易速傳真 (EFX) 2015 Q1 法說會逐字稿

Good day and welcome to the first-quarter 2015 earnings conference call.

Today's conference is being recorded.

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

Please go ahead, sir.

Thanks and good morning.

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 archive of the recording will be available later today in the Investor Relations section of the About Equifax tab of our website at www.equifax.com.

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

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

Certain risk factors inherent in our business are set forth in the filings with the SEC, including our 2014 Form 10-K and subsequent filings.

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

Adjusted EPS attributable to Equifax excludes acquisition-related amortization expense and the associated tax effects and a charge principally related to the realignment of internal resources to more effectively support the Company's strategic objectives.

Adjusted operating margin excludes the one-time charge principally related to the realignment of our internal resources.

These measures are detailed in our non-GAAP reconciliation tables included in 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, www.investor.equifax.com for further details.

Now I would like to turn it over to Rick.

Thank, Jeff, and good morning, everyone.

As always, thank you for making time to join us this morning.

The first quarter's performance was very robust and significantly exceeded our expectations.

A theme you will hear throughout my comments and John's comments and the question-and-answer period will be that the growth for the quarter was very broad-based.

It was across all business units, across many verticals, and across many countries.

USIS and Workforce Solutions, in particular, posted an exceptional quarter.

USIS saw its strength with its Decision360 initiatives, enterprise selling strategy, direct-to-consumer channel partners, mortgage, and home equity lending.

Workforce Solutions saw broad strength in Verification Services, including government, automotive, and mortgage, as well as solid strength in its Employer Services business.

The revenue strength in both those businesses led to nice margin expansions, as you saw.

Also international and PSOL finished with very solid performances for the quarter.

In total, the revenue was $652 million, up 12% on a reported basis, and up 14.4% on a local currency basis versus the first quarter of 2014.

In the quarter, FX created $17 million of year-over-year headwind, an increase from the fourth quarter of last year, which was $13 million of headwind.

The adjusted operating margin was 27.2%, up 120 basis points from the first quarter of 2014.

Adjusted EPS was $1.07, up 20% from $0.89 a share last year, and significantly above the upper end of the guidance we provided a few months ago.

As I always do, I'll walk through some business by business year on highlights and then John will get into the details of the financials.

I'll start, as I always do, with USIS.

There, the leveraged their Decision360 initiative, new product innovation, and enterprise selling teams to deliver 14% revenue growth, and a healthy 42.4% operating margin, up 520 basis points from last year.

A couple of highlights, our relationship with Credit Karma that we've talked about in the past, it went live in January, and generated transaction volumes exceeding our original projections.

In addition to purchasing our credit information, Credit Karma is also using our premier fraud and identity authentication solutions, to provide consumers with online access to their credit information.

Presently, we are part of a dual-bureau solution with Credit Karma, but we believe this will ultimately move to a three-bureau solution in an effort to better maximize the benefits to the consumers.

As I mentioned on the last call, in recent quarters, one of the thing we're seeing is that the financial institutions are changing the way they originate new consumer accounts.

In financial marketing services, FMS, the traditional pre-screen activity are giving away to more targeted one-on-one online offers.

We talked about this, again, the last few quarters and as a result our revenue mix has [rightly] been shifting towards higher margin online solutions, while our growth in pre-screen revenues has moderated somewhat.

Net/net, I view that shift as a benefit to USIS.

As we folded commercial into USIS a few quarters ago.

The commercial business is off to a great start, recording their best first-quarter performance since 2007, with record revenue and operating margin performance.

Mortgage origination and home equity lending were also strong during the quarter as low investment rate environment resulted in lending that exceeded our expectations for the quarter, and we'll get into that in the Q&A and compare to the [MBA].

Our core [tri-bureau, up 41] was 18% and we're also -- experienced strong growth in our high-value undisclosed debt and monitoring product services, as lenders continue to move -- continue with the more rigorous underwriting standards.

The pace of mortgage refinancing activity and home equity lending continues to be solid and we expect it will moderate as we talked about back in February, somewhat during the second quarter, and then continue to moderate as we exit the year.

USIS growth rate is expected to be strong over the course of the year, and be comfortably above this long-term growth rate of 5% to 7% for the full year.

On to international.

They posted double-digit local currency growth in five countries, including the UK.

The team makes good progress with integration of TDX, which delivered constant currency revenue growth in excess of 25% for the first quarter, and it also levered the NPI to further their market position, as many products delivered revenue above their expectation for the quarter around the world.

International's ongoing effort to diversity its revenue base is underscored by double-digit constant currency growth from their SME customer base, retail customers, insurance customers, government customers, and utility customers around the globe.

Also all verticals, including financial, our decision, and analytic solutions are strengthening relationships with our customers and opening new opportunities, NPI, and new sources of growth going forward.

International's operating margin performance is also improving.

