Q2 2021 Verisk Analytics Inc Earnings Call

Yes.

Good day and welcome to the various second quarter 'twenty 'twenty..1 earnings result conference call. This call is being recorded.

At this time all participants are in a listen only mode.

After today's prepared remarks, we will conduct a question and answer session will be and its participants to 1 question and 1 follow up.

We will have further instructions for you at that time.

For opening remarks, and introductions I would like to turn the call low birth did the various channel investors.

Investors installation Mr. He brought bar.

Broadband. Please go ahead.

Thank you Jay and good day, everyone. We appreciate you joining us today for a discussion of our second quarter 2021 financial results today's call will be led by Scott Stephenson <unk>.

Chairman, President and Chief Executive Officer, who will provide an overview of our cash.

These same bell Chief Financial Officer, and group, President and will follow with and Finance argue Mark on Pollari, Chief Operating Officer and group President will join the team for the Q&A session.

Earnings release referenced on this call as well and be associated 10-Q can be found on the investors section of our website <unk> <unk>.

Earnings release has also been attached to an 8-K that we have furnished to the FCC a replay of this call will be available for 30 days on our website or by dialing.

Finally, as set forth in more detail and today's earnings release.

And remind everyone that today's call may include forward looking statements about <unk> future performance, including but not limited to the potential impact on for COVID-19 pandemic actual performance could differ materially from what is suggested by our comments today.

Formation about the factors that could affect future performance is contained to the army's and asking for.

Filings now I will turn the call over to Scott.

Thanks, Stacy and good day, everyone. Thanks for joining us for our second quarter 2021 earnings conference call I'm pleased to share that ferrous delivered a strong second quarter result, the strength of our business model has been on full display and since the start and the pandemic and continues and the recovery.

We delivered solid top line and profit growth and every quarter last year, despite the weak economic environment and operating challenges from Lockdowns because of the consistent and durable growth and our subscription based businesses.

As expected we are now fully participating and the recovery as our transactional businesses are showing strong resilience and rebounding with the rollout of vaccines and global economies opening up to be more specific and the second quarter <unk> delivered organic constant currency revenue growth of 6.3% comprised of growth of 5.5 per.

<unk> and our mostly subscription based and non COVID-19 sensitive revenues and <unk>.

Growth of $12.1 per cent.

And are most of the transactional COVID-19 sensitive revenues and facts certain of our transactional businesses have already returned to pre COVID-19 levels. We have confidence this general trend can continue.

And believe that as the Covid impacts fully abate, we can return to delivering financial results in line with our long term model Lee will provide more details in his financial review.

These results were delivered through the hard work dedication and consistent focus on our customers by our 9000 employees around the globe and many parts of the world. We've already begun welcoming our employees back to our offices with a plan guided by our mission of protecting the health and wellbeing of our team members and in line with directives from local governments and PA.

Health officials.

While our global protection services team is keeping a close eye on developments with the Delta variant for our teams are energized to work together in person again, and fact currently more than half of our global offices are operating and a phase 2 or 3 format across the U S. We have plans to return to full use of our offices and September unless circuit.

Stance has changed considerably.

We have implemented a return to office policy of 3 days and the office or with customers and 2 days for mode. This approach, which incorporates the best learnings from the pandemic balances individuals' flexibility with the collaboration and creativity that stems from working together in person and we also.

I believe that this flexible working policies will help to retain and attract the very best talent as we continue to grow and what is a very competitive hiring environment.

Not only are we returning to office. We are also beginning to have certain in person meetings with our customers, including on site training and sales opportunities.

Given how effectively we've worked and a fully remote format. We have confidence that this return to office policies the optimal design or.

And our computing and network capacity have consistently and comfortably exceeded what we require and our teams have adjusted to using all the virtual collaboration tools, we have implemented enterprise wide.

On the topic and technology, we continue to make great strides on our efforts to modernize and optimize our technology platforms to always be best in class as of today, we have effectively and seamlessly moved most of our applications off the mainframe. This has been a huge undertaking and is a great example for true collaboration and partnership between our.

And it teams and business units around the globe in total we currently have thousands of solutions running native and the cloud, including those that were moved from prior on premise environments and those build native to the cloud we.

We are advancing our cloud first strategy and currently have more than half of our compute environment running and the cloud.

The migration to the cloud is a multifaceted multi stage project and we're pacing this transition and lockstep with our customers to ensure that we are always delivering on their highest expectations. In addition, as we advance on this journey the processes ever improving and we're seeing real benefits in terms of pace of innovation resiliency security.

And compliance.

Our ability to introduce new products and release updates to existing products and a quick and efficient manner and has vastly improved because of our shift for the cloud.

We're also able to onboard new customers and enter new geographies faster and with reduced capital intensity. For example, you've successfully deployed our new cloud based visualized ISO claim search platform to our P&C insurance customers. This modernized version of our industry, leading claims search platform <unk>.

And some more engaging user experience for thousands of claim adjusters and investigators and allows us to offer new features functionality and solutions quickly and easily to customers through this platform.

In addition, our new insurance digital media contributory database will take advantage of the flexibility and efficiencies of cloud technology to process store and analyze claim related digital images for more than 160 insurers.

Initially we expect to receive over 8 million digital media files per week as this new offering ramps up to help insurers better detect potential fraud and increased settlement speed for meritorious claims for cloud is also advancing our sales process as we can offer customers and easy and cost beneficial way to pilot or.

Trial, New solutions that was previously much more cumbersome and various prior on premise format.

This allows customers to truly see and actions the value of our solutions. Our sales team can then focus on converting those customers to long term subscriptions.

The cloud has also made our solutions more resilient and less downtime as the duration of maintenance windows are greatly reduced.

No longer must take our cloud native solutions offline to do things like update for at least new features or protect them with the latest security patches and protocols.

We have also constructed a cloud security program that uses artificial intelligence and machine learning to continuously monitor our entire environment, making us more secure and able to audit our entire process for full accountability and finally, the cloud makes it easier to keep applications and data that are running and local geographies.

And to adhere to the increasing nuances of regulatory and compliance requirements. So geographically specific and it's our business expands globally. This becomes an increasing benefit on cloud.

From a capital perspective, our cloud migration has reduced our ongoing need to spend on third party hardware and software. We are reallocating those savings towards internal innovation and spending more on growth Capex. We are leaning into our highest growth highest return on invested capital organic opportunities across insurance and energy.

Within insurance, we have seen great success with the development for the Lightspeed platform. This organically developed data for platform has automated and improved the underwriting process for our customers and is driving strong top line growth with within our ISO business as we've extended it across personal and commercial lines.

Specifics commercial lines, we've seen continued success and small commercials for business owners and commercial auto.

And with Lightspeed, we have augmented our AI and machine learning capabilities, introducing image analytics that will help present, a holistic view of risk at the point of quote and ensure that small business owners get the coverage they need.

We've also expanded our entity resolution and benchmarking data and analytics to help our diverse client base scale and increase their speed to market.

We are also accelerating our customers' journey towards zero application questions, helping drive speed and efficiency.

With over 80, traditional and insure tech customers leveraging lightspeed commercial we're enabling the industry to free up underwriting talent to focus on more complex risks.

And helping our customers become the carrier for managing general agent of choice in this fast moving and profitable space.

