Equifax Releases Third Quarter 2020 Results
Equifax reported strong financial results for Q3 2020, achieving over $1 billion in revenue for the first time, totaling $1,068.3 million, a 22% increase from Q3 2019. Net income surged 177% to $224.2 million, with diluted EPS rising to $1.82 from $0.66. The US Information Services and Workforce Solutions segments both experienced significant growth, with Workforce Solutions revenue up 57%. However, International segment revenue fell 5%. The company continues to invest in cloud technology and product innovation.
- Revenue increased 22% to $1,068.3 million in Q3 2020.
- Net income rose 177% to $224.2 million compared to Q3 2019.
- Diluted EPS increased to $1.82 from $0.66 year-over-year.
- Workforce Solutions revenue surged by 57%.
- International revenue declined by 5% compared to Q3 2019.
- Global Consumer Solutions revenue decreased by 2% year-over-year.
ATLANTA, Oct. 21, 2020 /PRNewswire/ -- Equifax Inc. (NYSE: EFX) today announced financial results for the quarter ended September 30, 2020.
"Equifax delivered its third consecutive quarter of strong, double digit growth and margin expansion while generating over
Financial Results Summary
The company reported revenue of
Net income attributable to Equifax of
Third quarter diluted EPS attributable to Equifax was
USIS third quarter results
- Total revenue was up 22 percent at
$386.3 million in the third quarter of 2020, compared to$315.5 million in the third quarter of 2019. Total revenue was up 15 percent compared to adjusted revenue of$335.5 million in the third quarter of 2019, which excludes a one-time charge to revenue related to settlements with commercial customers. Operating margin for USIS was 33.3 percent in the third quarter of 2020 compared to 31.1 percent in the third quarter of 2019. Adjusted EBITDA margin for USIS was 46.0 percent in the third quarter of 2020 compared to 44.4 percent in the third quarter of 2019. - Online Information Solutions revenue was
$284.7 million , up 22 percent on a reported basis and 15 percent on an adjusted basis, when compared to the third quarter of 2019. - Mortgage Solutions revenue was
$55.4 million , up 51 percent compared to the third quarter of 2019. - Financial Marketing Services revenue was
$46.2 million , up 1 percent on a reported basis and down 9 percent on an adjusted basis, when compared to the third quarter of 2019.
Workforce Solutions third quarter results
- Total revenue was
$376.8 million in the third quarter of 2020, a 57 percent increase compared to the third quarter of 2019. Operating margin for Workforce Solutions was 51.3 percent in the third quarter of 2020 compared to 41.4 percent in the third quarter of 2019. Adjusted EBITDA margin for Workforce Solutions was 57.8 percent in the third quarter of 2020 compared to 48.8 percent in the third quarter of 2019. - Verification Services revenue was
$301.1 million , up 63 percent compared to the third quarter of 2019. - Employer Services revenue was
$75.7 million , up 37 percent compared to the third quarter of 2019.
International third quarter results
- Total revenue was
$218.0 million in the third quarter of 2020, down 5 percent compared to the third quarter of 2019 on a reported and local currency basis. Operating margin for International was 11.6 percent in the third quarter of 2020, compared to 11.3 percent in the third quarter of 2019. Adjusted EBITDA margin for International was 32.3 percent in the third quarter of 2020, compared to 30.9 percent in the third quarter of 2019. - Asia Pacific revenue was
$80.2 million , up 4 percent compared to the third quarter of 2019 and flat on a local currency basis. - Europe revenue was
$58.7 million , down 9 percent compared to the third quarter of 2019 and down 13 percent on a local currency basis. - Latin America revenue was
$40.4 million , down 18 percent compared to the third quarter of 2019 and down 6 percent on a local currency basis. - Canada revenue was
$38.7 million , down 1 percent compared to the third quarter of 2019 and flat on a local currency basis.
Global Consumer Solutions third quarter results
- Total revenue was
$87.2 million in the third quarter of 2020, down 2 percent compared to the third quarter of 2019 on a reported and local currency basis. Operating margin was 14.4 percent in the third quarter of 2020 compared to 13.4 percent in the third quarter of 2019. Adjusted EBITDA margin was 24.8 percent compared to 24.9 percent in the third quarter of 2019.
