ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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 8 of this Form 10-K. This section discusses the results of our operations for the year ended December 31, 2025 compared to the year ended December 31, 2024 and the year ended December 31, 2024 compared to the year ended December 31, 2023. 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 justice, healthcare professional licensure and sanctions, demographic and marketing data. We use advanced statistical techniques, artificial intelligence and machine learning, as well as proprietary software tools to analyze available data for the creation of customized insights, decision-making and process automation solutions, and processing services for our clients. We are a leading provider of information and solutions used in payroll-related and human resource management business process services in the U.S., as well as e-commerce fraud and charge back protection services in North America. 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 provide information, technology and services to support debt collections and recovery management. We report our revenue derived from sales to clients in the mortgage market as well as those in non-mortgage market verticals (including, but not limited to, government, talent, employment, fraud and other non-mortgage related services). We refer to these non-mortgage market verticals collectively as "diversified markets."
We currently operate in four global regions: North America (U.S. and Canada), Latin America (Argentina, Brazil, Chile, Costa Rica, Dominican Republic, Ecuador, El Salvador, Honduras, Mexico, Paraguay, Peru and Uruguay), Europe (the United Kingdom (“U.K.”), Spain and Portugal) and Asia Pacific (Australia, New Zealand and India). We maintain support operations in Chile, Costa Rica, India and Ireland. We also have investments in consumer and/or commercial credit information companies through joint ventures in Brazil, Cambodia, Malaysia and Singapore.
Recent Events and Company Outlook
As further described above, we operate in the U.S., which represented 77% of our revenue in 2025, and internationally in 20 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 and small business commercial credit decisioning and portfolio review, marketing, identity validation and fraud protection activity, employee hiring and onboarding activity, and activity in provisioning support services in the U.S. by government agencies. Demand is also enhanced by our initiatives to expand our products, capabilities and markets served.
We remain in a period of economic uncertainty in the U.S. and our global markets, including uncertainty regarding expectations for inflation and interest rates. The direction of global economies, inflation and interest rates will have an impact on demand for our services.
Our current planning for 2026 assumes that U.S. economic activity, as measured by GDP, will grow at a rate consistent with 2025. We expect U.S. mortgage credit activity in 2026 to be slightly below the levels of activity seen in 2025. 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 which impact mortgage rates available to consumers. In the international markets in which we operate, our planning also assumes that economic activity, as measured by GDP, will generally grow in 2026 at rates below those experienced in 2025. As noted above, due to the current significant economic and market volatility and uncertainty, these assumptions may change.
For more information, see “Item 1A. Risk FactorsーNegative changes in general economic conditions, including interest rates, the level of inflation, unemployment rates, income, home prices, investment values and consumer confidence, could adversely affect us,” in this Form 10-K.
Segment and Geographic Information
Segments. The Workforce Solutions segment consists of the Verification Services and Employer Services business lines. Verification Services revenue is transaction and subscription based and is derived primarily from verifications of employment and income data, as well as criminal justice data and educational background 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, I-9 and onboarding services, Affordable Care Act ("ACA") compliance management, tax credits and incentives and other complementary employment-based transaction services.
The USIS segment consists of two service lines: Online Information Solutions and Financial Marketing Services. Online Information 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 analytical and decisioning software and 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 Latin America, Europe, Asia Pacific and Canada. 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, Brazil, Canada, Chile, Costa Rica, Dominican Republic, Ecuador, El Salvador, Honduras, India, Ireland, Mexico, New Zealand, Paraguay, Peru, Portugal, 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 Brazil, Cambodia, Malaysia and Singapore. Approximately 77% and 76% of our revenue was generated in the U.S. during the twelve months ended December 31, 2025 and 2024, 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 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 twelve months ended December 31, 2025, 2024 and 2023 were as follows:
Key Performance Indicators
Twelve Months Ended
December 31,
(In millions, except per share data)
Operating revenue
Operating revenue change
Operating income
Operating margin
Net income attributable to Equifax
Diluted earnings per share
Cash provided by operating activities
Capital expenditures*
*Amounts include accruals for capital expenditures.
Operational and Financial Highlights
• On April 21, 2025, the Board of Directors terminated the existing share repurchase authorization and approved an authorization to repurchase up to $3 billion of shares of common stock. We repurchased 4,006,173 shares of our common stock on the open market for $927.4 million, excluding brokerage commissions and excise taxes of $8.4 million, during the twelve months ended December 31, 2025. We did not repurchase any shares from public market transactions during the twelve months ended December 31, 2024 or 2023. At December 31, 2025, approximately $2.1 billion was available for future purchases of common stock under our share repurchase authorization.
• On April 21, 2025, the Board of Directors approved an increase in our quarterly cash dividend to $0.50 per share beginning in the second quarter of 2025. We paid out $232.8 million, or $1.89 per share, in dividends to our shareholders during 2025.
RESULTS OF OPERATIONS —
TWELVE MONTHS ENDED DECEMBER 31, 2025, 2024 AND 2023
Consolidated Financial Results
Operating Revenue
Twelve Months Ended December 31,
Change
Operating Revenue
(In millions)
Workforce Solutions
U.S. Information Solutions
International
Consolidated operating revenue
Revenue for 2025 increased 7% compared to 2024 due to revenue growth in all three business units. USIS revenue growth is primarily due to growth in mortgage and diversified markets revenue in Online Information Solutions, as well as growth in Financial Marketing Services. Workforce Solutions revenue growth is primarily due to growth in both diversified markets and mortgage verticals within Verification Services, partially offset by declines in Employer Services. International revenue growth is primarily driven by growth in Europe and Latin America. The effect of foreign exchange rates decreased revenue by $21.7 million, or less than 1%, in 2025 compared to 2024.
Revenue for 2024 increased 8% compared to 2023 due to revenue growth in USIS, International and Workforce Solutions. USIS revenue growth is primarily due to growth in mortgage related online services. International revenue growth is driven by growth in Latin America from the Boa Vista Serviços S.A. ("BVS") acquisition, completed in the third quarter of 2023, as well as local currency growth in Latin America, Europe and Canada. Workforce Solutions revenue growth is primarily due to growth in Verification Services, partially offset by declines in Employer Services. The effect of foreign exchange rates decreased revenue by $105.5 million, or 2%, in 2024 compared to 2023.
