10-QPeriod: Q2 FY2018

EQUIFAX INC Quarterly Report for Q2 Ended Jun 30, 2018

Filed July 26, 2018For Securities:EFX

Summary

Equifax Inc. reported its second quarter 2018 financial results, showing a slight increase in operating revenue of 2% to $876.9 million, compared to $856.7 million in the prior year's second quarter. This growth was primarily driven by the International and Workforce Solutions segments. However, operating income saw a significant decrease of 27% to $193.6 million from $265.9 million in the prior year's second quarter. This decline is largely attributable to increased costs associated with the 2017 cybersecurity incident, along with higher IT and data security expenses. Net income attributable to Equifax decreased by 12% to $144.8 million for the quarter, translating to diluted earnings per share of $1.19, down from $1.36 in the second quarter of 2017. The company continues to grapple with the financial and operational impact of the 2017 cybersecurity incident, which has led to increased legal, consulting, and IT security costs. Despite these challenges, Equifax maintained its quarterly dividend and has $590.1 million available for future share repurchases.

Financial Highlights

52 data points
Beta

Revenue

$876.90M

Net Income

$144.80M

16.5% Net Margin

EPS (Diluted)

$1.19

Total Assets

$7.12B

Cash & Equivalents

$327.40M

Free Cash Flow

$235.20M

Financial Statements
Beta
Revenue$876.90M
SG&A Expenses$257.50M
Operating Expenses$683.30M
Operating Income$193.60M
Interest Expense$26.40M
Net Income$144.80M
EPS (Basic)$1.20
EPS (Diluted)$1.19
Shares Outstanding (Basic)120.30M
Shares Outstanding (Diluted)121.40M

Key Highlights

  • 1Operating revenue increased by 2% to $876.9 million for the three months ended June 30, 2018, compared to $856.7 million for the same period in 2017.
  • 2Operating income decreased significantly by 27% to $193.6 million in Q2 2018, down from $265.9 million in Q2 2017, impacted by increased expenses.
  • 3Net income attributable to Equifax was $144.8 million for Q2 2018, a decrease from $165.4 million in Q2 2017.
  • 4Diluted earnings per share (EPS) for Q2 2018 was $1.19, down from $1.36 in Q2 2017.
  • 5The company is incurring significant costs related to the 2017 cybersecurity incident, including legal, IT, and security enhancements.
  • 6International and Workforce Solutions segments were key drivers of revenue growth, while U.S. Information Solutions saw a decline.
  • 7Equifax maintained its quarterly dividend of $0.39 per share and had $590.1 million available for share repurchases as of June 30, 2018.

Frequently Asked Questions

The revenue increase of 2% to $876.9 million was primarily driven by growth in the International and Workforce Solutions segments. The International segment saw local currency growth across most regions, while Workforce Solutions benefited from strong performance in Verification Services.

Operating income decreased by 27% primarily due to increased costs related to the 2017 cybersecurity incident, higher IT and data security expenses, and increased people and royalties costs. These factors also contributed to the 12% decrease in net income attributable to Equifax.

The cybersecurity incident has led to substantial expenses for Equifax, including costs for investigation, remediation, legal services, IT security enhancements, and providing free credit monitoring services to affected consumers. The company has also incurred significant legal and regulatory scrutiny and ongoing litigation, which creates uncertainty regarding future financial outcomes.

Equifax maintains access to liquidity through its revolving credit facility and a receivables funding facility, with $884.5 million available under the Revolver as of June 30, 2018. The company also issued new senior notes in May 2018 to refinance existing debt. While operating cash flow is expected to cover ongoing needs, potential losses from litigation and investigations related to the cybersecurity incident could impact liquidity.