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Equifax Inc. (NYSE:EFX)

Q1 2014 Results Earnings Conference Call

April 24, 2014; 08:30 a.m. ET

Executives

Rick Smith - Chairman & Chief Executive Officer

Lee Adrean - Chief Financial Officer

Jeff Dodge - Investor Relations

Analysts

Dan Perlin - RBC Capital Markets

Paul Ginocchio - Deutsche Bank

George Mihalos - Crédit Suisse

Shlomo Rosenbaum - Stifel

Rena Kumar - Evercore

Nick Nikitas - Robert W. Baird & Co

Manav Patnaik - Barclays Capital

Operator

Good day and welcome to the quarter one, 2014 Equifax earnings release 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.

Jeff Dodge

Thanks and good morning everyone. Welcome to today's conference call. I'm Jeff Dodge, Investor Relations and with me today are Rick Smith, Chairman and Chief Executive Officer; and 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 businesses 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 measure, including adjusted EPS attributable to Equifax that will be adjusted for certain items which effect the comparability of the underlining operation performance. Adjusted EPS attributable to Equifax excludes acquisition-related amortization expense and the associated tax effects. This measure was 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 the website for further details.

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

Rick Smith

Thanks Jeff and good morning everyone. Thanks for joining us this morning. As I always do, I’ll start off with a couple of high-level comments on how the company performed in the first quarter. I'll then gravitate towards some details at the business unit level and then come back to the corporate level and give you an update on a couple of key initiatives company wide, and Lee will go through his detailed financials and we’ll come back and look at the second quarter, the balance of the year and then we’ll do some Q&A.

Our first quarter performance, in our opinion was solid. We came in a little bitter than we had initial expected, all the business units continued their strong execution of their strategic initiatives and that will enable us to offset both the mortgage and the currency headwinds, which we described here during our last quarter call for the fourth quarter.

For the first quarter revenue was up 3% to $585 million on a reported basis, about 5% on local currency basis versus the first quarter 2013. The strategic acquisitions, which we recently completed, are enabling us to further leverage our core business assets and drive new sources of growth.

Early stage integrations are off to a good start and we are optimistic that all the acquisitions we made late fourth quarter and the first quarter will bode well for us going forward.

For the quarter our core non-mortgage market growth rate was 7%, solidly in the range we had targeted, about 6% to 8%. Operating margin was 26%, down slightly from 26.3% a year ago and our adjusted EPS was $0.89, up from $0.87 last year.

Our U.S. now are going to the individual business units, starting with USCIS. They delivered another solid quarter with strong execution. Their initiatives are consistent with our expectations. USCIS core non-mortgage market organic growth for the quarter was a solid 6%.

They are continuing to leverage innovations, to develop and deliver unique insights to the customers through partnerships and multi-product offerings that leverage our unique capabilities. I’ll give you a few examples there. First is, we’ve announced recently the partnerships with IHS, you remember HIS versus Polk last year.

So we announced this partnership, we’re going to develop product offering for one of our focus verticals we talked to you about and that’s automotive. Our first product is lost sales analysis for lenders, which helps them understand an actual situations where they lost good opportunities to competitors and helped them build a strategy to not loose those in the future. Off to a great start, automotive is a great growth vehicle for us going forward.

Another example, we’ve have identified a number of opportunities for integrating multiple data assets along with some of our proprietary analytics to develop what we call ‘super scores’ that enable our customers to make better decisions on higher risk opportunities about something they would normally pass on and they now able to underwrite those risks. The market interest is increasing nicely and our customers are increasingly focused on growing their running portfolios.

We talked about Mobile Commerce. We’ve got a great initiative, a partner called Jumio. They are a next-generation payments and ID company to help our customers maximize their opportunity with Mobile Commerce, while reducing fraud and streamlining mobile payments; really exciting early state opportunity.

In the mortgage space we continue to bundle undisclosed debt monitoring, which we’ve talked to you about our 4506-T product, verification of employment, verification of income and bundle all those products to a very unique decision platform, which we have in a mortgage market and these solutions are allowing us to increase our market penetration and to drive growth. This continues innovation in this large market has enabled us to mitigate the impact of the market decline, while positioning us to accelerate faster when the market conditions improve.

We’ve seen the MBA data for the quarter; we’ve seen how we’ve outperformed the MBA. We’ll talk about that in the Q&A as well and that’s largely driven by our unique offerings in our new decision platform.

