Equifax Inc (EFX) — Q4 2016 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, 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 in the About Equifax tab of our website at www.equifax.com. During this call, we will be making certain forward-looking statements to help you understand Equifax and its business environment. These statements involve a number of risks, uncertainties, and other factors that could cause actual results to differ materially from our expectations. Certain Risk Factors inherent in our businesses are set forth in filings with the SEC including our 2015 Form 10-K and subsequent filings. Also, we will be referring to certain non-GAAP financial measures including adjusted EPS attributable to Equifax and adjusted EBITDA margin, which will be adjusted for certain items that affect the comparability of the underlying operational performance. For the fourth quarter of 2016, adjusted EPS attributable to Equifax excludes acquisition related amortization expense, the transaction and integration expenses associated with our acquisition of Veda, the charge for our settlement with the CFPB which was announced earlier this year, and a charge for the realignment of internal resources which is largely concentrated in the International business segment. Adjusted EBITDA margin is defined as net income attributable to Equifax adding back income tax expense, interest expense net of interest income, depreciation, amortization and the impact of certain one-time items including the transaction and integration expenses associated with the acquisition of Veda, the charge for our settlement with the CFPB, and the charge for the realignment of internal resources. These non-GAAP measures are detailed in reconciliation tables which are included with our earnings release and are also posted on our website. 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 and thank you for joining us especially those who are up in the Northeast have got some inclement weather, we appreciate that. Not a very strong broad-based performance in the fourth quarter completes which I think you will agree with an outstanding year for Equifax. The operating DNA of this company has enabled us to consistently and successfully execute the strategy that we've been pursuing now 11.5 years. With the momentum the team has created, I feel very good as is John about how we are positioned for continued solid growth in 2017; we will talk about that in fair amount of detail in my closing comments. Our performance for the fourth quarter was outstanding as this team sets up and delivered beyond our expectations. Total revenue for the quarter was $801 million, up 20% on reported basis and up 23% on local currency basis from 2015. For the quarter, FX created a $20 million year-over-year headwind. The adjusted EBITDA margin was up 200 basis points year-on-year, up from 34.5% a year ago to 36.5% this year. Adjusted EPS was $1.42, up 25% from $1.14 last year and exceeded the upper end of the guidance range we provided to you, which was between $1.35 and $1.38. And given the strong performance in 2016, the Board of Directors approved an 18% increase in our quarterly dividend, which now is $0.39 a quarter. This is the seventh consecutive double-digit increase in our dividend rate. As I look back at the full-year of 2016 it too was another record performance and one we're very, very proud of on many fronts from integrating our acquisition of Veda, which was the largest in our company's history, to delivering results that exceeded our expectations again on NPI, EGI, LEAN, customer LEAN and just overall execution of many programs across the globe. For the year, total revenue was $3.1 billion, up 18% on a reported basis, and up 21% on a local currency basis versus 2015. For the year, FX created a $75 million year-over-year headwind. Organic constant currency growth was a very strong 12% for 2016. The adjusted EBITDA margin was 35.8% for the year, up 110 basis points from 34.7% in 2015 and that was well above the guidance we provided at the beginning of the year. Adjusted EPS was $5.52, up 23% from $4.50 a year ago and that was up significantly from the original guidance we gave you a year ago, which was between $4.95 and $5.05. Let me go through some of the business unit commentary and I will come back and talk you about some of the corporate highlights and then John will go into the financial details and also talk about framework probably thinking about 2017 as well. First, with USIS, they delivered a strong 7% growth in the fourth quarter ending the year with an impressive 6% revenue growth which was nicely above our expectations for the year. Some individual highlights for USIS: in December, we executed an enterprise-wide agreement with a world-class Silicon Valley firm to provide a number of products including our household income estimate, which will be used by the customers to select consumer audiences towards they want to advertise and promote products. This is a multi-year agreement that we will expect to position us very well in the digital marketing space in 2017 and beyond as our first big foray into digital marketing. We continue to make significant progress with some of our large financial institutions regarding opportunities to assets or Cambrian platform. Our customers are seeking greater speed to market and the Cambrian platform demonstrably reduced development times for months to days. The co-development relationships we created trended data attributes, integrate their customer data and deliver more frequent redevelopment of decisioning solutions. These opportunities significantly enhance our relationships by deeply embedding Cambrian and our local expertise into our customers' development and go-to-market strategies. USIS fraud authentic management solutions continue to trend strong double-digit growth growing 21% for the year. While years it has been a big focus for us, an area where we are continuing to invest in both platforms and capabilities. We also achieved a significant milestone in the year launching online trended data solution for mortgage market with our partner Fannie Mae. This solution contributed significantly to USIS revenue growth in 2016 and will make people more contributions to growth in 2017. Well still early there are some additional very promising opportunities to leverage credit data information to improve decisioning in other emerging categories. Automotive is one that we are very excited about for an example. In 2017, we launched an EGI focus specifically on trended data solutions. Our efforts include all of our major data assets trending data for up to 72 months and across all of our key verticals. We will also apply machine learning algorithms to assist and develop high value credit data attributes. This effort will be globally focused on U.S., Canada, Australia, and key countries in Europe and in Latin America. One last highlight for USIS is our commercial financial network comprises of tradeline data from banking and other financial institutions. Similar to the SBFE as well as communications, utility, wholesale trade, printing, publishing, chemicals, rental, and leasing data on approximately 30 million small businesses that provides very strong market position and enables us to offer our customers very unique and powerful decision solutions. Our CFN data is populated in Cambrian along for decisioning solutions that combine both our commercial and our consumer data. On to international, they delivered 54% local currency growth in the year 2016, organic constant currency growth was a strong 12% driven by double-digit growth in our Latin American and Europe, along with inorganic contribution from our acquisition of Veda almost a year ago. EBITDA margin increased over 200 basis points to 28.3%. Revenue from international's four largest verticals FI, SMEs, Telcos, and government represent almost 84% of organic revenue growing impressive 30% in 2016. Decisioning platforms and local services and debt management revenue delivered organic growth of very impressive 24% for the year. The team has done an outstanding job with the integration of Veda into the Equifax family. As a result, we are rapidly approaching a business as usual state for the business. For the year, Veda delivered the financial performance we were expecting and have previously communicated to you. Equifax COE sort of excellence model has been stood up with a formal operations function, a lean rebuild program, integration into our new product innovation process, and operating process including our global finance and human resource