Verisk Analytics - 10-Q quarterly report FY2020 Q1

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________________________

FORM 10-Q

___________________________________



☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2020



☐	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: 001-34480

___________________________________

VERISK ANALYTICS, INC.

(Exact name of registrant as specified in its charter)

___________________________________



Delaware		26-2994223
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

545 Washington Boulevard
Jersey City
NJ		07310-1686
(Address of principal executive offices)		(Zip Code)

(201) 469-3000

(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
Common Stock $.001 par value	VRSK	NASDAQ Global Select Market

___________________________________

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. Yes þ No ☐

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). Yes þ No ☐

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.



Large accelerated filer	þ	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐

		Emerging growth company	☐

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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 ☐ No þ

As of May 1, 2020, there were 162,259,111 shares outstanding of the registrant's Common Stock, par value $.001.

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Verisk Analytics, Inc.

Index to Form 10-Q

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	Page Number

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

Condensed Consolidated Balance Sheets	1

Condensed Consolidated Statements of Operations	2

Condensed Consolidated Statements of Comprehensive Income (Loss)	3

Condensed Consolidated Statements of Changes in Stockholders’ Equity	4

Condensed Consolidated Statements of Cash Flows	5

Notes to Condensed Consolidated Financial Statements	6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	24

Item 3. Quantitative and Qualitative Disclosures About Market Risk	35

Item 4. Controls and Procedures	35

PART II — OTHER INFORMATION

Item 1. Legal Proceedings	36

Item 1A. Risk Factors	36

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	36

Item 3. Defaults Upon Senior Securities	37

Item 4. Mine Safety Disclosures	37

Item 5. Other Information	37

Item 6. Exhibits	37

SIGNATURES	38

Exhibit 31.1

Exhibit 31.2

Exhibit 32.1

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PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

VERISK ANALYTICS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

As of March 31, 2020 and December 31, 2019



	2020			2019

	(in millions, except for share and per share data)
ASSETS
Current assets:
Cash and cash equivalents	$	204.4		$	184.6
Accounts receivable, net of allowance for doubtful accounts of $13.8 and $11.7, respectively		523.3			441.6
Prepaid expenses		66.6			60.9
Income taxes receivable		—			25.9
Other current assets		19.7			17.8
Current assets held for sale		—			14.1
Total current assets		814.0			744.9
Noncurrent assets:
Fixed assets, net		549.3			548.1
Operating lease right-of-use assets, net		208.6			218.6
Intangible assets, net		1,306.6			1,398.9
Goodwill		3,742.6			3,864.3
Deferred income tax assets		9.1			9.8
Other noncurrent assets		297.9			159.8
Noncurrent assets held for sale		—			110.8
Total assets	$	6,928.1		$	7,055.2

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	315.6		$	375.0
Acquisition-related liabilities		109.5			111.2
Short-term debt and current portion of long-term debt		444.0			499.4
Deferred revenues		668.4			440.1
Operating lease liabilities		38.7			40.6
Income taxes payable		21.7			6.8
Current liabilities held for sale		—			18.7
Total current liabilities		1,597.9			1,491.8
Noncurrent liabilities:
Long-term debt		2,652.4			2,651.6
Deferred income tax liabilities		349.6			356.0
Operating lease liabilities		198.6			208.1
Other liabilities		49.1			48.8
Noncurrent liabilities held for sale		—			38.1
Total liabilities		4,847.6			4,794.4
Commitments and contingencies
Stockholders’ equity:
Common stock, $.001 par value; 2,000,000,000 shares authorized; 544,003,038 shares issued; 162,498,132 and 163,161,564 shares outstanding, respectively		0.1			0.1
Additional paid-in capital		2,404.6			2,369.1
Treasury stock, at cost, 381,504,906 and 380,841,474 shares, respectively		(4,018.9	)		(3,849.9	)
Retained earnings		4,353.4			4,228.4
Accumulated other comprehensive losses		(658.7	)		(486.9	)
Total stockholders’ equity		2,080.5			2,260.8
Total liabilities and stockholders’ equity	$	6,928.1		$	7,055.2

The accompanying notes are an integral part of these condensed consolidated financial statements.

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VERISK ANALYTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)



	Three Months Ended March 31,
	2020			2019

	(in millions, except for share and per share data)
Revenues	$	689.8		$	625.0
Operating expenses:
Cost of revenues (exclusive of items shown separately below)		257.7			231.4
Selling, general and administrative		112.1			111.4
Depreciation and amortization of fixed assets		46.1			46.6
Amortization of intangible assets		41.0			33.2
Other operating income		(19.4	)		—
Total operating expenses		437.5			422.6
Operating income		252.3			202.4
Other income (expense):
Investment loss and others, net		(2.1	)		(0.4	)
Interest expense		(33.5	)		(31.9	)
Total other expense, net		(35.6	)		(32.3	)
Income before income taxes		216.7			170.1
Provision for income taxes		(45.0	)		(35.7	)
Net income	$	171.7		$	134.4
Basic net income per share	$	1.05		$	0.82
Diluted net income per share	$	1.04		$	0.81
Weighted-average shares outstanding:
Basic		162,894,306			163,528,343
Diluted		165,724,120			166,544,945

The accompanying notes are an integral part of these condensed consolidated financial statements.

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VERISK ANALYTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (UNAUDITED)



	Three Months Ended March 31,
	2020			2019

	(in millions)
Net income	$	171.7		$	134.4
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustment		(172.6	)		58.5
Pension and postretirement liability adjustment		0.8			1.1
Total other comprehensive (loss) income		(171.8	)		59.6
Comprehensive (loss) income	$	(0.1	)	$	194.0

The accompanying notes are an integral part of these condensed consolidated financial statements.

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VERISK ANALYTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)

For The Three Months Ended March 31, 2020 and 2019



	Common Stock Issued	Par Value		Additional Paid-in Capital		Treasury Stock			Retained Earnings			Accumulated Other Comprehensive Losses			Total Stockholders’ Equity

	(in millions, except for share data)
Balance, January 1, 2020	544,003,038	$	0.1	$	2,369.1	$	(3,849.9	)	$	4,228.4		$	(486.9	)	$	2,260.8
Adjustment to opening retained earnings related to Topic 326	—		—		—		—			(2.4	)		—			(2.4	)
Net income	—		—		—		—			171.7			—			171.7
Common stock dividend ⁽¹⁾	—		—		—		—			(44.3	)		—			(44.3	)
Other comprehensive loss	—		—		—		—			—			(171.8	)		(171.8	)
Treasury stock acquired (1,124,368 shares)	—		—		—		(173.8	)		—			—			(173.8	)
Stock options exercised (449,007 shares transferred from treasury stock)	—		—		14.8		4.7			—			—			19.5
Stock-based compensation expense	—		—		19.6		—			—			—			19.6
Other stock issuances (11,929 shares transferred from treasury stock)	—		—		1.1		0.1			—			—			1.2
Balance, March 31, 2020	544,003,038	$	0.1	$	2,404.6	$	(4,018.9	)	$	4,353.4		$	(658.7	)	$	2,080.5

Balance, January 1, 2019	544,003,038	$	0.1	$	2,283.0	$	(3,563.2	)	$	3,942.6		$	(591.9	)	$	2,070.6
Net income	—		—		—		—			134.4			—			134.4
Common stock dividend ⁽¹⁾	—		—		—		—			(41.0	)		—			(41.0	)
Other comprehensive income	—		—		—		—			—			59.6			59.6
Treasury stock acquired (636,590 shares)	—		—		—		(75.0	)		—			—			(75.0	)
Stock options exercised (307,270 shares transferred from treasury stock)	—		—		8.7		2.9			—			—			11.6
Stock-based compensation expense	—		—		9.2		—			—			—			9.2
Other stock issuances (11,504 shares transferred from treasury stock)	—		—		1.0		0.1			—			—			1.1
Balance, March 31, 2019	544,003,038	$	0.1	$	2,301.9	$	(3,635.2	)	$	4,036.0		$	(532.3	)	$	2,170.5

⁽¹⁾ Refer to Note 10. 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.

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VERISK ANALYTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

For The Three Months Ended March 31, 2020 and 2019



	2020			2019

	(in millions)
Cash flows from operating activities:
Net income	$	171.7		$	134.4
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of fixed assets		46.1			46.6
Amortization of intangible assets		41.0			33.2
Amortization of debt issuance costs and original issue discount, net of original issue premium		0.3			0.9
Provision for doubtful accounts		1.5			1.2
Gain on sale of assets		(19.4	)		—
Stock-based compensation expense		19.6			9.2
Realized loss (gain) on available-for-sale securities, net		0.5			(0.4	)
Deferred income taxes		(0.1	)		3.3
Loss on disposal of fixed assets, net		0.3			—

Changes in assets and liabilities, net of effects from acquisitions:
Accounts receivable		(96.5	)		(81.6	)
Prepaid expenses and other assets		(18.5	)		(2.2	)
Operating lease right-of-use assets, net		9.3			8.8
Income taxes		41.0			25.3
Acquisition-related liabilities		0.2			8.4
Accounts payable and accrued liabilities		(62.0	)		(35.8	)
Deferred revenues		237.6			217.7
Operating lease liabilities		(10.5	)		(9.1	)
Other liabilities		0.5			6.2
Net cash provided by operating activities		362.6			366.1
Cash flows from investing activities:
Acquisitions, net of cash acquired of $0 and $3.7, respectively		—			(69.1	)
Proceeds from sale of assets		23.1			—
Purchase of investments in a nonpublic company		(63.8	)		—
Capital expenditures		(52.9	)		(45.2	)
Other investing activities, net		6.1			(6.0	)
Net cash used in investing activities		(87.5	)		(120.3	)
Cash flows from financing activities:
Repayments of short-term debt, net		(75.0	)		(245.0	)
Proceeds from issuance of short-term debt with original maturities greater than three months		20.0			—
Repayments of current portion of long-term debt		—			(250.0	)
Proceeds from issuance of long-term debt, inclusive of original issue premium and net of original issue discount		—			397.9
Payment of debt issuance costs		—			(2.9	)
Repurchases of common stock		(173.8	)		(75.0	)
Proceeds from stock options exercised		19.2			11.6
Dividends paid		(43.9	)		(40.9	)
Other financing activities, net		(1.9	)		(2.1	)
Net cash used in financing activities		(255.4	)		(206.4	)
Effect of exchange rate changes		(0.2	)		0.6
Increase in cash and cash equivalents		19.5			40.0
Cash and cash equivalents classified within current assets held for sale, beginning of period		0.3			—
Cash and cash equivalents, beginning of period		184.6			139.5
Cash and cash equivalents, end of period	$	204.4		$	179.5
Supplemental disclosures:
Income taxes paid	$	4.1		$	7.5
Interest paid	$	22.6		$	15.3
Noncash investing and financing activities:
Debt issuance costs included in accounts payable and accrued liabilities	$	—		$	1.0
Deferred tax asset established on date of acquisition	$	—		$	0.1
Right-of-use assets obtained in exchange for new operating lease liabilities	$	—		$	247.6
Finance lease obligations	$	1.5		$	1.7
Operating lease additions, net of terminations	$	1.6		$	—
Fixed assets included in accounts payable and accrued liabilities	$	0.7		$	0.7
Dividend payable included in other liabilities	$	1.0		$	0.1
Gain on sale of assets	$	3.5		$	—
Held for sale assets contributed to a nonpublic company	$	65.9		$	—

The accompanying notes are an integral part of these condensed consolidated financial statements.