Excluding TDX and all the investments we'll be making in TDX, international's operating mortgage expanded by approximately 190 basis points in the quarter when compared to the first quarter of 2014.

During the quarter, we executed a debt recovery services contract with Her Majesty's government in the UK that we talked about last time.

That's resulting in continued investment in TDX, as we prepare to ramp up and go live sometime in the late third quarter, for this multi-year UK government opportunity.

So net/net, that opportunity is on pace and on track on almost every dimension, and again, we expect some modest revenue at the back end of this year, [with it] ramping up in 2014.

In addition, the unique capabilities of TDX and also Infinnix -- that's the one we bought in Mexico -- those capabilities are being leveraged in other geographic markets where we do not presently have credit information operating units.

This year, international will be launching a Latin America regionalization strategy -- that's what Jeff alluded to -- that includes people, process, and system changes.

This effort will further streamline our operations and provide incremental operating leverage for international.

It will also improve customer service and accelerate our time to revenue for new product innovation.

For the year, we expect revenue growth to be solidly in the long-term range of 7% to 10% growth for international with improved operating margins as we exit the year.

On to EWS, their momentum accelerated in the quarter.

Remarkable performance.

It was broad-based revenue growth of 24%, up from 15% growth in the fourth quarter, and margins were up an astonishing 800 basis points from the first quarter of last year to 40.3% for the quarter.

Verification Services continues to make great progress penetrating our targeted non-mortgage markets.

It delivered strong double-digit growth in home equity lending, auto, car, consumer finance, government, and pre-employment.

Combined with growth in the mortgage activity, it drove a very healthy 34% growth in overall Verification Services revenue.

In addition, our penetration of peer-to-peer lending space, with our employment and income Verification Services, has delivered strong new sources of growth.

We now have over 4,500 companies contributing their employment and income information into the work number database and this number of companies are growing on a monthly basis.

The outlook for 2015 continues to be very good, although mortgage originations are expected to slow.

Our revenues from various ACA initiatives, further penetration of employment income verification in non-mortgage markets, and our strategic initiatives in Employer Services are expected to offset the mortgage decrease later this year, resulting in full-year revenue growth well above the top end of the multi-year range and margin expansion in the range, or the neighborhood, of 350 basis points or more versus 2014.

On to PSOL, constant currency revenue growth was at the upper end of the multi-year range and operating margins continue to be strong.

In addition, they are making good progress on the strategic transformation.

Double-digit growth in indirect, Canada, and UK were the major contributors to growth in the quarter, or direct-to-consumer activities in the US, the key operating metric, average revenue per subscriber [and churn] continue to improve.

2015 will be a good transformational year for PSOL, as we've talked about in the past.

They are making good progress on three fronts, strengthening the core US base business with, two, developing a strong market position in the indirect space, and three, growing our international presence in Canada and the UK.

We expect Personal Solutions to end the year with revenue growth comfortably within our multi-year target range.

Let me go back to Corporate and I'll give you some highlights at the Corporate and then I'll turn it over to John for the financials.

You have often heard us -- it's been about nine years now -- talking about how NPI drives growth.

In fact, we have talked about 3 points of growth coming from NPI and it delivered those 3 points of growth for us in the first quarter.

There's another very important growth driver, which we launched about three or four years ago, that we don't talk a lot about.

We launched it across all of the business units, and that's what we call enterprise growth initiatives, EGI, for us.

Its a very systematic way for managing multi-million dollar revenue initiatives that we overwhelm with resources and process and senior Management attention, because of the importance to a long-term growth.

Our EGI initiatives had a banner first-quarter performance, with strong double-digit growth, exceeding the expectations for the quarter.

Our outlook for the year continues to be for strong year-over-year growth coming from EGI.

Also at the Corporate level, we're talking about how we've developed a strong reputation with our customers regarding our expertise in lean.

We're doing in globally.

We're not only leveraging relationships with our existing customers, where we continue to drive incremental revenue growth, but we're also opening doors with non-customers around the world because of the reputation we've developed, some of our key verticals.

It gives us yet another opportunity to grow revenue for the strong customer partnerships and differentiate our offerings to these customers in yet another dimension.

Our global fraud initiatives, which cross all of our B-to-B business units delivered solid double-digit growth for the quarter, as well.

In summary, the quarter's performance is the strongest first-quarter performance we have experienced in many years.

Sequential revenue growth from the fourth quarter was up 4.4%, whereas in the past years you would typically experience modest or even declining sequential growth.

Adjusted operating margin expanded 70 basis points from the fourth quarter and adjusted earning per share increased almost 5% from the fourth quarter, and we usually see declining sequential growth.

Despite this unprecedented performance, we're still early in the year and there are still some uncertainties out there and macroeconomic challenges around the globe; however, we are more optimistic now than we were when we entered the year.