systems. We have also initiated a number of global platform deployments including fraud, Cambrian, and interconnect on an accelerated timeline; those were keys for us to generate incremental long-term revenue as you recall in that part of the world and we're ahead of schedule. We have also identified a number of Veda products that represent a potential to take their products to other segments, other geographies around the world, and our product teams are doing that as we speak. The teams in Australia and New Zealand have collaborated well with their counterparts in the U.S. and international. As a result, this has been one of the smoothest acquisition integrations, we've experienced here at Equifax. Our debt management business in the UK with UK government is performing very well. Revenue for 2016 exceeded the budget; we awarded all six of the founding government agencies and have added an additional agency in the Ministry of Justice. We have signed additional contract for work and development and new debt solutions for HMRC which is the largest entity of the government we are dealing with right now. And most importantly, the team has exceeded the collection performance expectations that the client and we have established a year ago. In December, our UK operations leveraged the partnership we have with a very good global partner LexisNexis and have executed in the UK a 10-year multi-million dollar agreement. We are provisioning data and jointly developing product offerings for their customers in the UK. Latin America continues to broaden its product portfolio, expand its set of solutions with socioeconomic information and geographic analysis to enhance customers marketing decisions in Chile and Peru. New product innovation in Canada is accelerating; and looks very promising for growth opportunities this year and beyond. In the fourth quarter, our Cambrian data analytics platform was launched enabling them to develop powerful trended data solutions for our customers across all verticals in Canada. The Canadian team also won and implemented our first major debt management contracts with very large strategic customer in Canada. And we're also fast forward as we launch our workforce solutions business in Canada, while the services and strategies will differ slightly from our U.S.-based business, we will be able to leverage the IT investments to operating platform and processes we develop accelerating our time to launch in Canada and solve problems for our good customers, we couldn't solve before. Speaking of workforce solutions, what a year they had, yet another outstanding performance, revenue was up 22% for the year, along with a very impressive 310 basis points margin expansion in the adjusted EBITDA margin. That business continue to reinforce power, innovation and execution as we develop new solutions for our customers. Verification services with very strong growth for 2016 was driven by double-digit growth across virtually all verticals including mortgage, auto, consumer finance, government, card, and predeployment. At the year-end 2016, the Work Number database approached 300 million records from over 7,100 companies contributing to that database. We're very excited about Fannie Mae's decision to incorporate our employment and income verification services into their underwriting platform. While the revenue impact for 2016 was minimal, the opportunities for 2017 and beyond are expected to be significant as it positions the workforce solutions as a premier provider of important and critical underwriting decision in the area of VOE and VOI. The auto vertical is a key focus for employment and income verification and we've made great progress in 2016. In 2017, we will further our presence in the industry through the partnership with Pfizer. As some of you may already know, we recently announced a partnership with Pfizer which integrated our employment and income verification services into their automotive loan origination system. Pfizer was one of the top providers of loan origination and servicing systems completing almost 5 million originations in 2016. Customers will now be able to quickly retrieve income deployment data and approve applications quicker for fewer stipulations and errors. Employer services had also had outstanding year in 2016 growing 24% for the year. Unemployment claims, I9, and tax management services which represent almost 80% of employer services revenue grew a very good 7%, particularly impressive given the very low unemployment claims environment. Our Workforce Analytics business, which provide solutions to allow employers to ensure their compliance with the Affordable Care Act grew substantially in 2016. John will provide more detail in our ACA-related revenue in 2016 and the expectations that we have with the regulatory changes we expect ahead of the earnings financial review that follows. On to our Global Consumer Solutions, they grew 16% for the year and on reported revenue an 18% growth on local currency basis. That was just an outstanding performance. GCS also delivered a 30.3% adjusted EBITDA margin for the year. Our direct to consumer resellers which include great partners like Credit Karma, White Rock and a number of others are driving good growth for us. In the fourth quarter, we signed a multi-year contract extension with Credit Karma representing almost comprehensive and largest in the company's history. They will also be using our Cambrian platform to provide greater credit insights to their consumer base and to better target more relevant offers. As many of you know LifeLock has been acquired by Symantec who operates on a global scale. We have a very good relationship with LifeLock and view this project as we anticipate even more opportunities for global expansion and revenue growth for GCS. International revenue for GCS was up a solid 7% for the year. Finally, we completed development of our new platform for GCS, we call that Renaissance. We talk about that before, it gives us great flexibility in building changing product offerings to the market and that is now going for GCS. Well John will give his comments on the financials, let me transition back to corporate and talk about a few highlights at the corporate level. I will start with our 2016 class and new product launches, it was the strongest in the history of our company. For the year, we launched 53 products and our NPI revenue was 9.2% overall our target for the year. We feel very good about our ability to continue driving meaningful growth through our innovation process. Over the past few years, we have re-launched NPI we've talked to you about this; we called it NPI 2.0 that was really focused on increasing the funnel of ideas and improving our execution and importantly shortening our time to revenue. I can tell you that the NPI 2.0, the great work that the marketing team has done is working. As a result, the anticipated year three revenue for 2016 launch is expected to be almost five times what we expected full-year revenue to be from our 2014 launch; that is really impressive. And the pipeline on 2017 launches is off to a great start with an initial portfolio of 106 products in the funnel. Also, our data and analytics platform Cambrian has significantly enhanced our product development cycle time and quality and value of our new offerings, the technology infrastructure continues to support our growth initiatives, the contemporary platforms or global capabilities include fraud, the consumer solutions, we did Renaissance, Cambrian, and our interconnect just to name a few. Operationally, our enterprise growth initiatives exceeded their target by almost 50% for the year that bodes well for 2017. And our lean initiatives exceeded their target by almost 30%. On the regulatory front, we most likely read that we reached a settlement with the CFPB and the CIV rate issues in connection with our Global Consumer Solutions business. The settlement requires changes to be made in how we market, to interact with our consumers who come to our website at www.equifax.com, many require changes were implemented more than two years ago, this settlement and our obligations under it do not change in any way the opportunities for the financial health of that business. Additionally, the CFPB has closed their CIV investigation of the Workforce Solutions business that we talked about in the past with you. Obviously, we're going to have both of these issues behind us. That's my opening comments. With that, let me turn over to John for some financial details and I will close out the call before we go to Q&A with a look at 2017.

