Good day and welcome to the Second Quarter 2016 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Jeff Dodge. Please go ahead, sir

Thanks and good morning, everyone. Welcome to today's conference call. I'm Jeff Dodge, Investor Relations and with me today are Rick Smith, Chairman and Chief Executive Officer; and John Gamble, Chief Financial Officer. Today's call is being recorded. An archive of the recording will be available later today at www.equifax.com in the Investor Relations section under the About Equifax tab. During this call, we will be making certain forward-looking statements to help you understand Equifax and its business environment. These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from our expectations. Certain risk factors inherent in our businesses are set forth in our filings with the SEC including the 2015 Form 10-K and all subsequent filings. During this call, we will be referring to certain non-GAAP financial measures including adjusted EPS attributable to Equifax and adjusted EBITDA margin, which will be adjusted for certain items that affect the comparability of the underlying operational performance. For the second quarter of 2016, adjusted EPS attributable to Equifax excludes acquisition related amortization expense, as well as the transaction and integration expenses associated with our acquisition of Veda. Adjusted EBITDA margin in defined as net income attributable to Equifax adding back income tax expense, interest expense net of interest income, depreciation, amortization and the impact of certain one-time items, including the transaction and integration expenses associated with our acquisition of Veda. These non-GAAP measures are detailed in the reconciliation tables which are included with our earnings release and are also posted on our Web site. Also, please refer to our investor presentations which are posted in the Investor Relations section of our website for further details. Now, I'd like to turn it over to Rick.

Thanks, Jeff, and good morning, everyone. Once again, thank you for joining us for our earnings call. As is normal practice, I will start by giving you some high-level overview on some financials and then with some highlights by the individual business units, come back and give you some insight on the major corporate initiatives, and John will take it from here and go to details on financials, and I'll come back with the summary and then we'll do Q&A. The second quarter performance continues to reflect outstanding execution across our business units, our verticals in our countries around the world. The team has developed good momentum which should carry us nicely through the remainder of the year and into 2017. Also, our Veda team has continued to deliver the performance that attract us to the company and they fully embrace the integration strategy. I'll give you more on that in a moment. I'm optimistic about the opportunities that the Australian Southeast Asian business will generate for us not just this year, but into the future. In the quarter, total revenue was $811 million at 20% on reported basis and up 22% on local currency basis from the second quarter of 2015. Organic and constant currency revenue growth accelerated from the first quarter, up very strong at 12%. Also in the quarter, FX equated $17 million of year-over-year headwind. The adjusted EBITDA margin was 36.6% compared to 35% in the second quarter of 2015, a very solid year-on-year increase. Adjusted EPS was $1.43, up 24% from $1.15 last year and better than our expectations when we got back in April. I'm now going on to some of the each and individual businesses starting with USIS. 3% revenue growth from the quarter, driven largely by mortgage originations, credit marketing activities, commercial…

Thanks, Rick, and good morning, everyone. As before, I will generally be referring to the financial results from continuing operations represented on a GAAP basis. As a reminder, following to Veda acquisition, we started focusing on adjusted EBITDA margin to more consistently present the operating performance of the segments and the company as a whole. The non-GAAP reconciliation attached to our earnings release provides a more-detailed description of what is included in adjusted EBITDA margin. Now let me turn to the business units financial performance for the second quarter. U.S. Information Solutions revenue was $308 million, up 3% when compared to the second quarter of 2015. Online information solutions revenue was $220 million, up 2% compared to the year ago period. Total mortgage-related revenue in USIS was up 13% in the quarter. The mortgage bankers application index accelerated late in the quarter, coincident with the drop in the 10-year treasury, ending the quarter of 20%. Revenue mix shifted significantly in the quarter with almost 60% of the USIS mortgage revenue coming through resellers where revenue grew 22%. Financial marketing services revenue was $53 million, up 7% when compared to the year ago quarter. Our commercial business continues to grow nicely up 10% in 2Q and year-to-date. Identity in fraud solutions also continue to grow strongly, up 20% in 2Q and 25% year-to-date. As you recall, in 4Q '15, we realigned our business units, moving revenue with customers that have only direct-to-consumer relationships with Equifax from USIS to global consumer. During this realignment, customers with broader relationships with Equifax including direct-to-consumer, principally other credit reporting agencies were retained by USIS. USIS revenue in 2Q '16 and first half '16 has been negatively impacted by declines in revenues from these retained direct-to-consumer customers by about 2 percentage points. The adjusted EBITDA margin…

