What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-07-22 compared with 2024-04-22 · 155 added, 146 removed, 243 unchanged (55% 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, 2024 compared to the three months ended March 31, 2023.

This section discusses the results of our operations for the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023.

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

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interest rates which impact mortgage rates available to consumers.

In the international markets in which we operate, in particular in Australia, the U.K.

and Canada, our planning also assumes economic activity, as measured by GDP, to grow in 2024 but at slower rates than in 2023.

In the international markets in which we operate, in particular in Australia and Canada, our planning also assumes economic activity, as measured by GDP, to grow in 2024 but at slower rates than in 2023, and in the U.K.

for GDP to grow nominally.

Segment and Geographic Information

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Approximately 76% and 78% of our revenue was generated in the U.S.

during the three months ended March 31, 2024 and 2023, respectively.

during the three months ended June 30, 2024 and 2023, respectively.

Approximately 77% and 78% of our revenue was generated in the U.S.

during the six months ended June 30, 2024 and 2023, respectively.

We experience seasonality in certain of our revenue streams.

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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, 2024 and 2023 were as follows:

The key performance indicators for the three and six months ended June 30, 2024 and 2023 were as follows:

Key Performance Indicators

Three Months Ended March 31,

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

2024 2023 2024 2023

(In millions, except per share data)

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Operational and Financial Highlights

• We did not repurchase any shares from public market transactions during the first three months of 2024 and 2023.

At March 31, 2024, $520.2 million was available for future purchases of common stock under our share repurchase authorization.

• We paid out $48.2 million or $0.39 per share in dividends to our shareholders during the first three months of 2024.

RESULTS OF OPERATIONS—THREE MONTHS ENDED MARCH 31, 2024 AND 2023

• We did not repurchase any shares from public market transactions during the first six months of 2024 and 2023.

At June 30, 2024, $520.2 million was available for future purchases of common stock under our share repurchase authorization.

• We paid out $96.4 million or $0.78 per share in dividends to our shareholders during the first six months of 2024.

RESULTS OF OPERATIONS—THREE MONTHS ENDED JUNE 30, 2024 AND 2023

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 2024 2023 $ % 2024 2023 $ %

(In millions)

(In millions) (In millions)

Workforce Solutions $ 612.9 $ 582.8 $ 30.1 5 % $ 1,215.7 $ 1,179.1 $ 36.6 3 %

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Consolidated operating revenue $ 1,430.5 $ 1,317.6 $ 112.9 9 % $ 2,819.9 $ 2,619.6 $ 200.3 8 %

Revenue increased by $87.4 million, or 7%, for the first quarter of 2024, compared to the same period in 2023.

Total revenue was negatively impacted by foreign exchange rates, which decreased revenue by $20.2 million, or 2%, for the first quarter of 2024, compared to same period in 2023.

Revenue in the first quarter of 2024 increased due to revenue growth in USIS, International and Workforce Solutions.

International revenue growth was driven by growth in Latin America primarily from the Boa Vista Serviços S.A.

("BVS") acquisition.

USIS revenue growth was primarily due to growth in mortgage related online services.

Workforce Solutions revenue growth was due to growth in non-mortgage verticals within Verification Services, partially offset by declines in mortgage revenue and declines in Employer Services due to lower tax credit revenue.

Revenue increased by $112.9 million, or 9%, and increased by $200.3 million, or 8%, for the second quarter and first six months of 2024, respectively, compared to the same periods in 2023.

Total revenue was negatively impacted by foreign exchange rates, which decreased revenue by $32.2 million, or 2%, and $52.3 million, or 2%, for the second quarter and first six months of 2024, compared to the same periods in 2023.

Revenue in both periods increased due to growth in International, USIS, and Workforce Solutions.

International revenue growth for both periods is driven by growth in Latin America primarily from the Boa Vista Serviços S.A.

("BVS") acquisition, completed in August 2023, and local currency growth in Argentina.

USIS revenue growth in both periods is primarily due to growth in mortgage related online services.

Workforce Solutions revenue growth for both periods is primarily due to growth in non-mortgage verticals within Verification Services, partially offset by declines in mortgage revenue and declines in Employer Services due to lower tax credit revenue.

