UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
| | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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:
VERISK ANALYTICS, INC.
(Exact name of registrant as specified in its charter)
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| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
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| (Address of principal executive offices) | (Zip Code) |
(
(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 |
| | | |
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.
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).
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.
| | ☒ | 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
As of July 29, 2022, there were
Index to Form 10-Q
Table of Contents
| Page Number |
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| PART I — FINANCIAL INFORMATION |
|
| 1 | |
| 2 | |
| 3 | |
| Condensed Consolidated Statements of Changes in Stockholders’ Equity |
4 |
| 6 | |
| 7 | |
| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
27 |
| Item 3. Quantitative and Qualitative Disclosures About Market Risk |
40 |
| 40 | |
| PART II — OTHER INFORMATION |
|
| 41 | |
| 41 | |
| Item 2. Unregistered Sales of Equity Securities and Use of Proceeds |
41 |
| 41 | |
| 41 | |
| 42 | |
| 42 | |
| 43 | |
| Exhibit 31.1 |
|
| Exhibit 31.2 |
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| Exhibit 32.1 |
|
PART I — FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
| June 30, 2022 | December 31, 2021 | |||||||
| (in millions, except for share and per share data) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net of allowance for doubtful accounts of $ and $, respectively | ||||||||
| Prepaid expenses | ||||||||
| Income taxes receivable | ||||||||
| Other current assets | ||||||||
| Total current assets | ||||||||
| Noncurrent assets: | ||||||||
| Fixed assets, net | ||||||||
| Operating lease right-of-use assets, net | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| Deferred income tax assets | ||||||||
| Other noncurrent assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued liabilities | $ | $ | ||||||
| Short-term debt and current portion of long-term debt | ||||||||
| Deferred revenues | ||||||||
| Operating lease liabilities | ||||||||
| Income taxes payable | ||||||||
| Total current liabilities | ||||||||
| Noncurrent liabilities: | ||||||||
| Long-term debt | ||||||||
| Deferred income tax liabilities | ||||||||
| Operating lease liabilities | ||||||||
| Other noncurrent liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 16) | ||||||||
| Stockholders’ equity: | ||||||||
| Common stock, $ par value; shares authorized; shares issued; and shares outstanding, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Treasury stock, at cost, and shares, respectively | ( | ) | ( | ) | ||||
| Retained earnings | ||||||||
| Accumulated other comprehensive losses | ( | ) | ( | ) | ||||
| Total Verisk stockholders' equity | ||||||||
| Noncontrolling interests | ||||||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
| Three Months Ended June 30, |
Six Months Ended June 30, |
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| 2022 |
2021 |
2022 |
2021 |
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| (in millions, except for share and per share data) |
||||||||||||||||
| Revenues |
$ | $ | $ | $ | ||||||||||||
| Operating expenses (income): |
||||||||||||||||
| Cost of revenues (exclusive of items shown separately below) |
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| Selling, general and administrative |
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| Depreciation and amortization of fixed assets |
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| Amortization of intangible assets |
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| Other operating loss (income), net |
( |
) | ||||||||||||||
| Total operating expenses, net |
||||||||||||||||
| Operating income |
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| Other income (expense): |
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| Investment income (loss) |
( |
) | ||||||||||||||
| Interest expense |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Total other expense, net |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Income before income taxes |
||||||||||||||||
| Provision for income taxes |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Net income |
||||||||||||||||
| Less: Net (income) loss attributable to noncontrolling interests |
( |
) | ( |
) | ||||||||||||
| Net income attributable to Verisk |
$ | $ | $ | $ | ||||||||||||
| Basic net income per share attributable to Verisk |
$ | $ | $ | $ | ||||||||||||
| Diluted net income per share attributable to Verisk |
$ | $ | $ | $ | ||||||||||||
| Weighted-average shares outstanding: |
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| Basic |
||||||||||||||||
| Diluted |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
| 2022 |
2021 |
2022 |
2021 |
|||||||||||||
| (in millions) |
||||||||||||||||
| Net income |
$ | $ | $ | $ | ||||||||||||
| Other comprehensive (loss) income, net of tax: |
||||||||||||||||
| Foreign currency translation adjustment |
( |
) | ( |
) | ||||||||||||
| Pension and postretirement liability adjustment |
||||||||||||||||
| Total other comprehensive (loss) income |
( |
) | ( |
) | ||||||||||||
| Comprehensive income |
( |
) | ||||||||||||||
| Less: Comprehensive loss attributable to noncontrolling interests |
||||||||||||||||
| Comprehensive (loss) income attributable to Verisk |
$ | ( |
) | $ | $ | $ | ||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)
For The Three Months Ended June 30, 2022 and 2021
| Common Stock Issued | Par Value | Additional Paid-in Capital | Treasury Stock | Retained Earnings | Accumulated Other Comprehensive Losses | Total Verisk Stockholders' Equity | Noncontrolling Interests | Total Stockholders’ Equity | ||||||||||||||||||||||||||||
| (in millions, except for share data) | ||||||||||||||||||||||||||||||||||||
| Balance, April 1, 2022 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||||||
| Net income | — | |||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Investment in noncontrolling interests | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Common stock dividend (1) | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Treasury stock acquired ( shares) | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Stock options exercised ( shares transferred from treasury stock) | — | |||||||||||||||||||||||||||||||||||
| Performance share units lapsed ( shares transferred from treasury stock) | — | |||||||||||||||||||||||||||||||||||
| Restricted stock lapsed ( shares transferred from treasury stock) | — | ( | ) | |||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | |||||||||||||||||||||||||||||||||||
| Net share settlement from restricted stock awards ( shares withheld for tax settlement) | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Other stock issuances ( shares transferred from treasury stock) | — | |||||||||||||||||||||||||||||||||||
| Balance, June 30, 2022 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||||||
| Balance, April 1, 2021 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||||||
| Net income | — | |||||||||||||||||||||||||||||||||||
| Comprehensive loss attributable to noncontrolling interest | — | ( | ) | |||||||||||||||||||||||||||||||||
| Investment in noncontrolling interest | — | |||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | |||||||||||||||||||||||||||||||||||
| Common stock dividend (1) | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Treasury stock acquired ( shares) | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Stock options exercised ( shares transferred from treasury stock) | — | |||||||||||||||||||||||||||||||||||
| Restricted stock and performance share units lapsed ( shares transferred from treasury stock) | — | ( | ) | |||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | |||||||||||||||||||||||||||||||||||
| Net share settlement from restricted stock awards ( shares withheld for tax settlement) | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Other stock issuances (shares transferred from treasury stock) | — | |||||||||||||||||||||||||||||||||||
| Balance, June 30, 2021 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||||||
_______________
(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 CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)
For The Six Months Ended June 30, 2022 and 2021
| Common Stock Issued | Par Value | Additional Paid-in Capital | Treasury Stock | Retained Earnings | Accumulated Other Comprehensive Losses | Total Verisk Stockholders' Equity | Noncontrolling Interests | Total Stockholders’ Equity | ||||||||||||||||||||||||||||
| (in millions, except for share data) | ||||||||||||||||||||||||||||||||||||
| Balance, January 1, 2022 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||||||
| Net income | — | |||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Investment in noncontrolling interests | — | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Common stock dividend (1) | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Treasury stock acquired ( shares) | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Stock options exercised ( shares transferred from treasury stock) | — | |||||||||||||||||||||||||||||||||||
| Performance share units lapsed ( shares transferred from treasury stock) | — | ( | ) | |||||||||||||||||||||||||||||||||
| Restricted stock lapsed ( shares transferred from treasury stock) | — | ( | ) | |||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | |||||||||||||||||||||||||||||||||||
| Net share settlement from restricted stock awards ( shares withheld for tax settlement) | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Other stock issuances ( shares transferred from treasury stock) | — | |||||||||||||||||||||||||||||||||||
| Balance, June 30, 2022 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||||||
| Balance, January 1, 2021 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||||||
| Net income | — | |||||||||||||||||||||||||||||||||||
| Comprehensive loss attributable to noncontrolling interest | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||
| Investment in noncontrolling interest | — | |||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | |||||||||||||||||||||||||||||||||||
| Common stock dividend (1) | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Treasury stock acquired ( shares) | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Stock options exercised ( shares transferred from treasury stock) | — | |||||||||||||||||||||||||||||||||||
| Restricted stock and performance share units lapsed ( shares transferred from treasury stock) | — | ( | ) | |||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | |||||||||||||||||||||||||||||||||||
| Net share settlement from restricted stock awards ( shares withheld for tax settlement) | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Other stock issuances ( shares transferred from treasury stock) | — | |||||||||||||||||||||||||||||||||||
| Balance, June 30, 2021 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||||||
_____________
(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.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| (in millions) | ||||||||||||||||
| Cash flows from operating activities: | ||||||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||||
| Depreciation and amortization of fixed assets | ||||||||||||||||
| Amortization of intangible assets | ||||||||||||||||
| Amortization of debt issuance costs and original issue discount, net of original issue premium | ||||||||||||||||
| Provision for doubtful accounts | ||||||||||||||||
| Loss (gain) on sale of assets | ( | ) | ||||||||||||||
| Stock-based compensation expense | | |||||||||||||||
| Impairment of long-lived assets | ||||||||||||||||
| Deferred income taxes | ( | ) | ( | ) | ||||||||||||
| Loss on disposal of fixed assets | ||||||||||||||||
| Changes in assets and liabilities, net of effects from acquisitions: | ||||||||||||||||
| Accounts receivable | ( | ) | ( | ) | ||||||||||||
| Prepaid expenses and other assets | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Operating lease right-of-use assets, net | ||||||||||||||||
| Income taxes | ( | ) | ( | ) | ( | ) | ||||||||||
| Accounts payable and accrued liabilities | ( | ) | ( | ) | ||||||||||||
| Deferred revenues | ( | ) | ( | ) | ||||||||||||
| Operating lease liabilities | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other liabilities | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net cash provided by operating activities | ||||||||||||||||
| Cash flows from investing activities: | ||||||||||||||||
| Acquisitions and purchase of additional controlling interest, net of cash acquired of $ and $; $ and $ respectively | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Proceeds from sale of assets | ||||||||||||||||
| Investments in nonpublic companies | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Capital expenditures | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Escrow funding associated with acquisitions | ( | ) | ( | ) | ( | ) | ||||||||||
| Payment of contingent liability related to acquisition | ( | ) | ||||||||||||||
| Other investing activities, net | ||||||||||||||||
| Net cash provided by (used in) investing activities | ( | ) | ( | ) | ||||||||||||
| Cash flows from financing activities: | ||||||||||||||||
| (Repayments of) proceeds from short-term debt | ( | ) | ||||||||||||||
| Repayment of current portion of long-term-debt | ( | ) | ( | ) | ||||||||||||
| Proceeds from issuance of short-term debt with original maturities less than three months | ||||||||||||||||
| Repurchases of common stock | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Proceeds from stock options exercised | ||||||||||||||||
| Net share settlement of taxes from restricted stock and performance share awards | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Dividends paid | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other financing activities, net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net cash used in financing activities | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Effect of exchange rate changes | ( | ) | ( | ) | ( | ) | ||||||||||
| Net increase (decrease) in cash and cash equivalents | ( | ) | ||||||||||||||
| Cash and cash equivalents, beginning of period | ||||||||||||||||
| Cash and cash equivalents, end of period | $ | $ | $ | $ | ||||||||||||
| Supplemental disclosures: | ||||||||||||||||
| Income taxes paid | $ | $ | $ | $ | ||||||||||||
| Interest paid | $ | $ | $ | $ | ||||||||||||
| Noncash investing and financing activities: | ||||||||||||||||
| Deferred tax liability established on date of acquisition | $ | $ | $ | $ | ||||||||||||
| Net assets sold as part of the disposition | $ | $ | $ | $ | ||||||||||||
| Finance lease additions | $ | $ | $ | $ | ||||||||||||
| Operating lease additions, net | $ | $ | $ | $ | ||||||||||||
| Fixed assets included in accounts payable and accrued liabilities | $ | $ | $ | $ | ||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Amounts in millions, except for share and per share data, unless otherwise stated)
Verisk Analytics, Inc. is a data analytics provider serving customers in insurance and energy. Using various technologies to collect and analyze billions of records, we draw on numerous data assets and domain expertise to provide first-to-market innovations that are integrated into customer workflows. We offer predictive analytics and decision support solutions to customers in rating, underwriting, claims, catastrophe and weather risk, global risk analytics, natural resources intelligence, economic forecasting, and many other fields. Around the world, we help customers protect people, property, and financial assets.
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 June 30, 2022 and for the three and six months ended June 30, 2022 and 2021, 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 and six months ended June 30, 2022 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 and six months ended June 30, 2022 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, 2021. 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.
Our operating segments have historically been Insurance, Energy and Specialized Markets, and Financial Services. On March 11, 2022 and April 8, 2022, we sold our environmental health and safety business, which represented the “specialized markets” in our Energy and Specialized Markets segment and our Financial Services segment, respectively. See Note 7. Dispositions for further discussion. For the remainder of 2022, we will continue to show only the historical results of these dispositions in their respective previous operating segments.
