Equifax 10-Q 2023-03-31

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended March 31, 2023

OR

For the transition period from to .

Commission File Number: 001-06605

EQUIFAX INC.

(Exact name of registrant as specified in its charter)

404-885-8000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

On April 7, 2023, there were 122,643,754 shares of the registrant’s common stock outstanding.

EQUIFAX INC.

QUARTERLY REPORT ON FORM 10-Q

QUARTER ENDED MARCH 31, 2023

INDEX

FORWARD-LOOKING STATEMENTS

This report contains information that may constitute “forward-looking statements.” Generally, the words “believe,” “expect,” “intend,” “estimate,” “anticipate,” “project,” “will,” “may” and similar expressions identify forward-looking statements, which generally are not historical in nature. All statements that address future operating performance and events or developments that we expect or anticipate will occur in the future, including statements relating to future operating results, improvements in our information technology and data security infrastructure, including as a part of our cloud data and technology transformation, our strategy, the expected financial and operational benefits, synergies and growth from our acquisitions, changes in U.S. and worldwide economic conditions, such as rising interest rates and inflation, that materially impact consumer spending, consumer debt and employment and the demand for Equifax's products and services, our culture, our ability to innovate, the market acceptance of new products and services and similar statements about our business plans are forward-looking statements. Management believes that these forward-looking statements are reasonable as and when made. However, forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from the Company’s historical experience and our present expectations or projections, including without limitation our expectations regarding the Company’s outlook, long-term organic and inorganic growth, and customer acceptance of our business solutions referenced above under “Item 1. Business” and below in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation — Business Overview.” These risks and uncertainties include, but are not limited to, those described in Part II, “Item 1A. Risk Factors,” and elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2022, as well as subsequent reports filed with the Securities and Exchange Commission. As a result of such risks and uncertainties, we urge you not to place undue reliance on any such forward-looking statements. Forward-looking statements speak only as of the date when made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

PART I. FINANCIAL INFORMATION

EQUIFAX INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

See Notes to Consolidated Financial Statements.

EQUIFAX INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

See Notes to Consolidated Financial Statements.

EQUIFAX INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

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The following Management’s Discussion and Analysis (“MD&A”) is intended to help the reader understand the results of operations and financial condition of Equifax Inc. 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, 2023 compared to the three months ended March 31, 2022. All percentages have been calculated using unrounded amounts for each of the periods presented.

As used herein, the terms Equifax, the Company, we, our and us refer to Equifax Inc., a Georgia corporation, and its consolidated subsidiaries as a combined entity, except where it is clear that the terms mean only Equifax Inc.

All references to earnings per share data in MD&A are to diluted earnings per share, or EPS, unless otherwise noted. Diluted EPS is calculated to reflect the potential dilution that would occur if stock options or other contracts to issue common stock were exercised and resulted in additional common shares outstanding.

BUSINESS OVERVIEW

Equifax Inc. is a global data, analytics and technology company. We provide information solutions for businesses, governments and consumers, and we provide human resources business process automation and outsourcing services for employers. We have a large and diversified group of clients, including financial institutions, corporations, government agencies and individuals. Our services are based on comprehensive databases of consumer and business information derived from numerous sources including credit, financial assets, telecommunications and utility payments, employment, income, educational history, criminal history, healthcare professional licensure and sanctions, demographic and marketing data. We use advanced statistical techniques, machine learning and proprietary software tools to analyze available data to create customized insights, decision-making and process automation solutions and processing services for our clients. We are a leading provider of e-commerce fraud and charge back protection services in North America as well as information and solutions used in payroll-related and human resource management business process services in the U.S. For consumers, we provide products and services to help people understand, manage and protect their personal information and make more informed financial decisions. Additionally, we also provide information, technology and services to support debt collections and recovery management.

We currently operate in four global regions: North America (U.S. 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 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 previously had a joint venture in Russia that offered consumer credit services; however, during the third quarter of 2022, we completed the sale of this equity method investment.

