exv99w2
Exhibit
99.2
A Leader in Payroll / HR Outsourcing
July 27, 2006
Quarterly Earnings Conference Call
Statements expressing or indicating the beliefs and expectations of management regarding future performance are
forward-looking statements including, without limitation, favorable operating trends, anticipated revenue and earnings in
the second quarter of fiscal 2007 and for the fiscal year ending March 31, 2007, and any other plans, objectives,
expectations and intentions that are not historical facts. These statements reflect our current views with respect to future
events and are based on assumptions and subject to risks and uncertainties. These risks and uncertainties include,
without limitation, the preliminary nature of our estimates, which are subject to change as we collect additional
information and they are reviewed internally and by our external auditors, as well as the risks detailed in the company's
Form 10-K for the fiscal year ended March 31, 2006, in "Part I - Item 1A. Risk Factors," as well as (1) the risk that our
revenues from The Work Number may fluctuate in response to changes in certain economic conditions such as interest
rates and employment trends; (2) risks associated with our ability to prevent breaches of confidentiality or inappropriate
use of data as we perform large-scale processing of verifications; (3) risks associated with our ability to maintain the
accuracy, privacy and confidentiality of our clients' employee data; (4) risks related to our ability to increase the size and
range of applications for The Work Number database and to successfully market current and future services and related
to our dependence on third party providers to do so; (5) proceedings by Federal and state regulators related to our
business, including the inquiry by the Federal Trade Commission related to our acquisitions in the unemployment
compensation and Work Number businesses; (6) the risk of interruption of our computer network and telephone
operations, including potential slow-down or loss of business as potential clients review our operations; (7) risks
associated with potential challenges regarding the applicability of the Fair Credit Reporting Act or similar law; (8) risks
relating to the dependence of the market for The Work Number services on mortgage documentation requirements in the
secondary market and the risk that our revenues and profitability would be significantly harmed if those requirements
were relaxed or eliminated; (9) risks related to the applicability of any new privacy legislation or interpretation of existing
laws; (10) the risk that our revenues from unemployment tax management services may fluctuate in response to
changes in economic conditions; (11) risks related to changes in tax laws, including work opportunity , or "WOTC," and
welfare to work, or "WtW," tax credits; (12) the risk to our future growth due to our dependence on our ability to
effectively integrate acquired companies and capitalize on cross-selling opportunities; and (13) risks relating to doing
business with the federal government following our April 2006 acquisition of pan. These risks, uncertainties and other
factors may cause our actual results, performance or achievements to be materially different from those expressed or
implied by our forward-looking statements. We do not undertake any obligation or plan to update these forward-looking
statements, even though our situation may change.
Safe Harbor Statement
Highlights of quarterly results
Continued growth in The Work Number transactions
Benefits of acquisitions
Raising full-year guidance
Recent acquisitions
pan - acquired April 6, 2006
Electronic employee assessment and talent
management service
Fits nicely with existing onboarding services
Private placement of debt - $75 million
Reduced and refinanced existing debt facility with
proceeds
Quarter Overview
Earnings Highlights - Quarter Ended June 2006
Revenues of $66.2 million
41% growth over prior year's $46.8 million
The Work Number services - 27% growth
