ATLANTA, July 19,
2023 /PRNewswire/ -- Equifax® (NYSE:
EFX) today announced financial results for the quarter ended
June 30, 2023.
- Second quarter 2023 revenue of $1.318
billion was flat and up 1% in constant currency against a
mortgage market estimated to be down 37%.
- Very good execution of our 2023 Cloud spending reduction plan.
Implemented additional actions to increase spending reduction in
2023 to $210 million and in 2024 to
$275 million.
- Strong new product innovation leveraging Equifax Cloud with
record New Product Vitality Index of 14%.
- Workforce Solutions revenue down 4% from challenging mortgage
and hiring market partially offset by continued strong revenue
growth in Government.
- USIS revenue up 6%, with B2B non-mortgage revenue growth of 7%
and strong 9% Online B2B non-mortgage revenue growth.
- International constant currency revenue growth of 7%.
- Received shareholder approval for the merger of Boa Vista
Serviços, the second largest credit bureau in Brazil, which will expand Equifax capabilities
in the large and fast-growing Brazilian market.
- Revising guidance downward to reflect expected impact of weaker
than expected U.S. mortgage originations reducing full year 2023
revenue at the midpoint to $5.300
billion. Adjusted EPS guidance revised downward to
$6.98 per share at the midpoint from
lower mortgage revenue.
"Equifax had a solid second quarter against a continuing
challenging mortgage market, with very good execution against our
2023 Cloud spending reduction plan. Revenue growth of 1% in
constant currency was at about the midpoint of our guidance, with
continued strong new product performance with a New Product
Vitality Index of 14%, a record for Equifax. However, later in the
quarter, we saw U.S. mortgage activity at levels below our
expectations and slowing U.S. hiring activity, which impacted
revenue particularly in Workforce Solutions. Workforce Solutions
continued to substantially outperform the underlying mortgage and
talent markets, and delivered very strong revenue growth in
Government. USIS delivered a strong quarter, which included strong
Online B2B non-mortgage growth of 9%, and International delivered
constant currency revenue growth of 7%, which was above our
expectations," said Mark W. Begor,
CEO of Equifax.
"In June, we received shareholder approval for the merger of Boa
Vista Serviços, the second largest credit bureau in Brazil, and we expect to close the strategic
acquisition in early August. This merger will expand Equifax
capabilities in the large and fast-growing Brazilian market and add
to our diverse International portfolio, while giving Boa Vista
Serviços access to our expansive global capabilities and
cloud-native data, products, decisioning and analytical technology
for the rapid development of new products and services, and
expansion into new industries."
"We expect the weaker than expected U.S. mortgage market that we
saw in June to continue, and we now expect full year mortgage
originations to decline about 37%, which is down five percentage
points from our prior framework. We also expect to see the slowing
in U.S. hiring to continue throughout 2023, but expect to offset
this impact on non-mortgage revenue with stronger growth in the
Workforce Government business, as well as solid performance in USIS
and International. As we look to our Full Year 2023 guidance, we
are reducing our Revenue guidance to $5.300
billion at the midpoint reflecting the more negative impact
of the weaker mortgage market and loss of high margin mortgage
revenue. We are taking actions to realize additional Cloud spending
reductions of $10 million in the
second half. Our full year Adjusted EPS Guidance is now
$6.98 at the midpoint, reflecting the
impact of the lower mortgage revenue."
"We are confident in the future of the New Equifax as we move
toward completion of our EFX Cloud and Data transformation,
leverage our new Cloud capabilities to accelerate new product
roll-outs that 'Only Equifax' can provide to drive future growth in
2023 and beyond. We are energized about the New Equifax and remain
confident in our long-term 8-12% revenue growth framework that will
deliver higher margins and free cash flow."
Financial Results Summary
The company reported revenue of $1,317.6
million in the second quarter of 2023, flat compared to the
second quarter of 2022 on a reported basis and up 1% on a local
currency basis.
Net income attributable to Equifax of $138.3 million was down 31% in the second quarter
of 2023 compared to $200.6 million in
the second quarter of 2022.
Diluted EPS attributable to Equifax was $1.12 for the second quarter of 2023, down 31%
compared to $1.63 in the second
quarter of 2022.
Workforce Solutions second quarter results
- Total revenue was $582.8 million
in the second quarter of 2023, down 4% compared to the second
quarter of 2022. Operating margin for Workforce Solutions was 42.0%
in the second quarter of 2023 compared to 46.2% in the second
quarter of 2022. Adjusted EBITDA margin for Workforce Solutions was
51.5% in the second quarter of 2023 compared to 53.4% in the second
quarter of 2022.
- Verification Services revenue was $474.0
million, down 6% compared to the second quarter of
2022.
- Employer Services revenue was $108.8
million, up 4% compared to the second quarter of 2022.
USIS second quarter results
- Total revenue was $445.0 million
in the second quarter of 2023, up 6% compared to $421.4 million in the second quarter of 2022.
Operating margin for USIS was 23.1% in the second quarter of 2023
compared to 26.6% in the second quarter of 2022. Adjusted EBITDA
margin for USIS was 36.0% in the second quarter of 2023 compared to
38.2% in the second quarter of 2022.
- Online Information Solutions revenue was $358.6 million, up 9% compared to the second
quarter of 2022.
- Mortgage Solutions revenue was $30.3
million, down 18% compared to the second quarter of
2022.
- Financial Marketing Services revenue was $56.1 million, up 1% compared to the second
quarter of 2022.
International second quarter results
- Total revenue was $289.8 million
in the second quarter of 2023, up 1% and 7% compared to the second
quarter of 2022 on a reported and local currency basis,
respectively. Operating margin for International was 11.9% in the
second quarter of 2023, compared to 11.3% in the second quarter of
2022. Adjusted EBITDA margin for International was 24.2% in the
second quarter of 2023, compared to 24.7% in the second quarter of
2022.
- Asia Pacific revenue was
$87.7 million, down 3% and up 4%
compared to the second quarter of 2022 on a reported and local
currency basis, respectively.
- Europe revenue was
$78.7 million, down 1% and 2%
compared to the second quarter of 2022 on a reported and local
currency basis, respectively.
- Canada revenue was
$66.5 million, up 4% and 8% compared
to the second quarter of 2022 on a reported and local currency
basis, respectively.
