What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-07-21 compared with 2022-04-21 · 153 added, 136 removed, 269 unchanged (52% of the section changed)

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MD&A is provided as a supplement to and should be read in conjunction with our consolidated financial statements and the accompanying Notes to Financial Statements in Item 1 of this Form 10-Q.

This section discusses the results of our operations for the three months ended March 31, 2022 compared to the three months ended March 31, 2021.

This section discusses the results of our operations for the three and six months ended June 30, 2022 compared to the three and six months ended June 30, 2021.

All percentages have been calculated using unrounded amounts for each of the periods presented.

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and Canada), Asia Pacific (Australia, New Zealand and India), Europe (the U.K., Spain and Portugal) and Latin America (Argentina, Chile, Costa Rica, Dominican Republic, Ecuador, El Salvador, Honduras, Mexico, Paraguay, Peru and Uruguay).

We maintain support operations in the Republic of

Ireland, Chile, Costa Rica and India.

We maintain support operations in the Republic of Ireland, Chile, Costa Rica and India.

We also have investments in consumer and/or commercial credit information companies through joint ventures in Cambodia, Malaysia and Singapore and have an investment in a consumer and commercial credit information company in Brazil.

We have a joint venture in Russia that offers consumer credit services, however, we have determined as of March 31, 2022 that we expect no future economic benefit from the joint venture going forward.

We have a joint venture in Russia that offers consumer credit services;

however, we determined as of March 31, 2022 to exit our ownership position, wrote the value of the investment to zero and expect no future economic benefit from the joint venture's operations going forward.

Recent Events and Company Outlook

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We expect modest growth in consumer credit, excluding mortgage, over the course of 2022.

Our plan assumes the U.S.

mortgage market, as measured by credit inquiries, will decline by greater than 35 percent on average for the remaining nine months of 2022 versus the same period in 2021.

Our outlook assumes the U.S.

mortgage market, as measured by credit inquiries, will decline by greater than 46 percent on average for the remaining six months of 2022 versus the same period in 2021.

mortgage market, particularly the mortgage refinance portion of the U.S.

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interest rates and therefore mortgage rates.

In the International markets in which we operate, we expect 2022 economic activity, as measured by GDP, to improve but less than the rates of growth experienced in 2021.

In the international markets in which we operate, we expect 2022 economic activity, as measured by GDP, to grow but less than the rates of growth experienced in 2021.

Segment and Geographic Information

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We also have investments in consumer and/or commercial credit information companies through joint ventures in Cambodia, Malaysia, Singapore and Russia and have an investment in a consumer and commercial credit information company in Brazil.

We determined as of March 31, 2022 to exit our ownership position in Russia, wrote the value of the investment to zero and expect no future economic benefit from the joint venture's operations going forward.

Approximately 78% of our revenue was generated in the U.S.

during the three months ended June 30, 2022 and 2021, respectively.

Approximately 79% and 78% of our revenue was generated in the U.S.

during the three months ended March 31, 2022 and 2021, respectively.

during the six months ended June 30, 2022 and 2021, respectively.

We experience seasonality in certain of our revenue streams.

Revenue generated by the online consumer information services component of our USIS operating segment is typically the lowest during the first quarter, when consumer lending activity is at a seasonal low.

Revenue generated by the online consumer information services component of our USIS operating segment is typically the lowest during the first quarter, when consumer

lending activity is at a seasonal low.

Revenue generated from the Employer Services business unit within the Workforce Solutions operating segment is generally higher in the first quarter due primarily to the provision of Form W-2 and 1095-C services that occur in the first quarter each year.

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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 months ended March 31, 2022 and 2021 were as follows:

The key performance indicators for the three and six months ended June 30, 2022 and 2021 were as follows:

Key Performance Indicators

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

(In millions, except per share data)

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Diluted earnings per share $ 1.63 $ 1.74 $ 3.42 $ 3.38

Cash (used in) provided by operating activities $ (198.5) $ 143.4

Cash provided by operating activities $ 275.3 $ 407.7 $ 76.8 $ 551.1

Capital expenditures* $ (152.5) $ (117.4) $ 293.3 $ (224.9)

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• We did not repurchase any shares from public market transactions in 2022.

We repurchased 0.2 million shares of our common stock on the open market for $34.1 million during the first three months of 2021.

At March 31, 2022, $520.2 million was available for future purchases of common stock under our share repurchase authorization.

• We paid out $47.9 million or $0.39 per share in dividends to our shareholders during the first three months of 2022.

RESULTS OF OPERATIONS—THREE MONTHS ENDED MARCH 31, 2022 AND 2021

We repurchased 0.4 million shares of our common stock on the open market for $69.9 million during the first six months of 2021.

At June 30, 2022, $520.2 million was available for future purchases of common stock under our share repurchase authorization.

• We paid out $95.7 million or $0.78 per share in dividends to our shareholders during the first six months of 2022.

