01—Abstract
Summary
Summary of the 10-K filed February 20, 2018. Cited figures are marked; the original filing is the authoritative source.
Verisk Analytics, Inc. (NASDAQ: VRSK) reported 2017 revenues of $2,145.2 milliona, up from $1,995.2 million in 2016, and net income of $555.1 million, compared with $591.2 million in 2016 (which included discontinued operations).
Continuing-operations income was $555.1 millionb versus $451.5 million in 2016. Growth was driven by both organic gains and acquisitions: excluding recent acquisitions, revenue grew $88.7 million or 4.5%. The company operates two segments, Decision Analytics (revenues of $1,374.9 million) and Risk Assessment ($770.3 million).
EBITDA was $1,047.8 millionc in 2017 versus $1,251.3 million in 2016, a decline that the filing attributes largely to the 2016 gain on the sale of the healthcare business, Verisk Health. Cash generation strengthened, with net cash from operating activities of $743.5 million versus $577.5 million in 2016. The company spent $914.9 million on acquisitions in 2017, including PowerAdvocate, Sequel, G2 and LCI.
Total debt rose to $3,008.8 milliond from $2,387.0 million, and the 2017 Tax Act reduced the effective tax rate to 19.7% from 30.9%. Management's 2018 capital expenditure estimate is approximately $230.0 million. The filing also flags risks including reliance on external data sources, cybersecurity and privacy exposure, dependence on U.S. P&C insurers (48.9% of 2017 revenue), acquisition integration, Brexit and currency exposure tied to Wood Mackenzie, and ongoing antitrust class actions related to insurer claims payment practices, for which the company cannot estimate a range of loss.
02—Key points
Key Highlights
- Revenue of $2,145.2 million for 2017, up 7.5% from $1,995.2 million in 2016; the five-year revenue CAGR is 12.8%.
- Net income of $555.1 million in 2017 versus $591.2 million in 2016, which included discontinued operations and the healthcare business gain.
- Decision Analytics revenue rose 8.2% to $1,374.9 million, led by insurance (up 12.1%); Risk Assessment revenue rose 6.4% to $770.3 million.
- EBITDA of $1,047.8 million in 2017 versus $1,251.3 million in 2016; the filing links the decline to the 2016 healthcare business sale gain.
- Operating cash flow increased to $743.5 million from $577.5 million, driven by higher customer receipts.
- Total debt rose to $3,008.8 million from $2,387.0 million, mainly to fund $914.9 million of 2017 acquisitions; $366.2 million remained under the repurchase authorization.
- Over 80% of 2017 revenue came from annual subscriptions or long-term agreements, which are typically prepaid.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2017, Verisk Analytics kept $0.26.
- Revenue$2.15B100.0%
- Cost of revenue−$783.8M36.5%
- Gross profit$1.36B63.5%
- Operating costs−$560.2M26.1%
- Operating income$801.2M37.3%
- Interest, other & tax−$246.1M11.5%
- Net income$555.1M25.9%
Where FY2017 revenue went
$2.15B- Cost of revenue: $783.8M, 37% of revenue
- Net income: $555.1M, 26% of revenue
- SG&A: $322.8M, 15% of revenue
- R&D: $37.4M, 1.7% of revenue
- Other operating costs: $200.0M, 9.3% of revenue
- Interest, other & tax: $246.1M, 11% of revenue
Kept 26% as net incomeR&D $37.4M · 1.7%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2017filed February 20, 2018Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $2.15B$2.00B | +7.5% |
| Cost of Revenue | $783.80M$714.40M | +9.7% |
| Gross Profit | $1.36B$1.28B | +6.3% |
| R&D Expenses | $37.40M$27.40M | +36.5% |
| SG&A Expenses | $322.80M$301.60M | +7.0% |
| Operating Expenses | $1.34B$1.23B | +9.5% |
| Operating Income | $801.20M$767.60M | +4.4% |
| Interest Expense | $119.40M$120.00M | −0.5% |
| Net Income | $555.10M$591.20M | −6.1% |
| EPS (Basic) | $3.36$3.51 | −4.3% |
| EPS (Diluted) | $3.29$3.45 | −4.6% |
| Shares Outstanding (Basic) | 165.17M168.25M | −1.8% |
| Shares Outstanding (Diluted) | 168.69M171.17M | −1.5% |
05—Questions
Frequently Asked Questions
How did Verisk perform financially in 2017?
Revenue grew 7.5% to $2,145.2 million, and income from continuing operations rose to $555.1 million from $451.5 million. Excluding recent acquisitions, revenue grew $88.7 million, or 4.5%.
Why did EBITDA decline in 2017?
EBITDA fell to $1,047.8 million from $1,251.3 million. The 2016 figure included discontinued operations from the sale of the healthcare business, which contributed 10.0% to the 2016 EBITDA margin.
How much debt does Verisk carry and how is it used?
Total debt was $3,008.8 million at December 31, 2017, up from $2,387.0 million. The increase reflects borrowings under the credit facility used to fund acquisitions, and the company was in compliance with its financial covenants.
Does Verisk pay dividends?
No. The company did not pay or declare cash dividends in the two most recent fiscal years and does not currently intend to pay them. It instead repurchased $276.3 million of stock in 2017.
What are the main risks flagged in the filing?
Key risks include dependence on external data sources, cybersecurity and privacy breaches, reliance on U.S. P&C insurers (48.9% of 2017 revenue), acquisition integration, Brexit and sterling exposure from Wood Mackenzie, and antitrust class actions for which no loss range can be estimated.
06—Continue