CCC Intelligent Solutions (CCCS) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial statements and related notes, along with management's discussion and analysis of financial condition and results of operations Cautionary Statement Regarding Forward-Looking Statements This section outlines forward-looking statements in the Form 10-Q, noting that actual results may differ due to various risks and uncertainties, including revenue concentration and economic conditions - Forward-looking statements are based on current expectations, but actual results may vary due to risks and uncertainties[8][10] - Key risk factors encompass revenue concentration, customer retention, economic conditions, competition, technology development, and regulatory changes[9] Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, equity, and cash flows, with detailed accounting notes Condensed Consolidated Balance Sheets This subsection presents the unaudited condensed consolidated balance sheets, detailing assets, liabilities, and equity at specific reporting dates Condensed Consolidated Balance Sheets (in thousands) | Metric | June 30, 2025 (Unaudited) | December 31, 2024 | | :----------------------------------- | :-------------------------- | :------------------ | | ASSETS | | | | Cash and cash equivalents | $55,053 | $398,983 | | Accounts receivable—Net | $132,450 | $106,578 | | Total current assets | $277,705 | $564,650 | | Software, equipment, and property—Net | $170,341 | $172,079 | | Intangible assets—Net | $1,056,418 | $934,278 | | Goodwill | $1,956,485 | $1,417,724 | | Total Assets | $3,565,424 | $3,183,218 | | LIABILITIES & EQUITY | | | | Total current liabilities | $200,514 | $154,846 | | Long-term debt—Net | $973,298 | $761,053 | | Total liabilities | $1,429,074 | $1,163,716 | | Total stockholders' equity | $2,136,350 | $1,997,823 | | Total Liabilities, Mezzanine Equity and Stockholders' Equity | $3,565,424 | $3,183,218 | - Cash and cash equivalents significantly decreased from $398.983 million at December 31, 2024, to $55.053 million at June 30, 2025[12] - Goodwill increased substantially from $1.418 billion to $1.956 billion, primarily due to the acquisition of EvolutionIQ, Inc[12][76] - Long-term debt (net) increased from $761.053 million to $973.298 million[12] Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) This subsection presents the unaudited condensed consolidated statements of operations and comprehensive income (loss) for the reported periods Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenues | $260,451 | $232,618 | $512,016 | $459,855 | | Gross Profit | $194,016 | $177,297 | $379,008 | $345,160 | | Operating Income | $24,470 | $22,513 | $13,772 | $30,310 | | Pretax Income (Loss) | $5,797 | $25,752 | $(24,977) | $20,917 | | Net Income (Loss) Attributable to Common Stockholders | $12,960 | $20,224 | $(5,737) | $18,485 | | Basic EPS | $0.02 | $0.03 | $(0.01) | $0.03 | | Diluted EPS | $0.02 | $0.03 | $(0.01) | $0.03 | - Revenues increased by 12.0% for the three months and 11.3% for the six months ended June 30, 2025, compared to prior periods[14] - Net income attributable to common stockholders decreased by 35.9% for the three months and resulted in a net loss of $(5.737) million for the six months ended June 30, 2025[14] - Pretax income significantly decreased for the three months and became a pretax loss for the six months, primarily due to warrant liability changes and increased interest expense[14][191][193][208][211] Unaudited Condensed Consolidated Statements of Mezzanine Equity and Stockholders' Equity This subsection details the unaudited condensed consolidated statements of mezzanine equity and stockholders' equity, showing changes over the reporting periods Changes in Stockholders' Equity (in thousands, except number of shares) | Metric | December 31, 2024 | June 30, 2025 | | :----------------------------------- | :------------------ | :-------------------------- | | Common Stock (shares) | 629,207,115 | 648,994,473 | | Common Stock (par value) | $63 | $65 | | Additional Paid-In Capital | $3,094,182 | $3,409,623 | | Accumulated Deficit | $(1,095,227) | $(1,272,181) | | Total Stockholders' Equity | $1,997,823 | $2,136,350 | - Common stock shares increased from 629.21 million to 648.99 million, driven by compensation, option exercises, and acquisitions, partially offset by repurchases[16] - Accumulated deficit increased from $(1.095) billion to $(1.272) billion, reflecting net losses and share repurchases[16] Unaudited Condensed Consolidated Statements of Cash Flows This subsection presents the unaudited condensed consolidated statements of cash flows, categorizing cash activities into operating, investing, and financing Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $101,548 | $107,009 | | Net cash used in investing activities | $(445,682) | $(31,224) | | Net cash provided