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Equifax (NYSE:EFX)

Q4 2013 Earnings Call

February 14, 2014 8:30 am ET

Executives

Jeffrey L. Dodge - Senior Vice President of Investor Relations

Richard F. Smith - Chairman and Chief Executive Officer

Lee Adrean - Chief Financial Officer and Corporate Vice President

Analysts

Georgios Mihalos - Crédit Suisse AG, Research Division

Andre Benjamin - Goldman Sachs Group Inc., Research Division

Paul Ginocchio - Deutsche Bank AG, Research Division

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

Manav Patnaik - Barclays Capital, Research Division

Michael Landau - Evercore Partners Inc., Research Division

Jeffrey P. Meuler - Robert W. Baird & Co. Incorporated, Research Division

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

William A. Warmington - Wells Fargo Securities, LLC, Research Division

Brett Huff - Stephens Inc., Research Division

Andrew C. Steinerman - JP Morgan Chase & Co, Research Division

Operator

Good day, everyone, and welcome to the Q4 2013 Equifax Earnings Release Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Jeff Dodge. Please go ahead, sir.

Jeffrey L. Dodge

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 Lee Adrean, Chief Financial Officer.

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

During this call, we'll be making certain forward-looking statements to help you understand Equifax and its business environment. These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from our expectations. Certain risk factors inherent in our business are set forth in filings with the SEC, including our 2012 Form 10-K and subsequent filings.

In order to better understand our operating performance, it's important to remember that there were some unusual or infrequent items in the fourth quarter of 2012: the CSC acquisition fees, a pension settlement and certain unique income tax items, all of which were detailed in our fourth quarter release in February of 2012.

In addition, there were some usual or infrequent items in the fourth quarter of 2013: the collection of certain reserved 2012 billings, a restructuring charge to realign our internal resources against our most important strategic opportunities and an impairment of our investment in Boa Vista Servicos, driven by reduced near-term market expectations for credit information services in Brazil and increased investment needed to fully integrate and capitalize on a longer-term opportunity.

We will be referring to certain non-GAAP financial measures, including adjusted EPS attributable to Equifax, adjusted operating revenue and adjusted operating margin, that will be adjusted for certain items which affect the comparability of the underlying operational performance. Adjusted operating revenue excludes the collection of certain reserved 2012 billings. Adjusted EPS attributable to Equifax excludes acquisition-related amortization expense and the associated tax effects, as well as certain other items.

For 2012, the excluded items are the aforementioned CSC acquisition fees, the pension settlement and certain special income tax items. And then for 2013, excluded items are the collection of certain reserved 2012 billings which occurred during the fourth quarter of 2013, the resource realignment charge and the impairment of our investment in Boa Vista. Adjusted operating margin excludes certain items. The items excluded for 2012 are the CSC acquisition fees and the pension settlement, which was a noncash charge. For 2013, adjusted operating margin excludes the collection of certain reserved 2012 billings and the resource realignment charge. These measures are detailed in our non-GAAP reconciliation tables included with 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 under the About Equifax tab on our website for further details.

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

Richard F. Smith

Thanks, Jeff. And thanks to each and every one of you, excuse me, for the flexibility in working with us to move the call at a day we have experienced, as I think you've seen, a pretty severe storm down here. And those of you on the East Coast are experiencing a storm today, so I know it's difficult for you as well. So you're in our thoughts as you get through the storms the next few days.

Jeff's kind of preamble there is obviously longer than normal. It's due to the fact that we've had a number of moving parts in the quarter and it's our desire to give you as much transparency as possible, hence, Jeff's comments. And also what I'm going to do here is before I get into the details of the quarter and the business unit performance, I want to reflect back on the last conversation we had together, which is for the third quarter 2013 call. We talked about the outlook for fourth quarter 2013 and we gave you some insight into our expectations for calendar year 2014.

So if you wind back to our last call, we thought fourth quarter revenue would come in between 6% and 8%. We delivered at 7% reported and 8.4% constant dollar growth. We also said that organic nonmortgage market growth would come in at the upper end of our 6% to 8% targeted range, and we delivered 8.1%. So 2013 very much came in line as we expected.

As I said back on the last call, we talked about 2014, we said mortgage would face strong headwinds in the first half of the year, lessening headwinds in the back half of the year and that seems to be holding up pretty much as we expected, and Lee will give you a lot of texture and color around the mortgage market expectation for the year. For growth, we said expect us in 2014 to deliver organic -- core organic nonmortgage growth in a range of 6% to 8%. We're clearly anticipating being in that range for the year.

During the call, Lee and I will give you greater transparency into the FX impact, which, I think, you've all seen, has had pretty significant volatility, starting back in December and continuing into January. So Lee will help you understand how the FX impact will impact both our revenue growth for the year and our EPS growth, and again, he'll give you more insight into the mortgage market outlook for the year.

So in summary and before I get into the details here, 2013 was a great year. It ended as we expected. And as we sit here now in February 2014, with the exception of FX, it looks very much like the picture we painted for you back during the third quarter call. I hope that helps a bit. And obviously, we have ample time for Q&A once Lee and I go through the details.

I'll now jump into my traditional comments regarding the fourth quarter.

Our fourth quarter performance reflects continued strong execution on our strategic growth initiatives as 4 of our 5 business units met or exceeded the guidance we gave you during the third quarter call.

For the quarter, adjusted total revenue was $571 million, up 7% from the fourth quarter of 2012. More importantly, our core nonmortgage market growth -- organic growth was 8% for the quarter, enabling us to more than offset the mortgage headwinds that increased as expected from the third quarter. The adjusted operating margin was 27.4%, up significantly from 25.5% in 2012. Adjusted EPS was $0.91 a share, up 21% from $0.76 a year ago.

Year-to-date, adjusted total revenue was $2.3 billion, up 11%. And adjusted EPS was $3.60, up 24%. A very solid year, indeed.

Lee will shortly give the detailed financials for the quarter. But before that, as I normally do, I'll cover some key business highlights for the year and how we see ourselves positioned for 2014.

Looking back, starting with USCIS. With mortgage headwinds and the integration of its largest acquisition ever, USCIS took on some very big challenges last year and then delivered an impressive performance. As we expected, our core nonmortgage market organic revenue growth accelerated from the third quarter, ending the year at the upper end of the long-term growth target of 5% to 7%. Through verticalizing of the sales organization, USCIS has developed a much deeper understanding of our customers' challenges and new opportunities for growth. Combined with our enterprise sales strategy, we are developing more enduring customer relationships by integrating and cross-selling products from all of our business units.

In 2013, we expanded our key client program from 4 clients to 8 major clients, including 4 large banks, 2 telecoms and 2 large finance companies.

The success of our KCP program is broadening relationships with our largest customers and has elevated our interaction in these institutions to the very senior executive levels. In addition to our more traditional products, we are helping them with leveraging more sophisticated data and analytics to enhance underwriting decisions, mitigating fraud and improving identity management [indiscernible] linking our data with their internal data, regulatory compliance and improving collections effectiveness.

As the economy stabilizes and they turn their focus to growth, and they will do so, we expect even more opportunities to emerge that will further leverage our unique data assets and analytics and technology capabilities.

One of USCIS' most significant accomplishments in 2013 was the seamless integration of the CSC Credit Services asset we acquired in December of 2012. By the end of the year, they achieved all their financial and business objectives. In addition, all the former CSC Credit Service customer accounts have been assigned to the appropriate sales channel to ensure the best service levels for those customers going forward. We talked about that acquisition being a low-risk acquisition, but one we took very seriously, and the team just did a heck of a job in delivering on the integration and financial package last year.

