Good day, everyone. And welcome to the Verisk Second Quarter 2023 Earnings Results Conference Call. This call is being recorded, and currently, all participants are in a listen-only mode. After today’s prepared remarks, we will conduct a question-and-answer session where we will limit participants to one question so that we can allow everyone time to ask a question. We will have further instructions for you at that time. For opening remarks and introductions, I would like to turn the call over to Verisk’s Head of Investor Relations, Ms. Stacey Brodbar. Ms. Brodbar, please go ahead.

Thank you, Abby, and good day, everyone. We appreciate you joining us today for a discussion of our second quarter 2023 financial results. On the call today are Lee Shavel, Verisk’s President and Chief Executive Officer; and Elizabeth Mann, Chief Financial Officer. The earnings release referenced on this call, as well as our traditional quarterly earnings presentation and the associated 10-Q can be found in the Investors 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. As set forth in more detail in today’s earnings release, I will remind everyone today’s call may include forward-looking statements about Verisk’s future performance, including those related to our financial guidance. 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. Finally, I’d like to remind everyone that the financial results for recent dispositions are included in our consolidated and GAAP results but are excluded from all organic constant currency growth figures. A reconciliation of reported and historic non-GAAP financial measures discussed on this call is provided in our 8-K and today’s earnings presentation posted on the Investors section of our website, verisk.com. However, we are not able to provide a reconciliation of projected adjusted EBITDA and adjusted EBITDA margin to the most directly comparable expected GAAP results because of the unreasonable effort and high unpredictability of estimating certain items that are excluded from projected non-GAAP adjusted EBITDA and adjusted EBITDA margin, including, for example, tax consequences, acquisition-related costs, gain/loss from dispositions and other non-recurring expenses, the effect of which may be significant. And now I’d like to turn the call over to Lee Shavel.

