Equifax Q2 2023 Revenue Up 1% Against a Challenging Mortgage Market

Equifax^® (NYSE: EFX) Financial Results Summary: The company reported revenue of $1,317.6 million in the second quarter of 2023, flat compared to the second quarter of 2022 on a reported basis and up 1% on a local currency basis. Net income attributable to Equifax of $138.3 million was down 31% in the second quarter of 2023 compared to $200.6 million in the second quarter of 2022.Diluted EPS attributable to Equifax was $1.12 for the second quarter of 2023, down 31% compared to $1.63 in the second quarter of 2022

Second quarter 2023 revenue of $1.318 billion was flat and up 1% in constant currency against a mortgage market estimated to be down 37%.

Very good execution of our 2023 Cloud spending reduction plan. Implemented additional actions to increase spending reduction in 2023 to $210 million and in 2024 to $275 million.
Strong new product innovation leveraging Equifax Cloud with record New Product Vitality Index of 14%.
Workforce Solutions revenue down 4% from challenging mortgage and hiring market partially offset by continued strong revenue growth in Government.
USIS revenue up 6%, with B2B non-mortgage revenue growth of 7% and strong 9% Online B2B non-mortgage revenue growth.
International constant currency revenue growth of 7%.
Received shareholder approval for the merger of Boa Vista Serviços, the second largest credit bureau in Brazil, which will expand Equifax capabilities in the large and fast-growing Brazilian market.
Revising guidance downward to reflect expected impact of weaker than expected U.S. mortgage originations reducing full year 2023 revenue at the midpoint to $5.300 billion. Adjusted EPS guidance revised downward to $6.98 per share at the midpoint from lower mortgage revenue.

“Equifax had a solid second quarter against a continuing challenging mortgage market, with very good execution against our 2023 Cloud spending reduction plan. Revenue growth of 1% in constant currency was at about the midpoint of our guidance, with continued strong new product performance with a New Product Vitality Index of 14%, a record for Equifax. However, later in the quarter, we saw U.S. mortgage activity at levels below our expectations and slowing U.S. hiring activity, which impacted revenue particularly in Workforce Solutions. Workforce Solutions continued to substantially outperform the underlying mortgage and talent markets, and delivered very strong revenue growth in Government. USIS delivered a strong quarter, which included strong Online B2B non-mortgage growth of 9%, and International delivered constant currency revenue growth of 7%, which was above our expectations,” said Mark W. Begor, CEO of Equifax.

“In June, we received shareholder approval for the merger of Boa Vista Serviços, the second largest credit bureau in Brazil, and we expect to close the strategic acquisition in early August. This merger will expand Equifax capabilities in the large and fast-growing Brazilian market and add to our diverse International portfolio, while giving Boa Vista Serviços access to our expansive global capabilities and cloud-native data, products, decisioning and analytical technology for the rapid development of new products and services, and expansion into new industries.”

“We expect the weaker than expected U.S. mortgage market that we saw in June to continue, and we now expect full year mortgage originations to decline about 37%, which is down five percentage points from our prior framework. We also expect to see the slowing in U.S. hiring to continue throughout 2023, but expect to offset this impact on non-mortgage revenue with stronger growth in the Workforce Government business, as well as solid performance in USIS and International. As we look to our Full Year 2023 guidance, we are reducing our Revenue guidance to $5.300 billion at the midpoint reflecting the more negative impact of the weaker mortgage market and loss of high margin mortgage revenue. We are taking actions to realize additional Cloud spending reductions of $10 million in the second half. Our full year Adjusted EPS Guidance is now $6.98 at the midpoint, reflecting the impact of the lower mortgage revenue.”

“We are confident in the future of the New Equifax as we move toward completion of our EFX Cloud and Data transformation, leverage our new Cloud capabilities to accelerate new product roll-outs that ‘Only Equifax’ can provide to drive future growth in 2023 and beyond. We are energized about the New Equifax and remain confident in our long-term 8-12% revenue growth framework that will deliver higher margins and free cash flow.”

Workforce Solutions second quarter results

Total revenue was $582.8 million in the second quarter of 2023, down 4% compared to the second quarter of 2022. Operating margin for Workforce Solutions was 42.0% in the second quarter of 2023 compared to 46.2% in the second quarter of 2022. Adjusted EBITDA margin for Workforce Solutions was 51.5% in the second quarter of 2023 compared to 53.4% in the second quarter of 2022.
Verification Services revenue was $474.0 million, down 6% compared to the second quarter of 2022.
Employer Services revenue was $108.8 million, up 4% compared to the second quarter of 2022.

USIS second quarter results

Total revenue was $445.0 million in the second quarter of 2023, up 6% compared to $421.4 million in the second quarter of 2022. Operating margin for USIS was 23.1% in the second quarter of 2023 compared to 26.6% in the second quarter of 2022. Adjusted EBITDA margin for USIS was 36.0% in the second quarter of 2023 compared to 38.2% in the second quarter of 2022.
Online Information Solutions revenue was $358.6 million, up 9% compared to the second quarter of 2022.
Mortgage Solutions revenue was $30.3 million, down 18% compared to the second quarter of 2022.
Financial Marketing Services revenue was $56.1 million, up 1% compared to the second quarter of 2022.

International second quarter results

Total revenue was $289.8 million in the second quarter of 2023, up 1% and 7% compared to the second quarter of 2022 on a reported and local currency basis, respectively. Operating margin for International was 11.9% in the second quarter of 2023, compared to 11.3% in the second quarter of 2022. Adjusted EBITDA margin for International was 24.2% in the second quarter of 2023, compared to 24.7% in the second quarter of 2022.
Asia Pacific revenue was $87.7 million, down 3% and up 4% compared to the second quarter of 2022 on a reported and local currency basis, respectively.
Europe revenue was $78.7 million, down 1% and 2% compared to the second quarter of 2022 on a reported and local currency basis, respectively.
Canada revenue was $66.5 million, up 4% and 8% compared to the second quarter of 2022 on a reported and local currency basis, respectively.
Latin America revenue was $56.9 million, up 9% and 23% compared to the second quarter of 2022 on a reported and local currency basis, respectively.

Source: Equifax Earnings Release