ATLANTA, Feb. 12, 2020 /PRNewswire/ -- Equifax Inc.
(NYSE: EFX) today announced financial results for the quarter and
full year ended December 31,
2019.
"We had a solid finish to 2019, delivering our strongest revenue
growth of the year in the fourth quarter. This broad based growth
gives us confidence and momentum as we enter 2020." said
Mark W. Begor, Chief Executive
Officer of Equifax. "2019 was a transition year for Equifax as we
move back to a more normal growth mode. We made significant
progress during the year on our multi-year, $1.25 billion EFX2020 cloud technology
transformation including the ongoing migration of our data,
analytics, and application infrastructure to cloud native
technology, which will accelerate the speed at which we innovate
and grow while continuing to strengthen our data security. We also
took strong steps to expand our access to unique, differentiated
data and our collaboration with our customers and partners to
deliver advanced decisioning and data solutions that help them more
effectively grow and manage their business."
Financial Results Summary
The Company reported revenue of $905.8
million in the fourth quarter of 2019, an 8 percent increase
from the fourth quarter of 2018 and a 10 percent increase in local
currency.
Fourth quarter 2019 diluted EPS attributable to Equifax was
$0.07 per share, down from
$0.21 per share in the fourth quarter
of 2018.
Net income attributable to Equifax of $9.2 million was down from $25.6 million in the fourth quarter of 2018.
For the full year 2019, revenue was $3.5
billion, a 3 percent increase from 2018 and a 5 percent
increase in local currency. Diluted EPS attributable to Equifax was
a loss of $3.27 per share, down from
income of $2.47 per share for the
full year 2018. Net loss attributable to Equifax was $398.8 million, down compared to net income of
$299.8 million for the full year
2018.
Our results in the fourth quarter of 2019 included a pre-tax
legal accrual of $99.6 million for
losses associated with certain legal proceedings and government
investigations related to the 2017 cybersecurity incident. The
charge represents completed settlements and our best estimate of
remaining liabilities for the U.S. matters related to the 2017
cybersecurity incident. The impact of this accrual on diluted EPS
was $0.68 per share for the fourth
quarter.
USIS fourth quarter results
- Total revenue was $330.9 million
in the fourth quarter of 2019, an increase of 8 percent from the
fourth quarter of 2018. Operating margin for USIS was 33.6 percent
in the fourth quarter of 2019, compared to 35.5 percent in the
fourth quarter of 2018. Adjusted EBITDA margin for USIS was 45.1
percent in the fourth quarter of 2019, compared to 47.5 percent in
the fourth quarter of 2018.
- Online Information Solutions revenue was $227.3 million, up 8 percent from the fourth
quarter of 2018.
- Mortgage Solutions revenue was $32.5
million, an increase of 19 percent from the fourth quarter
of 2018.
- Financial Marketing Services revenue was $71.1 million, an increase of 3 percent when
compared to the fourth quarter of 2018.
Workforce Solutions fourth quarter results
- Total revenue was $250.5 million
in the fourth quarter of 2019, a 22 percent increase from the
fourth quarter of 2018. Operating margin for Workforce Solutions
was 39.2 percent in the fourth quarter of 2019 compared to 39.7
percent in the fourth quarter of 2018. Adjusted EBITDA margin for
Workforce Solutions was 47.0 percent in the fourth quarter of 2019,
compared to 48.7 percent in the fourth quarter of 2018.
- Verification Services revenue was $193.6
million, up 33 percent when compared to the fourth quarter
of 2018.
- Employer Services revenue was $56.9
million, down 6 percent when compared to the fourth quarter
of 2018.
International fourth quarter results
- Total revenue was $235.9 million
in the fourth quarter of 2019, a slight decrease from the fourth
quarter of 2018 and an increase of 4 percent on a local currency
basis. Operating margin for International was 15.3 percent in the
fourth quarter of 2019 compared to 6.6 percent in the fourth
quarter of 2018. Adjusted EBITDA margin for International was 36.4
percent in the fourth quarter of 2019 compared to 32.4 percent in
the fourth quarter of 2018.
- Asia Pacific revenue was
$73.7 million, down 4 percent from
the fourth quarter of 2018 and up 1 percent on a local currency
basis.
- Europe revenue was
$76.3 million, up slightly from the
fourth quarter of 2018 and up 1 percent on a local currency
basis.
- Latin America revenue was
$46.4 million, down 3 percent from
the fourth quarter of 2018 and up 11 percent on a local currency
basis.
- Canada revenue was
$39.5 million, up 9 percent from the
fourth quarter of 2018 on a reported and local currency basis.
Global Consumer Solutions fourth quarter results
- Revenue was $88.5 million, a 3
percent increase from the fourth quarter of 2018 on a reported and
local currency basis. Operating margin was 13.8 percent compared to
8.5 percent in the fourth quarter of 2018. Adjusted EBITDA margin
was 26.9 percent compared to 21.1 percent in the fourth quarter of
2018.
Adjusted EPS and Adjusted EBITDA Margin
- Adjusted EPS attributable to Equifax was $1.53, up 11 percent compared to the fourth
quarter of 2018. This financial measure for 2019 excludes the
accrual for legal matters related to the 2017 cybersecurity
incident, settlements with commercial customers and PayNet
acquisition-related amounts other than acquisition-related
amortization. The financial measure for both 2019 and 2018 excludes
acquisition-related amortization expense of certain acquired
intangibles, costs related to the 2017 cybersecurity incident,
realignment of internal resources and other costs, Argentina highly inflationary foreign currency
adjustment, and income tax effects of stock awards recognized upon
vesting or settlement. The financial measure for 2018 excludes a
legal settlement and adjustments for uncertain tax positions. These
items are net of associated tax impacts and are described more
fully in the attached Q&A.
- Adjusted EBITDA margin was 35.2 percent, compared to 33.2
percent in the fourth quarter of 2018. These financial measures for
2019 and 2018 have been adjusted for certain items, including costs
related to the 2017 cybersecurity incident, which affect the
comparability of the underlying operational performance and are
described more fully in the attached Q&A.
- Full year adjusted EPS attributable to Equifax was $5.62, down 3 percent from the prior year period.
Full year adjusted EBITDA margin was 33.4 percent compared to 33.7
percent in 2018. These financial measures for 2019 and 2018 have
been adjusted for certain items, including costs related to the
2017 cybersecurity incident, which affect the comparability of the
underlying operational performance and are described more fully in
the attached Q&A.
- Adjusted EPS, adjusted EBITDA and adjusted EBITDA margin are
non-GAAP financial measures which are explained under "Non-GAAP
Financial Measures" below and are reconciled to the most directly
comparable GAAP financial measures in the attached Q&A.
2020 First Quarter and Full Year Guidance
- For the first quarter of 2020, we expect reported revenue to be
between $915 and $930 million, reflecting local currency growth as
compared to the first quarter of 2019 of 9% to 11%, offset by an
expected over 1% negative impact of foreign exchange. Adjusted EPS
is expected to be between $1.29 and
$1.34 per share. The impact of
foreign exchange on adjusted EPS compared to the first quarter of
2019 is expected to be a negative impact of less than $0.01 per share. Impacting first quarter 2020
revenue and adjusted EPS is an expectation of a 21% increase in
U.S. mortgage market inquiries impacting our USIS and EWS
units.
- We expect full year 2020 reported revenue to be between
$3.650 and $3.750 billion, reflecting local currency growth
as compared to 2019 of 4% and 7%, offset by an expected less than
1% negative impact of foreign exchange. Adjusted EPS is expected to
be between $5.60 and $5.80 per share. The impact of foreign exchange
on adjusted EPS compared to full year 2019 is expected to be a
negative impact of $0.03 per share.
U.S. mortgage market inquiries are expected to be approximately
flat in 2020 versus 2019, with strong growth in inquiries in the
first half of 2020, offset by a decline in inquiries in the second
half of 2020.
About Equifax
Equifax is a global data, analytics, and technology Company and
believes knowledge drives progress. The Company blends unique data,
analytics, and technology with a passion for serving customers
globally, to create insights that power decisions to move people
forward.
Headquartered in Atlanta, Ga.,
Equifax operates or has investments in 27 countries in North America, Central and South America, Europe and the Asia
Pacific region. It is a member of Standard & Poor's
(S&P) 500® Index, and its common stock is
traded on the New York Stock Exchange (NYSE) under the symbol EFX.
Equifax employs approximately 11,200 employees worldwide.
Earnings Conference Call and Audio Webcast
In conjunction with this release, Equifax will host a conference
call on February 13, 2020 at 8:30 a.m.
(ET) via a live audio webcast. To access the webcast, go to
the Investor Relations section of our website at www.equifax.com.
The discussion will be available via replay at the same site
shortly after the conclusion of the webcast. In addition, we are
now posting certain supplemental financial information in the
February 2020 Investor Presentation.
