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
$1 billion of quarterly revenue for
the first time. Amidst the challenging economic impacts of the
coronavirus pandemic, both our Workforce Solutions income and
employment business, enabled by accelerating new product innovation
and record growth, and our US Information Services business,
performed very well. Our results reflect the strength and
resiliency of our broad-based business model, our differentiated
assets, and the importance of data and analytics to help our
customers make better decisions during these turbulent times," said
Mark W. Begor, Equifax Chief
Executive Officer. "These strong results follow our momentum over
the past 12 months and allow us to continue to invest in our cloud
data and technology transformation, along with data and analytics
and new products to position Equifax for future growth."
Financial Results Summary
The company reported revenue of $1,068.3
million in the third quarter of 2020, up 22% compared to the
third quarter of 2019 on a reported and local currency basis.
Net income attributable to Equifax of $224.2 million was up 177% in the third quarter
of 2020 compared to net income attributable to Equifax of
$81.1 million in the third quarter of
2019.
Third quarter diluted EPS attributable to Equifax was
$1.82, up compared to $0.66 in the third quarter of 2019.
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, up 19% 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
$1.5 billion in cash and $1.3 billion available under its revolving credit
facility, which matures in September
2023, and its receivables funding facility, which matures in
December 2022. We amended our credit
facility in the second quarter of 2020 to increase the maximum
leverage ratio through 2021 to provide us with additional financial
flexibility.
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
|
ben.sheidler@equifax.com
|
dorian.hare@equifax.com
|
|
EQUIFAX
|
CONSOLIDATED
STATEMENTS OF INCOME
|
|
|
|
Three Months Ended
September
30,
|
|
|
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 $15.8 and
$11.2 at September 30, 2020 and December 31, 2019,
respectively
|
|
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, $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
September 30, 2020 and December 31, 2019; Outstanding shares -
121.6 and 121.2 at September 30, 2020 and December 31, 2019,
respectively
|
|
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
September 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Local
Currency
|
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 $83.7 million
($63.0 million, net of tax) and
$77.0 million ($56.8 million, net of tax) for the third
quarter of 2020 and 2019, respectively, for costs related to the
2017 cybersecurity incident. The components of the costs are as
follows:
(In
millions)
|
|
Three Months
Ended
September 30, 2020
|
|
Three Months
Ended
September 30, 2019
|
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 $83.0 million of technology
and data security costs include incremental costs to transform our
technology infrastructure and improve application, network, and
data security. These include, but are not limited to, costs for
people, professional and contracted services, technical services
and products, and other costs added either directly or indirectly
to manage, execute, and support the implementation of these plans.
The $0.7 million of legal and investigative fees include
legal fees and professional services costs to investigate the 2017
cybersecurity incident and respond to legal, government, and
regulatory investigations and claims related to the 2017
cybersecurity incident.
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
investment (5)
|
|
(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 $36.0 million ($30.6
million, net of tax). We calculate this financial measure by
excluding the impact of acquisition-related amortization expense
and including a benefit to reflect the significant cash income tax
savings resulting from the income tax deductibility of amortization
for certain acquired intangibles. The $5.4 million of tax is
comprised of $9.4 million of tax expense net of
$4.0 million of a cash income tax benefit. During the third
quarter of 2019, we recorded acquisition-related amortization
expense of certain acquired intangibles of $35.1 million ($29.9
million, net of tax). The $5.2 million of tax is comprised of
$9.2 million of tax expense net of $4.0 million of a cash
income tax benefit. See the Notes to this reconciliation for
additional detail.
|
|
|
(2)
|
During the third
quarter of 2020, we recorded pre-tax expenses related to the 2017
cybersecurity incident of $83.7 million ($63.0 million, net of
tax). During the third quarter of 2019, we recorded $77.0 million
($56.8 million, net of tax) for costs related to the 2017
cybersecurity incident. See the Notes to this reconciliation for
additional detail.
|
|
|
(3)
|
During the third
quarter of 2020, we recorded a gain on the fair market value
adjustment of an equity investment of $129.9 million
($85.8 million, net of tax). The gain was recorded to Other
Income, net line item within the Consolidated Statements of Income.
