Equifax Inc.
Q1 2015 Earnings Call Transcript

Published: 23 Apr 2015

[Operator:]

Please standby. Good day and welcome to the First Quarter 2015 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Jeff Dodge. Please go ahead, sir.

[Jeffrey L. Dodge:]

Thanks and good morning. Welcome to today's conference call. I'm Jeff Dodge, Investor Relations. And with me today are Rick Smith, Chairman and Chief Executive Officer and John Gamble, Chief Financial Officer. Today's call is being recorded. An archive of the recording will be available later today in the Investor Relations section of the About Equifax tab of our website at www.equifax.com. During this call, we'll be making certain forward-looking statements to help you understand Equifax and its business environment. These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from our expectations. Certain risk factors inherent in our business are set forth in the filings with the SEC, including our 2013 Form 10-K and subsequent filings. We will be referring to certain non-GAAP financial measures including adjusted EPS attributable to Equifax, and adjusted operating margin that will be adjusted for certain items, which affect the comparability of the underlying operational performance. Adjusted EPS attributable to Equifax excludes acquisition-related amortization expense and the associated tax effects and the charge principally related to the realignment of internal resources to more effectively support the company's strategic objectives. Our adjusted operating margin excludes the one-time charge principally related to the realignment of our internal resources. These measures are detailed in our non-GAAP reconciliation tables included in our earnings release and also posted on our website. Also please refer to our various investor presentations, which are posted in the Investor Relations section of our website, www.investor.equifax.com for further details. Now, I'd like to turn it over to Rick.

[Richard F. Smith:]

Thanks, Jeff, and good morning, everyone. And as always, thank you for making time to join us this morning. The first quarter's performance was very robust and significantly exceeded our expectations. The thing you'll hear throughout my comments and John's comments in the question-and-answer period will be that the growth over the quarter was very broad based. It was across all business units, across many verticals and across many countries. USIS and Workforce Solutions in particular posted an exceptional quarter. USIS saw its strength with its Decision360 initiatives, enterprise selling strategy, direct-to-consumer channel partners, mortgage and home equity lending. Workforce Solutions saw broad strength in Verification Services including government, automotive and mortgage as well as solid strength in its Employer Services business. The revenue strength in both those businesses led to nice margin expansions as you saw. Also International and PSOL finished with very solid performances for the quarter. In total, the revenue was $652 million up 12% on a reported basis and up 14.4% on a local currency basis versus the first quarter of 2014. In the quarter, FX created $17 million of year-over-year headwind, an increase from the fourth quarter of last year, which was $13 million of headwind. The adjusted operating margin was 27.2%, up 120 basis points from the first quarter of 2014. Adjusted EPS was $1.07, up 20% from $0.89 a share last year and significantly above the upper end of the guidance we provided a few months ago. As I always do, I'll walk through some business-by-business unit highlights, and then John will get into the details of the financials. I'll start, as I always do, with USIS, there they leveraged their Decision360 initiative, new product innovation and enterprise selling teams to deliver 14% revenue growth and a healthy 42.4% operating margin, up 520 basis points from last year. Couple of highlights, our relationship with Credit Karma, as we've talked about in the past, it went live in January, and January transaction volumes exceeding our original projections. In addition to purchasing our credit information, Credit Karma is also using our Premier fraud and identity authentication solutions to provide consumers with online access to their credit information. Presently, we are part of a 2-Bureau solution with Credit Karma, but we believe this will ultimately move to a 3-Bureau solution in an effort to better maximize benefits to the consumers. As I mentioned on the last call, in recent quarters, one of the things we're seeing is that the financial institutions are changing the way they originate new consumer accounts in Financial Marketing Services, FMS. The traditional pre-screen activities are giving away to more targeted one-on-one online offers. We talked about this again last few quarters. And as a result, our revenue mix has gradually been shifting towards higher margin online solutions, while our growth in pre-screen revenues has moderated somewhat. Net-net, I view that shift as a benefit to USIS. As you know, we folded Commercial into USIS few quarters ago. The Commercial business is off to a great start, recording their best first quarter performance since 2007 with record revenue and operating margin performance. Mortgage origination and home equity lending were also strong during the quarter, as low interest rate environment resulted in lending activity that exceeded our expectations for the quarter. We'll get into that in the Q&A and compare it to the MDA (05

