CCC Intelligent Solutions Holdings Inc. (NASDAQ:CCCS) Q4 2023 Earnings Conference Call February 28, 2024 5:00 PM ET Company Participants Bill Warmington - VP, IR Githesh Ramamurthy - Chairman and CEO Brian Herb - CFO Conference Call Participants Alexei Gogolev - JPMorgan Samad Samana - Jefferies Callie Valenti - Goldman Sachs Peter Burkly - Evercore ISI Saket Kalia - Barclays Dylan Becker - William Blair Josh Baer - Morgan Stanley Matt Bullock - Bank of America Shlomo Rosenbaum - Stifel Operator Good day, a ...

CHICAGO--(BUSINESS WIRE)--CCC Intelligent Solutions Holdings Inc. (the “Company”) (NASDAQ: CCCS) today announced the pricing of the previously announced secondary offering of the Company’s common stock (the “Offering”) by affiliates of Advent International, L.P. and Oak Hill Capital Partners (collectively, the “Selling Stockholders”) at a price to the public of $11.42 per share. The Offering consists of 43 million shares of the Company’s common stock, upsized from the previously announced size of 40 million ...

CHICAGO--(BUSINESS WIRE)--CCC Intelligent Solutions Holdings Inc. (the “Company”) (NASDAQ: CCCS) today announced the proposed secondary offering of 40 million shares of the Company’s common stock (the “Offering”) by affiliates of Advent International, L.P. and Oak Hill Capital Partners (collectively, the “Selling Stockholders”). The Selling Stockholders intend to grant the underwriters a 30-day option to purchase up to an additional 6 million shares of the Company’s common stock. The Offering consists entir ...

CCC Intelligent Solutions Holdings Inc. (CCCS) came out with quarterly earnings of $0.09 per share, in line with the Zacks Consensus Estimate. This compares to earnings of $0.07 per share a year ago. These figures are adjusted for non-recurring items.A quarter ago, it was expected that this company would post earnings of $0.08 per share when it actually produced earnings of $0.09, delivering a surprise of 12.50%.Over the last four quarters, the company has surpassed consensus EPS estimates just once.CCC Int ...

Customer Dependency and Revenue Risks - A significant portion of the company's revenue is derived from a small number of customers in the P&C insurance and automotive collision industries, with no individual customer accounting for more than 10% of total revenue in 2023[95] - The company expects to continue relying on a limited number of customers for a substantial portion of its revenue, which poses risks if contracts are not renewed or if customers reduce services[95] - The company’s revenue growth rate is dependent on existing customers renewing and upgrading their SaaS software subscriptions, with potential declines in renewals adversely impacting future results[96] - The company’s large customers possess significant bargaining power, which may lead to reduced average selling prices and lower gross margins[95] SaaS Business Expansion - The company is focused on expanding its SaaS business, requiring significant investment in technical, financial, and sales resources, which may not yield immediate revenue increases[96] - The company’s SaaS arrangements include service level agreements that may impose penalties for failing to meet service levels, potentially impacting financial results[96] Economic and Market Conditions - Factors outside the company's control, such as natural disasters and geopolitical events, may adversely affect the P&C insurance economy and hinder revenue growth[97] - Economic uncertainty from global events, including trade tariffs and inflation, may lead to decreased demand for solutions and delayed sales cycles[99] - The company expects to derive most revenue from solutions provided to the P&C insurance and automotive collision industries, which are particularly exposed to economic downturns[99] - The transactional revenue model is sensitive to market conditions, making it difficult to forecast future revenues accurately[98] - Global economic conditions, including inflation and labor shortages, may impair customers' ability to make timely payments, affecting the company's financial results[99] Competition and Market Position - The