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, net of tax, the income
tax effects of stock awards that are recognized upon vesting or
settlement, accrual for legal matters related to the 2017
cybersecurity incident, costs related to the 2017 cybersecurity
incident, PayNet acquisition-related amounts other than
acquisition-related amortization, settlements with commercial
customers, settlement of a legal claim unrelated to the 2017
cybersecurity incident, the foreign exchange impact resulting from
accounting for Argentina as a
highly inflationary economy, realignment of internal resources and
other costs, and adjustment for uncertain tax positions. 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 the same items as adjusted EPS.
These are important financial measures for Equifax but are not
financial measures as defined by GAAP.
These non-GAAP financial measures should be reviewed in
conjunction with the relevant GAAP financial measures and are not
presented as an alternative measure of net income or EPS as
determined in accordance with GAAP.
Reconciliations of these non-GAAP financial measures to the most
directly comparable GAAP financial measures and related notes are
presented in the Q&A. This information can also be found under
"Investor Relations/GAAP/Non-GAAP Measures" on our website at
www.equifax.com.
Forward-Looking Statements
This release contains forward-looking statements 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
technology and security transformation program, capital investments
and asset acquisitions or dispositions), as well as developments
beyond our control, including, but not limited to, changes in
worldwide and U.S. economic conditions that materially impact
consumer spending, consumer debt and employment and the demand for
Equifax's products and services. Other risk factors include the
impact of the 2017 cybersecurity incident and the resulting
litigation and other impacts on our business and results of
operations; potential adverse developments in new and pending legal
proceedings or government investigations; 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; 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, 2018,
including without limitation under the captions "Item 1. Business
-- Governmental Regulation" and "-- Forward-Looking Statements" and
"Item 1A. Risk Factors," and in our other filings with the U.S.
Securities and Exchange Commission. Forward-looking statements are
given only as at the date of this release and the Company disclaims
any obligation to update or revise the forward-looking statements,
whether as a result of new information, future events or otherwise,
except as required by law.
EQUIFAX
|
CONSOLIDATED
STATEMENTS OF INCOME
|
|
|
|
Three Months
Ended
December 31,
|
|
|
2019
|
|
2018
|
(In millions,
except per share amounts)
|
|
|
|
|
Operating
revenue
|
|
$
|
905.8
|
|
|
$
|
835.3
|
|
Operating
expenses:
|
|
|
|
|
Cost of services
(exclusive of depreciation and amortization below)
|
|
382.9
|
|
|
372.2
|
|
Selling, general and
administrative expenses
|
|
389.0
|
|
|
337.9
|
|
Depreciation and
amortization
|
|
86.9
|
|
|
79.1
|
|
Total operating
expenses
|
|
858.8
|
|
|
789.2
|
|
Operating
income
|
|
47.0
|
|
|
46.1
|
|
Interest
expense
|
|
(29.3)
|
|
|
(26.5)
|
|
Other income,
net
|
|
6.2
|
|
|
5.4
|
|
Consolidated income
before income taxes
|
|
23.9
|
|
|
25.0
|
|
(Provision) benefit
for income taxes
|
|
(13.1)
|
|
|
1.7
|
|
Consolidated net
income
|
|
10.8
|
|
|
26.7
|
|
Less: Net income
attributable to noncontrolling interests including redeemable
noncontrolling interests
|
|
(1.6)
|
|
|
(1.1)
|
|
Net income
attributable to Equifax
|
|
$
|
9.2
|
|
|
$
|
25.6
|
|
Basic earnings per
common share:
|
|
|
|
|
Net income
attributable to Equifax
|
|
$
|
0.08
|
|
|
$
|
0.21
|
|
Weighted-average
shares used in computing basic earnings per share
|
|
121.1
|
|
|
120.6
|
|
Diluted earnings per
common share:
|
|
|
|
|
Net income
attributable to Equifax
|
|
$
|
0.07
|
|
|
$
|
0.21
|
|
Weighted-average
shares used in computing diluted earnings per share
|
|
122.3
|
|
|
121.4
|
|
Dividends per common
share
|
|
$
|
0.39
|
|
|
$
|
0.39
|
|
EQUIFAX
|
CONSOLIDATED
STATEMENTS OF (LOSS) INCOME
|
|
|
|
Twelve Months
Ended
December 31,
|
|
|
2019
|
|
2018
|
(In millions,
except per share amounts)
|
|
|
|
|
Operating
revenue
|
|
$
|
3,507.6
|
|
|
$
|
3,412.1
|
|
Operating
expenses:
|
|
|
|
|
Cost of services
(exclusive of depreciation and amortization below)
|
|
1,521.7
|
|
|
1,440.4
|
|
Selling, general and
administrative expenses
|
|
1,990.2
|
|
|
1,213.3
|
|
Depreciation and
amortization
|
|
331.1
|
|
|
310.4
|
|
Total operating
expenses
|
|
3,843.0
|
|
|
2,964.1
|
|
Operating (loss)
income
|
|
(335.4)
|
|
|
448.0
|
|
Interest
expense
|
|
(111.7)
|
|
|
(103.5)
|
|
Other income,
net
|
|
14.1
|
|
|
11.8
|
|
Consolidated (loss)
income before income taxes
|
|
(433.0)
|
|
|
356.3
|
|
Benefit (provision)
for income taxes
|
|
40.2
|
|
|
(50.0)
|
|
Consolidated net
(loss) income
|
|
(392.8)
|
|
|
306.3
|
|
Less: Net income
attributable to noncontrolling interests including redeemable
noncontrolling interests
|
|
(6.0)
|
|
|
(6.5)
|
|
Net (loss) income
attributable to Equifax
|
|
$
|
(398.8)
|
|
|
$
|
299.8
|
|
Basic earnings per
common share:
|
|
|
|
|
Net (loss) income
attributable to Equifax
|
|
$
|
(3.30)
|
|
|
$
|
2.49
|
|
Weighted-average
shares used in computing basic earnings per share
|
|
120.9
|
|
|
120.4
|
|
Diluted earnings per
common share:
|
|
|
|
|
Net (loss) income
attributable to Equifax
|
|
$
|
(3.27)
|
|
|
$
|
2.47
|
|
Weighted-average
shares used in computing diluted earnings per share
|
|
122.0
|
|
|
121.4
|
|
Dividends per common
share
|
|
$
|
1.56
|
|
|
$
|
1.56
|
|
EQUIFAX
|
CONDENSED
CONSOLIDATED BALANCE SHEET
|
|
|
|
December
31,
|
|
|
2019
|
|
2018
|
(In millions, except par values)
|
|
|
|
|
ASSETS
|
|
|
|
|
Current assets:
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
401.3
|
|
|
$
|
223.6
|
|
Trade accounts receivable, net of allowance for doubtful accounts of $11.2 and $10.9 at
December 31, 2019 and 2018, respectively
|
|
532.1
|
|
|
469.1
|
|
Prepaid expenses
|
|
88.1
|
|
|
100.0
|
|
Other current assets
|
|
187.9
|
|
|
109.6
|
|
Total current assets
|
|
1,209.4
|
|
|
902.3
|
|
Property and equipment:
|
|
|
|
|
Capitalized internal-use software and system costs
|
|
979.4
|
|
|
684.1
|
|
Data processing equipment and furniture
|
|
325.1
|
|
|
344.6
|
|
Land, buildings and improvements
|
|
236.3
|
|
|
216.1
|
|
Total property and equipment
|
|
1,540.8
|
|
|
1,244.8
|
|
Less accumulated depreciation and amortization
|
|
(593.2)
|
|
|
(480.0)
|
|
Total property and equipment, net
|
|
947.6
|
|
|
764.8
|
|
Goodwill
|
|
4,308.3
|
|
|
4,129.7
|
|
Indefinite-lived intangible assets
|
|
94.9
|
|
|
94.8
|
|
Purchased intangible assets, net
|
|
1,044.6
|
|
|
1,099.2
|
|
Other assets, net
|
|
304.2
|
|
|
162.4
|
|
Total assets
|
|
$
|
7,909.0
|
|
|
$
|
7,153.2
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