Recent Events and Company Outlook

As further described in our 2022 Form 10-K, we operate in the U.S., which represented 78% of our revenue in 2022, and internationally in 19 countries. Our products and services span a wide variety of vertical markets including financial services, mortgage, talent solutions, federal, state and local governments, automotive, telecommunications, e-commerce and many others.

Demand for our services tends to be correlated to general levels of economic activity and to consumer credit activity, small business commercial credit, marketing activity, identity and fraud, and employee hiring and onboarding activity. Demand is also enhanced by our initiatives to expand our products, capabilities and markets served.

For 2023, we expect that U.S. economic activity, as measured by GDP, to grow but at a slower rate of growth than experienced in 2022. Our forecast assumes the U.S. mortgage market, as measured by originations, is expected to decline by about 32% in 2023 versus 2022. The U.S. mortgage market, particularly the mortgage refinance portion of the U.S. mortgage market, can be significantly impacted by U.S. interest rates and therefore mortgage rates. In the International markets in which we operate, in particular in Australia, the U.K. and Canada, our forecast also assumes economic activity, as measured by GDP, to grow in 2023 but at slower rates than in 2022.

Segment and Geographic Information

Segments. The Workforce Solutions segment consists of the Verification Services and Employer Services business lines. Verification Services revenue is transaction-based and is derived primarily from employment and income verification, as well as criminal justice data. Employer Services revenue is derived from our provision of certain human resources business process outsourcing services that include both transaction and subscription based product offerings. These services include unemployment claims management, employment-based tax credit services and other complementary employment-based transaction services.

The USIS segment consists of three service lines: Online Information Solutions, Mortgage Solutions, and Financial Marketing Services. Online Information Solutions and Mortgage Solutions revenue is principally transaction-based and is derived from our sales of products such as consumer and commercial credit reporting and scoring, identity management, fraud detection, modeling services and consumer credit monitoring services. USIS also markets certain decisioning software services which facilitate and automate a variety of consumer and commercial credit-oriented decisions. Online Information Solutions also includes our U.S. consumer credit monitoring solutions business. Financial Marketing Services revenue is principally project and subscription based and is derived from our sales of batch credit and consumer wealth information such as those that assist clients in acquiring new customers, cross-selling to existing customers and managing portfolio risk.

The International segment consists of Asia Pacific, Europe, Canada and Latin America. Canada’s services are similar to our USIS offerings. Asia Pacific, Europe and Latin America are made up of varying mixes of service lines that are generally consistent with those in our USIS reportable segment. We also provide information and technology services to support lenders and other creditors in the collections and recovery management process.

Geographic Information. We currently have operations in the following countries: Argentina, Australia, Canada, Chile, Costa Rica, Dominican Republic, Ecuador, El Salvador, Honduras, India, Mexico, New Zealand, Paraguay, Peru, Portugal, the Republic of Ireland, Spain, the U.K., Uruguay and the U.S. 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 previously had a joint venture in Russia that offered consumer credit services; however, during the third quarter of 2022, we completed the sale of this equity method investment. Approximately 78% and 79% of our revenue was generated in the U.S. during the three months ended March 31, 2023 and 2022, respectively.

Seasonality. 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 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. Revenue generated from our financial wealth asset products and data management services in our Financial Marketing Services business is generally higher in the fourth quarter each year due to the significant portion of our annual renewals and deliveries which occur then. Mortgage related revenue is generally higher in the second and third quarters of the year due to the increase in consumer home purchasing during the summer in the U.S. Any

change in the U.S. mortgage market has a corresponding impact on revenue and operating profit for our business within the Workforce Solutions and USIS operating segments.

Key Performance Indicators. Management focuses on a variety of key indicators to monitor operating and financial performance. 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, 2023 and 2022 were as follows:

*Amounts include accruals for capital expenditures.

Operational and Financial Highlights

• We did not repurchase any shares from public market transactions during the first three months of 2023 and 2022. At March 31, 2023, $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 2023.

