Summary
Equifax Inc. reported strong financial performance for the second quarter and first six months of 2016, driven by robust revenue growth across most segments, notably the International segment following the significant acquisition of Veda. Total operating revenue increased by 20% and 16% respectively for the quarter and year-to-date compared to 2015, primarily fueled by the Veda acquisition and solid organic growth in U.S. Information Solutions and Workforce Solutions. Despite increased operating expenses, including those related to the Veda integration and amortization, operating income saw a healthy increase of 20% and 17% respectively. Net income attributable to Equifax grew by 18% and 17% for the respective periods, demonstrating effective management and operational execution in a dynamic market.
Financial Highlights
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Financial Statements
Beta
| Revenue | $811.30M |
| SG&A Expenses | $231.60M |
| Operating Expenses | $585.60M |
| Operating Income | $225.70M |
| Interest Expense | $23.60M |
| Net Income | $130.90M |
| EPS (Basic) | $1.10 |
| EPS (Diluted) | $1.08 |
| Shares Outstanding (Basic) | 119.20M |
| Shares Outstanding (Diluted) | 121.10M |
Key Highlights
- 1Operating revenue increased significantly by 20% in Q2 2016 and 16% year-to-date, largely driven by the acquisition of Veda and strong organic growth in key segments.
- 2Net income attributable to Equifax grew by 18% for Q2 2016 and 17% year-to-date, indicating improved profitability.
- 3The acquisition of Veda for approximately $1.7 billion was completed in February 2016, significantly expanding Equifax's international footprint and contributing to revenue growth, though also increasing operating expenses and goodwill.
- 4Operating income increased by 20% for Q2 2016 and 17% year-to-date, with operating margins remaining strong and even improving in some segments like Workforce Solutions.
- 5Interest expense increased due to higher debt levels incurred to finance the Veda acquisition, but the average cost of debt decreased due to favorable interest rates on new debt issuances.
- 6The company is actively managing its capital structure, with a significant increase in total debt following the Veda acquisition, yet maintaining compliance with debt covenants and sufficient liquidity.
- 7Despite legal and regulatory investigations, the company reported no material impact on its financial statements from these matters as of the reporting date.
Frequently Asked Questions
The primary driver of Equifax's substantial revenue increase in the second quarter of 2016 was the acquisition of Veda Group Limited for approximately $1.7 billion, which closed in February 2016. This acquisition significantly expanded Equifax's international presence and contributed to a reported revenue increase of 20% compared to the same period in the previous year. Strong organic growth in U.S. Information Solutions and Workforce Solutions also contributed positively.
The Veda acquisition significantly boosted Equifax's total assets and goodwill, leading to increased operating expenses primarily due to higher cost of services, selling, general, and administrative expenses, and depreciation and amortization related to acquired intangible assets. Consequently, interest expense also rose due to the debt financing for the acquisition. However, the company managed to maintain strong operating income and a growing net income attributable to Equifax, indicating effective integration and operational leverage.
Equifax anticipates long-term average organic revenue growth between 6% and 8%, with an additional 1% to 2% growth expected from strategic acquisitions. The company expects earnings per share to grow at a faster rate than revenue over time due to operating and financial leverage. While the U.S. economic outlook is for modest growth, international markets present ongoing challenges, and foreign exchange rates are expected to negatively impact reported revenue and profit.
Equifax is involved in ongoing legal and regulatory matters, including investigations by the Consumer Financial Protection Bureau (CFPB) and state attorneys general, as well as existing litigation. While the company is cooperating with these investigations and believes it has strong defenses in its legal cases, it is unable to predict the outcome or potential impact on financial statements. As of this report, none of these matters individually or in aggregate have had a material impact on the consolidated financial statements.