10-Q 1 vrsk20240331_10q.htm FORM 10-Q vrsk20240331_10q.htm
0001442145 Verisk Analytics, Inc. false --12-31 Q1 2024 15.7 15.1 0.001 0.001 2,000,000,000 2,000,000,000 544,003,038 544,003,038 142,785,185 143,308,729 401,217,853 400,694,609 0.0 1.1 892,273 278,561 27,819 55,959 50,998 6,390 10,902,788 631,334 27,771 85,922 67,807 8,184 1.8 1.0 0 99 2.1 0 3.625 3.625 9.5 9.6 4.125 4.125 7.4 7.8 4.00 4.00 1.4 1.8 5.500 5.500 3.8 3.8 5.750 5.750 8.6 8.9 2,850.0 2,000,000,000 0 0 10 3 1 4 4 3 40 60 0 Kathlyn Card Beckles Chief Legal Officer false false true March 14, 2024 June 12, 2026 13,689 false These accumulated other comprehensive loss components, before tax, are included under "Cost of revenues" and "Selling, general and administrative" in our accompanying condensed consolidated statements of operations. These components are also included in the computation of net periodic (benefit) cost (see Note 13. Pension and Postretirement Benefits for additional details). See Note 6. Acquisitions for more information. Includes estimated performance achievement Included in "Depreciation and amortization of fixed assets" in our accompanying condensed consolidated statements of operations Included in "Interest expense" in our accompanying condensed consolidated statements of operations Refer to Note 5. 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Table of Contents



UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


FORM 10-Q

 


 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                      to                     

Commission File Number: 001-34480

 


VERISK ANALYTICS, INC.

(Exact name of registrant as specified in its charter)

 


Delaware

26-2994223

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

  

545 Washington Boulevard

 

Jersey City

 

NJ

07310-1686

(Address of principal executive offices)

(Zip Code)

 

(201) 469-3000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange where registered

Common Stock $.001 par value

VRSK

NASDAQ Global Select Market

 


Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

       

Non-accelerated filer

 

 

Smaller reporting company

 

       
    

Emerging growth company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  ☒

 

As of April 26, 2024, there were 142,675,237 shares outstanding of the registrant's Common Stock, par value $.001.

 



 

 

 
 

Verisk Analytics, Inc.

Index to Form 10-Q

 

Table of Contents

 

 

 

Page Number

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

 

Condensed Consolidated Balance Sheets

1

Condensed Consolidated Statements of Operations

2

Condensed Consolidated Statements of Comprehensive Income (Loss)

3

Condensed Consolidated Statements of Changes in Stockholders’ Equity

4

Condensed Consolidated Statements of Cash Flows

5

Notes to Condensed Consolidated Financial Statements

6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

28

Item 3. Quantitative and Qualitative Disclosures About Market Risk

37

Item 4. Controls and Procedures

37

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

38

Item 1A. Risk Factors

38

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

38

Item 3. Defaults Upon Senior Securities

39

Item 4. Mine Safety Disclosures

39

Item 5. Other Information

39

Item 6. Exhibits

39

SIGNATURES

41

Exhibit 31.1

 

Exhibit 31.2

 

Exhibit 32.1

 

 

 

 

PART I — FINANCIAL INFORMATION

 

Item 1. Financial Statements

VERISK ANALYTICS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

 

  

March 31, 2024

  

December 31, 2023

 
  

(in millions, except for share and per share data)

 

ASSETS:

 

Current assets:

        

Cash and cash equivalents

 $352.4  $302.7 

Accounts receivable, net of allowance for doubtful accounts of $15.7 and $15.1, respectively

  486.6   334.2 

Prepaid expenses

  85.3   84.5 

Income taxes receivable

  32.2   23.5 

Other current assets

  60.5   65.2 

Total current assets

  1,017.0   810.1 

Noncurrent assets:

        

Fixed assets, net

  612.5   604.9 

Operating lease right-of-use assets, net

  187.5   191.7 

Intangible assets, net

  452.1   471.7 

Goodwill

  1,760.6   1,760.8 

Deferred income tax assets

  30.5   30.8 

Other noncurrent assets

  438.4   496.1 

Total assets

 $4,498.6  $4,366.1 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

Current liabilities:

        

Accounts payable and accrued liabilities

 $240.7  $340.8 

Short-term debt and current portion of long-term debt

  16.4   14.5 

Deferred revenues

  635.5   375.1 

Operating lease liabilities

  26.7   33.1 

Income taxes payable

  10.5   7.9 

Total current liabilities

  929.8   771.4 

Noncurrent liabilities:

        

Long-term debt

  2,860.3   2,852.2 

Deferred income tax liabilities

  202.5   210.1 

Operating lease liabilities

  197.1   195.6 

Other noncurrent liabilities

  21.1   14.6 

Total liabilities

  4,210.8   4,043.9 

Commitments and contingencies (Note 16)

          

Stockholders’ equity:

        

Common stock, $.001 par value; 2,000,000,000 shares authorized; 544,003,038 shares issued; 142,785,185 and 143,308,729 shares outstanding, respectively

  0.1   0.1 

Additional paid-in capital

  2,895.6   2,872.3 

Treasury stock, at cost, 401,217,853 and 400,694,309 shares, respectively

  (9,238.0)  (9,037.5)

Retained earnings

  6,580.9   6,416.9 

Accumulated other comprehensive income

  43.6   58.2 

Total Verisk stockholders' equity

  282.2   310.0 

Noncontrolling interests

  5.6   12.2 

Total stockholders’ equity

  287.8   322.2 

Total liabilities and stockholders’ equity

 $4,498.6  $4,366.1 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

 

 

VERISK ANALYTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

 

  

Three Months Ended March 31,

 
  

2024

  

2023

 
  

(in millions, except for share and per share data)

