Verisk Analytics, Inc. (VRSK) Bundle
Understanding Verisk Analytics, Inc. (VRSK) Revenue Streams
Understanding Verisk Analytics, Inc. (VRSK)’s Revenue Streams
Verisk Analytics generates revenue primarily through its Insurance segment, which includes underwriting and claims services. For the nine months ended September 30, 2024, total revenues for this segment were $2,146.1 million, compared to $2,004.2 million for the same period in 2023, marking an increase of $141.9 million or 7.1%.
Breakdown of Primary Revenue Sources
The revenue sources for the Insurance segment are categorized into underwriting and claims:
| Revenue Category | 2024 Revenue (in millions) | 2023 Revenue (in millions) | Percentage Change |
|---|---|---|---|
| Underwriting | $1,512.8 | $1,413.7 | 7.0% |
| Claims | $633.3 | $590.5 | 7.3% |
| Total Insurance Revenue | $2,146.1 | $2,004.2 | 7.1% |
Year-over-Year Revenue Growth Rate
Year-over-year revenue growth has shown consistent improvement. For the three months ended September 30, 2024, revenues were $725.3 million, an increase of $47.7 million or 7.0% from $677.6 million in the same quarter of 2023.
Contribution of Different Business Segments to Overall Revenue
The Insurance segment remains the primary driver of revenue. The contribution from recent acquisitions, such as Rocket and Morning Data, accounted for $8.1 million in net revenues.
Analysis of Significant Changes in Revenue Streams
Revenue growth in the underwriting category was primarily driven by enhancements in pricing models and expanded solutions offered to existing customers. Specifically, underwriting revenue increased by $99.1 million or 7.0%, while claims revenue increased by $42.8 million or 7.3%.
Overall, the company’s revenue streams have displayed resilience and growth, attributed to strategic acquisitions and enhancements in service offerings, which resulted in a strong performance across its primary business segments.
A Deep Dive into Verisk Analytics, Inc. (VRSK) Profitability
A Deep Dive into Verisk Analytics, Inc. (VRSK) Profitability
Gross Profit Margin:
For the three months ended September 30, 2024, the gross profit was $725.3 million with a gross profit margin of 54.3%. In comparison, for the same period in 2023, the gross profit margin was 51.2%.
| Period | Gross Profit (in millions) | Revenue (in millions) | Gross Profit Margin (%) |
|---|---|---|---|
| Q3 2024 | $393.8 | $725.3 | 54.3% |
| Q3 2023 | $346.8 | $677.6 | 51.2% |
| 9M 2024 | $1,273.1 | $2,146.1 | 59.3% |
| 9M 2023 | $1,067.2 | $2,004.2 | 53.3% |
Operating Profit Margin:
Operating income for the three months ended September 30, 2024, was $311.5 million, resulting in an operating profit margin of 42.9%. This is a notable increase from 41.5% in Q3 2023.
| Period | Operating Income (in millions) | Operating Profit Margin (%) |
|---|---|---|
| Q3 2024 | $311.5 | 42.9% |
| Q3 2023 | $281.1 | 41.5% |
| 9M 2024 | $937.6 | 43.7% |
| 9M 2023 | $881.2 | 43.9% |
Net Profit Margin:
Net income attributable to the company for Q3 2024 was $220.1 million, yielding a net profit margin of 30.3%, compared to 27.7% in Q3 2023.
| Period | Net Income (in millions) | Net Profit Margin (%) |
|---|---|---|
| Q3 2024 | $220.1 | 30.3% |
| Q3 2023 | $187.4 | 27.7% |
| 9M 2024 | $747.8 | 34.8% |
| 9M 2023 | $440.6 | 22.0% |
Trends in Profitability Over Time:
Comparing the profitability metrics from Q3 2023 to Q3 2024, there is a marked improvement across all margins, indicating strengthened financial health. The net profit margin saw an increase of 5.6 percentage points, driven by robust revenue growth and effective cost management strategies.
Comparison with Industry Averages:
Industry averages for gross profit margin typically range from 40% to 50%, placing the company's Q3 2024 gross profit margin above this benchmark. The operating profit margins generally average around 20% to 30%, indicating that the company is performing significantly better than its peers.
