Verisk Analytics, Inc. — 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This filing reports annual results, not a separate fourth-quarter earnings report. Dollar amounts are in millions unless noted.
Business context
Verisk provides data, analytics, and decision-support solutions across Insurance; Energy and Specialized Markets; and Financial Services. More than 81% of 2021 revenue came from annual subscriptions or long-term agreements, generally paid in advance. Insurance accounted for approximately 73% of revenue.
Key financial metrics
| Metric | 2021 | 2020 |
|---|---|---|
| Revenue | $2,998.6 | $2,784.6 |
| Operating income | $1,000.5 | $1,038.1 |
| Net income | $666.3 | $712.7 |
| Diluted EPS | $4.08 | $4.31 |
| Net income margin | 22.2% | 25.6% |
| EBITDA / EBITDA margin (non-GAAP) | $1,386.0 / 46.2% | $1,393.8 / 50.1% |
| Cash from operating activities | $1,155.7 | $1,068.2 |
| Capital expenditures | $268.4 | $246.8 |
Operating cash flow less capital expenditures was approximately $887.3 in 2021. Cash and cash equivalents were $280.3 at year-end; cash plus available-for-sale securities totaled $285.3. Debt excluding finance leases, unamortized discounts/premiums, and issuance costs was $3,310.0. The $1,000.0 revolving facility had $384.9 of capacity available at year-end, net of letters of credit; Verisk reported compliance with debt covenants. Current liabilities exceeded current assets, in part because customer prepayments create deferred-revenue liabilities.
Segments and changes versus 2020
- Insurance: Revenue $2,206.9, up 9.9% reported and 7.3% excluding specified acquisitions, businesses held for sale, and dispositions. Underwriting and rating and claims both grew.
- Energy and Specialized Markets: Revenue $648.9, up 4.8% reported and 4.3% on the stated adjusted basis, supported by research and environmental health and safety subscriptions.
- Financial Services: Revenue $142.8, down 8.9% reported and 8.1% on the stated adjusted basis. Management cited nonrecurring projects, lower consulting activity, and lower bankruptcy-related transactions.
Consolidated revenue rose 7.7%, including $53.7 of net revenue contribution from recent acquisitions and dispositions; growth excluding those effects was 5.8%. Net income fell 6.5% as a $134.0 long-lived-asset impairment and a higher effective tax rate outweighed revenue growth. The effective tax rate rose to 23.9% from 20.6%. Interest expense declined 8.2% to $127.0, partly because Verisk repaid its 5.800% senior notes in May 2021.
Outlook, risks, contingencies, and unusual items
- Outlook: The filing provides no specific numerical revenue or earnings guidance. Management described expectations for continued growth through customer penetration, new data and analytics, adjacent markets, international expansion, and acquisitions, while noting that investment in new offerings may constrain margin expansion.
- COVID-19: Management reported minimal interruption to customer-facing operations and no material effect identified for about 85% of revenue; those revenues grew approximately 6% in 2021. The more transactional portion grew approximately 1%, with activity affected by auto and travel insurance, property access, energy-sector capital spending, and advertising.
- Impairment and proposed sales: Weaker Financial Services performance triggered a $134.0 impairment ($88.2 intangible assets and $45.8 fixed assets). After year-end, Verisk agreed to sell its Financial Services business to TransUnion for $515.0 cash, subject to customary conditions. It also agreed to sell 3E, its environmental health and safety business, for up to $950.0, including $630.0 at closing and contingent/deferred amounts; closing conditions remained.
- Other post-year-end activity: Verisk acquired Infutor for $223.5 net cash plus a potential earn-out of up to $25.0. The board authorized a further $1,000.0 share repurchase and declared a $0.31-per-share dividend for March 2022.
- Legal matters: The Xactware patent litigation was settled in November 2021; the parties’ claims were dismissed and the injunction dissolved. Other disclosed matters include ERISA, Jornaya privacy/wiretapping, Leica contract, Wood Mackenzie licensing, data-privacy, and LCI consumer-reporting litigation, plus an ongoing government inquiry involving Financial Services contracts. Verisk said it could not reasonably estimate potential liability for these ongoing matters.
- Principal risks: Reliance on external data sources and U.S. P&C insurers (about 52% of revenue); privacy, cybersecurity, and regulatory changes; competition and technology shifts; acquisition integration and leverage; energy-market and energy-transition conditions; and international, currency, and litigation risks.
Important facts for investors to verify
- Confirm the status, closing proceeds, adjustments, and contingent consideration for the 3E and Financial Services divestitures, and how proceeds were used.
- Track underlying Insurance and Energy growth separately from acquisitions, dispositions, and pricing effects; assess whether Financial Services trends persist after its planned sale.
- Review the $134.0 impairment’s effect on reported earnings and non-GAAP EBITDA, and distinguish it from recurring operating performance.
- Monitor debt maturities, revolving-credit borrowings and availability, interest-rate exposure, and the impact of capital returns and acquisitions on leverage.
- Follow developments and potential exposure in the unresolved legal matters and government inquiry; the filing does not provide clear loss estimates for these matters.