Equifax Reports Q2 EPS Beat, Cuts 2023 Outlook On Challenging Mortgage Market

Equifax Inc EFX reported Q2 2023 revenues of $1.318 billion, flat Y/Y and up 1% Y/Y in constant currencies, broadly in line with the consensus.

Workforce Solutions revenues declined 4% Y/Y to $582.8 million due to the challenging mortgage and hiring market, partially negated by continued strong growth in Government.

U.S. Information Solution revenues rose 6% Y/Y to $445.0 million on higher revenues from Online Information Solutions (+9% Y/Y) business.

International revenues rose 1% Y/Y to $289.8 million on growth across Canada and Latin America, partially offset by the decline in the Asia Pacific and Europe regions. 

The company witnessed strong new product innovation in Equifax Cloud business, with Vitality Index of 14%.

Adjusted EBITDA margin contracted to 32.7% from 35.0% a year ago.

Adjusted EPS declined 18% Y/Y to $1.71, above the consensus of $1.67.

Outlook: EFX expects Q3 revenue of $1.320 billion-$1.340 billion (consensus: $1.35 billion) and adjusted EPS within $1.72-$1.82 (consensus: $1.97).

For 2023, it reduced the outlook for revenues to $5.270 billion to $5.330 billion (from $5.275 billion - $5.375 billion) vs. consensus of $5.32 billion and adjusted EPS to $6.85-$7.10 (from $7.05-$7.35) vs. consensus of $7.17.

EFX lowered guidance to reflect the expected impact of weaker-than-expected U.S. mortgage originations and lower mortgage revenue.

"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," stated Mark W. Begor, CEO. 

The company implemented additional measures to achieve $210 million in spending reductions in 2023 (vs. $200 million earlier) and expects $275 million in 2024.

Price Action: EFX closed lower by 0.13% at $237.49 on Wednesday.