VRSK

Verisk Analytics, Inc. (VRSK)

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Verisk Analytics (VRSK)

Q1 2013 Earnings Call

May 01, 2013 8:30 am ET

Executives

Eva F. Huston - Senior Vice President, Head of Corporate Finance, Head of Investor Relations and Treasurer

Scott G. Stephenson - Chief Executive Officer and President

Mark V. Anquillare - Chief Financial Officer, Principal Accounting Officer and Executive Vice President

Analysts

Manav Patnaik - Barclays Capital, Research Division

Timothy McHugh - William Blair & Company L.L.C., Research Division

Andrew W. Jeffrey - SunTrust Robinson Humphrey, Inc., Research Division

Andrew C. Steinerman - JP Morgan Chase & Co, Research Division

Suzanne E. Stein - Morgan Stanley, Research Division

Eric J. Boyer - Wells Fargo Securities, LLC, Research Division

William Clark - Keefe, Bruyette, & Woods, Inc., Research Division

Presentation

Operator

Good day, everyone, and welcome to the Verisk Analytics First Quarter 2013 Earnings Results Conference Call. This call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to Verisk's Senior Vice President, Treasurer and Head of Investor Relations, Ms. Eva Huston. Ms. Huston, please go ahead.

Eva F. Huston

Thank you, Christie. And good morning to everyone. We appreciate you joining us today for a discussion of our first quarter 2013 financial results. With me on the call this morning are Scott Stephenson, President and Chief Executive Officer; and Mark Anquillare, Chief Financial Officer. Following comments by Scott and Mark highlighting some key points about our strategic priorities and financial performance, we will open the call up for your questions.

The earnings release referenced on this call, as well as the associated 10-Q, can be found in the Investors section of our website, verisk.com. The earnings release has also been attached to an 8-K that we have furnished to the SEC. A replay of this call will be available for 30 days, until May 30, 2013, on our website and by dial-in.

Finally, as set forth in more detail in today's earnings release, I will remind everyone that today's call may include forward-looking statements about Verisk's future performance. Actual performance could differ materially from what is suggested by our comments today. Information about the factors that could affect future performance is summarized at the end of our press release as well as contained in our recent SEC filings. Now I will turn the call over to Scott Stephenson.

Scott G. Stephenson

Thank you, Eva, and good morning to everyone. In the first quarter of 2013, we delivered strong overall performance, with total revenue growth of over 16% and diluted adjusted EPS growth of about 13%. Our consolidated organic revenue growth in the first quarter was 6.8%. Our organic revenue growth was 9.5% in the first quarter, excluding our mortgage analytics business, which continues to face some macro challenges, as we've discussed with you before. Profitability was strong, with an EBITDA margin of over 44% in the quarter, even while we continued to invest in innovation, as we signaled to you last quarter. Our free cash flow growth, adjusted for the timing of a tax benefit that Mark will describe later, was also strong, increasing over 14% in the quarter.

We remain disciplined in our use of capital and we're focused on delivering shareholder returns. We returned capital to our shareholders through repurchases in this quarter of about $22 million. We remain active and disciplined in looking at M&A. We focus on assets with a genuine strategic fit, a strong financial model and an appropriate valuation in relation to future growth prospects. Last year, as you know, we spent about $800 million on acquisitions, principally for MediConnect and Argus, and we remain very pleased with last year's acquisitions, both from a strategic as well as a performance perspective.

With those high-level results as background, let me just say I'm pleased to continue speaking with you about our strategy, as I've done since our IPO in 2009, but now from the CEO's seat. We will build on the strong platform developed and led for over a decade by Frank Coyne, who I'm delighted to say, remains with us as the Chairman of our board. These are exciting times for Verisk and our over 6,000 employees who have the task, every day, of creating value for our customers, and as a result, for our shareholders. I hope that a lot of you were able to attend or listen to our Investor Day presentations in March, where we shared with you the deep industry expertise and the innovative solutions that we deliver daily.

As we've done for many years on our journey, we will continue to emphasize 4 things: first, looking for proprietary data sets and analytic methods; second, developing scalable industry-standard solutions; third, repurposing our intellectual property assets for enhanced value for both existing as well as new customers; and fourth, thinking with what we called the N+1 mindset.

We continue to focus on investment opportunities and we're encouraged -- encouraging our teams to bring more forward. As we've discussed, we are funding a number of initiatives in 2013 and we plan to continue to do so into the future. Our list of investment initiatives in 2013 is very exciting and includes: remote imagery; Touchstone, which is our next-generation platform for catastrophe modeling; the unified health care platform and health care data aggregation; and supply chain innovations. Combining the power of analytics with the creativity of all of our team members, we intend to build on the strong financial results we delivered this quarter. The ongoing experience, knowledge and dedication of our employees across our enterprise positions us well for the rest of 2013.

Read the rest of this transcript for free on seekingalpha.com