RESULTS OF OPERATIONS—THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021

Consolidated Financial Results

Operating Revenue

Three Months Ended March 31, Change

Three Months Ended June 30, Change Six Months Ended June 30, Change

Consolidated Operating Revenue 2022 2021 $ % 2022 2021 $ %

(In millions)

(In millions) (In millions)

Workforce Solutions $ 609.2 $ 502.0 $ 107.2 21 % $ 1,258.1 $ 989.2 $ 268.9 27 %

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Consolidated operating revenue $ 1,316.7 $ 1,234.8 $ 81.9 7 % $ 2,680.0 $ 2,447.8 $ 232.2 9 %

Revenue increased by $150.2 million, or 12%, for the first quarter of 2022, compared to the same period in 2021.

Total revenue was negatively impacted by foreign exchange rates, which decreased revenue by $12.6 million, or 1%, for the first quarter of 2022, compared to the same period in 2021.

Revenue in the first quarter of 2022 increased primarily due to growth in Workforce Solutions and International, partially offset by a decline in the USIS business.

Revenue increased by $81.9 million, or 7%, and by $232.2 million, or 9%, for the second quarter and first six months of 2022, respectively, compared to the same periods in 2021.

Total revenue was negatively impacted by foreign exchange rates, which decreased revenue by $23.0 million, or 2%, and $35.6 million, or 1%, for the second quarter and first six months of 2022, compared to the same periods in 2021.

Revenue in the second quarter and first six months of 2022 increased primarily due to growth in Workforce Solutions and International, partially offset by a decline in the USIS business.

Operating Expenses

Three Months Ended March 31, Change

Three Months Ended June 30, Change Six Months Ended June 30, Change

Consolidated Operating Expenses 2022 2021 $ % 2022 2021 $ %

(In millions)

(In millions) (In millions)

Consolidated cost of services $ 542.1 $ 483.0 $ 59.1 12 % $ 1,095.5 $ 966.2 $ 129.3 13 %

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Consolidated operating expenses $ 1,012.1 $ 928.8 $ 83.3 9 % $ 2,042.9 $ 1,835.2 $ 207.7 11 %

Cost of services increased $70.1 million for the first quarter of 2022, compared to the same period in 2021.

The increase was primarily due to higher royalty costs, people costs and production costs, which include third party cloud usage fees.

The impact of changes in foreign exchange rates on costs of services led to a decrease of $6.5 million for the first quarter of 2022, compared to the same period in 2021.

Selling, general and administrative expenses increased $31.5 million for the first quarter of 2022, compared to the same period in 2021.

The increase was due to increases in sales and marketing related costs.

The impact of changes in foreign currency exchange rates led to an decrease in selling, general and administrative expenses of $3.6 million for the first quarter of 2022, compared to the same period in 2021.

Depreciation and amortization expense increased $22.8 million for the first quarter of 2022, compared to the same period in 2021.

Cost of services increased $59.1 million and $129.3 million in the second quarter and first six months of 2022, respectively, compared to the same periods in 2021.

The increases for both periods were primarily due to higher royalty costs, people costs and production costs, which include third party cloud usage fees.

The impact of changes in foreign exchange rates on costs of services led to a decrease of $12.4 million and $19.0 million in the second quarter and first six months of 2022, respectively, compared to the same periods in 2021.

Selling, general and administrative expenses increased $1.8 million and $33.2 million for the second quarter and first six months of 2022, respectively, compared to the same periods in 2021.

The increase in the second quarter was due to increases in sales and marketing related costs, offset by a decrease in people costs related to incentive plans.

The increase in the first six months of 2022 was driven by an increase in sales and marketing related costs.

The impact of changes in foreign currency exchange rates led to a decrease in selling, general and administrative expenses of $6.4 million and $10.0 million for the second quarter and first six months of 2022, respectively, compared to the same periods in 2021.

Depreciation and amortization expense increased $22.4 million and $45.2 million for the second quarter and first six months of 2022, respectively, compared to the same periods in 2021.

The increase was due to the higher amortization of purchased intangible assets related to recent acquisitions and increased amortization of capitalized internal-use software and system costs from technology transformation capital spending incurred previously.

The impact of changes in foreign currency exchange rates led to a decrease in depreciation and amortization expense of $3.0 million and $4.8 million, for the second quarter and first six months of 2022, respectively, compared to the same periods in 2021.

Operating Income and Operating Margin

Three Months Ended March 31, Change

Three Months Ended June 30, Change Six Months Ended June 30, Change

Consolidated Operating Income 2022 2021 $ % 2022 2021 $ %

(In millions)

(In millions) (In millions)

Consolidated operating revenue $ 1,316.7 $ 1,234.8 $ 81.9 7 % $ 2,680.0 $ 2,447.8 $ 232.2 9 %

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Consolidated operating income $ 304.6 $ 306.0 $ (1.4) — % $ 637.1 $ 612.6 $ 24.5 4 %

Consolidated operating margin 24.4 % 25.3 % (0.9) pts

Total company operating margin decreased by 0.9 percentage points in the first quarter of 2022, compared to the same period in 2021.

