易速傳真 (EFX) 2014 Q4 法說會逐字稿

Good day, and welcome to the fourth quarter 2014 earnings call.

Today's conference is being recorded.

At this time, I would like to turn the conference over to Mr Jeff Dodge.

Please go ahead, sir.

Thanks, and good morning, everyone.

Welcome to today's conference call.

I'm Jeff Dodge, Investor Relations, and with me today are Rick Smith, Chairman and Chief Executive Officer, and John Gamble, Chief Financial Officer.

Today's call is being recorded.

An archives 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'll be making certain forward-looking statements to help you understand Equifax and its business environment.

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

Certain risk factors inherent in our business are set forth in filings with the SEC, including our 2013 Form 10-K and subsequent filings.

We will be referring to certain non-GAAP financial measures, including adjusted EPS attributable to Equifax, adjusted operating revenues, and adjusted operating margins that will be adjusted for certain items which affect comparability of the underlying operational performance.

Adjusted operating revenue includes the collection of certain reserve 2012 billings from 2013 revenues.

Adjusted EPS attributable to Equifax excludes acquisition-related amortization expense and the associated tax effects, as well as certain other items.

The other items excluded for 2013 are the collection of certain reserve 2012 billings, which occurred in the fourth quarter of 2013; the resource realignment charge; and the impairment of our investment in Boa Vista.

In 2014, we also exclude the associated tax effects, in addition to the impact of the settlement of a legal dispute over certain software license agreements.

The adjusted operating margin also excludes certain items.

For 2013, adjusted operating margin excludes the collection of certain reserve 2012 billings and a resource realignment charge.

For 2014, the adjusted operating margin excludes the legal settlement regarding the dispute over software license agreements.

All these measures are detailed in our non-GAAP reconciliation tables included with our earnings release and also posted on our website.

Also, please refer to our various investor presentations, which are posted in the investor relations section of our website at www.investor.

Equifax.com for further details.

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

Thanks, Joe, for that very detailed introduction.

That was great.

Thanks, everyone, for joining us this morning.

As we always do, I'll go through high-level review of the fourth quarter, and John will then go through the financial.

I'll come back around with [the] 2015.

Then, we'll go to Q&A.

We finished 2014 in very strong fashion, and we carry some good momentum as we move into 2015.

Looking back at last year, both reported growth and constant currency growth in the fourth quarter finished at their highest level of the year, which is always a good thing.

For the quarter -- fourth-quarter 2014 -- total revenue was $625 million, up 8% percent on a reported basis and up 10% on a local currency basis from the fourth quarter 2013.

In the quarter, FX created a $13 million year-over-year headwind, which was a significant increase in the third quarter -- a headwind of $6 million.

I think you all are intimately aware of what's going on with the euro, the ruble, the pound, and others.

Our core non-mortgage market growth accelerated nicely to 8% in the quarter and the year, at 7%, solidly in the range of our long-term growth model.

Consistent with the view we've articulated throughout the year, the mortgage market was no longer a headwind in the fourth quarter.

As a result, in 2015 and beyond, we'll focus our attention on the constant currency organic growth rate.

What I mean by that is, we've broken out the past few years, because of volatility -- we've broken out mortgage impacts.

We'll no longer do that because, as I'll talk about later on, we expect the mortgage market to be relatively benign, year-on-year, when we look at 2015.

The adjusted operating margin for the fourth quarter was 26.5%, in-line with the guidance that we gave you for the quarter.

Our adjusted EPS was $1.02, up 12% from $0.91 a year ago.

And it was at the upper end of the range that we guided to.

Also, given our strong performance for the quarter and the year, we've announced a 16% increase in the dividend, moving from $0.25 a share per quarter to $0.29 a share.

As I always do, we transition into some of the business unit highlights that I think are noteworthy.

First, start with USIS.

They accelerated their revenue and expanded operating margins throughout 2015.

And they're poised to deliver an even stronger top-line growth in margin expansion in 2015 than they delivered in 2014.

A couple of highlights -- Decision 360, which we've talked to you a lot about, continues to deliver unique value for our customers and drive revenue growth for us.

A couple of interesting data points -- in 2014, if you take our top 100 customers on average, they use, now, up from one product to three different, unique data assets that we have, which is really adding value to them and to us.

It's even a better story when you look at our KCP accounts.

We've talked about that being the key client program accounts -- about eight of our largest customers in the United States, on average, they're now consuming four and a half products -- unique data assets that we have.

Again, anytime we can bundle unique data assets together to add value to the client, they win and we win.

Rudy Ploder and his team have done a great job of not just monetizing these assets, but making it easy for customers to consume.

Sticking with USIS, we continue to make great progress in the auto sector, where we provide not only credit information to our auto customers, but also adding non-employment income verification.

In 2014, revenue from our auto vertical grew by 17%, almost 3 times the rate of the market growth.

We expect that trend to continue in 2015, as well.

IXI had a very successful year, returning to strong, double-digit growth, driven by new product innovation and deeper penetration with some of our largest, most important customers.

[One of] our more significant and unique [fraud issues], i.e.

management and authentication, continue to position us well with large government contract opportunities, particularly with the federal agencies such as Social Security Administration and the IRS.