[John W. Gamble:]

Thanks Rick and good morning everyone. As before, I'll be referring to the financial results from continuing operations generally presented on a GAAP basis. During the quarter, we reported a charge of $23.4 million, principally related to the realignment of internal resources to more effectively support our strategic objectives. The actions were primarily driven by the regionalization and consolidation strategy in International, including the integration of TDX, consolidation of functions related to the integration of Commercial into USIS, and then some realignment actions across the remainder of the business. The cost for two-third severance would also include related real estate, legal and other costs. The costs are reflected in SG&A and the general corporate expense lines of our financial statements. The actions will occur throughout 2015 and should be completed within 12 months. Ongoing savings, once the actions are complete, are expected to be $10 million to $15 million per year with limited incremental benefit in 2015. Now consistent with our past practice for treating unusual or infrequent items, we have excluded this charge from our adjusted EPS and adjusted operating margin in order to provide investors with a more consistent period-to-period operating comparison. The FX impact on revenue and EPS this quarter were consistent with our expectations that we provided to you in February. Now, let me turn to the business units' financial performance for the quarter. U.S. Information Solutions revenue was $299 million, up 14% when compared to the first quarter. Online Information Solutions revenue was $222 million, up 15% when compared to the year-ago period. Mortgage Solutions revenue was $31 million, up 28% compared to Q1 2014. These trends compare favorably to the Mortgage Bankers Application Index, which was up 21% in the first quarter. Financial Marketing Services revenue was $46 million, up 3% when compared to the year-ago quarter. As Rick mentioned earlier, this slower growth reflects a shift in how financial institutions are originating new accounts to 1

[Richard F. Smith:]

Great. Thanks John. Quick outlook for guidance for the second quarter and the total year. Before I give you some numbers, just want to put into perspective the influence of the mortgage market as it relates to the second quarter and the balance of the year. Again, we expect the market to – the mortgage market to perform much like we talked about back in February, moderating a bit in the second quarter and then continuing to moderate even further year-on-year in the third quarter and fourth quarter. So for the second quarter, we expect organic revenue growth – organic revenue to be between $655 million and $665 million, that is a constant currency organic revenue growth rate of 10% to 12%, and that's partially offset by three points of FX headwind. Adjusted EPS is expected to be between $1.09 and $1.11, which is up 14% to 16%, excluding $0.02 per share of negative impact from FX. This reflects constant currency growth rate of 16% to 18% for the quarter. We also expect operating margin to continue to improve in the quarter in the range of 27.5% to 28%. Obviously, there is some uncertainty for the balance of the year, it's macroeconomic uncertainty around the world, it's U.S. economic uncertainty, some uncertainty in Middle East, uncertainty in Latin America. So – but against that uncertain backdrop, I'm convinced that this team will continue to execute extremely well and continue driving above-market growth across all of our businesses and all of our verticals through the second quarter and the balance of the year. So with that, and based upon the current level of domestic and international business activity and the FX rates, we expect 2015 to – a revenue range of $2.585 billion to $2.635 billion, which is up from our previous guidance. This reflects constant currency organic revenue growth of 8% to 11% for the year. This strong revenue growth is partially offset by three points of negative impact from FX, and again, as before, this is only organic revenue growth at this time. 2015 adjusted EPS, we expect to be in the range of $4.28 and $4.35 per share, also up from our previous guidance. This reflects 10% to 12% growth in 2015. FX impact for the year, as we previously stated in the last earnings call, is expected to be about $0.11 for the year. We had about $0.02 a share impact in the first quarter, which says we have about – remaining $0.09 per share impact for the full year. So with that, operator, let's open up for any questions our callers might have.

[Operator:]

Thank you. We'll go to Shlomo Rosenbaum with Stifel.

[Shlomo H. Rosenbaum:]

Hi. Thank you very much, Rick, and for taking my questions, and John. I want to just drill in a little bit more very, very healthy growth across the company. The biggest, I would say, surprise was in the Employer Services; that has had the best growth it looks like in like five years. Can you talk a little bit about, just the stuff that came together specifically in the quarter and how I should be thinking about the growth? Have you gotten that to a sustainable double-digit growth level over there? How should I think about that?

