As used herein, the terms Equifax, the Company, we, our and us refer toEquifax Inc. , aGeorgia corporation, and its consolidated subsidiaries as a combined entity, except where it is clear that the terms mean onlyEquifax Inc. All references to earnings per share data in Management's Discussion and Analysis, or MD&A, are to diluted earnings per share, or EPS, unless otherwise noted. Diluted EPS is calculated to reflect the potential dilution that would occur if stock options or other contracts to issue common stock were exercised and resulted in additional common shares outstanding.
BUSINESS OVERVIEW
Equifax Inc. is a global data, analytics and technology company. We provide information solutions for businesses, governments and consumers, and we provide human resources business process outsourcing services for employers. We have a large and diversified group of clients, including financial institutions, corporations, government agencies and individuals. Our services are based on comprehensive databases of consumer and business information derived from numerous sources including credit, financial assets, telecommunications and utility payments, employment, income, demographic and marketing data. We use advanced statistical techniques, machine learning and proprietary software tools to analyze available data to create customized insights, decision-making solutions and processing services for our clients. We also provide information, technology and services to support debt collections and recovery management. Additionally, we are a leading provider of payroll-related and human resource management business process outsourcing services in theU.S. For consumers, we provide products and services to help people understand, manage and protect their personal information and make more informed financial decisions. We currently operate in four global regions:North America (U.S. andCanada ),Asia Pacific (Australia ,New Zealand andIndia ),Europe (theU.K. ,Spain andPortugal ) andLatin America (Argentina ,Chile ,Costa Rica ,Ecuador ,El Salvador ,Honduras ,Mexico ,Paraguay ,Peru andUruguay ). We maintain support operations in theRepublic of Ireland ,Chile ,Costa Rica andIndia . We also offer Equifax branded credit services inRussia through a joint venture, have investments in consumer and/or commercial credit information companies through joint ventures inCambodia ,Malaysia andSingapore and have an investment in a consumer and commercial credit information company inBrazil . Recent Events and Company Outlook As further described in our 2020 Form 10-K, we operate in theU.S. , which represented 78% of our revenue in 2020, and internationally in more than 20 countries. Our products and services span a wide variety of vertical markets including financial services, mortgage, federal, state and local governments, automotive, telecommunications and many others. InMarch 2020 , theWorld Health Organization designated the novel coronavirus disease ("COVID-19") as a global pandemic. The impact of COVID-19 and related actions to attempt to control its spread began to impact our consolidated operating results in the first quarter of 2020. During 2020, the impact on the operating results in each country in which we operate differed based on the conditions and the vertical markets we serve in that country with the impact of the pandemic experienced most severely by our International business. Details of the impact of COVID-19 to our 2020 results can be found under the heading "Segment Financial Results" in the Management's Discussion and Analysis of Financial Condition and Results of Operation section of the 2020 Form 10-K. In the third quarter and first nine months of 2021, as efforts to minimize the spread of COVID-19 have been more successful and access to vaccinations has increased, our consolidated revenue grew when compared to 2020, reflecting theU.S. mortgage market demand in 2021 compared to 2020, recovering country 23 -------------------------------------------------------------------------------- economies, Equifax-initiative growth and, to a lesser extent, revenue from acquired companies. A more thorough discussion of our business unit results are included under the heading "Segment Financial Results" in the Management's Discussion and Analysis of Financial Condition and Results of Operation section of this Form 10-Q. We are unable to determine the severity or duration of the impact of the COVID-19 pandemic on the individual markets in the countries we serve or how this impact will change with time. Although consolidated revenue has grown during the third quarter and first nine months of 2021 when compared to 2020, due to the uncertain effects on the global economy caused by the impact of COVID-19, the impact on our future results of operations related to the COVID-19 pandemic are unclear. We expect that the global COVID-19 pandemic will continue to impact our business and results of operations. While the COVID-19 pandemic affects the countries in which we operate, our critical priorities remain as follows: (i)the health and safety of our employees and their families; (ii)providing support to consumers; (iii)helping our customers execute their changing business plans by providing innovative solutions combining our unique data assets and leading analytical and technology capabilities; and (iv)executing on our cloud technology, data and security transformation per our previously stated plans. We are generally following the requirements and protocols published by theU.S. Centers for Disease Control andthe World Health Organization , and federal, state and local governments. In