Verisk Reports First-Quarter 2021 Financial Results
05/04/2021 - 04:15 PM
Consolidated revenues were $726.1 million , up 5.3% , and up 3.4% on an organic constant currency (OCC) basis for the first quarter of 2021. Net income attributable to Verisk was $168.6 million , down 1.8% for the first quarter of 2021. Adjusted EBITDA, a non-GAAP measure, was $345.5 million , up 8.7% , and up 5.2% on an OCC basis. Diluted GAAP earnings per share attributable to Verisk (diluted EPS) were $1.03 for the first quarter of 2021, down 1.0% . Diluted adjusted earnings per share (diluted adjusted EPS), a non-GAAP measure, were $1.23, up 5.1% . Net cash provided by operating activities was $448.7 million , up 23.7% for the first quarter of 2021. Free cash flow, a non-GAAP measure, was $389.5 million , up 25.8% . We paid a cash dividend of 29 cents per share on March 31, 2021. Our Board of Directors approved a cash dividend of 29 cents per share payable on June 30, 2021. We repurchased $100.0 million of our shares during the first quarter of 2021. JERSEY CITY, N.J., May 04, 2021 (GLOBE NEWSWIRE) -- Verisk (Nasdaq:VRSK), a leading global data analytics provider, today announced results for the first quarter ended March 31, 2021.
Scott Stephenson, chairman, president, and CEO, said, “I am very pleased with our start to 2021. Our first quarter results demonstrate solid financial performance and continued operating excellence despite the ongoing challenges from the pandemic. As we mark our 50th anniversary, our mission remains the same as it was at the start – to serve as a trusted partner to our customers by transforming data into insights and operational efficiencies and to solve their most complex problems. We have strong conviction in our long-term growth strategy and our plans to create durable shareholder value."
Lee Shavel, CFO and group president, said, “Verisk delivered organic constant currency revenue growth of 3.4% and organic constant currency adjusted EBITDA growth of 5.2% in the first quarter, led by continued strength in our insurance business. We generated solid free cash flow to invest in future growth opportunities while also returning capital to shareholders. We remain focused on maximizing value creation for all our stakeholders.”
Summary of Results (GAAP and Non-GAAP)
Three Months Ended March 31, 2021 2020 Change Revenues $ 726.1 $ 689.8 5.3 % Net income attributable to Verisk 168.6 171.7 (1.8 ) Adjusted EBITDA 345.5 318.0 8.7 Diluted GAAP EPS attributable to Verisk 1.03 1.04 (1.0 ) Diluted adjusted EPS 1.23 1.17 5.1 Net cash provided by operating activities 448.7 362.6 23.7 Free cash flow 389.5 309.7 25.8
Revenues 5.3% , and 3.4% on an OCC basis, for first-quarter 2021. In late March 2020, we analyzed our solutions and services to assess the impact of COVID-19 on our revenue streams. We did not identify any material impact stemming from COVID-19 on approximately 85% of our revenues as much of these revenues are subscription-based and subject to long-term contracts. These revenues increased 4.9% on an OCC basis in the first quarter of 2021. Of the remaining 15% , we have identified specific solutions and services, largely transactional in nature, that are being negatively impacted by COVID-19. These revenues declined approximately 5.9% on an OCC basis in first-quarter 2021 compared to the prior-year period.
Revenues and Revenue Growth by Segment
Revenue Growth Three Months Ended Three Months Ended March 31, March 31, 2021 2021 2020 Reported OCC Underwriting & rating $ 377.1 $ 350.0 7.7 % 5.3 % Claims 158.5 145.3 9.0 7.9 Insurance 535.6 495.3 8.1 6.0 Energy and Specialized Markets 156.2 154.2 1.3 (0.6 ) Financial Services 34.3 40.3 (15.0 ) (12.8 ) Revenues $ 726.1 $ 689.8 5.3 3.4
Insurance segment revenues grew 8.1% in the first quarter and 6.0% on an OCC basis.
• Underwriting and rating revenues increased 7.7% in the quarter and 5.3% on an OCC basis, resulting primarily from annual increases in prices derived from continued enhancements to the content of the solutions within our industry-standard insurance programs, as well as selling expanded solutions to existing customers in commercial and personal lines. In addition, catastrophe modeling services and our international software solutions contributed to the growth. These increases were partially offset by a decrease in certain transactional revenues.
• Claims revenues grew 9.0% in the quarter and 7.9% on an OCC basis. Growth was primarily driven by our repair cost estimating solutions revenue.
