Verisk Analytics Inc (VRSK) — Q2 2025 Earnings Call Transcript

Thank you, operator, and good day, everyone. We appreciate you joining us today for a discussion of our second 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-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 that today's call may include forward-looking statements about Verisk's future performance, including those related to our financial guidance and our recently announced pending acquisition of AccuLynx. 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 effects of which may be significant. And now I'd like to turn the call over to Lee Shavel.

Thank you, Stacey. Good day, everyone, and welcome to today's call. I'm pleased to share that our operating momentum continued in the second quarter as we delivered another strong quarter, which was generally in line with our expectations. Organic constant currency revenue growth of 7.9% was broad-based across most of our businesses. Our focus on cost discipline delivered healthy margin expansion, resulting in organic constant currency adjusted EBITDA growth of 9.7%. Elizabeth will provide much more detail in our financial review, but these results demonstrate the compounding power of our subscription-based business model, driven by the value we create for our clients. I'm confident that this year is on track to be another solid year for Verisk, and we are raising our revenue and adjusted EBITDA outlook for the full year 2025 to reflect the strong first half and the impact of M&A. Almost 3 years ago, we unveiled the new Verisk, an insurance-focused predictable growth company. We implemented structural and cultural changes to become more integrated, and we focused on elevating the strategic dialogue with our clients. The net result has been strong financial and operational growth. We also evolved our business from industry utility to data analytics specialists to an integrated technology network, serving the global insurance industry by focusing on innovation and advanced technologies. And we maintained our capital allocation discipline, investing behind our highest return on capital opportunities while returning excess capital to shareholders. This morning, we announced that we have signed a definitive agreement to acquire AccuLynx for $2.35 billion. AccuLynx is the leading SaaS platform providing end-to-end business management workflow for the residential restoration and repair industry with expertise in roofing. AccuLynx is a natural fit and extension of the network capabilities we provide to insurance carriers and contractors into our property estimating solutions business. AccuLynx's integrated service software platform sits at the center of the roofing contractors' workflow, addressing each critical stage, including lead generation, sales and customer relationship management, virtual measurements, materials ordering, labor sourcing, payment processing, and job management. Most of the company's 5,000-plus customers perform insurance-driven repairs and restoration, and roofs are one of the largest and most expensive home components, making up more than 25% of all residential claim value. AccuLynx is a very strong business with a compelling financial profile marked by revenue growth and EBITDA margins that are accretive to Verisk overall and a high mix of recurring revenues. But more importantly, AccuLynx is highly additive to our property estimating solutions business due to a high degree of customer overlap and complementary functionality. We see strong incremental value creation from combining AccuLynx with Verisk property estimating solutions, which will, in turn, improve, extend, and strengthen our network, enhancing the value of the ecosystem for all participants. Specifically, more seamless integration will remove manual work and improve information flow between carriers and contractors, delivering cost and time savings for both constituencies while property owners can benefit from quicker repairs due to workflow efficiency and cost savings driven by more accurate pricing data. On the data front, AccuLynx's differentiated and rich data sets focused on roofing materials and labor will improve the analytics we provide to insurers and contractors. Through our elevated strategic dialogue, we hear frequent requests for enhancements to our roofing materials information and benchmarking reports. We see synergistic cross-sell and upsell opportunities as we can advance the adoption of the AccuLynx platform and its many modules to existing Verisk customers. Additionally, we are excited about the opportunity for expanded data monetization of existing Verisk products across the AccuLynx client base. We previously announced the strategic acquisition of SuranceBay, a leading provider of producer licensing, onboarding, and compliance solutions for the life and annuity industry. SuranceBay will become part of Verisk life solutions and extends our presence into the independent agent and broader distribution channel. The combination of SuranceBay and Verisk's FAST business will help to streamline and improve the process of insurance distribution and will provide the life and annuity ecosystem with solutions that enhance workflows between carriers, general agencies, insurance agents, and consumers. The initial reaction to the announcement has been very positive. Clients, prospects, and industry analysts have commented that they see the value in an integrated solution as voiced by one of them that this was 'a perfect fit for the suite.' This feedback further affirms our ongoing commitment to delivering innovative, integrated solutions that address the evolving needs of the life and annuity sector. Together, the acquisitions of AccuLynx and SuranceBay are a meaningful demonstration of our capital allocation discipline, which includes our fundamental value-creating M&A philosophy. This approach is focused on 3 pillars: one, acquiring solid operating businesses consistent with our insurance-focused strategy with sustainable growth and operating leverage; two, identifying clear opportunities to improve and enhance the value of the combined entities; and three, to acquire businesses at a price that generates an attractive return on capital. Over the past 3 years, we have demonstrated patience, selectivity, and price discipline, and we are excited to welcome the AccuLynx and SuranceBay teams to Verisk. We are energized about working together to enhance the network effect of these businesses and maximize value for the property claims and life insurance ecosystems. Across Verisk, we have been focused on driving innovation and leaning in on our use of generative AI, embedding new features in some of our core products to deliver greater insights and efficiencies for our clients. In particular, as part of our Core Lines Reimagine initiative, we launched the Premium Audit Advisory Service AI, a first-to-market AI chatbot. This invention enables insurers to research classifications and rules to ensure risks are accurately classified at underwriting, with information retrievable over 95% faster than our legacy solutions. Client adoption of the solution has been strong, and we are experiencing increases in time spent by clients as they are finding value in the tool. Additionally, within Mozart, our forms management platform, the Mozart Compare with AI enables our customers to compare across ISO forms to quickly identify changes we have made to coverage language to reflect up-to-date market and compliance requirements. This solution is saving our customers time and eliminating complexity in managing forms changes. And finally, we are in the early stages of a commercial introduction of Underwriting Assistant, our AI-powered solution that produces transformative underwriting results with greater efficiency and data accuracy, enabling users to maximize their productivity and effectiveness. One of the key features of Underwriting Assistant is its ability to automate the creation of structured commercial property submissions, significantly reducing the time to decision, transforming what used to take days or weeks into just minutes. This not only speeds up the process but also replaces lower-value data capture activities, allowing underwriters who are leveraging the tool to focus on more strategic tasks. Our solution also enhances data accuracy through data augmentation by leveraging our extensive commercial property data sets to ensure that underwriters have the most reliable and complete data, contributing to more profitable underwriting decisions. And finally, our interactive chatbot provides real-time expert advice to underwriters and agents, which leverages our deep domain expertise and proprietary data. By providing timely prompts and insights, we help ensure that underwriting decisions are both more informed and profitable. We are excited about this new groundbreaking innovation and the opportunity to help our insurance partners include the most advanced technologies in their core processes. Before we close, I want to announce that Maroun Mourad is stepping down from his role at Verisk to assume an executive position at another public company. We wish Maroun well and thank him for his decade of service to Verisk. With Maroun's departure, Elizabeth Mann will take on the added responsibility of Interim President, Claims Solutions. We are confident in the bench strength we have in place within claims and have commenced a search for a permanent replacement. Now let me turn the call over to Elizabeth for the financial review.