by (used in) financing activities | $167 | $(33,328) | | Net change in cash and cash equivalents | $(343,930) | $42,321 | | Cash and cash equivalents, End of period | $55,053 | $237,893 | - Net cash used in investing activities significantly increased to $(445.682) million, primarily due to the $415.1 million acquisition of EvolutionIQ, Inc[22][247] - Net cash provided by financing activities turned positive at $0.167 million, driven by $225.0 million in incremental term loans, partially offset by $172.5 million in common stock repurchases[22][248] - Overall cash and cash equivalents decreased by $343.9 million, resulting in an end-of-period balance of $55.1 million[22] Note 1. Organization and Nature of Operations This note describes the Company's corporate structure, business, and the nature of its SaaS platform offerings for the insurance economy - CCC Intelligent Solutions Holdings Inc. provides SaaS platforms for the multi-trillion-dollar insurance economy, operating in the US and China[25][26] - The company's cloud-based SaaS platform connects trading partners and facilitates AI-enabled digital workflows[26] - The company domesticated as a Delaware corporation on July 30, 2021, following a business combination, originally incorporated in the Cayman Islands[27] Note 2. Summary of Significant Accounting Policies This note outlines the significant accounting policies, estimates, and assumptions used in preparing the unaudited condensed consolidated financial statements - The unaudited condensed consolidated financial statements are prepared under GAAP, requiring significant management estimates and assumptions[29][30] - Significant estimates include contract transaction prices, goodwill and intangible asset valuation, warrant liabilities, and stock incentive plans[34] - The company is evaluating new FASB ASUs 2024-03 and 2023-09, with 2023-09 not expected to have a significant impact[35][36] Note 3. Business Acquisition This note details the acquisition of EvolutionIQ, Inc., including the total consideration, resulting goodwill, and intangible assets recognized - On January 6, 2025, the Company acquired EvolutionIQ, Inc. for a total consideration of $674.3 million, expanding into disability and injury claims management[37][38][39] EvolutionIQ Acquisition Consideration (in thousands) | Component | Amount | | :-------------------------- | :------- | | Cash consideration | $420,642 | | Fair value of common stock issued | $250,441 | | Fair value of option holdback | $3,184 | | Total acquisition date fair value | $674,267 | - The acquisition resulted in $538.8 million in goodwill and $167.9 million in intangible assets, primarily for acquired technology and customer relationships[45] - EvolutionIQ's revenues were less than 5.0% of total revenues, with a pretax loss of $51.8 million including significant stock-based compensation and amortization expense[49] Note 4. Revenue This note provides a breakdown of revenue by service type, details remaining performance obligations, and changes in deferred revenue Revenue by Type of Service (in thousands) | Service Type | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Software subscriptions | $250,579 | $223,014 | $493,115 | $441,083 | | Other | $9,872 | $9,604 | $18,901 | $18,772 | | Total revenues | $260,451 | $232,618 | $512,016 | $459,855 | - Software subscriptions constitute the vast majority of revenue, accounting for 96% of total revenue for both periods[52][179][198] - As of June 30, 2025, $1.749 billion of revenue is expected from remaining performance obligations, with $738 million anticipated in the next twelve months[52] - Deferred revenue increased from $44.9 million to $71.2 million, including $21.5 million related to the EvolutionIQ acquisition[54][55] Note 5. Fair Value Measurements This note details the Company's fair value measurements for financial instruments, including interest rate swaps, caps, and long-term debt - The Company uses interest rate swap agreements to reduce floating rate debt exposure, with a $7.6 million fair value liability as of June 30, 2025[57][58][61] - Interest rate cap agreements had a fair value of $0.2 million as of June 30, 2025, down from $1.0 million at December 31, 2024[59][60][61] - The fair value of long-term debt was estimated at $996.0 million as of June 30, 2025, compared to a carrying amount of $994.9 million[63] Note 6. Income Taxes This note discusses the Company's income tax provisions, benefits, and the potential impact of recent legislative changes - The Company recognized an income tax benefit of $7.2 million for the three months and $20.5 million for the six months ended June 30, 2025, primarily due to pre-tax book losses[65][66] - The One Big Beautiful Bill Act (OBBB), signed July 4, 2025, may impact corporate taxation, and its effects are being evaluated[64] - Income tax payments were $27.3 million for the six months ended June 30, 2025, down from $30.6 million in the prior year[68] Note 7. Accounts Receivable This note provides a breakdown of accounts receivable, net of allowances, and identifies customer concentration Accounts Receivable—Net (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :------------ | :------------------ | | Accounts receivable | $136,760 | $111,270 | | Allowance for credit losses and sales reserves | $(4,310) | $(4,692) | | Accounts receivable—Net | $132,450 | $106,578 | - Accounts receivable—Net increased by $25.9 million from December 31, 2024, to June 30, 2025[70] - One customer accounted for 10% of accounts receivable—Net as of June 30, 2025[71] Note 8. Other Current Assets This note details the components of other current assets, including prepaid costs and other miscellaneous assets Other Current Assets (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :------------ | :------------------ | | Prepaid SaaS costs | $9,623 | $9,112 | | Prepaid service fees | $6,847 | $7,352 | | Other | $13,540 | $9,275 | | Total other current assets | $31,477 | $28,973 | - Total other current assets increased by $2.5 million from December 31, 2024, to June 30, 2025[72] Note 9. Software, Equipment, and Property This note provides a breakdown of software, equipment, and property, net of accumulated depreciation and amortization Software, Equipment, and Property—Net (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :------------ | :------------------ | | Total software, equipment, and property | $348,219 | $331,355 | | Less accumulated depreciation and amortization | $(177,878) | $(159,276) | | Software, equipment, and property—Net | $170,341 | $172,079 | - Depreciation and amortization expense for software, equipment, and property increased to $27.4 million for the six months ended June 30, 2025, from $19.2 million in the prior year[73] Note 10. Leases This note details the Company's lease costs, including operating and variable lease expenses, and changes in lease assets and liabilities Total Lease Costs (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating lease costs | $1,878 | $1,299 | $3,671 | $2,707 | | Variable lease costs | $1,085 | $1,093 | $2,210 | $2,194 | | Total lease costs | $2,963 | $2,392 | $5,881 | $4,901 | - Total lease costs increased by $0.6 million for the three months and $1.0 million for the six months ended June 30, 2025, compared to the prior year[74] - The Company obtained $8.8 million in operating lease assets, primarily due to the EvolutionIQ acquisition[75] Note 11. Goodwill and Intangible Assets This note provides details on changes in goodwill and intangible assets, including the impact of the EvolutionIQ acquisition and amortization expense - Goodwill increased by $538.8 million to $1.9565 billion as of June 30, 2025, primarily due to the EvolutionIQ acquisition[76] - Intangible assets increased by $167.9 million due to the EvolutionIQ acquisition, with a weighted average useful life of 9.5 years for amortizable assets[48][76] Intangible Assets (in thousands) | Intangible Asset | Gross Carrying Amount (June 30, 2025) | Net Carrying Amount (June 30, 2025) | | :----------------------- | :------------------------------------ | :---------------------------------- | | Customer relationships | $1,324,130 | $736,415 | | Acquired technologies | $139,100 | $128,363 | | Trademarks | $1,300 | $1,170 | | Trademarks—indefinite life | $190,470 | $190,470 | | Total intangible assets | $1,655,000 | $1,056,418 | - Amortization expense for intangible assets was $45.8 million for the six months ended June 30, 2025, up from $44.5 million in the prior year[78] Note 12. Accrued Expenses This note details the components of accrued expenses, including compensation, royalties, and professional services Accrued Expenses (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :----------------------- | :------------ | :------------------ | | Compensation | $39,060 | $47,505 | | Royalties and licenses | $5,680 | $5,116 | | Professional services | $3,600 | $6,260 | | Option holdback | $3,184 | — | | Total accrued expenses | $66,504 | $72,543 | - Total accrued expenses decreased by $6.0 million, primarily due to lower compensation and professional service costs, partially offset by the EvolutionIQ option holdback[80] Note 13. Other Liabilities This note details the components of other liabilities, including non-current income taxes payable, fair value of interest rate swaps, and non-current deferred revenue Other Liabilities (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :------------ | :------------------ | | Income taxes payable—non-current | $8,848 | $6,344 | | Fair value on interest rate swap | $7,569 | — | | Deferred revenue—non-current | $1,078 | $1,415 | | Total other liabilities | $17,495 | $11,303 | - Total other liabilities