- Latin America revenue was
$56.9 million, up 9% and 23% compared
to the second quarter of 2022 on a reported and local currency
basis, respectively.
Adjusted EPS and Adjusted EBITDA Margin
- Adjusted EPS attributable to Equifax was $1.71 in the second quarter of 2023, down 18%
compared to the second quarter of 2022.
- Adjusted EBITDA margin was 32.7% in the second quarter of 2023
compared to 35.0% in the second quarter of 2022.
- These financial measures exclude adjustments as described
further in the Non-GAAP Financial Measures section below.
2023 Third Quarter and Full Year
Guidance(2)
|
|
|
|
Q3 2023
|
|
FY 2023
|
|
Low-End
|
|
High-End
|
|
Low-End
|
|
High-End
|
Reported
Revenue
|
$1.320
billion
|
|
$1.340
billion
|
|
$5.270
billion
|
|
$5.330
billion
|
Reported Revenue
Growth
|
6.1 %
|
|
7.7 %
|
|
2.9 %
|
|
4.1 %
|
Local Currency Growth
(1)
|
6.2 %
|
|
7.8 %
|
|
3.5 %
|
|
4.7 %
|
Organic Local Currency
Growth (1)
|
5.3 %
|
|
6.9 %
|
|
2.5 %
|
|
3.7 %
|
Adjusted Earnings Per
Share
|
$1.72 per
share
|
|
$1.82 per
share
|
|
$6.85 per
share
|
|
$7.10 per
share
|
|
|
(1)
|
Refer to page 8 for
definitions.
|
(2)
|
Third quarter and full
year guidance excludes Boa Vista Serviços results.
|
About Equifax
At Equifax (NYSE: EFX), we believe knowledge drives progress. As
a global data, analytics, and technology company, we play an
essential role in the global economy by helping financial
institutions, companies, employers, and government agencies make
critical decisions with greater confidence. Our unique blend of
differentiated data, analytics, and cloud technology drives
insights to power decisions to move people forward. Headquartered
in Atlanta and supported by nearly
14,000 employees worldwide, Equifax operates or has investments in
24 countries in North America,
Central and South America,
Europe, and the Asia Pacific region. For more information,
visit Equifax.com.
Earnings Conference Call and Audio Webcast
In conjunction with this release, Equifax will host a conference
call on July 20, 2023 at 8:30 a.m. (ET) via a live audio webcast. To
access the webcast and related presentation materials, go to the
Investor Relations section of our website at www.equifax.com. The
discussion will be available via replay at the same site shortly
after the conclusion of the webcast. This press release is also
available at that website.
Non-GAAP Financial Measures
This earnings release presents adjusted EPS attributable to
Equifax which is diluted EPS attributable to Equifax adjusted (to
the extent noted above for different periods) for
acquisition-related amortization expense, legal expenses related to
the 2017 cybersecurity incident, fair value adjustment and gain on
sale of equity investments, foreign currency impact of certain
intercompany loans, acquisition-related costs other than
acquisition amortization, income tax effect of stock awards
recognized upon vesting or settlement, realignment of internal
resources and other costs and Argentina highly inflationary foreign currency
adjustment. All adjustments are net of tax, with a reconciling item
with the aggregated tax impact of the adjustments. This earnings
release also presents adjusted EBITDA and adjusted EBITDA margin
which is defined as consolidated net income attributable to Equifax
plus net interest expense, income taxes, depreciation and
amortization, and also excludes certain one-time items. These are
important financial measures for Equifax but are not financial
measures as defined by GAAP.
These non-GAAP financial measures should be reviewed in
conjunction with the relevant GAAP financial measures and are not
presented as an alternative measure of net income or EPS as
determined in accordance with GAAP.
Reconciliations of these non-GAAP financial measures to the most
directly comparable GAAP financial measures and related notes are
presented in the Q&A. This information can also be found under
"Investor Relations/Financial Information/Non-GAAP Financial
Measures" on our website at www.Equifax.com.
Forward-Looking Statements
This release contains forward-looking statements and
forward-looking information. These statements can be identified by
expressions of belief, expectation or intention, as well as
statements that are not historical fact. These statements are based
on certain factors and assumptions including with respect to
foreign exchange rates, expected growth, results of operations,
performance, business prospects and opportunities, the U.S.
mortgage market, economic conditions and effective tax rates. While
the Company believes these factors and assumptions to be reasonable
based on information currently available, they may prove to be
incorrect.
Several factors could cause actual results to differ materially
from those expressed or implied in the forward-looking statements,
including, but not limited to, actions taken by us, including
restructuring or strategic initiatives (including our technology,
data and security cloud transformation, capital investments and
asset acquisitions or dispositions), as well as developments beyond
our control, including, but not limited to, changes in the U.S.
mortgage market environment, as well as changes more generally in
U.S. and worldwide economic conditions that materially impact
consumer spending, such as rising interest rates and inflation,
consumer debt and employment and the demand for Equifax's products
and services. Further deteriorations in economic conditions or
interest rate increases could lead to a further or prolonged
decline in demand for our products and services and negatively
impact our business. It may also continue to impact financial
markets and corporate credit markets which could adversely impact
our access to financing or the terms of any financing. Other risk
factors include the impact of our technology and security
transformation and improvements in our information technology and
data security infrastructure; changes in tax regulations; adverse
or uncertain economic conditions and changes in credit and
financial markets, such as rising interest rates and inflation;
potential adverse developments in new and pending legal proceedings
or government investigations; risks associated with our ability to
comply with business practice commitments and similar obligations
under settlement agreements and consent orders entered into in
connection with the 2017 cybersecurity incident; economic,
political and other risks associated with international sales and
operations; risks relating to unauthorized access to data or
breaches of confidential information due to criminal conduct,
attacks by hackers, employee or insider malfeasance and/or human
error; changes in, and the effects of, laws and regulations and
government policies governing or affecting our business, including,
without limitation, our examination and supervision by the Consumer
Financial Protection Bureau, a federal agency that holds primary
responsibility for the regulation of consumer protection with
respect to financial products and services in the U.S., oversight
by the U.K. Financial Conduct Authority and Information
Commissioner's Office of our debt collections services and core
credit reporting businesses in the U.K., oversight by the Office of
Australian Information Commission, the Australian Competition and
Consumer Commission and other regulatory entities of our credit
reporting business in Australia
and the impact of current privacy laws and regulations, including
the European General Data Protection Regulation and the California
Consumer Privacy Act, or any future privacy laws and regulations;
federal or state responses to identity theft concerns; our ability
to successfully develop and market new products and services,
respond to pricing and other competitive pressures, complete and
integrate acquisitions and other investments and achieve targeted
cost efficiencies; timing and amount of capital expenditures;
changes in capital markets and corresponding effects on the
Company's investments and benefit plan obligations; foreign
currency exchange rates and earnings repatriation limitations; and
the decisions of taxing authorities which could affect our
effective tax rates. A summary of additional risks and
uncertainties can be found in our Annual Report on Form 10-K for
the year ended December 31, 2022
including without limitation under the captions "Item 1. Business
-- Governmental Regulation" and "-- Forward-Looking Statements" and
"Item 1A. Risk Factors" and in our other filings with the U.S.
