01—Abstract
Summary
Summary of the 10-K filed February 26, 2013. Cited figures are marked; the original filing is the authoritative source.
Verisk Analytics, Inc. (NASDAQ: VRSK) reported revenues of $1,534.3 milliona for 2012, up from $1,331.8 million in 2011, and net income of $329.1 million, compared with $282.8 million in 2011.
Revenue growth was driven by the Decision Analytics segment, which grew to $954.8 millionb (62.2% of revenues), while the Risk Assessment segment rose to $579.5 million (37.8% of revenues). Recent acquisitions contributed $105.1 million of the revenue increase. Subscriptions and long-term agreements made up approximately 67.2% of 2012 revenues, and the company describes a business that generates strong recurring revenue and cash flow, with operating cash flow of $468.2 million.
The balance sheet shows total debt rising to $1,461.4 millionc at December 31, 2012, from $1,105.886 million a year earlier, largely to fund acquisitions including Argus (approximately $405.0 million net cash price) and MediConnect (approximately $331.4 million). Stockholders' equity turned positive at $255.6 million from a deficit of $98.5 million in 2011. The company leverage ratio was 2.11x at year end, and it repurchased $162.6 million of stock in 2012 with $144.2 million remaining under its $900.0 million repurchase program.
The company does not pay cash dividends. Investors should weigh the company's strong margins and growth against its higher leverage and litigation exposure.
The filing notes pending Fair Credit Reporting Act class actions involving Intellicorp and iiX, for which the company states it cannot currently determine the ultimate resolution or estimate liability. Dependence on U.S. P&C insurers (about 48.3%d of revenue) and on a small number of mortgage customers are also highlighted as risks.
02—Key points
Key Highlights
- Revenues rose 15.2% to $1,534.3 million in 2012, with net income of $329.1 million, up from $282.8 million in 2011.
- Decision Analytics revenue grew 24.2% to $954.8 million, driven by healthcare (up 115.0%, largely from acquisitions) and insurance; Risk Assessment grew 2.9% to $579.5 million.
- Subscriptions and long-term agreements represented approximately 67.2% of 2012 revenues, supporting recurring revenue visibility.
- Operating cash flow increased to $468.2 million in 2012 from $375.7 million in 2011.
- Total debt increased to $1,461.4 million at year end, with a leverage ratio of 2.11x, following the Argus and MediConnect acquisitions and new senior notes.
- Stockholders' equity moved to $255.6 million from a deficit of $98.5 million, and $144.2 million remained under the $900.0 million share repurchase program.
- Pending FCRA class action lawsuits against Intellicorp and iiX could carry material exposure, and the company says it cannot estimate the potential liability.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2012filed February 26, 2013Financial Statements
FY2012 against FY2011
| Line item | FY2012FY2011 | Change |
|---|---|---|
| Revenue | $1.41B$1.19B | +18.2% |
| R&D Expenses | $18.39M$15.39M | +19.4% |
| SG&A Expenses | $220.07M$199.50M | +10.3% |
| Operating Expenses | $835.62M$710.23M | +17.7% |
| Operating Income | $572.23M$481.16M | +18.9% |
| Interest Expense | $72.51M$53.85M | +34.7% |
| Net Income | $329.14M$282.76M | +16.4% |
| EPS (Basic) | $1.98$1.70 | +16.5% |
| EPS (Diluted) | $1.92$1.63 | +17.8% |
| Shares Outstanding (Basic) | 165.89M166.02M | −0.1% |
| Shares Outstanding (Diluted) | 171.71M173.33M | −0.9% |
05—Questions
Frequently Asked Questions
What drove Verisk's revenue growth in 2012?
Revenues grew $202.5 million, or 15.2%, to $1,534.3 million. Recent acquisitions (Bloodhound, HRP, MediConnect, ALP and Argus) contributed $105.1 million, and excluding them revenues increased $97.4 million, or 7.3%. Healthcare revenue within Decision Analytics rose 115.0%, mostly due to acquisitions.
How much debt does Verisk carry and how was it used?
Total debt was $1,461.4 million at December 31, 2012, up from $1,105.9 million a year earlier. The company says the debt was issued primarily to finance stock repurchases and acquisitions, including $350.0 million of 4.125% senior notes issued in September 2012. The leverage ratio was 2.11x at year end, and the company was in compliance with its debt covenants.
What litigation risks does the filing disclose?
The company is defending several putative class actions alleging violations of the Fair Credit Reporting Act, including suits involving Intellicorp Records and Insurance Information Exchange (iiX), as well as a Citizens Insurance matter involving Xactware, which was dismissed as to Xactware in November 2012. The filing states that it is not possible to determine the ultimate resolution of these matters or estimate the related liability.
Does Verisk pay dividends or buy back stock?
Verisk has not paid or declared cash dividends on its Class A common stock in the two most recent fiscal years and does not intend to pay dividends. It repurchased $162.6 million of stock in 2012 and had $144.2 million remaining under its $900.0 million Repurchase Program as of December 31, 2012.
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