[Richard F. Smith:]

Thanks, Shlomo. I'd say there's two primary drivers to the growth. One, I think I mentioned it last year, that new leadership in there has been about a year or so, year-and-a-half, Scott Collins doing a heck of a job. He's changed the mentality out there from a business unit that's kind of protect the work number to a growth business model. So, he's built processes, he's changing the team. They think about growth, not protect, so that's helping him. And then you had a WOTC benefit for the first quarter that added some growth as well. So as I think about the Verification Services piece of EWS, Shlomo, when we bought the business, we thought it would be a good solid year-on-year middle-single-digit kind of growth rate. So I would not model a double-digit growth rate for Employer Services at this point.

[Shlomo H. Rosenbaum:]

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

[Richard F. Smith:]

Yeah. I mean in the Employer Services is a piece of business that is on fire. And I think we talked about it in the last earnings call, and that is what we call Workforce Analytics, and that is going to grow over 100% this year. And we've signed hundreds of contracts to help employers make sure they're compliant with the ACA laws. And remember as I mentioned before, Shlomo, we get multiple bites of the apple, there you get some consultant revenue, you get the analytics revenue and then in many cases, the employers who are using that analytics don't give us work number records; the only way we can analyze their level of compliance is to get the work number records. So that revenue growth, by adding those records to the database, don't show up in Employer, it shows up in Verification once they flow down the system. So you should consider ACA Analytics or Workforce Analytics as being a long-term sustainable growth piece of EWS's strategy. Also within the Employer Services, they are building out a really good full suite of compliance center products to help our employers ensure they're compliant with many regulatory changes, not just (26

[Shlomo H. Rosenbaum:]

So do you feel – I mean how much are you able to quantify or give a rough estimate as to kind of that virtuous circle of doing that type of compliance that's resulting in a work – The Work Number and then additional hits to the database that are coming back with something, so that's adding revenue to the Verification Services line?

[Richard F. Smith:]

Rest assured, we do know those numbers. We don't disclose those right now. But if you talk to Dann Adams, Shlomo, he would tell you, as would Scott, the guy that runs that part of the business, Shlomo, that the compliance center is a exciting multiyear growth strategy for EWS in total and clearly for the Employer side. We've given you some color in the past around the number of records added through ACA, through Workforce Analytics. And you know that the number on the average revenue per transaction, so you can build some sense of how important that is on the Verification side, it's meaningful.

[Shlomo H. Rosenbaum:]

One last question, and then I'll drop off. How much did the Credit Karma relationship add to the year-over-year growth in OCIS?

[Richard F. Smith:]

We don't disclose individual client activity. We gave you a number, I think it was back in the fourth quarter of what it would be. We said $20 million to $25 million a year in revenue. So, in the scheme of things for the company, great customer, great win, not only significant for the company, but important for USIS.

[Shlomo H. Rosenbaum:]

Very good. Thank you so much.

[Richard F. Smith:]

Thank you.

[Operator:]

We'll go next David Togut with Evercore ISI.

[David Mark Togut:]

Thank you, and good morning, Rick and John.

[Richard F. Smith:]

Hello David.

[David Mark Togut:]

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

[Richard F. Smith:]

Yeah. Again, as I tried to allude to in the – my opening comments as did John in his, it is extremely broad based, it is. Automotive was extremely strong. Our KCP clients was strong, Financial Services was strong, Telco was strong, Credit Karma was strong, mortgage channel partners were strong. It is extremely broad based.

[David Mark Togut:]

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

[Richard F. Smith:]

The gift that keeps on giving, you always want more, David. I'd say the beauty of this model is, we have the ability to continue to invest in CapEx for organic growth. And as you're growing, the leverage you get is phenomenal. So that exists not only in USIS as we really saw, that exists in virtually every business we have, and what you just saw in EWS as well. So yeah I think now that they're over, I don't know the exact number for USIS, over 42% I think it was, yeah, you should expect them to fall in that range. And the only way John and I can give you our targeted 25 basis points of expansion every year, is that every business unit continues to grow. So I would expect USIS to continue to expand on mortgage as well.

[David Mark Togut:]

Final question for me on capital allocation. What should we think about in the next year in terms of dividend growth given the elevated EPS growth that you showed in the first quarter?