In 2014, we processed over 516 million identity verifications within the government and across all verticals in the US alone.

Through the concerted effort of USIS, enterprise selling has become an integral part of our go-to-market initiative.

We've developed a detailed strategy for each vertical, including pricing, product innovation, distribution, incentive compensation, enabling us to further accelerate market growth and penetration.

On international, we had an outstanding execution of the NPI initiatives.

They delivered a vitality index of 14%, fueling solid growth in virtually every market where we operate.

We anticipate revenue growth to be at the upper end of the long-term range for 2015, which is 7% to 10%, and we expect margins to expand nicely throughout the course of 2015.

Some highlights there -- single-digit growth in our core information solution product offerings, coupled with double-digit growth in decision solutions and personal solutions, resulted in another year of strong organic growth and a much stronger market position as we enter 2015.

UK exited the year with double-digit growth and very high single-digit growth rate for the year, significantly outpacing the economic environment growth.

Particularly impressive was the double-digit growth in decision analytics and personal solutions, as the trend has continued, now, for three or four years in the UK.

Canada exited the year with very healthy double-digit constant currency growth rate, primarily driven by the core information solution product offerings.

Those are two great examples of the where the team is executing at a level enabling it to grow at significant levels above and beyond what the economy is contributing.

Latin America delivered broad-based double-digit constant currency growth across virtually all major product lines in all countries.

In Russia, we had over 20 millions records through the credit database and have significantly expanded the data assets in our fraud prevention system.

We should talk a little bit about Russia.

We've got some questions.

Obviously, the sanctions in the ruble will impact our view of Russia, going forward, at least, for 2015.

Finally, all of the centers of excellences that support our business units and, in this case, international have dedicated significant resources to ensure successful integration of TDX.

And I'd view, right now, the integration of TDX as largely behind us.

TDX and the COEs will now focus their immediate attention on the very large opportunity with the UK government that we announced in December.

For that project, which is going well, there will be required IT developments, in order to meet the security requirements of the UK government.

We're, in essence, standing up the environment to handle what the government needs.

It's going as planned, as scheduled.

We expect that environment to be stood up sometime in the late-second quarter to mid-third quarter -- start getting the data into the system, at that time.

It takes us some time to format the data, cleanse the data, and then work with partners -- the collection agencies.

We expect to monetize -- start monetizing that win sometime in late fourth-quarter and ramp up, really nicely, in 2016.

So that's going as planned.

Onto workforce solutions.

They had a blockbuster year in 2014.

Despite significant headwinds from the mortgage market, workforce solutions delivered strong, double-digit non-mortgage market organic growth, once again, and 270 basis points of margin expansion for the year.

We're expecting yet another really solid growth year in 2015 for EWS, as well as meaningful margin expansion, once again.

That's the great thing about those models.

Workforce solutions exited the year and the fourth quarter with core non-mortgage market organic growth rate of over 17%.

Remarkable.

For the year, core non-mortgage market growth was 13%, driven by strong double-digit growth in auto, government, and pre-employment.

We now have over 4,300 companies across the United States contributing their employment and income information to The Work Number database.

Our data and analytics initiative, which we talked to you about, now, for a couple of years, are key drivers of revenue growth in both 2014 and 2015.

In fact, we're looking at 35% to 40% growth in our analytics product line across EWS in 2015.

In 2014 we signed 227 contracts with companies who need to ensure their compliance obligations under the Affordable Care Act.

In addition to the incremental revenues, customers are also contributing their employment and income information to The Work Number database.

So it is two bytes of the apple, if you will -- making money on the analytics for ACA as well as building the database at a much faster rate.

We're also developing a number of other innovative analytical solutions to enlighten employers about the demographics and the profile of their workforce, truly taking EWS and bringing it to the level of any of our business we have around the world, if not even higher, in the area of analytics.

We've also broadened our relationship with CMS, leveraging our historical records to provide employment and income verification on individuals and alleviate their need to use alternative, more costly sources of information.

We're expecting our CMS relationship to grow over 50% in 2015, when compared to 2014.

What I meant by that comment, there, is we started off with CMS just using very recent records off The Work Number.

We're now going back through older records.

We still add great value and provide solutions to CMS, so that's providing an increased revenue source for us.

Finally, our compliance center initiatives, such as I-9, are generating strong interest in employers who require great assurance on their compliance with numerous regulations and laws.

And that's been a great growth vehicle for Dann and EWS.

On the PSol, they have moved aggressively on their four-prong strategy that I outlined, briefly, in the third quarter call, improving on their execution of delivering value-added products that consumers need and want, expanding our presence in the indirect market through the TrustedID acquisition, enhancing our international opportunities, leveraging our domestic delivery platforms and product strategies, and evaluating opportunities in the lean generation space to compete more directly with the freemium companies that exist.

We anticipate 2015 growth in margin will be in the range of the long-term model that we communicated to you before.

There are a variety of initiatives in value-based acquisitions and retention.

We improved customer lifetime value of our core product offerings by almost 45%.

We also have a number of other initiatives underway -- addressing our media strategy, increasing ARPU, and lowering our churn -- all of which enable us to deliver stronger growth and margin expansion.