Operating Expenses

Three Months Ended March 31, Change

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

Consolidated Operating Expenses 2024 2023 $ % 2024 2023 $ %

(In millions)

(In millions) (In millions)

Consolidated cost of services $ 630.9 $ 588.0 $ 42.9 7 % $ 1,258.6 $ 1,168.4 $ 90.2 8 %

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Consolidated operating expenses $ 1,148.3 $ 1,080.7 $ 67.6 6 % $ 2,313.0 $ 2,177.4 $ 135.6 6 %

Cost of services increased $47.3 million in the first quarter of 2024, compared to the same period in 2023.

The increase is primarily due to higher royalty costs, costs from BVS which was acquired in the third quarter of 2023, higher costs of purchased data and information, and higher third party cloud usage fees and software costs.

The impact of changes in foreign exchange rates on costs of services led to a decrease of $5.8 million in the first quarter of 2024, compared to the same period in 2023.

Selling, general and administrative expenses increased $6.5 million for the first quarter of 2024, compared to the same period in 2023.

The increase is primarily due to costs from BVS which was acquired in the third quarter of 2023, as well as higher legal expenses.

The impact of changes in foreign currency exchange rates led to a decrease in selling, general and administrative expenses of $8.5 million for the first quarter of 2024, compared to the same period in 2023.

Depreciation and amortization expense increased $14.3 million for the first quarter of 2024, compared to the same period in 2023.

The increase is due to higher amortization of purchased intangible assets related to the BVS acquisition, as well as 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 an increase in depreciation and amortization expense of $0.1 million for the first quarter of 2024 compared to the same period in 2023.

Cost of services increased $42.9 million and $90.2 million in the second quarter and first six months of 2024, respectively, compared to the same periods in 2023.

The increase in both periods is primarily due to higher royalty and revenue share costs, costs from BVS which was acquired in the third quarter of 2023, and higher third party cloud usage fees, partially offset by lower people costs.

The impact of changes in foreign exchange rates on costs of services led to a decrease of $9.6 million and $15.4 million in the second quarter and first six months of 2024, respectively, compared to the same periods in 2023.

Selling, general and administrative expenses increased $9.5 million and $16.0 million for the second quarter and first six months of 2024, respectively, compared to the same periods in 2023.

The increase in both periods is primarily due to costs from BVS which was acquired in the third quarter of 2023, partially offset by a decrease in people costs.

The impact of changes in foreign currency exchange rates led to a decrease in selling, general and administrative expenses of $12.2 million and $20.8 million for the second quarter and first six months of 2024, respectively, compared to the same periods in 2023.

Depreciation and amortization expense increased $15.2 million and $29.4 million for the second quarter and first six months of 2024, respectively, compared to the same periods in 2023.

The increase for both periods is primarily due to increased amortization of capitalized internal-use software and system costs from technology transformation capital spending incurred previously, as well as higher amortization of purchased intangible assets related to the BVS acquisition.

The impact of changes

in foreign currency exchange rates led to a decrease in depreciation and amortization expense of $0.8 million for the second quarter of 2024 and $0.7 million for the first six months of 2024, compared to the same periods in 2023.

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 2024 2023 $ % 2024 2023 $ %

(In millions)

(In millions) (In millions)

Consolidated operating revenue $ 1,430.5 $ 1,317.6 $ 112.9 9 % $ 2,819.9 $ 2,619.6 $ 200.3 8 %

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Consolidated operating income $ 282.2 $ 236.9 $ 45.3 19 % $ 506.9 $ 442.2 $ 64.7 15 %

Consolidated operating margin 16.2 % 15.8 % 0.4 pts

Total company operating margin increased by 0.4 percentage points in the first quarter of 2024, compared to the same period in 2023.

The margin increase was due to the aforementioned higher reported revenue, partially offset by the increased operating expenses and amortization expenses during the period.

Interest Expense and Other Income, net

Three Months Ended March 31, Change

Consolidated Interest Expense and Other Income, net 2024 2023 $ %

(In millions)

Consolidated operating margin 19.7 % 18.0 % 1.7 pts 18.0 % 16.9 % 1.1 pts

Total company operating margin increased by 1.7 percentage points and 1.1 percentage points in the second quarter and first six months of 2024, respectively, compared to the same periods in 2023.

The margin increase for both periods is due to the aforementioned higher reported revenue partially offset by the increased operating expenses and amortization expenses during the period.