Unemployment tax services - 25% growth
Tax credits & incentives - 53% growth
Talent mgmt services revenue - $6.7
million
Gross profit increased 40% to $40.9 million from
$29.2 million last year
Gross margin declined 50 basis points to 61.9%
from 62.4% last year
FY2007 quarter includes share-based
compensation (67 basis points)
The Work Number services - 78.5%
Tax management services - 50.9%
Unemployment tax management - 50.5%
Tax credits and incentives - 53.7%
Talent management services - 49.6%
The Work Number Unempl Tax Services Tax Credits Talent Management Other
25897 28766 4392 6717 402
SG&A expenses were 38.6% of revenues, compared to 38.1%
last year
FY2007 quarter includes share-based compensation
expense (75 basis points)
Operating margin was 23.3% of revenues, compared to 24.3%
last year
FY2007 quarter includes share-based compensation
expense (142 basis points)
Earnings from continuing operations
$7.3 million, or $0.22 per diluted share
Includes share-based compensation expense -
$813,000, or $0.02 per diluted share
Prior year - $6.4 million, or $0.19 per diluted share
No impact from SFAS 123r
Earnings Highlights - Quarter Ended June 2006
Cash flow from operating activities
$7.0 million versus $8.5 million last year
Change primarily reflects timing of annual bonus payments
Sources (Uses) of cash
Private placement of debt $ 75.0 million
Debt repayments (74.2) million
New borrowings 80.8 million
Acquisitions (78.8) million
Stock repurchase (8.1) million
Capital expenditures and
capitalized software (5.2) million
Dividend payments (1.3) million
Cash Flow Highlights - Quarter Ended June 2006
Financial Position Highlights - June 30, 2006
Cash and investments - $8.4 million
$11.6 million at March 31, 2006
Debt - $192.4 million
$110.8 million at March 31, 2006
$75.8 million borrowings for acquisition
$5.8 million borrowings for cash management needs
Treasury stock
347,400 shares repurchased during the quarter
267,400 shares in the treasury at June 30, 2006
164,000 shares repurchased in July
Fiscal 2007 Financial Guidance
Fiscal year ending March 2007 - Raising Guidance
Total revenues
$275 million to $280 million
Diluted earnings per share (from continuing operations)
$1.06 to $1.12
Includes an $0.08 charge related to share-based compensation
Quarter ending September 2006 - Initial Guidance
Total revenues
$66 million to $68 million
Year ago - $48.3 million
Diluted earnings per share (from continuing operations)
$0.22 to $0.24
Includes a $0.02 charge related to share-based compensation
Year ago - $0.21
No impact from SFAS 123r
The Work Number Services - Growth Initiatives
Continuing Initiatives
Add records to the database
Add new verifiers
Increase penetration (REACH)
Regular cost of doing business adjustments
New Initiatives
Verification of education
Confirmation direct
Increase pre-employment
screening transactions with
employer clients
One-stop verifications
59 41
61 39
39%
of TALX Revenue
(Fiscal 2007/Q1)
The Work Number
Services Revenue
The Work Number Services - Revenue History
FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007
1st Quarter 4.132 6.103 7.617 10.943 14.42 20.4 25.9
2nd Quarter 4.531 6.659 8.573 11.627 14.19 21.9
3rd Quarter 4.635 6.856 9.011 10.028 15.56 21.9
4th Quarter 5.796 7.566 10.733 14.01 21.21 27.1
Revenue History (millions)
$27.2
$35.9
$46.6
$65.4
$91.3
$25.9
Revenue Growth Outpaces Database Growth (percent)
Source: Mortgage Bankers Association
Revenue Records Mortgage index
3/31/1999 1 1 1
4/2/1999 1 1 1
4/9/1999 1 1 0.98
4/16/1999 1 1 1.07
4/23/1999 1 1 1.03
4/30/1999 1 1 1.07
5/7/1999 1 1 1.04
5/14/1999 1 1 0.93
5/21/1999 1 1 0.97
5/28/1999 1 1 0.97
6/4/1999 1 1 0.75
6/11/1999 1 1 0.96
6/18/1999 1 1 0.86
6/25/1999 1 1 0.85
7/2/1999 1.07 1.03 0.87
7/9/1999 1.07 1.03 0.61
7/16/1999 1.07 1.03 0.76
7/23/1999 1.07 1.03 0.74
7/30/1999 1.07 1.03 0.78
8/6/1999 1.07 1.07 0.75
8/13/1999 1.07 1.07 0.72
8/20/1999 1.07 1.07 0.71
8/27/1999 1.07 1.07 0.74
9/3/1999 1.07 1.18 0.64
9/10/1999 1.07 1.18 0.54
9/17/1999 1.07 1.18 0.65
9/24/1999 1.07 1.18 0.63