Adjusted Revenue, Adjusted EPS and Adjusted EBITDA Margin
- Revenue was
$1,068.3 million in the third quarter of 2020, up19% compared to adjusted revenue of$895.7 million in the third quarter of 2019. Adjusted revenue excludes a charge to revenue related to settlements with commercial customers in the third quarter of 2019. The adjustments affect the comparability of the underlying operational performance and are described more fully in the attached Q&A. - Adjusted EPS attributable to Equifax was
$1.87 in the third quarter of 2020, up 26 percent compared to the third quarter of 2019. The financial measure for both 2020 and 2019 excludes costs related to the 2017 cybersecurity incident, acquisition-related amortization expense, income tax effects of stock awards recognized upon vesting or settlement and the foreign currency impacts of Argentina being a highly inflationary economy. The financial measure for 2020 also excludes a gain on fair market value adjustment on an equity investment, income tax effects of the Q1 2020 gain on fair market value adjustment of an equity investment and foreign currency impact of certain intercompany loans. The financial measure for 2019 excludes a charge to revenue related to settlements with commercial customers. All adjustments are net of tax, with a reconciling item with the aggregated tax impact of the adjustments. The adjustments affect the comparability of the underlying operational performance and are described more fully in the attached Q&A. - Adjusted EBITDA margin was 36.6 percent in the third quarter of 2020 compared to 33.9 percent in the third quarter of 2019. This financial measure for both 2020 and 2019 excludes costs related to the 2017 cybersecurity incident and the foreign currency impacts of Argentina being a highly inflationary economy. The financial measure for 2020 also excludes a gain on fair market value adjustment on an investment and foreign currency impact of certain intercompany loans. The financial measure for 2019 excludes a charge to revenue related to settlements with commercial customers. All adjustments are net of tax, with a reconciling item with the aggregated tax impact of the adjustments. The adjustments affect the comparability of the underlying operational performance and are described more fully in the attached Q&A.
Liquidity and Capital Resources
At September 30, 2020, the Company had approximately
About Equifax
At Equifax (NYSE: EFX), we believe knowledge drives progress. As a global data, analytics, and technology company, we play an essential role in the global economy by helping financial institutions, companies, employees, and government agencies make critical decisions with greater confidence. Our unique blend of differentiated data, analytics, and cloud technology drives insights to power decisions to move people forward. Headquartered in Atlanta and supported by more than 11,000 employees worldwide, Equifax operates or has investments in 25 countries in North America, Central and South America, Europe, and the Asia Pacific region. For more information, visit Equifax.com.
Earnings Conference Call and Audio Webcast
In conjunction with this release, Equifax will host a conference call on October 22, 2020 at 8:30 a.m. (ET) via a live audio webcast. To access the webcast and related presentation materials, 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 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, costs related to the 2017 cybersecurity incident, gain on fair market value adjustment of an equity investment, settlements with commercial customers, income tax effects related to the Q1 2020 gain on fair market value adjustment of equity investment, foreign currency impact of certain intercompany loans, income tax effects of stock awards that are recognized upon vesting or settlement, the foreign exchange impact resulting from accounting for Argentina as a highly inflationary economy and the income tax impact of these adjustments. All adjustments are net of tax, with a reconciling item with the aggregated tax impact of the adjustments. 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 certain one-time items. Additionally, this earnings release presents adjusted revenue which is defined as GAAP revenue adjusted for a charge related to settlements with commercial customers. 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/Financial Information/Non-GAAP Financial 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 cloud technology, data and security transformation program, capital investments and asset acquisitions or dispositions), as well as developments beyond our control, including, but not limited to, the impact of COVID-19 and changes in U.S. and worldwide economic conditions that materially impact consumer spending, consumer debt and employment and the demand for Equifax's products and services. The extent to which the COVID-19 pandemic could negatively impact our operations will depend on future developments which are highly uncertain and cannot be predicted with confidence, including the duration of the outbreak, new information which may emerge concerning the severity of the COVID-19 pandemic, the actions taken to control the spread of COVID-19 or treat its impact, and changes in U.S. and worldwide economic conditions. Further deteriorations in economic conditions, as a result of COVID-19 or otherwise, could lead to a further or prolonged decline in demand for our products and services and negatively impact our business. It may also impact financial markets and corporate credit markets which could adversely impact our access to financing, or the terms of any financing. We cannot at this time predict the extent of the impact of the COVID-19 pandemic and resulting economic impact, but it could have a material adverse effect on our business, financial position, results of operations and cash flows. Other risk factors include the impact of the 2017 cybersecurity incident on our business and results of operations; 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; potential adverse developments in new and pending legal proceedings or government investigations; 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, 2019, 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.