Interest Expense and Other (Expense) Income, net

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

Consolidated Interest Expense and Other (Expense) Income, net

2024 2023 $ % 2024 2023 $ %

(In millions) (In millions)

Consolidated interest expense $ (57.3) $ (60.7) $ 3.4 (6) % $ (117.1) $ (118.3) $ 1.2 (1) %

Consolidated other income, net 1.6 4.4 (2.8) (64) %

Consolidated other (expense) income, net

(0.3) 15.9 (16.2) nm 1.3 20.4 (19.1) (94) %

Average cost of debt 4.1 % 4.2 % 4.2 % 4.1 %

Total consolidated debt, net, at quarter end $ 5,512.3 $ 5,672.1 $ (159.8) (3) % $ 5,512.3 $ 5,672.1 $ (159.8) (3) %

Interest expense increased by $2.1 million in the first quarter of 2024, compared to the same period in 2023.

The increase for the first quarter of 2024 was due to higher interest rates attributable to debt agreements entered into during 2023, partially offset by lower weighted average debt balances as compared to the first quarter of 2023.

Other income, net, decreased $2.8 million in the first quarter of 2024, as compared to the same period in 2023.

The decrease for the first quarter of 2024 was due to the gain on fair market value adjustment of our investment in BVS in the first quarter of 2023 that did not recur in the first quarter of 2024 due to our acquisition of BVS in the third quarter of 2023, partially offset by higher interest income as compared to the first quarter of 2023.

Three Months Ended March 31, Change

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Interest expense decreased by $3.4 million and $1.2 million in the second quarter and first six months of 2024, respectively, compared to the same periods in 2023.

The decrease for both periods is due to lower debt balances in the 2024 when compared to the same periods of 2023 due to repayments of commercial paper.

Other (expense) income, net, decreased by $16.2 million and $19.1 million in the second quarter of 2024 and in the first six months of 2024, respectively, as compared to the same periods in 2023.

The decrease for both periods is primarily due to the gain on fair market value adjustment of our investment in BVS in the second quarter and first six months of 2023 that did not recur in the same periods of 2024 due to our acquisition of BVS in the third quarter of 2023, as well as the sale of an investment in 2023 that did not recur in 2024.

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

Consolidated Provision for Income Taxes 2024 2023 $ % 2024 2023 $ %

(In millions)

(In millions) (In millions)

Consolidated provision for income taxes $ (59.4) $ (52.7) $ (6.7) 13 % $ (99.9) $ (91.4) $ (8.5) 9 %

Effective income tax rate 26.4 % 27.4 % 25.5 % 26.6 %

Our effective income tax rate was 24.3% for the three months ended March 31, 2024, compared to 25.4% for the three months ended March 31, 2023.

Our effective tax rate was lower for the first three months of 2024 as compared to the same periods in 2023 due to more favorable discrete benefits, none of which were individually material, as compared to the prior year, which were partially offset by an increase in the foreign rate differential.

Three Months Ended March 31, Change

Our effective income tax rate was 26.4% for the three months ended June 30, 2024, compared to 27.4% for the three months ended June 30, 2023.

Our effective income tax rate was 25.5% for the six months ended June 30, 2024, compared to 26.6% for the six months ended June 30, 2023.

Our effective tax rate was lower for the three and six months ended June 30, 2024 as compared to the same periods in 2023 due to more favorable discrete benefits in the current year primarily due to the expiration of the statute of limitations related to uncertain tax positions.

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

Consolidated Net Income 2024 2023 $ % 2024 2023 $ %

(In millions, except per share amounts)

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

Consolidated operating income $ 282.2 $ 236.9 $ 45.3 19 % $ 506.9 $ 442.2 $ 64.7 15 %

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Weighted-average shares used in computing diluted earnings per share 124.8 123.8 124.7 123.7

Consolidated net income increased by $12.6 million for the first quarter of 2024, compared to the same period in 2023.

The increase for the first quarter of 2024 was due to higher levels of operating income from increased revenue, partially offset by increased operating expenses, higher income tax expense, higher interest expense, and lower levels of other income, net.

Consolidated net income increased by $25.8 million and $38.3 million for the second quarter and first six months of 2024, respectively, compared to the same periods in 2023.

The increase in both periods is due to higher levels of operating income from increased revenue, partially offset by increased operating expenses, lower levels of other income, net, and higher income tax expense.

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 2024 2023 $ % 2024 2023 $ %

(In millions)

(In millions) (In millions)

Operating revenue:

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Total operating income $ 272.7 $ 244.6 $ 28.1 11 % $ 527.8 $ 493.4 $ 34.4 7 %

Operating margin 42.3 % 41.7 % 0.6 pts

Workforce Solutions revenue increased by 1% in the first quarter of 2024, compared to the same period in 2023.