RESULTS OF OPERATIONS—THREE MONTHS ENDED MARCH 31, 2023 AND 2022

Consolidated Financial Results

Operating Revenue

Revenue decreased by $61.2 million, or 4% for the first quarter of 2023, compared to the same period in 2022. Total revenue was negatively impacted by foreign exchange rates, which decreased revenue by $23.4 million, or 2%, for the first quarter of 2023, compared to same period in 2022.

Revenue in the first quarter of 2023 decreased primarily due to declines in Workforce Solutions, mainly Verification Services, and USIS, due to declines in the U.S. mortgage market.

Operating Expenses

Cost of services increased $27.0 million in the first quarter of 2023, compared to the same period in 2022. The increase was primarily due to higher people costs and royalty costs, as well as 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 $10.7 million in the first quarter of 2023, compared to the same period in 2022.

Selling, general and administrative expenses increased $25.8 million for the first quarter of 2023, compared to the same period in 2022. The increase was primarily due to increases in people costs. The impact of changes in foreign currency exchange rates led to a decrease in selling, general and administrative expenses of $6.4 million for the first quarter of 2023, compared to the same period in 2022.

Depreciation and amortization expense increased $13.0 million for the first quarter of 2023, compared to the same period in 2022. 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 $2.0 million for the first quarter of 2023 compared to the same period in 2022.

Operating Income and Operating Margin

Total company operating margin decreased by 8.6 percentage points in the first quarter of 2023, compared to the same period in 2022. The margin decrease was due to the aforementioned decreased revenue and increased operating expenses and amortization expense.

Interest Expense and Other Income, net

Interest expense increased by $17.9 million in the first quarter of 2023, compared to the same period in 2022. The increase for the first quarter of 2023 was due to a higher weighted average outstanding amount of debt and higher interest costs attributable to debt agreements entered into during 2022.

Other income, net, decreased $6.7 million in the first quarter of 2023, as compared to the same period in 2022. The decrease for the first quarter of 2023 was due to the lower fair value adjustment of our investment in Brazil as compared to the same period in 2022.

Income Taxes

Our effective income tax rate was 25.4% for the three months ended March 31, 2023, compared to 26.7% for the three months ended March 31, 2022. Our effective tax rate was lower during the first quarter of 2023 as compared to 2022 primarily due to an unfavorable impact of a state law change that was reflected in the prior year.

Net Income

Consolidated net income decreased by $109.3 million for the first quarter of 2023, compared to the same period in 2022. The decrease for the first quarter of 2023 was due to the decrease in operating income from decreased revenue and increased operating expenses and interest expense, partially offset by decreased tax expense.

Segment Financial Results

Workforce Solutions

Workforce Solutions revenue decreased by 8% in the first quarter of 2023, compared to the same period in 2022. The decrease was due to a decline in Verification Services driven by a decline in mortgage vertical revenue as U.S. mortgage origination activity has declined as a result of higher interest rates when compared to first quarter 2022, partially offset by growth in non-mortgage verticals, as well as an increase in Employer Services.

Verification Services

Revenue decreased by 11% for the first quarter of 2023, compared to the same period in 2022. The decrease in revenue was primarily due to a decline in the mortgage vertical due to continued slower U.S. mortgage origination activity in 2023 due to higher interest rates, partially offset by increases in government and talent solutions verticals.

Employer Services

Revenue increased by 4% in the first quarter of 2023, compared to the same period in 2022. The increase for the first quarter of 2023 is due to growth in the I-9 and onboarding verticals, as well as revenue from recent acquisitions.

Workforce Solutions Operating Margin

Operating margin decreased to 41.7% for the first quarter of 2023 from 47.5% for the first quarter of 2022. The decreased margin is due to the decline in revenue, as well as increased people costs, production costs, and purchased intangible asset amortization.

USIS

USIS revenue decreased by 3% for the first quarter of 2023, compared to the same period in 2022. The decrease was due to the negative impact of declining mortgage inquiry volumes on both online services and mortgage solutions, partially offset by growth in non-mortgage online services and Financial Marketing Services.

