Verisk Analytics, Inc. (VRSK) Earnings Call Transcript & Summary

Hi, everyone. For those of you who don't know me, I'm Andrew Adams, I head up the Data and Analytics Corporate Finance Team at Houlihan Lokey. We're delighted that you've all been able to join us today. This is a follow-up event, our inaugural conference last year. But as all the panelists here know, being online does have its [ best ], and we have more than double the number of attendees on today. So before we get into the panel sessions, there are a few housekeeping points, but they're all pretty self-explanatory. The windows that you can change and move around, if you'd like. This session is going to take around an hour with 40 minutes of the panel and then 20 minutes for questions, and please feel free to post questions in the pop-up boxes as we go through. We'll be asking a couple of poll questions and it'd be great if people can just click on the PowerPoint and term answers on that, so we can get some, something a little bit more dynamic going on. Anyway, without any further ado, we're extremely grateful to our panelists for taking the time to debate the status and opportunities in the sector that we love. So I'll pass you over to Mike Chinn, who's going to moderate for us. Thank you.

Great. Thanks, Andrew. Welcome, everybody, to this webinar. We're very appreciative of Houlihan Lokey's team, putting this together for us. And as Andrew said, the nice thing about these virtual events is we can, maybe more easily pull together such a distinguished panel, and we're thrilled to have 5 of the senior leaders of the largest information services companies with us today. So thank you all for joining. Just a little bit of backdrop. I know the Houlihan Lokey team sent out some pre-read. I hope you had a chance to see it, but maybe just a couple of key points before we get into it. First, about every 10 years, the information services space has the opportunity to showcase its resilience. And the reason that many of us have chosen to spend our whole careers in this space. And that will be -- some of -- those will be some of the key topics that we talk about today. Valuations remain incredibly strong. Most public companies are trading at north of 20x EBITDA. Stock prices continue to hover near their all-time highs for the most part. And the resiliency of the renewal book continues to come through, reinforcing the very wide moats that many of these companies enjoy. More broadly, there are some strong tailwinds in and around information services, incredibly strong demand for better data-driven analysis and decision-making tools, so strong demand, but also a booming supply of data from new sources that just didn't exist before. Combine that with much better analytical tools, easier to use software that makes the analysis available to the corporate masses. And I think one can argue that this is the latest golden age for information services. ZoomInfo, as many of you are aware, went public, now trades at north of 20x revenues, not EBITDA, revenues and Dun & Bradstreet looks like they're getting ready to come back to market after less than a couple of years owned by an investor consortium. But at the same time, all of these new sources of data and all of these new -- and all of the new technologies makes it much easier for hundreds or thousands of upstarts with a whole lot of capital knocking around in the market to help them scale and grow and challenge some of these incumbents. So with that, our panelists are going to help us sift through this landscape, and I'm looking forward to hearing from all of you.

So, Martina, I'm going to start with you. Can you talk to us a little bit about, because not everyone on the call is sort of an expert in information services? Just talk to us a little bit about the underlying drivers of revenue resilience in this space.

Absolutely. And thanks for the invitation. It's a really great panel, very cool [ so ] this morning. I would highlight a few different components to the revenue [ modification ] information services. I'm sure my fellow panelists can answer this as well. For the large parts, we're talking about subscription-based businesses or businesses that have some sort of variable subscription pricing basis. And oftentimes, those subscription agreements can extend beyond a year, 2, 3, 4 years, which in and of itself, is an embedded strength of the financial information businesses. I think the only actual commercial model or the pricing model, it goes back to some of the points that Mike made around the need for ways in which to digest all of the information that's becoming available, but without some of the computing capabilities and achieving our data science capability several years ago would have been much more difficult to navigate. And I think those things, regardless of the economic situation today, if anything, they're even more important to users of this data who are using it to make very important decisions, given the difficult environment that we're in. So I would say it's a combination of a real sustainable need for the services within the various different client groups that we serve as well as the pricing model and the commercial model associated with the services.

Yes. No that's -- thanks, Martina. And Paul, I'm going to -- just sort of a follow-up on that. When you think about the -- some of the drivers that Martina talked about, what do you use at Fitch in your information business to get a good sense of leading indicators of what that revenue is going to look like going forward?

It's a pleasure to be with you all. So there's a number of things we look at, a number of things we think about. In terms of -- we look at how products are going down, it really is about seeing what customers are up to. So it's usage. Usage is the bottom line to all of this. So of course, you can talk to them, you can survey them, you can get anecdotal stuff. But fundamentally, we look at usage. We look at how much interest that we're putting out there has to the customers that we're trying to reach. And then obviously, use that to follow-up in terms of tweaking and adjusting and amending. So really, it's about usage and it's about customer engagement.

Great. Yes. Yes. With usage as a strong leading indicator of value, which I think leads into an interesting thing. And David, you've got the biggest business of our panelists and probably the largest number of customers and users, I would hazard. When you think about and one of the wonderful things about information services is now since everyone -- everything is distributed digitally, you really can get a great understanding of exactly what Paul was talking about. Can you talk to us about some of the, sort of, methods and processes that you look at, at Refinitiv to really understand value you're delivering to your end customer? And then maybe what you're seeing in a COVID world in terms of customer demand for different kinds or maybe new kinds of data?