Operating Expenses
Twelve Months Ended
December 31,
Change
Operating Expenses
(In millions)
Consolidated cost of services
Consolidated selling, general and administrative expenses
Consolidated depreciation and amortization expense
Consolidated operating expenses
Cost of Services. Cost of services increased $126.9 million in 2025 compared to 2024. The increase is primarily due to higher royalty, revenue share and purchased data and information costs, partially offset by a decrease in temporary labor costs. The effect of changes in foreign exchange rates decreased cost of services by $5.9 million.
Cost of services increased $183.6 million in 2024 compared to 2023. The increase is primarily due to higher royalty and revenue share costs, costs of purchased data and information, and costs from BVS, which was acquired in the third quarter of 2023. The effect of changes in foreign exchange rates decreased cost of services by $28.1 million.
Selling, General and Administrative Expenses. Selling, general and administrative expenses increased $163.7 million in 2025 compared to 2024. The increase is primarily due to higher people costs which was primarily due to higher incentive
plan costs, as well as higher litigation expense and an accrual for a settlement associated with the resolution of four related class action lawsuits. The impact of changes in foreign currency exchange rates decreased our selling, general and administrative expenses by $9.3 million.
Selling, general and administrative expenses increased $64.8 million in 2024 compared to 2023. The increase is primarily due to increased people costs and costs from BVS, which was acquired in the third quarter of 2023, partially offset by a decrease in professional fees. The increased people costs, excluding the impact of costs from BVS, is primarily due to higher incentive plan costs. The impact of changes in foreign currency exchange rates decreased our selling, general and administrative expenses by $39.2 million.
Depreciation and Amortization. Depreciation and amortization expense for 2025 increased $49.7 million. The increase is primarily due to increased amortization of capitalized internal-use software costs resulting from technology transformation capital spending incurred previously, partially offset by lower amortization of acquisition-related purchased intangibles. The impact of changes in foreign currency exchange rates led to a decrease in depreciation and amortization expense of $0.3 million.
Depreciation and amortization expense increased $59.0 million in 2024 compared to 2023. The increase is primarily due to increased amortization of capitalized internal-use software costs resulting 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 $2.9 million.
Operating Income and Operating Margin
Twelve Months Ended
December 31,
Change
Operating Income and Operating Margin
(In millions)
Consolidated operating revenue
Consolidated operating expenses
Consolidated operating income
Consolidated operating margin
pts
pts
Total company operating margin decreased by 0.3 percentage points in 2025 versus 2024 and increased by 0.6 percentage points in 2024 versus 2023. The margin decrease in 2025 is primarily due to higher royalty, revenue share and purchased data and information costs, as well as increased amortization of capitalized internal-use software costs resulting from technology transformation capital spending incurred previously. The increase in operating expenses is partially offset by higher reported revenue. The margin increase in 2024 is due to the aforementioned higher reported revenue, partially offset by increased operating expenses and depreciation and amortization expenses during the period.
Interest Expense and Other Income (Expense), net
Twelve Months Ended
December 31,
Change
Consolidated Interest and Other Income (Expense), net
(In millions)
Consolidated interest expense
Consolidated other income (expense), net
Average cost of debt
Total consolidated debt, net, at year end
nm - not meaningful
Interest expense decreased in 2025 when compared to 2024 primarily due to lower weighted average debt balances during 2025 compared to 2024, partially offset by a higher weighted average cost of debt in 2025 when compared to 2024.
Interest expense decreased in 2024 when compared to 2023 due to lower overall debt balances and a lower weighted average cost of debt when compared to 2023.
The increase in other income, net in 2025 is primarily due to a decrease in pension expense and other non-operating expenses in 2025 as compared to 2024. For 2025 and 2024, we recorded a gain of $0.6 million and a loss of $11.6 million, respectively, on the mark-to-market adjustment of our pension and postretirement benefit plans.
The decrease in other income, net in 2024 was primarily due to the gain on fair market value adjustment of our investment in BVS due to our acquisition of BVS in the third quarter of 2023 that did not recur in the same period of 2024, as well as a gain on the sale of an investment in 2023 that did not recur in 2024. We also incurred higher pension expense in 2024 as compared to 2023. For 2024 and 2023, we recorded losses of $11.6 million and $0.1 million, respectively, on the mark-to-market adjustment of our pension and postretirement benefit plans.
Income Taxes
Twelve Months Ended
December 31,
Change
Provision for Income Taxes
(In millions)
Consolidated provision for income taxes
Effective income tax rate
Our effective tax rate was 25.8% for 2025, up from 25.1% for the same period in 2024. Our effective tax rate is higher for the year ended December 31, 2025 compared to 2024 primarily due to less favorable discrete tax benefits in the current period.
Our effective tax rate was 25.1% for 2024, up from 23.2% for the same period in 2023. Our effective tax rate was higher for the year ended December 31, 2024 compared to 2023 primarily due to a decrease in tax credits and an increase in tax on foreign earnings in 2024 compared to 2023.
Net Income
Twelve Months Ended
December 31,
Change
Net Income
(In millions, except per share amounts)
Consolidated operating income
Consolidated interest and other income (expense), net
Consolidated provision for income taxes
Consolidated net income
Net income attributable to noncontrolling interests including redeemable noncontrolling interests
Net income attributable to Equifax
Diluted earnings per share:
Net income attributable to Equifax
Weighted-average shares used in computing diluted earnings per share
Consolidated net income increased $57.0 million in 2025 compared to 2024 due to higher levels of operating income, lower interest expense and higher other income, net, partially offset by higher income tax expense.
Consolidated net income increased $55.6 million in 2024 compared to 2023 due to higher levels of operating income and lower interest expense, partially offset by higher income tax expense and lower levels of other income, net.
Segment Financial Results
Workforce Solutions
Twelve Months Ended
December 31,
Change
Workforce Solutions
(In millions)
Operating Revenue:
Verification Services
Employer Services
Total operating revenue
% of consolidated revenue
Total operating income
Operating margin
pts
pts
Workforce Solutions revenue increased 6% in 2025 compared to 2024 due to an increase in both diversified markets and mortgage verticals within Verification Services, partially offset by declines in Employer Services.
Workforce Solutions revenue increased 5% in 2024 compared to 2023, which was due to an increase in diversified markets verticals within Verification Services, partially offset by declines in Employer Services and Verification Services mortgage revenue.