The margin decrease was due to the aforementioned increased operating expense and amortization expense that slightly outpaced revenue growth during the period.

Consolidated operating margin 23.1 % 24.8 % (1.7) pts 23.8 % 25.0 % (1.2) pts

Total company operating margin decreased by 1.7 percentage points and 1.2 percentage points in the second quarter and first six months of 2022, respectively, compared to the same periods in 2021.

The margin decrease was due to the aforementioned increased operating expense and amortization expense that outpaced revenue growth during the period.

Interest Expense and Other Income, net

Three Months Ended March 31, Change

Three Months Ended June 30, Change Six Months Ended June 30, Change

Consolidated Interest Expense and Other Income, net 2022 2021 $ % 2022 2021 $ %

(In millions)

(In millions) (In millions)

Consolidated interest expense $ (41.6) $ (34.9) $ (6.7) 19 % $ (81.4) $ (72.1) $ (9.3) 13 %

Consolidated other income (expense), net 11.1 (0.9) 12.0 nm

Consolidated other income, net 1.8 6.0 (4.2) nm 12.9 5.1 7.8 nm

Average cost of debt 2.9 % 3.4 % 2.9 % 3.4 %

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nm - not meaningful

Interest expense increased by $2.5 million in the first quarter of 2022, compared to the same period in 2021.

The increase for the first quarter of 2022 was due to the issuance of the $1.0 billion 2.35% senior notes in August 2021 and increased commercial paper activity, partially offset by the retirement of various senior notes during the second and third quarters of 2021.

Other income, net, increased by $12.0 million in the first quarter of 2022, compared to the same period in 2021.

The increase for the first quarter of 2022 was due to the fair value adjustment of our investment in Brazil, partly offset by the other-than-temporary impairment recognized related to our equity investment in Russia.

Three Months Ended March 31, Change

Interest expense increased by $6.7 million and $9.3 million in the second quarter and first six months of 2022, respectively, compared to the same periods in 2021.

The increase for the second quarter and first six months of 2022 was due to higher debt balances in 2022 when compared to the same periods of 2021 due to the purchase of Insights in the fourth quarter of 2021.

Other income, net, decreased by $4.2 million in the second quarter of 2022, as compared to the same period in 2021.

Other income, net, increased by $7.8 million in the first six months of 2022, compared to the same period in 2021.

The decrease for the second quarter of 2022 was due to the fair value adjustment of our investment in Brazil, offset by gains associated with the sale of two equity investments.

The increase for the first six months of 2022 was due to gains associated with the sale of two equity method investments and the fair value adjustment of our investment in Brazil, partially offset by the other-than-temporary impairment recognized in the first quarter of 2022 related to our equity investment in Russia.

Three Months Ended June 30, Change Six Months Ended June 30, Change

Consolidated Provision for Income Taxes 2022 2021 $ % 2022 2021 $ %

(In millions)

(In millions) (In millions)

Consolidated provision for income taxes $ (63.4) $ (61.2) $ (2.2) 4 % $ (144.4) $ (126.8) $ (17.6) 14 %

Effective income tax rate 23.9 % 22.1 % 25.4 % 23.2 %

Our effective income tax rate was 26.7% for the three months ended March 31, 2022, compared to 24.4% for the three months ended March 31, 2021.

Our effective tax rate was higher during the first quarter of 2022 as compared to 2021 due to a greater foreign income tax rate differential and a change in deferred tax balances driven by a change in state law.

The increase in the foreign rate differential was driven by the fair value adjustment of our equity investment in Brazil and adjustment to fully impair our investment in Russia.

Three Months Ended March 31, Change

Our effective income tax rate was 23.9% for the three months ended June 30, 2022, compared to 22.1% for the three months ended June 30, 2021.

Our effective income tax rate was 25.4% for the six months ended June 30, 2022, compared to 23.2% for the six months ended June 30, 2021.

Our effective tax rate was higher for the second quarter and first six months of 2022 as compared to 2021 due to a greater foreign income tax rate differential.

The increase in the foreign rate differential was primarily driven by the adjustment to fully impair our investment in Russia.

Three Months Ended June 30, Change Six Months Ended June 30, Change

Consolidated Net Income 2022 2021 $ % 2022 2021 $ %

(In millions, except per share amounts)

(In millions, except per share amounts) (In millions, except per share amounts)

Consolidated operating income $ 304.6 $ 306.0 $ (1.4) — % $ 637.1 $ 612.6 $ 24.5 4 %

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Weighted-average shares used in computing diluted earnings per share 123.3 123.5 123.4 123.4

Consolidated net income increased by $19.9 million for the first quarter of 2022,compared to the same period in 2021.

The increase for the first quarter of 2022 was due to the increase in operating income from increased revenue, partially offset by increased tax expense.