Online Information Solutions

Revenue decreased by 1% for the first quarter of 2023, compared to the same period in 2022. The decrease was due to declining mortgage inquiry volumes compared to the prior year, partially offset by continued growth of non-mortgage online services and revenue from acquisitions.

Mortgage Solutions

Revenue decreased by 23% in the first quarter of 2023, compared to the same period in 2022. The decrease was due to declining mortgage inquiry volumes, as compared to the prior year.

Financial Marketing Services

Revenue increased by 4% for the first quarter of 2023, compared to the same period in 2022. The increase was driven by marketing services revenue.

USIS Operating Margin

USIS operating margin decreased to 18.6% for the first quarter of 2023 from 28.1% for the first quarter of 2022. The margin decrease was due to the decrease in revenue and increase in depreciation expense related to increased capitalized software development assets in service and cloud production costs, as well as increased royalty expense.

International

International revenue increased by 1% in the first quarter of 2023, compared to the same period in 2022. On a local currency basis, revenue increased by 9% in the first quarter of 2023, mainly driven by growth in Latin America, Asia Pacific and Canada, partially offset by declines in Europe due to our debt services business. Local currency fluctuations against the U.S. dollar negatively impacted revenue by $23.4 million, or 8%, for the first quarter of 2023.

Asia Pacific

On a local currency basis, revenue increased by 11% for the first quarter of 2023, compared to the same period in 2022. The increase was driven by the commercial business due to higher volumes, partially offset by the decline in background check verifications. Local currency fluctuations against the U.S. dollar negatively impacted revenue by $5.7 million, or 7%, for the first quarter of 2023. Reported revenue increased by 4% for the first quarter of 2023, compared to the same period in 2022.

Europe

On a local currency basis, revenue decreased by 4% for the first quarter of 2023, compared to the same period in 2022. The decrease was driven by a decline in the debt services business driven by lower revenue from public sector customers. This was partially offset by growth in the credit reporting business, principally in consumer online, analytical services and identity and fraud. Local currency fluctuations against the U.S. dollar negatively impacted revenue by $6.9 million, or 8%, for the first quarter of 2023. Reported revenue decreased by 12% for the first quarter of 2023, compared to the same period in 2022.

Latin America

On a local currency basis, revenue increased by 32% for the first quarter of 2023, compared to the same period in 2022. The increase principally reflects local currency growth in Argentina, Honduras, Paraguay, Chile and Uruguay, as well as growth due to acquisition revenue. Local currency fluctuations against the U.S. dollar negatively impacted revenue by $7.4 million, or 15%, for the first quarter of 2023, primarily within Argentina. Reported revenue increased by 17% for the first quarter of 2023, compared to the same period in 2022.

Canada

On a local currency basis, revenue increased by 8% for the first quarter of 2023, compared to the same period in 2022. The increase was driven by growth in consumer online and fraud products, partially offset by a decline in the consumer direct business. Local currency fluctuations against the U.S. dollar negatively impacted revenue by $3.4 million, or 6%, for the first quarter of 2023. Reported revenue increased by 2% for the first quarter of 2023, compared to the same period in 2022.

International Operating Margin

Operating margin decreased to 11.5% for the first quarter of 2023 from 13.2% for the first quarter of 2022. The decrease in margins for the first quarter of 2023 was due to lower margin revenue in debt services, higher cloud production and data costs, depreciation expense related to the technology transformation and increases in people costs.

General Corporate Expense

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 increased by $20.1 million for the first quarter of 2023, compared to the same period in 2022. The increase was due to increased people costs, primarily equity compensation.

LIQUIDITY AND FINANCIAL CONDITION

Management assesses liquidity in terms of our ability to generate cash to fund operating, investing and financing activities. We continue to generate substantial cash from operating activities, remain in a strong financial position and manage our capital structure to meet short- and long-term objectives including reinvestment in existing businesses and completing strategic acquisitions.

