Verisk Analytics Inc

Previous wording

We earn revenues through agreements for hosted subscriptions, advisory/consulting services, and for transactional solutions, recurring and non-recurring. Subscriptions for our solutions are generally paid in advance of rendering services either quarterly or in full upon commencement of the subscription period, which is usually for one year and automatically renewed each year. As a result, the timing of our cash flows generally precedes our recognition of revenues and income and our cash flow from operations tends to be higher in the first quarter as we receive subscription payments. Examples of these arrangements include subscriptions that allow our customers to access our standardized coverage language, our claims fraud database, or our actuarial services throughout the subscription period. In general, we experience minimal revenue seasonality within the busi ness. For thethree months ended March 31, 2024 and 2023, approximately 80% of our insurance revenues were derived from hosted subscriptions through agreements (generally one to five years) for our solutions.

Current wording

We earn revenues through agreements for hosted subscriptions, advisory/consulting services, and for transactional solutions, recurring and non-recurring. Subscriptions for our solutions are generally paid in advance of rendering services either quarterly or in full upon commencement of the subscription period, which is usually for one year and automatically renewed each year. As a result, the timing of our cash flows generally precedes our recognition of revenues and income and our cash flow from operations tends to be higher in the first quarter as we receive subscription payments. Examples of these arrangements include subscriptions that allow our customers to access our standardized coverage language, our claims fraud database, or our actuarial services throughout the subscription period. In general, we experience minimal revenue seasonality within the busi ness. For thesix months ended June 30, 2024 and 2023, approximately 81% and 80% of our insurance revenues were derived from hosted subscriptions through agreements (generally one to five years) for our solutions, respectively.

Previous wording

We also provide advisory/consulting services, which help our customers get more value out of our analytics and their subscriptions. In addition, certain of our solutions are paid for by our customers on a transactional basis, recurring and non-recurring. For example, we have solutions that allow our customers to access property-specific rating and underwriting information to price a policy on a commercial building, or compare a P&C insurance or a workers' compensation claim with information in our databases, or use our repair cost estimation solutions on a case-by-case basis. For thethree months ended March 31, 2024 and 2023, approximately 20% of our insurance revenues were derived from providing transactional and advisory/consulting solutions.

Current wording

We also provide advisory/consulting services, which help our customers get more value out of our analytics and their subscriptions. In addition, certain of our solutions are paid for by our customers on a transactional basis, recurring and non-recurring. For example, we have solutions that allow our customers to access property-specific rating and underwriting information to price a policy on a commercial building, or compare a P&C insurance or a workers' compensation claim with information in our databases, or use our repair cost estimation solutions on a case-by-case basis. For thesix months ended June 30, 2024 and 2023, approximately 19% and 20% of our insurance revenues were derived from providing transactional and advisory/consulting solutions, respectively.

Previous wording

Personnel expenses are the major component of both our cost of revenues and selling, general and administrative expenses. Personnel expenses, which represented approximately 58% and 62% of our total operating expenses (excluding gains/losses related to dispositions) for thethree months ended March 31, 2024 and 2023, respectively, include salaries, benefits, incentive compensation, equity compensation costs, sales commissions, employment taxes, recruiting costs, and outsourced temporary agency costs.

Current wording

Personnel expenses are the major component of both our cost of revenues and selling, general and administrative expenses. Personnel expenses, which represented approximately 58% and 61% of our total operating expenses (excluding gains/losses related to dispositions) for thesix months ended June 30, 2024 and 2023, respectively, include salaries, benefits, incentive compensation, equity compensation costs, sales commissions, employment taxes, recruiting costs, and outsourced temporary agency costs.

Previous wording

Revenuesfor our Insurance segment were $704.0 million for the three months ended March 31, 2024, compared to $651.6 million for the three months ended March 31, 2023, a n** **increase o f $52.4 million or 8.0%. Our underwriting revenue increased $37.9 million or 8.2%. Our claims revenue increased $14.5 million or 7.6%.

