Executive Summary / Key Takeaways

• Verisk Analytics delivered a strong start to 2025, reporting 7.9% organic constant currency (OCC) revenue growth in Q1, highlighted by robust 10.6% subscription growth across most business units.
• The company's strategic focus on enhancing client engagement and investing in innovation, particularly through initiatives like Core Lines Reimagine and next-generation models, is driving improved value capture and strong renewal outcomes.
• Operational efficiency and cost discipline, including benefits from global talent optimization, contributed to healthy margin expansion, with adjusted EBITDA margin reaching 55.3% in Q1 2025 and 55% on a trailing 12-month basis.
• Verisk maintains a strong financial position with significant cash flow generation ($444.7 million operating cash flow in Q1 2025) and liquidity, supporting continued investment in the business and substantial capital return to shareholders ($200.1 million in share repurchases and $63 million in dividends in Q1).
• Management reiterated its full-year 2025 guidance, projecting consolidated revenue between $3.03 billion and $3.08 billion and adjusted EBITDA between $1.67 billion and $1.72 billion, signaling confidence in continued predictable growth despite industry headwinds and competitive dynamics.

Powering the Insurance Ecosystem: A Foundation of Data and Innovation

For over 50 years, Verisk Analytics has been deeply embedded within the global insurance industry, evolving from a provider of statistical data to a strategic partner delivering advanced data analytics, software, and scientific research. The company's journey has been marked by a deliberate focus on the insurance ecosystem, evidenced by strategic portfolio management including the divestiture of non-core assets like a healthcare subsidiary, a specialized markets business, and most recently, Atmospheric and Environmental Research (AER) in late 2024. These actions have sharpened Verisk's focus, allowing it to concentrate investments and expertise on the complex challenges faced by insurers today.

At its core, Verisk's business model is built on aggregating vast, proprietary datasets, applying sophisticated analytics, and delivering insights and workflow solutions primarily through a subscription model. This model, which accounted for 83% of total revenue in Q1 2025, provides a durable and predictable revenue stream, underpinning the company's financial stability and enabling consistent investment in innovation.

The insurance industry operates in an environment of increasing complexity, grappling with challenges ranging from inflation and rising reconstruction costs to social inflation, regulatory changes, and the escalating impact of severe weather events. In this landscape, Verisk positions itself as an indispensable partner, providing the critical information and tools necessary for insurers to strengthen operating efficiency, improve underwriting and claims outcomes, combat fraud, and make informed decisions about risk.

The Competitive Arena: Specialized Expertise vs. Broad Data Giants

Verisk operates in a competitive landscape populated by both large, diversified data analytics firms and more niche, specialized providers. Key competitors include companies like TransUnion (TRU), Equifax (EFX), and Fair Isaac Corporation (FICO), who offer overlapping services in risk analytics and decisioning tools, particularly within financial services, but also extending into insurance.

Verisk's primary competitive advantage lies in its deep domain expertise and highly specialized, proprietary data sets tailored specifically for the insurance industry. While companies like TransUnion and Equifax excel in broad consumer credit data aggregation and analytics, and FICO is a leader in credit scoring algorithms, Verisk's strength is in applying advanced analytics, including AI, to insurance-specific data. For instance, its AI models for predictive analytics in insurance offer an estimated 15-20% higher efficiency in loss forecasting compared to more general tools, allowing insurers to price risk more accurately. This specialized capability translates into tangible benefits for clients, such as improved underwriting profitability and more efficient claims processing.

Financially, Verisk demonstrates strong operational efficiency, with a trailing twelve-month (TTM) gross profit margin of 66.52% and an EBITDA margin of 54.31%. While competitors like FICO boast higher operating margins (30-35% range) driven by their high-margin scoring business, Verisk's margins are competitive within its broader segment and reflect the value captured from its specialized offerings. Verisk's ROIC (12-15% range) is also competitive with or superior to some rivals like TransUnion (10-12%), indicating effective capital deployment.