 

Revenues

 $704.0  $651.6 

Operating expenses:

        

Cost of revenues (exclusive of items shown separately below)

  227.8   216.2 

Selling, general and administrative

  92.9   79.0 

Depreciation and amortization of fixed assets

  57.4   44.6 

Amortization of intangible assets

  18.5   17.7 

Total operating expenses, net

  396.6   357.5 

Operating income

  307.4   294.1 

Other expense:

        

Investment loss

  (3.3)  (1.1)

Interest expense, net

  (28.9)  (26.4)

Total other expense, net

  (32.2)  (27.5)

Income from continuing operations before income taxes

  275.2   266.6 

Provision for income taxes

  (55.8)  (72.2)

Income from continuing operations

  219.4   194.4 

Loss from discontinued operations net of tax expense of $0.0 and $1.1, respectively (Note 7)

     (138.0)

Net income

  219.4   56.4 

Less: Net loss (income) attributable to noncontrolling interests

  0.2   (0.1)

Net income attributable to Verisk

 $219.6  $56.3 

Basic net income per share attributable to Verisk:

        

Income from continuing operations

 $1.53  $1.28 

Loss from discontinued operations

     (0.91)

Basic net income per share attributable to Verisk:

 $1.53  $0.37 

Diluted net income per share attributable to Verisk:

        

Income from continuing operations

 $1.52  $1.27 

Loss from discontinued operations

     (0.90)

Diluted net income per share attributable to Verisk:

 $1.52  $0.37 

Weighted-average shares outstanding:

        

Basic

  143,298,163   152,032,255 

Diluted

  143,973,534   152,709,319 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

 

VERISK ANALYTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

 

   

Three Months Ended March 31,

 
   

2024

   

2023

 
                 

Net income

  $ 219.4     $ 56.4  

Other comprehensive (loss) income, net of tax:

               

Foreign currency translation adjustment

    (14.3 )     759.2  

Pension and postretirement liability adjustment

    0.8       0.7  

Total other comprehensive (loss) income

    (13.5 )     759.9  

Comprehensive income

    205.9       816.3  

Less: Comprehensive (income) loss attributable to noncontrolling interests

    (1.1 )     0.7  

Comprehensive income attributable to Verisk

  $ 204.8     $ 817.0  

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

 

VERISK ANALYTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)

For The Three Months Ended March 31, 2024 and 2023

 

  

Common Stock Issued

  

Par Value

  

Additional Paid-in Capital

  

Treasury Stock

  

Retained Earnings

  

Accumulated Other Comprehensive Income

  

Total Verisk Stockholders' Equity

  

Noncontrolling Interests

  

Total Stockholders’ Equity

 
  

(in millions, except for share data)

 

Balance, January 1, 2024

  544,003,038  $0.1  $2,872.3  $(9,037.5) $6,416.9  $58.2  $310.0  $12.2  $322.2 

Net income (loss)

              219.6      219.6   (0.2)  219.4 

Other comprehensive (loss) income

                 (14.6)  (14.6)  1.1   (13.5)

Investment in noncontrolling interests

        (7.0)           (7.0)  (7.5)  (14.5)

Common stock dividend (1)

              (55.6)     (55.6)     (55.6)

Treasury stock acquired (892,273 shares)

        37.5   (237.6)        (200.1)     (200.1)

Treasury stock shares repurchased not yet settled

        (30.0)  30.0                

Excise tax associated with share repurchases

           (1.2)        (1.2)     (1.2)

Stock options exercised (278,561 shares transferred from treasury stock)

        22.7   6.3         29.0      29.0 

Performance share units ("PSU") lapsed (27,819 shares transferred from treasury stock)

        (0.6)  0.6                

Restricted stock ("RSAs") lapsed (55,959 shares transferred from treasury stock)

        (1.3)  1.3                

Stock-based compensation expense

        13.2            13.2      13.2 

Net share settlement from RSAs (50,998 shares withheld for tax settlement)

        (12.1)           (12.1)     (12.1)

Other stock issuances (6,390 shares transferred from treasury stock)

        0.9   0.1         1.0      1.0 

Balance, March 31, 2024

  544,003,038  $0.1  $2,895.6  $(9,238.0) $6,580.9  $43.6  $282.2  $5.6  $287.8 
                                     

Balance, January 1, 2023

  544,003,038   0.1   2,720.8   (6,239.5)  5,999.1   (731.2) $1,749.3   18.4  $1,767.7 

Net income

              56.3      56.3   0.1   56.4 

Other comprehensive income

                 759.9   759.9   (0.7)  759.2 

Investment in noncontrolling interests

        (3.9)        0.7   (3.2)  (6.6)  (9.8)

Common stock dividend (1)

              (48.7)     (48.7)     (48.7)

Treasury stock acquired (10,902,788 shares)

        37.5   (2,557.9)        (2,520.4)     (2,520.4)

Share repurchases via accelerated share repurchase program not yet settled

        (500.3)  500.3                

Stock options exercised (631,334 shares transferred from treasury stock)

        50.7   11.8         62.5      62.5 

Performance share units ("PSU") lapsed (27,771 shares transferred from treasury stock)

        (0.4)  0.4                

RSA lapsed (85,922 shares transferred from treasury stock)

        (1.4)  1.4                

Stock-based compensation expense

         23.9   -         23.9      23.9 

Net share settlement from RSAs (67,807 shares withheld for tax settlement)

         (12.3)  -         (12.3)     (12.3)

Other stock issuances (8,184 shares transferred from treasury stock)

        0.9   0.2         1.1      1.1 

Balance, March 31, 2023

  544,003,038  $0.1  $2,315.5  $(8,283.3) $6,006.7  $29.4  $68.4  $11.2  $79.6 

_______________

(1) Refer to Note 11. Stockholders' Equity for discussion related to quarterly cash dividends declared per share