Securities and Exchange Commission. Forward-looking statements are
given only as at the date of this release and the Company disclaims
any obligation to update or revise the forward-looking statements,
whether as a result of new information, future events or otherwise,
except as required by law.
Contact:
|
|
|
Trevor Burns
|
Kate Walker
|
Investor
Relations
|
Media
Relations
|
trevor.burns@equifax.com
|
mediainquiries@equifax.com
|
EQUIFAX
CONSOLIDATED
STATEMENTS OF INCOME
|
|
|
|
Three Months Ended June 30,
|
|
|
2023
|
|
2022
|
(In millions, except per share amounts)
|
|
(Unaudited)
|
Operating
revenue
|
|
$
1,317.6
|
|
$
1,316.7
|
Operating
expenses:
|
|
|
|
|
Cost of services
(exclusive of depreciation and amortization below)
|
|
588.0
|
|
542.1
|
Selling, general and
administrative expenses
|
|
343.1
|
|
330.2
|
Depreciation and
amortization
|
|
149.6
|
|
139.8
|
Total operating
expenses
|
|
1,080.7
|
|
1,012.1
|
Operating
income
|
|
236.9
|
|
304.6
|
Interest
expense
|
|
(60.7)
|
|
(41.6)
|
Other income,
net
|
|
15.9
|
|
1.8
|
Consolidated income
before income taxes
|
|
192.1
|
|
264.8
|
Provision for income
taxes
|
|
(52.7)
|
|
(63.4)
|
Consolidated net
income
|
|
139.4
|
|
201.4
|
Less: Net income
attributable to noncontrolling interests including redeemable
noncontrolling interests
|
|
(1.1)
|
|
(0.8)
|
Net income attributable
to Equifax
|
|
$
138.3
|
|
$
200.6
|
Basic earnings per
common share:
|
|
|
|
|
Net income
attributable to Equifax
|
|
$
1.13
|
|
$
1.64
|
Weighted-average shares
used in computing basic earnings per share
|
|
122.7
|
|
122.4
|
Diluted earnings per
common share:
|
|
|
|
|
Net income
attributable to Equifax
|
|
$
1.12
|
|
$
1.63
|
Weighted-average shares
used in computing diluted earnings per share
|
|
123.8
|
|
123.3
|
Dividends per common
share
|
|
$
0.39
|
|
$
0.39
|
EQUIFAX
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
|
|
June 30, 2023
|
|
December 31, 2022
|
(In millions, except par
values)
|
|
(Unaudited)
|
ASSETS
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
164.1
|
|
$
285.2
|
Trade accounts
receivable, net of allowance for doubtful accounts of $17.0 and
$19.1 at June 30, 2023
and December 31, 2022, respectively
|
|
935.9
|
|
857.7
|
Prepaid
expenses
|
|
148.7
|
|
134.3
|
Other current
assets
|
|
66.7
|
|
93.3
|
Total current
assets
|
|
1,315.4
|
|
1,370.5
|
Property and
equipment:
|
|
|
|
|
Capitalized
internal-use software and system costs
|
|
2,350.9
|
|
2,139.1
|
Data processing
equipment and furniture
|
|
284.2
|
|
281.4
|
Land, buildings and
improvements
|
|
264.9
|
|
261.6
|
Total property
and equipment
|
|
2,900.0
|
|
2,682.1
|
Less accumulated
depreciation and amortization
|
|
(1,178.0)
|
|
(1,095.1)
|
Total property
and equipment, net
|
|
1,722.0
|
|
1,587.0
|
Goodwill
|
|
6,401.2
|
|
6,383.9
|
Indefinite-lived
intangible assets
|
|
94.9
|
|
94.8
|
Purchased intangible
assets, net
|
|
1,699.1
|
|
1,818.5
|
Other assets,
net
|
|
305.3
|
|
293.2
|
Total
assets
|
|
$
11,537.9
|
|
$
11,547.9
|
LIABILITIES AND EQUITY
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Short-term debt and
current maturities of long-term debt
|
|
$
169.1
|
|
$
967.2
|
Accounts
payable
|
|
148.3
|
|
250.8
|
Accrued
expenses
|
|
271.1
|
|
229.0
|
Accrued salaries and
bonuses
|
|
128.8
|
|
138.7
|
Deferred
revenue
|
|
109.7
|
|
132.9
|
Other current
liabilities
|
|
265.2
|
|
296.6
|
Total current
liabilities
|
|
1,092.2
|
|
2,015.2
|
Long-term
debt
|
|
5,503.0
|
|
4,820.1
|
Deferred income tax
liabilities, net
|
|
460.5
|
|
460.3
|
Long-term pension and
other postretirement benefit liabilities
|
|
97.4
|
|
100.4
|
Other long-term
liabilities
|
|
176.5
|
|
178.6
|
Total
liabilities
|
|
7,329.6
|
|
7,574.6
|
Preferred stock, $0.01
par value: Authorized shares - 10.0; Issued shares -
none
|
|
—
|
|
—
|
Common stock, $1.25
par value: Authorized shares - 300.0;
Issued shares - 189.3
at June 30, 2023 and December 31, 2022;
Outstanding shares -
122.7 and 122.5 at June 30, 2023 and December 31, 2022,
respectively
|
|
236.6
|
|
236.6
|
Paid-in
capital
|
|
1,650.5
|
|
1,594.2
|
Retained
earnings
|
|
5,410.5
|
|
5,256.0
|
Accumulated other
comprehensive loss
|
|
(445.9)
|
|
(473.7)
|
Treasury stock, at
cost, 66.0 and 66.2 shares at June 30, 2023 and
December 31, 2022, respectively
|
|
(2,654.6)
|
|
(2,650.7)
|
Stock held by employee