Verification Services. Revenue increased 8% in 2025 compared to 2024. The increase in revenue is principally due to growth in diversified markets revenue, primarily from growth in the government, talent solutions and consumer lending verticals, as well as growth in mortgage revenue.
Revenue increased 10% in 2024 compared to 2023. The increase in revenue is primarily due to growth in the government and talent solutions verticals, partially offset by declines in the mortgage vertical.
Employer Services. Revenue decreased 2% in 2025 compared to 2024 primarily due to declines in unemployment claims, ACA and I-9 revenue, partially offset by increases in work opportunity tax credit and identity theft protection services.
Revenue decreased 12% in 2024 compared to 2023, primarily due to lower Employee Retention Credit ("ERC") revenue and declines in I-9 and onboarding services. The ERC revenue decrease was driven by the wind down of this U.S. Federal government program.
Workforce Solutions Operating Margin. Operating margin increased to 44.2% in 2025 compared to 43.3% in 2024 and increased to 43.3% in 2024 compared to 41.9% in 2023. The increase in both periods is primarily due to the aforementioned increases in revenue.
U.S. Information Solutions
Twelve Months Ended December 31,
Change
U.S. Information Solutions
(In millions)
Operating revenue:
Online Information Solutions
Financial Marketing Services
Total operating revenue
% of consolidated revenue
Total operating income
Operating margin
pts
pts
U.S. Information Solutions revenue increased 10% in 2025 compared to 2024 primarily due to growth in Online Information Solutions which is due to growth in both mortgage and diversified markets revenue, as well as growth in Financial Marketing Services. Growth in mortgage related services is primarily due to product pricing, partially offset by lower mortgage credit inquiry volumes in the current year compared to the prior year.
U.S. Information Solutions revenue increased 10% in 2024 compared to 2023, due to growth in Online Information Solutions due to an increase in mortgage related and consumer solutions online services, as well as growth in Financial Marketing Services. Growth in mortgage related online services was due to both product pricing, as well as new products.
Online Information Solutions. Revenue for 2025 increased 10% compared to 2024, driven by growth in mortgage related services, as well as growth in diversified markets online services and consumer solutions revenue. The growth in mortgage related services is primarily due to product pricing, partially offset by lower mortgage credit inquiry volumes in the current year compared to the prior year.
Revenue for 2024 increased 11% compared to 2023, driven by higher mortgage related online services due to product pricing and new products, as well as continued growth of consumer solutions revenue.
Financial Marketing Services. Revenue increased 6% in 2025 compared to 2024 and increased 5% in 2024 compared to 2023. The increase in both periods is primarily due to growth in credit marketing services.
U.S. Information Solutions Operating Margin. USIS operating margin increased to 22.9% in 2025 compared to 21.4% in 2024 due to the aforementioned increase in revenue, partially offset by an increase in operating expenses primarily due to an increase in mortgage related royalty costs. The increase in operating expenses is partially offset by a decline in people costs. USIS operating margin increased to 21.4% in 2024 compared to 21.2% in 2023 due to the aforementioned increase in revenue.
International
Twelve Months Ended December 31,
Change
International
(In millions)
Operating revenue:
Latin America
Europe
Asia Pacific
Canada
Total operating revenue
% of consolidated revenue
Total operating income
Operating margin
pts
pts
International revenue increased 4% in 2025 as compared to 2024. Local currency revenue increased 6% in 2025, driven by local currency growth in Latin America, primarily from Argentina, Brazil and Paraguay, as well as local currency growth in Asia Pacific, Europe and Canada. Local currency fluctuations against the U.S. dollar negatively impacted revenue by $21.7 million, or 2%.
International revenue increased 10% in 2024 as compared to 2023. Local currency revenue increased 19% in 2024, driven by growth in Latin America from the BVS acquisition, completed in the third quarter of 2023, as well as local currency growth in Latin America, Europe and Canada. Local currency fluctuations against the U.S. dollar negatively impacted revenue by $105.5 million, or 9%.
Latin America. Local currency revenue increased 10% in 2025 as compared to 2024. The increase is primarily due to local currency growth in Argentina, Brazil and Paraguay. Local currency fluctuations against the U.S. dollar negatively impacted revenue by $21.4 million, or 5%, in 2024, primarily from Argentina and Brazil. Reported revenue increased 5% in 2025 as compared to 2024.
Local currency revenue increased 69% in 2024 as compared to 2023. The increase was primarily due to revenue from the BVS acquisition, which occurred in the third quarter of 2023, as well as local currency growth in Argentina. Revenue from the BVS acquisition was $159.3 million in 2024, compared to $64.8 million in 2023. Local currency fluctuations against the U.S. dollar negatively impacted revenue by $107.1 million, or 37%, in 2024, primarily from Argentina. Reported revenue increased 32% in 2024 as compared to 2023.
Europe. Local currency revenue increased 4% in 2025 as compared to 2024, primarily due to growth in the consumer credit reporting businesses in the U.K and Spain, partially offset by declines in the direct to consumer business in the U.K. Local currency fluctuations against the U.S. dollar positively impacted revenue by $13.5 million, or 3%, for 2025. Reported revenue increased 7% in 2025 as compared to 2024.
Local currency revenue increased 8% in 2024 as compared to 2023, primarily due to growth in the debt services and credit reporting businesses. Local currency fluctuations against the U.S. dollar positively impacted revenue by $8.0 million, or 3%, for 2024. Reported revenue increased 11% in 2024 as compared to 2023.
Asia Pacific. Local currency revenue increased 5% in 2025 as compared to 2024, primarily driven by growth in the commercial, consumer credit reporting and identity and fraud businesses in Australia, partially offset by a decline in India. Local currency fluctuations against the U.S. dollar negatively impacted revenue by $8.4 million, or 3%. Reported revenue increased 2% in 2025 as compared to 2024.
Local currency revenue decreased 2% in 2024 as compared to 2023, primarily driven by Australia due to declines in the commercial and direct to consumer businesses in the first half of the year. Local currency fluctuations against the U.S. dollar negatively impacted revenue by $2.4 million, or 1%. Reported revenue decreased 3% in 2024 as compared to 2023.