Thanks, John. Quick summary before we go to Q&A. The guidance looking forward to the third quarter, we're increasing our outlook for both revenue and adjusted EPS. We now expect revenue to be between $795 million and $805 million, reflecting constant currency revenue growth between 22% and 24%. This partially offset by 3 points of FX headwind. Adjusted EPS is expected to be between $1.33 and $1.36 for the quarter which is up 17% to 19%. Excluding $0.03 per share negative impact from FX, this reflects constant currency EPS growth for the third quarter of 19% to 22%. With our strong second quarter performance and our strong outlook for the third quarter, we're also increasing our full-year outlook. For the full year, we expect revenue to now be between $3.13 billion and $3.16 billion, reflecting constant currency revenue growth of 20% to 22%, partially offset again by 3 points of FX headwind. This is an improvement from the previous guidance we provided you, which was $3.05 billion to $3.15 billion and increases our confidence we will end the year nicely above the high end of a multi-year model of 6% to 8% of organic revenue growth. From a revenue perspective, 2016, I think you'd agree, they're shifting up nicely. Constant currency, organic revenue growth, 11% in the first quarter accelerated to 12% in the second quarter and we're holding in the range of 11% to 13% in the second half that gives two years of double-digit constant currency organic revenue growth. This will also -- as you might guess -- give us good momentum as we go into 2017. Adjusted EPS for the year is expected to be now between $5.35 and $5.40, which is up 19% to 20% excluding approximately $0.12 per share for the full-year of negative impact from the FX. This reflects constant currency EPS growth for the year of 22% to 23%. This, too is up from the $5.15 to $5.25 we got to during our first quarter earnings call and as John alluded to, we now expect our adjusted EBITDA margin to expand by 75 basis points as we did got into earlier for the full year of 2016. With that, operator, we'd like to open up the questions.

[Operator instructions] And we will take our first question from David Togut of Evercore ISI.

Thank you. Congrats on the second quarter outperformance and the lift in the 2016 outlook.

Thank you.

Rick, I was glad to hear the upgrade in your outlook for the mortgage market this year. I'm wondering more broadly, are the lower interest rates we're seeing in the U.S. and globally driving an increase in consumer credit demand more broadly as well? For example auto, mortgage and other key drivers?

Yes. We're seeing good strength in the U.S. in auto, in car and in mortgage and obviously beyond that, which is not really influenced by interest rates. Great strength in the debt management and analytics platform. We're talking about TDX, we got a nice win in Canada that we just announced. Broadly speaking, the interest rate environment in the U.S., I think is healthy for the U.S. consumer. We're not seeing dramatic changes quarter-to-quarter, David, but just good strength.

Got it. And then sorry if I missed it, but did you call out the number of active work number records as of the end of Q2? And as a related question, what are you seeing trend-wise in terms of hit ratio and Workforce Solutions?

Two great questions. I did not call it out. We are well on the path we can do to get to a number of 300 million total records. We focus on total records, there are so much value in historical, not just the active with that and with other things that we're used doing -- the hit rate across EWS on the work number continues to rise really solid.

Understood. And then just a quick final question, it was great to see the 480 basis points of EBITDA margin expansion in Workforce Solutions. How much operating leverage is left in this business over the next two to three years and what do you see as the ceiling on margins?

