Verisk Analytics, Inc. (VRSK) Q2 2016 Earnings Report, Transcript and Summary

Good day, everyone, and welcome to the Verisk Analytics Second Quarter 2016 Earnings Results Conference Call. This call is being recorded. At this time for opening remarks and introductions, I would like to turn the call over to Verisk's Director of Investor Relations, Mr. David Cohen. Mr. Cohen, please go ahead. David E. Cohen - Director-Investor Relations & Business Analytics: Thank you, Shannon, and good day to everyone. We appreciate your joining us today for discussion of our second quarter 2016 financial results. With me on the call this morning are Scott Stephenson, Chairman, President and Chief Executive Officer; Mark Anquillare, Chief Operating Officer; and Eva Huston, Chief Financial Officer. Following comments by Scott, Mark and Eva highlighting some key points about our strategic priorities and financial performance, we will open up the call for your questions. Unless stated otherwise, all results we discuss today will reflect continuing operations. All discussions of EBITDA reflect adjusted EBITDA, which excludes the second quarter 2015 hedge gain and one-time costs related to the Wood Mackenzie acquisition. The earnings release referenced on this call, as well as the associated 10-Q, can be found in the 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. The earnings release contains reconciliations of several non-GAAP measures which we'll reference on today's call. 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 yesterday's earnings release, 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. Now, I will turn the call over to Scott. Scott G. Stephenson - Chairman, President & Chief Executive Officer: Thanks, David, and good morning everyone. In the second quarter, we delivered solid overall results with total revenue growth of about 16%, adjusted EBITDA growth of about 12% and an increase in diluted adjusted EPS of 1.4% including the impact of the shares we issued last year for the Wood Mac transaction. Year to date free cash flow is up 21%. Organic revenue growth was 5.4% as we continue to grow faster than our underlying end markets. We've spoken of higher longer term organic growth, and the underlying trends remain encouraging. Profitability remains strong with total EBITDA margins over 49%. We're focused on leveraging our Verisk distinctives which are, one, unique data assets; two, deep domain expertise; three, first-to-market innovations; and four, deep integration into customer workflows and our core capabilities to add value for our customers and in turn for our shareholders. We're also seeing traction in new solutions that are being developed and continue to be optimistic about their long-term potential to contribute to customers and ultimately our financial performance. As we announced in June, I'm excited to have expanded the roles of several members of our senior leadership team. Mark Anquillare, who had been our CFO since before our 2009 IPO, is now Verisk's Chief Operating Officer with responsibility for our insurance businesses and our technology and customer experience organizations. Eva Huston is now our Chief Financial Officer responsible for financial strategy, including accounting, tax, treasury and investor relations. I'm also pleased to have appointed Nana Banerjee and Steve Halliday as group presidents. Nana leads Argus, Geomni and Verisk Retail. Steve leads Wood Mackenzie, 3E Company and Verisk Maplecroft. The strength of our platform and the clarity of our vision, combined with greater scope of responsibility for these four proven professionals, will support our growth agenda and global push into the near and long term. These are all natural evolutions from their previous roles and will help us continue to deliver value to our customers, employees and shareholders. During the quarter, we closed the sale of the healthcare business and used the proceeds to pay down our revolver, giving us plenty of capacity to support our long stated capital allocation strategy for a balanced approach over time to acquisitions and repurchases. We had $353 million remaining under our share repurchase authorization as of June 30, 2016. We remain active in evaluating possible acquisitions, in particular as we make buy versus build decisions in pursuit of our international expansion. We also see M&A as a channel for expanding our solution footprint. And subsequent to the end of the quarter, you saw that we purchased Greentech Media, an industry leading information services provider for next-generation electricity and renewable sectors. Greentech Media joins Wood Mac, enhancing our research and other capabilities for subsectors, including solar generation, energy storage and smart grids that react dynamically to changes in supply and demand. These are very exciting areas in the energy and power markets and an excellent complement to our outstanding oil and gas franchise. I remain encouraged by the opportunities we see for growth both near and long term. We're excited about a number of early stage efforts where we are developing new and innovative solutions for our customers and where we are expanding existing solutions around the world. Near term, we continue to expect acceleration of our combined insurance businesses and double digit growth at Argus. Wood Mac is performing in line with the expectations we discussed with you last quarter. So, with that, let me turn it over to Mark for some additional comments.

