Equifax Inc (EFX) — Q4 2015 Earnings Call Transcript

Thanks and good morning, everyone. Welcome to today’s conference call. I’m Jeff Dodge, Investor Relations. And with me today are Rick Smith, our 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. In the fourth quarter of 2015, we realigned the reporting structure of our direct-to-consumer reseller business, so that it now reports into our Personal Solutions business. Previously, direct-to-consumer resellers were reported within the USIS and International segments, based on the country of the customer. We have provided the quarterly history for Personal Solutions, USIS, and International in the new format for each quarter in 2014 and 2015 in the Q&A section of our earnings release. All discussion of the 2015 business unit performance and their outlook for 2016 will be consistent with the new structure. Earlier this week, the Veda shareholders voted to accept Equifax’s acquisition offer, and we also received subsequent approval from court. Therefore, the 2016 guidance provided today as well as the updated long-term business model for Equifax, which is included in the Q&A section of our earnings release, both include the impact of the Veda acquisition. However, our guidance for the first quarter of 2016 will not include any impact from Veda, including the incremental cost of the debt, given the short amount of time Veda will be part of Equifax in the quarter. During this call, as in previous earnings releases, we will be referring to certain non-GAAP financial measures including adjusted EPS attributable to Equifax and adjusted operating margin, which will be adjusted for certain items, which affect comparability of the underlying operational performance. In 2016, we will be emphasizing adjusted EBITDA margin in discussing our operational performance. Adjusted EBITDA is defined as operating income, adding back depreciation, amortization, and the impact of certain one-time items, including the acquisition and integration expenses from Veda, which are also reflected in our calculation of adjusted EPS. These non-GAAP measures are detailed in reconciliation tables posted on our website. 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 the subsequent filings. Please refer to our various investor presentations, which are posted in the Investor Relations section of our website for further details. Now, I’d like to turn it over to Rick.