In Fraud and ID Management we’ve made significant progress, particularly in the government sector. We are providing identity authentication for selected IRS portals in support of the strategic goals for reducing fraud, improving service, extending processes and improving efficiencies. We are also undertaking projects for health and human services, leveraging our proactive fraud solutions products and we continue to sign new accounts in the state agency market with our identity proofing services.

International; its a critical long term growth early for us and in the first quarter they performed well. Retained a little over 24% constant dollar growth, driven by solid organic growth in addition to contributions from their recent acquisitions.

In the midst of integrating TDX, you recall, quite a few hits recently and we are aggressively working on a plan, not only to integrate them, but to take their capabilities and solutions to countries outside their current footprint. They are predominately if you recall U.K. based company, we saw our operations in Spain and Australia. We have high hopes that this is going to have a fit in places like Canada, Argentina, Brazil and the U.S. and teams are working diligently to lay those plans out for execution later on this year.

We now have InterConnect implemented in five additional countries with a sales pipeline extended into six other countries. InterConnect ultimately enable us to deliver Decision 360 products in these counties and most importantly as you know we’ll get these decision platforms ingrained into our good customers, our stake in this goes up significantly.

In our non-consolidated investments overseas, both Russia and India are exceeding our expectations. We also made very good progress with our Brazilian partners and expect solid growth with them in 2014 and beyond.

Following an outstanding performance in 2013, Workforce Solutions delivered core non-mortgage market, organic growth of 10% in the first quarter, another outstanding quarter for Workforce Solutions. They continue to deepen our penetration of many of our existing served markets, while broadening the markets they serve with unique high value products.

For the first time in a long time, home equity lending is up dramatically and the need for employment and income verification services provides new growth opportunities for us. We are at the very early stages of home equity lending coming back and late in the first quarter we started seeing the benefit of that. We expect that to continue throughout the balance of the year.

One of Workforce Solutions newest offerings is getting very good attraction. The solution offering the ACA Management Platform provides customers with automated dashboards that enable them to evaluate, track and report their compliance with the Affordable Care Act.

If you recall few years ago we acquired eThority, which is a major analytics company. We leveraged that capability to help our customers, employers be sure they are complying with the Affordable Care Act. We have now signed up more than 100 major organizations with this platform to ensure they are compliant; exciting for those guys. In another way we bring analytics to every part of our company, now including EWS.

We are also making good progress on our targets on the Work Number database. We now have almost 3,400 companies contributing their Work Number records up 7% from year-end. Our records are now exceeding 240 million in our database and we are well on our way to reaching our short term goal, which we’ll talk to you about, of 250 million total records and 7 million active records will soon come back with a new base line for your larger target going forward and any other implications of that.

Finally our contract with CMS, Center for Medicare and Medicaid Services was renewed for another year. If you recall we signed the contract a year ago. It was a one-year contract with one-year renewals they have come back and have renewed it. We could talk about that in the Q&A session as well, but getting off to a good start there.

Personal Solutions continue to make good progress with the integration of TrustedID, while continuing to execute at a high level on the strategic initiatives. TrustedID has been successful in opening up new growth opportunities for PSOL in indirect market and providing us with opportunities to redirect our resources to better address the change in the competitive landscape.

In fact I think as we look forward to the next, one, two, three, four years of indirect market we’ll be in fact the significant growth driver within PSOL. And PSOL on the core business, they kind of tweak their business model to address the inroads being made by free scores, free services, marketing expenditures in that core business have been reduced a bit, which is resulting in over time higher profits and slightly lower growth we talked to you about last quarter, that combined a great combination with indirect and direct.

Finally North American commercial solutions began the integration of Forseva, whose decisions platform enable us to deliver high value decision solutions to small business information market. High single digit growth in transaction revenues for the quarter were largely offset by a decline in the project-oriented revenues. You know the project revenue can be lumpy, but the good news is we are seeing the transaction revenue growing, which is a good sign.

A couple of quite highlights for the company now. As you all know, successfully executing on all of our enterprise wide initiatives in a critical comparative to us. The management’s discipline that underpin our ability to execute a high level and ingrained almost every time, we give you a couple of examples. As you know seven years ago we launched NPI, New Product Innovation Program. We’ve had great success over the seven years. In fact 2013 represented our largest revenue contribution from products over the previous three years.

At this juncture, with seven years into it and to keep it fresh we have launched a new program called NPI 2.0, which is really to reinvigorate NPI innovation across the enterprise to again like four, five years of great runway from NPI. We launched that earlier this year, it’s off to a great start.

LEAN continues to be an important part of our DNA. Its delivering significant benefits internally, which we talked about, but also externally with our customers who engaged us to help them operate more efficiently and more effective, another way to differentiate ourselves from the competition.