Within energy our internally developed cloud based <unk> platform is transforming the way customers interact with wood Mackenzie data as we are integrating our complex datasets seamlessly into their workflows, we have greatly reduced our research cycle times from days to hours, allowing us to commercialized solutions more quickly and <unk>.

Update data and existing solutions more frequently.

This empowers our customers with the data necessary to make timely and well informed decisions about commodity markets around the globe, we are seeing strong value based price realization.

And revenue growth.

All thing and solid returns on capital for this platform.

The capital management discipline is also evidenced in our acquisition strategy.

While interest and valuations for data analytic assets are high and we've been very selective and focused our attention only on assets, where we can create incremental value by combining datasets for new solutions, leveraging our infrastructure or improving sales and distribution through our strong customer relationships and industry scale.

Our recent acquisition of fast is a great example of how we are leveraging our relationships.

The industry to accelerate the adoption of SaaS software driving strong returns on invested capital.

On the engagement front and even in a mostly virtual mode. We continue to get ever closer to our customers. This engagement starts at the C suite and runs through all levels of the organization.

This is evidenced by increasing frequency of meetings better attendance at our virtual events and increasing interest from customers to work with us as development partners and.

In fact, we recently announced 2 key development partners for our lens power solution, namely Vestas and when book.

It is also translated into building sales pipelines and more sales opportunities.

And we're having great success converting these sales opportunities into new contracts as we benefit from our ability to bundle our broad offerings to meet our customers' unique needs and this is particularly evident with our fastest growing customer segment and insure tech customer companies.

On the innovation front, we recently launched cyber risk navigator or cyber loss modeling application. This release represented a year long effort to redevelop the platform from an on premise solution to a cloud native SaaS solution given.

And given the scalability of the cloud clients are now able to run analyses and minutes that used to take hours.

It also provides us the ability to bring new features and model updates to the market quickly rather than being tied to annual software releases, which is essential for our rapidly changing risks such as cyber.

We've also made great strides and advancing our offerings and the telematics space with the introduction of the driving DNA score.

And this enhanced solution is powered by the unique data from <unk> data exchange and that includes 260 billion miles and rolling of robust driving behavior data.

And from $8 million connected car drivers the driving DNA score and enables our customers to enter and expand and rapidly growing usage based insurance market and is another key addition to our full suite of telematics solutions.

And finally, I'm excited to share about and advances <unk> made on our environmental stewardship commitments. We recently completed our 2020 greenhouse gas emissions inventory and I am pleased to report that for the fourth straight year, we balanced 100% of Barrick's reported scope, 1.2 and 3.

Including business Air travel emissions through a combination of purposeful reduction initiatives and investments and renewable energy certificates and carbon offsets.

We remain focused on implementing meaning meaningful physical and operational changes that will reduce our greenhouse gas emissions over the long term.

Those include the consolidation of multiple <unk> offices in Boston, and London and to new energy efficient business centers as well as the continuing strategic realignment of our data management activities to take advantage of the major efficiencies presented by cloud computing.

Building on the progress we have already achieved to date I'm also pleased to share that <unk> is committed to and absolute 21% reduction and our scope 1 and 2 greenhouse gas emissions by 2024 compared with the 2019 baseline.

And developing the targets <unk> collaborated with echo metrics.

And accomplished leader and the field of sustainability metrics software and services.

The resulting targets incorporate the latest science based targets guidance aligned with a 1.5 degrees Celsius global future.

I look forward to updating you on our progress as we remain committed to addressing the very real impacts of climate change today and for the benefit and future generations.

And I have great confidence that our focus on innovation and serving our customers will help us deliver on our long term growth objectives, creating lasting shareholder value as our business recovers from the short term impacts of the pandemic. We continue to actively studied the signs of resilience across the different parts of our company.

Our dynamic capital process is designed to ensure that our capital is deployed into the highest growth and highest return opportunities.

With that let me turn the call over to Lee to cover our financial results. Thank you Scott first I would like to bring to everyone's attention that we've posted a quarterly earnings presentation that is available on our website.

Moving to the financial results for the quarter on a consolidated and GAAP basis revenue grew 10, 1% to 748 million and net income attributable to <unk> decreased 14% to 140, and 54 million, while diluted GAAP earnings per share attributable to bear risk declined 13% for 94 cents per <unk>.

Share. These declines are the result of a noncash revaluation charge related to the U K tax law change adjusting for the impact of the 21 per share non cash revaluation charge diluted adjusted EPS increased 7% to $1.38.

Moving to our organic constant currency results adjusted for non operating items as defined in the non-GAAP financial measures section of our press release, we are very pleased with our operating results led by consistent growth and our subscription revenues and a recovery and our transactional revenues as our business rebounds from the Covid related declines from last year.

And the second quarter organic constant currency revenue grew 6.3% led by continued strength and our insurance segment and sequential improvement and our energy and financial services segment or.

Our non COVID-19 sensitive revenues as we defined at the beginning of the pandemic increased 5.5% and the second quarter 2021, as compared to the growth of 6.5% in the prior year quarter, the stable growth and our non COVID-19 sensitive revenues, representing approximately 85 per cent of our total revenues reflects.

The durability and resilience of our primarily subscription model on.

Our COVID-19 sensitive Brent revenues, which represented 15% of our consolidated revenues continued on the sequential improvement trend and returned to growth this quarter, increasing 12, 1%.

This compares to declines of 20% and the second quarter last year and to price.

Here quarter performance.

Lines of 5.9%.

Growth was primarily the result of improvements and consulting and our energy segment and a return to pre pandemic growth rates in many of our products and services within insurance, particularly within the U S. We did experience continued COVID-19 related weakness and our financial services segment as government forbearance programs are negatively impacting <unk>.

Proxy volumes.

Organic constant currency adjusted EBITDA growth was 4.2% and the second quarter led by solid growth and insurance and energy offset in part by weakness in financial services total adjusted EBITDA margin for the quarter, which includes both organic and inorganic revenue and adjusted EBITDA was 49, 6% and the quarter.

Down 172 basis points on a year over year basis, but still above our pre pandemic margin level of 46, 6% recorded in the second quarter of 2019.

Much of the decline is associated with the normalization of our costs as we anniversary the COVID-19 and benefits from last year, including reduced head count growth and lower incentive compensation.

This margin also reflects an increase and the pace of investment and our technological transformation, including our cloud transition costs and the impact of acquisitions.

On that note, let's turn to our segment results on an organic constant currency basis.

In the second quarter insurance segment revenues increased 7.8% demonstrating strong resilience and recovery we.

And we saw healthy growth and our industry standard insurance programs and catastrophe modeling solutions repair cost estimating solutions and international insurance software solutions. We also experienced strong growth in transactional revenues associated with an increased level of securitization revenues and our catastrophe modeling business.

A modest benefit from storm related revenue and double digit recovery growth and our COVID-19 impacted revenues as we compare it against declines last year.

Adjusted EBITDA grew 6.6% and the second quarter, while margins declined 148 basis points, reflecting a return to a normalized rate of head count growth compared to the prior year and higher year over year short term incentive compensation expense.

We also continue to invest and our breakout areas as well as our technology modernization, including our cloud transition.

Energy and specialized markets revenue increased 5% and the second quarter due to recovery and our consulting and project based revenues across energy and power and strong growth and environmental health and safety solutions and our energy transition research and included in the quarter was revenue associated with the strategic consulting project debt.