I'll turn it over to you, John, now for some financials and will come back with some closing comments.

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.

During the quarter, we recorded a charge of $23.4 million, principally related to the realignment of internal resources to more effectively support our strategic objections.

The actions were primarily driven by the regionalization and consolidation strategy in international, including the integration of TDX; consolidation of functions related to the integration of commercial and to USIF; and then some realignment actions across the remainder of the business.

The costs were two-thirds severance, but include related real estate, legal, and other costs.

The costs are reflected in SG&A and the general Corporate expense lines of our financial statements.

The actions will occur throughout 2015 and should be completed within 12 months.

Ongoing savings, once the actions are complete, are expected to be $10 million to $15 million per year with limited incremental benefit in 2015.

Consistent with our past practice for treating unusual or infrequent items, we have excluded this charge from our adjusted EPS and adjusted operating margin in order to provide investors with a more consistent period-to-period operating comparison.

The FX impacts on revenue and EPS this quarter were consistent with our expectations that we provided to you in February.

Now let me turn to the business units' financial performance for the quarter.

US Information Solutions revenue was $299 million, up 14% when compared to the first quarter.

Online Information Solutions revenue was $222 million, up 15% when compared to the year-ago period.

Mortgage Solutions represent was $31 million, up 28% compared to Q1 2014.

These trends compare favorably to the Mortgage Bankers application index, which was up 21% in the first quarter.

Financial Marketing Services was $46 million, up 3% when compared to the year-ago quarter.

As Rick mentioned earlier, this slower growth reflects a shift in how financial institutions are originating new accounts to one-to-one online solicitations.

The operating margin for US Information Solutions was 42.4%, up from 37.2% in the first quarter of 2013.

We continue to expect USIS to have operating margins in the low 40%s, consistent with our long-term model, in 2015.

Internationals revenue was $139 million, down 1% on a reported basis, but up 10% on a local currency basis.

By region, Europe's revenue was $58 million, up 1% in US dollars and up 12% in local currency.

Latin America's revenue was $48 million, up 2% in US dollars and 13% in local currency.

Canada revenue was $33 million, down 9% in US dollars, but up 3% in local currency.

For the first quarter, international's operating margin was 20.2%, down slightly from 20.6% in the first quarter of 2014.

This reduction in margin was due to FX.

For the full year, we continue to expect the operating margin to expand slightly compared to 2014.

Workforce Solutions revenue was $149 million for the quarter, up 24% when compared to the first quarter of 2014.

Verification Services, with revenue of $86 million, was up 34% when compared to the same quarter in 2014.

Employer Services revenue was $63 million, up 13% compared to last year.

Following the WOTC hiatus in 2014, states began processing their backlog during the first quarter.

Also revenue from our ACA analytical solutions was very strong in the quarter.

The Workforce Solutions operating margin was 40.3% compared to 32.3% in Q1 of 2014.

The margin benefited from the WOTC renewal, which contributed approximately 3 percentage points to the margin in the quarter.

For full-year 2015, we continue to expect Workforce Solutions operating margin to be in the range of 36% to 37%.

Personal Solutions revenue was $66 million, up 4% on a reported basis, and up 6% on a local currency basis.

For the first quarter, operating margin was 27.4% compared to 28.5% in Q1 2014.

This year-over-year reduction is consistent with our expectations and the guidance we gave for Q1 and the full year.

In the first quarter, general Corporate expense, at $78.4 million, was up significantly reflecting the $23.4 million realignment charge I mentioned previously.

Excluding this charge, general Corporate expense was $55 million, up $8.7 million sequentially, and $24.3 million versus 1Q 2014.

This increase was principally due to increased incentive and equity compensation and benefits expense.

This reflects the very strong performance in 1Q 2015, as well as earlier timing of annual equity expense in 2015 versus 2014.

We also saw increased professional, legal, and regulatory costs and 1Q 2015 versus 1Q 2014.

Looking at 2Q 2015, we expect general Corporate expense to be down $10 million sequentially on an adjusted basis, reflecting lower equity expense, and at or slightly below the Q2 level in both Q3 and Q4.

Operating cash flow was $103 million in the first quarter.

Cash flow grew faster than earnings, reflecting positive working capital performance.

We continued our aggressive stock buyback activity, repurchasing 1 million shares for $90 million, and paying $35 million in dividends to our shareholders.

Our leverage remains a very conservative 1.75 times EBITDA.

Now let me turn it back to Rick.

Thanks, John.

Quick outlook for guidance for the second quarter and the total year.

Before I give you some numbers, I just want to put it into perspective that the influence of the mortgage market as it relates to the second quarter and the balance of the year.

Again, we expect the mortgage market to perform much like we talked about back in February, moderating a bit in the second quarter and then continuing to moderate even further year-on-year in the third quarter and fourth quarter.