Canada. Local currency revenue increased 4% in 2025 as compared to 2024. Revenue growth in 2025 was driven by growth in the direct to consumer, consumer credit reporting and commercial businesses. Local currency fluctuations against the U.S. dollar negatively impacted revenue by $5.3 million, or 2%, in 2025. Reported revenue increased 2% in 2025 as compared to 2024.
Local currency revenue increased 4% in 2024 as compared to 2023. Revenue growth in 2024 is driven by growth in the direct to consumer and commercial businesses. Local currency fluctuations against the U.S. dollar negatively impacted revenue by $4.0 million, or 2%, in 2024. Reported revenue increased 2% in 2024 as compared to 2023.
International Operating Margin. Operating margin was 12.9% in 2025 compared to 13.4% in 2024. The decrease in margin is primarily due to higher people costs and increased amortization of capitalized internal-use software costs resulting from technology transformation capital spending incurred previously, partially offset by the increase in revenue. Operating margin was 13.4% in 2024 and 13.7% in 2023. The decrease in margin is mainly due to higher amortization costs, principally due to higher amortization of purchased intangible assets related to the BVS acquisition and amortization of capitalized internal-use software and system costs from technology transformation capital spending incurred previously.
General Corporate Expense
Twelve Months Ended
December 31,
Change
General Corporate Expense
(In millions)
General corporate expense
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 $107.2 million in 2025. The increase in 2025 as compared to 2024 is primarily due to higher people costs which was primarily due to higher incentive plan costs, as well as higher litigation expense, an accrual for a settlement associated with the resolution of four related class action lawsuits and increased depreciation and amortization of capitalized internal-use software costs.
General corporate expense increased $28.3 million in 2024 as compared to 2023. The increase in 2024 as compared to 2023 was primarily due to an increase in people costs, which was primarily due to higher incentive plan costs, and an accrual for a settlement associated with the resolution of a matter with the CFPB.
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 $1.5 billion five-year unsecured revolving credit facility (the "Revolver") and related commercial paper (“CP”) program, more fully described below, are our most significant sources of liquidity. At December 31, 2025, we had $180.8 million in cash and cash equivalents, as well as $0.7 billion 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 December 31, 2025 compared to December 31, 2024, we have utilized existing CP capacity, together with cash from operating activities, to meet our current obligations.
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 December 31, 2025, we held $167.4 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 twelve months ended December 31, 2025, 2024 and 2023:
Twelve Months Ended December 31,
Change
Net cash provided by (used in):
(In millions)
Operating activities
Investing activities
Financing activities
Operating Activities
Cash provided by operating activities for 2025 increased $291.2 million compared to 2024 and for 2024 increased $207.7 million compared to 2023. The increase in both periods is primarily due to increased net income and changes in our working capital position.
Investing Activities
Capital Expenditures
Twelve Months Ended December 31,
Change
Net cash used in:
(In millions)
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 decreased in 2025 and 2024 from 2024 and 2023, respectively, due to lower capitalized software costs and lower spending on technology infrastructure as compared to the prior year periods.
Acquisitions, Divestitures and Investments
Twelve Months Ended December 31,
Change
Net cash (used in) provided by:
(In millions)
Acquisitions, net of cash acquired
Cash received from divestitures
2025 Acquisitions and Investments. During 2025, we acquired a company within the Workforce Solutions operating segment.
2024 Acquisitions and Investments. During 2024, we did not complete any acquisitions.
2023 Acquisitions and Investments. During 2023, we acquired The Food Industry Credit Bureau and BVS within the International operating segment. During 2023, we sold an equity investment.
For additional information about our acquisitions, see Note 3 of the Notes to Consolidated Financial Statements in Item 8 of this report.
Financing Activities
Borrowings and Credit Facility Availability
Twelve Months Ended December 31,
Change
Net cash provided by (used in):
(In millions)
Net short-term borrowings (payments)
Payments on long-term debt
Proceeds from issuance of long-term debt
Borrowing and Repayment Activity. We primarily borrow under our CP program and Revolver as needed and as availability allows.
Net short-term borrowings (payments) primarily represent repayments or borrowings of outstanding amounts under our CP program.
The increase in net short-term borrowings in 2025 is due to higher borrowings on our CP notes during the year as compared to 2024. The increase in net short-term borrowings in 2024 is due to our issuance of more CP notes in 2024 than we repaid, compared to 2023 when we repaid more CP notes than we issued.
Proceeds from issuance of long-term debt in 2025 represent $1.7 million in borrowings on long-term debt. Proceeds from issuance of long-term debt in 2024 represent the issuance of $650 million of 4.8% Senior Notes in the third quarter of 2024. Proceeds from issuance of long-term debt in 2023 represent $175.0 million of borrowings on our Revolver during the first quarter of 2023 and the issuance of $700 million of 5.1% Senior Notes in the second quarter of 2023.
In August 2024, we issued $650 million in aggregate principal amount of 4.8% five-year Senior Notes due 2029 (the "2029 Notes") in an underwritten public offering. Interest on the 2029 Notes accrues at a rate of 4.8% per year and is payable semi-annually in arrears on March 15 and September 15 of each year. The net proceeds of the sale of the 2029 Notes were ultimately used for general corporate purposes, including the repayment of borrowings under our then-outstanding delayed draw term loan (the "Term Loan") prior to the August 2026 maturity. We must comply with various non-financial covenants, including certain limitations on mortgages, liens and sale-leaseback transactions, as well as mergers and sales of substantially all of our assets. The 2029 Notes are unsecured and rank equally with all of our other unsecured and unsubordinated indebtedness.
In May 2023, we issued $700 million aggregate principal amount of 5.1% five-year Senior Notes due 2028 (the "2028 Notes") in an underwritten public offering. Interest on the 2028 Notes accrues at a rate of 5.1% per year and is payable semi-annually in arrears on June 1 and December 1 of each year. The net proceeds of the sale of the 2028 Notes were ultimately used to repay our then-outstanding $400 million 3.95% Senior Notes due June 2023 at maturity. The remaining proceeds were used for general corporate purposes, including the repayment of borrowings under our CP program. We must comply with various non-financial covenants, including certain limitations on mortgages, liens and sale-leaseback transactions, as well as mergers and sales of substantially all of our assets. The 2028 Notes are unsecured and rank equally with all of our other unsecured and unsubordinated indebtedness.
