Verisk(US:VRSK)2022-11-01 20:16PART I — FINANCIAL INFORMATION This section presents the unaudited financial information for the company Item 1. Financial Statements (unaudited) This section presents Verisk Analytics, Inc.'s unaudited condensed consolidated financial statements for the periods ending September 30, 2022 Condensed Consolidated Balance Sheets Total assets decreased to $6,974.6 million as of September 30, 2022, primarily due to reduced goodwill and intangible assets, while stockholders' equity declined due to share repurchases Condensed Consolidated Balance Sheet Highlights (in millions) | | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Total Assets | $6,974.6 | $7,808.1 | | Cash and cash equivalents | $276.8 | $280.3 | | Goodwill | $3,655.6 | $4,331.2 | | Intangible assets, net | $1,090.5 | $1,225.9 | | Total Liabilities | $4,968.6 | $4,965.6 | | Long-term debt | $2,343.7 | $2,342.8 | | Total Stockholders' Equity | $2,006.0 | $2,842.5 | Condensed Consolidated Statements of Operations Q3 2022 revenues slightly decreased to $745.3 million, while nine-month revenues increased to $2,267.1 million, with net income significantly boosted by disposition gains Q3 and Nine Months 2022 vs 2021 Performance (in millions, except per share data) | Metric | Q3 2022 | Q3 2021 | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $745.3 | $759.0 | $2,267.1 | $2,232.6 | | Operating Income | $276.6 | $288.9 | $1,188.3 | $806.7 | | Net Income Attributable to Verisk | $189.4 | $201.7 | $892.8 | $524.3 | | Diluted EPS | $1.20 | $1.24 | $5.59 | $3.21 | Condensed Consolidated Statements of Cash Flows Net cash from operating activities decreased to $810.0 million for the nine months ended September 30, 2022, while investing activities saw a net inflow from asset sales, and financing outflows increased due to share repurchases Nine Months Ended September 30, Cash Flow Summary (in millions) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $810.0 | $967.1 | | Net cash (used in) provided by investing activities | $383.2 | $(261.2) | | Net cash used in financing activities | $(1,160.8) | $(617.1) | | Net (decrease) increase in cash | $(3.5) | $83.3 | Notes to Condensed Consolidated Financial Statements Notes detail accounting policies, significant dispositions and acquisitions, segment reporting, share repurchases, debt structure, legal contingencies, and the subsequent agreement to sell the Energy business - In 2022, the company sold its environmental health and safety business for $575.0 million (net) and its Financial Services segment for $498.3 million (net) These transactions did not qualify as discontinued operations4748 - Key acquisitions in 2022 included Opta Information Intelligence Corp. for $217.5 million and Infutor Data Solutions, LLC for $220.7 million, both integrated into the Insurance segment4041 - On October 28, 2022, the company entered into an agreement to sell its Energy business to Veritas Capital for up to $3.3 billion, with the transaction expected to close in Q1 2023107 - The company is involved in several legal proceedings, including ERISA litigation regarding 401(k) plan fees, a DOJ inquiry related to the former Financial Services segment, and data privacy class action lawsuits The company cannot reasonably estimate potential liability for these matters100101103 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, strategic dispositions, and segment results, noting a Q3 2022 revenue decrease to $745.3 million and a nine-month revenue increase, with significant share repurchases and debt management - The company has strategically shifted its focus by selling its environmental health and safety business and its Financial Services segment in 2022111 Consolidated Revenue and EBITDA Performance (in millions) | Metric | Q3 2022 | Q3 2021 | % Change | Nine Months 2022 | Nine Months 2021 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Revenues | $745.3 | $759.0 | (1.8)% | $2,267.1 | $2,232.6 | 1.5% | | EBITDA | $368.0 | $378.7 | (2.8)% | $1,467.8 | $1,095.0 | 34.0% | - Excluding the net impact of acquisitions and dispositions, consolidated revenue grew 3.2% in Q3 2022 and 4.1% in the first nine months of 2022130144 - During the nine months ended September 30, 2022, the company repurchased $1,196.3 million of its common stock and paid dividends of $147.2 million182 Results of Operations by Segment The Insurance segment achieved 9.4% revenue growth in Q3 2022, while the Energy and Specialized Markets segment declined 18.5% due to dispositions and Russian operations suspension Insurance Segment Revenue - Q3 2022 vs Q3 2021 (in millions) | Category | Q3 2022 | Q3 2021 | % Change | % Change (ex-acquisitions) | | :--- | :--- | :--- | :--- | :--- | | Underwriting & rating | $436.2 | $390.5 | 11.7% | 5.5% | | Claims | $173.9 | $167.4 | 3.9% | 1.7% | | Total Insurance | $610.1 | $557.9 | 9.4% | 4.4% | - Energy and Specialized Markets revenue decreased by $30.7 million (18.5%) in Q3 2022, with dispositions accounting for a net decrease of $28.8 million The remaining decrease was due to the suspension of Russian operations and lower consulting revenue169 Liquidity and Capital Resources The company held $280.6 million in cash with $3.42 billion total debt as of September 30, 2022, maintaining a $1.0 billion credit facility, while operating cash flow decreased to $810.0 million - The company had total debt of $3.42 billion as of September 30, 2022183 - As of September 30, 2022, available capacity under the $1.0 billion Credit Facility was $55.2 million Subsequently, capacity was increased to $420.2 million through repayments and securing additional capacity185 - Net cash from operating activities decreased 16.2% to $810.0 million for the nine months ended Sep 30, 2022, primarily due to a $119.7 million increase in tax payments and the impact of business dispositions190 Item 3. Quantitative and Qualitative Disclosures About Market Risk Market risks as of September 30, 2022, have not materially changed from those disclosed in the 2021 Annual Report on Form 10-K - There have been no material changes in market risks since the company's 2021 Annual Report on Form 10-K198 Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of September 30, 2022, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that as of September 30, 2022, the company's disclosure controls and procedures were effective at a reasonable assurance level200 - No material changes to internal control over financial reporting occurred during the third quarter of 2022201 PART II — OTHER INFORMATION This section provides other information not included in the financial statements Item 1. Legal Proceedings This section refers to Note 16 of the condensed consolidated financial statements for a detailed description of significant legal proceedings - For a description of significant legal proceedings, the report refers to Note 16 in Part I, Item 1 of the financial statements203 Item 1A. Risk Factors This section refers to the Risk Factors section of the 2021 Annual Report on Form 10-K for a discussion of risks - The report refers to the Risk Factors section of the previously filed 2021 Annual Report on Form 10-K for a discussion of risks204 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities, repurchasing 1,603,586 shares for $300.0 million in Q3 2022, with $407.5 million remaining for future repurchases Issuer Purchases of Equity Securities (Q3 2022) | Period | Total Shares Purchased | Average Price Paid per Share | Total Value (millions) | | :--- | :--- | :--- | :--- | | Jul 1 - Jul 31, 2022 | 1,386,562 | $173.09 | - | | Aug 1 - Aug 31, 2022 | — | — | - | | Sep 1 - Sep 30, 2022 | 217,024 | $187.08 | - | | Total | 1,603,586 | $187.08 | $300.0 | - As of September 30, 2022, $407.5 million was available for share repurchases under the authorized program206 Item 5. Other Information No other material information required to be disclosed under this item for the period - None209