Yes. Thanks, Mike. And hello, everyone. It's great to see you. I hope you're all safe and well and working well in this digital environment that we're all in and as [indiscernible] on the panel. The reach that we get is extraordinary in this digital world, you can reach any part of the world as we are now for it. Paul mentioned usage of data as being a really good lead indicator on what's actually happening. And I think all of us in the inflammation world have got a lot more sophisticated at understanding what our customers are doing with the data, how are they using it, and we're literally looking at that on a daily basis. So we get tremendous insight very quickly at what's changing. And I think through this crisis, we've never seen a crisis where the markets move so quickly with so much volatility in every single direction. And of course, it wasn't just a health care crisis, causing a market. We crash an oil crisis and energy crisis as well. And we've seen some extraordinary patterns. We've seen -- well, firstly, the data volume that's being produced, obviously, increasing by 4, 5x on peak days, just showing the volatility in the market. But on data consumption, we've seen our news readership go up by 5 or 6x on health care, pharma, vaccines, all of the areas that people are searching desperately for a leading indicator. We've seen wealth users go back into the market when the market just started to come up, there's about 160%, 170% increase in wealth users coming back in. Potentially, they were driving the surge back up in market levels we saw a few weeks ago. We've seen an uptake in sustainable finance data, ESG data as portfolio managers start to rebalance and try and move away from some of those assets with higher carbon emissions that they don't want to be in, in the future, recognizing that the companies and the funds with higher ESG scores have performed better through the crisis. So you're getting a whole lot of patterns here of different usage data, very real-time data, which we can use on and act on to say where the market moving, how can we deliver more value in these areas to our customers.

And let me ask you a follow-up there, David. So you've seen this surge in utilization of your products. And I think that we hear that and see that in a lot of places. I guess understanding that parts of the market are under distress, how do you -- and over what timeframe do you think you can translate that greater utilization and value into, sort of, real revenue growth. How do you do that and over what timeframe?

Well, there's 2 ends of the spectrum. And if you're in real-time trading, you're actually looking at milliseconds for trends to see where the market is going and where you act upon it. And for many years, the sell-side has been doing this, this isn't new, but where is the market moving in a couple of milliseconds and how do I trade and take advantage of that. I think the more longer term, say, the weekly, monthly view is more interesting because no one's really aggregated it before. We call it the data on the data that says, well, how do we then look at why is at sustainable finance data increasing? Or why is there increase in consumption in U.S. mortgage debt? What's happening there? And when we present that back to our customers, it's like holding up a glass of what the market is looking at. And their reaction is, okay, so we should be looking at that. We should be looking here. Or what are they not looking at that we want to be looking at in the market? So I think what we've found, it's not just a really, really fast real-time trading area, but the more weekly and the monthly view of where the market is at and what it's looking at is becoming incredibly value.

Yes. And can you charge for that? I mean, can you actually see that flow through to either retaining accounts that maybe you wouldn't have retained before or in pricing up or expanding your user base?

Well, I think it's part of our job of demonstrating value. And so the answer is yes, but not directly. You get it because you get higher retention, you get more interest. And frankly, rather than telling the world, hey, we've got these data sets, we can tell a different story. We can tell them where the market's moving based on the consumption of those data sets and that we can explain why the market finds them valuable. And that's a much richer discussion than we've been able to have it in the past.

Yes, yes. No, makes sense. So there's tremendous, I'd say, defensive characteristics in these businesses. Rob, let's talk a little bit more about maybe offense. Maybe thinking back to the last financial crisis, where clearly some new opportunities emerged for companies in this space. What are you seeing emerge as new organic opportunities or new customer segments where you can monetize the value of your information in this dislocation?

Yes. I think that COVID has accelerated the trend that we were already seeing, which is institutions being focused on managing a broader range of, not just financial, but extra-financial risks. And you think about it, the risks that weren't on the radar screen of many of these institutions just 5, 10 years ago, you have cyber risk, carbon transition risk, reputational risk, financial crime and so on. And there are a lot of drivers for institutions to manage these kinds of risks. It's not just regulation, but it's also your customers, your employees, your communities. And the penalties for getting the stuff wrong are increasingly serious, right? It's not just a regulatory sanction, but you may have -- it may become more difficult to attract talent to your organization. You may have a customer boycott. There's all sorts of things that I think are leading these institutions to focus on this range of risks. And so we see a real opportunity to help our customers with that. They're coming to us because they see that we've got vast data sets. We've got these analytical capabilities that can provide insights and help them get a more holistic view of risk than they had before. So it's being able to put together ESG, and cyber, and climate, and financial crime and being able to pull that together for our customers is a very interesting opportunity that we're hearing from the market.

Yes. Yes. No, that makes sense. And what segments are you seeing that? Is that sort of across the board where you see that? Is it in certain corporates or Street? Or where do you see that?

