Verisk Analytics, Inc. (VRSK)

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Verisk Analytics (VRSK)

Q2 2013 Earnings Call

July 31, 2013 8:30 am ET


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

Scott G. Stephenson - Chief Executive Officer, President and Director

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


Manav Patnaik - Barclays Capital, Research Division

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

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

Rayna Kumar - Evercore Partners Inc., Research Division

Suzanne E. Stein - Morgan Stanley, Research Division

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

Paul Ginocchio - Deutsche Bank AG, Research Division

Jeffrey M. Silber - BMO Capital Markets U.S.

James E. Friedman - Susquehanna Financial Group, LLLP, Research Division



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

Eva F. Huston

Thank you, April, and good morning to everyone. We appreciate you joining us today for a discussion of our second 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 up the call 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 August 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 the performance is summarized at the end of our press release, as well as contained in our recent SEC filings.

And now, I will turn the call over to Scott Stephenson.

Scott G. Stephenson

Thank you, Eva, and good morning, everyone. We have a lot of exciting initiatives underway, and we are energetically pursuing our data analytic agenda.

Before I get to the future, I'd like to talk a little bit about our results in the quarter, with which I'm pleased. In second quarter 2013, we delivered strong overall performance with total revenue growth of approximately 13% and diluted adjusted EPS growth of 17%.

Our consolidated organic revenue growth in the second quarter was approximately 8%. Organic revenue growth was 9.5% in the quarter, excluding our mortgage analytics business with its macro challenges.

Profitability was strong, with an EBITDA margin of over 44% in the quarter even while we continue to invest in innovations as discussed previously.

Year-to-date free cash flow growth, adjusted for last year's voluntary pension payment and the timing of a tax benefit in the first quarter of this year, was about 8% as we continue to generate strong operating cash flow, while we also elected to invest some of it into capital expenditures related to our investment initiatives.

We are focused on delivering value to our shareholders, and we remain disciplined in our use of capital. We also remain active in looking at M&A. There have been a few sizable assets on the market recently, which you no doubt are aware of, but none of these met our criteria. So we declined to pursue them. We continue to focus on assets with a strategic fit, a strong financial model and an appropriate valuation in relation to future growth prospects.

In the quarter, we returned capital to our shareholders through repurchases of $116 million. We also refreshed our buyback authorization in the quarter by $300 million. We will continue to use our authorization consistent with our capital allocation strategy, as we've previously outlined.

As we look to the future, we need to continue to be thought leaders in analytics. As we've discussed, we are making significant investments in certain areas this year, including Touchstone, which is our catastrophe modeling platform; the unified platform in healthcare; aerial imagery; and supply chain analytics. All of these are going well and are in various stages of development and rollout.

The first 2, Touchstone and the unified platform, are active with our clients. We're getting a great response on Touchstone, and we're seeing incremental value in our contracts with customers who have moved to the new platform. The unified platform in healthcare is also leading us to better results for customers and payment accuracy, where we have completed that phase of implementation.

Aerial imagery is a wonderful initiative. It involves gathering images, but much more importantly, using those images to generate data that can be analyzed via computer vision. Initial customer feedback from pilots and evaluations have been very positive. And we're very excited about the imagery initiative, and we may choose to pull some of the intended 2014 investment forward into the second half of 2013 and the 2015 investments into next year.

In addition, the supply chain platform is progressing well with very good conversations with customers on the functionality, as they're looking for it. We also are putting a lot of energy in deleveraging the value of our data and analytics across our enterprise. Everyday, we're discovering new ways in which different parts of our organization can collaborate for the benefit of our customers.

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