In the indirect market our TrustedID team has signed contracts or is in negotiation with large financial institutions and non-financial institutions opportunities, which, in aggregate, could represent up to $25 million of annualized revenue potential.

H&R Block is an excellent example of how we're developing highly-customized and unique product offerings which support and enhance our indirect partners' customer relationships.

It also underscores how personal solutions is developing new products and expanding its distribution channels with solutions that help consumers address an ever-growing threat of identity theft.

Millions of taxpayers are victims of tax identity theft, where criminals use a consumer's personal information to file a fraudulent tax return.

Leveraging our data and analytics expertise, combined with H&R Block tax-related capabilities and expertise, H&R Block's Tax Identity Shield provides consumers with the ability to better understand their vulnerabilities to tax identity theft and, most importantly, take appropriate steps to help reduce that vulnerability.

This is the first and only tax identity theft protection and restoration assistant product in the marketplace today, and we're proud to be working with a great partner like H&R Block.

For the past few years, North American personal solutions team has worked very closely with their counterparts in the UK to accelerate the growth in the UK.

Effective in January of this year, we decided to realign our personal solutions segments to include, now, the US, Canada, and the UK, and eventually expect to make this a global business, including Latin America.

The whole goal, here, is to leverage the infrastructure, the expertise, and the investments we're making in our largest PSol business, which is the US, to accelerate growth around the world.

And it's paying dividends.

Finally, personal solutions has been very innovative with a vitality index of over 17% for 2014, the highest of any business unit in the Company.

That's one of the reasons why we believe there will be a number of opportunities in the lead gen space for us to deliver incremental revenue growth and to establish strong competitive position in the marketplace.

Our unique mix of consumer data assets and strong partnerships with many of our customers should enable us to build superior solutions in this space.

Before I go over to John, let me transition back, quickly, to some things going on at the corporate level.

At the corporate level, in addition to improving our overall operating efficiency with our LEAN organization -- which, you're aware of, has been around about eight, nine years now -- at the request of some of our key client customers -- our largest customers; those large A customers -- we have now rolled out LEAN, at their request, into their operations.

This effort has significantly strengthened our relationship with these customers and providing valuable insights on how to further reduce their operating expenses and approve effectiveness through the application of our various product offerings.

A really unique way to add value to our customers, at their request.

New product innovation at the corporate level continues to be one of our strongest engines for growth.

We launched, last year, what we call NPI 2.0.

And what that's done for us is enhanced our voice of customer process to better understand our customers' needs and challenges.

We've built a better market testing environment, enabling us to bring products to market faster, do a prototype of the launch full-speed, reestablish metrics for local NPI, and made more effective use of our different IT platforms.

So it's really refreshed NPI, and the results were solid last year.

Here's an example.

We're building products, as I said, faster, accelerating revenue at faster rates.

And a great example is what we're doing in our fraud and ID services revenue, which, globally, was up over 17% last year.

It enables fraud and ID to prototype a product faster, get customer feedback faster, and launch that product faster than we ever could in the past.

So you should see time to revenue for NPI be reduced, as a result of what we are doing in 2.0.

In short, 2014 was an outstanding year.

In addition to delivering record revenue and earnings growth, the team executed well on our four corporate imperatives.

And they are, delivering consistent, strong, profitable growth in shareholder returns.

Number two, developing unparalleled analytical insights, leveraging our unique data assets.

Three, continue to innovate for market leadership in key domains and verticals that are important to us.

And fourth, further strengthen our reputation as a trusted steward and advocate for our customers and consumers around the world.

So with that, John, the [financials, please].

Thanks, Rick, and good morning, everyone.

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

The FX headwind accelerated in the fourth quarter beyond what we originally expected for the quarter, compared to the fourth quarter of 2013.

Revenues were negatively impacted by approximately $13 million, and adjusted EPS was negatively impacted by about $0.03 per share.

Now, let me turn to the business unit financial performance for 4Q 2014.

US information solutions revenue was $284 million, up 3% when compared to the fourth quarter of 2013.

Online information solutions revenue was $198 million, up about 7% when compared to the year-ago period.

Mortgage solutions revenue was $25 million, also up 7% compared to Q4 2013.

This compares favorably to the Mortgage Bankers Application Index, which was down 13% in the fourth quarter.

Financial marketing services revenue was $61 million, down 10% when compared to the year-ago quarter.

IXI revenues were up double-digits from 2013.

The decline in CMS was primarily driven by $7.2 million of prior-year revenues, which are detailed in our non-GAAP reconciliation tables and which Jeff referred to in his introduction.

Excluding these prior-year revenues from 2013, financial marketing services would be up about 0.7%, and CMS would be down about 1%.

The operating margin for US information solutions was 40.8%, up from the adjusted operating margin of 39% in the fourth quarter of 2013.

International's revenue was $159 million, up 15% on a reported basis and up 25% on a local currency basis.

Acquisitions contributed approximately 15 points of the local currency growth.

Constant currency organic revenue growth was about 10%.

By region, Europe's revenue was $72 million, up 44% in US dollars and up 47% in local currency, driven by the acquisition of TDX.

Organic revenue growth in Europe was slightly above 10%.