benefit trusts, at cost, 0.6 shares at June 30, 2023 and
December 31, 2022
|
|
(5.9)
|
|
(5.9)
|
Total Equifax
shareholders' equity
|
|
4,191.2
|
|
3,956.5
|
Noncontrolling
interests including redeemable noncontrolling interests
|
|
17.1
|
|
16.8
|
Total
equity
|
|
4,208.3
|
|
3,973.3
|
Total liabilities and
equity
|
|
$
11,537.9
|
|
$
11,547.9
|
EQUIFAX
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
|
|
Six Months Ended June 30,
|
|
|
2023
|
|
2022
|
(In millions)
|
|
(Unaudited)
|
Operating
activities:
|
|
|
|
|
Consolidated net
income
|
|
$
252.9
|
|
$
424.2
|
Adjustments to
reconcile consolidated net income to net cash provided by operating
activities:
|
|
|
|
|
Depreciation
and amortization
|
|
304.3
|
|
281.2
|
Stock-based
compensation expense
|
|
52.2
|
|
36.7
|
Deferred income
taxes
|
|
(5.6)
|
|
26.7
|
Gain on fair
market value adjustment and gain on sale of equity
investments
|
|
(13.6)
|
|
(2.4)
|
Changes in
assets and liabilities, excluding effects of
acquisitions:
|
|
|
|
|
Accounts
receivable, net
|
|
(75.3)
|
|
(170.5)
|
Other assets,
current and long-term
|
|
(10.0)
|
|
(43.4)
|
Current and
long term liabilities, excluding debt
|
|
(91.9)
|
|
(475.7)
|
Cash provided by
operating activities
|
|
413.0
|
|
76.8
|
Investing
activities:
|
|
|
|
|
Capital
expenditures
|
|
(321.3)
|
|
(315.4)
|
Acquisitions, net of
cash acquired
|
|
(4.3)
|
|
(111.4)
|
Cash received from
divestitures
|
|
6.9
|
|
98.1
|
Cash used in investing
activities
|
|
(318.7)
|
|
(328.7)
|
Financing
activities:
|
|
|
|
|
Net short-term
borrowings
|
|
(411.2)
|
|
386.7
|
Payments on long-term
debt
|
|
(575.0)
|
|
—
|
Borrowings on long-term
debt
|
|
872.9
|
|
—
|
Dividends paid to
Equifax shareholders
|
|
(95.6)
|
|
(95.7)
|
Dividends paid to
noncontrolling interests
|
|
(2.1)
|
|
(2.4)
|
Proceeds from exercise
of stock options and employee stock purchase plan
|
|
16.5
|
|
8.7
|
Payment of taxes
related to settlement of equity awards
|
|
(16.9)
|
|
(32.3)
|
Debt issuance
costs
|
|
(5.8)
|
|
—
|
Cash (used in) provided
by financing activities
|
|
(217.2)
|
|
265.0
|
Effect of foreign
currency exchange rates on cash and cash equivalents
|
|
1.8
|
|
(14.2)
|
Decrease in cash and
cash equivalents
|
|
(121.1)
|
|
(1.1)
|
Cash and cash
equivalents, beginning of period
|
|
285.2
|
|
224.7
|
Cash and cash
equivalents, end of period
|
|
$
164.1
|
|
$
223.6
|
Common Questions & Answers (Unaudited)
(Dollars in
millions)
1. Can you provide a further analysis of
operating revenue by operating segment?
Operating revenue consists of the following components:
(In millions)
|
|
Three Months Ended June 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Local
Currency
|
|
Organic
Local
Currency
|
Operating revenue:
|
|
2023
|
|
2022
|
|
$ Change
|
|
% Change
|
|
% Change (1)
|
|
% Change (2)
|
Verification
Services
|
|
$
474.0
|
|
$
504.5
|
|
$
(30.5)
|
|
(6) %
|
|
|
|
(6) %
|
Employer
Services
|
|
108.8
|
|
104.7
|
|
4.1
|
|
4 %
|
|
|
|
(2) %
|
Total Workforce
Solutions
|
|
582.8
|
|
609.2
|
|
(26.4)
|
|
(4) %
|
|
|
|
(5) %
|
Online Information
Solutions
|
|
358.6
|
|
329.2
|
|
29.4
|
|
9 %
|
|
|
|
5 %
|
Mortgage
Solutions
|
|
30.3
|
|
36.8
|
|
(6.5)
|
|
(18) %
|
|
|
|
(18) %
|
Financial Marketing
Services
|
|
56.1
|
|
55.4
|
|
0.7
|
|
1 %
|
|
|
|
1 %
|
Total U.S. Information
Solutions
|
|
445.0
|
|
421.4
|
|
23.6
|
|
6 %
|
|
|
|
3 %
|
Asia Pacific
|
|
87.7
|
|
90.1
|
|
(2.4)
|
|
(3) %
|
|
4 %
|
|
4 %
|
Europe
|
|
78.7
|
|
79.8
|
|
(1.1)
|
|
(1) %
|
|
(2) %
|
|
(2) %
|
Canada
|
|
66.5
|
|
64.0
|
|
2.5
|
|
4 %
|
|
8 %
|
|
7 %
|
Latin
America
|
|
56.9
|
|
52.2
|
|
4.7
|
|
9 %
|
|
23 %
|
|
23 %
|
Total
International
|
|
289.8
|
|
286.1
|
|
3.7
|
|
1 %
|
|
7 %
|
|
7 %
|
Total operating
revenue
|
|
$
1,317.6
|
|
$
1,316.7
|
|
$
0.9
|
|
— %
|
|
1 %
|
|
— %
|
|
|
(1)
|
Local currency revenue
change is calculated by conforming 2023 results using 2022 exchange
rates.
|
|
|
(2)
|
Organic local currency
revenue growth is defined as local currency revenue growth,
adjusted to reflect an increase in prior year Equifax revenue from
the revenue of acquired companies in the prior year period. This
adjustment is made for 12 months following the
acquisition.
|
2. What is the estimate of the change in overall U.S.
Mortgage Market credit inquiry volume that is included in the 2023
third quarter and full year guidance provided?
