I'd like to thank everybody for their participation.

We'll be around throughout the day if there's any additional questions.

And with that, operator, we'll conclude the call.

Thank you.

Once again, everyone, that will conclude today's call.

Thank you for joining us.

You may now disconnect.

Please enjoy the rest of your day.