Latin America's revenue was $49 million, down 3% in US dollars but up 13% in local currency, which included the acquisitions of Inffinix and the credit bureau in Paraguay.

Organic growth was 6%, driven by double-digit organic growth in decision solutions and analytical services.

Canada revenue was $39 million, with organic growth of 3% in US dollars and 12% in local currency.

For the fourth quarter, international's operating margin was 22.6%, down from 29.1% in the fourth quarter of 2014.

Workforce solutions revenue was $129 million for the quarter, up 15% when compared to the fourth quarter of 2013.

All growth in workforce solutions was organic.

Verification services, with revenue of $81 million, was up 24% when compared to the same quarter in 2013.

Employer services revenue was $48 million, up 2% compared to last year.

The workforce solutions operating margin was 32.5%, compared to 28.9% in Q4 of 2013.

North America personal solutions revenue was $59 million, up 2%.

Growth was driven primarily by Canadian subscription growth and indirect revenue through TrustedID.

For the fourth quarter, operating margin was 33.7%, compared to 30.7% in Q4 2013, largely driven by reduced marketing expense in the quarter.

I should note that the figures I just presented reflect the organizational structure as it existed on December 31, 2014.

As Rick noted, as of January, we have realigned our business units, consolidating our UK personal solutions, along with North American personal solutions, into the new personal solutions segment.

In the attachments to our earnings release, we're providing eight quarters of restated history for this segment, as we will be reporting them in 2015.

We also present our multi-year business model and the new business unit configuration.

For the full year 2014, consolidated revenue of $2.44 billion was up 6% on a reported and adjusted basis and up 7% a constant currency basis.

The full-year operating margin was 26.2%, while the adjusted operating margin was 26.5%, down slightly from 26.7% in 2013.

Diluted EPS attributable to Equifax was $2.97, compared to $2.69 for 2013.

Adjusted EPS from continuing operations was $3.89, up 8% when compared to the adjusted EPS of $3.60 in 2013.

Operating cash flow was, again, very strong at $203 million in 4Q 2014 and $616 million for the year.

We continued our aggressive stock buyback activity, repurchasing 1.4 million shares for $115 million in 4Q 2014 and 3.9 million shares for $302 million in calendar year 2014.

Our strong cash flow in 2014 allowed us to complete $340 million of acquisitions, in addition to over $300 million in share repurchases, and still maintain very conservative leverage ratio of 1.8 times EBITDA.

We believe we have significant debt capacity available to us within our current credit readings and are comfortable operating leverage ratios in the 2.5 times EBITDA area.

With our strong cash flow and substantial available leverage, we can implement the 16% dividend increase we announced yesterday and continue a substantial share repurchase program while completing acquisitions consistent with the high end of our targeted 1% to 2% of annual revenue range.

Now, let me turn it back to Rick.

Thanks, John.

To quickly summarize before we go to questions -- as we look at the 2015, we expect the US mortgage market will move from a headwind to a slightly positive, year-on-year.

We can discuss that in detail in the Q&A.

We expect, however, FX will continue to represent a headwind for both revenue and EPS throughout the year.

The guidance I will provide is organic growth only, at this time.

However, as the year unfolds, I would anticipate adding to our overall growth rate through some M&A.

With that, and based upon the current level of domestic and international business activity and current FX rates, we expect to 2015 revenues to be between $2.550 billion to $2.6 billion.

This reflects constant currency organic revenue growth of 7% to 10% in 2015, which is up from a 4% growth rate in 2014.

The strong revenue growth is partially offset by what we anticipate to be 2 to 3 points of negative impact from FX.

Again, this reflects organic growth, at this time.

At current FX rates, we expect adjusted EPS to be between $4.20 and $4.30 per share, excluding the $0.12 per share of negative impact from FX at the current rate.

This reflects an 11% to 14% growth in 2015, which is beyond the upper end of our range.

Long-term model -- we have growth, which is 10% to 13%.

This guide is consistent -- revenue growth -- consistent with our long-term business model for organic growth.

We also expect our 2015 operating margin to be up over 27%, which is up nicely from the 26.5% in 2014.

Also, our priorities for capital allocation have not changed.

We remain committed to our dividend policy of 25% to 35% of adjusted net income.

[We're investing] in our business with CapEx in the range of $75 million to $100 million and continuing our acquisition focus.

Given our strong cash flow and our conservative debt leverage, [assets], and major acquisitions, we intend to continue our current significant level of stock buyback activity.

And finally, we anticipate the tax rate for the year will between 35% and 36%.

For the first quarter, we expect revenue to be between $632 million and $642 million, reflecting constant currency organic growth rate of 11% to 13%.

And this will be partially offset by 2 to 3 points of FX headwind.

Adjusted EPS is expected to be between $1 and $1.03, which is up 12% to 16%, excluding $0.02 per share of negative impact from FX.

This reflects 15% to 18% organic growth.

And also, for the first quarter, we expect operating margin to finish over 27%, which is up over 100 basis points from 2014.

With that, operator, if you could please open it up for any questions our audience might have.

(Operator Instructions)

David Togut, Evercore ISI.

Nice to see the 16% dividend increase.

Thank you, David.

Rick, could you comment on how many work numbers are now in the database?

What are your goals for work numbers in the database, let's say, over the next your two?