As we enter 2014 I expected the first quarter to be the most challenging quarter we’ve faced due to the fact we had mortgage headwinds. The sluggish economy, that’s weather and FX. It was a difficult environment, but in that environment this team brought a very, very solid performance and as I looked at the balance of the year we started to see signs of strengthened economies around the global in which we operate. We are seeing that the mortgage headwinds will start to abate towards the end of this quarter, improve a little bit in the third quarter and with wins back in the fourth quarter.

We continue to executive at very high level on our innovation. The things that we’re doing on vertical focus is really making a difference and I can tell you, I’ve seen more share gains and wins in the market place in these key verticals with the Decision 360 platform, than I have seen since we’ve launched Decision 360 a number of years ago.

So I believe right now we are saying with the convergence of all these good things, it will position us very well towards the balance of 2014 and into 2015. So, with that Lee.

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.

Our first quarter performance was solid in the phase of the challenging mortgage headwinds, which we anticipated. As we indicated during our fourth quarter release, those headwinds will continue into the second quarter and moderate substantially in the second half. Our full year outlook has not changed.

Let me turn to the quarterly results. Compared to the same quarter in 2013, for the first quarter of 2014 consolidated revenue of $585 million was up 3% on a reported basis and up 5% on a constant currency basis, when compared to the first quarter of 2013.

Operating margin was 26%, down slightly from 26.3% in the first quarter of 2013. Diluted earnings per share attributable to Equifax was $0.67 per share. Excluding acquisition related amortization, adjusted EPS was $0.89 up from $0.87 in the first quarter 2013.

Moving to the individual business units, our U.S. Consumer Information Solutions revenue was $244 million, essentially flat when compared to the first quarter of 2013. Our core non-mortgage market organic growth, including strategic initiatives contributed approximately 6% to growth, although decline in mortgage market volumes subtracted 6% from growth.

Online Consumer Information Solutions revenue was $179 million, up 2%. Core credit decisioning transaction volume was up 9%, while average revenue per transaction declined 8%. The decline in revenue per transaction resulted from fewer mortgage related transactions, which are typically at higher than average per transaction and from expansion that select larger financial institutions in Telco’s, which have lower than average pricing due to their size.

Mortgage solutions revenue of $24 million was down 18% compared to the fist quarter of 2013. This compares very favorably to the mortgage bankers application index, which is down 54% in the first quarter.

Consumer financial marketing services revenue was $41 million, up 3% when compared to the year ago quarter and the operating margin for U.S. Consumer Information Solutions was 38.9% up from 37.5% in the first quarter of 2013.

Our international business unit’s revenue was $144 million, up 16% on a reported basis and up 24% on a local currency basis. The acquisitions we that completed in the fourth quarter and first quarter contributed approximately 15 percentage points at the local currency growth. Strong organic growth was aided by above average growth in small and medium enterprises, government insurance and utilities.

By region, Europe’s revenue was $66 million, up 48% in U.S. dollars and up 39% in local currency, driven by the acquisition of TDX and upper single digit organic growth in our core business. Latin America’s revenue is $47 million, flat in U.S. dollars, but up 23% in local currency, driven about equally by organic growth in technology and analytic services, marketing services and by the acquisitions in Paraguay and Mexico.

Canada consumer information revenue was $31 million, down 4% in U.S. dollars, but up 5% in local currency, driven primarily by solid growth in information solutions and technology and analytical services.

International’s operating margin was 20.4% compared to 28.1% in 2013. Approximately half of the decline resulted from the increased acquisition related amortization expense of $5.8 million related to producing acquisitions. The remaining decline resulted from seasonality in our newly acquired TDX business and inflation driven pressures on margin in Argentina. We expect to exit the year with operating margin over 25%.

Workforce Solutions revenue was $120 million for the quarter, down 3% when compared to the first quarter in 2013. Verification Services with revenue of $64 million was down 7% when compared to the same quarter in 2013. Strong growth in government and pre-employment partially offset the 31% decline in mortgage-related revenues. Revenue in our non-mortgage customer segments was up 16%.

Employer Services revenue was $56 million, up 1% compared to last year. The Workforce Solutions overall operating margin was 32.3% compared to 30.3% in the first quarter of 2013, driven primarily by the benefit of reduced acquisition amortization, offset partially by the negative effect of lower revenue against the primarily fixed cost expense base.

North America Personal Solutions revenue was $54 million, up 6%. Growth was driven primarily by the acquisition of TrustedID. Solid mid single digit growth in U.S. subscription revenues and strong growth in Canada were largely offset by declining revenue in breach and transaction products.