Recent Accounting Pronouncements
| Accounting Standard | Description | Effective Date | Effect on Consolidated Financial Statements or Other Significant Matters |
| Business Combinations (Topic 805) In October 2021, the FASB issued ASU No. 2021-08, "Accounting for Contract Assets and Contract Liabilities from Contracts with Customers" ("ASU No. 2021-08") | This amendment requires an acquirer to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. At the acquisition date, an acquirer should account for the related revenue contracts in accordance with Topic 606 as if it had originated the contracts. An acquirer should assess how the acquiree applied Topic 606 to determine what to record for the acquired revenue contracts. If the acquiree prepared financial statements in accordance with GAAP, this should result in an acquirer recognizing and measuring the acquired contract assets and contract liabilities consistent with how they were recognized and measured in the acquiree’s financial statements. In circumstances in which the acquirer is unable to assess or rely on how the acquiree applied Topic 606, the acquirer should consider the terms of the acquired contracts, such as timing of payment, identify each performance obligation in the contracts, and allocate the total transaction price to each identified performance obligation on a relative standalone selling price basis as of the date the acquiree entered into the contracts to determine what should be recorded at the acquisition date. | Fiscal years beginning after December 15, 2022 with early adoption permitted. | We elected to early adopt ASU No. 2021-08 on January 1, 2022 on a prospective basis to all business combinations that occurred on or after the date of adoption. The adoption of ASU No. 2021-08 did not have a material impact on our Condensed Consolidated Financial Statements. |
Disaggregated revenues by type of service and by country are provided below for the three and six months ended June 30, 2022 and 2021. No individual customer or country outside of the U.S. accounted for 10.0% or more of our consolidated revenues for the three and six months ended June 30, 2022 or 2021.
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Insurance: | ||||||||||||||||
| Underwriting & rating | $ | $ | $ | $ | ||||||||||||
| Claims | ||||||||||||||||
| Total Insurance | ||||||||||||||||
| Energy and Specialized Markets | ||||||||||||||||
| Financial Services | ||||||||||||||||
| Total revenues | $ | $ | $ | $ | ||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Revenues: | ||||||||||||||||
| United States | $ | $ | $ | $ | ||||||||||||
| United Kingdom | ||||||||||||||||
| Other countries | ||||||||||||||||
| Total revenues | $ | $ | $ | $ | ||||||||||||
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 June 30, 2022 and December 31, 2021, we had
The following is a summary of the change in contract liabilities from December 31, 2021 through June 30, 2022:
| Contract Liabilities at December 31, 2021 | $ | |||
| Revenue | ( | ) | ||
| Acquisitions | ||||
| Dispositions | ( | ) | ||
| Billings | ||||
| Contract Liabilities at June 30, 2022 | $ |
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
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 June 30, 2022 and December 31, 2021, we had deferred commissions of $
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, Accounting Standards Codification ("ASC") 820-10, Fair Value Measurements ("ASC 820-10"), 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 $
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 June 30, 2022 and December 31, 2021, respectively:
| 2022 | 2021 | ||||||||||||||||
| 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 | $ | $ | $ | $ | ||||||||||||
On March 23, 2022, we made an additional $
As of June 30, 2022 and December 31, 2021, we had securities without readily determinable market values, inclusive of Vexcel, of $
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 lease term for our corporate headquarters ends in 2033 and includes the options to extend for
The following table presents 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, 2022 and 2021, respectively:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Lease cost: | ||||||||||||||||
| Operating lease cost (1) | $ | $ | $ | $ | ||||||||||||
| Sublease income | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Finance lease costs | ||||||||||||||||
| Depreciation of finance lease assets (2) | ||||||||||||||||
| Interest on finance lease liabilities (3) | ||||||||||||||||
| Total lease cost | $ | $ | $ | $ | ||||||||||||
| Other information: | ||||||||||||||||
| Cash paid for amounts included in the measurement of lease liabilities | ||||||||||||||||
| Operating cash outflows from operating leases | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Operating cash outflows from finance leases | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Financing cash outflows from finance leases | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
_______________
(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 finance and operating leases as of June 30, 2022 and 2021, respectively:
| June 30, | ||||||||
| 2022 | 2021 | |||||||
| Weighted-average remaining lease term - operating leases (in years) | ||||||||
| Weighted-average remaining lease term - finance leases (in years) | ||||||||
| Weighted-average discount rate - operating leases | % | % | ||||||
| Weighted-average discount rate - finance leases | % | % | ||||||
Our ROU assets and lease liabilities for finance leases were $
Maturities of lease liabilities for the remainder of 2022 and the years through 2027 and thereafter are as follows:
| June 30, 2022 | ||||||||
| Years Ending | Operating Leases | Finance Leases | ||||||
| 2022 | $ | $ | ||||||
| 2023 | ||||||||
| 2024 | ||||||||
| 2025 | ||||||||
| 2026 | ||||||||
| 2027 and thereafter | ||||||||
| Total lease payments | ||||||||
| Less: Amount representing interest | ( | ) | ( | ) | ||||
| Present value of total lease payments | $ | $ | ||||||
2022 Acquisitions
On March 1, 2022, we acquired
On February 11, 2022, we acquired
The "Other" column includes other immaterial acquisitions that have occurred during the period. The preliminary purchase price allocation of the 2022 acquisitions resulted in the following:
| Opta | Infutor | Other | Total | |||||||||||||
| Cash and cash equivalents | $ | $ | $ | $ | ||||||||||||
| Accounts receivable | ||||||||||||||||
| Other current assets | ||||||||||||||||
| Fixed assets | ||||||||||||||||
| Operating lease right-of-use assets, net | ||||||||||||||||
| Intangible assets | ||||||||||||||||
| Goodwill | ||||||||||||||||
| Other noncurrent assets | ||||||||||||||||
| Total assets acquired | ||||||||||||||||
| Accounts payable and accrued liabilities | ||||||||||||||||
| Deferred revenues | ||||||||||||||||
| Operating lease liabilities | ||||||||||||||||
| Deferred income tax, net | ||||||||||||||||
| Other noncurrent liabilities | ||||||||||||||||
| Total liabilities assumed | ||||||||||||||||
| Net assets acquired | ||||||||||||||||
| Less: Cash acquired | ||||||||||||||||
| Net cash purchase price | $ | $ | $ | $ | ||||||||||||
The preliminary amounts assigned to intangible assets by type for the 2022 acquisitions are summarized in the table below:
| Weighted Average Useful Life (in years) | Total | |||||||
| Technology-based | $ | |||||||
| Marketing-related | ||||||||
| Customer-related | ||||||||
| Total intangible assets | $ | |||||||
The preliminary allocations of the purchase price for the 2022 and 2021 acquisitions with less than a year of ownership are subject to revisions as additional information is obtained about the facts and circumstances that existed as of each acquisition date. The revisions may have a significant impact on our condensed consolidated financial statements. The allocations of the purchase price will be finalized once all the information that was known and knowable as of the acquisition date is obtained and analyzed, but not to exceed one year from the acquisition date. The primary areas of the purchase price allocation that are not yet finalized relate to income and non-income taxes, deferred revenues, the valuation of intangible assets acquired, and residual goodwill. The goodwill associated with our acquisitions includes the acquired assembled workforce, the value associated with the opportunity to leverage the work force to continue to develop the technology and content assets, as well as our ability to grow through adding additional customer relationships or new solutions in the future. Of the $
For the three and six months ended June 30, 2022, we incurred transaction costs of $
On March 22, 2022, we acquired an additional
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 June 30, 2022 and December 31, 2021, the current portion of the escrows amounted to $
The acquisitions of Rebmark Legal Solutions Limited, ACTINEO GmbH, Data Driven Safety, LLC, and Infutor Data Solutions, LLC included acquisition-related contingent payments, for which the sellers of these acquisitions could receive additional payments by achieving the specific predetermined revenue, EBITDA, and EBITDA margin earn-out targets for exceptional performance. We believe that the liabilities recorded as of June 30, 2022 and December 31, 2021 reflect the best estimate of acquisition-related contingent payments. The associated current portion of contingent payments were $
2022 Dispositions
On March 11, 2022, the sale of our environmental health and safety business ("3E Company Environmental, Ecological and Engineering"), which made up our Supply Chain reporting unit, within the Energy & Specialized Markets segment, was completed for proceeds of $
On April 8, 2022, the sale of Verisk Financial Services, our Financial Services segment, to TransUnion, a global information and insights company, was completed for net cash proceeds of $
The major classes of assets and liabilities disposed of, reflected in our condensed consolidated balance sheets as of March 11, 2022 and April 8, 2022, respectively, are presented below.
| 3E Company Environmental, Ecological and Engineering | Verisk Financial Services | Total | ||||||||||
| Cash and cash equivalents | $ | $ | $ | |||||||||
| Accounts receivable, net of allowance for doubtful accounts | ||||||||||||
| Prepaid expenses | ||||||||||||
| Other current assets | ||||||||||||
| Current assets | ||||||||||||
| Fixed assets, net | ||||||||||||
| Operating lease right-of-use assets, net | ||||||||||||
| Intangible assets, net | ||||||||||||
| Goodwill | ||||||||||||
| Other noncurrent assets | ||||||||||||
| Noncurrent assets | ||||||||||||
| Total assets | ||||||||||||
| Accounts payable and accrued liabilities | $ | $ | $ | |||||||||
| Deferred revenues | ||||||||||||
| Operating lease liabilities | ||||||||||||
| Income taxes payable | ( | ) | ||||||||||
| Current liabilities | ||||||||||||
| Deferred income tax liabilities | ( | ) | ||||||||||
| Operating lease liabilities | ||||||||||||
| Other noncurrent liabilities | ||||||||||||
| Noncurrent liabilities | ||||||||||||
| Total liabilities | ||||||||||||
| Net assets sold as part of dispositions | ||||||||||||
| Less: Cash sold | ||||||||||||
| Net assets sold as part of dispositions, net of cash sold | $ | $ | $ | |||||||||
8. Goodwill and Intangible Assets:
The following is a summary of the change in goodwill from December 31, 2021 through June 30, 2022, both in total and as allocated to our operating segments:
| Insurance | Energy and Specialized Markets | Financial Services | Total | |||||||||||||
| Goodwill at December 31, 2021 | $ | $ | $ | $ | ||||||||||||
| Acquisitions(1) | ||||||||||||||||
| Purchase accounting reclassifications | ||||||||||||||||
| Dispositions(2) | ( | ) | ( | ) | ( | ) | ||||||||||
| Impairment charge | ( | ) | ( | ) | ||||||||||||
| Foreign currency translation adjustment | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Goodwill at June 30, 2022 | $ | $ | $ | $ | ||||||||||||
_______________
(1) See Note 6. Acquisitions for more information.
(2) See Note 7. Dispositions 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. Goodwill impairment testing compares the carrying value of each reporting unit to its fair value. If the fair value of the reporting unit exceeds the carrying value of the net assets, including goodwill assigned to that reporting unit, goodwill is not impaired. If the carrying value of the reporting unit’s net assets, including goodwill, exceeds the fair value of the reporting unit, then an impairment loss is recorded for the difference between the carrying amount and the fair value of the reporting unit. As of June 30, 2022, we completed the annual impairment review, in which goodwill impairment was tested at the reporting unit level. As part of our annual evaluation, we did not recognize any additional impairment charges related to our goodwill and indefinite-lived intangible assets. Although all our reporting units have a fair value that exceeds their carrying value by greater than 20%, one of our reporting units has an excess that is only modestly higher. Therefore, any significant adverse change in our near or long-term financial projections, macroeconomic conditions, or other market indicators could result in a future material impairment charge for this reporting unit.
