Verisk outlines $3.05B–$3.08B 2025 revenue target as AI strategy and subscription growth drive long-term model

Earnings Call Insights: Verisk Analytics (VRSK) Q3 2025

MANAGEMENT VIEW

* CEO Lee Shavel reported "organic constant currency revenue growth of 5.5% driven by strong subscription revenue growth of 8.7%." He noted that the company experienced "an exceptionally low level of severe weather resulting in a decline in claims assignments across our Xactware system" which contributed to an 8.8% decline in transactional revenues on an OCC basis.
* Shavel stated that "2025 is on track to be our strongest sales year yet with sales teams across Verisk exceeding an ambitious quota for the second straight year." He highlighted rapid adoption and expansion of AI-enhanced solutions, including growth in XactXpert and XactAI, and mentioned that "year-to-date, sales performance is now more than double original quotas."
* He provided an update on the AccuLynx transaction, explaining "FTC approval of the transaction has been delayed... we do not expect to realize any material benefit from the pending transaction in 2025 and have removed any operating results from our 2025 guidance."
* CFO Elizabeth Mann reported "third quarter revenue was $768 million, up 5.9% versus the prior year," and "net income was $226 million, a 2.5% increase versus the prior year while diluted GAAP earnings per share were $1.61, up 5%." Mann added "adjusted EBITDA margin of 55.8%."
* Mann noted, "Subscription revenues, which comprised 84% of our total revenue in the quarter, grew 8.7% on an OCC basis," and highlighted "double-digit subscription growth in Extreme Event Solutions," as well as ongoing success in anti-fraud, Specialty Business Solutions, and Life Solutions.

OUTLOOK

* Mann stated, "We do not expect to realize any material financial benefit from the pending [AccuLynx] transaction in 2025 and have therefore removed any operating results from our 2025 guidance."
* "We expect consolidated revenue to be in the range of $3.05 billion to $3.08 billion. We expect adjusted EBITDA to be in the range of $1.69 billion to $1.72 billion and adjusted EBITDA margins to remain in the 55% to 55.8% range."
* "We continue to expect diluted adjusted earnings per share in the range of $6.80 to $7."
* The company expects net interest expense in the range of $165 million to $185 million and a tax rate in the 23% to 25% range.
* Compared to the previous quarter, guidance has been revised to exclude any contribution from AccuLynx in 2025 due to FTC review delays.

FINANCIAL RESULTS

* Mann reported "third quarter revenue was $768 million, up 5.9% versus the prior year," and "net income was $226 million, a 2.5% increase versus the prior year." Diluted GAAP EPS was $1.61, up 5%.
* OCC revenues grew 5.5% with underwriting up 5.8% and claims up 5%.
* Adjusted EBITDA margin was reported at 55.8%, up 60 basis points from the prior year.
* Net cash from operating activities increased 36% to $404 million, and free cash flow rose 40% to $336 million, attributed primarily to improved collections and lower cash taxes.
* Mann described the quarter as impacted by "a historically low level of weather activity and therefore, claims volumes that were significantly lower than our estimate of a typical year" and "the reduction in a government contract."
* Transactional revenues, comprising 16% of total revenues, declined 8.8% on an OCC basis, mainly due to lower volumes in Property Estimating Solutions.