Thanks, Rick, and good morning everyone. Before I will generally be referring to the financial results from continuing operations represented on a GAAP basis. USIS revenue in the 4Q 2016 was $316 million, up 7% when compared to the fourth quarter of 2015. For the full year, revenue of $1.2 billion was up 6%. This compares favorably to our original expectations for USIS to be at the low-end of their 5% to 7% growth. The adjusted EBITDA margins for USIS was 51% in 4Q 2016 and 50.2% for calendar year 2016, up 230 and 40 basis points respectively. This is the first time USIS has delivered full-year adjusted EBITDA margins in excess of 50%, an outstanding performance. Online information solutions revenue was $211 million in 4Q 2016, up 4% year-to-year and $879 million for the full-year also up 4% when compared to the prior year. Total mortgage-related revenue was up 41% and 36% in the quarter for USIS and Equifax respectively. We also saw a mix shift towards mortgage solutions versus online in 4Q versus 3Q. For calendar year 2016, mortgage-related revenue was up 25% and 24% for USIS and Equifax respectively and represented just under 18% of total Equifax revenue. Our 4Q and calendar year 2016 growth compared favorably to the average mortgage bankers application index, which was up 1% in the fourth quarter and 17% for the calendar year. Mortgage solution revenue was $36 million in 4Q 2016, up 29% year-to-year and $142 million for the calendar year, up 15%. Financial Marketing Services revenue was $69 million in 4Q 2016, up 7% year-to-year and up $215 million for calendar year 2016, up 5% year-to-year. Identity and fraud solutions also continue to grow strongly, up 15% in 4Q and 21% for calendar year 2016 driven largely by our multi-factor authentication and IT management solutions. U.S. direct to consumer revenue principally our online revenue with other CRAs was down almost 30% in the quarter and 20% for calendar year 2016. The decline in these customers negatively impacted USIS growth by over two points in 4Q 2016 and approximately 1.5 in 2016. The impact on OIS in 4Q 2016 was over 300 basis points, up over 100 basis points from the impact in 3Q 2016. Workforce Solutions revenue was $174 million in the quarter, up 21% year-to-year and $702 million in calendar year 2015, up 22% year-to-year. The Workforce Solutions adjusted EBITDA margin was 45.8% in 4Q 2016 and 48.2% in calendar year 2016, up a very strong 150 basis points and 310 basis points respectively. This reflects continued very strong growth in verification services, up 24% in the fourth quarter and 20% year-to-year. Employer Services also delivered a very strong performance up 15% in 4Q 2016 and 24% in calendar year 2016. As Rick indicated, our unemployment, I9, and tax services products offered independently and through our compliance center offering represent almost 80% of Employer Services revenue and grew stronger than expected in 4Q, up 16% with organic growth of over 10% and up 7% for calendar year 2016. Our ACA Solutions delivered high single-digit percentage growth in 4Q 2016. As a reminder, total revenue related to the Affordable Care Act in 2016 was only 2% to 2.5% of Equifax total revenue. Approximately 75% of that revenue was in workforce analytics, a part of employer services, which provides a service to ensure employers are in compliance with the employer mandate of the ACA, margin for these products are below the average for Workforce Solutions. The remaining 25% is in verification services, where it provides current income validation for people who enroll in the Healthcare Exchange through Federal or state sites. This was part of the means test and had margins higher than the Workforce Solutions average. Our current planning reflects the expected repeal or substantial modification of the ACA including an expected transition period, so that the repeal or modification takes effect in 2018 or later. As such, we expect our ACA revenue to be about flat in 2017 with 2016. Combined revenue for USIS and Workforce Solutions, our total U.S. B2B revenue was $490 million in 4Q 2016, representing growth of 11%. Full-year revenue was $1.9 billion also up 11%. International's revenue was $212 million in 4Q 2016, up 49% on a reported basis and up 62% on a local currency basis. Revenue was $804 million for calendar year 2016, up 41% on a reported basis and up 54% on a local currency basis. Constant currency organic growth in international was a strong 13% in 4Q 2016, the strongest quarterly organic growth for the year and 12% for calendar year 2016. International's adjusted EBITDA margin was 30.3% in 4Q 2016 and 28.3% in calendar year 2016. By region, Europe's revenue was $64 million in 4Q 2016, up 4% in U.S. dollars and up 21% in local currency. For calendar year 2016, Europe revenue was $254 million, up 7% in U.S. dollars and up 18% in local currency reflecting the impact of the sharp drop in FX rates in the second half due to Brexit. Latin America's revenue was $48 million in 4Q 2016, down 4% in U.S. dollars but up 11% in local currency. Revenue was $184 million for calendar year 2016, down 8% in U.S. dollars again but up 12% in local currency. Latin America showed outstanding local currency growth throughout 2016 led by strong growth across Argentina, Chile, and Paraguay. Canada revenue was $31 million, up 4% in U.S. dollars and up 4% in local currency. Revenue for calendar year 2016 was $122 million flat in U.S. dollars, but up 3% in local currency. Asia-Pacific revenue was $71 million in 4Q and $244 million for the year. As Rick mentioned, for 2016, data performed well and ahead of our expectations. Global Consumer Solutions revenue was $99 million in 4Q 2016, up 18% on a reported basis and up 20% on a local currency basis. Revenue in calendar year 2016 was $403 million, up 16% on a reported basis and up 18% on a local currency basis. Adjusted EBITDA margin was 34.5% in 4Q 2016 and 30.3% for the calendar year. Our B2C business grew over 35% in 4Q 2016 and was up 60% in calendar year 2016. Our consumer business both directly through Equifax.com and through indirect white label applications grew almost 5% in 2016 despite the tremendous growth in free offerings that drove the growth of our B2C business. In the fourth quarter, general corporate expense was $69 million. Excluding the integration expenses associated with the Veda acquisition, the CFPB settlement, and the realignment charge, general corporate expense was $56 million and in line with the expectation we indicated during our 3Q earnings call. For calendar year 2016, corporate expense excluding the Veda integration expense and the other one-time items was $210 million, up from $198 million or 7% from 2015, driven by an increase in technology spend as we expand our global technology platforms. Adjusted EBITDA margins were 36.5% in 4Q 2016 and 35.8% in calendar year 2016, up 200 basis points and 110 basis points respectively. Our GAAP effective tax rate for the fourth quarter was 31.7%. This was modestly lower than expected primarily reflecting a decrease in the tax rate in some foreign jurisdictions. For the full-year, our non-GAAP effective tax rate was 31.8%. Looking forward into 2017, our expectation for the effective tax rate is approximately 32.5%. For 1Q 2017, our expectation is for the effective tax rate to be slightly above 33%. Operating cash flow was $260 million in 4Q 2016 and $785 million in calendar year 2016. Free cash flow equal to operating cash flow less capital expenditures was very strong in 2016 at $618 million. We expect free cash flow to be up again in 2017 however as in past years; 1Q will be weaker than the other quarters due to employee variable compensation payments following a very strong performance in 2016. Capital spending, which includes our capital expenditures in the period plus commitments we have made that will be paid in 2017, were $53 million in the quarter and $192 million for calendar year 2016 just over 6% of revenue. As we look forward into 2017, we expect capital spending to again be about 6% of revenue and in the range of our long-term model of 5% to 6% of revenue. Total debt at year-end was $2.67 billion. We continue to reduce our leverage following the Veda acquisition which is now down to 2.39 times EBITDA. Depending on the pace of acquisitions, we expect to be repurchasing shares again in the second half of 2017. Now let me turn it back to Rick for a discussion of our 2017 outlook, for perspective, the outlook for 1Q 2017 and 2017 that Rick will discuss is based on foreign exchange rates as of February 1, 2017.

