Verisk Analytics, Inc. (VRSK) Q3 2012 Earnings Report, Transcript and Summary

Good morning, my name is Brandy, and I will be your conference operator today. At this time, I'd like to welcome everyone to Verisk Analytics Third Quarter 2012 Earnings Results Conference Call. [Operator Instructions] As a reminder, today's call is being recorded. Thank you. Ms. Eva Huston, Treasurer and Head of Investor Relations, you may begin.

Great. Thank you, Brandy, and good morning to everyone. We appreciate you joining us today for a discussion of our third quarter 2012 financial results. With me on the call this morning are Frank Coyne, Chairman and Chief Executive Officer; Scott Stephenson, President and Chief Operating Officer; and Mark Anquillare, Chief Financial Officer. Following some comments by Frank, Scott and Mark, highlighting key points about our strategic priorities and financial performance, we will open the call up for your questions. The earnings release referenced on this call, as well as the associated 10-K were provided on Tuesday and can be found in the Investor website of our -- Investor section of our website, verisk.com. The earnings release has also been attached to an 8-K that we have furnished to the SEC. A replay of this call will be available for 30 days on our website and by dial in. Finally, as set forth in more detail in today's earnings release, I will remind everyone that today's call may include forward-looking statements about Verisk's future performance. Actual performance could differ materially from what is suggested by our comments today. Information about the factors that could affect future performance is summarized at the end of our press release, as well as contained in our recent SEC filings. And with that, I will now turn the call over to Frank Coyne.

Thank you, Eva, and good morning. Before going into comments on the third quarter, I would like to say our thoughts are with all our employees and all others who have been impacted by Sandy. We have continued to be operational throughout the storm and its aftermath and are supporting our customers at our usual excellent level of service. However, due to some travel and power issues, the management participants in this call are not in the same location. In third quarter 2012, we delivered strong overall performance of over 17% total revenue growth and 20% diluted adjusted EPS growth. Overall, our consolidated organic revenue growth was 8.5%, reflecting strong growth in healthcare and good growth in insurance solutions. Excluding our historical mortgage business, organic revenue growth was 10.8%. Profitability was strong with an EBITDA margin of 45.9% in the quarter. Free cash flow was also strong, increasing over 15% year-to-date after adjusting for certain timing items and the previously discussed pension funding. We are pleased with our results in the quarter. In the third quarter, our Risk Assessment revenue grew 4.9%, after adjusting for the impact of a transfer of some revenue to Decision Analytics in 2012. This growth is a continuation of what you saw in the first half and evidence of our strong subscription model. In Decision Analytics, our revenue grew almost 30%, and our insurance solutions grew about 9%, even while we continue to face tough comps with regards to storm activity in 2011. While we certainly will see claims coming through from Hurricane Sandy, much of our claims volume revenue is contracted above current volume, and we will still experience tough comps versus fourth quarter 2011. Our healthcare solutions continued on the excellent organic growth path we have seen in the past few quarters, growing revenue above 47% organically in the quarter. Total healthcare revenue grew -- growth was almost 130% bolstered by the contributions MediConnect continues to make. In the quarter, we generated almost $70 million in revenue from our healthcare business. Compared to 3Q 2009, our first quarter reporting after our IPO, our reported healthcare revenue increased by fivefold in just 3 years, making it a meaningful part of our enterprise. In mortgage and financial services, we are pleased to have closed our acquisition of Argus. And in the first month since closing, performance has been on target, and our future expectations have been reconfirmed. With our mortgage tools, we are seeing recent trends continuing. Our origination-related revenue continues to grow in line with the market, while our overall mortgage revenue declined due to lower volumes of forensic review. We remain disciplined in our use of capital and are focused on delivering shareholder returns. Year-to-date, we have spent almost $800 million on acquisitions. We are excited about these acquisitions and believe our shareholders should be pleased by this use of capital, as evidenced by the acquisition's strong initial results and strategic fit. As we have previously communicated, we moderated our share repurchase in the quarter to about $21 million. We continue to be active in looking at M&A, but also continue to maintain our discipline, focusing on assets with the true strategic fit, a strong financial model and an appropriate valuation in relation to future growth. We also remain focused on meeting our commitments to our debt holders as it relates to delevering back to our target ratios. In this quarter, we had strong financial results, and behind the numbers are many initiatives that we expect to bear fruit in the future. The creativity and deep domain expertise of our teams is evident, as we discussed our near-term and long-term objectives. And with our diversified portfolio, we have the ability to weather global uncertainty, while continuing to build a stronger Verisk. Now I'll turn it over to Scott to give you details about our progress in healthcare and other parts of the business.

