Good day, everyone, and welcome to the Verisk Fourth Quarter 2025 Earnings Results Conference Call. This call is being recorded. [Operator Instructions] 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, operator, and good day, everyone. We appreciate you joining us today for a discussion of our fourth quarter 2025 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-K 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 that 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. 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, gains and losses from dispositions and other nonrecurring 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 taking the time to join us this morning. Today, I will provide a broad overview of our fourth quarter and full year 2025 results and portfolio actions as well as our financial and strategic outlook for the year ahead. Elizabeth will give a more detailed view in our financial review. I will also offer recent perspective on our industry engagement, including client discussions around current operating environment and developments around the uses of advanced technologies, including the evolution of AI. Finally, I will finish with some updates on recent inventions we have introduced into the market to provide some context on how we are leveraging the demand and opportunity. Turning to the results. I am pleased to share that Verisk delivered solid financial results for 2025, marked by organic constant currency revenue growth of 6.6%, organic constant currency adjusted EBITDA growth of 8.5% and strong free cash flow growth. This growth was in line with the guidance that we provided at the beginning of the year and was achieved despite some temporary headwinds, including a year of very low weather activity. The solid financial results in 2025 close out the 3-year period with growth at or above the midpoint of the long-term expectations we set at Investor Day in 2023. As we look ahead, we continue to have confidence in delivering against our long-term growth targets based on the ongoing adoption of data and technology across the global insurance industry and our opportunity to support the needs of our clients and address their objectives with our distinct capabilities. Before we turn to the strategic discussion, I want to address the 2 portfolio actions taken at the end of the fourth quarter. First, we made the difficult decision to terminate the definitive agreement…

Thanks, Lee, and good day to everyone on the call. On a consolidated and GAAP basis, fourth quarter revenue was $779 million, up 5.9% versus the prior year. Net income was $197 million, a 6.2% decrease versus the prior year, while diluted GAAP earnings per share were $1.42, down 1% versus the prior year. The decrease in diluted net income and GAAP EPS was due to nonoperating items, including costs incurred in the current year associated with the early extinguishment of debt and net gains on the settlement of investments recognized in the prior year. Moving to our organic constant currency results adjusted for nonoperating items as defined in the non-GAAP financial measures section of our press release, Verisk delivered OCC revenue growth of 5.2%, with growth of 7.2% in underwriting and 0.5% in claims. This growth compounded from 8.6% growth in the prior year period, which included the impact of Hurricane Helene and Milton and was delivered despite the temporary headwinds we had called out previously, namely a historically low level of weather activity and a reduction in a government contract. Together, those 2 factors combined for an impact of approximately 1% to overall OCC revenue growth in the quarter. For the full year 2025, we delivered OCC revenue growth of 6.6%, marking another year of growth in line with our expectations and in line with our long-term targeted growth range. The continued strong growth of our subscription revenues is the clearest demonstration of the ongoing health of our business. Subscription revenues, which comprised 84% of our total revenues in the quarter, grew 7.7% on an OCC basis, compounding from the 11% organic constant currency increase that we delivered in the fourth quarter of 2024. The drivers of growth in the quarter were consistent with trends we have seen…

Thanks, Elizabeth. We are excited about the growth opportunities ahead and have confidence in delivering a year of growth in 2026 that is in line with our long-term growth targets and compounds the solid year in 2025. We continue to appreciate all the support and interest in Verisk. [Operator Instructions] With that, I'll ask the operator to open the line for questions.

[Operator Instructions] And our first question comes from the line of Toni Kaplan with Morgan Stanley.

Lee, you mentioned that you recently had many conversations with your clients. And so I was wondering when you are talking to them, would they prefer to be the ones to use your data to create AI products themselves so they have an advantage versus other insurers? Or would they prefer that you create the AI products so that they don't have to spend the capital doing it? And maybe also, are they able to use your data as an input into third-party AI products?

