Release Date: October 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Verisk Analytics Inc (VRSK, Financial) reported strong subscription revenue growth of 9.1%, driven by underwriting and claims contributions.
- Organic constant currency revenue growth was 8% on a two-year compound annual growth basis, at the high end of long-term targets.
- The company achieved a 7% increase in third-quarter revenue to $725 million, with income from continuing operations up 17.4%.
- Verisk's adjusted EBITDA margin improved to 55.2%, up 120 basis points from the prior year, highlighting strong revenue growth and cost discipline.
- The company returned $455 million to shareholders through repurchases and dividends, demonstrating a commitment to shareholder returns.
Negative Points
- Transactional revenues declined by 2.5% on an organic constant currency basis, impacted by strong prior-year results and conversion to subscription contracts.
- Net interest expense increased to $32 million due to higher interest rates from the issuance of senior notes.
- The company faces potential headwinds in 2025 from the normalization of attrition and a focus on profitability by insurance carriers.
- There is uncertainty regarding the impact of recent hurricanes on fourth-quarter results, with potential variability in claims and transactional revenue.
- The ongoing conversion from transactional to subscription contracts may continue to affect revenue growth dynamics in the short term.
Q & A Highlights
Q: Is 2025 setting up for an outsized year of growth given the industry dynamics and your current performance?
A: Elizabeth Mann, CFO, noted that while there are strong tailwinds such as subscription momentum and a strong premium environment, potential headwinds include the third year of elevated premium growth, carriers focusing on profitability, and possible normalization of attrition. Weather factors also remain an unknown.
Q: Can you estimate the tailwinds from Hurricanes Helene and Milton for Q4 and property estimating solutions going forward?
A: Elizabeth Mann explained that it's early to quantify the impact, but insured losses are estimated between $6 billion to $11 billion for Helene and $30 billion to $50 billion for Milton. The transition to subscription contracts may reduce transactional swings from single storms.
Q: What drove the acceleration of subscription revenue growth in Q3?
A: Elizabeth Mann highlighted that the growth was broad-based across all businesses, driven by focused go-to-market strategies, client engagement, product development, and innovation, supported by premium growth.
Q: How are insurance companies' focus on profitability affecting Verisk, especially with changes in Florida and California?
A: Lee Shavel, CEO, emphasized that the industry's interest in data and analytics for better risk decisions is a driver of opportunity. Verisk is focusing on improving internal processes and integrating external parties to enhance efficiency.
Q: What is the progress and impact of the Core Lines Reimagine initiative?
A: Lee Shavel and Saurabh Khemka explained that the initiative is more than halfway through, with new insights and innovations being introduced. The engagement platform has increased customer usage, driving value for Verisk.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