Thank you, Frank. We have a lot of exciting initiatives going on at Verisk, and I wanted to share a few with you to give you a sense of our current customer interactions, as well as some emerging opportunities that are not yet reflected in our numbers. First, our teams at AIR and AER have been working round the clock to provide real-time updates to their forecast on the path and impact of Hurricane Sandy. These estimates are vital to our customers, as they help them to understand what to expect and what will likely be a major impact on their business and operations. While our teams may be operating remotely, they are in constant communication with customers about the storm. It's events like this that highlight our importance of our customers. Now to talk about the value we bring, away from the storm, our Healthcare business is performing very well and also exceeding -- executing on its plans for the future. We continue to make progress on our unified healthcare platform, and it is proceeding as expected. We talked about having a new customer live and on the fraud platform last quarter. And more recently, we expect to use the combined fraud platform to bring a large corporate customers' healthcare claims together to allow them to see aggregate spend across employees and coverage limits in the fourth quarter this year. We estimate that our tool could save them substantial dollars and have a very strong ROI. We are also making excellent progress in bringing together our MediConnect business with our revenue integrity platform, a lot of this work is operational and involves ensuring that we work together seamlessly, both on the sales front and also on the customer delivery front. We are finding the teams energized by working together, as well as being a part of the bigger Verisk health platform and mission. As well, we continue to see the combination of our solutions and teams resonating with customers through new sales and improving product pipelines. We also continue to work to find ways to use our numerous capabilities in data sets across multiple functions, verticals or geographies. The aggregated medical database for P&C insurers for healthcare claims is running well and bringing significant value to our customers. We are also continuing our development of the next generation platform for our catastrophe models, and we expect to launch the customers in 2013. We are also using our weather data for P&C companies and continue to make traction in that space. And with the addition of Argus, we have spent time during the first 60 days holding brainstorming sessions between the Argus team and existing Verisk businesses. These sessions are leading to discoveries around how we can repurpose the data models built by Argus to deliver solutions to other customers, including in the insurance space. Internationally, we are working on translating our substantial intellectual property into new markets, where no or limited analytics exist today. This is a long-term project, but the reception we're finding so far is very encouraging. All of what we are doing is about creating innovation within our company, as that will permit us to reimagine and enlarge our markets. We must continue to know both our current customers' value propositions, as well as relate to our customers as development partners, and we're committed to both. With that, let me turn it over to Mark to cover our financial results.