[Richard F. Smith:]

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

[David Mark Togut:]

Thank you very much.

[David Mark Togut:]

Thank you, David.

[Operator:]

Go to Manav Patnaik with Barclays.

[Greg Mrva:]

Hi, this is actually Greg calling on for Manav. Just wanted to dig in a little bit on the TDX contract with the UK government. Clearly, you guys sound pretty constructive about it. But was hoping to get some color both around the magnitude of the cost as you ramp up that contract and then how to think about the ramp up and the ultimate opportunity there?

[Richard F. Smith:]

Yeah. Greg, thanks for joining. I'll talk specifically about TDX. What you can hear us talk about more in the future, is a debt services platform which is really integrating the capabilities we have and our Mexican acquisition is about the same timeframe called Infinix and then TDX, which is the UK-domiciled capability. So you'll hear us talk about kind of debt servicing platform versus TDX or Infinix going forward. Specific to the Her Majesty's contract, as I alluded to briefly in my comments, going as expected. We've overwhelmed this with people, with process. The timeline is tight. It was such a significant award that we had to make sure we got it right and we're getting it right. And hopefully, as we extend this technical environment up, this structure up, in the third quarter, we started to receive their first load of data in the third quarter. It takes you a while to analyze the data, understand the data, format the data, and then you pass the analytics on to the collection agencies across the country. So that's why I said you expect nominal amount of revenue in the 2015 year, maybe the very end of the fourth quarter, and then ramping up nicely in 2016.

[Greg Mrva:]

Okay. Thanks. And I guess along that same theme, during, post the acquisition, you talked a lot about bringing the TDX capabilities to new markets, whether it's the U.S. or Australia. Does this contract put that a little bit on the backburner or how are you seeing that progress right now?

[Richard F. Smith:]

That's a great question. We drilled a little bit early on because the same teams that can the build the capabilities to deploy in different countries were concerned, we're getting the DMI contract up and running in the UK. However, I can tell you that they're moving full speed now in places like Canada. I was just in South America last week, met with clients in both Chile and Argentina, the interest level is extremely high, and the pipeline is very good. Things are going very well in Australia. And we mentioned before, things are going very well in Peru, Colombia. There is a strong interest in Brazil for the platform. So while we're distracted a little bit with DMI, that distraction is now behind. And we're moving full speed.

[Greg Mrva:]

Okay. Thank you.

[Richard F. Smith:]

Thank you.

[Operator:]

Go to Andrew Jeffrey with SunTrust.

[Andrew Jeffrey:]

Hi. Good morning. Thanks for taking my question. Rick, I guess kind of a two-part question. One, from a big picture perspective, in terms of where we are in the credit cycle, I heard you mention a lot of consumer credit products save credit cards. So I wonder if you have a sense as to where you think we are as far as issuers ramping up their consumer credit card businesses. And then sort of as a corollary, you mentioned the shift in the way your customers are going to market. And I wonder how that dovetails with some of the newer credit modeling solutions that FICO is introducing around thin files and perhaps how that might open up sort of the next leg of growth in consumer credit cycle or whether you think it will at all?

[Richard F. Smith:]

Thanks, Andrew. Two thoughts, one on the bank card issuance, what's going on there. Since the bank card issuance in the U.S. kind of hit the bottom, the market has rebounded at a rate of about 10% or so a year, so it's growing modestly, actually above modestly. However, it still remains significantly below the pre-recessionary levels. So improving, but nowhere close to where we were back in the pre-recessionary environment. And obviously, that improvement helps us. As far as FICO, as you know, the FICO business score, the thin score, thin file score you've alluded to is predicated largely upon our data and analyst data, a lot of data used in that model, is borrowing the data from our (36

[Andrew Jeffrey:]

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

[Richard F. Smith:]

Yeah. I think, it's more incremental. If you look at, take a proxy, the subprime bank card market, what you're seeing there is, yes, they're getting a little more aggressive in subprime lending, but the outstanding that loan limits, I should say, are extremely low. And so, while they're going a little more aggressive and obviously this thin file score will help them to be a little more aggressive, they're being very cautious on the limits they're applying to those bank cards.