In 2014, we expect USCIS reported revenue growth to be in the 0% to 2% range as we cycle through the mortgage headwinds, particularly in the first half of the year. Their core nonmortgage market organic growth in 2014 is expected to be in the 5% to 7% range, consistent with their long-term growth target we've communicated to you of 5% to 7%.

International. They again had another strong performance in 2013, delivering 11% constant dollar growth, which is at the upper end of our multi-year target range. Throughout the year, they strengthened their market position by continuing to invest in new product innovation and strategic acquisitions. In 2013, 14% of their revenue came from new products launched in the prior 3 years. We call that our Vitality index.

Some highlights for International. With the mobile phone penetration across the globe peaking, our telecom customers face challenges in delivering faster organic revenue growth. Leveraging our vertical expertise in the U.S., we are working with customers to leverage data and analytics to develop high-value propensity models, which can deliver as much as a 30% improvement to their decisioning process for postpaid account origination processes.

In Latin America, approximately 65% of all adults are unbanked. Here, we're leveraging our experience with differentiated data assets to develop tools that will improve financial institutions' underwriting decisions for individuals who have no credit history.

Most recently, we closed 2 very important strategic acquisitions for International, Inffinix in Mexico and the TDX Group, which is headquartered in the U.K. These acquisitions broadened our decisioning and workflow management solutions offerings in collections and enables us to further penetrate existing, as well as new customer relationships in our served markets.

Inffinix, a small company, provides collections workflow software on a licensed basis to companies throughout the Latin American region. The software enables customers' collection staff to efficiently process, manage and track accounts throughout the entire collections process. Today, Inffinix's geographic footprint includes customers in Mexico, Brazil, Chile, Peru, Colombia and Costa Rica. And our plan is to take this product, which is very well suited for Central and South America, across our entire Latin American footprint in the coming years, providing for additional growth opportunities.

TDX provides data and analytics-based debt management solutions. Essentially, they're the middleman between the institution and the collection agencies determining the optimal placement of accounts to maximize collections on the institutions' delinquent portfolio. With their unique data and analytics, TDX provides critical, high-value solutions to customers, largely in the U.K., Spain and Australia. And again, we plan on not only growing TDX in that footprint, but taking it to countries like Canada and the United States down the road for, again, additional growth opportunities.

Historically, both these companies have experienced double-digit revenue growth and carry EBITDA margins which are comparable to our company average.

You think about it this way as well, we play in the collections area today. These give us 2 great opportunities, TDX like a SaaS model and we said Inffinix has a license model that allow us to service our existing customers and new customers in ways we never could do before. It puts us on a more level playing field with others in the marketplace also.

Over the course of 2014, both these companies will be fully integrated into International's Technology and Analytical Services business.

We also made an acquisition of the #1 credit bureau in Paraguay, giving us a leading, competitive position in another important geography across Latin America. As you may know, we were already in Paraguay. This gives us the ability to combine #1 and #2.

The U.K. and Spain had an outstanding year in face of difficult economic conditions, delivering strong growth and gaining market share by focusing on new products, assessing new data sources and developing new products.

For 2014, we expect International's constant dollar -- constant currency revenue growth, including the TDX and Inffinix acquisitions, to be between 30% and 35% growth over 2013. And Lee will give you more texture around that and the impact on EPS later.

Workforce Solutions delivered one of the most outstanding performances in 2013 and revamped many of the go-to-market strategies and ambitiously entered new markets where we'll leverage their enterprise-selling initiatives with USCIS, energize their organization with talent development and outside hires. They also significantly accelerated their core nonmortgage market organic growth in the third quarter to a very impressive 14% growth in the fourth quarter. As a result, all of our key nonmortgage verticals and Verification Services delivered double-digit growth, driven by market penetration and new products.

Our recently announced Decision 360 Solution to the auto industry is a powerful example of how Workforce Solutions is finding new opportunities for revenue growth by leveraging our data assets and verification resources. Through a single-ordering interface, a dealer can get verification of employment, verification of income, verification of address, verification of rent and verification of auto insurance while the consumer is in the dealership, a really big win for the auto dealers. And these are all delivered via the Internet with a single sign-on.

Combined with our credit reports and scores, this represents one of the newest Decision 360 product offerings and a true disruptor in the marketplace. And historical records in the Work Number are also providing a new opportunity to drive revenue growth. We now have 56 million active employed individuals in our database and over 235 million total records. We now have over 3,100 companies contributing payroll information into our Work Number database. We're very much on target to reach our goal of over 70 million active records in the next few years.

For new product innovation, EWS has implemented triggering services that enable state governments to apply greater fiscal discipline in their administration of various social programs. They can validate and verify someone's level of income, are they employed or not employed, before they provide a social service.

Finding new applications for our unique data demonstrates to our customers the commitment we have to innovation and to delivering high-value solutions that improve their underwriting decisions.

The Employer Services portion of Workforce Solutions also had an outstanding year in 2013. One of the biggest initiatives was the implementation of SIDES, which is the State Information Data Exchange System, along with CaseBuilder, to significantly streamline the unemployment claims management process. Currently, 31 states are on SIDES platform, which standardizes, streamlines and automates their entire unemployment claims process. These 2 technology platforms are expected to contribute to improved operating performance, as well as customer service, market penetration and retention. To be honest, that part of EWS was underinvested. Dan and the team have stepped up the investment. We've gone from a business that was probably lagging to a business that's clearly leading in unemployment claims, which bodes well, short term and long, in the marketplace.

EWS has also implemented a number of Lean initiatives to further streamline their work process, improving the quality of service to our customers, increasing our penetration of customers with employee services solutions, strengthen these relationships and increases their contributions of data through the Work Number database.

Finally, one of the most significant new product launches in 2013 was our Affordable Care Act management platform. Leveraging the analytical expertise we acquired through our eThority acquisition in 2011, this product is helping employers understand the financial impact of and mainly as their ongoing compliance with the Affordable Care Act, truly leading edge in the marketplace. And as importantly, this product has resulted in additional contributions to the data into the Work Number database as we sign new customers seeking to understand and ensure they're compliant. Said another way, one of the ways we can help those clients make sure they're compliant is if they give us their Work Number database, which they're now doing. So we add to the records database and we generate revenue through the analytics to ensure their compliant with the Affordable Care Act.

We began demonstration of this product in December of 2012 with the platform operational by May of 2013. In October of 2013, this product was awarded the HR Tech Top Product of the Year, a great example of our focus and commitment to solving our customers' most critical decision needs and our ability to rapidly deploy these critical solutions.

For 2014, we expect Workforce Solutions revenue growth to be approximately flat to up slightly when compared to 2013, reflecting the strong mortgage headwind we have been expecting, particularly for the first half of the year.

Their core nonmortgage market organic growth in 2014 is expected to be an impressive 8% to 11% growth when compared to their long-term growth target of 7% to 9%.

On to Personal Solutions. Personal Solutions delivered double-digit growth for the year, exceeding the long-term growth target and expanding operating margins by over 100 basis points. Through intense focus on customer retention and lifetime value, we have consistently increased average revenue per subscriber and return on marketing spend. PSol has developed some best-in-class management disciplines, which we're now implementing not only in the U.S., but in Canada, U.K. and we're taking it to Latin America as well.

The acquisition of TrustedID was PSol's first acquisition. It significantly broadens our product line in identity protection market and gives us a technology platform that we can leverage in the delivery of indirect solutions to many of our B2B customers.

While North America Commercial Solutions experienced a market slowdown and project slowdown in the fourth quarter, they delivered solid results in 2013, gaining share in what turned out to be an anemic market growth for small business [indiscernible] and they grew the business at 7% in 2013 in constant dollars.