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VERISK ANALYTICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Amounts in millions, except for share and per share data, unless otherwise stated)

1. Organization:

Verisk Analytics, Inc. and its consolidated subsidiaries (“Verisk” or the “Company”) is a data analytics provider serving customers in insurance, energy and specialized markets, and financial services. Using various technologies to collect and analyze billions of records, Verisk draws on numerous data assets and domain expertise to provide first-to-market innovations that are integrated into customer workflows. Verisk offers 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, Verisk helps customers protect people, property, and financial assets.

Verisk was established to serve as the parent holding company of Insurance Services Office, Inc. (“ISO”) upon completion of the initial public offering (“IPO”), which occurred on October 9, 2009. ISO was formed in 1971 as an advisory and rating organization for the property and casualty ("P&C") insurance industry to provide statistical and actuarial services, to develop insurance programs and to assist insurance companies in meeting state regulatory requirements. Over the past decade, the Company broadened its data assets, entered new markets, placed a greater emphasis on analytics, and pursued strategic acquisitions. Verisk trades under the ticker symbol “VRSK” on the Nasdaq Global Select Market.

Since January 2020, an outbreak of the 2019 novel coronavirus (“COVID-19”) has evolved into a worldwide pandemic. The Company has modified its operations in line with its business continuity plans due to COVID-19. While its facilities generally remain open, the Company is making extensive use of the work-from-home model at this moment. On a daily basis, management is reviewing the Company's operations and there have been to date minimal interruptions in the Company's customer facing operations. Given the digital nature of the Company's business and the move toward cloud enablement, the Company expects to remain operationally stable and fully available to customers. The Company is in compliance with all financial covenants and has not observed a loss of any significant customers, a significant deterioration in the collectability of receivables, a significant reduction in its liquidity, nor a significant decline in subscription renewal rates.

The Company has analyzed its solutions and services to assess the impact of COVID-19 on its revenue streams. The Company has not identified any material impact of COVID-19 on approximately 85% of its revenues at this point, as much of these revenues are subscription in nature and subject to long-term contracts. Of the remaining 15%, the Company has identified specific solutions and services, largely transactional in nature, that are being impacted by COVID-19. The primary causal factors are lower auto and travel insurance activity, the inability to enter commercial buildings to perform engineering analyses, decreased capital expenditure in the energy sector, and reduced levels of advertising by financial institutions and marketers. A portion of the revenue attributable to these solutions could be negatively impacted by COVID-19. The impact on many of these solutions is expected to be modest, with the deepest impacts felt in the categories of travel insurance analytics, auto underwriting and claims analytics, consulting services to the energy industry, and spend informed analytic solutions in financial services. Although the Company has experienced a decline in revenue attributable to these specific solutions in the last two weeks of March 2020, the impact on the quarter was modest, and the Company does not anticipate lasting impacts of a material nature to its long-term growth profile. As the global outbreak of COVID-19 is still rapidly evolving, management continues to closely monitor its impact on the Company’s business.

2. Basis of Presentation and Summary of Significant Accounting Policies:

The 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, the realization of deferred tax assets and liabilities, acquisition related liabilities, fair value of stock-based compensation for stock options granted, and assets and liabilities for pension and postretirement benefits. Actual results may ultimately differ from those estimates.

The condensed consolidated financial statements as of March 31, 2020 and for the three months ended March 31, 2020 and 2019, in the opinion of management, include all adjustments, consisting of normal recurring items, to present fairly the Company’s financial position, results of operations and cash flows. The operating results for the three months ended March 31, 2020 are not necessarily indicative of the results to be expected for the full year. The condensed consolidated financial statements and related notes as of and for the three months ended March 31, 2020 have been prepared on the same basis as and should be read in conjunction with the annual report on Form 10-K for the year ended December 31, 2019. Certain information

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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. Certain reclassifications, including reflecting operating lease right-of-use assets, net, operating lease liabilities, and acquisition-related liabilities as a separate line item in 2019, have been made within the condensed consolidated statements of cash flows to conform to the respective 2020 presentation. The Company believes the disclosures made are adequate to keep the information presented from being misleading.

Recent Accounting Pronouncements



Accounting Standard	Description	Effective Date	Effect on Consolidated Financial Statements or Other Significant Matters
Financial Instruments—Credit Losses (Topic 326) In June 2016, Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-13, "Measurement of Credit Losses on Financial Instruments" ("Topic 326")	Topic 326 replaces the current “incurred loss” model for recognizing credit losses with an “expected loss” model referred to as the Current Expected Credit Loss ("CECL") model. Under the CECL model, an entity is required to present certain financial assets carried at amortized cost, such as trade receivables, at the net amount expected to be collected. The measurement of expected credit losses is to be based on information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. This measurement takes place at the time the financial asset is first added to the balance sheet and periodically thereafter. This differs significantly from the “incurred loss” model required under U.S. GAAP, which delays recognition until it is probable a loss has been incurred.	The Company adopted these amendments on January 1, 2020.	Refer to the accompanying condensed consolidated statements of changes in stockholders' equity for the adjustment of the opening retained earnings and Note 4. Fair Value Measurements for further discussions.
Reference Rate Reform (Topic 848) In March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2020-04, "Facilitation of the Effects of Reference Rate Reform on Financial Reporting" ("ASU No. 2020-04").	The amendment in this update provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendment in this update applies only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by the amendment does not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship.	The amendment in this update is effective for all entities as of March 12, 2020 through December 31, 2022.	The Company adopted this amendment on March 12, 2020. There was no impact to the condensed consolidated financial statements as of and for the three months ended March 31, 2020. The Company continues to monitor the transition of LIBOR to alternative reference rate measures that will likely become effective post December 2021.

3. Revenues:

Disaggregated revenues by type of service and by country are provided below for the three months ended March 31, 2020 and 2019. No individual customer or country outside of the U.S. accounted for 10.0% or more of the Company's consolidated revenues for the three months ended March 31, 2020 or 2019.



	Three Months Ended March 31,
	2020		2019
Insurance:
Underwriting & rating	$	344.1	$	305.9
Claims		145.3		147.7
Total Insurance		489.4		453.6
Energy and Specialized Markets		160.1		128.4
Financial Services		40.3		43.0
Total revenues	$	689.8	$	625.0

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	Three Months Ended March 31,
	2020		2019
Revenues:
U.S.	$	523.6	$	480.6
U.K.		45.8		44.2
Other countries		120.4		100.2
Total revenues	$	689.8	$	625.0

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 March 31, 2020 and December 31, 2019, the Company had no contract assets. Contract liabilities are defined as an entity's obligation to transfer goods or services to a customer for which the entity has received consideration (an amount of consideration is due) from the customer. As of March 31, 2020 and December 31, 2019, the Company had contract liabilities of $672.2 million and $443.2 million, respectively. The $229.0 million increase in contract liabilities from December 31, 2019 to March 31, 2020 was primarily due to billings of $314.5 million that were paid in advance, partially offset by $85.5 million of revenue recognized in the three months ended March 31, 2020. Contract liabilities, which are current and noncurrent, are included in "Deferred revenues" and "Other liabilities" in the condensed consolidated balance sheet, respectively, as of March 31, 2020 and December 31, 2019.

The Company’s most significant remaining performance obligations relate to providing customers with the right to use and update the online content over the remaining contract term. Revenues expected to be recognized in the future related to performance obligations, included within our deferred revenue and other liabilities, that are unsatisfied were $672.2 million and $443.2 million as of March 31, 2020 and December 31, 2019, respectively. The 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 99.0% of the balance at March 31, 2020 and December 31, 2019.

The Company recognizes an asset for incremental costs of obtaining a contract with a customer if it expects the benefits of those costs to be longer than one year. As of March 31, 2020 and December 31, 2019, the Company had deferred commissions of $66.7 million and $63.7 million, respectively, which have been included in "Prepaid expenses" and "Other noncurrent assets" in the accompanying condensed consolidated balance sheets.

4. Fair Value Measurements:

Certain assets and liabilities of the Company are reported at fair value in the 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, the Company 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. The investments in registered investment companies, which are Level 1 assets measured at fair value on a recurring basis, were $3.0 million and $3.6 million as of March 31, 2020 and December 31, 2019, respectively. The investments in registered investment companies are valued using quoted prices in active markets multiplied by the number of shares owned and were included in "Other current assets" in the accompanying condensed consolidated balance sheet. For the three months ended March 31, 2020, the Company

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determined the provision for credit losses related to accounts receivable and investments in registered investment companies was immaterial.

The Company elected not to carry its 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. The Company assesses the fair value of these financial instruments based on an estimate of interest rates available to the Company for financial instruments with similar features, the Company’s current credit rating and spreads applicable to the Company. The following table summarizes the carrying value and estimated fair value of these financial instruments as of March 31, 2020 and December 31, 2019, respectively:



		2020				2019
	Fair Value Hierarchy	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Financial instruments not carried at fair value:
Long-term debt excluding finance lease liabilities and syndicated revolving credit facility debt issuance costs	Level 2	$	2,650.5	$	2,895.0	$	2,650.4	$	2,902.2

On February 1, 2020, the sale of the aerial imagery sourcing group was completed. The Company contributed the assets related to the disposed business and cash of $63.8 million in exchange for a non-controlling 35.0% ownership interest in a nonpublic company, Vexcel Group, Inc ("Vexcel"). As of March 31, 2020, the Company had an equity investment of $129.7 million related to such interest accounted for in accordance with ASC 820-10. The value of the equity investment is based on management estimates with the assistance of valuations performed by third party specialists. This investment was included in "Other noncurrent assets" in the accompanying condensed consolidated balance sheet. For the three months ended March 31, 2020, there was no provision for credit losses related to this investment. Refer to Note 6. Dispositions for further discussion.

As of March 31, 2020 and December 31, 2019, the Company had securities of $14.0 million, which were accounted for under ASC 323-10-25, The Equity Method of Accounting for Investments in Common Stock ("ASC 323-10-25"). The Company does not have the ability to exercise significant influence over the investees’ operating and financial policies. As of March 31, 2020 and December 31, 2019, the Company also had an investment in a limited partnership of $13.8 million and $13.1 million, respectively, accounted for in accordance with ASC 323-10-25 as an equity method investment. These investments were included in "Other noncurrent assets" in the accompanying condensed consolidated balance sheet. For the three months ended March 31, 2020, there was no provision for credit losses related to these investments.

