Equifax (EFX) Q2 Earnings Surpass Estimates, Revenues Lag
Equifax Inc. EFX reported mixed second-quarter 2018 results, wherein earnings surpassed the Zacks Consensus Estimate but revenues missed the same.
Adjusted earnings of $1.56 per share outpaced the consensus mark by 2 cents but declined 2.5% year over year. The bottom-line figure came in at the higher end of the guided range of $1.51-$1.56 per share. Costs associated with the cybersecurity incident and buyout-related amortization expenses resulted in the earnings decline, offset by the new tax (Tax Cuts and Jobs Act) law benefits. The company enjoyed a tax benefit of $1.9 million in the quarter.
Revenues came in at $876.9 million, which missed the consensus estimate by $9 million but increased 2.4% year over year. The reported figure was below the guided range of $880-$890 million. Strength across the International and Workforce Solutions segments contributed toward year-over-year revenue growth. These were, however, partially offset by Equifax’s soft business at the U.S. Information Solutions (USIS) and Global Consumer Solutions segments.
Shares were down 2.1% in in afterhours trading as the company provided a weak earnings guidance, the mid-point of which marks a significant year-over-year decline. In a year’s time, shares of Equifax have declined 10.5% against the 38.8% rally of the industry it belongs to.
Let’s check out the numbers in detail.
Revenues by Segment
Revenues from the USIS division amounted to $324.6 million, down 2% from the year-ago quarter. The division suffered revenues decline of 4% at Online Information Solutions ($219.7 million) and 9% at Financial Marketing Services ($45.5 million) sub-segments, while sales at Mortgage Solutions grew 18% to $41.7 million. USIS accounted for 37% of total revenues.
Revenues from the International division totaled $250.3 million, up 8% year over year on a reported as well as constant-currency basis. On the international front, Equifax registered revenue growth of 12%, 6%, 2% and 13% in Asia-Pacific, Europe, Latin America and Canada, respectively. On a local-currency basis, revenues from Asia-Pacific, Europe, Latin America and Canada grew 12%, 1%, 15% and 8%, respectively. International accounted for 28% of total revenues.
Revenues from the Workforce Solutions segment summed $207.6 million, up 7% from the year-ago quarter. This improvement includes Verification Services revenues of $149.3 million (up 15% year over year) and Employer Services revenues of $58.3 million (down 9% year over year). Workforce Solutions contributed to 24% of total revenues.
Revenues from Global Consumer Solutions segment came in at $94.4 million, down 5% year over year on a reported as well as local-currency basis. It contributed to 11% of total revenues.
Equifax, Inc. Revenue (TTM)
Adjusted EBITDA in second-quarter 2018 decreased 8% year over year to $306.9 million. Adjusted EBITDA margin was 35% compared with 39.1% in the year-ago quarter.
Adjusted EBITDA margin for USIS was 47.7% compared with 51.5% in the year-ago quarter. Adjusted EBITDA margin for International was 30.5% in second quarter compared with 30.9% in the year-ago quarter. Workforce Solutions’ adjusted EBITDA margin was 47.6% compared with 51.2% in the prior-year quarter. Adjusted EBITDA margin for Global Consumer Solutions was 31% flat with the year-ago tally.
Balance Sheet and Cash Flow
Equifax exited second-quarter with cash and cash equivalents of $327.4 million, higher than $249.3 million in the prior quarter. Long-term debt at the end of the quarter was $2.6 billion compared with $1.7 billion in the prior quarter. The company generated $235.2 million of cash from operating activities and spent $62.5 million in capital expenditures. Also, Equifaxpaid dividend of $47 million to its shareholders in the quarter.
For the third quarter of 2018, Equifax expect revenues to be in the range of $853-$863 million, reflecting year-over-year constant-currency growth of 4-5%. The guided range is much below the Zacks Consensus Estimate of $870.9 million. Adjusted EPS is anticipated to be between $1.39 and $1.44. This projected range is also far below the Zacks Consensus Estimate of $1.54.
For 2018, revenues are expected to be between $3.425 billion and $3.525 billion, the mid-point of which is slightly below the Zacks Consensus Estimate of $3.50 billion. Adjusted EPS is anticipated to be between $5.80 and $6.00. Mid-point of this guided range is also slightly below the Zacks Consensus Estimate of $5.94.
Zacks Rank & Upcoming Releases
Equifax currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Investors interested in the broader Business Services sector are keenly awaiting second-quarter earnings reports from key players like Verisk Analytics VRSK, Aptiv APTV and Fiserv FISV. All the companies are slated to report their quarterly numbers on Jul 31.
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