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, 2023, we had $232.5 million in cash balances, as well as $918.4 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, 2023 compared to December 31, 2022, we have utilized existing CP and Revolver capacity, together with cash from operating activities, to meet our current obligations. During the first quarter of 2023, we borrowed $175.0 million on our Revolver to pay down CP.

Fund Transfer Limitations. The ability of certain of our subsidiaries and associated companies to transfer funds to the U.S. may be limited, in some cases, by certain restrictions imposed by foreign governments. 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, 2023, we held $210.9 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, 2023 and 2022:

Operating Activities

Cash provided by operating activities in the three months ended March 31, 2023 increased by $349.4 million compared to the prior year period primarily 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, with no similar payments in the first quarter of 2023.

Investing Activities

Capital Expenditures

*Amounts above are total cash outflows for capital expenditures.

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 2023 increased by $1.8 million from the same period in 2022 as we continue to invest in enhanced technology systems and infrastructure as part of our technology transformation.

Acquisitions, Divestitures and Investments

During the first three months of 2023, we acquired a Canadian company within the International operating segment. During the first three months of 2022, we acquired Efficient Hire within our Workforce Solutions segment and Data Crédito within our International segment.

Financing Activities

Borrowings and Credit Facility Availability

Credit Facilities Availability

In August 2021, we refinanced our existing unsecured revolving credit facility of $1.1 billion set to expire in September 2023, and entered into a new $1.5 billion five-year unsecured Revolver and a new $700.0 million delayed draw Term Loan, collectively known as the “Senior Credit Facilities,” both which mature in August 2026. In March 2023, we amended our Senior Credit Facilities agreement to adjust our debt covenant requirements and incorporate the Secure Overnight Financing Rate (SOFR) into our agreement, among other changes. 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. Availability of the Revolver is reduced by the outstanding principal balance of our commercial paper notes and by any letters of credit issued under the Revolver.

In the third quarter of 2021, we increased the size of our CP program from $1.1 billion to $1.5 billion, consistent with the increase in our Revolver. Our $1.5 billion CP program has been established to allow for borrowing through the private placement of CP with maturities ranging from overnight to 397 days. 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.

As of March 31, 2023, there were $0.4 million of letters of credit outstanding, one hundred seventy-five million outstanding borrowings under the Revolver, $700.0 million outstanding under the Term Loan and $406.2 million of outstanding CP notes. Availability under the Revolver was $918.4 million at March 31, 2023.

At March 31, 2023, 78% of our debt was fixed-rate debt and 22% 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, 2023, the interest rate on our variable-rate debt ranged from 4.90% to 6.16%.

Borrowing and Repayment Activity

We primarily borrow under our CP program and Revolver as needed and as availability allows.

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

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

Debt Covenants. A downgrade in our credit ratings would increase the cost of borrowings under our CP program, Revolver and Term Loan, and could limit or, in the case of a significant downgrade, preclude our ability to issue CP. Our outstanding indentures and comparable instruments also contain customary covenants including, for example, limits on mortgages, liens, sale/leaseback transactions, mergers and sales of assets.

In August 2021, we entered into our new Senior Credit Facilities as noted above in anticipation of the Appriss Insights acquisition. In March 2023, we amended our 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. 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, 2023, 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 3.3% senior notes due 2022, 3.95% senior notes due 2023, 2.6% senior notes due 2024, 2.6% senior notes due 2025, 3.25% senior notes due 2026, 5.1% senior notes due 2027, 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. 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.

For additional information about our debt, including the terms of our financing arrangements, basis for variable interest rates and debt covenants, see Note 5 of the Notes to Consolidated Financial Statements in our 2022 Form 10-K.

Equity Transactions

Sources and uses of cash related to equity during the three months ended March 31, 2023 and 2022 were as follows:

- During the first three months of 2023 and 2022, 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 2023. We paid cash dividends to Equifax shareholders of $47.9 million, or $0.39 per share, during the three months ended March 31, 2023 and 2022, respectively.