The change year over year in total U.S. mortgage credit
inquiries received by Equifax in the second quarter of 2023 was a
decline of 33%. The guidance provided on page 3 assumes a change
year over year in total U.S. Mortgage Market Credit inquiries
received by Equifax in the third quarter of 2023 to be a decline of
about 23%. For full year 2023, our guidance assumes a decline of
about 31%.
Reconciliations of Non-GAAP Financial Measures to the
Comparable GAAP Financial Measures (Unaudited)
(Dollars in
millions, except per share amounts)
A. Reconciliation of net income attributable to Equifax
to diluted EPS attributable to Equifax, defined as net income
adjusted for acquisition-related amortization expense, legal
expenses related to the 2017 cybersecurity incident, fair value
adjustment and gain on sale of equity investments, foreign currency
impact of certain intercompany loans, acquisition-related costs
other than acquisition amortization, income tax effect of stock
awards recognized upon vesting or settlement, Argentina highly inflationary foreign currency
adjustment, realignment of resources and other costs and income tax
adjustments:
|
|
Three Months Ended June 30,
|
|
|
|
|
(In millions, except per share
amounts)
|
|
2023
|
|
2022
|
|
$ Change
|
|
% Change
|
Net income attributable
to Equifax
|
|
$
138.3
|
|
$
200.6
|
|
$
(62.3)
|
|
(31) %
|
Acquisition-related
amortization expense of certain acquired intangibles
(1)
|
|
60.3
|
|
57.9
|
|
2.4
|
|
4 %
|
Legal expenses related
to the 2017 cybersecurity incident (2)
|
|
0.3
|
|
0.5
|
|
(0.2)
|
|
(40) %
|
Fair market value
adjustment and gain on sale of equity investments
(3)
|
|
(10.5)
|
|
6.7
|
|
(17.2)
|
|
nm
|
Foreign currency impact
of certain intercompany loans (4)
|
|
(1.8)
|
|
(3.0)
|
|
1.2
|
|
(40) %
|
Acquisition-related
costs other than acquisition amortization (5)
|
|
26.9
|
|
12.0
|
|
14.9
|
|
124 %
|
Income tax effects of
stock awards that are recognized upon vesting or settlement
(6)
|
|
(0.8)
|
|
(2.0)
|
|
1.2
|
|
(60) %
|
Argentina highly
inflationary foreign currency adjustment (7)
|
|
0.1
|
|
(0.1)
|
|
0.2
|
|
nm
|
Realignment of
resources and other costs (8)
|
|
17.5
|
|
—
|
|
17.5
|
|
nm
|
Tax impact of
adjustments (9)
|
|
(18.5)
|
|
(14.7)
|
|
(3.8)
|
|
26 %
|
Net income attributable
to Equifax, adjusted for items listed above
|
|
$
211.8
|
|
$
257.9
|
|
$
(46.1)
|
|
(18) %
|
Diluted EPS
attributable to Equifax, adjusted for the items listed
above
|
|
$
1.71
|
|
$
2.09
|
|
$
(0.38)
|
|
(18) %
|
Weighted-average shares
used in computing diluted EPS
|
|
123.8
|
|
123.3
|
|
|
|
|
|
|
(1)
|
During the second
quarter of 2023, we recorded acquisition-related amortization
expense of certain acquired intangibles of $60.3 million ($49.0
million, net of tax). We calculate this financial measure by
excluding the impact of acquisition-related amortization expense
and including a benefit to reflect the significant cash income tax
savings resulting from the income tax deductibility of amortization
for certain acquired intangibles. The $11.3 million of tax is
comprised of $15.4 million of tax expense net of $4.1 million of a
cash income tax benefit. During the second quarter of 2022, we
recorded acquisition-related amortization expense of certain
acquired intangibles of $57.9 million ($47.2 million, net of tax).
The $10.7 million of tax is comprised of $14.8 million of tax
expense net of $4.1 million of a cash income tax benefit. See the
Notes to this reconciliation for additional detail.
|
|
|
(2)
|
During the second
quarter of 2023, we recorded legal expenses related to the 2017
cybersecurity incident of $0.3 million ($0.2 million, net of tax).
During the second quarter of 2022, we recorded legal expenses
related to the 2017 cybersecurity incident of $0.5 million ($0.4
million, net of tax). See the Notes to this reconciliation for
additional detail.
|
|
|
(3)
|
During the second
quarter of 2023, we recorded an unrealized gain on the fair market
value adjustment and gain on sale of equity investments of $10.5
million ($6.8 million, net of tax). During the second quarter of
2022, we recorded an unrealized loss on the fair market value
adjustment and gain on sale of equity investments of $6.7 million
($5.7 million, net of tax). The fair value adjustments were
recorded to the Other income, net line item within the Consolidated
Statements of Income. See the Notes to this reconciliation for
additional details.
|
|
|
(4)
|
During the second
quarter of 2023, we recorded a foreign currency gain on certain
intercompany loans of $1.8 million. During the second quarter of
2022, we recorded a foreign currency gain on certain intercompany
loans of $3.0 million. The impact was recorded to the Other income,
net line item within the Consolidated Statements of Income. See the
Notes to this reconciliation for additional detail.
|
|
|
(5)
|
During the second
quarter of 2023, we recorded $26.9 million ($21.2 million, net of
tax) for acquisition costs other than acquisition-related
amortization. During the second quarter of 2022, we recorded $12.0
million ($9.1 million, net of tax) for acquisition costs other than
acquisition-related amortization. These costs primarily related to
integration costs resulting from recent acquisitions and were
recorded in operating income. See the Notes to this reconciliation
for additional detail.
|
|
|
(6)
|
During the second
quarter of 2023, we recorded a tax benefit of $0.8 million related
to the tax effects of deductions for stock compensation in excess
of amounts recorded for compensation costs. During the second
quarter of 2022, we recorded a tax benefit of $2.0 million related
to the tax effects of deductions for stock compensation expense in
excess of amounts recorded for compensation costs. See the Notes to
this reconciliation for additional detail.
|
|
|
(7)
|
Argentina experienced
multiple periods of increasing inflation rates, devaluation of the
peso, and increasing borrowing rates. As such, Argentina was deemed
a highly inflationary economy by accounting policymakers in 2018.