[Andrew Jeffrey:]

Okay.

[Richard F. Smith:]

But obviously, anytime you get more people access to credit, and this score does that, we benefit by default.

[Andrew Jeffrey:]

Sure. Okay. That's helpful. Thank you. And then just as a follow-up, you mentioned, you called out EGI as a driver. Could you just give a couple of examples? And I wonder if, you moved toward more of these Enterprise Solutions, that's helping your pricing overall.

[Richard F. Smith:]

Yeah, (37

[Andrew Jeffrey:]

Terrific, appreciate the color, nice job.

[Richard F. Smith:]

Sure. Thank you.

[Operator:]

We'll go to George Mihalos with Credit Suisse. George Mihalos - Credit Suisse Securities (USA) LLC (Broker) Great. Good morning guys and congrats on the quarter. Rick and John, just wanted to start off with, if we look at the first quarter, you did, I think, 14% constant currency organic revenue growth. The outlook for the second quarter, I think you're talking about 10% to 12% constant currency. Is there anything outside of any sort of variability on the mortgage side that would cause you to expect that deceleration, I guess, is there going on in the business that you think was sort of one-time in the first quarter or that is slowing a little bit as you go through the back half of the year outside of mortgage?

[Richard F. Smith:]

No, it is specifically the second quarter, and then I'll come back to the balance of the year. There are two primary drivers when you look at sequential growth. And you hit one, George, which is the mortgage market. And the other is, I think I alluded to it in my comments, the WOTC contract, Workforce Opportunity Tax Credit contract, which we monetized in the first quarter this year, we did last year as well. It doesn't repeat. It's a one quarter – largely a one-quarter activity. That's the nuances, if you will, for the second quarter. And then for the balance of the year, the third quarter and fourth quarter, we look at growth rates here which are still very solid, I think you'd agree. It's really the uncertainty on a macro basis; interest rate environment, regulatory environment around the world, economic environment so on and so forth, geopolitical issues, and there's uncertainty there. That's about it. George Mihalos - Credit Suisse Securities (USA) LLC (Broker) Okay, great. I appreciate the color. And then as it relates to margins on international and the rollout of TDX there, it sounds like the contract will be somewhat fully ramped in the fourth quarter. I appreciate the commentary around margins in international for the year. But what is a good exit rate ending 2015 for international margins? I would imagine they would sort of spike up in the fourth quarter. Is that a fair way to think about it?

[Richard F. Smith:]

No. Because, as I alluded to, the data doesn't come in until third quarter. By the time we actually format it, analyze it and then start to distribute the data and analytics, it could be late fourth quarter. So I don't expect much revenue from that large contract. You got to understand the investment we've made in this business has been on two fronts; one is standing up DMI and the other is the typical stuff we invest when we acquire a company as security. That's compliance. We're in the process of applying for a license in UK for this organization, and so on and so forth. This makes (41

[Richard F. Smith:]

John?

[John W. Gamble:]

I would expect probably it's a combination of both, right. Some of it will pass through and then some of it we'll reinvest to try to accelerate growth in 2016 and 2017. So you're going to see a combination of both actions. George Mihalos - Credit Suisse Securities (USA) LLC (Broker) Okay, great. Thank you.

[Richard F. Smith:]

Thanks.

[Operator:]

We'll go to Brett Huff with Stephens, Inc.

[Brett Huff:]

Good morning, Rick, John and Jeff. Congrats on a nice quarter.

[Richard F. Smith:]

Thank you.

[Brett Huff:]

Two questions. One, you mentioned EGI and there was a follow up question on it. Could you call out the contribution to growth kind of like you do for NPI this quarter or maybe recent history and is that accelerating?

[Richard F. Smith:]

It's an interesting question. The answer is I'm not prepared to do that now, but let me give that some thought, Brett.

[Brett Huff:]

Okay.

[Richard F. Smith:]

Because you're right, there are a lot of similarities. It's a systematic way to bring process discipline to growth...

[Brett Huff:]

Okay.

[Richard F. Smith:]

...much like NPI. So let me give it some thought. At a high level, I will tell you this. It is becoming a very meaningful number. It is contributing to our organic growth rate quarter in quarter out. Rather than just react here on the phone, let John give some thought to what's the best way to frame that up for you. But the one reason we didn't break it up for this call is because; one, we've been at it and we have some credibility internally in doing this for three years or four years now; and two, it's meaningful. So I'll come back to you.