Thanks, Stacey. Good morning and thank you for participating in today’s call. I am excited to be with you today to provide an update on how our strategy, focus, and results-oriented culture is translating into strong financial performance for Verisk. I will leave the details of the financial results to Elizabeth. But in summary, Verisk delivered continued business momentum in the second quarter, underscored by strong organic revenue growth and solid margin expansion, translating into double-digit profit growth. We are driving these results by focusing on our clients’ most pressing needs as they deal with an environment marked by elevated underwriting losses, including those from catastrophes and high levels of inflation, leading to pressure on profitability. We have elevated the conversation and directed our sales focus to the solutions in our portfolio best suited to solve those challenges. Our byproduct of the tough operating environment is a hardening of the insurance market as carriers are taking rate actions to help drive improved profitability, leading to stronger net written premium growth. Rate takes time to work through, so we expect this environment to persist into 2024. The cross currents of elevated underwriting losses and increasing pricing in the insurance industry have become a hot topic across the press with headlines about trouble spots like Florida and California. Specific to Florida, since our last update, there has been little change as we have not seen any additional liquidations, though uncertainty remains. We continue to watch the market carefully, particularly as we head into the Atlantic hurricane season. We are also keeping a keen eye out for new financial stability ratings for the Florida market, which we expect in the next few weeks and could identify further deterioration in the market. Recent legislative reforms in the property market are expected to have a positive impact, but it may take some time for that to materialize. In California, current regulation restricts insurers from using catastrophe models in ratemaking, but the Department of Insurance is exploring a change to that policy. To that end, Verisk recently testified in front of the California State Assembly, joint hearing, insurance and emergency management as the expert on catastrophe models and how their use can help insurers assess risk from low frequency, high severity events like wildfires, ultimately benefiting the residents and businesses in the state. This is a great example of our enhanced industry engagement as we leverage our expertise to benefit all the players in the insurance ecosystem, including carriers and regulators, and build resilience for consumers and businesses. As I discussed at Investor Day and on prior calls, a key pillar in our strategy is elevating and strengthening the strategic dialogue with our clients. To that end, I had the opportunity in the second quarter to visit with many of our clients in the U.S. to understand their focus and explore how we can better support their objectives. These conversations generated several initiatives for expanded dialogue with C-suite support to accelerate opportunities on technology and data initiatives, particularly regarding inflationary impacts. During a visit to Europe, I encountered similar opportunities with our clients there, as well as exceptional energy and focus at Verisk offices in London, Malaga, Krakow, and Cologne. The message that we hear is very similar across industry participants, large and small, U.S. and international. We welcome Verisk’s expertise in partnership to drive more automation, lower our investment costs, and improve efficiency. Given our mission-critical data, deep customer relationships, and engagement and scale, no one is better positioned to meet this need than Verisk. A key extension of our conversations with our clients is our innovation agenda. We are listening to our customers and designing solutions to meet their most pressing needs. For example, we recently launched a new solution for carriers, contractors, and adjusters within our property estimating solutions called XactXpert. XactXpert is a no-code, low-code cloud-based rules engine designed to streamline the insurance restoration and claims estimation process. XactXpert targets the key challenges our clients face, including inaccurate and incomplete information and claims estimates, high compliance needs, pressure to reduce cycle times, revisions, loss adjustment expenses, and a need for more digital and simplified processes for a changing workforce demographic. Further, it empowers carriers, contractors, and adjusters to customize organizational estimating behaviors, delivering quick, accurate claims estimation by reducing manual input errors and driving consistency, accuracy and efficiency throughout the claims estimating process. We are seeing strong interest from our customers for this newly launched solution. In our anti-fraud solutions, we recently launched Image Forensics, an AI tool designed to detect fraud in digital images submitted as part of the claims settlement process. Image use in claims processing has grown exponentially with more and more images being submitted directly by the claimant. In fact, just since mid-2020, photo estimates for auto claim settlement have doubled. While virtual claims processing is driving industry efficiency and customer satisfaction, it has also exposed insurers to an increasing source of fraud from activities like reusing prior loss images using Internet images or digital or document manipulation. We are leveraging the depth and breadth of our customer’s relationships in building a contributory image database, combining it with images sourced from Verisk’s property estimating solutions databases to provide images in match reports and indications if an image was used in a prior loss. Image Forensics is also a great example of how our innovation engine is now actively associating data sets that were previously siloed into powerful new tools for our customers as this tool combines data from anti-fraud with data from property estimating solutions. I know that generative AI has been top of mind for many. At Verisk, we have been using artificial intelligence, machine learning, computer vision, and natural language processing in many of our solutions for some time. For example, our Mozart Forms Composer uses machine learning and natural language processing to help insurers organize, track, edit and analyze insurance policy forms with greater consistency, efficiency, and speed. This tool employs advanced technology to digitize a historically document-driven process and addresses a major pain point for our clients, managing the complex and growing problem of analyzing policy language across multiple lines and states, while enhancing their ability to customize policy language more quickly. With regard to generative AI, we are currently testing private versions of generative AI and are making an index of possible use cases focused on both customer-facing solutions and internal efficiency opportunities. We are working in partnership with our customers and state regulators to ensure that we are approaching this innovative technology with a focus on ethical use and fairness. Finally, I would like to formally welcome Samantha Vaughan to Verisk as our Chief Privacy Officer. Data governance and stewardship have always been a key focus for Verisk, and Vaughan will lead the oversight and enhancement of our policies to protect the data entrusted to Verisk and will help ensure the integrity of Verisk’s data practices, regulation, and compliance. In addition to the focus and dedicated privacy leadership, our new privacy officer expands on the thought leadership Verisk is providing across the insurance industry. As technology and data capabilities expand, the privacy risks expand as well. Concerns about AI, data risk management, and security, all have a key nexus in privacy, and we are glad to be joining the best-in-class companies that articulate a values-based approach to the privacy office. With that, I will hand it over to Elizabeth to review our financial results.

