Equifax (EFX)

Q1 2012 Earnings Call

April 26, 2012 8:30 am ET


Jeffrey L. Dodge - Senior Vice President of Investor Relations

Richard F. Smith - Chairman and Chief Executive Officer

Lee Adrean - Chief Financial Officer and Corporate Vice President


Carter Malloy - Stephens Inc., Research Division

Andrew W. Jeffrey - SunTrust Robinson Humphrey, Inc., Research Division

Georgios Mihalos - Crédit Suisse AG, Research Division

Rayna Kumar - Evercore Partners Inc., Research Division

Eric J. Boyer - Wells Fargo Securities, LLC, Research Division

Julio C. Quinteros - Goldman Sachs Group Inc., Research Division

Shlomo Rosenbaum - Stifel, Nicolaus & Co., Inc., Research Division

Matthew V. Roswell - RBC Capital Markets, LLC, Research Division



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Good day, and welcome to the First Quarter 2012 Equifax Earnings Release Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Jeff Dodge. Please go ahead, sir.

Jeffrey L. Dodge

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 Lee Adrean, Chief Financial Officer. Today's call is being recorded. An archive of the recording will be available later today in the Investor Relations section in the About Equifax tab of our website at www.equifax.com.

During this call, we'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 2011 Form 10-K and subsequent filings.

We will refer to a non-GAAP financial measure, adjusted diluted EPS attributable to Equifax, which exclude the acquisition-related amortization expense. Since our Brazilian operations were emerged with Boa Vista on May 31, 2011, we also present revenue growth, excluding Brazil, to provide a clearer understanding of our revenue growth for those businesses that will continue to be reported in our operating results.

These measures are detailed in our non-GAAP reconciliation tables included with our earnings release and also posted on our website. Please refer to the non-GAAP reconciliation and the various Investor Relations presentations, which are posted on our website in the Investor Relations section under the About Equifax tab at our website for further details.

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

Richard F. Smith

Thanks, Jeff, and good morning, everyone. As most of you know, we've made a number of commitments to some important foundational principles, which have guided this company for the past 6.5 years. These principles include an intense focus on growth, new product innovation, accountability, LEAN, strategic acquisitions, as well as leveraging our analytic expertise and unique data assets across all business units. Our execution against this commitments continues to pay off.

The momentum and broad-based performance we delivered throughout 2011 positions us well for 2012. For the first quarter, strong double-digit growth from our 4 largest business units resulted in record revenue growth and our record growth in adjusted EPS. The results were significantly ahead of our expectations as we entered the year. Shortly, I will update you on our full year outlook. But as you would assume, our optimism and confidence for the full year has improved.

Taking a quick look at some of the high-level financials for the quarter. Total revenue was $523 million, up 11% over year ago, excluding Brazil. Total revenue was up 15% for the quarter and up 16% in constant dollars. Our operating margin was 27 -- or 24.7%, up 160 basis points from a year ago. Finally, adjusted EPS was $0.70, which is up 21% from $0.58 a year ago. And as I normally do, I'll go through some highlights of each of the 5 business units before I hand it over to Lee for the financials.

Starting with USCIS. They had one of their strongest quarters ever, bolstered by very broad-based growth. The theme, by the way, you're going to hear throughout [indiscernible] this performance in the first quarter was extremely broad based. We had great growth in auto, telco, FIs, mortgage and insurance. We also increased our transaction with new products, accelerated the transaction activity in many of our larger customers and drove new strategic pricing programs across the board.

Along with strong revenue performance, operating margins in Online Consumer Information Solutions and credit marketing services extended nicely during the quarter. And with the primary drivers behind a 241 basis point improvement in USCIS' operating margin versus a year ago. Our execution in targeted verticals continues to improve and is delivering meaningful incremental revenue growth.

During the quarter, we had double-digit growth in our key client program. And to refresh memory, the key client program of the top 4 banks in the U.S. we focused on. We also had great double-digit growth in our channel partners in addition to telco, auto, financial services and insurance sectors, all are double-digit growth.

We have consolidated all of our analytic talent throughout the organization to further leverage their expertise, their familiarity with our vast array of data assets and deep understanding of our customers' needs in today's fast changing and highly competitive market that was done just over the quarter ago and the benefits of that new structure should yield in the coming quarters.

Continue with USCIS. Transaction with our new products continues. Of the products launched in 2009, 2010, and 2011, 29 of those products are now delivering revenue that exceeds our NPI target for the quarter, and those are allowing us to win in the marketplace. We're also in the beginning stages of developing strategies for new applications that use our vast data assets and analytical capabilities, such as mobile payments and marketing.

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