<unk> added approximately 1 point to segment growth.

We continue to benefit from strong adoption of our lens platform as customers are seeing the value of our integrated cloud based data analytic environment. We remain a key part of our customers' most strategic conversations as they deal with the ever changing energy landscape and our broad base of solutions across all commodities are mission critical to our customer.

And as they navigate through this dynamic environment.

Adjusted EBITDA grew 8.4% and the second quarter, while margins expanded 74 basis points, reflecting continued cost discipline and leverage from sales growth.

As we look to the remainder of 2021, we want to remind you that we have a very tough margin comparison in the third quarter associated with some head count reductions furloughs and compensation adjustments that we need in reaction to the top operating environment in 2020.

However, some of these costs were reversed in the fourth quarter of 2020.

That said, we have a solid track record of managing through volatile times effectively and believe we are well positioned with our energy transition solutions as well as our lens platform to continue to outperform the end market and help our customers navigate this broad energy transition.

Financial services revenue declined 8.1% and the quarter, reflecting the continued impact of contract transitions that we undertook in 2020 and will continue through the third quarter of 2021.

As well as a lower level of bankruptcy revenue because of government support and forbearance program.

Spend informed analytics demonstrated stronger growth than expected and spending and advertising improved which enabled us to reduce some of the negative impact on revenue growth from the contract transitions that we originally anticipated.

Adjusted EBITDA declined, 77% and the quarter, reflecting the negative impact of lower sales and a larger impact on corporate expense allocations on the segment's smaller base. We continue to believe that the actions we've taken with DFS over the last few years are setting the business on a stronger foundation from which to grow going forward.

Our reported effective tax rate was 35, 6% compared to 24% and the prior year quarter. This higher tax rate is the result of and earlier than anticipated enactment of a UK tax law change that caused a noncash revaluation charge. This is simply a timing difference from our original expectations.

The impact occurred in the second quarter instead of the third quarter as we had originally forecast there is no change to full year results given the earlier timing of the tax law change and the fact that discharge was onetime in nature. We now expect our tax rate to approximate 20% to 22% for the second half of 2021.

Adjusted net income was 191 million and diluted adjusted EPS was $1.17 for the second quarter 2021, adjusting for the impact by 'twenty, 1 cent per share non cash revaluation charge related to the U K tax law change described earlier diluted adjusted EPS increased 7% to $1.38.

These increases reflect organic growth and the business contributions from acquisitions and a lower average share count net.

Net cash provided by operating activities was $233 million for the quarter down 6.5% from the prior year period. The prior year periods cash flow benefited from a deferral and both federal income tax payments and certain employer payroll taxes. As a result of the cares act, partly offset by earn out payments year to date.

Net cash provided by operating activities was $682 million, reflecting growth of 11, 4% versus the prior year period capital expenditures were $62.5 million for the quarter up 10, 2%. We continue to believe that capex will be and the range of $250 million to $280 million, reflecting our continued.

<unk> and our innovation agenda, our technological transformation as what was the carryover of certain expenditures that were delayed in 2020 as a result of the pandemic.

Related to Capex, we expect fixed asset depreciation and amortization will be within the range of $200 million to $215 million and intangible amortization to be approximately $180 million, reflecting the impact of recent acquisitions and changes and foreign currency rates.

Depreciation and amortization elements are subject to FX variability and the timing of purchases and the completion of projects and future M&A activity during.

During the second quarter, we returned $197 million and capital to shareholders from share repurchases and dividends as our strong cash flow allows us to invest behind our highest return growth initiatives, but also returning capital to shareholders consistently.

Our strategy to deliver long term sustainable growth remains unchanged. We are encouraged by the recovery, we are experiencing and our COVID-19 impacted businesses and we believe the stability and predictability of our subscription revenues will persist. We also have confidence and our ability to manage the cost structure effectively to protect profitability, while we do have tough cost.

Comparisons this year, we believe that we should retain some of the margin expansion. We experienced in 2020 delivering margins ahead of our 2019 level of 47%.

Taking this all together, we believe that as the Covid impacts abate and the global economies continue to open up we can return to our long term growth model of 7% organic constant currency revenue growth with core operating leverage, allowing EBITDA to grow faster than revenue, although it is difficult to determine that to predict that timing.

We hope this provides some useful context for you and we look forward to addressing your questions.

We continue to appreciate all the support and interest and <unk> given the large number of analysts we have covering us we ask that you limit yourself to 1 question and 1 follow up with that I'll ask the operator to open the line for questions.

Thank you as a reminder, and if you would like to ask a question. Please press Star then the number 1 for.

On your telephone keypad once again Thats star 1 on your telephone keypad. Our first question comes from the line of Greg Peters of Raymond James Your line is open.

Good morning, Thanks for taking my question, so I'm going to let the other analysts focus on the financials I'd like to pivot to the insurance business.

And on.

Specifically.

For the property casualty industry, we're seeing 2 variables for some volatile commodity locked down and then secondly, favorable pricing and yet and your organic was quite strong and insurance and insurance industry is forecasting a moderation of growth for them.

For the balance for the year on into next year can you give us some expectation of how those variables are affecting your business.

Yeah, Scott here. Thanks for thanks for the question.

2 things 1 is.

If you were to if you were to look at the pricing algorithms that apply and the solutions that we provide to the insurance industry.

The way that we price our solutions as it's related to the value of the solutions that we're giving to our customers. So it's not the case debt and arts.

And the pricing algorithm is a term which is significant and that relates to the amount of premium that our customers are.

Are putting through their own books of business.

And our solutions are priced according to the amount of profitability and growth that they generate for our customers and every CEO that I speak to and the insurance industry every 1 of them to a person considers their businesses and growth business and.

And so they are leaning into new methods as a way of trying to to grow there.

2.

Growth for other businesses.

And.

We expect that to persist and it's always been the case actually debt.

Debt in our insurance business, we have grown considerably faster than the underlying.

On product marketplace, and actually that's true and the energy vertical as well.

And why because our customers are trying to make increasing use of data analytics solutions. So we're not really yolked to the.

Net written written premium volumes.

And the insurance industry.

Got it and my follow up question again sticking with operations.

And you talked about your claim analytics and exact wear products and suite of products share off from there.

<unk> history is really beginning to struggle with inflation cost per costs on cars.

Rental car.

<unk> gone through the roof and I'm just curious from an operational perspective your products your service for.

Abiding to the industry how are they adapting rapidly to these changing conditions.

Conditions in the marketplace to help the insurance industry.

Yes that is something that our customers care about a great deal and so it's really incumbent upon us to make sure that the cost factors associated with the kinds of solutions, we've got which which are are aimed at understanding.

And what it takes to repair something we need to make sure that the underlying cost factors are current and and and that is something that we give a lot of attention to that has always been a part of.

The way that we approached us, but it's particularly important in a moment like this where demand demand surge and therefore, the price and the underlying commodities moves around so you you have highlighted something that our customers care quite a bit about <unk>.

Actually I haven't turned and Mark here, who leads our insurance vertical not long ago, we were on a call with the CEO of 1 of the largest insurance companies and North America and.

And this was 1 of the topics they highlighted and we had a lot of conversation about what we're doing and.