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5. Leases:

The Company has operating and finance leases for corporate offices, data centers, and certain equipment that are accounted for under ASC 842. The leases have remaining lease terms ranging from one year to fourteen years, some of which include the options to extend the leases for up to twenty years, and some of which include the options to terminate the leases within one year. Extension and termination options are considered in the calculation of the right-of-use (“ROU”) assets and lease liabilities when the Company determines it is reasonably certain that it will exercise those options.

The following table presents lease cost, cash paid for amounts included in the measurement of lease liabilities, ROU assets obtained, weighted-average remaining lease terms, and weighted-average discount rates for finance and operating leases for the three months ended March 31, 2020 and 2019, respectively.



	Three Months Ended March 31,
	2020			2019
Lease cost:
Operating lease cost ⁽¹⁾	$	12.4		$	12.1
Finance lease cost
Depreciation of finance lease assets ⁽²⁾		1.6			2.8
Interest on finance lease liabilities ⁽³⁾		0.2			0.4
Total lease cost	$	14.2		$	15.3

Other information:
Cash paid for amounts included in the measurement of lease liabilities
Operating cash outflows from operating leases	$	(13.6	)	$	(12.5	)
Operating cash outflows from finance leases	$	(0.2	)	$	(0.4	)
Financing cash outflows from finance leases	$	(1.9	)	$	(2.1	)
Weighted-average remaining lease term - operating leases		9.3 years			9.7 years
Weighted-average remaining lease term - finance leases		2.2 years			2.8 years
Weighted-average discount rate - operating leases		4.0	%		3.9	%
Weighted-average discount rate - finance leases		3.7	%		4.4	%

_______________

⁽¹⁾Included in "Cost of revenues" and "Selling, general and administrative" expenses in the accompanying condensed consolidated statements of operations

⁽²⁾Included in "Depreciation and amortization of fixed assets" in the accompanying condensed consolidated statements of operations

⁽³⁾Included in "Interest expense" in the accompanying condensed consolidated statements of operations

The ROU assets and lease liabilities for finance leases were $9.6 million and $7.8 million, respectively, as of March 31, 2020. The ROU assets and lease liabilities for finance leases were $9.9 million and $7.7 million, respectively, as of December 31, 2019. The ROU assets for finance leases were included in "Fixed assets, net" in the accompanying condensed consolidated balance sheets. The lease liabilities for finance leases were included in the "Short-term debt and current portion of long-term debt" and "Long-term debt" in the accompanying condensed consolidated balance sheets (see Note 9. Debt).

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Maturities of lease liabilities for the remainder of 2020 and the years through 2026 and thereafter are as follows:



	March 31, 2020
Years Ending	Operating Leases			Finance Leases
2020	$	36.2		$	4.4
2021		39.1			3.0
2022		35.3			0.7
2023		30.5			0.1
2024		21.2			—
2025		18.8			—
2026 and thereafter		109.7			—
Total lease payments		290.8			8.2
Less: Amount representing interest		(53.5	)		(0.4	)
Present value of total lease payments	$	237.3		$	7.8

6. Dispositions:

In the fourth quarter of 2019, the Company’s compliance background screening business and the aerial imagery sourcing group within the remote imagery business qualified as assets held for sale. These assets held for sale were part of the claims category within the Company’s Insurance segment as of December 31, 2019.

On February 1, 2020, the sale of the aerial imagery sourcing group was completed. The Company contributed assets related to the disposed business, including cash of $63.8 million, in exchange for a non-controlling 35.0% ownership interest in a nonpublic company, Vexcel. The Company determined the fair value of the equity securities associated with the non-controlling ownership interest in Vexcel with the assistance of valuations performed by third party specialists, discounted cash flow analysis and estimates made by management. The equity securities were concluded not to have a readily determinable fair value and did not qualify for the practical expedient to estimate fair value in accordance with ASC 820-10. At each subsequent reporting period, the Company is required perform a qualitative assessment considering impairment indicators to evaluate whether the investment is impaired. The contributed assets approximated the fair value of the equity securities related to the non-controlling ownership interest; therefore, there was no gain or loss recorded in conjunction with this disposition for the three months ended March 31, 2020.

On February 14, 2020, the sale of the compliance background screening business was completed for net cash proceeds of $23.1 million. A gain of $15.9 million was included in "Other operating income" within the accompanying condensed consolidated statements of operations for the three months ended March 31, 2020.

In the first quarter of 2020, the Company's data warehouse business within the Financial Services segment qualified as assets held for sale and was sold on March 1, 2020. The Company recorded a gain of $3.5 million in "Other operating income" within the accompanying condensed consolidated statements of operations for the three months ended March 31, 2020.

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7. Goodwill and Intangible Assets:

The following is a summary of the change in goodwill from December 31, 2019 through March 31, 2020, both in total and as allocated to the Company’s operating segments:



	Insurance			Energy and Specialized Markets			Financial Services			Total
Goodwill at December 31, 2019	$	998.8		$	2,389.5		$	476.0		$	3,864.3
Purchase accounting reclassifications		2.9			(1.8	)		(0.2	)		0.9
Current period adjustment ⁽¹⁾		21.4			(19.5	)		—			1.9
Foreign currency translation		(25.4	)		(98.1	)		(1.0	)		(124.5	)
Goodwill at March 31, 2020	$	997.7		$	2,270.1		$	474.8		$	3,742.6

_______________

⁽¹⁾Of which $19.5 million relates to a segment reclassification, refer to Note 13. Segment Reporting

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 the Company will determine the implied fair value of the reporting unit’s goodwill. If the carrying value of a reporting unit’s goodwill exceeds its implied fair value, then an impairment loss is recorded for the difference between the carrying amount and the implied fair value of goodwill. The Company completed the required annual impairment test as of June 30, 2019 and concluded that there was no impairment of goodwill. There were no triggering events for the three months ended March 31, 2020 that would impact the results of the impairment test performed as of June 30, 2019. As a result of COVID-19 and the current economic environment, near-term pressures may adversely affect the Company's ability to grow as anticipated, which could lead to a potential impairment.

The Company’s intangible assets and related accumulated amortization consisted of the following:



	Weighted Average Useful Life	Cost		Accumulated Amortization			Net
March 31, 2020
Technology	7 years	$	510.0	$	(298.3	)	$	211.7
Marketing	16 years		252.3		(95.7	)		156.6
Contract	6 years		5.0		(5.0	)		—
Customer	13 years		876.6		(289.3	)		587.3
Database	19 years		458.5		(107.5	)		351.0
Total intangible assets		$	2,102.4	$	(795.8	)	$	1,306.6
December 31, 2019
Technology	7 years	$	519.2	$	(291.9	)	$	227.3
Marketing	16 years		265.3		(94.3	)		171.0
Contract	6 years		5.0		(5.0	)		—
Customer	13 years		901.2		(278.0	)		623.2
Database	19 years		484.6		(107.2	)		377.4
Total intangible assets		$	2,175.3	$	(776.4	)	$	1,398.9

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Amortization expense related to intangible assets for the three months ended March 31, 2020 and 2019 was $41.0 million and $33.2 million, respectively. Estimated amortization expense for the remainder of 2020 and the years through 2025 and thereafter for intangible assets subject to amortization is as follows:



Year	Amount
2020	$	120.4
2021		149.2
2022		138.1
2023		126.3
2024		121.8
2025 and thereafter		650.8
	$	1,306.6

8. Income Taxes:

The Company’s effective tax rate for the three months ended March 31, 2020 was 20.8% compared to the effective tax rate for the three months ended March 31, 2019 of 21.0%. The effective tax rate for the three months ended March 31, 2020 was lower than the March 31, 2019 effective tax rate primarily due to higher tax benefits from equity compensation and lower nondeductible earnout expenses in the current period versus the prior period. These benefits were partially offset by tax expense recorded in the current period in connection with the Company’s disposition of its aerial imagery sourcing business resulting from differences in the book and tax basis of the assets and entities disposed. The difference between statutory tax rates and the Company’s effective tax rate is primarily due to tax benefits attributable to equity compensation, offset by additional state and local taxes.

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9. Debt:

The following table presents short-term and long-term debt by issuance as of March 31, 2020 and December 31, 2019:



	Issuance Date	Maturity Date	2020			2019
Short-term debt and current portion of long-term debt:
Syndicated revolving credit facility	Various	Various	$	440.0		$	495.0
Finance lease liabilities ⁽¹⁾	Various	Various		4.0			4.4
Short-term debt and current portion of long-term debt				444.0			499.4
Long-term debt:
Senior notes:
4.125% senior notes, inclusive of unamortized premium, and net of unamortized discount and debt issuance costs of $13.5 and $13.9, respectively	03/06/2019	03/15/2029		613.5			613.9
4.000% senior notes, less unamortized discount and debt issuance costs of $(6.4) and $(6.7), respectively	05/15/2015	06/15/2025		893.6			893.3
5.500% senior notes, less unamortized discount and debt issuance costs of $(4.5) and $(4.5), respectively	05/15/2015	06/15/2045		345.5			345.5
4.125% senior notes, less unamortized discount and debt issuance costs of $(1.5) and $(1.6), respectively	09/12/2012	09/12/2022		348.5			348.4
5.800% senior notes, less unamortized discount and debt issuance costs of $(0.6) and $(0.7), respectively	04/06/2011	05/01/2021		449.4			449.3
Finance lease liabilities ⁽¹⁾	Various	Various		3.8			3.3
Syndicated revolving credit facility debt issuance costs	Various	Various		(1.9	)		(2.1	)
Long-term debt				2,652.4			2,651.6
Total debt			$	3,096.4		$	3,151.0

_______________

⁽¹⁾Refer to Note 5. Leases

As of March 31, 2020 and December 31, 2019, the Company had senior notes with an aggregate principal amount of $2,650.0 million outstanding and was in compliance with their financial and other debt covenants.

As of March 31, 2020, the Company had a $1,000.0 million committed senior unsecured Credit Facility 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., 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 share repurchase program (the "Repurchase Program"). As of March 31, 2020, the Company was in compliance with all financial and other debt covenants under the Credit Facility. As of March 31, 2020 and December 31, 2019, the available capacity under the Credit Facility was $555.4 million and $500.2 million, net of the letters of credit of $4.6 million and $4.8 million, respectively. Subsequent to March 31, 2020, the Company had borrowings of $20.0 million and repayments of $60.0 million on the Credit Facility.

10. Stockholders’ Equity:

The Company has 2,000,000,000 shares of authorized common stock as of March 31, 2020 and December 31, 2019. The Company's common shares have rights to any dividend declared by the board of directors (the "Board"), subject to any preferential or other rights of any outstanding preferred stock, and voting rights to elect all current members of the Board.

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The Company has 80,000,000 shares of authorized preferred stock, par value $0.001 per share. The preferred shares have preferential rights over the common shares with respect to dividends and net distribution upon liquidation. The Company did not issue any preferred shares as of March 31, 2020.

At March 31, 2020 and December 31, 2019, the adjusted closing price of Verisk's common stock was $139.38 and $149.07 per share, respectively.

