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Equifax Releases Fourth Quarter 2019 Results

ATLANTA , Feb. 12, 2020 /PRNewswire/ -- Equifax Inc. (NYSE: EFX) today announced financial results for the quarter and full year ended December 31, 2019 .

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"We had a solid finish to 2019, delivering our strongest revenue growth of the year in the fourth quarter. This broad based growth gives us confidence and momentum as we enter 2020." said Mark W. Begor , Chief Executive Officer of Equifax. "2019 was a transition year for Equifax as we move back to a more normal growth mode. We made significant progress during the year on our multi-year, $1.25 billion EFX2020 cloud technology transformation including the ongoing migration of our data, analytics, and application infrastructure to cloud native technology, which will accelerate the speed at which we innovate and grow while continuing to strengthen our data security. We also took strong steps to expand our access to unique, differentiated data and our collaboration with our customers and partners to deliver advanced decisioning and data solutions that help them more effectively grow and manage their business."

Financial Results Summary

The Company reported revenue of $905.8 million in the fourth quarter of 2019, an 8 percent increase from the fourth quarter of 2018 and a 10 percent increase in local currency.

Fourth quarter 2019 diluted EPS attributable to Equifax was $0.07 per share, down from $0.21 per share in the fourth quarter of 2018. 

Net income attributable to Equifax of $9.2 million was down from $25.6 million in the fourth quarter of 2018.

For the full year 2019, revenue was $3.5 billion , a 3 percent increase from 2018 and a 5 percent increase in local currency. Diluted EPS attributable to Equifax was a loss of $3.27 per share, down from income of $2.47 per share for the full year 2018. Net loss attributable to Equifax was $398.8 million , down compared to net income of $299.8 million for the full year 2018.

Our results in the fourth quarter of 2019 included a pre-tax legal accrual of $99.6 million for losses associated with certain legal proceedings and government investigations related to the 2017 cybersecurity incident. The charge represents completed settlements and our best estimate of remaining liabilities for the U.S. matters related to the 2017 cybersecurity incident. The impact of this accrual on diluted EPS was $0.68 per share for the fourth quarter.

USIS fourth quarter results

  • Total revenue was $330.9 million in the fourth quarter of 2019, an increase of 8 percent from the fourth quarter of 2018. Operating margin for USIS was 33.6 percent in the fourth quarter of 2019, compared to 35.5 percent in the fourth quarter of 2018. Adjusted EBITDA margin for USIS was 45.1 percent in the fourth quarter of 2019, compared to 47.5 percent in the fourth quarter of 2018.
  • Online Information Solutions revenue was $227.3 million , up 8 percent from the fourth quarter of 2018.
  • Mortgage Solutions revenue was $32.5 million , an increase of 19 percent from the fourth quarter of 2018.
  • Financial Marketing Services revenue was $71.1 million , an increase of 3 percent when compared to the fourth quarter of 2018.

Workforce Solutions fourth quarter results

  • Total revenue was $250.5 million in the fourth quarter of 2019, a 22 percent increase from the fourth quarter of 2018. Operating margin for Workforce Solutions was 39.2 percent in the fourth quarter of 2019 compared to 39.7 percent in the fourth quarter of 2018. Adjusted EBITDA margin for Workforce Solutions was 47.0 percent in the fourth quarter of 2019, compared to 48.7 percent in the fourth quarter of 2018.
  • Verification Services revenue was $193.6 million , up 33 percent when compared to the fourth quarter of 2018.
  • Employer Services revenue was $56.9 million , down 6 percent when compared to the fourth quarter of 2018.

International fourth quarter results

  • Total revenue was $235.9 million in the fourth quarter of 2019, a slight decrease from the fourth quarter of 2018 and an increase of 4 percent on a local currency basis. Operating margin for International was 15.3 percent in the fourth quarter of 2019 compared to 6.6 percent in the fourth quarter of 2018. Adjusted EBITDA margin for International was 36.4 percent in the fourth quarter of 2019 compared to 32.4 percent in the fourth quarter of 2018.
  • Asia Pacific revenue was $73.7 million , down 4 percent from the fourth quarter of 2018 and up 1 percent on a local currency basis.
  • Europe revenue was $76.3 million , up slightly from the fourth quarter of 2018 and up 1 percent on a local currency basis.
  • Latin America revenue was $46.4 million , down 3 percent from the fourth quarter of 2018 and up 11 percent on a local currency basis.
  • Canada revenue was $39.5 million , up 9 percent from the fourth quarter of 2018 on a reported and local currency basis.