We've kind of guided long-term model EWS from the 50% range, below 50s and I think we'll get there. It is remarkable, David, and you've done, too during analysis. When you look at the rate of increase in the EBITDA margins over the past five years, it's a beauty that not only incremental margins are high. Yes, we expect that being the low 50% range moving forward which is extremely healthy.

As just finally, as Workforce Solutions becomes a bigger part of Equifax's total profit pool, how do you think about capital allocation across the businesses over time?

We continue to invest heavily, we head along with forcing it because we've remodeled and have the ability to investment significantly in growth businesses. We have invested heavily in EWS over the year's corp structure products, new products, new platforms and will continue to do so. When I think about a long-term horizon data, all EWS in the next horizon for them which we're working upon now, is taking it to global markets, taking our exchange technology platforms or products that requires capital investment so we have the wherewithal, the ability to invest in those countries to create the vision we have for EWS, which is a truly global enterprise over the next 10 years.

Understood. Thank you very much.

Thank you.

And we'll move next to Manav Patnaik of Barclays.

Hi, this is actually Greg calling out for Manav. Just wanted to ask about USIS and the bridge to the low end of 5% to 7% for the full year. I think it was about 3% in the first half. So, just wondering what's driving the acceleration? I think you've got mortgage and the Fanny Mae contract, but any other things we should be thinking about?

There are two things and Jeff, John, you jump in if you want to this. It's the point that John had made and it's the third time, I think is important before I get to the acceleration if I may. I wanted to be thinking of 3% or 3.-something. Just 3.-something the first quarter and 3.-something the second quarter. As John alluded to, we made a restructuring of our peso business, peso business, now called GCS in the last year, firstly this year. We left behind some traditional relationships that do the same thing – sell these products, but not to Credit Karma and LifeLock. We left that behind with USIS, took them easily and moved that whole thing over to the peso. The [indiscernible] behind is a shrinking business as you know and with that came about 2 points of headwind. Think about the health of the core USIS business, it actually grew with tough comps year-on-year because of mortgage last year actually grew when you adjust that direct-to-consumer business over 5% baseline. Now when you think of the acceleration going into second half of the year, it's really NPI and part of the NPI you alluded to was quite a data for Fannie Mae. But it's NPI generically. The total also then aided by the trended data for Fannie Mae.

And very good continued performance expected in marketing services, in commercial, in identity in frauds. Those businesses that are growing very well are expected to continue to accelerate, drives the whole thing up.

Okay, helpful. And then the other one for me would be on M&A, maybe a little detail on how Barnet Associates fits in with EWS and then more broadly, how the pipeline that we should expect further deals in the back half of the year? Thanks.

Thank you, Greg. Yes. Barnet, we've known for a long, long time. It might be 20 years plus and in his time, when he ran the business, Greg, and even before him Bill Canfield, established really good relationships with the owners of the company over the last four or five years and we're just getting to know them well. That's our philosophy we're close to doing deals, is to get to know the cultures of products opportunities. We've done that here. It's a small deal, but it's a nice deal. There are many EWS. They do everything. There's the synergies for us there and I think as I said, by time is we should close that in August. As far as the pipeline, it continues to be healthy and we did not include any other acquisitions in the guidance that we provided you. We continue to be very thoughtful, obviously driven by the strategy as to what we'll acquire, but we have the capacity, and the pipeline, and the ability to do more acquisitions this year if it makes sense.

Otto Garrett of Deutsche Bank have our next question.

Congrats on the strong quarter and increased guidance. Just one more question on auto and market. I know you guys called out some very strong results there, but just given the fact that we're seeing declining auto sales, or the seller, not a sale, I should say this year. Just go through and say how dependent is that business on the strong auto sales volume and how you're able to get some strong growth despite those trends?

