10-QPeriod: Q2 FY2013

EQUIFAX INC Quarterly Report for Q2 Ended Jun 30, 2013

Filed July 25, 2013For Securities:EFX

Summary

Equifax Inc. reported solid financial results for the second quarter and first half of 2013, demonstrating robust revenue growth and improved profitability. Total revenue increased by 14% in the quarter and 13% year-to-date, driven by a combination of strategic acquisitions, organic growth initiatives, and favorable market conditions, particularly in mortgage-related services. The company also saw significant improvements in operating income, with margins expanding across several key segments, indicating effective cost management and operational leverage. Despite a challenging international economic environment, Equifax maintained strong performance in its core U.S. segments. The acquisition of CSC Credit Services in late 2012 appears to be integrating well, contributing to revenue growth. While there are expectations of a slowdown in the mortgage market in the second half of 2013, the company's diversified business model and ongoing investments in innovation position it for continued growth. The company also highlighted its strong liquidity position and commitment to returning capital to shareholders through dividends and share repurchases.

Financial Highlights

52 data points
Beta

Revenue

$586.90M

Net Income

$90.50M

15.4% Net Margin

EPS (Diluted)

$0.73

Total Assets

$4.37B

Cash & Equivalents

$104.90M

Free Cash Flow

$136.50M

Financial Statements
Beta
Revenue$586.90M
SG&A Expenses$186.50M
Operating Expenses$428.80M
Operating Income$158.10M
Interest Expense$17.60M
Net Income$90.50M
EPS (Basic)$0.75
EPS (Diluted)$0.73
Shares Outstanding (Basic)121.00M
Shares Outstanding (Diluted)123.60M

Key Highlights

  • 1Consolidated operating revenue grew by 14% to $586.9 million for the three months ended June 30, 2013, and by 13% to $1,153.4 million for the six months ended June 30, 2013.
  • 2Operating income increased significantly, up 23% to $158.1 million for the quarter and 19% to $307.1 million for the year-to-date period, indicating improved profitability.
  • 3Diluted earnings per share from continuing operations attributable to Equifax were $0.73 for the quarter, a 22% increase from $0.60 in the prior year, and $1.40 for the six months, a 18% increase from $1.18.
  • 4The U.S. Consumer Information Solutions segment showed strong revenue growth of 19% in the quarter, boosted by the CSC Credit Services acquisition and a strong mortgage market.
  • 5Workforce Solutions segment experienced robust revenue growth of 12% in the quarter, driven by a 21% increase in Verification Services, largely due to mortgage-related verification demand.
  • 6The company maintained a strong liquidity position, with $688.6 million available under its Senior Credit Facility as of June 30, 2013.
  • 7Dividends paid to Equifax shareholders increased to $53.2 million for the six months ended June 30, 2013, up from $43.1 million in the prior year, reflecting a commitment to shareholder returns.

Frequently Asked Questions

Revenue growth was primarily driven by the acquisition of CSC Credit Services in late 2012, ongoing strategic growth initiatives across various business units, and a strong performance in mortgage-related services due to high refinancing activity. The International segment also contributed positively in local currency terms.

The acquisition contributed significantly to revenue growth, particularly in the U.S. Consumer Information Solutions and Workforce Solutions segments. It also led to increased depreciation and amortization expenses due to acquired intangibles and some transitional selling, general, and administrative expenses.

Equifax anticipates a slowdown in mortgage market activity in the second half of 2013 due to rising interest rates, which is expected to reduce year-over-year growth rates in its USCIS and Workforce Solutions segments. However, the company continues to expect overall organic revenue growth of 6-8% and earnings per share growth at a somewhat faster rate.

Equifax reported a strong liquidity position with $688.6 million available under its Senior Credit Facility. The company has a diversified debt structure, with 77% fixed-rate debt. Net short-term repayments were significant in the first six months, partly reflecting the integration of the CSC Credit Services acquisition. The company's leverage ratio of 1.81 as of June 30, 2013, is well within its covenant limits.