VRSK

Verisk Analytics, Inc. (VRSK)

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Verisk Analytics (VRSK)

Q1 2014 Earnings Call

April 30, 2014 8:30 am ET

Executives

Eva F. Huston - Chief Knowledge Officer, Senior Vice President and Treasurer

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

Mark V. Anquillare - Chief Financial Officer, Principal Accounting Officer, Executive Vice President and Group Executive of Risk Assessment

Analysts

Suzanne E. Stein - Morgan Stanley, Research Division

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

Manav Patnaik - Barclays Capital, Research Division

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

Jeffrey P. Meuler - Robert W. Baird & Co. Incorporated, Research Division

William A. Warmington - Wells Fargo Securities, LLC, Research Division

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

Anjaneya Singh - Crédit Suisse AG, Research Division

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

Jeffrey Rossetti - Janney Montgomery Scott LLC, Research Division

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

Adrienne Colby - Deutsche Bank AG, Research Division

Rayna Kumar - Evercore Partners Inc., Research Division

Andre Benjamin - Goldman Sachs Group Inc., Research Division

Presentation

Operator

Good day, everyone, and welcome to the Verisk Analytics First Quarter 2014 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 Chief Knowledge Officer, Ms. Eva Huston. Ms. Huston, please go ahead.

Eva F. Huston

Thank you, Shirley. And good morning to everyone. We appreciate you joining us today for a discussion of our first quarter 2014 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.

All numbers we discuss today, unless stated otherwise, will reflect continuing operations and exclude the results from Interthinx, our mortgage services business which we sold in March. Interthinx is classified as discontinued operations in this quarter and previous periods. In our 10-Q filing, revenue is reported from continuing operations only, but EBITDA is shown including Interthinx and the related gain on sale, per the SEC requirement. In our press release, we report EBITDA from continuing operations to assist you in your analysis. As you will recall, last quarter, we included in the back of our press release a reconciliation of continuing operations to the total, as well as the quarterly detail for 2012 and 2013 excluding Interthinx.

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 29, 2014, on our website and by dial-in.

Finally, as set forth in more detail in yesterday's earnings release, I will remind everybody 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, everybody.

Our first quarter revenue growth was good, driven by very strong performance in our insurance units. Our innovation and analytic agenda is active in all of our verticals, and I'm very confident it will lead to new solutions for our customers and that these investments will deliver good returns over time. You can see some impacts of these investments in our margins this quarter, although our margins continue to place Verisk in an elite group of companies.

We consider our organic growth rate to be the single best measure of our vitality as an organization. Over the course of the last couple of years, we have improved our mix of assets and supported continued organic growth. In particular, we divested our mortgage services assets and acquired Argus, shifting our focus from the challenged mortgage market to the expanding global payments market. In addition, we have added health care assets that align with the fundamental trend toward improved efficiency in health care spend in both the government and private markets.

We remain focused on making sure our health care business delivers excellence. In February, we successfully concluded the Medicare Advantage review season. Ensuring we deliver the results our customers expected in the form of reimbursement from Medicare came with a cost to Verisk, which you see in the margins for the quarter. We did the right thing for our customers in the fourth and first quarters and believe our relationships with them are stronger for the effort. We continue to make progress in demand planning with our health care customers and we are reassured by these positive customer interactions, and continue to expect mid-teens revenue growth for the full year of 2014.

On the inorganic side, we remain excited about the opportunity to add EagleView Technologies, or EVT, to our existing solution sets. We are also active in evaluating additional opportunities to align with our strategic vision and focus on strong organic growth over time.

We continue to run the business with a long-term focus while remaining aware of the need to execute everyday. The data and analytic mindset informs our strategic thinking, as well as our approach to solving the immediate challenges our customers face. Our approach to managing the business is well aligned with our innovation agenda, as innovation works in long cycles. We will continue to invest prudently in order to drive both top line and free cash flow growth over time. Our twin goals of organic growth through innovation and operating with efficiency remain key focal points for the entire Verisk management team.

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