Q&A

* Manav Patnaik, Barclays: Asked about the AccuLynx deal and its integration with competitors like ServiceTitan. Mann responded, "the FTC is reviewing the deal, and we continue to work collaboratively and expeditiously with them."
* Toni Kaplan, Morgan Stanley: Inquired about AI startup competition. Shavel explained, "without access to kind of the proprietary content in terms of data sets that we have, expertise, specific knowledge of the insurance industry... it's difficult to achieve scale in delivering value for clients."
* Faiza Alwy, Deutsche Bank: Asked about pricing opportunity amid slowing industry premiums. Shavel indicated that AI enhancements and integration of data sets provide incremental value, supporting upsell and subscription growth.
* Andrew Steinerman, JPMorgan: Questioned auto underwriting and LightSpeed's uniqueness. Mann replied, "that business itself doesn't have any particular linkage to premiums."
* Keen Fai Tong, Goldman Sachs: Sought clarification on guidance reduction. Mann maintained details were provided in aggregate, without further breakdown.
* Ashish Sabadra, RBC: Asked about weather-related headwinds and sales momentum. Mann confirmed that sales momentum will continue into next year.
* Charles Peters, Raymond James: Asked about cash flow conversion rates. Mann emphasized "strong free cash flow growth is and will be the fuel to continue to drive our capital allocation engine."
* Kelsey Zhu, Autonomous Research: Asked about auto market share strategy. Mann stated "no change" since last quarter and emphasized focus on product differentiation.
* Jeffrey Silber, BMO: Asked about industry premium growth. Mann cited "high single-digit premium growth in 2024... normalizing to mid-single digits in 2025."
* Alex Kramm, UBS: Inquired about M&A outlook. Shavel said the focus remains on AccuLynx and SuranceBay, but market opportunities are monitored.
* Russell Quelch, Rothschild: Questioned impact of client AI on Verisk data sets. Shavel underlined that benchmarking against industry data remains critical for clients.
* Scott Wurtzel, Wolfe Research: Asked about technical integration of AccuLynx during FTC review. Mann clarified legal requirements to operate independently until approval.
* David Motemaden, Evercore: Sought details on OCC growth normalization. Mann attributed recent deceleration to expected auto softness, government contract, and light weather activity.
* Jason Haas, Wells Fargo: Asked about OCC growth deceleration. Mann reiterated temporary factors, not customer hesitation, were responsible.
* Andrew Nicholas, William Blair: Asked about strategic client feedback on AccuLynx. Shavel and Mann described positive high-level client feedback.
* Jeff Meuler, Baird: Asked about headwinds in subscription vs. transactional revenue. Mann confirmed government contract affects subscription, while weather and auto mainly impact transactional revenues.

SENTIMENT ANALYSIS

* Analysts displayed a neutral to slightly cautious tone, focusing on deal delays, competitive pressures, OCC growth deceleration, and weather-related headwinds. Questions probed the sustainability of subscription growth, competitive differentiation in auto, and clarity on guidance reductions.
* Management maintained a confident and constructive tone during prepared remarks and Q&A, repeatedly emphasizing the resilience of subscription growth and long-term confidence in guidance targets. Statements such as "we remain very confident in our ability to continue to deliver growth in that 6% to 8% range on an ongoing basis" (Shavel) signaled ongoing optimism.
* Compared to the previous quarter, both analysts and management exhibited increased caution around near-term headwinds and regulatory delays but sustained confidence in long-term strategy and growth model.

QUARTER-OVER-QUARTER COMPARISON

* The current quarter reflects a revision in 2025 guidance to exclude AccuLynx due to regulatory delays, whereas the previous quarter included expectations for its contribution.
* Subscription growth remained robust, but OCC revenue growth decelerated from 7.9% last quarter to 5.5% this quarter, driven by temporary weather and government contract headwinds.
* Management tone shifted slightly to address more near-term challenges, though long-term confidence in the strategic model and AI investment persisted.
* Analyst focus shifted from integration synergies and growth drivers in the prior quarter to current quarter headwinds, guidance adjustments, and regulatory uncertainty.

RISKS AND CONCERNS

* Delayed FTC approval for the AccuLynx acquisition has removed any expected 2025 benefit from guidance.
* Lower transactional revenue stemmed from a historic low in severe weather, impacting claims volumes and Property Estimating Solutions.
* Ongoing competitive pressures in the auto segment have persisted, with management focusing on differentiation and product innovation to address this.
* Reduction in a government contract further affected revenue growth, though management characterizes this as temporary.
* Management continues to monitor the regulatory process and competitive landscape, especially with the rise of AI startups.

FINAL TAKEAWAY

Verisk Analytics emphasized resilience in subscription revenues, strategic investment in AI-enhanced solutions, and strengthened client engagement, even as near-term results were impacted by unusually light weather and regulatory delays to the AccuLynx acquisition. Management reaffirmed guidance for 2025, targeting $3.05 billion to $3.08 billion in revenue and adjusted EPS of $6.80 to $7, with robust margin expectations. While facing temporary headwinds, the company remains confident in its long-term growth strategy and ability to deliver value to clients and shareholders.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/vrsk/earnings/transcripts]

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