01—Abstract
Summary
Summary of the 10-K filed February 19, 2019. Cited figures are marked; the original filing is the authoritative source.
Verisk Analytics, Inc. (VRSK) reported full-year 2018 revenues of $2,395.1 milliona, up from $2,145.2 million in 2017, an increase of $249.9 million or 11.6%.
Net income was $598.7 millionb, compared with $555.1 million in 2017, and diluted EPS was $3.56 versus $3.29. Operating income rose to $834.1 million from $801.2 million. Excluding recent acquisitions, revenue grew 6.5%.
The company describes its business as a data analytics provider serving insurance (71% of 2018 revenue), energy and specialized markets (22%), and financial services (7%). Over 80% of revenues came from annual subscriptions or long-term agreements that are typically prepaid. Cash flow strengthened, with net cash provided by operating activities of $934.4 millionc, up from $743.5 million.
Capital expenditures were $231.0 milliond, and the company repurchased $438.6 million of common stock during 2018. Total debt declined to $2,723.3 million from $3,008.8 million, and stockholders' equity rose to $2,070.6 million. EBITDA was $1,145.5 million, a 47.8% consolidated margin.
In January 2019 the company repaid $250.0 million of 4.875% senior notes, and its board declared a $0.25 per share cash dividend on February 13, 2019. The filing also highlights ongoing risks, including the dependence of about 47% of revenue on U.S. P&C primary insurers, exposure to Wood Mackenzie's energy-sector demand and pound sterling, and pending litigation including the Eagle View/Pictometry patent case and the 360Value antitrust suit, for which the company states it cannot estimate the outcome.
02—Key points
Key Highlights
- Revenue of $2,395.1 million for 2018, up 11.6% from $2,145.2 million; 6.5% growth excluding recent acquisitions
- Net income of $598.7 million and diluted EPS of $3.56, compared with $555.1 million and $3.29 in 2017
- Operating cash flow of $934.4 million, up from $743.5 million, with capital expenditures of $231.0 million
- Insurance segment generated 71% of 2018 revenue at $1,705.9 million; Energy and Specialized Markets contributed $513.3 million and Financial Services $175.9 million
- Total debt reduced to $2,723.3 million from $3,008.8 million; $250.0 million of senior notes repaid in January 2019
- Share repurchases of $438.6 million in 2018; $427.6 million remained available under the repurchase program at year-end
- Pending litigation includes the Eagle View/Pictometry patent case and the 360Value antitrust suit, with outcomes not reasonably estimable per the filing
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2018, Verisk Analytics kept $0.25.
- Revenue$2.40B100.0%
- Cost of revenue−$886.2M37.0%
- Gross profit$1.51B63.0%
- Operating costs−$674.8M28.2%
- Operating income$834.1M34.8%
- Interest, other & tax−$235.4M9.8%
- Net income$598.7M25.0%
Where FY2018 revenue went
$2.40B- Cost of revenue: $886.2M, 37% of revenue
- Net income: $598.7M, 25% of revenue
- SG&A: $378.7M, 16% of revenue
- R&D: $45.1M, 1.9% of revenue
- Other operating costs: $251.0M, 10% of revenue
- Interest, other & tax: $235.4M, 9.8% of revenue
Kept 25% as net incomeR&D $45.1M · 1.9%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2018filed February 19, 2019Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $2.40B$2.15B | +11.6% |
| Cost of Revenue | $886.20M$783.80M | +13.1% |
| Gross Profit | $1.51B$1.36B | +10.8% |
| R&D Expenses | $45.10M$37.40M | +20.6% |
| SG&A Expenses | $378.70M$322.80M | +17.3% |
| Operating Expenses | $1.56B$1.34B | +16.1% |
| Operating Income | $834.10M$801.20M | +4.1% |
| Interest Expense | $129.70M$119.40M | +8.6% |
| Net Income | $598.70M$555.10M | +7.9% |
| EPS (Basic) | $3.63$3.36 | +8.0% |
| EPS (Diluted) | $3.56$3.29 | +8.2% |
| Shares Outstanding (Basic) | 164.81M165.17M | −0.2% |
| Shares Outstanding (Diluted) | 168.30M168.69M | −0.2% |
05—Questions
Frequently Asked Questions
How did Verisk's revenue and profitability trend in 2018?
Revenues rose to $2,395.1 million from $2,145.2 million, and net income increased to $598.7 million from $555.1 million. Operating income was $834.1 million, up from $801.2 million. The company attributed much of the growth to its Insurance segment, which grew 10.0% to $1,705.9 million.
What share of revenue depends on the U.S. property and casualty insurance market?
The filing states that approximately 47% of 2018 revenue was derived from solutions provided to U.S. P&C primary insurers. The company warns that a downturn in that industry or lower acceptance of its solutions could reduce revenues.
How is Verisk's revenue generated and how predictable is it?
The company offers solutions primarily through annual subscriptions or long-term agreements, which are typically prepaid and represented over 80% of 2018 revenues. Subscriptions are generally billed in advance and renew automatically each year, while about 20% of revenue came from transactional and advisory/consulting solutions.
What did Verisk do with its cash and capital in 2018?
The company spent $231.0 million on capital expenditures and $153.1 million on acquisitions, including escrow funding, and repurchased $438.6 million of stock. It also repaid $300.0 million of net borrowings under its Credit Facility and declared a $0.25 per share dividend in February 2019.
What key legal matters does the filing disclose?
The filing describes the Eagle View and Pictometry patent suit against Xactware and Verisk, in which several summary judgment motions were denied, and the Sheahan v. State Farm putative class action alleging that the 360Value product was used to under-insure homes. For both, the company states that it is not reasonably possible to determine the ultimate resolution or estimate the liability.
06—Continue