Current liabilities:
|
|
|
|
|
Short-term debt and current maturities
of long-term debt
|
|
$
|
3.1
|
|
|
$
|
4.9
|
|
Accounts payable
|
|
148.3
|
|
|
175.7
|
|
Accrued expenses
|
|
163.5
|
|
|
213.2
|
|
Accrued salaries and bonuses
|
|
156.1
|
|
|
131.0
|
|
Deferred revenue
|
|
104.0
|
|
|
98.0
|
|
Other current liabilities
|
|
784.1
|
|
|
204.0
|
|
Total current liabilities
|
|
1,359.1
|
|
|
826.8
|
|
Long-term debt
|
|
3,379.5
|
|
|
2,630.6
|
|
Deferred income tax liabilities, net
|
|
248.0
|
|
|
316.2
|
|
Long-term pension and other postretirement benefit liabilities
|
|
118.9
|
|
|
139.3
|
|
Other long-term liabilities
|
|
180.6
|
|
|
84.6
|
|
Total liabilities
|
|
5,286.1
|
|
|
3,997.5
|
|
Equifax shareholders' equity:
|
|
|
|
|
Preferred stock, $0.01 par value: Authorized shares - 10.0; Issued shares - none
|
|
—
|
|
|
—
|
|
Common stock, $1.25 par value: Authorized shares - 300.0;
Issued shares - 189.3 at December 31, 2019 and 2018;
Outstanding shares -121.2 and 120.6 at December 31, 2019 and 2018, respectively
|
|
236.6
|
|
|
236.6
|
|
Paid-in
capital
|
|
1,405.1
|
|
|
1,356.6
|
|
Retained earnings
|
|
4,131.8
|
|
|
4,717.8
|
|
Accumulated other comprehensive loss
|
|
(631.6)
|
|
|
(626.3)
|
|
Treasury stock, at
cost, 67.5 shares and 68.1 shares at December 31, 2019 and
2018,
respectively
|
|
(2,557.4)
|
|
|
(2,571.0)
|
|
Stock held by employee benefits trusts, at cost,
0.6
shares at December 31, 2019 and 2018,
respectively
|
|
(5.9)
|
|
|
(5.9)
|
|
Total Equifax shareholders' equity
|
|
2,578.6
|
|
|
3,107.8
|
|
Noncontrolling interests including redeemable
noncontrolling interests
|
|
44.3
|
|
|
47.9
|
|
Total shareholders' equity
|
|
2,622.9
|
|
|
3,155.7
|
|
Total liabilities and equity
|
|
$
|
7,909.0
|
|
|
$
|
7,153.2
|
|
EQUIFAX
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
|
|
Twelve Months
Ended
December 31,
|
|
|
2019
|
|
2018
|
(In
millions)
|
|
|
|
|
Operating
activities:
|
|
|
|
|
Consolidated net
(loss) income
|
|
$
|
(392.8)
|
|
|
$
|
306.3
|
|
Adjustments to
reconcile consolidated net income to net cash provided by operating
activities:
|
|
|
|
|
Depreciation and
amortization
|
|
337.3
|
|
|
315.9
|
|
Stock-based
compensation expense
|
|
49.7
|
|
|
42.5
|
|
Deferred income
taxes
|
|
(87.2)
|
|
|
(2.3)
|
|
Changes in assets and
liabilities, excluding effects of acquisitions:
|
|
|
|
|
Accounts receivable,
net
|
|
(61.3)
|
|
|
(37.4)
|
|
Other assets, current
and long-term
|
|
(78.8)
|
|
|
(15.4)
|
|
Current and long-term
liabilities, excluding debt
|
|
546.9
|
|
|
62.6
|
|
Cash provided by
operating activities
|
|
313.8
|
|
|
672.2
|
|
Investing
activities:
|
|
|
|
|
Capital
expenditures
|
|
(399.6)
|
|
|
(321.9)
|
|
Acquisitions, net of
cash acquired
|
|
(272.9)
|
|
|
(138.3)
|
|
Cash received from
sale of asset
|
|
—
|
|
|
5.6
|
|
Investment in
unconsolidated affiliates, net
|
|
(25.0)
|
|
|
(6.9)
|
|
Cash used in
investing activities
|
|
(697.5)
|
|
|
(461.5)
|
|
Financing
activities:
|
|
|
|
|
Net short-term
(repayments) borrowings
|
|
(1.8)
|
|
|
(959.2)
|
|
Payments on long-term
debt
|
|
(250.0)
|
|
|
(100.0)
|
|
Proceeds from issuance
of long-term debt
|
|
998.3
|
|
|
994.5
|
|
Dividends paid to
Equifax shareholders
|
|
(188.7)
|
|
|
(187.9)
|
|
Dividends paid to
noncontrolling interests
|
|
(6.6)
|
|
|
(10.3)
|
|
Proceeds from exercise
of stock options
|
|
22.3
|
|
|
11.8
|
|
Payment of taxes
related to settlement of equity awards
|
|
(10.5)
|
|
|
(19.7)
|
|
Payment of contingent
consideration
|
|
—
|
|
|
(1.5)
|
|
Purchase of redeemable
noncontrolling interests
|
|
—
|
|
|
(30.9)
|
|
Debt issuance
costs
|
|
(5.1)
|
|
|
(7.8)
|
|
Cash provided by
(used in) financing activities
|
|
557.9
|
|
|
(311.0)
|
|
Effect of foreign
currency exchange rates on cash and cash equivalents
|
|
3.5
|
|
|
(12.5)
|
|
Increase (decrease)
in cash and cash equivalents
|
|
177.7
|
|
|
(112.8)
|
|
Cash and cash
equivalents, beginning of period
|
|
223.6
|
|
|
336.4
|
|
Cash and cash
equivalents, end of period
|
|
$
|
401.3
|
|
|
$
|
223.6
|
|
Common Questions & Answers (Unaudited)
(Dollars in
millions)
1. Can you provide a further analysis of
operating revenue for the fourth quarter and adjusted revenue for
the full year by operating segment?
Operating and adjusted revenue consists of the following
components:
(In
millions)
|
|
Three Months Ended
December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Local
Currency
|
Operating
revenue:
|
|
2019
|
|
2018
|
|
$ Change
|
|
% Change
|
|
% Change*
|
Online Information
Solutions
|
|
227.3
|
|
|
211.4
|
|
|
15.9
|
|
|
8
|
%
|
|
|
Mortgage
Solutions
|
|
32.5
|
|
|
27.3
|
|
|
5.2
|
|
|
19
|
%
|
|
|
Financial Marketing
Services
|
|
71.1
|
|
|
68.7
|
|
|
2.4
|
|
|
3
|
%
|
|
|
Total U.S. Information
Solutions
|
|
330.9
|
|
|
307.4
|
|
|
23.5
|
|
|
8
|
%
|
|
|
Verification
Services
|
|
193.6
|
|
|
145.4
|
|
|
48.2
|
|
|
33
|
%
|
|
|
Employer
Services
|
|
56.9
|
|
|
60.5
|
|
|
(3.6)
|
|
|
(6)
|
%
|
|
|
Total Workforce
Solutions
|
|
250.5
|
|
|
205.9
|
|
|
44.6
|
|
|
22
|
%
|
|
|
Asia
Pacific
|
|
73.7
|
|
|
76.5
|
|
|
(2.8)
|
|
|
(4)
|
%
|
|
1
|
%
|
Europe
|
|
76.3
|
|
|
75.9
|
|
|
0.4
|
|
|
—
|
%
|
|
1
|
%
|
Latin
America
|
|
46.4
|
|
|
47.7
|
|
|
(1.3)
|
|
|
(3)
|
%
|
|
11
|
%
|
Canada
|
|
39.5
|
|
|
36.3
|
|
|
3.2
|
|
|
9
|
%
|
|
9
|
%
|
Total
International
|
|
235.9
|
|
|
236.4
|
|
|
(0.5)
|
|
|
—
|
%
|
|
4
|
%
|
Global Consumer
Solutions
|
|
88.5
|
|
|
85.6
|
|
|
2.9
|
|
|
3
|
%
|
|
3
|
%
|
Total operating
revenue
|
|
$
|
905.8
|
|
|
$
|
835.3
|
|
|
$
|
70.5
|
|
|
8
|
%
|
|
10
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In
millions)
|
|
Twelve Months
Ended December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Local
Currency
|
Adjusted
revenue**:
|
|
2019
|
|
2018
|
|
$ Change
|
|
% Change
|
|
% Change*
|
Online Information
Solutions
|
|
$
|
939.1
|
|
|
$
|
877.5
|
|
|
$
|
61.6
|
|
|
7
|
%
|
|
|
Mortgage
Solutions
|
|
136.9
|
|
|
153.6
|
|
|
(16.7)
|
|
|
(11)
|
%
|
|
|
Financial Marketing
Services
|
|
221.4
|
|
|
216.2
|
|
|
5.2
|
|
|
2
|
%
|
|
|
Total U.S. Information
Solutions
|
|
1,297.4
|
|
|
1,247.3
|
|
|
50.1
|
|
|
4
|
%
|
|
|
Verification
Services
|
|
700.1
|
|
|
567.0
|
|
|
133.1
|
|
|
23
|
%
|
|
|
Employer
Services
|
|
249.6
|
|
|
259.8
|
|
|
(10.2)
|
|
|
(4)
|
%
|
|
|
Total Workforce
Solutions
|
|
949.7
|
|
|
826.8
|
|
|
122.9
|
|
|
15
|
%
|
|
|
Asia
Pacific
|
|
300.1
|
|
|
325.6
|
|
|
(25.5)
|
|
|
(8)
|
%
|
|
(1)
|
%
|
Europe
|
|
275.6
|
|
|
287.3
|
|
|
(11.7)
|
|
|
(4)
|
%
|
|
—
|
%
|
Latin
America
|
|
190.5
|
|
|
206.6
|
|
|
(16.1)
|
|
|
(8)
|
%
|
|
9
|
%
|
Canada
|
|
154.4
|
|
|
146.7
|
|
|
7.7
|
|
|
5
|
%
|
|
8
|
%
|
Total
International
|
|
920.6
|
|
|
966.2
|
|
|
(45.6)
|
|
|
(5)
|
%
|
|
3
|
%
|
Global Consumer
Solutions
|
|
359.9
|
|
|
371.8
|
|
|
(11.9)
|
|
|
(3)
|
%
|
|
(3)
|
%
|
Total adjusted
revenue
|
|
$
|
3,527.6
|
|
|
$
|
3,412.1
|
|
|
$
|
115.5
|
|
|
3
|
%
|
|
6
|
%
|
*Reflects percentage change in revenue conforming 2019 results
using 2018 exchange rates.