Thanks, Jeff, and good morning everyone. I appreciate your presence this morning. Our execution across all four business units remains robust, allowing us to deliver another solid quarter in the fourth quarter and for the entire year. In the fourth quarter of 2015, we reported total revenue of $666 million, reflecting a 7% increase on a reported basis and a 10% increase in local currency compared to 2014. Currency fluctuations posed an $18 million headwind year-over-year. Our adjusted operating margin improved to 27.1%, up from 26.5% in the fourth quarter of 2014. Adjusted EPS rose to $1.14, a 12% increase from $1.02 in 2014, surpassing our previous guidance range of $1.10 to $1.12. In recognition of our strong 2015 performance, our Board approved a 14% increase in our quarterly dividend, now at $0.33, marking the sixth consecutive year of double-digit increases showcasing the company's strong performance. 2015 was an exceptional year for our long-standing business, with contributions exceeding expectations from each business unit, investor verticals, and most of our geographic regions. We are well-prepared for a successful 2016, and I am proud of our team's ongoing commitment to innovation, execution, and exemplary customer service. For the full year, total revenue reached $2.7 billion, up 9% on a reported basis and 12% in local currency from 2014, with a $76 million impact from currency fluctuations. The adjusted operating margin for the year was 27.4%, which is a 90 basis point increase from 26.5% in 2014, significantly above our targeted increase of roughly 25 basis points. Adjusted EPS increased to $4.50, a 16% rise from $3.89 the previous year. It is important to note that all of our 2015 performance was driven organically, as we did not make any acquisitions. I will now transition to a brief commentary on our business units before John provides more detailed financial information. First, as Jeff mentioned, we repositioned PSOL in 2015. The team has been diligently working on our new growth model, which I fully endorse and is yielding positive results, details of which John will share. I decided it was crucial to have one team, one leader, and one business managing our strategy and product positioning in the consumer space, whether directly to consumers or through resellers. Consequently, we realigned that segment under Dann Adams, who leads our global direct-to-consumer businesses. This structure should provide greater continuity going forward. Regarding our businesses: USIS achieved an impressive 8% revenue growth for the year along with a 290 basis point increase in operating margins. Our insights-driven strategy has resonated well with our largest clients in our Key Client Program. These customers are utilizing multiple Decision 360 products and services, accessing nearly five Equifax data products on average, which is remarkable. In our top 100 clients, the uptake of Decision 360 products and services is also increasing, with an average of three products accessed. Our fraud and identity management solutions achieved a healthy 22% growth for the year, primarily driven by ID authentication and management solution products. Our enterprise vertical strategy has significantly contributed to our overall revenue growth, allowing us to better leverage our diverse data assets and analytical expertise to deliver top-tier decision solutions. USIS leads our enterprise vertical initiatives. For example, our mortgage vertical grew 25%, and USIS's growth reached 29%, exceeding the average Mortgage Bankers Application Index’s 17% growth for the year. Similarly, in the auto vertical, USIS revenue grew 6%, with total company growth at 9%, both outperforming the general market, which saw vehicle sales increase by around 5%. Recently, our retail banking vertical spurred USIS revenue growth of 17% and total company revenue by 18%. This enterprise focus, coupled with seasoned leadership delivering unique assets to our customers, is allowing us to grow at rates often surpassing the overall market. We have collaborated closely with Fannie Mae to better utilize our information for mortgage loan processes. In late 2015, Fannie Mae decided to incorporate credit data into their underwriting processes for mortgage lending, which we previously discussed. This initiative is expected to contribute significantly to revenue in 2016 and 2017, also indicating a structural change in loan underwriting that may lead to broader applications of trended data leveraging our Cambrian platform. Testing is anticipated to begin in the second quarter of 2016. More importantly, trended data will become accessible to our core credit online delivery system, benefiting all solutions utilizing our credit database. The opportunities for USIS in 2016 and beyond are considerable. Trended data, ID and fraud services, and deeper engagement with targeted vertical markets are projected to contribute significantly to sustained revenue growth. We continue to anticipate top-line growth for USIS in the 5% to 7% range, with adjusted EBITDA margins projected to gradually increase from the high 40s to the low 50s over time. International business saw a 12% local currency revenue growth, primarily due to strong performances in Europe and Latin America. Our three largest verticals—financial institutions, telecommunications, and small and medium-sized enterprises—grew 13% in 2015. Revenue from our decision platforms, analytics solutions, and debt management grew by 12% during the same period. Europe had an outstanding year fueled by broad-based growth in our UK operations, with all industry sectors reporting double-digit growth. TDX has been engaged with the UK government to manage overdue consumer debt since late 2015, and we are seeing slightly better-than-expected performance in this early phase. This opportunity, along with our ongoing sales efforts, is anticipated to drive significant growth for International for years to come. Historically, International has excelled in introducing new products, enhancing market penetration and customer loyalty. Their commitment to innovation continues to support growth, with six international regions accounting for nearly two-thirds of revenue and displaying a robust NPI Vitality Index growth of 10% or greater. As we look to 2016, we plan to broadly implement Cambrian across all international geographies, significantly enhancing our analytical capabilities and growth potential. After moderate increases, we now expect multiyear revenue growth for International in the 7% to 10% range, with a gradual rise in adjusted EBITDA margins from the low 30s to the mid 30s. Workforce Solutions reported 18% growth last year, marking an impressive performance alongside a 510 basis point margin expansion. Core product growth and new initiatives contributed to this success. Verification Services experienced