Scott Stephenson President and CEO Verisk Analytics

Transcription

1 Scott Stephenson President and CEO Verisk Analytics William Blair 34th Annual Growth Stock Conference June 12, 2014

2 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 that may cause our actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by these forward-looking statements. In some cases, you can identify forward-looking statements by the use of words such as may, could, expect, intend, plan, target, seek, anticipate, believe, estimate, predict, potential, or continue or the negative of these terms or other comparable terminology. You should not place undue reliance on forwardlooking statements because they involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond our control and that could materially affect actual results, levels of activity, performance, or achievements. Other factors that could materially affect actual results, levels of activity, performance, or achievements can be found in Verisk s quarterly reports on Form 10-Q, annual reports on Form 10-K, and current reports on Form 8-K filed with the Securities and Exchange Commission. If any of these risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may vary significantly from what we projected. Any forward-looking statement in this presentation reflects our current views with respect to future events and is subject to these and other risks, uncertainties, and assumptions relating to our operations, results of operations, growth strategy, and liquidity. We assume no obligation to publicly update or revise these forward-looking statements for any reason, whether as a result of new information, future events, or otherwise. Notes Regarding the Use of Non-GAAP Financial Measures The company has provided certain non-gaap financial information as supplemental information regarding its operating results. These measures are not in accordance with, or an alternative for, GAAP and may be different from non-gaap measures reported by other companies. The company believes that its presentation of non-gaap measures, such as EBITDA, EBITDA margin and Adjusted EBITDA, adjusted net income, and adjusted EPS, provides useful information to management and investors regarding certain financial and business trends relating to its financial condition and results of operations. In addition, the company s management uses these measures for reviewing the financial results of the company and for budgeting and planning purposes. 2

3 A Data and Analytics Company with a Proud History and Bright Future & Beyond Founding Culture Expansion Inflection Innovation Change Not-for-profit service bureau Limited legacy set of products Transition to for-profit status; ESOP created to provide employee/ management ownership Drive to operational efficiency and margin improvement Definition of business units and leadership culture Pay-for-performance compensation Focus on innovation, product development, and new vertical markets Greater emphasis on analytics Higher volume of acquisitions Overlay structures to Add new acquisitions encourage repurposing Creating more flexible and collaboration capital structure Improved analytics Greater focus on overseas infrastructure markets Initial public offering (100% secondary) of Verisk Analytics, Inc. 3

4 Revenue Diversity with High Subscription Percentage Financial Services 5% Specialized 5% Risk Assessment 40% Healthcare 16% Transaction Revenue, 25% Subscription Revenue, 75% Insurance 34% Decision Analytics 1Q

5 The Data/Analytic Mindset 1. N+1 Data Set (proprietary) 2. Analytic Differentiation 3. Leader in the Market as a Development Partner 4. Excellence at ETL 5. Excellent Consumability/Visualization of Content 6. Demonstrated Value in Use 5

6 Data/Analytic Business Models 1 Horizontal Insight via Proprietary / Unstructured Data (social media) Analytics Framework Digital Platform Global IT / Data Center Infrastructure 2 Insurance Healthcare Financial Services Supply Chain = 3 Multiple Thick Verticals, Enabled 6

7 Growth: Data Assets Contributory Model Application- Driven Model Open to Both: Driven by Customer Preparedness 7

8 Attractive Business Model Recurring revenue stream and high barriers to entry o 75% of total revenue is subscription and long-term contracts o Extremely high customer retention o Majority of revenue is prepaid quarterly or annually o Long-standing and deep relationships with our customers o Deeply embedded in our customers critical decision-making processes High incremental margins on existing businesses o Business model is build once, sell many times o Very little incremental cost to add a new customer o Our business is not service- or capital-intensive Diverse client base and revenue contribution o Largest customer accounts for less than 3% of revenues o Top 10 clients account for less than 20% of revenues o Revenue from customers who are not P&C primary insurers has increased to 53% of revenues, up from 20% in