**Adjusted revenue is defined as GAAP revenue adjusted for a charge
related to settlements with commercial customers. See Non-GAAP
reconciliation D for a reconciliation of operating revenue to
adjusted revenue.
2. What drove the fluctuation in the
effective tax rate?
Our effective income tax rate was 54.8% for the three months
ended December 31, 2019 due to the permanent tax differences
resulting from the accrual for losses associated with certain legal
proceedings and government investigations related to the 2017
cybersecurity incident. Our effective tax rate for the three months
ended December 31, 2018 was a tax benefit of 6.9%. The fourth
quarter 2018 benefit was a result of adjustments recorded during
the quarter to the provisional amounts recorded for the Tax Act
enacted in the fourth quarter of 2017 that more than offset the
income tax expense recorded during the quarter.
Our effective tax rate was 9.3% for the twelve months ended
December 31, 2019, down from 14.0% for the same period in
2018. Our effective tax rate is lower for the year ended
December 31, 2019 compared to 2018
due to the operating loss of the Company in 2019 and permanent tax
differences resulting from the accrual for losses associated with
certain legal proceedings and government investigations related to
the 2017 cybersecurity incident.
3. What is the breakdown of costs related
to the 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. Costs related to the 2017 cybersecurity incident do not
include the accrual for losses associated with certain legal
proceedings and government investigations related to the 2017
cybersecurity incident, as further described in the Notes to the
reconciliations of this release.
In the three and twelve months ended December 31, 2019, the
Company recorded expenses, net of directors and officers insurance
recoveries, of $99.6 million and
$800.9 million, respectively, for
losses associated with certain legal proceedings and government
investigations related to the 2017 cybersecurity incident,
exclusive of our legal and professional services expenses. While it
is reasonably possible that losses exceeding the amount accrued
will be incurred, it is not possible at this time to estimate the
additional possible loss in excess of the amount already accrued
that might result from adverse judgments, settlements, penalties or
other resolution of the proceedings and investigations related to
the 2017 cybersecurity incident based on a number of factors, such
as the various stages of these proceedings and investigations, that
alleged damages have not been specified or are uncertain, the
uncertainty as to the certification of a class or classes and the
size of any certified class, as applicable, and the lack of
resolution on significant factual and legal issues. The ultimate
amount paid on these actions, claims and investigations in excess
of the amount already accrued could be material to the Company's
consolidated financial condition, results of operations, or cash
flows in future periods.
We recorded $181.6 million
($147.0 million, net of tax), and
$1,138.2 million ($938.4 million, net of tax) for the fourth
quarter and for the year ended December 31, 2019,
respectively, for expenses, net of insurance, related to the 2017
cybersecurity incident. For the fourth quarter and year ended
December 31, 2018, we recorded
$104.6 million
($76.8 million, net of tax), and
$326.2 million ($243.9 million, net of tax), respectively, for
expenses, net of insurance, related to the 2017 cybersecurity
incident. The components of the costs are as follows:
(in
millions)
|
|
Three Months Ended
December 31,
|
|
Twelve Months
Ended December 31,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Accrual for legal
matters, net of directors and officers insurance recoveries,
related to the 2017 cybersecurity incident
|
|
$
|
99.6
|
|
|
$
|
—
|
|
|
$
|
800.9
|
|
|
$
|
—
|
|
2017 cybersecurity
incident related costs:
|
|
|
|
|
|
|
|
|
Technology and data
security
|
|
75.9
|
|
|
113.9
|
|
|
292.1
|
|
|
307.2
|
|
Legal and
investigative fees
|
|
6.1
|
|
|
12.2
|
|
|
41.3
|
|
|
73.6
|
|
Product
liability
|
|
—
|
|
|
8.5
|
|
|
3.9
|
|
|
20.4
|
|
Cybersecurity
insurance recoveries
|
|
—
|
|
|
(30.0)
|
|
|
—
|
|
|
(75.0)
|
|
Total
|
|
$
|
181.6
|
|
|
$
|
104.6
|
|
|
$
|
1,138.2
|
|
|
$
|
326.2
|
|
The $75.9 million and $292.1 million of technology and data security
costs include incremental costs to transform our technology
infrastructure and improve application, network, data security, and
the costs of development and launch of Lock and Alert™.
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 $6.1 million and $41.3 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. We did not record any product
liability costs in the fourth quarter of 2019. The $3.9
million of product liability costs in the twelve months ended
December 31, 2019 include the expected costs of fulfillment of
TrustedID® Premier and support of consumers using
TrustedID® Premier. Additionally, in 2018, the
Company extended the free credit file monitoring services for
impacted consumers using the free TrustedID®
Premier service by providing them the opportunity to enroll in
Experian® IDNotify™ at no cost for an
additional twelve months.
Since the announcement of the cybersecurity incident in
September 2017, we have incurred a
total of $1,703.4 million of costs related to the
incident, incremental technology and data security costs, and
expenses, net of insurance recoveries, for losses associated with
certain legal proceedings and government investigations related to
the 2017 cybersecurity incident.
We expect 2017 cybersecurity incident related costs for 2020 to
be less than the levels incurred in 2019. Costs related to the 2017
cybersecurity incident do not include the accrual for legal
proceedings and government investigations related to the 2017
cybersecurity incident, as further described in the Notes to the
reconciliations of this release.
At the time of the 2017 cybersecurity incident, we
had $125.0 million of cybersecurity insurance coverage, above
a $7.5 million deductible, to limit our exposure to
losses such as those related to this incident. Since the
announcement of the 2017 cybersecurity incident, we have received
the maximum reimbursement under the insurance policy of
$125.0 million, all of which was
received prior to 2019. We also maintained a directors and officers
insurance policy of which we have recorded our estimated maximum
recoveries as of December 31, 2019.
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, accrual for legal matters related to the 2017
cybersecurity incident, costs related to the 2017 cybersecurity
incident, settlements with commercial customers, realignment of
internal resources and other costs, PayNet acquisition-related
amounts other than acquisition-related amortization, Argentina highly inflationary foreign currency
impacts, the income tax effect of stock awards recognized upon
vesting or settlement, a legal settlement unrelated to the 2017
cybersecurity incident, adjustments for uncertain tax positions,
and income tax adjustments:
|
|
Three Months
Ended
December 31,
|
|
|
(In millions,
except per share amounts)
|
|
2019
|
|
2018
|
|
$
Change
|
Net income
attributable to Equifax
|
|
$
|
9.2
|
|
|
$
|
25.6
|
|
|
$
|
(16.4)
|
|
Acquisition-related
amortization expense of certain acquired intangibles
(1)
|
|
35.3
|
|
|
34.9
|
|
|
0.4
|
|
Cybersecurity
incident related costs (3)
|
|
82.0
|
|
|
104.6
|
|
|
(22.6)
|
|
Accrual for legal
matters related to the 2017 cybersecurity incident
(2)
|
|
99.6
|
|
|
—
|
|
|
99.6
|
|
Income tax effects of
stock awards that are recognized upon vesting or settlement
(8)
|
|
1.1
|
|
|
(0.5)
|
|
|
1.6
|
|
Argentina highly
inflationary foreign currency adjustment (7)
|
|
0.2
|
|
|
0.6
|
|
|
(0.4)
|
|
Realignment of
internal resources and other costs (5)
|
|
—
|
|
|
46.1
|
|
|
(46.1)
|
|
Tax impact of
adjustments (11)
|
|
(39.9)
|
|
|
(44.0)
|
|
|
4.1
|
|
Net income
attributable to Equifax, adjusted for items listed above
|
|
$
|
187.5
|
|
|
$
|
167.3
|
|
|
$
|
20.2
|
|
Diluted EPS
attributable to Equifax, adjusted for the items listed
above
|
|
$
|
1.53
|
|
|
$
|
1.38
|
|
|
$
|
0.15
|
|
Weighted-average
shares used in computing diluted EPS
|
|
122.3
|
|
|
121.4
|
|
|
|
|
|
Twelve Months
Ended
December 31,
|
|
|
(In millions,
except per share amounts)
|
|
2019
|
|
2018
|
|
$
Change
|
Net income
attributable to Equifax
|
|
$
|
(398.8)
|
|
|
$
|
299.8
|
|
|
$
|
(698.6)
|
|
Acquisition-related
amortization expense of certain acquired intangibles
(1)
|
|
140.2
|
|
|
152.8
|
|
|
(12.6)
|
|
Accrual for legal
matters related to the 2017 cybersecurity incident
(2)
|
|
800.9
|
|
|
—
|
|
|
800.9
|
|
Cybersecurity
incident related costs (3)
|
|
337.3
|
|
|
326.2
|
|
|
11.1
|
|
Settlements with
commercial customers (4)
|
|
20.0
|
|
|
—
|
|
|
20.0
|
|
Realignment of
internal resources and other costs (5)
|
|
11.5
|
|
|
46.1
|
|
|
(34.6)
|
|
PayNet
acquisition-related amounts other than acquisition-related
amortization (6)
|
|
6.3
|
|
|
—
|
|
|
6.3
|
|
Argentina highly
inflationary foreign currency adjustment (7)
|
|
1.0
|
|
|
1.8
|
|
|
(0.8)
|
|
Income tax effects of
stock awards that are recognized upon vesting or settlement
(8)
|
|
(3.0)
|
|
|
(7.5)
|
|
|
4.5
|
|
Legal settlement
(9)
|
|
—
|
|
|
18.5
|
|
|
(18.5)
|
|
Adjustments for
uncertain tax positions (10)
|
|
—
|
|
|
(14.1)
|
|
|
14.1
|
|
Tax impact of
adjustments (11)
|
|
(229.7)
|
|
|
(121.4)
|
|
|
(108.3)
|
|
Net income
attributable to Equifax, adjusted for items listed above
|
|
$
|
685.7
|
|
|
$
|
702.2
|
|
|
$
|
(16.5)
|
|
Diluted EPS
attributable to Equifax, adjusted for items listed above
|
|
$
|
5.62
|
|
|
$
|
5.79
|
|
|
$
|
(0.17)
|
|
Weighted-average
shares used in computing diluted EPS
|
|
122.0
|
|
|
121.4
|
|
|
|
(1) During the fourth quarter of 2019, we recorded
acquisition-related amortization expense of certain acquired
intangibles of $35.3 million
($30.0 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 $5.3 million of tax
is comprised of $9.3 million of tax
expense net of $4.0 million of a cash
income tax benefit. During the fourth quarter of 2018, we recorded
acquisition-related amortization expense of certain acquired
intangibles of $34.9 million
($29.9 million net of tax). The
$5.0 million of tax is comprised of
$9.0 million of tax expense net of
$4.0 million of a cash income tax
benefit.
