• Fourth-Quarter Revenue: $736 million, up 8.6% year-over-year.
• Income from Continuing Operations: $204 million, up 12% year-over-year.
• Diluted GAAP EPS from Continuing Operations: $1.44, up 15% year-over-year.
• Organic Constant Currency (OCC) Revenue Growth: 8.6% in Q4; 7.1% for full-year 2024.
• OCC Adjusted EBITDA Growth: 13.5% in Q4; 9.9% for full-year 2024.
• Adjusted EBITDA Margin: 54.1% in Q4; 54.7% for full-year 2024, up 120 basis points year-over-year.
• Subscription Revenue Growth: 11% on an OCC basis in Q4.
• Transactional Revenue Decline: 1.1% on an OCC basis in Q4.
• Free Cash Flow: $200 million in Q4; $920 million for full-year 2024, up 11% year-over-year.
• Capital Returned to Shareholders: $355 million in Q4 through repurchases and dividends; over $1 billion for full-year 2024.
• 2025 Revenue Guidance: $3.03 billion to $3.08 billion.
• 2025 Adjusted EBITDA Guidance: $1.67 billion to $1.72 billion.
• 2025 Adjusted EPS Guidance: $6.80 to $7.10.

• Warning! GuruFocus has detected 6 Warning Sign with VRSK.

Release Date: February 26, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Verisk Analytics Inc (NASDAQ:VRSK) reported strong fourth-quarter results with 11% subscription growth and solid margin expansion, leading to double-digit profit growth.
• The company achieved organic constant currency revenue growth of 8.6% in the fourth quarter, driven by sales momentum and storm-related transactional activity.
• For the full year 2024, Verisk delivered OCC revenue growth of 7.1%, OCC adjusted EBITDA growth of 9.9%, and 120 basis points of margin expansion, resulting in 16% EPS growth.
• Verisk's strategic initiatives, including enhancing go-to-market approaches and investing in innovation, have contributed to strong sales and client engagement.
• The company has introduced new products and modules, such as the Actuarial Hub and Future of Forms, which have been well-received by clients and are expected to drive further growth in 2025.

Negative Points

• Transactional revenues were down slightly in the quarter due to the ongoing conversion of transactional revenues into committed subscription contracts.
• The company experienced a modest headwind in the quarter's margin from foreign exchange translation.
• Net interest expense increased to $35 million due to higher interest expenses from the issuance of senior notes at a higher interest rate.
• The reported effective tax rate increased to 26% in the fourth quarter, reflecting the timing of certain discrete tax items.
• Verisk's guidance for 2025 includes potential challenges such as transactional revenue volatility and the impact of the divestiture of AER, which contributed $17 million in revenue in 2024.

Q & A Highlights

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.