And the way that our solutions do keep up so really just affirming that the topic that you highlighted there is on the minds of our customers market that you want to add to that I think our customers expect us to be on top of that so as an example.

Per cost estimate solutions.

We're making constant updates on it.

Weekly basis, we're providing them whats the cost of lumber as an example, which has been very significant inflationary item.

And debit product cost estimates are reflected.

Debt are reflecting that that increase.

We are very much into the world of social inflation and cost of.

Litigation and the cost of claims is up as a result of that so.

And those trends are reflected in our total was our loss cost and that's the pricing they do and it's reflected in the repair cost estimates.

And as reflected in how they underwrite a property or any insurance risk and I'd like to think that we are at the lead and thinking.

For them on that topic.

Thank you for your answers.

Thank you.

<unk> comes from the line of Gary Bisbee of Bank of America. Your line is open.

Hey, good morning, Scott Thanks for the updates on innovation and technology and I wanted to ask a little bit about that you've talked about how the tech modernization progress youre, making is accelerating the ability to innovate.

And reducing capex, which.

Youre trading that off for higher capital spending on innovation and new products I guess, a 2 parter.

As we think about innovation broadly across the company.

Do you keep internally or can you help us think about like the concept of a vitality index how much more.

As all of us.

Change youre doing contributing to growth from innovation and.

And.

And then.

Secondly.

Do you see that benefit.

And it's something that should allow you to continue to deliver to the long term, 7% revenue growth target that you have or is there potential and that innovation accelerates debt.

It began to outperform that target more meaningfully.

Innovation and.

New product and become a larger part of your revenue. Thank you.

Yes, Thanks, Gary well maybe to your second question first.

We do feel very good about the shape of our business, where we said and the and.

And the flow of what is happening and the business World 1 of the most important things happening.

In the economy as businesses, becoming better and more analytics digital version of themselves and that is that is fundamentally what is in and around and underneath.

Our business and that we enjoyed these.

Tremendous relationships with our customers.

Founded upon trust and some really really valuable and distinctive solutions, that's our business.

And the environment in which we're doing our work obviously.

Yeah.

And that in effect as it did on everybody, but over longer periods of time. There are these very constructive.

And so that that is that's kind of fundamentally our growth story against that our customers look to us to be their fill on the blank tech partner.

And in every 1 of the verticals we serve there's a fill in the blank Tech insure Tech Fintech energy Tech. There's a list of players like that as long as both of your arms.

Our customers expect us to be providing innovation that is 1 of the reasons why they they lean into the relationship with us and the first place so.

So.

I think that's the nature of your question Gary was like this investment into that solution and what is the effect of that.

In terms of our growth we pay attention to that it would probably surprise you to know the relatively modest size of investment opportunities that all the way to the office of the CEO. We're looking at because it's the lifeblood of our business and so we do we are resolving things down to the level of the individual solution.

And we pay attention to how theyre doing and we make decisions about should we put more and because it looks very promising should we pull back from it because it appears not to be gaining steam we're doing that all the time that is that is what we do on a moment to moment basis, but when you talk about vitality.

And you really you have to take it you have to take it holistically because.

And as we said earlier and this call.

Bye bye count of corporate entity.

And the insurance industry. The most rapidly growing segment are the insurer test the new players and I take such comfort and the fact that day they show up with a clean sheet of paper.

And then and they are rethinking everything how are we going to build and insurance business and they are day seemed so consistently to want to standardize on all of our solutions, that's vitality now where they.

They are adopting solutions that we've.

And in some cases that we created years ago, but they are buying into them because they remained right at the leading edge and theyre very insistent that everything be cloud native tech forward.

We're not even going to look at share if you if youre not that way so.

I would just encourage you to understand vitality means a lot of things. It means the infusion of value and to a solution that has been around for a long period of time as well as the new solution, it's new customers as well as existing customers.

But theres no question, if you pop all the way at the top of the organization and ask the question look at that top line rate of organic revenue growth.

1 of the most powerful things that drives our growth is the adoption of solutions, whether it's a new solution by and existing customer or an existing but enhanced solution by.

By a new customer and.

The investing that we do and innovation is in support of all of that.

Mark you want to add something.

Yes, just maybe to provide a good example of leveraging Scott described I think 1 of the its accessories is really inside of what is our underwriting and rating ISO business. We continue to have a very big business focused on what we're for its loss costs rules forms and we have been growing kind of inflationary way because we've been very thoughtful with our customers.

The growth that we've seen that has increased over the last several years is because of that and innovation investment and kind of bundling. Thanks for decent share techs and others. So I just wanted to reaffirm and maybe provide us a tangible evidence.

And then just a quick follow up for Lee and the margin you did a nice job keeping the majority of the pandemic benefit from from the prior year in this year's quarter.

Cause I guess travels 1 probably that hasnt come back, but what other costs may not have.

Fully normalized and sort of.

Is this a good rule of thumb going forward or would you expect that more and more of the costs that came out last year likely will come back in and the next few quarters. Thank you.

And thank you Gary.

Try to look at the cost structure and evaluate what's temporary and what's structural and there is some temporary element of this that we've been able to to hold on to but I think to your point.

On the on the travel and entertainment side I think there are structural savings that we are we will be able to take advantage of.

Over over time, and so I think some of that there was a structural change and I also think over the longer term as we adopt or adapt to the flexible work structure that Scott described in his comments on debt. It will provide opportunities for us from a productivity from our real estate cost standpoint.

And to reduce some of those expenses over time, but of course that follows kind of the lease the lease renewal process, but those will be things that we're able to achieve over overtime as well and then finally the other element is compensation.

And that is more directly tied to our overall performance against our growth targets and overall overall head count growth and I think that will that will that's the element that is likely and we certainly hope is going to normalize.

Insistent with the achievement of our revenue growth and are.

Our EBITDA growth.

Thank you.

Appreciate all the color.

Thank you next question comes from the line of Pat.

Hamzah and Missouri of Jefferies. Your line is open.

Okay.

Good morning.

I just wanted to go back to the.

For the question on your long term sort of 7% plus organic.

Growth.

Sort of aspiration you know it was very consistent prior prior to 2015.

Excuse me and.

And I realize.

For 2015, you hard mix issues cyclicality of the business mix changes and the portfolio.

But going forward is it just you know the word reopens and you can get back to 7% plus or you know you need to see some of these benefits from the big investment spend that's been going on and that really lagged and just give us a sense of you know is it is it just the macro or is it.

You know execution or any other thing, we should be paying attention to to get back to 7% plus consistently.

Well as I said before the nature of our business is that.

Because we're providing a unique kind of value to our customers.

Very consistently our experience has been that we grow at a rate greater than the rate of growth and the.

Verticals that we're serving and I don't see any change and that.

When you describe it that way kind of stable normal environments are all else equal supportive.

And you would have to expect over long periods of time. If you look at if you look at the marketplaces that we serve they are very important elements of the economy. So.

Pieces, which is they will remain important.

It's a pretty sound 1 and then actually the demography of the customer sets inside of these verticals. They don't really change all that rapidly of course, we're always paying attention to that but they don't tend to so you've got that as the background, but there is no question that there is a huge dependence upon execution the whole.

And agenda has to be done well we have to we.

Half 2.