company faces competition in the market, which could negatively affect market share and profitability due to pricing pressures and increased sales and marketing expenses[99] Cybersecurity and Data Protection - Cybersecurity risks, including data breaches and cyber-attacks, could adversely affect the company's reputation and ongoing operations[107] - The company has implemented security measures to protect data, but cannot guarantee their sufficiency against potential threats[107] - The company maintains liability insurance for cyber-related incidents, but there is a risk that claims could exceed coverage limits[108] Regulatory and Compliance Challenges - The company is subject to aggressive enforcement of anti-corruption laws, including the FCPA and the U.K. Bribery Act, which could result in fines and damage to reputation[104] - International sales efforts expose the company to risks under U.S. trade laws and regulations, with potential penalties for non-compliance[105] - The enactment of new data privacy legislation could cause the company to incur incremental costs and liabilities, adversely affecting business operations and financial plans[112] - The California Privacy Rights Act (CPRA), effective January 1, 2023, expands the California Consumer Privacy Act (CCPA) and introduces additional data protection obligations, which may require modifications to data processing practices[111] - The General Data Protection Regulation (GDPR) imposes fines of up to 4% of total annual worldwide turnover or €20 million for non-compliance, significantly impacting data controllers and processors operating in the EU[111] Financial Performance and Position - Total revenues for 2023 reached $866,378 thousand, an increase of 10.7% from $782,448 thousand in 2022[394] - Net loss attributable to common stockholders for 2023 was $(92,476) thousand, compared to a profit of $38,406 thousand in 2022[392] - Cash and cash equivalents decreased to $195.572 million in 2023 from $323.788 million in 2022, a decline of about 39%[361] - The accumulated deficit increased to $(1.126 billion) in 2023 from $(707.946 million) in 2022, reflecting a worsening of approximately 59%[361] - The company reported total liabilities of $1.252 billion as of December 31, 2023, down from $1.291 billion in 2022, indicating a reduction of about 3%[361] Research and Development - Research and development expenses were $173.1 million, representing 20% of total revenue for the year ended December 31, 2023[101] - Research and development expenses increased to $25,467 thousand in 2023, up from $19,536 thousand in 2022, reflecting a growth of 30.1%[391] Employee and Labor Costs - A significant portion of operating costs consists of personnel-related expenses, with increased labor costs impacting financial condition[99] - The company faces competition for qualified personnel, which may adversely impact its ability to achieve business goals and could lead to increased hiring costs[114] Stock and Equity - The Advent Investor owns approximately 43.62% of the common stock, which may influence significant corporate decisions and affect minority stockholders[116] - Total stockholders' equity decreased to $1.782 billion in 2023 from $2.045 billion in 2022, a decline of approximately 13%[361] Acquisitions and Growth Strategy - The company anticipates continued growth through targeted acquisitions, which may present integration challenges and unforeseen operational difficulties[109] - The company reported a fair value of contingent earnout consideration of $200 million related to acquisitions[364]

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CCC Intelligent Solutions Holdings Inc. (NASDAQ:CCCS) Q3 2023 Earnings Conference Call November 6, 2023 5:00 PM ET Company Participants Bill Warmington - Vice President, Investor Relations Githesh Ramamurthy - Chairman and Chief Executive Officer Brian Herb - Chief Financial Officer Conference Call Participants Matt Bullock - Bank of America Alexei Gogolev - JPMorgan Shlomo Rosenbaum - Stifel Dylan Becker - William Blair Kirk Materne - Evercore Saket Kalia - Barclays Arvind Ramnani - Piper Sandler Operator ...