[Brett Huff:]

Okay. Thank you. And second question is on PSOL there's been some strategic changes going on, specifically the Experian FICO deal. Have you seen changes in your PSOL business or consumer behavior around that? Do you think that FICO will become a more widely used standard of credit score in direct-to-consumer business for you all or other people, any thoughts on that?

[Richard F. Smith:]

Yes. I think FICO is the brand when it comes to scoring in the U.S. today. So I think the thing that's changed for PSOL largely is three things

[Brett Huff:]

Okay. Thank you guys.

[Richard F. Smith:]

Thank you.

[Operator:]

We'll go to Jeff Meuler with Baird.

[Jeffrey P. Meuler:]

Yes. Thank you. So some of these numbers are baffling – bafflingly good to me. So I got to ask, how – and I know your targets are multi-year targets, but how frequently do you revisit if they're still the right targets or is it possible that maybe they are the right long-term targets, but within that framework you could still grow for several years above the upper ends of the targets. And I'm just asking given how strong enterprise selling is going, NPI, it seems like a lot of these things should have legs to them?

[Richard F. Smith:]

Yes. When we give guidance or we give a multi-year framework, Jeff, we take that very seriously. So when John and I think it's prudent to revisit the multi-year framework and make any adjustments, you guys will be the first to know. But at this juncture, largely driven by, it has nothing to do with our ability to execute. The things you mentioned, D360, new product innovation, EGI, pricing all those things. I think you know Jeff, we've been at now for eight years, nine years, 10 years, and that's all organic as we talked about as well. So the only thing that's holding us back right now is macro uncertainty, and it's just too early to make any change on the model at this juncture.

[Jeffrey P. Meuler:]

Okay. And then the commercial business, I think you said it was the best Q1 since 2007. If you could help us understand what's driving that? Is it market or are you starting to see some of the benefits from move again into the USIS management?

[Richard F. Smith:]

Clearly it's the latter. You've heard me say before, leadership makes a difference. And that's now the responsibility of Rudy Ploder and then a guy within Rudy's team, we talked of before, he runs our KCP accounts, and a high potential guy in our company, Tom Madison. Those two gentlemen have brought focus and discipline and leveraging the USIS relationships. So leadership makes a difference and that's a great example.

[Jeffrey P. Meuler:]

Okay. And then on the guidance, John, if you could just help me understand the constant currency EPS growth was merely narrowed to the top end of the prior range, but the EPS figures that you're citing the top end of the guidance range was raised. I think currency got worse, not better, if you could just help me bridge that please?

[Richard F. Smith:]

Now, the currencies – this is Rick. So it's the same. We gave currency impact for the year of about $0.11 when we were together in February. And as I probably said in my comments, it's still $0.11 for the year. It's $0.09. The remaining $0.02 of it will occur in the first quarter.

[Jeffrey P. Meuler:]

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

[Richard F. Smith:]

They did go up. I think, speaking from memory, our last guidance was $4.20 to $4.30.

[Jeffrey P. Meuler:]

Correct.

[Richard F. Smith:]

And we're now saying $4.28 to $4.35.

[Jeffrey P. Meuler:]

Yes. And I'll take one more swipe at it and then I'll follow up offline. But I think the constant currency EPS growth rates, the top end of that is still $0.14, correct?

[John W. Gamble:]

$0.14 is what gave. Some of it's just rounding, right. But we did take it up a nickel. So we took the top-end of the guidance range up a nickel. Currency really hadn't changed much. So if you're seeing growth rate that look similar, it's simply rounding because a nickel on $4.30 isn't a huge percentage.

[Jeffrey P. Meuler:]

Okay. Thank you.

[Richard F. Smith:]

Thank you.

[Operator:]

We'll go to Andrew Steinerman with JPMorgan.

[Andrew Charles Steinerman:]

Hi, gents. I wanted to go back to debt collection, recovery management the way it is right now. Sure, I saw the comment of double-digit growth currently. I was wondering if you could just be a little more specific about what the current growth rate of that business is, what's the size of that business as we just anniversary TDX and Inffinix.