Contact: | |
Dorian Hare | Ben Sheidler |
Investor Relations | Media Relations |
(404) 885-8210 | |
EQUIFAX | ||||||||
CONSOLIDATED STATEMENTS OF INCOME | ||||||||
Three Months Ended September | ||||||||
2020 | 2019 | |||||||
(In millions, except per share amounts) | (Unaudited) | |||||||
Operating revenue | $ | 1,068.3 | $ | 875.7 | ||||
Operating expenses: | ||||||||
Cost of services (exclusive of depreciation and amortization below) | 433.2 | 374.5 | ||||||
Selling, general and administrative expenses | 330.0 | 295.5 | ||||||
Depreciation and amortization | 100.7 | 84.1 | ||||||
Total operating expenses | 863.9 | 754.1 | ||||||
Operating income | 204.4 | 121.6 | ||||||
Interest expense | (37.4) | (28.0) | ||||||
Other income, net | 133.4 | 2.9 | ||||||
Consolidated income before income taxes | 300.4 | 96.5 | ||||||
Provision for income taxes | (75.4) | (14.0) | ||||||
Consolidated net income | 225.0 | 82.5 | ||||||
Less: Net income attributable to noncontrolling interests including redeemable noncontrolling interests | (0.8) | (1.4) | ||||||
Net income attributable to Equifax | $ | 224.2 | $ | 81.1 | ||||
Basic earnings per common share: | ||||||||
Net income attributable to Equifax | $ | 1.84 | $ | 0.67 | ||||
Weighted-average shares used in computing basic earnings per share | 121.5 | 121.0 | ||||||
Diluted earnings per common share: | ||||||||
Net income attributable to Equifax | $ | 1.82 | $ | 0.66 | ||||
Weighted-average shares used in computing diluted earnings per share | 123.0 | 122.3 | ||||||
Dividends per common share | $ | 0.39 | $ | 0.39 | ||||
EQUIFAX | ||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
September 30, 2020 | December 31, 2019 | |||||||
(In millions, except par values) | (Unaudited) | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 1,535.6 | $ | 401.3 | ||||
Trade accounts receivable, net of allowance for doubtful accounts of | 605.9 | 532.1 | ||||||
Prepaid expenses | 123.3 | 88.1 | ||||||
Other current assets | 46.8 | 187.9 | ||||||
Total current assets | 2,311.6 | 1,209.4 | ||||||
Property and equipment: | ||||||||
Capitalized internal-use software and system costs | 1,254.3 | 979.4 | ||||||
Data processing equipment and furniture | 329.5 | 325.1 | ||||||
Land, buildings and improvements | 235.9 | 236.3 | ||||||
Total property and equipment | 1,819.7 | 1,540.8 | ||||||
Less accumulated depreciation and amortization | (749.1) | (593.2) | ||||||
Total property and equipment, net | 1,070.6 | 947.6 | ||||||
Goodwill | 4,366.0 | 4,308.3 | ||||||
Indefinite-lived intangible assets | 94.8 | 94.9 | ||||||
Purchased intangible assets, net | 1,001.4 | 1,044.6 | ||||||
Other assets, net | 405.4 | 304.2 | ||||||
Total assets | $ | 9,249.8 | $ | 7,909.0 | ||||
LIABILITIES AND EQUITY | ||||||||
Current liabilities: | ||||||||
Short-term debt and current maturities of long-term debt | $ | 1,102.1 | $ | 3.1 | ||||
Accounts payable | 159.5 | 148.3 | ||||||
Accrued expenses | 186.4 | 163.5 | ||||||
Accrued salaries and bonuses | 207.1 | 156.1 | ||||||
Deferred revenue | 103.5 | 104.0 | ||||||
Other current liabilities | 632.4 | 784.1 | ||||||
Total current liabilities | 2,391.0 | 1,359.1 | ||||||
Long-term debt | 3,275.3 | 3,379.5 | ||||||
Deferred income tax liabilities, net | 339.9 | 248.0 | ||||||
