Verisk Analytics, Inc.

Hey, everyone, and welcome to the Verisk Fourth Quarter 2019 Earnings Results Conference Call. This call is being recorded. At this time, all participants are in listen-only mode. After today's presentation, there will be a question-and-answer session. At this time, for opening remarks and introduction, I would like to turn the call over to Verisk Head of Investor Relations, Stacey Broadbar. Ms. Broadbar, please go ahead.

Thank you, Sarah, and good morning, everyone. We appreciate you joining us today for a discussion of our fourth quarter and full year 2019 financial results. Today's call will be led by Scott Stevenson, Verisk's Chairman, President, and Chief Executive Officer, who will provide a brief overview of our business. Eric Schneider, Chief Technology Officer, will then provide an update on our technology strategy, including our cloud migration. Lastly, Lee Schavel, Chief Financial Officer, will highlight some key points about our financial performance. Mark Anquillari, Chief Operating Officer, will join the team for Q&A. The earnings release referenced on this call, as well as the associated 10K, can be found in the Investors section of our website, Veris.com. The earnings release has been attached to an 8K 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 contained in our recent SEC filings. Now, I will turn the call over to Scott.

Thanks, Daisy. Good morning, everyone. I'm pleased to share that 2019 was another strong year for Verisk. marked by solid financial results while we continue to invest for future growth. Normalizing for the revenue impact of the injunction related to our root measurement solutions, we delivered organic constant currency revenue growth of 6.9% and organic constant currency adjusted EBITDA growth of 7.7%, demonstrating organic margin improvement in 2019. Moreover, our growth was driven by broad-based strength across our insurance vertical, and marked improvement in energy and specialized markets. The consistency of our growth comes from four sources. First, intimacy with our customers. Second, ever deeper levels of integration between our solutions and their environments. Third, a steady stream of innovative new solutions. And fourth, the cross-sell of existing solutions to existing customers. Within insurance, we continue to enjoy strong market uptake of our platform to analytic environments, including Lightspeed for automated underwriting and Touchstone for catastrophe modeling. These solutions are being well received by both the traditional P&C insurers as well as the InsurTech startups who need Dane Analytics to effectively price and sell in a competitive market. We've experienced great success with the InsurTech segment with more than 100 new sales wins in 2019 alone. Our energy and specialized market segment delivered improved growth in 2019 driven by particularly strong results in our market and cost intelligence solutions, as well as improvements within our core research at Wood Mackenzie. In addition, we delivered strong top-line growth and improving profitability from our breakout areas, including the LENS platform and our chemicals and energy transition solutions. As always, we are in close conversation with our customers as they navigate the near-term macro environment. In financial services, 2019 was a year of transition as we evolved from a tops-down orientation to a bottoms-up approach with an emphasis on steady growth. Along that journey, we took a very deep look at all our solutions in Barris Financial Solutions and concluded that our data hosting business, what we call Argus Data Warehouse, no longer aligned with our core business model. As such, earlier this month, we entered into an agreement to transition the Argus Data Warehouse by transferring approximately 50 people and licensing our intellectual property to a partner so that we could focus on data analytics. We believe this transaction will position the financial services segment for stronger growth and higher levels of profitability going forward. Continuing on the strategic front, on February 1st, Verisk closed on the previously announced sale of our aerial imagery sourcing group to Vexel Group. This transforms Geomni into an asset light operation with a focus on advanced data analytics. Moreover, it meaningfully reduces the cost structure of our Geomni business while giving us access to the leading US image library along with favorable economics. Regarding our roof measurement solution, we have applied for a patent on our new technology for roof measurement while continuing with our plan to appeal the recent court decision. On February 14th, we closed on the sale of our compliance background screening business. This business was in the claims subsegment of our insurance business. This transaction will allow us to continue to have access to this important data set, but in a more capitally efficient manner. Together, these three portfolio changes are examples of how we are actively managing our mix of businesses to capitalize on our competitive advantages and stay close to our proven business models. of offering platforms analytic solutions and unique analytic objects. These moves position Veris for continued long-term sustainable growth and improving returns on capital. On the strategic acquisition front, in December, we acquired Fast, a leading SaaS company for the life insurance and annuity industry. Fast offers a modular, flexible policy administration system that allows life insurance companies to modernize legacy systems in stages and without a large upfront capital commitment. It also provides a channel for Verist to deliver our new analytic objects to the life insurance industry. Adding FAST to the Verist portfolio is a strong step forward as we make advances into the life insurance market. The software intensity of our overall business has increased over the years, and we are excited about the opportunity for FAST software to deliver our analytics and embed more deeply into life insurance customers' workflows. I'm pleased with the early steps towards integration with Fast. Another key strategic initiative for Barrisk is our journey to migrate to the cloud, what we refer to internally as cloud first. We have made significant progress on this campaign and are poised to keep the momentum going. When we first started this journey in earnest two years ago, we sought customer feedback and listened carefully to their concerns. Today, in all of my discussions with CEOs of our customers, across all of our verticals. There's full support of our migration to the cloud as our customers realize the benefits of Verisk's faster pace of innovation and our ability to enter new geographies more quickly. Eric Schneider, our Chief Technology Officer, will discuss with you in more detail our cloud migration and broader technology strategy. 2019 was also a milestone year for our ESG objectives. We became a participant in the UN Global Compact, the world's largest sustainability initiative, which encourages companies to align their operations and strategies around universally accepted principles in the areas of human rights, labor, environment, and anti-corruption. We view participation as an extension of the vision and principles represented by our Verisk way and an appropriate calling card as our business grows and embraces all geographies, cultures, and people. Several Verisk businesses work with UN-sponsored initiatives addressing human rights and climate weather issues by contributing data analytics, professional insight, and scientific expertise. Additionally, the Global Compact distinguishes Verisk with customers and prospects and sets an example for our suppliers and business partners. On the environmental front, we again reported to the Carbon Disclosure Project, or CDP, And for the second consecutive year, we balanced 100% of our reported Scope 1 and 2 emissions and Scope 3 business air travel with the purchase of energy attribute certificates and carbon offsets. We're committed to reducing our emissions and have continued to do so through office consolidations, building improvements, and greater data processing efficiency. In the fourth quarter, we named Pat McLaughlin as our Chief Sustainability Officer, a first for Barrist, reporting directly to me. Pat and I have worked together for nearly 20 years, and in that time, Pat led a major business unit for us. His depth with the company gives him intimate knowledge of who we are and what we value. And so in 2014, I asked Pat to work with leadership and employees across Verisk to build a framework for understanding and addressing our impact on society, including the environment. He is championing sustainability efforts across our operations, and advancing initiatives for measuring and reporting varus in the context of sustainability. I would also like to publicly welcome Laura Ipsen to our Board of Directors. Laura joined us at the end of 2019 and brings with her more than 25 years of experience working as a technology executive at Microsoft, Cisco, and Oracle, yielding a deep knowledge of the cloud, artificial intelligence, and SaaS business models. Laura becomes the fourth woman serving on Verisk's Board of Directors and also our fourth new director in the past five years. Finally, I'm pleased to announce that our Board of Directors has approved an 8% increase in our cash dividend to $0.27 per share this quarter and has also increased our share repurchase authorization by $500 million. These actions underscore confidence in the stability of our business, its profitability, and its cash flows. Our core position within our three verticals is sound, and we're confident in our ability to deliver on our strategies to drive long-term shareholder value as we focus on serving our customers while also investing in market-leading innovation and our people. So with that, let me turn it over to Eric to provide some insight into our technology strategy.