Consolidated net income decreased by $14.5 million and increased by $5.4 million for the second quarter and first six months of 2022, respectively, compared to the same periods in 2021.

The decrease for the second quarter of 2022 is due to increased interest, other and income tax expenses in 2022 as operating income levels remained similar across both periods.

The increase for the first six months of 2022 is due to increased operating income resulting from increased revenue, partially offset by higher tax expense for the first six months of 2022.

Segment Financial Results

Workforce Solutions

Three Months Ended March 31, Change

Three Months Ended June 30, Change Six Months Ended June 30, Change

Workforce Solutions 2022 2021 $ % 2022 2021 $ %

(In millions)

(In millions) (In millions)

Operating revenue:

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Total operating income $ 281.2 $ 265.8 $ 15.4 6 % $ 589.7 $ 531.5 $ 58.2 11 %

Operating margin 47.5 % 54.5 % (7.0) pts

Workforce Solutions revenue increased by 33% in the first quarter of 2022, compared to the same period in 2021.

The increase was due to strong growth in Verification Services driven by growth in non-mortgage verticals and acquisition revenue in both Verification and Employer Services.

Operating margin 46.2 % 53.0 % (6.8) pts 46.9 % 53.7 % (6.8) pts

Workforce Solutions revenue increased by 21% and 27% in the second quarter and first six months of 2022, respectively, compared to the same periods in 2021.

The increases for both periods were due to strong growth in Verification Services driven by growth in non-mortgage verticals and acquisition revenue in both Verification and Employer Services.

Verification Services

Revenue increased by 33% for the first quarter of 2022, compared to the same period in 2021.

The increase in revenue was due to strong growth in talent solutions, government and other non-mortgage verticals, acquisition revenue from Appriss Insights and, to a lesser extent, growth in the mortgage vertical.

Revenue increased by 28% and 31% for the second quarter and first six months of 2022, respectively, compared to the same periods in 2021.

The increase in revenue for both periods was due to strong growth in talent solutions, government, other non-mortgage verticals, and acquisition revenue principally from Insights, offset by a decline in the mortgage vertical due to significantly slower U.S.

mortgage origination activity in 2022 due to higher interest rates.

Verification Services benefited across all verticals from the continued growth of employment and income records in The Work Number database.

Employer Services

Revenue increased by 33% in the first quarter of 2022, compared to the same period in 2021.

The increase was due to acquisition revenue and growth in employee services, partially offset by a decrease in unemployment claims revenue as the number of claims has greatly reduced in 2022 after having been significantly higher in 2021 due to the economic impact of COVID-19 on the U.S.

Revenue decreased by 3% and increased by 15% in the second quarter and first six months of 2022, respectively, compared to the same periods in 2021.

The decrease for the second quarter of 2022 is due to a decrease in unemployment claims management revenue as the number of claims has returned to pre-COVID-19 levels in 2022 after having been significantly higher in 2021 due to the economic impact of COVID-19 on the U.S.

The increase for the first six months of 2022 was due to acquisition revenue and growth in employee services, partially offset by a decrease in unemployment claims revenue.

Workforce Solutions Operating Margin

Operating margin decreased to 47.5% for the first quarter of 2022 from 54.5% for the first quarter of 2021.

The decreased margin for the first quarter of 2022 is due to increased royalty costs, people costs, production costs and purchased intangible asset amortization costs, partially offset by the increase in revenue.

Three Months Ended March 31, Change

Operating margin decreased to 46.2% for the second quarter of 2022 from 53.0% for the second quarter of 2021, and to 46.9% for the first six months of 2022 from 53.7% for the first six months of 2021.

The decreased margin for both periods is due to increased purchased intangible asset amortization costs, royalty costs, people costs and production costs which all grew faster than the increase in revenue.

Three Months Ended June 30, Change Six Months Ended June 30, Change

Information Solutions 2022 2021 $ % 2022 2021 $ %

(In millions)

(In millions) (In millions)

Operating revenue:

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Total operating income $ 112.0 $ 136.7 $ (24.7) (18) % $ 233.5 $ 291.6 $ (58.1) (20) %

Operating margin 28.1 % 33.7 % (5.6) pts

USIS revenue decreased by 6% for the first quarter of 2022, compared to the same period in 2021.

The decrease was due to the negative impact of declining mortgage inquiry volumes of online services and mortgage solutions, partially offset by acquisition-related revenue and growth in non-mortgage online services.

Operating margin 26.6 % 30.0 % (3.4) pts 27.3 % 31.9 % (4.6) pts

USIS revenue decreased by 8% and 7% for the second quarter and first six months of 2022, respectively, compared to the same periods in 2021.

The decreases in both periods were due to the negative impact of declining mortgage inquiry volumes on both online services and mortgage solutions, partially offset by acquisition-related revenue and growth in non-mortgage online services.