Long-term pension and other postretirement benefit liabilities | 106.1 | 118.9 | ||||||
Other long-term liabilities | 170.7 | 180.6 | ||||||
Total liabilities | 6,283.0 | 5,286.1 | ||||||
Preferred stock, | — | — | ||||||
Common stock, | 236.6 | 236.6 | ||||||
Paid-in capital | 1,454.1 | 1,405.1 | ||||||
Retained earnings | 4,423.1 | 4,131.8 | ||||||
Accumulated other comprehensive loss | (628.5) | (631.6) | ||||||
Treasury stock, at cost, 67.1 shares and 67.5 shares at September 30, 2020 and December 31, 2019, respectively | (2,550.4) | (2,557.4) | ||||||
Stock held by employee benefit trusts, at cost, 0.6 shares at September 30, 2020 and December 31, 2019 | (5.9) | (5.9) | ||||||
Total Equifax shareholders' equity | 2,929.0 | 2,578.6 | ||||||
Noncontrolling interests including redeemable noncontrolling interests | 37.8 | 44.3 | ||||||
Total equity | 2,966.8 | 2,622.9 | ||||||
Total liabilities and equity | $ | 9,249.8 | $ | 7,909.0 | ||||
EQUIFAX | ||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
Nine Months Ended September 30, | ||||||||
2020 | 2019 | |||||||
(In millions) | (Unaudited) | |||||||
Operating activities: | ||||||||
Consolidated net income (loss) | $ | 435.6 | $ | (403.6) | ||||
Adjustments to reconcile consolidated net income (loss) to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 295.2 | 248.8 | ||||||
Stock-based compensation expense | 43.9 | 40.6 | ||||||
Deferred income taxes | 78.0 | (81.7) | ||||||
Gain on fair market value adjustment of equity investments | (162.8) | — | ||||||
Changes in assets and liabilities, excluding effects of acquisitions: | ||||||||
Accounts receivable, net | (76.1) | (49.9) | ||||||
Other assets, current and long-term | 29.6 | 32.6 | ||||||
Current and long term liabilities, excluding debt | 5.6 | 296.3 | ||||||
Cash provided by operating activities | 649.0 | 83.1 | ||||||
Investing activities: | ||||||||
Capital expenditures | (309.5) | (305.7) | ||||||
Acquisitions, net of cash acquired | (61.4) | (234.8) | ||||||
Investment in unconsolidated affiliates, net | (10.0) | (25.0) | ||||||
Cash used in investing activities | (380.9) | (565.5) | ||||||
Financing activities: | ||||||||
Net short-term borrowings | 0.3 | 367.0 | ||||||
Payments on long-term debt | (125.0) | (50.0) | ||||||
Borrowings on long-term debt | 1,123.3 | 250.0 | ||||||
Dividends paid to Equifax shareholders | (142.1) | (141.4) | ||||||
Dividends paid to noncontrolling interests | (2.6) | (4.8) | ||||||
Proceeds from exercise of stock options and employee stock purchase plan | 29.9 | 15.3 | ||||||
Payment of taxes related to settlement of equity awards | — | (9.7) | ||||||
Purchase of redeemable noncontrolling interests | (9.0) | — | ||||||
Debt issuance costs | (9.8) | — | ||||||
Other | 0.3 | — | ||||||
Cash provided by financing activities | 865.3 | 426.4 | ||||||
Effect of foreign currency exchange rates on cash and cash equivalents | 0.9 | (0.1) | ||||||
Increase (decrease) in cash and cash equivalents | 1,134.3 | (56.1) | ||||||
Cash and cash equivalents, beginning of period | 401.3 | 223.6 | ||||||
Cash and cash equivalents, end of period | $ | 1,535.6 | $ | 167.5 | ||||
Common Questions & Answers (Unaudited)
(Dollars in millions)