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

VERISK ANALYTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

 

  

Three Months Ended March 31,

 
  

2024

  

2023

 
  

(in millions)

 

Cash flows from operating activities:

        

Net income

 $219.4  $56.4 

Adjustments to reconcile net income to net cash provided by operating activities:

        

Depreciation and amortization of fixed assets

  57.4   44.6 

Amortization of intangible assets

 

18.5

   17.7 

Amortization of debt issuance costs and original issue discount, net of original issue premium

  0.4   0.1 

Provision for doubtful accounts

  3.4   2.6 

Loss on sale of assets

     128.4 

Impairment of cost-based investments

  1.0    

Stock-based compensation expense

  13.2   23.9 

Deferred income taxes

  (8.3)  (19.0)

Gain on disposal of fixed assets

     (0.1)

Changes in assets and liabilities, net of effects from acquisitions:

        

Accounts receivable

  (155.9)  (185.4)

Prepaid expenses and other assets

  0.3   (32.9)

Operating lease right-of-use assets, net

  6.6   2.9 

Income taxes

  58.0   82.2 

Accounts payable and accrued liabilities

  (99.4)  (32.4)

Deferred revenues

  260.8   261.3 

Operating lease liabilities

  (7.3)  (2.6)

Other liabilities

  4.1   17.6 

Net cash provided by operating activities

  372.2   365.3 

Cash flows from investing activities:

        

Acquisitions and purchase of additional controlling interest, net of cash acquired of $1.8 and $1.0, respectively

  (25.9)  (37.2)

Proceeds from sale of assets

     3,066.4 

Investments in nonpublic companies

  (1.3)  (0.8)

Capital expenditures

  (55.2)  (61.2)

Escrow funding associated with acquisitions

  2.5    

Other investing activities, net

     (0.1)

Net cash (used in) provided by investing activities

  (79.9)  2,967.1 

Cash flows from financing activities:

        

Proceeds from issuance of long-term debt, net of original issue discount

     495.2 

Payment of debt issuance costs

     (5.5)

Repayment from short-term debt

     (1,265.0)

Repayment of short-term debt with original maturities greater than three months

     (125.0)

Repurchases of common stock

  (170.0)  (2,000.0)

Share repurchases not yet settled

  (30.0)  (500.0)

Proceeds from stock options exercised

  28.2   58.4 

Net share settlement of taxes from restricted stock and performance share awards

  (12.1)  (12.3)

Dividends paid

  (55.8)  (49.2)

Other financing activities, net

  (2.8)  (1.6)

Net cash used in financing activities

  (242.5)  (3,405.0)

Effect of exchange rate changes

  (0.1)  11.8 

Net increase (decrease) in cash and cash equivalents

  49.7   (60.8)

Cash and cash equivalents, beginning of period

  302.7   292.7 

Cash and cash equivalents, end of period

 $352.4  $231.9 

Supplemental disclosures:

        

Income taxes paid

 $6.1  $10.0 

Interest paid

 $9.1  $16.3 

Noncash investing and financing activities:

        

Deferred tax liability established on date of acquisition

 $1.4  $3.1 

Net assets sold as part of disposition

 $  $3,211.8 

Finance lease additions

 $12.4  $6.2 

Operating lease additions, net

 $2.7  $26.3 

Fixed assets included in accounts payable and accrued liabilities

 $0.2  $0.2 

  

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

VERISK ANALYTICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Amounts in millions, except for share and per share data, unless otherwise stated)

 

 

1. Organization:

 

Verisk Analytics, Inc. is a strategic data analytics and technology partner to the global insurance industry. We empower clients to strengthen operating efficiency, improve underwriting and claims outcomes, combat fraud and make informed decisions about global risks, including climate change, extreme events, ESG (environmental, social, and governance), and political issues. Through advanced data analytics, software, scientific research, and deep industry knowledge, we help build global resilience for individuals, communities, and businesses. We trade under the ticker symbol "VRSK" on the Nasdaq Global Select Market.

 

 

2. Basis of Presentation and Summary of Significant Accounting Policies:

 

Our accompanying unaudited condensed consolidated financial statements have been prepared on the basis of accounting principles generally accepted in the U.S. ("U.S. GAAP"). The preparation of financial statements in conformity with these accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates include acquisition purchase price allocations, the fair value of goodwill and intangibles, the realization of deferred tax assets and liabilities, acquisition-related liabilities, fair value of stock-based compensation for stock options and performance share units granted, and assets and liabilities for pension and postretirement benefits. Actual results may ultimately differ from those estimates.

 

Our condensed consolidated financial statements as of  March 31, 2024 and for the three months ended March 31, 2024 and 2023, in the opinion of management, include all adjustments, consisting of normal recurring items, to present fairly our financial position, results of operations, and cash flows. Our operating results for the three months ended March 31, 2024 are not necessarily indicative of the results to be expected for the full year. Our condensed consolidated financial statements and related notes as of and for the three months ended March 31, 2024 have been prepared on the same basis as and should be read in conjunction with our annual report on Form 10-K for the year ended December 31, 2023. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the rules of the SEC. We believe the disclosures made are adequate to keep the information presented from being misleading.

 

On  February 1, 2023, we completed the sale of our Energy business. We determined that the sale of our Energy business met the “discontinued operations” criteria in accordance with Financial Accounting Standard Boards (“FASB”) Accounting Standards Codification (“ASC”) 205-20, Discontinued Operations (“ASC 205-20”) due to its relative size and strategic rationale. The consolidated balance sheets, consolidated statements of operations, and the notes to the consolidated financial statements were recast for all periods presented to reflect the discontinuation of the Energy business, in accordance with ASC 205-20. The discussion in the notes to these consolidated financial statements, unless otherwise noted, relate solely to our continuing operations.