The decline in mortgage related online revenue and mortgage solutions revenue is due to declining mortgage inquiry volumes caused by higher interest rates during both periods of 2022 compared to the overall strength of the U.S.

mortgage market in the prior year.

Online Information Solutions

Revenue decreased by 2% for the first quarter of 2022, compared to the same period in 2021.

The decrease in the first quarter of 2022 was due to declining mortgage origination volume compared to the prior year, partially offset by revenue from acquisitions and continued growth of non-mortgage online services.

Revenue decreased by 5% and 4% for the second quarter and first six months of 2022, respectively, compared to the same periods in 2021.

The decreases for both periods were due to declining mortgage origination volumes compared to the prior year, partially offset by revenue from acquisitions and continued growth of non-mortgage online services.

Mortgage Solutions

Revenue decreased by 20% in the first quarter of 2022, compared to the same period in 2021.

Mortgage Solutions transaction volumes declined by 24.5% in the first quarter of 2022, as compared to the prior year.

Revenue decreased by 25% and 22% in the second quarter and first six months of 2022, respectively, compared to the same periods in 2021.

Total mortgage market credit inquiries reported by USIS declined by 33% and 29% in the second quarter and first six months of 2022, respectively, as compared to the prior year.

Financial Marketing Services

Revenue decreased by 14% for the first quarter of 2022, compared to the same period in 2021.

The decrease for the period was due to lower offline data licensing.

Revenue decreased by 5% and 10% for the second quarter and first six months of 2022, respectively, compared to the same periods in 2021.

The decreases for the second quarter and first six months of 2022 were driven by lower fraud, risk management and other data services revenue, partially offset by growth in marketing and wealth data sales.

USIS Operating Margin

USIS operating margin decreased to 28.1% for the first quarter of 2022 from 33.7% for the first quarter of 2021.

The margin decrease for the first quarter of 2022 is due to the decrease in revenue and increase in depreciation expense related to increased capitalized software development spending, higher people costs and cloud production costs, partially offset by a decrease in royalty costs.

USIS operating margin decreased to 26.6% for the second quarter of 2022 from 30.0% for the second quarter of 2021 and to 27.3% for the first six months of 2022 from 31.9% for the first six months of 2021.

The margin decrease for both periods is due to the decrease in revenue and increase in depreciation expense related to increased capitalized software development spending and cloud production costs, partially offset by a decrease in royalty costs driven by the overall mortgage market decline.

International

Three Months Ended March 31, Change

Three Months Ended June 30, Change Six Months Ended June 30, Change

International 2022 2021 $ % 2022 2021 $ %

(In millions)

(In millions) (In millions)

Operating revenue:

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Total operating income $ 32.4 $ 33.4 $ (1.0) (3) % $ 69.4 $ 63.2 $ 6.2 10 %

Operating margin 13.2 % 11.2 % 2.0 pts

International revenue increased by 6% for the first quarter of 2022, compared to the same period in 2021.

On a local currency basis, revenue increased by 10% for the first quarter of 2022, driven by growth in all geographies.

Operating margin 11.3 % 12.1 % (0.8) pts 12.2 % 11.6 % 0.6 pts

International revenue increased by 3% and 4% in the second quarter and the first six months of 2022, respectively, compared to the same periods in 2021.

On a local currency basis, revenue increased by 11% in the second quarter and first six months of 2022, respectively, driven by growth in all geographies.

Local currency fluctuations against the U.S.

dollar negatively impacted revenue by $12.6 million, or 4%, for the first quarter of 2022.

On a local currency basis, revenue increased by 6% for the first quarter of 2022, compared to the same period in 2021.

The increase was driven by growth in our commercial, consumer and background check verifications businesses in Australia.

Additionally, the increase in revenue for the first quarter of 2022 is also attributable to growth in India due to higher consumer volumes.

dollar negatively impacted revenue by $23.0 million, or 8%, for the second quarter of 2022, and by $35.6 million, or 7%, for the first six months of 2022.

On a local currency basis, revenue increased by 6% for the second quarter and first six months of 2022, respectively, compared to the same periods in 2021.

The increases in both periods were driven by our commercial, consumer, identity and fraud, and background check verifications businesses in Australia, in addition to growth in India due to higher consumer volumes.

Local currency fluctuations against the U.S.

dollar negatively impacted revenue by $5.6 million, or 7% for the first quarter of 2022.

Reported revenue decreased by 1% for the first quarter of 2022, compared to the same period in 2021.

On a local currency basis, revenue increased by 16% for the first quarter of 2022, compared to the same period in 2021.

The increase was driven by growth in the debt management business with higher volumes in the public sector, partially offset by lower debt management volumes within the private sector for the region.

dollar negatively impacted revenue by $7.2 million, or 8%, and $12.7 million, or 7%, for the second quarter and first six months of 2022, respectively.

Reported revenue decreased by 2% and 1% for the second quarter and first six months of 2022, respectively, compared to the same periods in 2021.