See the Notes to this reconciliation for additional
details.
|
|
|
(4)
|
During the third
quarter of 2019, we recorded a $20.0 million ($15.1 million, net of
tax) charge to revenue related to settlements with commercial
customers. See the Notes to this reconciliation for additional
detail.
|
|
|
(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 $1.5
million. See the Notes to this reconciliation for additional
detail.
|
|
|
(6)
|
During the third
quarter of 2020, we recorded foreign currency impact of certain
intercompany loans of $0.1 million. The impact was recorded to the
Other Income, net line item within the Consolidated Statements of
Income. See the Notes to this reconciliation for additional
detail.
|
|
|
(7)
|
During the third
quarter of 2020, we recorded a tax benefit of $0.3 million related
to the tax effects of deductions for stock compensation in excess
of amounts recorded for compensation costs. During the third
quarter of 2019, we recorded a tax benefit of $2.0 million related
to the tax effects of deductions for stock compensation expense in
excess of amounts recorded for compensation costs. See the Notes to
this reconciliation for additional detail.
|
|
|
(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 $0.1
million and $0.5 million, respectively, related to the impact of
remeasuring the peso denominated monetary assets and liabilities as
a result of Argentina being a highly inflationary economy. See the
Notes to this reconciliation for additional detail.
|
|
|
(9)
|
During the third
quarter of 2020, we recorded the tax impact of adjustments of $18.0
million comprised of (i) acquisition-related amortization expense
of certain acquired intangibles of $5.4 million
($9.4 million of tax expense net of $4.0 million of cash
income tax benefit), (ii) a tax adjustment of $20.7 million related
to expenses for the 2017 cybersecurity incident and (iii) a tax
adjustment of $44.1 million related to the gain on fair market
value adjustment of an equity investment.
|
|
|
|
During the third
quarter of 2019, we recorded the tax impact of adjustments of $30.3
million comprised of (i) acquisition-related amortization expense
of certain acquired intangibles of $5.2 million
($9.2 million of tax expense net of $4.0 million of cash
income tax benefit), (ii) a tax adjustment of $20.2 million related
to expenses for the 2017 cybersecurity incident, and (iii) a tax
adjustment of $4.9 million related to settlements with commercial
customers.
|
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 $0.6 million in 2020 and 2019.
|
|
|
(1)
|
During the third
quarter of 2020, we recorded pre-tax expenses related to the 2017
cybersecurity incident of $83.7 million ($63.0 million, net of
tax). During the third quarter of 2019, we recorded $77.0 million
($56.8 million, net of tax) for costs related to the 2017
cybersecurity incident. See the Notes to this reconciliation for
additional detail.
|
|
|
(2)
|
During the third
quarter of 2020, we recorded a gain on the fair market value
adjustment of an equity investment of $129.9 million
($85.8 million, net of tax). The gain was recorded to Other
Income, net line item within the Consolidated Statements of Income.
See the Notes to this reconciliation for additional
details.
|
|
|
(3)
|
During the third
quarter of 2019, we recorded a $20.0 million ($15.1 million, net of
tax) charge to revenue related to settlements with commercial
customers. See the Notes to this reconciliation for additional
detail.
|
|
|
(4)
|
During the third
quarter of 2020, we recorded foreign currency impact of certain
intercompany loans of $0.1 million. The impact was recorded to the
Other Income, net line item within the Consolidated Statements of
Income. See the Notes to this reconciliation for additional
detail.
|
|
|
(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 $0.1
million and $0.5 million, respectively, related to the impact of
remeasuring the peso denominated monetary assets and liabilities as
a result of Argentina being a highly inflationary economy. See the
Notes to this reconciliation for additional detail.
|
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.
Information
Solutions
|
|
Workforce
Solutions
|
|
International
|
|
Global
Consumer
Solutions
|
|
General
Corporate
Expense
|
|
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 $0.3 million in International and $0.3 million in General
Corporate Expense.
|
(In
millions)
|
|
Three Months Ended
September 30, 2019
|
|
|
U.S.