For the year ended December 31,
2019, we recorded acquisition-related amortization expense
of certain acquired intangibles of $140.2
million ($119.4 million net of
tax). The $20.8 million of tax is
comprised of $36.9 million of tax
expense net of $16.1 million of a
cash income tax benefit. For the year ended December 31, 2018, we recorded
acquisition-related amortization expense of certain acquired
intangibles of $152.8 million
($129.2 million net of tax). The
$23.6 million of tax is comprised of
$39.6 million of tax expense net of
$16.0 million of a cash income tax
benefit. See the Notes to this reconciliation for additional
detail.
(2) During the fourth quarter of 2019 and for the year
ended December 31, 2019, we recorded
expenses, net of directors and officers insurance recoveries, of
$99.6 million ($83.5 million, net of tax) and $800.9 million ($686.1
million, net of tax) for losses associated with certain
legal proceedings and government investigations related to the 2017
cybersecurity incident, exclusive of our legal professional
services expenses. See the Notes to this reconciliation for
additional detail.
(3) During the fourth quarter of 2019 and for the year
ended December 31, 2019, we recorded
pre-tax expenses of $82.0 million
($63.5 million, net of tax) and
$337.3 million ($252.3 million, net of tax), respectively, for
expenses related to the 2017 cybersecurity incident. During the
fourth quarter of 2018 and for year ended December 31, 2018, we recorded pre-tax expenses
of $104.6 million ($76.8 million, net of tax) and $326.2 million ($243.9
million, net of tax), respectively, for expenses related to
the 2017 cybersecurity incident. See the Notes to this
reconciliation for additional detail.
(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 first quarter of 2019 and the fourth
quarter of 2018, we recorded $11.5
million ($8.8 million, net of
tax) and $46.1 million ($35.0 million, net of tax), respectively, of
restructuring charges for the realignment of internal resources and
other costs, which predominantly relates to the reduction of
headcount and the realignment of our internal resources to support
the Company's strategic objectives and increase the integration of
our global operations. See the Notes to this reconciliation for
additional detail.
(6) During the second quarter of 2019, we recorded
$6.3 million ($4.8 million, net of tax) for PayNet acquisition
related amounts other than acquisition-related amortization which
was primarily related to transaction costs resulting from the
acquisition and was recorded in operating income. See the Notes to
this reconciliation for additional detail.
(7) Argentina 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 fourth quarter of 2019 and for the year ended
December 31, 2019, we recorded a
foreign currency loss of $0.2 million and $1.0 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. During the fourth quarter of
2018 and for the year ended December 31,
2018, we recorded a foreign currency loss of $0.6
million and $1.8 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.
(8) During the fourth quarter of 2019 and for the year
ended December 31, 2019, we recorded
tax expense of $1.1 million and tax
benefit of $3.0 million,
respectively, related to the tax effects of deductions for stock
compensation in excess of amounts recorded for compensation costs.
During the fourth quarter of 2018 and for the year ended
December 31, 2018, we recorded a tax
benefit of $0.5 million and
$7.5 million, respectively, related
to the tax effects of deductions for stock compensation in excess
of amounts recorded for compensation costs. See the Notes to this
reconciliation for additional detail.
(9) During the third quarter of 2018, we recorded
an $18.5 million ($14.1
million, net of tax) charge for a legal settlement that was
not related to the 2017 cybersecurity incident. See the Notes to
this reconciliation for additional detail.
(10) For the year ended December 31,
2018, we recorded a tax benefit of $14.1 million related to adjustments from
uncertain tax positions resulting from the completion of
examinations of historical tax returns. See the Notes to this
reconciliation for additional detail.
(11) During the fourth quarter of 2019, we recorded the tax
impact of adjustments of $39.9
million comprised of (i) acquisition-related amortization
expense of certain acquired intangibles of $5.3 million ($9.3
million of tax expense net of $4.0
million of a cash income tax benefit), (ii) tax adjustment
of $16.1 million related to the 2017
cybersecurity incident related legal matters, and (iii) a tax
adjustment of $18.5 million related
to expenses for the 2017 cybersecurity incident. During the fourth
quarter of 2018, we recorded the tax impact of adjustments of
$44.0 million comprised of (i)
acquisition-related amortization expense of certain acquired
intangibles of $5.0 million
($9.0 million of tax expense net of
$4.0 million of a cash income tax
benefit), (ii) tax adjustment of $11.1
million related to the realignment of internal resources,
and (iii) a tax adjustment of $27.8
million related to expenses for the 2017 cybersecurity
incident.
For the year ended December 31,
2019, we recorded the tax impact of adjustments of
$229.7 million comprised of (i)
acquisition-related amortization expense of certain acquired
intangibles of $20.8 million
($36.9 million of tax expense net of
$16.1 million of a cash income tax
benefit), (ii) a tax adjustment of $114.8
million related to cybersecurity incident related legal
matters, (iii) a tax adjustment of $85.0
million related to expenses for the 2017 cybersecurity
incident, (iv) a tax adjustment of $1.5
million for PayNet acquisition related amounts other than
acquisition-related amortization, (v) a tax adjustment of
$4.9 million related to the
settlement with commercial customers, and (vi) a tax adjustment of
$2.7 million related to the
realignment of internal resources. For the year ended December 31, 2018, we recorded the tax impact of
adjustments of $121.4 million
comprised of (i) acquisition-related amortization expense of
certain acquired intangibles of $23.6
million ($39.6 million of tax
expense net of $16.0 million of a
cash income tax benefit), (ii) tax adjustment of $4.4 million related to the settlement of a legal
claim, (iii) tax adjustment of $11.1
million related to the realignment of internal resources,
and (iv) a tax adjustment of $82.3
million related to expenses for the 2017 cybersecurity
incident.