So for the second quarter, we expect organic revenue to be between $655 million and $665 million, is a constant currency organic revenue growth rate of 10% to 12%, and that's partially offset by 3 points of FX headwind.

Adjusted EPS is expected to be between $1.09 and $1.11, which is up 14% to 16%, excluding $0.02 per share of negative impact from FX.

This reflects a constant currency growth rate of 16% to 18% for the quarter.

We also expect operating margin to continue to improve and end the quarter in the range of 27.5% to 28%.

Obviously, there's some uncertainty for the balance of the year.

It's macroeconomic uncertainty around the world, it's US economic uncertainty, some uncertainty in the Middle East, uncertainty in Latin America.

But against that uncertain backdrop, I'm convinced that this team will continue to execute extremely well and continue driving above-market growth across all of our businesses and all of our verticals through the second quarter and the balance of the year.

So with that, and based upon the current level of domestic and international business activity and the FX rates, we expect 2015 to have revenue in the range of $2.585 billion to $2.635 billion, which is up from our previous guidance.

This reflects constant currency organic revenue growth of 8% to 11% for year.

This strong revenue growth is partially offset by 3 points of negative impact FX, and again, as before, this is only organic revenue growth at this time.

2015 adjusted EPS, we expect to be in the range of $4.28 and $4.35 per share, also up from our previous guidance.

This reflects 10% to 12% growth in 2015.

FX impact for the year, as we previously stated in the last earnings call, is expected to be about $0.11 for the year, and we have a $0.02 a share impact in the first quarter, which says we have a remaining $0.09 per share impact for the full year.

So with that, operator, I would like to open it up for any questions we might have.

(Operator Instructions)

Shlomo Rosenbaum, Stifel.

Thank you very much, Rick, for taking my questions, and John.

I wanted to just drill in a little bit more.

Very, very healthy growth across the Company.

The biggest, I would say, surprise was in the Employer Services that has had the best growth, it looked like, in five years.

Can you talk a little bit about just stuff that came together, specifically in the quarter, and how I should be thinking about the growth.

Have you gotten that to a sustainable double-digit growth level over there?

How should I think about that?

Thanks, Shlomo.

I would say there's two primary drivers to the growth.

One, I mentioned it last year, we got new leadership in there, it's been about a year or so, 1.5 years, Scott Collins, doing a heck of a job.

He's changing the mentality out there from a business unit that's a [protect the work number] to a growth business model.

He's built processes, he's changing the team to think about growth, not protect.

Then you had the WOTC benefit for the first quarter, that added some growth, as well.

So as I think about the Verification Services please of EWS, Shlomo, when we bought the business, we thought it would be a good, solid year-on-year middle-single-digit growth rate, so I would not model a double-digit growth rate for Employer Services at this time.

If I dig further down, how much of that was ACA work and some of the stuff that's just compliance-type work that is going to be sustainable going forward?

In the Employer Services, is a piece of business that's on fire.

We talked about it in the last earnings call and that is the, what we call, workforce analytics.

That will go over 100% this year.

We're signing hundreds of contracts, help employers make sure they are compliant with the ACA laws.

Remember, as I mentioned before, Shlomo, we get multiple bites of the apple there.

You get some consulting revenue, you get the analytics revenue, and then in many cases, the employers who are using that analytics don't give us records work number records.

The only way we can analyze the level of compliance is to get the work number records, so that revenue growth, by adding those records to the database, don't show up in Employer, it shows up in Verification, once we put in on the system.

You should consider ACA analytics and workforce analytics as being a long-term sustainable growth piece of EWS's strategy.

Also, within the Employer Services, they are building out a really good full suite of compliance center products to help our employers ensure they are compliant with many regulatory changes, not just the Affordable Care Act.

Do you feel -- how much -- are you able to quantify or give a rough estimate as to that virtuous circle of doing that type of compliance that's resulting in the work number and then additional hits to the database that are coming back with something, so that's adding revenue to the Verification Services side?

Rest assured.

We do, do those numbers, we don't disclose those right, but if you talk to Dan Adams, Shlomo, he would tell you, as would Scott, the guy that runs that part of the business for him, that the compliance center is an exciting multi-year growth strategy for EWS in total, and clearly, for the Employer side.

We have given you some color in the past around the number of records added through ACA -- through workforce analytics and you know the number on the average revenue per transaction, so you can build some sense of how important that is on the Verification side.

It's meaningful.

One last question, I'll drop off.

How much did the Credit Karma relationship add to the year-over-year growth in OCIS?

We don't disclose individual client activity.

We have given you a number, it was back in the fourth quarter, of what it would be.

We said $20 million to $25 million a year in revenue.

So in the scheme of things, for the Company, great customer, great win, not overly significant for the Company, but important for USIS.

Very good.

Thank you so much.

Thank you.

David Togut, Evercore ISI.

