Equifax Misses Q3 Street View, Reduces FY23 Outlook Again On Sluggish US Mortgage Market

Equifax Inc EFX reported Q3 FY23 revenues of $1.319 billion, up 6% Y/Y and 6.5% Y/Y in constant currencies, missing the consensus of $1.332 billion.

Workforce Solutions revenues rose 3% Y/Y to $577.2 million, reflecting the challenging mortgage market. 

U.S. Information Solution revenues rose 7% Y/Y to $426.0 million, with B2B non-mortgage revenue growth of 8% and strong B2B Online non-mortgage revenue growth of 10%. 

The company witnessed solid new product innovation in Equifax Cloud business, with Vitality Index of 15%.

Adjusted EBITDA margin contracted to 33.1% from 32.5% a year ago.

Adjusted EPS rose 2% Y/Y to $1.76, below the consensus of $1.78.

Outlook: EFX expects Q4 revenue of $1.307 billion-$1.327 billion (consensus: $1.33 billion) and adjusted EPS within $1.72-$1.82 (consensus: $1.78).

For 2023, it again reduced the outlook for revenues to $5.246 billion-$5.266 billion (from $5.270 billion-$5.330 billion) vs. consensus of $5.29 billion and adjusted EPS to $6.62-$6.72 (from $6.85-$7.10) vs. consensus of $6.91.

Mark W. Begor, CEO, said, "The reduction in both revenue and Adjusted EPS are principally due to the weaker U.S. mortgage market and the impact of foreign exchange partially offset by the benefit from our Boa Vista acquisition. We expect the weaker U.S. mortgage market at current high interest rates to continue in the fourth quarter, and we now expect full year Equifax mortgage credit inquiries to decline about 34%, which is down over 3 percentage points from our prior framework."

"While the second half of 2023 has been challenging with the accelerated decline in the U.S. mortgage market, we are energized by the expected strong 13% non-mortgage revenue growth in the fourth quarter, which represents over 85% of Equifax revenue. We are confident in the future of the New Equifax as we move toward completion of our EFX Cloud and Data transformation, leveraging our new Cloud capabilities to accelerate new product roll-outs that 'Only Equifax' can provide, which will drive growth in 2024 and beyond. We are energized about the New Equifax that will deliver higher margins and free cash flow."

Also Read: Uncertain Macro, Sluggish Hiring Trends To Impact Equifax's 2023 Results, Analyst Predicts - Downgrades Stock

Price Action: EFX shares closed lower by 3.15% at $175.16 on Wednesday.