Payments on long-term debt in 2025 represent repayment of our $400.0 million 2.60% Senior Notes during the fourth quarter of 2025 with CP borrowings. Payments on long-term debt in 2024 represent repayment of our $750.0 million 2.60% Senior Notes during the fourth quarter of 2024 with cash on hand and CP borrowings and $695.6 million of payments on our then-outstanding Term Loan during the third quarter 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.
Credit Facility Availability. We have access to a $1.5 billion five-year unsecured revolving credit facility (the Revolver), which matures in August 2028. Borrowings under the Revolver 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 2025, we exercised our second option to extend the maturity date by one year, from August 2027 to August 2028, and thus have one extension option remaining. 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.
Our $1.5 billion CP program has been established to allow for borrowing through the private placement of CP notes with maturities ranging from overnight to 397 days. We may use the proceeds of CP notes for general corporate purposes. The CP program is supported by our Revolver and the total amount of CP notes 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 December 31, 2025, there were $762.0 million of outstanding CP notes, $1.3 million of letters of credit outstanding, and no outstanding borrowings under the Revolver. Availability under the Revolver was $0.7 billion at December 31, 2025.
At December 31, 2025, approximately 85% of our debt was fixed-rate debt and 15% was variable-rate debt. Our variable-rate debt consists of outstanding amounts under our CP program. The interest rates reset periodically, depending on the terms of the respective financing agreements. At December 31, 2025, the interest rate on our variable-rate debt ranged from 3.80% to 4.17%.
Debt Covenants. A downgrade in our credit ratings would increase the cost of borrowings under our CP program and our Revolver, 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.
The Revolver requires a maximum leverage ratio, defined as consolidated funded debt divided by consolidated EBITDA, of 3.75 to 1.0. We may also elect to increase the maximum leverage ratio by 0.5 to 1.0 (subject to a maximum leverage ratio of 4.25 to 1.0) in connection with certain material acquisitions if we satisfy certain requirements. The Revolver also permits cash in excess of $175 million to be netted against debt in the calculation of the leverage ratio, subject to certain restrictions.
As of December 31, 2025, 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 our outstanding debt; however, our 3.25% senior notes due 2026, 5.1% senior notes due 2027, 5.1% senior notes due 2028, 4.8% senior notes due 2029, 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 we experience a change of control or publicly announce 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 we 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.
Credit Ratings. Credit ratings reflect an independent agency’s judgment on the likelihood that a borrower will repay a debt obligation at maturity. The ratings reflect many considerations, such as the nature of the borrower’s industry and its competitive position, the size of the company, its liquidity and access to capital and the sensitivity of a company’s cash flows to changes in the economy. A security rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the assigning rating agency.
A downgrade in our credit rating would increase the cost of borrowings under our CP program and our Revolver, and could limit, or in the case of a significant downgrade, preclude our ability to issue CP. If our credit ratings were to decline to lower levels, we could experience increases in the interest cost for any new debt. In addition, the market’s demand for, and thus our ability to readily issue, new debt could become further affected by the economic and credit market environment. These ratings are subject to change as events and circumstances change.
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 Item 8 of this report.
Equity Transactions
Twelve Months Ended December 31,
Change
Net cash (used in) provided by:
(In millions)
Treasury stock purchases
Dividends paid to Equifax shareholders
Distributions paid to noncontrolling interests
Proceeds from exercise of stock options and employee stock purchase plan
Sources and uses of cash related to equity during the twelve months ended December 31, 2025, 2024 and 2023 were as follows:
• On April 21, 2025, our Board of Directors terminated the existing share repurchase authorization and approved an authorization to repurchase up to $3 billion of shares of common stock. During the twelve months ended December 31, 2025, we repurchased 4,006,173 shares of our common stock on the open market. As of December 31, 2025, approximately $2.1 billion was available for future purchases of common stock under our share repurchase authorization. We did not repurchase any shares on the open market in 2024 or 2023.
• On April 21, 2025, our Board of Directors approved an increase in our quarterly cash dividend to $0.50 per share beginning in the second quarter of 2025. During the twelve months ended December 31, 2025, we paid cash dividends to Equifax shareholders of $232.8 million, at $1.89 per share. During the twelve months ended December 31, 2024 and 2023, we paid cash dividends to Equifax shareholders of $193.2 million and $191.8 million, respectively, at $1.56 per share, for 2024 and 2023.
• During the twelve months ended December 31, 2025 and 2024, we paid dividends to noncontrolling interests of $6.1 million and $4.6 million, respectively. During the twelve months ended December 31, 2023, we paid distributions to noncontrolling interests of $45.6 million.
• We received cash of $46.4 million, $78.2 million, and $32.3 million during the twelve months ended December 31, 2025, 2024 and 2023, respectively, from the exercise of stock options and the employee stock purchase plan.
We anticipate continuing the payment of quarterly cash dividends. The actual amount of such dividends is subject to declaration by our Board of Directors and will depend upon future earnings, results of operations, capital requirements, our financial condition and other relevant factors. There can be no assurance that the Company will continue to pay quarterly cash dividends at current levels or at all.
Contractual Obligations, Commercial Commitments and Other Contingencies
Our material cash requirements include the following contractual and other obligations. Our plan is to use existing cash balances and funds generated by operating activities to fund our obligations and commitments. If our cash requirements exceed our existing cash balances and funds generated by operations, we will finance future cash requirements with existing borrowing capacity, as necessary. In the event that additional financing is needed, we would finance using the public and private corporate bond markets or syndicated loan markets, if available. The following sections provide details of material cash requirements from known contractual and other obligations as of December 31, 2025.
Debt
As of December 31, 2025, we had outstanding variable and fixed rate debt with varying maturities for an aggregate principal amount of $5.1 billion, with $1,038.0 million payable within the next twelve months, as detailed further in Note 5 of the Notes to Consolidated Financial Statements in Item 8 of this report. Future interest payments associated with the outstanding variable and fixed rate notes totals $786.8 million, with $209.1 million payable within the next twelve months.
We also issue unsecured promissory notes through our Revolver and CP program, with the Revolver set to expire in August 2028. As of December 31, 2025, we had no amount outstanding under our Revolver and $762.0 million outstanding under our CP program.