Thanks, Lee, and good morning to everyone on the call. Today, I plan to provide details on 3 topics. First, I will cover our financial results for the second quarter 2025. Second, I will address the financial impact of our recently announced acquisitions of SuranceBay and AccuLynx. And third, I will provide details on our updated outlook for 2025. Turning to earnings. On a consolidated and GAAP basis, second quarter revenue was $773 million, up 7.8% versus the prior year, reflecting strong growth across both underwriting and claims. Net income was $253 million, an 18% decrease versus the prior year, while diluted GAAP earnings per share were $1.81, down 16% versus the prior year. The decline in GAAP net income and EPS are primarily the result of a cumulative $102 million net gain in the prior year period related to previously disposed businesses and the early extinguishment of debt. Moving to our organic constant currency results adjusted for nonoperating items, as defined in the non-GAAP financial measures section of our press release, our operating results demonstrated sustained broad-based growth across the business. In the second quarter, OCC revenues grew 7.9% with balanced growth of 7.7% in underwriting and 8.3% in claims. Our subscription revenues, which comprised 82% of our total revenue in the quarter, grew 9.3% on an OCC basis. This was driven by strong growth across our largest businesses in underwriting and claims, including forms, rules and loss costs, extreme event solutions, and anti-fraud. All 3 of these businesses delivered strong price realization and expanded renewals as we continue to innovate and improve our core offerings. Additionally, we saw solid double-digit growth in specialty business solutions as we continue to see strong acceptance and usage across our Whitespace platform. As we look ahead to the second half of the year, we remind you that we will be comparing against strong elevated double-digit subscription growth in 2024 that was helped by the conversion of certain contracts to subscription. Additionally, we will be realizing the impact related to federal government spending cuts that we expect to start in the third quarter, though, as we have previously communicated, the federal government contracts represent less than 1% of our total revenue. Our transactional revenues, which comprised 18% of total revenue, returned to growth in the quarter, up a modest 1.8% on an OCC basis. This growth was a function of strength in our international businesses, including properties and life, health, and travel. Additionally, we delivered strong revenue growth in our extreme events business from securitization as issuance volumes were at record levels. This market continues to attract new capital, and market participants turn to Verisk's models as the trusted source on pricing risk. This growth was offset by softness in our auto business related to tough comparison from last year, customer mix, and some competitive pressures, which we expect to persist. Additionally, we are experiencing some weakness in our sustainability business, owing to market conditions. Moving to our adjusted EBITDA results. OCC adjusted EBITDA growth was 9.7% in the quarter while total adjusted EBITDA margins, which include both organic and inorganic results, were 57.6% up 220 basis points from the prior year. Our reported margins benefited from a foreign exchange translation impact, which contributed 120 basis points in the quarter. This FX benefit was not contemplated in our guidance as we do not forecast or hedge foreign currency. Adjusting for this nonoperational benefit, we still delivered healthy margin expansion, highlighting the effect of strong revenue growth, ongoing cost discipline, and our Global Talent Optimization initiative. As we have shared in the past, we find it useful to look at our margins on a trailing 12-month basis to adjust for seasonality. LTM margins came in at 55.6% in the period. As we look to the second half of the year, we want to remind you that we did have some margin variability in the third and fourth quarter of 2024 associated with foreign currency translation. Moving down the income statement, net interest expense was $36 million in the second quarter compared to $29 million in the same period last year due to higher debt balances and higher interest rates. During the second quarter, we retired $500 million of 4% notes that were due in June 2025. Our reported effective tax rate was 22.7% compared to 21.7% in the