On February 12, 2020, the Company’s Board approved a cash dividend of $0.27 per share of common stock issued and outstanding to the holders of record as of March 13, 2020. A cash dividend of $43.9 million was paid on March 31, 2020 and recorded as a reduction to retained earnings. The Company paid a cash dividend of $40.9 million on March 29, 2019 at $0.25 per share of common stock issued and outstanding to the holders of record as of March 15, 2019.

Share Repurchase Program

Since May 2010, the Company has authorized repurchases of up to $3,800.0 million of its common stock through its Repurchase Program, inclusive of the $500.0 million authorization approved by the Board on February 12, 2020. Since the introduction of share repurchase as a feature of the Company's capital management strategies in 2010, the Company has repurchased shares with an aggregate value of $3,346.2 million. As of March 31, 2020, the Company had $453.8 million available to repurchase shares through its Repurchase Program. The Company has no obligation to repurchase stock under this program and intends to use this authorization as a means of offsetting dilution from the issuance of shares under the Verisk 2013 Equity Incentive Plan (the "2013 Incentive Plan"), the Verisk 2009 Equity Incentive Plan (the “2009 Incentive Plan”), the Company's sharesave plan (“UK Sharesave Plan”), and the employee stock purchase plan ("ESPP") while providing flexibility to repurchase additional shares if warranted. This authorization has no expiration date and may be increased, reduced, suspended, or terminated at any time. Shares that are repurchased under the Repurchase Program will be recorded as treasury stock and will be available for future issuance.

In December 2019, the Company entered into an Accelerated Share Repurchase ("ASR") agreement to repurchase shares of its common stock for an aggregate purchase price of $50.0 million with HSBC Bank USA, N.A. The ASR agreement is accounted as a treasury stock transaction and forward stock purchase agreement indexed to the Company's common stock. The forward stock purchase agreement is classified as an equity instrument under ASC 815-40, Contracts in Entity's Own Equity ("ASC 815-40") and deemed to have a fair value of zero at the respective effective date. Upon payment of the aggregate purchase price on January 2, 2020, the Company received an aggregate delivery of 267,845 shares of its common stock at a price of $149.34. Upon the final settlement of the ASR agreement in February 2020, the Company received additional 40,901 shares as determined by the volume weighted average share price of Verisk's common stock during the term of the ASR agreement. The aggregate purchase price was recorded as a reduction to stockholders' equity in the Company's condensed consolidated statements of changes in stockholders' equity for the three months ended March 31, 2020. These repurchases of 308,746 shares for the three months ended March 31, 2020 resulted in a reduction of outstanding shares used to calculate the weighted average common shares outstanding for basic and diluted earnings per share ("EPS").

During the three months ended March 31, 2020, the Company repurchased 1,124,368 shares of common stock with an aggregate value of $173.8 million as part of the Repurchase Program, inclusive of the ASR, at a weighted average price of $154.56 per share. The Company utilized cash from operations and borrowings from its Credit Facility to fund these repurchases.

Treasury Stock

As of March 31, 2020, the Company’s treasury stock consisted of 381,504,906 shares of common stock, carried at cost. During the three months ended March 31, 2020, the Company transferred 460,936 shares of common stock from the treasury shares at a weighted average treasury stock price of $10.31 per share.

Earnings Per Share

Basic EPS is computed by dividing net income 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.

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The following is a presentation of the numerators and denominators of the basic and diluted EPS computations for the three months ended March 31, 2020 and 2019:



	Three Months Ended March 31,
	2020		2019
Numerator used in basic and diluted EPS:
Net income	$	171.7	$	134.4
Denominator:
Weighted average number of common shares used in basic EPS		162,894,306		163,528,343
Effect of dilutive shares:
Potential common shares issuable from stock options and stock awards		2,829,814		3,016,602
Weighted average number of common shares and dilutive potential common shares used in diluted EPS		165,724,120		166,544,945

The potential shares of common stock that were excluded from diluted EPS were 1,009,520 and 49,820 for the three months ended March 31, 2020 and 2019, respectively, because the effect of including these potential shares was anti-dilutive.

Accumulated Other Comprehensive Losses

The following is a summary of accumulated other comprehensive losses as of March 31, 2020 and December 31, 2019:



	2020			2019
Foreign currency translation adjustment	$	(572.7	)	$	(400.1	)
Pension and postretirement adjustment, net of tax		(86.0	)		(86.8	)
Accumulated other comprehensive losses	$	(658.7	)	$	(486.9	)

The before tax and after tax amounts of other comprehensive (loss) income for the three months ended March 31, 2020 and 2019 are summarized below:



	Before Tax			Tax (Expense) Benefit			After Tax
For the Three Months Ended March 31, 2020
Foreign currency translation adjustment	$	(172.6	)	$	—		$	(172.6	)
Pension and postretirement adjustment before reclassifications		2.1			(0.6	)		1.5
Amortization of net actuarial loss and prior service benefit reclassified from accumulated other comprehensive losses ⁽¹⁾		(1.0	)		0.3			(0.7	)
Pension and postretirement adjustment		1.1			(0.3	)		0.8
Total other comprehensive loss	$	(171.5	)	$	(0.3	)	$	(171.8	)
For the Three Months Ended March 31, 2019
Foreign currency translation adjustment	$	58.5		$	—		$	58.5
Pension and postretirement adjustment before reclassifications		2.8			(0.7	)		2.1
Amortization of net actuarial loss and prior service benefit reclassified from accumulated other comprehensive losses ⁽¹⁾		(1.3	)		0.3			(1.0	)
Pension and postretirement adjustment		1.5			(0.4	)		1.1
Total other comprehensive income	$	60.0		$	(0.4	)	$	59.6

_______________


⁽¹⁾	These accumulated other comprehensive loss components, before tax, are included under “Cost of revenues” and “Selling, general and administrative” in the accompanying condensed consolidated statements of operations. These components are also included in the computation of net periodic (benefit) cost (see Note 12. Pension and Postretirement Benefits for additional details).

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11. Equity Compensation Plans:

Equity Compensation Plans

All of the Company’s outstanding stock options, restricted stock awards, deferred stock units, and PSUs are covered under the 2013 Incentive Plan or 2009 Incentive Plan. Awards under the 2013 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, directors and consultants are eligible for awards under the 2013 Incentive Plan. The Company transferred common stock under these plans from the Company’s treasury shares. As of March 31, 2020, there were 3,075,647 shares of common stock reserved and available for future issuance under the 2013 Incentive Plan. Cash received from stock option exercises for the three months ended March 31, 2020 and 2019 was $19.2 million and $11.6 million, respectively.

The Company granted equity awards to key employees of the Company. The nonqualified stock options have an exercise price equal to the adjusted closing price of the Company’s common stock on the grant date, with a ten-year contractual term. The fair value of the restricted stock is determined using the closing price of the Company’s 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 three-year performance period, subject to the recipient’s continued service. Each PSU represents the right to receive one share of Verisk common stock and the ultimate realization is based on the Company’s achievement of certain market performance criteria and may range from 0% to 200% of the recipient’s target levels of 100% established on the grant date. The fair value of PSUs is determined on the grant date using the Monte Carlo Simulation model. The Company recognizes the expense of the equity awards ratably over the vesting period, which could be up to four years.

On January 15, 2020, the Company granted 882,749 stock options, 148,658 shares of restricted stock, and 50,736 performance share units to key employees. The 882,749 stock options and 141,725 shares of restricted stock have a graded service vesting period of four years, while 6,933 shares of restricted stock have a four-year cliff vesting period, and 50,736 performance share units have a three-year performance period, subject to the recipients' continued service.

A summary of the status of the stock options, restricted stock, and PSUs awarded under the 2013 Incentive Plan as of December 31, 2019 and March 31, 2020 and changes during the interim period are presented below:



	Stock Option						Restricted Stock				PSU
	Number of Options		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, 2019	6,432,814		$	79.51	$	449.2	428,729		$	107.96	93,960		$	158.50
Granted	883,282		$	158.63			149,040		$	158.62	50,736		$	192.93
Dividend reinvestment	—		$	—			—		$	—	268			Not applicable
Exercised or lapsed	(449,007	)	$	43.28	$	50.7	(2,478	)	$	107.87	—
Canceled, expired or forfeited	(49,672	)	$	113.26			(8,842	)	$	118.60	—
Outstanding at March 31, 2020	6,817,417		$	91.86	$	324.0	566,449		$	121.00	144,964		$	170.40
Exercisable at March 31, 2020	3,808,076		$	66.94	$	275.9
Exercisable at December 31, 2019	4,175,855		$	65.05	$	352.0
Nonvested at March 31, 2020	3,008,420						566,449				145,121
Expected to vest at March 31, 2020	2,604,017						487,007				288,444	⁽¹⁾

_______________


⁽¹⁾	Includes estimated performance achievement

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The fair value of the stock options granted for the three months ended March 31, 2020 was estimated using a Black-Scholes valuation model that uses the weighted average assumptions noted in the following table. There were no stock options granted for the three months ended March 31, 2019.



	2020
Option pricing model		Black-Scholes
Expected volatility		18.17	%
Risk-free interest rate		1.59	%
Expected term in years		4.3
Dividend yield		0.71	%
Weighted average grant date fair value per stock option	$	25.49

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 award. The expected dividend yield was based on the Company’s 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 Verisk common stock as of the reporting date. Excess tax benefits from exercised stock options were recorded as income tax benefit in the 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 6.29 years and 4.53 years for outstanding and exercisable stock options, respectively, as of March 31, 2020.

As of March 31, 2020, there was $117.3 million of total unrecognized compensation costs, exclusive of the impact of vesting upon retirement eligibility, related to nonvested stock-based compensation arrangements granted under the 2013 Incentive Plans. That cost is expected to be recognized over a weighted average period of 2.94 years. The total grant date fair value of options vested was $5.6 million and $4.4 million during the three months ended March 31, 2020 and 2019, respectively. The total grant date fair value of restricted stock vested during the three months ended March 31, 2020 and 2019 was $6.1 million and $4.7 million, respectively. The total grant date fair value of PSUs vested during the three months ended March 31, 2020 and 2019 was $2.1 million and $0.5 million, respectively.

The Company’s UK Sharesave Plan offers qualifying employees in the United Kingdom the opportunity to own shares of the Company’s common stock. Employees who elect to participate are granted stock options, of which the exercise price is equal to the adjusted closing price of the Company’s common stock on the grant date discounted by 5%, and enter into a savings contract, the proceeds of which are then used to exercise the options upon the three-year maturity of the savings contract. During the three months ended March 31, 2020 and 2019, the Company granted no stock options under the UK Sharesave Plan. As of March 31, 2020, there were 462,040 shares of common stock reserved and available for future issuance under the UK Sharesave Plan.

The Company’s ESPP offers eligible employees the opportunity to purchase shares of the Company’s common stock at a discount of its fair market value at the time of purchase. During the three months ended March 31, 2020 and 2019, the Company issued 9,451 and 8,310 shares of common stock at a weighted discounted price of $132.41 and $126.35 for the ESPP, respectively. As of March 31, 2020, there were 1,283,317 shares of common stock reserved and available for future issuance under the ESPP.