Yes. Toni, thank you very much for the question. It's a great question to, I think, frame the conversations. And the answer is both, based upon the nature, typically the scale, sometimes the sophistication of the client. But in those conversations, particularly with our largest clients, they want to compare what their objectives are in AI, recognizing that our data is a critical input to that function. And so they first want to have a coordinating or an alignment discussion to make certain that we're delivering the data in a format that can be effectively utilized by AI. We have been working on establishing model context protocols and MCP servers to be able to meet those needs. But part of that discussion is also, look, here's what we're looking to develop and what do you have or how are you integrating AI that may be an efficiency for them so that they can dedicate their dollars to more differentiating competitively oriented applications. On the smaller side, I think we have a lot of clients that are daunted by the breadth of AI development. And so in those context, there is clearly more interest in how they can get a clearer and stronger return on their investment by testing and utilizing a number of the AI products that we are applying to our existing processes and our products. That was something, as I mentioned in my prepared remarks, where you could see, particularly in the contracting firm, the estimating firm and on the claims professional side, where there is strong adoption of that AI, because in many cases, those are smaller midsized companies that are more interested in getting that immediate benefit, and we can deploy that AI across an established process that they're familiar with. So I think it's both, but the important thing is our data is at the core because that analytics function relies on good quality industry-wide data. And there is a recognition that... [Technical Difficulty]

Ladies and gentlemen, this is the operator. I apologize, but there will be a slight delay in the conference, and we will resume shortly. Thank you. Please stay on the line. Hello, everyone. This is the operator again. Our speakers are in. Please proceed.

Yes. So Toni, can you let us know where we dropped off? In terms of answering, how much of that did you catch? Toni may have dropped as well. So I'm just going to recap briefly the question from Toni is, to what extent are clients looking to utilize your data and Verisk's applications relative to their own applications? And my answer was there really is a range from our largest, most sophisticated clients who emphasize that they want to use our data, in many cases, are looking to develop their own AI applications, but also interested in what they can leverage in terms of what they're doing on existing either underwriting or claims applications. And from smaller and midsized, there is more of an interest in relying on the AI functionality that we're integrating into our product and process given their scale and desire to achieve a faster return on investment. So that's, in essence, the response to Toni's question.

Our next question comes from the line of Manav Patnaik with Barclays.

Lee, maybe just to follow up on that question to a certain extent. You've talked about the softwarization of Verisk over the years. I was just curious how much of the software and analytics that you sell come tied with the data that you have versus separate? And how those relationships and contract structures might change in this new environment?

Yes. Thanks, Manav. Also a great question. And I think the primary application of software in our context is in the delivery of data and the integration of the ecosystems to deliver the data and the outcomes that facilitate improved efficiency and functionality of those ecosystems. So it's inherently a data delivery device and a data connectivity element that is integral to that core process. And I think we see that in Whitespace. We see that in the Core Lines Reimagine upgrades where we have provided new connectivity and deeper connectivity to our data sets. On the claims side, the Xactware function, the anti-fraud functions are software-delivered, but at the core, it's a data and analytics function. Some of the smaller businesses like our Life business is going to be a policy administration system, but it is tied to data and is delivering significant economic benefits to participants within that marketplace. But the predominance of our software footprint is related to that data delivery and integration function.

Next question comes from the line of Faiza Alwy with Deutsche Bank.

So also, I wanted to follow up on the same topic. And I guess I wanted to ask that as you're rolling out these new technologies, do you expect to see sort of better ability to take pricing for the value that you're providing? And if there's any differentiation in terms of customer type? And similarly, what does this mean for margins in terms of cost of innovations versus the efficiencies that you're now able to generate?

