Verisk Analytics Inc (VRSK) Q1 2024 Earnings Call Transcript Highlights: Strong Growth and ...

• Revenue: $704 million, up 8% year-over-year.

• Net Income: $219 million, up 12.9% year-over-year.

• Earnings Per Share (EPS): $1.52, up 19.7% year-over-year.

• Organic Constant Currency Revenue Growth: 6.9%.

• Subscription Revenue Growth: 7.8% on an organic constant currency basis.

• Adjusted EBITDA Growth: 10.6% on an organic constant currency basis.

• Adjusted EBITDA Margin: 54%, up 180 basis points year-over-year.

• Free Cash Flow: $317 million, up 4.2% year-over-year.

• 2024 Revenue Guidance: $2.84 billion to $2.9 billion.

• 2024 Adjusted EBITDA Guidance: $1.54 billion to $1.6 billion.

• 2024 Adjusted EBITDA Margin Guidance: 54% to 55%.

• 2024 Adjusted EPS Guidance: $6.30 to $6.60 per share.

• Warning! GuruFocus has detected 2 Warning Sign with VRSK.

Release Date: May 01, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Verisk Analytics Inc (NASDAQ:VRSK) reported a solid start to 2024 with 6.9% organic constant currency revenue growth and 7.8% subscription growth.

• The company achieved strong double-digit organic constant currency adjusted EBITDA growth and margin expansion, resulting in a 26% increase in adjusted EPS.

• Verisk Analytics Inc (NASDAQ:VRSK) is effectively executing its strategy, focusing on consistent and predictable revenue growth, operating efficiency, and disciplined cash flow allocation.

• The company introduced innovative solutions such as Next Generation Models (NGM) and Filing Intelligence, enhancing its offerings and client engagement.

• Verisk Analytics Inc (NASDAQ:VRSK) continues to invest in advanced technologies like Generative AI, which is integrated into customer-facing initiatives and internal efficiencies.

Negative Points

• Verisk Analytics Inc (NASDAQ:VRSK) faces challenges in the marketing solutions revenue, which continues to experience headwinds despite signs of industry recovery.

• The company decided to discontinue its telematics offering due to changes in data source availability, reflecting potential vulnerabilities in data-dependent services.

• Transactional revenue growth faces headwinds due to tough comparisons with the previous year, particularly in auto transactional shopping and weather-related transaction volumes.

• While subscription revenue growth is strong, there is variability and potential for deceleration depending on market conditions and client consolidation.

• Investments in internal systems and technology replatforming are necessary but may strain resources temporarily, requiring careful management to maintain profitability.

Q & A Highlights

Q: How would you assess the health of your clients, meaning the P&C insurance industry now versus 3 or really kind of 6 months ago and how might that impact Verisk this year? A: Lee M. Shavel, CEO, President & Director of Verisk Analytics, Inc., noted that the financial position of the P&C insurance industry is stronger compared to a few years ago, with companies experiencing strong premium growth and improved profitability. This positive financial health is beneficial for Verisk as it correlates with the company's growth and provides opportunities for Verisk to engage more constructively with clients on investments to enhance their business operations.

Q: Could you provide an example of new solutions that are gaining traction, and how is the new initiative expected to impact revenue growth going into 2025? A: Lee M. Shavel mentioned that the guidance provided at Investor Day, which included expectations of incremental revenue growth, has been incorporated into their current performance metrics. Elizabeth D. Mann, CFO, added that products like Discovery Navigator in claims and image forensics in anti-fraud are examples of new solutions gaining traction. These innovations are part of Verisk's ongoing investment in their products, which are expected to contribute to revenue growth.

Q: How do you view the pricing environment this year compared to last year, especially concerning contracts tied to prior year net premium? A: Elizabeth D. Mann explained that the pricing environment remains positive, influenced by the industry's hard market conditions which align with last year's trends. The company's increased client engagement and investment in product enhancements have led to strong renewals and favorable pricing outcomes.

Q: What prompted the decision to discontinue the auto telematic offering? A: Lee M. Shavel clarified that the discontinuation was due to the data providers deciding to stop collecting the data, which was essential for the offering. The financial impact of this discontinuation is minimal, and Verisk continues to serve auto insurers with a variety of other significant products.

Q: Can you discuss the expected normal level of subscription growth for this year and the factors influencing it? A: Elizabeth D. Mann indicated that while minor quarterly variations might occur, there are no significant changes expected that would drastically affect subscription growth. The primary drivers for growth include broad-based strength across business segments, particularly in forms, rules, and loss costs.

Q: What are the expectations around transactional revenue growth, especially considering the conversion of the anti-fraud business? A: Elizabeth D. Mann acknowledged that transactional revenue faces headwinds due to tough comparisons with the previous year's strong performance. Key areas like auto transactional shopping and weather activity are expected to impact growth, with the company continuing to monitor these segments closely.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.