Equifax

At a time when businesses are reeling, fighting to reposition, to cut costs and survive as Covid decimates demand, the results from the credit bureau Equifax this week spoke to a very different backdrop. Revenue surged through $1bn for the first time ever, printing the third straight quarter of double digit revenue growth. Indeed, the highest growth rate in over a decade. Margins too, up. The highest EBITDA margin since 2017. The company was seeing many favourable trends pre-Covid, and these continued. Customers continue to demand better insights, to shape and guide decision making. The digitalisation of businesses has accelerated, and revamped expectations. The surge in data means more demand for analytics, more real time tools to crunch the numbers and learn more. Data has become embedded in the long-term strategic decision making of the C-suite. These powerful trends sugared the Q3 beat which was broad, with all segments lightly roasting expectations. Sift the detail and there were two standout drivers. Firstly, with rates slammed to 5000 year lows, people rightly stood around the BBQ, idly turning sausages, thinking it might be time to re-mortgage. This they did, in droves, leading to banks sucking out information from Equifax’s credit book. The second area of strength was in unemployment claims processing fees, as businesses eyed up their own Covid hit revenue forecasts and quickly memo-ed HR to prune the payroll. The shares, though, sold off on the day, as the market read the results, sucked on a biro, and quickly assumed the re-mortgage and unemployment factors are one offs, leaving some challenging numbers to beat next year. Management are a considered, experienced bunch and struck a conservative line, but were keen to highlight how increased innovation is also to thank for the current strength. Into next year the bears also point to the fact that Equifax has been restructuring, investing in their tech stack with an eye on the future. These costs are currently excluded from adjusted profit, but will be included next year. If these persist, it may weigh on the margin. Day-trading stock jockey’s won’t appreciate a near-term hit to the margin, but for long-term investors management are doing exactly the right thing. Investing in the future. Investing in a future that, given the demand for data assets, remains as bright as ever.