There were
Our intangible assets and related accumulated amortization consisted of the following:
| Weighted Average Useful Life (in years) | Cost | Accumulated Amortization | Net | ||||||||||
| June 30, 2022 | |||||||||||||
| Technology-based | | $ | $ | ( | ) | $ | |||||||
| Marketing-related | | ( | ) | ||||||||||
| Contract-based | | ( | ) | ||||||||||
| Customer-related | | ( | ) | ||||||||||
| Database-based | | ( | ) | ||||||||||
| Total intangible assets | $ | $ | ( | ) | $ | ||||||||
| December 31, 2021 | |||||||||||||
| Technology-based | | $ | $ | ( | ) | $ | |||||||
| Marketing-related | | ( | ) | ||||||||||
| Contract-based | | ( | ) | ||||||||||
| Customer-related | | ( | ) | ||||||||||
| Database-based | | ( | ) | ||||||||||
| Total intangible assets | $ | $ | ( | ) | $ | ||||||||
Amortization expense related to intangible assets for the three months ended June 30, 2022 and 2021 was $
| Years Ending | Amount | |||
| 2022 | $ | |||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 and thereafter | ||||
| Total | $ | |||
Our effective tax rate for the three and six months ended June 30, 2022 was
The following table presents short-term and long-term debt by issuance as of June 30, 2022 and December 31, 2021:
| Issuance Date | Maturity Date |
|
| ||||||||
| Short-term debt and current portion of long-term debt: | |||||||||||
| Syndicated revolving credit facility | Various | Various | $ | $ | |||||||
| Term loan facility | 6/13/2022 | 7/12/2022 | |||||||||
| Senior notes: | |||||||||||
| % senior notes, less unamortized discount and debt issuance costs of $() and $(), respectively | 9/12/2012 | 9/12/2022 | |||||||||
| Finance lease liabilities (1) | Various | Various | |||||||||
| Short-term debt and current portion of long-term debt | |||||||||||
| Long-term debt: | |||||||||||
| Senior notes: | |||||||||||
| % senior notes, less unamortized discount and debt issuance costs of $() and $(), respectively | 5/13/2020 | 5/15/2050 | |||||||||
| % senior notes, inclusive of unamortized premium, and net of unamortized discount and debt issuance costs of $ and $, respectively | 3/6/2019 | 3/15/2029 | |||||||||
| % senior notes, less unamortized discount and debt issuance costs of $() and $(), respectively | 5/15/2015 | 6/15/2025 | |||||||||
| % senior notes, less unamortized discount and debt issuance costs of $() and $(), respectively | 5/15/2015 | 6/15/2045 | |||||||||
| Finance lease liabilities (1) | Various | Various | |||||||||
| Syndicated revolving credit facility debt issuance costs | Various | Various | ( | ) | ( | ) | |||||
| Long-term debt | |||||||||||
| Total debt | $ | $ | |||||||||
_______________
(1) Refer to Note 5. Leases
As of June 30, 2022 and December 31, 2021, we had senior notes with an aggregate principal amount of $
As of June 30, 2022, we had a $
On March 11, 2022, we entered into a $
We have
We have
On February 16, 2022 and April 27, 2022, our Board approved a cash dividend of $
Share Repurchase Program
In December 2021 and March 2022, we entered into Accelerated Share Repurchase ("ASR") agreements to repurchase shares of our common stock for an aggregate purchase price of $
During the six months ended June 30, 2022, we repurchased
In June 2022, we entered into an additional ASR agreement with Citibank, N.A. to repurchase shares of our common stock for an aggregate purchase price of $
Treasury Stock
As of June 30, 2022, our treasury stock consisted of
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 awards consisting of 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 and six months ended June 30, 2022 and 2021:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Numerator used in basic and diluted EPS: | ||||||||||||||||
| Net income attributable to Verisk | $ | $ | $ | $ | ||||||||||||
| Denominator: | ||||||||||||||||
| Weighted average number of common shares used in basic EPS | ||||||||||||||||
| Effect of dilutive shares: | ||||||||||||||||
| Potential common shares issuable from stock options and stock awards | ||||||||||||||||
| Weighted average number of common shares and dilutive potential common shares used in diluted EPS | ||||||||||||||||
The potential shares of common stock that were excluded from diluted EPS were
Accumulated Other Comprehensive Losses
The following is a summary of accumulated other comprehensive losses as of June 30, 2022 and December 31, 2021:
| 2022 | 2021 | |||||||
| Foreign currency translation adjustment | $ | ( | ) | $ | ( | ) | ||
| Pension and postretirement adjustment, net of tax | ( | ) | ( | ) | ||||
| Accumulated other comprehensive losses | $ | ( | ) | $ | ( | ) | ||
The before tax and after tax amounts of other comprehensive (loss) income for the three and six months ended June 30, 2022 and 2021 are summarized below:
| Before Tax | Tax (Expense) Benefit | After Tax | ||||||||||
| For the Three Months Ended June 30, 2022 | ||||||||||||
| Foreign currency translation adjustment attributable to Verisk | $ | ( | ) | $ | $ | ( | ) | |||||
| Foreign currency translation adjustment attributable to noncontrolling interests | ( | ) | ( | ) | ||||||||
| Foreign currency translation adjustment | ( | ) | ( | ) | ||||||||
| Pension and postretirement adjustment before reclassifications | ( | ) | ||||||||||
| Amortization of net actuarial loss and prior service benefit reclassified from accumulated other comprehensive losses (1) | ( | ) | ( | ) | ||||||||
| Pension and postretirement adjustment | ( | ) | ||||||||||
| Total other comprehensive loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| For the Three Months Ended June 30, 2021 | ||||||||||||
| Foreign currency translation adjustment | $ | $ | $ | |||||||||
| Pension and postretirement adjustment before reclassifications | ( | ) | ||||||||||
| Amortization of net actuarial loss and prior service benefit reclassified from accumulated other comprehensive losses (1) | ( | ) | ( | ) | ||||||||
| Pension and postretirement adjustment | ( | ) | ||||||||||
| Total other comprehensive income | $ | $ | ( | ) | $ | |||||||
| Before Tax | Tax (Expense) Benefit | After Tax | ||||||||||
| For the Six Months Ended June 30, 2022 | ||||||||||||
| Foreign currency translation adjustment attributable to Verisk | $ | ( | ) | $ | $ | ( | ) | |||||
| Foreign currency translation adjustment attributable to noncontrolling interests | ( | ) | ( | ) | ||||||||
| Foreign currency translation adjustment | ( | ) | ( | ) | ||||||||
| Pension and postretirement adjustment before reclassifications | ( | ) | ||||||||||
| Amortization of net actuarial loss and prior service benefit reclassified from accumulated other comprehensive losses (1) | ( | ) | ( | ) | ||||||||
| Pension and postretirement adjustment | ( | ) | ||||||||||
| Total other comprehensive loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| For the Six Months Ended June 30, 2021 | ||||||||||||
| Foreign currency translation adjustment | $ | $ | $ | |||||||||
| Pension and postretirement adjustment before reclassifications | ( | ) | ||||||||||
| Amortization of net actuarial loss and prior service benefit reclassified from accumulated other comprehensive losses (1) | ( | ) | ( | ) | ||||||||
| Pension and postretirement adjustment | ( | ) | ||||||||||
| Total other comprehensive income | $ | $ | ( | ) | $ | |||||||
___________
| (1) | 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). |
12. Equity Compensation Plans:
All of our outstanding stock options, restricted stock awards, deferred stock units, and PSUs are covered under our 2021 Incentive Plan, our 2013 Incentive Plan, or our 2009 Incentive Plan. Awards under our 2021 Incentive Plan may include one or more of the following types: (i) stock options (both nonqualified and incentive stock options), (ii) stock appreciation rights, (iii) restricted stock, (iv) restricted stock units, (v) performance awards, (vi) other share-based awards, and (vii) cash. Employees, non-employee directors, and consultants are eligible for awards under our 2021 Incentive Plan. We transferred common stock under these plans from our treasury shares. As of June 30, 2022, there were
We grant equity awards to our key employees. The nonqualified stock options have an exercise price equal to the adjusted closing price of our common stock on the grant date, with a -year contractual term. The fair value of the restricted stock is determined using the closing price of our common stock on the grant date. The restricted stock is not assignable or transferable until it becomes vested. PSUs vest at the end of a -year performance period, subject to the recipient’s continued service. Each PSU represents the right to receive share of our common stock and the ultimate realization is based on our achievement of certain market performance criteria and may range from
In January 2022, we granted
A summary of the status of the stock options, restricted stock, and PSUs awarded under our 2021, 2013, and 2009 Incentive Plans as of December 31, 2021 and June 30, 2022 and changes during the interim period are presented below:
| Stock Option | Restricted Stock | PSU | |||||||||||||||||||||||||||
| Number of Shares | Weighted Average Exercise Price | Aggregate Intrinsic Value | Number of Shares | Weighted Average Grant Date Fair Value Per Share | Number of Shares | Weighted Average Grant Date Fair Value Per Share | |||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||
| Outstanding at December 31, 2021 | $ | $ | $ | $ | |||||||||||||||||||||||||
| Granted | $ | $ | $ | ||||||||||||||||||||||||||
| Dividend reinvestment | $ | $ | — | N/A | |||||||||||||||||||||||||
| Exercised or lapsed | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||
| Canceled, expired or forfeited | ( | ) | $ | ( | ) | $ | ( | ) | $ | 202.55 | |||||||||||||||||||
| Outstanding at June 30, 2022 | $ | $ | $ | $ | |||||||||||||||||||||||||
| Exercisable at June 30, 2022 | $ | $ | |||||||||||||||||||||||||||
| Exercisable at December 31, 2021 | $ | $ | |||||||||||||||||||||||||||
| Nonvested at June 30, 2022 | |||||||||||||||||||||||||||||
| Expected to vest at June 30, 2022 | (1) | ||||||||||||||||||||||||||||
| (1) | Includes estimated performance achievement |
The fair value of the stock options granted was estimated using a Black-Scholes valuation model that uses the weighted average assumptions noted in the following table for the six months ended June 30, 2022 and 2021:
| 2022 | 2021 | |||||||
| Option pricing model | Black-Scholes | Black-Scholes | ||||||
| Expected volatility | % | % | ||||||
| Risk-free interest rate | % | % | ||||||
| Expected term in years | ||||||||
| Dividend yield | % | % | ||||||
| Weighted average grant date fair value per stock option | $ | $ | ||||||
The expected term for the stock options granted was estimated based on studies of historical experience and projected exercise behavior. However, for certain awards granted, for which no historical exercise pattern exists, the expected term was estimated using the simplified method. The risk-free interest rate is based on the yield of U.S. Treasury zero coupon securities with a maturity equal to the expected term of the equity award. The volatility factor is calculated using historical daily closing prices over the most recent period that is commensurate with the expected term of the stock option awards. The expected dividend yield was based on our expected annual dividend rate on the date of grant.
Intrinsic value for stock options is calculated based on the exercise price of the underlying awards and the adjusted closing price of our common stock as of the reporting date. Excess tax benefits from exercised stock options were recorded as income tax benefit in our condensed consolidated statements of operations. This tax benefit is calculated as the excess of the intrinsic value of options exercised and restricted stock lapsed in excess of compensation recognized for financial reporting purposes. The weighted average remaining contractual terms were
For the six months ended June 30, 2022, there was $
Our U.K. Sharesave Plan offers qualifying employees in the United Kingdom the opportunity to own shares of our common stock. Employees who elect to participate are granted stock options, of which the exercise price is equal to the average of the closing price on the five trading days immediately preceding the plan invitation date discounted by
Our ESPP offers eligible employees the opportunity to purchase shares of our common stock at a discount of its fair market value at the time of purchase. During the six months ended June 30, 2022 and 2021, we issued
13. Pension and Postretirement Benefits:
We maintain a frozen qualified defined benefit pension plan for certain employees through membership in our Pension Plan for Insurance Organizations (the "Pension Plan"), a multiple-employer trust. We also apply a cash balance formula to determine future benefits. Under the cash balance formula, each participant has an account, which is credited annually based on the interest earned on the previous year-end cash balance. We also have a frozen non-qualified supplemental cash balance plan ("SERP") for certain employees. The SERP is funded from our general assets. During the first quarter of 2022, we changed the investment guidelines on our Pension Plan assets to target an investment allocation of
The components of net periodic (benefit) cost for the three and six months ended June 30, 2022 and 2021 are summarized below:
| Pension Plan and SERP | Postretirement Plan | |||||||||||||||
| For the Three Months Ended June 30, | ||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Interest cost | $ | $ | $ | $ | ||||||||||||
| Expected return on plan assets | ( | ) | ( | ) | ( | ) | ||||||||||
| Amortization of prior service cost (credit) | ( | ) | ||||||||||||||
| Amortization of net actuarial loss | ||||||||||||||||
| Net periodic (benefit) cost | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||
| Employer contributions, net | $ | $ | $ | $ | ||||||||||||
| Pension Plan and SERP | Postretirement Plan | |||||||||||||||
| For the Six Months Ended June 30, | ||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Interest cost | $ | $ | $ | $ | ||||||||||||
| Expected return on plan assets | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Amortization of prior service cost (credit) | ( | ) | ||||||||||||||
| Amortization of net actuarial loss | ||||||||||||||||
| Net periodic (benefit) cost | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||
| Employer contributions, net | $ | $ | $ | $ | ||||||||||||
The expected contributions to the Pension Plan, SERP, and Postretirement Plan for the year ending December 31, 2022 are consistent with the amounts previously disclosed as of December 31, 2021.
ASC 280-10, Disclosures About Segments of an Enterprise and Related Information ("ASC 280-10"), establishes standards for reporting information about operating segments. ASC 280-10 requires that a public business enterprise reports financial and descriptive information about its reportable operating segments. Operating segments are components of an enterprise for which separate financial information is available that is evaluated regularly by the Chief Operating Decision Maker ("CODM") in deciding how to allocate resources and in assessing performance. Our Chief Executive Officer is identified as the CODM as defined by ASC 280-10. Our operating segments, which are also our reportable segments, have historically been the following: Insurance, Energy and Specialized Markets, and Financial Services. On March 11, 2022, we sold our environmental health and safety business, which represented the “specialized markets” in our Energy and Specialized Markets segment. On April 8, 2022, the sale of our Financial Services segment was also completed. See Note 7. Dispositions for further discussion. For the remainder of 2022, we will continue to show only the historical results of these dispositions in their respective previous operating segments
Each of the reportable segments, Insurance, Energy and Specialized Markets, and Financial Services, has a portion of its revenue from more than one of the three revenue types described within our revenue recognition policy. Below is the overview of the solutions offered within each reportable segment.