- We received cash of $6.6 million and $5.7 million during the first three months of 2023 and 2022, respectively, from the exercise of stock options and the employee stock purchase plan.

- We paid taxes of $15.9 million and $29.8 million related to the settlement of equity awards during the first three months of 2023 and 2022, respectively.

At March 31, 2023, 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

Our contractual obligations and commercial commitments have not changed materially from those reported in our 2022 Form 10-K. For additional information about certain obligations and contingencies, see Note 6 of the Notes to Consolidated Financial Statements in this Form 10-Q.

Off-Balance Sheet Arrangements

There have been no material changes with respect to our off-balance sheet arrangements from those presented in our 2022 Form 10-K.

Benefit Plans

At December 31, 2022, our U.S. Retirement Income Plan met or exceeded ERISA’s minimum funding requirements. In the future, we expect to make minimum funding contributions as required and may make discretionary contributions, depending on certain circumstances, including market conditions and our liquidity needs. We believe additional funding contributions, if any, would not prevent us from continuing to meet our liquidity needs, which are primarily funded from cash flows generated by operating activities, available cash and cash equivalents, our CP program and our Revolver.

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. GAAP.

For additional information about our benefit plans, see Note 9 of the Notes to Consolidated Financial Statements in our 2022 Form 10-K.

Foreign Currency

Argentina experienced multiple periods of increasing inflation rates, devaluation of the peso, and increasing borrowing rates. 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, 2023. There was minimal foreign currency impact during the three months ended March 31, 2022.

RECENT ACCOUNTING PRONOUNCEMENTS

For information about new accounting pronouncements and the potential impact on our Consolidated Financial Statements, see Note 1 of the Notes to Consolidated Financial Statements in this Form 10-Q and Note 1 of the Notes to Consolidated Financial Statements in our 2022 Form 10-K.

APPLICATION OF CRITICAL ACCOUNTING POLICIES

The Company’s Consolidated Financial Statements are prepared in conformity with U.S. GAAP. This requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses and related disclosures of contingent assets and liabilities in our Consolidated Financial Statements and the Notes to Consolidated Financial Statements. We believe the most complex and sensitive judgments, because of their significance to the Consolidated Financial Statements, result primarily from the need to make estimates and assumptions about the effects of matters that are inherently uncertain. The “Application of Critical Accounting Policies and Estimates” section in the MD&A, and Note 1 of the Notes to Consolidated Financial Statements, in our 2022 Form 10-K describe the significant accounting estimates and policies used in the preparation of our Consolidated Financial Statements. Although we believe that our estimates, assumptions and judgments are reasonable, they are based upon information available at the time. Actual results may differ significantly from these estimates under different assumptions, judgments or conditions.

For information regarding our exposure to certain market risks, see “Quantitative and Qualitative Disclosures about Market Risk,” in Part II, Item 7A of our 2022 Form 10-K. There were no material changes to our market risk exposure during the three months ended March 31, 2023.

As of the end of the period covered by this report, an evaluation was carried out by the Company’s management, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that these disclosure controls and procedures were effective as of the end of the period covered by this report. In addition, no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) occurred during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Canadian Class Actions. In 2017, we experienced a cybersecurity incident following a criminal attack on our systems that involved the theft of personal information of consumers. Five putative Canadian class actions, four of which are on behalf of a national class of approximately 19,000 Canadian consumers, are pending against us in Ontario, British Columbia and Alberta. Each of the proposed Canadian class actions asserts a number of common law and statutory claims seeking monetary damages and other related relief in connection with the 2017 cybersecurity incident. In addition to seeking class certification on behalf of Canadian consumers whose personal information was allegedly impacted by the 2017 cybersecurity incident, in some cases, plaintiffs also seek class certification on behalf of a larger group of Canadian consumers who had contracts for subscription products with Equifax around the time of the incident or earlier and were not impacted by the incident.

