Verisk Analytics, Inc. (VRSK) Earnings

Management highlights

- Hosted key client events (IFM, VIC) with record attendees. AI featured prominently in education and solutions gallery. Clients interested in AI, with robust pipelines and strong win rates. Faster pace of trial and proof of concepts for AI solutions. Some extended sales cycles due to complex contracting for AI. Engaged with large clients on AI strategies. Subscription revenues durable, with strong price realization in renewals. Released new client-facing modules. Onboarded new data contributors. Catastrophe and risk solutions had double-digit growth. Anti-fraud driving value realization. Life business had double-digit organic revenue growth.

Guidance

Reaffirming 2026 outlook: consolidated revenue $3.19 - $3.24B, adjusted EBITDA $1.79 - $1.83B, adjusted EBITDA margins 56 - 56.5%, net interest expense $190 - $200M, effective tax rate 23 - 26%, adjusted EPS $7.45 - $7.75. First quarter 2026 expected to be a trough in organic OCC revenue growth rates and absolute dollars, with gradual improvement. Tougher comparisons in first half due to strong 2025 subscription renewals. Guidance reflects divestiture of Verisk Marketing Solutions. Second quarter prior year margins benefited from foreign currency translation impact, not expected to recur.

Segment performance

Consolidated GAAP first quarter revenue was $783 million, up 4% vs prior year. Organic constant currency (OCC) revenues grew 4.7% in Q1, with 5.3% growth in underwriting and 3.4% in claims. Subscription revenues, comprising 84% of total revenues, grew 7% on OCC basis. Transactional revenues, 16% of total, declined 6.1% on OCC. Adjusted EBITDA OCC growth was 5.9%, total adjusted EBITDA margins 55.9%, up 60 bps. Net interest expense $43M vs $36M prior year. Reported effective tax rate 24.1% vs 21.6% prior year. Adjusted net income up 0.6% to $246M, diluted adjusted EPS up 5.2% to $1.82 per share.

Risks & headwinds

Surveys of insurers identified data readiness as top impediment to AI implementation. In certain cases, extended sales cycles related to complex contracting to incorporate AI governance and compliance.

Analyst Q&A

• Q: In the prepared remark, there was a comment on strong pricing realization on renewals. I was wondering if you could unpack that further. Can you talk about how the NWPs are impacting pricing, but also how you're getting pricing on the non-NWP contracts?

  A: Both at large client multi-year renewals, seen stronger price increases on annualized basis for multi-year contracts, with terms averaging 4 - 5 years. Also achieving pricing increases reflective of greater value from core lines re-imagine initiative across both levels.

• Q: Lee, you talked in the prepared remarks about clients wanting to use your data and capabilities in their internal AI strategies, which makes a lot of sense given your proprietary data. I was hoping you could talk about how you see the monetization model for that type of situation. Could you be net neutral in selling your data versus selling a whole software solution? And I guess, does selling just the data limit your ability to cross-sell if they're not using your interface? Or no, because you'll still have salespeople trying to upsell those clients anyway. And so you're just as well off. I know you want to partner with these clients to try to maximize the value. So just wanted to understand the puts and takes of monetization of the different models and situations.

  A: Monetization opportunity rooted in application of AI driven by data sets provided. Data readiness is a big challenge for industry, creating partnership opportunity. Encourages more use of data within specific and related areas. Modernization strategy includes realizing value through pricing arrangements and opening new data utilization for AI applications.

• Q: There was a comment, Lee, from you in the prepared remarks about extended sales cycles for some AI solutions. I just want to make sure I'm understanding what you're trying to convey there correctly. Are you trying to insert any incremental caution relative to your prior commentary on how revenue should develop for you over the balance of the year? Or is this just all about governance and compliance of AI solutions and a of a disruptive tech and a risk focused industry or anything on if the competitive side is broader after you go after those opportunities or anything like that?

  A: Extended sales cycles due to need to be thoughtful about intellectual property, privacy issues in negotiating and adapting contracts. This will improve over time as industry standards improve. We are used to dealing with data governance, security, privacy issues, so better positioned to resolve them. Signals growing opportunity but taking longer to work through contractually.

• Q: You mentioned expectations of gradual improvement in organic revenue growth moving through the year. Can you provide some color on the cadence of improvement, taking into account factors like weather, property underwriting overages, and subscription renewal timing?

  A: Expected one Q to be trough, with improvement from there. On reported revenue standpoint, steady build to full year guidance as year progresses. Second quarter could still see OCC perspective below long-term guidance range due to year-over-year headwinds, but core business remains strong.

• Q: There was a comment, Lee, from you in the prepared remarks about extended sales cycles for some AI solutions. I just want to make sure I'm understanding what you're trying to convey there correctly. Are you trying to insert any incremental caution relative to your prior commentary on how revenue should develop for you over the balance of the year? Or is this just all about governance and compliance of AI solutions and a of a disruptive tech and a risk focused industry or anything on if the competitive side is broader after you go after those opportunities or anything like that?