One, obviously a growing market helps all and we are benefactor if the market itself is gone. Having said that, our forecast calls – and I don't know the exact numbers – but largely calls over the next X number of years, a moderation in growth in new and used car sales and we're talking in the U.S. So we don't expect the dramatic uptake from the market than we've seen post global recession to-date. Having said that, we are relatively under penetrated in auto. Number two, we have gotten great new products and we have been launching that help us penetrate the auto market. Within the penetration, a long [ph] we left still is the use of our award-number records to validate, verify and plug the net income. So that will fuel automotive growth for a number of quarters or years to come.

Great. And also looking at the global consumer solution, you mentioned that you're getting some strong growth in your indirect channels in that. Can you just give us your comments or thoughts on some of the long-term agreements that some of your competitors are in that space or some of the transactions that have happened in that space? Thanks.

Sure. When we think of partners out there – I'll come back to that -- very, very nice and important good part of those that we had is a business called TrustedID who have got a variety of partners. You heard us talking about over the years and those continue to grow nicely. Specific to Credit Karma as you know, we had a contract with Credit Karma. That contract is far as the end of this year. This Karma practice with any good customer that we deal with. It's in both of our best interest to negotiate these contracts well before expiration. We have the teams doing that now. But beyond just that, we're looking really to enhance the partnership to add value to Credit Karma and that value would be through things like insights that we provide, the unique assets that we have and interest in partnering with them are what makes sense in countries around the world where we got very strong sizable platforms to help them expand their revenue streams beyond just the U.S. All of those are being intertwined as you might guess into the discussion of a contract negotiation and we remain very, very confident that the good resolution to the contract is Credit Karma.

Okay. One last one. Just wondering if you have any updates on your contract with the Social Security Administration in terms of your fraud identity authentication revenue?

They're doing so well. It's still early.

Great. Thank you.

Thanks.

And we'll move next to Ramsey [ph] of Jefferies.

Hi, guys. Great quarter. I wanted to ask you about the international margin expansion. They're very solid this quarter. Is this just a question of increasing operating leverages you scale in global markets? Are there other mix-related impacts? Are there other leverage you can work in order to get the margin going internationally?

I'll start and John, please jump in. It is consistent with the expectation when we gave you the multi-year guidance for margins for Internationals. First and foremost, no surprises at all. There are a couple of things I think about – John, you may have a couple more that I'd miss – that are coming together to aid that margin increase. Number one, you may recall sometime in 2015, we announced some restructuring, some recent innovation across the international marketplace. We did greater scale. That was an investment, we're now yielding some benefits. Number two, we talked about the government contract for debt management analytics in the UK who have investments in the cash in the revenue, you're now getting revenue. And number three is what our model is, just incremental margin. As you grow [ph], margin expands. Number four is as you know, we bought Veda. Veda had margins. We announced the acquisition and that were accreted for the international margins and now staying on focus. I think those four things are the vast majority. John, you know some?

Those are the biggest areas and we're also globalizing platforms which allows you to reduce your cost more rapidly. Yes.

That's a great point. As we deployed these global platforms around the world, over the next X number of years, you should continue to see some margin enhancement from International.

Okay, that makes sense. Did the small tuck-in Barnet, will that add an impact? Can you parse out the impact on the year in terms of revenue EPS?

It's small, Ramsay. It's nice for us. At the corporate level, it's very small this year because in August you'll have less than half a year of revenue. But we've got some great finance for percentages in growth as we take that asset under our wings for 2017 and beyond.

All right, terrific. Thanks a lot, guys.

Sure.

And Toni Kaplan of Morgan Stanley has our next question.

Good morning. This is Patrick in for Toni. I wanted to ask about global consumer growth because obviously, very robust this quarter, but remains well above 5% to 8% multi-organic growth framework you've talked about in the past. Do you have any sense of that market for providing consumers with credit scores on personal finance websites, credit card statements, et cetera? Is it becoming increasingly saturated?