Good morning, Rick and John.

Hello, David.

Quite a quarter.

Since you touched on Workforce Solutions in some detail, could you provide a little more detail on the 18% unit growth you disclosed in USCIS, in terms of the underlying drivers, sustainability of those drivers?

Yes.

Again, as I tried to allude in my opening comments, and as did John in this, it is extremely broad-based.

Automotive was extremely strong.

Our KCP clients were strong.

Financial services was strong.

Telco was strong.

Credit karma was strong.

Mortgage channel partners were strong.

It's extremely broad-based.

Just as a follow-up, your 450 basis points of operating margin expansion in that business, do you have a higher target now for operating leverage in that business or is this short-term strength that will slow over time?

The gift that keeps on giving.

You always want more, David.

I'd say, the beauty of this model is we have the ability to continue to invest in CapEx for organic growth, and as you are growing, the leverage you get is phenomenal.

That exists not only USI, because as you saw, that exists in virtually every business.

You just saw it in EWS, as well.

Now that they are over that -- I don't remember the exact number for USIS, but over 42%, I think it was, yes, you should expect to be in that range and continue.

The only way John and I can give you our target of 25 basis points of expansion every year is if every business here continues to grow, so I expect USIS to continue to expand on margins, as well.

Final question from me on capital allocation.

What should we think about in the next year in terms of dividend growth, given the elevated EPS growth that you showed in the first quarter?

We're committed to that range that we talked about -- I think it was three or four years ago when we established the new dividend policy of 25% to 35% of our net income going back in the form of a dividend, so as we continue to grow net income, you should continue to expect dividends to increase.

Thank you very much.

Thank you, David.

Manav Patnaik, Barclays.

This is actually Greg calling on for Manav.

Just wanted to dig in a little bit on the TDX contract with the UK government.

Clearly, you guys sound pretty constructive around it, but was hoping to get color, both around the magnitude of the cost as you ramp up that contract and then how to think about the ramp-up and the ultimate opportunity there?

Greg, thanks for joining.

I'll talk specifically about TDX, but what you are going to hear us talk about more in the future is a debt services platform, which is really integrating the capabilities we have in our Mexican acquisition, which about the same time frame, called Inffinix, and then TDX, which is the UK domiciled capability.

You'll hear us talk about a debt servicing platform versus TDX or Inffinix going forward.

Specific to Her Majesty's contract that I alluded to briefly in my comments, it's gone as expected.

We have overwhelmed this with people, with process.

The timeline was tight.

It was such a significant award that we had to make sure we got it right and were getting it right.

The hope is we stand this technical environment up, this structure up in the third quarter.

We started to receive their first load of data in the third quarter.

It takes you a while to analyze the data, understand the data, format the data, and then you pass that -- the analytics onto the collection agencies across the country.

So that's why I said expect a nominal amount of revenue in the 2015 year, maybe the very end of the fourth quarter, and then ramping up nicely in 2016.

Okay.

Thanks.

Along that same theme, during, post the acquisition you talked a lot about bringing the TDX capabilities to new market, whether it's the US or Australia.

Does this contract put that a little bit on the back burner or how are you seeing that progress right now?

That's a great question.

It did a little bit early on because the same teams that could build the capabilities to deploy different countries were consumed with getting the DMI contract up and running in the UK.

However, I can tell you this: they're in full speed now in places like Canada.

I was just in South America last week, met with clients in both Chile and Argentina.

The interest level is extremely high, the pipeline is very good.

Things are going very well in Australia.

As we mentioned before, things are going very well in Peru, Colombia, there's a strong interest in Brazil for the platform.

So while we were distracted with DMI, that distraction is now behind, and we're running full speed.

Okay.

Thank you.

Thank you.

Andrew Jeffrey, Sun Trust.

Good morning.

Thanks for taking my question.

Rick, a two-part question, Rick.

One, from a big picture perspective, in terms of where we are in the credit cycle, I heard you mention a lot of consumer credit product save credit cards, so I wonder if you have a sense as to where you think we are as far as issuers ramping up their consumer credit card businesses?

And then as a corollary, you mentioned the shift in the way the customers are going to market and I wonder how that dovetails with some of the newer credit modeling solutions that FICO is introducing around thin files, and perhaps, how that might open up the next leg of growth in the consumer credit cycle or whether you think it will at all?

Thanks, Andrew.

Two thoughts, one on the bank card issuance, what is going on there.

Since the bank card issuance in the US hit the bottom, the market has rebounded at a rate of about 10% or so a year, so it's growing modestly, actually above modestly.

However, it still remains definitely below the pre-recession earning levels, so improving but nowhere close to where we were back in the pre-recession earning environment, and obviously that improvement helps us.

As far as FICO, as you know, the FICO, the new score, the thin file score that you alluded to is predicated largely upon our data and LN's data.

