10-QPeriod: Q3 FY2018

EQUIFAX INC Quarterly Report for Q3 Ended Sep 30, 2018

Filed October 25, 2018For Securities:EFX

Summary

Equifax Inc. reported its third quarter and nine-month results for 2018, showing a notable decline in profitability compared to the previous year. For the third quarter, operating revenue remained relatively flat at $834.2 million, but operating income significantly decreased by 59% to $64.1 million, primarily due to increased technology and data security costs following the 2017 cybersecurity incident. Net income attributable to Equifax fell by 60% to $38.4 million. For the first nine months of 2018, revenue saw a modest increase of 2% to $2.58 billion, but operating income plummeted by 37% to $401.9 million. This substantial drop in profitability was driven by higher operating expenses, including incremental technology and data security investments, legal costs, and the expenses related to the cybersecurity incident. Consequently, net income attributable to Equifax decreased by 34% to $274.2 million. The company continues to navigate the significant financial and operational impacts of the 2017 cybersecurity incident, including ongoing litigation and investigations, while also investing in technology and security enhancements.

Financial Highlights

53 data points
Beta

Revenue

$834.20M

Net Income

$38.40M

4.6% Net Margin

EPS (Diluted)

$0.32

Total Assets

$7.13B

Cash & Equivalents

$253.40M

Free Cash Flow

$152.60M

Financial Statements
Beta
Revenue$834.20M
SG&A Expenses$317.50M
Operating Expenses$770.10M
Operating Income$64.10M
Interest Expense$26.70M
Net Income$38.40M
EPS (Basic)$0.32
EPS (Diluted)$0.32
Shares Outstanding (Basic)120.50M
Shares Outstanding (Diluted)121.60M

Key Highlights

  • 1For the three months ended September 30, 2018, Equifax reported operating revenue of $834.2 million, a slight decrease from $834.8 million in the prior year period. This quarter experienced a significant decline in operating income to $64.1 million from $154.7 million in Q3 2017.
  • 2Net income attributable to Equifax for the third quarter was $38.4 million ($0.32 per diluted share), a substantial decrease from $96.3 million ($0.79 per diluted share) in the same period last year.
  • 3For the nine months ended September 30, 2018, operating revenue increased by 2% to $2,576.8 million, compared to $2,523.8 million in the prior year.
  • 4Operating income for the nine-month period decreased significantly by 37% to $401.9 million, down from $639.1 million in the prior year.
  • 5Net income attributable to Equifax for the nine-month period was $274.2 million ($2.26 per diluted share), down from $415.0 million ($3.41 per diluted share) in the prior year.
  • 6The company incurred increased incremental technology and data security costs, as well as legal and other professional services expenses, related to the 2017 cybersecurity incident.
  • 7As of September 30, 2018, Equifax had $1.08 billion available under its revolving credit facility, indicating a stable liquidity position.

Frequently Asked Questions

The primary driver for the significant decrease in operating income and net income was the increased incremental technology and data security costs following the 2017 cybersecurity incident. These costs, along with associated legal and professional services expenses, significantly impacted profitability, especially in the third quarter and year-to-date periods.

The cybersecurity incident continued to affect Equifax's financial performance through increased expenses related to technology, data security, and legal/investigative services. While the company received some insurance recoveries, the ongoing costs and associated litigation remain a significant factor impacting profitability and operations.

As of September 30, 2018, Equifax maintained a healthy liquidity position with $1.08 billion available under its revolving credit facility and $253.4 million in cash and cash equivalents. Total debt was $2.65 billion, with 89% being fixed-rate debt. The company was in compliance with its debt covenants.

The U.S. Information Solutions (USIS) segment saw a slight revenue increase in Q3 but a significant drop in operating margin. International revenue decreased in Q3, impacted by currency fluctuations, though nine-month revenue showed growth. Workforce Solutions reported revenue growth in both Q3 and the nine-month period. Global Consumer Solutions experienced revenue declines in both periods, primarily due to the cessation of advertising following the cybersecurity incident.