jurisdictions where local restrictions have been lifted, as is the case at our majorU.S. locations, our employees are returning to work to their assigned offices in conjunction with jurisdictional guidance. In jurisdictions where the local restrictions that were implemented to prevent the further spread of the virus allow, our employees can work from their assigned offices or from home. Generally across our facilities, we have undertaken actions to make these sites safer. We have also substantially reduced employee travel. If public health authorities dictate further measures to limit further spread of the virus, we may need to reinstate our business continuity plans in certain countries or regions in which we operate. As of the date of this filing, we do not believe our work from home and return to office protocols have materially adversely impacted our internal controls, financial reporting systems or our operations. Our data and analytics, product and sales teams are focused on how to refine existing products and services, as well as generate new products and services, to meet the changing needs of our customers in this environment. Our technology teams continue to execute on our cloud technology, data and security transformation, including the continued migration of our technology to cloud native environments. To date, the change to our working environment has not caused material disruptions in the execution of these plans. As a response to the ongoing COVID-19 pandemic, we implemented plans to manage our costs. We limited the addition of new employees and third party contracted services, limited most travel except where necessary to meet customer or regulatory needs, and acted to limit discretionary spending. The pace of recovery of the global economy from the COVID-19 induced recession remains uncertain and may affect certain markets or regions we serve differently. Any future asset impairment charges, increase in allowance for doubtful accounts, or restructuring charges could be more likely and will be dependent on the severity and duration of the pandemic. In light of the evolving health, social, economic and business environment, governmental regulations or mandates, and business disruptions that could occur, the potential impact that COVID-19 could have on our financial condition and operating results remains uncertain. For more information, see "Item 1A. Risk Factors-Our business has been and will continue to be negatively impacted by the recent COVID-19 outbreak," in our 2020 Form 10-K. 24 -------------------------------------------------------------------------------- 2017 Cybersecurity Incident In 2017, we experienced a cybersecurity incident following a criminal attack on our systems that involved the theft of certain personally identifiable information ofU.S. , Canadian andU.K. consumers. Criminals exploited a software vulnerability in aU.S. website application to gain unauthorized access to our network. InMarch 2017 , theU.S. Department of Homeland Security distributed a notice concerning the software vulnerability. We undertook efforts to identify and remediate vulnerable systems; however, the vulnerability in the website application that was exploited was not identified by our security processes. We discovered unusual network activity inlate-July 2017 and upon discovery promptly investigated the activity. Once the activity was identified as potential unauthorized access, we acted to stop the intrusion and engaged a leading, independent cybersecurity firm to conduct a forensic investigation to determine the scope of the unauthorized access, including the specific information impacted. Based on our forensic investigation, the unauthorized access occurred frommid-May 2017 throughJuly 2017 . No evidence was found that the Company's core consumer, employment and income, or commercial reporting databases were accessed. OnFebruary 10, 2020 , theU.S. Department of Justice announced that four members of theChinese People's Liberation Army were indicted on criminal charges for their involvement in the 2017 cybersecurity incident. As a result of the 2017 cybersecurity incident, we were subject to a significant number of proceedings and investigations as described in Part II, "Item 1. Legal Proceedings" in this Form 10-Q. We did not record any settlement expenses related to the resolution of these proceedings and investigations for the three or nine months endedSeptember 30, 2021 and 2020. To date, we have recorded legal settlement expenses, net of insurance recoveries, of$800.9 million in selling, general, and administrative expenses in our Consolidated Statements of Income (Loss). As ofSeptember 30, 2021 ,$345.0 million is outstanding on the Consolidated Balance Sheet within other current liabilities related to theU.S. Consumer MDL Litigation. The amounts accrued represent our best estimate of the liability related to these matters. The Company will continue to evaluate information as it becomes known and adjust accruals for new information and further developments in accordance with ASC 450-20-25. Future Costs We are currently executing substantial initiatives in security and consumer support, and a company-wide transformation of our technology platforms to cloud based technologies, which we refer to as our technology transformation, and incurred substantially increased expenses and capital expenditures in 2018, 2019 and 2020 related to these initiatives. We expect to continue to incur additional expenses and capital expenditures in the remainder of 2021 related to these initiatives, although at reduced levels compared to those incurred in 2020.