And what's the significance of the current number of work records, in terms of driving business growth?

Yes.

It's --Dann has done a hell of a job, there -- and his team -- David, not only taking the traditional paths to adding work number records, but being very innovative with things like the ACA platform with different partners out there.

And we're seeing acceleration at the rate of which we're adding records.

The total database ended the year, well over 250 million.

The active database, well over 60 million.

We have, as I mentioned in my opening comments, over 4,300 companies, now, are contributing.

That's growing at a rapid clip every year.

I see no reason we can't get the active records up over 100 million records in the database -- in total, over 300 million.

And as I've always said before, both add value.

The historical records, as I mentioned on the CMS talk a few minutes ago, is a great source of revenue -- and elsewhere.

And you, obviously, know the value of the active records.

And the significance of getting that database continuing to drive, obviously, is incremental revenue.

Every time you add a record, you get a hit.

You get X number of dollars.

But as you continue to go from 30 million active to 40 million to 50 million to 60 million to 70 million, the viability that database has in high transaction volume verticals is greatly enhanced.

So we're making great progress in places like credit card, automotive, insurance, as some examples.

Got it.

Just shifting gears -- John, could you break down online CIS unit growth and unit pricing trends in the fourth quarter on a year-over-year basis?

Sure.

So the core credit decisioning volume was up 14%.

And revenue transaction was down about 5%.

And the down about 5% was really volume mix.

And what your thoughts for 2015, in terms of volume growth and revenue per transaction in online CIS?

I don't expect to see a significant mix change in 2015 versus 2014, David.

What you're seeing, on volume, is great growth in places like KCP.

Again, I mentioned before, those are our eight most strategic, larger, more complex customers that we deal with -- bank and non-bank.

That was great growth last year.

I expect that to continue in 2015.

Automotive, I think I mentioned, up 17% -- three times the market growth.

That will continue.

There's another dynamic, David, going on, which may be of interest to everyone, here.

That is a shift, which is influencing the online activity.

A shift from we call prospect data feeds, which used to reside -- or does reside -- in our business called CMS.

What customers used to do is take these mass mailings to try to target people.

What we're seeing our customers want to do now, more, is up-sell, cross-sell current customers at the point of sale.

So, what you're seeing is a decline in the CMS product data feeds and an increase in pre-screened, which is online activity.

That occurred last year.

I expect that trend to continue to occur in 2015.

Understood.

Thank you very much.

Sure.

Thank you.

Manav Patnaik, Barclays.

This is actually Greg, calling on for Manav.

I just wanted to ask about the seasonality of the revenue growth.

You're showing the 11% to 14%, or 10% to 14%, revenue growth in the first-quarter.

And 7% to 10% for the year.

Is that differential coming from mortgage, or how should we think of that throughout the year?

Greg, as you might know, the first-quarter tends to be the slowest quarter for us.

And it tends to ramp throughout the year, with a little stronger in the fourth quarter versus the other three.

What you're seeing in the first-quarter is a couple factors.

You mentioned one, yes.

You [follow the 10-year treasuries,] you follow the interest rates.

And the mortgage applications are up in the first quarter.

Our expectation, Greg, as I said in my opening comments, is we expect overall mortgage for the year to be a modest tailwind versus last year.

You see a little strength in the first quarter and then dissipating as you go to second, third, and fourth quarters.

So mortgage is a little bit of help in the first quarter.

But beyond that, a number of wins that we had last year across the board -- that can be ACA and EWS.

That could be automotive in USIS.

A large direct-to-consumer win we talked about back in the third quarter is monetizing itself in the first quarter.

So think about it as being overall great execution by the BU leaders, which is driving first-quarter growth rate at a higher level than we would normally see, combined with some help from the mortgage market.

Okay.

Thank you.

And then, on personal solutions, you've got your large competitor shifting their strategy in the direct market with the new FICO product.

I'm just wondering how you guys are thinking about the direct market and how you're positioning yourself, there.

I believe in the team.

I believe in Trey, and I think they've got a good strategy.

It's a four-pronged strategy, which we laid out in the third quarter, which is number one.

We managed the core -- free is here to stay, no matter what.

It's here to stay.

So number one, he's got to manage this core business to the best of his ability, which is managing ARPU, managing churn, [what they're doing, they] get great metrics.

Then, we've invested heavily in a new platform -- we're calling it Renaissance -- within PSol, which enables him to launch products at a faster rate -- better an user interface and experience for the customer.

Number two, he's got to leverage the heck out of his indirect model.

We bought a company called TrustedID, and he's doing that.

I mentioned $25 million worth of annual contracts that in the pipeline, either closed or being negotiated right now.

Number three, he's got to leverage everything he's doing which is great in the US, to accelerate growing in Canada and the UK.

And take it to Latin America.

Number four, he's in the process of developing his own free model.

If you believe free is here to stay, which I do, why abdicate that responsibility to others?

We're going to find a way to participate, ourselves.

So if he does that -- think about this, as you're thinking building your models.

Think about 2015 being that transition year where performance improves throughout the year.

And 2016 and beyond is when we move back into that long-term growth model I communicated, which is mid- to upper-single-digit growth rates with mid- to upper-20% margins.