Yes. I think it depends on the use case. So we're seeing that certainly in financial institutions. And I -- we've got a pretty big business in what we call, know your customer, which is mainly being driven by regulation, but I think banks are stepping back and saying, okay, it's not just -- I don't just need to understand the aspects of who I'm doing business with in order to comply with regulation, but I need a broader view of the risk of these institutions I'm doing business with. So that KYC, we think, is expanding, and so maybe not just know your customer, but know your company, know more about the companies that you're dealing with. And we're seeing that with corporates as well. So COVID is a great example. Companies now looking at their supply chains and trying to understand the resiliency of their supply chains, understanding who else they may be wanting or needing to do business with and having to do some diligence around those entities.

And preferably do that in a more digital way rather than sort of the analog and stone tablets that are often used for those processes today, I think.

That's right. Mike, we hear from the customers all the time, it's a very manual process and they're looking for things that can make this much more efficient for them.

Yes. Yes, Martina, I know you and the S&P team has spent a lot of time sort of looking at these kinds of things too. What would you add to that in terms of opportunities that have emerged or maybe been sharpened or heightened as a result of the pandemic?

One thing that we might, maybe not spend as much time on it is actually the traditional core reasons why our clients come to us in the first space, we're actually seeing a massive uptick in consumption and usage of our credit models, our credit research, [ fundamental ] data. So the stuff that might not seem exotic in comparison to some of the new [indiscernible] factors that our clients are looking at as well. But similar to what Rob said, there's massive demand for [ late ] insights that take different data sets and actually put them together. So we were already seeing what some of the trade disputes, massive uptick and usage of our panjiva supply chain data set for clients who had focus in China and their supply chains, but also for clients who were looking to kind of pursue a China Plus One strategy in order to reduce the risk. But today, we're actually combining those supply chain data sets with our carbon data sets because we're getting a lot of corporates [indiscernible] basically asking for a view of some scope 1, 2 and 3 emissions that would include looking at detailed supply chains for cash [indiscernible] portfolio companies, et cetera. So it's the old reliables have been holding off and in fact, have been growing gangbusters in terms of usage. The newer data sets we're getting request for a much more granular analysis and linked insights as a result of what was coming. I think, Rob put it very well. It was we saw these trends coming, but they were just accelerated through COVID and probably through some of the trade to speed stuff that was going on for that.

Yes, yes. And puts an even greater premium on being able to build the technology to surface those insights quicker, I guess, when you're looking at such a vast number of counterparties in your supply chain, for example. Makes sense. So let's shift gears just a touch. And Lee, at Verisk, you all have been acquisitive, but I know also incredibly focused on innovation, organic growth. How do you sort of as CFO of your shop? I mean, how do you think about the balance and sort of capital allocation between those 2 big levers of growth you can pull and how you also balance that with thinking about margin, which I know is something that the analysts are always beating all of you all up on.

Thanks, Mike. It's a great question. It's something that we spend a tremendous amount of time thinking about. I think the short answer is, we want to make the right value decisions. And so I think everybody on the panel is probably confronted with an environment that because of the growth in data sets, the growth in demand from our client set -- clients as well as demand and growth in the analytical methods that are now available to us, there is just a wealth of potential investment opportunity, both internally and externally for us to pursue and we all have certainly ample amounts of capital and even greater access at lower cost of capital than we probably had in the long time. So what we try to do is understand what the internal opportunities are, because in many cases, we can use capital much more efficiently with those internal investments, and frankly, it's pretty exciting for us to see our ability to develop new technologies or tie data sets together, some of them are own, some of them external to create value for our clients, but we also look to supplement that externally where we feel that we can create value with those data sets or those solutions. I think one of the challenges we all face is that at the valuation levels that we have right now, it is more challenging to get an attractive return on capital simply by acquiring a great business. We need to find ways to be able to extract value by either accelerating the deployment of those data sets and solutions or by enhancing them with [ new ] methods. So to kind of tie that off into margin, I think every almost quarterly investor interaction that I have as a CFO, margin is a topic. And of course, it's a very simple and effective metric for us to evaluate, well, how is the business performing. But beneath that, I think what it misses is that you can often confuse investment activity, which is -- if it is high-return driven, it's going to have a near-term impact on margin. And so what we try to do is we look at our margin on a pre-investment basis so that we see that good operating leverage is there and expanding. And then we choose how much of that margin expansion we want to invest in the business. That's one guide. It isn't an absolute rule because if there are great return opportunities, you should be investing. But the final thing I'd say, I think this is true for the sector as a whole is that when we're talking about resilience, I kind of think of a metaphor in Whitewater rafting, where you might have a very broad raft. But when you hit turbulence, it's the ability to propel the raft by working the oars pretty aggressively, and those oars, I think, for all of us, are the ability to invest in new growth opportunities coming from all of these new data sets. And I think that's one of the most exciting dimensions for the sector as a whole. Mike, I think you're still -- I think you're on mute.