On a local currency basis, revenue increased by 16% for the second quarter and first six months of 2022, respectively, compared to the same periods in 2021.

The increases in both periods were driven by growth in the debt services business with higher volumes in the public sector, partially offset by a decline in the consumer direct business.

Local currency fluctuations against the U.S.

dollar negatively impacted revenue by $3.2 million, or 5% for the first quarter of 2022.

Reported revenue increased by 11% for the first quarter of 2022, compared to the same period in 2021.

On a local currency basis, revenue increased by 2% for the first quarter of 2022, compared to the same period in 2021.

The increase was driven by growth in the identity and fraud and analytics businesses, mainly within the auto and telco verticals.

dollar negatively impacted revenue by $9.2 million, or 12%, and $12.4 million, or 8%, for the second quarter and first six months of 2022, respectively.

Reported revenue increased by 4% and 8% for the second quarter and first six months of 2022, compared to the same periods in 2021.

On a local currency basis, revenue increased by 2% for the second quarter and first six months of 2022, respectively, compared to the same periods in 2021.

The increases in both periods were driven by higher batch credit volumes, partially offset by declines in consumer services, mortgage related products, and online businesses due to interest rate increases.

Local currency fluctuations against the U.S.

dollar negatively impacted revenue by $0.1 million, or 1%, for the first quarter of 2022.

Reported revenue increased by 1% for the first quarter of 2022, compared to the same period in 2021.

dollar negatively impacted revenue by $2.0 million, or 3%, and $2.1 million or 2%, for the second quarter and first six months of 2022, respectively.

Reported revenue decreased by 1% and remained flat for the second quarter and first six months of 2022, compared to the same periods in 2021.

Latin America

On a local currency basis, revenue increased by 23% for the first quarter of 2022, compared to the same period in 2021.

The increase reflects local currency growth in all countries, driven by price increases in Argentina and growth in the consumer and recovery management verticals in Chile.

On a local currency basis, revenue increased by 28% and 26% for the second quarter and first six months of 2022, respectively, compared to the same periods in 2021.

The increases in both periods reflect local currency growth across most countries driven by price increases mainly in Argentina and Chile, as well as growth due to acquisition revenue.

Local currency fluctuations against the U.S.

dollar negatively impacted revenue by $3.8 million, or 9%, for the first quarter of 2022, primarily within Argentina and Chile.

Reported revenue increased by 14% for the first quarter of 2022, compared to the same period in 2021.

dollar negatively impacted revenue by $4.5 million, or 10%, and $8.4 million, or 10%, for the second quarter and first six months of 2022, respectively, primarily within Argentina and Chile.

Reported revenue increased by 18% and 16% for the second quarter and first six months of 2022, compared to the same periods in 2021.

International Operating Margin

Operating margin increased to 13.2% for the first quarter of 2022 from 11.2% for the first quarter of 2021.

The increased margin was due to higher revenue and lower purchased intangible asset amortization costs in Australia, partially offset by higher cloud production costs and higher depreciation expense related to technology transformation project spending.

Operating margin decreased to 11.3% for the second quarter of 2022 from 12.1% for the second quarter of 2021 and increased to 12.2% for the first six months of 2022 from 11.6% for the first six months of 2021.

The decreased margin for the second quarter of 2022 is due to higher cloud production costs and depreciation expense related to technology transformation project spending, partially offset by higher revenue.

The increased margin for the first six months of 2022 is due to higher revenue and lower purchased intangible asset amortization costs in Australia, partially offset by higher cloud production costs and depreciation expense related to technology transformation project spending.

General Corporate Expense

Three Months Ended March 31, Change

Three Months Ended June 30, Change Six Months Ended June 30, Change

General Corporate Expense 2022 2021 $ % 2022 2021 $ %

(In millions)

(In millions) (In millions)

General corporate expense $ 121.0 $ 129.9 $ (8.9) (7) % $ 255.5 $ 273.7 $ (18.2) (7) %

Our general corporate expenses are unallocated costs that are incurred at the corporate level and include those expenses impacted by corporate direction, including shared services, technology, security, data and analytics, administrative, legal, restructuring, and the portion of management incentive compensation determined by total company-wide performance.

General corporate expense decreased by $9.3 million for the first quarter of 2022, compared to the same period in 2021.

The decrease was due to reduced incremental technology and data security costs as we work to complete our ongoing technology transformation and a decrease in people costs.

General corporate expense decreased by $8.9 million and $18.2 million for the second quarter and first six months of 2022, respectively, compared to the same periods in 2021.

The decrease was due to reduced people costs, primarily incentive plans.

LIQUIDITY AND FINANCIAL CONDITION

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Funds generated by operating activities, our Revolver and related CP program, more fully described below, are our most significant sources of liquidity.

At March 31, 2022, we had $200.9 million in cash balances, as well as $663.3 million available to borrow under our Revolver.

