10-QPeriod: Q3 FY2020

EQUIFAX INC Quarterly Report for Q3 Ended Sep 30, 2020

Filed October 22, 2020For Securities:EFX

Summary

Equifax Inc. reported a significant increase in financial performance for the third quarter and the first nine months of 2020 compared to the same periods in 2019. Revenue surged by 22% in Q3 and 16% year-to-date, driven by strong growth in the Workforce Solutions and U.S. Information Solutions (USIS) segments, particularly benefiting from the robust mortgage market and increased unemployment claims management. This top-line growth, coupled with a favorable comparison to the prior year's significant legal accruals, led to a substantial improvement in operating income and net income. Despite the ongoing economic uncertainties stemming from the COVID-19 pandemic, Equifax demonstrated resilience and a strong recovery. The company's strategic focus on technology transformation and data security, alongside prudent cost management, positions it well. Significant positive impacts were observed from investments, notably a gain from the fair value adjustment of its Brazil investment following its IPO. The company maintained a strong liquidity position with substantial cash reserves and available credit facilities.

Financial Highlights

52 data points
Beta

Revenue

$1.07B

Net Income

$228.50M

21.4% Net Margin

EPS (Diluted)

$1.86

Total Assets

$9.25B

Cash & Equivalents

$1.54B

Free Cash Flow

$367.00M

Financial Statements
Beta
Revenue$1.07B
SG&A Expenses$330.00M
Operating Expenses$863.90M
Operating Income$204.40M
Interest Expense$37.40M
Net Income$228.50M
EPS (Basic)$1.88
EPS (Diluted)$1.86
Shares Outstanding (Basic)121.50M
Shares Outstanding (Diluted)123.00M

Key Highlights

  • 1Operating revenue increased by 22% in Q3 2020 and 16% for the first nine months of 2020 year-over-year, reaching $1,068.3 million and $3,009.1 million respectively.
  • 2Net income attributable to Equifax grew substantially to $224.2 million in Q3 2020 ($1.82 EPS) from $81.1 million in Q3 2019 ($0.66 EPS), and to $432.7 million year-to-date from a net loss of $408.0 million in the prior year.
  • 3Workforce Solutions segment showed exceptional growth, with revenue up 57% in Q3 and 48% year-to-date, driven by Verification Services and Employer Services (including unemployment claims management).
  • 4U.S. Information Solutions (USIS) revenue increased by 22% in Q3 and 16% year-to-date, boosted by a strong mortgage market and core credit decisioning services.
  • 5Other income, net, significantly increased due to a $129.9 million gain from the fair value adjustment of the Brazil investment following its IPO.
  • 6Operating expenses, while increasing in Cost of Services and Depreciation, saw a substantial decrease in Selling, General, and Administrative expenses year-to-date, largely due to the absence of significant legal accruals recorded in the prior year.
  • 7The company maintained a strong liquidity position with $1.5 billion in cash and cash equivalents at September 30, 2020, and significant availability under its revolving credit facility.

Frequently Asked Questions

The primary drivers of revenue growth were the strong performance in the Workforce Solutions segment, up 57%, and the U.S. Information Solutions (USIS) segment, up 22%. This growth was significantly fueled by the robust U.S. mortgage market and increased demand for unemployment claims management services within Workforce Solutions.

While the company has resolved most major legal settlements, the 2017 cybersecurity incident continued to be a factor in financial results, primarily through ongoing legal and professional service expenses, though these were significantly lower year-to-date in 2020 compared to 2019. A substantial legal accrual recorded in 2019 related to the incident was not repeated in 2020, which contributed to the year-over-year improvement in operating income and net income.

The significant increase in 'Other income, net' was primarily due to a $129.9 million gain recorded from the fair value adjustment of Equifax's investment in its Brazil operations following its initial public offering in the third quarter of 2020. This unrealized gain provided a notable boost to the company's net income.

Equifax maintained a strong liquidity position, with $1.5 billion in cash and cash equivalents as of September 30, 2020. The company also had approximately $1.1 billion available under its revolving credit facility. In Q2 2020, Equifax amended its revolving credit facility to temporarily increase its maximum leverage ratio, providing additional financial flexibility to navigate the economic uncertainties.