- Consolidated revenues were $713 million for the fourth quarter of 2020, up 5.4%, and up 3.5% on an organic constant currency (OCC) basis.
- Net income was $176 million for the fourth quarter of 2020, up 33.3%. Adjusted EBITDA, a non-GAAP measure, was $344 million, up 7.9%, and up 4.9% on an OCC basis.
- Diluted GAAP earnings per share (GAAP EPS) were $1.07 for the fourth quarter of 2020. Diluted adjusted earnings per share (adjusted EPS), a non-GAAP measure, were $1.27.
- Net cash provided by operating activities was $248.9 million for the fourth quarter of 2020, up 41.1%. Free cash flow, a non-GAAP measure, was $176.5 million, up 57.0%.
- We paid a cash dividend of 27 cents per share on December 31, 2020. Our Board of Directors has approved an increase in our cash dividend to 29 cents per share payable on March 31, 2021.
- We repurchased $50 million of our shares in the fourth quarter of 2020.
JERSEY CITY, N.J., February 23, 2021 — Verisk (Nasdaq:VRSK), a leading data analytics provider, today announced results for the fourth quarter and fiscal year ended December 31, 2020.
Scott Stephenson, chairman, president, and CEO, said, “Despite the broader economic challenges the pandemic continues to present, Verisk delivered another year of strong organic constant currency revenue and adjusted EBITDA growth in 2020. These results demonstrate the resiliency and stability of our business model, the valuable impact of our technology and insights to customers, and the commitment of our more than 9,000 Verisk teammates to support our customers through an unprecedented period of digital transformation. We continue to have strong conviction in our long-term growth strategy and our plans to create durable shareholder value.”
Lee Shavel, CFO and group president, said, “Verisk delivered organic constant currency revenue growth of 3.5% and organic constant currency adjusted EBITDA growth of 4.9% in the fourth quarter, led by continued strength in our insurance business. During the year we generated $821 million in free cash flow, allowing us to continue to invest in our high growth, high return on investment projects while also returning capital to shareholders through repurchases and our dividend. Our dividend increase of 7.4% underscores our confidence in the long-term growth of our business and our capital management discipline.
Consolidated revenues increased 5.4% for fourth-quarter 2020 and 3.5% on an OCC basis.
We have analyzed our solutions and services to assess the impact of COVID-19 on our revenue streams. We have not identified any material impact stemming from COVID-19 on approximately 85% of our revenues at this point, as much of these revenues are subscription-based and subject to long-term contracts. These revenues increased 6.5% on an OCC basis in the fourth quarter of 2020. Of the remaining 15%, we have identified specific solutions and services, largely transactional in nature, that are being negatively impacted by COVID-19. These revenues declined 12.5% on an OCC basis in fourth-quarter 2020 compared to the prior-year period.
Insurance segment revenues grew 8.5% in the fourth quarter of 2020 and 7.4% on an OCC basis.
- Underwriting & rating revenues increased 10.6% in the quarter and 6.8% on an OCC basis, resulting primarily from annual increases in prices derived from continued enhancements to the content of the solutions within our industry-standard insurance programs, as well as selling expanded solutions to existing customers in commercial and personal lines. In addition, catastrophe modeling services contributed to the growth. These increases were partially offset by a decrease in certain transactional revenues.
- Claims revenue grew 4.2% in the quarter and increased 8.8% on an OCC basis. Growth was primarily driven by repair cost estimating solutions revenue, claims analytics revenue, and workers compensation claims resolution services.
Energy and Specialized Markets segment revenue increased 3.5% in the quarter and declined 3.9% on an OCC basis. The Genscape acquisition, environmental health and safety service solutions and core research contributed to the growth. The decrease in the segment was primarily due to declines in consulting revenues in connection with the COVID-19 pandemic and declines in cost intelligence solutions' implementation projects that did not reoccur.
Financial Services segment revenue decreased 19.6% in the quarter and 13.0% on an OCC basis, primarily the result of lower levels of project spending from our bank customers stemming from the COVID-19 pandemic.
Net Income and Adjusted EBITDA
During fourth-quarter 2020, net income increased 33.3%. Adjusted EBITDA increased 7.9%, and 4.9% on an OCC basis.
Earnings Per Share
Diluted EPS increased 33.8% to $1.07 for the fourth quarter of 2020 primarily due to a decrease in acquisition-related costs (earn-outs) and a lower effective tax rate.
