10-QPeriod: Q2 FY2022

EQUIFAX INC Quarterly Report for Q2 Ended Jun 30, 2022

Filed July 21, 2022For Securities:EFX

Summary

Equifax Inc. (EFX) reported a 7% increase in consolidated operating revenue for the second quarter of 2022, reaching $1,316.7 million, and a 9% increase for the first six months, totaling $2,680.0 million, compared to the prior year periods. This growth was primarily driven by a strong performance in the Workforce Solutions segment, which saw a 21% revenue increase in Q2 and 27% for the six months, boosted by its Verification Services. The U.S. Information Solutions (USIS) segment experienced a revenue decline of 8% and 7% for the respective periods, largely due to the slowdown in the mortgage market. Despite revenue growth, operating income saw a slight decrease of 0.5% to $304.6 million in Q2, with operating margin contracting by 1.7 percentage points to 23.1%, primarily due to operating expenses growing faster than revenue. Net income attributable to Equifax decreased by 7% to $200.6 million ($1.63 per diluted share) for the quarter, while for the first six months, net income increased slightly by 1% to $422.4 million ($3.42 per diluted share). The company continued to invest in technology transformation and faced increased interest expenses due to higher debt balances.

Financial Highlights

52 data points
Beta

Revenue

$1.32B

Net Income

$200.60M

15.2% Net Margin

EPS (Diluted)

$1.63

Total Assets

$11.22B

Cash & Equivalents

$223.60M

Free Cash Flow

$275.30M

Financial Statements
Beta
Revenue$1.32B
SG&A Expenses$330.20M
Operating Expenses$1.01B
Operating Income$304.60M
Interest Expense$41.60M
Net Income$200.60M
EPS (Basic)$1.64
EPS (Diluted)$1.63
Shares Outstanding (Basic)122.40M
Shares Outstanding (Diluted)123.30M

Key Highlights

  • 1Consolidated operating revenue grew by 7% year-over-year to $1.32 billion for Q2 2022 and 9% to $2.68 billion for the first six months of 2022, driven by strong performance in Workforce Solutions.
  • 2Workforce Solutions revenue increased significantly (21% for Q2, 27% for YTD), primarily due to strong growth in Verification Services.
  • 3U.S. Information Solutions (USIS) revenue declined by 8% for Q2 and 7% for YTD, impacted by a slowdown in the mortgage market.
  • 4Operating income decreased slightly by 0.5% to $304.6 million in Q2, and operating margin contracted by 1.7 percentage points to 23.1% due to expenses outpacing revenue growth.
  • 5Net income attributable to Equifax decreased by 7% to $200.6 million ($1.63 per diluted share) in Q2, but saw a 1% increase for the first six months to $422.4 million ($3.42 per diluted share).
  • 6The company had $788.6 million available under its revolving credit facility as of June 30, 2022.
  • 7Equifax paid $95.7 million in dividends to shareholders in the first six months of 2022 and has $520.2 million remaining under its share repurchase authorization.

Frequently Asked Questions

The primary driver of Equifax's revenue growth in the second quarter of 2022 was the strong performance of its Workforce Solutions segment, which saw a 21% increase in revenue, largely due to robust growth in Verification Services. The International segment also contributed positively, although the U.S. Information Solutions (USIS) segment experienced a decline.

Despite revenue growth, operating income saw a slight decrease, and operating margin contracted. This was mainly because consolidated operating expenses, including cost of services, selling, general, and administrative expenses, and depreciation and amortization, increased at a faster rate (9%) than revenue (7%) during the second quarter of 2022. Increased amortization of purchased intangible assets and capitalized internal-use software also contributed to this trend.

Equifax's outlook indicates a significant decline in the U.S. mortgage market, with an expected decrease of over 46% for the remainder of 2022 compared to the prior year. This slowdown, driven by rising interest rates, negatively impacted the U.S. Information Solutions (USIS) segment, particularly its Mortgage Solutions and Online Information Solutions revenue streams.

Most of the lawsuits and government investigations related to the 2017 cybersecurity incident have concluded or been resolved, including a significant U.S. consumer settlement that became effective in January 2022, for which Equifax contributed $380.5 million to a restitution fund. However, some matters remain ongoing, including Canadian class actions and a UK Financial Conduct Authority (FCA) investigation. Equifax continues to cooperate with ongoing investigations and disputes allegations in remaining lawsuits, but notes that an adverse outcome could have a material impact.