Thank you, John. I will begin with a brief overview of the company and then share some thoughts at the business unit level before opening the floor for questions. In summary, 2016 has been the best year since I joined the company over 11 years ago. Each business unit performed exceptionally well, applying our core strengths such as talent acquisition, product innovation, growth initiatives, value-based pricing, enterprise channels, and marketing. These strategies, refined over the years, are essential to our overall strategic goals and will be important for a strong 2017 and beyond. In our October earnings release, we shared our preliminary revenue growth outlook through 2017, expressing confidence in achieving growth at the upper end of our long-term financial model of 7% to 10%, based on a stable mortgage market. However, following the elections, the mortgage market outlook worsened significantly, with estimates indicating that originations may decline by double digits in 2017. We currently expect mortgage originations to decrease by about 50% next year and be flat or slightly down in the first quarter. Moreover, we anticipate ACA revenue for 2017 to remain flat compared to 2016. Together, the mortgage and ACA outlook represents about a 3% challenge to our 2017 growth compared to our previous expectations. Despite this headwind, we are confident in our ability to counterbalance the mortgage and ACA impacts and achieve total constant currency revenue growth in 2017 at the higher end of our 7% to 10% range. We are closing 2016 with strong momentum driven by new product innovation and anticipated growth in our non-mortgage sectors, including USIS and Workforce Solutions, alongside continued strong performance from GCS and International. Consequently, our guidance for 2017 estimates total revenue between $3.375 billion and $3.425 billion, reflecting a constant currency revenue growth of 8% to 9%, partially offset by approximately 1% from foreign exchange challenges. We expect adjusted EPS to range between $5.96 and $6.10, which represents an increase of 8% to 10% year-on-year, excluding a slight negative impact from FX. This corresponds to constant currency earnings per share growth of 9% to 11%. We also expect adjusted EBITDA margins to expand by at least 100 basis points for the full year, following a 110 basis point expansion in 2016. Looking at individual business units, we anticipate USIS growth to be slightly below their long-term range of 5% to 7% due to the weak mortgage market. Despite this, EBITDA margins are expected to rise slightly from strong levels achieved in 2016. Workforce Solutions is projected to grow at or above the high end of their long-term range of 9% to 11%, despite a struggling mortgage market and flat ACA business. EBITDA margins there are also expected to increase from solid 2016 levels. GCS is expected to continue to grow above its long-term range of 6% to 8%, with EBITDA margins remaining around 30%. International growth is expected to exceed the long-term model of 8% to 10%, driven by record NPI organic growth and contributions from the Veda acquisition, which will represent about two months of additional benefits in 2017. We foresee a nice increase in EBITDA margins to around 30% for International this year. For the first quarter, total revenue is expected between $822 million and $826 million, reflecting a constant currency revenue growth of 14%, with almost 1% impacted by FX. Adjusted EPS is projected to be between $1.39 and $1.42 for the quarter, reflecting an increase of 13% to 15% year-over-year, excluding a minor negative impact from FX. This indicates organic growth of 14% to 16% in constant currency for the first quarter. Before we proceed to the Q&A, I would like to acknowledge a very important partner, Jeff Dodge, who after 25 years with the company has announced his retirement. We all appreciate Jeff for his incredible contributions over the years. We will have time for farewells and a party for him later. I'm also pleased to announce a smooth transition plan, with Doug Brandberg taking over the IR role. Doug has extensive financial experience and has been with us for many years. I am confident this transition will go well. Thank you, Jeff, for your 25 years, and welcome aboard, Doug. Now, operator, let's open the floor for questions.

