Verisk Analytics' CEO Discusses Q2 2012 Results - Earnings Call Transcript

Verisk Analytics, Inc. (VRSK)

Q2 2012 Earnings Call

August 1, 2012 8:30 am ET


Eva F. Huston - Treasurer, and Head, IR

Frank Coyne - Chairman and CEO

Scott Stephenson - President and COO

Mark Anquillare - CFO


Kelly Flynn - Credit Suisse

Rayna Kumar - Evercore Partners

Eric Boyer - Wells Fargo

Bill Warmington - Raymond James

Andrew Steinerman - JPMorgan

Suzanne Stein - Morgan Stanley

Manav Patnaik - Barclays

James Friedman - SIG

Jennifer Huang - UBS

Bill Cork - KBW

Tim Mchugh - William Blair



Good day everyone and welcome everyone to the Verisk Analytics’ Second Quarter 2012 Earnings Results Conference Call. This call is being recorded.

At this time for opening remarks and introductions, I would now like to turn the call over to Verisk Treasurer and Head of Investors Relations, Ms. Eva Huston. Ms. Huston, please go ahead.

Eva Huston

Thank you, Amber, and good morning to everyone. We apologize for the slight technical delay we had at the starting here. We appreciate you joining us today for the discussion of our second quarter 2012 financial results.

With me on the call this morning are Frank Coyne, Chairman and Chief Executive Officer; Scott Stephenson, President and Chief Operating Officer; and Mark Anquillare, Chief Financial Officer. Following some comments by Frank, Scott, and Mark highlighting some key points about our strategic priorities and financial performance, we’ll open the call up for your question.

The earnings release referenced on this call as well as the associated 10-Q can be found in the Investor section of our website The earnings release has also been attached to an 8-K that we have furnished to the SEC. A replay of this call will be posted on our website and available by dial-in for 30 days until September 1, 2012.

Finally, as set forth in more detail in today’s earnings release, I will remind everyone that today’s call may include forward-looking statements about Verisk’s future performance. Actual performance could differ materially from what is suggested by our comments today. And information about the factors that could affect future performance is summarized at the end of our press release as well as contained in our recent SEC filings.

And with that, I will now turn the call over to Frank Coyne.

Frank Coyne

Thank you, Eva, and good morning. In second quarter 2012, we delivered good performance of 14% total revenue growth and almost 15% diluted adjusted EPS growth. We continued strong performance from our Healthcare business and good performance from our insurance businesses and our emerging businesses in specialized markets.

In the second quarter our risk adjustment revenue grew 4.9% after adjusting for the impact of a transfer of some revenue to Decision Analytics beginning in 2012. This growth is a continuation of what you saw in the first quarter and evidence of our sticky customer relationship based on the recognizable value we bring.

In Decision Analytics, we grew revenue almost 23% and our insurance solutions in Decision Analytics grew about 9%, a very solid rate given the lower storm activity versus last year.

Our Healthcare solutions continued on the organic growth we have seen in the past few quarters growing revenue nearing 37% organically in the quarter. Our total Healthcare revenue growth was over 160% bolstered by the contributions MediConnect has made to our second quarter performance.

In Mortgage, we continue to see challenges in the market and our revenue declined due to the declining items of forensic review, but I would note that we continue to grow our underwriting solutions at a faster pace than the 2Q estimates for the origination market.

Overall, our consolidated organic revenue growth was 6.4% as we saw both a lighter quarter per storm activity and mortgage continue to weigh on growth. Excluding all historical mortgage business, organic revenue growth was 8.4%. Profitability remained strong with an EBITDA margin of 43.9% in the quarter.

We remain disciplined of our use of capital and are focused on delivering shareholder returns. We brought $68 million of shares in the quarter as we mange our buyback as part of our broader capital allocation plan. We continue to be active in looking at M&A but also continue to maintain our discipline, focusing on assets with a true strategic fit, strong financial model and appropriate value in relation to future growth.

The first half of 2012 has been solid and met expectations overall. I remain confident that behind the numbers we are doing the right things to position our business for future growth driven by delivering quality solutions to our customers.

Now, I'll turn it over to Scott to give you details about our progress in healthcare and other parts of the business.

Scott Stephenson

Thank you, Frank. I'm going to briefly update you on development in several of our business with an emphasis on innovations aimed at our customers' emerging needs and ways in which we are becoming more integral to their operation.

First, in the Healthcare vertical three items, the unified platform initiatives is proceeding in the first phase of integrating our payment integrity businesses has been largely completed. We are one month into hosting of large customer on the platform and then our teams are pleased with the results to-date. The efficacy of our real-time edits are increasing materially inside the new platform. In the next phase, we will leave our enterprise analytic solution into the platform as we also transition more customers to the platform. We are pleased to be meeting important milestones on time as we steam towards 2013 completion of the project.

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