Thanks, Lee, and good morning to everyone on the call. I am pleased to share that Verisk delivered strong second quarter financial results. On a consolidated and GAAP basis, revenue was $675 million, up 10% versus the prior year and income from continuing operations was $204 million, up 18% versus the prior year, reflecting strong growth across both underwriting and claims. Diluted GAAP earnings per share from continuing operations were $1.35, up 9% versus the prior year. Moving to our organic constant currency results adjusted for non-operating items, as defined in the non-GAAP financial measures section of our press release, our operating results demonstrated strong and broad-based growth from most of our businesses, aided by some in-period transactional benefits. In the second quarter, OCC revenues grew 9.8% and with growth of 9.3% in underwriting and 11.2% in claims. This quarter’s result was boosted by certain transactional revenues that we do not expect to repeat in the back half of the year. Our subscription revenues, which comprised 79% of our total revenue in the quarter, grew 9.1% on an OCC basis. We saw contributions across nearly all of our subscription offerings. More specifically on the drivers of growth in subscription revenues, during the quarter, we experienced the continued benefit on certain of our revenues from the stronger net written premium growth in 2021, which is currently reflected in some of our contract pricing. In anti-fraud, we are driving accelerated growth from the successful conversion to subscription from previously transactional customers through our claims essential bundle. And in property estimating solutions, we continue to benefit from strong contractor subscription growth as contractors are realizing the value of being part of the Verisk network, particularly with the active weather patterns we are undergoing. In fact, according to Verisk’s Property Claim Services, PCS, in 70-plus years of history, this was the most active first half of the year on record from a weather event perspective, dominated by hail, wind, and thunderstorms. Finally, liquidations and consolidation across the industry were lower than historic averages during the quarter, but we continue to anticipate some normalization in the second half of the year. Our transactional revenues, representing 21% of total revenue in the second quarter, grew 12.4% on an OCC basis. The largest contributor to growth for the second consecutive quarter was from our auto solutions, driven by increased rate shopping by consumers and the continuation of a large non-rate action deal with a national insurer that we told you about last quarter. Our trends are reflective of those noted by recent J.D. Power data, which pointed to a 13% increase in shopping activity for auto insurance in the second quarter as consumers react to rate increases. However, J.D. Power also noted that carrier switching increased a much more modest 4%, which may suggest a potential slowing of the market going forward. In addition to gains in auto, our transactional revenue growth also benefited from double-digit growth from life insurance solutions as we are seeing strong customer demand for incremental services. And within our extreme events business, we saw very strong transactional growth related to securitization, as the second quarter marked a record for new issuance in the catastrophe bond market. I will remind you that the catastrophe bond market is seasonal and we do not expect this level of activity to continue in the second half of 2023. These transactional results also included some one-time benefits, including overage charges on specific large underwriting contracts that renewed in the quarter. Moving now to our adjusted EBITDA results. OCC adjusted EBITDA growth was 12.6% in the second quarter, reflecting core operating leverage on the strong revenue growth and the impact of certain cost reduction actions we have taken in connection with our margin expansion objectives. Total adjusted EBITDA margin, which includes both organic and inorganic results was 54.1%, up 160 basis points from the reported results in the prior year. On a pro forma basis for all divestitures, the second quarter margin expanded 140 basis points from margins of 52.7% in Q2 2022. The margin rate in any given quarter can be influenced by the revenue mix, leading to a seasonal pattern in our margins. As such, we think it’s helpful to look at our margins on a trailing 12-month basis, which within the second quarter were 53.1% on a trailing 12-month basis, up 140 basis points over the prior period. The year-over-year change in the second quarter margin reflects the impact of certain one-time expenses in the prior year quarter, as well as strong cost and operational discipline and the impact of our cost reduction program. This was offset in part by higher levels of performance-based compensation, including commissions related to our stronger year-to-date performance, as well as a decrease in our pension credit, negative margin impact from recent acquisitions, and higher T&E expenses. Reflecting on our ongoing cost reduction plans, we continue to run the margin targets that we articulated in our 2023 guidance and at Investor Day in mid-March. Continuing down the income statement. Net interest expense was $31.6 million for the second quarter, compared to $31.9 million in the prior year. With the divestitures now behind us, the proceeds from the sales directed to our $2.5 billion accelerated share repurchase plan and the long-term capital structure now in place, we now expect this current level of net interest expense to be at a similar quarterly run rate for the remainder of the year. On taxes, our reported effective tax rate was 23.8%, compared to 19.2% in the prior year quarter. The year-over-year change in the tax rate is related to lower stock compensation benefits in this quarter versus the prior year’s period. Going forward, we still expect the tax rate for the remainder of the year to be in the originally guided range of 23% to 25%. Adjusted net income increased 8.5% to $219.8 million and diluted adjusted EPS increased 18.9% to $1.51 for the second quarter 2023. These changes reflect organic growth in the business, contributions from acquisitions and a lower average share count, offset in part by a higher tax rate. With regard to the share count, we received the vast majority of the shares from the $2.5 billion accelerated share repurchase plan when we entered into the plan back in March, and while we did not make any repurchases in the second quarter, we do have the ability to repurchase some additional shares outside of the ASR, and we may do so in the future. From a cash flow perspective, net cash from operating activities increased 48% to $193 million due to strong operations and a decrease in cash taxes paid. The decrease in taxes paid is primarily related to the non-recurring gain on the three dispositions in the prior year quarter. Though there was also a one-time cash tax payment of $17 million paid in the second quarter of 2023 related to the energy divestiture. I will remind you that the prior year cash flow metrics include the results from previously divested businesses. Turning to guidance. Given our strong first half performance, as well as the contribution from recent acquisitions, we are increasing our financial outlook for 2023. We have posted a summary of all guidance measures in the earnings deck on the Investors section of our website, verisk.com. Specifically, for 2023, we now expect consolidated revenue to be in the range of $2.63 billion to $2.66 billion and adjusted EBITDA to be in the range of $1.39 billion to $1.43 billion. We continue to expect adjusted EBITDA margins to be in the range of 53% to 54%. Walking further down the P&L, we still expect fixed asset D&A to be between $175 million and $195 million, and intangible amortization to be approximately $70 million. Both depreciation and amortization elements are subject to currency variability, the timing of purchases, the completion of projects, and future M&A activity. Regarding capital expenditures, we now expect CapEx to be between $220 million and $240 million, reflecting increases associated with recent acquisitions, as well as our continued focus on investing organically behind our highest return on investment opportunities. These include a modernization of our forms, rules and loss costs, a migration of our extreme events platform to a cloud-native architecture and further investments across our growth businesses. We are also investing in an upgrade of our financial and human capital systems that will enable future efficiencies once implemented. As previously communicated, we expect the tax rate to be in the range of 23% to 25%, bringing adjusted earnings per share to a range of $5.50 to $5.70. And now I will turn the call back over to Lee for some closing comments.