prior year. The year-over-year increase was driven by a one-time tax benefit in the prior year period. Adjusted net income increased 6.3% to $264 million and diluted adjusted EPS increased 8% to $1.88 for the quarter. The increase was driven by strong revenue growth, margin expansion, and a lower average share count. This was partially offset by higher depreciation and interest expenses and a higher tax rate. On a reported basis, net cash from operating activities increased 15.5% to $245 million while free cash flow rose 22.6% to $189 million. This increase was driven primarily by the timing of certain cash collections. We remain committed to returning capital to shareholders. During the second quarter, we paid a cash dividend of $0.45 per share, a 15% increase from the prior year. Additionally, we completed a $100 million accelerated share repurchase program. As of June 30, we had $1.3 billion in capacity under our share repurchase authorization. Turning to our acquisitions, we are excited about the growth opportunities ahead with the acquisition of SuranceBay and AccuLynx upon closing. These businesses both have strong financial characteristics, marked by robust revenue and adjusted EBITDA growth and healthy margins that will enhance Verisk's overall growth profile. Additionally, both businesses have a substantial mix of recurring revenue, consistent with our predictable growth model. We are expecting revenue contribution in the range of $40 million to $50 million from all acquisitions this year, assuming that the AccuLynx transaction closes at the end of the third quarter of 2025. And we expect the transaction to be accretive to earnings by year-end 2026. As we discussed, we see strong value creation opportunities from the combination of these businesses with Verisk. We have plans to invest behind the integration to drive durable long-term revenue growth and maximize synergy. From a financing perspective, we funded the $163 million purchase of SuranceBay with cash on hand and closed the transaction on July 17. And we have fully committed debt financing in place, supporting the $2.35 billion acquisition of AccuLynx. This financing will increase our leverage temporarily, bringing it to the high end of our current 2 to 3x target range, but we intend to delever towards the middle of the target leverage range by year-end 2026. Additionally, we expect our interest expense to increase in the back half of the year, reflecting the new borrowings associated with the deal. Given our strong free cash flow generation, which will only be enhanced by these acquisitions, we intend to continue to repurchase shares as we also delever. These transactions are representations of our disciplined approach and execution of our capital allocation framework. We will continue to actively manage our portfolio, both through acquisitions and dispositions to maximize value creation for shareholders. On guidance, we are pleased with our strong results for the first half of the year, and we have updated our full year outlook for 2025 to reflect this solid performance as well as to incorporate the impact of our recently announced acquisitions, which are still subject to regulatory approval and closing. More specifically, we are raising our outlook for consolidated revenue and now expect it to be in the range of $3.09 billion to $3.13 billion, inclusive of $40 million to $50 million from acquisitions. We are also increasing our outlook for adjusted EBITDA to a range of $1.7 billion to $1.74 billion. We expect adjusted EBITDA margins to remain in the 55% to 55.8% range, reflecting contribution from our acquisition and some one-time expenses associated with the transaction and integration of these businesses. We expect interest expense to be in the range of $190 million to $210 million, reflecting the incremental debt necessary to fund the acquisition of AccuLynx. From a tax perspective, we are still expected to be in the range of 23% to 25%, so we will likely come in closer to the low end. Taken all together, we now expect diluted adjusted earnings per share in the range of $6.80 to $7, reflecting strong results in our core business and modest initial dilution from the acquisition. We expect the transaction to become accretive by year-end of 2026. A complete list of all guidance measures can be found in the earnings slide deck, which has been posted to the Investors section of our website, verisk.com. And now I will turn the call back over to Lee for some closing comments.