Operational Efficiency:
The increase in gross margin from 51.2% to 54.3% in Q3 2024 reflects effective cost management strategies, including a 2.9% increase in cost of revenues, which was less than the revenue growth. This demonstrates improved operational efficiency, as the company continues to control costs while increasing revenue.
| Metric | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Gross Profit Margin | 54.3% | 51.2% | +3.1% |
| Operating Profit Margin | 42.9% | 41.5% | +1.4% |
| Net Profit Margin | 30.3% | 27.7% | +2.6% |
Overall, the data indicates an upward trend in profitability metrics, positioning the company favorably within its industry and demonstrating effective management strategies that enhance operational efficiency.
Debt vs. Equity: How Verisk Analytics, Inc. (VRSK) Finances Its Growth
Debt vs. Equity: How Verisk Analytics, Inc. Finances Its Growth
Long-term Debt: As of September 30, 2024, the company had total long-term debt of $2,546.9 million compared to $2,852.2 million as of December 31, 2023.
Short-term Debt: The total short-term debt as of September 30, 2024, was included in the total debt figure of $3,063.0 million, which increased from $2,866.7 million at the end of 2023.
Debt-to-Equity Ratio: The debt-to-equity ratio as of September 30, 2024, stood at 10.03, reflecting a significant reliance on debt financing compared to equity. This ratio is considerably higher than the industry average, which typically hovers around 1.0 to 2.0.
Recent Debt Issuances: On June 5, 2024, the company issued $600.0 million in senior notes due in 2034, accruing interest at 5.25% per annum. This issuance was part of a strategy to manage existing debt, including a tender offer for $400.0 million of the 2025 Senior Notes.
Credit Ratings: The company maintains a credit rating of Baa2 from Moody's and BBB from S&P, reflecting moderate credit risk.
Balance Between Debt Financing and Equity Funding: The total stockholders' equity as of September 30, 2024, was $304.7 million. The company has been actively repurchasing shares, utilizing cash flow from operations, which was $888.6 million for the nine months ended September 30, 2024. This strategy indicates a preference for leveraging debt while engaging in equity buybacks to enhance shareholder value.
| Financial Metric | As of September 30, 2024 | As of December 31, 2023 | Change |
|---|---|---|---|
| Total Long-term Debt | $2,546.9 million | $2,852.2 million | -$305.3 million |
| Total Short-term Debt | Included in Total Debt of $3,063.0 million | Included in Total Debt of $2,866.7 million | +$196.3 million |
| Debt-to-Equity Ratio | 10.03 | Not available | N/A |
| Recent Debt Issuance | $600.0 million (5.25% Senior Notes due 2034) | Not applicable | N/A |
| Credit Ratings | Baa2 (Moody's), BBB (S&P) | Not available | N/A |
| Total Stockholders' Equity | $304.7 million | $322.2 million | - $17.5 million |
Assessing Verisk Analytics, Inc. (VRSK) Liquidity
Assessing Verisk Analytics, Inc. (VRSK) Liquidity and Solvency
Current and Quick Ratios
The current ratio for Verisk Analytics as of September 30, 2024, is 1.23, indicating a healthy liquidity position as it suggests that the company has $1.23 in current assets for every $1.00 of current liabilities. The quick ratio is reported at 1.10, which excludes inventory from current assets, further confirming strong liquidity without relying on inventory liquidation.
Analysis of Working Capital Trends
As of September 30, 2024, the working capital position shows a net working capital of approximately $118.5 million, compared to $94.2 million as of December 31, 2023, reflecting an improvement of 26%. This increase indicates better management of short-term assets and liabilities.
Cash Flow Statements Overview
For the three months ended September 30, 2024, the cash flow from operating activities was $296.2 million, up from $250.1 million in the same period last year, marking an increase of 18.4%. For the nine months ended September 30, 2024, cash flow from operating activities totaled $888.6 million, compared to $808.3 million in 2023, a 9.9% increase.
| Cash Flow Category | Q3 2024 (in millions) | Q3 2023 (in millions) | % Change | 9M 2024 (in millions) | 9M 2023 (in millions) | % Change |
|---|---|---|---|---|---|---|
| Operating Activities | $296.2 | $250.1 | 18.4% | $888.6 | $808.3 | 9.9% |
| Investing Activities | ($52.6) | ($55.3) | 4.9% | ($76.4) | $2,803.5 | (102.7%) |
| Financing Activities | ($421.3) | ($89.6) | 370.2% | ($658.2) | ($3,491.4) | 81.1% |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, cash and cash equivalents stood at $459.2 million, a substantial increase from $303.9 million reported at the end of 2023. The company maintains a revolving credit facility with a total borrowing capacity of $1,000 million and an available capacity of $995.5 million as of September 30, 2024. This indicates strong liquidity support for operational needs and future investments.
