Verisk Analytics (VRSK), a leading data analytics provider, recently posted solid financials for the fourth quarter of 2016. Revenues increased 6% y-o-y to $506.1 mn, mostly in line with consensus estimates. Decision Analytics segment’s revenues rose 6.5% to $323.5 mn and accounted for 63.9% of total revenues. Risk Assessment segment’s revenues (36.1% of total revenues) grew 5.1% to $182.6 mn. Adjusted EBITDA climbed 7% to $257.8 mn, and EBITDA margin improved 50 basis points to 50.9%. Adjusted earnings per share jumped 8.1% to 80 cent beating analysts’ average projection by 3 cents. For full year 2016, Verisk earned $3.11 per share (growth of 8.4%) on revenues of $2 bn (growth of 13.3%).
Verisk ended Q4 with $135.1 mn in cash and cash equivalents and long-term debt of $2.28 bn. In 2016, the company generated operating cash flow of $546.1 mn and spent $156.5 mn on capex and $326.8 mn on share buybacks. At the year-end, the company had $636 mn worth of shares remaining under its share repurchase authorization.
To note, M&A deals have been an important part of Verisk’s growth strategy. In Q4, it acquired UK-based GeoInformation Group, a premier provider of geographic data solutions. The company also bought MarketStance, a primary provider of market intelligence and analytics services in the insurance industry. In 2017, Verisk purchased Arium, a liability risk modeling and decision support firm, and signed an agreement to acquire Fintellix, a Bangalore-based data solutions company specializing in the development of data management platforms and regulatory reporting solutions for financial institutions. I expect the acquisitions to be accretive for the company in the near future.
So, I believe Verisk to continue to deliver outstanding data analytics solutions to its customers across its core verticals of insurance, natural resources, and financial services. The company’s ability to generate strong cash will enable it to meet its deleveraging objectives and helps it invest on behalf of its shareholders.
I expect Verisk's shares to continue to rebound, with medium-term target at $90.