Energy and Specialized Markets segment revenue increased 1.3% in the quarter and declined 0.6% on an OCC basis. Growth in core research and environmental health and safety service revenues was offset by declines in transactional and consulting revenues.
Financial Services segment revenue decreased 15.0% in the quarter and 12.8% on an OCC basis, primarily due to certain contract transitions, projects that did not reoccur and lower levels of consulting spending from our bank customers stemming from the COVID-19 pandemic.
Net Income and Adjusted EBITDA 1.8% . Adjusted EBITDA increased 8.7% , and 5.2% on an OCC basis.
EBITDA and Adjusted EBITDA by Segment
Three Months Ended March 31, EBITDA EBITDA Margin Adjusted EBITDA Adjusted EBITDA Growth Adjusted EBITDA Margin 2021 2021 2021 2020 2021 2020 2021 2020 Reported OCC 2021 2020 Insurance $ 289.0 $ 273.2 54.0 % 55.2 % $ 288.9 $ 257.4 12.2 % 8.3 % 53.9 % 52.0 % Energy and Specialized Markets 53.7 49.4 34.4 32.0 53.7 49.4 8.8 6.6 34.4 32.0 Financial Services 2.9 14.7 8.3 36.4 2.9 11.2 (74.4 ) (73.8 ) 8.3 27.6 Consolidated $ 345.6 $ 337.3 47.6 48.9 $ 345.5 $ 318.0 8.7 5.2 47.6 46.1
Earnings Per Share 1.0% to $1.03 for the first quarter of 2021 primarily due to a higher effective tax rate.
Diluted adjusted EPS increased 5.1% to $1.23 for the first quarter of 2021, reflecting cost discipline in the business, a reduction in travel expenses as a result of COVID-19, and a lower average share count.
Cash Flow $448.7 million for the first quarter of 2021, up 23.7% . Capital expenditures were $59.2 million for the first quarter, up 11.9% . Free cash flow was $389.5 million , up 25.8% , primarily due to an increase in cash collections from customers and a reduction in travel payments as a result of COVID-19.
Free cash flow represented 112.7% of adjusted EBITDA for the first quarter, compared with 97.4% in the prior-year period.
Dividend
On April 28, 2021, our Board of Directors approved a cash dividend of 29 cents per share of common stock issued and outstanding, payable on June 30, 2021, to holders of record as of June 15, 2021.
Share Repurchases $100.0 million for the first quarter of 2021. On March 31, 2021, we had $478.8 million remaining under our share repurchase authorization.
Conference Call http://investor.verisk.com . The discussion will also be available through dial-in number 1-877-755-3792 for U.S./Canada participants or 512-961-6560 for international participants.
A replay of the webcast will be available for 30 days on our investor website and through the conference call number 1-855-859-2056 for U.S./Canada participants or 404-537-3406 for international participants using Conference ID #7598329.
About Verisk all team members feel they belong. With more than 100 offices in nearly 35 countries, we consistently earn certification by Great Place to Work®. For more, please visit our website at www.verisk.com or follow our social media profiles on LinkedIn, Twitter, Facebook, and YouTube.
Contact:
Investor Relations IR@verisk.com
Media Alberto.Canal@verisk.com
Forward-Looking Statements
Other factors that could materially affect actual results, levels of activity, performance, or achievements can be found in our quarterly reports on Form 10-Q, annual reports on Form 10-K, and current reports on Form 8-K filed with the Securities and Exchange Commission. If any of these risks or uncertainties materialize or if our underlying assumptions prove to be incorrect, actual results may vary significantly from what we projected. Any forward-looking statement in this release reflects our current views with respect to future events and is subject to these and other risks, uncertainties, and assumptions relating to our operations, results of operations, growth strategy, and liquidity. We assume no obligation to publicly update or revise these forward-looking statements for any reason, whether as a result of new information, future events, or otherwise.
Notes Regarding the Use of Non-GAAP Financial Measures
EBITDA, Adjusted EBITDA, and Adjusted EBITDA Expenses: EBITDA represents GAAP net income adjusted for (i) depreciation and amortization of fixed assets; (ii) amortization of intangible assets; (iii) interest expense; and (iv) provision for income taxes. Adjusted EBITDA represents EBITDA adjusted for acquisition-related costs (earn-outs), gain/loss from dispositions (which includes businesses held for sale), and nonrecurring gain/loss. Adjusted EBITDA expenses represent adjusted EBITDA net of revenues. We believe these measures are useful and meaningful because they allow for greater transparency regarding our operating performance and facilitate period-to-period comparison.