 

Recent Accounting Pronouncements

Accounting Standard

Description

Effective Date

Effect on Consolidated Financial Statements or Other Significant Matters

Segment Reporting (Topic 280) In November 2023, the FASB issued Accounting Standards Update "ASU" No. 2023-07, Improvements to Reportable Segment Disclosures ("ASU No. 2023-07")

This update changes the reportable segment disclosure requirements requiring enhanced disclosures about significant segment expenses. Public entities are required to disclose significant segment expenses that are regularly provided to the chief operating decision maker and to disclose how reported measures of segment profit or loss are used in assessing segment performance and allocating resources.

ASU No. 2023-07 are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted.

The adoption of this guidance is not expected to have a material impact on our consolidated financial statements.

Income Taxes (Topic 740) In December 2023, the FASB issued Accounting Standards Update "ASU" No. 2023-09, Improvements to Income Tax Disclosures (ASU No. 2023-09)

The amendments within ASU No. 2023-09 address investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. This Update also includes certain other amendments to improve the effectiveness of income tax disclosures

The ASU’s amendments are effective for public business entities for fiscal years beginning after December 15, 2024. Early adoption is permitted

The adoption of this guidance is not expected to have a material impact on our consolidated financial statements.

 

 
6

 
 

3. Revenues:

 

Disaggregated revenues by type of service and by country are provided below for the three months ended March 31, 2024 and 2023. No individual customer or country outside of the U.S. accounted for 10.0% or more of our consolidated revenues for the three months ended March 31, 2024 or 2023.

 

  

Three Months Ended March 31,

 
  

2024

  

2023

 
         

Insurance:

        

Underwriting

 $498.4  $460.5 

Claims

  205.6   191.1 

Total revenues

 $704.0  $651.6 

 

 

  

Three Months Ended March 31,

 
  

2024

  

2023

 

Revenues:

        

United States

 $581.1  $551.8 

United Kingdom

  51.9   46.9 

Other countries

  71.0   52.9 

Total revenues

 $704.0  $651.6 

 

7

 

Contract assets are defined as an entity's right to consideration in exchange for goods or services that the entity has transferred to a customer when that right is conditioned on something other than the passage of time. As of March 31, 2024 and December 31, 2023, we had no contract assets. Contract liabilities are defined as an entity's obligation to transfer goods or services to a customer for which the entity has received consideration (or an amount of consideration is due) from the customer. As of March 31, 2024 and December 31, 2023, we had contract liabilities that primarily related to unsatisfied performance obligations to provide customers with the right to use and update the online content over the remaining contract term of $638.6 million and $375.1 million, respectively. Contract liabilities, which are current and noncurrent, are included in "Deferred revenues" and "Other noncurrent liabilities" in our condensed consolidated balance sheets, respectively, as of March 31, 2024 and December 31, 2023.

 

The following is a summary of the change in contract liabilities from December 31, 2023 through March 31, 2024:

 

Contract liabilities at December 31, 2023

 $375.1 

Revenue

  (704.0)

Foreign currency translation adjustment

  0.4 

Billings

  967.1 

Contract liabilities at March 31, 2024

 $638.6 

 

Our most significant remaining performance obligations relate to providing customers with the right to use and update the online content over the remaining contract term. Our disclosure of the timing for satisfying the performance obligation is based on the requirements of contracts with customers. However, from time to time, these contracts may be subject to modifications, impacting the timing of satisfying the performance obligations. These performance obligations, which are expected to be satisfied within one year, comprised approximately 99% of the balance at March 31, 2024 and December 31, 2023.

 

We recognize an asset for incremental costs of obtaining a contract with a customer if we expect the benefits of those costs to be longer than one year. As of March 31, 2024 and December 31, 2023, we had deferred commissions of $79.0 million and $76.4 million, respectively, which have been included in "Prepaid expenses" and "Other noncurrent assets" in our accompanying condensed consolidated balance sheets.

 

8

 
 

4. Investments and Fair Value Measurements:

 

We have certain assets and liabilities that are reported at fair value in our accompanying condensed consolidated balance sheets. To increase consistency and comparability of assets and liabilities recorded at fair value, ASC 820-10, Fair Value Measurements, established a three-level fair value hierarchy to prioritize the inputs to valuation techniques used to measure fair value. ASC 820-10 requires disclosures detailing the extent to which companies measure assets and liabilities at fair value, the methods and assumptions used to measure fair value, and the effect of fair value measurements on earnings. In accordance with ASC 820-10, we applied the following fair value hierarchy:

 

Level 1 -

Assets or liabilities for which the identical item is traded on an active exchange, such as publicly-traded instruments.

   

Level 2 -

Assets or liabilities valued based on observable market data for similar instruments.

   

Level 3 -

Assets or liabilities for which significant valuation assumptions are not readily observable in the market; instruments valued based on the best available data, some of which are internally-developed, and considers risk premiums that market participants would require.

 

The fair values of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, and short-term debt approximate their carrying amounts, because of the short-term nature of these instruments. Our investments in registered investment companies, which are Level 1 assets measured at fair value on a recurring basis, were $1.1 million and $1.2 million as of March 31, 2024 and December 31, 2023, respectively. Our investments in registered investment companies are valued using quoted prices in active markets multiplied by the number of shares owned and were included in "Other current assets" in our accompanying condensed consolidated balance sheets. 