During the second quarter of 2023 and 2022, we recorded a foreign
currency loss of $0.1 million and a foreign currency gain of $0.1
million, respectively, related to the impact of remeasuring the
peso denominated monetary assets and liabilities as a result of
Argentina being a highly inflationary economy. See the Notes to
this reconciliation for additional detail.
|
|
|
(8)
|
During the second
quarter of 2023, we recorded $17.5 million ($12.4 million, net of
tax) of restructuring charges for the realignment of internal
resources and other costs, which predominantly relates to the
reduction of headcount and the realignment of our internal
resources to support the Company's strategic objectives. See the
Notes to this reconciliation for additional detail.
|
|
|
(9)
|
During the second
quarter of 2023, we recorded the tax impact of adjustments of $18.5
million comprised of (i) acquisition-related amortization expense
of certain acquired intangibles of $11.3 million ($15.4 million of
tax expense net of $4.1 million of cash income tax benefit), (ii) a
tax adjustment of $0.1 million related to legal expenses for the
2017 cybersecurity incident, (iii) a tax adjustment of $3.7 million
related to the fair market value adjustment and gain on sale of
equity investments (vi) a tax adjustment of $5.1 million related to
the realignment of internal resources and (v) a tax adjustment of
$5.7 million related to acquisition costs other than
acquisition-related amortization.
|
|
|
|
During the second
quarter of 2022, we recorded the tax impact of adjustments of $14.7
million comprised of (i) acquisition-related amortization expense
of certain acquired intangibles of $10.7 million ($14.8 million of
tax expense net of $4.1 million of cash income tax benefit), (ii) a
tax adjustment of $0.1 million related to legal expenses for the
2017 cybersecurity incident, (iii) a tax adjustment of $1.0 million
related to the loss on fair market value adjustment and gain on
sale of equity investments and (iv) a tax adjustment of $2.9
million related to acquisition costs other than acquisition-related
amortization.
|
B. Reconciliation of net income attributable to Equifax
to adjusted EBITDA, defined as net income excluding income taxes,
interest expense, net, depreciation and amortization expense, legal
expenses related to the 2017 cybersecurity incident, fair value
adjustment and gain on sale of equity investments, foreign currency
impact of certain intercompany loans, acquisition-related costs
other than acquisition amortization, Argentina highly inflationary foreign currency
adjustment, realignment of resources and other costs and
presentation of adjusted EBITDA margin:
|
|
Three Months Ended June 30,
|
|
|
|
|
(in millions)
|
|
2023
|
|
2022
|
|
$ Change
|
|
% Change
|
Revenue
|
|
$
1,317.6
|
|
$
1,316.7
|
|
$
0.9
|
|
— %
|
|
|
|
|
|
|
|
|
|
Net income attributable
to Equifax
|
|
$
138.3
|
|
$
200.6
|
|
$
(62.3)
|
|
(31) %
|
Income taxes
|
|
52.7
|
|
63.4
|
|
(10.7)
|
|
(17) %
|
Interest expense,
net*
|
|
58.2
|
|
41.4
|
|
16.8
|
|
41 %
|
Depreciation and
amortization
|
|
149.6
|
|
139.8
|
|
9.8
|
|
7 %
|
Legal expenses related
to 2017 cybersecurity incident (1)
|
|
0.3
|
|
0.5
|
|
(0.2)
|
|
(40) %
|
Fair market value
adjustment and gain on sale of equity investments
(2)
|
|
(10.5)
|
|
6.7
|
|
(17.2)
|
|
(257) %
|
Foreign currency impact
of certain intercompany loans (3)
|
|
(1.8)
|
|
(3.0)
|
|
1.2
|
|
(40) %
|
Acquisition-related
amounts other than acquisition amortization
(4)
|
|
26.9
|
|
12.0
|
|
14.9
|
|
124 %
|
Argentina highly
inflationary foreign currency adjustment (5)
|
|
0.1
|
|
(0.1)
|
|
0.2
|
|
nm
|
Realignment of
resources and other costs (6)
|
|
17.5
|
|
—
|
|
17.5
|
|
nm
|
Adjusted EBITDA,
excluding the items listed above
|
|
$
431.3
|
|
$
461.3
|
|
$
(30.0)
|
|
(7) %
|
Adjusted EBITDA
margin
|
|
32.7 %
|
|
35.0 %
|
|
|
|
|
|
|
nm - not
meaningful
|
*Excludes interest
income of $2.5 million in 2023 and $0.2 million 2022.
|
|
|
(1)
|
During the second
quarter of 2023, we recorded legal expenses related to the 2017
cybersecurity incident of $0.3 million ($0.2 million, net of tax).
During the second quarter of 2022, we recorded legal expenses
related to the 2017 cybersecurity incident of $0.5 million ($0.4
million, net of tax). See the Notes to this reconciliation for
additional detail.
|
|
|
(2)
|
During the second
quarter of 2023, we recorded an unrealized gain on the fair market
value adjustment and gain on sale of equity investments of $10.5
million ($6.8 million, net of tax). During the second quarter of
2022, we recorded an unrealized loss on the fair market value
adjustment and gain on sale of equity investments of $6.7 million
($5.7 million, net of tax). The fair value adjustments were
recorded to the Other income, net line item within the Consolidated
Statements of Income. See the Notes to this reconciliation for
additional details.
|
|
|
(3)
|
During the second
quarter of 2023, we recorded a foreign currency gain on certain
intercompany loans of $1.8 million. During the second quarter of
2022, we recorded a foreign currency gain on certain intercompany
loans of $3.0 million. See the Notes to this reconciliation for
additional detail.
|
|
|
(4)
|
During the second
quarter of 2023, we recorded $26.9 million ($21.2 million, net of
tax) for acquisition costs other than acquisition-related
amortization. During the second quarter of 2022, we recorded $12.0
million ($9.1 million, net of tax) for acquisition costs other than
acquisition-related amortization. These costs primarily related to
integration costs resulting from recent acquisitions and were
recorded in operating income. See the Notes to this reconciliation
for additional detail.
|
|
|
(5)
|
Argentina experienced
multiple periods of increasing inflation rates, devaluation of the
peso, and increasing borrowing rates. As such, Argentina was deemed
a highly inflationary economy by accounting policymakers in 2018.