Adjusted Net Income and Diluted Adjusted EPS: Adjusted net income represents GAAP net income adjusted for (i) amortization of intangible assets, net of tax; (ii) acquisition-related costs (earn-outs), net of tax; (iii) gain/loss from dispositions (which includes businesses held for sale), net of tax; and (iv) nonrecurring gain/loss, net of tax. Diluted adjusted EPS represents adjusted net income divided by weighted-average diluted shares. We believe these measures are useful and meaningful because they allow evaluation of the after-tax profitability of our results excluding the after-tax effect of acquisition-related costs and nonrecurring items.
Free Cash Flow: Free cash flow represents net cash provided by operating activities determined in accordance with GAAP minus payments for capital expenditures. We believe free cash flow is an important measure of the recurring cash generated by our operations that may be available to repay debt obligations, repurchase our stock, invest in future growth through new business development activities, or make acquisitions.
Organic Constant Currency (OCC): Our operating results, such as, but not limited to, revenue and adjusted EBITDA, reported in U.S. dollars are affected by foreign currency exchange rate fluctuations because the underlying foreign currencies in which we transact changes in value over time compared with the U.S. dollar; accordingly, we present certain constant currency financial information to assess how we performed excluding the impact of foreign currency exchange rate fluctuations. We calculate constant currency by translating comparable prior-year-period results at the currency exchange rates used in the current period. We define “organic” as operating results excluding the effect of recent acquisitions and dispositions (which include businesses held for sale) that have occurred over the past year. An acquisition is included as organic at the beginning of the calendar quarter that occurs subsequent to the one-year anniversary of the acquisition date. Once an acquisition is included in its current-period organic base, its comparable prior-year-period operating results are also included to calculate organic growth. A disposition (which includes a business held for sale) is excluded from organic at the beginning of the calendar quarter in which the disposition occurs (or when a business meets the held-for-sale criteria under U.S. GAAP). Once a disposition is excluded from its current-period organic base, its comparable prior-year-period operating results are also excluded to calculate organic growth. The organic presentation enables investors to assess the growth of the business without the impact of recent acquisitions for which there is no prior-year comparison. A disposition’s results are removed from all prior periods presented to allow for comparability. We believe organic constant currency is a useful and meaningful measure to enhance investors’ understanding of the continuing operating performance of our business and to facilitate the comparison of period-to-period performance because it excludes the impact of foreign exchange rate movements, acquisitions, and dispositions.
See page 10 for a reconciliation of consolidated adjusted EBITDA and a segment results summary and a reconciliation of adjusted EBITDA. See page 11 for a reconciliation of segment adjusted EBITDA margin, a reconciliation of adjusted EBITDA expenses, and a reconciliation of diluted adjusted EPS. See page 12 for a reconciliation of net cash provided by operating activities to free cash flow.
Attached Financial Statements
VERISK ANALYTICS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) As of March 31, 2021 and December 31, 2020
