10-QPeriod: Q3 FY2022

EQUIFAX INC Quarterly Report for Q3 Ended Sep 30, 2022

Filed October 20, 2022For Securities:EFX

Summary

Equifax Inc. (EFX) reported its third-quarter and year-to-date results for the period ending September 30, 2022. For the third quarter, the company saw a modest 2% increase in revenue, reaching $1.24 billion, driven by growth in its Workforce Solutions and International segments. However, this was offset by a 9% decline in the U.S. Information Solutions (USIS) segment, primarily due to a slowdown in the mortgage market. Net income attributable to Equifax decreased by 19% to $165.7 million, or $1.34 per diluted share, from $205.4 million, or $1.66 per diluted share, in the prior year period. For the first nine months of the year, total revenue increased by 7% to $3.92 billion, again driven by Workforce Solutions and International segments, while USIS revenue declined by 7%. Net income attributable to Equifax for the nine-month period decreased by 5% to $588.0 million, or $4.77 per diluted share, from $622.1 million, or $5.04 per diluted share, in the comparable period of 2021. The company experienced increased operating expenses, including higher cost of services and depreciation/amortization, which outpaced revenue growth, impacting operating margins. The company also noted a significant increase in interest expense due to higher debt balances.

Financial Highlights

52 data points
Beta

Revenue

$1.24B

Net Income

$165.70M

13.3% Net Margin

EPS (Diluted)

$1.34

Total Assets

$11.31B

Cash & Equivalents

$241.70M

Free Cash Flow

$354.90M

Financial Statements
Beta
Revenue$1.24B
SG&A Expenses$318.00M
Operating Expenses$1.00B
Operating Income$242.90M
Interest Expense$47.10M
Net Income$165.70M
EPS (Basic)$1.35
EPS (Diluted)$1.34
Shares Outstanding (Basic)122.40M
Shares Outstanding (Diluted)123.30M

Key Highlights

  • 1Total revenue for Q3 2022 increased by 2% to $1.24 billion, and by 7% to $3.92 billion for the first nine months of 2022, compared to the prior year periods.
  • 2Workforce Solutions segment revenue saw robust growth, up 9% for Q3 and 21% for the nine months, driven by Verification Services.
  • 3U.S. Information Solutions (USIS) segment revenue declined by 9% for Q3 and 7% for the nine months, largely due to the slowdown in the mortgage market.
  • 4Consolidated net income attributable to Equifax decreased by 19% to $165.7 million in Q3 2022, and by 5% to $588.0 million for the first nine months of 2022, compared to the prior year.
  • 5Diluted EPS for Q3 2022 was $1.34, down from $1.66 in Q3 2021. For the nine months, diluted EPS was $4.77, down from $5.04 in the prior year.
  • 6Operating expenses increased by 5% for Q3 and 9% for the nine months, with cost of services and depreciation/amortization being key drivers of the increase, impacting operating margins.
  • 7Interest expense increased by 35% in Q3 and 20% for the nine months due to higher debt balances from recent acquisitions and note issuances.

Frequently Asked Questions

The primary driver of revenue growth in the Workforce Solutions segment is the strong performance of Verification Services, which benefited from increased volumes in talent solutions, government, and consumer finance verticals, as well as revenue from acquisitions.

The USIS segment's revenue decline was primarily due to the significant slowdown in the U.S. mortgage market, which impacted mortgage inquiry volumes and, consequently, revenue from online information solutions and mortgage solutions. Declines in Financial Marketing Services also contributed.

While most of the litigation and investigations related to the 2017 cybersecurity incident have been resolved, the company has accrued liabilities and continues to monitor ongoing matters, including Canadian class actions and a UK FCA investigation. These contingent liabilities could potentially have a material adverse effect on future financial condition, results of operations, or cash flows if an adverse outcome occurs.

The company's total debt increased due to acquisitions and the issuance of new senior notes, leading to a significant increase in interest expense. Specifically, interest expense rose by 35% in Q3 and 20% for the nine-month period compared to the prior year, reflecting higher debt balances.