Global Consumer Solutions fourth quarter results

  • Revenue was $88.5 million , a 3 percent increase from the fourth quarter of 2018 on a reported and local currency basis. Operating margin was 13.8 percent compared to 8.5 percent in the fourth quarter of 2018. Adjusted EBITDA margin was 26.9 percent compared to 21.1 percent in the fourth quarter of 2018.

Adjusted EPS and Adjusted EBITDA Margin

  • Adjusted EPS attributable to Equifax was $1.53 , up 11 percent compared to the fourth quarter of 2018. This financial measure for 2019 excludes the accrual for legal matters related to the 2017 cybersecurity incident, settlements with commercial customers and PayNet acquisition-related amounts other than acquisition-related amortization. The financial measure for both 2019 and 2018 excludes acquisition-related amortization expense of certain acquired intangibles, costs related to the 2017 cybersecurity incident, realignment of internal resources and other costs, Argentina highly inflationary foreign currency adjustment, and income tax effects of stock awards recognized upon vesting or settlement. The financial measure for 2018 excludes a legal settlement and adjustments for uncertain tax positions. These items are net of associated tax impacts and are described more fully in the attached Q&A.
  • Adjusted EBITDA margin was 35.2 percent, compared to 33.2 percent in the fourth quarter of 2018. These financial measures for 2019 and 2018 have been adjusted for certain items, including costs related to the 2017 cybersecurity incident, which affect the comparability of the underlying operational performance and are described more fully in the attached Q&A.
  • Full year adjusted EPS attributable to Equifax was $5.62 , down 3 percent from the prior year period. Full year adjusted EBITDA margin was 33.4 percent compared to 33.7 percent in 2018. These financial measures for 2019 and 2018 have been adjusted for certain items, including costs related to the 2017 cybersecurity incident, which affect the comparability of the underlying operational performance and are described more fully in the attached Q&A.
  • Adjusted EPS, adjusted EBITDA and adjusted EBITDA margin are non-GAAP financial measures which are explained under "Non-GAAP Financial Measures" below and are reconciled to the most directly comparable GAAP financial measures in the attached Q&A.

2020 First Quarter and Full Year Guidance

  • For the first quarter of 2020, we expect reported revenue to be between $915 and $930 million , reflecting local currency growth as compared to the first quarter of 2019 of 9% to 11%, offset by an expected over 1% negative impact of foreign exchange. Adjusted EPS is expected to be between $1.29 and $1.34 per share. The impact of foreign exchange on adjusted EPS compared to the first quarter of 2019 is expected to be a negative impact of less than $0.01 per share. Impacting first quarter 2020 revenue and adjusted EPS is an expectation of a 21% increase in U.S. mortgage market inquiries impacting our USIS and EWS units.
  • We expect full year 2020 reported revenue to be between $3.650 and $3.750 billion , reflecting local currency growth as compared to 2019 of 4% and 7%, offset by an expected less than 1% negative impact of foreign exchange. Adjusted EPS is expected to be between $5.60 and $5.80 per share. The impact of foreign exchange on adjusted EPS compared to full year 2019 is expected to be a negative impact of $0.03 per share. U.S. mortgage market inquiries are expected to be approximately flat in 2020 versus 2019, with strong growth in inquiries in the first half of 2020, offset by a decline in inquiries in the second half of 2020.

About Equifax

Equifax is a global data, analytics, and technology Company and believes knowledge drives progress. The Company blends unique data, analytics, and technology with a passion for serving customers globally, to create insights that power decisions to move people forward.

