Equifax Delivers Solid Revenue and Earnings Performance in the Fourth Quarter and Full Year 2007; Announces Outlook for First Quarter and Full Year 2008
ATLANTA, February 4, 2008 -- Equifax Inc. (NYSE: EFX) today reported financial results for the quarter and year ended December 31, 2007. Based on unaudited results, revenue increased 26 percent in the fourth quarter to $490.9 million from the fourth quarter 2006. Operating income grew 9 percent to $120.2 million. Fourth quarter diluted earnings per share (“EPS”) was 49 cents compared to 50 cents in the prior year period. On a non-GAAP basis, EPS, adjusted to exclude the impact of acquisition-related amortization expense and the 2006 organizational realignment charge, increased 4 percent to 59 cents for the fourth quarter 2007.
For the full year 2007, revenue increased 19 percent to $1.84 billion compared to 2006. Operating income grew 11 percent to $486.2 million. Diluted EPS was $2.02 compared to $2.12 for the full year 2006. EPS for the full year 2007, adjusted to exclude the impact of acquisition-related amortization expense and certain 2006 matters, increased 7 percent to $2.32 from the prior year period. Adjusted EPS is a non-GAAP financial measure, which is defined and reconciled to the most closely related GAAP financial measure in the information accompanying this release.
“In 2007, we made significant progress executing on our growth strategy. We acquired TALX, the largest acquisition in the company’s history, which significantly diversifies revenues and broadens our product portfolio. In addition, we continued market penetration of analytics and enabling technologies in U.S. Consumer Information Solutions and experienced strong incremental growth and margin improvement in our International businesses,” said Richard F. Smith, Equifax Chairman and Chief Executive Officer. “North America Personal Solutions exceeded performance expectations and North America Commercial Solutions finished the year with strong growth and a much sharper strategic focus.”
Fourth Quarter 2007 Highlights
- Double-digit revenue growth in our North America Personal Solutions, North America Commercial Solutions and International operating segments and results from TALX contributed to a 26 percent increase in revenue in the fourth quarter of 2007, when compared to the same period in 2006. Equifax, excluding TALX, delivered 7 percent revenue growth while TALX contributed 19 points to fourth quarter growth.
- Operating margin was 24.5 percent compared to 28.2 percent in the fourth quarter of 2006. On a non-GAAP basis, operating margin adjusted to exclude the impact of acquisition-related amortization expense and the 2006 charge related to organizational realignment was 28.9 percent in 2007 compared to 31.8 percent in the fourth quarter of 2006. Adjusted operating margin is a non-GAAP financial measure which is defined and reconciled to the most closely related GAAP financial measure in the information accompanying this release.
- The effective tax rate for the fourth quarter of 2007 was 33.1 percent, as compared to 37.3 percent for the same period in 2006 and 36.6 percent for the first nine months of 2007.
U.S. Consumer Information Solutions ("USCIS")
Total revenue was $228.7 million in the fourth quarter of 2007, a 3 percent decrease from the fourth quarter of 2006. Credit Marketing and Mortgage Reporting were affected by weakness in the U.S. credit and mortgage markets and were the primary contributors to this revenue decline. Compared to the fourth quarter of 2006:
- Online Consumer Information Solutions revenue was $150.6 million, up 2 percent;
- Mortgage Reporting Solutions revenue was $12.7 million, down 15 percent;
- Credit Marketing Services revenue was $37.1 million, down 16 percent; and
- Direct Marketing Services revenue was $28.3 million, down 3 percent.
Operating margin for USCIS was 36.6 percent in the fourth quarter of 2007, down from 41.4 percent in the fourth quarter of 2006. Based on current revenue run rates and specific actions already taken or currently identified, USCIS operating margins are expected to increase steadily throughout 2008 from the fourth quarter level starting in the first quarter.
International
Total revenue was $128.9 million in the fourth quarter of 2007, a 23 percent increase from the fourth quarter of 2006. In local currency, revenue was up 11 percent when compared to the same period in the prior year. Compared to the fourth quarter of 2006:
- Europe revenue was $48.8 million, up 18 percent in U.S. dollars (10 percent in local currency);
- Latin America revenue was $51.6 million, up 30 percent in U.S. dollars (18 percent in local currency); and
- Canada Consumer revenue was $28.5 million, up 20 percent in U.S. dollars (3 percent in local currency).
Operating margin for International was 28.6 percent in the fourth quarter of 2007 versus 28.8 percent in the fourth quarter of 2006.
TALX
Total revenue was $73.8 million and operating margin was 20.0 percent for the fourth quarter of 2007. Fourth quarter revenue in 2007 was 14 percent greater than the amount of revenue reported by TALX during the same period in 2006. In addition, approximately 7.0 million total records were added to the employment database, bringing total records in the database to 165.9 million, up 16 percent from a year ago.
