Equifax Inc. — FY2021 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2021. The filing was signed February 24, 2022. This summary covers the full fiscal year, not Q4 alone. Equifax is a global data, analytics and technology company, reporting through Workforce Solutions, U.S. Information Solutions (USIS) and International. Segment disclosures were retrospectively restated after Global Consumer Solutions was integrated into those segments in Q4.
Financial performance
| Metric | FY2021 | FY2020 | Change |
|---|---|---|---|
| Operating revenue | $4,923.9 million | $4,127.5 million | +19% |
| Operating income | $1,138.0 million | $676.6 million | +68% |
| Operating margin | 23.1% | 16.4% | +6.7 percentage points |
| Net income attributable to Equifax | $744.2 million | $520.1 million | +43% |
| Diluted EPS | $6.02 | $4.24 | +42% |
| Cash provided by operating activities | $1,334.8 million | $946.2 million | +$388.6 million |
| Capital expenditures (cash) | $469.0 million | $421.3 million | +$47.7 million |
Revenue growth reflected strength in Workforce Solutions, recovery across International markets, and growth in USIS non-mortgage services; foreign exchange added $50.4 million to reported revenue. Operating income benefited from higher revenue and reduced incremental technology and data-security costs, partly offset by higher people, production and depreciation costs. FY2021 other expense included a $64.0 million fair-value loss on the Brazil investment, compared with a $149.5 million gain on Brazil and India investments in FY2020.
Segment results
| Segment | Revenue | Revenue change | Operating margin |
|---|---|---|---|
| Workforce Solutions | $2,035.4 million | +39% | 49.2% (FY2020: 48.2%) |
| USIS | $1,786.7 million | +4% | 30.9% (FY2020: 30.1%) |
| International | $1,101.8 million | +15% | 12.9% (FY2020: 7.9%) |
Workforce Solutions growth was led by employment and income verification, including mortgage, talent and government demand. USIS mortgage revenue declined 5% year over year as origination volumes eased. International growth reflected recovery in local economies and a favorable foreign-exchange effect.
Cash, debt and liquidity
- Year-end cash and cash equivalents were $224.7 million, down from $1,684.6 million in 2020. Cash used in investing activities was $3,398.2 million, principally due to $2,935.6 million of acquisitions, net of cash acquired.
- Total debt was $5,325.1 million at year-end; debt, net, was reported as $5,294.9 million. Approximately 81% of debt was fixed-rate and 19% variable-rate. The weighted-average cost of debt was 3.2%.
- Equifax reported $1,177.4 million of available capacity under its $1.5 billion revolving credit facility, with no revolver borrowings; commercial paper outstanding was $321.9 million and the term loan was $700.0 million. The company reported compliance with debt covenants and investment-grade ratings of BBB (S&P) and Baa2 (Moody’s), both stable.
- Debt principal of $824.8 million was scheduled for 2022, including $500 million of notes due December 2022. Management expected to use operating cash flow, available facilities or capital-market borrowings to address maturities.
- The company paid $190.0 million in shareholder dividends and repurchased 0.4 million shares for $69.9 million in 2021. The annual dividend was $1.56 per share.
Outlook, risks and contingencies
- Management outlook: The 2022 plan assumed continued economic growth, but at a slower pace than 2021. Equifax expected modest growth in U.S. consumer credit excluding mortgages and projected U.S. mortgage inquiries to decline by more than 20% versus 2021. No consolidated numerical revenue or EPS guidance is provided in the supplied filing text.
- Technology transformation: The multi-year cloud migration and systems rebuild is a major investment intended to improve innovation, resilience and efficiency. Execution, migration, customer adoption, cybersecurity and third-party cloud-provider disruptions could create costs, service interruptions or customer losses.
- Cybersecurity settlement: The 2017 breach settlement became effective January 11, 2022; Equifax deposited the remaining $345 million on January 24, 2022. The settlement allows for up to a further $125 million contribution if the fund is exhausted. The company also has continuing information-security and consumer-assistance commitments subject to third-party assessments.
- Other legal and regulatory matters: Five Canadian class actions and a U.K. Financial Conduct Authority investigation related to the 2017 incident remained ongoing. A CFPB Civil Investigative Demand received in December 2021 concerns handling of consumer disputes; its outcome was not predictable. Adverse outcomes could result in fines, obligations or changes to business practices.
- Economic and market risks: Demand is sensitive to lending, hiring, interest rates, inflation and consumer activity. Management identified falling mortgage volumes as a particular 2022 risk. COVID-19 effects remained uncertain, and foreign-exchange movements can affect reported results.
- Acquisitions and goodwill: 2021 acquisitions included Appriss Insights for approximately $1.825 billion and Kount for $640 million, among others. Goodwill was $6.258 billion; management reported no 2021 impairment but identified Asia Pacific as more exposed to possible future impairment if recovery or execution underperforms.
- Other unusual items: FY2021 included $8.6 million of restructuring charges. In 2019, Equifax recorded $800.9 million of losses, net of insurance recoveries, relating to the 2017 incident; this did not recur in 2020 or 2021.
Most important facts for investors to verify
- Whether the expected U.S. mortgage-inquiry decline and broader economic assumptions are reflected in subsequent results and guidance.
- Progress, spending and service reliability in the cloud transformation, including customer migration and security controls.
- Final costs and continuing obligations from the 2017 breach settlement, Canadian litigation, FCA investigation and CFPB dispute-process inquiry.
- Debt reduction and refinancing capacity following the Appriss acquisition, including the 2022 maturity and leverage-covenant headroom.
- Acquisition integration, realized growth and goodwill sensitivity, particularly for the Asia Pacific reporting unit.
- FY2021 financial statements received unqualified audit opinions, and management and the auditor concluded internal control over financial reporting was effective; controls at Kount and Appriss were excluded from the year-end assessment.