The increase is due to an increase in non-mortgage verticals within Verification Services, partially offset by declines in mortgage revenue and declines in Employer Services due to lower tax credit revenue.

Operating margin 44.5 % 42.0 % 2.5 pts 43.4 % 41.8 % 1.6 pts

Workforce Solutions revenue increased by 5% and increased by 3% in the second quarter and first six months of 2024, respectively, compared to the same periods in 2023.

The increase in revenue for both periods is due to an increase in non-mortgage verticals within Verification Services, partially offset by declines in mortgage revenue and declines in Employer Services due to lower tax credit revenue.

Verification Services

Revenue increased by 5% for the first quarter of 2024, compared to the same period in 2023.

The increase in revenue is primarily due to growth in the government vertical, partially offset by declines in the mortgage vertical.

Revenue increased by 9% and increased 7% for the second quarter and first six months of 2024, respectively, compared to the same periods in 2023.

The increase in revenue for both periods is primarily due to growth in the government and talent verticals, partially offset by declines in the mortgage vertical.

Employer Services

Revenue decreased by 10% in the first quarter of 2024, compared to the same period in 2023.

The decrease for the first quarter of 2024 is primarily due to lower Employee Retention Credit ("ERC") revenue.

Revenue decreased by 11% and 10% in the second quarter and first six months of 2024, respectively, compared to the same periods in 2023.

The decrease in revenue for both periods is primarily due to lower Employee Retention Credit ("ERC")

The ERC revenue decrease is driven by the wind down of the program, accelerated by the IRS pausing new claims processing in the third quarter of 2023.

Workforce Solutions Operating Margin

Operating margin increased to 42.3% for the first quarter of 2024 from 41.7% for the first quarter of 2023.

The increased margin is due to the aforementioned increase in revenue.

Three Months Ended March 31, Change

Operating margin increased to 44.5% for the second quarter of 2024 from 42.0% for the second quarter of 2023, and increased to 43.4% for the first six months of 2024 from 41.8% for the first six months of 2023.

The increased margin for both periods is due to the aforementioned increase in revenue.

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

Information Solutions 2024 2023 $ % 2024 2023 $ %

(In millions)

(In millions) (In millions)

Operating revenue:

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Total operating income $ 98.6 $ 102.8 $ (4.2) (4) % $ 191.2 $ 181.4 $ 9.8 5 %

Operating margin 19.9 % 18.6 % 1.3 pts

Information Solutions revenue increased by 10% for the first quarter of 2024, compared to the same period in 2023.

The increase is due to growth in online revenue primarily from growth in mortgage related online services, as well as growth in consumer solutions revenue and Mortgage Solutions.

Growth in mortgage related online revenue and Mortgage Solutions was due to both annual pricing actions and increased mortgage prequalification credit inquiry revenue.

Operating margin 20.6 % 23.1 % (2.5) pts 20.3 % 20.9 % (0.6) pts

USIS revenue increased by 7% and 9% for the second quarter and first six months of 2024, respectively, compared to the same periods in 2023.

The increase for both periods is due to growth in mortgage related online services, as well as growth in Mortgage Solutions and consumer solutions revenue.

Growth in mortgage related online revenue and Mortgage Solutions was due to both increased product prices and increased mortgage prequalification credit inquiry revenue.

Online Information Solutions

Revenue increased by 12% for the first quarter of 2024, compared to the same period in 2023.

The increase is due to higher mortgage revenue due to annual pricing actions and higher mortgage prequalification credit inquiry revenue, as well as continued growth of consumer solutions revenue.

Revenue increased by 5% and 8% for the second quarter and first six months of 2024, respectively, compared to the same periods in 2023.

The increase for both periods is driven by higher mortgage revenue due to increased product prices and higher mortgage prequalification credit inquiry revenue, as well as continued growth of consumer solutions revenue.

Mortgage Solutions

Revenue increased by 14% in the first quarter of 2024, compared to the same period in 2023.

The increase is due to both annual pricing actions and higher mortgage prequalification credit inquiry revenue.

Revenue increased by 33% and 23% in the second quarter and first six months of 2024, respectively, compared to the same periods in 2023.

The increase in both periods is due to both increased product prices and higher mortgage prequalification credit inquiry revenue.