Let me go back, as I always do, to a few of the corporate highlights and then transition to Lee for the detailed financials.

NPI, new product innovation. We've talked about that for 6, 7 years now. 2013 was a very impressive year. For the year, we launched 47 new products and our NPI revenue was up 18%. More importantly, 4 of our 5 business units exceeded their NPI revenue targets for the year. And during the year, we also launched an initiative to reengineer our process to further institutionalize new learnings and experiences so we can continue to drive growth and strengthen our competitive position through innovation. As you know, when you've had something this long, it's good to take a timeout, reinvigorate it, tweak it, reinvent it if you have to, and that's what we've done. It's probably our second or third time we've done that in the 7 or 8 years we've had NPI.

In 2013, we launched 7 new products under our Decision 360 strategy, and we currently have 16 active new Decision 360 product initiatives across 3 business units that will be launched in 2014. We continue to leverage Lean to improve our operating efficiency, and we're leveraging Lean to speed up time to revenue, further enhancing revenue growth. For example: In Workforce Solutions, we totally reworked the process for loading new clients into the Work Number database. This drove a 68% reduction in the time required, improving our service to customers and accelerating the time to revenue.

We also leveraged our expertise in Lean with our customers to improve or streamline their operations and their interaction with us. These initiatives have significantly enhanced our relationship with our customers and made us a more valued partner for future business success. We see that Lean to the customer is a true differentiator in the marketplace and one that our key customers very much appreciate.

Strategic acquisitions play a critical role in our long-term growth strategy. Since 2012, we made acquisitions in 6 countries, supporting strategic initiatives in 3 of our business units. We've also exercised our call option in Russia, increasing our ownership to 50%, which is the current foreign direct investment allowed by Russian law.

Our strategic acquisitions have been and will continue to be a part of our long-term growth model. Each of our business units is involved in identification, recording and the due diligence activities for all of our acquisitions. Historically, we have not participated in auctions, preferring to nurture these relationships to better understand the opportunities, culture and the integration challenges. For example, TDX is a great example of that. For those that we've already made, we continue to identify new applications that were not even contemplated at the time of the original acquisition. That's important here. As we buy companies, good, solid companies, tuck-in companies, that when we get to know them, we find ways to grow their businesses at ways we had not contemplated within the pro forma. Our pipeline of strategic tuck-in acquisitions continues to be robust, and we expect to continue to see these opportunities where the valuation and strategic fit is optimized. I'll underscore they're tuck-in acquisitions. That is, by and large, our focus.

The leadership team of Equifax has relentlessly focused on both the opportunities and the challenges in 2013. In many respects, and I hope you agree, 2013 was a record year for the company. We delivered strong performance in the face of dramatic slowdown in mortgage originations, penetrating new customers and new markets, closed and integrated new strategic acquisitions and we increased our shareholder value by over $2 billion.

2014 is off to a good start. We've already closed 2 strategic acquisitions in our International and Commercial businesses and launched a major new Decision 360 initiative that we just talked about in the outer sector. We believe our diversified portfolio of businesses, investments, strategic acquisitions and the ability to drive core nonmortgage organic growth through innovation and execution will enable us to continue driving value for our customers and our shareholders.

And with that, Lee, if you could go through the financials.

Lee Adrean

Thanks, Rick, and good morning, everyone. This morning, I'll be referring to the financial results from continuing operations generally presented on a GAAP basis.

As we mentioned at the outset of the call, we had a number of unusual or infrequent items, which impacted both revenue and operating income in the quarter. In order to facilitate your understanding of the operating performance for Equifax and its business units, we have prepared tables attached to the earnings release, which reflect our operating performance, excluding these unusual items.

The non-GAAP reconciliations, which are also attached to the earnings release, provide a detailed reconciliation of these non-GAAP measures to their respected GAAP measure.

Our fourth quarter performance was solid and very much in line with what we had expected. We have a couple more quarters where the mortgage headwinds will challenge us, but so far, it's playing out pretty much as we'd expected.

Looking at the quarter's results. Compared to the same quarter in 2012 for the fourth quarter of 2013, consolidated revenue of $579 million was up 8% on a reported basis. Adjusted operating revenue, which excludes the impact of the collection of certain reserved 2012 billings, was $571 million, up 7% and up 8% on a constant currency basis when compared to the fourth quarter of 2012. Operating margin was 26.6%. Adjusted operating margin, which excludes the collection of certain 2012 billings and the resource realignment charge, was 27.4%, up 190 basis points from last year's adjusted operating margin, driven primarily by operating margin expansion, Workforce Solutions and Personal Solutions and lower corporate expenses as a percent of revenue.

Diluted earnings per share attributable to Equifax was $0.62. Excluding acquisition-related amortization and associated tax effects, the collection of certain reserved 2012 billings, the resource realignment charge and the impairment of our investment in Boa Vista, adjusted EPS was $0.91 per share, up 21% when compared to the adjusted EPS of $0.76 in the fourth quarter a year ago.

During the quarter, management of Boa Vista, or BVS, our Brazilian affiliate in which we hold a 15% interest, developed a plan to invest more aggressively in technology platforms and market-facing capabilities to capitalize on the long-term opportunities in Brazil, at the same time, reduced near-term market expectations for credit, and as a result, credit information services. This caused management to take a more cautious view of near-term growth. As a result of these changes in plans and expectations, we wrote down our investment in BVS by $17 million. As a noncash charge related to a nonconsolidated investment, we have excluded this item from our calculation of adjusted earnings per share. We continue, however, to be optimistic about the longer-term prospects for BVS in Brazil.

Moving to the individual business units. U.S. Consumer Information Solutions revenue was $256 million. Adjusted operating revenue was $248 million, up 12%. The acquisition of CSC, which we call our Central Region, contributed 11% growth. And our core nonmortgage market organic growth, including strategic initiatives, contributed approximately 7% to growth, while the decline in mortgage market volumes subtracted 6% from growth.

Online Consumer Information Solutions revenue was $170 million, up 12%. Excluding the Central Region, revenue was down 1%, driven by the anticipated slowdown in mortgage activity.

Mortgage Solutions revenue of $24 million was down 1% compared to the fourth quarter of 2012. Excluding the acquisition of our Central Region, Mortgage Solutions revenue was down 14%, driven by the decline in mortgage activity, partially offset by newer information in analytical products. This compares favorably to the Mortgage Bankers Application Index, which is down 51% in the fourth quarter.

Consumer Financial Marketing Services revenue was $62 million. Adjusted operating revenue, excluding the collection of certain reserved 2012 billings, was $54 million, up 20% from the fourth quarter of 2012. Organic growth was approximately 12%.

The operating margin for U.S. Consumer Information Solutions was 41.4%. Adjusted operating margin was 39.7%, down slightly from 39.8% in the fourth quarter of 2012. Excluding acquisition-related amortization, adjusted margins have expanded nicely.

Our International business unit's revenue was $132 million, up 6% on a reported basis and up 11% on a constant dollar basis. By region, Latin America's revenue was $50 million, up 5% in U.S. dollars and up 18% in local currency, driven by solid double-digit growth in Technology and Analytical Services, as well as Information Solutions and Marketing Services. Europe's revenue was $50 million, up 15% in U.S. dollars and up 12% in local currency. Good growth in financial institutions, telco, retail, and small and medium enterprise, along with strong double-digit growth in Personal Solutions, all contributed to this strong performance. Canada Consumer information revenue was $32 million, down 5% in U.S. dollars but up 1% in local currency. Strength in Technology and Analytical Services revenue was partially offset by a weaker market for Marketing Services. International's operating margin was 28.6% compared to 29.9% in 2012, continuing in the 28% to 30% range of the last 2 years as we continue to invest in growth and infrastructure.