Reconciliations of Non-GAAP Financial Measures to the
Comparable GAAP Financial Measures (Unaudited)
(Dollars in millions, except per share amounts)
B. Reconciliation of adjusted revenue,
defined as GAAP revenue adjusted for a charge related to
settlements with commercial customers, and net income attributable
to Equifax to adjusted EBITDA, defined as net income excluding
income taxes, interest expense, net, depreciation and amortization,
accrual for legal matters related to the cybersecurity incident,
costs related to the 2017 cybersecurity incident, settlements with
a commercial customer, realignment of resources and other costs,
PayNet acquisition related amounts, Argentina highly inflationary foreign currency
impacts, a legal settlement unrelated to the 2017 cybersecurity
incident, and presentation of adjusted EBITDA margin:
|
|
Three Months
Ended
December 31,
|
|
|
(In
millions)
|
|
2019
|
|
2018
|
|
$
Change
|
Revenue
|
|
$
|
905.8
|
|
|
$
|
835.3
|
|
|
$
|
70.5
|
|
Settlements with
commercial customers (3)
|
|
—
|
|
|
—
|
|
|
—
|
|
Adjusted
revenue
|
|
$
|
905.8
|
|
|
$
|
835.3
|
|
|
$
|
70.5
|
|
|
|
|
|
|
|
|
Net income
attributable to Equifax
|
|
$
|
9.2
|
|
|
$
|
25.6
|
|
|
$
|
(16.4)
|
|
Income
taxes
|
|
13.1
|
|
|
(1.7)
|
|
|
14.8
|
|
Interest expense,
net*
|
|
28.1
|
|
|
25.4
|
|
|
2.7
|
|
Depreciation and
amortization
|
|
86.9
|
|
|
79.1
|
|
|
7.8
|
|
Cybersecurity
incident related costs (exclusive of depreciation and amortization
above) (2)
|
|
82.0
|
|
|
102.5
|
|
|
(20.5)
|
|
Accrual for legal
matters related to the 2017 cybersecurity incident
(1)
|
|
99.6
|
|
|
—
|
|
|
99.6
|
|
Argentina highly
inflationary foreign currency adjustment (6)
|
|
0.2
|
|
|
0.6
|
|
|
(0.4)
|
|
Realignment of
internal resources and other costs (4)
|
|
—
|
|
|
46.1
|
|
|
(46.1)
|
|
Adjusted EBITDA,
excluding the items listed above
|
|
$
|
319.1
|
|
|
$
|
277.6
|
|
|
$
|
41.5
|
|
Adjusted EBITDA
margin
|
|
35.2
|
%
|
|
33.2
|
%
|
|
|
|
|
Twelve Months
Ended
December 31,
|
|
|
(In
millions)
|
|
2019
|
|
2018
|
|
$
Change
|
Revenue
|
|
$
|
3,507.6
|
|
|
$
|
3,412.1
|
|
|
$
|
95.5
|
|
Settlements with
commercial customers (3)
|
|
20.0
|
|
|
—
|
|
|
20.0
|
|
Adjusted
revenue
|
|
$
|
3,527.6
|
|
|
$
|
3,412.1
|
|
|
$
|
115.5
|
|
|
|
|
|
|
|
|
Net income
attributable to Equifax
|
|
$
|
(398.8)
|
|
|
$
|
299.8
|
|
|
$
|
(698.6)
|
|
Income
taxes
|
|
(40.2)
|
|
|
50.0
|
|
|
(90.2)
|
|
Interest expense,
net*
|
|
108.6
|
|
|
99.3
|
|
|
9.3
|
|
Depreciation and
amortization
|
|
331.1
|
|
|
310.4
|
|
|
20.7
|
|
Accrual for legal
matters related to the 2017 cybersecurity incident
(1)
|
|
800.9
|
|
|
—
|
|
|
800.9
|
|
Cybersecurity
incident related costs (exclusive of depreciation and amortization
above) (2)
|
|
337.3
|
|
|
324.0
|
|
|
13.3
|
|
Settlements with
commercial customers (3)
|
|
20.0
|
|
|
—
|
|
|
20.0
|
|
Realignment of
internal resources and other costs (4)
|
|
11.5
|
|
|
46.1
|
|
|
(34.6)
|
|
PayNet
acquisition-related amounts other than acquisition-related
amortization (5)
|
|
6.3
|
|
|
—
|
|
|
6.3
|
|
Argentina highly
inflationary foreign currency adjustment (6)
|
|
1.0
|
|
|
1.8
|
|
|
(0.8)
|
|
Legal settlement
unrelated to the 2017 cybersecurity incident
(7)
|
|
—
|
|
|
18.5
|
|
|
(18.5)
|
|
Adjusted EBITDA,
excluding the items listed above
|
|
$
|
1,177.7
|
|
|
$
|
1,149.9
|
|
|
$
|
27.8
|
|
Adjusted EBITDA
margin
|
|
33.4
|
%
|
|
33.7
|
%
|
|
|
*Excludes interest income of $1.2
million and $1.1 million for
the fourth quarter of 2019 and 2018, respectively. Also, excludes
interest income of $3.1 million and
$4.2 million the years ended
December 31, 2019 and 2018,
respectively.
(1) During the fourth quarter of 2019 and for the year
ended December 31, 2019, we recorded
expenses, net of directors and officers insurance recoveries, of
$99.6 million ($83.5 million, net of tax) and $800.9 million ($686.1
million, net of tax) for losses associated with certain
legal proceedings and government investigations related to the 2017
cybersecurity incident, exclusive of our legal professional
services expenses. See the Notes to this reconciliation for
additional detail.
(2) During the fourth quarter of 2019 and for the year
ended December 31, 2019, we recorded
pre-tax expenses of $82.0 million
($63.5 million, net of tax) and
$337.3 million ($252.3 million, net of tax), respectively, for
expenses related to the 2017 cybersecurity incident. During the
fourth quarter of 2018 and for year ended December 31, 2018, we recorded pre-tax expenses
of $104.6 million ($76.8 million, net of tax) and $326.2 million ($243.9
million, net of tax), respectively, for expenses related to
the 2017 cybersecurity incident. See the Notes to this
reconciliation for additional detail.
(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 first quarter of 2019 and the fourth
quarter of 2018, we recorded $11.5
million ($8.8 million, net of
tax) and $46.1 million ($35.0 million, net of tax), respectively, of
restructuring charges for the realignment of internal resources and
other costs, which predominantly relates to the reduction of
headcount and the realignment of our internal resources to support
the Company's strategic objectives and increase the integration of
our global operations. See the Notes to this reconciliation for
additional detail.
(5) During the second quarter of 2019, we recorded
$6.3 million ($4.8 million, net of tax) for PayNet acquisition
related amounts other than acquisition-related amortization which
was primarily related to transaction costs resulting from the
acquisition and was recorded in operating income. See the Notes to
this reconciliation for additional detail.
(6) During the fourth quarter of 2019 and for
the year ended December 31, 2019, we
recorded a foreign currency loss of $0.2 million and
$1.0 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.
During the fourth quarter of 2018 and for the year ended
December 31, 2018, we recorded a
foreign currency loss of $0.6 million and $1.8 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.
(7) During the third quarter of 2018, we recorded
an $18.5 million ($14.1
million, net of tax) charge for a legal settlement that was
not related to the 2017 cybersecurity incident. 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 to
Adjusted EBITDA, excluding depreciation and amortization expense,
other income, net, noncontrolling interest, accrual for legal
matters related to the cybersecurity incident, costs related to the
2017 cybersecurity incident, settlements with a commercial
customer, realignment of resources and other costs, PayNet
acquisition related amounts, Argentina highly inflationary foreign currency
impacts, a legal settlement unrelated to the 2017 cybersecurity
incident, and presentation of adjusted EBITDA margin for each of
the segments:
(In
millions)
|
|
Three Months Ended
December 31, 2019
|
|
|
U.S. Information
Solutions
|
|
Workforce
Solutions
|
|
International
|
|
Global Consumer
Solutions
|
|
General Corporate
Expense**
|
|
Total
|
|
|
|
|
|
|
Revenue
|
|
$
|
330.9
|
|
|
$
|
250.5
|
|
|
$
|
235.9
|
|
|
$
|
88.5
|
|
|
—
|
|
|
$
|
905.8
|
|
Operating
Income
|
|
111.2
|
|
|
98.3
|
|
|
36.2
|
|
|
12.2
|
|
|
(210.9)
|
|
|
47.0
|
|
Depreciation and
Amortization
|
|
21.7
|
|
|
14.2
|
|
|
30.2
|
|
|
3.6
|
|
|
17.2
|
|
|
86.9
|
|
Other
income/(expense), net*
|
|
0.7
|
|
|
—
|
|
|
7.2
|
|
|
—
|
|
|
(2.9)
|
|
|
5.0
|
|
Noncontrolling
interest
|
|
—
|
|
|
—
|
|
|
(1.6)
|
|
|
—
|
|
|
—
|
|
|
(1.6)
|
|
Adjustments (1)
(2) (6)
|
|
15.7
|
|
|
5.1
|
|
|
13.8
|
|
|
8.0
|
|
|
139.2
|
|
|
181.8
|
|
Adjusted
EBITDA
|
|
$
|
149.3
|
|
|
$
|
117.6
|
|
|
$
|
85.8
|
|
|
$
|
23.8
|
|
|
$
|
(57.4)
|
|
|
$
|
319.1
|
|
Operating
Margin
|
|
33.6
|
%
|
|
39.2
|
%
|
|
15.3
|
%
|
|
13.8
|
%
|
|
nm
|
|
5.2
|
%
|
Adjusted EBITDA
Margin
|
|
45.1
|
%
|
|
47.0
|
%
|
|
36.4
|
%
|
|
26.9
|
%
|
|
nm
|
|
35.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In
millions)
|
|
Twelve Months
Ended December 31, 2019
|
|
|
U.S. Information
Solutions
|
|
Workforce
Solutions
|
|
International
|
|
Global Consumer
Solutions
|
|
General Corporate
Expense**
|
|
Total
|
|
|
|
|
|
|
Revenue
|
|
$
|
1,277.4
|
|
|
$
|
949.7
|
|
|
$
|
920.6
|
|
|
$
|
359.9
|
|
|
—
|
|
|
$
|
3,507.6
|
|
Adjustments
(3)
|
|
20.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
20.0
|
|
Adjusted
revenue
|
|
1,297.4
|
|
|
949.7
|
|
|
920.6
|
|
|
359.9
|
|
|
—
|
|
|
3,527.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Income
|
|
423.4
|
|
|
389.7
|
|
|
96.1
|
|
|
48.4
|
|
|
(1,293.0)
|
|
|
(335.4)
|
|
Depreciation and
Amortization
|
|
81.8
|
|
|
53.6
|
|
|
117.8
|
|
|
15.0
|
|
|
62.9
|
|
|
331.1
|
|
Other
income/(expense), net*
|
|
2.6
|
|
|
—
|
|
|
17.5
|
|
|
—
|
|
|
(9.1)
|
|
|
11.0
|
|
Noncontrolling
interest
|
|
—
|
|
|
—
|
|
|
(6.0)
|
|
|
—
|
|
|
—
|
|
|
(6.0)
|
|
Adjustments (1)
(2) (3) (4) (5) (6)
|
|
70.4
|
|
|
17.9
|
|
|
54.3
|
|
|
25.2
|
|
|
1,009.2
|
|
|
1,177.0
|
|
Adjusted
EBITDA
|
|
$
|
578.2
|
|
|
$
|
461.2
|
|
|
$
|
279.7
|
|
|
$
|
88.6
|
|
|
$
|
(230.0)
|
|
|
$
|
1,177.7
|
|
Operating
Margin
|
|
33.1
|
%
|
|
41.0
|
%
|
|
10.4
|
%
|
|
13.4
|
%
|
|
nm
|
|
(9.6)
|
%
|
Adjusted EBITDA
Margin
|
|
44.6
|
%
|
|
48.6
|
%
|
|
30.4
|
%
|
|
24.6
|
%
|
|
nm
|
|
33.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*Excludes interest income of $1.2
million in the fourth quarter and $3.1 million for the year ended December 31, 2019.