Thanks, Elizabeth. Before I close, I want to ask you all to mark your calendars and save the date of March 5, 2026, for our next Investor Day, which will be hosted in Jersey City. We will share more information as it gets closer. We are excited about the growth opportunities ahead and have confidence in delivering on our strategy and value creation. We continue to appreciate all 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. With that, I'll ask the operator to open the line for questions.

I was wondering if you could discuss the AccuLynx deal, particularly regarding your property estimating solutions and partnerships with other industry players. I'm interested in whether this changes the dynamics of those relationships and what revenue and cost synergies you anticipate from this deal, as I don't think you mentioned that.

Thank you, Manav. Your question highlights a key strategic aspect of the AccuLynx merger. Originally, the property estimating solutions business focused on providing damage estimates, but it has evolved into a valuable network connecting insurers, contractors, third-party administrators, remediation specialists, adjusters, and policyholders. The strong platform developed by AccuLynx for roofers enables us to expand and integrate this network with essential insurance-related repairs. There is significant overlap between our customer bases, as AccuLynx has over 5,000 customers, and we believe that more than half of them are also linked to our property estimating solutions business. This demonstrates our connectivity and the potential for synergy opportunities. We can immediately identify AccuLynx customers who are not yet using our property estimating solutions, as well as contractors on our PES system who could benefit from the Xactware suite of products. Additionally, there's a considerable advantage in the detailed roofing materials and operating costs we can offer to our insurance clients. Recently, within the last three months, I met with the CEO of a major insurance company who specifically requested more detailed, current relevant roofing data, which we can provide. Moreover, while AccuLynx primarily focuses on roofing, we also see potential applications in water mitigation and other specialized areas of repair and restoration.