Thank you, Scott. Across our businesses which serve the property and casualty insurance industry, we have seen several key industry themes including vertical big data, industry automation and digital engagement. With these themes in mind, I will briefly describe a number of positive recent developments in our businesses. Reflecting on all three themes, Verisk Insurance Solutions launched a new integration option for 360Value, our web based replacement cost estimator for homeowner's insurance. 360Value is built on our unique and industry standard construction materials and labor cost data. This solution helps our customers estimate coverage limits for residential, commercial and agricultural properties. Our customers can now integrate 360Value directly into their online homeowners quoting platforms. This helps the industry deploy more engaging solutions which include pre-filling and online insurance application with property-specific information when a homeowner enters an address. Another recent launch is Mozart, a new product development platform increasing engagement in automation which helps our clients to easily research, create and distribute coverage language, providing efficiencies in time-to-market from new products and critical coverage updates. Mozart will help our customers accelerate profitable growth, reduce expense ratios and enhance audit and compliance. Leveraging big data methods, cutting edge technology and pioneering automation, AIR released a hosted cloud solution for its catastrophe risk management platforms, Touchstone and CATRADER. More than a dozen companies are already up and running on the AIR cloud, which enables them to conduct all of their analyses remotely while minimizing capital expenditures. Finally, in addition to the new deployment option, AIR recently expanded its coverage model of Southeast Asia. These models combine 10 years of extensive scientific research by AIR scientists with findings from studies of local building codes, damage surveys, lost experience data and structural engineering research. With that, let me turn it over to Eva to cover our financial results in more detail. Eva F. Huston - Chief Financial Officer & Senior Vice President: Thank you, Mark. In the second quarter, we again delivered both revenue and EBITDA growth while also investing in solutions that we expect will deliver incremental growth going forward. Revenue grew 16.3% and 5.4% organically. EBITDA grew 12.4% to $245 million. EBITDA margins were 49.2% in the quarter. Within the Decision Analytics segment, revenue grew 23.5% and 5.5% organically. Financial services was the fastest-growing organic revenue end market while insurance focused solutions were the largest contributor of dollars to growth. Decision Analytics insurance revenue grew 6.2% in the second quarter. The increase was led by strong growth in loss quantification and claims analytics solutions. Underwriting solutions also grew in the quarter. Our catastrophe modeling solutions saw a modest decline versus the prior year as a result of lower cat bond issuance and consulting revenues. Customer retention remains very high, and we remain confident in our ability to continue to deliver growth. Financial services revenue returned to strong growth, up 15.9% in the quarter. We were particularly pleased with the contributions from the media effectiveness solutions, which grew very well in the quarter. Our international revenue continues to grow nicely here as well, which does mean that FX may influence the reported results throughout the rest of the year. As Scott noted, we remain comfortable with double digit growth based on accelerating growth in the second half of the year. Energy and specialized markets revenue grew 70.4% including Wood Mac, which was acquired in May 2015. In this year's second quarter, Wood Mac revenue was around flat on a constant currency basis. The decline in the British pound late in Q2 will have a larger effect on reported results starting in Q3 as the average Q2 rate was $1.43 and is currently in the low $1.30s. Organic revenue excluding Wood Mac, PCI and Infield declined $2.4 million in the quarter. Services revenue peaked in the prior year as customers met 2015 compliance deadlines. We are also transitioning to a subscription revenue model, which is better for Verisk and better for our customers over the long term. The dollar impact remains small in relation to Verisk as a whole. Finally as a reminder, Wood Mac is organic starting in Q3. Risk Assessment revenue grew 5.5% and 5.3% on an organic basis, continuing to demonstrate the value to our long-standing insurance customers. Additionally, contributions of new solutions that are in early stages and the inclusion of Risk Intelligence Ireland, which we have rebranded as Verisk Insurance Solutions Ireland, added growth. Industry standard insurance programs revenue grew 6.0%, reflecting our 2016 invoices and continued contribution from newer solutions such as predictive models and electronic rating content. Our property-specific rating and underwriting information revenue increased 3.8% in the quarter. Growth was led by an increase in commercial underwriting solutions subscription revenue. EBITDA increased 12.4% in the quarter to $245 million, resulting in EBITDA margins of 49.2%. Decision Analytics EBITDA increased 20.8% to $141 million in the quarter as a result of acquisitions and growth in our existing businesses. EBITDA in Risk Assessment increased 2.9% to $105 million as a result of revenue growth and good expense management, offset in part by talent realignment initiatives we have been discussing with you. This resulted in moderated margins versus Q1 as the hiring started to take effect, as well as the impact of our annual merit increases. We are very excited about the additions we've made to the team, and we look forward to their contributions over time. Reported interest expense was $31 million in the quarter. Total debt was $2.3 billion at June 30, 2016, after our repayments facilitated by cash flow generation and the proceeds from the sale of the healthcare business. Our leverage at the end of the second quarter was about 2.2 times pro forma for the healthcare divestiture, and we are pleased to have reached our target ahead of plan. We appreciate the support and confidence of our debt holders as we acquired Wood Mac with the goal of returning to the 2.5 times steady-state leverage. Our reported effective tax rate in the quarter was 33.5%. Adjusted net income in 2Q increased 3.7% to $124 million. Adjusted EPS on a fully diluted basis was $0.73 in the quarter, an increase of 1.4%. Adjusted EPS increased because of solid operations both organic and acquired and lower interest expense. The increases were partially offset by higher fixed asset depreciation and amortization, only a partial quarter of Wood Mac ownership in the prior period and an increase in shares outstanding related to the 2015 acquisition of Wood Mac. We expect that our adjusted EPS growth will normalize over time to reflect similar trends you see in our underlying business results. The average diluted share count was 171.2 million shares in the quarter. And on June 30, 2016, our diluted share count was 171.4 million shares. We did not repurchase any shares in the quarter as we continue to balance our appetite for share repurchase with our desire to maintain flexibility for M&A. At June 30, 2016, we had about $353 million remaining under our share repurchase authorization. Our repurchase program has been successful to date, generating annualized IRRs above our cost of capital. Free cash flow increased 21.1% for the six month period to $305 million including Wood Mac. This represented 61.9% of EBITDA. These numbers are all for continuing operations. Growth in free cash flow was driven by greater profitability of our businesses and stable CapEx, partially offset by higher interest and fees related to the acquisition of Wood Mac. Free cash flow remains an important metric for measurement of driving enterprise and therefore shareholder value. Capital expenditures increased 4.6% to $52 million for the six month period ended June 30, 2016, due to the inclusion of Wood Mac's CapEx for the full quarter. CapEx was 5.2% of revenue. We expect CapEx for the full year to be $150 million to $155 million pro forma for the divestiture of the healthcare business. We continue to manage our capital intensity to enable free cash flow growth. As you think about your models for 2016 on a continuing operations basis, we expect that based on current FX rates, there's about a $25 million impact to full year revenue relative to where rates were at the start of 2016. This is up from our estimate last quarter of a $10 million impact. FX is a new factor as you think about our future growth, and we will look to provide more insight going forward to help you include it in your forecasting. As you think about Q3, keep in mind that last year, EBITDA included a $15.6 million warrant sale gain which will not recur this year. Additionally, in the fourth quarter, we expect to have a one-time P&L charge of $19 million related to the ESOP. This is a nonrecurring item related to adjustments made to the ESOP at the time of the IPO which will be excluded from adjusted EBITDA. This does not affect the underlying business profitability, and we just want it to be on your radar ahead of time. For the full year 2016, we expect CapEx of $150 million to $155 million, fixed asset depreciation and amortization of about $132 million and amortization of intangibles of about $95 million. We know these are items that are hard to project, which is why we share them with you each quarter. Based on our current debt balances, we expect interest expense after paying down the revolver with the divestiture proceeds to be around $120 million. We estimate the tax rate will be in the range of 32% to 33%. For the intangible and amortization add-back in the adjusted net income calculation, we will continue to use 26% to reflect the tax rate that's applicable to our intangible assets. And finally, we expect a diluted weighted average share count of about 172 million shares before incremental repurchases. Overall, we are working hard to execute on our 2016 plan and remain excited about the go-forward financial profile of the company. We're well positioned for profitable growth in the future and have the financial strength and capital structure to support investment for continued long-term growth. We continue to appreciate all the interest in Verisk. Given the large number of analysts we have covering us, we ask that you limit your questions to one and one follow-up. And with that, I'll ask the operator to open up the line for questions.