Insurance: We are the leading provider of statistical, actuarial, and underwriting data for the U.S. P&C insurance industry. Our databases include cleansed and standardized records describing premiums and losses in insurance transactions, casualty and property risk attributes for commercial buildings and their occupants, and fire suppression capabilities of municipalities. We use this data to create policy language and proprietary risk classifications that are industry standards and to generate prospective loss cost estimates used to price insurance policies, which are accessed via a hosted platform. We also develop solutions that our customers use to analyze key processes in managing risk. Our combination of algorithms and analytic methods incorporate our proprietary data to generate solutions. We also help businesses and governments better anticipate and manage climate and weather-related risks. In most cases, our customers integrate the solutions into their models, formulas, or underwriting criteria in order to predict potential loss events, ranging from hurricanes to earthquakes. We develop catastrophe and extreme event models and offer solutions covering natural and man-made risks, including acts of terrorism. We further develop solutions that allow customers to quantify costs after loss events occur. Our multitier, multispectral terrestrial imagery and data acquisition, processing, analytics, and distribution system using remote sensing and machine learning technologies helps gather, store, process, and deliver geographic and spatially referenced information that supports uses in many markets. Additionally, we offer fraud-detection solutions including review of data on claim histories, analysis of claims to find emerging patterns of fraud, and identification of suspicious claims in the insurance sector. Our underwriting & rating, insurance anti-fraud claims, catastrophe modeling, loss quantification, and weather risk solutions are included in this segment.
Energy and Specialized Markets: We are a leading provider of data analytics via hosted platform for the global energy, chemicals, and metals and mining industries. Our research and consulting solutions focus on exploration strategies and screening, asset development and acquisition, commodity markets, and corporate analysis in the areas of business environment, business improvement, business strategies, commercial advisory, and transaction support. We gather and manage proprietary information, insight, and analysis on oil and gas fields, mines, refineries, and other assets across the interconnected global energy sectors to advise customers in making asset investment and portfolio allocation decisions. Our analytical tools measure and observe environmental properties and translate those measurements into actionable information based on customer needs. In addition, we provide market and cost intelligence to energy companies to optimize financial results. In the first quarter of 2022, the sale of our environmental health and safety business was completed. See Note 7. Dispositions for further discussion.
Financial Services: On April 8, 2022, the sale of this segment was completed. See Note 7. Dispositions for further discussion. We maintained a bank account consortia to provide competitive benchmarking, decisioning algorithms, business intelligence, and customized analytic services that help financial institutions, payment networks and processors, alternative lenders, regulators, and merchants make better strategy, marketing, and risk decisions. Customers apply our solutions in the areas of tailored data management and media effectiveness that include business intelligence platforms, profile views, mobile data solutions, enterprise database services, and fraud risk scoring algorithms for marketing, fraud, and risk mitigation. In addition, our bankruptcy management solutions assist creditors, debt servicing businesses, and credit services to enhance regulatory compliance by eliminating stay violation and portfolio valuation risk.
The three aforementioned operating segments represent the segments for which discrete financial information is available and upon which operating results are regularly evaluated by our CODM in order to assess performance and allocate resources. We use EBITDA as the profitability measure for making decisions regarding ongoing operations. EBITDA is net income before interest expense, provision for income taxes, and depreciation and amortization of fixed and intangible assets. EBITDA is the measure of operating results used to assess corporate performance and optimal utilization of debt and acquisitions. Operating expenses consist of direct and indirect costs principally related to personnel, facilities, software license fees, consulting, travel, and third-party information services. Indirect costs are generally allocated to the segments using fixed rates established by management based upon estimated expense contribution levels and other assumptions that management considers reasonable. We do not allocate interest expense and provision for income taxes since these items are not considered in evaluating the segment’s overall operating performance. In addition, our CODM does not evaluate the financial performance of each segment based on assets. See Note 3. Revenues for information on disaggregated revenues by type of service and by country.
The following tables provide our revenue and EBITDA by reportable segment for the three and six months ended June 30, 2022 and 2021, and the reconciliation of EBITDA to income before income taxes as shown in our accompanying condensed consolidated statements of operations:
| For the Three Months Ended | ||||||||||||||||||||||||||||||||
| June 30, 2022 | June 30, 2021 | |||||||||||||||||||||||||||||||
| Insurance | Energy and Specialized Markets | Financial Services | Total | Insurance | Energy and Specialized Markets | Financial Services | Total | |||||||||||||||||||||||||
| Revenues | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Expenses: | ||||||||||||||||||||||||||||||||
| Cost of revenues (exclusive of items shown separately below) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Selling, general and administrative | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Other operating income (loss) | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Investment income (loss) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
| EBITDA | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||||||
| Depreciation and amortization of fixed assets | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Amortization of intangible assets | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Interest expense | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Income before income taxes | $ | $ | ||||||||||||||||||||||||||||||
| For the Six Months Ended | ||||||||||||||||||||||||||||||||
| June 30, 2022 | June 30, 2021 | |||||||||||||||||||||||||||||||
| Insurance | Energy and Specialized Markets | Financial Services | Total | Insurance | Energy and Specialized Markets | Financial Services | Total | |||||||||||||||||||||||||
| Revenues | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Expenses: | ||||||||||||||||||||||||||||||||
| Cost of revenues (exclusive of items shown separately below) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Selling, general and administrative | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Other operating income (loss) | ( | ) | ||||||||||||||||||||||||||||||
| Investment income (loss) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||
| EBITDA | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||||||
| Depreciation and amortization of fixed assets | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Amortization of intangible assets | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Interest expense | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Income before income taxes | $ | $ | ||||||||||||||||||||||||||||||
Long-lived assets by country are provided below:
| June 30, 2022 | December 31, 2021 | |||||||
| Long-lived assets: | ||||||||
| U.S. | $ | $ | ||||||
| U.K. | ||||||||
| Other countries | ||||||||
| Total long-lived assets | $ | $ | ||||||
We consider our stockholders that own more than
16. Commitments and Contingencies:
We are a party to legal proceedings with respect to a variety of matters in the ordinary course of business, including the matters described below. With respect to ongoing matters, we are unable, at the present time, to determine the ultimate resolution of or provide a reasonable estimate of the range of possible loss attributable to ongoing matters or the impact these matters may have on our results of operations, financial position, or cash flows. Although we believe we have strong defenses and have appealed adverse rulings to us, we could in the future incur judgments or enter into settlements of claims that could have a material adverse effect on our results of operations, financial position, or cash flows.
ERISA Litigation
On September 24, 2020, former employees Jillyn Peterson, Gabe Hare, Robert Heynen and Adam Krajewski ("Plaintiffs"), filed suit in the United States District Court, District of New Jersey (No. 2:20-cv-13223-CCC-MF) against Defendants Insurance Services Office Inc. ("ISO"), the Plan Administration Committee of Insurance Services Office Inc. and its members ("Committee Defendants"), and the Trust Investment Committee of Insurance Services Office Inc. and its members. The class action complaint alleges violations of the Employee Retirement Income Security Act, as amended ("ERISA"). The class is defined as all persons who were participants in or beneficiaries of the ISO 401(k) Savings and Employee Stock Ownership Plan ("Plan"), at any time between September 24, 2014 through the date of judgment. The complaint alleges that all defendants are fiduciaries with respect to the Plan. Plaintiffs challenge the amount of fees paid by Plan participants to maintain the investment funds in the plan portfolio and the amount of recordkeeper fees paid by participants. Plaintiffs allege that by permitting the payment of excessive fees, the Committee Defendants breached their ERISA duties of prudence and loyalty. Plaintiffs further allege that ISO breached its ERISA duty by failing to monitor the Committee Defendants who they allege committed known breaches of their fiduciary duties. The complaint does not specify damages but alleges the fiduciary breaches cost Plan participants millions of dollars. Defendants filed their motion to dismiss the complaint on January 12, 2021, which the Court partially denied on April 13, 2021. The parties are currently proceeding with discovery. At this time, it is not possible to reasonably estimate the liability related to this matter as the case is still in its early stages.
Financial Services Government Inquiry
We continue to cooperate with a civil inquiry by the Department of Justice related to government contracts within our former Financial Services segment, which was sold to TransUnion in April 2022. In addition, in March 2022, we were informed that the SEC is conducting an inquiry related to certain of the same government contracts of our former Financial Services segment. These inquiries are ongoing, we have voluntarily produced documents, and we cannot anticipate the timing, outcome or possible impact of the inquiry, financial or otherwise. Under the stock purchase agreement we entered into with TransUnion pursuant to which TransUnion acquired our former Financial Services segment, we agreed to indemnify TransUnion for certain losses with respect to the DOJ inquiry.
Breach of Contract Litigation
On April 2, 2021, Leica Geosystems ("Leica") and its subsidiary, Intergraph Corporation filed a lawsuit against Verisk Analytics and Geomni, Inc. ("we" "our" or "us") in the Circuit Court of Madison County, Alabama, titled Leica Geosystems AG, et al. v. Geomni, Inc., Verisk Analytics, Inc., Vexcel Imaging, Inc., et al. Co-Defendant, Vexcel Imaging, through its subsidiary, GV Air, is alleged to have breached a master lease agreement related to Leica’s aerial sensor units. The complaint further alleges breach of a license agreement for royalties earned from the sale of aerial imagery data, and breach of a mutual nondisclosure agreement related to the alleged disclosure of confidential information to co-defendant, Vexcel Imaging. Leica seeks compensatory and punitive damages, as well as attorney’s fees and costs. We filed a motion to dismiss the Plaintiffs’ claims and the hearing took place on January 7, 2022. The court denied our motion and we subsequently filed a petition for a writ of mandamus with the Supreme Court of Alabama. On or about May 26, 2022, the parties settled this lawsuit with no liability attached to Verisk or Geomni. The case was dismissed with prejudice on June 13, 2022.
Data Privacy Litigation
On December 10, 2020, we were served with a putative class action lawsuit brought by Erica Jackson in the Court of Common Pleas of Lackawanna County, Pennsylvania against Lead Intelligence, Inc. d/b/a Jornaya ("we" or "us"), Case No. 2020 CV 03695. The class complaint alleges that we violated Pennsylvania’s Wiretap Act ("PWA"), 18 Pa. Const. Stat. § 5701 et seq. by "wiretapping" and "intercepting" the plaintiff’s communications on the website colleges.educationgrant.com. The plaintiff alleges a class of all persons whose electronic communications were intercepted through the use of our wiretapping on the website. The complaint claims damages pursuant to the PWA for actual damages, but not less than liquidated damages computed at the rate of $
On December 15, 2021, Plaintiff Jillian Cantinieri brought a putative class action against Verisk Analytics, Insurance Services Office and ISO Claims Services, Inc. (“we,” “our,” or “us”) in the United States District Court for the Eastern District of New York, titled Cantinieri v. Verisk Analytics Inc., et al., Civil Action No. 2:21-cv-6911. The Complaint alleges that we failed to safeguard the personally identifiable information (PII) of Plaintiff and the members of the proposed classes from a purported breach of our databases by unauthorized entities. Plaintiff and class members allege actual and imminent injuries, including theft of their PII, fraudulent activity on their financial accounts, lowered credit scores, and costs associated with detection and prevention of identity theft and fraud. They seek to recover compensatory, statutory and punitive damages, disgorgement of earnings and profits, and attorney’s fees and costs. We filed our motion to dismiss Plaintiff’s claims on April 22, 2022. As of June 15, 2022, the motion to dismiss was fully briefed but has neither been heard nor decided. At this time, it is not possible to reasonably estimate the liability related to this matter.
On June 27, 2022, Plaintiff Loretta Williams brought a putative class action against Lead Intelligence, Inc. d/b/a Jornaya (“we,” “our,” or “us”) in the United States District Court for the Northern District of California, titled Williams v. DDR Media, LLC and Lead Intelligence, Inc. d/b/a Jornaya, Civil Action No. 3:22-cv-03789. The Complaint alleges that the Defendants violated the California Invasion of Privacy Act, Cal. Penal Code 631 (“CIPA”) and invaded Plaintiff’s and class members’ privacy rights when Defendants purportedly recorded visitors’ visits to the scrappyrent2 own.com website without prior express consent. It is further alleged that this conduct constitutes a violation of the California Unfair Competition Law, Cal. Bus. Prof. Code Section 17200 et seq. and the California Constitution. The Complaint seeks class certification, injunctive relief, statutory damages in the amount of $
**************
17. Subsequent Events:
On July 29, 2022, we made repayments of $
| Management’s Discussion and Analysis of Financial Condition and Results of Operations |
The following discussion should be read in conjunction with our historical financial statements and the related notes included in our annual report on Form 10-K ("2021 10-K") dated and filed with the Securities and Exchange Commission on February 22, 2022. This discussion contains forward-looking statements that involve risks and uncertainties, including the impact of the 2019 novel coronavirus pandemic ("COVID-19"). Our actual results may differ materially from those discussed in or implied by any of the forward-looking statements as a result of various factors, including but not limited to those listed under "Risk Factors" and "Special Note Regarding Forward Looking Statements" in our 2021 10-K and those listed under Item 1A in Part II of this quarterly report on Form 10-Q.
We are a leading data analytics provider serving customers in insurance and energy. Using advanced technologies to collect and analyze billions of records, we draw on unique data assets and deep domain expertise to provide innovations that may be integrated into customer workflows. We offer predictive analytics and decision support solutions to customers in rating, underwriting, claims, catastrophe and weather risk, global risk analytics, natural resources intelligence, economic forecasting, and many other fields. In the United States ("U.S.") and around the world, we help customers protect people, property, and financial assets.