Operating margin for Personal Solutions was 28.2% compared to 28.4% in the first quarter a year ago. North American Commercial Solutions revenue was $23 million, flat on a reported basis and up 2% on a local currency basis, driven by growth in transaction revenue, partially offset by weakness in project oriented revenues. The operating margin was 19.4% compared to 21.3% in the year ago quarter.

Now, let me turn it back to Rick.

Rich Smith

Thanks Lee. Before we go to Q&A, I thought I’ll just give you a couple of thoughts front up and how we think about the remainder of 2014 and how we think about – our overviews of 2015. One, our core organic non-mortgage market growth of 6% to 8% we talked about for a number of years remains solid and we continue to make great progress on all of our initiatives, to ensure we deliver in that range as we did in the first quarter.

Secondly, the integration of the acquisitions we’re talking about are on track and we’re more optimistic about the potential for TDX and Inffinix together with different markets than at the of the acquisition and these acquisitions are expected to move, to be accretive towards the back end of this year.

Three, as we talked about in the largely through the mortgage headwinds, that will start to abate as we exit the second quarter and continue to abate in the third quarter and put it in the fourth quarter and they are coming back in 2014.

At this point the foreign exchange headwinds we’re talking about and we’re probably getting more, seeing some stability there and when we put that all together it says that at this juncture, versus the fourth quarter earnings call that we did, Lee and I would be more confident in the outlook for the balance of this year and 2015 as we still have time. We still have to execute obviously as a company.

As was always, we reconfirm our full year guidance; we gave it in the last call. We expect core organic non-mortgage to grow there in the 6% to 8% acquisition added to our growth to our FX and mortgage will continue to be headwinds and going through the second quarter and the early third quarter very much as we expected, which is encouraging.

We should expect the total, revenue for he total year to be $2.425 billion and $2.475 billion and our adjusted EPS as we told you in the last call between $2.75 a share and $2.89 a share. In the second quarter we expect reported revenue between $606 million and $619 million and adjusted EPS between $0.92 and $0.95, so very much in line with what we’ve expected from the year.

So with that operator we’d like to open up the phones for some questions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions). We’ll go to our first question with Dan Perlin from RBC Capital Markets.

Dan Perlin - RBC Capital Markets

Thanks. Good morning guys. So I wanted to – Rick there’s a lot of things your throwing out in terms of initiatives that are taking place and I just wanted to parse it a little bit, when we think about this conviction going into the second half and I guess what I’m trying to figure out is, how much of the benefit really needs to be kind of cyclical and then the second part is, versus what I would consider to be kind of contractual obligations or what your seeing kind of spool up in all of your new products. I’m just trying to split those two a bit.

Rick Smith

Yes, it’s tough to quantify the exact breakup. But let me give you some color around it Dan. One, vertical markets, the we’ve doing, and have been doing that for a couple of years, focus on verticals like autos, for example insurance, Telco are very more frequently anticipate just a few months ago, a few quarters ago, that’s number one.

Number two, like we mentioned the acquisitions that we have, which are great strategically and they become accretive a the back end of year, that helps us.

And two, the mortgage market, as I said before, is abating almost as expected. So it really comes down to continuing to do the things that the group has been doing for a number of years now, focusing on customers needs, bundling price together in a unique way to solve this problem and executing on a high level. That combined with a little bit of market help.

I think the economy will start to improve, we’re seeing it in some of data right now in many parts of the world., is that the economy is improving; that helps us as well.

Dan Perlin - RBC Capital Markets

Okay, and then on the home equity lending side, you know that sounds like something that’s new and could be meaningful. When we think about that, I guess how fast are you seeing that kind of pace or play now and is that something that also gives you some confidence as you think about second half and just, I want to be clear where that falls in the P&L. Is that in verification services or is that up in somewhere else. Thanks.

Rick Smith

Great question Dan. Its early stages and I’m very encouraged. We saw some nice volume in the end of the first quarter, we expect that to continue in the second quarter. So I think you'll see that home equity is right at the historical numbers in home equity loans in the marketplace. You’ll see us returning closer to more normal levels versus the fresh levels we’ve had last four or five years. As far as where it shows up, it predominantly shows up in our EWS business and verification of employment and income.

Dan Perlin - RBC Capital Markets

Okay, and then just a last one, congratulations on renewing the CMS deal. But now we’ve got some framework for numbers around that. Should we come to expect that the contractual minimums is something that is just the jumping off point and you guys should earn a lot more of that revenue possibly into ’14. Thanks, I’ll jump off.

