Equifax (EFX) Expands Technology Center in Santiago, Chile
Equifax Inc. EFX is moving ahead with its plans to expand internationally. The financial information solutions company recently announced the expansion of its technology center in Chile. The recent expansion has been made at the company’s largest global technology center, which is located in Santiago, Chile.
The expanded office will accommodate over 50 engineers. The company anticipates filling the positions with new hiring. Equifax also revealed that the newly expanded office as well as the engineers will mainly focus on “developing innovative analytical and big data solutions to produce insights” for all 24 of the company's markets located across four continents.
Chile: A Favored Destination for US Tech Firms
Chile continues to be a popular destination for U.S.-based technology companies due to a number of reasons. The country has a similar time zone as New York City and has signed various free trade agreements including NAFTA.
Moreover, the availability of cheap talented professionals as well as easy immigration policy attracts U.S. companies to open offices in the country. Additionally, the country is a favored destination due to its low corporate tax.
Looking at the huge prospects in Chile, Equifax entered the market way back in 2009 by opening its largest technology center in Santiago. The facility is as important as Equifax’s technology centers in Atlanta, GA and Dublin, Ireland which support all of its 24 markets in which it operates.
Other U.S.-based technology giants who have their data centers in Chile are Alphabet GOOGL aka Google and Intel INTC. Moreover, Amazon’s AMZN Amazon Web Services is planning to open its first data center in the country.
We believe that given the availability of a huge pool of talented IT professionals, ease of doing business and economic as well as political stability, the country is well poised to attract foreign companies to open their offices.
Global Expansion Driving Growth
For the last few years Equifax has been focusing on expanding its international footprint. Last year in September, the company opened a second office in Dublin, and employed more than 100 people at the new facility.
Apart from this, the company has resorted to acquisitions and joint ventures to drive growth. In Feb 2016, the company acquired Australia-based data and analytic services provider Veda for cash consideration of approximately $1.7 billion (2.4 billion Australian dollars). Veda has been integrated into the newly created Asia Pacific reporting unit within the International segment.
Notably, international revenues (including Europe, the Asia-Pacific, Canada and Latin America) surged 49% year over year to $212.4 million in the fourth quarter of 2016. On a constant-currency basis, revenues soared 62%. The Veda buyout boosted Asia-Pacific revenues from $2.6 million in the fourth quarter of 2015 to $70.7 million in the fourth quarter of 2016.
Furthermore, Equifax remains enthusiastic about forming joint ventures that could expand its business internationally. Joint ventures keep operating costs down and need no integration time while diversifying the revenue source. To tap the immense growth opportunity in the Brazilian credit data market, Equifax merged credit reporting operations of its Brazilian subsidiary with Boa Vista Servicos S.A., the second-largest consumer credit bureau in Brazil.
Equifax also owns roughly 50% in Russia-based credit reporting agency, Global Payments Credit Services LLC, and 49% interest in the Indian credit reporting agency, Equifax Credit Information Services Private Limited (a joint venture between Equifax and 6 Indian financial institutions). The company expects its investments in the joint ventures to yield desired results and help it to register solid growth over the long term.
Bottom Line
Management’s efforts, such as strategic initiatives for product innovation, expansion of data assets through acquisitions and continuous share gains in North America, should prove to be tailwinds. Also, the company’s strong correlation with the consumer and financial markets and exposure in the U.S. and Europe are likely to propel growth, going ahead.
The ongoing initiatives have helped the company to post splendid financial results for the last quarter. Equifax’s top- and bottom-line results for fourth-quarter 2016 not only came ahead of our estimates but also marked solid year-over-year improvement.
Investors have also reacted strongly to the company’s overwhelming quarterly results posted on Feb 8. The stock has gained 6% since its last quarterly results, outperforming the Zacks categorized Financial Transaction Services industry’s gain of just 2.5% during the same time frame.
Nonetheless, we expect the company’s investments in new initiatives to weigh on its bottom-line results in the near term. Additionally, uncertainty surrounding IT spending and strengthening U.S. dollar are some concerns. Moreover, increasing competition from the likes of Fiserv and Total System Services are the other factors likely to affect earnings in the near term.
Currently, Equifax has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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