Your first question comes from the line of Tim McHugh from William Blair Company. Your line is open. Please go ahead. Timothy J. McHugh - William Blair & Co. LLC: Thank you. First, I wanted to ask about the cat modeling business. I guess, one, can you give us any sense in terms of the magnitude of the impact from the consulting and cat bonds or I guess how big those are relative to the size of the cat modeling business? And just trying to get a sense of the underlying trend in that cat modeling business versus the trends you have been seeing. Eva F. Huston - Chief Financial Officer & Senior Vice President: Great. Hey, Tim. It's Eva. Thanks for the question. Maybe just starting at a high level, cat bonds and consulting are less than 5% of overall Decision Analytics insurance revenue. Obviously for AIR, those would be a greater percentage. But if you were to peel back the onion and look at AIR's performance, the underlying subscription business is performing very well. We're very happy with our position in the market. And with regards to cat bonds, we continue to win and we have strong market share. There's just some variability that can happen across periods in some of those revenues that are non-subscription. Timothy J. McHugh - William Blair & Co. LLC: Okay. That's helpful. And then the comment about accelerating growth in the insurance vertical this year, it seems to imply you would need pretty strong performance in the second half of the year. I guess, can you just tell us, make sure I guess, tell us what you are assuming there? And I guess, just to be clear, is that I guess inclusive or exclusive of the kind of true-up revenue that you had in the first quarter? Scott G. Stephenson - Chairman, President & Chief Executive Officer: Scott, here. We'll come back to that true-up question. But the way that we observe our business, Tim, it's always really going through pipelines and conversion rates on renewal opportunities or new business opportunities. So, it's very much a bottoms-up view. If I look across the insurance vertical, it's pretty broadly based in terms of our expectations for the latter half of the year. I wouldn't say that any one theme really stands out. We called out that in this quarter some of the transaction based business around the cat modeling space were soft. But overall, as we look at the latter half of 2016, it's really pretty broadly based across claims, underwriting, industry standard solutions and catastrophe modeling. One perspective I thought I might just add here is, if you just think about the kind of the world in which Verisk sits at the moment, and you think about really exogenous factors, there's really three things that are kind of out there that are just sort of bubbling at the moment, probably in order of importance when you think about Verisk outcomes overall. One would be that our customers in the oil and gas industry are under a lot of pressure at the moment because of where the commodity stands. We think that that's a moment-in-time effect. We don't predict the oil price, but we expect a more normalized environment. The second is that there hasn't been a lot of extreme event activity over the last couple of years and that really tends to have two effects. Now I'm in the insurance vertical. That tends to have two effects. One is the reinsurance world has softened. The pricing has softened, and there has been some consolidation, and so that works its way in little bit. And then cat bond issuance has actually responded to that as well, the lack of extreme events. And as Eva said, we continue to get the overwhelming share of the cat bond activity. It's just that the absolute volumes have turned down there. We get asked a lot, by the way, whether overall premium progression in the insurance industry tends to affect us, and the answer is basically no because of the way that we contract with our customers. But when there is a sustained period of less extreme events activity, it actually it shows up a little bit because the underlying markets respond to that. And also, a few of the things that we do like repair cost estimating, there is an element of it which responds to the absolute number of claims. And when you have extreme events, you have more claims. And then the third thing is, as Eva was pointing out in 2015, a lot of our environmental health and safety customers needed to really scramble to make sure that they were compliant with regulations that required compliance by the end of 2015. So, there was a bit of surge of work in that regard. So you have kind of a moment-in-time effect which is that was kind of powering the business up to 2015. That is also a part of the business where when you look at subscription-based revenues, we're actually happy with what's happening. So, I just thought I would throw out that perspective overall in the sense that, on the one hand, I don't really think our business is that affected by what's happening in the outside world, but it's not as if we're totally immune. And probably, all the dials are pointed in the wrong direction just at this moment, and yet the performance of our company is good. I'm really happy with it. So then, Mark, did you want to just take on the?