12. Pension and Postretirement Benefits:

The Company maintains a frozen qualified defined benefit pension plan for certain of its employees through membership in the Pension Plan for Insurance Organizations (the “Pension Plan”), a multiple-employer trust. The Company also applies 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. The Company also has a frozen non-qualified supplemental cash balance plan (“SERP”) for certain employees. The SERP is funded from the general assets of the Company. During the first quarter of 2020, the Company changed its investment guidelines on the Pension Plan assets to target investment allocation of 55% to equity securities and 45% to debt securities from its previous target allocation of 60% to equity securities and 40% to debt securities as of December 31, 2019.

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The Company also provides certain healthcare and life insurance benefits to certain qualifying active and retired employees. The Postretirement Health and Life Insurance Plan (the “Postretirement Plan”), which has been frozen, is contributory, requiring participants to pay a stated percentage of the premium for coverage. The components of net periodic (benefit) cost for the three months ended March 31, are summarized below:



	Pension Plan and SERP						Postretirement Plan

	For the Three Months Ended March 31,
	2020			2019			2020			2019
Interest cost	$	3.3		$	3.7		$	—		$	—
Expected return on plan assets		(7.6	)		(6.4	)		—			—
Amortization of net actuarial loss		1.0			1.2			—			0.1
Net periodic (benefit) cost	$	(3.3	)	$	(1.5	)	$	—		$	0.1
Employer contributions, net	$	0.2		$	0.2		$	(0.4	)	$	(0.3	)

The expected contributions to the Pension Plan, SERP and Postretirement Plan for the year ending December 31, 2020 are consistent with the amounts previously disclosed as of December 31, 2019.

13. Segment Reporting:

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 (the "CODM") in deciding how to allocate resources and in assessing performance. The Company’s President and Chief Executive Officer is identified as the CODM as defined by ASC 280-10. The operating segments of the Company are the following: Insurance, Energy and Specialized Markets, and Financial Services. These three operating segments are also the Company's reportable 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 the Company's revenue recognition policy. Below is the overview of the solutions offered within each reportable segment.

Insurance: The Company is the leading provider of statistical, actuarial and underwriting data for the U.S. P&C insurance industry. The Company’s 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. The Company uses 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. The Company also develops solutions that its customers use to analyze key processes in managing risk. The Company’s combination of algorithms and analytic methods incorporates its proprietary data to generate solutions. In most cases, the Company’s customers integrate the solutions into their models, formulas or underwriting criteria in order to predict potential loss events, ranging from hurricanes to earthquakes. The Company develops catastrophe and extreme event models and offers solutions covering natural and man-made risks, including acts of terrorism. The Company further develops solutions that allow customers to quantify costs after loss events occur. The Company's multitier, multispectral terrestrial imagery and data acquisition, processing, analytics, and distribution system using the remote sensing and machine learning technologies help gather, store, process, and deliver geographic and spatially referenced information that supports uses in many markets. Additionally, the Company offers 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. The Company’s underwriting & rating, insurance anti-fraud claims, catastrophe modeling, loss quantification and aerial imagery solutions are included in this segment. During the first quarter of 2020, the CODM transferred Maplecroft, an immaterial component of the Energy and Specialized Markets segment, to the Insurance segment. Consequently, effective as of the first quarter 2020, Maplecroft became part of the underwriting and rating category within the Insurance segment. The Company previously reported results from Maplecroft under the Energy and Specialized Markets segment. The Company's prior year results have been recast to reflect this change. The related impact to the Company's condensed consolidated financial statements was not material for all periods presented.

Energy and Specialized Markets: The Company is a leading provider of data analytics via hosted platform for the global energy, chemicals, and metals and mining industries. Its research and consulting solutions focus on exploration strategies

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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. The Company gathers and manages 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. The Company also helps businesses and governments better anticipate and manage climate and weather-related risks. The Company's analytical tools measure and observe environmental properties and translate those measurements into actionable information based on customer needs. The Company further offers a suite of data and information services that enable improved compliance with global Environmental Health and Safety requirements related to the safe manufacturing, distribution, transportation, usage, and disposal of chemicals and products. The Company’s energy business, environmental health and safety services and, weather risk solutions are included in this segment.

Financial Services: The Company maintains 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 the Company's 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, the Company's 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 the CODM in order to assess performance and allocate resources. The Company uses EBITDA as the profitability measure for making decisions regarding ongoing operations. EBITDA is net income before interest expense, provision for income taxes, 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. The Company does 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, the 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.

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The following table provides the Company’s revenue and EBITDA by reportable segment for the three months ended March 31, 2020 and 2019, and the reconciliation of EBITDA to income before income taxes as shown in the accompanying condensed consolidated statements of operations:



	For the Three Months Ended
	March 31, 2020												March 31, 2019
	Insurance			Energy and Specialized Markets			Financial Services			Total			Insurance			Energy and Specialized Markets			Financial Services			Total
Revenues	$	489.4		$	160.1		$	40.3		$	689.8		$	453.6		$	128.4		$	43.0		$	625.0
Expenses:
Cost of revenues (exclusive of items shown separately below)		(163.3	)		(70.5	)		(23.9	)		(257.7	)		(152.7	)		(54.4	)		(24.3	)		(231.4	)
Selling, general and administrative		(68.4	)		(38.9	)		(4.8	)		(112.1	)		(69.7	)		(36.3	)		(5.4	)		(111.4	)
Other operating income		15.9			—			3.5			19.4			—			—			—			—
Investment (loss) income and others, net		(1.2	)		(0.5	)		(0.4	)		(2.1	)		0.1			(0.5	)		—			(0.4	)
EBITDA	$	272.4		$	50.2		$	14.7			337.3		$	231.3		$	37.2		$	13.3			281.8
Depreciation and amortization of fixed assets											(46.1	)											(46.6	)
Amortization of intangible assets											(41.0	)											(33.2	)
Interest expense											(33.5	)											(31.9	)
Income before income taxes										$	216.7											$	170.1

Long-lived assets by country are provided below:



	March 31, 2020		December 31, 2019
Long-lived assets:
U.S.	$	3,172.0	$	3,162.5
U.K.		2,505.9		2,685.3
Other countries		436.2		462.5
Total long-lived assets	$	6,114.1	$	6,310.3

14. Related Parties:

The Company considers its stockholders that own more than 5.0% of the outstanding stock within the class to be related parties as defined within ASC 850, Related Party Disclosures. As of March 31, 2020 and December 31, 2019, the Company had no material transactions with related parties owning more than 5.0% of the entire class of stock.

15. Commitments and Contingencies:

The Company is 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, the Company is unable, at the present time, to determine the ultimate resolution of or provide a reasonable estimate of the range of possible loss attributable to these matters or the impact they may have on the Company’s results of operations, financial position or cash flows. In the case of the 360Value Litigation, this is primarily because the matter is generally in early stages and discovery has not yet commenced. Although the Company believes it has strong defenses and intends to vigorously defend these matters, the Company could in the future incur judgments or enter into settlements of claims that could have a material adverse effect on its results of operations, financial position or cash flows.

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Xactware Solutions, Inc. Patent Litigation

On October 8, 2015, the Company was served with a summons and complaint in an action titled Eagle View Technologies, Inc. and Pictometry International Group, Inc. v. Xactware Solutions, Inc. and Verisk Analytics, Inc. filed in the United States District Court for the District of New Jersey. The complaint alleged that the Company’s Roof InSight (now known as Geomni Roof), Property InSight product (now known as Geomni Property) and Aerial Sketch product in combination with the Company's Xactimate product infringe seven patents owned by Eagle View and Pictometry namely, Patent Nos. 8,078,436 (the "436 patent"), 8,170,840 (the "840 patent"), 8,209,152 (the "152 patent"), 8,542,880 (the "880 patent"), 8,818,770 (the "770 patent"), 8,823,732 (the "732 patent"), and 8,825,454 (the "454 patent"). On November 30, 2015, plaintiffs filed a First Amended Complaint adding Patent Nos. 9,129,376 (the "376 patent") and 9,135,737 (the "737 patent") to the lawsuit. The First Amended Complaint sought an entry of judgment by the Court that defendants have and continue to directly infringe and/or indirectly infringe, including by way of inducement the Patents-in-Suit, permanent injunctive relief, damages, costs and attorney’s fees. On May 19, 2017, the District Court entered a Joint Stipulated Order of Partial Dismissal with Prejudice dismissing all claims or assertions pertaining to the 880 and 732 patents, and certain asserted claims of the 436, 840, 152, 770, 454, 376 and 737 patents (collectively the “Patents in Suit”). Eagle View further reduced the number of asserted claims pertaining to the Patents in Suit to 18 asserted claims. Thereafter, Eagle View dropped the 152 patent and further reduced the number of asserted claims from the six remaining Patents in Suit to 11 asserted claims. Fact discovery and expert discovery closed in 2018 and the Company's summary judgment motions were fully submitted on October 26, 2018. On December 6, 2018, the Court denied Eagle View’s motion for summary judgment that a key prior art reference be excluded. On December 20, 2018, the Court denied the Company’s motion for summary judgment of equitable estoppel. On January 29, 2019, the Court denied the Company’s motion for summary judgment of unpatentability pursuant to Section 101 of the Patent Act. Thereafter, Eagle View dropped the 737 patent and further reduced the number of asserted claims from the five remaining Patents in Suit to 6 asserted claims. On September 25, 2019, following a trial, the jury determined that the Company had willfully infringed the 6 asserted claims, and assessed damages in the amount of $125.0 million, for which the Company has recorded a reserve. The impact associated with the reserve was included in the "Selling, general and administrative" in the accompanying condensed consolidated statements of operations for the year ended December 31, 2019. After trial, Eagle View moved for a temporary restraining order (“TRO”) and a permanent injunction preventing the Company's sales of the Geomni Roof, Geomni Property and Aerial Sketch products in combination with Xactimate. The Court granted the motion for a TRO on September 26, 2019 and on October 18, 2019, issued an Order permanently enjoining the Company's sales of the Geomni Roof, Geomni Property and Aerial Sketch products in combination with Xactimate. The Company plans to appeal these results. Eagle View has petitioned the Court to award up to treble damages, together with fees and expenses. The parties' post-trial motions were fully submitted on December 10, 2019 and the parties are awaiting a decision on these motions. The Company has established a $125.0 million reserve in connection with this litigation, however, at this time, it is not reasonably possible to determine the ultimate resolution of this matter.