9 Strong Track Record of Top-Line Growth 1,408 1,596 Revenue $ in millions CAGR 12.8% , Note: from continuing operations; excludes Interthinx 9

10 Revenue and EBITDA Growth with Low Capex Drives Strong Free Cash Flow Strong, Stable Revenue Growth: 15.1% CAGR ($M) Leading EBITDA Margin 1 (%) $910 $992 $1,191 $1,408 $1, % 46.3% 46.6% 47.7% 46.7% Low Capital Intensity (CapEx as % of Revenue) Strong Free Cash Flow 2 ($M) $388 $283 $295 $307 $ % 3.6% 5.1% 5.2% 9.2% Note: Revenue and EBITDA margins exclude Interthinx, the sale of which was announced in January 2014; Capex and FCF are as reported. (1) For 2009, represents Adjusted EBITDA margin. Adjusted EBITDA is equal to income from continuing operations plus depreciation and amortization of fixed and intangible assets, interest expense, provision for income taxes, ESOP allocation expense, and IPO-related costs. (2) Free cash flow calculated as cash from operations less capital expenditures. 10

11 Key Strategic Commitments Are Clear and Consistent Predictive Analytics Cross-Selling to Existing Customers Multiple Verticals But not without constraint Repurposing of Existing Intellectual Property Buy and Build Scalable Profitability: Build It Once, Sell It Many Times 11

12 Capital Allocation Strategy Focus on highest-return investments, adjusted for risk o Internal investment o Acquisitions o Share repurchase Use debt capacity within target range of 2.0x debt/ebitda to generate additional returns o Temporarily exceed target for unique opportunities, e.g., Argus o In 2012, de-levered from 2.35x at acquisition back below 2x in 4 months Maintain committed lines and debt market access to fund opportunities with minimal friction o $975 million committed bank facility through 2018 o Access to public bond markets as well as private placement markets 12

13 Capital Allocation: EagleView Technology Corp. (EVT) Signed a definitive purchase agreement to acquire EagleView Technology Corp. ( EVT ), an acknowledged leader in the United States of geo-referenced aerial image capture, and visual-centric data analytics and solutions to government and commercial customers, insurers, and contractors - Image library covering over 85% of the U.S. population and over one million square miles and approximately 90% of U.S. structures Total transaction value of $650M, net $637M after Verisk/Xactware warrants - As a part of transaction, VRSK will also gain approx. $25 million of tax benefits - Expected close late Q2 after regulatory & shareholder approvals, but no later than July 15 EVT will be integrated with Xactware and reported as a part of the Insurance category in the Decision Analytics segment 13

14 Capital Allocation: Eagleview Technology Corp. (EVT) Strategic Rationale Verisk, through its Xactware business, has established a presence in aerial imagery applications for insurance companies and service providers Aerial imagery emerging as a disruptive innovation for insurance Next data-driven area within P&C where VRSK can compete Growth can be accelerated through VRSK Financial EVT Pro Forma LTM (9/30/13) Revenue: $123.4M, Adj. EBITDA: $36.4M with 29.5% margin Will be funded from cash (~$160M) and revolving credit facility (~$475M), bringing debt/ebtida to ~2.3x pro forma as of December 31,

15 Capital Allocation: Interthinx Divestiture Sale of mortgage services business, Interthinx, to First American Financial Corporation, for a purchase price of $155 million in cash, subject to typical adjustments for, among other things, the working capital of the business. Announced February 6, 2014; expected to close by March 31, Strategic Rationale Allows Verisk to focus on businesses most closely aligned with our strategy. Financial Pro Forma Results provided in 4 th Quarter 2013 earnings press release. 15

16 Disciplined Capital Allocation ($ in millions) $1,200 $1,000 $800 $600 $400 $200 $ Q 2014 Share Repurchase Acquisitions and earn-outs $69 $222 $143 $808 $1 $4 Acquisitions and earn-outs Share Repurchase Cumulative 1,396 53% $1,247 47% Acquisitions and earn-outs Share Repurchase 16

17 The Verisk Way 17

18 Thank You Contact Investor Relations