Hi, good morning and congratulations on a strong quarter. I appreciate the insights on mortgage. Can you provide more details about the challenges in the Workforce Solutions business? Also, with the strong growth you're projecting, what areas do you expect to drive growth to counteract the anticipated decline in mortgage volumes throughout the year? Thank you.

Yes, thanks Gary. I appreciate the opportunity to respond. This is Rick, and John will add his thoughts as well. Overall, I want to highlight three challenges we’re facing, particularly from the mortgage sector and a bit more from Workforce Solutions. While we don't provide specific figures separating EWS and USIS, I believe you have enough data to make a reasonable estimate. The mortgage segment is crucial to Verification Services and has always been significant for EWS. We have confidence in our ability to manage these challenges, especially with our 11-year renewal history. Our pipeline is impressive; the success of our NPI last year was extraordinary, and we anticipate that our revenue this third year will be five times what it was in 2014, which is remarkable. We aim for thorough reviews with Greg Locker and his team as we prepare our product pipeline for 2017. We have 106 products in the pipeline that are of exceptional quality. Although we won't launch all 106, we feel very confident in the number we will launch, which are expected to generate significant income. Secondly, our enterprise growth initiative, which we've been implementing for about seven years, is projected to yield a record year. I mentioned this in my 2016 remarks, and it sets us up very well for 2017, as our team has consistently delivered for our customers over the past seven to ten years.

EDS EWS performance in the fourth quarter is outstanding, showing over 20% growth, indicating that we are not experiencing a slowdown. However, as Rick mentioned, there will be an impact from mortgages next year, and some of the growth we saw in 2016 from the ACA is not expected to repeat. Nevertheless, the rest of the businesses are performing very well.

Gary one last thing, one final color might be that another contributor to incremental growth in 2017 is going to be slightly improving economies in some major places in the U.S. will be modestly better in our opinion, UK will be modestly better for the full-year and Spain will be modestly better, I mentioned this before Argentina we are confident Argentina will have a GDP perspective most better year in 2017 versus 2016. So again global so modest global economic health and 80-plus percent of all the revenues is non-mortgage where we did 15%, 17% mortgage closed. So economies tend to grow that tends to help our core business.

Great, thanks. And then just one quick follow-up, you mentioned this digital marketing opportunity in a Silicon Valley company. Could you help us understand what exactly that opportunity is what you are providing and should we think this is more of a one-off or the beginning of what you see is it incremental new opportunity?

It's a brief overview that I will pass to Gary. We’re collaborating with top firms in Silicon Valley, and this partnership is proving to be a significant revenue source for us this year. More importantly, it’s enhancing our reputation in the digital marketing sector as we develop products and solutions alongside these leading companies. Think of it as a sales initiative.

