Equifax Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; comparisons are with Q1 2023 unless noted. Equifax provides data, analytics, information solutions, and workforce process services through Workforce Solutions, U.S. Information Solutions (USIS), and International.
Financial performance
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Revenue | $1,389.4 million | $1,302.0 million | +7% |
| Operating income | $224.7 million | $205.4 million | +9% |
| Operating margin | 16.2% | 15.8% | +0.4 percentage points |
| Net income attributable to Equifax | $124.9 million | $112.4 million | +11% |
| Diluted EPS | $1.00 | $0.91 | +10% |
| Cash from operating activities | $252.7 million | $150.9 million | +$101.8 million |
| Capital expenditures, cash outflow | $131.9 million | $158.3 million | -$26.4 million |
Revenue growth included a $20.2 million adverse foreign-exchange impact. Cost of services rose 8%, depreciation and amortization increased 10%, and SG&A rose 2%. Interest expense was $59.7 million versus $57.6 million; the effective tax rate declined to 24.3% from 25.4%. The $1.6 million of other income compared with $4.4 million a year earlier, when the prior-year period included a gain on the BVS investment.
Business and segment results
- Workforce Solutions: Revenue $602.8 million, up 1%; operating income $255.1 million, up 3%; margin 42.3% versus 41.7%. Verification Services grew 5%, while Employer Services fell 10%, primarily as Employee Retention Credit revenue wound down.
- USIS: Revenue $465.3 million, up 10%; operating income $92.6 million, up 18%; margin 19.9% versus 18.6%. Online Information Solutions grew 12% and Mortgage Solutions 14%, with pricing and higher mortgage prequalification inquiries contributing to growth.
- International: Revenue $321.3 million, up 13% reported and 20% in local currency; operating income $31.9 million, down 2%; margin 9.9% versus 11.5%. Latin America growth was substantially driven by the 2023 BVS acquisition; Asia Pacific revenue declined 13% reported, mainly reflecting Australia.
Liquidity, debt and balance sheet
Cash and cash equivalents were $201.0 million at March 31, 2024, down from $216.8 million at year-end. Current assets were $1,449.5 million and current liabilities $1,973.8 million. Total debt was $5,653.8 million, including $880.0 million classified as short-term debt and current maturities; long-term debt, net, was $4,745.3 million. The filing reports quarter-end total debt, net, of $5,625.3 million in its MD&A comparison.
Equifax had $1,387.1 million of available Revolver capacity, $112.5 million of commercial paper outstanding, and $691.3 million outstanding under the term loan. It reported 86% fixed-rate and 14% effectively variable-rate debt, and compliance with all debt covenants. Management believes cash, operating cash generation, credit facilities, and debt-market access will cover requirements for the next 12 months and beyond. Q1 cash used in investing and financing activities was $131.9 million each.
Outlook, commentary and risks
- 2024 planning assumes U.S. GDP growth, but at a slower pace than in 2023, and an approximately 11% decline in the U.S. mortgage market measured by credit inquiries. Management also assumes slower GDP growth in key international markets including Australia, the U.K., and Canada.
- Management cited progress toward completing its technology transformation; lower capital spending reflected lower software and technology-infrastructure investment versus Q1 2023. Higher cloud, software, royalty, and acquired-intangible amortization costs affected expenses.
- Foreign currency translation produced a $98.9 million comprehensive loss for the quarter, including a $95.4 million translation adjustment attributable to Equifax shareholders. Goodwill declined by $68.6 million, primarily due to foreign-currency translation.
- Five Canadian putative class actions related to the 2017 cybersecurity incident remain pending; the Ontario action has been certified in part. CFPB investigations concern consumer disputes, a legacy-server credit-score coding issue, and data accuracy and dispute handling at Workforce Solutions. The company says it is cooperating and cannot predict the investigations’ outcomes.
- The filing identifies ordinary-course legal and regulatory matters and outsourcing agreements that may include significant termination fees in certain circumstances. It says risk factors and market-risk exposure were not materially changed from the 2023 Form 10-K.
Important facts for investors to verify
- Whether U.S. mortgage-inquiry weakness and the assumed 11% full-year market decline affect revenue and margins as expected.
- How much reported International growth depends on BVS and currency movements, and whether Asia Pacific weakness persists.
- Cash conversion and working-capital trends, particularly the increase in receivables, alongside ongoing technology investment.
- Debt maturities, refinancing terms, covenant headroom, and variable-rate exposure; $750 million of 2.6% notes are due in December 2024.
- Developments, potential financial exposure, and timing in the CFPB investigations and remaining 2017-incident litigation; the filing does not provide a clear estimate of potential losses for these matters.