On December 13, 2019, the court in Ontario granted certification of a nationwide class that includes all impacted Canadians as well as Canadians who had subscription products with Equifax between March 7, 2017 and July 30, 2017 who were not impacted by the incident. We appealed one of the claims on which a class was certified and on June 9, 2021, our appeal was granted by the Ontario Divisional Court. The plaintiff filed a notice of further appeal with the Ontario Court of Appeal, and on November 25, 2022, the Ontario Court of Appeal dismissed the plaintiff’s appeal and upheld the Divisional Court’s ruling in our favor. On January 24, 2023, the plaintiff appealed this decision to the Supreme Court of Canada. All remaining purported class actions are at preliminary stages or stayed.

FCA Investigation. The U.K.’s Financial Conduct Authority (“FCA”) opened an enforcement investigation against our U.K. subsidiary, Equifax Limited, in October 2017 in connection with the 2017 cybersecurity incident. The investigation by the FCA has involved a number of information requirements and interviews. We have responded to the information requirements and continue to cooperate with the investigation. We have been advised by the FCA that it intends to send us a notice with the FCA's findings and proposed penalty, which we anticipate will result in the initiation of settlement discussions. At this time, we are unable to predict the outcome of this FCA investigation, including whether the investigation will result in any settlement, action or proceeding against us.

CFPB Matters

In December 2021, we received a Civil Investigative Demand (a “CID”) from the CFPB as part of its investigation into our consumer disputes process in order to determine whether we have followed the FCRA's requirements for the proper handling of consumer disputes. The CID requests the production of documents and answers to written questions. We are cooperating with the CFPB in its investigation and are in discussions with the CFPB regarding our response to the CID. In addition, in January 2023, the CFPB informed us that its enforcement division will be investigating our previously-disclosed coding issue identified within a legacy server environment in the U.S. slated to be migrated to the new Equifax cloud infrastructure which impacted how some credit scores were calculated during a three-week period in 2022. We are cooperating with the CFPB in its investigation. At this time, we are unable to predict the outcome of these CFPB investigations, including whether the investigations will result in any actions or proceedings against us.

Other

Equifax has been named as a defendant in various other legal actions, including administrative claims, regulatory matters, government investigations, class actions and other litigation arising in connection with our business. Some of the legal actions include claims for substantial compensatory or punitive damages or claims for indeterminate amounts of damages. We believe we have defenses to and, where appropriate, will contest many of these matters. Given the number of these matters, some are likely to result in adverse judgments, penalties, injunctions, fines or other relief. We may explore potential settlements before a case is taken through trial because of the uncertainty and risks inherent in the litigation process.

For information regarding our accounting for legal contingencies, see Note 6 of the Notes to Consolidated Financial Statements in this Form 10-Q.

There have been no material changes with respect to the risk factors disclosed in our 2022 Form 10-K.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table contains information with respect to purchases made by or on behalf of Equifax or any “affiliated purchaser” (as defined in Rule 10b-18(a) (3) under the Securities Exchange Act of 1934), of our common stock during our first quarter ended March 31, 2023:

(1)The total number of shares purchased for the quarter includes shares surrendered, or deemed surrendered, in satisfaction of the exercise price and/or to satisfy tax withholding obligations in connection with the exercise of employee stock options, totaling 469 shares for the month of January 2023, 74,574 shares for the month of February 2023, and 2,757 shares for the month of March 2023.

(2)Average price paid per share for shares purchased as part of our share repurchase program (includes brokerage commissions). For the quarter ended March 31, 2023 we did not repurchase any shares of our common stock under our share repurchase program.

(3)At March 31, 2023, the amount authorized for future share repurchases under the share repurchase program was $520.2 million. The program does not have a stated expiration date.

Dividend and Share Repurchase Restrictions

Our Revolver restricts our ability to pay cash dividends on our capital stock or repurchase capital stock if a default or event of default exists or would result if these payments were to occur, according to the terms of the applicable credit agreements.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.