So, just to kind of follow up on the question you had from a DA perspective, that growth would be with and without the true-up adjustment. Just to kind of reiterate Scott said, I mean we're feeling pretty good and confident because of what I refer to as contracts that are signed and waiting for implementation, so those do kick in in the second half. Timothy J. McHugh - William Blair & Co. LLC: Okay. Thank you. Scott G. Stephenson - Chairman, President & Chief Executive Officer: Welcome.

Your next question comes from the line of Sara Gubins from Bank of America. Your line is open. Please go ahead.

Hi. Thanks. Good morning. Scott G. Stephenson - Chairman, President & Chief Executive Officer: Good morning.

In Wood Mac, so good to see that the trend was largely as you expected. Any reason to think that that changes in one direction or another in the back half of the year based on what you're seeing from client demand? Scott G. Stephenson - Chairman, President & Chief Executive Officer: No. No. The retention rates on the subscription based part of the business remain very strong. And actually, the services side of the business actually had some very nice wins in the last couple of months. So no, we don't anticipate any changes.

Okay. Great. And then turning to margins, as we think about margin trends for the two segments, you had talked before about plans for increased hiring in Risk Assessment and it looks like we saw that come through in this quarter. Are we now at a stable run rate for cost in that segment or is there further ramp in the cost base to come? And if you could help us think about various factors impacting the margin trends for Decision Analytics in the back half of the year as well, that would be great. Thanks. Scott G. Stephenson - Chairman, President & Chief Executive Officer: So let me just make a general comment and then, Eva, maybe you want to take it on a little more specifically. One of the decisions that you get to make when you are in the position we are of leading a company like Verisk is, when you're aware of kind of the macro environment and modest waxing and waning in terms of revenues in any particular moment, the question you get to ask yourself is what is your confidence in the business. Are you going to continue to invest? And we're very confident in this business. And so we have continued to invest knowing that at this moment in time, we have the kinds of just macro factors that I talked about before. Specifically with respect to ISO solutions, we are very interested in amplifying what it is that we do there. And so the kind of talent that we brought in with respect to topics like – and all of these relate to the insurance world, cyber, Internet of Things, the linkage between the energy ecosystem and the insurance world, et cetera – we've really created a substantially new talent base that we just didn't have before. Also resilience issues as they relate to extreme events, and I could go on. We're excited to have this new talents inside of the organization. And so our judgment is that the best thing to do is to keep investing inside of our company and to do it on a consistent sort of a basis, which is where we are right at the moment. Did you want to add anything to that, Eva? Eva F. Huston - Chief Financial Officer & Senior Vice President: Yeah so, Sara, just to take on your specific questions around margin, I mean I think Scott's elaborated on the talent realignment, and there is impact there as well. Don't lose sight of our usual annual merit increases that go in in the second quarter, a common occurrence and does have impact on margin in 2Q. I think if you look back historically, you would see that as well. With regards to Decision Analytics, one, I would just point out that the non-subs revenue that we've been talking about a bit, actually unlike some of the historical transactional revenue that we used to have in businesses we no longer own, that's actually pretty high margin business. And so when we don't have that come through, that can have some impact on the margin in the moment. I would also point out to you, I mentioned in my comments FX, and FX can have some impact on margin as well. Revenue and expense, we try to have those mostly aligned, but they're not always perfectly aligned.

Okay. Thank you. Eva F. Huston - Chief Financial Officer & Senior Vice President: You're welcome.

Your next question comes from the line of Andrew Steinerman from JPMorgan. Your line is open. Please go ahead.

Hi. Scott, I definitely heard the second half acceleration for insurance which is expected. I just wanted to know quantitatively if we're still looking for Verisk to see each RA and DA insurance accelerate for the full year 2016 from the 2015 rates which were 6% and 8%. Scott G. Stephenson - Chairman, President & Chief Executive Officer: Most of the lift in terms of the growth rate is going to come on the DA side.

Okay. Thank you. Scott G. Stephenson - Chairman, President & Chief Executive Officer: You're welcome.

Your next question comes from the line of Andrew Jeffrey from SunTrust. Your line is open. Please go ahead.

Hi. Thanks. Good morning. Scott G. Stephenson - Chairman, President & Chief Executive Officer: Hey.

