Equifax Revenue Growth Accelerates Despite Legal Charge on Net Income
Equifax posted revenue of $1.700 billion in the second quarter, up 11% from a year earlier, even as a new legal settlement charge pulled net income down 4%.
Equifax (EFX), the credit-reporting and workforce data company, reported second-quarter revenue of $1.700 billion, up 11% on a reported basis and 10% in local currency, an acceleration from 9% reported growth in the fourth quarter of 2024. Revenue rose sequentially from $1.551 billion in the fourth quarter and from $1.537 billion a year earlier.
The quarter's headline numbers diverged from what showed up on the bottom line. Net income attributable to Equifax fell 4% to $183.9 million from $191.3 million a year earlier, even as revenue grew at a double-digit clip, a gap the company attributed to a new $40 million legal settlement charge tied to a previously disclosed coding issue in Workforce Solutions — a $100 million accrual net of $60 million in expected insurance recovery that had no counterpart in the prior-year quarter. Equifax also disclosed $0.6 million in antitrust litigation costs tied to Workforce Solutions, versus none a year earlier. Adjusted earnings per share, which add back the settlement charge and other items, rose 13% to $2.25 from $2.00, decoupling from the net-income decline.
Growth patterns shifted beneath the two main segments. USIS revenue growth decelerated to 17% from 12% in the fourth quarter, but that deceleration masked an acceleration in Mortgage, where growth within USIS climbed to 40% from 33%. Diversified Markets within USIS added more than 300 basis points of growth sequentially, reaching 6%. Workforce Solutions told a different story: revenue growth slowed to 7% from 9%, and U.S. Mortgage revenue growth eased to 25% from a fourth-quarter pace the company had called very strong at 20% — with Equifax now framing the deceleration against higher mortgage rates rather than the market-decline headwind it cited in the prior quarter.
Margins moved in different directions across segments. Workforce Solutions operating margin compressed 150 basis points to 44.9% from 46.4% a year earlier, with its Adjusted EBITDA margin also narrowing to 52.1% from 53.3%. USIS Adjusted EBITDA margin fell 220 basis points to 32.8% from 35.0%, even as its operating margin held roughly steady at 22.5% versus 22.6%. International bucked the trend, with operating margin expanding to 12.1% from 10.9% and Adjusted EBITDA margin rising to 27.6% from 26.4%, though International revenue growth itself slowed to 8% reported and 4% local currency from 7% and 5% in the fourth quarter. Consolidated Adjusted EBITDA margin held flat at 32.5%.
The company's new-product pipeline showed a modest step back, with the Vitality Index falling to 16% from a record 17% in the fourth quarter. Equifax also disclosed a definitive agreement to acquire Círculo de Crédito, a Mexican credit bureau, for $750 million in enterprise value, with the deal expected to close in the fourth quarter of 2024. Alongside the acquisition, the company doubled its AI-driven cost-reduction target to $150 million for 2026 through 2028, up from the target it had set earlier in the year.
For the full year, Equifax reiterates revenue guidance at a midpoint of $6.745 billion, in a range of $6.710 billion to $6.780 billion, consistent with the $6.72 billion midpoint issued alongside fourth-quarter results. Adjusted earnings-per-share guidance of $8.39 to $8.69 brackets the prior $8.50 guide. The anchor release does not disclose a free cash flow figure, a metric that appeared in the fourth-quarter release when Equifax reported almost 40% growth to $1.13 billion for full-year 2024.
Equifax returned $366 million to shareholders in the quarter, comprising $300 million in share repurchases covering 1.8 million shares and $66 million in dividends, down from $561 million returned in the fourth quarter through $500 million in buybacks and dividends.