[PART I. FINANCIAL INFORMATION](index=5&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) Unaudited statements show revenue growth alongside a net loss driven by goodwill impairment and positive operating cash flow Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2023 (Unaudited) | Dec 31, 2022 | | :--- | :--- | :--- | | **Total Current Assets** | $613,747 | $479,070 | | Cash and cash equivalents | $448,733 | $323,788 | | **Goodwill** | $1,417,724 | $1,495,129 | | **Intangible Assets—Net** | $1,039,555 | $1,118,819 | | **Total Assets** | **$3,341,783** | **$3,350,921** | | **Total Current Liabilities** | $148,554 | $151,565 | | **Long-Term Debt—Net** | $769,136 | $774,132 | | **Total Liabilities** | **$1,282,801** | **$1,291,455** | | **Total Stockholders' Equity** | **$2,043,478** | **$2,045,287** | Statement of Operations Highlights (in thousands, except per share data) | Metric | Q3 2023 | Q3 2022 | Nine Months 2023 | Nine Months 2022 | | :--- | :--- | :--- | :--- | :--- | | **Revenues** | $221,147 | $198,734 | $637,777 | $578,342 | | **Gross Profit** | $163,121 | $145,607 | $463,495 | $422,975 | | **Operating Income (Loss)** | $16,571 | $17,054 | $(43,286) | $42,228 | | **Impairment of Goodwill** | - | - | $77,405 | - | | **Net (Loss) Income** | $(21,202) | $9,795 | $(116,362) | $37,334 | | **Diluted EPS** | $(0.04) | $0.02 | $(0.19) | $0.06 | Cash Flow Summary (Nine Months Ended Sep 30, in thousands) | Activity | 2023 | 2022 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $163,138 | $118,438 | | **Net cash used in investing activities** | $(43,187) | $(67,185) | | **Net cash provided by financing activities** | $5,383 | $15,006 | | **Net change in cash and cash equivalents** | $124,945 | $65,609 | | **Cash and cash equivalents, end of period** | $448,733 | $248,153 | - In May 2023, the company performed a quantitative assessment of its China reporting unit due to adverse market conditions and rising interest rates, resulting in a **goodwill impairment charge of $77.4 million**[40](index=40&type=chunk) - The company also recorded an **impairment charge of $5.3 million** on its China reporting unit's customer relationships and acquired technologies intangible assets due to unrecoverable carrying amounts based on cash flow forecasts[243](index=243&type=chunk) - As of September 30, 2023, the company has approximately **$1.423 billion in remaining performance obligations**, with $561 million expected to be recognized as revenue in the next twelve months[214](index=214&type=chunk) Stock-Based Compensation Expense (in thousands) | Category | Nine Months 2023 | Nine Months 2022 | | :--- | :--- | :--- | | Cost of revenues | $6,595 | $4,167 | | Research and development | $18,833 | $14,433 | | Sales and marketing | $25,264 | $18,331 | | General and administrative | $53,779 | $43,838 | | **Total** | **$104,471** | **$80,769** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses revenue growth, increased operating expenses, a significant impairment charge, and non-GAAP performance metrics - The company's SaaS platform connects over 35,000 companies in the P&C insurance economy, processing **more than $100 billion in annual transaction value**[98](index=98&type=chunk) - CCC has deep customer penetration, with **18 of the top 20 U.S. automotive insurance carriers** and over 29,000 collision repair facilities on its network[100](index=100&type=chunk)[98](index=98&type=chunk) - The company is actively using AI, with over 100 U.S. auto insurers using its AI-powered solutions and having processed **over 14 million unique claims with deep learning AI** as of year-end 2022[98](index=98&type=chunk) Software Net Dollar Retention (NDR) | Quarter Ending | 2023 | 2022 | | :--- | :--- | :--- | | March 31 | 106% | 114% | | June 30 | 107% | 111% | | September 30 | 107% | 110% | Software Gross Dollar Retention (GDR) | Quarter Ending | 2023 | 2022 | | :--- | :--- | :--- | | March 31 | 99% | 99% | | June 30 | 99% | 99% | | September 30 | 98% | 99% | Q3 2023 vs Q3 2022 Financial Comparison (in thousands) | Metric | Q3 2023 | Q3 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenues | $221,147 | $198,734 | $22,413 | 11.3% | | Gross Profit | $163,121 | $145,607 | $17,514 | 12.0% | | Operating Income | $16,571 | $17,054 | $(483) | -2.8% | | Net (Loss) Income | $(22,212) | $9,795 | $(32,007) | NM | - The increase in Q3 revenue was primarily a result of **8% growth from existing customer upgrades** and expanding solution offerings, and **3% growth from new customers**[95](index=95&type=chunk) Nine Months 