I appreciate you taking my question. Hey. Mark, the color on some of those new products is helpful. I wonder if you can elaborate again as a follow-up to Andrew Steinerman's question, specifically within DA, is do we see some of those new products making a meaningful contribution in the back half or is this sort of just the natural motion of continued share gain and pricing to value and so forth?

So, the short answer is I think these will become more meaningful as we think about 2017 and beyond. But as I highlighted, we have some AIR customers that are on the cloud and moving quickly. So it does help 2016 back half, but I would think these are a little bit more longer term in the way I think and outline the business for the future.

Okay. And are there any other callouts? I know underwriting is sort of one of your burgeoning areas, or is as you indicated in the second quarter, the growth sort of pretty evenly distributed across your solution sets? And again, I'm thinking about insurance DA.

Once again I'll just, I'll echo Scott. I mean it's broad-based. I think we feel good about most areas of the business with regard to growth in the second half relative to the first. And there's a couple areas where we actually are having customers transition to our solutions. And that just sometimes takes a little more time than you anticipate, whether it's volumes coming through or the volumes you expect coming through. Although you have signed contracts that you know there's a commitment over time, we want to go as fast as we can, and we have to work with our customers to do that.

Okay, so maybe a little bit of timing to consider in the second quarter too then?

All true.

Okay. Thank you.

Your next question comes from the line of Arash Soleimani from KBW. Your line is open. Please go ahead. Arash Soleimani - Keefe, Bruyette & Woods, Inc.: Thanks. Just to start off. In terms of Wood Mac, I know in the past you talked about how you thought it was undersold. I was just wondering if you have any updates there on progress you've made on that front. Scott G. Stephenson - Chairman, President & Chief Executive Officer: Yeah so, the sort of the selling of Wood Mac really you can think of it as being in two different buckets. So one of those is to cross-sell and up-sell inside of our existing customer set which is order of magnitude 1,000 customers. And we give a lot of attention to whether we're right-sized there. Obviously, we're trying to pick our spots at the moment because of just the overall environment. But that is a team that is strong and getting stronger. We actually have new leadership of the sales team there and very excited about Lynda's leadership for us. And then secondly, there is how do we go from 1,000 to say 5,000 or more kinds of customers. And that in part hinges upon opening up new channels for distributing our content. And we have one new such relationship in place and are working hard to get others in place. So, I think that it's a good feeling into the future and kind of there are some early shoots with respect to these new channels. Arash Soleimani - Keefe, Bruyette & Woods, Inc.: Thank you for that. And I guess next question is kind of staying on the Wood Mac topic. Just given that I guess last year in the second of half of the year was when Wood Mac started to become sort of challenging, and given that earlier in this call, you mentioned that even on the services side, you're starting to see more of a pick-up. Is there any reason not to expect there to be positive momentum in the second half of the year given those dynamics? Scott G. Stephenson - Chairman, President & Chief Executive Officer: Well, we're sticking by what we said before which is our view of 2016 overall is essentially flat relative to 2015 and there are puts and takes with respect to the different lines of business that Wood Mac does. And then of course, there's always the X factor of just the macro environment overall. And so we're pretty comfortable with where we're at. But I would like to say as I said also last quarter, I think the performance of our Wood Mac colleagues is absolutely outstanding in light of something which is tsunami-like inside of their end market. I mean, I think the quality of what Wood Mac does and the depth of relationship with customers is actually demonstrated so strongly in this moment actually. So we expect a normalized environment. We want our customers to feel less pressured than they do today, and when they do, I'm absolutely certainly that it will be reflected in our performance. Arash Soleimani - Keefe, Bruyette & Woods, Inc.: Okay. Great. Thanks very much for the answers.