Current wording

Revenuesfor our Insurance segment were $716.8 million for the three months ended June 30, 2024, compared to $675.0 million for the three months ended June 30, 2023, a n** **increase o f $41.8 million or 6.2%. Our underwriting revenue increased $29.4 million or 6.2%. Our claims revenue increased $12.4 million or 6.3%.

Previous wording

Our recent acquisitions (Morning Data within the underwriting category of our Insurance segment; Mavera, Krug and Rocket within the claims category of the Insurance segment) contributed net revenues of $5.8 million, while the remaining Insurance revenues increased$46.6 million or 7.2%. Our underwriting revenue increased $37.3 million or 8.1%, primarily due to an annual increase in prices derived from continued enhancements to the models and content of the solutions within our forms, rules and loss cost services, as well as selling expanded solutions to new and existing customers within underwriting data solutions and extreme event solutions. In addition, life insurance and specialty business solutions contributed to the growth, and were partially offset by continued weakness within our Verisk Marketing Solutions. Our claims revenue increased $9.3 million or 4.9%, primarily due to solid growth in anti-fraud solutions and international revenues, partially offset by lower transactional activity in property estimating solutions and casualty solutions.

Current wording

Our recent acquisitions (Morning Data within the underwriting category of our Insurance segment; Krug and Rocket within the claims category of the Insurance segment) contributed net revenues of $1.6 million, while the remaining Insurance revenues increased$40.2 million or 6.0%. Our underwriting revenue increased $29.1 million or 6.1%, primarily due to an annual increase in prices derived from continued enhancements to the models and content of the solutions within our forms, rules and loss cost services, as well as selling expanded solutions to new and existing customers within extreme event solutions. In addition, specialty business and life solutions contributed to the growth. Our claims revenue increased $11.1 million or 5.7%, primarily due to solid growth in anti-fraud solutions and property estimating solutions.

Previous wording

Cost of revenues was $227.8 million for thethree months ended March 31, 2024 compared to$216.2 million for thethree months ended March 31, 2023, anincreaseof$11.6 million or 5.4%. Our recent acquisitions accounted for anincrease of $5.0 million in cost of revenues. The remaining increase related to Insurance of $6.6 million or 3.1% was primarily due toincreasein salaries and employee benefits of $4.9 million, professional consulting fees of $2.0 million, bad debt expense of $1.3 million, andi nformation technology expenses of $0.7 million, partially offset by a reduction in travel expenses of $1.0 million, data costs of $0.5 million, and other operating costs of $0.8 million.

Current wording

Cost of revenues was $219.4 million for thethree months ended June 30, 2024 compared to$216.9 million for thethree months ended June 30, 2023, anincreaseof$2.5 million or 1.2%. Our recent acquisitions accounted for anincrease of $1.6 million in cost of revenues. The remaining increase of $0.9 million or 0.4% was primarily due toincreasein salaries and employee benefits of $3.1 million, bad debt expense of $1.0 million, information technology expenses of $0.8 million, and travel expenses of $0.5 million, partially offset by a reduction in rent expense of $1.8 million, professional consulting fees of $1.7 million, data costs of $0.5 million, and other operating costs of $0.5 million.

Previous wording

Selling, general and administrative expenses were $92.9 million for thethree months ended March 31, 2024 compared to$79.0 million for thethree months ended March 31, 2023, anincreaseof$13.9 million or 17.6%. Our recent acquisitions, inclusive of our acquisition-related costs (earn-outs) accounted for an increase of $14.5 million in selling, general, and administrative expenses. This increase was primarily due to our earn-out credit of $15.0 million in the prior year and $0.0 in the current period. The remaining decrease of $0.6 million or 0.6% was primarily due to decreases in professional fees of $1.8 million, and other operating costs of $1.4 million, partially offset by increases in salaries and employee benefits of $2.4 million, and travel expenses of $0.2 million.

Current wording

Selling, general and administrative expenses were$101.5 million for thethree months ended June 30, 2024 compared to$86.8 million for thethree months ended June 30, 2023, an increaseof$14.7 million or 16.9%. Our recent acquisitions, inclusive of our acquisition-related costs (earn-outs) accounted for an increase of $7.0 million in selling, general, and administrative expenses. This increase was primarily due to our earn-out credit of $7.0 million in the prior year that did not recur in the current period. The remaining increase of $7.7 million or 8.2% was primarily due to increases in professional fees of $3.8 million, salaries and employee benefits of $3.7 million, andi nformation technology expenses of $0.9 million, partially offset by a decrease in other operating costs of $0.7 million.

