Verisk Analytics, Inc. · NASDAQ:VRSK
Verisk Analytics — Raymond James & Associates 37th Annual Institutional Investors Conference (March 2016)
32 slides from Verisk Analytics's conference presentation, Mar 8, 2016
Slide 1: Verisk Analytics
Verisk Analytics Mark Anquillare, Chief Financial Officer
Slide 2: Forward Looking Statements, Safe Harbor & Non-GAAP Financial Measures
Forward Looking Statements, Safe Harbor & Non-GAAP Financial Measures Forward-Looking Statements This presentation contains forward-looking statements. These statements relate to future events or to future financial performance and involve known and unknown risks, uncertainties, and other factors th
Slide 3: History of Growth and Innovation
History of Growth and Innovation 1971–1997 1998–2001 2002–2009 2010–2014 2015 & Beyond Expansion Founding Culture + Innovation The Verisk Way Change Inflection • Not-for-profit • Drive to operational • Focus on • Add new • Aspire to be the service bureau efficiency and innovation, product acquisitio
Slide 4: How Do We Achieve Leading End-Market Positions?
How Do We Achieve Leading End-Market Positions? The Four Distinctives in The Verisk Way Unique Deep Domain First-Mover Embedded in Data Assets Expertise Advantage Customer Workflows Multiple Thick Verticals, Enabled Thematically Focused Financial Supply • Pricing and Underwriting Insurance Healthcar
Slide 5: Vertical Big Data
Vertical Big Data 19B 17.9 billion records in commercial and personal lines • Over 1,800 insurers provide data 1 in 3 Verisk Health's technology solutions presently impact 1 in 3 American lives • Almost 3 billion records submitted each year 35 35 years of VIN auto information 4.5M+ More than 4.5 mil
Slide 6: Global Platform
Global Platform Edinburgh Guildford Minneapolis Bath London Moscow Ontario Copenhagen Quebec Munich Astana Beijing Calgary Boston Seoul San Francisco Vienna New York Nepal Tokyo Fleet Salt Lake City Hong Kong Jersey City Tel Aviv Carlsbad Annapolis Kuala Lumpur Columbia Dubai Singapore Chicago Houst
Slide 7: Attractive Business Model
Attractive Business Model • Recurring revenue stream and high barriers to entry − 75% of total revenue is subscription and long-term contracts − Extremely high customer retention − Majority of revenue is prepaid quarterly or annually − Long-standing and deep relationships with our customers − Deeply
Slide 8: The Verisk Formula
The Verisk Formula Steadily Growing Increasing Financial Newly Acquired Businesses Powered Capacity Businesses at by Innovation, with Reasonable Prices Expanding Margins with Similar and Low Capital Characteristics Intensity Stronger and Larger Company 8
Slide 9: The Verisk Formula (continued)
The Verisk Formula (continued) We can continue to drive Balanced strong organic growth expectations • Stay close to for M&A spend our distinctives • Moderate levels of transactions and services • Innovate effectively • Globalize effectively • Expand channels Strong balance sheet Return capital to •
Slide 10: Discipline and Execution
Discipline and Execution 1. Discipline 2. Execution • Drive operating leverage and scale • Hear the voice of the customer in existing businesses • Commit to quality and continuous • Embrace innovation and investment improvement • Strategic fit • Focus on timeliness, accuracy, • Long-term economic re
Slide 11: Verisk Strength Built on P&C foundation
Verisk Strength Built on P&C foundation • Unique data sets, enhanced over time, have enabled growth into more decision processes at our customers − Since 1971, our P&C business has served as the industry standard − Leveraging long-standing relationships with innovation and new solutions has enabled
Slide 12: Insurance: Industry-Leading Analytics Solutions
Insurance: Industry-Leading Analytics Solutions Primary Risk Assessment Competitive Advantage Competitors Industry-Standard Extensive time-series data and coverage language Internal in >200M policies Insurance Programs Comprehensive database of 3.6M commercial Property Information buildings & rating
Slide 13: Wood Mackenzie: An Overview
Wood Mackenzie: An Overview What do we do? How do we win? How have we What will drive future grown? growth? Provide leading Differentiated Strong financial Large and diverse commercial value proposition record addressable market intelligence to built on proprietary the global information, Subscripti
Slide 14: We have developed unrivaled breadth and depth in our assets coverage
We have developed unrivaled breadth and depth in our assets coverage Upstream Data • 30,000 oil & gas fields (assets) Valuation • 52,000 blocks • 5,500+ commercial upstream • 55+ million data points valuations Plus… • 1,300+ technical upstream • 500+ exploration basins valuations • 200 unconventiona
Slide 15: Competitors operate across all of Wood Mackenzie's commercial information market
Competitors operate across all of Wood Mackenzie’s commercial information market; we aim to be the leader in each vertical Energy Metals & Mining Chemicals Front-runners/ Established Established New entrants leaders global regional 15
Slide 16: Healthcare: Addressing Our Clients' Challenges
Healthcare: Addressing Our Clients’ Challenges Increasingly Complex Greater Need for Cost Shift to Value-Based Regulatory Environment Containment Healthcare Our Solutions Revenue Payment Population Quality Solutions to align patient Solutions to ensure Analytics and reporting Solutions to drive risk