Thanks, Lee. I think the strongest correlations to multiples in this space that I consistently see put out from the analysts is revenue growth, inorganic revenue growth specifically. And I think that tension you described between margin and investment is a good one. And I like your notion of looking at sort of existing business margin and making sure you're getting operating leverage, but making sure that you're investing for things that are going to pay off 3, 4 years down the road because you should get multiple lift if you're successful in executing on those initiatives. So it's -- I know it's always a challenging conversation to have with the Street. So we're going to -- on the topic of M&A, we have a poll that I'm going to ask our moderator to bring up. And see if we can get that up. So here we go. So the question, and I'm going to -- we're going to have everybody answer, then I'm going to sort of run around the room here and have you all answer it, too. But from an acquisition characteristic standpoint, question is beyond strategic fit and competitive positioning, which you would always evaluate probably first and foremost, what characteristics in an acquisition target are most attractive to you right now. Quality and depth of the leadership team, so the team you're bringing on; revenue -- their revenue performance during COVID; sort of the modernity and extensibility of the tech stack, which I think is a huge issue, given that all of you are dealing with a certain amount of technical debt and bringing more on is probably not at the top of your list. And then revenue growth that is -- that enhances your own baseline growth. So we're going to ask the audience to respond to that poll. And while they're doing that, David, maybe you can give us your view on this?

Yes. I think what do I look for in terms of this? I think revenue performance through COVID is interesting, but it's too early to say because we are still at the beginning of the crisis. So I think you need to look in, say, 12 months' time about how that reperforms, because I think that shows you how embedded they are to the workflow. We've talked a lot about the value of data companies and the value of data to the industry and our customers. I think what's changed in the last 10 years is the data we all provide has been far more integrated into the workflow of our customers. And our customers through COVID, in particular, are accelerating the digitization of everything they do. In fact, what they found is if they haven't automated things and it's not digitized, then those processes are very hard to run in a COVID environment. And so the incremental value of having data that is firmly embedded in the workflow of customers is disproportionately large. So what you will find is the companies that have performed well through COVD given really valuable data that's embedded in the workflow of their customers, and therefore, it's absolutely essential. I think we've moved from a world where a lot of our information services were nice to have decision support tools to core to the workflow of the trading, the wealth investment management, all of the clients that we serve and the risk management and the operations that they do, and that's what I would be looking for.

Yes. That makes sense. So, E., how embedded they are in customer workflows, which is -- which makes sense. But Paul, how about -- from your view, what's most important to you be on strategic fit?

Yes. So I'd certainly echo the -- how embedded the products are in customer workflows. So that's pretty fundamental. I'd also emphasize management actually. So certainly in our case, I'm not interested in buying a business that we have to spend an inordinate amount of time trying to fix or to get on the right track. We want to buy something that's already on the right track. So I found that the management team is so key in this -- in these situations. Having a team, finding a team that you can invest in, you can put money behind, you can help, you can support, you can give access to some of the wider resource base that we have is a fundamentally important factor. So -- and that's particularly important in many areas of this market where you come across businesses that are very successful. They've been set up and run for long periods of time, often by a founder and that founder is thinking of transitioning out of the business. So you need to think very hard about how would that work? Does the business continue, it's not overly reliant upon one or a few individuals who may or may not be incentivized or motivated to stay building that business.

Yes, yes, yes. It's a good point. So just a couple of statistics just to maybe shed some light on how acquisitive this group. So we looked at your 5 companies and then sort of the other 10, kind of larger sort of information conglomerates in this space. So 15 companies, and over the last 10 years have done 311 acquisitions, which is a big number. And only about 10% of those were deal values north of $500 million. So 90% of those are these sort of smaller, sort of nimble, typically fast-growing and typically with interesting content. So certainly, a critical part, I think, of everybody's strategy who's on the panel. So a lot of this comes back to technology capabilities. I think you all are, I think, fortunate to have built up pretty wide moats over the years. And I think what a lot of people would say going forward is that having world-class and nimble technology is going to be a real differentiator and also a requirement to preserving that franchise value that you've all built. So Rob, I guess, at Moody's, maybe give us your thoughts on the -- how you all view and invest in technology. And I think how you think about attracting and retaining top-quartile talent, given that you're competing for that talent with the Amazons and the Googles and sort of the large and small tech companies?

Yes, Mike, I think we've been on a journey, an evolution as a company. And I think there's a real increasing view across the company about the importance of technology as an enabler. And then data as really the fuel. And you think about our formula, which is curated data with rigorous analytics and then being able to layer on top of that insights with our expertise. That's a winning formula for us. So I talked a little bit about earlier about this idea of starting to be able to bring these things together for our customers. And you talk about how many acquisitions we've done and integrating all of this stuff is challenging. In fact, I got tired and we went through those stacks. So we're increasingly focused on data access across the enterprise, both internally and externally for our customers. I'm sure my other fellow panelists can probably sympathize with. We still have silos of data and being able to better access that and create more technology interoperability so that we can assemble solutions quickly and easily to meet emerging customer needs. And COVID is a great example. We needed to be able to pull together things in weeks, not in months for our customers. So having the technology be more interoperable across the enterprise is something we're really focused on. We've also, to the point around talent. Historically, we've had a lot of outsourcing of our development talent. I think an appreciation of just how important this is and needing to be able to have our developers work with our product strategists and engage with our customers. We've actually in-sourced a lot of that development talent, application development talent. We set up a development hub in Charlotte, North Carolina, where we've got access to great talent. And people that are used to working for us, a big part of our business is regulated. So used to working in a regulated financial services environment. So that's been really important for us.