During the second quarter of 2023 and 2022, we recorded a foreign
currency loss of $0.1 million and a foreign currency gain of $0.1
million, respectively, related to the impact of remeasuring the
peso denominated monetary assets and liabilities as a result of
Argentina being a highly inflationary economy. See the Notes to
this reconciliation for additional detail.
|
|
|
(6)
|
During the second
quarter of 2023, we recorded $17.5 million ($12.4 million, net of
tax) of restructuring charges for the realignment of internal
resources and other costs, which predominantly relates to the
reduction of headcount and the realignment of our internal
resources to support the Company's strategic objectives. See the
Notes to this reconciliation for additional
detail.
|
|
|
C. Reconciliation of operating income by segment to
Adjusted EBITDA, excluding depreciation and amortization expense,
other income, net, noncontrolling interest, legal expenses related
to the 2017 cybersecurity incident, fair value adjustment and gain
on sale of equity investments, foreign currency impact of certain
intercompany loans, acquisition-related costs other than
acquisition amortization, Argentina highly inflationary foreign currency
adjustment, realignment of resources and other costs and
presentation of adjusted EBITDA margin for each of the
segments:
(In millions)
|
Three Months Ended June 30,
2023
|
|
|
Workforce
Solutions
|
|
U.S.
Information
Solutions
|
|
International
|
|
|
General
Corporate
Expense
|
|
Total
|
|
|
|
|
|
|
Revenue
|
|
$
582.8
|
|
$
445.0
|
|
$
289.8
|
|
|
—
|
|
$
1,317.6
|
Operating
income
|
|
244.6
|
|
102.8
|
|
34.4
|
|
|
(144.9)
|
|
236.9
|
Depreciation and
amortization
|
|
44.3
|
|
50.5
|
|
33.6
|
|
|
21.2
|
|
149.6
|
Other income,
net*
|
|
—
|
|
0.7
|
|
12.2
|
|
|
0.5
|
|
13.4
|
Noncontrolling
interest
|
|
—
|
|
—
|
|
(1.1)
|
|
|
—
|
|
(1.1)
|
Adjustments
(1)
|
|
11.2
|
|
6.0
|
|
(8.9)
|
|
|
24.2
|
|
32.5
|
Adjusted
EBITDA
|
|
$
300.1
|
|
$
160.0
|
|
$
70.2
|
|
|
$
(99.0)
|
|
$
431.3
|
Operating
margin
|
|
42.0 %
|
|
23.1 %
|
|
11.9 %
|
|
|
nm
|
|
18.0 %
|
Adjusted EBITDA
margin
|
|
51.5 %
|
|
36.0 %
|
|
24.2 %
|
|
|
nm
|
|
32.7 %
|
|
nm - not
meaningful
|
*Excludes interest
income of $0.9 million in International and $1.6 million in General
Corporate Expense.
|
(In millions)
|
|
Three Months Ended June 30,
2022
|
|
|
Workforce
Solutions
|
|
U.S.
Information
Solutions
|
|
International
|
|
|
General
Corporate
Expense
|
|
Total
|
|
|
|
|
|
|
Revenue
|
|
$
609.2
|
|
$
421.4
|
|
$
286.1
|
|
|
—
|
|
$
1,316.7
|
Operating
income
|
|
281.2
|
|
112.0
|
|
32.4
|
|
|
(121.0)
|
|
304.6
|
Depreciation and
amortization
|
|
40.1
|
|
46.3
|
|
34.0
|
|
|
19.4
|
|
139.8
|
Other income,
net*
|
|
—
|
|
27.9
|
|
(30.9)
|
|
|
4.6
|
|
1.6
|
Noncontrolling
interest
|
|
—
|
|
—
|
|
(0.8)
|
|
|
—
|
|
(0.8)
|
Adjustments
(1)
|
|
4.1
|
|
(25.4)
|
|
35.9
|
|
|
1.5
|
|
16.1
|
Adjusted
EBITDA
|
|
$
325.4
|
|
$
160.8
|
|
$
70.6
|
|
|
$
(95.5)
|
|
$
461.3
|
Operating
margin
|
|
46.2 %
|
|
26.6 %
|
|
11.3 %
|
|
|
nm
|
|
23.1 %
|
Adjusted EBITDA
margin
|
|
53.4 %
|
|
38.2 %
|
|
24.7 %
|
|
|
nm
|
|
35.0 %
|
|
nm - not
meaningful
|
*Excludes interest
income of $0.2 million in International.
|
|
|
(1)
|
During the second
quarter of 2023, we recorded pre-tax expenses of $0.3 million for
legal expenses related to the 2017 cybersecurity incident, a $10.5
million unrealized gain on the fair value adjustment of equity
investments, a $1.8 million foreign currency gain on certain
intercompany loans, $26.9 million for acquisition costs other than
acquisition-related amortization, a foreign currency loss of $0.1
million related to the impact of remeasuring the peso denominated
monetary assets and liabilities as a result of Argentina being a
highly inflationary economy and $17.5 million of restructuring
charges for the realignment of internal resources and other
costs.
|
|
|
|
During the second
quarter of 2022, we recorded pre-tax expenses of $0.5 million for
legal expenses related to the 2017 cybersecurity incident, a $6.7
million unrealized loss on the fair value adjustment and gain on
sale of equity investments, a $3.0 million foreign currency gain on
certain intercompany loans, $12.0 million in acquisition costs
other than acquisition-related amortization and a $0.1 million
foreign currency gain related to the impact of remeasuring the peso
denominated monetary assets and liabilities as a result of
Argentina being a highly inflationary economy.
|
Notes to Reconciliations of Non-GAAP Financial Measures to
the Comparable GAAP Financial Measures
Diluted EPS attributable to Equifax is adjusted for the
following items:
Acquisition-related amortization expense - During the
second quarter of 2023 and 2022, we recorded acquisition-related
amortization expense of certain acquired intangibles of
$60.3 million ($49.0 million, net of tax) and $57.9 million ($47.2 million, net of tax), respectively. We
calculate this financial measure by excluding the impact of
acquisition-related amortization expense and including a benefit to
reflect the material cash income tax savings resulting from the
income tax deductibility of amortization for certain acquired
intangibles. These financial measures are not prepared in
conformity with GAAP. Management believes excluding the impact of
amortization expense is useful because excluding
acquisition-related amortization and other items that are not
comparable allows investors to evaluate our performance for
different periods on a more comparable basis. Certain acquired
intangibles result in material cash income tax savings which are
not reflected in earnings. Management believes that including a
benefit to reflect the cash income tax savings is useful as it
allows investors to better value Equifax. Management makes these
adjustments to earnings when measuring profitability, evaluating
performance trends, setting performance objectives and calculating
our return on invested capital.