Your next question comes from the line of Jeff Meuler from Baird. Your line is open. Please go ahead. Jeff P. Meuler - Robert W. Baird & Co., Inc. (Broker): Thank you. Good morning. Can you just give us an update on where you are in terms of aerial imagery image capture as well as productizing the broader aerial imagery capabilities? Scott G. Stephenson - Chairman, President & Chief Executive Officer: Yeah. So, one of our favorite topics. So we have at the moment basically two different ways that we give ourselves access to images today. One is our own efforts to source images and the other is working with third parties who have been sourcing images for their own purposes. That mix I would say is working, and has helped us to take all of the great image analytics technology that we've got and basically make that more active, particularly in the insurance vertical today. That's really where it's happening today. And we continue to ask questions about how we can be more in control of a larger set of images that are optimized for the use cases that we have in mind and we're working actively on that right now. So the report, Jeff, would be that commercially we're succeeding with what we're doing in the imaging space and we continue to think deeply about additional things that would help us to be more in control of a larger set of images. Jeff P. Meuler - Robert W. Baird & Co., Inc. (Broker): When you say commercially succeeding, do you have the image library and gathering apparatus necessary that you're at the point where you're productizing and selling to clients? Scott G. Stephenson - Chairman, President & Chief Executive Officer: Yes. Correct. Jeff P. Meuler - Robert W. Baird & Co., Inc. (Broker): And then, just maybe a comment on the Wood Mac M&A pipeline. There's been a few smaller deals, so I guess just any comment on how much of the activity is you putting more capital behind Wood Mac than they were getting under their prior ownership. How much is it more opportunity in the market because of what's going on in the end market? And then just any, what's your appetite for a potentially larger deal for Wood Mac? Scott G. Stephenson - Chairman, President & Chief Executive Officer: Yeah. Yeah. So, let me just step through to that real quick. So, part of what we've done on the M&A front has been what I would consider to be small and tuck-in and really about trying to give ourselves additional distinctive data assets. That for example was the Infield acquisition. So that's sort of point one. The second point I would make is that we're very excited about Greentech Media because of the depth of expertise there with respect to solar and smart grids and grid edge technologies and storage technologies. And what we're finding is that our existing hydrocarbon-based customers are increasingly interested in the alternatives. And so, not only is it in a sense new business for us, the degree to which we're now looking specifically at the dynamics of what's going on in solar generation, specifically in terms of what's going on with respect to grid edge effects, not only is it new business, but it also actually makes us a more compelling partner for our existing customers in the hydrocarbon ecosystem. So, we are really excited about it. We think that it's really going to be helpful. And then I think overall, you were just kind of looking for what's the forward profile. Well, I'd make a couple comments. One is, there have been some very large trades in the oil and gas space. And we didn't participate as you saw. And we continue to ask questions about what strategically would advantage this business the most. But we're certainly not enamored of the thought of large deals. And a lot of it is, we're going to make the business that we have run well. I think that again, kind of around the edges, we will try to support that which we already do. And there will be opportunities that are kind of thematic in the way that say Greentech is thematic. Jeff P. Meuler - Robert W. Baird & Co., Inc. (Broker): Thank you, Scott. Scott G. Stephenson - Chairman, President & Chief Executive Officer: You bet.

Your next question comes from the line of Bill Warmington from Wells Fargo. Your line is open. Please go ahead.

Good morning everyone. Scott G. Stephenson - Chairman, President & Chief Executive Officer: Hi. Eva F. Huston - Chief Financial Officer & Senior Vice President: Good morning.

So, first congratulations to Mark and to Eva on the promotion. Eva F. Huston - Chief Financial Officer & Senior Vice President: Thank you, Bill.

Thanks.

So first question for the new CFO, you've hit your leverage target, exceeded it, 2.5 is what you had set back when you had purchased Wood Mac, you're at 2.2 times. Going forward, what's that new leverage target? It had been 2.5, but that seemed like more of a combination temporarily. Is it more like 3 times? Eva F. Huston - Chief Financial Officer & Senior Vice President: Bill, I would say that our leverage target steady-state remains 2.5 times. But remember how we've always operated, is we have flexibility to go above that. We did with. We said we'd delever. I think that we have a leverage point that our business can very easily support. I think that we always just look at the opportunities and figure out where we need to settle that. But I think the good news for us is we've got capacity under even at steady-state and the flexibility to go up as warranted if there's a deal that makes sense for us.

Got it. And then a second question for you on the insurance business and Decision Analytics. If you could talk a little bit about Xactware, XactContents and the blend of the subscription and transaction business and then also how the new 360Value product fits in with that whole category. Eva F. Huston - Chief Financial Officer & Senior Vice President: Yeah so, Bill, maybe I'll take the second part first, then I'll let Mark talk a little bit about some of the specific products in insurance and solutions. If you were to think about Decision Analytics overall, the mix between subscription and non-subscription, it's about 77% subscription. I would say insurance in Decision Analytics looks fairly similar to the rest of Decision Analytics now, now that we don't have that highly transactional business in healthcare in there anymore. There's more uniformity across that. So, I think that we love where we sit. We've always thought it was natural to have someone out of non-subscription revenue, and I think in Decision Analytics, we have a bit more of that, and that includes things we do that provide us opportunities to work closely with customers and develop those new solutions. I'll let Mark comment a bit on Xactware and some of the other solutions. Scott G. Stephenson - Chairman, President & Chief Executive Officer: And the 360 innovations.

Sure. So let me just quickly highlight the fact that we continue to improve the suite of Xactware solutions. Our vision and our focus for this year and next is to bring out what I'll refer to as a more integrated solution which brings together Xactimate that's used in probably about 85% of the property repair cost estimates across the United States in combination with XactAnalysis which is the BI tool and everything around it so that you can work and use your back office in an efficient way. In addition, Contents, which represents all of the information about pricing and materials inside the home to replace the TV, couches, rugs and things. So our focus, make it more integrated, easier to use, more focus on the claim as opposed to the assignment, which was doing the work but more on the claim. All of that has been kind of a focus from a customer perspective and our perspective to achieve those things. Very much in our forward vision is to take that solution, that more simplified solution and bring it to the global insurance market, customizing it in a way that it is fit for use in that market and we've put a lot of time and resource and are making progress there. The final component to this is we are seeing a lot of activity in the US market where people are interested in trying to make access to the quote engine, going online and getting a quote for auto and home, more and more interactive with the customer. And our ability to help our customers do that through the enhancement here at 360Value, lets you as a homeowner go online to make sure you have the proper coverage for your home. That's valuable, that's helpful and it's easy. You have the policyholder, or the person who's getting the quote do it himself and that's the type of innovation we want to work with and help our customers with their customers. Last piece as we think about this bringing it together, we are finding increased interest in basically the whole property suite of solutions as we go overseas. So we kind of led in with the claims side of things, but clearly people are looking for information about large commercial buildings. So, replicating some of the things we do here in the United States, using both remote sensing and aerial images, providing with insights into risk about a building and help him understand what the insurance to value is, meaning what's the replacement cost if there was a total loss. And all of those themes, I think we are trying to be more comprehensive, more seamless, both internationally and that will obviously revert back with our US customers as well. So I probably said a lot, but I want to make sure I responded to some of the questions then.