Thanks, Scott. You've heard some of the exciting things that are going on in our business, and I'll share some of the numbers as the results of these efforts. In the third quarter, we delivered 17.3% total revenue growth and 8.5% organic revenue growth. Excluding our historical mortgage business, organic growth in the quarter was 10.8%. For the third quarter, our Decision Analytics segment revenue continued to lead with 27.4% growth, of which 11% was organic, excluding the acquisitions of MediConnect, Aspect Loss Prevention and Argus, as well as the transferred revenue for the mortgage appraisal tools. As a reminder, in 2012, we transferred revenue related to the mortgage appraisal tools from Risk Assessments, property-specific revenue categories into Decision Analytics mortgage and financial services revenue category. We will continue to provide you visibility into the apples-to-apples comparisons throughout 2012. Within Decision Analytics, our insurance category grew 8.6% in the third quarter and 8.3% organically, excluding June, July acquisition of Aspect Loss Prevention. We continued strong double-digit growth in our catastrophe modeling solutions. We also saw improved growth in our loss quantification solutions despite continued to lower levels of storm activity in 2012 versus the same period in 2011. I knew you have a question on the impact of Sandy on our volumes through exact analysis. As you may remember, our multi-year customer contracts include an annual days number of claims to be processed that varies by client. To give you a sense, we are tracking below the contracted amounts of claims year-to-date. So we don't expect to see the transactional bump we saw last year, when clients went into overages. For 2012, we have approximately 20% more claims volumes under contract than in 2011. So we're not currently forecasting overages. Also in the quarter, Claims Solutions delivered good growth. In mortgage and financial services, we grew 10.8%, reflecting the addition of Argus as of August 31. Argus is an excellent business, and we're pleased with the performance today and continue to see opportunity, at least as large than we initially anticipated. After adjusting for the acquisition of Argus and it's transfer to the mortgage appraisal tools from Risk Assessment into this revenue category in the third quarter revenues declined 11.9%. We continue to see the same themes that we've been discussing in previous quarters. Underwriting tools grew nicely in the quarter and reflected the growth in the mortgage application to the market. Our revenue from forensic solutions declined in the quarter, more than offsetting that growth. To provide additional clarity on these trends, a quick reminder about the shape of our business. Broadly speaking, there are 2 types and 2 parts of the mortgage business, what we call the front end, the part that are related to originations and refinancings. It's about half of the mortgage business and is performing well. The other part is what we call the forensic piece. That's about half the business and about 4% of consolidated revenue in the quarter. The forensic business benefited from the surge in demand in the wake of the financial crisis. That demand is now subsiding. To frame the potential downside for you, before the crisis, the forensic business is about $10 million on an annual basis, with business primarily from 1 of our 2 large current customers. We are now in the process of reverting to historic levels. However, because our customers remain somewhat uncertain about where their needs will stabilize, it is harder for us to get kind of forward visibility into our mortgage revenue that characterizes most of our businesses. Based upon our latest review of the mortgage business, our current expectation is that there is more revenue likely to roll off as a part of this normalization process, including in the fourth quarter of 2012. We have projected in early 2012 that our mortgage revenue in aggregate for the year will decline similar to the fourth quarter 2010 or about 7%. Our current revenue expectation for the fourth quarter now leads us to believe the decline for the full year 2012 will be in the 12% to 15% range. The EBITDA margins in this business are below the segment average, so there is less of an impact on the bottom line than top line. Now, of course, when we aren't standing still, we continue to develop new solutions that bring value to our customers, and those opportunities will create new revenue streams in our forensic space. Healthcare continues strong revenue growth, 129% for the third quarter and 47.4% organic. Healthcare organic growth year-to-date is 41%. Our total growth benefited from the second quarter addition of MediConnect. Organically, we continue to add, implement new customers and expand our relationships with existing customers. Both the acquisitions of Bloodhound and Health Risk Partners became part of the organic growth calculation this quarter and have added to organic growth, although all of the businesses are growing nicely. As a reminder, we do have seasonality in our Revenue Integrity and MediConnect businesses related to the CMS review cycle. And the revenue between third quarter and fourth