Workforce Solutions revenue was $112 million for the quarter, flat when compared to the fourth quarter of 2012. Verification Services, with revenue of $65 million, was down 7% when compared to the same quarter a year ago. Strong growth in card, government and preemployment partially offset the 32% decline in mortgage-related revenues. Employer Services revenue was $47 million, up 12% compared to last year. The Workforce Solutions operating margin was 28.9% compared to 22.6% in Q4 of 2012, driven by reduced acquisition amortization and improved operating efficiencies.

North America Personal Solutions revenue was $53 million, up 9%. Solid growth in our U.S.-based subscription revenue and in Canada, along with the acquisition of TrustedID, were the drivers of this growth in Personal Solutions. Operating margin was 30.7% compared to 28.2% in the fourth quarter of 2012, largely driven by lower acquisition expense, partially offset by acquisition-related amortization from our acquisition of TrustedID.

North America Commercial Solutions revenue was $27 million, down 3% on a reported basis and down 2% on local currency basis, driven largely by softness in our U.S. risk and marketing data services business segments, more than offsetting growth in Canada. The operating margin was 32.5% compared to 34.4% in the year ago quarter.

For the full year 2013, consolidated revenue of 12 -- $2.3 billion was up 11% on a reported and an unadjusted basis and up 12% on a constant currency basis. The full year operating margin was 26.5%, while adjusted operation -- operating margin was 26.7%, up from 25.3% in 2012, driven by operating margin expansion of Workforce Solutions and Personal Solutions and lower corporate expenses as a percent of revenue.

Diluted earnings per share attributable to Equifax is $2.69 compared to $2.18 for 2012. Excluding acquisition-related amortization and associated tax effects, the collection of certain 2012 billings, the resource realignment charge and the impairment of our investment in BVS, adjusted earnings per share from continuing operations was $3.60, up 24% when compared to the adjusted earnings per share of $2.91 in 2012.

Finally, last quarter, we alerted you to a comment letter we received from the SEC regarding our accounting for goodwill and intangibles in the CSC acquisition. During the quarter, we continued communication with the SEC about indefinite-lived intangibles, including those assets associated with prior affiliate acquisitions dating back to 2001 to 2005. However, the issue remains open and we continue to work to understand the SEC's point of view and resolve the matter. Any changes to prior acquisition-related intangibles and associated amortization would be noncash adjustments and would not affect our adjusted earnings per share or cash flow.

Looking forward to 2014, we see a few items that will impact our financial results. As Rick mentioned, we recently completed 3 strategic acquisitions in International, one of which closed in January. These, combined with TrustedID and Personal Solutions and an acquisition in Commercial, will add nicely to our product and geographic ranges and will add 5% to 6% to our revenue growth in 2014. We expect these acquisitions to be non-dilutive in their first year and accretive thereafter. As you all -- second, as you all recognized, we expect the mortgage market to be a meaningful headwind due to the decline in mortgage volume since interest rates increased in mid-2013. We expect mortgage originations to be down between 40% and 50% in the first half of 2014 compared to last year and then down a more modest 10% to 15% in the second half of the year. This is very much in line with our views over the past year.

Finally, as you have probably seen, foreign exchange rates for many foreign countries, including emerging markets, have experienced significant volatility over the past few months. Specifically, foreign exchange rates for a number of countries where we compete have weakened versus the U.S. dollar starting in December and accelerating in January. We generally expect a certain amount of year-to-year change in foreign exchange rates, but these movements have been more significant than changes we have typically seen in the last few years. The 2 markets that will impact us the most are Argentina, whose currency depreciation accelerated in December and then dropped 19% in the month of January from the month-end December, and in Canada where weaker foreign demand for oil and minerals have weakened the Canadian dollar. The impact of these foreign exchange movements are significant for us because these 2 countries are among our largest foreign operations and they have strong leadership positions with above-average margins.

Along with movements in select other currencies, we expect foreign exchange rates in 2014 will negatively impact our reported revenue growth by approximately 2% and will impact our adjusted earnings per share by $0.05 to $0.07 per share more than we had previously expected. Because the impact of those 3 factors, acquisitions, the mortgage market headwind and foreign exchange, is not uniform throughout the year, particularly as regards mortgage, we will provide a more detailed view of 2014 than we have in past years.

For the full year, we continue to expect core organic nonmortgage market growth in our target range of 6% to 8%. Acquisitions should add 5% to 6% growth while mortgage, on average for the year, will reduce growth by about 4%, and foreign exchange will reduce growth by about 2% based on our current expectations. We expect this will result in constant dollar revenue growth approaching 8% to 10% and reported revenue between $2,425,000,000 and $2,475,000,000.

For the first half, core revenue growth will also be 6% to 8% while the mortgage impact will reduce growth by about 6 percentage points, given that higher market decline we expect in the first half versus the second half until we anniversary last year's interest rate increases at midyear.

Acquisitions are expected to add 5 to 6 percentage points of revenue growth and foreign exchange will subtract about 2%, yielding 3% to 5% growth for the first half. In the first quarter, the mortgage impact will be slightly greater, about 7% negative and at the peak impact for the year, while the acquisition benefit will be slightly less, in the range of 4% to 5%, as we will have less than a full quarter of acquisition benefit on 2 of the acquisitions. As a result, we expect reported revenue for the first quarter to be between $575 million and $588 million.

For the second half, again we expect core growth of 6% to 8%, but only 1% to 2% negative impact from mortgage. Acquisitions should add 5% to 6% growth and foreign exchange is expected to subtract 2% from growth, leading to an 8% to 10% total revenue growth for the second half.

With regard to profitability, as I noted earlier, the acquisitions will be non-dilutive in 2014, which means the revenue growth will not contribute appreciably to EPS growth until 2015.

Operating margins will decline slightly due to certain first year integration expense in acquisition and amortization, although operating margins, excluding the acquisitions, will increase, consistent with our long-term operating model.

Our tax rate is also expected to increase from 35.6% in 2013 to between 36% and 37% in 2014.

As a result of these forces, adjusted EPS is expected to grow between 4% and 8% from 2013 to $3.75 to $3.89. Adjusted EPS may be down slightly to flat in the first 2 quarters when the integration expenses and the seasonal pattern of revenue in the acquired businesses will cause the acquisitions to be slightly dilutive. Then up single -- high single digits to mid-teens in the second half as the impact of the mortgage market diminishes and the acquisitions begin adding to earnings per share.

We don't normally look beyond 1 year in our public comments, but it's important for me to put this in context. In 2012, we had a great year, driven by 7% core growth and a strong mortgage market, yielding double-digit revenue growth and 18% growth in adjusted EPS.

In 2013, we had an even better year, driven by another year of 7%-plus core growth and the benefit of the CSC acquisition, yielding 11% revenue growth and 24% growth in adjusted EPS.

In 2014, we expect another year of core growth solidly in our target range. But with the mortgage and foreign exchange headwinds, we expect 2014 to be a little below our long-term target performance. However, our 3-year cumulative performance will be well above our long-term goals.

Importantly, as we look to 2015, our long-term business and financial model is clearly intact. We will continue to target 6% to 8% core growth and have shown the ability to add to that through intelligent strategic acquisitions. Early forecasts for the mortgage markets suggest that mortgage origination activity will return to growth in 2015, adding to our total reported growth.