Financial Marketing Services

Revenue decreased by 1% for the first quarter of 2024, compared to the same period in 2023.

The decrease is driven by declines in credit marketing services, as well as risk and data services.

Revenue increased by 7% and 3% for the second quarter and first six months of 2024, respectively, compared to the same periods in 2023.

The increase for both periods is driven by growth in credit marketing services.

USIS Operating Margin

USIS operating margin increased to 19.9% for the first quarter of 2024 from 18.6% for the first quarter of 2023.

The margin increase is due to the increase in revenue, partially offset by an increase in operating expenses.

The increase in operating expenses is primarily due to increased royalty expenses, increased amortization of capitalized internal-use software and system costs from technology transformation capital spending incurred previously and third party cloud usage fees.

USIS operating margin decreased to 20.6% for the second quarter of 2024 from 23.1% for the second quarter of 2023 and decreased to 20.3% for the first six months of 2024 from 20.9% for the first six months of 2023.

The margin decrease for both periods is due to an increase in operating expenses, partially offset by an increase in revenue.

The increase in operating expenses in both periods is primarily due to increased royalty expenses, particularly in the mortgage vertical, increased amortization of capitalized internal-use software and system costs from technology transformation capital spending incurred previously, and third party cloud usage fees.

International

Three Months Ended March 31, Change

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

International 2024 2023 $ % 2024 2023 $ %

(In millions)

(In millions) (In millions)

Operating revenue:

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Total operating income $ 40.4 $ 34.4 $ 6.0 17 % $ 72.3 $ 67.0 $ 5.3 8 %

Operating margin 9.9 % 11.5 % (1.6) pts

International revenue increased by 13% in the first quarter of 2024, compared to the same period in 2023.

On a local currency basis, revenue increased by 20% in the first quarter of 2024, driven by revenue growth in Latin America from the BVS

acquisition, as well as growth in Europe and Canada, partially offset by a decline in Australia.

Operating margin 11.9 % 11.9 % — pts 10.9 % 11.7 % (0.8) pts

International revenue increased by 17% and 15% in the second quarter and the first six months of 2024, respectively, compared to the same periods in 2023.

On a local currency basis, revenue increased by 28% and 24% in the second quarter and first six months of 2024, respectively, compared to the same periods in 2023.

The increase in both periods is driven by Latin America, primarily due to revenue from the BVS acquisition and local currency growth in Argentina, as well as growth in Europe and Canada, partially offset by a decline in Australia.

Local currency fluctuations against the U.S.

dollar negatively impacted revenue by $20.0 million, or 7%, for the first quarter of 2024.

dollar negatively impacted revenue by $32.2 million, or 11%, for the second quarter of 2024, and by $52.3 million, or 9%, for the first six months of 2024.

Latin America

On a local currency basis, revenue increased by 102% for the first quarter of 2024, compared to the same period in 2023.

The increase in revenue is primarily due to revenue from the BVS acquisition and local currency growth in Argentina.

On a local currency basis, revenue increased by 124% and 113% for the second quarter and first six months of 2024, respectively, compared to the same periods in 2023.

The increase in both periods is primarily due to revenue from the BVS acquisition, which was $41.2 million and $82.4 million in the second quarter and first six months of 2024 , respectively, as well as from local currency growth in Argentina.

Local currency fluctuations against the U.S.

dollar negatively impacted revenue by $21 million, or 37%, for the first quarter of 2024, primarily within Argentina.

Reported revenue increased by 65% for the first quarter of 2024, compared to the same period in 2023.

On a local currency basis, revenue increased by 10% for the first quarter of 2024, compared to the same period in 2023.

The increase is due to growth in the credit reporting businesses in the U.K., as well as growth in our debt services business in the U.K.

dollar negatively impacted revenue by $30.1 million, or 53%, and $50.6 million, or 45%, for the second quarter and first six months of 2024, respectively, primarily in Argentina and Chile.

Reported revenue increased by 71% and 68% for the second quarter and first six months of 2024, respectively, compared to the same periods in 2023.

On a local currency basis, revenue increased by 12% and 11% for the second quarter and first six months of 2024, respectively, compared to the same periods in 2023 .

The increase in both periods is primarily due to growth in the debt services and credit reporting businesses in the U.K.

Local currency fluctuations against the U.S.

dollar positively impacted revenue by $3 million, or 4%, for the first quarter of 2024.

Reported revenue increased by 14% for the first quarter of 2024, compared to the same period in 2023.