Thank you, Faiza. So all of our businesses are fundamentally value-driven from a pricing standpoint. And I think there are kind of 2 key elements. One is that are we able to make that investment, monetize it and deliver that functionality at a lower cost relative to what our client is able to deploy? And are we able to find new uses of data that create value through our clients' utilization of AI? Both of those are going -- should drive incremental revenues because we are creating value for the client and as we are with a number of our investments looking to participate in that value creation. From a margin standpoint, I think the incremental margin on the use of that data, I think there's inherent operating leverage associated with that that's beneficial. And we are also implementing AI in a variety of contexts that improves the productivity of the functions, whether it's on the coding side or whether it's on the data ingestion or data normalization function that is beneficial from an operational standpoint. And so we do believe that this is supportive of our operating leverage and serves to fund a lot of the investment that we're making in AI.

Next question comes from the line of Andrew Nicholas with William Blair.

I wanted to switch gears a little bit and just talk about the transactional growth or declines of late. And maybe, Elizabeth, if you could speak to the path to recovery there. I appreciate all the commentary on first quarter. But as we think about kind of the acceleration of that line over the course of the year and looking ahead to '27, do you feel like that's a line that can grow organically at some point in '26? Or what are the different levers there that we should have in mind?

Yes. Thanks for the question, Andrew. Let me start with, in the fourth quarter itself, really the primary contributor to that drop is the comparison to the storms in the prior year, and that makes up by far the bulk of that decline. There's other areas of tough comps and some of the temporary factors that we talked about. There's also other areas of strength in that -- underlying that fourth quarter transactional growth, such as the securitizations. If you look at it on a 3-year basis, it is still a 3-year positive CAGR on the transactional side. And there have been a couple of different factors that moved through. In 2024, there were challenging comps to the double digits in the prior year. There was also the conversion of transactional revenue to subscriptions, which was kind of throughout summer '24 and summer '25. And then more recently, in '25, we've had some of the tougher comps on weather and lower weather volumes as well as the auto side. So all those things said, we do expect to work through those through the first half of '26 and do over the long term expect transactional revenue to be a source of strength.

Next question comes from the line of George Tong with Goldman Sachs.

For your guidance for 2026 EBITDA margins, it looks like you're looking for not a significant amount of margin expansion. Can you discuss some of the puts and takes you're embedding into your margin outlook for the year in terms of balancing investments with cost efficiencies?

Yes. Thanks for the question, George. So first of all, we look at it -- we should look at 2025 on a normalized basis. While the reported margins were 56.2%, we did call out that that included 40 basis points of foreign currency translation kind of balance sheet impact that we don't expect to continue. So we view the normalized -- the operational baseline as 55.8%. The 56% to 56.5% is that guidance does show modest but meaningful margin expansion from there, which balances the efficiencies that we're able to get in our business, the operating leverage that we continue to expect while managing to significantly fund exciting investments in some of the AI products that Lee has talked about.

Next question comes from the line of Kelsey Zhu with Autonomous Research Portal.

I was wondering if you can talk a little bit more about any recent changes to the broader selling environment or sales cycle that you're seeing? As the P&C insurance industry transitions from hard to soft market, I think the profitability of the carriers should improve and that theoretically should translate to better budget environment for data and analytics. So just curious if you're seeing or hearing that from your customers.

Sure. Thank you, Kelsey. I'm glad to address that. So I would say that cautiously, I think we are seeing an improving sales cycle in this. And as you've indicated, as we've seen a normalization in the net written premium growth, there's always a growth motivation from the carriers. There is obviously always a risk and a profitability focus on their part. And in a lower growth environment, I think there is a tendency to look to utilize more tools, whether it's data or analytics to help them understand where their opportunities for profitable growth are and how their risk assessment can be improved in a more difficult environment. And so I think that that along with the heightened profitability that they have experienced, give them the resources as well as the motivation to explore more interest in selling. And then that ties into, I think, the opportunity on the AI side to see how that is additive to their functions from a process and from an efficiency standpoint. So I would say we view that as a net positive from -- environmentally.

Next question comes from the line of Greg Peters with Raymond James.

