Business context and reporting period
Verisk Analytics, Inc. filed this unaudited Form 10-Q for the quarter ended March 31, 2024. Verisk provides data analytics and technology to the insurance industry. Following the February 2023 sale of its Energy business, continuing operations are reported as one segment: Insurance. Results below compare continuing operations unless otherwise noted.
Financial performance and position
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Revenue | $704.0 million | $651.6 million | +8.0% |
| Operating income | $307.4 million | $294.1 million | +4.5% |
| Income from continuing operations | $219.4 million | $194.4 million | +12.9% |
| Net income attributable to Verisk | $219.6 million | $56.3 million | +290.1% |
| Diluted EPS | $1.52 | $0.37 | Continuing-operations EPS: $1.52 vs. $1.27 |
| EBITDA and EBITDA margin | $380.0 million; 54.0% | $355.3 million; 54.5% | EBITDA +7.0%; margin down 0.5 percentage point |
| Operating cash flow | $372.2 million | $365.3 million | +1.9% |
All dollar amounts are U.S. dollars. Underwriting revenue was $498.4 million (+8.2%); claims revenue was $205.6 million (+7.6%). Recent acquisitions added $5.8 million of revenue; excluding them, Insurance revenue grew 7.2%.
At March 31, 2024, cash and cash equivalents were $352.4 million, total assets $4.50 billion, and total liabilities $4.21 billion. Total debt was $2.88 billion, including $2.85 billion of senior notes and finance lease liabilities. Verisk reported $995.4 million of available capacity under its $1.0 billion revolving credit facility and compliance with debt covenants. Capital expenditures were $55.2 million. Cash dividends paid were $55.8 million.
Material changes versus the prior comparable period
- Net income comparisons are materially affected by the Energy business disposal: Q1 2023 included a $138.0 million discontinued-operations loss, while Q1 2024 had none. Continuing-operations income rose 12.9%; reported net income growth should not be read as underlying operating growth.
- The effective tax rate fell to 20.3% from 27.1%, primarily because Q1 2023 included tax charges related to the Energy sale. Continuing-operations diluted EPS increased 19.7%, also benefiting from a 5.7% reduction in weighted-average shares.
- Cost of revenues rose 5.4%, while selling, general and administrative expenses rose 17.6%; the latter comparison reflects a $15.0 million earn-out credit in the prior-year quarter and none in Q1 2024. Depreciation and amortization of fixed assets increased 28.7%, mainly due to software and data-capacity assets placed in service.
- Operating cash flow increased modestly. Q1 2024 cash use included a $37.0 million DOJ settlement payment; Q1 2023 investing cash flow included $3.07 billion of Energy sale proceeds and financing cash flow included substantial share repurchases and debt repayments.
- Deferred revenues rose to $635.5 million from $375.1 million at year-end, consistent with advance-billed subscriptions. Approximately 99% of remaining performance obligations were expected to be satisfied within one year.
Outlook, commentary, risks and unusual items
The filing provides no quantified full-year revenue, earnings, or margin guidance. Management says it expects cash and the credit facility to be sufficient for working capital, capital expenditure needs, and growth plans, and cautions that quarterly results are not necessarily indicative of full-year results. Subscription contracts are generally paid in advance; about 80% of Insurance revenue came from hosted subscriptions.
Management attributed underwriting growth to pricing, enhanced models and content, and expanded solutions; continued weakness in Verisk Marketing Solutions partly offset growth. Claims growth reflected anti-fraud solutions and international revenue, offset by lower transactional activity in property estimating and casualty solutions. EBITDA margin declined to 54.0% from 54.5% despite higher EBITDA.
In January, Verisk acquired Rocket Enterprise Solutions GmbH for a net cash purchase price of $10.1 million. In March, it entered a $200 million accelerated share repurchase agreement; it repurchased $200 million of shares in the quarter, including unsettled shares, and paid $55.8 million in dividends. A new $1.0 billion repurchase authorization was approved in February.
Legal matters include newly filed telematics-related class actions alleging collection and sharing of driver data without consent; several data-privacy cases; an earn-out dispute related to the Data Driven Safety acquisition; and a Nepalese tax indemnification claim concerning a former subsidiary. Verisk states that it cannot currently reasonably estimate potential liability for these matters. A former Financial Services subsidiary settled a DOJ civil inquiry for $37.0 million; Verisk had agreed to indemnify the buyer for certain losses and had previously accrued a liability. The ERISA class action settlement received preliminary court approval, subject to independent fiduciary review.
Important facts for investors to verify
- Whether organic Insurance growth and pricing trends persist, particularly in underwriting, and whether weakness in Marketing Solutions or lower transactional claims activity continues.
- Whether expense growth, including elevated depreciation and amortization, affects EBITDA margin and operating leverage in coming quarters.
- Cash conversion and working-capital movements, including advance billings, receivables, and the timing of deferred-revenue recognition.
- Debt maturities, interest costs, covenant headroom, and the scale and funding of future buybacks and dividends.
- Developments and potential financial exposure in the telematics, data-privacy, earn-out, and indemnification matters; the filing does not provide clear estimates of possible losses.