Our customers use our solutions to make better decisions about risk and opportunities with greater efficiency and discipline. We refer to these products and services as "solutions" due to the integration among our services and the flexibility that enables our customers to purchase components or the comprehensive package. These solutions take various forms, including data, statistical models, or tailored analytics, all designed to allow our customers to make more logical decisions. We believe our solutions for analyzing risk positively impact our customers’ revenues and help them better manage their costs.
We organize our business in three segments: Insurance, Energy and Specialized Markets, and Financial Services. On March 11, 2022, we sold our environmental health and safety business, which represented the "specialized markets" in our Energy and Specialized Markets segment. On April 8, 2022, the sale of our Financial Services segment was also completed. See Note 7. Dispositions for further discussion. For the remainder of 2022, we will continue to show only the historical results of these dispositions in their respective previous operating segments. Our Insurance segment provides underwriting and rating, and claims insurance data for the U.S. P&C insurance industry. This segment's revenues represented approximately 79% and 74% of our revenues for the six months ended June 30, 2022 and June 30, 2021, respectively. Our Energy and Specialized Markets segment provides research and consulting data analytics for the global energy, chemicals, and metals and mining industries. In the first quarter, we sold our environmental health and safety business. Our Energy and Specialized Markets segment's revenues represented approximately 19% and 21% of our revenues for the six months ended June 30, 2022 and June 30, 2021, respectively. Our Financial Services segment provided competitive benchmarking, decisioning algorithms, business intelligence, and customized analytic services to financial institutions, payment networks and processors, alternative lenders, regulators, and merchants. Our Financial Services segment's revenues represented approximately 2% and 5% of our revenues for the six months ended June 30, 2022 and June 30, 2021, respectively. On April 8th 2022, we sold our Financial Services segment to TransUnion.
Executive Summary
Key Performance Metrics
We believe our business's ability to grow recurring revenue and generate positive cash flow is the key indicator of the successful execution of our business strategy. We use year-over-year revenue and EBITDA growth as metrics to measure our performance. EBITDA and EBITDA margin are non-GAAP financial measures (See footnote 2 within the Condensed Consolidated Results of Operations section of Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations). The nearest equivalent respective GAAP financial measures are net income and net income margin.
Revenue growth. We use year-over-year revenue growth as a key performance metric. We assess revenue growth based on our ability to generate increased revenue through increased sales to existing customers, sales to new customers, sales of new or expanded solutions to existing and new customers, and strategic acquisitions of new businesses.
EBITDA growth. We use EBITDA growth as a measure of our ability to balance the size of revenue growth with cost management and investing for future growth. EBITDA growth allows for greater transparency regarding our operating performance and facilitate period-to-period comparison.
EBITDA margin. We use EBITDA margin as a metric to assess segment performance and scalability of our business. We assess EBITDA margin based on our ability to increase revenues while controlling expense growth. We calculate EBITDA margin as EBITDA divided by revenues.
Revenues
We earn revenues through agreements for hosted subscriptions, advisory/consulting services, and for transactional solutions, recurring and non-recurring. Subscriptions for our solutions are generally paid in advance of rendering services either quarterly or in full upon commencement of the subscription period, which is usually for one year and automatically renewed each year. As a result, the timing of our cash flows generally precedes our recognition of revenues and income and our cash flow from operations tends to be higher in the first quarter as we receive subscription payments. Examples of these arrangements include subscriptions that allow our customers to access our standardized coverage language, our claims fraud database, or our actuarial services throughout the subscription period. In general, we experience minimal revenue seasonality within the business.
Approximately 81% of the revenues in our Insurance segment for the six months ended June 30, 2022 and 2021 were derived from hosted subscriptions through agreements (generally one to five years) for our solutions. Our customers in this segment include most of the P&C insurance providers in the U.S. Approximately 83% of the revenues in our Energy and Specialized Markets segment for the six months ended June 30, 2022 and 2021 were derived from hosted subscriptions with long-term agreements for our solutions. Our customers in this segment include most of the top 10 global energy providers. Approximately 85% of the revenues in our Financial Services segment for the six months ended June 30, 2022 and 2021 were derived from subscriptions with long-term agreements for our solutions. Our customers in this segment included financial institutions, payment networks and processors, alternative lenders, regulators, merchants, and the top 30 credit card issuers in North America, the United Kingdom, and Australia.
We also provide advisory/consulting services, which help our customers get more value out of our analytics and their subscriptions. In addition, certain of our solutions are paid for by our customers on a transactional basis, recurring and non-recurring. For example, we have solutions that allow our customers to access property-specific rating and underwriting information to price a policy on a commercial building, or compare a P&C insurance or a workers' compensation claim with information in our databases, or use our repair cost estimation solutions on a case-by-case basis. For the six months ended June 30, 2022 and 2021, approximately 19% of our consolidated revenues were derived from providing transactional and advisory/consulting solutions.
Operating Costs and Expenses
Personnel expenses are the major component of both our cost of revenues and selling, general and administrative expenses. Personnel expenses, which represented approximately 59% and 58% of our total operating expenses (excluding the net gain on the sale of our environmental health and safety business and our Financial Services segment) for the six months ended June 30, 2022 and 2021, respectively, include salaries, benefits, incentive compensation, equity compensation costs, sales commissions, employment taxes, recruiting costs, and outsourced temporary agency costs.
We assign personnel expenses between two categories, cost of revenues and selling, general and administrative expense, based on the actual costs associated with each employee. We categorize employees who maintain our solutions as cost of revenues, and all other personnel, including executive managers, salespeople, marketing, business development, finance, legal, human resources, and administrative services, as selling, general and administrative expenses. A significant portion of our other operating costs, such as facilities and communications, is also either captured within cost of revenues or selling, general and administrative expenses based on the nature of the work being performed.
While we expect to grow our headcount over time to take advantage of our market opportunities, we believe that the economies of scale in our operating model will allow us to grow our personnel expenses at a lower rate than revenues. Historically, our EBITDA margin has improved because we have been able to increase revenues without a proportionate corresponding increase in expenses. However, part of our corporate strategy is to invest in new solutions and new businesses, which may offset margin expansion.
Cost of Revenues. Our cost of revenues consists primarily of personnel expenses. Cost of revenues also includes the expenses associated with the acquisition, disposition and verification of data, the maintenance of our existing solutions, and the development and enhancement of our next-generation solutions. Our cost of revenues excludes depreciation and amortization.
Selling, General and Administrative Expenses. Our selling, general and administrative expenses consist primarily of personnel costs. A portion of the other costs such as facilities, insurance, and communications are also allocated to selling, general and administrative expenses based on the nature of the work being performed by the employee. Our selling, general and administrative expenses exclude depreciation and amortization.
Condensed Consolidated Results of Operations
| Three Months Ended |
Six Months Ended |
|||||||||||||||||||||||
| June 30, |
Percentage |
June 30, |
Percentage |
|||||||||||||||||||||
| 2022 |
2021 |
Change |
2022 |
2021 |
Change |
|||||||||||||||||||
| (in millions, except for share and per share data) |
||||||||||||||||||||||||
| Statement of income data: |
||||||||||||||||||||||||
| Revenues: |
||||||||||||||||||||||||
| Insurance |
$ | 610.0 | $ | 550.0 | 10.9 | % | $ | 1,196.4 | $ | 1,085.6 | 10.2 | % | ||||||||||||
| Energy and Specialized Markets |
133.5 | 162.3 | (17.7 | )% | 287.8 | 318.5 | (9.6 | )% | ||||||||||||||||
| Financial Services |
2.8 | 35.2 | (92.1 | )% | 37.6 | 69.5 | (45.9 | )% | ||||||||||||||||
| Revenues |
746.3 | 747.5 | (0.2 | )% | 1,521.8 | 1,473.6 | 3.3 | % | ||||||||||||||||
| Operating expenses (income): |
||||||||||||||||||||||||
| Cost of revenues (exclusive of items shown separately below) |
246.1 | 264.9 | (7.1 | )% | 526.6 | 527.3 | (0.1 | )% | ||||||||||||||||
| Selling, general and administrative |
125.9 | 111.4 | 13.0 | % | 261.2 | 231.2 | 13.0 | % | ||||||||||||||||
| Depreciation and amortization of fixed assets |
49.8 | 53.3 | (6.7 | )% | 99.4 | 101.8 | (2.4 | )% | ||||||||||||||||
| Amortization of intangible assets |
39.8 | 50.5 | (21.1 | )% | 84.4 | 95.5 | (11.6 | )% | ||||||||||||||||
| Other operating loss (income), net |
15.6 | — | N/A | (361.5 | ) | — | N/A | |||||||||||||||||
| Total operating expenses, net |
477.2 | 480.1 | (0.6 | )% | 610.1 | 955.8 | (36.2 | )% | ||||||||||||||||
| Operating income |
269.1 | 267.4 | 0.6 | % | 911.7 | 517.8 | 76.1 | % | ||||||||||||||||
| Other income (expense): |
||||||||||||||||||||||||
| Investment income (loss) |
4.7 | (0.5 | ) | (948.6 | )% | 4.3 | 1.2 | 272.0 | % | |||||||||||||||
| Interest expense |
(31.8 | ) | (31.5 | ) | 1.4 | % | (63.1 | ) | (66.9 | ) | (5.6 | )% | ||||||||||||
| Total other expense, net |
(27.1 | ) | (32.0 | ) | (15.2 | )% | (58.8 | ) | (65.7 | ) | (10.5 | )% | ||||||||||||
| Income before income taxes |
242.0 | 235.4 | 2.8 | % | 852.9 | 452.1 | 88.7 | % | ||||||||||||||||
| Provision for income taxes |
(44.2 | ) | (83.8 | ) | (47.2 | )% | (149.3 | ) | (132.5 | ) | 12.7 | % | ||||||||||||
| Net income |
197.8 | 151.6 | 30.4 | % | 703.6 | 319.6 | 120.2 | % | ||||||||||||||||
| Less: Net (income) loss attributable to noncontrolling interests |
(0.1 | ) | 2.4 | (104.5 | )% | (0.2 | ) | 3.0 | (108.4 | )% | ||||||||||||||
| Net income attributable to Verisk |
$ | 197.7 | $ | 154.0 | 28.4 | % | $ | 703.4 | $ | 322.6 | 118.1 | % | ||||||||||||
| Basic net income per share attributable to Verisk: |
$ | 1.25 | $ | 0.95 | 31.6 | % | $ | 4.41 | $ | 1.99 | 121.6 | % | ||||||||||||
| Diluted net income per share attributable to Verisk: |
$ | 1.24 | $ | 0.94 | 31.9 | % | $ | 4.39 | $ | 1.97 | 122.8 | % | ||||||||||||
| Cash dividends declared per share (1): |
$ | 0.31 | $ | 0.29 | 6.9 | % | $ | 0.62 | $ | 0.58 | 6.9 | % | ||||||||||||
| Weighted average shares outstanding: |
||||||||||||||||||||||||
| Basic |
157,972,755 | 162,007,784 | (2.5 | )% | 159,326,855 | 162,324,802 | (1.8 | )% | ||||||||||||||||
| Diluted |
159,123,563 | 163,046,538 | (2.4 | )% | 160,381,090 | 163,741,628 | (2.1 | )% | ||||||||||||||||
| The financial operating data below sets forth the information we believe is useful for investors in evaluating our overall financial performance: |
||||||||||||||||||||||||
| Other data: |
||||||||||||||||||||||||
| EBITDA: |
||||||||||||||||||||||||
| Insurance |
$ | 333.9 | $ | 310.7 | 7.5 | % | $ | 636.2 | $ | 599.7 | 6.1 | % | ||||||||||||
| Energy and Specialized Markets |
47.1 | 57.6 | (18.2 | )% | 549.0 | 111.3 | 393.2 | % | ||||||||||||||||
| Financial Services |
(17.6 | ) | 2.4 | (822.9 | )% | (85.4 | ) | 5.3 | (1,718.8 | )% | ||||||||||||||
| EBITDA(2) |
$ | 363.4 | $ | 370.7 | (1.9 | )% | $ | 1,099.8 | $ | 716.3 | 53.5 | % | ||||||||||||
| The following is a reconciliation of net income to EBITDA: |
||||||||||||||||||||||||
| Net income |
$ | 197.8 | $ | 151.6 | 30.4 | % | $ | 703.6 | $ | 319.6 | 120.2 | % | ||||||||||||
| Depreciation and amortization of fixed assets and intangible assets |
89.6 | 103.8 | (13.7 | )% | 183.8 | 197.3 | (6.8 | )% | ||||||||||||||||
| Interest expense |
31.8 | 31.5 | 1.4 | % | 63.1 | 66.9 | (5.6 | )% | ||||||||||||||||
| Provision for income taxes |
44.2 | 83.8 | (47.2 | )% | 149.3 | 132.5 | 12.7 | % | ||||||||||||||||
| EBITDA |
$ | 363.4 | $ | 370.7 | (1.9 | )% | $ | 1,099.8 | $ | 716.3 | 53.5 | % | ||||||||||||
| (1) |
Cash dividends declared per share is calculated by the aggregate cash dividends declared in a fiscal quarter divided by the shares issued and outstanding. See Note 11. of our consolidated financial statements included in this interim report on Form 10-Q. |
| (2) | EBITDA is a financial measure that management uses to evaluate the performance of our segments. "EBITDA" is defined as net income before interest expense, provision for income taxes, and depreciation and amortization of fixed and intangible assets. See Note 14. of our condensed consolidated financial statements included in this quarterly report on Form 10-Q.