Yes. Yes, it makes sense. Lee, on the Verisk side, how have you guys approached this sort of attraction of talent, making sure you're leveraging data and technology across your multiple verticals that you guys have chosen to operate in?

Yes. Thanks, Mike. So there is absolutely a critical element for our business. And I'd say the short answer is for a lot of these data scientists and data engineers what matters most is that they have interesting projects and exciting things to work on where they feel as though they have an impact. And one thing that we try to avoid is just bringing in [ folks ] who think of themselves as data shepherds. We really want folks that are taking the data and finding ways to activate that data and tying it into prophecies or to new applications, a lot of the kind of the cutting-edge work of the data science PhDs that we pull into our business is in dealing with topics like unstructured data. And so as you can imagine, one of the rapidly growing data sets is all of the social media data that is out there. And our ability to take that unstructured social media data and move it and analyze it to evaluate life-risk peril in terms of avocation models with the information that people are sharing about what they do in their activities and their movement is really a fascinating topic. The life insurance industry has used credit models. I think as Martina was describing, in many cases, to evaluate risk. Now we have this much broader data set. So finding projects like that of relevance to our industry verticals and tied specifically to their [ prophecies ] are the types of things that these folks get excited about and to do it in a very specific way, where they can see the value we can demonstrate the value to our client set, I think, has been our best tool of recruiting data scientists and engineers against the much larger companies.

Yes. I think I remember during my days at both SNL and S&P, that one of the big attractions, when I would talk to the data scientists that we hired, is that when they came in, they were actually getting to work with clean organized data. And at most companies, if you go to a bank or you go to somewhere else, the data is everywhere. It's not synthesized, it's not integrated. And you spend 90% of your time being a data engineer and 10% of your time being a data scientist, and we could offer the flip side of that, which I do think is one of the keys to recruiting. So just back to our poll question a second go on M&A. Here, you can see, I guess, hopefully, everybody can see that. The overwhelming response from the audience is the most interesting acquisition candidates enhance your -- the incumbents revenue growth, which, I guess, sort of reinforces sort of the acquisitions that you've done at these fast-growing nimble companies. So we've got maybe a few more minutes here for the structured part of the Q&A. Just a couple of other things. Martina, maybe you can talk a little bit about just around COVID. What's been your great takeaway? Maybe from a leadership standpoint in sort of navigating this. And then for the whole group, I'll pose a question, what's the one thing that you are -- you do not want to come back from the way that we did business before? So Martina, first you and then we'll go around.

Thanks, Mike. I think the biggest takeaway is the reinforcement of 2 key sort of tenants to our own strategy. One is putting people first, significantly, our employees and communities that we operate in, and the second is how we work with our folks through this process. So we have to, within market intelligence, we're the largest number of people within S&P. So we moved about 11,500 employees to work-from-home where we supplemented the entire experience, which for some people who [indiscernible] most ideal circumstances and working from home, we've provided extensive allowances, support programs, a lot of leadership transparency around how [indiscernible] . And all the investments in individuals that we needed to try to make sure that everybody had what they needed to feel productive and continue to do their jobs and combined that with a lot of flexibility as much as we could and the types of [ IRS ] people were working, particularly with people with the young kids or other people who were working in same house. So it's been -- I mean, it's very important. I think the biggest takeaway, and I've been deeply impressed with the culture that our CEO and our People Officer have been promoting throughout this, I think it's been one of the high, actually for me, for how S&P has dealt with this and on the customer side, we jumped in, I mean, Rob said, that quick response was [indiscernible], like many others we jumped in and put a whole bunch of research outside of payroll, we provided extensive free access. We worked with NGOs and governments providing the supply chain data so they could look at tracking TPE across the supply chains. So trying to equip our customers as much as possible to produce some of the difficulty and the challenges with decision-making and navigating was a key objective of ours. And I think sort of the 2 things that, I think, were basically learned. Do you want me to answer the second question on what I don't want to change going to...

What do you don't want to go back to? What are you hoping that we tossed off the bus permanently here?

I think, I look at air travel, I will say, but perhaps maybe one slight less every so often, wouldn't be such a bad thing. And frankly, I think that's good for carbon emissions as well. But I think organizationally, we have a lot of employees who are very interested in flexible work-from-home options. And that's going to be the big thing that we'll be working with our groups with going forward.

Yes. David, maybe you can -- feel free to reflect a little bit on what you've learned. And then the one thing that you don't want to go back to?