quarter can be a bit fluid depending on customer schedules. While I expect to see strong, continued growth year-over-year next quarter, we may see a modest sequential dip in dollar revenue. Our Specialized Markets grew 11% in the third quarter, with growth both from the supply chain solutions as well as weather analytics. Turning to Risk Assessment. We reported revenue growth of 2.8% in the quarter and 4.9% after adjusting for the impact of the transfer we discussed earlier. Our industry-standard programs grew 5.8% in the quarter, reflecting our 2012 invoices and strong growth from our premium leakage solutions. Our property-specific revenue declined 5.1% as reported, but excluding the transfer grew 4% based upon new sales and higher volumes, as well as growth in appraisal solutions. EBITDA for the third quarter was $182.9 million as outlined in Table 3 of our press release. EBITDA increased 21.1% for the quarter, and our EBITDA margin was 45.9%, reflecting good expense management, as well as seasonal benefit of some of our healthcare businesses. We continue to see opportunities from investing in future growth, and as you remember, those can have a near-term impact on margins, but grow our future opportunity. In the quarter, the Risk Assessment margins were 54.6% versus 50.5% in third quarter 2011. We benefited by about 2% on the margin due to this lower pension costs related to the freeze of the plan in February. Our business continues to show scalable profitability, while we also continue to invest in developing new solutions. Margins in Decisions Analytics was 40.9% in third quarter 2012 versus 40.1% in third quarter 2011. Our acquisitions of MediConnect and Argus added slightly to our margins. Our interest expense was up $3.5 million versus third quarter 2011, based upon higher debt balances related to our acquisitions. We ended third quarter with total debt of $1.6 billion, including the $380 million to fund the Argus acquisition on August 31. Our reported effective tax rate was 39.3% for the quarter, which we expect to continue for the rest of 2012. Coming down to net income. We focus on adjusted net income, a non-GAAP measure, which we defined in the current period as net income plus acquisition-related amortization expense, less income tax, except on that acquisition -- on that amortization. Our adjusted net income increased 20.9% to $92.2 million for the quarter. Adjusted EPS, on a fully diluted basis, was $0.54, an increase of 20%, a great growth rate. The average diluted share count was 171.7 million shares in the quarter. As of September 30, 2012, our diluted share count was 171.5 million shares. In the quarter, we purchased 425,000 shares or about $21 million. At quarter end, we had about 179 million left under our authorization. As we discussed last quarter, we have moderated our buyback program after acquiring Argus to ensure that we meet our deleveraging commitments. Our share repurchase program has been successful to date, generating annualized IRRs of over 25%. Turning to the balance sheet. As of September 30, our cash and cash equivalents were $98 million. Total debt, both short term and long term, totaled about $1.6 billion, reflecting the borrowed funds to acquire Argus, which closed on August 31. Post-Argus, our debt capacity is over $850 million and will grow with our EBITDA and free cash flow. Our pro forma debt-to-EBITDA ratio at September 30, including a full year of historical results for both MediConnect and Argus, was 2.2x, down from the pro forma ratio of 2.35x we cited at the time of the acquisition. As we've stated before, we are willing to temporarily go above our long-term target of 2x debt-to-EBITDA to take advantage of unique opportunity, because our free cash flow is strong and allows us to delever quickly. Free cash flow in the first 9 months of 2012, which we define as cash from operations, less capital expenditures, was $264.2 million, a decrease of about $11.3 million or negative 4.1% versus the 9 months of 2011. This decline was principally due to the funding of our pension, which we have mentioned previously. Excluding the impact of our pension, net of the tax benefit and certain year-over-year timing issues, our free cash flow was up about 16%. Our capital expenditures was about 5.1% of revenue for the 9 months ended September 30, 2012. Free cash flow represented 52.2% of EBITDA in the first 9 months of 2012, reflecting a reduced conversion rate due to the $72 million pension funding, partially offset by the associated tax benefit. As we have indicated previously, we moderate our share buyback program as we delever following the solid acquisitions we made this year. We would anticipate that the share count in 4Q may be up about 1%. Overall, our business is performing very well, and we have a nice mix of growth from multiple verticals and continue to invest in the future. We see that both our subscription and transaction revenue is growing well. Even with our transaction revenue, while we see some variations around that revenue, the purchase of our solutions is largely nondiscretionary, and therefore, we have good visibility into the future. With that, I'll ask the operator to open up the line for questions.