1. Can you provide a further analysis of adjusted revenue by operating segment?
Adjusted revenue consists of the following components:
(In millions) | Three Months Ended | |||||||||||||||||
Local | ||||||||||||||||||
Adjusted revenue*: | 2020 | 2019 | $ Change | % Change | % Change** | |||||||||||||
Online Information Solutions | $ | 284.7 | $ | 248.0 | $ | 36.7 | 15 | % | ||||||||||
Mortgage Solutions | 55.4 | 36.7 | 18.7 | 51 | % | |||||||||||||
Financial Marketing Services | 46.2 | 50.8 | (4.6) | (9) | % | |||||||||||||
Total U.S. Information Solutions | 386.3 | 335.5 | 50.8 | 15 | % | |||||||||||||
Verification Services | 301.1 | 185.3 | 115.8 | 63 | % | |||||||||||||
Employer Services | 75.7 | 55.3 | 20.4 | 37 | % | |||||||||||||
Total Workforce Solutions | $ | 376.8 | $ | 240.6 | $ | 136.2 | 57 | % | ||||||||||
Asia Pacific | 80.2 | 77.4 | 2.8 | 4 | % | — | % | |||||||||||
Europe | 58.7 | 64.8 | (6.1) | (9) | % | (13) | % | |||||||||||
Latin America | 40.4 | 49.2 | (8.8) | (18) | % | (6) | % | |||||||||||
Canada | 38.7 | 39.1 | (0.4) | (1) | % | — | % | |||||||||||
Total International | 218.0 | 230.5 | (12.5) | (5) | % | (5) | % | |||||||||||
Global Consumer Solutions | 87.2 | 89.1 | (1.9) | (2) | % | (2) | % | |||||||||||
Total adjusted revenue | $ | 1,068.3 | $ | 895.7 | $ | 172.6 | 19 | % | 19 | % | ||||||||
* Adjusted revenue is defined as GAAP revenue adjusted for a charge related to settlements with commercial customers in the third quarter of 2019. See Non-GAAP reconciliation D for a reconciliation of operating revenue to adjusted revenue. |
**Reflects percentage change in revenue conforming 2020 results using 2019 exchange rates. |
2. What is the breakdown of the costs related to the September 2017 cybersecurity incident?
Costs related to the 2017 cybersecurity incident are defined as incremental costs to transform our information technology infrastructure and data security; legal fees and professional services costs to investigate the 2017 cybersecurity incident and respond to legal, government and regulatory claims; as well as costs to provide the free product and related support to the consumer.
We recorded
(In millions) | Three Months Ended | Three Months Ended | ||||||
2017 cybersecurity incident related costs: | ||||||||
Technology and data security | 83.0 | 64.5 | ||||||
Legal and investigative fees | 0.7 | 10.3 | ||||||
Product liability | — | 2.2 | ||||||
Total | $ | 83.7 | $ | 77.0 | ||||
The
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 attributable to Equifax to diluted EPS attributable to Equifax, defined as net income adjusted for acquisition-related amortization expense, costs related to the 2017 cybersecurity incident, gain on fair value adjustment of equity investment, settlements with commercial customers, income tax effects of Q1 2020 gain on fair market value adjustment of equity investment, foreign currency impact of certain intercompany loans, income tax effect of stock awards recognized upon vesting or settlement, Argentina highly inflationary foreign currency adjustment and income tax adjustments:
Three Months Ended September 30, | |||||||||||||||
(In millions, except per share amounts) | 2020 | 2019 | $ Change | % Change | |||||||||||
Net income attributable to Equifax | $ | 224.2 | $ | 81.1 | $ | 143.1 | 176 | % | |||||||
Acquisition-related amortization expense of certain acquired intangibles (1) | 36.0 | 35.1 | 0.9 | 3 | % | ||||||||||
2017 cybersecurity incident related costs (2) | 83.7 | 77.0 | 6.7 | 9 | % | ||||||||||
Gain on fair market value adjustment of equity investment (3) | (129.9) | — | (129.9) | nm | |||||||||||
Settlements with commercial customers (4) | — | 20.0 | (20.0) | nm | |||||||||||
Income tax effects of Q1 2020 gain on fair market value adjustment of equity | (1.5) | — | (1.5) | nm | |||||||||||
Foreign currency impact of certain intercompany loans (6) | 0.1 | — | 0.1 | nm | |||||||||||
Income tax effects of stock awards that are recognized upon vesting or settlement (7) | (0.3) | (2.0) | 1.7 | (85) | % | ||||||||||