Data Processing, Outsourcing Agreements and Other Purchase Obligations
We utilize several outsourcing partners for services that we outsource associated with our network and security infrastructure, computer data processing operations, applications development, business continuity and recovery services, help desk service and desktop support functions, operation of our voice and data networks, maintenance and related functions and to provide certain other administrative and operational services. These agreements expire between 2026 and 2033. As of December 31, 2025 the estimated aggregate minimum contractual obligation remaining under these agreements is approximately $1.1 billion, with $507.4 million payable within the next twelve months.
Pension, Post-Retirement and Deferred Compensation Obligations
As detailed further in Note 9 of the Notes to Consolidated Financial Statements in Item 8 of this report, we have several pension, post-retirement benefit and deferred compensation plans. Our U.S. Retirement Plan is frozen and is supported by plan assets to fund future payments. We have three supplemental retirement plans for certain key employees which are unfunded. As of December 31, 2025, the total gross obligation for the pension and post-retirement plans was $445.4 million, with $40.8 million of benefits expected to be paid within the next twelve months.
We maintain deferred compensation plans for certain management employees and the Board of Directors to defer the receipt of compensation until a later date based on the terms of the plan. As of December 31, 2025, the total obligation for the deferred compensation plans was $60.3 million, with $6.7 million expected to be paid within the next twelve months. These obligations exclude those under our deferred stock compensation plans.
Payments to Resolve Certain Legal Proceedings and Investigations
During the first quarter of 2025, we paid $15.0 million for a settlement associated with the resolution of a matter with the Consumer Financial Protection Bureau ("CFPB"). 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. We received a notice with the FCA's findings on October 13, 2023, and paid a penalty of $13.5 million to resolve the matter.
Leases
As detailed further in Note 12 of the Notes to Consolidated Financial Statements in Item 8 of this report, our lease arrangements principally involve office space. As of December 31, 2025, our total fixed lease payment obligations were $148.9 million, with $36.1 million payable within the next twelve months.
Other Planned Uses of Capital
We will continue to invest in sales, marketing, new product development, security and our technology, as well as continue to make strategic acquisitions that align with our business strategy. Additions to property and equipment will continue
in order to support growth in new product development and the completion of our technology transformation, although we expect spending related to capital expenditures for the next twelve months to be down from current levels.
Off-Balance Sheet Arrangements
We do not engage in off-balance sheet financing activities.
Letters of Credit and Guarantees
We will from time to time issue standby letters of credit, performance or surety bonds or other guarantees in the normal course of business. The aggregate notional amount of all performance and surety bonds and standby letters of credit was not material at December 31, 2025, and generally have a remaining maturity of one year or less. Guarantees are issued from time to time to support the needs of our operating units. The maximum potential future payments we could be required to make under the guarantees is not material at December 31, 2025.
Benefit Plans
We sponsor a qualified defined benefit retirement plan, the U.S. Retirement Income Plan (“USRIP”), that covers approximately 5% of current U.S. salaried employees who were hired on or before June 30, 2007, the last date on which an individual could be hired and enter the plan before the USRIP was closed to new participation at December 31, 2008. This plan also covers retirees as well as certain terminated but vested individuals not yet in retirement status.
During the twelve months ended December 31, 2025 and 2024, we made no voluntary contributions to the USRIP. At December 31, 2025, the USRIP 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 Notes 1 and 9 of the Notes to Consolidated Financial Statements in Item 8 of this report.
Effects of Inflation and Changes in Foreign Currency Exchange Rates
Inflation in the countries in which we operate may result in increases in the Company’s expenses, which may not be readily recoverable in the price of services offered. To the extent inflation results in rising U.S. interest rates and has other adverse effects upon the U.S. securities markets and upon the value of financial instruments, it may adversely affect the Company’s financial position and profitability. Increases in U.S. interest rates may also negatively impact the U.S. mortgage market, which may adversely affect the Company’s revenue, financial position and profitability.
A portion of the Company’s business is conducted in currencies other than the U.S. dollar and changes in foreign exchange rates relative to the U.S. dollar can therefore affect the value of non-U.S. dollar net assets, revenues and expenses. Potential exposures as a result of these fluctuations in currencies are closely monitored. We generally do not mitigate the risks associated with fluctuating exchange rates, although we may from time to time through forward contracts or other derivative instruments, hedge a portion of our translational foreign currency exposure or exchange rate risks associated with material transactions which are denominated in a foreign currency.
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 Item 8 of this report.
APPLICATION OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The Company’s Consolidated Financial Statements are prepared in conformity with U.S. generally accepted accounting principles, or 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. The following accounting policies involve critical accounting estimates because they are particularly dependent on estimates and assumptions made by management about matters that are uncertain at the time the accounting estimates are made. In addition, while we have used our best estimates based on facts and circumstances available to us at the time, different estimates reasonably could have been used in the current period, or changes in the accounting estimates that we used are reasonably likely to occur from period to period, either of which may have a material impact on the presentation of our Consolidated Balance Sheets, Statements of Income and Statements of Comprehensive Income. We also have other significant accounting policies which involve the use of estimates, judgments and assumptions that are relevant to understanding our results. For additional information about these policies, see Note 1 of the Notes to Consolidated Financial Statements in Item 8 of this report. 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.
Revenue Recognition
In accordance with Accounting Standards Codification ("ASC") 606, “Revenue from Contracts with Customers,” we recognize revenue when a performance obligation has been satisfied by transferring a promised good or service to a customer and the customer obtains control of the good or service. In order to recognize revenue, we note that the two parties must have an agreement that creates enforceable rights, the performance obligations must be distinct and the transaction price can be determined. Our revenue is derived from the provision of information services to our customers on a transactional basis, in which distinct services are delivered over time as the customer simultaneously receives and consumes the benefits of the services delivered. To measure our performance over time, the output method is utilized to measure the value to the customer based on the transfer to date of the services promised, with no rights of return once consumed. In these cases, revenue on transactional contracts with a defined price but an undefined quantity is recognized utilizing the right to invoice expedient resulting in revenue being recognized when the service is provided and billed. Additionally, multi-year contracts with defined pricing but an undefined quantity that utilize tier pricing would be defined as a series of distinct performance obligations satisfied over time utilizing the same method of measurement, the output method, with no rights of return once consumed. This measurement method is applied on a monthly basis resulting in revenue being recognized when the service is provided and billed.