Rick Smith

Yes, sure I hope so Dan. Thank you for you for the congratulations on the renewal. Dan Adams is a doing a heck of a job with CMS for the last 18 months is secure, has been re-secured. There’s a lot of noise in this, and frontline of 8 million people who have signed up and you should think about it around the contractual minimums at this point and as far as ramp up you know I expect that in 2015, not 2014.

Dan Perlin - RBC Capital Markets

Okay, thank you.

Rick Smith

Sure.

Operator

And we’ll take our next question from Paul Ginocchio with Deutsche Bank.

Paul Ginocchio - Deutsche Bank

Thanks. I think we talked about that IHS JV that you said it was your first product. Can you just elaborate on that? Is there potentially more products in the pipeline with them. Thank you.

Rick Smith

Yes, thanks Paul. Yes, it’s pretty cool. Lee and his team have been working with Polk, a standalone company for a number of years now and the good news is post IHS acquisition of Polk the doors have continued to remain open. The see us a unique provider of solutions for the automotive vertical, they know this is a unique focus for us.

So we've already had a couple, I mentioned one on the call which is the lost sales analysis, which is really, its helps the underwriters of risk understand why they lost the risk, how to place the risk, where the ultimate buyer ends up going and why and how they might reposition the next offering better to reduce churn of loss sales.

That is one of the many products that we are currently working with IHS on. And again, I think that’s an example. Maybe goes back to Dan’s question of what’s different, is when we restructure a company we want deep execution on different verticals like auto. You get intimate with that industry and you understand their needs and challenges. So our ability to bundle our new products is so important now and so much more effective than it would have been and that sales analysis with IHS is one example.

Paul Ginocchio - Deutsche Bank

Great. If I could just ask a follow-up to Lee. Lee, any way to give us what the total acquired revs were in the first quarter, and what the rough range would be for the second quarter?

Lee Adrean

I don’t know about the dollars, but the growth was about 4%, contributed 4% to growth, so it would be roughly 4% against last year’s revenue, that’s in the low 20’s. That will actually step up some in the second quarter, because we’ll have a full quarter on TEX and also just the effective acquisition accounting. When you first do an acquisition you loose some of the differed revenue that the acquired company may have and that tends to affect the first period the most and then diminish over time. So you’ll see a somewhat bigger effect on growth in the second quarter. There is about 4% in Q1 and the next quarter the growth and contribution is probably more like 5%.

Rick Smith

If I remember the mortgage headwind cost us about six points relative to this quarter, is that right?

Lee Adrean

Yes, and probably something roughly similar in the second quarter. It really doesn’t start and then it falls off in the third and fourth quarter to much smaller impacts.

Paul Ginocchio - Deutsche Bank

Thank you very much.

Operator

And we’ll take our next question from George Mihalos from Crédit Suisse.

George Mihalos - Crédit Suisse

Hey guys, thanks for taking my questions and congrats on the solid quarter. I just wanted to dig in on the international side a little bit. Canada seemed to really accelerate from the fourth quarter. I just wonder what’s driving that and then also it seems to me that Europe constant currency slowed a little bit. Is there anything going on there or are there any sort of variations that will sort of play out throughout the course of the year.

Rick Smith

Yes, there is nothing unusual on either side that is either drawing optimism or concern, you got some seasonality in both areas. As I look at the long term forecast for both Europe, excluding Russia, but Europe is a little solid performance outperforming the marketplace growing at multiple of GDP. I see it continuing, but I don’t see anything that is really unusual either on the upside or for the downside in that geography.

Lee Adrean

And George I would add two things. One, on Canada we have had continued good success with our technology and analytical services offerings. We also saw a little bit stronger growth in just our traditional online credit reporting in the first quarter and I don’t know if there’s any predictability to that. It will strengthen or weaken a little bit from time to time. I think Canada continues to be in the low to mid single digit kind of core organic growth trend.

On Europe you know, we’ve been indicating that last year it tended to run at very high single digits on organic growth, but looking at a very relatively stagnant U.K. economy and the weak Spain economy reflected just great performance in growth on our part, but we’ve been flagging. That could moderate a little bit and I think that’s what we saw, that it continues to perform well across a number of product and customer segments.

Rick Smith

Yes, I think the organic growth in Europe is about 8%.

Lee Adrean

7%.

Rick Smith

7% for the quarter, so we think that those two economies, that continue to be fully processed.