Yes. I'll just add on the synergy front, as Lee highlighted, there's a number of revenue opportunities that we'll be pursuing that will build over the next couple of years post close. I'll just add from a cost synergy standpoint, we will always be focused, of course, on efficiency, but this is not an acquisition that's predicated on cost takeout. We've highlighted the attractive margins of the AccuLynx business. And so we actually see some opportunity to invest in that business while still maintaining their attractive margins.

Just in terms of the revenue guide, it looks like you really just brought it up for the contribution from M&A by that $40 million to $50 million. I think FX should also be helpful given everything that's going on. You're still talking about a very strong beginning of the year and positive outlook. But just seems like given where you're running, you should have brought that up. So just wondering if the outlook is a little bit softer than before. I know you have the government side, you're talking about. So just maybe flesh out a little bit what's working better or not as good as you saw it at the beginning of the year. Sorry for the lengthy question.

Thank you for your question, Alex. It makes sense. We're very proud of the results we achieved in the first half of the year. Looking ahead to the second half, we have a balanced outlook and a few key areas to monitor. Firstly, we are considering the comparisons to last year and the second half of 2024, specifically noting the storms in the fourth quarter of '24 which included hurricanes. Additionally, we expect subscription revenue to accelerate in the latter half of '24, driven by strong renewals. This means we'll be facing a strong growth comparison that could impact our current growth rate. Secondly, we've identified several known factors affecting us, particularly regarding federal government contracts that we mentioned earlier, which will begin to impact us in the third quarter. Additionally, in our auto business, we are seeing some short-term challenges in the UDAS sector due to competitive pressures and moderating discretionary spending from insurers in California. There are also some unknown factors like attrition, weather events, and transaction volumes in our international operations that could influence our performance in the second half. Despite these influences, the core strength of our business remains robust, and our full-year outlook of 6% to 8% organic growth aligns with our overall guidance.

In auto, outside of the tougher comps and shopping activity and maybe some impact from contract conversions, I think you called out a couple of times the competitive pressure there. So I was just wondering if you can add more color on who you're seeing these competitive pressures from and just any color from your conversations with customers there. That would be really helpful.

Yes. Thank you, Kelsey. I appreciate the question. In the auto space, we face a significant competitor where we lack the same scale. While we have been successful in this area, we occasionally encounter greater pressures. We are working to find ways to enhance our other businesses, such as linking claims-related data to underwriting data and offering innovative solutions. Although this sector makes up less than 10% of our total business, we do experience occasional competitive pressure in our auto-related businesses.

I wanted to go back to AccuLynx. You sort of characterized it as the leading SaaS platform in that part of the market. I was wondering if that is sort of a priority for you. I know in the past, you've tried to integrate with a number of P&C insurance SaaS platforms. Is that an area that strategically we should expect to see more sort of going towards that type of platform or product set just in the future?

Thank you, Toni. That's a very good question. While we are widely recognized as a data and analytics company, many of our current businesses also operate in the software or SaaS space, where we link critical underwriting or claims processes through software. The PES business exemplifies this. We clearly position ourselves as a robust SaaS platform, and our connectivity to clients helps integrate their internal processes and connect contractors, adjusters, and insurers within the restoration and repair sector. Furthermore, our extreme events business is transitioning to a SaaS platform, which will enhance the efficiency, speed, and computing power of many of our modeling operations. Additionally, in our underwriting segment, I'll invite Saurabh Khemka to elaborate on how we are also creating various integration functions in our Core Lines Reimagine initiative that can be viewed as software or connectivity enhancements.

Yes. Thank you, Lee. Absolutely. If you look at our Core Lines Reimagine program, the central point of that is the core.verisk.com platform. It brings in all our content in one place and offers the opportunity for our customers to integrate that into their workflow. And this is where we're getting great feedback, where customers are saying, look, this is now the one-stop shop for all the content that you provide, which is the premier content in the industry. But now I can integrate that into my workflow and get a lot of efficiency. So that connectivity is very important to us.