Legal expenses related to the 2017 cybersecurity
incident - Legal expenses related to the 2017
cybersecurity incident include legal fees to respond to subsequent
litigation and government investigations for both periods
presented. During the second quarter of 2023 and 2022, we recorded
legal expenses related to the 2017 cybersecurity incident of
$0.3 million ($0.2 million, net of tax) and $0.5 million ($0.4 million, net of tax). Management
believes excluding these charges is useful as it allows investors
to evaluate our performance for different periods on a more
comparable basis. Management makes these adjustments to net income
when measuring profitability, evaluating performance trends,
setting performance objectives and calculating our return on
invested capital. This is consistent with how management reviews
and assesses Equifax's historical performance and is useful when
planning, forecasting and analyzing future periods. The legal
expenses related to the 2017 cybersecurity incident do not include
losses accrued for certain legal proceedings and government
investigations related to the 2017 cybersecurity incident.
Fair market value adjustment and gain on sale of equity
investments - During the second quarter of 2023, we
recorded a $10.5 million
($6.8 million, net of tax)
unrealized gain related to adjusting our investment in Brazil to fair value and gain related to sale
of an equity method investment. During the second quarter of 2022
we recorded a $6.7 million
($5.7 million, net of tax)
unrealized loss related to adjusting our investment in Brazil to fair value and gains related to the
sale of two equity method investments. The investment in
Brazil has a readily determinable
fair value and is adjusted to fair value at the end of each
reporting period, with unrealized gains or losses to be recorded
within the Consolidated Statements of Income in Other income, net.
Management believes excluding these charges from certain financial
results provides meaningful supplemental information regarding our
financial results for the three months ended June 30, 2023 and
2022, since the non-operating gains or losses are not comparable
among the periods. This is consistent with how our management
reviews and assesses Equifax's historical performance and is useful
when planning, forecasting and analyzing future periods.
Foreign currency impact of certain intercompany loans
- During the second quarter of 2023 and 2022, we recorded
a gain of $1.8 million and
$3.0 million, respectively,
related to foreign currency impact of certain intercompany loans.
Management believes excluding this charge is useful as it allows
investors to evaluate our performance for different periods on a
more comparable basis. This is consistent with how management
reviews and assesses Equifax's historical performance and is useful
when planning, forecasting and analyzing future periods.
Acquisition-related costs other than acquisition
amortization - During the second quarter of 2023
and 2022, we recorded $26.9 million ($21.2 million, net of tax) and $12.0 million ($9.1 million, net of tax), respectively, for
acquisition costs other than acquisition-related amortization.
These costs primarily related to integration costs resulting from
recent acquisitions and were recorded in operating income.
Management believes excluding this charge from certain financial
results provides meaningful supplemental information regarding our
financial results, since a charge of such an amount is not
comparable among the periods. This is consistent with how our
management reviews and assesses Equifax's historical performance
and is useful when planning, forecasting, and analyzing future
periods.
Income tax effects of stock awards that are recognized upon
vesting or settlement - During the second quarter of 2023, we
recorded a tax benefit of $0.8
million related to the tax effects of deductions for stock
compensation in excess of amounts recorded for compensation costs.
During the second quarter of 2022, we recorded a tax benefit of
$2.0 million related to the tax
effects of deductions for stock compensation in excess of amounts
recorded for compensation costs. Management believes excluding this
tax effect from financial results provides meaningful supplemental
information regarding our financial results for the three months
ended June 30, 2023 and 2022 because these amounts are
non-operating and relate to income tax benefits or deficiencies for
stock awards recognized when tax amounts differ from recognized
stock compensation cost. This is consistent with how management
reviews and assesses Equifax's historical performance and is useful
when planning, forecasting and analyzing future periods.
Argentina highly
inflationary foreign currency adjustment - Argentina
experienced multiple periods of increasing inflation rates,
devaluation of the peso, and increasing borrowing rates. As such,
Argentina was deemed a highly
inflationary economy by accounting policymakers. We recorded a
foreign currency loss of $0.1 million
and a foreign currency gain of $0.1
million during the second quarter of 2023 and 2022,
respectively, as a result of remeasuring the peso denominated
monetary assets and liabilities due to Argentina being highly inflationary.
Management believes excluding this charge is useful as it allows
investors to evaluate our performance for different periods on a
more comparable basis. This is consistent with how management
reviews and assesses Equifax's historical performance and is useful
when planning, forecasting and analyzing future periods.
Charge related to the realignment of internal resources and
other costs - During the second quarter of 2023, we recorded
$17.5 million ($12.4 million, net of tax) of restructuring
charges for the realignment of internal resources and other costs,
which predominantly relates to the reduction of headcount and the
realignment of our internal resources to support the Company's
strategic objectives. Management believes excluding this charge
from certain financial results provides meaningful supplemental
information regarding our financial results for the three months
ended June 30, 2023, since the charges are not comparable
among the periods. This is consistent with how our management
reviews and assesses Equifax's historical performance and is useful
when planning, forecasting and analyzing future periods.
Adjusted EBITDA and EBITDA margin - Management
defines adjusted EBITDA as consolidated net income attributable to
Equifax plus net interest expense, income taxes, depreciation and
amortization and also excludes certain one-time items. Management
believes the use of adjusted EBITDA and adjusted EBITDA margin
allows investors to evaluate our performance for different periods
on a more comparable basis.
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SOURCE Equifax Inc.