Thanks, Elizabeth. In summary, we are excited about the opportunity ahead and our ability to focus all our attention, talent, and resources on the global insurance industry. Verisk is best positioned to capitalize on the opportunity because of our scale and expertise. Our motivating purpose is to work together with our clients in building resilience for individuals, communities, and businesses globally. The combination of our focused business model, deep customer relationships, and strategy to deliver value for clients through improved decision-making and operational efficiency is a formula that we are confident will also deliver value to our shareholders through growth and returns. We continue to appreciate the support and interest in Verisk. Given the large number of analysts we have covering us, we ask that you limit yourself to one question. And with that, I will ask the Operator to open the line for questions.

Thank you. We will take our first question from Heather Balsky with Bank of America. Your line is open.

Hi. Good morning. Thanks for taking my question. I wanted to ask about the outlook for the back half on sales. I know that both this quarter and last quarter, you ring-fenced some items that, you articulated were potentially one-time. But it seems like guidance implies at the high end 7.5% revenue growth versus you did 10% organic sales in the first half. Is it those items tapering off? Do you have a different outlook for the environment? Could it really helpful to reconcile how you did in the first half and your expectation for the back half?

Yes, Heather, thank you for your question. We have been quite pleased with our performance in the first half, as we have been operating effectively across the board. Our business within the insurance sector is diversified, and we have identified several environmental or industry factors that suggest the revenue growth we experienced in the first half may not carry over into the second half. To reiterate, there are at least six key factors that have contributed to our strong performance in the first half. First, we have seen low attrition and consolidation in the industry, which could normalize in the second half. Second, the level of auto shopping activity, which drives transaction volume in our auto insurance business, is expected to moderate. Third, we experienced elevated weather activity in the first half, although there were no specific catastrophic events, and we must consider the significant hurricane that occurred in the fourth quarter of last year, making comparisons in that quarter more challenging. Fourth, in our anti-fraud business, we have been achieving strong growth by converting transactional customers to subscription services in our claims essential bundle, but we will soon begin to see the impact of that benefit starting from roughly this time last year. Fifth, we discussed the securitizations and the robustness of the ILS market, which was higher in the second quarter, but we do not anticipate that level of strength to continue. Lastly, we noted various technical items such as billing catch-ups, overages, and the additional business day in the quarter. All of these factors have contributed to our 9.8% revenue growth, which is above our long-term sustainable target of 6% to 8% and may not persist in the second half.

And Heather, if I can put a wrapper around the detail that Elizabeth provided, you asked the question initially in terms of a sales dynamic in the second half. And as Elizabeth was describing, these really aren’t sales-related elements; they are more environmental factors that contributed to a strong first half that we think are likely to moderate in the second half where we can’t have confidence that they will continue to reoccur. So there’s nothing that we see that this is predominantly sales-driven. It is more environmental.

Appreciate it. Thank you.

And we will take our next question from George Tong with Goldman Sachs. Your line is open.

Hi. Thanks. Good morning. Just a follow-up on the prior question. As you think about the normalization of trends in the external environment, acknowledging that the internal execution has been relatively stable and strong. When would you expect that normalization? How would you expect the subscription and transaction revenue performance to normalize in the coming quarters? Thank you.