Yes. And I'll build on what Martina said. I mean, a lot of companies said their people are important. And we've talked on this panel about analytics expertise. And kind of ironically, in technology and data-driven businesses, our people are so important. I think we found that actually the companies that really meant that and put it to work [Audio Gap] and we had to move 135 offices to VOE, a virtual operating environment, across the 100-or-so countries we work in. We actually recognized, too, that by doing it ahead of when governments did it, we were saying to our employees that we're not going to wait for governments to do shut down, we can actually value health and the communities that you work in are very important to us. So I think doing that and saying that has had a huge boost of engagement in our own company. And has demonstrated that we really do think about our employees and their safety as #1. And put that as even serving our customers. And then, of course, as you serve your customers, and the point was made earlier about being in the supply chain of our customers, resiliency is absolutely and I'm amazed about how resilience has worked through the crisis with the data volumes that we've seen on a global basis that we've seen. We distributed 176-plus billion data updates in 24 hours. We splashed all records and the systems have held through. So I think actually knowing that you've got real resilience in your systems in a world where the volume is going up, the volatility is going up, the cyber threats going up is incredibly important. I was going to make that point about the technology side earlier. So those are 2 things that I think have struck us has been really, really important through this crisis. How do we look at our people, our most important asset, and how do we serve our customers with resilience in our service and our systems in this digital world. In terms of things leaving behind, I really like what Martina said. I mean, the 95 office day, where everyone sort of waits for the bell to leave, I mean, the flexibility [ window ] that we've given people is such an empowerment. I mean, the downside is that we don't know whether we're sleeping in the office or working from home sometimes, but that flexibility is something that I would really want to keep. We're all having the debate about what does the office mean and when we do go back for how long we're never going to be spending the hours that we did back in the offices that we were in. And we're not sure how many that will be, but we're going to think about the office in a different role. And give a lot more flexibility to our people globally. And I also love the reach, the fact that I can jump on a last week and this come on a virtual visit to China, you can just jump on a video conference and be speaking to clients and you don't have to queue up at the security gate and get on the plane and the plane's delayed and all that stuff. I wouldn't miss that for a moment. I won't miss the security line at Heathrow Terminal-5 or JFK and I also wouldn't miss fixing my printer. I haven't printed a document for 4 months. And I think that -- if we [ could just ] get rid of all printers throughout the entire organization, no printing, no toner, the environmental impact of that alone, let alone the commuting save is going to be extraordinary. So those are the things I'm going to leave behind.

The toner -- the toner variance -- the positive variance to budget in toner at Refinitiv this year is going to be extraordinary, I think. I can really feel it.

We're very excited, yes.

So we've had -- we've solicited question ahead of time, and we had a bunch, and we've also had some come through in the Q&A. So I'm going to [ off ] a couple of these. Let's see, there are questions about -- one question that came up a few times is around not so much the renewal side of business during COVID, but how your teams, your business development, your new business generation teams have adapted without being able to use face-to-face conferences, face-to-face meetings as a catalyst. Rob, can you comment on what you've seen out of the Moody's sales team?

Yes. I think I'd say, in general, we've adapted really well. I think a lot of our customers actually like the ability to engage via Zoom in the way that we're doing internally. So we've had a lot of -- as the other panelists have said, very intense engagement and active engagement with our customers. About what do they need from us and how can we help. And I think maybe where we're seeing some headwinds is we've got some of the more complex products that we offer, the enterprise risk software, where the sales cycles are measured in months and months and months. That's been a little bit more difficult to start those sales cycles from scratch in a completely virtual environment. We've been able to close those out because a lot of those sales cycles were very well advanced. But in general, I feel like we haven't missed much of a beat. We have, as I said, seen some headwinds. It's interesting, I was talking to one of the folks who's a senior manager in our [ sovereign ] ratings franchise. And you can imagine a sovereign -- we have a meeting with a sovereign that's a delegation. That's a multi-day event. And he told me that even those meetings have been working remarkably well, and he commented to me about how nice it was not to be spending time flying all over the place and that's been a pretty effective way to engage.

Yes. Yes. No, makes sense. Paul, anything you would add to that about sort of either the challenges or what your teams have learned about generating new business and new relationships in this environment?

Yes. I think surprised actually by the level of activity we've been able to undertake. So I think getting access to people is, in many ways easier. The [ PBR ] team and the calls that we've been putting on has been increasing. We've been putting on hugely increased numbers of calls to clients, the market in general. So I mean, first of all, our team has done a fantastic job. I think they feel quite motivated by the challenge that's in front of them. So I've seen a real uptick in energy and effort by the teams we have. So that's a fantastic testament to the people we have. But it's working. It really is working. And we're getting our message out there. We're getting our materials out there. And we've always focused on the quality of the content we have. And this is a time to benefit from that focus over the last decade. So I've nothing to complain about. That there will come a time where we do need to think about some return to normality, and I totally agree that things won't be the same. There will be more flexibility. But you do lose a few things in the environment we have. There's some team building implications, there's implication around mentorship, maybe even culture of a business if you have this kind of operating environment for too long. But really, at the moment, things are working remarkably well, and I don't see any problems.

Yes. Okay. That's sort of the feedback that we've heard is that for all of the trade-off in not being able to meet face-to-face that people generally are a bit more receptive to actually jumping on and sort of demoing products, that's certainly true just in our -- in my own life these days because you just, you have less wasted time in your day and maybe a little bit more time to hear about new products. So I'm going to skip the question that asks if any of you all foresee a transaction with another party to create real synergies on the call, that was one that came through. We're going to put that one off to the side. Question around technology, specifically around where and what kinds of areas or skill sets within technology, your teams are particularly focused on. Martina, you want to weigh in on that?