2023 vs 2022 Financial Comparison (in thousands) | Metric | Nine Months 2023 | Nine Months 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenues | $637,777 | $578,342 | $59,435 | 10.3% | | Gross Profit | $463,495 | $422,975 | $40,520 | 9.6% | | Operating (Loss) Income | $(43,286) | $42,228 | $(85,514) | NM | | Net (Loss) Income | $(117,687) | $37,334 | $(155,021) | NM | - For the nine months ended Sep 30, 2023, the company recorded **impairment charges of $77.4 million for goodwill** and **$4.9 million for intangible assets** related to its China reporting unit[125](index=125&type=chunk) Adjusted EBITDA Reconciliation (in thousands) | Period | Q3 2023 | Q3 2022 | Nine Months 2023 | Nine Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Net (Loss) Income | $(21,202) | $9,795 | $(116,362) | $37,334 | | Adjustments... | ... | ... | ... | ... | | **Adjusted EBITDA** | **$92,927** | **$78,116** | **$253,360** | **$225,297** | Adjusted Net Income and EPS | Period | Q3 2023 | Q3 2022 | Nine Months 2023 | Nine Months 2022 | | :--- | :--- | :--- | :--- | :--- | | **Adjusted Net Income (thousands)** | $57,161 | $46,604 | $151,494 | $132,449 | | **Adjusted Diluted EPS** | $0.09 | $0.07 | $0.23 | $0.21 | Free Cash Flow Reconciliation (in thousands) | Period | Nine Months 2023 | Nine Months 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $163,138 | $118,438 | | Less: Purchases of software, equipment, and property | $(43,187) | $(38,844) | | **Free Cash Flow** | **$119,951** | **$79,594** | - The company believes its existing cash of **$448.7 million**, operating cash flows, and available credit will be sufficient to fund operations for at least the next twelve months[136](index=136&type=chunk) - As of September 30, 2023, the company had **$786.0 million principal outstanding on its Term B Loan** and **$249.3 million available under its revolving credit facility**[136](index=136&type=chunk)[137](index=137&type=chunk) - In May 2023, the company amended its credit agreement to **replace LIBOR with SOFR** as the benchmark interest rate[137](index=137&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=44&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) Market risk disclosures remain materially unchanged from the 2022 Annual Report on Form 10-K - There have been **no material changes** in the company's market risk from what was disclosed in the 2022 Annual Report on Form 10-K[180](index=180&type=chunk) [Controls and Procedures](index=44&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective with no material changes in internal controls - The principal executive officer and principal financial officer concluded that as of September 30, 2023, the company's **disclosure controls and procedures were effective**[159](index=159&type=chunk) - **No changes in internal control over financial reporting** occurred during Q3 2023 that materially affected, or are reasonably likely to materially affect, internal controls[182](index=182&type=chunk) [PART II. OTHER INFORMATION](index=46&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Legal Proceedings](index=46&type=section&id=Item%201.%20Legal%20Proceedings) Pending legal actions are not expected to have a material adverse effect on the company's financial position - Management believes that pending or threatened legal actions are **not expected to have a material adverse effect** on the Company's consolidated financial position or results of operations[183](index=183&type=chunk)[69](index=69&type=chunk) [Risk Factors](index=46&type=section&id=Item%201A.%20Risk%20Factors) This section references the risk factors detailed in the company's 2022 Annual Report on Form 10-K - The report refers to the 'Risk Factors' section in the **Annual Report on Form 10-K for the year ended December 31, 2022**, for a detailed discussion of business risks[184](index=184&type=chunk) [Other Information](index=46&type=section&id=Item%205.%20Other%20Information) Two company executives terminated their Rule 10b5-1 trading arrangements during the third quarter of 2023 - During Q3 2023, **two executives, Mary Jo Prigge and Rodney Christo, terminated their Rule 10b5-1 trading arrangements**[187](index=187&type=chunk)