Thank you for the question, George. To begin, I want to say that based on the details Elizabeth covered, it's challenging to predict what will happen. It seems there may be a return to average conditions in the ILS market. We experienced a robust second quarter, which isn't typically observed from one quarter to the next, making predictions difficult. We're noticing some early trends in shopping activity, but that will be influenced by broader economic factors. Therefore, considering the nature of this and its particular strength in transactions, we're not in a position to estimate when moderation might occur, so we're adopting a more cautious approach regarding its impact in the second half.

Got it. Thank you.

We will take our next question from Andrew Steinerman with JP Morgan. Your line is open.

Hi. I was hoping to revisit kind of an older question about net written premiums. I know it has less of an effect on Verisk pricing, but it’s still part of the Verisk pricing. And looking back to 2021 and 2022, those were strong growth years for net written premiums for the U.S. P&C Insurance industry, and I just wanted to get a sense with the two-year lag that I think is typical for a contract. How much is that helping this year’s organic revenue growth?

Yeah. Thanks, Andrew. It is helping this year’s revenue growth and we are looking back to 2021 on our 2023 contract. I think we have previously called out that was a 9.6% net written premium growth across the industry. And as I called out, the factors of strength in our subscription growth and the strength in our forms, rules, and loss cost business has probably been the largest contributor to our subscription growth.

And Andrew, to add a little bit of context around that. As Elizabeth described, it has been a benefit, but there are also, I think, the impact of inflation is clearly driving some of that net written premium. We are also seeing the benefit of a hardening market within the insurance as a whole. But the other element is, because of inflation, our costs are going up, that gives us a little bit more scope on the pricing side, and we are also continuing to add value to those products, which particularly in this environment with the insurance industry focused on improving their efficiency. We have been able in a number of areas to deliver substantial value on that front given those pressures, and those elements are probably a larger factor than the pure net written premium. I think we estimate that the portion of our revenues that has some exposure to that is in the 15% to 20% type of range.

Perfect. Thanks, Lee. Thanks, Elizabeth.

We will take our next question from Toni Kaplan with Morgan Stanley. Your line is open.

Thank you. I have a question that combines the previous three. When considering the unusual or one-time items that have been beneficial, it seems that most of them affect the non-subscription business. A few apply to the subscription side. However, regarding the traditional subscription business, is the primary influence due to pricing or low attrition? What is the main factor at play? Additionally, in relation to net written premium growth in 2022 compared to 2021, how should we consider pricing for 2024? Thank you.

Thank you, Toni. Regarding subscription growth, I want to highlight the top three factors contributing to our strong performance. First, in the forms, rules, and loss cost sector, we see a positive impact from pricing dynamics and historically low industry liquidations or consolidations. The second major contributor has been our anti-fraud business, especially as we've shifted from transactional customers to the claims essential bundle, which has boosted subscription growth. Lastly, our property estimating solutions have experienced strong subscription growth this quarter, thanks to increased usage by contractors and insurance carriers due to recent weather events. These drivers demonstrate that our subscription growth is broad-based and not solely dependent on pricing. Now, addressing your question about net written premium and 2022, the Verisk review of 2022 net written premiums has yet to be published, but recent A.M. Best data indicates an 8.4% net written premium growth in the U.S. P&C industry, which aligns with our preliminary Verisk data. This serves as a positive tailwind. However, as Lee noted, there are challenges related to inflation and profitability; A.M. Best data also reveals a 15% increase in losses and overall combined ratios exceeding 100%. This underscores the difficulties facing carriers and highlights the need for our solutions to help address these profitability issues.

Thank you.

We will take our next question from Manav Patnaik with Barclays. Your line is open.

Thank you. I have a question regarding the margins. I understand you've reiterated the figure, but could you provide an update on the long-term cost actions that have been implemented, similar to what you shared last quarter? I'm also curious about the discussions around generative AI and the increase in capital expenditures. If spending rises in these areas, how might that affect your margin outlook in the coming years?

Thank you for the question, Manav. Regarding the margins, as we mentioned previously, about 90% of the cost actions will be reflected in our run rate for 2023, and we are making steady progress. For this quarter, the mergers and acquisitions have presented a 40-basis-point headwind due to recent acquisitions. Our investments in cloud technology, ERP systems, and the normalization of travel and expenses have contributed to an additional 90-basis-point headwind. Additionally, as a non-operating item, the pension plan has affected our margins by 50 basis points this quarter. Looking ahead, our margin targets will continue to support our technology investments. As Lee mentioned, we are in the early stages of exploring new opportunities with our clients, particularly with generative AI, and we will provide more updates as we gain further insights.