Asia Pacific.

On a local currency basis, revenue decreased by 10% for the first quarter of 2024, compared to the same period in 2023.

The decrease is primarily driven by Australia due to declines in the commercial and consumer credit reporting businesses.

dollar positively impacted revenue by $0.4 million, or less than 1%, and $3.6 million, or 2%, for the second quarter and first six months of 2024, respectively.

Reported revenue increased by 12% and 13% for the second quarter and first six months of 2024, respectively, compared to the same periods in 2023.

On a local currency basis, revenue decreased by 2% and 6% for the second quarter and first six months of 2024, respectively, compared to the same periods in 2023.

The decrease in both periods is primarily driven by Australia due to declines in the commercial and consumer credit reporting businesses.

Local currency fluctuations against the U.S.

dollar negatively impacted revenue by $3.0 million, or 3%, for the first quarter of 2024.

Reported revenue decreased by 13% for the first quarter of 2024, compared to the same period in 2023.

On a local currency basis, revenue increased by 4% for the first quarter of 2024, compared to the same period in 2023.

The increase is driven by growth in the direct to consumer, commercial and identity and fraud businesses.

dollar negatively impacted revenue by $1.2 million, or 2%, and $4.2 million, or 2%, for the second quarter and first six months of 2024, respectively.

Reported revenue decreased by 4% and 8% for the second quarter and first six months of 2024, respectively, compared to the same periods in 2023.

On a local currency basis, revenue increased by 6% and 5% in the second quarter and first six months of 2024, respectively, compared to the same periods in 2023.

Revenue growth in both periods is driven by growth in the direct to consumer and the consumer credit reporting businesses.

Local currency fluctuations against the U.S.

dollar positively impacted revenue by $0.2 million, or 0.3%, for the first quarter of 2024.

Reported revenue increased by 4% for the first quarter of 2024, compared to the same period in 2023.

dollar negatively i mpacted revenue by $1.3 million, or 2%, and $1.1 million or 1%, for the second quarter and first six months of 2024, respectively.

Reported revenue increased by 4% for both the second quarter and first six months of 2024 compared to the same periods in 2023.

International Operating Margin

Operating margin decreased to 9.9% for the first quarter of 2024 from 11.5% for the first quarter of 2023.

The decrease in margin for the first quarter of 2024 is principally due to higher amortization of purchased intangible assets related to the BVS acquisition.

Operating margin was flat at 11.9% for both the second quarter of 2024 and the second quarter of 2023 and decreased to 10.9% for the first six months o f 2024 from 11.7% for the first six months of 2023.

The margin decrease for the first six months of 2024 compared to the first six months of 2023 is due to higher amortization costs, principally due to higher amortization of purchased intangible assets related to the BVS acquisition.

General Corporate Expense

Three Months Ended March 31, Change

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

General Corporate Expense 2024 2023 $ % 2024 2023 $ %

(In millions)

General corporate expense $ 154.9 $ 154.6 $ 0.3 nm

(In millions) (In millions)

General corporate expense $ 129.5 $ 144.9 $ (15.4) (11) % $ 284.4 $ 299.6 $ (15.2) (5) %

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

General corporate expense increased by $0.3 million for the first quarter of 2024, compared to the same period in 2023.

The increase is primarily due to higher people costs and litigation expense, partially offset by lower third party cloud usage fees and software costs, as well as lower amortization of capitalized internal-use software and system costs.

General corporate expense decreased by $15.4 million and $15.2 million for the second quarter and first six months of 2024, respectively, compared to the same periods in 2023.

The decrease for both periods is primarily due to a decrease in people costs and consulting services.

The decrease in people costs is primarily due to lower salary costs, temporary labor costs, and restructuring charges recorded in 2023, partially offset by higher incentive plans.

LIQUIDITY AND FINANCIAL CONDITION

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Funds generated by operating activities, our $1.5 billion five-year unsecured revolving credit facility ("Revolver") and related commercial paper ("CP") program, more fully described below, are our most significant sources of liquidity.

At March 31, 2024, we had $201.0 million in cash and cash equivalents, as well as $1,387.1 million available to borrow under our Revolver.

At June 30, 2024, we had $181.9 million in cash and cash equivalents, as well as $1,499.6 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, 2024 compared to December 31, 2023, we have utilized existing CP and Revolver 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, 2024 compared to December 31, 2023, we have utilized cash from operating activities to meet our current obligations.