[But while the] data they use in that model is buying the data from our -- we used to call NCTUE Plus, the positive credit file on utilities in telcos, so as that product takes off, obviously we're a benefactor of that.

Okay.

Do you think, from a macro perspective, that this signals -- the move towards thin file scoring and so forth -- signals an opening up of the underwriting environment or is this more tactical, or more incremental?

It's more incremental.

If you look at -- take a proxy, the sub-prime bank card market, what you are seeing there is, yes, they're getting a little more aggressive in sub-prime money, but the outstanding loan limits, I should say, are extremely low.

So while they are going a little more aggressive, and obviously this thin file score will help them be even more aggressive, they are being cautious on the limits they're applying to those bank cards.

Any time you can give more people access to credit, and this score does that, we benefit by default.

Sure.

Okay.

That's helpful.

Thank you.

Then just as a follow-up, you mentioned -- you called out EGI as a driver.

Could you just give a couple of examples?

And I wonder if you move toward more of the enterprise solutions, that's helping your pricing overall?

Yes.

Andrew, you may know, a leader for us here, the guy's name is Andy Bodea, works for me, runs global operations, runs the global lean, global procurement.

He is a great operator, a disciplined operator, he's a great team around him.

We started looking at this in earnest, maybe three or four years ago, and said, we've got these large multi-million dollar, sometimes cross-business [users].

It needs more rigor to ensure our time to revenue as expected, much like we did in NPI.

Andy and his team have been doing this now for three or four years and we're doing stuff, I've give you a couple of examples of where we're attacking EGI today.

One is automotive, and we're a couple of years into that now.

We decided to get into automotive heavily.

We leveraged EGI discipline to do so.

Another I alluded in a EWS a few minutes ago, was this compliance center, building up more capabilities, other than just [I&I] and W2 and some others, and [now] ACA, workforce analytics, a whole suite theme of new products.

So he's leading that one there.

We're doing some things in PSOL with replatforming of PSOL's go-to-market.

So does it give you explicit pricing power?

It definitely gives you revenue growth, which is a factor in our performance, as you've seen us exit 2014 and continuing in 2015.

Any time you can build products that differentiate what you do versus your competition, you add more value, the discussion goes away from price and more to share gain [and spend].

Terrific.

Appreciate the color.

Nice job.

Sure.

Thank you.

George Mihalos, Credit Suisse.

Good morning, guys, and congrats on the quarter.

Rick and John, just wanted to start off with, if we look at the first quarter, you did 14% constant currency organic revenue growth.

The outlook for the second quarter, you are talking about 10% to 12% constant currency.

Is there anything outside of any variability on the mortgage side that would cause you to expect that deceleration?

Is there anything going on in the business that you think was one-time in the first quarter or that is slowing a little bit through the back half of the year outside of mortgage?

No, it's specific to the second quarter, and I'll come back to the balance of the year.

The two primary drivers when you look at sequential growth, and you hit one, George, which is the mortgage market, and the other is, I alluded to it in my comments, the WOTC contract, Workforce Opportunity Tax Credit contract, which we monetized in the first quarter this year; we did it last year, as well.

It doesn't repeat; it's largely a one-quarter activity.

So that's the nuances, if you will, for the second quarter.

For the balance of the year, the third quarter and fourth quarter, when you look at the growth rate, which it's still very solid, I think you would agree, it's really the uncertainty on a macro basis: interest rate environment, regulatory environment around the world, economic environment, so on and so forth, geopolitical issues, and there's uncertainty there.

That's about it.

Okay, great.

Appreciate the color.

As then it relates to margins on international and the rollout of TDX there, it sounds like the contract will be somewhat fully ramped in the fourth quarter.

I appreciate the commentary around margins in international for the year, but what is a good exit rate ending 2015 for international margin?

I would imagine they will spike up in the fourth quarter?

Is that a fair way to think about it?

No, because as I alluded to, the data does not come in until the third quarter.

By the time we've actually [flown] at it, analyzed it, and then start to distribute the data and analytics, it's going to be late fourth quarter.

So I don't expect much revenue from that [lords] contract.

You've got to understand, the investment we made in this business has been on two fronts.

One is standing up DMI, and the other is the typical stuff we invest in when we acquire a company, that is security, that is compliance.

We're in the process of applying for a license in the UK for this organization, and so on and so forth, just to make sure it's fully, fully integrated.

So this is a year of fairly heavily broad-based investment in TDX.

Also investment to bring it global into more countries.

So as far as margin expansions for TDX specifically, and then for international, I expect modest improvement for international for this year, but then more significant improvement as we go into 2016 because the level of spend comes down, the core TDX business to go up strong double-digit, and [you get my position] of [DMI].

Great.

Just last question from me, as it relates to the restructuring savings, the $10 million to $15 million, would you expect that to fully pass through in 2016 or is the expectation that you will reinvest those savings in the business for accelerated growth?