Previous wording

Depreciation and amortization of fixed assets were$57.4 million for thethree months ended March 31, 2024 compared to $44.6 millionfor thethree months ended March 31, 2023, anincrease of$12.8 million or 28.7%. Theincreasewas primarily driven by assets being placed into service to support revenue growth and data capacity expansion. The increase in assets placed into service primarily resulted from the timing of certain large internally developed software projects that were completed and placed into service during 2023.

Current wording

Depreciation and amortization of fixed assets were$59.0 million for thethree months ended June 30, 2024 compared to $46.5 millionfor thethree months ended June 30, 2023, anincrease of$12.5 million or 26.9%. The increase was due to assets placed into service primarily resulted from the timing of certain large internally developed software projects that were completed and placed into service.

Previous wording

Amortization of intangible assets was$18.5 million for thethree months ended March 31, 2024 compared to$17.7 millionfor thethree months ended March 31, 2023, anincrease of$0.8 million or 4.5%. Theincrease was primarily due to theamortization of intangible assets related to our recent acquisitions.

Current wording

Amortization of intangible assets was$18.2 million for thethree months ended June 30, 2024 compared to$18.8 millionfor thethree months ended June 30, 2023, adecrease of$0.6 million or 3.2%. The decrease was primarily due tointangible assets that were fully amortized of $0.8 million, partially offset by the amortization of intangible assets related to our recent acquisitions of $0.2 million.

Previous wording

Interest expense, net was$28.9 million for thethree months ended March 31, 2024 compared to $26.4 million for thethree months ended March 31, 2023, anincrease of$2.5 million or 9.5%. Theincrease in net interest expensewas primarily due to lower interest income for the three months ended March 31, 2024.

Current wording

Interest expense, net was$29.1 million for thethree months ended June 30, 2024 compared to $31.6 million for thethree months ended June 30, 2023, adecrease of$2.5 million or 7.9%. The decrease in net interest expensewas primarily due to higher interest income earned on cash in the current quarter, partially offset by interest expense related to the issuance of our 2025 Senior Notes.

Previous wording

The provision for income taxes was $55.8 million for thethree months ended March 31, 2024, compared to$72.2 million for thethree months ended March 31, 2023, adecrease of $16.4 million or 22.7%. The effective tax rate was 20.3% for thethree months ended March 31, 2024 compared to 27.1% for thethree months ended March 31, 2023. The effective tax rate for thethree months ended March 31, 2024 waslower than the effective tax rate for thethree months ended March 31, 2023 primarily due to tax charges incurred in structuring the sale of our Energy business in the prior year. The difference between statutory tax rates and our effective tax rate is primarily due to state and local taxes, partially offset by tax benefits attributable to equity compensation.

Current wording

The provision for income taxes was$85.2 million for thethree months ended June 30, 2024, compared to$63.9 million for thethree months ended June 30, 2023, an increase of$21.3 million or 33.3%. The effective tax rate was 21.7% for thethree months ended June 30, 2024 compared to 23.8% for thethree months ended June 30, 2023. The effective tax rate for thethree months ended June 30, 2024 waslower than the effective tax rate for thethree months ended June 30, 2023 primarily due to additional tax benefits resulting from the Company's recognition of capital gains arising from the settlement of our investment in non-public companies in the current period. The difference between statutory tax rates and our effective tax rate is primarily due to state and local taxes, partially offset by tax benefits attributable to equity compensation.

Previous wording

The net income margin from continuing operations was 31.2% for thethree months ended March 31, 2024 compared to 8.7% for thethree months ended March 31, 2023. The net income margin for March 31, 2023 included a loss from discontinued operations of $138.0 million, which negatively impacted our net income margin by 21.1%. Excluding discontinued operations, the increase** **in net income margin was primarily driven by revenue growth and cost discipline as well as a decrease in our effective tax rate discussed above.