Our recently completed acquisitions should also become accretive. And if we only pursued a normalized level of acquisition activity during 2014, share repurchase during the year will lead to a decline in shares going in [ph] 2015, adding further to EPS growth.

As you can see, while short-term factors may cause our results to vary from our longer-term targets in individual years, the underlying dynamics of our business and our management's ability to deliver against core growth and margin improvement objectives makes our business an attractive one with continued good prospects.

Let me turn it back to Rick.

Richard F. Smith

Thanks, Lee. And we started 45 minutes ago talking about a number of moving parts and it was our intent to provide you with a new level of transparency and insight to 2013, 2014 and as Lee also gave us, an insight into 2015, so hopefully you felt we met that expectation.

So let me summarize before we go to Q&A. Despite the headwind in 2013, our strategy and execution delivered an impressive broad-based performance, and the business model continues to be sound and the strategy we've been executing against continues to offer attractive growth opportunities. The road map that Lee just gave you details the transitional nature of 2014. We fully expect to exit this year with very good momentum, positioning us for stronger performance as we enter 2015.

Given our outlook for 2014, we have increased our dividend 14% to $1 per share per year. This represents what we expect to be a payout ratio at the upper end of the board's policy, which, if you'll recall, is 25% to 30% of our net income going back in the form of a dividend.

So in summary, for 2014, core organic nonmortgage growth of 6% to 8% remains solid and within the model we've given you over the past few years. The mortgage market performance will be as we anticipated and as we've communicated to you in the past year. Foreign exchange is a headwind this year, but should abate as the world economies stabilize in the future. And we should move up to an 8% to 10% revenue growth range in the back half of 2014. And we should be aided by the mortgage market returning to growth latter part of this year and into 2015.

So with that, operator, we'd like to open it up for some questions.

Question-and-Answer Session

Operator

[Operator Instructions] And we will take your first question from George Mihalos from Crédit Suisse.

Georgios Mihalos - Crédit Suisse AG, Research Division

Just looking to reconcile some items. You called out a 32% decline in mortgage-related revenue for Workforce Solutions. For mortgage-related revenue, Mortgage Solutions was down about 14%. Why wouldn't we see those 2 numbers kind of converge a little bit more? Why is Mortgage Solutions sort of outperforming Workforce there?

Richard F. Smith

I'll jump in, then Lee can give you some details, George. It's a couple things, one is the 1% in USCIS then moved to 14% was for mortgage reported revenue, so it's 1% including CSC. If you exclude CSC, it's the 14% that you alluded to. That's just mortgage reporting that's online. There's other mortgage-related revenue streams that were not captured in the 1% or the 14%, that's number one. Number two, as we always say, there's some timing differences between EWS and USCIS. Number three, we've been at the differentiated products in mortgage longer in USCIS, things like UDM and others, than we have in EWS. So we don't break that detail up. But if you were to normalize it, you'd probably find USCIS total mortgage, when you exclude CSC, is closer to that of what you saw in EWS.

Lee Adrean

Yes, and just, George, I would add that pure tri-merge activity within mortgage services was down in the low to mid-20s. And the difference between that and the 14% organic was some of the newer information analytic-based products that we sell into the mortgage market that are actually still gaining traction and increasing share even in a declining market. So just the pure market activity effects are a lot more similar than the headline numbers would make it appear.

Georgios Mihalos - Crédit Suisse AG, Research Division

Okay, that's great color. And then just sort of moving on, if you can sort of update us as to your expectations around the CMS contract for 2014 and maybe how you're thinking about it beyond.

Richard F. Smith

Yes, we're still very optimistic. Long term, this is going to be a great revenue generator for EWS and for Equifax. You've seen and read about all the trials and tribulations that the Affordable Care Act has had in rolling it out. There are a number of things that Dan and his team are trying to do now to help the CMS get to a greater coverage. We call it Tier 2. We continue to get very excited about the analytics that eThority is bringing to the table. So it's not a huge number that we're anticipating in 2014. It'll be bigger than 2013. I'm hopeful, as we exit 2014, this thing starts to click in 2015 and deliver some really, really good revenue for us.

Georgios Mihalos - Crédit Suisse AG, Research Division

Okay, great. And just the last question for me. I know you called out acquisitions in aggregate, but can you comment a little bit more on the contribution from the TDX acquisition? I know it was $90 million in '13. Is that going to be somewhere around $100 million of revenue contribution for '14?

Lee Adrean

Yes, that's a reasonable estimate.

Operator

We'll take your next question from Andre Benjamin from Goldman Sachs.

Andre Benjamin - Goldman Sachs Group Inc., Research Division

My first question, what is the magnitude of incremental revenue opportunities specific to some of the new verification products that you rolled out in the auto vertical? And do you have any more products in the works there, or you're pretty much done? Are there some other verticals that you see as low-hanging fruit or good near-term opportunities?

Richard F. Smith

Thanks, Andre. Now the verification opportunities in the auto D360 solutions we just launched, you should think of those as being incremental margin, very much like the rest of the work, very, very high margin. And as I alluded to D360 in general terms, I can't remember the number now, but we have double-digit pipeline of D360 that we'll be launching in 2014. So that robustness of NPI -- new revenue from NPI and Verification Services and beyond will continue.

Andre Benjamin - Goldman Sachs Group Inc., Research Division

Okay. And then in terms of the North America Commercial Solutions segment, in terms of the small medium businesses, talk a little bit about what the competitive dynamics you're seeing there, what's your current level of commitment and investment to that segment versus some of the others that you talk a little bit more about and maybe where some of the successes gaining share are versus not.

Richard F. Smith

Yes, good questions. We're as committed to Commercial as we are any other business. We don't talk about it as much because it's a smaller business, Andre, as yet. But we continue to invest. We have mentioned an acquisition, small tuck-in acquisition we just made for Commercial. We invest in platforms, we invest in new products, we invest in people. So it's a market that's always going to be there. It's going to go through cycles like the consumer pieces, but I think it's important for us as a business to continue to build out a sizable successful commercial business to augment what we do on the Consumer side.

Operator

We'll move next to Paul Ginocchio from Deutsche Bank.

Paul Ginocchio - Deutsche Bank AG, Research Division

Just a question about Brazil. It looks like the charge is about 27% of the book value. It seems pretty significant. Has it been a marked slowdown to start the year in Brazil? Or is it more just about the reorg and the investment opportunity you need or the investment you're making to capture the opportunity there?

Richard F. Smith

Sure, Paul. It's both. The only caveat I'd give to your question was it's not just the recent slowdown. If you look back the last couple years, the GDP has slowed, the use or the demand of credit products has slowed. If you follow experience, historical growth patterns in Brazil, that's a good proxy for what the market sees. We obviously don't disclose that level of detail because we don't consolidate Brazil, but there's no doubt that the U.S. -- or the Brazilian economy has slowed. Secondly, we are investing, as you noted, and we've talked about now for a number of years in 2 -- 3 very important areas. One is integrating the core platforms in which we operate, which is important to do. It simplifies and shortens your time to market for new products. That's a heavier investment than we anticipated early on. We're also investing in positive data capabilities in IT. That's still maybe multiple years away, but it's important we invest now so that when the country embraces positive data, we're in a position to jump on that. And third is we'll continue to invest in sales people, sales processes. I was just down there with Paulino late last year; we are still committed to Brazil. I think it's a place we've got to keep our pulse on and stay actively engaged. I believe in what Boa Vista is doing, combined with TMG and our leadership. So while it was a write-down, a noncash write-down for the fourth quarter, we're still committed short term and long term in Brazil.

Paul Ginocchio - Deutsche Bank AG, Research Division

I appreciate it. And maybe just a little quick one. Has been an even further slowdown into the first quarter?