Thank you.

I would expect probably it's a combination of both.

Some of it will pass through and then some we'll reinvest to try to accelerate growth in 2016 and 2017, so you are going to see a combination of both actions.

Okay, great.

Thank you.

Brett Huff, Stephens Inc.

Good morning, Rick, John, and Jeff.

Congrats on a nice quarter.

Two questions.

One, you've mentioned EGI, and there was a follow-up question on it.

Do you guys -- or could you call out the contribution to growth like you do for NPI this quarter or maybe recent history and is that accelerating?

That's an interesting question.

The answer is I'm not prepared to do that now, but let me give that some thought, Brett, because you are right, there's a lot of similarities.

It's a systematic way to [bring process] the one to growth, much like NPI is.

So let me give it some thought.

At a high level, I will tell you this.

It is becoming a very meaningful number.

It is contributing to our organic growth rate, quarter in, quarter out.

Rather than just react here on the phone, let John give some thought to what's the best way to frame that up for you.

But the whole reason I bring it up for this call is because, one, we have been at it, and we have some credibility internally, been doing this for three or four years, and two is, it's meaningful, so I'll come back to you.

Okay.

Thank you.

Second question, on PSOL, there's been some strategic changes going on, specifically the Experian-FICO deal.

Have you seen changes in your PSOL business or consumer behavior around that?

Do you think that FICO will become a more widely used standard of credit score in direct-to-consumer business for you all or other people?

Any thoughts on that?

FICO is the brand when it comes to scoring in the US today.

The thing that has changed with PSOL largely is three things.

One that we now have a good enough international platform versus a US platform.

Two, with the acquisition of TrustedID 1.5 years or so ago, that gives us a new area of focus for growth.

And three, obviously, this free thing we've talked about -- free market is here to stay, so be that a FICO score or any other score, getting your score for free is here to stay.

As I mentioned in the last earnings call, Trey and his team, and even [Murray] and his team from the USIS side, are working diligently on figuring out how to best play there.

I always tell people that there's a different way to think about that, and if you look at one of our competitors who talks about their PSOL business, their Credit Karma, if you will, reseller partners, they aggregate in their PSOL business, that reflects a much different growth profile.

So as I think about it, I don't really care if it comes through a USIS channel, which it does today, or if it comes through PSOL, which it may in the future, that free market is here and it's clear that we got to have a great strategy around that and the team is developing that right now.

Okay.

Thank you, guys.

Thank you.

Jeff Meuler, Baird.

Thank you.

Some of these numbers are bafflingly good to me, so I have got to ask, how -- and I know your targets are multi-year targets -- but how frequently do you revisit if they are still the right targets or is it possible that maybe they are the right long-term targets, but within that framework you could still grow for several years above the upper ends of the targets?

I'm just asking given how strong enterprise selling is going, NPI, it seems like a lot of these things should have legs to them?

We give guidance or we give a multi-year framework, Jeff, we take that seriously.

So when John and I think it's prudent to revisit the multi-year framework and make any adjustments, you guys will be the first to know.

But at this juncture, largely driven by -- it has nothing to do with our ability to execute.

The things you mentioned, D360, new product invasion, EGI, pricing, all those things, I think you know, Jeff, we've been at now for eight, nine, 10 years, and that's all organic, as we've talked about, as well, so the only thing holding us back right now is macro uncertainty, and it's just too early to make any change on the model at this juncture.

Okay.

And then the commercial business, you said was the best Q1 since 2007.

If you could help us understand what is driving that.

Is that market or are you starting to see some of the benefits from moving into the USIS management?

Clearly the latter.

You have heard me say before, leadership makes a difference, and that is now the responsibility of Rudy Ploder, and then a guy within Rudy's, we've talked about before, he runs our KCP accounts, and a high-potential guy in our Company, Tom Madison, those two gentlemen have brought focus and discipline in leveraging the USIS relationships.

So leadership makes a difference and that's a great example.

Okay.

Then on the guidance, John, if you could help me understand, the constant currency EPS growth was merely narrowed to the top end of the prior range, but the EPS figures that you are citing, the top end of the guidance end was raised.

Currency got worse, not better.

If you could help me bridge that, please?

The currency -- this is Rick, sorry -- it's the same.

We gave currency impact for the year of about $0.11 when we were together in February, and I thought I said in my comments, it's still $0.11 for the year, $0.09 that were remaining, because $0.02 of it occurred in the first quarter.

So why does the top end of the constant currency EPS growth guidance range not go up but the EPS figures that you are citing for the full year do go up at the top end up of the range?

They did go up.

Speaking from memory, our last guidance was $4.20 to $4.30 and we're now saying $4.28 to $4.35.

Yes and I'll take one more [slight at it] and then I'll follow up offline, but the constant currency EPS growth rate, the top end is still [$0.14], correct?