It will become saturated at some point in time. We don't see any signs and we'll start the U.S. first. There isn't any signs that there's a saturation of that marketplace yet in the U.S. and having said that, you also know that we directly and indirectly – who partners [ph] questions is taken that capability to other markets around the world. Our global consumer in GCS business is truly global. So if there's a need and opportunity for us, we and our partners will directly build those pricing capabilities in other parts of the world, we're going to do so.

Thanks. And then I wanted to ask about potential investments in alternative data. I know you're getting data from telecom and utility companies now. But I wanted to ask about that from an M&A and then OpEx perspective going forward?

We have under Ray Lockers [ph] leadership we have got Annie [ph] who runs data analytics in marketing for us, have a data team. They are very capable team and their team is coming back to our strategy. As you might guessed, Patrick, if you look at each country around the world, as you look at every vertical around the world, there's a strategy that says where are we playing our data capabilities? Where are the gaps in data capabilities? What is the process to fill those gaps? Is it to partner or is it to buy? That's a continual focus we have. That granular level of detail around the world.

Great. And then lastly I do want to ask about growth in peer-to-peer lending in marketplaces over the last number of years and it's sort of a longer term question. But do you anticipate any impact from that trend, disintermediation on the USIS business over the long term?

I do not. I think obviously the marketplace is adjusting a bit. You can see challenges ahead of as you know. They're customers of ours, they buy our credit data as you know, they buy our employment data, they buy our income data, they buy some fraud data. They're good customers of ours. I don't know, but if I'd make a guess, I think in the future, if you think about that remote on secured lending, which you call peer-to-peer lending, it would surprise me if those become really part of banking capabilities as opposed individual entities.

Great. Thanks, Rick. Congratulations on the quarter, everyone.

Thank you.

And we'll move next to Tim McHugh of William Blair & Company.

Yes, thanks. Can I ask if you can help size, I guess what part of USIS at this point that said direct-to-consumer piece though that's declining and is that a business meant longer term decline? Should we just try and think about how much of a medium-term drag we should think about that being on the piece of the business?

Yes, Tim, maybe. Back some time in 2015, I can't recall, John, we've talked about what the world might look like direct-to-consumer business and we said that that business would be the low-growth, lowest single digit growth, maybe even decline. But the other partners and some so forth are trustworthy business. So within USIS, to be very specific, John, to find that for, if you take the USIS business, that PPC revenue created 2 points of headwind for USIS in the first half of the year. You can reverse, do the math yourself. I don't have it up on my head. You can do that math -- how large the revenue decline rate on that basis [ph].

But it's not a large business for us. No. But it did decline materially in the quarter.

Okay. And then for USIS, you didn't really change the revenue outlook, but you said you feel better about where margins lined up for this year. I guess what changed if you look at the piece?

Just clarification on the revenue outlook, we didn't change it which is prior to guidance. Sequentially, it's going to go from three point something until a total year up, about 5% growth. So you have much higher growth in the second half of the year over the USIS and with that comes obviously margins, incremental margin in the USIS is significant. Growth acceleration in margin grows with it.

Okay, but your full-year guidance, I guess wasn't any different than before, what you said your full-year margin guidance was different?

We said slightly higher.

Okay. All right. Thanks.

Sure.

And we'll move next to Gary Bisbee of RBC Capital Markets.

Hey, guys, good morning. This is Anthony [ph] for Gary. Congratulations on the quarter again and I guess just thinking longer term, I think you mentioned that 2016 NPI is running 10% above planned for June. Any insight that was driving that? It would be kind of greater market potential that you guys are seeing, or penetration, or new adjacent market that somebody's products came? Do you have any use by or what is driving that?

