01—Abstract
Summary
Summary of the 10-K filed February 21, 2017. Cited figures are marked; the original filing is the authoritative source.
Verisk Analytics, Inc. (VRSK) reported 2016 revenues of $1,995.2 milliona, up from $1,760.7 million in 2015, and net income of $591.2 million, compared with $507.6 million in 2015.
The company describes itself as a leading data analytics provider serving insurance, natural resources and financial services, with two segments: Risk Assessment ($724.3 millionb of 2016 revenue) and Decision Analytics ($1,270.9 million). Subscriptions and long-term agreements represented over 80% of 2016 revenues, and the company cites a five-year revenue CAGR of 13.9%. Growth was helped by acquisitions, most notably Wood Mackenzie, which contributed $151.0 million of 2016 revenue alongside other recent acquisitions.
Excluding recent acquisitions, revenue growth was $83.5 millionc, or 4.9%. The balance sheet shows total assets of $4,631.2 million, down from $5,593.7 million, after the June 2016 sale of the healthcare business, Verisk Health, for $714.6 million in cash plus a $100.0 million subordinated note. Total debt fell to $2,387.0 million from $3,145.7 million, and stockholders' equity was $1,332.4 million.
The company repurchased $326.8 milliond of stock in 2016 and had $636.0 million remaining under its repurchase authorization at year-end. Net cash from operating activities was $546.1 million, down from $623.7 million, mainly due to $99.9 million of additional income tax payments tied to the healthcare sale. The filing also discloses multiple pending class actions and patent litigation, including FCRA claims against Intellicorp Records, the Eagle View/Pictometry patent suit, and antitrust suits against ISO.
The company states it cannot currently estimate potential liability for the ongoing matters. Management also expects 2017 capital expenditures of approximately $160.0 million.
02—Key points
Key Highlights
- Revenues rose to $1,995.2 million in 2016 from $1,760.7 million in 2015; net income was $591.2 million versus $507.6 million.
- Decision Analytics revenue grew to $1,270.9 million (up $198.4 million, or 18.5%), with energy and specialized markets up 43.4% largely from Wood Mackenzie.
- Risk Assessment revenue reached $724.3 million, up 5.2%, driven by industry-standard insurance programs ($554.1 million).
- Sale of the Verisk Health healthcare business on June 1, 2016 for $714.6 million in cash produced a $265.9 million gain and reduced total debt to $2,387.0 million.
- Organic growth was modest: excluding recent acquisitions, revenue increased $83.5 million, or 4.9%.
- Share repurchases totaled $326.8 million in 2016, with $636.0 million remaining under the authorization after a $500.0 million increase announced December 8, 2016.
- Pending litigation includes FCRA class actions, the Eagle View/Pictometry patent suit, and antitrust claims against ISO; the company cannot estimate the potential liability.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2016, Verisk Analytics kept $0.30.
- Revenue$2.00B100.0%
- Cost of revenue−$714.4M35.8%
- Gross profit$1.28B64.2%
- Operating costs−$513.2M25.7%
- Operating income$767.6M38.5%
- Interest, other & tax−$176.4M8.8%
- Net income$591.2M29.6%
Where FY2016 revenue went
$2.00B- Cost of revenue: $714.4M, 36% of revenue
- Net income: $591.2M, 30% of revenue
- SG&A: $301.6M, 15% of revenue
- R&D: $27.4M, 1.4% of revenue
- Other operating costs: $184.2M, 9.2% of revenue
- Interest, other & tax: $176.4M, 8.8% of revenue
Kept 30% as net incomeR&D $27.4M · 1.4%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2016filed February 21, 2017Financial Statements
FY2016 against FY2015
| Line item | FY2016FY2015 | Change |
|---|---|---|
| Revenue | $2.00B$1.76B | +13.3% |
| Cost of Revenue | $714.40M— | — |
| Gross Profit | $1.28B— | — |
| R&D Expenses | $27.40M$20.60M | +33.0% |
| SG&A Expenses | $301.60M$278.30M | +8.4% |
| Operating Expenses | $1.23B$1.06B | +16.1% |
| Operating Income | $767.60M$703.40M | +9.1% |
| Interest Expense | $120.00M$121.40M | −1.2% |
| Net Income | $591.20M$507.60M | +16.5% |
| EPS (Basic) | $3.51$3.07 | +14.3% |
| EPS (Diluted) | $3.45$3.01 | +14.6% |
| Shares Outstanding (Basic) | 168.25M165.09M | +1.9% |
| Shares Outstanding (Diluted) | 171.17M168.45M | +1.6% |
05—Questions
Frequently Asked Questions
How much of Verisk's revenue is recurring?
Verisk states that annual subscriptions and long-term agreements, typically prepaid, represented over 80% of 2016 revenues. Transactional revenue was 16.5% of 2016 revenues, down from 17.2% in 2015.
What drove the increase in 2016 revenue?
Revenue rose $234.5 million, or 13.3%, to $1,995.2 million. Acquisitions contributed $151.0 million from Wood Mackenzie and other recent acquisitions. Excluding recent acquisitions, growth was $83.5 million, or 4.9%, led by insurance and financial services in Decision Analytics and price increases in Risk Assessment.
Why did net cash from operations decline in 2016?
Net cash provided by operating activities fell to $546.1 million from $623.7 million. The filing attributes the decrease mainly to $99.9 million of additional income tax payments related to the gain on the healthcare business sale and a one-time $18.8 million cash funding of the ESOP plan.
What is the company's debt position after the healthcare sale?
Total debt was $2,387.0 million at December 31, 2016, down from $3,145.7 million. Senior notes totaled $2,300.0 million in principal, and $100.0 million was outstanding under the Credit Facility. In January and February 2017, the company repaid $70.0 million of that balance. The company said it was in compliance with its debt covenants.
Does Verisk pay dividends, and how is it returning capital?
Verisk has not paid or declared cash dividends in the two most recent fiscal years and does not intend to pay them. It returns capital through share repurchases, which totaled $326.8 million in 2016, leaving $636.0 million available under the authorization as of December 31, 2016.
06—Continue