Dig in with our customers as development partners to make sure that we hit what's needed that we get it to market faster all of those things have a lot to do with returns on any given.

Innovation investment that we've made so that's very important and another thing, which I don't know I suppose if you watch it really carefully over long periods of time.

This would be this would be evident but I just want to highlight that there is there is a great deal of dynamic inside of what we're doing in terms of looking at the solution families and the solution sets that we've got and deciding where are they and where are they headed and we have a very long track record and all.

I'll take the insurance vertical since thats the largest 1 for us.

And investing more in side of things that are showing a lot of promise, but retiring and some cases selling off solution sets that debt, we have as well and so it can all look it's kind of like the dark on top of the lake It looks it looks very it looks very steady but underneath there is furious.

Paddling going on and we get down to the level of individual solutions.

Again, just using insurance as an example through the years. We've retired a number of things that we were doing we invented a whole lot of things all of that is inside of getting to this this long term view.

And growth potential.

Central.

And so our hands up.

If I can just kind of supplement on that indicated to provide some validation.

You referenced there are a couple of elements here, but if you look at the underlying insurance business. It has consistently delivered on that 7% organic growth area and were weak.

Where there have been on negative impacts from that it is either been because of some of the nearer term cyclical elements associated with the energy business, but that business as we have seen and demonstrated particularly with the lens platform on the investment in the energy transition practice and has demonstrated their potential.

And to move to similar levels of growth and financial services.

<unk> has been undergoing a transition on to a more focus on sustainable growth, reducing some of that volatility so I want to make certain that debt.

Net you appreciate that underneath the space is a consistent track record of delivering on that potential with some of the other elements as we move down this path of investing in the platform in order to for us to deliver the value of those rapidly growing datasets improved platforms against the business that's been the recipe.

That is delivered and supports our conviction of the achieve ability of that going forward.

That's extremely helpful. I really appreciate that and then just just my follow up question is around capital allocation.

Your leverage is arguably going and get very low next next year.

Your capex at some point is going to go down and.

And so free cash flow should inflect a lot.

Should we be thinking about buybacks being and much bigger piece of a return on.

And what's sort of your cash deployment.

Or should we be thinking you know.

Outsize growth and the dividend.

Haven't done much large scale M&A and so I'm, assuming you can do M&A and return cash.

Just any thoughts as to you know when you see that big free cash flow inflection at some point, where do you do with the cash. Thank you.

And so hamzah. Thanks for the question and we appreciate you identifying the the the strength and the in the cash flow and I think the important thing to emphasize here is that we believe that 1 of the strongest elements that we have the strongest opportunities that we have to create value.

<unk> is investing internally within the business.

Scott has described in the technology in the data sets and new services for our clients and so we want to make certain that we are taking every advantage, where we think we can generate incremental growth, where we can generate high incremental returns on capital from that so we start from the position of how much capital do we.

Have available that were generating from the business, what our opportunities first to invest in the business in a way that takes advantage of those opportunities to generate growth and returns and secondly are there opportunities that we see in the M&A market to invest in businesses that we can create value by meaning.

Improving their revenue growth through our distribution and utilizing their datasets are more effectively or improving their technology and fast as we've described it's been it has been a great example of that Gen escape and our energy business has been additive has generated attractive returns on capital for us. So that's the second use.

And then the decision on share repurchases is really an outcome of what capital do we have that we don't have an opportunity, we don't see and opportunity to invest to contribute to growth or returns on returns on capital. So it is a and outcome of our capital allocation process not something.

And that we target at the outset, so kind of taking your question. If we don't see those opportunities if the M&A market.

Doesn't present opportunities for us given where valuations are or the nature of the business to create value and then we would expect that excess capital to be returned either through the dividend or through increased share repurchases, but it will all be driven by that investment opportunity on our discipline.

Great. Thank you.

Thank you once again, if you would like to ask a question. Please press star 1 now.

Question comes from the line of Andrew Jeffrey Securities.

Sir your line is open.

Hi, Good morning, I appreciate you taking the question.

Mark maybe a question for you on on Lightspeed It sounds like it's 1 of the day.

For exciting revenue growth drivers within your insurance businesses, especially as you expand beyond auto can you maybe dimensionalize for us.

And of pricing power might have and that business and how important that is to.

And the durability of that 7% segment organic revenue growth target.

Yeah. So let me try to maybe provide some parameters.

The way we're going about this is we really believe that and insure and their search for the best experience for the customer the digital engagement and they want information that's actionable and they can kind of have a binder book quote, meaning when you go online and you want to get a price.

You don't want it to change and didn't.

And basically 33% to <unk> 40 per cent of the cases that price changes if you stay on interest and they do all of this underwriting and pull the information, we're bringing all that information forward and the combination of data, we have and analytics so that sure.

Sure has confidence to quote and that's a big change so that is noteworthy and important and we've tried to do and kind of thinking about the opportunity here.

And we know who is providing that information.

And we feel its about a billion dollars and so the b type of market opportunity and insurance space.

So we think we have a lot of runway, especially on the personal line side, we have a strong base on the commercial line side to begin once that's kind of an extension.

Which hopefully provide you with a little bit of context of why we think it's important and also why we've.

Can you emphasize that's fine.

Yes, that's really helpful I think being on.

We'll quantify some of these tangible will really help investors.

Gain confidence and our long term growth targets and then and then a quick follow up on cat modeling.

It seemed like that was a decent tailwind this quarter is that something we need to think about in terms of a volatility how much of an impact does that have on your business on from an issuance perspective on a quarterly basis.

So the majority of our catastrophe modeling is around a touchdown subscription model that we've taken a lot of customers and we've had a lot of wins. So the growth you've seen the underlying foundational growth has us winning customers and bringing them onto the platform.

And where youre seeing a little bit of a spike and valley is inside of what is the ILS market. Those are the cat bonds and we referred to.

And that is a little bit a function of timing of the market.

And we had a good couple of we had a good quarter, we probably would expect a strong I'll refer to and end of year.

It's a little bit tough to tell whether that's going to grow in 2022 at the same time I would say to you that the market in general is getting more and more collateralized those type of risks. So if I were if you would ask me what the growth perspective is for cat bonds over the next 5 years I would say, it's going to be up and it's going to.

Bigger and we're well positioned for it and.

Whether it can be up or down and 1 particular quarter that is a tough estimate for you and I hope you can appreciate that.

Difficult to we haven't and forecast and quarter by quarter, but I think we have field for year over year.

Yeah, that's good insight thank you.

Thank you next question comes from the line of Kevin Mcveigh.

<unk> Suisse. Your line is open.

Great. Thanks, so much hey, wonder if you could just.

Give us a little bit more context on the Duck Creek.

And now it's been earlier this quarter, where you talked about day enhance integration.

Within your insurance workflows, and what that can meet for the business longer term in terms of.

Similar template should we expect a similar.

Opportunities.

Let me continue.

Thank you for the question another good opportunity I think I've highlighted in past sessions here 1 of the things, we're seeing more and more frequently our customers are looking forward to this interconnected ecosystem. They want the ability to use their internal solutions.

<unk> solutions or other third party solutions and a connected way whether that's through API on micro services and we're spending a lot of time and money, making that happen. So what we're seeing and what we're hearing and what it does is it really helps us because there are a lot of customers out there on those big.