I guess I'm going to focus my question on the annual price increases in OCC. Lee, you mentioned how you've been talking with your customers. And I'm curious about the feedback they're providing you on the annual price increases that are embedded into your contracts. And maybe, Elizabeth, you can remind us, when we think about '26 or '27, what component of OCC will include or be benefited by the price increases that you expect to get?

Yes. Thank you. Thanks, Greg. Let me start off and then Elizabeth will follow up. So I think the general comment that I would make, and it's more than what we are hearing, although the hearing -- what we're hearing from clients has been positive. It's also in terms of what we have been able to achieve in our longer-term multiyear contracts with our largest customers. And so what we are hearing is a clear recognition of the value of the investments that we have made to improve and digitize a lot of those data sets, providing more access, more functionality, more insights to what we're doing and more connectivity. So I'll talk about it first on the underwriting side. The ability to provide more frequent updates, for instance, on our loss experience that we're now providing quarterly within that business, is a clear value enhancement for our clients to be able to see the trends more accurately. The broader industry insights within the lines of business has been well received. And so they have felt as though they are getting more value. They've seen the investments that we've made, and that's translated into strong renewals with annual increases that reflect the value that our clients are driving. This goes back to the point that all of our growth is value-oriented, and that's what we are hearing and that's what we're experiencing. Similarly, coming off of the Elevate Conference in our claims property estimating solutions area, our success in integrating now over 140 ecosystem partners has provided a lot of value and improved connectivity for our clients. That has been very well received. It has reduced their costs and effort of purchasing the incremental analytics or functionality that those players provide, which creates value for them, and provides new sources of data to assess their operational performance. And so similarly, notwithstanding kind of the weather dynamics, we've gotten very positive feedback and engagement from clients around how they see the value, and that naturally supports the pricing environment. So that's the way I would describe it, Greg, and I'll turn it over to Elizabeth to add her perspective.

Yes, I think that was -- that's a great perspective. Not too much to add because, Greg, we don't give sort of specific annual price ranges per year. There's a wide range of outcomes for the carriers. I think, in general, we'd comment that after 3 years of historically very strong pricing environment, it may be modestly coming down versus the prior year, but still historically very strong, reflecting the value of the solutions that Lee talked about.

Next question comes from the line of Scott Wurtzel with Wolfe Research.

Just wondering if you can give an update on sort of the competitive dynamics on the kind of auto, personal lines side of things. I know that that's been a little bit of a headwind to growth. But just wondering if you can give an update on some of the maybe actions you're taking to maybe stem some of those competitive dynamics.

Yes. Scott, thank you very much for the question. I'm going to turn over to my colleague, Saurabh Khemka, who has responsibility for our auto underwriting business, to share some color there.

Yes. Thanks, Lee. So as I've looked at the business, we see the challenges in the business come from, first, the onetime revenues that peaked in 2024 and is minimal now due to the lack of demand for non-rate action products. And then secondly, where we have products that are not differentiated in the marketplace, and that's where the competitive challenges come from. And we'll work through those challenges through 2026. But where we're focused on is delivering differentiated analytics that drive long-term subscription growth. And to that end, we've launched a new enhancement to our flagship Coverage Verifier product that delivers new ratable insights at the point of quote. Now this is an innovation that is the subject of almost all our client conversations today, and we're encouraged by the interest that they are seeing in the solution. So our focus going forward will be on these differentiated analytics that drive long-term subscription growth.

Next question comes from the line of Jason Haas with Wells Fargo.

I wanted to follow up on some of the margin commentary. Correct me if I'm wrong, but I was getting about a 60 bps tailwind from the divestiture of VMS. So that would mean that all the -- that's right. That would mean basically all the margin expansion you're guiding to is coming from that. So can you talk about -- if that's all correct, can you just talk about why there's no margin expansion ex the VMS divestiture for 2026? Is it investment in the business? And how should we think about like the long-term trajectory of margins going forward?