Yeah. And I would just add, I think, on a lot of those investment opportunities, they are more CapEx driven than OpEx driven at this point. And we have given you our targets that we are very focused on achieving, while at the same time, continuing to maintain the necessary investment, both in OpEx and CapEx to make certain that we are delivering on our top priority, which is organic growth in the business.

We will take our next question from Greg Peters with Raymond James. Your line is open.

Good morning, Lee, Elizabeth, and Stacey. I am going to focus my question on the transactional revenue component. And I am curious if there is a reporting lag in some of your transactional revenue. For example, you called out the benefit from auto in the second quarter yet. We are seeing some of the large auto insurance companies really cut back in their marketing expenses in their second quarter results. And would it be appropriate for us to match property transactional revenue with either PCS events and/or hurricane activity, because you called that out in one of your answers? Thank you.

Thank you for your question, Greg. I’ll address the first part. There are many complex factors affecting our overall financial results. Currently, we see weaker performance in our Verisk Marketing Solutions, reflecting the marketing dimension. However, shopping activity does create some offsetting revenue as people are looking into potential rate opportunities. Regarding homeowners, there are numerous products that respond differently to market dynamics, making it hard to connect them to a single metric. Additionally, the current activity in auto is largely driven by consumer behavior rather than that of carriers. This may not be a completely satisfying answer, but it’s quite challenging to link our overall financial performance to specific indicators in the auto sector due to the numerous factors involved.

Understand. It’s an intriguing question. Thanks for the time.

And we will take our next question from Andrew Jeffrey with Truist. Your line is open.

Hi. Good morning, everybody. Appreciate you taking the question. Lee, I continue to be intrigued by some of the conversations around moving up into the C-suite and perhaps sort of expanding the scope of your relationships with some of the carriers given relatively low sort of share of net written premium. Can you just talk about a little bit how you think that will affect the long-term trajectory of your revenue growth and if that’s still a benefit sort of yet to come over the next several years?

Thank you for the question, Andrew. I’ve emphasized the importance of engaging at higher levels within the organization, and we’ve been pleasantly surprised by the positive response we’ve received. Recently, I’ve had discussions with four CEOs from our large clients, and these conversations have highlighted various critical issues. One CEO was particularly concerned about the long-term impacts of climate change on their business model and requested our insights into how it could affect their underwriting decisions across different regions. This presents an opportunity for us to integrate our underwriting benchmarks and long-term weather trend analysis. In another discussion, we focused on regulatory challenges related to rate approvals, where we provided our expertise on non-rate actions to help carriers improve their rate positions. Additionally, one client recognized their need for technological and process support to advance their organization, and we can assist them in developing effective technology solutions to meet client needs. Each of these interactions opened doors for us to combine our data sets and offer integrated solutions. When we have this level of support from C-suite executives, it creates a motivating mandate that allows us to demonstrate real value to our clients. We are just in the early stages of developing these strategic relationships, aiming to address broader needs that could lead to new industry solutions across our client base. Currently, our performance reflects a favorable environment and focused efforts within certain businesses, energized by recent organizational changes; however, we are still at the beginning of expanding our partnerships with clients.

Very thorough. Thanks.

And we will take our next question from Jeff Silber with BMO Capital Markets. Your line is open.

Thank you so much. Elizabeth, I think you called out about a half a dozen items that you think may not recur in the second half of the year. I know it may be difficult to quantify the impact on that. But is it possible to quantify the impact those items had either in the first half of the year or maybe just the past quarter?

Thank you for the question, Jeff. We haven't broken down the specific components of each item. I can mention two things. First, I have outlined various factors that are driving subscription and transactional growth, and those can help you gauge their significance. Second, we generally use a rough guideline to identify one-time events that contribute over 1% to revenue growth. None of these individual factors reach that level.

And I would say…

Okay.

…you can certainly see some of the outperformance relative to our long-term targets, and so some significant portion of that delta reflects those one-time elements; otherwise, they would be part of our normal operating cost. So I think it gives you some kind of sense of the scale of the impact of some of these.

Okay. Great. That’s helpful. Thanks so much.

And we will take our next question from Andrew Nicholas with William Blair. Your line is open.