360Value Litigation

On December 10, 2018, the Company was served with a First Amended Complaint filed in the United States District Court for the Northern District of California titled Sheahan, et al. v. State Farm General Insurance Co., Inc., et al. The action is brought by California homeowners, on their own behalf and on behalf of an unspecified putative class of State Farm policyholders whose homes were damaged or lost during the Northern California wildfires of 2017, against State Farm as well as the Company, ISO, and Xactware Solutions, Inc. Plaintiffs served a Second Amended Complaint on January 6, 2019. Like the First Amended Complaint, it alleges that defendants through the use of the Company’s 360Value product conspired to under-insure plaintiffs’ homes by issuing undervalued policies and underestimating the costs of rebuilding those homes. Plaintiffs claim that defendants violated federal antitrust law as well as California consumer protection law and common law. Defendants filed their motions to dismiss the Second Amended Complaint on March 8, 2019. On July 2, 2019, the Court granted those motions, dismissing various claims with leave to amend, and dismissing other claims with prejudice. Plaintiffs filed their Third Amended Complaint on August 1, 2019. As in the Second Amended Complaint plaintiffs claim in the Third Amended Complaint that defendants violated federal antitrust law as well as California consumer protection law and common law. Defendants filed their motions to dismiss the Third Amended Complaint on September 19, 2019. The motions were fully submitted on October 31, 2019 and oral argument was held on February 13, 2020. The Court granted defendants' motions to dismiss the Third Amended Complaint and dismissed all claims against defendants with prejudice on March 4, 2020. Plaintiffs have not filed a notice of appeal regarding the Court's decision.

16. Subsequent Events:

In March 2020, the Company entered into an additional ASR agreement with Bank of America N.A. to repurchase shares of its common stock for an aggregate purchase price of $75.0 million. Upon payment of the aggregate purchase price on April 1, 2020, the Company received an initial delivery of 430,477 shares of its common stock at a price of $139.38 per share, representing approximately $60.0 million of the aggregate purchase price. Upon the final settlement of the ASR agreement in

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April 2020, the Company received additional 85,231 shares as determined by the volume weighted-average share price of Verisk's common stock during the term of the ASR agreement. See Note 10. Stockholders' Equity for further discussion.

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Item 2.	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, or 2019 10-K, dated and filed with the Securities and Exchange Commission on February 18, 2020. This discussion contains forward-looking statements that involve risks and uncertainties, including the impact of the 2019 novel coronavirus, or COVID-19 pandemic. 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 2019 10-K and those listed under Item 1A in Part II of this quarterly report on Form 10-Q.

Verisk is a leading data analytics provider serving customers in insurance, energy and specialized markets, and financial services. 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, natural resources intelligence, economic forecasting, and many other fields. In the United States, or 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 a comprehensive package. These solutions take various forms, including data, expert insight, statistical models and 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. 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 71% and 72% of our revenues for the three months ended March 31, 2020 and 2019, respectively. Our Energy and Specialized Markets segment provides research and consulting data analytics for the global energy, chemicals, and metals and mining industries. Our Energy and Specialized Markets segment's revenues represented approximately 23% and 21% of our revenues for the three months ended March 31, 2020 and 2019, respectively. Our Financial Services segment provides 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 6% and 7% of our revenues for the three months ended March 31, 2020 and 2019, respectively.

COVID-19

Since January 2020, an outbreak of the 2019 novel coronavirus, or COVID-19, has evolved into a worldwide pandemic. We have modified our operations in line with our business continuity plans due to COVID-19. While our facilities generally remain open, we are making extensive use of the work-from-home model at this moment. On a daily basis, management is reviewing our operations and there have been to date minimal interruptions in our customer facing operations. Given the digital nature of our business and the move toward cloud enablement, we expect to remain operationally stable and fully available to our customers. We are in compliance with all financial covenants and have not observed a loss of any significant customers, a significant deterioration in the collectability of receivables, a significant reduction in our liquidity, nor a significant decline in subscription renewal rates.

We have analyzed our solutions and services to assess the impact of COVID-19 on our revenue streams. We have not identified any material impact of COVID-19 on approximately 85% of our revenues at this point, as much of these revenues are subscription in nature and subject to long-term contracts. Of the remaining 15%, we have identified specific solutions and services, largely transactional in nature, that are being impacted by COVID-19. The primary causal factors are lower auto and travel insurance activity, the inability to enter commercial buildings to perform engineering analyses, decreased capital expenditure in the energy sector, and reduced levels of advertising by financial institutions and marketers. A portion of the revenue attributable to these solutions could be negatively impacted by COVID-19. The impact on many of these solutions is expected to be modest, with the deepest impacts felt in the categories of travel insurance analytics, auto underwriting and claims analytics, consulting services to the energy industry, and spend informed analytic solutions in financial services. Although we have experienced a decline in revenue attributable to these specific solutions in the last two weeks of March 2020, the impact on the quarter was modest, and we do not anticipate lasting impacts of a material nature to our long-term growth profile. As the global outbreak of COVID-19 is still rapidly evolving, management continues to closely monitor its impact on our business.

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Executive Summary

Key Performance Metrics

We believe our business' 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 growth and EBITDA as metrics to measure our performance. EBITDA and EBITDA margin are non-GAAP financial measures (See footnote 1 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.

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 82% and 83% of the revenues in our Insurance segment for the three months ended March 31, 2020 and 2019 were derived from hosted subscriptions through agreements (generally one to five years) for our solutions, respectively. Our customers in this segment include most of the P&C insurance providers in the U.S. Approximately 84% and 78% of the revenues in our Energy and Specialized Markets segment for the three months ended March 31, 2020 and 2019 were derived from hosted subscriptions with long-term agreements for our solutions, respectively. Our customers in this segment include most of the top 10 global energy providers. Approximately 72% and 75% of the revenues in our Financial Services segment for the three months ended March 31, 2020 and 2019 were derived from subscriptions with long-term agreements for our solutions, respectively. Our customers in this segment include financial institutions, payment networks and processors, alternative lenders, regulators, merchants, and all of 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 three months ended March 31, 2020 and 2019, approximately 18% and 19% of our consolidated revenues were derived from providing transactional and advisory/consulting solutions, respectively.

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 62% and 58% of our total operating expenses for the three months ended March 31, 2020 and 2019, 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, sales people, marketing, business development, finance, legal, human resources, and administrative services, as selling, general and administrative expenses. A significant portion of our

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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.

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Condensed Consolidated Results of Operations



	Three Months Ended March 31,						Percentage Change
	2020			2019			Percentage Change

	(in millions, except for share and per share data)
Statement of income data:
Revenues:
Insurance	$	489.4		$	453.6		7.9	%
Energy and Specialized Markets		160.1			128.4		24.6	%
Financial Services		40.3			43.0		(6.4	)%
Revenues		689.8			625.0		10.4	%
Operating expenses:
Cost of revenues (exclusive of items shown separately below)		257.7			231.4		11.4	%
Selling, general and administrative		112.1			111.4		0.7	%
Depreciation and amortization of fixed assets		46.1			46.6		(1.0	)%
Amortization of intangible assets		41.0			33.2		23.6	%
Other operating income		(19.4	)		—		100.0	%
Total operating expenses		437.5			422.6		3.5	%
Operating income		252.3			202.4		24.7	%
Other income (expense):
Investment loss and others, net		(2.1	)		(0.4	)	452.9	%
Interest expense		(33.5	)		(31.9	)	4.7	%
Total other expense, net		(35.6	)		(32.3	)	10.2	%
Income before income taxes		216.7			170.1		27.4	%
Provision for income taxes		(45.0	)		(35.7	)	25.9	%
Net Income	$	171.7		$	134.4		27.8	%
Basic net income per share:	$	1.05		$	0.82		28.0	%
Diluted net income per share:	$	1.04		$	0.81		28.4	%
Cash dividends declared per share ⁽¹⁾:	$	0.27		$	0.25		8.0	%
Weighted average shares outstanding:
Basic		162,894,306			163,528,343		(0.4	)%
Diluted		165,724,120			166,544,945		(0.5	)%

The financial operating data below sets forth the information we believe is useful for investors in evaluating our overall financial performance:
Other data:
EBITDA ⁽²⁾:
Insurance	$	272.4		$	231.3		17.8	%
Energy and Specialized Markets		50.2			37.2		34.8	%
Financial Services		14.7			13.3		10.5	%
EBITDA	$	337.3		$	281.8		19.7	%
The following is a reconciliation of net income to EBITDA:
Net income	$	171.7		$	134.4		27.8	%
Depreciation and amortization of fixed assets and intangible assets		87.1			79.8		9.2	%
Interest expense		33.5			31.9		4.7	%
Provision for income taxes		45.0			35.7		25.9	%
EBITDA	$	337.3		$	281.8		19.7	%


⁽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 10. 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 13 of our condensed consolidated financial statements included in this quarterly report on Form 10-Q. In addition, this Management’s Discussion and Analysis of Financial Condition and Results of Operations includes references to EBITDA margin, which is computed as EBITDA divided by revenues.

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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 March 31, 2020 Compared to Three Months Ended March 31, 2019

Revenues

Revenues were $689.8 million for the three months ended March 31, 2020 compared to $625.0 million for the three months ended March 31, 2019, an increase of $64.8 million or 10.4%. Our recent acquisitions ( PPW, BuildFax, and FAST within the Insurance segment, the CaaS business and Genscape within the Energy and Specialized Markets segment, and Commerce Signals within the Financial Services segment) and dispositions (the aerial imagery sourcing group and the compliance background screening business within the claims category of the Insurance segment, and the retail analytics solution business and the data warehouse business within the Financial Services segment) contributed net revenues of $35.4 million. The remaining movement of our consolidated revenue increased $29.4 million or 4.8% related to the following: revenues within our Insurance segment increased $25.7 million or 5.8%; revenues within our Energy and Specialized Markets segment increased $2.7 million or 2.1%; and revenues within our Financial Services segment increased $1.0 million or 2.7%. Refer to the Results of Operations by Segment within this section for more information regarding our revenues. As noted in the COVID-19 section above, certain transactional revenues experienced declines in the last two weeks of March 2020, which had a modest impact on the results for the three months ended March 31, 2020.



	Three Months Ended March 31,				Percentage change		Percentage change excluding recent acquisitions and dispositions
	2020		2019		Percentage change

	(in millions)
Insurance	$	489.4	$	453.6	7.9	%	5.8	%
Energy and Specialized Markets		160.1		128.4	24.6	%	2.1	%
Financial Services		40.3		43.0	(6.4	)%	2.7	%
Total Revenues	$	689.8	$	625.0	10.4	%	4.8	%

Cost of Revenues

Cost of revenues was $257.7 million for the three months ended March 31, 2020 compared to $231.4 million for the three months ended March 31, 2019, an increase of $26.3 million or 11.4%. Our recent acquisitions and dispositions accounted for an increase of $20.9 million in cost of revenues, which was primarily related to salaries and employee benefits. The remaining cost of revenues increased $5.4 million or 2.4% primarily due to increases in information technology expenses of $3.2 million, salaries and employee benefits of $2.9 million, professional consulting costs of $1.6 million, and other operating expenses of $0.1 million. The increase in salaries and employee benefits was mostly resulting from a change in the timing of our annual long-term equity incentive grants from the second quarter in the prior year to the first quarter in current year. These increases were partially offset by decreases in travel expenses of $2.0 million, primarily resulting from travel restrictions in connection with the COVID-19 pandemic, and data costs of $0.4 million.