increased by $6.2 million, mainly due to a $7.6 million fair value liability from interest rate swaps, partially offset by decreased non-current deferred revenue[81] Note 14. Long-Term Debt This note details the Company's long-term debt, including amendments to credit agreements, incremental term loans, interest rates, and interest rate swap agreements - The Company incurred $225.0 million in incremental term loans in January 2025 to refinance existing loans and extend maturity to January 23, 2032[83][86] - Amendments removed the SOFR credit spread adjustment and reduced the interest rate margin on all term loans[86] Long-Term Debt (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :------------ | :------------------ | | Term Loan | $995,995 | $776,000 | | Term Loan—Net of discount & fees | $983,308 | $769,053 | | Total long-term debt—Net of current portion | $973,298 | $761,053 | - The weighted-average interest rate on the Term Loan decreased to 6.4% for the three months ended June 30, 2025, from 7.8% in the prior year[97] - The Company entered into three interest rate swap agreements with a notional amount of $750.0 million, fixing the rate at 3.94% from July 2025 to July 2027[100] Note 15. Redeemable Non-Controlling Interest This note describes the reclassification of Series A Preferred Stock from mezzanine equity due to a redemption notice from a minority investor - On March 17, 2025, Series A Preferred Stock held by a minority investor was reclassified from mezzanine equity due to a redemption notice[103][106] - The redemption price includes the original issue price plus 10.0% compound interest per annum[105] Note 16. Note Payable to Minority Investor This note details the promissory note issued to a minority investor in connection with the redemption of Series A Preferred Stock, including its principal and interest terms - CCC Cayman issued a promissory note to a minority investor on May 16, 2025, with an initial principal of $23.4 million[108][109] - The Promissory Note accrues interest at 12.0% per annum, compounded daily, with an outstanding amount of $23.7 million as of June 30, 2025[109][111] Note 17. Capital Stock This note provides information on common stock shares issued and outstanding, shares issued for acquisitions, and details of the share repurchase program - As of June 30, 2025, 648.99 million shares of common stock were issued and outstanding, up from 629.21 million shares at December 31, 2024[114] - The Company issued 10.36 million restricted shares of common stock for the EvolutionIQ acquisition, subject to two-year service-based vesting conditions[115] - Under the 2024 Share Repurchase Program, 17.99 million shares were repurchased for $172.3 million, with $127.7 million remaining available[119][120][121] Note 18. Stock Incentive Plans This note details stock-based compensation expense by category, unrecognized compensation expense, and the impact of the EvolutionIQ acquisition on stock awards Stock-Based Compensation Expense (in thousands) | Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Cost of revenues | $4,110 | $2,672 | $6,795 | $4,754 | | Research and development | $14,535 | $11,515 | $32,136 | $22,586 | | Sales and marketing | $12,522 | $6,785 | $25,650 | $12,513 | | General and administrative | $14,808 | $19,153 | $42,442 | $45,243 | | Total stock-based compensation expense | $45,975 | $40,125 | $107,023 | $85,096 | - Total stock-based compensation expense increased to $107.0 million for the six months ended June 30, 2025, partly due to the EvolutionIQ acquisition[129] - $217.4 million of unrecognized time-based stock compensation and $25.0 million for performance-based awards remain, to be recognized over 2.3 and 2.0 years, respectively[129] - An additional $35.4 million of unrecognized stock compensation expense from the EvolutionIQ acquisition will be recognized over 1.6 years[130] Note 19. Warrants This note explains the redemption of all outstanding Private Warrants in May 2024 and the resulting impact on fair value changes - All outstanding Private Warrants were redeemed in May 2024 for 3.81 million shares of common stock, with no warrants outstanding as of June 30, 2025[133] - The Company recognized $16.0 million and $14.4 million income from warrant liability fair value changes in 2024, with no such income/expense in 2025 due to redemption[133][193][211] Note 20. Commitments This note outlines the Company's long-term purchase obligations for data licensing, outsourced services, and SaaS, and its warranty and indemnification policies - The Company has long-term purchase obligations for data licensing, outsourced services, and SaaS, expiring through 2031, with no material changes from December 31, 2024[134] - The Company provides service warranties and intellectual property indemnification, incurring no material costs or accrued liabilities to