10-QPeriod: Q1 FY2018

EQUIFAX INC Quarterly Report for Q1 Ended Mar 31, 2018

Filed April 26, 2018For Securities:EFX

Summary

Equifax Inc. reported its first-quarter 2018 financial results, showcasing a 4% increase in operating revenue to $865.7 million, driven primarily by strong performance in its International and Workforce Solutions segments. Despite revenue growth, operating income saw a significant 34% decline to $144.2 million, largely impacted by increased operating expenses. These expenses were driven by costs associated with the 2017 cybersecurity incident and incremental IT and data security investments, which together offset revenue gains and prior-year integration cost reductions. Net income attributable to Equifax decreased by 41% to $90.9 million, resulting in diluted earnings per share of $0.75, down from $1.26 in the prior year. This decline reflects the substantial operational costs incurred due to the cybersecurity incident and ongoing investments in IT security. While the company's revenue growth demonstrates resilience in its core business lines, investors should closely monitor the ongoing impact of cybersecurity-related expenses and potential liabilities on future profitability and cash flows. The company continues to manage its liquidity effectively, with ample availability under its credit facilities.

Financial Highlights

52 data points
Beta

Revenue

$865.70M

Net Income

$90.90M

10.5% Net Margin

EPS (Diluted)

$0.75

Total Assets

$7.20B

Cash & Equivalents

$249.30M

Free Cash Flow

$119.60M

Financial Statements
Beta
Revenue$865.70M
SG&A Expenses$300.50M
Operating Expenses$721.50M
Operating Income$144.20M
Interest Expense$23.90M
Net Income$90.90M
EPS (Basic)$0.76
EPS (Diluted)$0.75
Shares Outstanding (Basic)120.20M
Shares Outstanding (Diluted)121.30M

Key Highlights

  • 1Operating revenue increased by 4% to $865.7 million, driven by the International and Workforce Solutions segments.
  • 2Operating income decreased by 34% to $144.2 million due to a 18% increase in operating expenses.
  • 3Net income attributable to Equifax decreased by 41% to $90.9 million.
  • 4Diluted earnings per share (EPS) declined to $0.75 from $1.26 in the prior year's first quarter.
  • 5The company incurred significant costs related to the 2017 cybersecurity incident, impacting operating expenses and net income.
  • 6Cash provided by operating activities increased by $15.9 million to $119.6 million.
  • 7The company maintained its quarterly dividend of $0.39 per share.

Frequently Asked Questions

The primary drivers for the increase in operating expenses were costs related to the 2017 cybersecurity incident and incremental IT and data security investments. These factors led to a 14% increase in Cost of Services and a 24% increase in Selling, General, and Administrative expenses compared to the prior year.

The cybersecurity incident significantly impacted the company's financial results. It led to increased operating expenses, including costs for remediation, IT and data security enhancements, and legal and professional services. This resulted in a substantial decrease in operating income and net income for the quarter.

Equifax maintains a strong liquidity position. Cash provided by operating activities increased in the first quarter of 2018. The company has significant availability under its revolving credit facility and commercial paper program, and its cash and cash equivalents were $249.3 million as of March 31, 2018. Management expects operating cash flows to be sufficient for anticipated needs, though the ultimate costs of the cybersecurity incident could materially affect liquidity.

The International segment showed strong revenue growth of 13%, driven by all regions, and a 23% increase in operating income. The Workforce Solutions segment also grew revenue by 6% and operating income by 1%. The U.S. Information Solutions (USIS) segment experienced a 1% revenue decrease but maintained a strong operating margin. The Global Consumer Solutions segment saw a 3% revenue decrease, partly due to a strategic decision to reduce advertising following the cybersecurity incident.