Current wording

The net income margin was 42.9% for thethree months ended June 30, 2024 compared to 29.2% for thethree months ended June 30, 2023. The increase in net income margin was primarily driven bynet gains associated with the settlement of retained interests related to the prior sales of our healthcare business in 2016 and our specialized markets business in 2022, and the early extinguishment of debt, discussed above. The net income margin for June 30, 2023 included a loss from discontinued operations of $7.5 million, which negatively impacted our net income margin by 1.1%.

Previous wording

EBITDA was$380.0 million for the three months ended March 31, 2024 compared to $355.3 million for the three months ended March 31, 2023. The EBITDA margin for our consolidated results was 54.0% for the three months ended March 31, 2024 compared to 54.5% for the three months ended March 31, 2023.

Current wording

EBITDA was $499.3 million for thethree months ended June 30, 2024 compared to $365.1 million for thethree months ended June 30, 2023. The EBITDA margin for our consolidated results was 69.7% for thethree months ended June 30, 2024 compared to 54.1% for thethree months ended June 30, 2023.

Previous wording

As of March 31, 2024 and December 31, 2023, we had cash and cash equivalents and available-for-sale securities totaling $353.5 million and $303.9 million, respectively. We maintain our cash and cash equivalents in higher credit quality financial institutions in order to limit the amount of credit exposure. As of March 31, 2024 and December 31, 2023, a vast majority of our domestic cash and cash equivalents is with TD Bank, N.A., and JPMorgan Chase N.A. Subscriptions for our solutions are billed and generally paid in advance of rendering services either quarterly or in full upon commencement of the subscription period, which is usually for one year. Subscriptions are automatically renewed at the beginning of each calendar year. We have historically generated significant cash flows from operations. As a result of this factor, as well as the availability of funds under our Credit Facility, we expect that we will have sufficient cash to meet our working capital and capital expenditure needs and to fuel our future growth plans.

Current wording

As of June 30, 2024 and December 31, 2023, we had cash and cash equivalents and available-for-sale securities totaling $633.3 million and $303.9 million, respectively. We maintain our cash and cash equivalents in higher credit quality financial institutions in order to limit the amount of credit exposure. As of June 30, 2024 and December 31, 2023, a vast majority of our domestic cash and cash equivalents is with TD Bank, N.A., and JPMorgan Chase N.A. Subscriptions for our solutions are billed and generally paid in advance of rendering services either quarterly or in full upon commencement of the subscription period, which is usually for one year. Subscriptions are automatically renewed at the beginning of each calendar year. We have historically generated significant cash flows from operations. As a result of this factor, as well as the availability of funds under our Credit Facility, we expect that we will have sufficient cash to meet our working capital and capital expenditure needs and to fuel our future growth plans.

Previous wording

We have also historically used a portion of our cash for repurchases of our common stock from our stockholders. During thethree months ended March 31, 2024 and 2023, we repurchased $200.0 million (inclusive of $30.0 million in treasury stock not yet settled) and $2,500.0 million (inclusive of $500.0 million in treasury stock not yet settled), respectively, of our common stock. The repurchase of our common stock in the first quarter of 2024 was funded using cash from operations. For thethree months ended March 31, 2024 and 2023, we also paid dividends of $55.8 million and $49.2 million, respectively.

Current wording

We have also historically used a portion of our cash for repurchases of our common stock from our stockholders. During thesix months ended June 30, 2024 and 2023, we repurchased$350.0 million (inclusive of$22.5 million in treasury stock not yet settled) and$2,500.0 million (inclusive of$500.0 million in treasury stock not yet settled), respectively, of our common stock. The repurchase of our common stock in the second quarter of 2024 was funded using cash from operations. For thesix months ended June 30, 2024 and 2023, we also paid dividends of$111.3 million and$98.7 million, respectively.