Richard F. Smith

I don't have any data on the first quarter this time. I think if you look throughout 2013, you'd see the year continue to slide throughout the year in Brazil.

Operator

Moving on to Andrew Jeffrey from SunTrust.

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

Just trying to catch my breath after that. Rick, lots of moving pieces. Can I just have you summarize, if you look at the business from 30,000 feet, when you look to '14 versus, say, where we were a year ago, core business, noise notwithstanding, better, worse, the same as far as the growth and profitability profile of Equifax compared to 12 months ago?

Richard F. Smith

I'd say better for these reasons: So the core business, the core organic nongrowth business, is as solid today as it was a year ago. And I think we'd all agree last year was just a great year, building on a great year in 2012. And 2014 and 2015 will be solid. It is better for this reason. TDX is a strategic acquisition that gives us capabilities that we didn't have before. It will start to monetize, I think, in very meaningful ways at the back end of this year and into 2015. They connect capabilities to new geographies, existing customers in new geographies, I'm very hopeful that, that is going to bode very well for us long term. The other point I'd make is we get smarter and smarter every day in this verticalization and enterprise selling that we're doing through USCIS. Andrew, I know you know this, but we've taken the commercial products, we've taken the verification deployment products, verification income products and all the products we had to bear to our core customers in the U.S. and differentiating our offering from anyone else. So we've been at that a couple of years. Each and every day goes by, that gets better and better.

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

Okay. So if TDX is your call-out in terms of incremental excitement in '14, when you look at the core business beyond the acquisitions, what are the things about which you're the most enthusiastic?

Richard F. Smith

I just think the execution the team has delivered now for 4 or 5 years in a row continues to hum, such things like NPI. If the verticalization that we have, if you've seen some of the leases we've had, for example, in auto, that is a true differentiator that no one else has done. We get smarter and smarter. In other words, we get domain expertise in each of these verticals, and that in itself isn't a solution. Anybody could do that. It's taking that vertical expertise with the unique data assets we have to accelerate growth and with that, obviously, the D360 is another thing that really excites me this year.

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

Okay. So auto has been a pretty important share driver for you.

Richard F. Smith

Yes.

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

Lee, just a couple of housekeeping questions, if I may. What do you anticipate the net acquisition-related weighted amortization to be this year?

Lee Adrean

Andrew, I don't have that off the top of my head. I would have -- we'd have get back to you on that.

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

Suffice to say it's up?

Lee Adrean

It's a significant number, yes.

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

Yes, okay. And as far as the tax rate is concerned, you called out the FX headwinds. You called out the mortgage headwinds. Do you have a sense of what the higher tax rate is costing you just in terms of reported earnings?

Lee Adrean

Yes, that's actually a couple of cents a share. I mean if you take from 35.6%, call it, to the midpoint of the 36%, 37%, 0.9 point on $500 million to $600 million of pretax, you're talking $0.03, $0.04 a share.

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

Okay. And finally, puts and takes notwithstanding again, and this may be more of a question directionally as we look to '15, is there still some operating leverage left in the business? I mean, I guess I'm thinking more about EBITDA because of all the intangibles amortization now.

Lee Adrean

Yes, it's a great question because it'll get muddied through the acquisitions in 2014, even on the EBITDA line as well, because of some initial expenses we incur as we integrate companies. But both on an operating margin basis, and what I'd call, cash margin, it's not EBITDA margin, but cash margin the way I look at it would be operating profit adding back just the acquisition amortization. Both of those measures will get better on our core business in 2014 if you take out the acquisitions. So the underlying model remains intact. And then as we have some experience with those new businesses, we will expect those partly through expense management, but a lot of it from revenue leverage, given the growth prospects of those businesses, those will start contributing to widening. So yes, I think the margin model is intact.

Operator

[Operator Instructions] We'll move next to Manav Patnaik with Barclays.

Manav Patnaik - Barclays Capital, Research Division

Can I just ask on the margin side, I think you said for the full year, it's going to be flat to slightly down. Are there any specific within the segments that you'd need to call out in terms of any directional moves that will be different than what we've expected in the past?

Richard F. Smith

Let me jump in with a general. We always do give some more color. It's largely being driven by the fact that you've got some acquisitions coming on with increased revenue, and in the first year, not adding a lot of profit. We call that as being nondilutive, so that's putting a little bit of margin pressure. The fundamentals of each of the 5 business units from a margin perspective are largely intact. You have slight movement quarter-to-quarter and year-to-year for each of the business units. But at the company level, most of it's being driven by adding the revenue we're getting from TDX and Inffinix without adding profit to the bottom line. Lee, anyone else you'd add?

Lee Adrean

Yes, Manav, I think the key place you'll see some downward margin movement, and it's because of the acquisitions, is going to be International. That's where the bulk of the acquisitions have occurred. And you'll see that affect International margins by a couple hundred basis points.

Manav Patnaik - Barclays Capital, Research Division

Okay. And then just sort of big picture, Rick. I think you mentioned, I guess, it was 47 new products this year. I think in the past, you've been in the mid-60s range, not that, that number sort of means a lot from a year-over-year perspective. But just on your NPI targets, 10% I think was your range. Just your comfort level with all the good work that you've been highlighting. Is that becoming a conservative target? Or do you still stick around in that 10%?

Richard F. Smith

I still think the 10% makes sense. Let me allude -- I'll give you some more color in a second. The 47 I'd mentioned in my opening comments, one of the things we had done is kind of re-energize and we've done this a couple of times now with NPI -- with a focus on NPI. One of the things we decided to do very intentionally in 2013 is focus on a fewer larger products. We've traditionally been in the 65 to 70 products per year, so our goal is to reduce that. We didn't target 47 specifically, but a reduction in larger, more meaningful price, and that's what you saw last year. Revenue was up 18% year-on-year from NPI. So extremely healthy year. And long term, yes, I still see a Vitality Index of 10% is kind of the right range for us. You're going to have ebbs and flows as you sunset large classes 1 year. Maybe the next year you don't have large classes you sunset, so you'll be above the 10%. Yes, I think 6, 7, 8 years into NPI, that 10% number still makes sense.

Lee Adrean

And it becomes 10% of a larger number as you might guess, obviously.

Manav Patnaik - Barclays Capital, Research Division

Yes, correct. Fair enough. And then just one last one. I was just wondering on the PSol side, you obviously have some headwinds out there with the data breaches and all those sorts of issues. But I was just curious on is there a potential tailwind now that a lot of these banks are giving the FICO score for free and then you get your free credit report? Does the combination of the 2 maybe have any impact on your underlying PSol business?

Lee Adrean

Yes, Manav, I think that's a great observation. I think the growth -- likely growth expectation for PSol probably is moderating, which helps us a little bit as you see more breaches out there. But you're right, the banks -- number one, the banks are under some pressure relative to the way they sell add-on products to their customers as a result of the way the regulators view any kind of cross-selling activities. And you're seeing an increased presence in the marketplace of some free models, which are based on lead generation for other products. So I think you might see a little bit more moderate growth in our PSol business over the coming year.

Richard F. Smith

The flip side, Manav, which you don't really have the benefit of seeing, but we do, is the PSol business is gaining traction, accelerating at a faster growth rate outside the U.S. So the things that we're doing, taking PSol and all the great tools and capabilities that Trey has built again to Canada, U.K., now Latin America helps. And we're at the early days of really understanding what we can do and how far we can take TrustedID with a lot of capabilities for our partners, which as you know, is new to us as well.

Operator

We'll hear next from David Togut from Evercore.