[Richard F. Smith:]

Yes. Andrew, I thought I mentioned in my comments, it was 25% growth in the first quarter and that's specific to TDX. Anyways, I expect it to be strong double-digit growth for the year as we talked about before and (50

[Andrew Charles Steinerman:]

And how big is that business now?

[Richard F. Smith:]

I think we've given the number when we bought it. We didn't give. Jeff is shaking his head, no. It's becoming a very meaningful size business for us.

[Andrew Charles Steinerman:]

Right. But it is still under $100 million of revenues, right?

[Richard F. Smith:]

Right.

[Andrew Charles Steinerman:]

Okay. Thank you.

[Richard F. Smith:]

Thank you.

[Operator:]

We'll go to Paul Ginocchio with Deutsche Bank.

[Paul L. Ginocchio:]

Thanks. Rick, any way to size the contribution to growth in verification from WOTC? And also maybe just talk about the CMS contract, was that a benefit to OIS in the first quarter? And then finally, the new 15 million people who were going to be scored by the new JV you just announced with FICO and LexisNexis, does that 15 million, does that add roughly about 10% to the people in your credit database, and will those people use, you think, these active in credit as your existing people in the files? Thanks.

[Richard F. Smith:]

Okay. The first one on the WOTC, I'm not sure I remember all three questions. First on the WOTC was, if you took the WOTC benefit out, the growth rate for all of EWS I think went from 24% to 21%.

[Paul L. Ginocchio:]

Thank you.

[Richard F. Smith:]

Sure. And number two – what the heck was number two, again?

[Paul L. Ginocchio:]

CMS.

[Richard F. Smith:]

Which CMS? The Medicaid & Medicare Services contract?

[Paul L. Ginocchio:]

Correct.

[Richard F. Smith:]

And you said what benefits that had for EWS?

[Paul L. Ginocchio:]

No, no, for – yes, that's right for EWS.

[Richard F. Smith:]

Yes. (51

[Paul L. Ginocchio:]

And will that up significantly that would coincide with enrollment growth in Obamacare?

[Richard F. Smith:]

Yes, absolutely. Remember, last year they had all the issues with standing up the CMS websites. That's largely behind. The awareness is greater. The activity rate is much higher, so yes.

[Paul L. Ginocchio:]

I mean just on how does the additional 15 million of people with the FICO JV you just announced, how much does that increase your current number of people with credit scores that you send credit reports on and will those people be as active?

[Richard F. Smith:]

Yes, that is yet to be seen on the activity base. But the good thing is we're finding people who don't have a credit file, who have some payment behavior that seems positive that you can now introduce to telcos and banks and auto lenders to potentially give them credit. But the time will tell if in fact they have a credit activity that's like the rest of our customer base. My guess is no (53

[Paul L. Ginocchio:]

Thank you.

[Richard F. Smith:]

Thank you.

[Operator:]

And we'll go Bill Warmington with Wells Fargo.

[William Arthur Warmington:]

Good morning, everyone, and I'll add my congratulations on a strong quarter.

[Richard F. Smith:]

Thank you, Bill

[William Arthur Warmington:]

So a question for you on the U.S. government ID authentication work. If you could talk a little bit about how the volumes have been this year versus last, and also which government agencies you are currently serving and what the pipeline looks like for new ones?

[Richard F. Smith:]

Yes. I mean I gave you a high-level overview in my comments that the fraud and (53

[William Arthur Warmington:]

And then a question for you on Europe, very strong performance there, up 12% constant currency despite the sluggish economy. Is that share gains driving that growth? And if so, how you're taking share in what would normally be considered a fairly mature market?

[Richard F. Smith:]

Yes. We've talked about this before. We've got a great leader who is an Argentine that worked for us across Latin America and then we moved him to Spain. He got Spain really on a great roll through the recession and post recession. And then we moved him and then it was Patricia Ramon (55

[William Arthur Warmington:]

Thank you very much.

[Richard F. Smith:]

Thank you.

[Jeffrey L. Dodge:]

Okay. I'd like to thank everybody for their time, their support of the company. And with that, operator, we'll terminate the call. Have a good day.

[Operator:]

This does conclude today's conference. Thank you for your participation.