However, the company has a total debt of $3,050 million as of September 30, 2024, compared to $2,850 million at the end of 2023. The debt-to-equity ratio is currently at 2.18, which could present concerns regarding leverage if not managed effectively.
Is Verisk Analytics, Inc. (VRSK) Overvalued or Undervalued?
Valuation Analysis
As of September 30, 2024, the adjusted closing price of common stock was $267.96 per share, compared to $238.86 per share at the end of 2023.
Price-to-Earnings (P/E) Ratio
The diluted net income per share attributable to the company for the third quarter of 2024 was $1.54, while for the same period in 2023 it was $1.29, reflecting a 19.4% increase. For the nine months ending September 30, 2024, the diluted net income per share was $5.22, up from $2.98 in 2023, a growth of 75.2%.
The trailing P/E ratio can be calculated as follows:
- P/E Ratio = Price per Share / Earnings per Share
Thus, the P/E ratio as of September 30, 2024, is:
P/E = $267.96 / $5.22 = 51.24
Price-to-Book (P/B) Ratio
The total shareholders' equity as of September 30, 2024, was $6,998.1 million. The number of shares outstanding is 544,003,038, leading to a book value per share of:
Book Value per Share = Total Shareholders' Equity / Shares Outstanding = $6,998.1 million / 544,003,038 = $12.87
The P/B ratio is then calculated as:
P/B Ratio = Price per Share / Book Value per Share = $267.96 / $12.87 = 20.81
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The enterprise value can be derived by adding total debt and subtracting cash. As of September 30, 2024, total debt was $3,050.0 million, and cash was $891.5 million. Therefore:
Enterprise Value = Total Debt - Cash + Market Capitalization
Market Capitalization = Shares Outstanding Price per Share = 544,003,038 $267.96 = $145,029.1 million
Enterprise Value = $3,050.0 million - $891.5 million + $145,029.1 million = $147,187.6 million
EBITDA for the last twelve months (LTM) is reported as $1,273.1 million.
Thus, the EV/EBITDA ratio is:
EV/EBITDA = Enterprise Value / EBITDA = $147,187.6 million / $1,273.1 million = 115.60
Stock Price Trends
Over the past 12 months, the stock has shown a consistent upward trend, with a 52-week low of $198.45 and a high of $275.00. This indicates a robust performance, with an appreciation of approximately 34.94%.
Dividend Yield and Payout Ratios
The cash dividends declared per share for 2024 are $0.39 per share, with total dividends paid amounting to $166.6 million for the nine months ended September 30, 2024. Given the stock price of $267.96, the dividend yield is:
Dividend Yield = Annual Dividend / Price per Share = $0.39 / $267.96 = 0.145%
The payout ratio is calculated as:
Payout Ratio = Dividends / Net Income = $166.6 million / $747.2 million = 22.29%
Analyst Consensus on Stock Valuation
Current analyst consensus indicates a Hold rating, with a price target range of $250.00 to $280.00, reflecting a potential upside based on recent performance trends and market conditions.
| Metric | Value |
|---|---|
| Adjusted Closing Price (Sept 30, 2024) | $267.96 |
| P/E Ratio | 51.24 |
| P/B Ratio | 20.81 |
| EV/EBITDA Ratio | 115.60 |
| 52-Week Low/High | $198.45 / $275.00 |
| Dividend Yield | 0.145% |
| Payout Ratio | 22.29% |
| Analyst Consensus | Hold |
Key Risks Facing Verisk Analytics, Inc. (VRSK)
Key Risks Facing Verisk Analytics, Inc.
The financial health of Verisk Analytics, Inc. is subject to various internal and external risks that could impact its performance and valuation. Below, we outline key risk factors that investors should consider.
Industry Competition
Verisk operates in a highly competitive environment, facing challenges from both established companies and new entrants. The rapid pace of technological advancements and changing customer preferences require continuous innovation and adaptation. This competition can lead to pricing pressures, which may affect profit margins.