Okay.

Thanks, guys.

Sure.

Ryan Davis, Credit Suisse.

Congrats on the quarter.

My first question is on the PSol segment.

Outside of the reorganization, including UK, what should we be thinking about as a sustainable rate of growth for the legacy business?

And how much of it is direct-to-consumer versus the [affinity] today?

You've got a couple of questions there, Ryan.

I mean, [Gabe] just gave the overall growth.

So I think it was a portfolio with those four different levers that we have in PSol.

And that's going to be the mid- to upper-single-digit.

I think, what you're going to see over time, is a low-single-digit growth for the core legacy business and faster growth in the indirect business and faster growth in the international segments and the freemium model, over time.

So right now, the indirect channel is a smaller piece of the total but one of the fastest-growing pieces of the total.

And that was -- our capabilities are greatly enhanced.

We bought TrustedID -- whenever it was -- 12, 18 months ago.

Okay.

No, that's helpful.

And thinking about the margin progression in the international business throughout the year, I know you said you expect it -- margin to expand.

Do you have any expectation or a target of where you expect to exit the year at?

Yes.

We expect to be over 25%.

Between 25% and 26%, as we exit the year.

Okay.

All right, guys, thanks so much.

Thank you.

Andrew Jeffrey, SunTrust.

I guess, a couple of things, starting with workforce -- great year.

Rick, could you, maybe, elaborate a little bit on David's question about drivers?

Is it primarily adding records, or is it adding functionality and analytics, too?

I'm trying to understand what the dynamics are, there.

So monetization and MPI and how that's influencing workforce, in particular.

And then, given the momentum in that business, would you expect -- I apologize if I missed this -- would you expect 2015 to show faster organic revenue growth than the long-term trend in that segment?

Great questions.

Think about the growth strategy in EWS on four dimensions.

And they're all equally important.

Number one, is increasing the size of the database at the fastest rate we possibly can.

So, going from 60-some million to 70 million this year, 70 million to 100 million records.

That is an enormous -- you know the math, Andrew -- that's an enormous growth lever, in and of itself.

Number two is, taking The Work Number assets to either new verticals or deeper into existing verticals.

We are at the early stages, for example, in automotive.

It is booming for EWS, but it's very early stages.

So we need to penetrate that market deeper, faster, so on and so forth.

Same with credit cards.

So more verticals and deeper in the current verticals we've [just been in.]

Number three, it is taking analytics to a new level.

I think I talked -- I can't remember the exact numbers, now, Andrew -- but I talked about 40% to 50% growth in analytics.

It's remarkable what we've done.

And that's meaningful -- I'm not going to disclose the numbers -- but it's meaningful dollars to the Corporation, let alone to EWS, with they've done in the last couple of years in analytics.

And again, that's early days, as well.

The fourth one, which we don't talk about a lot, but is very important -- this is my fault from years ago.

We look at the employer size.

You've got the work number, which is the verification side, as you know, and all the other great suite of products we have -- unemployment claims, tax credit, compliance center, so on and so forth.

Our mentality for years -- we've owned this asset for eight years, now.

It's hard to believe.

(Inaudible) today, asset that is only there to protect the core [fourth] number.

That's a tough way to wake up every morning, thinking I'm here to protect.

So Dann and I, a couple of years ago, decided to change the mentality and bring a great new leader in, Scott Collins, and really change the culture, the capabilities, and the mindset to grow.

So, they've gone from a just protect, which means you're probably negative growth to flat, to now, a business that grow for us, even though things like unemployment claims are at historical lows.

That's how I think about EWS -- on those levers.

Okay.

And as far as the organic growth in 2015, yes.

As I think I may have mentioned, I expect their growth rate in 2015 to, once again, be a stellar -- and it will be all organic -- stellar growth and meaningful margin expansions, once again.

Right.

Those long-term targets are helpful, and pretty impressive upside in that segment, from even what you just reported.

I guess the other question, in USIS -- Could you just rank order the revenue growth drivers in that business, in terms of new product adoption at KCP versus, again, monetization versus anything else that is critical in that high-single-digit organic revenue growth expectation?

Yes.

Let me tackle it from two angles.

One is strategic capabilities, and that will be verticals.

On strategic capabilities, clearly, two significant growth drivers that we have experienced and will experience, going forward.

One is what we call Decision 360, which you're aware of.

Now, we have all of these unique data assets.

What Rudy has done is build this thing call the Office of the Connector.

We've invested in systems.

We've invested in prototyping capabilities that enable us, now, to take these unique data assets, pull them together, and make it so much easier and faster for our customers to consume.

That is really disrupting the marketplace.

I think mentioned that our top 100 cards are now consuming 3 products, on average.

Our top KCP accounts are four and a half to five products.

So Decision 360, leveraging all those unique assets, is one huge strategic enabler.

Number 2 is, about 18 months, 2 years ago, we changed organizational structure to a concept we call enterprise-wide, which is, Rudy owns the relationship with all of these large clients.

So he takes all those unique assets and brings all those assets to the customers.

That simplification of go-to-market strategy has helped.

As far as verticals, I think, offer significant opportunity for core organic growth.

Obviously, KCP, I mentioned, significant growth last year.