**General Corporate Expense includes non-recurring adjustments of
$139.2 million for the fourth quarter
and $1,009.2 million for the year
ended December 31, 2019.
(In
millions)
|
|
Three Months Ended
December 31, 2018
|
|
|
U.S. Information
Solutions
|
|
Workforce
Solutions
|
|
International
|
|
Global Consumer
Solutions
|
|
General Corporate
Expense**
|
|
Total
|
|
|
|
|
|
|
Revenue
|
|
$
|
307.4
|
|
|
$
|
205.9
|
|
|
$
|
236.4
|
|
|
$
|
85.6
|
|
|
—
|
|
|
$
|
835.3
|
|
Operating
Income
|
|
109.2
|
|
|
81.7
|
|
|
15.6
|
|
|
7.3
|
|
|
(167.7)
|
|
|
46.1
|
|
Depreciation and
Amortization
|
|
18.6
|
|
|
11.5
|
|
|
30.7
|
|
|
3.8
|
|
|
14.5
|
|
|
79.1
|
|
Other
income/(expense), net*
|
|
0.6
|
|
|
—
|
|
|
5.7
|
|
|
—
|
|
|
(2.0)
|
|
|
4.3
|
|
Noncontrolling
interest
|
|
—
|
|
|
—
|
|
|
(1.1)
|
|
|
—
|
|
|
—
|
|
|
(1.1)
|
|
Adjustments (2)
(4) (6)
|
|
17.6
|
|
|
7.0
|
|
|
25.8
|
|
|
6.9
|
|
|
91.9
|
|
|
149.2
|
|
Adjusted
EBITDA
|
|
$
|
146.0
|
|
|
$
|
100.2
|
|
|
$
|
76.7
|
|
|
$
|
18.0
|
|
|
$
|
(63.3)
|
|
|
$
|
277.6
|
|
Operating
Margin
|
|
35.5
|
%
|
|
39.7
|
%
|
|
6.6
|
%
|
|
8.5
|
%
|
|
nm
|
|
5.5
|
%
|
Adjusted EBITDA
Margin
|
|
47.5
|
%
|
|
48.7
|
%
|
|
32.4
|
%
|
|
21.1
|
%
|
|
nm
|
|
33.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In
millions)
|
|
Twelve Months
Ended December 31, 2018
|
|
|
U.S. Information
Solutions
|
|
Workforce
Solutions
|
|
International
|
|
Global Consumer
Solutions
|
|
General Corporate
Expense**
|
|
Total
|
|
|
|
|
|
|
Revenue
|
|
$
|
1,247.3
|
|
|
$
|
826.8
|
|
|
$
|
966.2
|
|
|
$
|
371.8
|
|
|
—
|
|
|
$
|
3,412.1
|
|
Operating
Income
|
|
441.7
|
|
|
332.7
|
|
|
108.6
|
|
|
68.6
|
|
|
(503.6)
|
|
|
448.0
|
|
Depreciation and
Amortization
|
|
79.2
|
|
|
45.8
|
|
|
118.5
|
|
|
14.9
|
|
|
52.0
|
|
|
310.4
|
|
Other
income/(expense), net*
|
|
2.7
|
|
|
—
|
|
|
14.4
|
|
|
—
|
|
|
(9.5)
|
|
|
7.6
|
|
Noncontrolling
interest
|
|
—
|
|
|
—
|
|
|
(6.5)
|
|
|
—
|
|
|
—
|
|
|
(6.5)
|
|
Adjustments (2)
(4) (6) (7)
|
|
55.3
|
|
|
19.8
|
|
|
58.6
|
|
|
23.7
|
|
|
233.0
|
|
|
390.4
|
|
Adjusted
EBITDA
|
|
$
|
578.9
|
|
|
$
|
398.3
|
|
|
$
|
293.6
|
|
|
$
|
107.2
|
|
|
$
|
(228.1)
|
|
|
$
|
1,149.9
|
|
Operating
Margin
|
|
35.4
|
%
|
|
40.2
|
%
|
|
11.2
|
%
|
|
18.4
|
%
|
|
nm
|
|
13.1
|
%
|
Adjusted EBITDA
Margin
|
|
46.4
|
%
|
|
48.2
|
%
|
|
30.4
|
%
|
|
28.8
|
%
|
|
nm
|
|
33.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*Excludes interest income $1.1
million in the fourth quarter and $4.2 million for the year ended December 31,
2018.
**General Corporate Expense includes non-recurring adjustments of
$91.9 million in the fourth quarter
and $233.0 million for the year ended
December 31, 2018.
(1) During the fourth quarter of 2019 and for the year
ended December 31, 2019, we recorded
expenses, net of directors and officers insurance recoveries, of
$99.6 million ($83.5 million, net of tax) and $800.9 million ($686.1
million, net of tax) for losses associated with certain
legal proceedings and government investigations related to the 2017
cybersecurity incident, exclusive of our legal professional
services expenses. See the Notes to this reconciliation for
additional detail.
(2) During the fourth quarter of 2019 and for the year
ended December 31, 2019, we recorded
pre-tax expenses of $82.0 million
($63.5 million, net of tax) and
$337.3 million ($252.3 million, net of tax), respectively, for
expenses related to the 2017 cybersecurity incident. During the
fourth quarter of 2018 and for year ended December 31, 2018, we recorded pre-tax expenses
of $104.6 million ($76.8 million, net of tax) and $326.2 million ($243.9
million, net of tax), respectively, for expenses related to
the 2017 cybersecurity incident. See the Notes to this
reconciliation for additional detail.
(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 first quarter of 2019 and the fourth
quarter of 2018, we recorded $11.5
million ($8.8 million, net of
tax) and $46.1 million ($35.0 million, net of tax), respectively, of
restructuring charges for the realignment of internal resources and
other costs, which predominantly relates to the reduction of
headcount and the realignment of our internal resources to support
the Company's strategic objectives and increase the integration of
our global operations. See the Notes to this reconciliation for
additional detail.
(5) During the second quarter of 2019, we recorded
$6.3 million ($4.8 million, net of tax) for PayNet acquisition
related amounts other than acquisition-related amortization which
was primarily related to transaction costs resulting from the
acquisition and was recorded in operating income. See the Notes to
this reconciliation for additional detail.
(6) During the fourth quarter of 2019 and for
the year ended December 31, 2019, we
recorded a foreign currency loss of $0.2 million and
$1.0 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.
During the fourth quarter of 2018 and for the year ended
December 31, 2018, we recorded a
foreign currency loss of $0.6 million and $1.8 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.
(7) During the third quarter of 2018, we recorded
an $18.5 million ($14.1
million, net of tax) charge for a legal settlement that was
not related to the 2017 cybersecurity incident. See the Notes to
this reconciliation for additional detail.
