Verisk Analytics, Inc.

Good day, everyone, and welcome to the VAERS Fourth Quarter 2020 Earnings Results Conference Call. This call is being recorded. At this time, all participants are in listen-only mode. After today's prepared remarks, we will conduct a question-and-answer session where we will limit participants to one question. We will have further instructions for you at that time. For opening remarks and introductions, I would like to turn it over to First Head of Investor Relations, Ms. Daisy Bodbar. Ms. Bodbar, please go ahead.

Thank you, Mary, and good morning, everyone. We appreciate you joining us today for a discussion of our fourth quarter and full year 2020 financial results. Today's call will be led by Scott Stevenson, VAERS Chairman, President, and Chief Executive Officer, who will provide an overview of our business. Lee Schabel, Chief Financial Officer and Group President, will follow with a financial review. Mark Aguilari, Chief Operating Officer and Group President, and Ken Thompson, General Counsel, will join the team for the Q&A session. The earnings release referenced on this call, as well as the associated 10K, can be found in the investor section of our website, Verisk.com. The earnings release has also 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 VAERS' future performance, including, but not limited to, the potential impact of the COVID-19 pandemic. 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 FEC filings. Now I'll turn the call over to Scott.

Thanks, Stacey. Hello, everyone. Thanks for joining us for our Q4 2020 earnings conference call. While 2020 was a year like no other for everyone, at Verisk, it was a year that demonstrated the resilience and stability of our business model, the relevance and mission-critical nature of our solutions, and our relentless focus on our customers. And this was all powered by the strength and creativity of our over 9,000 various teammates around the globe, who I want to thank for their dedication and commitment to deliver on our core mission to serve, add value, and innovate during these challenging times. The net result in 2020 was another strong year of financial performance marked by organic constant currency revenue growth of 4.1%. and organic constant currency adjusted EBITDA growth of 11.6 percent after normalizing for the impact of the injunction related to roof measurement solutions. More importantly, in 2020, we delivered 6.9 percent organic constant currency revenue growth in the 85% of our revenues that we identified as non-COVID sensitive, essentially in line with our long-term growth target. Conversely, our COVID sensitive revenues declined 11% on an OCC basis, yet those revenue streams continue to show resilience as the underlying causal factors improve and we have confidence in this relationship. Throughout the year, we've been very deliberate in our cost actions and have protected profitability by matching headcount growth with the trend in our revenue growth. As such, the pace of our hiring and our overall headcount growth has increased sequentially following the moves that we took at the onset of the pandemic in early spring 2020. As a result, Veris delivered strong organic adjusted EBITDA growth and solid margin expansion throughout the year. Lee will provide more details on our performance in his financial review. 2020 also exhibited the importance of our strong cash flow, the disciplined capital allocation mindset, and our emphasis on creating long-term, durable shareholder value. Despite the challenges of the operating environment during 2020, we were deliberate about our continued investment in our innovation agenda by inventing new solutions and enhancing existing ones. We also partnered with our customers to bring them solutions to help them be more automated and digitally connected during the pandemic. We funded the continued transformation of our technical infrastructure through cloud migration, tokenization of key data assets, and the development of cutting-edge data fabric to underlie our analytic solutions. This is a journey we embarked on in earnest two years ago, and we have made significant progress moving our datasets and solutions to the cloud. Yet, we still returned over $500 million in cash to shareholders through share repurchases and dividends, and I'm pleased to announce that our Board of Directors has approved a 7% increase in our cash dividend and a $300 million increase in our share repurchase authorization to support ongoing capital return. On the innovation front, our insurance business continued to advance our existing solutions and introduced new innovations. In our commercial property business, we substantially enhanced and updated our database of commercial properties by building an advanced analytic model for over 8 million commercial properties that give insurers information for five key building attributes, including building use, construction class, building age, number of stories, and area. This brings the database to a total of 12.2 million commercial properties And this data can be delivered to our insurance customers' workflows in an automated and easy-to-use format. Additionally, during the quarter, we continue to advance our analytics and offerings in the fast-growing area of cyber risk with the addition of Nationwide to the Verisk Cyber Data Exchange. The Cyber Data Exchange is a contributory database of aggregated and anonymized insurance data from participating cyber insurers globally. The insights and analytics that Verisk derives from this data help our insurance customers make intelligent strategic decisions about their portfolios and select risk and benchmark their performance against peers. The cyber exchange is an important part of Verisk's cyber solution suite, which is an end-to-end ecosystem that helps insurers and reinsurers more quickly deliver new cyber programs or enhance existing ones. I'd like to take a minute to observe on recent developments related to our ongoing patent dispute with Eagleview Technologies. We continue to disagree with the current outcome of the case and are aggressively pursuing all our legal and operational options. In September 2019, we recorded a $125 million legal reserve related to this matter. We filed our appeal of the original ruling at the end of the fourth quarter 2020. On February 16th, the trial court granted EVT's motion for trouble damages as well as some interest and fees. We intend to appeal this ruling as well. As discussed in more detail in our 10-K, because our appeal is pending, we're unable to predict the ultimate outcome of this matter. Still, we remain committed to providing our customers with superior aerial imagery solutions and remain very excited about our partnership with Bexel, which has not been impacted by this ruling. At Wood Mackenzie, we continued to expand our LENS energy analytic platform. In the fourth quarter, we