And that's the essence, Toni, that I want to leave you with is that while our legacy function of collecting data across the industry, cleansing that data, which requires a lot of expertise and a lot of work, and distributing it is a foundation of the business, increasingly, the connectivity function that substantiates a network element to our business is where we see additional opportunity for us to continue to grow and serve the industry. And it's certainly something that in our conversations with our clients, connecting that ecosystem is a role that Verisk is uniquely well positioned to address.

Congrats on AccuLynx. In terms of its strong growth, can you just help us understand, I guess, the drivers or the penetration rates in its core market? I guess I'm just trying to understand the sustainability of that level of growth.

Thanks, Jeff. So I'm going to start this off, and then I'm going to turn it over to Aaron Brunko, who leads our property estimating solutions business. But from my standpoint, the growth dynamic has been that AccuLynx really developed a specialized SaaS integrated service platform that was specifically focused on the roofing function. And its founder was originally a roofer, so knew that business well, and they have successfully penetrated that roofing business, which is, as you can imagine, a very large business by creating a competitively differentiated product specialized to the needs of that particular function. So there continues to be a significant opportunity to penetrate that opportunity as well as you add more value to that function, then that creates more value for the roofer and then sustains overall pricing benefit. To give you a sense of our estimate of the TAM for that roofing sector as it exists on its own, it's approximately a $2 billion TAM. And as we've conveyed, AccuLynx is looking at approximately $150 million in 2025 of revenue. So it gives you a sense of the ongoing penetration opportunity. But Aaron, perhaps in terms of ongoing growth and the opportunity that we see in conjunction with the property estimating solutions, perhaps you can give Jeff some additional color.

Yes. Thank you, Lee, and Jeff, I appreciate the question. So just when you think about the growth within the market, there are a large number of roofers that really represent white space opportunity within the market itself. One of the other things that we've noticed is a lot of roll-ups through private equity that have occurred that also put AccuLynx really in a very strong growth position over the next several years from the analysis that we've seen. So not only do we have the increase in severe convective storms, but we have more sophisticated needs, if you will, in the roofing market. And that general changing demographic further supports that deeper penetration of the TAM is very much what we're focused on.

Thank you, Aaron. And Jeff, one other dimension that I want to mention, you'll see this in the slides that we've presented on the strategic rationale. While we're focusing on the contractors, the other interesting dimension that AccuLynx has developed is the relationships that they've built with the suppliers in which they are providing for a direct negotiation, delivery, and pricing on materials. And that dimension is, I think, still in a relatively early stage, specifically at AccuLynx, so an opportunity to expand there and then, of course, potentially to expand that more broadly to our other contractor relationships. So that's another dimension of growth that's supporting the core business.

I would like to follow up on the revenue growth profile of AccuLynx. I'm curious if there is any cyclicality involved. Property estimating solutions often see an uptick due to extreme events, especially hurricanes. Does AccuLynx show similar patterns? Additionally, regarding investments, I recall Elizabeth mentioning the potential for more investments in this area. Could you provide insights on how we should consider those investments for the business?

Thank you, Ashish. Let me address the cyclicality issue before handing it over to Elizabeth for the investment side. We examined this aspect thoroughly and engaged a third-party consultant for an evaluation, supplementing it with our own insights. We discovered that cyclicality is relatively low, as the roofing and repair business relies more on the overall housing market, which is substantial due to the large number of residential homes. Naturally, there will always be a consistent need for roof repairs and restoration. Consequently, this sector doesn't experience significant fluctuations compared to businesses more closely tied to mortgages or construction. We are confident that the level of cyclicality is relatively low based on our findings.

Thanks, Lee. And the one thing I'll add to that, that I agree with that on cyclicality. From a seasonality standpoint, there is less roofing work that takes place in the winters. When it's very cold, it's not possible to do that. So there may be just a bit of seasonality in that during the winter months. From an investment standpoint, to the second part of your question, yes, AccuLynx, as we acquired them, was run fairly leanly as a private company. We will have 2 elements of investment in the business. One is kind of building out some of the public company functions as they join the Verisk family. But the second and the more important is really to continue to build behind the revenue synergies and the product development opportunities that we see to combine it with the property estimating solution suite of products. To give some confidence on that, we've highlighted that the business is accretive to Verisk from an overall margin standpoint, and we expect to be able to maintain that.