Fund Transfer Limitations.

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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, 2024, we held $187.5 million of cash in our foreign subsidiaries.

As of June 30, 2024, we held $157.6 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, 2024 and 2023:

Three Months Ended March 31, Change

The following table summarizes our cash flows for the six months ended June 30, 2024 and 2023:

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, 2024 increased by $101.8 million compared to the prior year period primarily due to changes in our working capital position and increased net income.

Cash provided by operating activities in the six months ended June 30, 2024 increased by $107.2 million compared to the prior year period primarily due to improved net income and changes in our working capital position.

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 2024 decreased by $26.4 million from the same period in 2023 due to lower capitalized software costs and lower spending on technology infrastructure as compared to the first quarter of 2023 as we continue to make progress toward completion of our technology transformation.

Capital expenditures paid in the first six months of 2024 decreased by $52.7 million from the same period in 2023 due to lower capitalized software costs and lower spending on technology infrastructure as compared to the first six months of 2023 as we continue to make progress toward completion of our technology transformation.

Financing Activities

Borrowings and Credit Facility Availability

Three Months Ended March 31, Change

Six Months Ended June 30, Change

Net cash (used in) provided by:

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Credit Facilities Availability

We have access to a $1.5 billion five-year unsecured revolving credit facility (Revolver) and a $700.0 million delayed draw term loan (Term Loan), collectively known as the “Senior Credit Facilities,” both of which mature in August 2026.

Borrowings under the Senior Credit Facilities may be used for working capital, for capital expenditures, to refinance existing debt, to finance acquisitions and for other general corporate purposes.

We have access to a $1.5 billion five-year unsecured revolving credit facility (Revolver), which matures in August 2027, and a $700.0 million delayed draw term loan ("Term Loan"), which matures in August 2026, collectively known as the “Senior Credit Facilities.” Borrowings under the Senior Credit Facilities may be used for working capital, for capital expenditures, to refinance existing debt, to finance acquisitions and for other general corporate purposes.

The Revolver includes an option to request a maximum of three one-year extensions of the maturity date any time after the first anniversary of the closing date of the Revolver.

In May 2024, we exercised our first option to extend the maturity date by one year, from August 2026 to August 2027, and amended the Revolver agreement to replace a discontinued reference rate for Canadian Dollar-denominated commitments.

Availability of the Revolver is reduced by the outstanding principal balance of our CP notes and by any letters of credit issued under the Revolver.

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We may use the proceeds of CP for general corporate purposes.

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 and by any letters of credit issued under the facility.

As of March 31, 2024, there were $0.4 million of letters of credit outstanding, no outstanding borrowings under the Revolver, $691.3 million outstanding under the Term Loan and $112.5 million of outstanding CP notes.

Availability under the Revolver was $1,387.1 million at March 31, 2024.

At March 31, 2024, 86% of our debt was fixed-rate debt and 14% was effectively variable-rate debt.

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

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

As of June 30, 2024, there were $0.4 million of letters of credit outstanding, no outstanding borrowings under the Revolver, $686.9 million outstanding under the Term Loan, and no outstanding CP notes.

Availability under the Revolver was $1,499.6 million at June 30, 2024.

At June 30, 2024, 88% of our debt was fixed-rate debt and 12% was effectively variable-rate debt.

Our variable-rate debt consists of our outstanding amounts under our Term Loan and CP program.

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

At March 31, 2024, the interest rate on our variable-rate debt ranged from 5.45% to 6.68%.

At June 30, 2024, the interest rate on our variable-rate debt was 6.69%.

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 on long-term debt for the first three months of 2024.

Borrowings on long-term debt represent $175 million of borrowings on our Revolver during the first three months of 2023.

Payments on long-term debt represent $4.4 million of payments on the Term Loan during the first three months of 2024.

There were no payments on long-term debt for the first three months of 2023.

There were no borrowings on long-term debt for the first six months of 2024.

Borrowings on long-term debt represent $175.0 million of borrowings on our Revolver during the first quarter of 2023 and the issuance of $700.0 million of 5.1% Senior Notes in the second quarter of 2023.

Payments on long-term debt in 2024 represent $8.8 million of payments on the Term Loan during the first six months of 2024.

Payments on long-term debt in 2023 represent $175.0 million of repayments on our Revolver and repayment of our $400.0 million 3.95% senior notes during the second quarter of 2023.

Debt Covenants.