Company Overview - CCC's platform facilitates over $100 billion in annual transactions within the P&C insurance economy[12] - The company boasts a high gross dollar retention rate of 99% and a net dollar retention of 107%[19] - CCC has demonstrated durable, long-term organic growth with an 11% revenue CAGR from 2015 to 2022[19] Financial Performance - The company has a strong adjusted EBITDA margin of 39% in 2022[19] - CCC targets long-term revenue growth of 7-10% annually[59] - As of June 30, 2023, the adjusted gross profit margin was calculated to be 77%[105] Market and Solutions - Nearly half (42%) of the entire P&C insurance market is auto insurance, with claims of approximately $225 billion[28] - CCC connects over 35,000 companies within the insurance economy, facilitating over $100 billion in annual transactions[30, 31] - The US auto market presents a $9 billion market opportunity for CCC[72] - CCC's cloud platform processes 49 billion database transactions daily[87]

Financial Data and Key Metrics Changes - Total revenue for Q2 2023 was $211.7 million, up 10% year-over-year [16] - Adjusted EBITDA was $81 million, also ahead of guidance, with an adjusted EBITDA margin of 38% [116] - Free cash flow in the quarter was $55 million compared to $30 million in the prior year period, with unlevered free cash flow at $65 million or about 80% of adjusted EBITDA [154] - Software net dollar retention (NDR) was 107%, up from 106% in the previous quarter [17] Business Line Data and Key Metrics Changes - Parts revenue currently represents about 5% of total revenue but is growing significantly faster than the overall company [13] - Adjusted gross profit for the quarter was $162 million, with a gross profit margin of 77%, flat year-over-year [48] - Incremental growth in Q2 was driven by cross-sell, upsell, and adoption of solutions across the client base, including upsell of repair shop packages and ongoing momentum in casualty [125] Market Data and Key Metrics Changes - The cumulative days of cycle-time for automotive claims increased to over 2 billion days in 2022, highlighting the need for operational efficiency in the P&C insurance economy [8][111] - The collision repair industry spent about $18 billion on parts last year, indicating a significant revenue opportunity for the company [122] Company Strategy and Development Direction - The company is focused on expanding its Estimate-STP solution and integrating AI-based technologies to improve operational efficiency and customer satisfaction [10][12] - There is a strong emphasis on innovation, particularly in casualty solutions, which are seen as a major growth opportunity [146] - The company has raised its revenue guidance for 2023 to reflect business momentum, now expecting 9% growth for the full year [20] Management's Comments on Operating Environment and Future Outlook - Management noted that the auto insurance economy is facing multiple headwinds, including staffing shortages, inflation, and rising consumer expectations, but remains confident in the company's durable business model [38] - The company expects adjusted EBITDA margins to increase from 39% in the first half of 2023 to 41% in the second half, benefiting from operating leverage [129] - Management expressed optimism about the ongoing strength in customer engagement and the adoption of innovative solutions [32] Other Important Information - The company ended the quarter with $404 million in cash and cash equivalents and $788 million of debt, resulting in a net leverage of approximately 1.2 times adjusted EBITDA [49] - The company is committed to investing in innovation to enhance the value delivered to clients and drive growth [151] Q&A Session Summary Question: Can you discuss the opportunity for Estimate-STP outside mobile and self-service? - Management indicated that testing with insurance staff adjusters has shown strong receptivity, expanding the total addressable market (TAM) by an additional 25% [53] Question: Should we expect net dollar retention to remain around the $107 million range? - Management confirmed that they feel good about the $107 million range and the overall momentum in the business [25] Question: How do you view the potential for AI and automation in underwriting workflows? - Management acknowledged that while AI can unlock new capabilities, the focus remains on current use cases and operational efficiencies [61] Question: What are the trends in frequency and severity related to EVs? - Management noted that while frequency has increased slightly, it remains below 2019 levels, with growing complexity in repairs being a significant factor [62] Question: Can you elaborate on the new APD win this quarter? - Management highlighted that the new customer was previously using only casualty solutions and is now adopting the full suite of auto physical damage solutions, which is expected to contribute revenue in 2024 [145][197]