Although EBITDA is a non-GAAP financial measure, EBITDA is frequently used by securities analysts, lenders, and others in their evaluation of companies. EBITDA has limitations as an analytical tool, and should not be considered in isolation, or as a substitute for an analysis of our operating income, net income, or cash flows from operating activities reported under GAAP. Management uses EBITDA in conjunction with GAAP operating performance measures as part of its overall assessment of company performance. Some of these limitations are: |
| • |
EBITDA does not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments; |
| • |
EBITDA does not reflect changes in, or cash requirements for, our working capital needs; |
| • |
Although depreciation and amortization are noncash charges, the assets being depreciated and amortized often will have to be replaced in the future and EBITDA does not reflect any cash requirements for such replacements; and |
| • |
Other companies in our industry may calculate EBITDA differently than we do, limiting its usefulness as a comparative measure. |
Consolidated Results of Operations
Three Months Ended June 30, 2022 Compared to Three Months Ended June 30, 2021
Revenues
Revenues were $746.3 million for the three months ended June 30, 2022 compared to $747.5 million for the three months ended June 30, 2021, a decrease of $1.2 million or 0.2%. Our recent acquisitions (Whitespace Software Limited, Ignite Software Systems Limited, Data Driven Safety, LLC, Infutor Data Solutions, LLC, and Opta Information Intelligence Corp. within the underwriting & rating category of the Insurance segment, ACTINEO GmbH within the claims category of the Insurance segment, and Roskill Holdings Limited within the Energy and Specialized Markets segment) and dispositions (environmental health and safety business within the Energy & Specialized Markets segment and the Financial Services segment) contributed a net decrease of $30.3 million. The remaining movement in our consolidated revenue increased $29.1 million or 4.3% related to the following: revenues within our Insurance segment increased $31.6 million or 5.8%; and revenues within our Energy and Specialized Markets segment decreased $2.5 million or 1.8%. Refer to the Results of Operations by Segment within this section for more information regarding our revenues.
| Three Months Ended June 30, |
Percentage |
Percentage change excluding |
||||||||||||||
| 2022 |
2021 |
change |
recent acquisitions and dispositions |
|||||||||||||
| (in millions) |
|
|||||||||||||||
| Insurance |
$ | 610.0 | 550.0 | 10.9 | % | 5.8 | % | |||||||||
| Energy and Specialized Markets |
133.5 | 162.3 | (17.7 | )% | (1.8 | )% | ||||||||||
| Financial Services |
2.8 | 35.2 | (92.1 | )% | — | % | ||||||||||
| Total Revenues |
$ | 746.3 | $ | 747.5 | (0.2 | )% | 4.3 | % | ||||||||
Cost of Revenues
Cost of revenues was $246.1 million for the three months ended June 30, 2022 compared to $264.9 million for the three months ended June 30, 2021, a decrease of $18.8 million or 7.1%. Our recent acquisitions and dispositions accounted for the decrease of $20.2 million in cost of revenues. The remaining cost of revenues increased $1.4 million or 0.6% primarily due to increases of information technology expenses of $3.6 million, and travel expenses of $1.9 million; offset by decreases in data costs of $1.9 million, salaries and employee benefits of $0.4 million, professional consulting costs of $0.2 million, and other operating costs of $1.6 million.
Selling, General and Administrative Expenses
Selling, general and administrative expenses ("SGA") were $125.9 million for the three months ended June 30, 2022 compared to $111.4 million for the three months ended June 30, 2021, an increase of $14.5 million or 13.0%. Our recent acquisitions and dispositions accounted for the increase of $2.3 million in SGA primarily related to salaries and employee benefits. The remaining SGA increase of $12.2 million or 11.9% was primarily due to increases of salaries and employee benefits of $10.7 million, travel expenses of $2.6 million, and information technology expenses of $1.3 million; offset by decreases in professional consulting costs of $1.8 million, and other operating costs of $0.6 million.
Depreciation and Amortization of Fixed Assets
Depreciation and amortization of fixed assets was $49.8 million for the three months ended June 30, 2022 compared to $53.3 million for the three months ended June 30, 2021, a decrease of $3.5 million or 6.7%. The decrease was primarily driven by recent dispositions of $5.9 million, partially offset by $2.2 million attributed to assets placed into service to support data capacity expansion and revenue growth and $0.2 million of recent acquisitions.
Amortization of Intangible Assets
Amortization of intangible assets was $39.8 million for the three months ended June 30, 2022 compared to $50.5 million for the three months ended June 30, 2021, a decrease of $10.7 million or 21.1%. The decrease was primarily driven by intangible assets that were fully amortized for the three months ended June 30, 2022 of $6.4 million and recent dispositions of $4.5 million, partially offset by additional amortization of intangible assets incurred in connection with our recent acquisitions of $0.2 million.
Other Operating Loss, net
Other operating loss, net was $15.6 million for the three months ended June 30, 2022 compared to $0.0 million for the three months ended June 30, 2021. The increase was primarily driven by the loss on the sale of our Verisk Financial Services segment on April 8, 2022. See Note 7. Dispositions for further information.
Investment Income (Loss)
Investment income (loss) was a gain of $4.7 million for the three months ended June 30, 2022 compared to a loss of $0.5 million for the three months ended June 30, 2021. The increase was primarily due to impact on foreign currencies.
Interest Expense
Interest expense was $31.8 million for the three months ended June 30, 2022 compared $31.5 million for the three months ended June 30, 2021, an increase of $0.3 million or 1.4%. The increase was primarily due to the Term Loan facility entered into during the first quarter of 2022.
Provision for Income Taxes
The provision for income taxes was $44.2 million for the three months ended June 30, 2022 compared to $83.8 million for the three months ended June 30, 2021, a decrease of $39.6 million or 47.2%. The effective tax rate was 18.3% for the three months ended June 30, 2022 compared to 35.6% for the three months ended June 30, 2021. The effective tax rate for the three months ended June 30, 2022 was lower than the effective tax rate for the three months ended June 30, 2021 primarily due to the deferred tax impact of the tax rate increase in the United Kingdom that was enacted and recorded in the prior period, as well as the impact of increased stock option exercises resulting in higher tax benefits from equity compensation in the current period versus the prior period. The difference between statutory tax rates and our effective tax rate is primarily due to tax benefits attributable to equity compensation, offset by additional state and local taxes.
Net Income Margin
The net income margin was 26.5% for the three months ended June 30, 2022 compared to 20.3% for the three months ended June 30, 2021. The increase in net income margin was primarily driven by the reduction in our effective tax rate as described above.
EBITDA Margin [1]
The EBITDA margin for our consolidated results was 48.7% for the three months ended June 30, 2022 compared to 49.6% for the three months ended June 30, 2021. The decrease in EBITDA margin was primarily driven by the net loss from the sale of the Verisk Financial Services segment, which negatively impacted our margin by 2.4%.
Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021
Revenues
Revenues were $1,521.8 million for the six months ended June 30, 2022 compared to $1,473.6 million for the six months ended June 30, 2021, an increase of $48.2 million or 3.3%. Our recent acquisitions (Whitespace Software Limited, Ignite Software Systems Limited, Data Driven Safety, LLC, Infutor Data Solutions, LLC, and Opta Information Intelligence Corp. within the underwriting & rating category of the Insurance segment, ACTINEO GmbH within the claims category of the Insurance segment, and Roskill Holdings Limited within the Energy and Specialized Markets segment) and dispositions (environmental health and safety business within the Energy & Specialized Markets segment and the Financial Services segment) contributed a net decrease of $13.5 million in revenues. The remaining movement in our consolidated revenue increased $61.7 million or 4.6% related to the following: revenues within our Insurance segment increased $63.2 million or 5.8%; and revenues within our Energy and Specialized Markets segment decreased $1.5 million or 0.6%. Refer to the Results of Operations by Segment within this section for more information regarding our revenues.
| Six Months Ended June 30, |
Percentage |
Percentage change excluding |
||||||||||||||
| 2022 |
2021 |
change |
recent acquisitions and dispositions |
|||||||||||||
| (in millions) |
||||||||||||||||
| Insurance |
$ | 1,196.4 | 1,085.6 | 12.8 | % | 5.8 | % | |||||||||
| Energy and Specialized Markets |
287.8 | 318.5 | 6.5 | % | (0.6 | )% | ||||||||||
| Financial Services |
37.6 | 69.5 | 10.9 | % | — | % | ||||||||||
| Total Revenues |
$ | 1,521.8 | $ | 1,473.6 | (17.7 | )% | 4.6 | % | ||||||||
Cost of Revenues
Cost of revenues was $526.6 million for the six months ended June 30, 2022 compared to $527.3 million for the six months ended June 30, 2021, a decrease of $0.7 million or 0.1%. Our recent acquisitions and dispositions accounted for a decrease of $15.1 million in cost of revenues. The remaining cost of revenues increased $14.4 million or 3.2% primarily due to increases in information technology expenses of $9.2 million, salaries and employee benefits of $7.4 million, travel expenses of $3.0 million, and professional consulting costs of $0.3 million; offset by decreases in data costs of $3.3 million and other operating costs of $2.2 million.
Selling, General and Administrative Expenses
Selling, general and administrative expenses ("SGA") were $261.2 million for the six months ended June 30, 2022 compared to $231.2 million for the six months ended June 30, 2021, an increase of $30.0 million or 13.0%. Our recent acquisitions and dispositions accounted for an increase of $12.5 million in SGA primarily related to salaries and employee benefits and transaction costs. The remaining SGA increase of $17.5 million or 8.3% was primarily due to increases in salaries and employee benefits of $10.3 million, professional consulting costs of $3.6 million, travel expenses of $3.4 million, and information technology expenses of $2.1 million; offset by a decrease in other operating costs of $1.9 million.
Depreciation and Amortization of Fixed Assets
Depreciation and amortization of fixed assets was $99.4 million for the six months ended June 30, 2022 compared to $101.8 million for the six months ended June 30, 2021, a decrease of $2.4 million or 2.4%. The decrease was primarily driven by recent dispositions of $8.9 million, partially offset by $5.8 million attributed to assets placed into service to support data capacity expansion and revenue growth and $0.7 million of recent acquisitions.
Amortization of Intangible Assets
Amortization of intangible assets was $84.4 million for the six months ended June 30, 2022 compared to $95.5 million for the six months ended June 30, 2021, a decrease of $11.1 million or 11.6%. The decrease was primarily driven by intangible assets that were fully amortized for the three months ended June 30, 2022 of $8.8 million and recent dispositions of $4.9 million, partially offset by additional amortization of intangible assets incurred in connection with our recent acquisitions of $2.6 million.
Other Operating Loss, net
Other operating loss, net was $361.5 million for the six months ended June 30, 2022 compared to $0.0 million for the six months ended June 30, 2021. The increase was primarily driven by the net gain from the sale of our environmental health and safety business and Verisk Financial Services segment.
Investment Income (Loss)
Investment income was a gain of $4.3 million for the six months ended June 30, 2022 compared to a gain of $1.2 million for the six months ended June 30, 2021. The increase was primarily due to impact on foreign currencies.
Interest Expense
Interest expense was $63.1 million for the six months ended June 30, 2022 compared to $66.9 million for the six months ended June 30, 2021, a decrease of $3.8 million or 5.6%. The decrease was primarily due to the maturity of our 5.800% senior notes in the second quarter of the prior year.
Provision for Income Taxes
The provision for income taxes was $149.3 million for the six months ended June 30, 2022 compared to $132.5 million for the six months ended June 30, 2021, an increase of $16.8 million or 12.7%. The effective tax rate was 17.5% for the six months ended June 30, 2022 compared to 29.3% for the six months ended June 30, 2021. The effective tax rate for the six months ended June 30, 2022 was lower than the effective tax rate for the six months ended June 30, 2021 primarily due to the deferred tax impact of the tax rate increase in the United Kingdom that was enacted and recorded in the prior period, as well as the impact of increased stock option exercises resulting in higher tax benefits from equity compensation in the current period versus the prior period. The effective tax rate for the six months ended June 30, 2022 was also lower than the prior period due to a tax rate benefit in connection with the sale of our environmental health and safety business for which a benefit was recognized for the difference between book and tax basis of our investment. The difference between statutory tax rates and our effective tax rate is primarily due to tax benefits attributable to equity compensation, offset by additional state and local taxes.
Net Income Margin
The net income margin was 46.2% for the six months ended June 30, 2022 compared to 21.7% for the six months ended June 30, 2021. The increase in net income margin was primarily driven by the net gain from the sale of our environmental health and safety business and the Verisk Financial Services segment, as well as a lower effective tax rate as described above.
EBITDA Margin [1]
The EBITDA margin for our consolidated results was 72.3% for the six months ended June 30, 2022 compared to 48.6% for the six months ended June 30, 2021. The increase in EBITDA margin was primarily driven by the net gain from the sale of our environmental health and safety business and the Verisk Financial Services segment, which positively impacted our margin by 28.6%.