Yes. Thanks, Jason, for the question. I'm not sure where you're getting that VMS comment. We can take that offline with you. But there may be other elements in that -- in some of the M&A line. There are some acquisitions as well. So let us take that offline. We are still exhibiting operating leverage across our businesses to deliver the margin expansion.

Next question comes from the line of Henry Hayden with Rothschild & Co Redburn.

We had a follow-up on the cross-sell environment as carriers are improving their profitability. You mentioned module deployment has been very strong, but any incremental color you could give on adoption of these modules would be very helpful. And then as you move past Core Lines Reimagine, how you're thinking about what drives the next leg of pricing and the sustainability of those increases?

Thanks, Henry. So I'll take the first part and then turn it over to SK on incremental functionality on the Core Lines. So in terms of module adoption, I think the -- what we are seeing is that having introduced this, the clients to varying extents have adopted and adjusted that new functionality. But it is a process in some ways of training the clients and their employees on how to utilize it effectively. And so we have been dedicating a lot of time to training for our clients to make certain that they're getting as much value as possible out of those modules. None of that suggests that the clients don't see the value, and we've heard that repeatedly. In fact, clients have told investors when asked the question that they have seen significant productivity gains, but we will continue to work to make sure they're getting as much value of those enhancements as possible. At our upcoming Verisk Insurance Conference, we often couple that with extensive training opportunities for them to understand what's available to them. So I think we will see continued uptake and continued value realization as our clients become more familiar, and we'll continue to enhance that as I'm sure SK can describe.

Yes, absolutely. So two things. One, the original scope of Reimagine is what we're talking about in terms of completeness. So we will put all our content on this digitized new platform, and the adoption of that platform will continue, and the adoption of these new analytics will continue. The second thing I would say is that we have really created a culture of continuous innovation through Reimagine. So as we now have this platform, we will continuously innovate on the underlying content and put it on the platform that will drive new use cases for our customers, like AI. As Lee mentioned, a lot of these use cases drive better insights but also drive productivity gains. So we see continuous opportunities for us to drive value for our customers.

And let me add to that, Henry. One thing to tie in the AI component is we have asked SK and our colleague, Tim Rayner, who runs our U.K. businesses in the SBS, to partner to think about what our enterprise AI strategy is with an orientation to product implementation and understanding how our clients are working with the technology. So many of the lessons and the successes that we've had in identifying how we can improve that technology, understand what our clients' needs are, are going to drive that close integration of the AI opportunity as well, which we think will continue to increase the value of what we've done with Core Lines.

Next question comes from the line of Judson Lindley with JPMorgan.

This is Judson on for Andrew. First, I just wanted to ask, Lee, when you look at Verisk's most sophisticated clients in terms of willingness to adopt AI, do you think these clients are using more or less of Verisk's data today, and why? And then if I could just follow up quickly on some of the color you provided about the first quarter revenue guide. I think you're expecting it to be down low single digits on a sequential basis. Could you just help us think through what that might mean on an organic constant currency basis year-over-year?

Thanks, Judson. I'll let Elizabeth handle the second part of that on the revenue guide. In terms of your first question, I think the way that we have -- that we see it, and it's very similar to other technology deployments. And if you think about what the primary driver of our ability to grow at a faster rate than the insurance industry has been the ongoing adoption of technologies that utilize the data sets that we are able to gather and normalize across the industry. And so when we have these AI strategic alignment discussions, it is clearly founded on a recognition that the underlying data that we are able to provide, one, that has kind of industry-wide value; two, is more efficiently gathered through a trusted third-party and which can be integrated easily into existing processes because of our connectivity, that is fundamentally as valuable in an AI context, if not more so and that AI is improving the productivity of core underwriting functions, claims functions, risk management functions. And so it becomes an incremental opportunity to use that data set to inform those decisions more effectively. And I think there is an understanding from our clients that that will enhance their value. And in fact, it may -- that we see an opportunity to expand those data sets in a more connected environment. We have talked in the past about the development of new data sets in the excess and surplus market, which I think has been driven by this trend of being better able to connect and associate data sets, leveraging the connectivity that we have with P&C carriers that are writing both admitted lines and excess and surplus lines as well as greater connectivity in the specialty market where we are beginning to see more requests for data and analytics to support that market. So I think from our perspective, this clearly is an opportunity to utilize that valuable, more efficiently gathered and connected data set to support the implementation of that technology similar to what we had -- what we have seen in the past. I'll turn it over to Elizabeth to talk about your question on the first quarter revenue guide.