Hi. Good morning. Thanks for taking my question. Just wanted to circle back on marketing solutions. I think you called out in the prepared remarks or in the slide deck that you continue to see some pressure there, and new customer acquisition spend is low amongst the carriers. Any signs of moderation there? It does seem like, in general, they continue to pull back. I think the expectation previously was that was going to improve in the second half. Just wondering what kind of the latest temperature check is there and what’s kind of baked into guidance in terms of a recovery?

Thank you, Andrew. I believe you have grasped the situation accurately. The carriers are reducing their marketing expenses, primarily due to uncertainty about their ability to underwrite profitably in certain markets or product lines, which has affected us in the first half and is expected to continue impacting us in the second half for that business. While it's a small segment of our operations, there's clearly a demand among consumers. As they encounter higher rates, they are looking for more competitive alternatives to what they currently have, indicating that there is potential for growth. We anticipate that as regulators approve some of the rate increases, which we've seen some positive signs of, it will provide us with a better opportunity to assist our carriers and clients with marketing analysis. Additionally, I want to stress that, in the long run, our clients are increasingly focused on acquiring sophisticated analytics on online insurance shopping behaviors, interests, and delivering the right products at the right moments. This area presents a broad and expanding opportunity for us, despite the current marketing challenges we are facing in the industry.

Understood. Thanks, Lee.

And we will take our next question from Alex Kramm with UBS. Your line is open.

Yes. Hey. Good morning, everyone. I may be scrutinizing the guidance change a little bit too much, but just a quick question about the margin. When I look at the change in guidance on before in revenue and on EBITDA, it seems like the incremental margins you are implying here are at the midpoint in the low 40s and even at the high end only 50%. So, again, this may be just like some of the, like, a number thing, but I am just wondering why the incremental margins on the outperformance would be lower than your overall margins? Is it performance-based payments, is it incremental investing, or is it just the mix of business?

Thanks, Alex. That's a good question. There are a few factors at play. First, the guidance encompasses a range, so there's variability involved. The recent mergers and acquisitions we've completed typically bring in lower margins compared to our existing operations. Additionally, there are some variations in business mix throughout the year, as well as incentive-based payments reflecting strong year-to-date performance. We also experience some seasonal fluctuations in our margins. Ultimately, we've made investments throughout the year to balance operational efficiency with our long-term growth objectives.

Fair enough. Thank you.

And we will take our next question from Russell Quelch with Redburn. Your line is open.

Hi.

I apologize. Operator, we cannot understand or hear what the analysts are saying.

Sir, yes, we have a very garbled connection. If you could try reconnecting and rejoining the queue, please?

Sure. Is that better now?

It is. Thank you.

Thank you. Apologies for that, and thank you for having me on. So the question was, could you give us the H1 revenue numbers for the marketing business, the ES business, and the life insurance and the international businesses so we can assess you versus the numbers that you gave at the Investor Day earlier in this year? And also, I wondered if you might consider increasing disclosure going forward so we can better assess the growth in the business, now it’s solely an insurance business? Thank you.

Thank you for the question, Russell. At this time, we don’t provide that level of disclosure on our businesses. The Investor Day was aimed at giving an overview of our long-term portfolio and included more information than we have shared in the past. We will take your feedback into account and consider it.

Okay. It was worth a try. And then just a quick follow-up on the revenue to CapEx. I appreciate that’s higher than most of your peers, and I heard you talk earlier about incremental investment from a CapEx perspective for AI. I wondered if you would be willing to take that revenue to CapEx ratio over 10% if you were to see a great opportunity to invest in AI opportunities in the next couple of years?

So thanks for the question. In terms of CapEx as a percent of revenue, again, we have talked about it, that’s not a metric that we target. What we target is strong returns on invested capital for our capital deployment. But if you are benchmarking against our peers, there are two things that you have to keep in mind in terms of CapEx as a percent of revenue. One is our very high margins, which would make the CapEx as a percent of revenue skewed, and maybe we should look at CapEx as a percent of EBITDA or free cash flow. The second point is that our R&D is very low, just given the way that we classify items. And so you should look at CapEx plus R&D, and on that basis, you would get to a more normalized level. As to kind of where we would take it, I think at Investor Day, I pointed to a similar range of sort of high single digits area, and we continue to assess what the opportunity is and what’s the best way to create value for shareholders.

Okay. Good stuff. Thanks for that and apologies for the connection issues.

Thanks, Russell.

And we will take our next question from Ashish Sabadra with RBC. Your line is open.