    

We elected not to carry our long-term debt at fair value. The carrying value of the long-term debt represents amortized cost, inclusive of unamortized premium, and net of unamortized discount and debt issuance costs. We assess the fair value of these financial instruments based on an estimate of interest rates available to us for financial instruments with similar features, our current credit rating, and spreads applicable to us. The following table summarizes the carrying value and estimated fair value of these financial instruments as of March 31, 2024 and December 31, 2023, respectively:

 

     

March 31, 2024

   

December 31, 2023

 
 

Fair Value

 

Carrying

   

Estimated

   

Carrying

   

Estimated

 
 

Hierarchy

 

Value

   

Fair Value

   

Value

   

Fair Value

 

Financial instruments not carried at fair value:

                                 

Senior notes (Note 10)

Level 2

  $ 2,834.1     $ 2,687.8     $ 2,833.7     $ 2,735.3  

 

As of March 31, 2024 and December 31, 2023, we had securities without readily determinable market values of $205.2 million and $200.9 million, respectively, which were accounted for at cost. We do not have the ability to exercise significant influence over the investees’ operating and financial policies and do not hold investments in common stock or in-substance common stock in such entities. As of March 31, 2024 and December 31, 2023, we also had investments in private companies of $26.6 million and $30.5 million, respectively, accounted for in accordance with ASC 323-10-25, The Equity Method of Accounting for Investments in Common Stock ("ASC 323-10-25") as equity method investments. All such investments were included in "Other noncurrent assets" in our accompanying condensed consolidated balance sheets. For the three months ended March 31, 2024, there was no provision for credit losses related to these investments.

 

9

 
 

5. Leases:

 

We have operating and finance leases for corporate offices, data centers, and certain equipment that are accounted for under ASC 842, Leases ("ASC 842").

 

The following table presents the consolidated lease cost and cash paid for amounts included in the measurement of lease liabilities for finance and operating leases for the three months ended March 31, 2024 and 2023, respectively:

 

  

Three Months Ended March 31,

 
  

2024

  

2023

 

Lease cost:

        

Operating lease cost (1)

 $8.5  $9.0 

Sublease income

  (1.0)  (0.4)

Finance lease costs:

        

Depreciation of finance lease assets (2)

  4.4   3.7 

Interest on finance lease liabilities (3)

  0.5   0.1 

Total lease cost

 $12.4  $12.4 
         

Other information:

        

Cash paid for amounts included in the measurement of lease liabilities

        

Operating cash outflows from operating leases

 $(8.9) $(9.0)

Operating cash outflows from finance leases

 $(0.5) $(0.1)

Financing cash outflows from finance leases

 $(2.8) $(1.6)

  _______________

(1) Included in "Cost of revenues" and "Selling, general and administrative" expenses in our accompanying condensed consolidated statements of operations

(2) Included in "Depreciation and amortization of fixed assets" in our accompanying condensed consolidated statements of operations

(3) Included in "Interest expense" in our accompanying condensed consolidated statements of operations

 

The following table presents weighted-average remaining lease terms and weighted-average discount rates for the consolidated finance and operating leases as of March 31, 2024 and 2023, respectively:  

 

  

March 31,

 
  

2024

  

2023

 

Weighted-average remaining lease term - operating leases (in years)

  7.9   8.5 

Weighted-average remaining lease term - finance leases (in years)

  3.3   4.0 

Weighted-average discount rate - operating leases

  4.0%  3.9%

Weighted-average discount rate - finance leases

  4.2%  3.3%

 

Our ROU assets and lease liabilities for finance leases were $48.8 million and $44.1 million, respectively, as of March 31, 2024. Our ROU assets and lease liabilities for finance leases were $41.2 million and $34.5 million, respectively, as of December 31, 2023. Our ROU assets for finance leases were included in "Fixed assets, net" in our accompanying condensed consolidated balance sheets. Our lease liabilities for finance leases were included in the "Short-term debt and current portion of long-term debt" and "Long-term debt" in our accompanying condensed consolidated balance sheets (see Note 10. Debt).

 

Maturities of lease liabilities for the remainder of 2024 and the years through 2029 and thereafter are as follows:

 

  

March 31, 2024

 

Years Ending

 

Operating Leases

  

Finance Leases

 

2024

 $24.9  $16.6 

2025

  34.7   16.7 

2026

  33.2   6.1 

2027

  33.0   5.6 

2028

  31.7   3.2 

2029 and thereafter

  104.0    

Total lease payments

  261.5   48.2 

Less: Amount representing interest

  (37.7)  (4.1)

Present value of total lease payments

 $223.8  $44.1 

 

10

 
 

6. Acquisitions:

 

2024 Acquisitions

 

On  January 8, 2024, we completed the acquisition of 100 percent of Rocket Enterprise Solutions GmbH ("Rocket") for a net cash purchase price of $10.1 million, of which $2.2 million represents a deferred payment and $0.3 million represents a holdback payment. The majority of the purchase price was allocated to goodwill as we did not incur any material liabilities. Rocket’s strong property claims and underwriting technology has been widely adopted by many of the largest insurers and service providers across Germany and Austria. Rocket has become a part of our claims category. The acquisition, which follows a strategic investment by Verisk in Rocket in 2022, will further Verisk's expansion in Europe and the Company’s goal of helping insurers and claims service providers leverage more holistic data and technology tools to enhance the claims experience.

 

For the three months ended March 31, 2024 and 2023, we incurred transaction costs of $0.1 million and $1.0 million, respectively. The transaction costs were included within "Selling, general and administrative" expenses in our accompanying condensed consolidated statements of operations. The 2024 acquisition was immaterial to our condensed consolidated statement of operations for the three months ended March 31, 2024 and 2023, and therefore, supplemental information disclosure on an unaudited pro forma basis is not presented.

 

Acquisition Escrows and Related Liabilities

 

Pursuant to the related acquisition agreements, we have funded various escrow accounts to satisfy pre-acquisition indemnity and tax claims arising subsequent to the applicable acquisition dates. At  March 31, 2024 and  December 31, 2023, the current portion of the escrows amounted to $3.8 million and $3.9 million, respectively. There were no noncurrent portions of the escrows. The current portion of the escrows have been included in "Other current assets" in our accompanying condensed consolidated balance sheets.