robust growth of 25%, driven by an increase in records added to The Work Number database. Our coverage of individual employment records enhances our service value across key target verticals, including mortgage, auto, consumer finance, government, and pre-employment, all of which enjoyed strong double-digit growth. By year-end, The Work Number database contained nearly 280 million records, with a goal of reaching 300 million. The rise of "instant mortgages" through online applications is creating new growth avenues for automated income and employment verification. We recently secured a major contract with one of the leading companies in this space, highlighting our ability to provide essential credit and employment verification simultaneously, improving efficiency and the consumer experience. Additionally, our Employer Services business within EWS achieved solid growth of 8% in 2015, largely due to our workforce analytics offering. This tool helps employers maintain compliance with the Affordable Care Act and provide necessary tax information to employees. Our workforce analytics business doubled in size in 2015 and is anticipated to more than double again this year. Our client base is approaching 800, and our strong pipeline remains robust. In 2016, we plan to target smaller employers, enhancing cross-sell opportunities with our employee services portfolio. Healthcare-related revenue from income verification and ACA-compliant solutions more than doubled in 2015 compared to 2014. Overall, Workforce Solutions has consistently delivered exceptional performance over the last nine years. Their commitment to innovation and LEAN practices has resulted in impressive revenue growth and margin improvements. Our multiyear expectations for Workforce Solutions have been raised, and we now project revenue growth of 9% to 11%, with adjusted EBITDA margins in the high-40s, expanding to the low-50s over time. Personal Solutions has completed its strategic transformation and is executing effectively against its four-pronged strategy, achieving over 19% local currency revenue growth and positioning itself well for 2016 and beyond. Revenue from our direct and indirect consumer activities has met expectations, with Canada and the UK seeing a 7% growth in 2015. In the U.S., we have seen consistent performance, with increasing average revenue per user (ARPU) and lower subscriber churn. Our direct-to-consumer resellers significantly contributed to Personal Solutions in 2015, particularly with strengthened reseller revenues in Canada and the UK, experiencing solid double-digit growth. In the U.S., reseller revenue was strong, particularly due to a two-year contract with Credit Karma, which we have previously discussed. We have also welcomed a new reseller, LifeLock, signing a multi-year contract recently. With our extensive portfolio of data assets, we foresee additional opportunities to provide a wider range of credit, income, and fraud services to consumers directly and through resellers. Under the new organizational structure, our multiyear revenue growth expectations for Personal Solutions are now set at 5% to 8%, an increase from the previous 4% to 6%. We expect adjusted EBITDA margins to be in the low 30s, gradually expanding to the mid-30s over time. The significant growth in 2015 was largely fueled by the launch of our relationship with Credit Karma, our largest direct-to-consumer reseller, and while 2016 will mark the anniversary of this revenue, we anticipate long-term growth rates for Personal Solutions reverting to more normal levels of 5% to 8%. As we wrap up, I want to highlight some corporate achievements before I hand it over to John for more detailed financials. Today, we are truly a global enterprise with a unified set of processes in place worldwide. Our global structure, culture, and strategic imperatives align our efforts across the board. Over the years, we have globalized crucial management practices to enhance alignment between strategy and execution. This streamlining has enabled us to optimize product innovation and leverage our IT platforms effectively. Additionally, we have improved the investment in our talent and shifted our resources to where opportunities are strongest. This globalization allows us to quickly apply skills and expertise from one market to another, enhancing our processes, products, and personnel. Every department's contributions to our global objectives are measured and evaluated. Our renewed focus on new product innovation led to the launch of 64 new products last year. With a robust pipeline of upcoming launches, we expect significant revenue contributions from NPI growth in 2016 and beyond. Our most diverse growth opportunities stem from our enterprise growth initiatives, experiencing over 20% revenue growth for these large projects year-over-year in 2015, exceeding our expectations by 6%. The new products we launched in 2015 under our refreshed innovation strategy are projected to generate record revenue levels in year three compared to prior launches, marking this as the healthiest product class introduced since NPI's inception. One exciting opportunity involves trended data, which we are investing in and leveraging alongside our unique data assets. We believe that trended data represents a pivotal advancement for information-based solutions, enhancing our competitive edge. Our aim is to trend as many unique data assets as possible to provide significant value to our customers. Lastly, I want to touch on Veda. Regulatory approval was granted in December, enabling us to schedule a shareholder meeting, which took place on February 8th. Following that, we received final court approval this week, and we anticipate closing the acquisition by the end of February. We are enthusiastic about the strategic opportunities this acquisition presents, including strong financial performance and a talented management team. Expanding our presence in the Asia-Pacific region is critical for diversifying our revenue streams. As we move into our first quarter earnings call and beyond, we will keep you informed on the strategic and financial progress made with this new asset. To conclude, our strong performance in 2015 highlights our management team's commitment to innovation and execution for our customers. This culture, developed over many years, supports our confidence in meeting our commitments and satisfying our customers and shareholders. As we enter 2016, our strategic priorities focus on delivering profitable growth and shareholder returns, developing unparalleled analytical insights from our unique data assets, maintaining market leadership through innovation, being a trusted partner for customers and consumers worldwide, and investing in talent to drive our strategy and foster a culture of innovation. With that, John, please take us through the financials.

Thanks Rick, and good morning. As before, I generally will be referring to the financial results from continuing operations represented on a GAAP basis. Now, let me turn to the business units’ financial performance for the fourth quarter. As Jeff mentioned at the opening, all BU information is based on the new segments, with direct-to-consumer resellers moved to PSOL from USIS and International. Going forward, given the substantial amortization expense related to the Veda acquisition, we will increase our discussion of EBITDA for Equifax and the operating segments. U.S. Information Solutions revenue in 4Q ‘15 was $296 million, up 7% when compared to the fourth quarter of ‘14. For the full year, revenue of $1.2 billion was up 8%. This compares favorably to our long-term expectation for USIS of 5% to 7% growth as both mortgage and automotive were very strong in 2015. Online Information Solutions revenue was $204 million in 4Q ‘15, up 6% year-to-year, and $842 million for the full year, up 8% when compared to the prior year. Mortgage Solutions revenue was $28 million in 4Q ‘15, up 10% year-to-year, and $124 million for calendar year ‘15, up 17%. Total mortgage related revenue was up 16% and 17% in the quarter for USIS and Equifax, respectively. For calendar year ‘15, mortgage-related revenue was up 25% and 29% for USIS and Equifax, respectively. This compares favorably to the average Mortgage Bankers Application Index, which was up 14% in the fourth quarter and 17% for the calendar year. Financial Marketing Services revenue was $64 million in 4Q ‘15, up 7% year-to-year, and up $205 million for the calendar year ’15, up 5% year-to-year. The operating margin for U.S. Information Solutions was 41.6% in 4Q ‘15 and 41.9% for calendar year ‘15, up 50 basis points and 290 basis points, respectively. Adjusted EBITDA margin was 48.5% in 4Q ‘15 and 49.7% in calendar year ‘15. We expect to see continued expansion in USIS EBITDA margins in 2016. International’s revenue was $143 million in 4Q ‘15, down 1% on a reported basis, but up 11% on a local currency basis. Revenue was $569 million for calendar year ‘15, down 1% on a reported basis, but up 12% on a local currency basis. By region, Europe’s revenue was $64 million in 4Q ‘15, up 3% in U.S. dollars, and up 10% in local currency. For calendar year ‘15, Europe revenue was $247 million, up 2% in U.S. dollars, and up 12% in local currency. Latin America’s revenue was $49 million in 4Q ‘15, up 2% in U.S. dollars and up 18% in local currency. Revenue was $200 million for calendar year ‘15, up 4% in U.S. dollars and 17% in local currency. Latin America showed outstanding local currency growth throughout ‘15, led by strong growth across Argentina, Uruguay, and Paraguay. Canada revenue was $29 million, down 11% in U.S. dollars but up 5% in local currency. Revenue for calendar year ‘15 was $122 million in U.S. dollars, down 11% in U.S. dollars but up 3% in local currency. Canada’s performance strengthened very nicely in the second half and has momentum going into 2016. International’s operating margin was 20.7% in 4Q ‘15 and 20% in calendar year ‘15. EBITDA margins were 27.2% in 4Q ‘15 and 27% in calendar year ‘15. Both operating and EBITDA margins were down year-to-year in International. However, both showed sequential improvement in the fourth quarter relative to the third. In 2016, we expect to see continued margin improvement driven by continued strong local currency growth and the benefits of regionalization as well as from the addition of Veda. We will see some margin pressure related to weakened foreign currencies, particularly with the Canadian dollar and the devaluation of the Argentine peso. Workforce Solutions revenue was $144 million in the quarter, up 12% year-to-year, and $578 million in calendar year ‘15, up 18% year-to-year. This reflects continued very strong growth in verification services, up 14% in the fourth quarter and 25% year-to-year. Employer Services also delivered a very strong performance, up 8% in the fourth quarter and 8% in the calendar year. This was driven by success in their Compliance Center and offerings and their solution for employers’ compliance with the requirements of the ACA. The Workforce Solutions’ operating margin was 36.8% in 4Q '15 and 37.9% in calendar '15, up 430 and 510 basis points respectively. Workforce Solutions EBITDA margins were 44.3% in the fourth quarter and 45.1% in the calendar year. We expect continued strong expansion in Workforce Solutions’ EBITDA margins in 2016. Global Personal Solutions revenue was $84 million in 4Q '15, up 12% on a reported basis and up 14% on a local currency basis. Revenue in Calendar year '15 was $346 million, up 18% on a reported basis and up 19% on a local currency basis. PSOL’s business has two main areas, credit and identity monitoring services sold through direct and indirect channels that protect and monitor consumers' IDs and enable consumers to gain better access to credit, and credit another data sales sold through our DTC reseller partners. Credit and identity monitoring services sold through the indirect channel represent those circumstances where Equifax provides white label online credit and identity service through partners. In 2015, ongoing revenue from credit and identity monitoring services grew at the high end of the 4% to 6% guidance range we have previously provided for the PSOL segment, prior to the addition of DTC resellers. DTC resellers’ revenue represents sales of credit and other data to resellers. In these cases, Equifax provides data and analytics, but not the web properties with which the customer directly interacts. Examples of this business are our relationships with Credit Karma and LifeLock. DTC reseller revenue showed substantial growth in 2015, driven primarily by our relationship with Credit Karma, which began in 4Q '14. Our DTC reseller revenue should continue to grow faster than our direct-to-consumer sales, but as Rick mentioned, not at the very high rate we saw in 2015. Looking forward, as previously mentioned, we expect this overall segment to grow 5% to 8%. Operating margin was 27% in 4Q ‘15 and 27.5% for calendar year ‘15, consistent with our expectations. EBITDA margins were 29.7% in 4Q ‘15 and 30.2% in calendar year '15. PSOL revenue and operating margin in 4Q ‘14 were very strong, reflecting a large rich deal won in 4Q '14. 4Q '15 operating margin of 27% was consistent with our expectations and our guidance, and reflects the impact of our decision to invest more in marketing in 2015 as well as the addition of DTC reseller business to PSOL. In the fourth quarter, general corporate expense was $51 million, excluding $3.7 million of one-time expenses associated with the Veda acquisition. General corporate expense was up slightly from Q3, consistent with our guidance. For the first quarter of 2016, we expect general corporate expense excluding Veda related acquisition and integration expenses to be in the range of $55 million to $60 million and run at a slightly lower rate throughout the remaining quarters of the year. The adjusted operating margin at 27.1% in 4Q '15 and 27.4% in calendar year '15 were up 60 and 90 basis points year-to-year respectively. Adjusted EBITDA margins were 34.4% in 4Q '15 and 34.8% in calendar year '15. We expect to see improvements in our adjusted EBITDA margin in 2016 expanding by about 75 basis points. Our GAAP effective tax rate for the fourth quarter was 32.6%, equal to our expectation and in our guidance. For the full year, our non-GAAP effective tax rate after adjusting for non-GAAP items, the Missouri State tax law change in the second quarter and the TDX escrow adjustment in the third quarter was 33.7%, consistent with our comments during our third quarter release. Looking forward into 2016, our expectation is for a GAAP effective tax rate of about 33%. Operating cash flow was $205 million in Q4 '15 and $742 million in calendar year '15, both were very strong reflecting strong earnings and working capital performance. Free cash flow equal to operating cash flow less capital expenditures was very strong in 2015 at $596 million, up 12% from 2014. Capital expenditures for the quarter were $53 million, and for calendar year '15 were $146 million. Consistent with our comments throughout the year, the increase in capital spending versus 2014 reflects the acceleration of our investment in new product innovation, deployment of global platforms including Cambrian and other analytics, InterConnect, fraud, and our new PSOL infrastructure. As we look forward to 2016, we expect capital spending including Veda to be in the range of 5% to 6% of revenue. This is consistent with 2015 and reflects a continuation of our current investments as well as some additional spending in the near-term as we integrate Veda. This is slightly higher than our expected long-term rate of capital spending of about 5% of revenue due to the Veda integration. As Rick indicated, we have received Veda shareholder approval and approval from the Australian court to complete the purchase of data. We expect the acquisition to close on about February 25th. The total purchase price, including assumed debt and fees, is approximately U.S. $1.9 billion. At the close of the Veda transaction, we will have debt outstanding of just under $3.1 billion and debt-to-EBITDA on a trailing basis of just under three times. As indicated previously, we expect to maintain our current credit ratings. In 2016, we will focus on using our very strong cash flow for debt reduction and returning our leverage to a level consistent with our current credit ratings. Therefore, we do not intend to repurchase shares in 2016. However, we will continue with acquisitions beyond Veda in 2016 with the goal of delivering on our long-term model of an additional one to two points of revenue growth. Assuming acquisitions consistent with our targets in 2016 and 2017, we would expect to repurchase shares in 2017. As we discussed last quarter, we will exclude Veda transaction and other acquisition expenses and integration expenses incurred in the first year after the Veda acquisition through Q1 '17 in calculating adjusted EPS and adjusted operating margin and EBITDA margin. We will provide information regarding transaction and acquisition expenses incurred with the acquisition as well as integration expenses we expect to incur related to the Veda acquisition after the transaction closes at our Q1 '16 earnings release conference call. Also, Jeff mentioned at the beginning of the call, given the relatively short time we will own Veda in the quarter, our Q1 '16 guidance does not include the impact of Veda, nor the incremental debt costs, including interest expense related to the acquisition. We will provide you details on the impact of Veda on Q1 '16 during our Q1 '16 earnings call in April. The 2016 full-year guidance Rick will provide includes Veda. For 2016, we have assumed Veda will be a part of Equifax for 10 months. Veda revenue for the 10 months is assumed to be U.S. $220 million to $230 million. This includes an estimate of the impact to revenue of U.S. GAAP, which will be updated as we close Q1 '16. The benefit to adjusted EPS from Veda, net of acquisition financing cost is about $0.10 to $0.15 per share. As a reminder, adjusted EPS excludes acquisition amortization expense. For modeling purposes, you can assume an average cost of our Veda acquisition debt during 2016 of about 2.5%. Veda’s seasonality of revenue is similar to Equifax, with Q2 revenue typically the highest from the seasonality perspective; Q1 generally the lowest revenue; and Q3 and Q4 somewhat similar in terms of revenue. The spread between Q2 and Q1 revenue has recently been in the range of 7% to 10%. Now, let me turn it back to Rick.

Thanks, John. Some summary comments before we go to the Q&A. As I have mentioned before to all of you, and as many of you had noted in our conversations and the write-ups, the level of execution and the momentum that this team has generated in 2015 is the best in my 10 years here. So, I think it is truly remarkable what they have done. We are well-positioned for growth opportunities that lie ahead and our ability to take on any of the challenges that may confront us. In coming years, the revenue is going to be contributed from the class of new products that we just launched and expected to exceed our historical leverage that there is wind at our back. Our enterprise growth initiatives including expanding insights-driven Cambrian, healthcare, trended data, and auto will not only enhance our competitive position but also deliver growth opportunities for years to come. All of these efforts are expected, in our opinion, to offset the anticipated slowdown of the U.S. mortgage market, which as you know started to decelerate over the course of 2015. While it’s impossible to predict where the mortgage market is going to go, especially when I looked this morning, the ten-year treasury is under 1.6. Forecast range from down 20% to up mid-single digits. Our forecast that we’ve given you for 2016 is anticipating that the mortgage market will be down single-digits in 2016. And obviously, our expectation is that the team in both Workforce Solutions and USIS, as they have done for many, many years, outperforms that quite significantly. Obviously, if rates continue to stay low as they are, there may be some market upside to what occurs in the mortgage market, and we’ll know obviously as we head deeper into the year. 2016 is yet again expected to be another strong year of performance for the Company. For the year, we expect revenue including the impact of Veda to be between $3 billion and $3.1 billion, reflecting constant currency revenue growth of 15% to 19%, that’s going to be partially offset by about 2 to 3 points of FX headwind. This is consistent with our comments in October that the organic constant currency growth would be at the high end of our long-term range of 6% to 8%. I’ve got to say it again that’s the high end of the range coming off of constant currency growth last year of 12%. So, it’s I think quite remarkable. As John mentioned, we also expect to add another 1 to 2-point of tuck-in acquisitions throughout the year. These additional acquisitions are obviously beyond Veda, which as he said is not included in the first quarter of 2016 outlook. Adjusted EPS is expected to be between $4.95 and $5.05, which is up 10% to 12% for the year. Excluding approximately $0.13 per share of negative impact from FX, this reflects constant currency organic EPS growth of 14% to 15%. For the first quarter, we expect organic revenue to be between $685 million and $695 million, reflecting constant currency organic revenue growth of 8% to 10%, to be partially offset by about 3 points of FX headwind in the quarter. First-quarter adjusted EPS is expected to be between $1.14 and $1.16, which is up 7% to 8%. Excluding $0.04 per share of negative impact from FX, this reflects constant currency organic EPS growth of 10% to 12% for the first quarter. Again, we expect to close Veda in the first quarter, but we’re not including it in the estimate. Maybe during Q&A, we’ll talk about why it’s going to push forward for that one month. In 2016, we are also going to shift our focus to adjusted EBITDA margin that we talk about throughout the call since it better represents the true operating performance of the Company. 2016, we expect our adjusted EBITDA margin to expand by a solid 75 basis points over last year’s 34.8% EBITDA margin. In our modified multiyear business model, we expect adjusted EBITDA margins to be in the upper 30% to 40% range with annual acceleration of at least 25 basis points. So, with that operator, if you’d open it up for questions for the audience, it’d be great.

Thank you. Good morning, Rick and John; and congrats on the strong results. Rick, could you give us your outlook for the health of the consumer by major geographies served? Given some of the trends we’re seeing globally, do you think the consumer will hold up?

Dave, that’s a great question obviously with the volatility we’ve seen in the first five or six weeks of 2016. John and I spend a lot of time with our teams talking about that. I can’t at this juncture draw a connection between equity market volatility and the health of the consumer in our major markets around the world. As you know, we operate in about 19 different countries and have a great pulse on what’s going on with customers, many cases on a daily basis across different verticals, different industry sectors, and combined that with some very smart people internally and externally we leverage on a routine basis, economists that help us think through consumer small business lending trends. And we are not seeing a slowdown in our markets, maybe exceptions here or there but nothing material, David that gives me concern that the forecast we just gave you for guidance is not very attainable. We’re just not seeing that strong correlation. So, at this juncture in our major markets around the world, the consumers continue to be healthy. We described it, I think it was a few quarters ago as in a sweet spot; we still believe that and feel it, and we see it in our numbers.

Great, thank you. And then could you talk about operating leverage for 2016? Most of your margin comments were more mid to long-term which were very helpful. But, we saw Workforce Solutions’ margin up in the fourth quarter, for example, 430 basis points. So, how should we think about sort of margin profile by business segment for this year?

Let me provide you with some overall insights before handing it over to John for more details. I guided at the end that we expect a 75 basis points margin expansion at the corporate level for EBITDA from 2015 to 2016. This indicates ongoing margin growth in businesses that have been developing for some time, such as EWS and USIS, and that trend is expected to continue. Additionally, we strategically invested in PSOL in 2015 to prepare for stronger growth in 2016 and beyond. As a result, you can anticipate margin expansion in PSOL compared to the levels seen in 2015. We also made significant investments in two key areas in International that are now behind us. One of these was the establishment of the UK government contract, which involved a year of investments, and we are now beginning to see revenue flow in, as there was virtually no revenue in 2015. The second investment was in regionalizing platforms, personnel, and processes to create a more cost-effective international model in the long run. Those investments were mainly made in 2015 and are now completed. Therefore, you will see margins in both International and PSOL expanding this year, and International’s margins will also improve with the addition of a high-margin, successful business in Veda. Beyond that, do you have any other questions?

Yes. The only thing I’d add is compliance and security expenses continued to tremendous growth in 2014, 2015, still more substantial investment in ‘16, but we do expect over time those are going to moderate in terms of the increases, although still be substantial. So, we should see some accretion over time related to the moderation of those curves.

I’ll make a statement here, John, correct me if I am wrong, David, to give you a little more texture, maybe to what you’re looking for. If you look at each individual BU and you look sequentially, ‘16 versus ‘15, every BU’s EBITDA margin will go up from 2015 to 2016’s expectation.

You’ll see much larger expansion in the USIS and EWS, as you’ve seen over the past several years; should see some across PSOL and International; and then overall, we will expand, because you’re just not going to see the degradation from the last two.

That’s very helpful, thanks. Just a quick final question. Rick, you called out 280 million Work Number records, which is up pretty substantially. Can you give us a sense of how you’re thinking of the growth of this business, particularly as The Work Number records increase? Are you seeing a much greater hit rate on searches by clients?

David, I believe all four businesses are performing well and have significant growth potential. These areas are still in the early phases of their growth opportunities. It's not just about the increase to 280 to 300 and the hit rate you mentioned; we are just at the beginning. I shared some insights on the growth rates by verticals, which are remarkable. The verification side is experiencing very high double-digit growth rates. We are well positioned in many high-growth markets, and there is several years of growth potential for verification in the U.S. Let me also mention the growth from the analytics platform we've developed for employers. I briefly touched on this earlier without going into detail, but I’ll elaborate now. The demand from customers in various global regions for us to introduce The Work Number platform is stronger than ever. We have a dedicated team working diligently in a couple of key global markets to address the same issues we are tackling here. In summary, the growth opportunity is substantial, spans multiple years, and extends beyond just the U.S.

Hey Rick, I have a couple of questions regarding the trended data. First, I was curious if you could discuss the price premium or the average selling price for trended data compared to the credit snapshot. Additionally, could you share what percentage of mortgages currently utilize The Work Number and what you anticipate that percentage will be at year-end, as well as your expectations for two to three years from now? Thank you.

Yes, your observations were correct. I will not disclose the extent of the pricing increase associated with trended data. Instead, it's crucial to understand the value derived on a return on investment basis from mortgage underwriters when analyzing data over several years compared to a short duration, which justifies the willingness to pay more for trended data. Additionally, I mentioned earlier that we plan to trend more than just credit files; we will also utilize our unique data assets that no one else possesses and begin trending those. Consider the value of trending income data compared to just capturing a snapshot in time, along with trending utility data. I genuinely believe that the trending of unique data assets we possess will lead to innovative products and solutions for the future. Regarding the mortgage market on Workforce Solutions, we do not share specific details. However, there is still substantial growth potential. As David Togut noted, as our database expands, the hit rate increases, which benefits all sectors, including mortgage. We still have opportunities for deeper penetration not only based on hit rates but also on individual accounts in the mortgage sector within EWS, similar to what we see in auto, insurance, credit card, government, and other areas for The Work Number.

If I could just ask a follow-up, I think you left guidance for USIS relatively stable under the new system versus the old. I am just wondering with the opportunity that trended presents to you, why would you not have kind of not set up a little bit?

There are a couple of things, one is short term, as we look at ‘16, and then I’ll go to multiyear, two. For ‘16, there is one primary thing going on there. You’ve got significant headwinds, specifically in the first half of the year in USIS for mortgage. Mortgage’s biggest quarters were the first and second quarters and as we said before, it starts to decelerate in the second half. So, that’s why I left that model consistent for ‘16 Paul. In fact, I think, it would be at the lower end of that range in ‘16, to be very clear with you. And then as far as the multiyear model, I’d rather not ratchet that up; I’d rather do that once I have success under our belt and we see just how big this is going to be. So, I think it’s a little premature business. But at the right time, once we see the success and traction, as you know there is lies in mid-year, and will be a lot smarter at the end of the year and if model justifies being changed at that time, we will.

Great. Thanks, Rick, and congratulations on the Social Security Administration contract. If I could just really quickly ask for the my online social security accounts, how many times a year do you think they’ll verify each of those 22 million accounts on average? Thanks.

Great question, I have no idea.

Yes, good morning gentlemen. Rick, nice to hear, as always, a lot of progress, but it sounds like at least with all of your initiatives, you guys have taken that up one notch like level there. And I think you still have your NPI target of 10%; I know I have asked this many times before. It doesn’t sound like you need to motivate people by taking it up, but at what point do you do sort of push yourselves even further to the target up?

I think of it this way; I did mention that the revitalization in NPI that we launched in late ‘14 benefited in the ‘15 class, one of the strongest classes ever and that bode will well for the next three years. So, it’s moving in the right direction. Two, you always have, as you think about the vitality index, Manav, you get big chunks of product roll off every once in a while. So, making up big chunks of products is harder than it sounds, just to stay at 10%. But three, maybe most importantly, you’ve heard us now talk for about two years around EGI. It’s not about innovation; it is about taking large complicated growth initiatives across multiple geographies and making sure we sustain the kind of growth we need there. And that was, I think 20% growth I alluded to in my earnings call. So look at it totally, and the contributions from NPI and EGI, it is significant. So I don’t feel compelled at this juncture to ratchet up 10%, beyond 10%.

Okay. Regarding the margins, the 25 basis points still appear to reflect a degree of conservatism. What factors are influencing your decision to maintain 25 instead of increasing it to 50?

I think you know us well enough by now; we tend to be thoughtful and maybe a little conservative in our guidance. We guided 25 basis points for 2015, where operating margin was up 90 basis points and guided 2016 with EBITDA margin up 75 basis points. So, I don’t want to starve the business and you heard John talk about investment and CapEx, while was higher than we have historically, the standardized platforms to bring Cambrian global to facilitate faster more profitable growth. So, Manav, I think it’s a Rubik’s Cube and I think that combination of really strong organic growth that we’ve talked to you about combined with margin expansion of 25 basis points. If we can get this business to do that year in and year out and get to our aspiration of goals, we alluded to 40% EBITDA margin, I think that’s pretty damn good. I hope you agree.

That’s fair. And then just one last one from me, I mean I know you said it and your guidance obviously implies as well where you don’t expect a consumer recession. But just trying to understand, like if equity markets operators drag and we do get there, like obviously Equifax today is much different than what it was in 2008, 2009. So, any high-level comments on which areas should hold up and which areas would be a hit?

We do not expect a global recession at this time. If one does occur, our current positioning as a company is vastly different from 2007, especially with our LEAN practices. Our capability to manage global platforms and enhance processes while reducing costs has significantly improved. In 2007, we were still learning about the globalization of our platform and processes, as well as implementing LEAN practices worldwide, which would allow us to respond more rapidly in a recessionary context. Additionally, our product pipeline is much stronger now. We are at the beginning stages of new product introduction; back then, we did not have EGI, so the opportunity for organic growth was limited. Furthermore, we have developed larger counter-cyclical products that perform well in economic downturns, such as our unemployment solution. Our global presence has expanded, particularly with the integration of Veda and their platform. While a global recession might not benefit us, being a larger global enterprise could provide an advantage if the recession is confined to a few developed markets.

Hi Rick. I would like to ask you about the Veda revenue and EPS assumptions that you highlighted for the 10 months included in Equifax. On kind of a like-for-like basis, what type of revenue growth does that assume, and when you talk about the EPS accretion, are you counting on core synergies?

Sure, I’ll address that, and John can add his thoughts as well. Consider Veda as a business that aligns perfectly with our organic growth model, which targets a growth rate of 6% to 8%, leaning towards the higher end of that range. This fits well within our organic growth goals, not just for 2016 but consistently over the years, similar to global trends. Additionally, there are opportunities for smaller acquisitions in regions that are appealing to us at this early stage. Now, what was the second question?

It does not include synergies. So, we didn’t assume any meaningful synergies in 2016.

Yes. I said on cost side. Yes, there really aren’t many cost synergies. In fact, it’d be just the opposite. We’re adding to cost Veda to bring things like Cambrian and InterConnect and other things to help link data and grow faster.

Andrew, if you look at the last reported revenue of Veda and then take a look at what we have just indicated, growth rate for 18 months for that to be in the high single, it’s near 10%.

Okay. And just more on that. Rick, are you counting a lot on comprehensive data being a meaningful impact to the Australian market over the next couple of years when thinking about the Veda acquisition?

The model did not contemplate that, Andrew. I’d tell you what I walked away on my last visit with the team down there more impressed with the way in which contributors have been contributing data, positively I should say. So, it’s not right now in our guidance; it’s not in the model we use to justify buying the company. But I’m more hopeful and impressed now than I was in early days that it will be a meaningful change down the road.

Hi, good morning. You already commented on USIS maybe being towards the lower end of the long-term targets but how about the other businesses; are any of them in position to be above the high end this year or do we think those targets by segment are good places to be for 2016?

The ranges are established for a reason, and we believe they are solid. You may notice some fluctuations from quarter to quarter and even year to year, but over a longer period, those ranges hold up well. EWS is one business that is performing exceptionally well and likely has more potential for growth. Their market is larger and less mature, and they are in the early stages of expansion. If there's one area that seems to have a greater chance of exceeding expectations, it's EWS.

And would that include your commentary about mortgage being much tougher comps still able to be where you are?

Absolutely. I would also mention that, while the mortgage environment is currently down in single digits, we anticipate having to outperform it. If the mortgage market strengthens, we expect that to benefit both EWS and USIS. In the short term for 2016, I believe PSOL may have more growth potential than our long-term projections because they are making significant progress in redefining their model.

And then a question on within International on Latin America, a two-part question I guess. It seems like there is a lot weaker economic activity in a bunch of those markets, and you face a really tough comp. So, how are you thinking about that? And then specifically, can you comment on how much inflation in Argentina is driving the growth of that segment versus volume or unit sales of your offerings? Thank you.

Yes, I don’t think we can break that down. The first part is that what is enabling International to maintain its growth rates, even amidst challenging economic conditions in Latin America and other regions, is innovation. I indicated that the majority of their revenue in these significant markets is generated from new product innovations, which are achieving vitality indexes above 10%. Without these innovative strategies and the advantages from EGI, their performance would not be as strong.

Great. Just one last question. Do you have an idea of what we might expect the amortization and depreciation from Veda to be? Thank you.

It’s early. And obviously, as the transaction closes, these numbers will be updated. But acquisition amortization right now, we’re assuming it somewhere in the neighborhood of $95 million.

Thanks. This is Nick Nikitas on for Jeff. Just switching back to Veda and maybe talking more about some revenue, potential synergies; you mentioned TDX has seen some positive signs in Australia. Do you guys really see that as an opportunity to leverage Veda’s presence throughout the region or if any potential avenues you see to drive additional growth into the future?

Yes. We have a small team in Australia and New Zealand focused on debt management analytics. Having access to a larger sales organization with established relationships will enhance our debt management growth. Additionally, we are gaining a business with strong organic growth opportunities, as well as potential inorganic opportunities. We also plan to introduce products such as The Work Number, Cambrian, InterConnect, and our global fraud platform in Australia. The relationships and market presence in Australia and New Zealand are substantial across all major sectors. They have developed a wide variety of unique data assets, and if we can apply our expertise there to create products, it will serve as a significant growth driver. Furthermore, as Andrew mentioned earlier, when comprehensive or positive data becomes more mainstream, we are well-equipped to manage and build platforms on positive data, which will also contribute to our growth in the future.

We saw a very nice growth rate in the core UK business. TDX continued to provide growth. But we saw very nice growth rates in the core UK business as well. And just to make sure everyone understands my answer. The $95 million for Veda acquisition amortization is an annualized number; it’s not the ‘16 number, it’s an annualized number.

Hi. Thanks, good morning. Rick, it’s interesting the way the way the PSOL business has evolved generally, and direct-to-consumer in particular and obviously Credit Karma was a big win. Can you frame up perhaps the additional opportunities in DTC; is Credit Karma probably the biggest single opportunity you see out there recognizing that the market’s changing pretty quickly and you have some new entrants, or are there other large potential targets too that could be callouts, the way Credit Karma was?

Credit Karma represents a uniquely significant opportunity in the U.S. reseller market, particularly in indirect channels. While there could be further potential in the U.S., I don't believe it’s likely to be substantial. The addition of LifeLock will enhance what PSOL offers. It's also important to consider expanding the Credit Karma concept into other markets where we operate, such as Australia, Canada, and the UK. Additionally, Dann Adams brings a fresh perspective to this business, as he is examining how to leverage our existing assets from EWS, where he has worked for over five years, to strengthen our global PSOL channel. The prospects for long-term growth in PSOL are not only tied to the major indirect resellers but also to the four strategies we discussed and the integration of other data assets into PSOL. It's the latter, and it's significantly so. I envision a time when this business will be much larger than it is today, not only in the U.S. but also globally. Andrew, we will realize in a few years that we have expanded into additional key regions. I mentioned trended data; we are just getting started with it and are developing our capabilities in this area. I must acknowledge that the previous leadership was exceptional; they performed excellently, and I know Dann has been doing a remarkable job, as evidenced by our financial results. We will continue to make progress and elevate this business. It’s not unrealistic to anticipate that at some point, EWS could surpass our core 117-year-old credit business, achieving margins that are equal to or potentially higher than USIS. That's our perspective on this matter.

If regulation continues to extend, the opportunities to expand the compliance business; so it’s not just verifiers; it’s in employer as well, both side of the business.

Thank you. I believe most of my questions have been addressed. In relation to the earlier question about the EWS, it’s evident that there is significant global demand for these solutions. Regarding the U.S., are there any major areas of focus that you can highlight beyond what is already obvious, such as in autos, mortgage, and government? Are there any large sectors that you should pursue but are currently not targeting?

No, I think we’ve got our toes into everything but it’s all relative; I hate this baseball analogy but again, are we in the bottom half of the first inning or the top half of the ninth inning. In most cases, we are very early stages. So, the credit card is important to us, the insurance is important to us, pre-screening is important to us. So, thinking about anywhere we are having affirmation that someone is employed and the confirmation of how much someone makes across almost every vertical, there is a need for that. So, we are into virtually all of them Andre, but there are some; we’re in the very, very early days where penetration has got years to go. I’ll make a statement here; we did mention some things already, relating to clarity and actions around acquisitions and growth. We can’t afford to do nothing. If we did nothing, it would impact our earnings we say is probably zero to the top line. But in most cases, we know what happens from an acquisition perspective; we know that captures margins and helps to increase or stabilize earnings or close the dip of - going between quarters.

Good morning, Rick, John, and Jeff; and congrats on a nice job.

Thank you.