  A: Extended sales cycles due to need to be thoughtful about intellectual property, privacy issues in negotiating and adapting contracts. This will improve over time as industry standards improve. We are used to dealing with data governance, security, privacy issues, so better positioned to resolve them. Signals growing opportunity but taking longer to work through contractually.

• Q: You mentioned expectations of gradual improvement in organic revenue growth moving through the year. Can you provide some color on the cadence of improvement, taking into account factors like weather, property underwriting overages, and subscription renewal timing?

  A: Expected one Q to be trough, with improvement from there. On reported revenue standpoint, steady build to full year guidance as year progresses. Second quarter could still see OCC perspective below long-term guidance range due to year-over-year headwinds, but core business remains strong.

• Q: You talked about, I think what was noticed was the more impactful innovation at a faster rate. And I'm just curious, like, how much of that, you know, gets absorbed as part of your value pricing strategy that you have as opposed to, you know, driving new incremental revenue? Because, you know, I guess the next day you reiterated your long term from the way you were describing this, it sounded like it could be incremental. So I'm just trying to parse that out, if that makes sense.

  A: The greater balance of innovation is applied to developing new revenue opportunities, creating distinctively incremental value not previously seen. For example, aerial imagery and digital media forensics provide new analytics and anti-fraud solutions, contributing to incremental revenue.

• Q: You talked a bit earlier regarding contract renewal and embedding the different aspects of AI into the negotiation. I'm just curious. I know from a market perspective, we've seen, I guess, what you called in the past normalization of net written premium growth, but your clients are still under a lot of pressure focusing on profitability. Are you seeing any changes, either pushback on price increases or lengthening of sales cycles, because of that specific item, and how are you addressing that?

  A: Not seeing pushback or lengthening of sales cycles due to profitability pressure. Industry's improved combined ratios create opportunity for clients to invest in technology, including AI, with data and analytics being important. Larger clients recommitted to long multi-year contracts, demonstrating importance of data and its value.

• Q: We were hoping for an update on the cross-sell environment that you're seeing, specifically as it relates to how adoption of additional modules from existing solution upgrades is trending. Are you seeing an acceleration uptake as you sort of work through the client base? And what's the current state of penetration of that?

  A: Seeing strong environment with interest and engagement in new products. Better strategic dialogue with clients improved individual product cross-sells. Clients more engaged in integrating data sets and product functionality for enterprise-oriented solutions.

• Q: Just in terms of the shape of the year and growth, what is the expected contribution from new core lines, reimagined modules that you're continuing to feather in versus, say, just the impact of some of the easier comps in the second half of the year?

  A: Improvement over balance of year driven by easier year-over-year comps. Forms rules on lost cost business contributing to subscription growth, with strong subscription outcomes across portfolio.

• Q: Where do you see as the biggest margin or top line opportunity brought by your own AI investment? And any thoughts around sizing that top line margin aside from AI would be really helpful. I know you've talked about aerial imagery, digital forensics, but any other incremental revenue or cost opportunities you want to highlight here that weren't previously available in the pre-AI world?

  A: AI opportunity in new products, seen as long-term opportunity. Benefit of efficiency and productivity on software development teams, data ingestion. Supporting productivity of underwriters, claims adjusters, etc., through data application and integration, supporting value realization and longer term contracts.

• Q: Lee, you mentioned this, I think, underwriting platform that you're developing with one client. Not sure to what degree that was disclosed already, but can you maybe flesh out what exactly you're doing there and Obviously, like the revenue model there, is this just a one-off with one client, or is this becoming more of an industry utility over time, and are there opportunities to do something similar with other clients, obviously?

  A: Specific to this customer, working on restructuring underwriting process, integrating data sets and agentic technologies. Driven by familiarity with process, data governance elements, and client comfort. Indicative of clients' broad objectives, could be done with larger number of clients.

• Q: Can you talk about the moat around your underwriting data analytics solutions business? And what prevents your competitors or largest customers from using AI to recreate this data? And I know there's a lot that goes into it, but I'm curious if you could talk about some of the major data that's in there and the defensibility.

  A: A lot of data sets are proprietary. Analytics include normalization and risk segmentation. Experience and focus on risk segmentation, being trusted provider. For example, aerial imagery for roof condition and perils, creating new segmentation.

• Q: I was wondering if you can talk about the sustainability of the subscription OCC revenue growth? I know it deceled a little bit to 7%, but just wondering if you can talk about, you know, if we can see, you know, sustainable growth in that high single-digit range.

  A: Continue to see sustainability of subscription growth. Strong engagement across portfolio, investments in products driving good outcomes. Subscription growth seen in various businesses, including forms, rules, loss cost, catastrophe and risk solutions, property and restoration solutions.