Continued Momentum in Health-Care Vertical Helped Verisk Report Solid First-Quarter Results

Led by a strong performance from its Decision Analytics business, Verisk Analytics VRSK reported solid first-quarter results, with revenue up 16.4% to $403.3 million and EBITDA up 12.6% to $179.7 million. Acquisitions played a large part in the company’s performance during the quarter as organic revenue growth came-in at 6.8%. Decision Analytics’ revenue increased 24.4% year over year to $250.7 million and now accounts for 62% of the company's total business, up 4 percentage points compared with last year. Given the limited growth opportunities in its Risk Assessment business, we think management's strategy to focus on fast growing Decision Analytics should handsomely repay it in the long run. Growth in Decision Analytics is driven by continued momentum in health-care and insurance solutions, partly offset by weakness in financial services (mortgage in particular) business. Health care remains a bright spot for the company, and we think MediConnect and the unified health-care technology platform should help Verisk further penetrate the health-care analytics market. The outlook for mortgage products continues to remain negative, but we think the firm should be able to absorb it, as mortgage makes up less than 10% of the total business. Despite solid top-line numbers, Decision Analytics saw 200 basis points of compression (39.3% to 37.3%) in margin during the quarter. This was due to continued investments made by the company to strengthen its products in the health-care vertical. Verisk’s health-care product portfolio is still growing, which will likely keep margins under pressure in the near-term.