[Operator Instructions] Your first question comes from Eric Boyer with Wells Fargo.

Mark, with the guidance you gave about the sequential dip in healthcare revenue and absolute dollar terms for Q4, I just want to make sure I'm thinking about this right. Would that assume a year-over-year growth rate in the single digits to the maybe the low to mid-teens?

Well, I mean, I don't want get into very specifics. I didn't go over -- just trying to describe this. We see very strong growth for healthcare, both in aggregate and organically in fourth quarter. But when you consider seasonality, and if you actually look at the absolute dollars in third quarter relative to fourth quarter, we're just talking about what we see from an absolute dollar amount, 4Q relative to 3Q.

Okay. And then starting again next year, and then '13, would you suspect the growth rates to reaccelerate then?

Well, we have high hopes, and we continue to be very bullish on the prospects for healthcare. So I think we feel good about healthcare. We continue to just describe that it's a growing business. We expect growth. But over time, the law of large numbers takes over. So we would expect that it's going to be -- continue to grow. But at the percent levels of today, I think will be diminishing over time.

Okay, just one more in healthcare. In the past, you talked about being in early innings in terms of completing implementations and then being able to recognize revenue. Are we still in the early innings there or no? And then how is the pace of new integration startups going?

So let me take the beginning of that, and then maybe I can ask Scott to just comment. So the first thing that we're -- are saying is a, from a back-end perspective, from a fraud perspective, we are implementing the customers. You're seeing that in the revenue now, and we have a very good and improved process around implementing customers. So there's a combination of a, existing customers rolling out more regions and states. That's good that's in, and that continues. At the same time, we have signed new customers. And that does take a little time to ramp up, and that will have kind of more of a tail to it into 2013. That is particularly true on the front end. When we sell the customer on the front end, we do require information and data from them, And then we turn around some of the models. And there, there's a little bit of a deferral until we are able to deliver the product to those customers. So that is also kind of a deferral of sorts from a revenue rack. But I think you see the trend, and you can see the opportunity, as both the pipeline and new customers come to fruition are implemented. Scott, maybe you can comment a little more on the progress.

Well, I think you said it well. I would just add that this effect of catching up with respect to implementations is particularly felt in our payment accuracy business. And we're certainly not complete in that process, but we do continue to make progress, as Mark said. And I would just say that you have to account for the fact that our mix is shifting a little bit also. And all of what we do that we call Revenue Integrity is just becoming a more and more important fraction of the total of what we do in the healthcare space. So we do have a mix effect in there as well.

Eric, it's Eva. I just want to add one clarifying point on healthcare. Fourth quarter 2011 healthcare revenue was $38 million. And this quarter, we did $69 million.

And you did have a question on how the integration is going, and we're very pleased with our progress there. And the synergies of the business are really showing enhanced opportunities in the marketplace.

And your next question comes from David Togut with Evercore Partners.

Evercore Partners. Scott, could you provide a little bit more granular insight into the underlying drivers of the 47% organic revenue growth in healthcare? And to what extent is superior growth sustainable in this business? Perhaps not at the 47% level, but if you could perhaps take us out into 2013 and talk about how some of those growth drivers might play out?

Yes, happy to. First of all, I think everybody's aware, but I'll just kind of refresh you that we actually do a variety of different things in the healthcare space. We do risk adjusting, which we call our Enterprise Analytics group, and all of the analytics driven off of that. We do payment accuracy, which is combing through claims flows to make sure that there are no fraudulent ways or abusive claims. And then we do a lot of work in the revenue integrity space, which is the collection of things that we do, which is fundamentally that helping plans to assure that they're being completely and properly reimbursed for the work that they do, particularly if it's in the Medicare context, so a wide variety of things. And MediConnect, our most recent acquisition, actually supports both the revenue integrity business, but also the opportunity to accumulate clinical data will increasingly become meaningful inside of our enterprise analytics. So with that as the backdrop, we're really kind of hitting on all cylinders is the sort of the first part of the answer. So I wouldn't really point to any one thing. I would say that it is the case that Verisk Health collectively has really emerged as a meaningful vendor inside of the space. We bring a number of things. We bring a lot of unique intellectual property. We bring kind of a unique positioning, because, we, I think, we're seen as, in many ways, as kind of a Switzerland inside of the space. I think it's been noticed by the marketplace that Verisk is strongly supportive of what -- of our business in the healthcare arena. And so that kind of corporate commitment, I think, does -- we're selling a lot of enterprise-level applications. And so that level of commitment really does communicate into the market, creating an even greater sense of confidence to buy our solutions. And the healthcare space remains one where there is mounting interest on the part of our customers in using data analytics to drive their decision making. So it's -- it's very broadly based, I would say. And as Mark said before, we remain very optimistic about the opportunity to continue to grow the business in the future. I mean, we have, from time to time, at Investor Day meetings and in other forums, just made the point that the space is very large. And you know what our run rate was in the third quarter. We are still relatively modest in terms of the fraction of the overall market that we represent. So it's a very broad -- and what's happening right now is very broadly based. It's not one part of our business, and it's not one team. And it's certainly not related to what's going on with respect to regulation in the healthcare space. That's sort of mildly benign from our perspective.

Bracket for us, some reasonable organic growth expectations for healthcare in 2013?

I don't think we put out numbers like that. But the -- again, I'll just say that the kinds of conditions, which are underlying the performance that we've turned in recently, we don't see any changes in those. Obviously, third quarter organically was very strong, but the underlying conditions remain.

And just a question for Mark, if I might. I just want to understand your comments on the mortgage business. For 2012, I think your updated guidance was down 12% to 15% for the year versus 7%. What's changing your thinking on the forensic side that would lead you to reduce guidance for the year?