date[135][136] Note 21. Legal Proceedings and Contingencies This note addresses ongoing legal proceedings and contingencies, stating management's belief that they will not have a material adverse effect on financial results - Management believes current legal actions are not expected to have a material adverse effect on financial position or results of operations[137] - Intellectual property violation claims made by the Company in a prior year were settled during the six months ended June 30, 2025[138] Note 22. Related Parties This note discloses transactions with related parties, including revenues from credit card processing and expenses for employee benefits and board fees Related Party Transactions (in thousands) | Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenues (Credit card processing) | $506 | $338 | $888 | $603 | | Expenses (Employee health insurance benefits) | $565 | $683 | $947 | $1,853 | | Expenses (Board of director fees) | $245 | $239 | $331 | $351 | | Expenses (IT security software) | $156 | $128 | $312 | $255 | - Revenues from credit card processing with related parties increased, while employee health insurance benefits expenses decreased for the six months ended June 30, 2025[139] Note 23. Other (Expense) Income—Net This note details the components of other (expense) income—net, primarily focusing on gains and losses from changes in fair value of derivative instruments Other (Expense) Income—Net (in thousands) | Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Loss from change in fair value of interest rate swaps | $(2,238) | — | $(7,569) | — | | Loss from change in fair value of interest rate caps | $(402) | $(852) | $(812) | $(134) | | Income from derivative instruments | $492 | $2,008 | $989 | $4,039 | | Total other (expense) income—Net | $(2,057) | $1,253 | $(7,154) | $4,191 | - The Company recognized a net expense of $7.2 million for the six months ended June 30, 2025, primarily due to losses from interest rate swaps and caps[140][212] Note 24. Net Income (Loss) Per Share This note presents the calculation of basic and diluted net income (loss) per share, including the weighted-average shares outstanding Net Income (Loss) Per Share (in thousands, except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) attributable to common stockholders | $12,960 | $20,224 | $(5,737) | $18,485 | | Basic EPS | $0.02 | $0.03 | $(0.01) | $0.03 | | Diluted EPS | $0.02 | $0.03 | $(0.01) | $0.03 | | Weighted average shares—Basic | 637,578,033 | 609,997,114 | 637,207,185 | 604,138,246 | | Weighted average shares—Diluted | 660,622,703 | 638,367,745 | 637,207,185 | 636,990,633 | - Diluted EPS for the six months ended June 30, 2025, was $(0.01), reflecting the net loss position compared to $0.03 in the prior year[143] - Approximately 28.9 million common stock equivalent shares were excluded from diluted EPS due to their anti-dilutive effect[144] Note 25. Segment Information and Information About Geographic Areas This note provides information on the Company's single reportable segment, the Domestic Segment, and a breakdown of revenues by geographic area - The Company operates in one reportable segment, the 'Domestic Segment,' primarily providing SaaS platforms in the United States[146][148] Revenues by Geographic Area (in thousands) | Geographic Area | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | United States | $258,751 | $230,995 | $508,626 | $456,561 | | China | $1,700 | $1,623 | $3,390 | $3,294 | | Total revenues | $260,451 | $232,618 | $512,016 | $459,855 | - The CODM uses net income (loss) and adjusted financial information to evaluate segment performance and allocate resources[149] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's analysis of financial condition and results, including business overview, key metrics, financial performance, non-GAAP reconciliations, liquidity, and critical accounting estimates Business Overview This subsection provides an overview of CCC's SaaS platforms for the insurance economy, its market position, and strategic acquisitions - CCC provides leading SaaS platforms for the multi-trillion-dollar insurance economy, connecting over 35,000 businesses in automotive claims and collision repair[161][162] - The platform leverages over $2 trillion of historical data for AI-enhanced workflows, with over 100 U.S. auto insurers and 10,000 U.S. collision repairers using AI solutions[165] - The Company acquired EvolutionIQ in January 2025 to expand into disability and workers' compensation insurance, aiming to digitize the automotive claims lifecycle[167] - CCC maintains strong customer relationships, including 27 of the top 30 U.S. auto insurers, over 30,500 collision repair facilities, and 13 of the top 15 automotive manufacturers[168] Key Performance Measures and Operating Metrics This subsection presents key performance indicators, including