Argentina highly inflationary foreign currency adjustment (8) | 0.1 | 0.5 | (0.4) | nm | |||||||||||
Tax impact of adjustments (9) | 18.0 | (30.3) | 48.3 | (159) | % | ||||||||||
Net income attributable to Equifax, adjusted for items listed above | $ | 230.4 | $ | 181.4 | $ | 49.0 | 27 | % | |||||||
Diluted EPS attributable to Equifax, adjusted for the items listed above | $ | 1.87 | $ | 1.48 | $ | 0.39 | 26 | % | |||||||
Weighted-average shares used in computing diluted EPS | 123.0 | 122.3 | |||||||||||||
nm - not meaningful | |
(1) | During the third quarter of 2020, we recorded acquisition-related amortization expense of certain acquired intangibles of |
(2) | During the third quarter of 2020, we recorded pre-tax expenses related to the 2017 cybersecurity incident of |
(3) | During the third quarter of 2020, we recorded a gain on the fair market value adjustment of an equity investment of |
(4) | During the third quarter of 2019, we recorded a |
(5) | During the third quarter of 2020, we recorded income tax effects of the Q1 2020 gain on fair market value adjustment of equity investment of |
(6) | During the third quarter of 2020, we recorded foreign currency impact of certain intercompany loans of |
(7) | During the third quarter of 2020, we recorded a tax benefit of |
(8) | Argentina has experienced multiple periods of increasing inflation rates, devaluation of the peso, and increasing borrowing rates. As such, Argentina has been deemed a highly inflationary economy by accounting policymakers. During the third quarter of 2020 and third quarter of 2019, we recorded a foreign currency loss of |
(9) | During the third quarter of 2020, we recorded the tax impact of adjustments of |
During the third quarter of 2019, we recorded the tax impact of adjustments of |
B. Reconciliation of adjusted revenue, defined as GAAP revenue adjusted for a charge related to settlements with commercial consumers, and net income attributable to Equifax to adjusted EBITDA, defined as net income excluding income taxes, interest expense, net, depreciation and amortization expense, costs related to the 2017 cybersecurity incident, gain on fair value adjustment of equity investment, settlements with commercial customers, foreign currency impact of certain intercompany loans and Argentina highly inflationary foreign currency adjustment, and presentation of adjusted EBITDA margin:
Three Months Ended September 30, | |||||||||||||||
(in millions) | 2020 | 2019 | $ Change | % Change | |||||||||||
Revenue | $ | 1,068.3 | $ | 875.7 | $ | 192.6 | 22 | % | |||||||
Settlements with commercial customers (3) | — | 20.0 | (20.0) | nm | |||||||||||
Adjusted Revenue | $ | 1,068.3 | $ | 895.7 | $ | 172.6 | 19 | % | |||||||
Net income attributable to Equifax | $ | 224.2 | $ | 81.1 | $ | 143.1 | 176 | % | |||||||
Income taxes | 75.4 | 14.0 | 61.4 | 439 | % | ||||||||||
Interest expense, net* | 36.8 | 27.4 | 9.4 | 34 | % | ||||||||||
Depreciation and amortization | 100.7 | 84.1 | 16.6 | 20 | % | ||||||||||
2017 cybersecurity incident related costs (1) | 83.7 | 77.0 | 6.7 | 9 | % | ||||||||||
Gain on fair market value adjustment of equity investment (2) | (129.9) | — | (129.9) | nm | |||||||||||
Settlements with commercial customers (3) | — | 20.0 | (20.0) | nm | |||||||||||
Foreign currency impact of certain intercompany loans (4) | 0.1 | — | 0.1 | nm | |||||||||||
Argentina highly inflationary foreign currency adjustment (5) | 0.1 | 0.5 | (0.4) | nm | |||||||||||
Adjusted EBITDA, excluding the items listed above | $ | 391.1 | $ | 304.1 | $ | 87.0 | 29 | % | |||||||
Adjusted EBITDA margin | 36.6 | % | 33.9 | % | |||||||||||
nm - not meaningful | |
*Excludes interest income of | |
(1) | During the third quarter of 2020, we recorded pre-tax expenses related to the 2017 cybersecurity incident of |
(2) | During the third quarter of 2020, we recorded a gain on the fair market value adjustment of an equity investment of |
(3) | During the third quarter of 2019, we recorded a |
(4) | During the third quarter of 2020, we recorded foreign currency impact of certain intercompany loans of |