I wanted to ask about some of the new AI products that you discussed in your prepared remarks, Lee, in particular, the AI automated underwriting function. And curious if you think the industry is sort of ready to adopt that. And maybe if you can talk about pricing perspective around that and if that increases your ability to price for value.

Thank you, Faiza. I'm going to turn it over to Saurabh. I think to your general question, one of our value adds is developing products and applying new technology and then testing it with the industry. And across the industry, as I think with most, you have early adopters, you have fast followers, you have kind of conservative players that are more resistant to change. But I think that we're in that unique position of being able to test this. But I think in each of these cases, and we've talked about 3 of them, we're seeing a high degree of interest and varied levels of adoption.

Yes, absolutely. So I'll talk about the 2 around our PAAS AI tool and Mozart AI tool. And I'll just highlight the adoption of these tools has been really good. And on the PAAS side, we have almost 1/4 of our users already using it. They love it. They see a lot of efficiency from a time perspective for them. And what we're getting in the feedback is this is helping us kind of build the value for the underlying tool as well. So the underlying information is great, but adding an AI component to it increases the value to our customers. On the Mozart side, which is our forms management platform, almost half of our customers have started using it. And again, this is a huge time efficiency saving for them, and they are also enjoying the tool, and we expect to add more functionality to it.

I have several questions but will focus on the capital comments. Considering the transaction, could you elaborate on how the leverage will reach the upper end of the range and then how you plan to reduce it while simultaneously buying back stock? I'm curious about the mechanics of this process and how you envision it playing out.

Yes, thank you for the question, Greg. We will be raising debt to finalize the transaction. This will involve a combination of term debt and bank debt, which we will be able to repay over time at a manageable rate. Our strong free cash flow, which will improve due to these acquisitions, allows us to balance debt repayment while continuing our share repurchase program. Although the pace may be slower than before when we weren't involved in M&A activities, we will still proceed with share repurchases.

I know you've labeled AccuLynx as the leading provider of SaaS in the roofer space. Could you just tell us who do they compete with? I'm assuming you're going to say ServiceTitan. But if that's true, how does AccuLynx distinguish itself? And just go over the competitive landscape for SaaS.

Andrew, I'm impressed that you're familiar with the contractor SaaS models. ServiceTitan is a competitor. JobNimbus is also in that space. They generally are providing more general contractor services. And so the competitive differentiation for AccuLynx is their specialization on the specific needs, both from a materials and from a process and a job management perspective for those roofing contractors. I'll ask Aaron to add to that if there's anything he would like to share on the competitive front. Aaron?

Lee, I believe you did a great job highlighting the companies you mentioned. AccuLynx clearly stands out as the leading provider in the roofing SaaS market, and I think you addressed that effectively, Lee.

Also had a question on AccuLynx. So I think it's around 5% of your existing revenues, but it's also growing in the mid- to high teens. And then you also called out a decent-sized cross-sell opportunity. I'm wondering if this changes at all your view of the 6% to 8% OCC growth target once we fully get this into organic in 2027.

Yes. Thanks for the question, David. We will have to take a look at that as we unfold into 2027. Obviously, it is unquestionably additive from a growth standpoint. As you say, it's a smaller percent of the total. So we'll see how it shakes out.

It looks like we're seeing moderating net written premium growth this year after several years of very strong growth. So I'm curious if it's possible that you'll be able to continue to take price at the same rate that you have been given all that you've been delivering to your customers with Core Lines Reimagine and your other investments. Or should we expect that pricing will start to moderate? I guess it would be in 2027 given the 2-year lag. But yes, if you could help explain that dynamic, that would be helpful.

Yes. Thank you, Jason. And I think your observation is fair. It's something that we watch. I'm going to turn it over to Saurabh Khemka to give you color on that.