I think the short answer is, we are very much dependent upon our customers to provide us with insight as to what and how much service they need, and we just haven't seen the type of commitment from customers that we need to feel confident about fourth quarter. And specifically, we think that they're going to need less. So we are trying to provide you with as much information insight as we have. The reality is most of our businesses, those type of transactional services are very much nondiscretionary in the minds of most of our customers. The mortgage, and specifically, the forensic review, is unlike that, and we just felt that, that's the best guess right now around 4Q.

Are you signaling cost reduction actions to limit any earnings impact from that decline?

Well, I think we've always been very cost conscious. So to the extent that you think about a decline in top line, we're going to be try to be as thoughtful around expenses as possible. But obviously, it's tough to pull enough expense out to offset the type of declines that we've seen on the top.

Your next question comes from Andrew Steinerman with JPMorgan. Andrew C. Steinerman - JP Morgan Chase & Co, Research Division: I wanted to ask about the trajectory of the RA growth, which has been mid single-digit going into next year. And I wanted to know if it's likely that Verisk's RA segment will accelerate in 2013, knowing January is a key point, asking about the lag effects of the 4% P&C premium growth in 2011.

Yes, Mark?

Sure. Thank you, Frank. I think what we continue to see is, first of all, we like the fact that, there's a stronger market that helps our customers and, obviously, a customer that is feeling good about their business, they make it more apt to more likely to purchase services from others. when we think about, specifically, premiums, I think the way we continue to interact with customers is not just about a Risk Assessment or how our industry standard programs will interact. But more importantly, what's the best way to grow our business with our customers across the insurance space in broad term. So clearly, the harder market or at least better pricing, I'm not sure if it's going to be called the harder market, will potentially have good news for our customers. I think we're going to remain as pretty tempered in the way we think about Risk Assessment, because what we really believe is the opportunity to grow inside those insurance customers is to sell them some Decision Analytics customer -- excuse me, Decision Analytics products and our customers receive value there. And we think that's the best way to grow our business, and we continue to believe that. Andrew C. Steinerman - JP Morgan Chase & Co, Research Division: Sure. No, I understand your answer. And surely, a broader customer sell is great, but is it there some mechanics with your RA line and the premiums that are up in 2011?

So I think you were talking about the industry-standard program. Those premiums are related to our invoices. But as I said, I think we've always described it as -- typically, we try to put in some type of inflationary type of increases. And I think we would continue to think about that into the future, because we really do believe there's some good opportunity to make sure that we can sell -- continue to sell more product and bigger volumes of product into those customers, as well as those industry-standard programs. So I don't see a sweeping uptake, no. I think we will be pretty tempered in the way we handle those.

Your next question comes from Kelly Flynn with Credit Suisse. Kelly A. Flynn - Crédit Suisse AG, Research Division: I want to go back to healthcare. I was wondering if you could just be a little bit more clear in the sequential revenue decline. Do you expect that at both MediConnect and the rest of the Healthcare business? Or is it going to be more pronounced at one or the other?

Mark, why don't you start that?

Sure. So I think we've always talked about the fact that a combination of MediConnect and the Revenue Integrity businesses are very much focused on the latter part of the year, and it's tied to the CMS review process. So what we're just trying to describe is that we continue to see wonderful growth. But as you think about those 2 businesses, which are, for the most part, the latter part of the year weighted, it's a little difficult to understand how things move between third and fourth quarter. And we have seen a good third quarter. I think we would continue to see a good fourth quarter. But in absolute dollar terms, we could see a slight dip between third and fourth quarter because of those 2 specific businesses. Kelly A. Flynn - Crédit Suisse AG, Research Division: Okay. And then, I mean, just back to the comment someone made earlier about the implied growth. I mean, I think it does come in at the high single-digits organically, if you calculate based on everything you said. And I know you tried to clarify, Eva, but it didn't really change the imprint, so I'm just wondering if you want to clarify any further.

Yes, Kelly, I think if you did the simple math, and you took -- again, we're not going to give you forecast for the fourth quarter, but look at the third quarter revenue, look at what MediConnect did. And if you just did that simple math and took out MediConnect, because again, where I believe you're getting too organic, you would see a double-digit growth rate, if you did that math. Now both of those pieces may move a bit, but I think that, that would be the simple math. Kelly A. Flynn - Crédit Suisse AG, Research Division: Okay. All right. And then can we talk about Argus? I think you said -- I think maybe, Frank, in your comments that your future expectations were reconfirmed. But I was hoping you could just reconfirm them as far as the numbers. Are you still also thinking about that as a 15% to 20% organic grower? And then maybe you could comment on the margins. I think Mark said they were accretive to the corporate margin. Does that imply that it's higher than what the EBITDA margin was this quarter? And that's what we should expect going forward?