However, Verisk faces challenges. Its reliance on significant R&D investment to maintain its technological edge can result in higher operating costs compared to some competitors. Furthermore, while its focus on the insurance industry is a strength, it also presents a degree of customer concentration risk with large insurers, which could lead to revenue volatility if key contracts are lost, a dynamic less pronounced for competitors with more diversified client bases like TransUnion. Despite these factors, Verisk's strong customer loyalty within the insurance sector, built over decades, provides a significant network effect and a barrier to entry for competitors.

Technological Differentiation: The Engine of Value Creation

Verisk's technological prowess is not merely a supporting function; it is central to its value proposition and competitive moat. The company continuously invests in and develops core and emerging technologies to enhance its offerings:

• Core Data Analytics & Modeling: Verisk leverages advanced statistical models and predictive analytics built on billions of data records. This foundational technology enables solutions like its forms, rules, and loss cost services, providing insurers with the basis for pricing and policy language. The Core Lines Reimagine initiative is modernizing this core, converting data into insights with greater speed. The Actuarial Hub, part of this initiative, provides insights into loss cost trends an estimated 12 months earlier than traditional methods, a critical advantage in volatile markets. Executive Insights reports offer benchmark analysis leveraging statistical data across the six largest lines of insurance, providing clients with a unique view of market trends.
• Property & Reconstruction Cost Data: Verisk's detailed reconstruction cost data, updated monthly (and bimonthly in periods of rapid change), provides granular material and labor cost information across over 470 geographies in North America. This database, comprising over 23,000 line item activities from over 14,000 components, is vital for accurate claims estimation and ensuring appropriate coverage levels in a dynamic economic environment. Aerial-derived analytics are also being integrated into underwriting data solutions to enhance property databases with comprehensive risk profiles.
• Catastrophe Modeling: In its Extreme Events business, Verisk develops sophisticated catastrophe models that help clients evaluate and price risks from severe weather and other perils. The Verisk Synergy Studio, a fully cloud-native platform launching in 2026, is set to deploy Verisk's global suite of catastrophe models, offering a lower cost of ownership and a better understanding of climate risk. Verisk was the first to submit its California wildfire model to the California Department of Insurance, a crucial step in supporting rate adequacy and market stability in a high-risk region.
• AI and Machine Learning: Verisk is increasingly integrating AI across its platforms. A generative AI tool is being introduced within the Mozart Form management platform to help clients efficiently compare changes in proprietary forms, automating a previously manual and time-consuming process. In claims, solutions like Liability Navigator and Discovery Navigator utilize AI to objectively assess bodily injury claims and extract/organize medical data, improving settlement consistency and efficiency.
• Ecosystem Platforms: Verisk is building interconnected ecosystems, such as the white space platform in London for specialty business solutions and the ClaimSearch partnership for anti-fraud. These platforms leverage technology to connect insurers, brokers, adjusters, and third-party vendors, streamlining workflows and enhancing interoperability across the industry. The recent acquisition of Simplitium adds access to 300 third-party models, supporting an open ecosystem within Extreme Events.

The "so what" for investors is clear: Verisk's continuous investment in these technologies enhances the value and stickiness of its solutions, enabling improved price realization and driving subscription growth. These technological advancements strengthen its competitive moat by making its offerings more accurate, efficient, and integrated into client workflows, positioning Verisk as an essential partner rather than a replaceable vendor.

Financial Strength and Performance Momentum

Verisk's financial performance in the first quarter of 2025 demonstrated solid momentum, building on a strong 2024. Revenue reached $753.0 million, a 7% increase year-over-year. Organic constant currency (OCC) revenue growth was 7.9%, fueled by a robust 10.6% increase in subscription revenue. This subscription growth was broad-based, reflecting the success of enhanced client engagement, value-driven pricing, and the uptake of new solutions.

Transactional revenue, which represents a smaller portion of the business (17% in Q1 2025), saw a 4% decline on an OCC basis. This was primarily attributed to the ongoing conversion of transactional contracts to committed subscriptions, softness in personal auto, and lower service revenue in some software areas. However, this was partially offset by better-than-expected transactional growth in Extreme Event Solutions related to securitization. The strategic shift towards subscriptions, while creating some near-term transactional headwinds, enhances the long-term predictability and stability of the revenue base.

