01—Abstract
Summary
Summary of the 10-K filed February 28, 2011. Cited figures are marked; the original filing is the authoritative source.
Verisk Analytics, Inc. enables risk-bearing businesses to better understand and manage their risks by supplying proprietary data combined with analytic methods.
For the year ended December 31, 2010, revenues were $1,138.3 milliona, up from $1,027.1 million in 2009, and net income was $242.6 million, compared with $126.6 million in 2009. Operating income was $440.9 million versus $302.0 million a year earlier, and EBITDA was $508.5 million versus $373.2 million. The filing states that approximately 70.0% of 2010 revenues came from annual subscriptions or long-term agreements, which are typically pre-paid, and that the company operates in two segments: Risk Assessment ($542.1 million in revenue) and Decision Analytics ($596.2 million in revenue).
The company's Decision Analytics segment drove much of the growth. Its fraud identification and detection solutions revenue rose 17.5%, loss prediction solutions rose 15.4%, and loss quantification solutions rose 26.2%. Cash flow from operations was $336.0 millionb in 2010.
The company repurchased $422.3 millionc of treasury stock during 2010, funded in part by $839.5 million of total debt, and it ended the year with a stockholders' deficit of $114.4 million. Total debt increased from $594.2 million at December 31, 2009. The filing also discloses material legal matters, including the Hensley Claims Outcome Advisor litigation, Xactware class actions in Louisiana, DPPA class actions involving subsidiary iiX, and a wage-and-hour class action at Interthinx.
Management states it cannot determine the ultimate outcome or estimate the liability for these matters. Class B common stock held by insurer customers carries the right to elect up to three of eleven directors, and Class B-1 and B-2 shares convert to Class A on April 6, 2011 and October 6, 2011, respectively.
02—Key points
Key Highlights
- 2010 revenues of $1,138.3 million, up from $1,027.1 million in 2009; net income of $242.6 million versus $126.6 million
- Recurring model: approximately 70.0% of 2010 revenues came from annual subscriptions or long-term agreements, typically pre-paid
- Decision Analytics revenue rose to $596.2 million in 2010 from $503.1 million, with fraud identification and detection up 17.5% and loss quantification up 26.2%
- Risk Assessment revenue of $542.1 million in 2010, up 3.5% from $524.0 million in 2009
- Operating cash flow of $336.0 million in 2010; $422.3 million repurchased in treasury stock during the year
- Total debt rose to $839.5 million at December 31, 2010 from $594.2 million, and stockholders' deficit was $114.4 million
- Class B-1 and B-2 common stock convert automatically to Class A on April 6, 2011 and October 6, 2011, which could affect share supply
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2010filed February 28, 2011Financial Statements
FY2010 against FY2009
| Line item | FY2010FY2009 | Change |
|---|---|---|
| Revenue | $1.14B$1.03B | +10.8% |
| R&D Expenses | $14.87M$14.11M | +5.4% |
| SG&A Expenses | $166.37M$162.60M | +2.3% |
| Operating Expenses | $697.43M$725.10M | −3.8% |
| Operating Income | $440.91M$302.01M | +46.0% |
| Interest Expense | $34.66M$35.27M | −1.7% |
| Net Income | $242.55M$126.61M | +91.6% |
| EPS (Basic) | $1.36$0.72 | +88.9% |
| EPS (Diluted) | $1.30$0.70 | +85.7% |
| Shares Outstanding (Basic) | 177.73M174.77M | +1.7% |
| Shares Outstanding (Diluted) | 186.39M182.17M | +2.3% |
05—Questions
Frequently Asked Questions
What drove the increase in revenue and net income in 2010?
Revenues rose $111.2 million, or 10.8%, to $1,138.3 million. Decision Analytics accounted for most of the growth, with revenue up $93.1 million, or 18.5%. Net income increased to $242.6 million from $126.6 million, helped in part by the absence of the $57.7 million accelerated ESOP allocation charge recorded in 2009.
How is the company's revenue structured?
The company reports through two segments. Risk Assessment provides statistical, actuarial and underwriting data for the U.S. P&C insurance industry and generated $542.1 million in 2010. Decision Analytics provides loss prediction, fraud identification and detection, and loss quantification solutions and generated $596.2 million. About 70.0% of 2010 revenues came from subscriptions and long-term agreements.
What legal risks does the filing disclose?
The filing describes several pending matters, including the Hensley Claims Outcome Advisor class action with a Hanover indemnification demand of $2.5 million, Xactware-related class actions in Louisiana, DPPA class actions against subsidiary iiX, and a putative wage-and-hour class action at Interthinx. Management states it cannot currently determine the ultimate resolution or estimate the liability for these matters.
How does the ownership structure affect shareholders?
Class B common stock, held by insurance company customers, carries the right to elect up to three of the eleven directors. The Class B-1 and B-2 shares convert to Class A on April 6, 2011 and October 6, 2011. The filing states that stockholders owning about 30.33% of outstanding common stock could sell in the public market, which may pressure the share price.
What is the company's capital allocation approach?
In 2010 the company repurchased $422.3 million of common stock, including Class B shares tied to a follow-on offering, and made acquisitions including 3E Company and Crowe Paradis Services for net cash of approximately $99.6 million and $83.6 million. It funded these largely through its $575 million syndicated revolving credit facility. The company paid no cash dividends and does not intend to pay them.
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