I think it's a couple of things, Kyle. I think you may recall – I can't remember what the heck it was now, but we launched this thing called Innovation 2.0 maybe late '14 and that was a catalyst. Just when you think about integration, we think about NPI, also focused on how we become better at executing and we launched products at the time, the revenue is better. It was a big focus as well. The other thing you can recall, we've launched this capability called Cambrian. There's a lot of this that build products in a fraction of time. It used to take us to build products, modify products to the customer's needs. The combination of Innovation 2.0, higher level execution which means build and launch, we actually get the word sooner and faster and then the third element is Cambrian. Those three, you're seeing an alteration of those three now result in greater confidence in our revenue outlook for NPI to the point that it was just not NPI [ph], but was the growth coming out of our enterprise growth initiatives, which is substantially higher than one we thought and also the last year. Our team is actually very high-level as well.

Okay, thanks. I guess on a similar front, the International organic growth among some of the key verticals you pointed out accelerated pretty strong in there in the second quarter. I guess are there particular markets within those verticals, particular products that you guys are seeing particular strength or little more in there [ph]?

Kyle, the rewarding aspect is it is so broad-based. I think I mentioned a number of verticals International, but sequentially was stronger in the second quarter versus first quarter and if you broke that down like country by vertical, you see similar things. It's not that it's being driven by one vertical, one country should broad-based countries and verticals. That's largely due to the fact that the focus we launched a number of years ago to become experts in different verticals that were important to our long-term growth, but the resources the data assets, the technology platforms, the analytics focus on those verticals to drive growth and we're seeing as it continued benefit of that focus.

Great, thanks.

Sure.

And Jeff Mueler of Baird have our next question.

Yes, thank you. Can you talk about the employer services, new product pipeline? Obviously WSA is red-hot right now, but can you just talk about the pipeline and anything about that product development process in terms of how it's maybe similar versus different to developing products in your other businesses given that I think there's more of a BPO element to a lot of the products?

How should I tackle that? I'd say the process are the same. NPI, it doesn't matter what you're doing, it's rigorous to process and we've been at it now for 10 years. That applied as much too. We are not developing a lot of products to be very explicit, any WSA, BPO products. You don't get that kind of margin enhances we're getting in EWS to 400 basis points, which we said was over 50% total EBITDA margin, those are SaaS products. We talk about in the last couple of calls, this contract of compliance center and it's really the products underneath compliance center that Dan has started building out, now Marie is building out. Think of those as SaaS products largely; I-9 would be an example, ACA would be an example and others. But the staff margin as you know is a great revenue model, highly recurring revenue margin. So think about that, no differently you think about the rest of the Equifax as we think about new products.

The largest is users has substantial investment there to make.

John, you said it great. Thanks. A big, big piece of employer service is part of EWS as you probably know, Jeff, is in our employment claims business and the team is investing heavily in moving that to a SaaS product as well, which if you think of the next five or ten years in the margin enhancement, you're getting, converting a model on these business to more of a SaaS product, that's huge margin.

Okay. And then super scores. How big of a business is that for you today? Are we at the early stages of it?

In the scheme of things, if you think of a major growth leverage we have in the genre, primarily is day-in day-out, super scores is not one of them.

Okay and then just finally I guess specific to Credit Karma, is it reasonable to assume that since you were the second in terms of order, time, data, provider to that relationship, that maybe you came in at a lower price, so as price gets reset every through your competitor that you would theoretically have lots to lose in terms of potential pricing adjustment?

Jeff in particular time, but know this -- and I think you know this well enough now, our philosophy, we think about the relationships. Probably if you continue to add, you unique value and insights that make their business better, that make their revenue stronger, that make their profit stronger – if we could do things about leveraging capabilities that we have that are unique to us about the employment data, the income data, some fraud data, Cambrian, I think I've mentioned in my comments earlier, helping them get that we are in and we are very significant players is a way to make their business better, stronger – you wrap all those things together as we've done over the years, you tend to move away from price discussion or the value discussion. But they are very, very good customers. I'd say even more than customer, a partner of ours and the attitude is along the lines that you just describe and that's value creation for both sides.

Good. Thank you. Great quarter.

Thank you.

And we'll move to Andrew Steinerman of JPMorgan.