At June 30, 2022, we had $223.6 million in cash balances, as well as $788.6 million available to borrow under our Revolver.

Sources and Uses of Cash

We believe that our existing cash balance, liquidity available from our CP and Revolver, cash generated from ongoing operations and continued access to public or private debt markets will be sufficient to satisfy cash requirements over the next 12 months and beyond.

While there was no significant change in our cash requirements as of March 31, 2022 compared to December 31, 2021, we have utilized existing CP capacity, together with cash from operating activities, to meet our current obligations.

While there was no significant change in our cash requirements as of June 30, 2022 compared to December 31, 2021, we have utilized existing CP capacity, together with cash from operating activities, to meet our current obligations.

This includes the $345.0 million consumer class action settlement payment that was made in January 2022 related to the U.S.

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These restrictions do not, individually or in the aggregate, materially limit our ability to service our indebtedness, meet our current obligations or pay dividends.

As of March 31, 2022, we held $188.3 million of cash in our foreign subsidiaries.

As of June 30, 2022, we held $194.4 million of cash in our foreign subsidiaries.

Information about our cash flows, by category, is presented in the Consolidated Statements of Cash Flows.

The following table summarizes our cash flows for the three months ended March 31, 2022 and 2021:

Three Months Ended March 31, Change

The following table summarizes our cash flows for the six months ended June 30, 2022 and 2021:

Six Months Ended June 30, Change

Net cash provided by (used in):

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Operating Activities

Cash provided by operating activities in the three months ended March 31, 2022 decreased by $341.9 million compared to the prior year period due to the $345.0 million consumer class action settlement payment that was made in January 2022 related to the U.S.

Consumer MDL Litigation settlement that became effective on January 11, 2022.

Cash provided by operating activities in the six months ended June 30, 2022 decreased by $474.3 million compared to the prior year period due to the $345.0 million consumer class action settlement payment that was made in January 2022 related to the U.S.

Consumer MDL Litigation settlement that became effective on January 11, 2022 and an increase in working capital during the year.

Investing Activities

Capital Expenditures

Three Months Ended March 31, Change

Six Months Ended June 30, Change

Net cash used in:

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Our capital expenditures are used for developing, enhancing and deploying new and existing software in support of our expanding product set, replacing or adding equipment, updating systems for regulatory compliance, the licensing of certain software applications, investing in system reliability, security and disaster recovery enhancements, and updating or expanding our office facilities.

Capital expenditures paid in the first three months of 2022 increased by $43.5 million from the same period in 2021.

Capital expenditures paid in the first six months of 2022 increased by $79.9 million from the same period in 2021.

We are continuing to invest in enhanced technology systems and infrastructure as part of our technology transformation.

Acquisitions, Divestitures and Investments

Three Months Ended March 31, Change

Six Months Ended June 30, Change

Net cash used in:

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Cash received from divestiture $ 98.1 $ 1.5 $ 96.6

During the first three months of 2022, we acquired Efficient Hire within our Workforce Solutions segment and Data Crédito within our International segment.

During the first three months of 2021, we acquired Kount within our USIS segment, HIRETech and i2Verify within our Workforce Solutions segment and a small tuck-in acquisition within our International segment.

In addition, in 2021, we also sold a small business within our International segment.

During the first six months of 2022, we acquired Efficient Hire within our Workforce Solutions segment and Data Crédito within our International segment.

During the first six months of 2022, we reported $98.1 million of cash inflows from investing activities associated with cash received from the sale of two investments and the pending sale of another investment.

During the first six months of 2021, we acquired Kount within our USIS segment, HIREtech and i2Verify within our Workforce Solutions segment and a small tuck-in acquisition within our International segment.

In addition, in 2021, we sold a small business within our International segment.

Financing Activities

Borrowings and Credit Facility Availability

Three Months Ended March 31, Change

Six Months Ended June 30, Change

Net cash provided by (used in):

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Net short-term borrowings $ 386.7 $ (0.6) $ 387.3

Payments on long-term debt $ — $ (500.1) $ 500.1

Credit Facilities Availability

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The CP program is supported by our Revolver and the total amount of CP which may be issued is reduced by the amount of any outstanding borrowings under our Revolver.

As of March 31, 2022, there were $0.7 million of letters of credit outstanding, no outstanding borrowings under the Revolver, $700.0 million outstanding under the Term Loan and $836.0 million of outstanding CP notes.

Availability under the Revolver was $663.3 million at March 31, 2022.

At March 31, 2022, 74% of our debt was fixed-rate debt and 26% was effectively variable debt.

As of June 30, 2022, there were $0.4 million of letters of credit outstanding, no outstanding borrowings under the Revolver, $700.0 million outstanding under the Term Loan and $711.0 million of outstanding CP notes.

Availability under the Revolver was $788.6 million at June 30, 2022.

At June 30, 2022, 75% of our debt was fixed-rate debt and 25% was effectively variable debt.