Good morning and thanks for everything over the years Jeff.

Yes Dave, thank you. You are welcome.

You're welcome.

Rick I appreciate you calling out the expected headwind from mortgage for 2017 putting some numbers around it. I noted that you grew 25% in mortgage in the fourth quarter despite the NBIA being up only 1%, so in that 3% headwind you are calling out, are you sort of baking in a very significant impact from mortgage in line with the NBIA outlook or are you incorporating some continued expectation that you would likely significantly outgrow the mortgage market as you have in the past?

Great question, David. So the commentary on the guidance was for the mortgage market to be down 15% and equates to three points of headwind for us. Our expectation as you kind of noted there is to continue to innovate and gain share build new products and grow at much faster rate in the market or in this case decline at a much slower rate than the mortgage decline.

Got it. And then just as a follow-up, if you could talk about some of the other big drivers of consumer credit reporting demand for 2017 for example, auto, credit card, what is your outlook for those?

Yes, for us if you think about the enterprise channel what we use we will take all of our products in EWS products and credit products, we are expecting automotive to be as a market relatively flat with 2016, we expect credit card issues to be up, we expect mortgage to be down. Then when you look at other markets, home equity lending to be up on the mortgage side, it's a tale of two stories refinancing will be extremely negative make sure it's the exact number but home sales is expected to be up, and then when you think about businesses in that environment, you think about EWS and even though automotive is a marketplace is expected to be flat, we expect significant growth in EWS because we are widely penetrated. We talked about the Pfizer partnership which gives us a platform to fully distribute our products to them. So we've got improving markets in some cases, stable markets in others, and declining in others; in aggregate that's why we get the kind of forecast we gave you for USIS but also continued strong growth in EWS because of market penetration I think is still significant.

Understood, thanks. Nice to see the 18% dividend increase.

Thank you.

Good morning and thanks for taking my question. Two quick ones. One of the things that I think folks always try and contemplate with your guidance is how conservative is it, how comfortable do you feel with that, is often you sort of raise that guidance through the year, given that you sort of accommodated this 3% headwind that you originally didn't, can you comment on how much comfort you have with that achievability or conservatism in that guidance?

Brett, this is Rick. We take obviously as most companies do, the framework of guidance extremely seriously to all parts of business John and I and many others from the company and we go into a period like this on a quarterly basis with updated guidance with those all the facts we possibly have at our fingertips and we give guidance following any unforeseen macro changes we cannot expect to follow through may be but we give guidance we think we are very likely to attain. So I wouldn't call it conservative, I just call it, it's balanced and it's based on all the facts I hope it's done.

Okay, thanks. And then you talked a little bit about qualitatively some of the new products that you have been working on including TDX or the new project and some things like that and you said they are going to be good in 2017, is there any qualitative measure that you can start putting around those four so we just get a lot of questions from investors on that?

Let me respond to that, and then John will add his thoughts. The qualitative framework we are sharing with investors regarding our ability to maintain growth across two segments is important. The product class from last year, which lasted 53 months, is the strongest we have ever had. We anticipate revenue to be five times higher than in 2014, and when combined with EGI, it continues to perform well, which is promising for 2017. Our enterprise focus has a wide scope and allows us to budget for a pipeline of 106 new products this year. These are all the qualitative aspects I've mentioned that we have been focusing on regarding innovation.

Okay. And then just one last question anything in the guidance from the change in the stock-based comp accounting rules?

Yes, so we have assumed that we are going to remove that from our non-GAAP reporting. So we will just exclude that, since it will be very difficult for us to forecast the impact of any given quarter, our current thinking is we will exclude that. To the extent there becomes a trend in either direction that makes us have to revisit that decision, we certainly can but our guidance assumes that it will be excluded.

Okay. So it's an apples-to-apples to 2016?

Absolutely, yes.

Thank you. Your ability to offset these mortgage challenges reflects a certain resilience in the model. Could you discuss how changes in your mix or diversification over the past two years have influenced your sensitivity to macroeconomic cycles? This seems to be an evolving trend, but does this signify a turning point in that regard?

Yes great question. I think Ramsey the change really started strategically and then exactly from an execution perspective 10 years ago when we made the decision to pivot from being solely dependent on credit based data assets and largely U.S. geographic exposure to a units assets company with more geographic focus in just in U.S. and secondarily when we have the technology platforms invested in data assets or ability to build products and innovate and where you see that we have never done before, you navigate changes in macroeconomic environment that we couldn't do before. As you know, that process takes time we launched with the acquisition of TALX and NPI back in 2007 we gained momentum that we had a recession and we come out of the recession with this great robust processing capability and we continue to add the data assets and done nothing but mature, mature, mature get better every year, talk about the NPI 2.0 we launched with product innovation, we've got to reinvent and reinvigorate innovation that's paying great dividend, I should say.

That makes a lot of sense. I mean given sounds like your guidance obviously your 2017 guidance would have been 3% higher without mortgage and ACA. And it doesn't really sound like you had to put any emergency plans into effect, it seems like a lot of the stuff was in the pipeline already. I mean is the implication of your long-term guidance is getting to be a little bit too conservative for those factors?