[$0.14] is what we gave.

Some of it is rounding but we did take it up $0.05, so we took the top end of the guidance range up $0.05.

Currency has not changed much, so if you're seeing growth rates that look similar, it's simply rounding because $0.05 on $4.30 is not a huge percentage.

Okay, thank you.

Andrew with JPMorgan.

I wanted to go back to debt collection and recovery management the way it is right now.

Surely I saw the comment of double-digit growth currently.

I was wondering if you could just be a little more specific about the what current growth rate of that business is, what's the size of that business as we just anniversary, TDX and Inffinix?

Andrew, I thought I mentioned this in my comments.

It was 25% growth in the first quarter, and that's specific to TDX.

Anyway, I expect that to be strong double-digit growth for the year, as we talked about before, and [a debt retraction].

How big is that business now?

Give him that number, we bought it -- Jeff is shaking his head no.

It's becoming a very meaningful sized business.

Right, but it's still under $100 million of revenues, right?

Right.

Okay.

Thank you.

Paul Ginocchio, Deutsche Bank.

Thanks.

Rick, any way to size the contribution to growth in Verification from WOTC?

And also maybe just talk about the CMS contract, was that a benefit to OIS in the first quarter?

Then finally, the new 15 million people who are going to be scored by the new JV you just announced with FICO and LexisNexis, does that 15 million, does that add 10% to the people in your credit database and will those people use -- do you think be as active in credit as your existing people in the files?

Thanks.

The first one, on the WOTC -- let me see if I can remember all three question -- the first one on the WOTC, was if you took the WOTC benefit out, the growth rate for all of EWS went from 24% to 21%.

Thank you.

Sure.

Number two, what the heck was number two?

CMS.

Which CMS, the Medicaid/Medicare services contract?

Correct?

And you said what benefit did that have for EWS?

No, no, for -- yes, that's right, for EWS?

Yes, I thought you said [US].

It's -- I gave some numbers earlier on the last call, Paul, and that is it's -- last year we were slightly above the minimum contract and we expect to be up significantly from that this year.

That was number one.

Number two, we talked about another big part which is becoming even bigger from the CMS mandate is the [ACAA] workforce analytics stuff that we talked about, which will be up over 100% this year versus last year, and also adding a lot of number of records to the database, so it's very important to us.

Will that up significantly, or that would coincide with enrollment growth in Obamacare?

Yes.

Absolutely.

Remember last year, they had all the issues of standing up the CMS websites.

That's largely behind you.

The awareness is great.

The activity rate is higher.

So, yes.

Just how does the additional 15 million of people with the FICO JV you just announced, how much does that increase your current number of people with credit scores that you [synchro] worked on and will those people be as active?

That is yet to be seen on the activity base.

But the good thing is we're finding people who don't have a credit file, who have some payment behavior that seems positive, that you can now introduce to telcos and banks and auto lenders to potentially give them credit.

Time will tell if in fact they have a credit activity that is like the rest of our customer base.

My guess is no.

It will be below [around], but time will tell.

Thank you.

(Operator Instructions)

Bill Warmington, Wells Fargo.

Good morning, everyone.

I'll add my congratulations on a strong quarter.

A question for you on the US government ID authentication work.

If you could talk about how the values have been this year versus last and also which government agencies you are currently serving and what the pipeline looks like for new ones?

I gave you a high level overview of my comments that the fraud identity protection, which is much more than just the US, is growing strong double-digit for us, which is great.

If I think of, specific to your questions, where are we solving problems for the US with fraud and ID prevention products, it is the SSA and the IRS and the CMS and it's also a number of state agencies across the country, so it's broad-based.

And, yes, the punch line there is, if I look at our three- to five-year strategic plan and say what might look different three to five years out, one of the areas we've talked about with you guys is a much larger, more impactful, higher performing fraud and ID protection business.

That's why we dedicated so many resources and restructured that last year and it's performing very well.

A question for you on Europe, a very strong performance there, up 12% constant currency despite the sluggish economy.

Is that share gains driving that growth and, if so, how are you taking share and what would normally be considered a fairly mature market?

We talked about this before.

We have a got great leader who is an Argentine that worked for us across Latin America, [another one] in Spain, got Spain rolling on a great roll [during] the recession and post-recession and then we moved him, his name to [Patricio] Ramon to the UK sometime last year, continues to do a good job there.

So it's the same dynamics you would be seeing, Bill, around the world.

It is innovation, it is focus on verticals that are important, just like insurance, government over there, and now collections.

It is decision analytics platforms that we're deploying across multiple verticals in our European footprint.

Thank you very much.

I would like to thank everybody for their time and their support of the Company.

With that, operator, we'll terminate the call.

Have a good day.

This does conclude today's conference.

Thank you for your participation.