Yes, certainly. I'll start with maybe the machine learning, Data Science and the things. We've been extremely fortunate to have a team at Kensho has been working with us to really raise the bar on some new technology capabilities, one of which, for example, was the ability to scale much more rapidly in how we make [ constructor ] datasets. That's been an enormous -- of enormous value for us. And they're working on many other things that we've been making variables for our desktop or for our data marketplace. But I would also say there's a lot of work to be done. I think there was a question about the tech stack and legacy tech [ debt ] and things like that. And like 311 acquisitions mean 311 tech stacks, and with that comes all [indiscernible] capacity. And so that's an area that -- it's not super-exotic, but it requires real heavy lift. And we've been heavily focused on it the last few years, stepping up the focus on it as we accelerate our migration to the cloud as well.

Yes. Okay. So there are a few questions around sort of competition, this notion that upstarts can weaken the moats or maybe fill in parts of your moat over time. Lee, who do you worry about the most? You worry about sort of the big companies with lots of resources? Or do you worry about sort of the upstarts in the smaller companies who can maybe go really deep on particular use cases with -- starting from scratch with a really modern set of technologies?

Yes. Mike, that's a great question. I think all of us worry about competition from whatever channel. And I guess, one advantage that we have, I think this is the moat is the quality of the data sets that we've acquired, particularly the proprietary data sets that we have. And if you think about -- if you aren't able to maintain that proprietary dimension, then the risk, one risk that we worry about is achieving the network of connectivity among our client sets that facilitates the regeneration of those data sets. And so if we're -- if we think of the data, the proprietary data as the moat, then what we worry about is somebody else building a wall that connects that ecosystem. And so -- and in many cases, software companies that are connecting processes among our client sets, are potential networks for both data gathering, data ingestion and data analytics distribution. And so that's been an area where we've probably been more offensively engaged with some of our acquisitions, one, because we view it as an interesting and attractive way to utilize our data set, but also as a means to develop new networks. So we watch very carefully the companies that may be pursuing that dimension. And those, I think to answer your question, are more probably the smaller companies that are building vertical focused on software applications that could be used for that purpose. I think we probably are differentiated out of this group of great companies as being a more vertically oriented company. And so I think it's probably a distinct with that, that we focus on.

Yes. No, that's an interesting because we think about the creation of data, and the explosion of these new data sources. And I think a lot of us immediately think of sensors and IoT and those sorts of things. But enterprise software companies that are digitizing processes are creating vast amounts of data that they may or may not have the rights to monetize, but if they do, it's sort of maybe a side door into some of your resilient franchises. So I think that's a very interesting point. And where enterprise B2B software starts to overlap quite a bit with more B2B information services. So thanks for pointing that out. I think that's a very good point and something that I think all of you probably are spending time thinking about. So let's see. We've just got a few more minutes here. Couple of other questions, I guess. One, maybe, David, maybe for you. You serve all sorts of clients, buy-side, sell-side, corporates. Who do you think has the most catching up to do among your client segments in really adopting a more data-driven, analytical way of making all sorts of decisions across their business.

It's a great question. And actually, through COVID, that's been a big jump. So a lot of the changes we've been seeing in the last few years have suddenly hit an acceleration across our business. So [ encroaches ] our largest segment there's a lot of talk about the new trading floor of the future, which is a completely virtual automated trading floor, completely digital. I think that's where that is going now, and it's just a trend that was always there, just accelerating faster than ever. In wealth management, wealth management in the last few weeks has gone through an upheaval because the [Audio Gap] now can't decline and do the traditional family planning, the engagement, [indiscernible] all had to become digital. So in wealth management, the wealth managers who are moving had moved to a digital relationship base with their clients are now doing really well, are actually on-boarding more clients and those who haven't have been really struggling. And so that digitization of wealth management and for us, has become incredibly important with our new services and software that we're delivering into that space. On the buy-side, we were talking about data earlier. And I think the challenge our clients have is not obtaining more data. A lot of the challenge they have is data management. It's that total cost of how do I put all this together, how do I hand it in a way that I don't have 50 different data sets or 500 different places. I've actually linked them in a way that I could manage them. How do I manage the entitlements, the rights, the controls and how do I keep. And I think on the buy-side, this is the most experience because the last few years, they've gone through a digital revolution of using data and becoming quantitative data analytics firms. And now they're really trying to manage that data problem down. And yes, there's new data sets that they need, but they're looking for partners who can help them on the data management as well. One thing that we compete on now is not just the agility in getting new data sets on quickly, and we're at record pace of that. But how do we actually help our clients manage that data set, manage all of those sources in a concordant and coherent way. There's different things across the space and then I haven't spoken about M&A and banking and deal raising. We all know that, that's the most manual or most hot cake processes out there and that is the one that really has to digitize now. That is the one that I think we're going to see the most digital step in terms of capital raising, the M&A process, recruitment. I haven't had one M&A banker come to me with a picture book in the last 3 months in those big books and just write on my desk. And frankly, I haven't really missed them either. So I think that's a good way of thinking about it, hey, it's going to completely [ check ] as well.