Our variable-rate debt consists of our outstanding term loan and CP.

The interest rates reset periodically, depending on the terms of the respective financing agreements.

At March 31, 2022, the interest rate on our variable-rate debt ranged from 0.35% to 1.69%.

At June 30, 2022, the interest rate on our variable-rate debt ranged from 1.25% to 2.94%.

Borrowing and Repayment Activity

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Net short-term borrowings primarily represent net borrowings or repayments of outstanding amounts under our CP program.

There were no borrowings or payments on long-term debt for the first three months of 2022 or 2021.

There were no borrowings or payments on long-term debt for the first six months of 2022 or 2021.

Debt Covenants.

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The Senior Credit Facilities also permit cash in excess of $175 million to be netted against debt in the calculation of the leverage ratio, subject to certain restrictions.

As of March 31, 2022, we were in compliance with all of our debt covenants.

As of June 30, 2022, we were in compliance with all of our debt covenants.

We do not have any credit rating triggers that would accelerate the maturity of a material amount of the outstanding debt;

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If the Company experiences a change of control or publicly announces the Company’s intention to effect a change of control and the rating on the Senior Notes is lowered by Standard & Poor’s (“S&P”) and Moody’s Investors Service (“Moody’s”) below an investment grade rating within 60 days of such change of control or notice thereof, then the Company will be required to offer to repurchase the Senior Notes at a price equal to 101% of the aggregate principal amount of the Senior Notes plus accrued and unpaid interest.

As of March 31, 2022, our S&P credit rating was BBB with a stable outlook and our Moody’s credit rating was Baa2 with a stable outlook.

As of June 30, 2022, our S&P credit rating was BBB with a stable outlook and our Moody’s credit rating was Baa2 with a stable outlook.

These ratings are subject to change as events and circumstances change.

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Equity Transactions

Three Months Ended March 31, Change

Six Months Ended June 30, Change

Net cash provided by (used in):

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Proceeds from exercise of stock options and employee stock purchase plan $ 8.7 $ 25.1 $ (16.4)

Payment of taxes related to settlement of equity awards $ (32.3) $ (30.4) $ (1.9)

Purchase of noncontrolling interests $ — $ (3.6) $ 3.6

Sources and uses of cash related to equity during the three months ended March 31, 2022 and 2021 were as follows:

- During the first three months of 2022, we did not repurchase any shares of our common stock on the open market.

During the first three months of 2021, we repurchased 0.2 million shares of our common stock for $34.1 million.

- We maintained our quarterly dividend of $0.39 per share in the first quarter of 2022.

We paid cash dividends to Equifax shareholders of $47.9 million and $47.5 million, or $0.39 per share, during the three months ended March 31, 2022 and 2021, respectively.

- We received cash of $5.7 million and $6.6 million during the first three months of 2022 and 2021, respectively, from the exercise of stock options and the employee stock purchase plan.

At March 31, 2022, the Company had $520.2 million remaining for stock repurchases under the existing authorization from the board of directors.

Sources and uses of cash related to equity during the six months ended June 30, 2022 and 2021 were as follows:

- During the first six months of 2022, we did not repurchase any shares of our common stock on the open market.

During the first six months of 2021, we repurchased $0.4 million shares of our common stock for $69.9 million.

- We maintained our quarterly dividend of $0.39 per share in the second quarter of 2022.

We paid cash dividends to Equifax shareholders of $95.7 million and $95.0 million, or $0.78 per share, during the six months ended June 30, 2022 and 2021, respectively.

- We received cash of $8.7 million and $25.1 million during the first six months of 2022 and 2021, respectively, from the exercise of stock options and the employee stock purchase plan.

At June 30, 2022, the Company had $520.2 million remaining for stock repurchases under the existing authorization from the board of directors.

Contractual Obligations, Commercial Commitments and Other Contingencies

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As such, Argentina was deemed a highly inflationary economy by accounting policymakers.

Beginning in the third quarter of 2018, we have accounted for Argentina as a highly inflationary economy which resulted in the recognition of a $1.1 million foreign currency gain that was recorded in other income, net in our Consolidated Statements of Income during the three months ended March 31, 2021.

There was minimal foreign currency impact during the three months ended March 31, 2022.

Beginning in the third quarter of 2018, we have accounted for Argentina as a highly inflationary economy which resulted in the recognition of a $0.1 million foreign currency gain and a $0.1 million foreign currency loss that was recorded in other income, net in our Consolidated Statements of Income during the three months and six months ended June 30, 2022 and June 30, 2021, respectively.

RECENT ACCOUNTING PRONOUNCEMENTS

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For information regarding our exposure to certain market risks, see “Quantitative and Qualitative Disclosures about Market Risk,” in Part II, Item 7A of our 2021 Form 10-K.

There were no material changes to our market risk exposure during the three months ended March 31, 2022.

There were no material changes to our market risk exposure during the three and six months ended June 30, 2022.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis