July 22, 2015

Equifax Reports Record Second Quarter 2015 Results Significantly Exceeding Expectations

- Revenue of $678.1 million was up 10 percent (14 percent in local currency) compared to the second quarter of 2014.
- Diluted EPS of $0.92 was up 23 percent compared to the second quarter of 2014.
- Adjusted EPS of $1.15 was up 20 percent compared to the second quarter of 2014.
- Operating margin was 27.8 percent, up 50 basis points compared to the second quarter of 2014.
- 0.9 million of our common shares were repurchased for $92.3 million during the second quarter of 2015.

ATLANTA, July 22, 2015 /PRNewswire/ -- Equifax Inc. (NYSE: EFX) today announced financial results for the quarter ended June 30, 2015.

Equifax Inc. logo.

"Equifax continues to benefit from our unique diversified business model, high levels of execution and new product innovation," said Richard F. Smith, Equifax's Chairman and Chief Executive Officer. "Interest in our Decision 360 solutions is getting stronger as New Product Innovation 2.0 and our Enterprise Growth Initiatives deliver new and compelling insights that help our customers make better decisions. We anticipate a strong performance in 2015 and feel good about the outlook for 2016."

Financial Results Summary

The company reported revenue of $678.1 million in the second quarter of 2015, a 10 percent increase from the second quarter of 2014 on a reported basis and 14 percent in local currency. Diluted EPS attributable to Equifax was $0.92, up 23 percent from the second quarter of 2014. Adjusted EPS attributable to Equifax was $1.15, up 20 percent from the second quarter of 2014, after adjusting for an impairment in our cost method investment, an unanticipated income tax benefit, and acquisition-related amortization expense. Operating margin was 27.8 percent, up 50 points from the second quarter of 2014. 

USIS continues to deliver strong, broad-based growth driven by Decision 360 initiatives, Enterprise Selling and mortgage

  • Total revenue was $315.7 million in the second quarter of 2015 compared to $281.1 million in the second quarter of 2014, an increase of 12 percent. Operating margin for USIS was 42.1 percent in the second quarter of 2015 compared to 39.5 percent in the second quarter of 2014.
  • Online Information Solutions revenue was $232.9 million, up 13 percent from the second quarter of 2014.
  • Mortgage Solutions revenue was $33.1 million, up 20 percent from the second quarter of 2014.
  • Financial Marketing Services revenue was $49.7 million, up 4 percent when compared to the second quarter of 2014.

International drove strong, double digit local currency growth primarily through new product innovation and debt management services

  • Total revenue was $148.4 million in the second quarter of 2015, a 1 percent decrease from the second quarter of 2014 and an 11 percent increase on a local currency basis. Operating margin for International was 19.9 percent in the second quarter of 2015 compared to 21.9 percent in the second quarter of 2014.
  • Europe revenue was $62.5 million, down 1 percent from the second quarter of 2014 and up 12 percent on a local currency basis.
  • Latin America revenue was $50.9 million, up 6 percent from the second quarter of 2014 and up 18 percent on a local currency basis.
  • Canada revenue was $35.0 million, down 10 percent from the second quarter of 2014 and up 2 percent on a local currency basis.

Workforce Solutions delivered very strong, double digit growth driven by the Affordable Care Act initiatives and Verification Services

  • Total revenue was $146.3 million in the second quarter of 2015, a 23 percent increase from the second quarter of 2014. Operating margin for Workforce Solutions was 38.3 percent in the second quarter of 2015 compared to 33.9 percent in the second quarter of 2014.
  • Verification Services revenue was $94.0 million, up 30 percent when compared to the second quarter of 2014.
  • Employer Services revenue was $52.3 million, up 11 percent when compared to the second quarter of 2014.

Personal Solutions delivered solid growth exceeding the upper end of their target range driven by double digit growth in Indirect and International, in addition to breach activity

  • Revenue was $67.7 million, a 7 percent increase from the second quarter of 2014 and up 8 percent on a local currency basis.
  • Operating margin was 27.6 percent compared to 30.9 percent in the second quarter of 2014.

Third Quarter 2015 and Full Year 2015 Outlook

For the third quarter, we expect revenue between $655 and $670 million, or up approximately 10% to 12% over Q3 2014, on a local currency basis. Adjusted EPS, is expected to be between $1.08 and $1.11, up 10% to 13% year-over-year, on a local currency basis.  Foreign exchange is expected to negatively impact revenue growth by 3% and Adjusted EPS by $0.03.

For the full year, based on the current level of domestic and international business activity, we anticipate revenue between $2.645 and $2.670 billion, and Adjusted EPS between $4.38 and $4.42.  Given the recent strength of the US dollar, at current exchange rates, we expect foreign currency to negatively impact 2015 revenue growth by 3%, and Adjusted EPS by approximately $0.10.  On a local currency basis, revenue is expected to grow 11% to 12% in 2015.  On a local currency basis, Adjusted EPS is expected to grow 15% to 16%.

About Equifax

Equifax is a global leader in consumer, commercial and workforce information solutions that provides businesses of all sizes and consumers with insight and information they can trust. Equifax organizes and assimilates data on more than 600 million consumers and 81 million businesses worldwide.  The company's significant investments in differentiated data, its expertise in advanced analytics to explore and develop new multi-source data solutions, and its leading-edge proprietary technology enable it to create and deliver unparalleled customized insights that enrich both the performance of businesses and the lives of consumers.

Headquartered in Atlanta, Equifax operates or has investments in 19 countries and is a member of Standard & Poor's (S&P) 500® Index.  Its common stock is traded on the New York Stock Exchange (NYSE) under the symbol EFX. In 2014, Equifax was nominated as a Bloomberg BusinessWeek Top 50 company; its CIO was listed as one of the top 100 by CIO magazine; the company was named to the Fintech 100 list, was recognized as a top 20 company to work for by the Atlanta Journal and Constitution, and was recognized as a 2015 InformationWeek Elite 100 Winner. For more information, please visit www.equifax.com.

Earnings Conference Call and Audio Webcast

In conjunction with this release, Equifax will host a conference call tomorrow, July 23, 2015, 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. This press release is also available at that website.

Non-GAAP Financial Measures

This earnings release presents diluted adjusted EPS attributable to Equifax which (to the extent noted above for different periods) excludes acquisition-related amortization expense, an impairment of our cost method investment in Brazil, an unanticipated state income tax benefit, and the adjustment of redeemable noncontrolling interest that reflects a redemption value in excess of fair value. 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 or 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, 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 capital investments or asset acquisitions or dispositions), as well as from 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 adverse or uncertain economic conditions and changes in credit and financial markets; risks relating to illegal third party efforts to access data or other cybersecurity or physical security breaches; changes in, and the effects of, laws and regulations and government policies governing our business, including, without limitation, our examination and supervision by the Consumer Financial Protection Bureau ("CFPB"), a federal agency that holds primary responsibility for the regulation of consumer protection with respect to financial products and services in the U.S., supervision by the U.K. Financial Conduct Authority of our debt collections services and core credit reporting businesses in the U.K. (including the requirement that we apply for, by June 30, 2015, which has been submitted and is pending, and March 31, 2016, respectively, and obtain certain licenses and authorizations to carry on these businesses); federal or state responses to identity theft concerns; potential adverse developments in new and pending legal proceedings or government investigations, including investigations or examinations undertaken by the CFPB, State Attorneys General or other governmental agencies; 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, all of 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, 2014, 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 June 30,



2015


2014

(In millions, except per share amounts)


(Unaudited)

Operating revenue


$

678.1



$

613.9


Operating expenses:





Cost of services (exclusive of depreciation and amortization below)


220.8



212.3


Selling, general and administrative expenses


218.7



183.5


Depreciation and amortization


50.1



50.7


Total operating expenses


489.6



446.5


Operating income


188.5



167.4


Interest expense


(16.2)



(17.4)


Other (expense) income, net


(13.9)



0.5


Consolidated income from operations before income taxes


158.4



150.5


Provision for income taxes


(45.9)



(56.0)


Consolidated net income


112.5



94.5


Less: Net income attributable to noncontrolling interests


(1.5)



(1.7)


Net income attributable to Equifax


$

111.0



$

92.8


Basic earnings per common share:





Net income attributable to Equifax


$

0.94



$

0.76


Weighted-average shares used in computing basic earnings per share


118.6



122.0


Diluted earnings per common share:





Net income attributable to Equifax


$

0.92



$

0.75


Weighted-average shares used in computing diluted earnings per share


120.9



124.3


Dividends per common share


$

0.29



$

0.25







 

EQUIFAX

CONDENSED CONSOLIDATED BALANCE SHEETS




June 30, 2015


December 31, 2014

(In millions, except par values)


(Unaudited)



ASSETS





Current assets:





Cash and cash equivalents


$

84.2



$

128.3


Trade accounts receivable, net of allowance for doubtful accounts of $7.7 and $7.2 at June 30, 2015 and December 31, 2014, respectively


368.2



337.2


Prepaid expenses


46.2



35.7


Other current assets


92.6



103.9


Total current assets


591.2



605.1


Property and equipment:





Capitalized internal-use software and system costs


207.0



257.3


Data processing equipment and furniture


212.4



203.3


Land, buildings and improvements


194.2



194.8


Total property and equipment


613.6



655.4


Less accumulated depreciation and amortization


(298.0)



(354.8)


Total property and equipment, net


315.6



300.6


Goodwill


2,600.4



2,606.8


Indefinite-lived intangible assets


95.0



95.2


Purchased intangible assets, net


895.5



953.9


Other assets, net


87.8



112.6


Total assets


$

4,585.5



$

4,674.2


LIABILITIES AND EQUITY





Current liabilities:





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


$

335.1



$

380.4


Accounts payable


35.8



20.3


Accrued expenses


111.5



85.5


Accrued salaries and bonuses


86.3



101.9


Deferred revenue


74.1



73.4


Other current liabilities


141.7



161.6


Total current liabilities


784.5



823.1


Long-term debt


1,145.8



1,145.7


Deferred income tax liabilities, net


226.4



241.5


Long-term pension and other postretirement benefit liabilities


168.1



173.0


Other long-term liabilities


54.1



56.3


Total liabilities


2,378.9



2,439.6


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 June 30, 2015 and December 31, 2014;
Outstanding shares - 118.2 and 119.4 at June 30, 2015 and December 31, 2014, respectively


236.6



236.6


Paid-in capital


1,240.1



1,201.7


Retained earnings


3,676.1



3,554.8


Accumulated other comprehensive loss


(448.2)



(435.4)


Treasury stock, at cost, 70.5 shares and 69.3 shares at June 30, 2015 and December 31, 2014, respectively


(2,531.1)



(2,351.7)


Stock held by employee benefit trusts, at cost, 0.6 shares at June 30, 2015 and December 31, 2014


(5.9)



(5.9)


Total Equifax shareholders' equity


2,167.6



2,200.1


Noncontrolling interests


39.0



34.5


Total equity


2,206.6



2,234.6


Total liabilities and equity


$

4,585.5



$

4,674.2


 

EQUIFAX

CONSOLIDATED STATEMENTS OF CASH FLOWS




Six months ended June 30,



2015


2014

(In millions)


(Unaudited)

Operating activities:





Consolidated net income


$

202.1



$

180.8


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





Impairment of cost method investment


14.8




Depreciation and amortization


100.8



101.9


Stock-based compensation expense


24.5



19.6


Excess tax benefits from stock-based compensation plans


(17.1)



(10.4)


Deferred income taxes


(18.6)



2.8


Changes in assets and liabilities, excluding effects of acquisitions:





Accounts receivable, net


(34.8)



(27.8)


Prepaid expenses and other current assets


2.7



(21.0)


Other assets


4.4



2.5


Current liabilities, excluding debt


9.4



(26.0)


Other long-term liabilities, excluding debt


1.4



2.2


Cash provided by operating activities


289.6



224.6


Investing activities:





Capital expenditures


(55.2)