Additionally, we recognize revenue from subscription-based contracts under which a customer pays a preset fee for a predetermined or unlimited number of transactions or services provided during the subscription period, generally one year. Revenue from subscription-based contracts having a preset number of transactions is recognized as the services are provided, using an effective transaction rate as the actual transactions are delivered. Any remaining revenue related to unfulfilled units is not recognized until the end of the related contract’s subscription period. Revenue from subscription-based contracts having an unlimited volume is recognized ratably during the contract term. Multi-year subscription contracts are analyzed to determine the full contract transaction price over the term of the contract and the subsequent price is ratably recognized over the full term of the contract.
Revenue is recorded net of sales taxes.
If at the outset of an arrangement, we determine that collectability is not reasonably assured, revenue is deferred until the earlier of when collectability becomes probable or the receipt of payment from the customer. If there is uncertainty as to the customer’s acceptance of the performance obligation, revenue is not recognized until the earlier of receipt of customer acceptance or expiration of the acceptance period.
Certain costs incurred prior to the satisfaction of a performance obligation are deferred as contract costs and are amortized on a systematic basis consistent with the pattern of transfer of the related goods and services. These costs generally consist of labor costs directly relating to the implementation and setup of the contract.
Contract Balances – The contract balances are generated when revenue recognized varies from billing in a given period. A contract asset is created when an entity transfers a good or service to a customer and recognizes more revenue than what has been billed. As of December 31, 2025, the contract asset balance was $22.6 million. A contract liability is created when an entity transfers a good or service to a customer and recognizes less than what has been billed. Deferred revenue is recognized when we have an obligation to transfer goods or services to a customer and have already received consideration
from the customer. We generally expect to recognize our deferred revenue as revenue within twelve months of being recorded based on the terms of the contracts.
Goodwill
Goodwill is tested for impairment annually (as of December 1) and between annual tests if events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. These events or circumstances could include a significant change in the business climate, legal factors, operating performance or trends, competition, or sale or disposition of a significant portion of a reporting unit. We have six reporting units, comprised of Workforce Solutions, USIS, Asia Pacific, Latin America, Europe and Canada.
We performed a qualitative assessment to determine whether further impairment testing was necessary for our Workforce Solutions, USIS, Latin America, Europe and Canada reporting units. In this qualitative assessment, we considered the following items for each of the reporting units: macroeconomic conditions, industry and market conditions, overall financial performance and other entity specific events. In addition, for each of these reporting units, the most recent fair value determination resulted in an amount that significantly exceeded the carrying amount of the reporting units. Based on these assessments, we determined the likelihood that a current fair value determination would be less than the current carrying amount of the reporting unit is not more likely than not. As a result of our conclusions, no further testing was required for these reporting units.
The goodwill balance at December 31, 2025, for our six reporting units was as follows:
December 31, 2025
(In millions)
Workforce Solutions
USIS
Asia Pacific
Latin America
Europe
Canada
Total goodwill
Valuation Techniques
We performed a quantitative assessment for our Asia Pacific reporting unit to determine whether impairment exists from the most recent valuation date due to the size of the cushion. In determining the fair value of the reporting unit, we used a combination of the income and market approaches to estimate the reporting unit’s business enterprise value. We assess the valuation methodology based upon the relevance and availability of the data at the time we perform the valuation. If multiple valuation methodologies are used, the results are weighted appropriately. We engaged a third party specialist to assist in developing these estimates and valuation approaches.
Under the income approach, we calculate the fair value of a reporting unit based on estimated future discounted cash flows which require assumptions about short and long-term revenue growth rates, operating margins for the reporting unit, discount rates, foreign currency exchange rates and estimates of capital expenditures. The assumptions we use are based on what we believe a hypothetical marketplace participant would use in estimating fair value. Under the market approach, we estimate the fair value based on market multiples of earnings before income taxes, depreciation and amortization, for benchmark companies or guideline transactions. We believe the benchmark companies used for our Asia Pacific reporting unit serve as an appropriate input for calculating a fair value for the reporting unit as those benchmark companies have similar risks, participate in similar markets, provide similar services for their customers and compete with us directly. The companies we use as benchmarks are principally outlined in our discussion of Competition in Item 1 of this Form 10-K and have not significantly changed since our last annual impairment test. Valuation multiples were selected based on a financial benchmarking analysis that compared the reporting unit’s operating result with the comparable companies’ information. In addition to these financial considerations, qualitative factors such as variations in growth opportunities and overall risk among the benchmark companies were considered in the ultimate selection of the multiple.
Given the lower historical cushion of concluded fair value in excess of carrying value for our Asia Pacific reporting unit, we used a combination of the income and market approaches to estimate our Asia Pacific reporting unit’s business enterprise value. The values separately derived from each of the income and market approach valuation techniques were used to develop an overall estimate of the Asia Pacific reporting unit’s fair value. This approach relies more heavily on the calculated
fair value derived from the income approach with 70% of the value coming from the income approach. We believe this approach is consistent with that of a market participant in valuing prospective purchase business combinations. The selection and weighting of the various fair value techniques may result in a higher or lower fair value. Judgment is applied in determining the weightings that are most representative of fair value.
We have not made any material changes to the valuation methodology we use to assess goodwill impairment since the date of our last annual impairment test.
The estimated fair value of the Asia Pacific reporting unit is derived from the valuation techniques described above incorporating the related projections and assumptions. Impairment occurs when the estimated fair value of the reporting unit is below the carrying value. The estimated fair value for all of our Asia Pacific reporting unit exceeded its related carrying value as of December 1, 2025. As a result, no goodwill impairment was recorded.
Growth Assumptions
The assumptions for our future cash flows begin with our historical operating performance, the details of which are described in our Management’s Discussion & Analysis of operating performance. Additionally, we consider the impact that known economic, industry and market trends, including the impact of rising interest rates and inflation, will have on our future forecasts, as well as the impact that we expect from planned business initiatives including new product initiatives, client service and retention standards, and cost management programs. At the end of the forecast period, the long-term growth rate we used to determine the terminal value of our Asia Pacific reporting unit was between 3.0% and 5.0% based on management’s assessment of the minimum expected terminal growth rate of the reporting unit, as well as broader economic considerations such as GDP, inflation and the maturity of the markets we serve.