Well, thank you very much. Appreciate it. Eva F. Huston - Chief Financial Officer & Senior Vice President: Thanks, Bill.

Your next question comes from the line of David Togut from Evercore. Your line is open. Please go ahead.

Thanks. Good morning, would appreciate your thoughts more broadly on capital allocation, Scott, especially since you've reached the target leverage ratio or even below it, ahead of schedule. Post the sale of healthcare, you have more subscription revenue, more visibility on cash flow. You indicated a preference for small tuck-in data-oriented acquisitions. I guess two questions. First, how do you think about opportunities in the acquisition pipeline versus share repurchase given the current price of your stock? And then secondly, with the higher subscription based revenue, more visible cash flow, higher margin profile, how do you think about the possibility of initiating a dividend? Scott G. Stephenson - Chairman, President & Chief Executive Officer: Yeah. I mean all good, all good topics. So, maybe back to the top. If you look at our company over extended periods of time, the program of acquisition and the share repurchase program have both done very well for our shareholders, both have done very well. And there's really nothing in our situation that would cause us to think that anything fundamentally is going to be different in the future than in the past. You actually pointed out one of the features of our company, which is that the cash flow visibility is, if anything, even greater than it was. So we would continue to see both of those as real pillars inside of the way that we do what we do. And so at any given moment, this moment for example, we're always taking stock of where we stand in the M&A pipeline and how imminent we think good opportunities are. And we remain very interested in deploying capital in terms of returning it to shareholders when we feel that sort of that which is right at the head of the pipeline and the size is such that we still have capacity. And I would say that we do have, we have capacity as we sit here. So we're very alert to the application of capital and we'll remain so and that's a statement for the third quarter and the fourth quarter and really forever. I actually thought your second question, David, was going to be different, more about sort of a higher leverage target rather than a dividend. We're very interested in returning capital to shareholders I guess that's the way that I would put it. Our analysis to date has not indicated that there's anything fundamentally superior about doing it in the form of a dividend versus the buyback program that we've had. So, that's kind of where we sit with that thought at the moment. By the way, even David and I and Mark and all of us that are out there talking to investors, we actually ask that question all the time, how do you feel about it. And so we remain open to the conversation, but I would say that we haven't drawn the conclusion that a dividend is a superior way of expressing our commitment to returning capital to shareholders.

Understood. Thanks so much for the insights. Scott G. Stephenson - Chairman, President & Chief Executive Officer: You bet.

Your next question comes from the line of Toni Kaplan from Morgan Stanley. Your line is open. Please go ahead. Toni M. Kaplan - Morgan Stanley & Co. LLC: Hi. Good morning. Scott G. Stephenson - Chairman, President & Chief Executive Officer: Good morning. Toni M. Kaplan - Morgan Stanley & Co. LLC: I was hoping you could give a little more color on the pieces within specialized excluding Wood Mac. Were there parts of the business that did well this quarter? And basically, where were the sort of the troubled areas; where were the bright spots? Eva F. Huston - Chief Financial Officer & Senior Vice President: Yeah, Toni, I'll kick off on that and Scott may want to add some comments. I think if you take Wood Mac, PCI and Infield out of specialized because those are all inorganic in the quarter, you primarily have our environmental health and safety solutions and some of our weather solutions. We referenced in the press release and on the call, when you think about EH&S, there were some global standards that went into place in 2015 which gave us the opportunity to serve our customers in making those transitions. Those transitions are complete and so you'll kind of see a normalization of that type of work this year which is leading to the organic result of a decline there. I would say that that's probably the primary impact. And if you were to think about it, I think the headline growth decline as a percentage is larger than the actual dollar impact on Verisk. The other thing we mentioned is with regards to that area, we are transitioning into more subscription based revenues. And I think that's really great both for us and for our customers. So in a moment in time, if you're going from more transactional to more subscription, the great thing about subscription is it's recognized over time but in the moment, transaction is not there and subscription is only the portion of what you're going to recognize, you're going to see a little impact. Scott G. Stephenson - Chairman, President & Chief Executive Officer: We've actually observed on this before, but just a little sort of data analytic observation is that when you start out with a new solution, both customers and the vendors often want it to be transaction priced, because nobody really knows the absolute level of demand. There really do come these moments where the customers are open to, and maybe even wanting to move to a subscription, because they want more certainty and visibility in terms of the future. So, it's a kind of a natural sort of a development for newer kinds of solutions. And Eva was describing that with respect to some of which goes on on the EH&S side. Same thing on the country and political risk side, we're doing the same thing. Toni M. Kaplan - Morgan Stanley & Co. LLC: Okay, great. And then looking at financial, the comps get a lot easier in the back half of the year. I think you've previously talked about double digits in that segment for the full year. What would be the difference between getting to low double digits versus mid teens? Would it be project revenue? You mentioned the media effectiveness grew nicely this quarter. And how's the transition going from sort of project revenue to subscription in that business? Eva F. Huston - Chief Financial Officer & Senior Vice President: Toni, I would just start by saying as a reminder, when we talk about double digits, we're actually including the grow over impact of that one-time media effectiveness revenue we had in 2015 in the first quarter. So I actually think the target we set is pretty ambitious. If you consider that we're not taking that out in that analysis. I would say that like many of our businesses, I think there's opportunity for us to add incremental revenue through project revenue. And certainly, that's something that you can move, that could move a growth rate in a short term. But I think fundamentally, when we talk about the double digit growth rate, again given the comparable that we have for last year, we think that that is very strong. Scott G. Stephenson - Chairman, President & Chief Executive Officer: Yeah, and I'll just add that there are some sparkling new names on the customer list even this quarter. I mean, this business is doing a wonderful job of reaching out to new customer sets. Toni M. Kaplan - Morgan Stanley & Co. LLC: Thanks a lot. Eva F. Huston - Chief Financial Officer & Senior Vice President: Thank you.