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Selling, General and Administrative Expenses

Selling, general and administrative expenses, or SGA, were $112.1 million for the three months ended March 31, 2020 compared to $111.4 million for the three months ended March 31, 2019, an increase of $0.7 million or 0.7%. Our acquisition-related costs (earn-outs) accounted for a decrease of $9.8 million. Our recent acquisitions and dispositions accounted for an increase of $8.5 million in SGA primarily related to salaries and employee benefits. The remaining SGA increase of $2.0 million or 2.1% was primarily due to an increase in salaries and employee benefits of $8.0 million, mostly resulting from a change in the timing of our annual long-term equity incentive grants from the second quarter in the prior year to the first quarter in current year. This increase was partially offset by decreases in professional consulting costs of $3.3 million, information technology expenses of $0.9 million, and other general expenses of $1.8 million.

Other Operating Income

Other operating income was $19.4 million for the three months ended March 31, 2020 compared to $0 for the three months ended March 31, 2019, an increase of $19.4 million, primarily related to gains associated with the dispositions of our compliance background screening business and data warehouse business.

Depreciation and Amortization of Fixed Assets

Depreciation and amortization of fixed assets was $46.1 million for the three months ended March 31, 2020 compared to $46.6 million for the three months ended March 31, 2019, a decrease of $0.5 million or 1.0%. Our recent dispositions accounted for a decrease of $5.5 million, partially offset by a $3.1 million increase due to recent acquisitions. The remaining increase of $1.9 million is primarily due to assets placed in service to support data capacity expansion and revenue growth.

Amortization of Intangible Assets

Amortization of intangible assets was $41.0 million for the three months ended March 31, 2020 compared to $33.2 million for the three months ended March 31, 2019, an increase of $7.8 million or 23.6%. The amortization of intangible assets incurred in connection to our recent acquisitions of $8.5 million was partially offset with the intangible assets that were sold and were fully amortized for the three months ended March 31, 2020.

Investment Loss and Others, net

Investment loss and others, net was a loss of $2.1 million for the three months ended March 31, 2020, compared to $0.4 million for the three months ended March 31, 2019. The increase of $1.7 million was primarily due to a loss on foreign currencies of $1.4 million.

Interest Expense

Interest expense was $33.5 million for the three months ended March 31, 2020, compared to $31.9 million for the three months ended March 31, 2019, an increase of $1.6 million or 4.7%. The increase was due to our higher average outstanding borrowings for the three months ended March 31, 2020 related to the committed senior unsecured Syndicated Revolving Credit Facility, or the "Credit Facility". In the third quarter of 2019, we also completed an additional issuance of $200.0 million aggregate principal amount of the 2029 notes to support the acquisition of Genscape.

Provision for Income Taxes

The provision for income taxes was $45.0 million for the three months ended March 31, 2020 compared to $35.7 million for the three months ended March 31, 2019, an increase of $9.3 million or 25.9%. The effective tax rate was 20.8% for the three months ended March 31, 2020 compared to 21.0% for the three months ended March 31, 2019. The effective tax rate for the three months ended March 31, 2020 was lower than the March 31, 2019 effective tax rate primarily due to higher tax benefits from equity compensation and lower nondeductible earnout expenses in the current period versus the prior period. These benefits were partially offset by tax expense recorded in the current period in connection with the Company’s disposition of its aerial imagery sourcing business resulting from differences in the book and tax basis of the assets and entities disposed of.

Net Income Margin

The net income margin for our consolidated results was 24.9% for the three months ended March 31, 2020 compared to 21.5% for the three months ended March 31, 2019. The increase in net income margin was primarily related to growth within the Company, the gains on sales of our compliance background screening business and data warehouse business, and a decrease in acquisition-related costs (earn-outs) as discussed above.

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EBITDA Margin

The EBITDA margin for our consolidated results was 48.9% for the three months ended March 31, 2020 as compared to 45.1% for the three months ended March 31, 2019. The increase in EBITDA margin was primarily related to growth within the Company, the gains on sales of our compliance background screening business and data warehouse business, and a decrease in acquisition-related costs (earn-outs) as discussed above.

Results of Operations by Segment

Insurance

Revenues

Revenues for our Insurance segment were $489.4 million for the three months ended March 31, 2020 compared to $453.6 million for the three months ended March 31, 2019, an increase of $35.8 million or 7.9%. Our underwriting & rating revenue increased $38.2 million or 12.5%. Our claims revenue decreased $2.4 million or 1.6%.

Our revenue by category for the periods presented is set forth below:



	For the Three Months Ended March 31,						Percentage change excluding recent acquisitions & dispositions
	2020		2019		Percentage Change

	(in millions)
Underwriting & Rating	$	344.1	$	305.9	12.5	%	8.3	%
Claims		145.3		147.7	(1.6	)%	0.3	%
Total Insurance	$	489.4	$	453.6	7.9	%	5.8	%

Our recent acquisitions (PPW, BuildFax, and FAST) and dispositions (the aerial imagery sourcing group and the compliance background screening business) contributed net revenues of $10.1 million and the remaining Insurance revenue increased $25.7 million or 5.8%. Our underwriting & rating revenue increased $25.3 million or 8.3%, 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, catastrophe modeling services contributed to the growth. Our claims revenue increased $0.4 million or 0.3%, primarily due to growth in our claims analytics revenue and repair cost estimating solutions revenue, which was slightly offset by the impact of the injunction ruling related to the roof measurement solutions in the fourth quarter of 2019.

Cost of Revenues

Cost of revenues for our Insurance segment was $163.3 million for the three months ended March 31, 2020 compared to $152.7 million for the three months ended March 31, 2019, an increase of $10.6 million or 7.0%. Our recent acquisitions and dispositions within the Insurance segment represented an increase of $5.6 million in cost of revenues, which was primarily related to salaries and employee benefits. The remaining cost of revenues increased $5.0 million or 3.5% primarily due to increases in salaries and employee benefits of $2.8 million, information technology expenses of $2.5 million, and professional consulting fees of $1.5 million. The increase in salaries and employee benefits was mostly resulting from a change in the timing of our annual long-term equity incentive grants from the second quarter in the prior year to the first quarter in current year. These increases were partially offset by a decrease in data costs of $0.9 million and travel expenses of $0.9 million, primarily resulting from travel restrictions in connection with the COVID-19 pandemic and a reduction in travel-related costs due to the sale of our aerial imagery sourcing group in February 2020.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for our Insurance segment were $68.4 million for the three months ended March 31, 2020 compared to $69.7 million for the three months ended March 31, 2019, a decrease of $1.3 million or 1.7%. Our acquisition-related costs (earn-out) accounted for a decrease of $7.3 million. Our recent acquisitions and dispositions accounted for an increase of $4.8 million related to salaries and employee benefits. The remaining SGA increase of $1.2 million or 2.2% was primarily due to an increase in salaries and employee benefits of $5.8 million, mostly resulting from a change in the timing of our annual long-term equity incentive grants from the second quarter in the prior year to the first quarter in current year. This increase was partially offset by decreases in professional consulting costs of $2.3 million, information technology expenses of $0.8 million, and other general expenses of $1.5 million.

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Other Operating Income

Other operating income was $15.9 million for the three months ended March 31, 2020 compared to $0 for the three months ended March 31, 2019, an increase of $15.9 million, primarily related to a gain associated with the disposition of our compliance background screening business.

EBITDA Margin

EBITDA for our Insurance segment was $272.4 million for the three months ended March 31, 2020 compared to $231.3 million for the three months ended March 31, 2019. The EBITDA margin for our Insurance segment was 55.7% for the three months ended March 31, 2020 compared to 51.0% for the three months ended March 31, 2019. The increase in EBITDA margin was primarily related to growth within the Insurance segment, the gain on sale of our compliance background screening business, and a decrease in acquisition-related costs (earn-outs) as discussed above.

Energy and Specialized Markets

Revenues

Revenues for our Energy and Specialized Markets segment were $160.1 million for the three months ended March 31, 2020 compared to $128.4 million for the three months ended March 31, 2019, an increase of $31.7 million or 24.6%. Our recent acquisitions, the CaaS business and Genscape, within this segment contributed revenues of $29.0 million. The remaining increase in Energy and Specialized Markets revenue of $2.7 million or 2.1% was primarily due to growth in core research, increases in our environmental health and safety service revenues and weather analytics revenues. These increases were partially offset by a decline in our market and cost intelligence solutions due to implementation projects that did not reoccur and a decline in our consulting revenues.

Cost of Revenues

Cost of revenues for our Energy and Specialized Markets segment was $70.5 million for the three months ended March 31, 2020 compared to $54.4 million for the three months ended March 31, 2019, an increase of $16.1 million or 29.5%. Our recent acquisitions accounted for an increase of $15.6 million in cost of revenues, which was primarily related to salaries and employee benefits. The remaining cost of revenues increased $0.5 million or 0.9% primarily due to increases in salaries and employee benefits costs of $0.8 million, information technology expenses of $0.6 million, and data costs of $0.2 million. These increases were partially offset by decreases in travel expenses of $0.9 million, primarily resulting from travel restrictions in connection with the COVID-19 pandemic, and professional consulting costs of $0.2 million.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for our Energy and Specialized Markets segment were $38.9 million for the three months ended March 31, 2020 compared to $36.3 million for the three months ended March 31, 2019, an increase of $2.6 million or 7.1%. Our acquisition-related costs (earn-outs) accounted for a decrease of $2.5 million. Our recent acquisitions accounted for an increase of $3.9 million primarily related to salaries and employee benefits. The remaining SGA increased $1.2 million or 3.5% primarily due to an increase in salaries and employee benefits costs of $1.8 million, mostly resulting from a change in the timing of our annual long-term equity incentive grants from the second quarter in the prior year to the first quarter in current year. These increases were partially offset by decreases in professional consulting costs of $0.4 million, and other general expenses of $0.2 million.

EBITDA Margin

EBITDA for our Energy and Specialized Markets segment was $50.2 million for the three months ended March 31, 2020 compared to $37.2 million for the three months ended March 31, 2019. The EBITDA margin for our Energy and Specialized Markets segment was 31.4% for the three months ended March 31, 2020 compared to 29.0% for the three months ended March 31, 2019. The increase in EBITDA margin was primarily related to growth within the Energy and Specialized Markets segment and a decrease in acquisition-related costs (earn-outs) as discussed above.

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Financial Services

Revenues

Revenues for our Financial Services segment were $40.3 million for the three months ended March 31, 2020 compared to $43.0 million for the three months ended March 31, 2019, a decrease of $2.7 million or 6.4%. Our recent acquisition of Commerce Signals and dispositions of the retail analytics solution business and the data warehouse business contributed a net decrease in revenues of $3.7 million. This decrease was partially offset by an increase in revenue of $1.0 million or 2.7%, which was primarily due to an increase in management information and regulatory reporting.