Headquartered in Atlanta, Ga. , Equifax operates or has investments in 27 countries in North America , Central and South America , Europe and the Asia Pacific region. It is a member of Standard & Poor's (S&P) 500 ® Index, and its common stock is traded on the New York Stock Exchange (NYSE) under the symbol EFX. Equifax employs approximately 11,200 employees worldwide.

Earnings Conference Call and Audio Webcast

In conjunction with this release, Equifax will host a conference call on February 13, 2020 at 8:30 a.m. (ET) via a live audio webcast. To access the webcast, go to the Investor Relations section of our website at www.equifax.com . The discussion will be available via replay at the same site shortly after the conclusion of the webcast. In addition, we are now posting certain supplemental financial information in the February 2020 Investor Presentation. This press release is also available at that website.

Non-GAAP Financial Measures

This earnings release presents adjusted EPS attributable to Equifax which is diluted EPS attributable to Equifax adjusted (to the extent noted above for different periods) for acquisition-related amortization expense, net of tax, the income tax effects of stock awards that are recognized upon vesting or settlement, accrual for legal matters related to the 2017 cybersecurity incident, costs related to the 2017 cybersecurity incident, PayNet acquisition-related amounts other than acquisition-related amortization, settlements with commercial customers, settlement of a legal claim unrelated to the 2017 cybersecurity incident, the foreign exchange impact resulting from accounting for Argentina as a highly inflationary economy, realignment of internal resources and other costs, and adjustment for uncertain tax positions. This earnings release also presents adjusted EBITDA and adjusted EBITDA margin which is defined as consolidated net income attributable to Equifax plus net interest expense, income taxes, depreciation and amortization, and also excludes the same items as adjusted EPS. These are important financial measures for Equifax but are not financial measures as defined by GAAP.

These non-GAAP financial measures should be reviewed in conjunction with the relevant GAAP financial measures and are not presented as an alternative measure of net income or EPS as determined in accordance with GAAP.

Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures and related notes are presented in the Q&A. This information can also be found under "Investor Relations/GAAP/Non-GAAP Measures" on our website at www.equifax.com .

Forward-Looking Statements

This release contains forward-looking statements and forward-looking information. These statements can be identified by expressions of belief, expectation or intention, as well as statements that are not historical fact. These statements are based on certain factors and assumptions including with respect to foreign exchange rates, expected growth, results of operations, performance, the outcome of legal proceedings, business prospects and opportunities and effective tax rates. While the Company believes these factors and assumptions to be reasonable based on information currently available, they may prove to be incorrect.

Several factors could cause actual results to differ materially from those expressed or implied in the forward-looking statements, including, but not limited to, actions taken by us, including restructuring or strategic initiatives (including our EFX2020 technology and security transformation program, capital investments and asset acquisitions or dispositions), as well as developments beyond our control, including, but not limited to, changes in worldwide and U.S. economic conditions that materially impact consumer spending, consumer debt and employment and the demand for Equifax's products and services. Other risk factors include the impact of the 2017 cybersecurity incident and the resulting litigation and other impacts on our business and results of operations; potential adverse developments in new and pending legal proceedings or government investigations; impact of our technology and security transformation and improvements in our information technology and data security infrastructure; changes in tax regulations; adverse or uncertain economic conditions and changes in credit and financial markets; uncertainties regarding the ultimate amount and timing of payments for the legal proceedings and government investigations related to the 2017 cybersecurity incident; risks associated with our ability to comply with business practice commitments and similar obligations under settlement agreements and consent orders entered into in connection with the 2017 cybersecurity incident; economic, political and other risks associated with international sales and operations; risks relating to unauthorized access to data or breaches of confidential information due to criminal conduct, attacks by hackers, employee or insider malfeasance and/or human error; changes in, and the effects of, laws and regulations and government policies governing or affecting our business, including, without limitation, our examination and supervision by the Consumer Financial Protection Bureau, a federal agency that holds primary responsibility for the regulation of consumer protection with respect to financial products and services in the U.S., oversight by the U.K. Financial Conduct Authority ("FCA") and Information Commissioner's Office of our debt collections services and core credit reporting businesses in the U.K., oversight by the Office of Australian Information Commission, the Australian Competition and Consumer Commission ("ACCC") and other regulatory entities of our credit reporting business in Australia and the impact of current privacy laws and regulations, including the European General Data Protection Regulation and the California Consumer Privacy Act, or any future privacy laws and regulations; federal or state responses to identity theft concerns; our ability to successfully develop and market new products and services, respond to pricing and other competitive pressures, complete and integrate acquisitions and other investments and achieve targeted cost efficiencies; timing and amount of capital expenditures; changes in capital markets and corresponding effects on the Company's investments and benefit plan obligations; foreign currency exchange rates and earnings repatriation limitations; and the decisions of taxing authorities which could affect our effective tax rates. A summary of additional risks and uncertainties can be found in our Annual Report on Form 10-K for the year ended December 31, 2018 , including without limitation under the captions "Item 1. Business -- Governmental Regulation" and "-- Forward-Looking Statements" and "Item 1A. Risk Factors," and in our other filings with the U.S. Securities and Exchange Commission. Forward-looking statements are given only as at the date of this release and the Company disclaims any obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