Nor have the 23-year-olds, who used to stay up all night, putting them together. So that's also driving change, I think, I see Andrew laughing. So all right. So we just got a couple of minutes left. We have one more poll that we want to bring up if we can do that. And then I'm going to pose this question to each of you. See if we're able to get that up. So let's see. So of these major trends, which one are you most excited about in terms of the business opportunities it creates for your company over the next 5 years? So rise in growth of ESG. We haven't talked a ton about ESG, but that's clearly -- so that's choice 1. Machine learning, AI and all the implications they're in. The growth of the -- and the ongoing passive to active movement in asset management, explosion of alternative data sources, including sensors and IoT or supply chain risk awareness, which we did spend some time talking about. So we're going to ask the audience to weigh in. And then I'm going to -- David, since you're right, big on my screen, why don't you go first?

Well, I think the one that I think is going to have the biggest impact in the fastest time is the rise of ESG, sustainable finance now. We're seeing it coming at our clients from [ tree ] base, from an employee base from an investor base. And the problems ahead of the data. For many years, the data has been ahead of the problem. But actually, if you look at the challenges that our clients are having to solve now about how do I revalue a portfolio? How do I do stress testing on these instruments from homes to actually the whole thing, the data isn't there yet. So us as an industry, have got an extraordinary challenge over the next few years to solve the data problem around sustainable finance. And I think that's a very exciting problem to solve.

Great. Paul, how about you?

Would it be dodging the question to say, I get excited about all of them. They all offer opportunities.

You can say you're excited about all of them, but you have to pick one that you're most excited about.

Pick one, okay. Well, how about I'll try again. I think the commercial timing of taking advantage of the things we're talking about differ. So it's not just a simple black and white, I like this one now, I don't like that one. I think there's some that have immediate opportunity. And I think some will be a better commercial opportunity, slightly further down the line. I think ESG and fixed income is a good example of that. There was a huge amount of activity, huge amount of innovation going on in that space. Not quite sure how many people are making money out of it at the moment on the fixed income side. So that will become an important -- it's important for kinds of proper society reasons. So I am excited, genuinely excited about that. Is it the most important business opportunity at the moment? Probably not. We have to position ourselves to take advantage, but I don't see that replacing parts of our core business anytime soon.

Yes. Great. Yes. Thanks for that. I think that's an important -- these are long-term trends. And I think back to the sort of -- or some of the earlier discussion about the patience of the investment community for long-term organic growth bets, I mean some of these things will play out over 5 or 10 years, and you have to invest early in order to be there, or wait and acquire something on the tail end. Rob, how about you on this question? Go ahead, Paul.

I assumed you're going to make the point that as a private company, that can help sometimes.

It's true. Yes, that's right. Not to rub it in Rob, but next.

Yes. Right. I actually -- I agree with Paul that I think sustainable finance is a major theme, but I think the path to it being commercially material for us. It's still a few years out. But that doesn't mean we don't need to invest in it. And we are investing in it right now, and we see a lot of demand from our customers to help them with that. I'm going to go with E, but I'm going to broaden it because I actually think this is about understanding -- a deeper understanding of who you're doing business with, like I talked about earlier. It goes beyond just supply chain. It goes to who's on the other end of a business transaction with you? And how much do I know about you? And I think that's is going to be a meaningful trend and opportunity.

Great. Thank you. Let's see, Lee.

Yes. So Mike, I'm going to actually try to answer this question and an earlier one that you asked in conjunction, it probably goes back to my exchange background and focus on supply/demand. So the question before that you asked is what don't you want to go back to? And my answer is the benefit of kind of the status quo thinking and the shift in this environment to, right, we need to find new ways to do things. We need to automate more and utilize data, I don't want to lose that momentum that we're clearly seeing expressed in our client set. So that's the demand side. And the answer to this question that ties to that is the massive expansion of the data sets. I think for all of us, the opportunity to take those new data sets and tie them into new solutions that improve automation, decision making across, that's where real economic value creation opportunity exists.

Great. Thanks for that. All right. Martina, I'm going to let you close this out. What's your area of excitement and I think I know the answer.

You probably do. On the size of market intelligence, I would say, ESG. It's not to say the others. I mean, we have material opportunities. In the others also, but the ones that I would be most excited about is ESG. And we've prioritized ESG and climate as 2 separate areas of focus because climate has the most materially significant financial upside or downside, depending on how you look at it and depending on which sector. So that will be my thought. And I think you probably predicted that much.

I did. We'll talk about it later. Great. So I think we're going to wrap there. We're right on the hour. A few minutes after [ noon post ]. Oh, and here's our poll question. So almost -- sort of almost a 3-way tie with ESG, machine learning and AI and the explosion of alternative data sources. Rob, you're going to have to build more excitement about your supply chain risk awareness here, but you're the man for the job. Great. Andrew, am I turning this over to you? Or am I wrapping it up?

Yes. I think you should wrap it up, Mike. Thank you very much.

Great. Well, thanks, everyone, for joining us. Thank you, especially to our panelists. I think it was a great discussion. Just only able to scratch the surface on some of these important topics, so maybe we'll do this again sometime. I hope you all have a great weekend. And any questions, feel free to reach out to the Houlihan Team. Thanks, everyone.