North America Personal Solutions
Total revenue rose to $38.3 million, a 21 percent increase from the fourth quarter of 2006, driven by solid execution of the segment’s strategic transformation from transaction-based products to subscription-based products. Operating margin was 26.1 percent versus 26.5 percent in the fourth quarter of 2006.
North America Commercial Solutions
Total revenue rose to $21.2 million, a 26 percent increase from the fourth quarter of 2006. Operating margin was 30.2 percent, up from 28.8 percent in the fourth quarter of 2006.
Full Year 2007 Highlights
- Broad-based revenue growth in our North America Commercial Solutions, North America Personal Solutions and International operating segments and the results of our TALX business segment, subsequent to its acquisition on May 15, 2007, contributed to a 19 percent increase in revenue during 2007, when compared to the same period in 2006. TALX represented 12 percent of the full year revenue growth.
- Operating margin decreased to 26.4 percent for the full year 2007 from 28.2 percent for the full year 2006. On a non-GAAP basis, operating margin adjusted to exclude the impact of acquisition-related amortization expense and the 2006 litigation-related matters and organizational realignment charge was 30.0 percent in 2007 compared to 31.2 percent in 2006.
- EBITDA, a non-GAAP measure calculated by adding back depreciation and amortization expense and the 2006 litigation-related matters and organizational realignment charge to operating income, was $613.9 million for the full year 2007 compared to $534.3 million a 15 percent increase over 2006.
- The effective tax rate for the full year 2007 was 35.8 percent, as compared to 34.0 percent for the same period in 2006. The 2007 rate reflects a lower foreign and state tax rate compared to 2006 and other discrete items. The 2006 rate included the reversal of certain income tax reserves during the third quarter and a non-taxable gain related to a litigation settlement during the second quarter.
- Interest expense increased by $26.6 million to $58.5 million, and weighted-average diluted shares increased 4 percent to 135.1 million, as a result of the combined effect of the acquisition of TALX and the subsequent issuance of debt to repurchase a portion of the shares issued in the acquisition.
- We repurchased 17.9 million shares of our common stock on the open market for $718.7 million during the full year 2007.
U.S. Consumer Information Solutions (“USCIS”)
Total revenue was $969.7 million in 2007, a slight increase over 2006. Compared to the full year of 2006:
- Online Consumer Information Solutions revenue was $639.0 million, up 3 percent;
- Mortgage Reporting Solutions revenue was $66.1 million, down 8 percent;
- Credit Marketing Services revenue was $156.4 million, down 6 percent; and
- Direct Marketing Services revenue was $108.2 million, down 2 percent.
Operating margin for USCIS was 39.6 percent in the full year 2007, down from 40.9 percent in the full year 2006.
International
Total revenue was $472.8 million in 2007, a 17 percent increase from 2006. In local currency, revenue was up 10 percent when compared to the same period in the prior year. Compared to the full year of 2006:
- Europe revenue was $183.8 million, up 20 percent in U.S. dollars (10 percent in local currency);
- Latin America revenue was $182.5 million, up 19 percent in U.S. dollars (12 percent in local currency); and
- Canada Consumer revenue was $106.5 million, up 12 percent in U.S. dollars (5 percent in local currency).
Operating margin for International was 29.8 percent in the full year 2007, up from 29.3 percent in the full year 2006.
TALX
Total revenue was $179.4 million and operating margin was 16.3 percent for the period from its acquisition on May 15, 2007 through December 31, 2007. In addition, approximately 23.1 million total records were added to the employment database, bringing total records in the database to 165.9 million.
North America Personal Solutions
Total revenue rose to $153.5 million, a 22 percent increase from the full year 2006. Solid execution of a strategic transformation led to an increase in the subscriber base to 1.4 million customers, a 41 percent increase from 2006. Operating margin was 22.1 percent, up from 10.8 percent for the full year 2006. On a non-GAAP basis, excluding the impact of certain 2006 litigation matters, operating margin was 14.8 percent for the full year 2006.
North America Commercial Solutions
Total revenue rose to $67.6 million, a 37 percent increase from the full year 2006. In 2007, U.S. commercial transaction volume rose 33 percent to 4.7 million transactions. Operating margin for 2007 was 17.7 percent, down from 20.2 percent in 2006, reflecting our continued investments in this high growth area of the business.
2008 Annual and First Quarter Outlook
Based on current business trends and management’s outlook, Equifax expects consolidated annual revenue growth to be between 9 percent and 12 percent. Adjusted EPS for the full year is expected to be between $2.48 and $2.58. EBITDA is expected to be in the range of $675 million to $710 million for the full year. Annual capital expenditures are targeted at $125 million to $150 million.
Equifax expects consolidated revenue for the first quarter of 2008 to be between $488 million and $498 million and adjusted EPS to be between 56 cents and 60 cents.
Adjusted EPS, a non-GAAP financial measure, is calculated by excluding acquisition-related amortization expense from the determination of net income in the calculation of diluted EPS. EBITDA, a non-GAAP financial measure, is calculated by adding back depreciation and amortization expense to operating income.