Your next question comes from the line of Jeff Silber from BMO Capital. Your line is open. Pease go ahead.

Thanks so much. I know it's late. I just have a quick question. Eva, you had mentioned the potential $25 million impact from FX for the year. Can you give us a little bit more color exactly which line items from a revenue perspective we might see the biggest impact? Thanks. Eva F. Huston - Chief Financial Officer & Senior Vice President: Sure, absolutely. I mean obviously Wood Mac has the most of the pound-based revenue which is the rate we're referencing, although we do have other currencies in there as well. I would say that we have international revenue in our financial services, as I mentioned. We have some of that in EH&S. I mean we have a little bit now in insurance as well. And so most of it would be in Wood Mac, but I think it is actually scattered across the company. And as we go forward, I think one of the things that's been on my mind is, I think we will continue to try to provide you more visibility into that, because my sense is that to date, your inclusion of that impact in our forward-looking expectations that you develop has been a little more soft as opposed to direct. And so we'll try to help you with that.

All right. That would be appreciated. Thanks so much. Eva F. Huston - Chief Financial Officer & Senior Vice President: You're welcome.

Your next question comes from the line of Joseph Foresi from Cantor Fitzgerald. Your line is open. Please go ahead.

Hi. So, my question is just on the longer term margin profile of the business. It sounded like obviously there's some macro issues and some issues within the insurance vertical in general that are kind of, I wouldn't call them one-time, but are ebbs and flows of the business. and you're taking the opportunity here to add resources and to maybe bulk up on some of your new offerings. So how should we think about the longer term margin profile of the business? Is this a short term thing, and if those macro factors turn in your favor, will you kind of pull back on that or is this something that's in place until those new businesses kick in? How should we think about it? Thanks. Eva F. Huston - Chief Financial Officer & Senior Vice President: Yeah, well maybe just starting with long term because as we think about long term, that's over multiple years. I don't know when you're saying that and you're referencing the quarter, it almost sounds to me like you're referring more to a shorter long term than we would. But what I would say is I think we continue to be constructive on margins over the long term. Our business is that build it once, sell it many times. As I did observe in the quarter in particular, when you have some high margin non-subscription business like cat bonds and you have lots of that, that will have a moment-in-time impact on the margin in the quarter. But that being said, I think over the long term, nothing has changed in our outlook for what we can do there and the opportunity to expand margins over time.

Thank you. Eva F. Huston - Chief Financial Officer & Senior Vice President: Welcome.

Your final question comes from the line of James Friedman from Susquehanna. Your line is open. Please go ahead.

Hi. Let me echo the congratulations on your respective promotions. I'll just ask my two questions up front. And you sort of addressed them in your prior three responses, Eva, but I just want to make sure I had this right. The transition to subscription in Wood Mac, how should we sort of dimensionalize the revenue impact? That's the first one, the subscription in Wood Mac. And the second one is, were there any project based revenues in the Q2 related to financial services? Thank you. Eva F. Huston - Chief Financial Officer & Senior Vice President: Yeah so, just on the first question, a clarification. When you're talking about transition to subscription revenue, that was referencing ex-Wood Mac in energy and specialized, so that was really more around our EH&S solutions. Scott G. Stephenson - Chairman, President & Chief Executive Officer: Yeah, in country and political risk. Eva F. Huston - Chief Financial Officer & Senior Vice President: Country and political. So, that was not a Wood Mac related comment. With regards to project revenue in financial services, I mean we always have some. I would say there was nothing in particular that we would call out in the quarter. Scott G. Stephenson - Chairman, President & Chief Executive Officer: And that's not the dominant theme in terms of what's going on. The growth in financial services is very broadly based. It's new geographies. It's the traditional subscription revenues. It's analytic product. It's the whole mix.

Thank you, Scott. Thank you. Eva F. Huston - Chief Financial Officer & Senior Vice President: Thank you.

And there are no further questions on the phone lines at this time. I would return the call to the presenters. Scott G. Stephenson - Chairman, President & Chief Executive Officer: Okay. Well, just wanted to say thank you all very much for your interest today and all the good questions. And I know we'll be seeing some of you in the relatively near future and look forward to that. And otherwise, we'll speak with you next quarter. Thanks a lot.

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