Release Date: February 26, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q: How much pushback are you getting from customers on price realization, and how do you expect pricing to evolve in 2025? A: Lee Shavel, President and CEO, explained that Verisk has been successful in driving value-driven price increases by focusing on delivering more value and orienting sales efforts around this value. This approach has led to strong renewals and pricing realization, particularly in the Core Lines Reimagine and Extreme Events businesses. The company expects this value-driven pricing strategy to continue yielding results in 2025.
Q: How should we think about the conversion to subscription revenue in 2025 and beyond? A: Elizabeth Mann, CFO, noted that the conversion of transactional revenue to subscription packages has been a significant trend, particularly in the Anti-Fraud business. This conversion is expected to continue through the first half of 2025, providing a sustained tailwind for subscription revenue growth.
Q: Can you quantify the impact of storm activity on transactional revenue in the fourth quarter and expectations for 2025? A: Elizabeth Mann stated that while storm activity did not meet the threshold to quantify a specific revenue impact, it was similar to the impact from Hurricane Ian in 2022. The storms, Helene and Milton, occurred late in the third quarter and early in the fourth quarter, so they are not expected to significantly impact 2025 results. The company assumes a normalized level of storm activity for future projections.
Q: How does the shift towards the state being the insurer of choice in California impact Verisk's business? A: Lee Shavel highlighted that the recent wildfires in California underscore the need for increased pricing and risk-based models. Verisk was the first to submit a wildfire model for pricing in California, which should provide stability and rate adequacy. The company expects continued demand for its catastrophic risk modeling and analytics as the risk environment evolves.
Q: What are the expectations for pricing contribution to growth in 2025, given the strong premium growth in recent years? A: Elizabeth Mann explained that while 20% to 25% of Verisk's revenue is influenced by premium growth, the more critical factor is the value perception from clients. The company has been successful in delivering value, which is reflected in pricing conversations and is expected to continue contributing to growth in 2025.
Q: How should we think about transaction revenues in 2025, given the difficult comps and contract conversions? A: Elizabeth Mann noted that transaction revenues face tough comps due to contract conversions and the sale of AER, which was primarily transactional. The company expects some variability due to factors like auto activity and weather but remains focused on subscription growth.
Q: Can you provide more details on the extended duration of contract renewals and its benefits? A: Elizabeth Mann mentioned that while the extension of contract lengths is gradual, it provides greater predictability and reflects stronger strategic relationships with clients. Longer contracts indicate client confidence and a deeper embedding of Verisk's solutions in their operations.
Q: How did the marketing business perform in the fourth quarter, and what are the expectations for 2025? A: Elizabeth Mann stated that the insurance customer segment showed strong growth, with tailwinds expected to continue into 2025. However, the broader customer base remains more muted, reflecting the overall advertising and marketing environment.
Q: What are the expectations for CapEx and free cash flow growth in 2025? A: Elizabeth Mann explained that while CapEx was below guidance in 2024, some timing factors pushed investments into 2025. The company expects healthy organic investment and is confident in free cash flow growth, as indicated by the dividend increase.
Q: Can you estimate the impact of California wildfires on Verisk's business and discuss exposure to federal government-related revenues? A: Elizabeth Mann noted that while wildfires have an industry impact, they are geographically concentrated and do not significantly affect Verisk's financials. Lee Shavel added that federal government revenues are less than 1% of total revenues, with minimal direct exposure to tariffs or trade orders.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
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