Yes. Thanks, Judson. And your question, Judson, was on the first quarter OCC revenue growth. We don't give that in specific. We do give you a lot of the ingredients necessary. We talked about the Verisk Marketing Solutions business on a full year basis, and you can think of that as a quite even quarterly spread, if that's helpful. So we were calling out some of the pressures and the headwind from the temporary factors as continuing in the first quarter from the fourth quarter. In addition, there were some areas of -- we called out some areas of outperformance and strength in the fourth quarter and the first quarter being facing some tough comps, particularly on the subscription side. So we just wanted to -- between those things, we wanted to call out that we saw the first quarter as the trough from a growth standpoint, with that continuing to improve over the balance of '26.

Our last question comes from the line of Ashish Sabadra with RBC Capital Markets.

This is David Paige on for Ashish. Maybe just following up on that last question. Can you remind us what percentage of revenues are derived from contributory data sources? And then maybe at a high level, how should we think about the AI moats across your different business segments, particularly as, I guess, investors are concerned about vibe coding potentially impacting vertical software or just workflow solutions in general?

Yes. Thanks a bunch for the question, David. And I think this is something also that we'll continue the discussion at Investor Day. In terms of -- I think Lee talked about the data that is an input really across most of our businesses. To be very concrete on the contributory data, sometimes said, as you look at our revenues, it's primarily the forms, rules and loss costs and the anti-fraud that are built on those industry-wide contributory solutions. Elsewhere in our business, we have some elements potentially of contributory data and significant proprietary data and analytics. So we think that really most of our business has a lot of defensibility to it with those strong data ingredients, and we'll talk more about it in a few weeks.

Yes. And it's both the -- apart from the contributory data sets, as Elizabeth was describing, there also is an element of proprietary data sets. For instance, in our property estimating solutions, embedded in the value of what we provide, apart from materials and labor costs, which are located -- that are identified and utilized kind of specifically for estimates, an understanding of what a repair entails in terms of materials or labor costs, is an aspect of that proprietary nature. And there is also an element of -- it becomes a reference point that the claims professionals, that the carriers, the adjusters and the contractors use to facilitate resolution of that claim. So it becomes an established industry standard that has a valuable proprietary content because all participants understand how that is derived, and it's kind of been established as a base point. To your question on vibe coding, it relates in some way to the question around software that we had earlier. And this is where the nature of our software is one for the delivery of the data sets, not so much the underlying software itself as well as the connectivity that that software or that platform provides. And so simply the function of AI-driven or vibe coding isn't -- doesn't, in our view, represent a threat to the fundamental data differentiation and connectivity differentiation that we provide. We think that that's a very different software proposition. In some ways, I kind of -- I liken it to the securities exchanges where they are providing connectivity to a large and complex group of market participants. It's a very similar dynamic within our business. But I'll also use this as an opportunity to advertise and encourage you all to attend our Investor Day where we will be going through the business and talking about those components from a data, from a software standpoint, from a competitive differentiation for each of our businesses to far greater detail and better texture than we can provide in this call.

Ladies and gentlemen, that concludes the question-and-answer session. Thank you all for joining in. You may now disconnect. Everyone, have a great day.