10-QPeriod: Q2 FY2020

EQUIFAX INC Quarterly Report for Q2 Ended Jun 30, 2020

Filed July 23, 2020For Securities:EFX

Summary

Equifax Inc. (EFX) reported strong revenue growth of 12% for both the three and six months ended June 30, 2020, compared to the prior year, reaching $982.8 million and $1,940.8 million, respectively. This growth was primarily driven by a significant surge in the Workforce Solutions segment (up 53% and 43%) and continued strength in U.S. Information Solutions (up 10% and 12%), largely fueled by the mortgage market and increased demand for unemployment claims management services amidst the COVID-19 pandemic. Despite revenue growth, the company faced increased interest expenses due to recent debt issuances, totaling $4.4 billion in debt outstanding. However, net income attributable to Equifax saw a substantial increase, growing 44% to $95.9 million for the quarter and $208.5 million for the six-month period, largely benefiting from the absence of significant legal accruals recorded in the prior year related to the 2017 cybersecurity incident. The company maintained a strong liquidity position with $1.3 billion in cash and substantial borrowing capacity.

Financial Highlights

53 data points
Beta

Revenue

$982.80M

Net Income

$100.20M

10.2% Net Margin

EPS (Diluted)

$0.82

Total Assets

$8.83B

Cash & Equivalents

$1.35B

Free Cash Flow

$251.20M

Financial Statements
Beta
Revenue$982.80M
SG&A Expenses$309.90M
Operating Expenses$816.00M
Operating Income$166.80M
Interest Expense$36.60M
Net Income$100.20M
EPS (Basic)$0.83
EPS (Diluted)$0.82
Shares Outstanding (Basic)121.40M
Shares Outstanding (Diluted)122.70M

Key Highlights

  • 1Revenue grew 12% year-over-year for both the three and six-month periods, reaching $982.8 million and $1,940.8 million, respectively.
  • 2Workforce Solutions segment experienced exceptional growth, up 53% for the quarter and 43% year-to-date, driven by strong demand in Verification Services and Employer Services.
  • 3U.S. Information Solutions (USIS) also showed robust growth, with revenue up 10% for the quarter and 12% year-to-date, benefiting from a strong mortgage market.
  • 4Net income attributable to Equifax increased significantly by 44% to $95.9 million in Q2 2020 and by 143% to $208.5 million for the first six months of 2020.
  • 5Operating income improved dramatically, especially for the six-month period, turning from a $504.0 million loss in 2019 to a $302.7 million gain in 2020, largely due to the absence of significant legal accruals from the prior year.
  • 6Interest expense increased by 33% for the quarter and 24% year-to-date due to recent debt issuances totaling $1.0 billion in April 2020.
  • 7The company maintained a strong liquidity position with $1.3 billion in cash and cash equivalents and $1.1 billion available under its revolving credit facility as of June 30, 2020.

Frequently Asked Questions

The COVID-19 pandemic had a mixed impact. While it led to revenue declines in international markets and some U.S. verticals like commercial and financial services, it also drove significant growth in Workforce Solutions, particularly in unemployment claims management, and benefited from a strong mortgage market in U.S. Information Solutions. Overall, the company reported consolidated revenue growth due to these offsetting factors.

Most of the major lawsuits and government investigations related to the 2017 cybersecurity incident have been resolved. The company entered into a significant Consumer Settlement in July 2019, which received final court approval in early 2020, subject to appeals. Other settlements related to securities class action litigation and shareholder derivative actions were also finalized. While most matters are resolved, the company continues to face some ongoing investigations and potential for future costs, though these are expected to be significantly lower than in prior periods.

Equifax's total debt increased significantly, reaching $4.4 billion by June 30, 2020, up from $3.4 billion at the end of 2019. This increase is primarily due to the issuance of $1.0 billion in senior notes in April 2020 and $750 million in November 2019, intended for general corporate purposes and to repay existing debt. Despite the increase in debt, the company has a strong liquidity position and its revolving credit facility was amended to provide additional financial flexibility regarding leverage ratios.

The primary drivers of revenue growth were the strong performance in the Workforce Solutions segment, boosted by employment and income verification services and a surge in unemployment claims management due to the pandemic, and the U.S. Information Solutions segment, which benefited from increased mortgage market activity. International operations, however, experienced revenue declines due to the global economic impact of COVID-19.