Cost of Revenues

Cost of revenues for our Financial Services segment was $23.9 million for the three months ended March 31, 2020 compared to $24.3 million for the three months ended March 31, 2019, a decrease of $0.4 million or 1.7%. Our recent acquisition and dispositions within the Financial Services segment represented a net decrease of $0.3 million in cost of revenues, which was primarily related to salaries and employee benefits. The remaining cost of revenues decreased $0.1 million or 0.6% primarily due to decreases in salaries and employee benefits costs of $0.7 million and travel expenses of $0.2 million, primarily resulting from travel restrictions in connection with the COVID-19 pandemic. These decreases were partially offset by increases in data costs of $0.3 million, professional consulting costs of $0.3 million, information technology expenses of $0.1 million, and other operating costs of $0.1 million.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for our Financial Services segment were $4.8 million for the three months ended March 31, 2020 compared to $5.4 million for the three months ended March 31, 2019, a decrease of $0.6 million or 12.0%. Our recent acquisition and dispositions within the Financial Services segment represented a net decrease of $0.2 million, which was primarily related to salaries and employee benefits. The remaining SGA decreased $0.4 million or 8.5% primarily due to decreases in professional consulting costs of $0.6 million, information technology expenses of $0.1 million, and other general expenses of $0.1 million. These decreases were partially offset by an increase in salaries and employee benefits costs of $0.4 million.

Other Operating Income

Other operating income was $3.5 million for the three months ended March 31, 2020 compared to $0 for the three months ended March 31, 2019, an increase of $3.5 million, primarily related to a gain associated with the disposition of our data warehouse business.

EBITDA Margin

EBITDA for our Financial Services segment was $14.7 million for the three months ended March 31, 2020 compared to $13.3 million for the three months ended March 31, 2019. The EBITDA margin for our Financial Services segment was 36.4% for the three months ended March 31, 2020 compared to 30.8% for the three months ended March 31, 2019. The increase in EBITDA margin was primarily related to the gain on sale of our data warehouse business as discussed above.

Liquidity and Capital Resources

As of March 31, 2020 and December 31, 2019, we had cash and cash equivalents and available-for-sale securities of $207.4 million and $188.2 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 syndicated revolving credit facility, or 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

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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 three months ended March 31, 2020 and 2019, we repurchased $173.8 million and $75.0 million, respectively, of our common stock. For the three months ended March 31, 2020 and 2019, we also paid dividends of $43.9 million and $40.9 million, respectively.

Given current market conditions as a result of the COVID-19 pandemic, we have not observed a loss of any significant customers, a significant deterioration in the collectability of receivables, a significant reduction in our liquidity, nor a significant decline in subscription renewal rates. We continue to maintain sufficient financial resources to meet our debt and operating obligations, an investment-grade credit rating, staggered debt maturities with no debt maturity until May 2021, and ongoing access to our Credit Facility and the investment grade debt markets.

Financing and Financing Capacity

We had total debt, excluding finance lease liabilities, unamortized discounts and premium, and debt issuance costs of $3,090.0 million and $3,145.0 million at March 31, 2020 and December 31, 2019, respectively. As of March 31, 2020, we had senior notes with an aggregate principal amount of $2,650 million, outstanding, and we were in compliance with our financial and other debt covenants.

As of March 31, 2020, we had a borrowing capacity of $1,000.0 million under the Credit Facility 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., 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 share repurchase program, or the Repurchase Program. As of March 31, 2020, we were in compliance with all financial and other debt covenants under the Credit Facility.

We have started to consider the implications of the transition of LIBOR to alternative reference rate measures that will likely become effective post December 2021. 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, or SOFR. 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. As our only current contract extending beyond 2021, 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, based on recent borrowings and applicable SOFR, we do not anticipate it to have a material impact on the business.

As of March 31, 2020 and December 31, 2019, the available capacity under the Credit Facility was $555.4 million and $500.2 million, net of the letters of credit of $4.6 million and $4.8 million, respectively. We had outstanding borrowings under the Credit Facility of $440.0 million and $495.0 million, respectively, as of March 31, 2020 and December 31, 2019. During the three months ended March 31, 2020, we had borrowings of $245.0 million and repayments of $300.0 million under the Credit Facility. Subsequent to March 31, 2020, we had borrowings of $20.0 million and repayments of $60.0 million under the Credit Facility.

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Cash Flow

The following table summarizes our cash flow data:



	Three Months Ended						Percentage Change
	March 31,
	2020			2019

	(in millions)
Net cash provided by operating activities	$	362.6		$	366.1		(1.0	)%
Net cash used in investing activities	$	(87.5	)	$	(120.3	)	(27.3	)%
Net cash used in financing activities	$	(255.4	)	$	(206.4	)	23.7	%

Operating Activities

Net cash provided by operating activities was $362.6 million for the three months ended March 31, 2020 compared to $366.1 million for the three months ended March 31, 2019. Net cash provided by operating activities for the three months ended March 31, 2020 was partially offset by an increase in interest payments and timing of certain customer collections and operating expense payments.

Investing Activities

Net cash used in investing activities of $87.5 million for the three months ended March 31, 2020 was primarily related to the disposed business and cash of $63.8 million in exchange for a non-controlling 35.0% ownership interest in nonpublic company, Vexcel Group, Inc, or Vexcel, and capital expenditures of $52.9 million, partially offset by proceeds of $23.1 million from the sale of our compliance background screening business. Net cash used in investing activities of $120.3 million for the three months ended March 31, 2019 was primarily related to the CaaS business acquisition of $69.1 million and capital expenditures of $45.2 million.

Financing Activities

Net cash used in financing activities of $255.4 million for the three months ended March 31, 2020 was primarily driven by repurchases of common stock of $173.8 million, net repayments on our Credit Facility of $55.0 million, and dividend payments of $43.9 million, partially offset by proceeds from stock options exercised of $19.2 million. Net cash used in financing activities of $206.4 million for the three months ended March 31, 2019 was primarily related to repayments on our current portion of long-term debt of $250.0 million, net repayments on our Credit facility of $245.0 million, repurchases of common stock of $75.0 million, and dividend payments of $40.9 million, partially offset by proceeds from issuance of long-term debt, net of original issue discount, of $397.9 million, and proceeds from stock options exercised of $11.6 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 18, 2020.

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Critical Accounting Policies and 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 18, 2020. 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.



Item 3.	Quantitative and Qualitative Disclosures About Market Risk

Market risks at March 31, 2020 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 18, 2020.



Item 4.	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 the Company’s 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 March 31, 2020, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

During the three months ended March 31, 2020, 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.

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PART II — OTHER INFORMATION



Item 1.	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 15 to our condensed consolidated financial statements for the three months ended March 31, 2020 for a description of our significant current legal proceedings, which is incorporated by reference herein.



Item 1A.	Risk Factors

Other than the risk presented below, there has been no material change in the information provided under the heading “Risk Factors” in our annual report on Form 10-K dated and filed with the Securities and Exchange Commission on February 18, 2020.

Our business may be adversely affected by the coronavirus (COVID-19) outbreak.

The impact of COVID-19 and measures to prevent its spread could adversely affect our business in any number of ways. Our reliance on individuals for the development, sale, delivery, and management of our data and analytics services exposes us to the risk of global human infection and disruption. The general economic disruption resulting from COVID-19, including lower auto and travel insurance activity, the inability to enter commercial buildings to perform engineering analyses, decreased capital expenditure in the energy sector, reduced levels of advertising by financial institutions and marketers, reduced travel, or other factors, could impact customer demand for our solutions and services. Moreover, the pandemic may lead to unpredictable events that may increase our costs. The extent to which COVID-19 may impact our business is uncertain at this point. However, if the pandemic or the related economic disruption continues, the resulting impacts could have a material adverse effect on our business, results of operations and financial condition. To the extent the pandemic adversely affects our business, results of operations and financial condition, it may also have the effect of heightening many of the other risks described in “Risk Factors” set forth in our annual report on Form 10-K for the year ended December 31, 2019.



Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds

Recent Sales of Unregistered Securities

There were no unregistered sales of equity securities by the Company during the period covered by this report.

Issuer Purchases of Equity Securities

Our board of directors has authorized the Repurchase Program since May 2010, of up to $3.8 billion, inclusive of the $500.0 million authorization approved by the board on February 12, 2020. As of March 31, 2020, we had $453.8 million available to repurchase shares. 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. Since the introduction of share repurchase as a feature of our capital management strategies in 2010, we have repurchased shares with an aggregate value of $3,346.2 million. Our share repurchases for the quarter ended March 31, 2020 are set forth below:



						Total Number of	Approximate Dollar
						Shares Purchased	Value of Shares that
	Total Number		Average			as Part of Publicly	May Yet Be
	of Shares		Price Paid			Announced Plans	Purchased Under the
Period	Purchased		per Share			or Programs	Plans or Programs
								(in millions)
January 1, 2020 through January 31, 2020	267,845		$	149.34	⁽¹⁾	267,845	$	77.6
February 1, 2020 through February 29, 2020	172,561	⁽¹⁾	$	154.34	⁽¹⁾	172,561	$	557.6
March 1, 2020 through March 31, 2020	683,962		$	151.74		683,962	$	453.8
	1,124,368		$	154.56	⁽¹⁾	1,124,368

_______________

⁽¹⁾In December 2019, we entered into an Accelerated Share Repurchase, or ASR agreement, to repurchase shares of our common stock for an aggregate purchase price of $50.0 million with HSBC Bank USA, N.A. 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

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purchase price of $50.0 million in January 2020, we received 267,845 shares of its common stock at a price of $149.34 per share. Upon the final settlement in February 2020, we received an additional 40,901 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 308,746 and a final average price paid of $161.95 per share. In addition to the ASR agreement, we also repurchased 131,660 shares of our common stock at an average price of $151.98 in February 2020.



Item 3.	Defaults Upon Senior Securities

None.



Item 4.	Mine Safety Disclosures

None.



Item 5.	Other Information

None.



Item 6.	Exhibits

See Exhibit Index.

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SIGNATURES

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.
	(Registrant)



Date: May 5, 2020	By:	/s/ Lee M. Shavel
		Lee M. Shavel
		Executive Vice President and Chief Financial Officer
		(Principal Financial Officer and Duly Authorized Officer)

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EXHIBIT INDEX



Exhibit Number		Description
31.1		Certification of the Chief Executive Officer of Verisk Analytics, Inc. pursuant to Rule 13a-14 under the Securities Exchange Act of 1934.*

31.2		Certification of the Chief Financial Officer of Verisk Analytics, Inc. pursuant to Rule 13a-14 under the Securities Exchange Act of 1934.*

32.1		Certification of the Chief Executive Officer and Chief Financial Officer of Verisk Analytics, Inc. pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002.*

101.INS		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		XBRL Taxonomy Extension Schema.*

101.CAL		XBRL Taxonomy Extension Calculation Linkbase.*

101.DEF		XBRL Taxonomy Definition Linkbase.*

101.LAB		XBRL Taxonomy Extension Label Linkbase.*

101.PRE		XBRL Taxonomy Extension Presentation Linkbase.*



*	Filed herewith.

Verisk Analytics - 10-Q quarterly report FY2020 Q1

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