Diluted adjusted EPS grew 12.4% to $1.27 for the fourth quarter of 2020, reflecting cost discipline in the business, a reduction in travel expenses as a result of COVID-19, and a lower average share count.
Net cash provided by operating activities was $248.9 million for the fourth quarter of 2020, up 41.1%. Capital expenditures were $72.4 million for the fourth quarter of 2020, up 13.1%. Free cash flow was $176.5 million for the fourth quarter of 2020, up 57.0%, primarily due to an increase in collections, a reduction in income tax payments primarily due to an increase in deductible stock option exercises, the deferral of certain employer payroll taxes resulting from the CARES Act, and a reduction in travel payments as a result of COVID-19.
Free cash flow represented 51.3% of adjusted EBITDA for the fourth quarter of 2020, compared with 35.3% in the prior-year period.
On December 31, 2020, we paid a cash dividend of 27 cents per share of common stock issued and outstanding to the holders of record as of December 15, 2020.
On February 17, 2021, our Board of Directors approved a 7.4% increase in our cash dividend to 29 cents per share of common stock issued and outstanding, payable on March 31, 2021, to holders of record as of March 15, 2021.
We repurchased approximately 260 thousand shares through an accelerated share repurchase (ASR) program at an average price of $190.19, for a total cost of $50 million for the fourth quarter of 2020. We also entered into an additional $50 million ASR agreement; the associated shares will be delivered and settled in March 2021. At December 31, 2020, we had $279 million remaining under our share repurchase authorization. On February 16, 2021, our Board of Directors approved an additional authorization of $300 million.
Our management team will host a live audio webcast on Wednesday, February 24, 2021, at 8:30 a.m. EST (5:30 a.m. PST, 1:30 p.m. GMT) to discuss the financial results and business highlights. All interested parties are invited to listen to the live event via webcast on our investor website at http://investor.verisk.com. The discussion is also available through dial-in number 1-877-755-3792 for U.S./Canada participants or 1-512-961-6560 for international participants.
A replay of the webcast will be available for 30 days on our investor website and also through the conference call number 1-855-859-2056 for U.S./Canada participants or 1-404-537-3406 for international participants using conference ID #5731667.
We (Nasdaq:VRSK) provide predictive analytics and decision support solutions to customers in the insurance, energy and specialized markets, and financial services industries. More than 70 percent of the FORTUNE 100 uses our advanced technologies to manage risks, make better decisions and improve operating efficiency. Our analytic solutions address insurance underwriting and claims, fraud, regulatory compliance, natural resources, catastrophes, economic forecasting, geopolitical risks, as well as environmental, social, and governance (ESG) matters. Celebrating our 50th anniversary, we continue to make the world better, safer, and stronger, and foster an inclusive and diverse culture where all team members feel they belong. With more than 100 offices in nearly 35 countries, we consistently earn certification by Great Place to Work®. For more, please visit our website at http://verisk.com or follow our social media profiles on LinkedIn, Twitter, Facebook, and YouTube.
This release contains forward-looking statements. These statements relate to future events or to future financial performance and involve known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by these forward-looking statements. This includes, but is not limited to, our expectation and ability to pay a cash dividend on our common stock in the future, subject to the determination by our Board of Directors and based on an evaluation of our earnings, financial condition and requirements, business conditions, capital allocation determinations, and other factors, risks, and uncertainties. In some cases, you can identify forward-looking statements by the use of words such as “may,” “could,” “expect,” “intend,” “plan,” “target,” “seek,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” or “continue” or the negative of these terms or other comparable terminology. You should not place undue reliance on forward-looking statements, because they involve known and unknown risks, uncertainties, and other factors that are, in some cases, beyond our control and that could materially affect actual results, levels of activity, performance, or achievements.
Other factors that could materially affect actual results, levels of activity, performance, or achievements can be found in our quarterly reports on Form 10-Q, annual reports on Form 10-K, and current reports on Form 8-K filed with the Securities and Exchange Commission. If any of these risks or uncertainties materialize or if our underlying assumptions prove to be incorrect, actual results may vary significantly from what we projected. Any forward-looking statement in this release reflects our current views with respect to future events and is subject to these and other risks, uncertainties, and assumptions relating to our operations, results of operations, growth strategy, and liquidity. We assume no obligation to publicly update or revise these forward-looking statements for any reason, whether as a result of new information, future events, or otherwise.