George Mihalos - Crédit Suisse

Okay great, that’s very helpful. And just one more question Lee, the general corporate expenses were down considerably year-on-year. What’s driving that and how should we think about that line item going forward as it compares to your revenue growth. Thank you.

Lee Adrean

The corporate line in addition to having certain of the corporate staff expenses, which tend to be pretty stable, include the number of activities that are project related, discretionary, certain investments that we make that are corporate wide and that line can fluctuate from quarter-to-quarter. It was down year-over-year in the first quarter, which would not be the normal trend. I would say that you should expect for the year, that the corporate line will be up, but by less than revenue, but you will see fluctuations quarter-to-quarter as we have seen some times in the past.

George Mihalos - Crédit Suisse

Okay, great. Thank you.

Operator

And we’ll take our next question from Shlomo Rosenbaum with Stifel.

Shlomo Rosenbaum - Stifel

Hi, good morning and thank you for taking my questions. Hey Rick, I want to focus a little bit more on the super scores. It seems to me that if I look over the last kind of seven years or so at Equifax, went through a period of focusing more on buying unique assets and then a period of kind of I guess that’s you are still in, in terms of integrating the different assets and it seems like the end game or at least part of the end game should be coming up with a lot more of these super scores in areas where your competitors can’t do that. Can you talk about where – which verticals do you feel like you have that in and where you think you have a lot of potential and how important that is for kind of the strategic revenue growth of the business overall?

Rick Smith

Yes, good question. As I think about the tenants, the long-term growth for the company, kind of new area source and talking to you in the past about fraud and ID, prevention as being one, we talked about analytical solutions being another. So clearly we’re investing in a very heavy rate. We brought a great guy in, who's steeped in his understanding of and developing of analytical products. He's done analytics for Hewlett-Packard and he has been for about a year now.

So one, having the focus and the talent around analytics, and two, having the unique data assets available to build those new analytics and insights. I think we’re in a pretty good position, so its clearly a place where we have been and will continue to make a bet on investments in because I think we are uniquely positioned because of our unique data assets.

As far as verticals, its going to start off with the verticals where we think we’re uniquely positioned with our unique dated assets, automotive is one, mortgage is one, Telco is one, insurance is one. To start with those are the key areas we can start and maybe also (Inaudible).

Shlomo Rosenbaum - Stifel

How far along do you feel you are in terms of coming out with some of these super scores? Do you feel like there’s lot of open terrain in front of you?

Rick Smith

I do for one primary reason we have developed some technical capabilities that maybe was to – maybe write the data in different ways than we could before, to do it real-time and do it cost-efficiently. Those capabilities have started late last year, early this year that continue to be the third quarter and I expect us to be in position where we can run a much faster rate, in an economical way in the fourth quarter this year. It's early days but very encouraging days.

Shlomo Rosenbaum - Stifel

Okay, great. Just jumping back to the ACA question, are you seeing these amount of sign ups actually flowing through and kind of hitting your numbers in terms of expanding the revenue for you guys?

Rick Smith

Yes, yes, great question. To make sure I understand it, I’ll expand on time the differences. We have a analytical capability that builds a company. They said give us all of your data and with that data we can analyze and tell if your complying with Affordable Care Act. Two revenue streams that have been important to acknowledge; one is we charge those hundred plus companies for that analytical solution.

Secondly, in many cases those companies that were using our platform, our analytics have not been Work Number contributors in the past. So we use this platform, analytics platform to not only solve their problem. But in many cases added a Work Number database, which has exceeded our expectations so far and so the monetization of that is once you get on the database, people start hitting that database, looking for verification and for an income and you know if those record, cost records looks like there.

So there’s two revenue streams. The latter, Work Number database lags obviously you get it at the end, cleansed and people start hitting it, project revenues is more immediate.

Shlomo Rosenbaum - Stifel

What about the substance coming from the government? I’m trying to understand, there’s a big number that the government put out and just if you do some machinations around them, I’m trying to figure out, based on the levels of sign ups and where your seeing the revenue flow, they hit the quarterly $50 million, $60 million year potential that contract would imply.

Rick Smith

Okay great question, and again the governments proclaimed 7 million to 8 million people that have signed up. There is so much more, in those numbers than you’ve expected. So again you can find that many of those people are retired people, so there’s more people on the record at this juncture.

So we are not seeing – I think someone asked the question earlier. If you think about 2014, think more in the framework of the minimum security by CMS and my hope is if this thing ramps up in 2015 and beyond, you’ll see revenues move well beyond the minimums, its too early to claim that now. So as I said in the past calls, as we more and more get smarter to see what’s occurring in the market place you guys will be the first to know.