(37.7)


Acquisitions, net of cash acquired


(4.4)



(333.7)


Investment in unconsolidated affiliates, net


(0.1)



(3.0)


Cash used in investing activities


(59.7)



(374.4)


Financing activities:





Net short-term (repayments) borrowings


(45.2)



131.4


Payments on long-term debt




(15.0)


Treasury stock purchases


(182.2)



(73.4)


Dividends paid to Equifax shareholders


(69.0)



(61.2)


Dividends paid to noncontrolling interests


(6.0)



(6.3)


Proceeds from exercise of stock options


17.2



24.5


Excess tax benefits from stock-based compensation plans


17.1



10.4


Other




0.1


Cash (used in) provided by financing activities


(268.1)



10.5


Effect of foreign currency exchange rates on cash and cash equivalents


(5.9)



(4.9)


Decrease in cash and cash equivalents


(44.1)



(144.2)


Cash and cash equivalents, beginning of period


128.3



235.9


Cash and cash equivalents, end of period


$

84.2



$

91.7


 

Common Questions & Answers (Unaudited)

(Dollars in millions)


1.    Can you provide a further analysis of operating revenue and operating income by operating segment?


       Operating revenue and operating income consist of the following components:


(in millions)


Three months ended June 30,











Local Currency

Operating revenue:


2015


2014


$ Change


% Change


% Change*

Online Information Solutions


$

232.9



$

205.5



$

27.4



13

%



Mortgage Solutions


33.1



27.6



5.5



20

%



Financial Marketing Services


49.7



48.0



1.7



4

%



Total U.S. Information Solutions


315.7



281.1



34.6



12

%



Europe


62.5



63.3



(0.8)



(1)

%


12

%

Latin America


50.9



48.0



2.9



6

%


18

%

Canada


35.0



38.7



(3.7)



(10)

%


2

%

Total International


148.4



150.0



(1.6)



(1)

%


11

%

Verification Services


94.0



72.3



21.7



30

%



Employer Services


52.3



47.1



5.2



11

%



Total Workforce Solutions


146.3



119.4



26.9



23

%



Personal Solutions


67.7



63.4



4.3



7

%


8

%

Total operating revenue


$

678.1



$

613.9



$

64.2



10

%


14

%

 


(in millions)


Three Months Ended June 30,

Operating income:


2015


Operating
Margin


2014


Operating
Margin


$ Change


% Change

U.S. Information Solutions


$

132.8



42.1

%


$

111.1



39.5

%


$

21.7



20

%

International


29.5



19.9

%


32.8



21.9

%


(3.3)



(10)

%

Workforce Solutions


56.0



38.3

%


40.5



33.9

%


15.5



38

%

Personal Solutions


18.7



27.6

%


19.6



30.9

%


(0.9)



(5)

%

General Corporate Expense


(48.5)



nm


(36.6)



nm


(11.9)



33

%

Total operating income


$

188.5



27.8

%


$

167.4



27.3

%


$

21.1



13

%


nm - not meaningful


*Reflects percentage change in revenue conforming 2015 results using 2014 exchange rates.

 

2.    Can you provide depreciation and amortization by segment?


       Depreciation and amortization are as follows:




Three Months Ended
June 30,



2015


2014

U.S. Information Solutions


$

20.9



$

22.1


International


10.5



10.9


Workforce Solutions


10.3



10.7


Personal Solutions


2.5



2.0


General Corporate Expense


5.9



5.0


Total depreciation and amortization


$

50.1



$

50.7


 

3.    What was the currency impact on the foreign operations?


       The U.S. dollar impact on operating revenue and operating income is as follows:




Three Months Ended June 30, 2015



Operating Revenue


Operating Income



Amount


%


Amount


%

Europe


$

(7.9)



(13)%



$

(1.0)



(17)%


Latin America


(5.6)



(12)%



(1.4)



(11)%


Canada


(4.5)



(12)%



(2.0)



(11)%


Personal Solutions


(1.0)



(1)%



(0.1)



(1)%


Total


$

(19.0)



(4)%



$

(4.5)