Michael Landau - Evercore Partners Inc., Research Division

This is Mike Landau in for David. Can you talk a little bit about the competitive landscape that TDX would participate in when you bring the product to North America and maybe quantify the opportunity in that region?

Richard F. Smith

Yes, Mike, you should know this, that one, we did a very -- one, let me back up. My comments kind of alluded to this. We had been working with TDX for about 2 years just really to get to know their culture, their people, their management, their pipeline, their capabilities. We did very thorough studies, brought consultants in to help us understand their uniqueness versus competition in the current footprint in U.K., Spain and Australia, as well as their uniqueness in countries where they were not, places like Canada and U.S. is 2 obvious ones. The second point I'll make there on TDX is we did not contemplate any acquisition or justification of the purchase price TDX coming to the U.S. or Canada at this juncture. There's enough growth short term in the next couple years to grow nicely in the current footprint. We will very systematically think through the launch plan. In fact, I've chartered Paulino and Rudy Ploder with putting that launch plan in place by the end of this year so we can really understand all the nuances of who's in the U.S., who's in Canada and how you systematically make this thing work in those 2 countries, but the business has to stand on its own merits in the current geographical footprint.

Michael Landau - Evercore Partners Inc., Research Division

Great. And then I know you had a quick comment on acquisition-related amortization expense. Would you have an idea of the impact of just TDX to that number?

Lee Adrean

Yes. I'm sorry, I do not have that with me.

Operator

Moving on to Jeff Meuler from Baird.

Jeffrey P. Meuler - Robert W. Baird & Co. Incorporated, Research Division

Actually a follow-up on the NPI and Vitality Index. Rick, should we think about -- looking back over the last couple of years, is this -- is the Vitality Index kind of the accumulation of a lot of singles and doubles? Or are there any triples and home runs that you guys have hit that you can discuss?

Richard F. Smith

Yes, it's great. I kind of think about home runs as transformational from a revenue respective. If that's how you define it, which is how I do define it, those are few and far between. I think I've got a lot more singles and a lot more doubles financially. However, what you can find is there are some things that disrupt the marketplace that, over time, will allow you to get additional revenue streams from add-on products, if you will. So trying to chase the home runs, I think, is a bit of a gamble. That's why you see us in the range of 47 products last year up to, I think our high ever was maybe 70-something. If there were home runs, you'd find these being in 5, 10, 15 kind of products. So that's a big risk.

Michael Landau - Evercore Partners Inc., Research Division

Okay. And then on the Key Client Program, it seems like you continue to add clients 1, 2 at a time. It's still a relatively small number. It seems like it's going well. I guess just why not roll it out faster? Is it just that you need to add headcount to that organization? Or is it that there's only, call it, 10 to 20 potential accounts that could get slotted into there?

Richard F. Smith

Good question, probably requires some clarification. Think about KCP under the same banner as verticalization. It is no different. So I go back I think it was 2007 or so in the recession, we were looking at the banking sector and said, "What might the banking sector look like postrecession versus pre, the emergence of 4 very large powerful banks seemed inevitable. I wasn't confident in our positioning with all 4 of those banks at that time, so we created KCP at that time. We then added on larger, more strategic accounts, 2 examples I just talked about, that is now 8. But beyond the KCP accounts, we've got vertical focus now in mortgage. We've got vertical focus in auto, we have vertical focus in telco, probably missing a few more as well. Retail banking. So verticalization, in total, of which KCP is one element, has really transformed our go-to-market approach over the past 6 years. And KCP is one piece of that, and that's working very well.

Lee Adrean

By the way, if I can tag a completely unrelated comment on to that. I've had -- we've had 2 questions about acquisition-related amortization. I've been shuffling through my papers here, and I would tell you that the acquisition -- in total, acquisition-related amortization looks like we'll be up around $15 million to $18 million year-over-year. Again, the biggest impact will be in our International business. That $15 million to $18 million is actually a net number because we'll be down some and we'll see some benefit in Workforce Solutions as we complete the amortization of certain assets from prior deals, but the net for the company will be up $15 million to $18 million.

Operator

We'll move on to Shlomo Rosenbaum from Stifel.

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

I just wanted to focus a little bit more about the demand in the core markets. You're seeing Consumer Financial Marketing has had very good growth for the last 3 quarters. Is this -- are you guys working out kind of the concerns that the banks had in terms of using the IXI data? Or is it really that you're seeing good pickup in the core kind of marketing for -- to consumers within various aspects of the business that's much more related to what I would say kind of the core business?

Richard F. Smith

Yes, I think it's a combination of both, Shlomo. We have new leadership in IXI. That, combined with our legal team really working with customers, understand what the regulation really means, it doesn't mean it has helped. You're also seeing the prescreen business continue to increase. That entire Bancard business is up 8% to 10% per year, which is low, so well below the prerecession highs of pre-2009. But yes, we're clearly getting market base momentum, market share gains and improvement in IXI.

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

So if I wanted to isolate the market share gains that you guys are doing over there, would you say that we're starting to see the banks, excluding the auto that everybody's talked about, just on the credit card thing, are they loosening up the credit standards? Or is it a matter that you guys are able to go ahead and help them dice the market better because of your analytics and unique data, and therefore, you're getting better growth there?

Richard F. Smith

It's a combination of both. For example, there's no doubt that the banks are getting a little more aggressive in their lending standards. For example, if they're going to be more aggressive in auto, go down the store chain, they're requiring a larger down payment or deposit upfront. So they're all looking for ways to grow in a reasonable risk base, and our ability to help them make those decisions with our Decision 360 helps us differentiate and gain share.

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

Okay. And just in commercial, can you just give us a little bit more detail? You had 3 really solid quarters and then a quarter where things dropped down. I know that things kind of bump around. Is it really project-related revenue timing? Or is there anything changing underlying in that market?

Richard F. Smith

It's -- I don't think there's any underlying. It's so small, and this is not in a derogatory sense. It's a small business, Shlomo, so going from -- I don't have the math in front of me -- going from, I think, it was negative 3% in the fourth quarter, deposit at 10%. It is a small swing in total dollars. So you could have nuances and movement quarter-to-quarter. I pay more attention to the long-term trajectory of the business and I still remain committed that, that is a growth business for us and it did grow 7%, yes, in 2013.

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

And then in light of what you're seeing in PSol, can you give us more long-term expectations? Have you -- the revision that you guys have in your own mind in terms of what to expect of growth over there over the multiple years.

Richard F. Smith

Yes, I can't remember the growth model we provided for PSol long term.

Lee Adrean

Upper single digits.

Richard F. Smith

Long term with a margin profile of x?

Lee Adrean

The margin profile, mid to upper 20s.

Richard F. Smith

So I think, Shlomo, that long-term model still exists. Even though there may be some pressure and you've seen PSol growing at the upper end outside that range for a number of quarters, if not years, you're seeing some moderate slowdown and we expect that to continue. The regulatory environment is unknown. So our challenge is to find ways to continue to innovate, take trusted ideas in levels. And I still think we're in that long-term model we told you guys a number of years ago, upper single digits in the margin profile that we talked about.

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

Okay. There's really -- it's just a bit of coming from maybe above that range to just within that range. That's all we're talking about here?

Richard F. Smith

That's a great way to think about it.

Operator

[Operator Instructions] We'll move next to Bill Warmington from Wells Fargo.

William A. Warmington - Wells Fargo Securities, LLC, Research Division

So Rick, I had a question for you. You've thrown out the Vitality Index being 14% of revenue for International. Did you give that also for the company as a whole?

Richard F. Smith

I did not. I think what I talked about was the entire revenue was up about 18% year-on-year. I think the Vitality index is around 9%, if I remember right, Bill.