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 for the twelve months ended
December 31, 2019**:
(In
millions)
|
|
Twelve Months
Ended
December 31,
|
|
|
|
|
|
|
|
|
Operating
revenue
|
|
Adjustments
(1)
|
|
Adjusted
revenue
|
|
Operating
revenue
|
|
|
|
|
|
Local
Currency
|
Operating
revenue:
|
|
2019
|
|
|
|
2019
|
|
2018
|
|
$
Change
|
|
%
Change
|
|
%
Change*
|
Online Information
Solutions
|
|
$
|
924.1
|
|
|
$
|
15.0
|
|
|
$
|
939.1
|
|
|
$
|
877.5
|
|
|
61.6
|
|
|
7
|
%
|
|
|
Mortgage
Solutions
|
|
136.9
|
|
|
—
|
|
|
136.9
|
|
|
153.6
|
|
|
(16.7)
|
|
|
(11)
|
%
|
|
|
Financial Marketing
Services
|
|
216.4
|
|
|
5.0
|
|
|
221.4
|
|
|
216.2
|
|
|
5.2
|
|
|
2
|
%
|
|
|
Total U.S. Information
Solutions
|
|
1,277.4
|
|
|
20.0
|
|
|
1,297.4
|
|
|
1,247.3
|
|
|
50.1
|
|
|
4
|
%
|
|
|
Verification
Services
|
|
700.1
|
|
|
—
|
|
|
700.1
|
|
|
567.0
|
|
|
133.1
|
|
|
23
|
%
|
|
|
Employer
Services
|
|
249.6
|
|
|
—
|
|
|
249.6
|
|
|
259.8
|
|
|
(10.2)
|
|
|
(4)
|
%
|
|
|
Total Workforce
Solutions
|
|
949.7
|
|
|
—
|
|
|
949.7
|
|
|
826.8
|
|
|
122.9
|
|
|
15
|
%
|
|
|
Asia
Pacific
|
|
300.1
|
|
|
—
|
|
|
300.1
|
|
|
325.6
|
|
|
(25.5)
|
|
|
(8)
|
%
|
|
(1)
|
%
|
Europe
|
|
275.6
|
|
|
—
|
|
|
275.6
|
|
|
287.3
|
|
|
(11.7)
|
|
|
(4)
|
%
|
|
—
|
%
|
Latin
America
|
|
190.5
|
|
|
—
|
|
|
190.5
|
|
|
206.6
|
|
|
(16.1)
|
|
|
(8)
|
%
|
|
9
|
%
|
Canada
|
|
154.4
|
|
|
—
|
|
|
154.4
|
|
|
146.7
|
|
|
7.7
|
|
|
5
|
%
|
|
8
|
%
|
Total
International
|
|
920.6
|
|
|
—
|
|
|
920.6
|
|
|
966.2
|
|
|
(45.6)
|
|
|
(5)
|
%
|
|
3
|
%
|
Global Consumer
Solutions
|
|
359.9
|
|
|
—
|
|
|
359.9
|
|
|
371.8
|
|
|
(11.9)
|
|
|
(3)
|
%
|
|
(3)
|
%
|
Total
|
|
$
|
3,507.6
|
|
|
$
|
20.0
|
|
|
$
|
3,527.6
|
|
|
$
|
3,412.1
|
|
|
$
|
115.5
|
|
|
3
|
%
|
|
6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*Reflects percentage change in revenue conforming 2019 results
using 2018 exchange rates.
**We did not have any adjustments to revenue for the three months
ended December 31, 2019 or the three and twelve months ended
December 31, 2018.
(1) During the third quarter of 2019, we recorded a
$20.0 million ($15.1 million, net of tax) charge to revenue
related settlements with commercial customers. See the Notes to
this reconciliation for additional detail.
Notes to Reconciliations of Non-GAAP Financial Measures to
the Comparable GAAP Financial Measures
Acquisition-related amortization expense, net of tax -
During the fourth quarter of 2019, we recorded acquisition-related
amortization expense of certain acquired intangibles of
$35.3 million ($30.0 million net of tax). For the year ended
December 31, 2019, we recorded
acquisition-related amortization expense of certain acquired
intangibles of $140.2 million
($119.4 million net of tax).
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. 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 significant 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.
Accrual for legal matters related to the 2017 cybersecurity
incident - During the fourth quarter of 2019 and for the year
ended December 31, 2019, we recorded
expenses, net of directors and officers insurance recoveries, of
$99.6 million ($83.5 million, net of tax) and $800.9 million ($686.1
million, net of tax) for losses associated with certain
legal proceedings and government investigations related to the 2017
cybersecurity incident, exclusive of our legal professional
services expenses. While it is reasonably possible that losses
exceeding the amount accrued will be incurred, it is not possible
at this time to estimate the additional possible loss in excess of
the amount already accrued that might result from adverse
judgments, settlements, penalties or other resolution of the
proceedings and investigations related to the 2017 cybersecurity
incident. The ultimate amount paid on these actions, claims and
investigations in excess of the amount already accrued could be
material to the Company's consolidated financial condition, results
of operations, or cash flows in future periods. Management believes
excluding this charge from certain financial results provides
meaningful supplemental information regarding our financial results
for the three and twelve months ended December 31, 2019, since
a charge of such an amount is not comparable among the periods.
This is consistent with how our management reviews and assesses
Equifax's historical performance and is useful when planning,
forecasting and analyzing future periods.
Costs related to the 2017 cybersecurity incident -
During the third quarter of 2017, we reported that we were the
target of a cybersecurity incident. We recorded $82.0 million ($63.5
million, net of tax) and $337.3
million ($252.3 million, net
of tax) during the fourth quarter of 2019 and for the year ended
December 31, 2019, respectively, and
$104.6 million ($76.8 million, net of tax) and $326.2 million ($243.9
million, net of tax) during the fourth quarter of 2018 and
for the year ended December 31, 2018,
respectively, for costs related to the 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 credit monitoring product and related
support to the consumer. Costs related to the 2017 cybersecurity
incident do not include the above accrual for losses associated
with certain legal proceedings and government investigations
related to the 2017 cybersecurity incident. 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.
Settlements 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.
Charge related to the realignment of internal resources and
other costs - During the first quarter of 2019 and the fourth
quarter of 2018, we recorded $11.5
million ($8.8 million, net of
tax) and $46.1 million ($35.0 million, net of tax), respectively, of
restructuring charges for the realignment of internal resources and
other costs, which predominantly relates to the reduction of
headcount and the realignment of our internal resources to support
the Company's strategic objectives. Management believes
excluding this charge from certain financial results provides
meaningful supplemental information regarding our financial results
for the years ended December 31, 2019 and 2018, since a charge
of such amount is not comparable among the periods. This is
consistent with how our management reviews and assesses Equifax's
historical performance and is useful when planning, forecasting and
analyzing future periods.
PayNet acquisition related amounts for transaction expenses
incurred as a direct result of the acquisition - During the
second quarter of 2019, we recorded $6.3
million ($4.8 million, net of
tax) for PayNet acquisition related amounts other than
acquisition-related amortization which was primarily related to
transaction costs resulting from the acquisition and was recorded
in operating income. Management believes excluding this charge from
certain financial results provides meaningful supplemental
information regarding our financial results for the twelve months
ended December 31, 2019, since a charge of such amount is not
comparable among the periods. This is consistent with how our
management reviews and assesses Equifax's historical performance
and is useful when planning, forecasting, and analyzing future
periods.
Argentina highly
inflationary foreign currency adjustment - Argentina 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 fourth quarter of 2019 and for the year ended
December 31, 2019, we recorded a
foreign currency loss of $0.2 million and $1.0 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. During the fourth quarter of
2018 and for the year ended December 31,
2018, we recorded a foreign currency loss of $0.6
million and $1.8 million,
respectively. 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 fourth quarter of 2019
and for the year ended December 31,
2019, we recorded tax expense of $1.1
million and tax benefit of $3.0
million, respectively, related to the tax effects of
deductions for stock compensation in excess of amounts recorded for
compensation costs. During the fourth quarter of 2018 and for the
year ended December 31, 2018, we
recorded a tax benefit of $0.5
million and $7.5 million,
respectively. Management believes excluding this tax effect from
financial results provides meaningful supplemental information
regarding our financial results for the three and twelve months
ended December 31, 2019, as compared to the corresponding
period in 2018, 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.
Legal settlement unrelated to the 2017 cybersecurity incident
- During the third quarter of 2018, we recorded
an $18.5 million ($14.1
million, net of tax) charge for a legal settlement that was
not related to the 2017 cybersecurity incident. Management believes
excluding this charge from certain financial results provides
meaningful supplemental information regarding our financial results
for the year ended December 31, 2018, since a charge of such
an amount is not comparable among the periods. This is consistent
with how our management reviews and assesses Equifax's historical
performance and is useful when planning, forecasting and analyzing
future periods.
Adjustments for uncertain tax positions - For
the year ended December 31, 2018, we
recorded a tax benefit of $14.1
million related to adjustments from uncertain tax positions
resulting from the completion of examinations of historical tax
returns. Management believes excluding this tax effect from
certain financial results provides meaningful supplemental
information regarding our financial results for the year ended
December 31, 2018, since a charge of
such amount for 2018 is not comparable among the periods. 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.
Management believes the use of adjusted revenue allows investors to
evaluate our performance for different periods on a more comparable
basis.
Contact:
|
|
|
|
Trevor
Burns
|
Ben
Sheidler
|
Investor
Relations
|
Media
Relations
|
(404)
885-8804
|
404-885-8332
|
trevor.burns@equifax.com
|
ben.sheidler@equifax.com
|
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SOURCE Equifax Inc.