Thanks for taking my question. I wanted to drill down further on the new product innovation. Lee, you mentioned several new products that were launched in the quarter that are gaining traction with customers. I was wondering how do you track those KPIs internally and is there anything that you can share externally on how we can track the success that you are having with this new Verisk initiative and the new product innovation over the near term, but also over the next three years to five years? Thanks.

Thank you, Ashish. Given the scale of these initiatives and their deep integration, we will continue to share anecdotal successes and client traction. However, at this stage, it does not have a significant financial impact, so we won't provide specific details. These initiatives are part of a broader portfolio of investments we are making across the business, which we expect will contribute to other innovations. For example, our LightSpeed suite of products was developed in response to a need and has significantly contributed to our growth by helping clients improve their ability to provide timely quotes. Throughout the organization, we have numerous opportunities like this, not just the few I mentioned, so sharing all the details may be overwhelming. Nonetheless, it is essential to our ongoing process of adding value for all our clients.

Okay. That’s great color. Thank you.

And we will take our next question from Stephanie Moore with Jefferies. Your line is open.

Hi. Good morning. Thank you. I was wondering if you could talk a little bit about your strategy within Europe for your international business, maybe you could touch on how organic growth is trending, also your thoughts on any kind of acquisitions or that could help you kind of further gain critical mass going forward? Thank you.

Thank you, Stephanie. The international opportunity for us is one that we actively pursue using a couple of approaches. I will start by discussing our intention to leverage the product sets we have in the U.S. We have various underwriting products, such as our participation product, core lines, forms, rules, and loss cost businesses, which have attracted interest from international buyers. As a result, we have successfully entered that market with our product offerings. Additionally, we have developed claims products tailored to specific international markets. This constitutes the first stage of our international strategy. We have also made several acquisitions in international markets that enable us to provide similar services. These acquisitions allow us to add value by offering additional capital, leveraging our network of relationships, enhancing our technology expertise, or improving efficiency to accelerate our market penetration. Furthermore, we aim to integrate these elements to create more composite value and a stronger ecosystem. In this regard, I would highlight our specialty business solutions, which combine and integrate our original Sequel acquisition with others such as Whitespace, Ignite, Rulebook, and most recently, Morning Data. This combination serves the non-standard and London markets with a broadening and increasingly integrated range of products, enhancing our ability to serve the insurance industry effectively. Each of these components represents our efforts in the international domain. Overall, we have been experiencing double-digit growth rates for our international business, reflecting contributions from all of these areas. For example, our life and health travel segment has been growing rapidly as the global travel industry recovers post-COVID, although that is starting to normalize. Other businesses are automating or enhancing traditional claims functions, including some recent acquisitions in Germany and Sweden. We are also seeing continued success in the U.K. by serving both the general insurance market and the London non-standard excess and surplus market. In general, we view the international markets as areas where we can apply our expertise and collaborate with existing InsurTech players effectively serving the industry there.

Great. I appreciate all the color.

We will take our next question from Faiza Alwy with Deutsche Bank. Your line is open.

Yes. Hi. Thank you, and good morning. So I wanted to talk about the sales growth acceleration. You cited basically environmental factors that have accelerated your growth. But you have also talked about innovation, better dialogue and partnership with your customers. So it seems like the financial impact of that represents more upside over time, but curious how you think about the return on the innovation and some of the cultural things that you are doing. Is that something that you think accelerates that growth by allowing for pricing, improving retention, cross-selling, et cetera? Has your thinking evolved just over the last few months since you gave your long-term outlook?

Thank you, Faiza. Your question touches on several important points. Essentially, you’re asking if, now that we’re about a year post our exit from non-insurance businesses and as we become more focused on insurance, we still believe in the growth opportunities we outlined during Investor Day. The answer is yes. We are pleased with our clients' engagement levels and feel good about our direction as an insurance-focused organization. We are investing more effort into integrating our data sets and products to better serve the industry, which has sparked increased innovation. We're approaching this from both grassroots perspectives, gathering ideas from our employees close to the products, and through higher-level insights to ensure we’re addressing client needs effectively. Our goal is to create solutions that benefit not just individual clients but the entire industry, driving a strong return on our investments and effectively serving as a utility for the industry. The positive feedback we've received thus far reinforces our initial thesis, and we are encouraged by our investors' responses. We recognize there's still a lot to achieve, and we are optimistic about continuing to build on this momentum.

Great. Thanks, Lee. Appreciate it.

And ladies and gentlemen, this concludes today’s call. We thank you for participating and you may now disconnect.