Software Net Dollar Retention Rate and Software Gross Dollar Retention Rate - Software Net Dollar Retention Rate (NDR) was 107% for the quarters ended March 31, 2025, and June 30, 2025, indicating strong revenue growth from existing customers[172] - Software Gross Dollar Retention Rate (GDR) remained at 99% for the quarters ended March 31, 2025, and June 30, 2025, demonstrating high customer retention[175] - Both Software NDR and GDR calculations now include EvolutionIQ's software revenue starting from the quarter ended March 31, 2025[171][174] Results of Operations This subsection provides a detailed analysis of the Company's revenues, operating income, and net income (loss) for the reported periods Revenue Growth (YoY) | Period | Revenue (2025) | Revenue (2024) | Change ($) | Change (%) | | :------------------------------- | :------------- | :------------- | :--------- | :--------- | | Three Months Ended June 30 | $260,451 | $232,618 | $27,833 | 12.0% | | Six Months Ended June 30 | $512,016 | $459,855 | $52,161 | 11.3% | - Revenue growth was driven by 5% from existing customer upgrades, 4% from the EvolutionIQ acquisition, and 3% from new customers[182][199] Operating Income and Net Income (Loss) Attributable to Common Stockholders (YoY) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating Income | $24,470 | $22,513 | $13,772 | $30,310 | | Net Income (Loss) Attributable to Common Stockholders | $12,960 | $20,224 | $(5,737) | $18,485 | - Operating income increased by 8.7% for three months but decreased by 54.6% for six months, primarily due to increased operating expenses and the EvolutionIQ acquisition[180][187][188][197][204][205] - Net income decreased for three months and became a net loss for six months, largely due to the absence of warrant liability income and increased interest expense[180][191][193][197][208][211] Non-GAAP Financial Measures This subsection provides reconciliations and analysis of non-GAAP financial measures, including Adjusted Gross Profit, Adjusted EBITDA, Adjusted Net Income, and Free Cash Flow Adjusted Gross Profit and Margin (in thousands, except percentages) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Adjusted Gross Profit | $202,521 | $182,080 | $394,983 | $359,097 | | Adjusted Gross Profit Margin | 78% | 78% | 77% | 77% | Adjusted EBITDA and Margin (in thousands, except percentages) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Adjusted EBITDA | $108,116 | $95,797 | $207,194 | $189,512 | | Adjusted EBITDA Margin | 42% | 41% | 40% | 40% | Adjusted Net Income and Free Cash Flow (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Adjusted Net Income | $58,855 | $56,186 | $113,337 | $110,976 | | Free Cash Flow | $27,353 | $36,213 | $70,999 | $75,785 | - Adjusted EBITDA increased by 12.9% for three months and 9.3% for six months, demonstrating operational performance growth excluding non-recurring and non-cash items[222] - Free Cash Flow decreased by 24.4% for three months and 6.3% for six months, primarily due to increased capital expenditures for software, equipment, and property[226] Liquidity and Capital Resources This subsection discusses the Company's liquidity position, including cash flows from operations, cash and cash equivalents, working capital, and available credit facilities - The Company generated $101.5 million in cash flows from operating activities during the six months ended June 30, 2025[227] - As of June 30, 2025, cash and cash equivalents were $55.1 million, with a working capital surplus of $77.2 million and an accumulated deficit of $1.2722 billion[227] - Management believes existing cash, operating cash flows, and $248.9 million available under the 2021 Revolving Credit Facility are sufficient for the next twelve months[98][228] Debt This subsection provides details on the Company's long-term debt, including outstanding amounts, credit agreement amendments, interest rates, and hedging strategies - The Company's Term Loan outstanding was $996.0 million as of June 30, 2025, with $10.0 million classified as current[237] - The Fourth Amendment extended term loan maturity to January 23, 2032, and reduced the interest rate margin[234] - The weighted-average interest rate on the Term Loan was 6.3% for the six months ended June 30, 2025, down from 7.8% in the prior year[241] - The Company entered into interest rate swap agreements to fix interest rates on $750.0 million of debt at 3.94% from July 2025 to July 2027[244] Cash Flows This subsection provides a summary and analysis of cash flows from operating, investing, and financing activities for the reported periods Summary of Cash Flow Data (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $101,548 | $107,009 | | Net cash used in investing activities | $(445,682) | $(31,224) | | Net cash provided by (used in) financing activities | $167 | $(33,328) | | Net change in cash