Verisk Analytics, Inc. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023. Verisk provides data analytics and technology primarily to the global insurance industry. Following the February 2023 sale of its Energy business, Insurance is its sole reportable segment. Unless stated otherwise, amounts are in millions.
Key financial results
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $675.0 | $612.8 | $1,326.6 | $1,256.4 |
| Operating income | $306.0 | $247.6 | $600.1 | $870.4 |
| Income from continuing operations | $204.3 | $173.6 | $398.7 | $660.6 |
| Net income attributable to Verisk | $196.9 | $197.7 | $253.2 | $703.4 |
| Diluted EPS from continuing operations | $1.41 | $1.09 | $2.67 | $4.12 |
| Operating cash flow | $192.9 | $130.2 | $558.2 | $529.8 |
- Q2 revenue rose 10.1%; Insurance revenue increased 10.6% to $675.0. Management reported 9.7% growth excluding recent acquisitions and dispositions. Underwriting revenue grew 9.2% and claims 14.4%.
- Q2 income from continuing operations rose 17.7%; diluted continuing-operations EPS increased to $1.41. Total net income attributable to Verisk was nearly flat because discontinued operations recorded a $7.5 loss in Q2 2023 versus $24.2 income a year earlier.
- Q2 EBITDA, a non-GAAP measure, was $365.1, up 19.9%, with a 54.1% margin versus 49.7%. The reported consolidated comparison includes prior-year results of businesses since disposed; Insurance’s Q2 EBITDA margin was 54.1% versus 54.4%.
- For the first half, revenue rose 5.6%; management reported 9.4% growth excluding acquisitions and dispositions. Insurance EBITDA increased 13.8% to $720.4, and its margin improved to 54.3% from 52.9%.
- First-half continuing income and operating income declined year over year, principally reflecting substantial prior-year gains on divestitures. The filing reports $361.5 of other operating income in the first half of 2022; 2023 had none in continuing operations.
- Q2 operating cash flow increased 48.2%; first-half operating cash flow increased 5.4%. Management attributed the first-half increase mainly to lower cash taxes, partly offset by disposed businesses. First-half capital expenditures were $119.4.
Liquidity, debt and capital allocation
- At June 30, 2023, cash and cash equivalents were $308.7, total current assets $854.8, and current liabilities $800.8. Deferred revenue was $468.7, primarily customer prepayments; the filing says subscriptions are generally paid in advance.
- Total debt on the balance sheet was $2,845.5, including finance lease liabilities; senior-note principal was $2,850.0. The company had no borrowings under its $1.0 billion syndicated revolver and reported $995.5 of available capacity. It said it was in compliance with debt covenants.
- Verisk issued $500.0 of 5.75% senior notes due 2033 and extended its syndicated revolving facility maturity to April 2028. Two bilateral facilities, with maturities in September and October 2023, had no borrowings at quarter-end.
- First-half investing cash flow included $3,066.4 of proceeds from the Energy sale. Financing cash outflow was $3,401.8, including a $2.5 billion accelerated share repurchase program and $1,390.0 of repayments of revolving and bilateral facility debt. First-half dividends paid were $98.7.
- As of June 30, $941.3 remained available under share-repurchase authorizations. The company paid quarterly dividends of $0.34 per share.
Material developments, outlook and risks
- Verisk completed the Energy business sale on February 1, 2023, for net cash proceeds of $3,066.4, with up to $200.0 of contingent consideration. It recorded a $128.4 loss on sale and an additional $6.9 loss in Q2 from closing-adjustment true-up. First-half discontinued operations reported a net loss of $145.5.
- Acquisitions included Krug, a German motor-claims solutions provider, and Mavera, a Swedish claims-management platform. First-half acquisition cash outflow, including an additional controlling-interest purchase, was $83.3.
- Management expects cash from operations and available credit to be sufficient for working capital, capital expenditures and growth plans. The filing provides no specific revenue, earnings or cash-flow guidance; results for the first half are not necessarily indicative of full-year results.
- Management cited pricing, enhanced solutions and customer growth as contributors to Insurance revenue growth, and cost discipline as supporting Q2 continuing-operations margins. It also noted that investment in new solutions and businesses may offset margin expansion.
- Contingencies include an ERISA fee litigation matter, DOJ and SEC inquiries concerning the former Financial Services segment (with certain indemnification obligations to its buyer), and several privacy-related class actions. The company said it could not reasonably estimate potential liability for these matters.
- The filing reports no material change in risk factors or market risks, no material change in internal control over financial reporting, and no off-balance-sheet arrangements. Disclosure controls were assessed as effective.
Investor verification checklist
- Review the drivers and sustainability of Insurance growth, especially reported growth excluding acquisitions and dispositions, and compare claims and underwriting trends.
- Separate recurring operating performance from prior-year divestiture gains and from Energy-sale losses when assessing year-over-year earnings and margins.
- Check debt maturities, interest costs, covenant headroom and liquidity after the large repurchase program; confirm settlement of the March 2023 accelerated repurchase.
- Track Energy-sale contingent consideration and closing adjustments, as well as acquisition earn-outs and purchase-price allocation changes.
- Monitor the DOJ/SEC inquiries and privacy and ERISA litigation; potential exposure is not quantifiable from this filing.