 

EQUIFAX

CONSOLIDATED STATEMENTS OF INCOME




Three Months Ended
December 31,



2019


2018

(In millions, except per share amounts)





Operating revenue


$

905.8



$

835.3


Operating expenses:





Cost of services (exclusive of depreciation and amortization below)


382.9



372.2


Selling, general and administrative expenses


389.0



337.9


Depreciation and amortization


86.9



79.1


Total operating expenses


858.8



789.2


Operating income


47.0



46.1


Interest expense


(29.3)



(26.5)


Other income, net


6.2



5.4


Consolidated income before income taxes


23.9



25.0


(Provision) benefit for income taxes


(13.1)



1.7


Consolidated net income


10.8



26.7


Less: Net income attributable to noncontrolling interests including redeemable noncontrolling interests


(1.6)



(1.1)


Net income attributable to Equifax


$

9.2



$

25.6


Basic earnings per common share:





Net income attributable to Equifax


$

0.08



$

0.21


Weighted-average shares used in computing basic earnings per share


121.1



120.6


Diluted earnings per common share:





Net income attributable to Equifax


$

0.07



$

0.21


Weighted-average shares used in computing diluted earnings per share


122.3



121.4


Dividends per common share


$

0.39



$

0.39


 

 

EQUIFAX

CONSOLIDATED STATEMENTS OF (LOSS) INCOME




Twelve Months Ended
December 31,



2019


2018

(In millions, except per share amounts)





Operating revenue


$

3,507.6



$

3,412.1


Operating expenses:





Cost of services (exclusive of depreciation and amortization below)


1,521.7



1,440.4


Selling, general and administrative expenses


1,990.2



1,213.3


Depreciation and amortization


331.1



310.4


Total operating expenses


3,843.0



2,964.1


Operating (loss) income


(335.4)



448.0


Interest expense


(111.7)



(103.5)


Other income, net


14.1



11.8


Consolidated (loss) income before income taxes


(433.0)



356.3


Benefit (provision) for income taxes


40.2



(50.0)


Consolidated net (loss) income


(392.8)



306.3


Less: Net income attributable to noncontrolling interests including redeemable noncontrolling interests


(6.0)



(6.5)


Net (loss) income attributable to Equifax


$

(398.8)



$

299.8


Basic earnings per common share:





Net (loss) income attributable to Equifax


$

(3.30)



$

2.49


Weighted-average shares used in computing basic earnings per share


120.9



120.4


Diluted earnings per common share:





Net (loss) income attributable to Equifax


$

(3.27)



$

2.47


Weighted-average shares used in computing diluted earnings per share


122.0



121.4


Dividends per common share


$

1.56



$

1.56


 

 

EQUIFAX

CONDENSED CONSOLIDATED BALANCE SHEET




December 31,



2019


2018

(In millions, except par values)





ASSETS





Current assets:





Cash and cash equivalents


$

401.3



$

223.6


Trade accounts receivable, net of allowance for doubtful accounts of $11.2 and $10.9 at
 December 31, 2019 and 2018, respectively