Hi, Rick. I know Equifax has many current strong growth drivers. I do want to ask more about the trended credit data specifically the Fannie Mae initiative and how much that might add to Equifax revenues by fourth quarter of this year? Our team calculated about 1.2% for that, thinking about the price increases that only go to Fannie Mae loans, but maybe that's too low. Could I think, I understand now, that the trended data price increases are also going to do it to Freddie loans as well?

I'm going to start the latter piece and I'll come to the first piece. What you're saying at current with the support of Fannie Mae making this standard for all loans securitize through them, they turned, we're saying merging is the only product being offered to the marketplace going forward. The mortgage will be a product that has data that has been trended. Freddie does not have the technical capabilities yet to consume, they turn the data. It's our understanding, they're highly interested in doing so, but being very clear, the product we're going to offer to the mortgage market in the U.S. is trended product only. That comes at a different price point than in the past when it started. You're pretty smart, you got ways to think about that, look at your number. I'm not going to disclose that here.

Right. I understand the reason that price increased, but you do admit that when you add it all up, it's over a point of additional revenue for Equifax. Right?

You're good, Andrew. Yes, it will go to all of the resellers and our direct customers as well. We just not here to disclose. You know this, you've been a witness a long time. Wherever we could add value to a customer – in this case the mortgage market, make underlying decisions better and we can add value from our product, in this case trended and charge more for that. We've done that for years. We're always about trying to create value to our customers and I think trended data, we know for a fact as mortgages, we had investments and resources behind that, there's also the higher price. That's no different than what we've been doing for 10 years. It just happened to be a little different product because there's a trended element to it, but we're not going to disclose that percentage.

All right. Thanks for the try. I appreciate it.

Thank you, Andrew.

And Shlomo Rosenbaum of Stifel has our next question.

Hi, good morning. Thank you for squeezing me in here.

Sure.

Rick, could you remind us where we are in terms of getting ACA clients to contribute more of the employment records to the work number database? You mentioned in the past that for the start, defaulting there, are that just happening in their contracts and are you actively working on migrating that?

Great question, Shlomo. I think we've talked about this generically before its ready and maybe a quarter or so ago. Think about what had to be done and number one was a technology-built that enabled a client when they signed up for ACA to seamlessly forward the data from the ACA database, into the work number database. That work was launched earlier this year and I believe went live in June, July. Guys, am I that right? June or July? Okay. So June or July, it is now out and warming today. If you check on the slides, one will think about is two buckets of customers. There are customers who have already been clients of ACA and there are new guys who will sign up for ACA. The new ones are easy. You sign them up, it ports over to the work number database. The team and I are going back to those times who have previously been customers of ACA and working with them. Now they're porting their data from ACA into the work number. Yes, we're adding records and have been adding records for at least a month or so to the work number database out of ACA.

Okay. Are the customers amenable to that? In other words, the old customers, the relatively old customers there amenable to going back and actively putting it on this platform?

Yes. There's almost virtually no work required from them as well. Existing customers will be clients of ACA in the last years, yes are amenable to becoming to contributors to work number database. That's a process we put them through to make sure they're clearly aware of that population of the work number database.

Okay, thanks. And then John, in terms of second half free cash flows, we see some of those working capital items like really reversed? To have a pretty strong second half, or is there something going on that is going to make this just somewhat of a lower free cash flow year in general?

The working capital items that affected the first half are really specific in the first half. So you should see better working capital performance in the second half. CapEx is up this year, so you're going to see that impact year-on-year, but in terms of operating cash flow before free cash flow, the working capital items should reverse.

Okay. And then I hate to beat this horse again, but can you just give us an on-the-ground description of the part of the business that was retained in USIS that is shrinking? Are other euros are selling your scores, or you're selling their scores? I'm just trying to understand exactly what it is that's shrinking over there.