Yes, I'll turn to Mark for the numbers. But I would reconfirm, and Scott had indicated in his comments that as we have visited with Argus that has both great leadership and tremendous assets, we see a lot of opportunities for our entire enterprise. Beyond our original expectations, though we were optimistic that, that's what we would find. Mark, why don't you comment on the numbers?

Sure. I mean, everything that we've said in the past, with regard to the growth rate that you described are -- I think we remain consistent with us. And specifically around margins, yes, I mean, the Argus has some wonderful margins. As you've seen in historic results, they're actually running ahead of the Verisk margins, and I think that will continue into the future.

Your next question comes from Tim McHugh with William Blair & Company.

[indiscernible] in for Tim this morning. I just want -- I appreciate the color you guys you gave earlier on the healthcare business. And I just want to specifically ask about MediConnect. If we compare that to the rest of the healthcare practice, how would you compare that growth rate? Is it similar, is it slower or faster on a organic basis?

Mark?

So MediConnect, once again, was not a part of our operations in 2011. And if you looked at some of the filings we did regarding the prior year, I think you'll see that MediConnect has been growing extremely well, and I think, probably, a little bit faster than the organic growth we even described for our healthcare business. So they are doing well. And it is -- it's ramped very nicely. And I think, as Scott described, a part of the power of MediConnect is not just Medicaid alone, it's a part of that overall suite of solutions. The business that is our Revenue Integrity business, in combination with some of the HEDIS reporting and the MediConnect business all in one provide a very nice suite of solutions to a set of customers. And I think it's been well received by our customers.

Okay. And then if we looked at the acquisition environment right now, could you maybe talk a little bit about the opportunities you're seeing there? And if there are any particular sectors you guys are looking at more than others?

Yes, let me comment on that. There are opportunities out there. There are no particular sectors that we look at more the others. As I observed in my comments, and this is Frank, we're looking for good strategic fits at what we consider an appropriate price, given the growth profile the companies that we look at. There are certain characteristics that we particularly like that is that they have business models much like the businesses that we have. And as we look for international opportunity, that's a plus. But we see opportunities, especially in supply chain, to add to our portfolio. But we're not exclusive to just that. We look across the entire spectrum of our strategic map.

Your next question comes from Bill Clark with KBW. William Clark - Keefe, Bruyette, & Woods, Inc., Research Division: Healthcare margins being modestly lower than insurance, yet you've been able to maintain and even grow overall Decision Analytics margins as healthcare has become a bigger piece of that segment. Just trying to find out if you'd say that, that's more due to the GAAP between healthcare and insurance margins closing? Or are you seeing margin expansion across all verticals and the difference between kind of product types is staying about the same?

Mark? Mark, are you still with us?

Sure, I apologize. One of the great things about all of our businesses, there's natural operating leverage across the board. So to your specific question, we have seen an increase in the margins inside of our Healthcare business, in part, that's because we have more volumes running through, doesn't take as many people to run those volumes through to natural scale. The other thing that has happened is to the point that we're talking about earlier, we weren't able to recognize as much revenue. Implementation takes time. It takes effort. And then sometimes, that revenue is somewhat deferred. So you're seeing the cumulative effects of both of those on the Healthcare business. And also, just to be clear, across-the-board, with the exception of mortgage, obviously, we see and have seen scale and ramping margins in our Decision Analytics businesses.

Your next question comes from Bill Warmington with Raymond James. William A. Warmington - Raymond James & Associates, Inc., Research Division: So a question for you on your long-term EBITDA margin targets. We've talked about 43% to 45% in the past, and you guys look like you're on target to actually be above that potentially this year. And with the Argus acquisition, that would seem to put upward pressure on that. So with that in mind, is that still a way we should be thinking about it? Or are we thinking that it's probably likely to move up into the 44% to 46% range?

Mark?