Yes, Jason, you are correct. We are noticing a slowdown in industry premium growth, which varies depending on the type of insurance, whether property or liability. For the contracts linked to annual premium growth, there will be a lag in impact. However, a larger portion of our revenue comes from long-term contracts. When renewing these contracts, our customers anticipate this slowdown, so we are designing long-term agreements to accommodate both the current growth phase and the anticipated slower growth phase. This approach provides our clients with stability over the life of their contracts and enhances our pricing visibility. It’s important to note that premium is just one part of our pricing strategy. Our main focus during these renewals is to emphasize the value our customers recognize, which is further supported by our investment in the Core Lines Reimagine program.

Yes. Additionally, if you examine the long-term growth of our core insurance business, we have observed fluctuations in premium growth during both upturns and downturns, yet we have consistently achieved organic growth in the range of 6% to 8%. Furthermore, we are witnessing robust growth in our SBS and life businesses, which are exploring new opportunities and are not reliant on overall premium growth.

Kind of wanted to stick with the organic growth theme. Last 3 quarters now, you're at or, in the fourth quarter's case, slightly above the 6% to 8% range that you outlined at Investor Day a couple of years ago. Just kind of curious, if we look at the last 3 quarters, in particular, are there any kind of components of the long-term growth algorithm between price, new customers, upsell, cross-sell, new initiatives, client consolidation, all the different drivers that you outlined a few years back that are running at the top end of those ranges or even above? Just trying to get a sense and frame recent momentum relative to the way that you kind of constructed that top line growth algo back at the Investor Day in '23.

Thank you for the question, Andrew. I want to expand on a point that Saurabh made earlier. The key factor behind our strong performance has been our investments in enhancing and effectively communicating the additional value we offer our clients. This has been particularly evident in our Core Lines Reimagine program, which aims to improve data usability and process efficiency. We've received positive feedback not just directly, but also from an investor conducting their own research, who talked to several of our clients about the value they are deriving from these enhancements. Additionally, our senior-level engagement has helped us clearly convey our value proposition and identify relevant investment opportunities. For instance, in a meeting with a CEO of an insurance company, the focus on improving roofing data was evident, and this influenced our acquisition decisions. I believe this focus on value delivery has played a crucial role in driving our overall business growth.

Thanks, Lee. And then to dimensionalize that and map that against the factors, Andrew, that you were qualifying, I think as we think about our build, that engagement and that value delivery has enabled us to deliver at the high end of the range or in some, occasionally, above the range on the factors of pricing as we highlight the value on the factors of cross-sell and upsell as well as the fact that attrition has been lower. So I think those 3 factors have really contributed to the strong recent strength. As I think I highlighted in the near term, those create a short-term tough comp. And then as we lap through that, we will maintain the growth.

Your transactional revenue growth returned to positive territory in the quarter, and that was led by international performance and the securitization market. Can you talk about to what extent you expect international and securitization trends to continue into the second half?

Thank you for the question, George. I'll start with the securitization market, which tends to be more active in the second quarter each year. We do not expect significant activity in the second half of the year, and this will create a headwind when comparing the first and second halves. Regarding international transactional activity, it is harder to forecast. It benefited from comparability in the second quarter, but we anticipate it may decrease in the second half, influenced by weather and volume. Looking at overall transactional activity, we will face some challenges in the second half due to the storm comparison and pressures on our underwriting data and analytics solutions that I mentioned earlier. Although the level is lower than before, we are still witnessing some conversions to subscription across our portfolio, which means there will be ongoing headwinds in transactions during the second half of the year.

Lee and Elizabeth, what hurdle rate did you consider for your recent acquisitions? I'm curious about what to anticipate regarding your return on invested capital in the near term.

Yes. Thanks for the question, Russell. Yes, we evaluate our acquisitions on an ROIC framework, return on invested capital. And we target acquisitions that have a return on invested capital above our WACC in a 3-year period. We see good strategic merit in these acquisitions. And so we're looking for them to deliver value over time.