William A. Warmington - Wells Fargo Securities, LLC, Research Division

Okay, about 9%, currently, okay.

Richard F. Smith

Yes, for 2013.

William A. Warmington - Wells Fargo Securities, LLC, Research Division

Got it. And then, Lee, the CSC had provided some pretty healthy revenue and margin benefits in 2013. Can it continue to help performance in 2014? Is there more juice in the lemon, so to speak?

Lee Adrean

Well, I think that we've captured most of the margin benefit, the first quarter will still be advantageous year-over-year because we had some initial expenses in integrating CSC in the first quarter last year. The -- now I think we're into the steady process within USCIS of driving a little bit of growth every quarter and getting them to perform fully at the levels that we think is possible. That's much more of a steady year-by-year effort.

William A. Warmington - Wells Fargo Securities, LLC, Research Division

Got it. And then I wanted to ask about the collections market today in terms of what's the opportunity there for Equifax. It's a place where you've been making investments, Inffinix, TDX. I've always thought of it as being a fairly mature market. I mean, some people call it the second oldest profession, so...

Richard F. Smith

That's good, Bill. Think about it this way. It's servicing our -- one, we're in collections today, and I think you know that we do collections in many geographies around the world. It's an important offering we must have for our customers; two, think about TDX is kind of a SaaS model, which is really our sweet spot, that's what we do. Think about it as Analytics and Technology platforms as right what we do today. So they are a very, very powerful player in the U.K., having great early successes in places like Spain. So I am confident we can bring that capability with our bigger pipes. We've got far bigger distribution network than they do, growing their capabilities for our current customers and new customers in a model that's very financially friendly to us, SaaS model. And think about Inffinix as a little different. If you know our vernacular, you find TDX more akin to InterConnect. It's sophisticated, it's upper end in its capabilities. That's TDX. If you think of a decisioning platform we have across Central and South America, Experto, it really fits those market needs. Inffinix is more like an Experto for us, so it's the same concept there. They're good really in Mexico plus a few other countries. We've got the largest footprint in Central and South America. We can bring their product through our pipeline to our customers and add value.

William A. Warmington - Wells Fargo Securities, LLC, Research Division

Got it. And now last question was, helping banks comply with regulation as a revenue driver, getting better, weaker, flat?

Richard F. Smith

Early stages but hopeful, and I think if we are -- as an industry, including banks, long term, going to successfully navigate the regulatory environment, we're going to have to do it as partners. And that's our intent, was to reach out proactively to some of the larger banks out there last year and proactively help them because if we can help them become more compliant on data accuracy, as an example, that helps us. So early stages.

Operator

Brett Huff from Stephens Inc.

Brett Huff - Stephens Inc., Research Division

Two questions. One is on the restructuring, you haven't talked much about that. Can you give us a sense of where the restructuring happened? And I'm less concerned about the current period costs and I'm more interested in what are the benefits in terms of better margins? Will we see them -- where will we see them? And when will we see that?

Richard F. Smith

Yes. I'll take a crack at it and Lee, I don't know if you would, please. One, in the scheme of things, the size of restructuring we took is relatively de minimis. We take restructurings and repositionings very, very seriously because it impacts people's and families' lives. But the economic environment in which we operate isn't static. It's very dynamic. The opportunities you may have in one part of the world are not static, it's dynamic. So our challenge as leaders is to always make sure we are reallocating, repositioning our human capital resources and financial resources in order to get the best return. So it was nothing more than that and taking some areas that were offered lower growth and in cutting back expenses there and repositioning to higher growth areas. So that is a normal process in my 8.5 years here that we have done so many times over the 8.5 years. This is a little bit more meaningful and as we called it out as a non-GAAP item. As far as margin impact, Lee?

Lee Adrean

Yes. I mean, I think the other thing to about think our margins is that we continue to expect to grow our staffing over the course of this year. It will be at a modest rate and in line with a recognition of where our revenue for the year is going to grow. So this really is much more about realigning resources to where the best opportunities are. It helps us accommodate the softer revenue we'll see in the first half of the year. But for the year as a whole, you take our revenue growth, subtract a couple percentage points that has to go to salary increases, merit increases. That's going to give you just about what our headcount growth will be. And that's kind of consistent with the [indiscernible] model. So it's not really a margin-driving action so much as staying focused on where the returns are.

Brett Huff - Stephens Inc., Research Division

Okay. And then the second question is -- and people have asked a little bit about NPI already. But can you just give us a sense -- you've been added, I think you said 6 or 8 years with a very systematic way of hitting singles and doubles and hopefully getting some triples in there, too. What -- as you guys look forward, how much of NPI is going to come from sort of brand-new data sets versus analytics or add-on products for existing data sets, so we have a better idea of kind of what -- how proprietary some of those NPI revenues are?

Richard F. Smith

That's an interesting way to ask. As you think about product, I'd say this. If you think of a continuum, I think the next 3 years, the greater NPI growth comes from mining the current unique data assets we have around the world more fully. There's a lot of juice, as someone had mentioned earlier on a comment, an earlier comment about juice left, and a lot of juice left in just mining the current data by taking those unique data assets to new verticals with unique data with unique domain expertise. The auto example is a prime example. We've had the wealth data -- or the employment data. We've had the income data. We've had all those data assets now for a few years. But getting domain expertise in the verticals, to focus on that and bring those through to deliver new products is an example. I think there's more opportunity over the next 3 years. We'll always go out looking for the next unique data asset. We've got a lot more we can still do and mine what we have today.

Operator

We'll hear next from Andrew Steinerman from JPMorgan.

Andrew C. Steinerman - JP Morgan Chase & Co, Research Division

I was hoping you could make a comment about credit card applications. Rick, I definitely heard you talk about prescreening up in the quarter. Do you think that was just sort of Christmas holiday related? What's your sense of credit card application as we're going into 2014? Often, it's a very big driver for you, but it hasn't for a while.

Richard F. Smith

Yes, I'd say it this way, Andrew. Since the lows, the trough of the recession, you're steadily seeing that increase, in the last couple years anyways, the upper single-digit range, and we expect that to continue. But still, I think I mentioned before, 39%, 38% below the prerecession peak. So nowhere close to what we were before the recession, but I expect it to continue in 2014 and up.

Andrew C. Steinerman - JP Morgan Chase & Co, Research Division

Right. And you're not just talking about the prescreen, you're just talking about the follow-through where you get the application, you get the consumer credit report as well, right?

Richard F. Smith

Yes, and I got to be -- the answer's yes, but I have not actually tracked the linkages we've done in the past between prescreen and credit file pool. I don't have that number off the top of my head. If you remember, there was a very strong correlation prerecession. I think it was 30- to 45-day lag between prescreen and credit file pool. That lag was impacted dramatically during the recession. I can't tell you exactly where it is today, but eventually, yes, prescreen leasing pools were up.

Andrew C. Steinerman - JP Morgan Chase & Co, Research Division

All right. So it sounds like moderate recovery.

Richard F. Smith

Yes. Thank you. And operator, I think that's about it. We're about 1/2 hour over our normal time unless you have one more question that has to be asked from the phone.

Operator

And at this time, there are no further questions in the queue. Mr. Dodge, I'd like to turn the conference back over to you for any closing remarks.

Jeffrey L. Dodge

Okay. I want to thank everybody for their time and their interest in Equifax. And I think with that, we'll conclude the call. Thank you, everybody.

Operator

Again, that does conclude today's teleconference. We thank you, all, for your participation.

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Source: Equifax Management Discusses Q4 2013 Results - Earnings Call Transcript
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