and cash equivalents | $(343,930) | $42,321 | - Net cash provided by operating activities decreased slightly to $101.5 million, primarily due to working capital changes, including income taxes and accounts receivable increases[246] - Net cash used in investing activities surged to $445.7 million, predominantly driven by the $415.1 million acquisition of EvolutionIQ[247] - Net cash provided by financing activities turned positive at $0.2 million, reflecting $225.0 million from incremental term loans, largely offset by $172.5 million in common stock repurchases[248] Recent Accounting Pronouncements This subsection refers to Note 2 for information on recent accounting pronouncements and their potential impact on the Company's financial statements - The Company refers to Note 2 for information on recent accounting pronouncements, including ASU 2024-03 and ASU 2023-09[249] Critical Accounting Estimates This subsection highlights critical accounting estimates, particularly those related to business combinations and the allocation of purchase price - Business combinations require significant judgment and estimates in allocating purchase price to acquired assets and liabilities, including valuations of future revenue and discount rates[252][253] - The EvolutionIQ acquisition in January 2025 resulted in $538.8 million in goodwill and $167.9 million in intangible assets, based on these estimates[255] Item 3. Quantitative and Qualitative Disclosures about Market Risk This section reports no material changes in the Company's market risk compared to disclosures in the Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes in market risk compared to the disclosures in the Annual Report on Form 10-K for the year ended December 31, 2024[256] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with EvolutionIQ's internal controls integration ongoing and excluded from current evaluation - Disclosure controls and procedures were effective as of June 30, 2025[257] - The EvolutionIQ acquisition is excluded from the scope of internal control evaluation for the first year, with integration ongoing[258] - No other material changes in internal control over financial reporting were identified during the three months ended June 30, 2025[259] PART II. OTHER INFORMATION This section provides additional information not covered in the financial statements, including legal proceedings, risk factors, equity sales, and exhibits Item 1. Legal Proceedings This section reiterates that ongoing legal actions are not expected to have a material adverse effect on the Company's financial condition or results of operations - Management believes current legal proceedings are not expected to materially adversely affect the Company's financial position or results of operations[260] Item 1A. Risk Factors This section refers readers to the 'Risk Factors' section in the Annual Report on Form 10-K for a comprehensive discussion of potential business risks - Readers are referred to the 'Risk Factors' section in the Annual Report on Form 10-K for a comprehensive list of business risks[261] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities This section details the Company's common stock repurchase activities during the three months ended June 30, 2025, under its 2024 Share Repurchase Program Issuer Purchases of Equity Securities (Three Months Ended June 30, 2025) | Period | Total Number of Shares Purchased | Average Purchase Price per Share | Approximate Dollar Value Remaining Under Program | | :--------- | :------------------------------- | :------------------------------- | :----------------------------------------------- | | April 2025 | — | — | $227.7 million | | May 2025 | 3,218,076 | $8.907 | $199.1 million | | June 2025 | 7,770,251 | $9.095 | $127.7 million | | Total | 10,988,327 | $9.019 | $127.7 million | - The Company repurchased 10.99 million shares of common stock for $99.1 million during the three months ended June 30, 2025, under the $300.0 million 2024 Share Repurchase Program[263] Item 3. Defaults Upon Senior Securities This item is marked as 'Not applicable,' indicating no defaults upon senior securities during the reporting period - Not applicable[264] Item 4. Mine Safety Disclosures This item is marked as 'Not applicable,' indicating no mine safety disclosures are required for the Company - Not applicable[265] Item 5. Other Information This item is marked as 'Not applicable,' indicating no other material information to disclose that is not covered elsewhere in the report - Not applicable[266] Item 6. Exhibits This section lists all exhibits filed as part of the Quarterly Report on Form 10-Q, including certifications and XBRL documents - The report includes certifications from the CEO and CFO and Inline XBRL documents[268][269] SIGNATURE This section contains the required signatures for the Quarterly Report on Form 10-Q