Yes. John have described it fairly well, you just hit it on the head and that is other players in marketplace and we've got extensive relationships with including PPC, so the other bureaus as you call have them and are buying those products they sell in the PPC marketplace. Because of the free marketplace, it's growing their business. The bureau's business is shrinking. When that shrinks, the USIS revenue shrinks. Okay? Thanks.

Yes, it does, but your own direct-to-consumer, is that business that we stable?

Repeat?

Yes. Where you guys have your own subscription-based business that I go up there on Equifax.com and sign myself up per month or something like that?

It's flat.

Flat? Okay. All right, very good. Thank you.

Thank you, Shlomo.

And Oscar Turner of SunTrust have our next question.

Good morning. Thanks for taking my question.

Sure.

So you talked about the importance of your enterprise-wide vertical focus distribution strategy. Which verticals do you view as having the most wide space? Maybe both in the U.S. and then also international, and then also would it make sense to start reporting your business based on verticals?

I'll answer that last piece first and I'll go to the first piece. I'm a firm believer by verticals. They just have [indiscernible]. We have verticals focuses across the globe however which gives the domain expertise and the ability to invest specifically on products and technology and most of them – I don't see a time, Oscar, in the near future where that means or several years where you report at a vertical. That does not mean we're not running full speed around verticals. Having said that, we'll remain verticals as John -- that I think about the next five years, global will add a lot of excitement and energy for long-term growth. Obviously fraud prevention and identity management would be one. The government is another around the world. There are some really cool things in U.S. as you know, around government. The debt management platform in UK is government, so government is going to be a continued big growth there. Of course healthcare is I think when you talk about growing almost 200% in the second quarter would be another one. There's the traditional ones you always think about us, you under-penetrated auto, but growing nicely. Financial services are all of the important...

Commercials and opportunities.

Commercials and opportunity. We've talked about, Oscar, with the early days, if your horizons are like ours, which is five to ten years, was like bringing our exchange capability and product capability from EWS on the world and opening up a whole new realm of growth opportunities there would be another.

Okay, thanks. That's helpful. And then you mentioned government being a focus, but just looking at the UK government bill, can you provide more color on the status of that deal? What's the volume in the database and also how should we think about the timing of the revenue growth ramp?

Revenue is coming through nicely. It's high expectations and relationships are fabulous. They give us – you know hard to believe with pounds and they give us something about £1 billion of debt. We've now analyzed and replaced things. At the expected level when we launched this thing, almost under any dimension you can think of for the management and complicated frauds like the UK debt management analytics platform, it's at or ahead our expectations. It's really going well. And as we talked about before, I hope they give us credibility, it's starting to yield right now in the other arms of the UK government to help build more revenue streams than we have today and take that product capability, once it's a certain point and bringing other countries as well and help other governments on the world solve the same problem.

Okay, thank you.

Thank you.

And we will take our final question from Brett Huff of Stephens Inc.

Good morning. Thanks for taking my question.

Sure, Brett.

Just one sort of housekeeping thing and then one general question. On the housekeeping side, I don't want to beat the Barnet thing to death, but your guidance raise was substantially above your 2Q beat and I just want to make sure how much of that guidance raise was sort of fundamental or organic and how much of it was from Barnet? I know you said it was small. I just want to make sure I understand that magnitude.

Good question. Thank you for the clarification. Zero is associated to the Barnet acquisition.

Okay, that's helpful. And then in mortgage, I recall when mortgage is good and you're selling a lot of 3-in-1s, that's a low-margin business. Did you see negative impact from that in the quarter on the percentage margin?

What we saw on the quarter actually is a shift in our mortgage business for resellers, which is much higher margins. It's less revenue generation, but the margin is substantially higher.

Just one point of clarification that -- just try towards lower, it's still exceptional margin at the end of the business.

Okay. That's all I needed. Thank you.

Thank you, Brett.

Okay. I'd like to thank everybody for their time and interest. And with that, operator we'll terminate the call.

And ladies and gentlemen, this does conclude today's conference. Thank you everyone for your participation.