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In March 2023, we amended the Senior Credit Facilities, resulting in a modification of our required maximum leverage ratio, among other changes.

As amended, the Senior Credit Facilities require a maximum leverage ratio, defined as consolidated funded debt divided by consolidated EBITDA, of (i) 4.25 to 1.0 commencing with the fourth quarter of 2022 through the fourth quarter of 2023 and (ii) 3.75 to 1.0 commencing with the first quarter of 2024 and for each fiscal quarter ending thereafter

through the remaining term of the Senior Credit Facilities.

As amended, the Senior Credit Facilities require a maximum leverage ratio, defined as consolidated funded debt divided by consolidated EBITDA, of (i) 4.25 to 1.0 for the fourth quarter of 2022 through the fourth quarter of 2023 and (ii) 3.75 to 1.0 for the first quarter of 2024 and for each fiscal quarter ending thereafter through the remaining term of the Senior Credit Facilities.

We may also elect to increase the maximum leverage ratio by 0.5 to 1.0 (subject to a maximum leverage ratio of 4.75 to 1.0) in connection with certain material acquisitions if we satisfy certain requirements.

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, 2024, we were in compliance with all of our debt covenants.

As of June 30, 2024, 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;

however, our 2.6% senior notes due 2024, 2.6% senior notes due 2025, 3.25% senior notes due 2026, 5.1% senior notes due 2027, 5.1% senior notes due 2028, 3.1% senior notes due 2030, 2.35% senior notes due 2031 and 7.0% senior notes due 2037 (collectively, the “Senior Notes”) contain change in control provisions.

2037 (collectively, the “Senior Notes”) contain change in control provisions.

If the Company experiences a change of control or publicly announces an 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.

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Equity Transactions

Three Months Ended March 31, Change

Net cash provided by (used in):

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Net cash (used in) provided by:

2024 2023 2024 vs.

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Payment of taxes related to settlement of equity awards $ (16.0) $ (16.9) $ 0.9

Sources and uses of cash related to equity during the three months ended March 31, 2024 and 2023 were as follows:

- During the first three months of 2024 and 2023, we did not repurchase any shares of our common stock on the open market.

- We maintained our quarterly dividend of $0.39 per share in the first quarter of 2024.

We paid cash dividends to Equifax shareholders of $48.2 million and $47.9 million, or $0.39 per share, during the three months ended March 31, 2024 and 2023, respectively.

- We received cash of $19.9 million and $6.6 million during the first three months of 2024 and 2023, respectively, from the exercise of stock options and the employee stock purchase plan.

- We paid taxes of $15.4 million and $15.9 million related to the settlement of equity awards during the first three months of 2024 and 2023, respectively.

At March 31, 2024, 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, 2024 and 2023 were as follows:

- During the first six months of 2024 and 2023, we did not repurchase any shares of our common stock on the open market.

- We maintained our quarterly dividend of $0.39 per share in the second quarter of 2024.

We paid cash dividends to Equifax shareholders of $96.4 million and $95.6 million, or $0.78 per share, during the six months ended June 30, 2024 and 2023, respectively.

- We received cash of $38.1 million and $16.5 million during the first six months of 2024 and 2023, respectively, from the exercise of stock options and the employee stock purchase plan.

- We paid taxes of $16.0 million and $16.9 million related to the settlement of equity awards during the first six months of 2024 and 2023, respectively.

At June 30, 2024, 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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For our non-U.S., tax-qualified retirement plans, we fund an amount sufficient to meet minimum funding requirements but no more than allowed as a tax deduction pursuant to applicable tax regulations.

For our non-qualified supplementary retirement plans, we fund the benefits as they are paid to retired participants, but accrue the associated expense and liabilities in accordance with U.S.

For our non-qualified supplementary

retirement plans, we fund the benefits as they are paid to retired participants, but accrue the associated expense and liabilities in accordance with U.S.

For additional information about our benefit plans, see Note 9 of the Notes to Consolidated Financial Statements in our 2023 Form 10-K.

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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 $0.1 million foreign currency loss that was recorded in other income, net in our Consolidated Statements of Income during the three months ended March 31, 2024 and March 31, 2023.

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 loss that was recorded in other income, net in our Consolidated Statements of Income during both the three months ended June 30, 2024 and 2023.

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 2023 Form 10-K.

There were no material changes to our market risk exposure during the three months ended March 31, 2024.

There were no material changes to our market risk exposure during the three and six months ended June 30, 2024.

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