I don't know, I think about 118-year-old company growing top-line and bottom-line and NPI and EBITDA margin that has been certainly conservative. I think it's something we are very proud of. That to your point there are no emergency plans that have been pulled off the shelf it's just that one thing it'll reflect back upon the quality of the solutions we developed last year in NPI and you had the hindsight of pretty similar months of visibility that was just stronger than we expected then.

To be specific in our long-term model we are not envisioning change in the long-term model.

Thanks good morning. I know you guys have talked a bit about the use of trended data potentially going to other loan categories besides mortgages. I was wondering any color you can give on how those conversations are going about the tradeoff between cost and incremental lift to some of those categories and how are you thinking about making it more cost-effective for say lower dollar value categories like credit cards.

Yes, I think Andre we are making great progress like I mentioned in my prepared comments that we are not looking Cambrian gives us great ability to use all of our data assets we never could before. And this will be a needle where we are going to take all of our data assets and use to our company, putting in Cambrian turned about 72 months in some cases actually application value will be determined on the ROI if the customer gets them. I mentioned one more seems to be very helpful is automotive. Obviously we are doing mortgage undoubtedly another top routinely about you need to get to a point that no longer talking at 5,000 foot level at an industry about where you trended, you go to look at what type of data are you trending, how long are you trending it, what vertical you are looking at, what geography and what vertical and which sub-vertical and vertical, so is the automotive improved, sometime with the list you get there and then hence with those value, you can determine the price. We've made great progress there and we'll continue to make very good progress. I'm confident over the prior year, we have earnings calls update we will continue to have visibility throughout this. Next step is the on payment.

And then just one follow-up on Personal Solutions, I know you said you expect the growth there to remain above your long-term trend. It is definite in the case over the last couple of years. Any color you can provide on how you expect the growth for the direct versus indirect channel?

Obviously the indirect channel has been and will be a greater revenue contributor. But we expect growth out of both and we expect growth globally, not just in the U.S. and I think one of the things you can't underestimate is the multi-year journey that that business has been on to build, launch, and work globally, we in fact we call it Renaissance it's our platform and the goal that gives you on the direct side to build, modify, launch, and create products much faster than we ever did before, create a user interface that is much more friendly not knowing to do in the past as well. So that would be a great enabler for growth for those guys.

Hi guys, thanks. Just can you elaborate on the trends you're seeing in Europe, the growth continues to be incredibly strong. I know, you talked about the TDX contract? But I mean this is more than that, so I mean can you talk about a bit more about what's driving the strength there and connect, can you determine?

Yes, I think strategically, Tim, it's the same that goes to the world, you are saying that the ballpark in EDI and EPI. So the core processes we will use to grow around the world, it's on Europe. In addition to those core processes, yes you do have the industrial contract, TDX contract. And you know TDX is not just in the UK, TDX is now part of our debt management strategy globally but is revenue being generated beyond just investor or government contract in the UK. Beyond that as I mentioned in my comments we are seeing a modestly improving economic environment even with Brexit in the UK, we are seeing really good performance by our team and we are seeing that for years now, we continue to really good job and executing core growth in NPI and EGI. So it's broad-based.

Thank you. It seems that international margins play a significant role in the margin story as we anticipate above-average expansion for 2017. Is this primarily due to growth leverage, or are there savings from the realignments you've implemented? Additionally, what factors are contributing to a faster expansion as we approach 2017?

Great question. One we did great framework, the commitment we have given you our investors and ourselves is to continue to drive EBITDA margin up to that 40% range, approximately 40% once we've carried around including international. So you continue to see us through a couple of things. We took after reposition the business to take inefficiencies out and we've done a lot of that and we've not slightly short from on this earnings call to do just that. Number two for years now we have been at the standardization of technology platforms around the globe where you can transfer platforms from U.S. with one part of the world to another part of the world take cost out drive efficiency. So those are the two main things we have done and third if you do acquisitions over time those acquisitions become more efficient that will run and as the incremental margins. So those were and I think we guided long-term model for international in the mid-30s and you are seeing a nice step up in 2016, you'll see another nice step in 2017.

Congratulations on the strong quarter guys and Jeff congratulations on your pending retirement. Rick I think you mentioned you expect margins will expand at least 100 basis points in 2017, which is obviously, well in excess of the 25 basis point annual target you've talked about in the past. As you think about our models in 2018 and beyond, I'm wondering if 25 basis points is still sort of the right number and then I have a follow-up.

Our goal is to manage investment levels to achieve the growth rate desired by our customers while addressing price requirements and maximizing margins. We aim for a growth rate of 7% to 10%, with an EPS growth of 11% to 14% over multiple years, and at least 25% margin expansion. We have set a target to reach a 40% margin. In some years, like last year, we achieved a 110% increase, and this year we anticipate margins to expand over 100 basis points again, while there may also be years with a decline of 25 basis points. It's important to focus on the long-term growth of revenue and EPS as we work towards that 40% margin.

Got it. That makes sense. And just sort of as a follow-up I wanted to ask about Global Consumer Solutions margins which were up obviously very nicely compared to the fourth quarter of 2015 is there anything to call out there that was sort of one-time high margin revenue or anything else that might be driving that?

No I think the fourth quarter that the investment and marketing was a little lower than normal. Actually you're seeing margins a little higher than you would normally see. And then if you remember, earlier in the year they had quite a bit of expense to onboard a new major customer LifeLock and that was pretty much completed by the time you got to the fourth quarter. So you put those two things together and our margins look a little better. That's why we indicated we expect next year's margins to be slightly over 30%, but on average that's where they played out this year, we would expect the same type of thing to play out in 2017.