Information
Solutions
|
|
Workforce
Solutions
|
|
International
|
|
Global
Consumer
Solutions
|
|
General
Corporate
Expense
|
|
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 $0.5 million in International and $0.1 million in General
Corporate Expense.
|
|
|
(1)
|
During the third
quarter of 2020, we recorded pre-tax expenses related to the 2017
cybersecurity incident of $83.7 million, a $129.9 million gain on
the fair value adjustment of an equity investment, $0.1 million
foreign currency impact of certain intercompany loans, and a
foreign currency loss of $0.1 million related to the impact of
remeasuring the peso denominated monetary assets and liabilities as
a result of Argentina being a highly inflationary
economy.
|
|
|
|
During the third
quarter of 2019, we recorded pre-tax expenses related to the 2017
cybersecurity incident of $77.0 million, a $20.0 million charge to
revenue related to settlements with commercial customers and a
foreign currency loss of $0.5 million related to the impact of
remeasuring the peso denominated monetary assets and liabilities as
a result of Argentina being a highly inflationary
economy.
|
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
revenue
|
|
Operating
revenue
|
|
Adjustments
(1)
|
|
Adjusted
revenue
|
|
|
|
|
|
Local
Currency
|
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 $20.0 million ($15.1 million, net of
tax) charge to revenue related to settlements with commercial
customers.
|
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 $83.7 million
($63.0 million, net of tax) and
$77.0 million ($56.8 million, net of tax) during the third
quarter of 2020 and 2019, respectively, associated with the costs
to investigate the 2017 cybersecurity incident, legal fees to
respond to subsequent litigation and government investigations,
costs to deliver the free product offering made to all U.S.
consumers and incremental costs to transform our information
technology, data security, and infrastructure. Management believes
excluding these charges 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. Costs related
to the 2017 cybersecurity incident do not include losses accrued
for certain legal proceedings and government investigations related
to the 2017 cybersecurity incident.
Gain on fair market value adjustment of equity
investment - During the third quarter of 2020, we recorded
a $129.9 million ($85.8 million, net of tax) gain related to
adjusting our investment in Brazil
to fair value, in conjunction with the initial public offering of
the company. The investment had previously been recorded on our
books at cost less impairment, as it did not have a readily
determinable fair value. Subsequent to the initial public offering,
our investment in Brazil has been
adjusted to fair value, and will continue to be adjusted to fair
value at the end of each reporting period, with unrealized gains or
losses to be recorded within the Consolidated Statements of Income
in Other income, net. Management believes excluding this charge
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.
Settlement with commercial customers - During the third
quarter of 2019, we recorded a $20.0
million ($15.1 million, net of
tax) charge to revenue related to settlements with commercial
customers. Management believes this adjustment to revenue provides
meaningful information regarding our revenue and provides a basis
to compare revenue between periods and to net income when measuring
profitability, evaluating performance trends, setting performance
objectives and calculating our return on invested capital.
Management considers these adjustments when assessing historical
performance and is useful when planning, forecasting and analyzing
future periods.
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
$0.1 million loss related to foreign
currency impact of certain intercompany loans. Management believes
excluding this charge is useful as it allows investors to evaluate
our performance for different periods on a more comparable basis.
This is consistent with how management reviews and assesses
Equifax's historical performance and is useful when planning,
forecasting and analyzing future periods.
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 $0.3
million related to the tax effects of deductions for stock
compensation in excess of amounts recorded for compensation costs.
During the third quarter of 2019, we recorded a tax benefit of
$2.0 million related to the tax
effects of deductions for stock compensation expense in excess of
amounts recorded for compensation costs. Management believes
excluding this tax effect from financial results provides
meaningful supplemental information regarding our financial results
for the three months ended September 30, 2020 because this
amount is non-operating and relates to income tax benefits or
deficiencies for stock awards recognized when tax amounts differ
from recognized stock compensation cost. This is consistent with
how management reviews and assesses Equifax's historical
performance and is useful when planning, forecasting and analyzing
future periods.
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 $0.1
million during the third quarter of 2020 as a result of
remeasuring the peso denominated monetary assets and liabilities
due to Argentina being highly
inflationary. Management believes excluding this charge is useful
as it allows investors to evaluate our performance for different
periods on a more comparable basis. This is consistent with how
management reviews and assesses Equifax's historical performance
and is useful when planning, forecasting and analyzing future
periods.
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.