Sure and software solutions like Duck Creek.

And why it would be another 1.

And we have integrated with those solutions and such a way for those customers can access information from <unk> and analytics from Paris or claim solutions from desk in a way that makes it easier for them to operate more efficient for them to operate and what it also does is it gives us an opportunity for an easier sell because the <unk>.

<unk> is built in and it's connected so we find it to be very customer focused and it also gives us some runway and accelerated pipeline for sales.

And Mark just to follow up is it.

Lead conversion enable you to do more of those whereas maybe a year ago. When it was more on Prem you wouldn't add that functionality and to do it or is it just coincidence in terms of the timing.

So let me say it this way I think what we have done.

Over the last 20 years as we've had SaaS based environment. So these are not locally installed.

Solutions, so the SaaS based business model facilitates this.

Your question no. It's a good 1 I think we can do it quicker and more efficiently when we want to integrate using the cloud and as we've kind of transitioned to cloud. So it has not been and enabler, but it has become more efficient and cost.

Thank you.

And.

Thank you next question comes from the line of Jeff Mueller of Baird. Your line is open.

Yes. Thank you appreciate all of the updates in terms of your current thinking on the cloud transition was hoping you could give us a similar update on the <unk>.

Associated expense arc, I think we said that.

There's a headwind from increased cloud transition costs. This year. So just would love any thoughts on how much are you spending per year, 1 does it flip positive and when it flips positive.

Is it a step function change or should it just be viewed and the context of <unk>.

Expanding organic EBITDA faster than organic revenue over time, because there was a reallocation of those savings.

Yes.

Thank you Jeff for the for the question there are.

Several elements to it and I know that you are asking it within the context of cost.

Which I'll address but I also want to make sure that there is an appreciation that there is a capex element of this and then there was also the productivity element to to this transition first on the cost.

You are taking on.

And additional cloud capacity from the provider before you are eliminating some of that legacy. So you have kind of a redundant redundant period. In addition, you are taking on Recoding expense for the applications as you migrate them.

And into that new into that new environment and so.

As we have been implementing this of this process across hundreds of applications in our various businesses you have that upfront cost that is aid on a net have a negative cost impact.

Which we view as an investment and we look at it on individual project by project basis R. R.

Our technology team does a great job tracking the specific costs and <unk>.

Savings, but think of this as rolling across the organization and for the first year and second year. We are still in a net investment mode from a cost perspective within the within the business.

Capex.

We will be more limited going forward. So you will be extracting capex savings over time, because the capex intensity of our technology footprint is declining, but that's something that's achieved over overtime and.

And we're beginning to experience that in.

In the second year of the project, but that will continue naturally into the into the third year and and beyond.

And so we think about Opex and Capex, we're still on a net investment mode and the second year, we would expect that and the third year that turns into a positive a positive contribution.

Now.

The other thing to factor and is that as Scott described on the Capex front that is it will enable us and this was also true on the Opex front to shift some of that opex into other investment areas. So when I've talked about margin and the past I've described there is natural operating margin expansion on a pre investment.

Level, but then we consume a portion of that from an investment perspective, and that's where we generate incremental growth and returns. So we do believe that debt. This will be additive going into the third Europe and then we will determine do we see investment opportunities to pursue that beyond and riding on top of all of that is I think.

The more material benefit of this which is the pace of innovation the ability to associate more datasets to populate platforms that are creating a broader lift I think within the within the business and has since by I think a number of the questions in terms of its impact on our overall growth. So.

I wanted to give you a kind of a comprehensive sense of the way that we are thinking about it and because of that complexity I think it would be very limiting on too to kind of specifically just focus on the cost element of it yes, there will be cost benefits, but those have to be will be balanced by our investment decisions and then the broader impact.

From the from the transition.

Got it adds and.

And just add to what you were saying there Lee and not trying to sort of specify on sort of a particular level of margin impact.

I do think of this transition as being and events at a moment in time and it does have some discrete elements associated with them just to call out a few of them.

And there will come there will come a moment, where we're no longer computing on mainframe.

We're not fully at that point, yet, but they are I mean, we will have an event, where we will get out of a sledgehammer and literally break up the quarters inside the the mainframe and that.

We're already reducing the load on the mainframe.

And we can find some ways to benefit from that we run power data centers 2 of them and the United States, We will close them at some point there are fixed costs associated with data centers.

And so that will be and events and we will call out those events for you when we get to those and then something else, which I think is really extremely important as debt.

You used to buy compute capacity.

And in relatively large chunks and then as we moved more towards.

On the server environment, the chunk, Scott smaller, but you're still buying chunks and a world like that anybody who is writing and algorithm anybody who is demanding compute power.

For them, you've already you've already bought the capacity within limits and so incrementally it doesn't cost you anything and.

And then and a world like that you can actually be a little bit.

And I don't want to use the word sloppy.

But you can't you can essentially use more compute capacity and how you want to get to the answer you are trying to get too and.

Maybe you don't have to cash that analysis, you just did quite as much or you don't have to summarize at the column and row level. Once and then and then worked through those those derivatives et cetera, My point here being that there should be and interaction between how you analyze for.

Computation, how you compute in the context of analysis.

And and the way that you consume computing capacity and and a variable lives world you have to pay more attention to that than you used to and so our development and analytic communities are responding and need to respond to that but on the other side of the transition you actually think differently about.

Literally what have you and code.

And then you did before so that you can be efficient and your use of compute capacity. So what I'm, saying is there is that there is a multi year thing here, but on the other side of it. It is actually very different than where you were before you entered into this this transition you don't run physical facilities, you don't run really large hardware and you think very differently about how you are.

Structure analysis, and that will just be a more and that's a better world for a company like ours.

Appreciate the comprehensive response.

You addressed the insured tech impact and the vertical software providers that served the insurance industry.

And I want to ask about I guess, the third category of.

Maybe adjacent players to you, which is there is a lot of funding going to companies that are gathering data with force.

Horizontal ambitions, but some of them also have ambitions to applied the data to the insurance industry and.

The real estate digital twin image capture companies the satellite based with telematics and cause a whole bunch of these companies that are out there and I know you have the various data exchange but.

Curious as to how you view the impact on on Paris for your customers from those types of options and if they are competitive day partnership opportunities for you et cetera.

Well, yes sort of in reverse order on your question, yes, there can be partnership opportunities.

Probably be of interest to you if I took a list of the top.

Okay.

50, insure tech companies the number of them that we're in communication with today, when and when I say it share tech companies I don't mean, new form insurance companies I mean providers of solutions.

And the number of those companies that were in conversation with many of those conversations.

They are coming and looking for us.

So.

So we start out aware of the fact that and this world.

You can you can start out with some programming capability and try to create something where you're hosting it and it's mostly about digital workflows et cetera, we see this all the time.

And so we do pay attention to it.

I would I would just say also that.

There are there are <unk> there are a lot of reasons why our customers lean into a relationship with us.

Some of it has to do with the breadth of our family of solutions.

Solutions some of it has to do with our proven track record and some of it has to do with reliability and customers really care about that when you were talking about and enterprise level.

Application there are a lot of reasons and and and we're powered by really really strong.

On content assets and a lot of the filling the blank tech startups, they don't start with content. So.

No.