Sure, so let me take that on. I think the reality is, yes you're right, right now, we are running a bit above. I think what we continue to talk to you about and make sure everyone's aware of is that we really don't think about ways that we can keep our margins high. We think about ways that we can grow cash flows, and we can grow our top line for the long term. With that in mind, we are happy to see a lot of our business units coming to us with investment ideas and investment opportunity that have started in third quarter and will continue into 4Q and into '13? So there's some costs that we feel will happen. We also expect that will contribute to the top line into the future. And although Argus and MediConnect have some very strong margins, as you noted, it is tough to find businesses to acquire that have those type of margin characteristics. So as we think about the long term, still -- we think we still remain a little bit tempered about how big those margins can be, because what we're most and first focused on is longer-term growth. William A. Warmington - Raymond James & Associates, Inc., Research Division: Okay. And then if you could remind us the comps on the mortgage business in the fourth quarter versus third quarter, I believe, eased. Is that enough to offset some of that decline? Or are we still likely to see another 200 basis point type drag?

Just to recap. I mean, I think when we talked about the range of 12% to 15% for the full year, we factored in the fourth quarter of 2011. So I think that is kind of our best guess, full year, including the comp in 4Q of '11. William A. Warmington - Raymond James & Associates, Inc., Research Division: Got it. One last question for you was on the -- your -- how do you balance the -- your goal of taking leverage from 2.2 to 2? And then also the share repurchase and the M&A opportunities?

Good question. I think what we've tried to do is really be very thoughtful about our capital management program. So at the time Argus came along, we were in talks and knew about Argus for a long time. It was a unique opportunity. And we said, we want to continue to be very growth oriented. That is our primary focus. And at that point, we've been telling everybody that we would go above that 2x target. I think, once that happened and we jumped above the 2x, we now have been thoughtful about the cash that goes out the door, and that comes in the form of acquisitions. We will do the right acquisitions. There'll probably be for a bit of a time, a little bit smaller. At the same time, we've also dialed back our buyback program, so that hopefully, in the near term, we'll be back towards that 2x level. And we have a little greater flexibility around acquisitions, as we kind of go into the future towards the latter part of -- in the middle of 2013.

The next question comes from Kevin McVeigh with Macquarie.

Could you remind us, how big is the catastrophe modeling business as a percentage of revenue? And with Sandy and, obviously, Katrina not that far back. While, the claims, it sounds like you're not going to get a spike there. Does it impact kind of your clients' view on overall P&C, and just bode well for the business longer-term as we think about it going forward?

Mark, do you want to start that with percentages?

Sure. So let me -- first of all, obviously, we haven't provided you specific visibility into the cat remodeling business. It is a significant part of our insurance category within Decision Analytics. It has been growing very nicely over the last year. And I think, Frank, from the standpoint of characteristics and how the market...

Yes, I'll go there. And yes, sure. I'd make this observation. We -- the cat modeling business did not get recognized until we had Andrew on the heels of Hugo, '89 and 2002, I think, Andrew was. And then, since then, of course, it has had significant tick up. What will likely happen here is that we -- number one, AIR delivers great science and great products, and that's being recognized. So we're getting more opportunities to be sometimes an additional model to companies that have not been customers of ours in the past. We have done 100% of the cat bonds. We have the model within 100% of the cat bonds that have been issued this year. And we're finding that other industries are recognizing the value of these catastrophe models and their enterprise risk management. So we will see -- we'll, a, recognition of the value proposition around the product. And b, I think, that we'll see more market opportunities as risk managers understand that these cat models can be used in their organizations beyond just P&C.

Got it. And Frank, can you just remind us what other industries beyond the traditional P&C your kind of focusing on this services?

Well, I can point to one that we've already gotten some pickup, and that's crop, where the models have that impact. But when you think of supply chain in its entirety, the disruption associated with that, I think, is going to cause -- with Sandy is going to cost increased focus on how companies can get a better handle, enterprises can get a better handle on their exposures.

At this time, there are no further questions. And again, there are no further questions.

Do we have no more questions, operator?

No, sir, there are no further questions.

Okay, well, thank you very much. We appreciate everyone joining us. We're sorry that we had a delay, but we think it was a prudent decision. And we appreciate the value of the questions and the quality of them and look forward to speaking with you the next quarter. Have a good day.

Thank you. This concludes today's conference call. You may now disconnect.