Shlomo Rosenbaum - Stifel

Okay if I can, I want to squeeze in one. I want to ask a housekeeping one for Lee. You purchased a 0.4 million shares, the share account still went up a little bit. Is there a kind of a timing difference, is it a stock price or issuance in the equity timing. How should we think of that in terms of repurchases?

Lee Adrean

Yes, I haven’t looked at it quite that closely. But we probably need to buy between 1 million and 1.25 million shares over the course of the year to offset the effected equity compensation. I have the average shares that could be timing. I don’t know have it right in front of me, the ending shares. My guess is the ending shares many have come down just slightly. But the average shares would be affected when it comes to that timing. We would have been buying relatively late in the quarter, because of the timing of our year-end earnings release. So its probably a function of timing and the effect on weighted average shares.

Shlomo Rosenbaum - Stifel

Okay, great. Thank you.

Operator

And we’ll move on to our next question from David Togut with Evercore.

Rena Kumar – Evercore

Good morning. This is Rena Kumar for David Togut. You discussed a lot of your new products in your opening remarks. Can you just call out which of your new products made the biggest contribution to revenue in the quarter?

Rick Smith

I don’t have that off the top of my head, but again you got to put it in perspective. We launched anywhere from 15 to 75 new products every year. Have been so for about seven years, so its truly broad based. We don’t typically look at or get what you call home runs with products. In total it ends up being a significant number of goals. As you know there’s a vitality mix of 10% and 11% coming from possibly just three years ago. So it tends to be a bunch of singles and doubles and it’s truly in almost every geography we have around the world.

Lee Adrean

I can give a couple of examples, some of the bigger categories. The products that we have developed from the Telco positive database are relatively larger products that have developed in the mortgage base, taking advantages of our additional sources of data. We’re bringing some of our technology decision in platforms much more broadly across our international space, and there we have high-end platforms and low-end platforms depending on the size and sophistication of our customers.

Some of the things we’ve down with identity authentication are another one of the larger categories that we’ve brought out. So those are a couple of the product families that have been the most significantly over the last year.

Rick Smith

And just – that’s a good point Lee. For your benefit, those categories have been largely consistent, not just this first quarter, but as you said the last year or two, that’s an area of focus.

Kumar – Evercore

Great, and if you can just discuss your current acquisition pipeline.

Rick Smith

Yes, at this juncture we are really focused on integrating TDX, Inffinix, Paraguay and taking strategically the Inffinix and TDX platforms as I mentioned earlier to different geography. I think that’s a key to the business occupying for quite some time.

For M&A, we continue to look at M&A. We’re focused more on strategic tuck-ins than there are large deals and so it’ll always be an important part of our strategy. There’s noting that’s imminent to talk about this juncture.

Rena Kumar – Evercore

Thank you.

Rick Smith

Sure.

Operator

And we’ll take our next question from Nick Nikitas from Robert Baird.

Nick Nikitas - Robert W. Baird & Co

Yes, thanks for taking the question. You mentioned continued expectations from mortgage improvement. I think last quarter you guys quantified your MBA expectations. Could you put a number on that for 2Q if possible?

Rick Smith

Let me speak from memory. Maybe you have that later Jeff. We talked about – the MBA was – talked about being done probably in the first half of the year, modestly in the second half of the year, total year down by 30% for the year. Second quarter will improve over first quarter is it is down 15%. It maybe down 20% to 30% for the second quarter. Does that sound about right.

Lee Adrean

My word of caution on the MBA industry is that we have had difficultly over time tightly correlating our revenue growth, but even some of the flow of closed mortgage loans with the MBA industries. There’s a lot of different sources for data. You can look at different economists and they forecast different things. So there is a lot attention on the MBA indices. Its as good an index as others, but the correlation is a little loose. So be careful about using that as our – a benchmark for our revenue.

Rick Smith

Does someone known what the published MBA is?

Lee Adrean

The Q2 forecast?

Rick Smith

The trend is everyone is expecting mortgage in general, beyond MBA. The mortgage market in the second quarter was a modestly better than the first quarter.

Nick Nikitas - Robert W. Baird & Co

Okay, that helps. And you mentioned the NPI 2.0 introductions. Could you just talk more about what your doing differently there and then just in general the pipeline for that product line.

Rick Smith

Yes, I think it’s more of a process than a product line. NPI was launched seven years ago and after we’ve waited for seven years, it runs the risk of becoming somewhat stale, when the entitlement sets in.

