EQUIFAX INC EFX

Equifax reported Q2 FY26 revenue of $1.7 billion, an 11% increase on a reported basis and 10% in constant currency, surpassing guidance by $5 million. Adjusted EPS grew 13% to $2.25, $0.05 above expectations. EBITDA margin, excluding FICO, expanded by 120 basis points year-over-year to almost 35%, significantly exceeding the long-term target. This strong performance was attributed to operating leverage and AI-driven cost productivity.

The company is rapidly expanding its AI and generative AI capabilities, embedding them into new products and internal operations. In the first half of the year, 54 new products with AI capabilities were launched, contributing to a strong 16% vitality index. Internal deployment of AI tools and agents across operations, technology, and G&A functions led to doubling the AI for EFX productivity goal from $75 million to $150 million for the 2026-2028 period.

Workforce Solutions (EWS) government segment, despite a 4% revenue decline due to a tough prior-year comparable, secured approximately $300 million in new and renewed state government contracts over the last four months. This includes $100 million in new business, primarily benefiting 2027, and $200 million in renewals, reinforcing confidence in the long-term growth opportunities within the $5 billion TAM, especially with new OB3 legislation requirements.

Following FHFA activation, Vantage Score adoption is gaining traction, with 1,200 additional mortgage lenders pulling free Vantage Scores alongside paid FICO scores for testing. While only 100 smaller lenders have exclusively moved to Vantage Score at the $1 price point, the company expects strong adoption given the potential $1 billion annual cost savings for originators and consumers. Equifax plans to maintain the $1 Vantage Score price through 2027 to drive further adoption.

Equifax signed a definitive agreement to acquire Círculo de Crédito, Mexico's fastest-growing credit bureau, for $750 million. The acquisition, expected to close in Q4 FY26, represents an attractive 9.4x EBITDA multiple including synergies and is projected to be accretive in year one. Círculo's strong growth (31% in LTM) and mid-40s adjusted EBITDA margins align with Equifax's strategic focus on international expansion and highly accretive bolt-on M&A.

Equifax returned $366 million to shareholders in Q2, including $300 million in share repurchases (1.8 million shares) and $66 million in dividends. Over the last 12 months, $1.6 billion has been returned, representing 100% of operating cash flow. The company expects over $1 billion in free cash flow for FY26, providing $1.5 billion in capital for M&A and shareholder returns while maintaining leverage under 3x EBITDA.

Equifax is seeing strong customer interest and commercial discussions for its Twin Indicator solutions in auto, card, and personal loans, similar to its success in mortgage. These solutions, which combine credit data with income and employment data, are offered at no cost to drive differentiation and share gains, helping lenders approve more consumers at lower loss rates and improve marketing funnel efficiency.