We never walk around feeling overly confident we're very aware of these developments, but we do feel as if we start out and a very strong place in this and this discussion and we like talking to these filling the blank tax and they like talking to us. So if there's someplace, where 1 plus 1 can be greater than 2 we're very alert to that.

Got it thank you.

Thanks, Jeff.

Good question.

Thank you next question comes from the line of Alex Kramm of UBS. Your line is open.

Hey, good morning.

Sorry, if I missed this earlier, but on.

On the Covid impact the 15% that grew 12% this quarter did you.

Can you talk about where we are there do you feel like we have fully recovered.

Or what areas do you do you do you still wait for I guess improvement I guess I could point to a couple but.

And what do you think we are and that transition.

Yes. Thank you Alex I appreciate the question. So I would say that we are when we look at R and good sensitive revenues across the across the business as a whole we're looking at it business by business and so we are seeing some recovery stronger recovery in <unk>.

And areas for instance on the on the property side, we've seen and the insurance from probably the stronger the strongest recovery some recovery in and driving although driving us would not be what we would describe as fully recover and at this at this point.

Energy and specialized markets, we are seeing a strong rebound and consulting revenues.

And that is demonstrating relatively robust recovery. We're also seeing some strengthening in our and our new subscriptions on it which will flow in overtime I think reflecting some of the improved.

On pricing dynamics.

And DFS there is.

As an element, which I referred to our spend informed analytics, which because of advertising and marketing we have seen and uplift and that's performing better than we expected, but the bankruptcy element of our business is still experiencing the challenges of all of the government support out there in the <unk>.

<unk> and so that's.

And yet to recover it becomes very difficult to kind of quantify what and how far how much of a recovery I would say, it's certainly on a partial recovery not a full recovery, but and trends that we see we expect to see continuing improvement in that recovery for the business and it's probably worth.

Noting in our insurance in the insurance and and the energy specialized markets business, our COVID-19 sensitive revenues were up 20% year over year over year.

Financial services are still seeing kind of a year over year decline, even though we've seen and improvement in spend informed analytics and a deterioration or not and deterioration, but kind of the same level of declines on the bankruptcy side, So and hopefully that gives you a little bit of texture across the business for some of the trends that we're seeing I would also.

And note naturally should come as no surprise that our travel business internationally is still suffering significantly from very low international travel and so that's that's an important component.

Okay, maybe just a very quick follow up on this on the energy side and specifically.

If I look at some of the recurring transactional.

Breakout, which I I know, they're not perfect but.

It does look like a lot of the upside this quarter came from net consulting on the more transactional side. So given all the things that you're talking about with lens et cetera.

Is that not driving.

And the impact yet that you and the deal.

And I'm, hoping for or are they or are there maybe some retention issues elsewhere. It doesn't it doesn't look like it's it's flowing from the business quite yet. The success you were talking about there. So maybe just flush that out a little bit more.

Sure Alex and thanks for thanks for asking.

Asking that question on the follow up on that in that regard. So I think it is a.

Good distinction to make that the consulting element is where we are seeing that recovery on the COVID-19 sensitive side and focusing on the.

The subscription side of the business and I kind of want to build on my earlier comments.

And the impact of lens.

Which has been very positively received by a lot of our clients has been generating significant from contract renewals with price increases in the mid to high single digits. Now there are 2 elements to that in terms of its ongoing impact 1 is going to be.

And the rolling impact of that as subscriptions become come up.

And for renewal and.

And the second element of that is that then again net subscription is something that will phase in over and over time, given the nature of that but the important point from my perspective is that we are seeing.

A very positive uptake clients are working with wins, we've got and several operational assessments that had been <unk> been very positive and we've been able to achieve those price increases so that will be based upon our feedback so far a slow rolling but a and.

And improvement to the growth and that business, even before we also begin to utilize that platform to expand that customer set and the.

And the applications. We also are still experiencing some impact from the.

<unk>.

The last cycle's wasabi of 1 client in the energy space and some consolidation.

In the upstream area that is having a near term impact on the on the research components. So that's another element that's factoring into it.

The distinction that you made is relevant and hopefully that differentiates that near term consulting boost against what we see as constructive longer term trends from lens and the pricing experience that we've had and how that should flow through over time within the business.

Yes very helpful color. Thank you.

Next question.

The next question comes from the line of Andrew Feinman with Jpmorgan. Your line is open.

Hi, Lee I wanted to ask you as you've taken over the operational responsibility of Rguest what have you found in terms.

On the Rguest in terms of various the ability to create further customer value and find new customer segments for August data or just the.

In general within a subscription model.

Thank you for the question Andrew.

Been able to to spend spend more time with the team at at various financial services and <unk>.

1 thing I would first emphasize is that they have been very focused on trying to integrate the data sets that we have from the various from the various businesses and.

And move from a more compartmentalized approach to the business to a focus on our broader client objectives and in fact, Lisa has implemented some organizational changes that support that a bad approach and focus from the business.

Which we think youll moves that that on 2 or more.

More effectively integrated platform for our for our businesses and we have also taken the step structurally too.

To move that business from a more consulting oriented.

Revenue revenue base to more sustainable growth and and.

And we are seeing that from a new business signings and pipeline perspective, and the way that we are bringing on new business and how we are structuring it and the types of the types of business.

To your question.

1 thing Thats important to emphasize is that various financial services in many ways has been and intellectual capital engine for much of the rest of the much of the rest of the business a lot of what they have learned and dealing with very large datasets and integrating them managing them data architecture.

For elements have been exported to the rest of the business. Many of the data sciences and many of the data scientists, including our CEO Nick defend.

Our chief analytics officer for cost spots have come from that background and are on we're drawing from their expertise and so there are other elements of the of what they've contributed to the virus that has been helpful. We are pulling from some of those externalized elements and a variety of ways.

Analytically and to develop new new products and the re platforming of the of.

<unk> 2 <unk>.

As an example of where we've been able to draw from some of the external expertise. So I think there is a good dialog across the across the 2 entities and we also look for interactions between the credit dimensions that various financial services have and some of the insurance elements of our of our business too and inform and in general.

Great new opportunities.

Okay, great. Thanks, Mike.

Thank you next question comes from the line of Toni Kaplan from Morgan Stanley. Your line is open.

Thank you so much.

And I wanted to ask another question on the Fintech side I.

I guess by partnering with the software platforms. It sounds like there's potential for upside from selling additional solutions on there just wanted to understand compared to history before these platforms, whereas prevalent.

You, providing a platform to your customers or are they just using their own platform and so and this case. This is just completely upside or is there any revenue that has sort of lost by them going to a sort of a software platform that is not yours.

No theres not revenue lost by them going to.

Platform provided by another third party so just to expand on that answer just a hair.

So in the and if you look at sort of over I'd say over the course of the decade, you go back a decade ago it was either.

Basically what we were doing was going to market either through our own platforms.

For our solutions, we are operating more point solutions and most of the integration was occurring customer by customer they were doing their own integration.

So now you fast forward for where we are today and where we're headed into the future.

We are we are more platforms and we were significantly more platform that we were and that is constructive and side of the growth of our business now and into the future and if you actually look at the pattern of investment what are we spending money on a great deal of it and a lot more than it used to be is on developing software, which you should hear as us building our own platform.

But when we strike a relationship with a third party that is debt itself, providing a platform. It is.