2021 2020 (in millions, except for share and per share data) ASSETS: Current assets: Cash and cash equivalents $ 390.9 $ 218.8 Accounts receivable, net of allowance for doubtful accounts of $19.3 and $17.7, respectively 519.5 432.4 Prepaid expenses 82.9 81.2 Income taxes receivable — 25.4 Other current assets 48.3 36.4 Total current assets 1,041.6 794.2 Noncurrent assets: Fixed assets, net 646.6 632.3 Operating lease right-of-use assets, net 264.0 267.6 Intangible assets, net 1,355.7 1,384.8 Goodwill 4,135.6 4,108.1 Deferred income tax assets 9.0 9.1 Other noncurrent assets 358.0 365.7 Total assets $ 7,810.5 $ 7,561.8 LIABILITIES AND STOCKHOLDERS’ EQUITY: Current liabilities: Accounts payable and accrued liabilities 380.2 407.3 Short-term debt and current portion of long-term debt 464.8 514.3 Deferred revenues 723.9 466.7 Operating lease liabilities 37.5 38.7 Income taxes payable 16.5 3.8 Total current liabilities 1,622.9 1,430.8 Noncurrent liabilities: Long-term debt 2,699.6 2,699.6 Deferred income tax liabilities 399.6 396.9 Operating lease liabilities 269.6 271.6 Other noncurrent liabilities 47.3 64.7 Total liabilities 5,039.0 4,863.6 Commitments and contingencies Stockholders’ equity: Common stock, $.001 par value; 2,000,000,000 shares authorized; 544,003,038 shares issued; 162,466,592 and 162,817,526 shares outstanding, respectively 0.1 0.1 Additional paid-in capital 2,515.3 2,490.9 Treasury stock, at cost, 381,536,446 and 381,185,512 shares, respectively (4,277.0 ) (4,179.3 ) Retained earnings 4,884.1 4,762.2 Accumulated other comprehensive losses (366.2 ) (375.7 ) Total Verisk stockholders' equity 2,756.3 2,698.2 Noncontrolling interest 15.2 — Total stockholders’ equity 2,771.5 2,698.2 Total liabilities and stockholders’ equity $ 7,810.5 $ 7,561.8
VERISK ANALYTICS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) For the Three Months Ended March 31, 2021 and 2020
Three Months Ended March 31, 2021 2020 (in millions, except for share and per share data) Revenues $ 726.1 $ 689.8 Operating expenses: Cost of revenues (exclusive of items shown separately below) 262.4 257.7 Selling, general and administrative 119.8 112.1 Depreciation and amortization of fixed assets 48.5 46.1 Amortization of intangible assets 45.0 41.0 Other operating income — (19.4 ) Total operating expenses 475.7 437.5 Operating income 250.4 252.3 Other income (expense): Investment income (loss) and others, net 1.7 (2.1 ) Interest expense (35.4 ) (33.5 ) Total other expense, net (33.7 ) (35.6 ) Income before income taxes 216.7 216.7 Provision for income taxes (48.7 ) (45.0 ) Net income 168.0 171.7 Less: Net loss attributable to noncontrolling interest (0.6 ) — Net income attributable to Verisk $ 168.6 $ 171.7 Basic net income per share attributable to Verisk $ 1.04 $ 1.05 Diluted net income per share attributable to Verisk $ 1.03 $ 1.04 Weighted-average shares outstanding: Basic 162,641,819 162,894,306 Diluted 164,436,717 165,724,120
VERISK ANALYTICS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) For the Three Months Ended March 31, 2021 and 2020
Three Months Ended March 31, 2021 2020 (in millions) Cash flows from operating activities: Net income $ 168.0 $ 171.7 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of fixed assets 48.5 46.1 Amortization of intangible assets 45.0 41.0 Amortization of debt issuance costs and original issue discount, net of original issue premium 0.4 0.3 Provision for doubtful accounts 3.2 1.5 Gain on sale of assets — (19.4 ) Stock-based compensation expense 25.4 19.6 Realized loss on available-for-sale securities, net — 0.5 Deferred income taxes (0.7 ) (0.1 ) Loss on disposal of fixed assets, net — 0.3 Changes in assets and liabilities, net of effects from acquisitions: Accounts receivable (89.5 ) (96.5 ) Prepaid expenses and other assets (4.2 ) (18.5 ) Operating lease right-of-use assets, net 10.4 9.3 Income taxes 38.4 41.0 Accounts payable and accrued liabilities (25.9 ) (61.8 ) Deferred revenues 256.9 237.6 Operating lease liabilities (10.1 ) (10.5 ) Other liabilities (17.1 ) 0.5 Net cash provided by operating activities 448.7 362.6 Cash flows from investing activities: Acquisitions and purchase of controlling interest, net of cash acquired of $3.8 and $0.0, respectively (13.7 ) — Proceeds from sale of assets — 23.1 Investments in nonpublic companies — (63.8 ) Capital expenditures (59.2 ) (52.9 ) Payment of contingent liability related to acquisition (1.2 ) — Other investing activities, net 0.4 6.1 Net cash used in investing activities (73.7 ) (87.5 )