Previous wording

We had total debt, excluding finance lease liabilities, unamortized discounts and premium, and debt issuance costs of $2,850.0 million at March 31, 2024 and December 31, 2023, and we were in compliance with our financial and other covenants. The debt at March 31, 2024 primarily consists of senior notes issued in 2023, 2020, 2019, and 2015. Interest on the senior notes is payable semi-annually each year. The unamortized discount and debt issuance costs were recorded as "Long-term debt" in the accompanying consolidated balance sheets, and will be amortized to "Interest expense" in the accompanying consolidated statements of operations within this Form 10-Q over the life of the respective senior note. The indenture governing the senior notes restricts our ability to, among other things, create certain liens, enter into sale/leaseback transactions, and consolidate with, sell, lease, convey, or otherwise transfer all or substantially all of our assets, or merge with or into, any other person or entity. We have made, and may from time to time in the future make, optional repayments on our debt obligations, which may include repurchases or exchanges of our outstanding notes, depending on various factors, such as market conditions. Any such repurchases may be effected through privately negotiated transactions, market transactions, tender offers, redemptions or otherwise. See Note 10. for additional information on our financing activities.

Current wording

We had total debt, excluding finance lease liabilities, unamortized discounts and premium, and debt issuance costs of $3,050.0 million and $2,850.0 million at June 30, 2024 and December 31, 2023, respectively, and we were in compliance with our financial and other covenants. The debt at June 30, 2024 primarily consists of senior notes issued in 2024, 2023, 2020, 2019, and 2015. Interest on the senior notes is payable semi-annually each year. The unamortized discount and debt issuance costs were recorded as "Long-term debt" in the accompanying consolidated balance sheets, and will be amortized to "Interest expense" in the accompanying consolidated statements of operations within this Form 10-Q over the life of the respective senior note. The indenture governing the senior notes restricts our ability to, among other things, create certain liens, enter into sale/leaseback transactions, and consolidate with, sell, lease, convey, or otherwise transfer all or substantially all of our assets, or merge with or into, any other person or entity. We have made, and may from time to time in the future make, optional repayments on our debt obligations, which may include repurchases or exchanges of our outstanding notes, depending on various factors, such as market conditions. Any such repurchases may be effected through privately negotiated transactions, market transactions, tender offers, redemptions or otherwise. See Note 10. for additional information on our financing activities.

Previous wording

We have a $1,000 million Syndicated Revolving Credit Facility with Bank of America N.A., HSBC Bank USA, N.A., JP Morgan Chase Bank, N.A., Wells Fargo Bank, National Association, Citibank, N.A., Morgan Stanley Bank, N.A., TD Bank, N.A., Goldman Sachs Bank USA, and the Northern Trust Company with a maturity date of April 5, 2028. Borrowing under the facility is payable at an interest rate of SOFR plus 100.0 to 162.5 basis points, depending on the public debt rating. The financial covenants require that, at the end of any fiscal quarter, we have a consolidated funded debt leverage ratio of less than 3.75 to 1.0*.* At our election, the maximum consolidated funded debt leverage ratio could be permitted to increase to 4.50 to 1.0 (no more than once) and to 4.25 to 1.0 (no more than once) in connection with the closing of a permitted acquisition. The Syndicated Credit Facility may be used for general corporate purposes, including working capital needs and capital expenditures, acquisitions, dividend payments, and the Repurchase Program. As of March 31, 2023, we were in compliance with all financial and other debt covenants under the Syndicated Credit Facility. As of March 31, 2024 and December 31, 2023, the available capacity under the Syndicated Revolving Credit Facility was $995.4 million, which takes into account outstanding letters of credit of $4.6 million.

Current wording

We have a $1,000.0 million Syndicated Revolving Credit Facility with Bank of America N.A., HSBC Bank USA, N.A., JP Morgan Chase Bank, N.A., Wells Fargo Bank, N.A., Citibank, N.A., Morgan Stanley Bank, N.A., TD Bank, N.A., Goldman Sachs Bank USA, and the Northern Trust Company with a maturity date of April 5, 2028. Borrowing under the facility is payable at an interest rate of SOFR plus 100.0 to 162.5 basis points, depending on the public debt rating. The financial covenants require that, at the end of any fiscal quarter, we have a consolidated funded debt leverage ratio of less than 3.75 to 1.0*.* At our election, the maximum consolidated funded debt leverage ratio could be permitted to increase to 4.50 to 1.0 (no more than once) and to 4.25 to 1.0 (no more than once) in connection with the closing of a permitted acquisition. The Syndicated Credit Facility may be used for general corporate purposes, including working capital needs and capital expenditures, acquisitions, dividend payments, and the Repurchase Program. As of June 30, 2023, we were in compliance with all financial and other debt covenants under the Syndicated Credit Facility. As of June 30, 2024 and December 31, 2023, the available capacity under the Syndicated Revolving Credit Facility was $995.5 million and $995.4 million, which takes into account outstanding letters of credit of $4.5 million and $4.6 million.