That will continue this year.

Tom and Madison's team are doing a great job.

Telco -- we legally positioned there with our unique data assets.

Auto -- we're going at multiples of the market, itself.

In midterm, I'd say, what we're seeing is a rebound in the home equity market.

I think we talked about that a little bit last year.

That will benefit Dann as well as Rudy, and I think that's a multi-year growth lever for us, not just 2015.

Okay.

One housekeeping one, if I may sneak it in, John.

I noticed corp ex was up.

I know there's some seasonality in there.

It was above what we were looking for.

Is there any call out in that?

No.

Corporate expenses -- we indicated that thought them to be flat to slightly up.

They were up a little more than we expected.

It was really incentive compensation.

We did a little better than we had thought.

And the incentive comp was little bit higher.

Okay.

Great.

Thank you very much.

Thanks, Andrew.

Otto Garrett, Deutsche Bank

One question on the resulting impact from the improving mortgage -- expectation for improving mortgage trends in the first quarter.

Might that, actually, have a positive effect on price within USIS?

That's an interesting -- you know, it will have a positive influence on margin.

[I don't] think about it from a pricing perspective.

If you think about the margin -- and there's different buckets or categories of mortgage.

As you know, [trial] margin is a little less profitable than the online.

But in general terms, say, an improving mortgage market does help the margins in the USIS and helps the margins in EWS.

Great.

Thank you.

Thank you.

Nick Nikitas, Robert W Baird

Just really strong performance out of Canada in the quarter.

I realize it's a smaller sub-segment, but with growth accelerated to 12% constant currency year-over-year, can you just -- I mean, you mentioned the broader information solutions strength that you're seeing.

But can you talk more about the drivers behind that and your outlook for the business into 2015?

Yes, Nick.

If I could take your question and, maybe, just expand it a bit because there are couple of geographies I'm particularly proud of, outside the US, in their growth.

You mentioned one, which is Canada, but the other is UK.

We had that as a troubled economy, it's growing double-digit, as you exit the year.

And the other is Spain.

I mean, just go look at Spain.

We're growing almost double-digit there, as we exit the year.

It's just remarkable those three countries, which are not booming economies by any means.

Canada is a commodity-based economy, and they're starting to slow.

So the core you're seeing there, or the reason you're seeing the growth in Canada -- to answer your question -- as well as UK and Spain, is the same set of strategic initiatives we have across the Company.

It's innovation.

So new products, just taking products to market faster, is driving analytics.

It's leveraging fraud and ID.

The core strategy that's important to Rudy Ploder and important to Dann Adams -- and you have EWS and Trey Laughran and PSol -- are the same initiatives that Paulino and his team in Canada, the UK, and Spain are driving.

Okay.

And then, circling back to the verification services revenue -- can you guys talk about any benefit you saw from the ACA in Q4?

And is that driving some of the expected strong growth in Q1?

Yes.

So remember, ACA, you think about it under three buckets.

There is the contractual -- the contract we have with CMS.

I think we talked about, before, that we expected last year to end the year slightly above the minimum guarantee.

That's what occurred -- and that will accelerate by the way, as I mentioned in my comments, in 2015.

The second bucket of revenue, which definitely added to growth, was the analytics side of the ACA, which we talked about -- 227 accounts; relative growth going to grow something like 40%, 50% this year.

And the third bucket with ACA revenue growth, which I did mention in my comments too, Nick, is every time you sell an ACA analytical platform -- not every time; most times -- to a company, they've got to give us their work number records.

And many times, those are work number records we never had before.

So once we get them in the database, it's a recurring monetization.

So all three of those have some assistance in fourth-quarter 2014 and will accelerate in 2015.

Okay.

Good to hear.

And just one last one for me.

Looking at the USIS margins, you mentioned the mortgage beneficial impact in 2015.

Just looking year-over-year, would you, I mean, after solid growth in 2014, should we expect that market expansion to moderate, going into 2015?

Well for us, as I mentioned in my comments, we expect the Company to move to a margin level of over 27% in 2015.

For us to attain that, every business has got to move in the right direction, including USIS.

So I expect USIS margins to continue to expand.

That's just the beauty of their model and international's model, EWS's model of variable cost.

The fixed cost is so high.

Yes, I'd expect the margins to increase.

Okay.

Thanks.

Thank you.

Brett Huff, Stephens Inc.

Two questions from me.

One, I just want to make sure I'm getting the 1Q versus full-year guide.

There was a question, I think, that someone opened with.

And I think you answered -- mortgage a little bit better, relative to the year-over-year comp, early in the year and tapering a little bit.

But aside from that, it sounds like the 1Q strength is just reflecting wins from last year.

Is there something about those wins that they would taper?

Or are we just waiting until we see how the year plays out and maybe things get a little bit -- maybe we have more visibility as we go out?

It's more the latter.

It's -- I'm glad you asked the question, Brett.

As we look at 2015, John and I and the BU leaders, are very optimistic for the year.

But to take those growth rates and extrapolate those for the balance of the year, I think, is imprudent at this time.

There's a lot of uncertainty where the 10-year treasuries go, what happens in Ukraine, what happens in Russia, what happens in European economy, what happens in Greece.