10/1/1999 1.2 1.25 0.69
10/8/1999 1.2 1.25 0.65
10/15/1999 1.2 1.25 0.6
10/22/1999 1.2 1.25 0.62
10/29/1999 1.2 1.25 0.67
11/5/1999 1.2 1.29 0.65
11/12/1999 1.2 1.29 0.62
11/19/1999 1.2 1.29 0.71
11/26/1999 1.2 1.29 0.44
12/3/1999 1.2 1.36 0.58
12/10/1999 1.2 1.36 0.57
12/17/1999 1.2 1.36 0.54
12/24/1999 1.2 1.36 0.39
12/31/1999 1.2 1.36 0.37
1/7/2000 1.41 1.39 0.52
1/14/2000 1.41 1.39 0.61
1/21/2000 1.41 1.39 0.58
1/28/2000 1.41 1.39 0.68
2/4/2000 1.41 1.41 0.76
2/11/2000 1.41 1.41 0.69
2/18/2000 1.41 1.41 0.68
2/25/2000 1.41 1.41 0.66
3/3/2000 1.41 1.52 0.78
3/10/2000 1.41 1.52 0.78
3/17/2000 1.41 1.52 0.78
3/24/2000 1.41 1.52 0.83
3/31/2000 1.41 1.52 0.77
4/7/2000 1.57 1.54 0.83
4/14/2000 1.57 1.54 0.79
4/21/2000 1.57 1.54 0.79
4/28/2000 1.57 1.54 0.79
5/5/2000 1.57 1.6 0.68
5/12/2000 1.57 1.6 0.65
5/19/2000 1.57 1.6 0.71
5/26/2000 1.57 1.6 0.65
6/2/2000 1.57 1.69 0.6
6/9/2000 1.57 1.69 0.56
6/16/2000 1.57 1.69 0.57
6/23/2000 1.57 1.69 0.57
6/30/2000 1.57 1.69 0.59
7/7/2000 1.72 1.74 0.55
7/14/2000 1.72 1.74 0.61
7/21/2000 1.72 1.74 0.58
7/28/2000 1.72 1.74 0.57
8/4/2000 1.72 1.8 0.6
8/11/2000 1.72 1.8 0.59
8/18/2000 1.72 1.8 0.56
8/25/2000 1.72 1.8 0.57
9/1/2000 1.72 1.85 0.59
9/8/2000 1.72 1.85 0.62
9/15/2000 1.72 1.85 0.61
9/22/2000 1.72 1.85 0.6
9/29/2000 1.72 1.85 0.62
10/6/2000 1.76 1.9 0.6
10/13/2000 1.76 1.9 0.62
10/20/2000 1.76 1.9 0.62
10/27/2000 1.76 1.9 0.65
11/3/2000 1.76 1.95 0.66
11/10/2000 1.76 1.95 0.69
11/17/2000 1.76 1.95 0.64
11/24/2000 1.76 1.95 0.63
12/1/2000 1.76 1.99 0.7
12/8/2000 1.76 1.99 0.74
12/15/2000 1.76 1.99 0.68
12/22/2000 1.76 1.99 0.64
12/29/2000 1.76 1.99 0.54
1/5/2001 2.2 2.03 0.87
1/12/2001 2.2 2.03 1.26
1/19/2001 2.2 2.03 1.08
1/26/2001 2.2 2.03 0.99
2/2/2001 2.2 2.06 1.18
2/9/2001 2.2 2.06 1.14
The Work Number Services - Revenue Growth
Revenue
Records
Mortgage Index
FY2005 FY2005 FY2006 Fiscal 2007
Pre-employment 2.6 2.7 2.8 2.97 3.88 3.78 4.08 3.77 4.626
Consumer Finance 2.31 2.98 3.27 5.09 4.7 6.11 5.89 5.89 6.14
Social Services 1.87 1.14 1.24 1.7 1.84 1.85 1.94 2.36 2.538
Other Verifications 0.72 0.71 0.78 0.42 0.41 0.41 0.38 0.43 0.483
Mortgage 5.05 4.82 5.45 5.73 6.95 7.52 7.17 7.55 8.289
Complementary Work Number Services* 1.87 1.84 2.02 5.3 2.66 2.23 2.44 6.95 3.819
*Complementary Work Number
Services include ePayroll,
W-2 eXpress, FasTime
and HireXpress
The Work Number Services - Revenue Mix (quarterly)
Revenue Mix (millions by quarter)
+27%
Q1 Q2 Q3 Q4 Q1
$20.4
$21.9
$21.9
$25.9
Fiscal Year 2006
Fiscal
Year
2007
$27.1
The Work Number Services - Metrics
The Work Number Employment and Income Verification
4.1 million records added to the database during the quarter
143.0 million records under contract
133.1 million live
9.9 million in backlog
28% of database represents current employees
Approximately 29% of non-agricultural U.S. workforce is
currently on The Work Number
Complementary Work Number services
ePayroll - 46% revenue growth over year-ago quarter
FasTime - 31% revenue growth over year-ago quarter
Tax Management Services
Complementary to The Work Number
Cross-selling opportunities
Growth through acquisitions in Tax
Credits & Incentives business
Unemployment Tax Services Tax Credits and Incentives
43 7 50
50%
of TALX Revenue
(Fiscal 2007/Q1)
Tax Management
Services Revenue
Talent Management Services
New segment - Talent Management
Services
Secure, electronic-based
psychometric testing and
assessments
Comprehensive talent
management services
1Q07 revenues of $6.7 million
FY07 growth expectations
Federal government
FY08 growth expectations
Corporate market
Talent Management
6.7 0 59.5
10%
of TALX Revenue
(Fiscal 2007/Q1)
Talent Management
Services Revenue
Key Investment Highlights
Market Leadership in Two Payroll and HR Areas
Employment and income verification
Unemployment tax management
Diversified Client Base
No one client > 10% of revenue in FY06 or 1Q07
Over 3/4 of the Fortune 500 use one or more TALX services
Proven Business Model
Revenue growth
Earnings and EPS growth
Strong gross and operating margins
Strong operating cash flow