(5) | Argentina has experienced multiple periods of increasing inflation rates, devaluation of the peso, and increasing borrowing rates. As such, Argentina has been deemed a highly inflationary economy by accounting policymakers. During the third quarter of 2020 and third quarter of 2019, we recorded a foreign currency loss of |
C. Reconciliation of adjusted revenue, defined as GAAP revenue adjusted for a charge related to settlements with commercial customers, and operating income by segment to Adjusted EBITDA, excluding depreciation and amortization expense, other income, net, noncontrolling interest, costs related to the 2017 cybersecurity incident, gain on fair value adjustment of equity investment, settlements with commercial customers, foreign currency impact of certain intercompany loans and Argentina highly inflationary foreign currency adjustment, and presentation of adjusted EBITDA margin and adjusted revenue growth for each of the segments:
(In millions) | Three Months Ended September 30, 2020 | |||||||||||||||||||||||
U.S. | Workforce | International | Global | General | Total | |||||||||||||||||||
Revenue | $ | 386.3 | $ | 376.8 | $ | 218.0 | $ | 87.2 | — | $ | 1,068.3 | |||||||||||||
Operating income (loss) | 128.6 | 193.2 | 25.4 | 12.5 | (155.3) | 204.4 | ||||||||||||||||||
Depreciation and Amortization | 29.2 | 18.0 | 33.8 | 5.0 | 14.7 | 100.7 | ||||||||||||||||||
Other income, net* | 0.7 | — | 134.4 | — | (2.3) | 132.8 | ||||||||||||||||||
Noncontrolling interest | — | — | (0.8) | — | — | (0.8) | ||||||||||||||||||
Adjustments (1) | 19.0 | 6.5 | (122.4) | 4.1 | 46.8 | (46.0) | ||||||||||||||||||
Adjusted EBITDA | $ | 177.5 | $ | 217.7 | $ | 70.4 | $ | 21.6 | $ | (96.1) | $ | 391.1 | ||||||||||||
Operating margin | 33.3 | % | 51.3 | % | 11.6 | % | 14.4 | % | nm | 19.1 | % | |||||||||||||
Adjusted EBITDA margin | 46.0 | % | 57.8 | % | 32.3 | % | 24.8 | % | nm | 36.6 | % | |||||||||||||
nm - not meaningful |
*Excludes interest income of |
(In millions) | Three Months Ended September 30, 2019 | |||||||||||||||||||||||
U.S. | Workforce | International | Global | General | Total | |||||||||||||||||||
Revenue | $ | 315.5 | $ | 240.6 | $ | 230.5 | $ | 89.1 | — | $ | 875.7 | |||||||||||||
Adjustments (1) | 20.0 | — | — | — | — | 20.0 | ||||||||||||||||||
Adjusted revenue | 335.5 | 240.6 | 230.5 | 89.1 | — | 895.7 | ||||||||||||||||||
Operating income | 98.2 | 99.6 | 26.0 | 11.9 | (114.1) | 121.6 | ||||||||||||||||||
Depreciation and Amortization | 21.3 | 13.7 | 29.1 | 3.8 | 16.2 | 84.1 | ||||||||||||||||||
Other income/(expense), net* | 0.7 | — | 3.5 | — | (1.9) | 2.3 | ||||||||||||||||||
Noncontrolling interest | — | — | (1.4) | — | — | (1.4) | ||||||||||||||||||
Adjustments (1) | 28.9 | 4.2 | 14.1 | 6.5 | 43.8 | 97.5 | ||||||||||||||||||
Adjusted EBITDA | $ | 149.1 | $ | 117.5 | $ | 71.3 | $ | 22.2 | $ | (56.0) | $ | 304.1 | ||||||||||||
Operating margin | 31.1 | % | 41.4 | % | 11.3 | % | 13.4 | % | nm | 13.9 | % | |||||||||||||
Adjusted EBITDA margin | 44.4 | % | 48.8 | % | 30.9 | % | 24.9 | % | nm | 33.9 | % | |||||||||||||
nm - not meaningful | |
*Excludes interest income of | |
(1) | During the third quarter of 2020, we recorded pre-tax expenses related to the 2017 cybersecurity incident of |
During the third quarter of 2019, we recorded pre-tax expenses related to the 2017 cybersecurity incident of |
D. Reconciliation of adjusted revenue, defined as GAAP revenue adjusted for a charge related to settlements with commercial customers, and adjusted revenue growth for each of the segments:
(In millions) | Three Months Ended September 30, | |||||||||||||||||||||||||
Operating | Operating | Adjustments (1) | Adjusted | Local | ||||||||||||||||||||||
Operating revenue: | 2020 | 2019 | to 2019 | 2019 | $ Change | % Change | % Change* | |||||||||||||||||||
Online Information Solutions | $ | 284.7 | $ | 233.0 | $ | 15.0 | $ | 248.0 | 36.7 | 15 | % | |||||||||||||||
Mortgage Solutions | 55.4 | 36.7 | — | 36.7 | 18.7 | 51 | % | |||||||||||||||||||
