Verisk(VRSK) - 2025 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q3 2025, consolidated revenue was $768 million, reflecting a 5.9% increase year-over-year, driven by growth in both underwriting and claims [18] - Net income rose to $226 million, a 2.5% increase compared to the previous year, with diluted GAAP earnings per share at $1.61, up 5% [19] - Organic constant currency (OCC) revenue growth was 5.5%, with adjusted EBITDA growth of 8.8% and an expanded EBITDA margin of 55.8% [7][26] Business Line Data and Key Metrics Changes - Subscription revenues, which account for 84% of total revenue, grew 8.7% on an OCC basis, compounding on the previous year's 9.1% growth [21] - Transactional revenues, making up 16% of total revenues, declined 8.8% on an OCC basis, primarily due to lower transactional volumes in property estimating solutions from historically low weather activity [23][24] Market Data and Key Metrics Changes - Weather events in Q3 2025 declined 18% year-over-year and were 31% below the five-year average, marking the lowest level of storm events in the U.S. since 2017 [24] - The company noted that 2025 is on track to be the first year since 2015 without a named U.S. hurricane making landfall so far [24] Company Strategy and Development Direction - The company is committed to investing in AI enhancements and integrations to deliver value to clients, with a focus on strategic engagement leading to increased pipeline opportunities [9][10] - The AccuLynx acquisition is still viewed as strategically and financially beneficial, despite delays in FTC approval [17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to deliver results in line with long-term targets, despite temporary factors impacting growth [20] - The company anticipates that the strategic engagement initiatives and product innovations, including AI, will enhance the value of their data and expand growth opportunities [16] Other Important Information - The company paid a cash dividend of $0.45 per share, a 15% increase from the prior year, and repurchased $100 million of common stock [30] - Adjusted net income increased 1% to $241 million, with diluted adjusted EPS rising 3% to $1.72 for the quarter [29] Q&A Session Summary Question: Update on AccuLynx deal and ServiceTitan partnership - Management confirmed ongoing collaboration with the FTC regarding the AccuLynx deal and clarified that ServiceTitan is not the main competitor of AccuLynx [36] Question: Competitive landscape regarding AI startups - Management acknowledged the presence of AI startups but emphasized the company's strong position due to proprietary data and industry expertise [39] Question: Future pricing opportunities amid decelerating net written premiums - Management highlighted the potential for upsell revenue through AI enhancements and integration of data sets into clients' strategies [44] Question: Impact of auto underwriting market dynamics - Management noted that the auto underwriting business is not directly linked to premium growth and emphasized the strategic benefits of their Lightspeed product [50] Question: Clarification on guidance reduction due to AccuLynx deal - Management did not break down the guidance changes but indicated that the overall impact was a combination of factors including weather and the AccuLynx deal [55] Question: Cash flow and free cash flow growth - Management reported strong free cash flow growth driven by improved collections and lower cash taxes, with expectations for continued growth [65] Question: Competitive pressure in the auto market - Management reiterated ongoing competitive pressures in the auto market but emphasized efforts to differentiate their products [69] Question: Industry premium growth expectations - Management indicated that the industry is expected to normalize to mid-single digits in 2025 after experiencing high single-digit growth in 2024 [73][76]