[1] Note: Consolidated EBITDA margin, a non-GAAP measure, is calculated as a percentage of consolidated revenue. A reconciliation from net income to EBITDA is presented in the table below.
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
| 2022 |
2021 |
2022 |
2021 |
|||||||||||||
| Total |
Total |
Total |
Total |
|||||||||||||
| Net income |
$ | 197.8 | $ | 151.6 | $ | 703.6 | $ | 319.6 | ||||||||
| Depreciation and amortization of fixed assets |
49.8 | 53.3 | 99.4 | 101.8 | ||||||||||||
| Amortization of intangible assets |
39.8 | 50.5 | 84.4 | 95.5 | ||||||||||||
| Interest expense |
31.8 | 31.5 | 63.1 | 66.9 | ||||||||||||
| Provision for income taxes |
44.2 | 83.8 | 149.3 | 132.5 | ||||||||||||
| EBITDA |
$ | 363.4 | $ | 370.7 | $ | 1,099.8 | $ | 716.3 | ||||||||
| Revenue |
$ | 746.3 | $ | 747.5 | $ | 1,521.8 | $ | 1,473.6 | ||||||||
| EBITDA Margin |
48.7 | % | 49.6 | % | 72.3 | % | 48.6 | % | ||||||||
Results of Operations by Segment
On April 8, 2022, the sale of our Financial Services segment was completed, as such, it has been excluded from the results of operations by segment. For more information please refer to Note 7. Dispositions.
Insurance
Revenues
Revenues for our Insurance segment were $610.0 million for the three months ended June 30, 2022 compared to $550.0 million for the three months ended June 30, 2021, an increase of $60.0 million or 10.9%. Our underwriting & rating revenue increased $49.5 million or 12.8%. Our claims revenue increased $10.5 million or 6.5%.
Our revenue by category for the periods presented is set forth below:
| Three Months Ended June 30, | Percentage |
Percentage change excluding |
||||||||||||||
| 2022 | 2021 | change | recent acquisitions | |||||||||||||
| (in millions) |
||||||||||||||||
| Underwriting & rating |
$ | 437.8 | $ | 388.4 | 12.8 | % | 6.4 | % | ||||||||
| Claims |
172.2 | 161.6 | 6.5 | % | 4.3 | % | ||||||||||
| Total Insurance |
$ | 610.0 | $ | 550.0 | 10.9 | % | 5.8 | % | ||||||||
Our recent acquisitions (Whitespace Software Limited, Ignite Software Systems Limited, Data Driven Safety, LLC, ACTINEO GmbH, Infutor Data Solutions, LLC, and Opta Information Intelligence Corp.) contributed revenues of $28.4 million and the remaining Insurance revenue increased $31.6 million or 5.8%. Our underwriting & rating revenue increased $24.7 million or 6.4%, primarily due to an annual increase in prices derived from continued enhancements to the content of the solutions within our industry-standard insurance programs as well as selling expanded solutions to existing customers in commercial and personal lines. In addition, extreme event solutions and our life solutions contributed to the growth. Our claims revenue increased $6.9 million or 4.3%, primarily due to solid growth in our claims analytics and property estimating solutions, offset by a modest decline in our workers' compensation claims.
Revenues for our Insurance segment were $1,196.4 million for the six months ended June 30, 2022 compared to $1,085.6 million for the six months ended June 30, 2021, an increase of $110.8 million or 10.2%. Our underwriting & rating revenue increased $88.3 million or 11.5%. Our claims revenue increased $22.5 million or 7.0%.
Our revenue by category for the periods presented is set forth below:
| Six Months Ended June 30, |
Percentage |
Percentage change excluding |
||||||||||||||
| 2022 |
2021 |
change |
recent acquisitions |
|||||||||||||
| (in millions) |
||||||||||||||||
| Underwriting & rating |
$ | 853.8 | $ | 765.5 | 11.5 | % | 6.3 | % | ||||||||
| Claims |
342.6 | $ | 320.1 | 7.0 | % | 4.7 | % | |||||||||
| Total Insurance |
$ | 1,196.4 | $ | 1,085.6 | 10.2 | % | 5.8 | % | ||||||||
Our recent acquisitions (Whitespace Software Limited, Ignite Software Systems Limited, Data Driven Safety, LLC, ACTINEO GmbH, Infutor Data Solutions, LLC, and Opta Information Intelligence Corp.) contributed revenues of $47.6 million and the remaining Insurance revenue increased $63.2 million or 5.8%. Our underwriting & rating revenue increased $48.1 million or 6.3%, primarily due to an annual increase in prices derived from continued enhancements to the content of the solutions within our industry-standard insurance programs as well as selling expanded solutions to existing customers in commercial and personal lines. In addition, extreme event solutions and our life solutions contributed to the growth. Our claims revenue increased $15.1 million or 4.7%, primarily due to growth in our claims analytics revenue and property estimating solutions.
Cost of Revenues
Cost of revenues for our Insurance segment was $190.7 million for the three months ended June 30, 2022 compared to $172.8 million for the three months ended June 30, 2021, an increase of $17.9 million or 10.4%. Our recent acquisitions within the Insurance segment represented an increase of $14.3 million in cost of revenues. The remaining cost of revenues increased $3.6 million or 2.1% primarily due to increases in information technology expenses of $3.0 million, salaries and employee benefits of $1.1 million, travel expenses of $1.1 million, and professional consulting costs of $0.1 million. These increases were partially offset by decreases in data costs of $1.5 million, and other operating costs of $0.2 million.
Cost of revenues for our Insurance segment was $384.5 million for the six months ended June 30, 2022 compared to $346.0 million for the six months ended June 30, 2021, an increase of $38.5 million or 11.1%. Our recent acquisitions within the Insurance segment represented an increase of $23.6 million in cost of revenues. The remaining cost of revenues increased $14.9 million or 4.3% primarily due to increases in salaries and employee benefits of $8.7 million, information technology expenses of $8.1 million, and travel expenses of $1.9 million. These increases were partially offset by decreases in data costs of $2.6 million, professional consulting costs of $0.1 million, and other operating costs of $1.1 million. The increase in salaries and employee benefits was primarily due to a pause in our employee hiring activities in the prior year's period.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for our Insurance segment were $86.9 million for the three months ended June 30, 2022 compared to $66.7 million for the three months ended June 30, 2021, an increase of $20.2 million or 30.3%. Our recent acquisitions accounted for an increase of $12.7 million, which was primarily related to salaries and employee benefits. The remaining SGA increase of $7.5 million or 10.5% was primarily due to increases in salaries and employee benefits of $6.1 million, travel expenses of $2.1 million, and information technology expenses of $1.2 million. These increases were partially offset by decreases in professional consulting costs of $1.7 million, and other operating costs of $0.2 million.
Selling, general and administrative expenses for our Insurance segment were $176.9 million for the six months ended June 30, 2022 compared to $141.4 million for the six months ended June 30, 2021, an increase of $35.5 million or 25.1%. Our recent acquisitions accounted for an increase of $24.3 million, which was primarily related to salaries and employee benefits. The remaining SGA increase of $11.2 million or 7.6% was primarily due to increases in salaries and employee benefits of $4.4 million, travel expenses of $2.9 million, professional consulting costs of $2.7 million, and information technology expenses of $1.8 million. These increases were partially offset by a decrease in other operating costs of $0.6 million.
Investment Income
Investment income was a gain of $1.5 million for the three months ended June 30, 2022 compared to a gain of $0.2 million for the three months ended June 30, 2021. This was primarily due to the impact of foreign currencies.
Investment income was a gain of $1.2 million for the six months ended June 30, 2022 compared to a gain of $1.5 million for the six months ended June 30, 2021. This was primarily due to the impact of foreign currencies.
EBITDA Margin
EBITDA for our Insurance segment was $636.2 million for the six months ended June 30, 2022 compared to $599.7 million for the six months ended June 30, 2021. The EBITDA margin for our Insurance segment was 53.2% for the six months ended June 30, 2022 compared to 55.2% for the six months ended June 30, 2021. The decrease in EBITDA margin was primarily due to new acquisitions.
Energy and Specialized Markets
Revenues
Revenues for our Energy and Specialized Markets segment were $133.5 million for the three months ended June 30, 2022 compared to $162.3 million for the three months ended June 30, 2021, a decrease of $28.8 million or 17.7%. Our recent acquisition of Roskill Holdings Limited, and disposition of the environmental health and safety business, within this segment contributed a net decrease in revenues of $26.3 million. The remaining decrease in Energy and Specialized Markets revenue of $2.5 million or 1.8% was primarily due to a modest decrease in our subscription solutions related to our decision to suspend all commercial operations in Russia and a decrease in our energy consulting revenue.
Revenues for our Energy and Specialized Markets segment were $287.8 million for the six months ended June 30, 2022 compared to $318.5 million for the six months ended June 30, 2021, a decrease of $30.7 million or 9.6%. Our recent acquisition of Roskill Holdings Limited, and disposition of the environmental health and safety business, within this segment contributed a net decrease in revenues of $29.2 million. The remaining decrease in Energy and Specialized Markets revenue of $1.5 million or 0.6% was primarily due to increases in our subscription and consulting revenue, mitigated by the suspension of all commercial operations in Russia which negatively impacted revenue by approximately $3.5 million.
Cost of Revenues
Cost of revenues for our Energy and Specialized Markets segment was $53.4 million for the three months ended June 30, 2022 compared to $67.2 million for the three months ended June 30, 2021, a decrease of $13.8 million or 20.4%. Our recent acquisition of Roskill Holdings Limited, and disposition of the environmental health and safety business, accounted for a net decrease of $11.6 million. The remaining decrease in cost of revenues of $2.2 million or 3.8% was primarily due to decreases in salaries and employee benefits of $1.5 million, data costs of $0.4 million, professional consulting costs of $0.3 million, and other operating costs of $1.4 million. These decreases were partially offset by increases in travel expenses of $0.8 million, and information technology expenses of $0.6 million.
Cost of revenues for our Energy and Specialized Markets segment was $118.5 million for the six months ended June 30, 2022 compared to $132.2 million for the six months ended June 30, 2021, a decrease of $13.7 million or 10.3%. Our recent acquisition of Roskill Holdings Limited, and disposition of the environmental health and safety business, accounted for a net decrease of $13.2 million. The remaining decrease in cost of revenues of $0.5 million or 0.4% was primarily due to decreases in salaries and employee benefits of $1.3 million, data costs of $0.7 million, other operating costs $1.1 million. These decreases were partially offset by increases in travel expenses of $1.1 million, information technology expenses of $1.1 million, and professional consulting costs of $0.4 million.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for our Energy and Specialized Markets segment were $39.1 million for the three months ended June 30, 2022 compared to $36.9 million for the three months ended June 30, 2021, an increase of $2.2 million or 6.1%. Our recent acquisition of Roskill Holdings Limited, and disposition of the environmental health and safety business, accounted for a net decrease of $2.5 million primarily related to salaries and employee benefits. The remaining increase in SGA of $4.7 million or 15.2% was primarily due to increases in salaries and employee benefits of $4.6 million, travel expenses of $0.5 million, and information technology expenses of $0.1 million. These increases were partially offset by a decrease in professional consulting costs of $0.1 million, and other operating costs of $0.4 million.
Selling, general and administrative expenses for our Energy and Specialized Markets segment were $77.1 million for the six months ended June 30, 2022 compared to $74.8 million for the six months ended June 30, 2021, an increase of $2.3 million or 3.1%. Our recent acquisition of Roskill Holdings Limited, and disposition of the environmental health and safety business, accounted for a net decrease of $4.0 million primarily related to salaries and employee benefits. The remaining increase in SGA of $6.3 million or 10.0% was primarily due to increases in salaries and employee benefits of $5.9 million, professional consulting costs of $0.9 million, travel expenses of $0.5 million, and information technology expenses of $0.3 million. These increases were partially offset by a decrease in other operating costs of $1.3 million.
Investment Income (Loss)
Investment income (loss) was a gain of $3.5 million for the three months ended June 30, 2022 compared to a loss of $0.6 million for the three months ended June 30, 2021. This was primarily due to the impact on foreign currencies.
Investment income (loss) was a gain of $3.4 million for the six months ended June 30, 2022 compared to a loss of $0.2 million for the six months ended June 30, 2021. This was primarily due to the impact on foreign currencies.
EBITDA Margin
EBITDA for our Energy and Specialized Markets segment was $549.0 million for the six months ended June 30, 2022 compared to $111.3 million for the six months ended June 30, 2021. The EBITDA margin for our Energy and Specialized Markets segment was 190.7% for the six months ended June 30, 2022 compared to 35.0% for the six months ended June 30, 2021. The increase in EBITDA margin was primarily driven by the gain from the sale of our environmental health and safety business, which positively impacted our margin by 157.5%.
Liquidity and Capital Resources
As of June 30, 2022 and December 31, 2021, we had cash and cash equivalents and available-for-sale securities of $484.6 million and $285.3 million, respectively. Subscriptions for our solutions are billed and generally paid in advance of rendering services either quarterly or in full upon commencement of the subscription period, which is usually for one year. Subscriptions are automatically renewed at the beginning of each calendar year. We have historically generated significant cash flows from operations. As a result of this factor, as well as the availability of funds under our Credit Facility, we expect that we will have sufficient cash to meet our working capital and capital expenditure needs and to fuel our future growth plans.