Notes Regarding the Use of Non-GAAP Financial Measures
The company has provided certain non-GAAP financial information as supplemental information regarding its operating results. These measures are not in accordance with, or an alternative for, U.S. GAAP and may be different from non-GAAP measures reported by other companies. The company believes that its presentation of non-GAAP measures provides useful information to management and investors regarding certain financial and business trends relating to its financial condition and results of operations. In addition, the company’s management uses these measures for reviewing the financial results of the company, for budgeting and planning purposes, and for evaluating the performance of senior management.
EBITDA, Adjusted EBITDA, and Adjusted EBITDA Expenses: EBITDA represents GAAP net income adjusted for (i) depreciation and amortization of fixed assets; (ii) amortization of intangible assets; (iii) interest expense; and (iv) provision for income taxes. Adjusted EBITDA represents EBITDA adjusted for acquisition-related costs (earn-outs), gain/loss from dispositions (which include businesses held for sale), nonrecurring gain/loss, and interest income on the subordinated promissory note. Adjusted EBITDA expenses represent adjusted EBITDA net of revenues. The company believes these measures are useful and meaningful because they allow for greater transparency regarding the company’s operating performance and facilitate period-to-period comparison.
Adjusted Net Income and Diluted Adjusted EPS: Adjusted net income represents GAAP net income adjusted for (i) amortization of intangible assets, net of tax; (ii) acquisition-related costs (earn-outs), net of tax; (iii) gain/loss from dispositions (which include businesses held for sale), net of tax; (iv) nonrecurring gain/loss, net of tax; and (v) interest income on the subordinated promissory note, net of tax. Diluted adjusted EPS represents adjusted net income divided by weighted-average diluted shares. The company believes these measures are useful and meaningful because they allow evaluation of the after-tax profitability of the company’s results excluding the after-tax effect of acquisition-related costs and nonrecurring items.
Free Cash Flow: Free cash flow represents net cash provided by operating activities determined in accordance with GAAP minus payments for capital expenditures. The company believes free cash flow is an important measure of the recurring cash generated by the company’s operations that may be available to repay debt obligations, repurchase its stock, invest in future growth through new business development activities, or make acquisitions.
Organic Constant Currency (OCC): The company’s operating results, such as, but not limited to, revenue and adjusted EBITDA, reported in U.S. dollars are affected by foreign currency exchange rate fluctuations because the underlying foreign currencies in which it transacts change in value over time compared with the U.S. dollar; accordingly, it presents certain constant currency financial information to assess how the company performed excluding the impact of foreign currency exchange rate fluctuations. The company calculates constant currency by translating comparable prior-year-period results at the currency exchange rates used in the current period. The company defines “organic” as operating results excluding the effect of recent acquisitions and dispositions (which include businesses held for sale) that have occurred over the past year. An acquisition is included as organic at the beginning of the calendar quarter that occurs after the one-year anniversary of the acquisition date. Once an acquisition is included in its current-period organic base, its comparable prior-year-period operating results are also included to calculate organic growth. A disposition (which includes a business held for sale) is excluded from organic at the beginning of the calendar quarter in which the disposition occurs (or when a business meets the held-for-sale criteria under U.S. GAAP). Once a disposition is excluded from its current-period organic base, its comparable prior-year-period operating results are also excluded to calculate organic growth. The organic presentation enables investors to assess the growth of the business without the impact of recent acquisitions for which there is no prior-year comparison. A disposition’s results are removed from all prior periods presented to allow for comparability. The company believes organic constant currency is a useful and meaningful measure to enhance investors’ understanding of the continuing operating performance of its business and to facilitate the comparison of period-to-period performance because it excludes the impact of foreign exchange rate movements, acquisitions, and dispositions.
See page 10 for a reconciliation of consolidated adjusted EBITDA and a segment results summary and a reconciliation of adjusted EBITDA. See page 11 for a reconciliation of segment adjusted EBITDA margin, a reconciliation of adjusted EBITDA expenses, and a reconciliation of diluted adjusted EPS. See page 12 for a reconciliation of net cash provided by operating activities to free cash flow.
Attached Financial Statements
Please refer to the full Form 10-Q filing for the complete financial statements and related notes.