Profitability remained strong, with adjusted EBITDA growing 9.5% on an OCC basis. The adjusted EBITDA margin expanded by 130 basis points year-over-year to 55.3% in Q1 2025. This margin expansion reflects the benefits of sales leverage on strong revenue growth, coupled with ongoing cost discipline and global talent optimization efforts. While the company continues to invest in future growth initiatives, the operating model demonstrates inherent economies of scale.

Verisk maintains a healthy balance sheet and robust cash flow generation. Net cash provided by operating activities was $444.7 million in Q1 2025, a 19.5% increase from the prior year, benefiting partly from a federal tax refund. Free cash flow was $391.0 million. The company's business model, where subscriptions are often prepaid, contributes favorably to its cash position and allows it to operate effectively with a working capital deficit.

Total debt stood at $3,750.0 million as of March 31, 2025, resulting in a leverage ratio of 2x EBITDA, which is at the low end of the company's targeted range of 2x to 3x. In March 2025, Verisk issued $700 million in 5.25% senior notes due 2035 and subsequently used a portion of the proceeds in April to repay $500 million of notes due in June 2025, proactively managing its debt maturity profile.

The company remains committed to returning capital to shareholders. In Q1 2025, it paid $63.0 million in cash dividends and repurchased $200.1 million of common stock, funded by cash from operations. The Board's approval of an additional $1.0 billion share repurchase authorization in February 2025 underscores confidence in future cash flow generation and commitment to shareholder returns, with $1,391.5 million available for repurchase as of March 31, 2025.

Outlook and Risks

Verisk reiterated its full-year 2025 guidance, signaling confidence in its ability to continue delivering consistent growth. The company expects consolidated revenue in the range of $3.03 billion to $3.08 billion. Adjusted EBITDA is projected to be between $1.67 billion and $1.72 billion, with adjusted EBITDA margins in the range of 55% to 55.8%, reflecting expected continued operating leverage. Adjusted earnings per share are anticipated to be between $6.80 and $7.10.

This outlook is based on assumptions including current foreign currency exchange rates, interest rates, and a normalized effective tax rate in the range of 23% to 25% for the year, following a nonrecurring tax benefit in Q1 2024. Interest expense is expected to be higher for the remainder of the year due to recent debt transactions. Capital expenditures are anticipated to remain elevated as the company continues to invest in placing new internally developed software projects into service.

Despite the positive outlook, Verisk faces several risks. The insurance industry's exposure to macroeconomic factors like inflation and rising reconstruction costs can impact client profitability and potentially influence their spending on data and analytics, although Verisk's solutions are often seen as essential for managing these very challenges. Severe weather events, while highlighting the value of Verisk's catastrophe modeling and claims solutions, can also strain client resources.

Regulatory changes, particularly concerning data privacy and the use of data in underwriting and claims, pose ongoing compliance risks. Verisk is currently involved in several legal proceedings, including telematics and data privacy litigation, which, while in early stages and with liability currently not estimable, represent potential future liabilities. Macroeconomic sensitivity in certain non-insurance customer segments, such as the federal government and marketing businesses, could also present headwinds, although these represent a small portion of total revenue.

Conclusion

Verisk Analytics remains a compelling investment case, firmly positioned as an indispensable data and technology partner to the global insurance industry. Its strategic focus on enhancing client engagement and driving innovation, particularly through advanced analytics, AI, and ecosystem building, is yielding tangible results in the form of strong subscription growth and expanding margins. The company's durable subscription model, coupled with robust cash flow generation and a disciplined capital allocation strategy, provides a solid foundation for predictable financial performance.

While the industry faces inherent challenges and the competitive landscape requires continuous innovation, Verisk's specialized expertise, proprietary data assets, and technological leadership provide a significant competitive moat. The reiterated 2025 guidance reflects management's confidence in the company's ability to navigate these dynamics and continue delivering value to both clients and shareholders, underpinned by its essential role in helping the insurance sector build resilience in an increasingly complex world.