Verisk Analytics, Inc. Q4 FY2024 earnings call

• Enhanced go-to-market approach: Aligned sales territories and account teams, implemented new sales force compensation plans, introduced product integration, and pricing optimization strategies. For example, in Extreme Events business, new client-centric approach drove strong value-based price realization and extended contract renewals.
• Elevated client engagement: Enhanced and deepened engagement across industry-wide and C-suite level, gaining deeper insights into client needs, strengthening relationships, and creating new opportunities. For instance, anti-fraud business expanded to serve state insurance departments using core platforms and analytic tools.
• Investment in innovation: Core Lines Reimagine project introduced new features like Actuarial Hub and Future of Forms. In Extreme Events, sustained investment in models, e.g., update to California wildfire model. Also, Verisk Augmented Underwriting combines data and expertise for seamless solutions. Ecosystem expansion in property estimating and anti-fraud businesses with new partners.
• Support during California wildfires: Equipped claims adjusters with tools and had survey teams on the ground to incorporate wildfire impact into models.

In the fourth quarter, organic constant currency (OCC) revenues grew 8.6%. Underwriting OCC revenues grew 7% and Claims OCC revenues grew 12.7%. Subscription revenues, which comprised 82% of total revenue in the quarter, grew 11% on an OCC basis during the fourth quarter. Transactional revenue declined 1.1% on an OCC basis in the fourth quarter due to conversion to subscription and attrition, but was partially offset by storm-related volume. For full year 2024, OCC revenue growth was 7.1%, OCC adjusted EBITDA growth was 9.9%, and adjusted EBITDA margin was 54.7%, up 120 basis points year-over-year.

• Consolidated revenue expected to be in the range of $3.03 billion to $3.08 billion, translating to OCC revenue growth of 6% to 8%.
• Adjusted EBITDA expected to be in the range of $1.67 billion to $1.72 billion, with adjusted EBITDA margin in the range of 55% to 55.8%.
• Adjusted earnings per share expected to be in the range of $6.80 to $7.10.
• CapEx expected to be between $245 million and $265 million.
• Board approved 15% increase to dividend and $1 billion share repurchase authorization.

• Foreign currency translation can impact quarterly results though minimal on full year.
• Potential customer attrition, especially in auto insurtech segment.
• Economic environment, interest rates, and regulatory changes can influence performance.
• Transactional revenue subject to variability from storm activity and contract conversions.

Q: Toni Kaplan with Morgan Stanley asked about price realization, pushback from customers, and pace of elevated pricing in 2025.

A: Lee Shavel responded that value-driven price increases are due to focusing on delivering more value and communicating value orientation, with examples like Core Lines Reimagine investments and Extreme Events business showing stronger value perception.

Q: Brendan Popson with Barclays asked about conversions to subscription and runway for 2025.

A: Elizabeth Mann said a specific contract conversion impact persists through first quarter of next year and longer-term subscription growth continues as customers see value and commit to longer-term contracts.

Q: Keen Fai Tong with Goldman Sachs asked about transaction revenue benefit from storms and 2025 expectations.

A: Elizabeth Mann said storm impact on transaction revenue was similar to Hurricane Ian in 2022, and storms in 2024 (Helene and Milton) had minimal impact on 2025, with transactional revenue having tough comps in 2025 including auto and anti-fraud conversions.

Q: Surinder Thind with Jefferies asked about state of insurance in California and impact on business.

A: Lee Shavel said California wildfires highlight need for risk and pricing, California now allows forward-looking models, and Verisk was first to submit wildfire model, with carriers evaluating risk-based pricing and continued demand for catastrophic modeling expertise.

Q: Kelsey Zhu with Autonomous Research asked about pricing contribution to growth in 2025.

A: Elizabeth Mann said 20%-25% of revenue comes from contracts with premium growth input, but more important is clients' perception of value provided by Verisk.

Q: Faiza Alwy with Deutsche Bank asked about transaction revenues, tough comps in 2025, and storm impact.

A: Elizabeth Mann said storm impact on transaction revenue is primarily transactional, with tough comps on transactional side including auto activity and sale of AER, and seasonality affecting transactional growth.

Q: Andrew Steinerman with JPMorgan asked about share buyback, interest expense step-up, and D&A step-up in 2025.

A: Elizabeth Mann said guide assumes share buyback, interest expense reflects higher debt and rates, and D&A step-up is due to investment in projects and CapEx.

Q: Alex Kramm with UBS asked about revenue guidance range, swing factors, and subscription growth.

A: Elizabeth Mann said transactional volumes and potential customer attrition are swing factors, with new products and traction being upside factors, and Lee Shavel added broader factors like weather, regulatory, and economic environment influence but Verisk has strong momentum.

Q: Ashish Sabadra with RBC Capital Markets asked about M&A opportunities.

A: Lee Shavel said pipeline for M&A remains unchanged, values are high, and opening ecosystem creates opportunities to understand how new businesses fit within broader business.

Q: David Motemaden with Evercore ISI asked about Core Lines Reimagine modules and price realizations in 2025.

A: Saurabh Khemka mentioned enhanced insights from proprietary databases and digital delivery of content, and Elizabeth Mann added pricing benefit from new modules is gradual and sustained for large customers on multiyear contracts.

Q: Jeff Meuler with Baird asked about subscription growth exit rate in 2025.

A: Elizabeth Mann said subscription strength is across businesses, with contract conversions and easier comps in fourth quarter, and dynamics show strong momentum.

Q: Russell Quelch with Redburn Atlantic asked about CapEx and free cash flow growth.

A: Elizabeth Mann said CapEx timing factors pushed some into 2025, with organic investment in OpEx too, and dividend increase reflects confidence in free cash flow growth.

Q: Jeff Silber with BMO Capital Markets asked about California wildfire impact and federal government revenues.

A: Elizabeth Mann said California wildfire impact on business is hard to quantify and geographically concentrated, and Lee Shavel said federal government revenues are less than 1% of total, with no direct exposure to tariffs or trade executive orders currently.