In the case of forward-looking non-GAAP financial measures, we have not provided corresponding forward-looking GAAP financial measures because these measures are not accessible to us. We cannot predict the occurrence, timing, or amount of all non-GAAP items that we exclude from our non-GAAP financial measures which could potentially be significant to the calculation of our GAAP financial measures for future fiscal periods.
About Equifax
Equifax empowers businesses and consumers with information they can trust. A global leader in information solutions, employment and income verification and human resources business process outsourcing services, we leverage one of the largest sources of consumer and commercial data, along with advanced analytics and proprietary technology, to create customized insights that enrich both the performance of businesses and the lives of consumers.
Customers have trusted Equifax for over 100 years to deliver innovative solutions with the highest integrity and reliability. Businesses – large and small – rely on us for consumer and business credit intelligence, portfolio management, fraud detection, decisioning technology, marketing tools, HR/payroll services, and much more. We empower individual consumers to manage their personal credit information, protect their identity and maximize their financial well-being.
Headquartered in Atlanta, Georgia, Equifax Inc. employs approximately 7,000 people in 14 countries throughout North America, Latin America and Europe. Equifax is a member of Standard & Poor’s (S&P) 500® Index. Our common stock is traded on the New York Stock Exchange under the symbol EFX.
www.equifax.com
Earnings Conference Call and Webcast
Equifax's quarterly teleconference to discuss the fourth quarter and full year 2007 earnings release will be held tomorrow, February 5, at 8:30 a.m. (EDT). The live audio webcast of the speakers’ presentations will be available in the Investor Center of our website at www.equifax.com and a replay will be available at the same site shortly after the conclusion of the webcast. This press release, the financial tables, as well as other supplemental information, are also available at that website.
Supplemental Financial Information and Non-GAAP Financial Measures
The Common Questions and Answers (Unaudited) (“Q&A”) that are a part of this press release include supplemental financial information which Equifax believes is useful to assess its operating performance. The following financial measures included herein or in the Q&A are not prepared in accordance with U.S. generally accepted accounting principles (“GAAP”): operating income, operating margin and net income excluding the net impact of certain 2006 litigation-related matters, income tax benefit and charge related to organizational realignment; adjusted operating income and operating margin excluding acquisition-related amortization expense and the net impact of certain litigation-related matters and charge related to organizational realignment in 2006; EBITDA, defined as operating income adding back depreciation and amortization expense and excluding the net impact of certain 2006 litigation matters and charge related to organizational realignment; diluted EPS, as adjusted to exclude acquisition-related amortization expense, the net impact of certain 2006 litigation matters, income tax benefit and charge related to organizational realignment; and effective tax rate, excluding certain items. 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 "About Equifax/Investor Center/Non-GAAP/GAAP Financial Measures" on our website at www.equifax.com. Non-GAAP financial measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP.
Reported results for the prior year quarter and twelve month period do not include revenue, operating income or operating expenses from TALX, which we acquired on May 15, 2007. To give investors further basis for comparison, in addition to the historical reported results, we have provided pro forma results for the year ended December 31, 2006 and three months ended March 31, 2007. These pro forma results combine financial results from Equifax and TALX and are available in our Form 8-K/A filed on June 25, 2007 and on our website at www.equifax.com/About Equifax/Investor Center/Financials/SEC Filings.
Caution Concerning Forward-Looking Statements
Statements in this press release that relate to Equifax's future plans, objectives, expectations, performance, events and the like may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Future events, risks and uncertainties, individually or in the aggregate, could cause our actual results to differ materially from those expressed or implied in these forward-looking statements. Those factors include, but are not limited to, completing the Company’s 2007 year end audit, changes in worldwide and U.S. economic conditions that materially impact consumer spending, consumer debt and employment, changes in demand for Equifax's products and services, our ability to develop new products and services, pricing and other competitive pressures, our ability to achieve targeted cost efficiencies, risks relating to illegal third party efforts to access data, risks associated with our ability to complete and integrate acquisitions and other investments, changes in laws and regulations governing our business, including federal or state responses to identity theft concerns, the outcome of pending litigation, the impact of tax audits by the IRS or other taxing authorities, and certain other factors discussed under the caption "Risk Factors" in the Management's Discussion and Analysis section of Equifax's Annual Report on Form 10-K for the year ended December 31, 2006, in “Risk Factors” in TALX Corporation’s Annual Report on Form 10-K for the year ended March 31, 2006 and Quarterly Report on Form 10-Q for the quarter ended September 30, 2006, and in our other filings with the Securities and Exchange Commission. Equifax assumes no obligation to update any forward-looking statements to reflect events that occur or circumstances that exist after the date on which they were made.
For further press information please contact: Claire Foster, Kate Clements or Wendy Harrison at HSL on 020 8977 9132 / Fax: 020 8977 5200 or Email: claire@harrisonsadler.com
