Verisk Analytics, Inc. Q2 FY2025 earnings call

• Operating momentum continued in the second quarter with organic constant currency revenue growth of 7.9% and organic constant currency adjusted EBITDA growth of 9.7%. - Announced the definitive agreement to acquire AccuLynx for $2.35 billion, which is a natural fit for the property estimating solutions business, with high customer overlap and complementary functionality. Also announced the acquisition of SuranceBay, which extends presence into the life and annuity sector. - Focused on innovation with generative AI, launching products like Premium Audit Advisory Service AI, Mozart Compare with AI, and Underwriting Assistant. - Maroun Mourad stepped down, and Elizabeth Mann took on the added responsibility of Interim President, Claims Solutions.

On a consolidated and GAAP basis, second quarter revenue was $773 million, up 7.8% versus the prior year. Organic constant currency revenue growth was 7.9%. Subscription revenues, which comprised 82% of total revenue in the quarter, grew 9.3% on an OCC basis. Transactional revenues, which comprised 18% of total revenue, returned to growth in the quarter, up a modest 1.8% on an OCC basis. OCC adjusted EBITDA growth was 9.7% in the quarter while total adjusted EBITDA margins were 57.6% up 220 basis points from the prior year.

• Raised full year 2025 revenue outlook to $3.09 billion to $3.13 billion, inclusive of $40 million to $50 million from acquisitions. - Increased adjusted EBITDA outlook to $1.7 billion to $1.74 billion. - Expect diluted adjusted earnings per share in the range of $6.80 to $7. - Anticipate the AccuLynx transaction to be accretive to earnings by year-end 2026.

• Actual performance could differ materially from forward-looking statements due to factors in SEC filings. - Auto business faces tough comparisons, customer mix, and competitive pressures. - Sustainability business affected by market conditions. - Federal government contracts represent less than 1% of total revenue but still a factor. - Foreign exchange translation impact on margins is a nonoperational factor that could affect expectations.

Q: On the AccuLynx deal, can you talk about revenue and cost synergies?

A: There is high customer overlap, immediate opportunities to connect AccuLynx customers with Verisk's property estimating solutions business, and benefits in roofing materials and operating costs data. Immediate synergies include identifying customers not utilizing current solutions and vice versa.

Q: Regarding the revenue guide, what are the factors affecting it?

A: Lapping strong growth from the second half of 2024, federal government contract impact starting in the third quarter (less than 1% of revenue), auto business challenges with tough comparisons, customer mix, competitive pressures, and weakness in sustainability business due to market conditions.

Q: In auto, who are the competitive pressures from?

A: There is a large competitor with less scale in the auto space where Verisk faces greater pressures, but efforts are made to supplement with claims-related data to underwriting data.

Q: Are the new AI products ready for industry adoption?

A: There are early adopters, fast followers, and conservative players, but there is high interest and varied levels of adoption. PAAS AI tool has almost 1/4 of users already using it, and Mozart AI tool has almost half of customers using it.

Q: What is the hurdle rate for the recent acquisitions?

A: Evaluated on an ROIC framework, targeting acquisitions with a return on invested capital above WACC in a 3-year period, looking for value delivery over time.