We will recognize the expenses and capital expenditures referenced herein as they are incurred.
Segment and Geographic Information
Segments. The Workforce Solutions segment consists of the Verification Services and Employer Services business lines. Verification Services revenue is transaction-based and is derived primarily from employment and income verification. Employer Services revenue is derived from our provision of certain human resources business process outsourcing services that include both transaction and subscription based product offerings. These services include unemployment claims management, employment-based tax credit services and other complementary employment-based transaction services. The USIS segment consists of three service lines: Online Information Solutions, Mortgage Solutions, and Financial Marketing Services. Online Information Solutions and Mortgage Solutions revenue is principally transaction-based and is derived from our sales of products such as consumer and commercial credit reporting and scoring, identity management, fraud detection and modeling services. USIS also markets certain decisioning software services that facilitate and automate a variety of consumer and commercial credit-oriented decisions. Financial Marketing Services revenue is principally project and subscription based and is derived from our sales of batch credit and consumer wealth information such as those that assist clients in acquiring new customers, cross-selling to existing customers and managing portfolio risk. The International segment consists ofAsia Pacific ,Europe ,Latin America andCanada .Canada's services are similar to our USIS offerings.Asia Pacific ,Europe andLatin America are made up of varying mixes of service lines that are generally consistent with those in our USIS reportable segment. We also provide information and technology services to support lenders and other creditors in the collections and recovery management process.
GCS revenue is both transaction and subscription based and is derived from the
sale of credit monitoring and identity theft protection products, which we
deliver electronically to consumers primarily via the internet in the
25 --------------------------------------------------------------------------------U.K. We also sell consumer and credit information to resellerswho combine our information with other information to provide direct-to-consumer monitoring, reports and scores. Geographic Information. We currently have operations in the following countries:Argentina ,Australia ,Canada ,Chile ,Costa Rica ,Ecuador ,El Salvador ,Honduras ,India ,Mexico ,New Zealand ,Paraguay ,Peru ,Portugal , theRepublic of Ireland ,Spain , theU.K. ,Uruguay and theU.S. We also offer Equifax branded credit services inRussia through a joint venture, have investments in consumer and/or commercial credit information companies through joint ventures inCambodia ,Malaysia andSingapore and have an investment in a consumer and commercial credit information company inBrazil . Approximately 79% and 78% of our revenue was generated in theU.S. during the three months endedSeptember 30, 2021 and 2020, respectively. Approximately 79% and 78% of our revenue was generated in theU.S. during the nine months endedSeptember 30, 2021 and 2020, respectively. Key Performance Indicators. Management focuses on a variety of key indicators to monitor operating and financial performance. These performance indicators include measurements of operating revenue, change in operating revenue, operating income, operating margin, net income, diluted earnings per share, cash provided by operating activities and capital expenditures. The key performance indicators for the three and nine months endedSeptember 30, 2021 and 2020 were as follows: Key Performance Indicators Three Months Ended September 30, Nine months ended September 30, 2021 2020 2021 2020 (In millions, except per share
data) (In millions, except per share data) Operating revenue
$ 1,222.9 $ 1,068.3 $ 3,670.7 $ 3,009.1 Operating revenue change 14 % 22 % 22 % 16 % Operating income $ 273.2$ 204.4 $ 885.8$ 507.2 Operating margin 22.3 % 19.1 % 24.1 % 16.9 % Net income attributable to Equifax $ 205.4$ 228.5 $ 622.1$ 445.7 Diluted earnings per share $ 1.66$ 1.86 $ 5.04$ 3.63 Cash provided by operating activities $ 398.4$ 367.0 $ 949.5$ 649.0 Capital expenditures* $ 121.0$ (112.3) $ 345.9$ (309.6)
*Amounts include accruals for capital expenditures.
Operational and Financial Highlights
•We repurchased 0.4 million shares of our common stock on the open market for
•We paid out
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