(3)%











 

Reconciliations of Non-GAAP Financial Measures to the Comparable GAAP Financial Measures (Unaudited)

(Dollars in millions, except per share amounts)


A.    Reconciliation of net income from continuing operations attributable to Equifax to diluted EPS attributable to Equifax, adjusted for an impairment of our cost method investment in Brazil, state income tax benefit generated from a tax law change, and acquisition-related amortization expense:




Three Months Ended
June 30,







2015


2014


$ Change


% Change

Net income attributable to Equifax


$

111.0



$

92.8



$

18.2



20

%

Acquisition-related amortization expense, net of tax, and cash income tax benefit of acquisition-related amortization expense of certain acquired intangibles


26.9



26.9





%

Impairment of Brazil investment, net of tax (1)


9.8





9.8



nm

State income tax benefit (2)


(8.6)





(8.6)



nm

Net income attributable to Equifax, adjusted for items listed above


$

139.1



$

119.7



$

19.4



16

%

Diluted EPS attributable to Equifax, adjusted for items listed above


$

1.15



$

0.96



$

0.19



20

%

Weighted-average shares used in computing diluted EPS


120.9



124.3







nm - not meaningful


(1)

Impairment of Brazil investment of $14.8 million ($9.8 million, net of tax) relates to the impairment of our cost


method investment in Brazil in the second quarter of 2015.  The impairment of $14.8 million is recorded in other


(expense) income, net, on our consolidated statements of income, and does not impact our operating margin.


See the Notes to this reconciliation for additional detail.



(2)

The state income tax benefit of $8.6 million was generated from a tax law change enacted in the second


quarter of 2015.

 

Notes to Reconciliations of Non-GAAP Financial Measures to the Comparable GAAP Financial Measures

                Diluted EPS attributable to Equifax is adjusted for the following items:

                Impairment of our cost method investment in Brazil - During the second quarter of 2015, we recorded a charge of $14.8 million ($9.8 million, net of tax) related to the impairment of our cost method investment in Brazil.  Management believes excluding this charge from certain financial results provides meaningful supplemental information regarding our financial results for the three months ended June 30, 2015, as compared to the corresponding period in 2014, since a charge of such an amount is not comparable among the periods. This is consistent with how our management reviews and assesses Equifax's historical performance and is useful when planning, forecasting and analyzing future periods.

                State income tax benefit  - During the second quarter of 2015, we recorded an unanticipated state income tax benefit of $8.6 million, due to a change in tax law.  Management believes excluding this charge from certain financial results provides meaningful supplemental information regarding our financial results for the three months ended June 30, 2015, as compared to the corresponding period in 2014, because a charge of such an amount is not comparable among the periods. This is consistent with how our management reviews and assesses Equifax's historical performance and is useful when planning, forecasting and analyzing future periods.

                Acquisition-related amortization expense, net of tax - We calculate this financial measure by excluding the impact of acquisition-related amortization expense and including a benefit to reflect the material cash income tax savings resulting from the income tax deductibility of amortization for certain acquired intangibles.  These financial measures are not prepared in conformity with GAAP.  Management believes excluding the impact of amortization expense is useful because excluding acquisition-related amortization, and other items that are not comparable, allows investors to evaluate our performance for different periods on a more comparable basis. Certain acquired intangibles result in material cash income tax savings which are not reflected in earnings. Management believes that including a benefit to reflect the cash income tax savings is useful as it allows investors to better value Equifax. Management makes these adjustments to earnings when measuring profitability, evaluating performance trends, setting performance objectives and calculating our return on invested capital.

                Redeemable noncontrolling interest adjustment- During the first half of 2015, there was not an adjustment of redeemable noncontrolling interest as the redemption value is not in excess of fair value.  Management believes excluding this charge is useful as it allows investors to evaluate our performance for different periods on a more comparable basis. Management makes these adjustments to net income when measuring profitability, evaluating performance trends, setting performance objectives and calculating our return on invested capital. This is consistent with how management reviews and assesses Equifax's historical performance and is useful when planning, forecasting and analyzing future periods.

 

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