Financial Marketing Services | 46.2 | 45.8 | 5.0 | 50.8 | (4.6) | (9) | % | |||||||||||||||||||
Total U.S. Information Solutions | 386.3 | 315.5 | 20.0 | 335.5 | 50.8 | 15 | % | |||||||||||||||||||
Verification Services | 301.1 | 185.3 | — | 185.3 | 115.8 | 62 | % | |||||||||||||||||||
Employer Services | 75.7 | 55.3 | — | 55.3 | 20.4 | 37 | % | |||||||||||||||||||
Total Workforce Solutions | 376.8 | 240.6 | — | 240.6 | 136.2 | 57 | % | |||||||||||||||||||
Asia Pacific | 80.2 | 77.4 | — | 77.4 | 2.8 | 4 | % | — | % | |||||||||||||||||
Europe | 58.7 | 64.8 | — | 64.8 | (6.1) | (9) | % | (13) | % | |||||||||||||||||
Latin America | 40.4 | 49.2 | — | 49.2 | (8.8) | (18) | % | (6) | % | |||||||||||||||||
Canada | 38.7 | 39.1 | — | 39.1 | (0.4) | (1) | % | — | % | |||||||||||||||||
Total International | 218.0 | 230.5 | — | 230.5 | (12.5) | (5) | % | (5) | % | |||||||||||||||||
Global Consumer Solutions | 87.2 | 89.1 | — | 89.1 | (1.9) | (2) | % | (2) | % | |||||||||||||||||
Total | $ | 1,068.3 | $ | 875.7 | $ | 20.0 | $ | 895.7 | $ | 172.6 | 19 | % | 19 | % | ||||||||||||
* Reflects percentage change in revenue conforming 2020 results using 2019 exchange rates. | |
(1) | During the third quarter of 2019, we recorded a |
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:
Acquisition-related amortization expense - 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.
Costs related to the 2017 cybersecurity incident - We recorded
Gain on fair market value adjustment of equity investment - During the third quarter of 2020, we recorded a
Settlement with commercial customers - During the third quarter of 2019, we recorded a
Income tax effects of Q1 2020 gain on fair market value adjustment of equity investment - During the first quarter of 2020, we recorded a gain related to adjusting our equity method investment in India, in conjunction with the purchase of the remaining interest of our joint venture. Prior to the purchase of the remaining interest, Equifax did not have control over the joint venture. As a result of the transaction, Equifax recognized a gain related to the remeasurement of the preexisting equity interest in the India joint venture at the acquisition-date fair value of the business combination. Additional income tax effects related to this transaction were recorded in the third quarter of 2020. Management believes excluding this gain and related income tax effects from certain financial results provides meaningful supplemental information regarding our financial results for the three months ended September 30, 2020, since the non-operating gain 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.
Foreign currency impact of certain intercompany loans - During the third quarter of 2020, we recorded a
Income tax effects of stock awards that are recognized upon vesting or settlement - During the third quarter of 2020, we recorded a tax benefit of
Argentina highly inflationary foreign currency adjustment - Argentina has experienced multiple periods of increasing inflation rates, devaluation of the peso, and increasing borrowing rates. As such, Argentina has been deemed a highly inflationary economy by accounting policymakers. We recorded foreign currency losses of
Adjusted EBITDA and EBITDA margin - Management defines adjusted EBITDA as consolidated net income attributable to Equifax plus net interest expense, income taxes, depreciation and amortization, and also excludes certain one-time items. Management believes the use of adjusted EBITDA and adjusted EBITDA margin allows investors to evaluate our performance for different periods on a more comparable basis.
Adjusted revenue - Management defines adjusted revenue as GAAP revenue adjusted for certain non-recurring items such as a charge related to settlements with commercial customers in the third quarter of 2019. Management believes the use of adjusted revenue allows investors to evaluate our performance for different periods on a more comparable basis.
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SOURCE Equifax Inc.
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