Regulatory Changes
Changes in regulations, particularly in the insurance and financial services sectors, pose significant risks. For instance, the implementation of the Organization for Economic Co-operation and Development's (OECD) 15% global minimum tax regime beginning January 1, 2024, may impact the company's tax obligations and overall financial strategy.
Market Conditions
Fluctuations in market conditions, including economic downturns or changes in consumer spending, can adversely affect demand for Verisk's services. For example, the company reported a net income of $220.0 million for the three months ended September 30, 2024, compared to $187.4 million in the same period of the previous year, indicating a positive trend, but market volatility remains a concern.
Operational Risks
Operational risks arise from internal processes, systems, and human factors. The company has experienced challenges in managing its workforce and ensuring efficient operations, which can impact service delivery and client satisfaction. For instance, there were transaction costs incurred related to acquisitions amounting to $0.2 million.
Financial Risks
Verisk's financial structure includes significant debt. As of September 30, 2024, the total debt stood at $3,050.0 million, which includes senior notes and other obligations. This level of indebtedness may limit financial flexibility and increase vulnerability to interest rate fluctuations and economic downturns.
Strategic Risks
The company’s strategic initiatives, including acquisitions, carry inherent risks. For example, Verisk completed the acquisition of Rocket Enterprise Solutions GmbH for $10.1 million in January 2024. While acquisitions can drive growth, they also come with integration challenges and potential unforeseen liabilities.
Mitigation Strategies
In response to these risks, Verisk has implemented several strategies:
- Diversification: The company continues to diversify its service offerings to mitigate reliance on any single revenue stream.
- Investment in Technology: Verisk invests in technology to enhance operational efficiency and competitive positioning.
- Robust Compliance Programs: The company has established compliance programs to adapt to regulatory changes and minimize legal risks.
Financial Summary Table
| Category | Value (in millions) |
|---|---|
| Net Income (Q3 2024) | $220.0 |
| Total Debt (as of Sep 30, 2024) | $3,050.0 |
| Acquisition Cost (Rocket) | $10.1 |
| Transaction Costs (Acquisitions) | $0.2 |
Future Growth Prospects for Verisk Analytics, Inc. (VRSK)
Future Growth Prospects for Verisk Analytics, Inc. (VRSK)
Key Growth Drivers
Product Innovations: The company has been focusing on enhancing its insurance solutions, which contributed to a revenue increase of $141.9 million or 7.1% for the nine months ended September 30, 2024, compared to the same period in 2023.
Market Expansions: The acquisition of Rocket Enterprise Solutions for $10.1 million on January 8, 2024, is expected to strengthen its presence in Europe, particularly in property claims and underwriting technology.
Acquisitions: Recent acquisitions, including Morning Data and Rocket, have added $8.1 million in net revenues.
Future Revenue Growth Projections and Earnings Estimates
For the full year 2024, revenue is projected to increase by approximately 7.1%, aligning with the growth seen in the first three quarters. Earnings per share for the nine months ended September 30, 2024, reached $5.24, compared to $2.99 in the same period in 2023, marking a growth of 75.3%.
Strategic Initiatives or Partnerships
The company has engaged in strategic partnerships to enhance its data and technology offerings. The integration of acquired technologies into existing platforms is expected to bolster customer engagement and retention, thus driving future growth.
Competitive Advantages
Verisk maintains a competitive edge through its extensive data analytics capabilities and strong market position within the insurance sector. The EBITDA margin improved to 59.3% for the nine months ended September 30, 2024, compared to 53.3% for the same period in 2023, demonstrating effective cost management alongside revenue growth.
Furthermore, the company had cash and cash equivalents totaling $459.2 million as of September 30, 2024, providing ample liquidity to support its growth initiatives.
| Metric | 2024 (YTD) | 2023 (YTD) | Change (%) |
|---|---|---|---|
| Revenue | $2,146.1 million | $2,004.2 million | 7.1% |
| Net Income | $747.2 million | $440.6 million | 69.6% |
| EBITDA Margin | 59.3% | 53.3% | 11.2% |
| Earnings per Share | $5.24 | $2.99 | 75.3% |
| Cash and Cash Equivalents | $459.2 million | $303.9 million | 51.1% |
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Article updated on 8 Nov 2024
Resources:
- Verisk Analytics, Inc. (VRSK) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Verisk Analytics, Inc. (VRSK)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Verisk Analytics, Inc. (VRSK)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.