So its just our way of reenergizing, redefining the parameters on NPI, think about NPI. How you get new ideas in from clients and working with VC firms and Silicon Valley firms. Just to continue to make sure we got great ideas coming through the funnel. So its our way of reenergizing it and we started it late last year and its off to a great start. My hope is that this keeps the energy around NPI going for another four, five years.

Nick Nikitas - Robert W. Baird & Co

Okay, great, and just one last one for me. You talked about the vitality index in the past three-year contribution mix. I think previously you said that international sees a large benefit from that. Any other segments where you’re kind of running above that 10% run rate? Is it pretty spread out across all of them?

Rick Smith

It will ebb and flow, because sometimes you’ll have large products in one particular venue that will run off in a particular year, so its accounted. The last four years, as you get into the fourth year, we’re counted as part of the core to them, not the vitality. So every business unit will have its ups and downs if they have a good product launch in any one given year, so.

Nick Nikitas - Robert W. Baird & Co

Okay, great. Thanks.

Rick Smith

Good.

Operator

We’ll go ahead to our next question with Manav Patnaik with Barclays.

Manav Patnaik - Barclays Capital

Hey, good morning everybody. The first around the sort of new product and the partnerships you talked about. So firstly you know you mentioned auto obviously is a key vertical. You are partnering with IHS Polk. I was just wondering, over the longer term like what your appetite for acquisitions in that area is with respect to sort of building out that capability. And just around partnerships, I know you mentioned HIS. I was just wondering you guys had an announcement teaming up with CoreLogic as well. I was wondering you know how significant or incremental could that be?

Rick Smith

As far as acquisitions, we’ll obviously look. At this juncture as outlook is specifically auto to answer your question. A key focus here for us, I think we’ve assembled unique data assets that we need to succeed there. I think we’ve assembled the right partners and there are a number of key partners who have capability in the pipes into the automotive industry that they see the value we bring and we see the value they bring.

They tend to look towards commercial agreements versus hard core JVs at this juncture. I don’t see we need to do anything on the M&A front, because that obviously may change. I think we can do as we have been doing and be quite successful.

As far as CoreLogic, I’m not going to break that out. The partnerships are important to us as we get into verticals and vertical focus, to find people like CoreLogic who are very good in a particular spacing and we’re going to bring value and do bring value. It’s a win-win situation. So we are not going to quantity the size of that.

Manav Patnaik - Barclays Capital

Fair enough. Your not quantifying it, but would that be an added lever in terms of offsetting the market growth more than what you already are doing.

Rick Smith

Yes, I think so. I think you think of any time we can find it, it will bring value to the mortgage market that we couldn’t bring in the past. That’s offset the revenues, yes.

Manav Patnaik - Barclays Capital

Okay, and then Lee just on the margin side, I was just wondering if you’d help us sort of cover the things out. So on the corporate expense line you said the total year number should be I guess higher than the 2013 number and you said less than growth. I’m guessing up 10% or so. I just wanted to see if you give us a little more specificity there. And then on the international side, I think you said exit the year at 25%. I just wanted to clarify that meant the full year number should be 25% or just the fourth quarter should be the 25%?

Lee Adrean

On the corporate expense I would expect that they growth probably in the range of 4% or 5%, although again that can change as we make decisions through the year on various projects and initiatives we want to undertake, but my current expectations would be, we might be looking at 4%, 5% growth for the year.

In international, that 25% probably a reasonable number for the second half, but that’s not a full year number, that’s a half number. Particularly as we get TDX integrated, recognizing the seasonality of its business, as well as we get through the period where we’re running off or is not able to recognize their past differed revenue, just give a nature lift in what TDX is contributing.

Manav Patnaik - Barclays Capital

And then for the second quarter international is similar to the first quarter?

Lee Adrean

Probably a little bit better, but we’re still below where we would expect it to be over time.

Manav Patnaik - Barclays Capital

Okay and just one last one, I don’t know if I remember this, but in terms of the CMS minimums that you talked about that, have you guys disclosed that before?

Rick Smith

I think we have. Jeff, hope you – have you given the numbers? Yes, we though that that number is around $8 million to $10 million.

Manav Patnaik - Barclays Capital

Okay, all right, thanks a lot guys.

Rick Smith

Thank you. Okay, with that I’d like to thank everybody for their interest and support in Equifax and with that operator we’ll conclude the call.

Operator

That concludes today’s question-and-answer session. Mr. Jeff Dodge, I’d like to turn the conference back to you for any additional and closing remarks.

Jeffrey Dodge

No, there are none. Thank you.

Operator

All right, that concludes today’s conference. Thank you for your participation.

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