Previous wording

Net cash provided by operating activities was$372.2 million for thethree months ended March 31, 2024, compared to $365.3 for thethree months ended March 31, 2023, an increase of $6.9 million or 1.9%. The increase in operating cash flow was due to an increase in operating profit, partially offset by a $37.0 million payment to settle the inquiry by the DOJ.

Current wording

Net cash provided by operating activities was$592.4 million for thesix months ended June 30, 2024, compared to$558.2 million for thesix months ended June 30, 2023, an increase of $34.2 million or 6.1%. The increase in operating cash flow was due to an increase in operating profit, partially offset by a $37.0 million payment to settle the inquiry by the Department of Justice.

Previous wording

Net cash used in investing activities of $79.9 million for the three months ended March 31, 2024 wasprimarily related to capital expenditures of$55.2 million, acquisitions and a purchase of an additional controlling interest of $25.9 million, and investments in nonpublic companies of $1.3 million. Net cash provided by investing activities of$2,967.1 million for the three months ended March 31, 2023 wasprimarily related to proceeds from the sale of our Energy business of $3,066.4 million, partially offset by capital expenditures of $61.2 million,acquisitions and a purchase of an additional controlling interest of $37.2 million, and investments in nonpublic companies of $0.8 million.

Current wording

Net cash used in investing activities of $23.8 million for thesix months ended June 30, 2024 wasprimarily related to capital expenditures of$113.0 million, and acquisitions and a purchase of an additional controlling interest totaling $23.4 million, partially offset by proceeds received upon settlement of ourretained interests related to the prior sales of our healthcare business in 2016 and our specialized markets business in 2022 of $112.1 million. Net cash provided by investing activities of$2,858.8 million for thesix months ended June 30, 2023 was primarily related to proceeds from the sale of our Energy business of $3,066.4 million, partially offset by capital expenditures of $119.4 million, and acquisitions and a purchase of an additional controlling interest totaling $83.3 million.

Previous wording

Net cash used in financing activities of$242.5 million for the three months ended March 31, 2024 was primarily driven by the funding of a $200.0 million accelerated share repurchase program, and dividends paid of $55.8 million, partially offset by proceeds from stock options exercised of $28.2 million. Net cash used in financing activities of$3,405.0 million for the three months ended March 31, 2023 was primarily driven by the funding of a $2,500.0 million accelerated share repurchase program, repayments of debt under our revolving credit and bilateral credit facilities of $1,390.0 million, and dividend payments of $49.2 million, partially offset by the proceeds from the issuance of our 2033 Senior Notes of $495.2 million, and proceeds from stock options exercised of $58.4 million.

Current wording

Net cash used in financing activities of$236.9 million for thesix months ended June 30, 2024 was primarily driven by the payment on the early extinguishment of debt of $396.4 million, the funding of $350.0 million of accelerated share repurchase programs, and dividends paid of $111.3 million, partially offset by proceeds from the issuance of long-term debt, net of original discount, of $590.2 million, andproceeds from stock options exercised of$63.2 million. Net cash used in financing activities of$3,401.8 million for thesix months ended June 30, 2023 was primarily driven by the funding of a $2,500.0 million accelerated share repurchase program, repayments of debt under our revolving credit and bilateral credit facilities of $1,390.0 million, and dividend payments of $98.7 million, partially offset by the proceeds from the issuance of our 2033 Senior Notes of $495.2 million, and proceeds from stock options exercised of $114.9 million.