So not knowing -- not having the clarity of what's going happen on the macro perspective for the second, third, and fourth quarter, I think, it would be imprudent be too optimistic in the forecast we're giving you now.

The other thing, too, as I mentioned, the forecast is largely all organic.

Our philosophy is, when you have a big deal like the one we won at TDX -- one, get the Company integrated; and two, throw in all the resources to get this mult-year couple hundred million dollar opportunity up and running is the full focus of the international team and of our M&A team, who's intimately involved in that.

So we've taken our foot off the gas on the M&A.

We'd expect that to pick up, as I said before, in the second half of the year.

Great.

And just one final question -- a little bit bigger picture.

We thought USIS would show a little more strength.

Our sense is that credit card offers are starting to sort of go out, down into the prime and near prime, from just the super prime.

Credit is generally easing a little bit for consumers.

So we thought that would show up.

It wasn't quite as strong as we thought.

Is there a drag in there from North American commercial, or is there something hidden in USIS, that may be dragging a little bit, that we can't see from the sub-segments?

No.

Let me address one thing, which I'm like you brought it up.

Even though we don't disclose it anymore, our commercial business ended the year with the highest growth rate of the year in the fourth quarter.

Okay.

So when you look at drag, what specific line are looking at?

CMS online?

What are looking at you, when you reference --?

We were just looking -- I think you guys came out at 3%, all-in, for USIS.

And I just thought, generally, those items, even accommodating mortgage, I thought that -- we're just sensing there's more.

Like I said, specifically on the credit card side, we thought there would be more polls on your credit files than we did.

So I just didn't know if you guys were seeing that, or maybe not yet?

The only one thing that I think John alluded to, and I talked about a little bit, is the fact that you've got a big chunk of the business -- CMS -- that was flat.

And that impacts USIS.

Okay.

I think that's what was looking for.

Thank you for your time.

All right.

Thanks, Brett.

Shlomo Rosenbaum, Stifel Nicolaus.

You guys alluded to this a little bit, but I want to just go a little further.

Between the capacity on the debt side and the healthy free cash flow and the low leverage, it's just a set up for the potential for a big deal.

Potentially, deploying somewhere around $1 billion, if you want to -- without stretching the business, really, too far.

Are there deals of that size in the pipeline, potentially, sometime for this year?

Or is that, really, not within the scope of what you're looking out, right now?

Yes.

Obviously, I'll stay at a high level, Shlomo.

But you hit it on the head.

We have the fast capacity to do a lot of mid-sized deals or some significant deals.

I don't see this happening in 2015.

You know my philosophy -- you can only do so many large deals at a time.

You want to make sure that they're operating at the level that our shareholders expect.

Since I've been here in 10 years we've done talks, CMS, now TDX.

So right now, all of our energy is, really, getting TDX up and running as a core business and getting this new acquisition -- when we announce -- up and running.

So you'll see us doing deals this year, but you'll see us doing more mid- to small-sized deals.

I just don't see that large, transformational deal front and center, for this year.

Plus, I don't really see the need to have to do a large deal this year.

Okay.

That's helpful.

And then can you -- there was -- I guess, it was last quarter, when we talked a little bit about the implementation time for TDX and making sure that you want to get that right for the timing of the sales.

The demand seemed to be good, but you wanted to make sure the implementation works.

And that might be -- maybe went a little bit slower.

In the additional three months since the last time we talked, has there been any streamlining of that or improving the implementation times for TDX deals?

Yes.

The answer is absolutely yes.

I alluded to it at a very high level in my comments.

But we overwhelmed -- in a positive way, I'd say -- TDX on the integration front the second half of last year and really accelerated through the fourth quarter last year, with support to get the forecasting model down and really understand different variables.

And I'm very pleased with where Paulino and Andy Bodea, from the operations perspective, are.

We've moved people over to Nottingham to assist, and we are expecting double-digit growth from TDX in 2015, excluding any lift from that large deal we won in December.

Okay.

And then, just moving a little bit the freemium space.

Can you talk a little bit about the strategy over there and the work that you have to do to it, to make sure that you don't cannibalize the existing, very healthy margin business from-- (multiple speakers)

There are two strategies.

If you just take and bifurcate the freemium into two buckets.

One is the organic path, which means a different level of advertising, a different type of advertising.

And the other is augmenting the build with some sort of capabilities through M&A.

And we're looking at both.

But, Shlomo, I talked to the team about that, and I think they get it, as well, when you talk about cannibalization.

If we don't do something, those that exist in the marketplace will, in fact, cannibalize that for us.

I would rather have our own product, which would be a high-margin product, cannibalize our core legacy business than give it to someone else.

So it's a matter of fact.

Over some period of time, the frame-in model, I think, is going to be the dominant model.

And it's either we find ways to participate, ourselves, or we get out of it altogether.

And I'm not going to do that.

So there will be some cannibalization, but it will be self punitive.

All right.

Totally understood.

Thank you very much.

Thank you.

There are no further questions at this time.

I'd like to turn it back to our speakers for any additional or closing remarks.

Okay.

I thank everybody for their time and their interest in Equifax.

I think, with that, we'll terminate the call.

Thanks again.

This concludes today's conference.

Thank you for your participation.