We're analyzing that and the context up well, okay. We could go direct the customer to do the integration themselves.

But basically that third party platform that is and ours is substituting for the customer zone integration efforts.

But not in a way that it impacts the underlying value of what it is that we provide which is being integrated and open there. So the whole moving towards platforms is customer friendly and it's constructive for <unk>, because we ourselves are doing a lot more of that and we used to.

That's helpful and then just and.

For the past couple of quarters financial services has had single digit EBITDA margins.

This debt.

And normalized margin.

And things depressing, a temporarily and any updated thoughts on strategic options.

Not the new normal the I don't know if you want to expand on that and and Tony Thanks for the thanks for the question.

That's not the case we are.

What you are seeing and that quarterly impact is the impact of some of the contract transitions, but we are expecting as we come come through that third quarter.

On a period, where we reached the end of that contract transition impact that you will see more normalized margins within that within that business. So that is not what you see now is not the expected sustained sustained element here.

And normal looks like what it did.

Last year for example.

In that vicinity.

Yes.

Thank you next question comes from the line of Manhattan.

Of Barclays. Your line is open.

Thank you Yeah, I just wanted to follow up on the financial services as well.

We've heard the positive spin on the business for quite some time, but for 5 years now the growth is declined the margins have come down as well so and what time do you guys decided to cut the cord or what's the what's the plan how do we get comfortable that it can be.

Growth.

Yes, Thank you Manav and we.

And you don't see a fairpoint we understand.

B.

On the frustration and.

And with regard to the growth.

It is important to understand.

There are 2 factors that are influencing where the growth rates are right now, but a very significant 1 is the are the contract transitions that we believe.

Our.

1 absolutely the right operational decision they are structural and they are finite and as I, just indicated and the and the answer to Tony.

Moved past those after the third quarter of this of this year. The other element is naturally the impact from from Covid on the business on our Covid sensitive revenues, which clearly had an impact on spend informed activity.

Bankruptcy activity and even some of the bank consulting and consulting revenue and so when we are evaluating and we are constantly evaluating the value of that potential entity as we do with all of our businesses and what are our options to optimize the value of that.

The right timeframe that we think is to look at once.

Russell transitions and the impact from Covid and so certainly 2022 should be what we believe is a much more normalized level from a revenue from a revenue revenue growth and from a margin perspective on that informs our view of the more normal operating state of the business as.

Well as a sense of calm.

On the structural changes that we have implemented and the operating changes.

And demonstrate their more there.

Are there impact more clearly in terms of growth at a top line and on an EBITDA level. So in.

In short I think as we move through these 2 temporal impacts and the and the structural impact on the contract transition 2022 should be a much more normalized basis for us to be well I'll say I'll say it more strongly 2020 and would have been coming out here party for various financial but for the.

The pandemic.

2020 would have been a coming out party for <unk>.

Gross financial all these changes that we're talking about making.

And Tom.

Yes, I mean, the fact that the business has a above average level of transaction revenues relative to the mix that is embarrassed as.

And has caused it to sort of respond differentially.

But.

Beginning in 2018, we acknowledged changes that needed to happen and the business model they were all <unk>.

Packaged and on deck and ready.

And then depending on the cabins.

Okay. Thank you for that and then maybe just a similar question on energy.

Lens on this he has been doing really well and you talked about energy transition growing but I think collectively.

Still a small part of the business right. So Heidi.

What is the other.

On the initiatives going on there that can help this growth, 7% and whats a pretty cyclical industry.

Yes so.

And that's and that situation and when we look at the rapidly changing landscape within power I think it's important.

Manav to understand kind of a legacy perception of where wood Mackenzie was from and oil and gas market.

Resource asset pricing orientation, and their and their expertise and where they have evolved and where there are potential to continue to evolve in an environment, where the energy transition from carbon based alternative schools and all of the capital decision investment decision expense dis.

<unk> that this client base and investors are addressing.

Is.

We are incredibly well positioned and lenses the platform that puts us in this space to be able to capture the rapid growth in datasets and analytics for that business and we're already seeing it as I indicated in terms of the pricing on the legacy product, we're seeing it in the growth in energy.

Energy transition revenues, both on a consulting and description subscription basis within chemicals, you saw on acquisition and metals and mining, which have increasing relevance given the importance of battery raw materials and so we.

And we view.

Wood Mackenzie and power advocate, our primary energy businesses as positioning themselves very well for capturing the growth and demand for those products and we see.

And through the the impact on consulting revenues and some of the challenges on the subscription basis that that growth potential ahead and so.

I think it's a combination of both that future opportunity and the clear success that we've had to date and <unk>.

Moving that business forward 1 piece of evidence from that if you look at a number of our competitors in that space. I think you will see very differentiated performance from a from a revenue growth and and earnings growth perspective, reflecting the significant progress that we've made and moving it from that legacy orientation around.

And the upstream oil and gas sector.

Alright, Thank you alright. Thanks.

Thank you and our last question comes from the line of Heath said Butka of RBC capital markets. Your line is open.

Thanks for squeezing me in.

Just wanted to focus on the strength and the software within the insurance segment book to international as well as the life insurance and international as well as life insurance, you, obviously talked about strength and the SaaS business I was wondering what's really driving it is it new customers the ability to cross sell.

Can you comment on the pipeline and maybe just a follow up on that is there was a lot of discussion about platform and partnership but how do you think about buying and building on our increasing your software and intensity.

And expanding on the platform that you already have.

Sure well. Thank you for the question let me.

Describe the 2 different <unk>.

Vertical for 2 different businesses, Scott So first of all.

With regard to international software.

And as part of that represents our sequel offerings. So we were talking a little bit about <unk>.

Platform to be for the policy admin system for the claim systems.

We are a player in the London market. We are the most significant players and the blended market and that is about growth and customers that is about extension of different solutions and products, including some of the acquisitions. We did that helped extend that platform.

And then space.

We will book.

Well all of those are interconnected ecosystem and we've taken that capability.

And as it relates to for the most part specialty commercial lines and started to extended outside of the U K and even into the United States. So those are big wins and extensions and it has been.

Very positive.

And if I wish to go over too fast side, which is the license side and what.

And what we've done is we've infused it with some analytics, but in large part what you're seeing is.

There are some very major life insurers, who have made some very major inc decisions and they've chosen and fast.

These are very long term contracts, 5 and 10 years and we.

We're implementing as we speak.

And that will be a very nice and very substantial run on <unk>.

Because as we implement what we will get is.

And I'll refer to it as subscription type revenue and as they put on new products and Theres new volumes, we would see increased revenue on long.

Each of those line so.

The major wins across the life insurance software platform space its been with fast and almost every case that were worth.

And again those are new logos as well as well as extension into other solutions and products within existing customers. So hopefully that answers your question and what I did try to at least kind of conclude and there we have significantly increased the index.

Make sure we transitioned SaaS environment to transition to the cloud we've extended both our capabilities through acquisition and build.

That's really helpful color. Thank you.

And Keith I will turn the call free to our presenters for any closing remarks.

Thank you this is Scott I'm seeing on where name on and okay. Thanks.

Thanks.

We are concluded. Thank you all for your time today your interest we'll be following up with a number of you and.

I appreciate as always the dialogue.

Great rest of the day.

Ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect have a great day.

Okay.

Sure.

And.

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