Thank you. Good morning, everyone. Rick, you mentioned many positive aspects, but you saved the most challenging news for last with Jeff's retirement announcement. Congratulations and thank you, Jeff. I hope we still have some time with you. My first question is about the 3% headwind you are experiencing. I understand this is clearly a reflection of your NPI initiatives, EGI, and so on. Regarding the components of that offset, did you have to shift towards different products or areas that might perform better in a rising rate environment, or was this something you already had in your toolkit that you are now utilizing?

Yes, it's more the latter in pivoting on product innovation is always speed but you can just quickly change it is a pipeline that's been developed for quite some time and really what happened look Manav, is we gave guidance, sort of framework, you shouldn't call guidance in October and that was a value of the time looking back in February, number of prices launched already are out that are being used are at a one rate far higher than we had thought, we could achieve at that point in time. So it's really more the latter rather than pivot to say it was launched our products do well high in share development.

Got it. And then in Workforce I think you said you guys are launching in Canada. I guess what I'm trying to just understand is, how we should think about the timeline on how that plays out?

Yes, please be patient with us. We have the capacity to make several investments for the long-term benefit of our shareholders and customers. Our international presence includes Canada, the UK, and Australia, among others. Latin America has a longer-term outlook compared to Vietnam in 2017. We are diligently working to improve our margins and evaluate our assets. For example, we made significant investments in the fourth quarter and will continue to invest in 2017 while enhancing our international capabilities. We're committed to maintaining a mid-50s EBITDA margin for EWS year after year. Additionally, think about the revenue generated internationally aligning with the 2018 to 2019 timeframe.

In terms of your concerns about Jeff Dodge, let me hear from your end, you can do a farewell super. You'll have an opportunity to see him again don't worry.

That's okay. I think it's going to be a revenue generator.

That's fine. I think Jeff will find his continued contribution.

Great, thank you very much. And congratulations I wonder the new administration being so pro-growth as you think about growth opportunities obviously seeing being a potential headwind but there are other areas that could be sources of growth as the government tries to enhance economy beyond traditional GDP. And is there any sensitivity beyond that we've been in this less than optimal GDP environment to the extent we do get 3%. How does that impact the longer-term organic growth target?

Kevin may be three points; obviously strength in the overall economy is good for us. Our customer who go to faster rate that helps us do more. Number two, corporate tax reform, if corporate tax reform is passed in a comprehensive manner the ability to companies to generate more earnings and best practice and that ability to grow, which will help us grow that's beneficial to us. Number three is if there is a meaningful change in the regulatory landscape that helps our customers, be able to attract more customers underwrite more products and expand those are three areas that all help us.

Specific to us corporate tax reform we're likely on the good side of the ledger, positive. We have been specific about how much, and we'll have a way to wait to see what it looks like. But generally speaking, it would be a positive forever.

Great, congrats on another nice quarter guys and Jeff congrats on your retirement, it sounds like we'll have a fair amount of time to tell about you, which is good. Rick and John I'm going to trying to ask this question a bit of another way but if we sort of look at 20% of your business between ACA and mortgage being down effectively double-digit. That means the other 80% to get to that 8% to 9% constant currency growth for the whole company that's up almost kind of in the mid-teens. And I'm just wondering if you might be order to rank order, what are some of those drivers whether it would be verticals or geographies that really stand out for you to give you that strong growth?

Let me see if I can deconstruct your view which is a good view as stated it is in the teams you also have not too much of Veda benefit in 2017 than you have in 2016 so that's part of the contributor. Then what you are saying is true, you have very high once again very high kind of organic non-mortgage, non-HCA growth and there is no magic there, George that is the same thing we've been doing in NPI and ETI. So it's truly broad-based and if I went through I can't remember that's an example I think I gave and even U.S. the number of verticals have grown double-digit, I can do the same thing in international, I pick different countries and different verticals of different countries, I can take that verticals in the USIS and see how they are growing. It is so broad based, it's not one vertical, it's not two verticals it's not one part, two parts it's a combination of all those things coming together. And as Rick mentioned in his script we are seeing continued very strong double-digit growth out of EWS and then out of international and then GCS growing above their long-term model rate. So the areas of growth are really concentrated there. USIS still performing well relative to mortgage but the growth is concentrated in those businesses as we have talked about.

Hey good morning. Thanks for squeezing me in here. Very thorough job as usual Rick, the comments on data and in particular are pretty encouraging. I'm wondering if you could frame up a little bit what the internal growth rate is there and how much that might be contributing to the 2017 organic growth as that business anniversaries.

Yes, I think we bought the company we bought it because it was a great franchise, it was a great cash, there is a geographical expansion in the area we like a lot. But the gross rate as we stand up would about be the rate of internationals growth rate so. When you think about the organic growth of Equifax think of Veda bringing us in a range we're taking for a company.

Okay. So neutral to the consolidated company outlook?

Yes.

And I assume that some of the efforts Cambrian and EGIS et cetera are poised at some point to accelerate that growth?

Yes, we're ahead of schedule in deployment of platforms as you know it's taking time to contraction we get customers that from to get technology in place through could be a adoption of the customers. And the hope would be over multiple years in the future that those are enablers with different areas of growth which is facilitating potentially in faster growth.