We have historically managed the business with a working capital deficit due to the fact that, as described above, we offer our solutions and services primarily through annual subscriptions or long-term contracts, which are generally prepaid quarterly or annually in advance of the services being rendered. When cash is received for prepayment of invoices, we record an asset (cash and cash equivalents) on our balance sheet with the offset recorded as a current liability (deferred revenues). This current liability is deferred revenue that does not require a direct cash outflow since our customers have prepaid and are obligated to purchase the services. In most businesses, growth in revenue typically leads to an increase in the accounts receivable balance causing a use of cash as a company grows. Unlike these businesses, our cash position is favorably affected by revenue growth, which results in a source of cash due to our customers prepaying for most of our services.
We have also historically used a portion of our cash for repurchases of our common stock from our stockholders. During the six months ended June 30, 2022 and 2021, we repurchased $896.3 million and $250.0 million, respectively, of our common stock. For the six months ended June 30, 2022 and 2021, we also paid dividends of $98.6 million and $94.2 million, respectively.
Financing and Financing Capacity
We had total debt, excluding finance lease liabilities, unamortized discounts and premium, and debt issuance costs of $3,475.0 million and $3,310.0 million at June 30, 2022 and December 31, 2021, respectively, and we were in compliance with our financial and other debt covenants.
We have a Credit Facility with a borrowing capacity of $1,000.0 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., Credit Suisse AG, Cayman Islands Branch, Morgan Stanley Bank, N.A., First Commercial Bank, Ltd., Los Angeles Branch, TD Bank, N.A., and the Northern Trust Company. The Credit Facility may be used for general corporate purposes, including working capital needs and capital expenditures, acquisitions, dividends and the Repurchase Program. As of June 30, 2022, we were in compliance with all financial and other debt covenants under the Credit Facility.
As of June 30, 2022 and December 31, 2021, the available capacity under the Credit Facility was $345.1 million and $384.9 million, net of the letters of credit of $4.9 million and $5.1 million, respectively. We had $650.0 million and $610.0 million in borrowings outstanding under the Credit Facility as of June 30, 2022 and December 31, 2021, respectively. Subsequent to June 30, 2022, we made repayments of $100.0 million under the Credit Facility.
On March 11, 2022, we entered into a $125.0 million Bilateral Term Loan Agreement (the "Term Loan") with Bank of America, N.A. The Term Loan carries an interest rate of 100bps plus the one month BSBY margin at the time of the original draw and each subsequent roll over period. At each roll over period, we can continue the loan for a period of 1 or 3 months until the agreed maturity date of September 12, 2022. This loan may be used for general corporate purposes, including working capital needs and capital expenditures, acquisitions, dividend payments, and the Repurchase Program.
We are considering the implications of the transition of LIBOR to alternative reference rate measures that will likely become effective post December 2021 for any new credit facilities or loans established. We believe that there is still some uncertainty over what these rates will be but one possibility for U.S. dollar LIBOR would be the Secured Overnight Financing Rate ("SOFR") or the BSBY. As this decision has not been finalized at the time of amending our Credit Facility agreement, there is no definitive alternative rate proposed in the current contract. We are, however, reviewing the potential impact on the application of this rate on our interest expense once it becomes applicable; we however do not anticipate this change having a material impact on the interest expense charged on any applicable commitments. As our only current contract that is subject to the LIBOR rate is the Credit Facility, the impact will be dependent on what the outstanding borrowing amount is on the Credit Facility and the relevant interest rate that will be contractually applicable. Should we amend our Credit Facility to reflect SOFR or BSBY, based on recent borrowings and applicable SOFR, we do not anticipate such an amendment to have a material impact on the business.
Cash Flow
The following table summarizes our cash flow data:
| Three Months Ended |
Six Months Ended |
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| June 30, |
June 30, |
|||||||||||||||||||||||
| 2022 |
2021 |
Percentage change |
2022 |
2021 |
Percentage change |
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| (in millions) |
(in millions) |
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| Net cash provided by operating activities |
$ | 130.2 | $ | 233.2 | (44.2 | )% | $ | 529.8 | $ | 681.9 | (22.3 | )% | ||||||||||||
| Net cash provided by (used in) investing activities |
$ | 424.8 | $ | (99.8 | ) | (525.7 | )% | $ | 451.1 | $ | (173.5 | ) | (360.0 | )% | ||||||||||
| Net cash used in financing activities |
$ | (467.4 | ) | $ | (248.7 | ) | 87.9 | % | $ | (761.0 | ) | $ | (447.9 | ) | 69.9 | % | ||||||||
Operating Activities
Net cash provided by operating activities was $130.2 million for the three months ended June 30, 2022 compared to $233.2 million for the three months ended June 30, 2021, a decrease of $103.0 million or 44.2%. The decrease is related to an increase in tax payments of $122.0 million, primarily related to the gain on the sale of our environmental health and safety business ("3E") on March 11, 2022 and the impact of the sold businesses.
Net cash provided by operating activities was $529.8 million for the six months ended June 30, 2022 compared to $681.9 million for the six months ended June 30, 2021, a decrease of $152.1 million or 22.3%. The decrease is related to an increase in tax payments of $122.0 million, primarily related to the gain on the sale of 3E, and the impact of the sold businesses.
Investing Activities
Net cash provided by investing activities of $424.8 million for the three months ended June 30, 2022 was primarily related to the $498.3 million in proceeds from the sale of our Verisk Financial Services segment, partially offset by capital expenditures of $69.2 million. Net cash used in investing activities of $99.8 million for the three months ended June 30, 2021 was primarily related to capital expenditures of $62.5 million, acquisitions and purchase of controlling interest, including escrow funding associated with the acquisitions, of $22.6 million, and investments in nonpublic companies of $15.1 million.
Net cash provided by investing activities of $451.1 million for the six months ended June 30, 2022 was primarily related to the $1,073.3 million in proceeds from the sale 3E and Verisk Financial Services, partially offset by acquisitions, including escrow funding associated with the acquisitions, of $451.2 million, capital expenditures of $129.2 million, and investments in nonpublic companies of $41.8 million. Net cash used in investing activities of $173.5 million for the six months ended June 30, 2021 was primarily related to capital expenditures of $121.7 million, acquisitions and purchase of controlling interest, including escrow funding associated with the acquisitions, of $36.3 million, and investments in nonpublic companies of $15.1 million.
Financing Activities
Net cash used in financing activities of $467.4 million for the three months ended June 30, 2022 was primarily driven by repurchases of common stock of $325.0 million, repayments of debt under our Credit Facility of $160.0 million, and dividend payments of $49.2 million, partially offset by proceeds from stock options exercised of $77.2 million. Net cash used in financing activities of $248.7 million for the three months ended June 30, 2021 was primarily driven by repayment of our $450.0 million 5.800% senior notes on May 3, 2021, repurchases of common stock of $150.0 million, and dividend payments of $47.1 million, partially offset by net proceeds from our Credit Facility of $390.0 million and proceeds from stock options exercised of $13.4 million.
Net cash used in financing activities of $761.0 million for the six months ended June 30, 2022 was primarily driven by repurchases of common stock of $896.3 million, net share settlements of taxes on restricted stock of $20.0 million, and dividend payments of $98.6 million, partially offset by proceeds under our term loan facility of $125.0 million, proceeds from stock options exercised of $93.0 million, and proceeds, net of repayments of debt under our Credit Facility, of $40.0 million. Net cash used in financing activities of $447.9 million for the six months ended June 30, 2021 was primarily driven by repayment of our $450.0 million 5.800% senior notes on May 3, 2021, repurchases of common stock of $250.0 million, dividend payments of $94.2 million, and net share settlement of taxes on restricted stock of $11.0 million, partially offset by net proceeds from our Credit Facility of $340.0 million and proceeds from stock options exercised of $21.0 million.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Contractual Obligations
There have been no material changes to our contractual obligations outside the ordinary course of our business from those reported in our annual report on Form 10-K and filed with the Securities and Exchange Commission on February 22, 2022.
Critical Accounting Estimates
Our management’s discussion and analysis of financial condition and results of operations are based on our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. The preparation of these financial statements require management to make estimates and judgments that affect reported amounts of assets and liabilities and related disclosures of contingent assets and liabilities at the dates of the financial statements and revenue and expenses during the reporting periods. These estimates are based on historical experience and on other assumptions that are believed to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates, including those related to acquisition purchase price allocations, revenue recognition, goodwill and intangible assets, pension and other postretirement benefits, stock based compensation, income taxes, and allowance for doubtful accounts. Actual results may differ from these assumptions or conditions. Some of the judgments that management makes in applying its accounting estimates in these areas are discussed under the heading "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in our annual report on Form 10-K dated and filed with the Securities and Exchange Commission on February 22, 2022. Since the date of our annual report on Form 10-K, there have been no material changes to our critical accounting policies and estimates other than the items noted below.
| Quantitative and Qualitative Disclosures About Market Risk |
Market risks at June 30, 2022 have not materially changed from those discussed under Item 7A in our annual report on Form 10-K dated and filed with the Securities and Exchange Commission on February 22, 2022.
| Controls and Procedures |
Disclosure Controls and Procedures
We are required to maintain disclosure controls and procedures (as that term is defined in Rules 13a-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives at the reasonable assurance level.
Our management, with the participation of the Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this quarterly report on Form 10-Q. Based upon the foregoing assessments, our Chief Executive Officer and Chief Financial Officer have concluded that, as of June 30, 2022, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
During the three months ended June 30, 2022, there has been no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
| Legal Proceedings |
We are party to legal proceedings with respect to a variety of matters in the ordinary course of business. See Part I Item 1. Note 16 to our condensed consolidated financial statements for the six months ended June 30, 2022 for a description of our significant current legal proceedings, which is incorporated by reference herein.
| Risk Factors |
For a discussion of the risk factors affecting us, see "Risk Factors" in Part 1, Item 1A of our annual report on Form 10-K dated and filed with the Securities and Exchange Commission on February 22, 2022.
| Unregistered Sales of Equity Securities and Use of Proceeds |
Recent Sales of Unregistered Securities
We did not have any unregistered sales of equity securities during the period covered by this report.
Issuer Purchases of Equity Securities
Under the Repurchase Program, we may repurchase stock in the market or as otherwise determined by us. These authorizations have no expiration dates and may be suspended or terminated at any time. As of June 30, 2022, we had $707.5 million available to repurchase shares, inclusive of the $1,000.0 million authorization approved by the board on February 16, 2022. Our share repurchases for the quarter ended June 30, 2022 are set forth below:
| Period |
Total Number of Shares Purchased |
Average Price Paid per Share |
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs |
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| (in millions) |
||||||||||||||||
| April 1, 2022 through April 30, 2022 |
1,211,387 | (1) |
$ | 214.63 | (1) |
1,211,387 | $ | 707.5 | ||||||||
| May 1, 2022 through May 31, 2022 |
349,762 | (1) |
$ | 185.84 | (1) |
349,762 | $ | 707.5 | ||||||||
| June 1, 2022 through June 30, 2022 |
— | $ | — | — | $ | 707.5 | ||||||||||
| 1,561,149 | (1) |
$ | 208.18 | (1) |
1,561,149 | |||||||||||
(1) In March 2022, we entered into an ASR agreement to repurchase shares of our common stock for an aggregate purchase price of $325.0 million with Morgan Stanley & Co., LLC. The ASR agreement is accounted for as a treasury stock transaction and a forward stock purchase agreement indexed to our common stock. Upon the payment of the aggregate purchase price of $325.0 million in April 2022, we received 1,211,387 shares of our common stock at a price of $214.63 per share. Upon the final settlement in May 2022, we received an additional 349,762 shares as determined by the daily volume weighted average share price of our common stock during the term of the ASR agreement, bringing the total shares received under this ASR agreement to 1,561,149 and a final average price paid of $208.18 per share.
| Defaults Upon Senior Securities |
None.
| Mine Safety Disclosures |
None.
| Other Information |
None.
| Exhibits |
See Exhibit Index.
| Exhibit Number |
Description |
|
| 3.1 | ||
| 3.2 |
||
| 10.1 | Transition and Consulting Agreement dated May 10, 2022 between Scott G. Stephenson and Verisk Analytics, Inc.* | |
| 10.2 | ||
| 31.1 |
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| 31.2 |
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| 32.1 |
||
| 101.INS |
Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.* |
|
| 101.SCH |
Inline XBRL Taxonomy Extension Schema.* |
|
| 101.CAL |
Inline XBRL Taxonomy Extension Calculation Linkbase.* |
|
| 101.DEF |
Inline XBRL Taxonomy Definition Linkbase.* |
|
| 101.LAB |
Inline XBRL Taxonomy Extension Label Linkbase.* |
|
| 101.PRE |
Inline XBRL Taxonomy Extension Presentation Linkbase.* |
|
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).* |
| * |
Filed herewith. |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Verisk Analytics, Inc. |
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| (Registrant) |
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| Date: August 2, 2022 |
By: |
/s/ David J. Grover |
|
| David J. Grover |
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| Interim Chief Financial Officer |
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| (Principal Financial Officer and Duly Authorized Officer) |
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