released LENS subsurface discovery on time and on budget, rounding out our five upstream solutions within the LENS platform. This module enables faster, more accurate decision-making for exploration and resource development teams as they have access to a comprehensive global data set and can run custom analyses and perform benchmarking studies right into the workflows. Despite the softness in the energy end market driving industry consolidation, we continue to see demand for LENs across our different customer segments, which is reflected in increased adoption, constructive pricing, and longer contract terms. Looking ahead, we are on track to launch a suite of modules related to the energy transition into the LENs platform, namely LENs Power, which will include global discovery and valuation, as well as carbon emissions benchmarking solutions. In financial services, we launched Small Business Attributes, a new solution in partnership with Enigma Technologies that provides greater insights into the financial health of small businesses, which have been the hardest hit part of the economy during the pandemic. This solution offers our bank customers near real-time information about sales trends that can be used by a bank's risk underwriting and marketing teams so they can better serve small business customers. This partnership is a great example of how VFS is leveraging our unique data assets to extend and serve new segments of the financial services end market. On the acquisition front in the fourth quarter, Verisk closed on the acquisition of Jornia, a leading provider of consumer behavioral data and intelligence. The acquisition will add Jornia's proprietary view of consumer buying journeys to Verisk's growing set of marketing solutions for the insurance and financial service markets, delivering better experiences, and improving customer acquisition and retention for our customers. In addition, we've made great strides throughout 2020 with recently acquired companies. We have now owned Fast and Genscape for a full year, and I'm happy to share that we're having great success extending and accelerating the adoption of their solutions across our customer set, as well as improving profitability through cost synergies. We're very pleased with these results as they are tracking ahead of our plans at the time of acquisition and are a great example of management's focus on delivering strong returns on the capital invested in acquisitions. 2020 also marked another high point for our company's culture and our commitment to investing in our people and their skills. Despite the remote work environment, the Veris team increased productivity, boosted connection and collaboration through internal communication tools and engaged in training and development courses through our many different platforms and across all levels in the organization. This year alone, we trained more than 700 teammates in our leadership and management development programs and in our Lean Six Sigma programs. Vera's teammates earned 900 yellow belt certifications and 70 green belt certifications. Lean Six Sigma is an embedded mindset across Vera's, and we continue to leverage this established methodology and set of tools to serve our customers better every day. Some examples of important accomplishments this year include, first, model developers worked to reduce the time spent collecting data and creating models, improving time to market from new models. Second, field representatives developed new time-saving procedures for completing and updating property surveys, increasing their productivity. And third, sales and support teams developed new processes to execute new contracts or amend current ones quicker with our customers. The benefits are reflected in increased productivity, high customer satisfaction, and improved employee engagement. In fact, this year, our employee engagement score increased eight points to 78%, and for the fifth consecutive year, Barris received U.S. certification from the Great Place to Work Institute for outstanding workplace culture. We also received first-time certification in the United Kingdom, India, and Spain. Finally, I'd like to share my enthusiasm and my views on the recently announced leadership changes and expanded responsibilities for our executive management team. These changes reflect the thoughtful and strategic approach to our long-term growth and planning for the global organization and are a testament to the deep bench of talented leaders we have at Ferris. I'm pleased to share that both Mark Anquillari and Lee Schabel are taking on new leadership responsibilities within Ferris, and both have been elevated to the position of group president. Mark Ancolari, who currently serves as Verisk's Chief Operating Officer, is adding oversight of the company's enterprise risk management function to his current responsibilities of leading the company's insurance business and government-facing businesses. Our risk management operations will continue to be led by our very talented and seasoned team that work diligently every day to make sure that our technical infrastructure remains secure and that we are always using the most advanced data protection techniques. This move also more closely ties our enterprise risk assessment and management with the core operations of our business. Lee Schabel, who currently serves as VERA's Chief Financial Officer, will add oversight responsibility for the operations of our energy and specialized market segment and our financial services segment. bringing an even more direct link between our capital allocation discipline and our business unit operations. We will continue to be supported by our deep and tenured finance organization, including our Chief Accounting Officer and Controller, David Grover, and our Treasurer, Brian Aird. Finally, I'm pleased to publicly welcome Kathy Card-Beckles to Verisk as our new General Counsel and Corporate Secretary. Kathy joins us from Chase Consumer Bank, where she most recently served as General Counsel. Kathy brings with her extensive experience in intellectual property and technology and significant expertise partnering with and advising boards of directors and management teams. I look forward to having Kathy formally join the team on April 5th and working with her to advance our long-term strategy. Kathy will replace Ken Thompson, who announced his retirement late last year. To ensure a smooth transition, Ken will continue with the company as executive counsel. Over the last 14 years, Ken has been an integral part of Verisk's success and a valued partner and a friend to many across the organization. On behalf of the entire organization, I want to personally thank Ken for his dedication to Verisk and his counsel through this transition. We wish him much health and happiness in his retirement. And now I will turn the call over to Lee to cover our financial results.