10-QPeriod: Q1 FY2016

EQUIFAX INC Quarterly Report for Q1 Ended Mar 31, 2016

Filed April 29, 2016For Securities:EFX

Summary

EQUIFAX INC. (EFX) reported a strong first quarter for 2016, with significant revenue growth driven by both organic increases and the strategic acquisition of Veda. Total operating revenue increased by 12% year-over-year to $728.3 million. This growth was notably boosted by the acquisition of Veda for approximately $1.7 billion, which closed in February 2016, integrating into the International segment. Despite increased operating expenses, largely due to the acquisition and related costs, operating income rose by 14% to $176.2 million. Net income attributable to Equifax grew by 16% to $102.1 million, translating to a diluted EPS of $0.85, up from $0.73 in the prior year's quarter. The company's balance sheet shows a substantial increase in total assets to $6.73 billion, primarily due to the Veda acquisition, which also led to a significant increase in long-term debt. Equifax management highlighted robust performance across its Workforce Solutions and Global Consumer Solutions segments, while the International segment's growth was largely driven by the Veda acquisition, despite currency headwinds.

Financial Highlights

53 data points
Beta

Revenue

$728.30M

Net Income

$102.10M

14.0% Net Margin

EPS (Diluted)

$0.85

Total Assets

$6.73B

Cash & Equivalents

$96.80M

Free Cash Flow

$108.10M

Financial Statements
Beta
Revenue$728.30M
SG&A Expenses$243.10M
Operating Expenses$552.10M
Operating Income$176.20M
Interest Expense$20.10M
Net Income$102.10M
EPS (Basic)$0.86
EPS (Diluted)$0.85
Shares Outstanding (Basic)118.80M
Shares Outstanding (Diluted)120.80M

Key Highlights

  • 1Total operating revenue grew 12% to $728.3 million, driven by broad-based organic growth and the significant acquisition of Veda.
  • 2Operating income increased by 14% to $176.2 million, with an improved operating margin of 24.2% compared to 23.7% in the prior year.
  • 3Net income attributable to Equifax rose 16% to $102.1 million, resulting in diluted EPS of $0.85, up from $0.73.
  • 4The acquisition of Veda for approximately $1.7 billion closed on February 24, 2016, significantly expanding the International segment and increasing total assets.
  • 5Total assets grew substantially to $6.73 billion, up from $4.50 billion at the end of the prior year, largely due to the Veda acquisition.
  • 6Long-term debt increased significantly to $1.88 billion from $1.14 billion, primarily to finance the Veda acquisition.
  • 7The company paid $39.2 million in dividends, an increase from $34.7 million in the prior year, and maintained its share repurchase authorization with $667.2 million available.

Frequently Asked Questions

The acquisition of Veda, completed in February 2016 for approximately $1.7 billion, was a major driver of revenue growth, particularly in the International segment. It contributed significantly to the increase in total assets and long-term debt. While Veda's operations added to revenue and operating expenses, management highlighted that the acquisition is expected to provide a strong platform for future growth.

Equifax experienced strong top-line growth, with operating revenue increasing by 12% to $728.3 million. Operating income also grew by 14% to $176.2 million, and net income attributable to Equifax increased by 16% to $102.1 million, leading to a 16% rise in diluted EPS to $0.85. This performance was bolstered by both organic growth and the Veda acquisition, alongside improvements in segment-level profitability, notably in Workforce Solutions and Global Consumer Solutions.

The Veda acquisition was financed through a combination of new debt, including a $800 million term loan and commercial paper, which significantly increased Equifax's debt levels. Total debt rose to $3.08 billion at March 31, 2016, with long-term debt increasing to $1.88 billion from $1.14 billion at the end of 2015. Despite the increased leverage, the company reported compliance with its debt covenants and noted a decrease in its average cost of debt due to the balance of low-rate commercial paper.

The U.S. Information Solutions (USIS) segment saw a modest 4% revenue increase, but its operating margin slightly decreased due to litigation and people costs. The International segment experienced 17% revenue growth, largely driven by the Veda acquisition, though its operating margin declined due to amortization costs and integration expenses. Workforce Solutions demonstrated robust performance with a 21% revenue increase and a significant expansion in operating margin. Global Consumer Solutions also showed strong growth, with revenues up 14% and an improved operating margin.