Slide 17: Financial Services: Leading Provider of Data Analytic Solutions for Banks
Financial Services: Leading Provider of Data Analytic Solutions for Banks and Their Regulators At the foundation of our value-creating solutions… Strategy • Unique and Proprietary Advertising Regulation Consortia Datasets • Deep Domain Expertise in Analytics and Banking Argus Risk & Fraud Product •
Slide 18: Financial Services: Providing Valuable and Differentiated Solutions
Financial Services: Providing Valuable and Differentiated Solutions Built on Unique Data Assets Credit Payment Payment Description Argus* Bureaus Networks Processors Transaction POS & online transaction detail Data (merchant, location, amount, date) Account Credit card, deposits, checking, and Data
Slide 19: Verisk: Strong Track Record of Top-Line Growth
Verisk: Strong Track Record of Top-Line Growth 13.1% CAGR Revenue ($ millions) $2,068 $1,747 $1,596 $1,408 $1,191 $992 $910 $830 $761 $679 $603 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 ________________________________________________________________ Note: From continuing operations 19
Slide 20: Organic Revenue Growth
Organic Revenue Growth 8.1% Average 7.1% Average 9.1% 9.4% 8.7% 8.2% 7.7% 7.6% 7.8% 5.7% 5.7% 5.8% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Key Drivers: • Organic growth is a measure of our vitality • Robust innovation agenda has spurred stronger organic growth • Growth has become more cons
Slide 21: Diverse, High Recurring Revenue Sources
Diverse, High Recurring Revenue Sources FY2015 Revenue Distribution FY2015 YTD Subscription Base Energy & (1) Specialized Healthcare 15% 15% Financial Services Transaction 6% Revenue 25% Risk Subscription Assessment Revenue 33% 75% DA Insurance 31% Decision Analytics 67% Note: 1. Energy & Specialize
Slide 22: Verisk's Differentiated Financial Model
Verisk’s Differentiated Financial Model Fiscal Year Strong, Stable Revenue Growth… and Leading Margins (2) Power EPS ($ millions),(organic revenue growth) (% EBITDA/Revenue),($ Earnings per Share) 47.4% 49.0% 2,500 46.7% 19.0% 2,068 46.0% $4.10 47.0% 1,747 2,000 17.0% 1,596 45.0% $3.60 15.0% 1,500 4
Slide 23: Strong Capital Structure to Support Growth
Strong Capital Structure to Support Growth as of 12/31/2015 Investment Grade Ratings ($ millions) S&P: BBB- Bonds $2,300 Moody’s: Baa3 Revolver Drawn 0,870 Fitch: BBB+ Total Debt $3,170 880 Revolver expanded to Debt/ EBITDA (1) 2.86x $1,750M, due May 2020 Covenant level (2) 3.75x 870 900 450 350 350
Slide 24: Verisk: Disciplined Capital Allocation
Verisk: Disciplined Capital Allocation Acquisitions and earn-outs Share Repurchase ($ millions) 2012 2013 2014 2015 (1) Share Repurchase 163 279 778 20 Acquisitions and earn-outs 808 1 35 2,856 Cumulative Capital Allocation, $ billions (2) $1.2B, 25% $3.7B, 75% Note: 1. 2015 acquisition amount is ne
Slide 25: M&A Has Been Effective
M&A Has Been Effective • Driven by strategy • Valuation discipline crucial • Cash generation focused: 19% overall IRR − 15% hurdle rate, adjusted for risk − Analysis benchmark for measuring IRR is unlevered − Assume conservative 10x terminal EBITDA multiple • Exceeded WACC for all deals of size − St
Slide 26: Internal Rates of Return Demonstrate Shareholder Value Creation
Internal Rates of Return Demonstrate Shareholder Value Creation Average IRR ~19% Mortgage Sale Price ~$155M 8% Estimated WACC IRR Methodology • Size of bubble reflects purchase price • IRR based on free cash flow and 10x terminal multiple methodology for all deals except Mortgage • Some bubbles refl
Slide 27: Multiple Paths to Growth
Multiple Paths to Growth • Strong track record of BOTH organic revenue increases and effective M&A −8% historical organic revenue growth −16% average acquisition revenue growth • Opportunities remain large and growing −Executing on both organic and acquisitions to drive growth • Share repurchases re
Slide 28: Conclusion
Conclusion The best benchmark for Verisk is Verisk. 1 Average organic revenue growth over the past ten years has been about 8% • Our business is even better now than it was before • We should be able to grow over time and on average in a way that is consistent with the past We have expanded EBITDA m
Slide 29: Questions?
Questions? Contact Investor Relations eva.huston@verisk.com david.e.cohen@verisk.com
Slide 30: Non-GAAP reconciliations
Non-GAAP reconciliations Adjusted EBITDA ($ in millions) 2015 2014 2013 Net Income 508 371 342 Depreciation and amortization of fixed assets and intangible assets 215 142 130 Interest expense 121 70 76 Provision for income taxes 210 220 196 Plus: Nonrecurring items related to the WoodMackenzie acqui
Slide 31: Non-GAAP reconciliations
Non-GAAP reconciliations Adjusted EPS ($ in millions) 2015 2014 2013 Income from continuing operations 508 371 342 Plus: Amortization of intangibles 95 57 64 Less: Income tax effect on amortization of intangibles 26 22 24 Plus: Nonrecurring items related to the Wood Mackenzie acquisition -45 — — Les
Slide 32: Non-GAAP reconciliations
Non-GAAP reconciliations Free Cash Flow ($ in millions) 2015 2014 2013 Net cash provided by operating activities 624 489 507 Capital expenditures 166 146 146 Free Cash Flow 458 343 361 Note: Numbers may not add due to rounding 32