We projected revenue growth in 2026 for our Asia Pacific reporting unit in completing our 2025 impairment testing based on planned business initiatives and prevailing trends exhibited by this reporting unit. The anticipated revenue growth in this reporting unit, however, is partially offset by assumed increases in expenses and capital expenditures for the reporting unit, which reflects the additional level of investment needed in order to achieve the planned revenue growth and completion of our technology transformation initiatives.
Discount Rate Assumptions
We utilize a weighted average cost of capital, or WACC, in our impairment analysis that makes assumptions about the capital structure that we believe a market participant would make and include a risk premium based on an assessment of risks related to the projected cash flows for the reporting unit. We believe this approach yields a discount rate that is consistent with an implied rate of return that a market participant would require for an investment in a company having similar risks and business characteristics to the reporting unit being assessed. To calculate the WACC, the cost of equity and cost of debt are multiplied by the assumed capital structure of the reporting unit as compared to industry trends and relevant benchmark company structures. The cost of equity was computed using the Capital Asset Pricing Model which considers the risk-free interest rate, beta, equity risk premium and specific company risk premium related to a particular reporting unit. The cost of debt was computed using a benchmark rate and the reporting unit’s tax rate. For the 2025 annual goodwill impairment evaluation, the discount rate used to develop the estimated fair value of the Asia Pacific reporting unit was higher than the discount rate used in 2024 but was within the same range between 10.0% and 11.5%.
Estimated Fair Value and Sensitivities
The estimated fair value of the Asia Pacific reporting unit is highly sensitive to changes in these projections and assumptions; therefore, in some instances, changes in these assumptions could impact whether the fair value of a reporting unit is greater than its carrying value. For example, an increase in the discount rate and decline in the projected cumulative cash flow of a reporting unit could cause the fair value of certain reporting units to be below its carrying value. We perform sensitivity analyses around these assumptions in order to assess the reasonableness of the assumptions and the resulting estimated fair values. Ultimately, future potential changes in these assumptions may impact the estimated fair value of a reporting unit and cause the fair value of the reporting unit to be below its carrying value. Due to the lower cushion when compared to other reporting units, Asia Pacific is more sensitive to changes in the assumptions noted above that could result in a fair value that is less than its carrying value. The excess of fair value over carrying value for the Asia Pacific reporting unit was greater than 10% as of December 1, 2025.
Given the relatively smaller excess of fair value over carrying value for the Asia Pacific reporting unit, we believe that it is at risk of a possible future goodwill impairment. The future impact of changes in economic conditions, including rising
interest rates and inflation, remains uncertain. Avoidance of a future impairment will be dependent on continued growth during current economic conditions and our ability to execute on initiatives to grow revenue and operating margin and manage expenses prudently. We will continue to monitor the performance of this reporting unit to ensure no interim indications of possible impairment have occurred before our next annual goodwill impairment assessment in December 2026.
Loss Contingencies
We are subject to various proceedings, lawsuits and claims arising in the normal course of our business. We determine whether to disclose and/or accrue for loss contingencies based on our assessment of whether the potential loss is estimable, probable, reasonably possible or remote.
Judgments and uncertainties — We periodically review claims and legal proceedings and assess whether we have potential financial exposure based on consultation with internal and outside legal counsel and other advisors. If the likelihood of an adverse outcome from any claim or legal proceeding is probable and the amount can be reasonably estimated, we record a liability on our Consolidated Balance Sheets for the estimated amount. If the likelihood of an adverse outcome is reasonably possible, but not probable, we provide disclosures related to the potential loss contingency. Our assumptions related to loss contingencies are inherently subjective.
Effect if actual results differ from assumptions — We do not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions we use to determine loss contingencies. However, if facts and circumstances change in the future that change our belief regarding assumptions used to determine our estimates, we may be exposed to a loss that could be material.
Income Taxes
We record deferred income taxes using enacted tax laws and rates for the years in which the taxes are expected to be paid. We assess the likelihood that our deferred tax assets will be recovered from future taxable income or other tax planning strategies. To the extent that we believe that recovery is not likely, we must establish a valuation allowance to reduce the deferred tax assets to the amount we estimate will be recoverable.
Our income tax provisions are based on assumptions and calculations which will be subject to examination by various tax authorities. We record tax benefits for positions in which we believe are more likely than not of being sustained under such examinations. We assess the potential outcome of such examinations to determine the adequacy of our income tax accruals.
Judgments and uncertainties — We consider accounting for income taxes critical because management is required to make significant judgments in determining our provision for income taxes, our deferred tax assets and liabilities, and our future taxable income for purposes of assessing our ability to realize any future benefit from our deferred tax assets. These judgments and estimates are affected by our expectations of future taxable income, mix of earnings among different taxing jurisdictions, and timing of the reversal of deferred tax assets and liabilities.
We also use our judgment to determine whether it is more likely than not that we will sustain positions that we have taken on tax returns and, if so, the amount of benefit to initially recognize within our financial statements. We review our uncertain tax positions and adjust our unrecognized tax benefits in light of changes in facts and circumstances, such as changes in tax law, interactions with taxing authorities and developments in case law. These adjustments to our unrecognized tax benefits may affect our income tax expense. Settlement of uncertain tax positions may require use of our cash.
Effect if actual results differ from assumptions — Although management believes that the judgments and estimates discussed herein are reasonable, actual results could differ, and we may be exposed to increases or decreases in income tax expense that could be material.
Purchase Accounting for Acquisitions
We account for acquisitions under Accounting Standards Codification 805, Business Combinations. In general, the acquisition method of accounting requires companies to record assets acquired and liabilities assumed at their respective fair market values at the date of acquisition. We primarily estimate fair value of identified intangible assets using discounted cash flow analyses based on market participant based inputs. Any amount of the purchase price paid that is in excess of the estimated fair values of net assets acquired is recorded in the line item Goodwill in our Consolidated Balance Sheets. Transaction costs, as well as costs to reorganize acquired companies, are expensed as incurred in our Consolidated Statements of Income.
Judgments and uncertainties — We consider accounting for business combinations critical because management's judgment is used to determine the estimated fair values assigned to assets acquired and liabilities assumed and amortization periods for intangible assets which can materially affect our results of operations.
Effect if actual results differ from assumptions — Although management believes that the judgments and estimates discussed herein are reasonable, actual results could differ and we may be exposed to an impairment charge if we are unable to recover the value of the recorded net assets.