 

As of March 31, 2024, the acquisitions of Rocket Enterprise Solutions GmbH, LLC, Krug Sachverständigen GmbH, Mavera Holding AB, and Morning Data Limited included acquisition-related contingent payments, for which the sellers of these acquisitions could receive additional payments by achieving the specific predetermined revenue, EBITDA, and/or EBITDA margin earn-out targets for exceptional performance. We believe that the liabilities recorded as of  March 31, 2024 and  December 31, 2023 reflect the best estimate of acquisition-related contingent payments. The associated current portion of the contingent payments were $0.0 million and $10.0 million as of  March 31, 2024 and  December 31, 2023, respectively. The associated noncurrent portion of contingent payments were $2.1 million as of  March 31, 2024 and  December 31, 2023, respectively.

 

11

 
 

7. Dispositions and Discontinued Operations:

 

On  February 1, 2023, we completed the sale of our Energy business to Planet Jersey Buyer Ltd, an entity that was formed on behalf of, and is controlled by, The Veritas Capital Fund VIII, L.P. and its affiliated funds and entities (“Veritas Capital”), for a net cash sale price of $3,066.4 million paid at closing (reflecting a base purchase price of $3,100.0 million, subject to customary purchase price adjustments for, among other things, the cash, working capital, and indebtedness of the companies as of the closing) and up to $200.0 million of additional contingent cash consideration based on Veritas Capital’s future return on its investment paid through a Class C Partnership interest.

 

The Energy business, which was part of our Energy and Specialized Markets segment, was classified as discontinued operations per ASC 205-20 as we determined, qualitatively and quantitatively, that this transaction represented a strategic shift that had a major effect on our operations and financial results. Accordingly, all results of the Energy business have been removed from continuing operations and presented as discontinued operations in our consolidated statements of operations for all periods presented. Additionally, all assets and liabilities of the Energy business were classified as assets and liabilities held for sale within our consolidated balance sheet as of  December 31, 2022. In connection with the held for sale classification, we recognized an impairment of $303.7 million on the remeasurement of the disposal group held for sale, which has been included in discontinued operations in our consolidated statement of operations. Upon classification of the Energy business as held for sale, its cumulative foreign currency translation adjustment within shareholders’ equity was included with its carrying value, which primarily resulted in the impairment. When we closed on the sale of our Energy business on  February 1, 2023, we recognized a loss of $128.4 million. As a result of closing adjustments in the second and fourth quarter of 2023, we incurred an additional net loss of $2.7 million.

 

The following table presents the financial results from discontinued operations, net of income taxes in our consolidated statement of income for the periods indicated:

 

   

For the Three Months Ended March 31,

 
   

2023

 

Revenues

  $ 46.8  

Operating expenses:

       

Cost of revenues (exclusive of items shown separately below)

    18.3  

Selling, general and administrative

    33.0  

Depreciation and amortization of fixed assets

    -  

Amortization of intangible assets

    -  

Other operating loss, net

    128.4  

Total operating expenses

    179.7  

Operating loss

    (132.9 )

Other income (expense):

       

Investment loss and others, net

    (4.0 )

Loss from discontinued operations before income taxes

    (136.9 )

Income tax expense

    (1.1 )

Loss from discontinued operations, net of income taxes

  $ (138.0 )

 

The consolidated statements of cash flows have not been adjusted to separately disclose cash flows related to discontinued operations. The following table presents selected cash flow information associated with our discontinued operations:

 

   

For the Three Months Ended March 31,

 
   

2023

 

Significant non-cash operating activities:

       

Depreciation and amortization of fixed assets

  $ -  

Amortization of intangible assets

    -  

Operating lease right-of-use assets, net

    0.1  

Investing activities:

       

Capital expenditures

    (6.5 )

Supplemental disclosures:

       

Fixed assets included in accounts payable and accrued liabilities

    -  

 

 

12

 
 

8. Goodwill and Intangible Assets:

 

The following is a summary of the change in goodwill from December 31, 2023 through March 31, 2024, for our Insurance operating segment:

 

  

Insurance

 

Goodwill at December 31, 2023

 $1,760.8 

Acquisitions(1)

  10.6 

Purchase accounting reclassifications

  0.7 

Foreign currency translation adjustment

  (11.5)

Goodwill at March 31, 2024

 $1,760.6 

_______________

(1) See Note 6. Acquisitions for more information.

 

Goodwill and intangible assets with indefinite lives are subject to impairment testing annually as of  June 30, or whenever events or changes in circumstances indicate that the carrying amount  may not be fully recoverable. When evaluating goodwill for impairment, we may decide to first perform a qualitative assessment, or “Step Zero” impairment test, to determine whether it is more likely than not that impairment has occurred. The qualitative assessment includes a review of macroeconomic conditions, industry and market considerations, internal cost factors, and our own overall financial and share price performance, among other factors. If we do not perform a qualitative assessment, or if we determine that it is more likely than not that the carrying amounts of our reporting units exceeds their fair value, we perform a quantitative assessment and calculate the estimated fair value of the respective reporting unit. If the carrying amount of a reporting unit’s goodwill exceeds the fair value of that goodwill, an impairment loss is recognized. As of  June 30, 2023, we completed our Step Zero impairment test at the reporting unit level and determined it was not more likely than not that the carrying values of our reporting units exceeded their fair values. We did not recognize any additional impairment charges related to our goodwill and indefinite-lived intangible assets. Subsequent to performing our annual impairment test, we continued to monitor for events that would trigger an interim impairment test; we did not identify any such events.

 

There were no impairments to long lived assets for the three months ended March 31, 2024 and 2023.

