September 13, 2011

Equifax Inc. 

 

 - 31 - 

OCIS and Mortgage Solutions revenue is principally transaction-based and derived from sales of 

products such as consumer credit reporting and scoring, mortgage settlement services, identity verification, 

fraud detection and modeling services. Meanwhile, Consumer Financial Marketing revenue is primarily project 

and subscription based and is derived from sales of batch credit, consumer wealth or demographic information. 

Online Consumer Information Solutions (OCIS) (66% of USCIS Revenues) 

The OCIS unit is the most profitable of the three USCIS business units. Products within this unit are 

developed from the Company’s large databases of consumer information.  Equifax offers other data, analytical 

and predictive services based on information in its databases to help further mitigate the risk of granting credit 

by verifying the identity of the consumer seeking credit, predicting the risk of consumer bankruptcy, or 

indicating the credit applicant’s risk potential for account delinquency.  

Mortgage Solutions (15% of USCIS Revenues) 

The Company’s mortgage solutions products consist of specialized reports that combine the reports of 

the three major credit consumer credit reporting agencies (Equifax, Experian, and TransUnion) in a single 

report (known a tri-merge) provided in an online format. Mortgage lenders use the tri-merge reports to make 

underwriting decisions. Equifax also offers ancillary mortgage services (appraisal, title, closing etc.), some of 

which are provided by third parties.   

Consumer Financial Marketing Services (CFMS) (19% of USCIS revenues) 

Equifax’s CFMS products apply consumer financial information (credit, income, asset, liquidity, etc.) to 

help companies target new customers efficiently and effectively and cross sell new services. Customers for 

these products primarily include companies in the banking, brokerage, insurance, mortgage and marketing 

(digital/interactive).  

 

Recent Results – USCIS 

 U.S. Consumer Information Solutions 

  

  

  

  

% Change 

    

  

  

  

2008 2009 2010 

2009 

vs.  

2008 

2010 

vs. 

2009 

 

6 Mos. 

2010 

6 Mos.

2011 

%  

Change

Operating Revenues: 

 

 

 

 

 

 

 

 

 

Online Consumer Information Solutions 

$566.5

$501.4

$485.2

-11.5%

-3.2%

$240.0 $247.8

3.3% 

Mortgage Solutions 

$70.2

$99.5

$113.5

41.7%

14.1%

$52.0

$54.2

4.2% 

Consumer Financial Marketing Services $132.0

$111.3

$144.3

-15.7%

29.6%

$65.7

$73.0

11.1% 

U.S. CIS Operating Revenue:

$768.7

$712.2

$743.0

-7.4%

4.3%

$357.7 $375.0

4.8% 

  

  

  

  

  

  

    

  

  

U.S. CIS Operating Income 

$298.9

$259.4

$269.8

-13.2%

4.0%

$128.4 $132.5

3.2% 

U.S. CIS Operating Margin 

38.9%

36.4%

36.3%  

  

35.9%

35.3%

  

 

While the results in OCIS unit have been impacted by the downturn in lending, prospects for the 

business are looking up. Through June, volume growth in online information services provided by OCIS has 

improved sequentially for 6 straight quarters from -15% in 1Q10 to +11% in 2Q11 as financial institutions are 

beginning to grow, albeit modestly, their lending portfolios. For the first half of 2011, revenues in OCIS 

increased by 3% reflecting a 9% increase in core credit decision transaction volume partially offset by lower 

average price per transaction. It should be noted that a portion of the Company’s revenue growth was aided by 

the fourth quarter 2010 acquisition of IXI Corporation (we will provide additional detail on IXI later).  

The Mortgage Solutions business showed good revenue growth during 2010 (+14%) reflecting low 

interest rates (more refinancing) and a boost from the government incentives for housing purchases (expired 

May 2010). While revenue increased 4% during the first six months of 2011, revenue growth declined by 6% 

during the second quarter due to decreased mortgage application and refinancing activity. Equifax has stated 

that the mortgage business will face difficult comps during the second half of 2011.  

---

Equifax Inc. 

 

 - 32 - 

Revenue growth in the Consumer Financial Marketing Services (CFMS) business was strong, 

increasing by 11% in both the first quarter and first half of 2011 on a year over year basis. Results were driven 

by strong market penetration of wealth-based consumer information services as well as continued growth in 

credit-based pre-screen and portfolio management revenue. In our view, the continued growth in pre-screen 

activity in CFMS bodes well for future lending activity, which should provide a boost to the OCIS business unit.  

Margins in the USCIS segment have been impacted by the combination of weak lending and 

investments in new products to drive future growth. Equifax expects segment margins to continue to expand in 

the second half of 2011 and during 2012 as well.  

International  

The International operating segment includes Equifax’s consumer business in Canada as well as the 

Europe and Latin America business units. These business units offer products that are similar to those 

available in the USCIS Operating segment, although data sources tend to rely more heavily on government 

agencies than in the U.S. 

Recent Results – International 

International 

  

  

  

  

% Change 

     

  

  

 

2008 2009 2010 

2009 vs. 

2008 

2010 vs. 

2009  

6 Mos.  

2010 

6 Mos. 

2011 

%  

Change

Operating Revenues: 

  

  

  

  

  

     

  

  

Latin America 

$219.9 $200.4 $231.3

-8.9%

15.4%  

$111.8

$119.2

6.6%

Europe $175.0 $138.4 $137.6

-20.9%

-0.6% 

 

$66.4

$76.3

14.9%

Canada Consumer $110.8

$99.8 $113.9

-9.9%

14.1%  

$56.2

$62.5

11.2%

International Operating Revenue: $505.7 $438.6 $482.8

-13.3%

10.1%  

$234.4

$258.0

10.1%

  

  

  

  

  

  

     

  

  

International Operating Income 

$149.9 $118.9 $119.4

-20.7%

0.4%  

$58.8

$64.0

8.8%

International Operating Margin 

29.6%

27.1%

24.7%  

  

  

25.1%

24.8%  

 

Operating margins within the Company’s international business have been impacted as Equifax has 

invested heavily in sales, marketing and product management to strengthen its franchises in Brazil and the 

U.K. In addition, operations in Brazil have adversely impacted results though the Company has recently 

addressed its poor performance in that market. In May 2011, Equifax reached an agreement to combine its 

operations in Brazil with Boa Vista Services in exchange for a 15% equity interest in the business. We will 

provide more detail on this transaction below in a later section, but the agreement looks attractive on a number 

of fronts. Specifically, the combined entity now represents a formidable competitor in Brazil, diversifies the 

Company’s operations away from the commercial business in that country and is structured in a way that 

Equifax is able to increase its stake in the business over time.  

With the new entity structured as an equity investment, the Company’s operations in Brazil will no 

longer be consolidated with Equifax’s financials (accounted for under the cost method). As a result, Equifax 

expects overall Company margins to be aided by ~100 basis points with the Brazil business no longer included 

in the Company’s International segment results (the business was generating ~$80 million in annual revenue, 

but was not generating an operating profit). Margins in the international segment expanded by 70 basis points 

during the second quarter reflecting rapid growth in the Company’s higher margin country operations and the 

exclusion of Brazil (subsequent to May 2011).  

TALX  

TALX, which was acquired in 2007, operates in two business segments including The Work Number 

(TWN Services) and Tax and Talent Management Services. The following chart illustrates the revenue 

breakdown by TALX’s two business units:  

---