Three Months Ended March 31, 2021 2020 (in millions) Cash flows from financing activities: Repayments of short-term debt, net (50.0 ) (75.0 ) Proceeds from issuance of short-term debt with original maturities greater than three months — 20.0 Repurchases of common stock (100.0 ) (173.8 ) Proceeds from stock options exercised 7.6 19.2 Net share settlement of taxes from restricted stock and performance share awards (7.8 ) — Dividends paid (47.1 ) (43.9 ) Other financing activities, net (1.9 ) (1.9 ) Net cash used in financing activities (199.2 ) (255.4 ) Effect of exchange rate changes (3.7 ) (0.2 ) Net increase in cash and cash equivalents 172.1 19.5 Cash and cash equivalents classified within current assets held for sale, beginning of period — 0.3 Cash and cash equivalents, beginning of period 218.8 184.6 Cash and cash equivalents, end of period $ 390.9 $ 204.4 Supplemental disclosures: Income taxes paid $ 10.8 $ 4.1 Interest paid $ 19.5 $ 22.6 Noncash investing and financing activities: Deferred tax liability established on date of acquisition $ 2.2 $ — Finance lease additions $ 2.0 $ 1.5 Operating lease additions, net of terminations $ 6.7 $ 1.6 Fixed assets included in accounts payable and accrued liabilities $ 0.9 $ 0.7 Dividends included in accrued liabilities and other liabilities $ 0.4 $ 1.0 Gain on sale of assets included in other current and long-term assets $ — $ 3.5 Held for sale assets contributed to a nonpublic company $ — $ 65.9
Non-GAAP Reconciliations
Consolidated Adjusted EBITDA Reconciliation
Three Months Ended March 31, 2021 2020 Total Margin Total Margin Net income $ 168.0 23.1 % $ 171.7 24.9 % Depreciation and amortization of fixed assets 48.5 6.7 46.1 6.7 Amortization of intangible assets 45.0 6.2 41.0 6.0 Interest expense 35.4 4.9 33.5 4.8 Provision for income taxes 48.7 6.7 45.0 6.5 EBITDA 345.6 47.6 337.3 48.9 Acquisition-related costs (earn-outs) (0.1 ) — 0.1 — Gain from dispositions — — (19.4 ) (2.8 ) Adjusted EBITDA 345.5 47.6 318.0 46.1 Adjusted EBITDA from acquisitions and dispositions (3.2 ) (0.5 ) 3.1 0.5 Organic adjusted EBITDA $ 342.3 47.1 $ 321.1 46.6
Segment Results Summary and Adjusted EBITDA Reconciliation
Three Months Ended March 31, 2021 Three Months Ended March 31, 2020 Insurance Energy and Specialized Markets Financial Services Insurance Energy and Specialized Markets Financial Services Revenues $ 535.6 $ 156.2 $ 34.3 $ 495.3 $ 154.2 $ 40.3 Revenues from acquisitions and dispositions (12.5 ) — — (4.0 ) — (1.4 ) Organic revenues $ 523.1 $ 156.2 $ 34.3 $ 491.3 $ 154.2 $ 38.9 EBITDA $ 289.0 $ 53.7 $ 2.9 $ 273.2 $ 49.4 $ 14.7 Acquisition-related costs (earn-outs) (0.1 ) — — 0.1 — — Gain from dispositions — — — (15.9 ) — (3.5 ) Adjusted EBITDA 288.9 53.7 2.9 257.4 49.4 11.2 Adjusted EBITDA from acquisitions and dispositions (3.2 ) — — 3.9 — (0.8 ) Organic adjusted EBITDA $ 285.7 $ 53.7 $ 2.9 $ 261.3 $ 49.4 $ 10.4
Segment Adjusted EBITDA Margin Reconciliation
Three Months Ended March 31, 2021 Three Months Ended March 31, 2020 Insurance Energy and Specialized Markets Financial Services Insurance Energy and Specialized Markets Financial Services EBITDA margin 54.0 % 34.4 % 8.3 % 55.2 % 32.0 % 36.4 % Acquisition-related costs (earn-outs) (0.1 ) — — — — — Gain from dispositions — — — (3.2 ) — (8.8 ) Adjusted EBITDA margin 53.9 34.4 8.3 52.0 32.0 27.6
Consolidated Adjusted EBITDA Expense Reconciliation
Three Months Ended March 31, 2021 2020 Operating expenses $ 475.7 $ 437.5 Depreciation and amortization of fixed assets (48.5 ) (46.1 ) Amortization of intangible assets (45.0 ) (41.0 ) Investment (income) loss and others, net (1.7 ) 2.1 Acquisition-related costs (earn-outs) 0.1 (0.1 ) Gain from dispositions — 19.4 Adjusted EBITDA expenses $ 380.6 $ 371.8
Diluted Adjusted EPS Reconciliation
Three Months Ended March 31, 2021 2020 Net income $ 168.0 $ 171.7 plus: Amortization of intangibles 45.0 41.0 less: Income tax effect on amortization of intangibles (9.9 ) (9.0 ) plus: Acquisition-related costs and interest expense (earn-outs) (0.1 ) 0.1 less: Gain from dispositions — (19.4 ) plus: Income tax effect on gain from dispositions — 9.6 Adjusted net income $ 203.0 $ 194.0 Diluted EPS attributable to Verisk $ 1.03 $ 1.04 Diluted adjusted EPS $ 1.23 $ 1.17 Weighted-average diluted shares outstanding 164.4 165.7
Free Cash Flow Reconciliation
Three Months Ended March 31, 2021 2020 Change Net cash provided by operating activities $ 448.7 $ 362.6 23.7 % Capital expenditures (59.2 ) (52.9 ) 11.9 Free cash flow $ 389.5 $ 309.7 25.8