532.1



469.1


Prepaid expenses


88.1



100.0


Other current assets


187.9



109.6


Total current assets


1,209.4



902.3


Property and equipment:





Capitalized internal-use software and system costs


979.4



684.1


Data processing equipment and furniture


325.1



344.6


Land, buildings and improvements


236.3



216.1


Total property and equipment


1,540.8



1,244.8


Less accumulated depreciation and amortization


(593.2)



(480.0)


Total property and equipment, net


947.6



764.8


Goodwill


4,308.3



4,129.7


Indefinite-lived intangible assets


94.9



94.8


Purchased intangible assets, net


1,044.6



1,099.2


Other assets, net


304.2



162.4


Total assets


$

7,909.0



$

7,153.2


LIABILITIES AND EQUITY





Current liabilities:





Short-term debt and current maturities of long-term debt


$

3.1



$

4.9


Accounts payable


148.3



175.7


Accrued expenses


163.5



213.2


Accrued salaries and bonuses


156.1



131.0


Deferred revenue


104.0



98.0


Other current liabilities


784.1



204.0


Total current liabilities


1,359.1



826.8


Long-term debt


3,379.5



2,630.6


Deferred income tax liabilities, net


248.0



316.2


Long-term pension and other postretirement benefit liabilities


118.9



139.3


Other long-term liabilities


180.6



84.6


Total liabilities


5,286.1



3,997.5


Equifax shareholders' equity:





Preferred stock, $0.01 par value: Authorized shares - 10.0; Issued shares - none





Common stock, $1.25 par value: Authorized shares - 300.0;
 Issued shares - 189.3 at December 31, 2019 and 2018;
 Outstanding shares -121.2 and 120.6 at December 31, 2019 and 2018, respectively


236.6



236.6


Paid-in capital


1,405.1



1,356.6


Retained earnings


4,131.8



4,717.8


Accumulated other comprehensive loss


(631.6)



(626.3)


Treasury stock, at cost, 67.5 shares and 68.1 shares at December 31, 2019 and 2018,
 respectively


(2,557.4)



(2,571.0)


Stock held by employee benefits trusts, at cost, 0.6 shares at December 31, 2019 and 2018, respectively


(5.9)



(5.9)


Total Equifax shareholders' equity


2,578.6



3,107.8


Noncontrolling interests including redeemable noncontrolling interests


44.3



47.9


Total shareholders' equity


2,622.9



3,155.7


Total liabilities and equity


$

7,909.0



$

7,153.2


 

 

...

EQUIFAX

CONSOLIDATED STATEMENTS OF CASH FLOWS 




Twelve Months Ended
December 31,



2019


2018

(In millions)





Operating activities:





Consolidated net (loss) income


$

(392.8)



$

306.3


Adjustments to reconcile consolidated net income to net cash provided by operating activities:





Depreciation and amortization


337.3



315.9


Stock-based compensation expense


49.7



42.5


Deferred income taxes


(87.2)



(2.3)


Changes in assets and liabilities, excluding effects of acquisitions:





Accounts receivable, net


(61.3)



(37.4)


Other assets, current and long-term


(78.8)



(15.4)


Current and long-term liabilities, excluding debt


546.9



62.6


Cash provided by operating activities


313.8



672.2


Investing activities:





Capital expenditures


(399.6)



(321.9)


Acquisitions, net of cash acquired


(272.9)



(138.3)


Cash received from sale of asset




5.6


Investment in unconsolidated affiliates, net


(25.0)



(6.9)


Cash used in investing activities


(697.5)



(461.5)


Financing activities:





Net short-term (repayments) borrowings


(1.8)



(959.2)


Payments on long-term debt


(250.0)



(100.0)


Proceeds from issuance of long-term debt


998.3



994.5


Dividends paid to Equifax shareholders


(188.7)



(187.9)


Dividends paid to noncontrolling interests


(6.6)



(10.3)


Proceeds from exercise of stock options


22.3



11.8


Payment of taxes related to settlement of equity awards


(10.5)



(19.7)


Payment of contingent consideration




(1.5)


Purchase of redeemable noncontrolling interests