 

Our intangible assets and related accumulated amortization consisted of the following:

 

  

Weighted Average Useful Life (in years)

  

Cost

  

Accumulated Amortization

  

Net

 

March 31, 2024

                

Technology-based

  8  $369.1  $(267.7) $101.4 

Marketing-related

  6   42.6   (39.0)  3.6 

Contract-based

  6   5.0   (5.0)   

Customer-related

  13   540.4   (200.1)  340.3 

Database-based

  8   15.2   (8.4)  6.8 

Total intangible assets

     $972.3  $(520.2) $452.1 

December 31, 2023

                

Technology-based

  8  $370.2  $(261.2) $109.0 

Marketing-related

  6   42.7   (38.7)  4.0 

Contract-based

  6   5.0   (5.0)   

Customer-related

  13   542.1   (190.7)  351.4 

Database-based

  8   15.2   (7.9)  7.3 

Total intangible assets

     $975.2  $(503.5) $471.7 

 

13

 

Amortization expense related to intangible assets for the three months ended  March 31, 2024 and 2023 was $18.5 million and $17.7 million, respectively. Estimated amortization expense for the remainder of 2024 and the years through 2029 and thereafter for intangible assets subject to amortization is as follows:

 

Years Ending

 

Amount

 

2024

 $53.5 

2025

  62.8 

2026

  60.9 

2027

  52.7 

2028

  45.6 

2029 and thereafter

  176.6 

Total

 $452.1 

 

14

 
 

9. Income Taxes:

 

Our effective tax rate for the three months ended March 31, 2024 was 20.3% compared to the effective tax rate for the three months ended March 31, 2023 of 27.1%. The effective tax rate for the three months ended March 31, 2024 was lower than the effective tax rate for the three months ended March 31, 2023 primarily due to tax charges incurred in structuring the sale of our Energy business in the prior year. The difference between statutory tax rates and our effective tax rate is primarily due to state and local taxes, partially offset by tax benefits attributable to equity compensation.

 

A number of jurisdictions have begun to enact legislation to implement the Organization for Economic Co-operation and Development’s 15% global minimum tax regime with effect from January 1, 2024. We do not expect these changes to have a material impact on our consolidated financial statements.

 

15

 
 

10. Debt:

 

The following table presents short-term and long-term debt by issuance as of March 31, 2024 and December 31, 2023:

 

 

Issuance Date

 

Maturity Date

 

2024

  

2023

 

Short-term debt and current portion of long-term debt:

           

Credit Facilities:

           

Syndicated revolving credit facility

Various

 

Various

 $  $- 

Finance lease liabilities (1)

Various

 

Various

  16.4   14.5 

Short-term debt and current portion of long-term debt

  16.4   14.5 

Long-term debt:

           

Senior notes:

           

3.625% senior notes, less unamortized discount and debt issuance costs of $(9.5) and $(9.6), respectively

5/13/2020

 

5/15/2050

  490.5   490.4 

4.125% senior notes, inclusive of unamortized premium, net of unamortized discount and debt issuance costs, of $7.4 and $7.8, respectively

3/6/2019

 

3/15/2029

  607.4   607.8 

4.000% senior notes, less unamortized discount and debt issuance costs of $(1.4) and $(1.8), respectively

5/15/2015

 

6/15/2025

  898.6   898.2 

5.500% senior notes, less unamortized discount and debt issuance costs of $(3.8) and $(3.8), respectively

5/15/2015

 

6/15/2045

  346.2   346.2 

5.750 senior notes, less unamortized discount and debt issuance costs of $(8.6) and $(8.9), respectively

3/3/2023

 

4/1/2033

  491.4   491.1 

Finance lease liabilities (1)

Various

 

Various

  27.7   20.0 

Syndicated revolving credit facility debt issuance costs

Various

 

Various

  (1.5)  (1.5)

Long-term debt

  2,860.3   2,852.2 

Total debt

 $2,876.7  $2,866.7 

_______________

(1) Refer to Note 5. Leases

 

Senior Notes

 

As of March 31, 2024 and December 31, 2023, we had senior notes with an aggregate principal amount of $2,850.0 million outstanding, and were in compliance with our financial and other covenants.

 

Credit Facilities

 

We have a syndicated revolving credit facility ("Syndicated Revolving Credit Facility") with a borrowing capacity of $1,000 million with Bank of America N.A., HSBC Bank USA, N.A., JP Morgan Chase Bank, N.A., Wells Fargo Bank, National Association, Citibank, N.A., Morgan Stanley Bank, N.A., TD Bank, N.A., Goldman Sachs Bank USA, and the Northern Trust Company. The Syndicated Revolving Credit Facility  may be used for general corporate purposes, including working capital needs and capital expenditures, acquisitions, dividend payments, and the share repurchase program (the "Repurchase Program"). As of March 31, 2024, we were in compliance with all financial and other debt covenants under our Syndicated Revolving Credit Facility. As of March 31, 2024 and December 31, 2023, the available capacity under the Syndicated Revolving Credit Facility was $995.4 million, which takes into account outstanding letters of credit of $4.6 million. 

 

16

 
 

11. Stockholders’ Equity:

 

We have 2,000,000,000 shares of authorized common stock as of  March 31, 2024 and December 31, 2023. Our common shares have rights to any dividend declared by the board of directors (the "Board"), subject to any preferential or other rights of any outstanding preferred stock, and voting rights to elect all current members of the Board. At March 31, 2024 and December 31, 2023, the adjusted closing price of our common stock was $235.73 and $238.86 per share, respectively. 

 

We have 80,000,000 shares of authorized preferred stock, par value $0.001 per share. The preferred shares have preferential rights over the common shares with respect to dividends and net distribution upon liquidation. We did not issue any preferred shares as of March 31, 2024 and December 31, 2023

 

On February 14, 2024, our Board approved a cash dividend of $0.39 and per share of common stock issued and outstanding to the holders of record as of March 15, 2024. Cash dividends of $55.8 million and $49.2 million were paid during the three months ended March 31, 2024 and 2023, respectively, and recorded as a reduction to retained earnings.

 

Share Repurchase Program

 

In  December 2023, we entered into an Accelerated Share Repurchase ("ASR") agreement (the "December 2023 ASR Agreement") to repurchase shares of our common stock for an aggregate purchase price of $250.0 million with Goldman Sachs & Co. LLC. All ASR agreements are accounted for as a treasury stock transaction and forward stock purchase agreement indexed to our common stock. The forward stock purchase agreements are classified as equity instruments under ASC 815-40, Contracts in Entity's Own Equity ("ASC 815-40") and deemed to have a fair value of zero at the respective effective date. The aggregate purchase price was recorded as a reduction to stockholder's equity in our condensed consolidated statements of changes in stockholder's equity for the three months ended March 31, 2024Upon payment of the aggregate purchase price on December 14, 2023we received an initial delivery of 873,479 shares of our common stock. Upon the final settlement of the December 2023 ASR Agreement in February 2024, we received 178,227 additional shares as determined based on the volume weighted average share price of our common stock of $237.71 during the term of the December 2023 ASR Agreement. These repurchases for the three months ended March 31, 2024 resulted in a reduction of outstanding shares used to calculate the weighted average common shares outstanding for basic and diluted earnings per share ("EPS").

 

In  March 2024, we entered into an additional ASR agreement (the "March 2024 ASR Agreement") to repurchase shares of our common stock for an aggregate purchase price of $200.0 million with JPMorgan Chase Bank, National Association. Upon payment of the aggregate purchase price on March 13, 2024, we received an initial delivery of 714,046 shares of our common stock. Upon the final settlement of the March 2024 ASR Agreement in April 2024, we received 148,286 additional shares, as determined based on the volume weighted average share price of our common stock of $231.93 during the term of the March 2024 ASR Agreement. The initial share delivery reduced our outstanding shares used to calculate the weighted average common shares outstanding for basic and diluted EPS. 

 

We utilized cash received from operations for these repurchases. As of March 31, 2024, we had $1,441.5 million available to repurchase shares through our Repurchase Program, inclusive of the $1.0 billion authorization approved by our board on February 14, 2024.

 

The Inflation Reduction Act of 2022, which was enacted into law on August 16, 2022, imposed a nondeductible 1% excise tax on the net value of certain stock repurchases made after December 31, 2022. Through the first quarter of 2024, we recorded total excise tax of $26.4 million, which has been included within treasury stock, as part of the cost basis of the stock repurchased, and other current and other noncurrent liabilities in our condensed consolidated balance sheet as of March 31, 2024.

 

17

 

Treasury Stock

 

As of March 31, 2024, our treasury stock consisted of 401,217,853 shares of common stock, carried at cost. During the three months ended March 31, 2024, we transferred 368,729 shares of common stock from the treasury shares at a weighted average treasury stock price of $22.63 per share.

 

Earnings Per Share

 

Basic EPS is computed by dividing net income attributable to Verisk by the weighted average number of common shares outstanding during the period. The computation of diluted EPS is similar to the computation of basic EPS except that the denominator is increased to include the number of additional common shares that would have been outstanding, using the treasury stock method, if the dilutive potential common shares, including vested and nonvested stock options, nonvested restricted stock awards, nonvested restricted stock units, nonvested performance share units ("PSU"), and nonvested deferred stock units, had been issued.

 

The following is a presentation of the numerators and denominators of the basic and diluted EPS computations for the three months ended March 31, 2024 and 2023:

 

  

Three Months Ended March 31,

 
  

2024

  

2023

 

Numerator used in basic and diluted EPS:

        

Income from continuing operations

 $219.4  $194.4 

Less: Net loss (income) attributable to noncontrolling interests

  0.2   (0.1)

Loss from discontinued operations, net of tax

     (138.0)

Net income attributable to Verisk

 $219.6  $56.3 

Denominator:

        

Weighted average number of common shares used in basic EPS

  143,298,163   152,032,255 

Effect of dilutive shares:

        

Potential common shares issuable from stock options and stock awards

  675,371   677,064 

Weighted average number of common shares and dilutive potential common shares used in diluted EPS

  143,973,534   152,709,319 

 

The potential shares of common stock that were excluded from diluted EPS were 254,861 and 1,399,406 for the three months ended March 31, 2024 and 2023, respectively, because the effect of including these potential shares was anti-dilutive.

 

Accumulated Other Comprehensive Income (Loss)

 

The following is a summary of accumulated other comprehensive income (loss) as of March 31, 2024 and December 31, 2023:

 

  

2024

  

2023

 

Foreign currency translation adjustment

 $115.3  $130.7 

Pension and postretirement adjustment, net of tax

  (71.7)  (72.5)

Accumulated other comprehensive income

 $43.6  $58.2 

 

18

 

The before-tax and after-tax amounts of other comprehensive income (loss) income for the three months ended March 31, 2024 and 2023 are summarized below:

 

  

Before Tax

  

Tax (Expense) Benefit

  

After Tax

 

For the Three Months Ended March 31, 2024

            

Foreign currency translation adjustment attributable to Verisk

 $(15.4) $  $(15.4)

Foreign currency translation adjustment attributable to noncontrolling interests

  1.1      1.1 

Foreign currency translation adjustment

  (14.3)     (14.3)

Pension and postretirement adjustment before reclassifications

  2.1   (0.5)  1.6 

Amortization of net actuarial loss and prior service benefit reclassified from accumulated other comprehensive losses (1)

  (1.0)  0.2   (