Workflow
CCC Intelligent Solutions (CCCS) - 2023 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements (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 million40 - 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 forecasts243 - 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 months214 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 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 $100 billion in annual transaction value98 - CCC has deep customer penetration, with 18 of the top 20 U.S. automotive insurance carriers and over 29,000 collision repair facilities on its network10098 - The company is actively using AI, with over 100 U.S. auto insurers using its AI-powered solutions and having processed over 14 million unique claims with deep learning AI as of year-end 202298 Software Net Dollar Retention (NDR) | Quarter Ending | 2023 | 2022 | | :--- | :--- | :--- | | March 31 | 106% | 114% | | June 30 | 107% | 111% | | September 30 | 107% | 110% | Software Gross Dollar Retention (GDR) | Quarter Ending | 2023 | 2022 | | :--- | :--- | :--- | | March 31 | 99% | 99% | | June 30 | 99% | 99% | | September 30 | 98% | 99% | Q3 2023 vs Q3 2022 Financial Comparison (in thousands) | Metric | Q3 2023 | Q3 2022 | Change ($) | 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 | $(32,007) | NM | - The increase in Q3 revenue was primarily a result of 8% growth from existing customer upgrades and expanding solution offerings, and 3% growth from new customers95 Nine Months 2023 vs 2022 Financial Comparison (in thousands) | Metric | Nine Months 2023 | Nine Months 2022 | Change ($) | 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 unit125 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 months136 - 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 facility136137 - In May 2023, the company amended its credit agreement to replace LIBOR with SOFR as the benchmark interest rate137 Quantitative and Qualitative Disclosures about Market Risk 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-K180 Controls and Procedures 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 effective159 - No changes in internal control over financial reporting occurred during Q3 2023 that materially affected, or are reasonably likely to materially affect, internal controls182 PART II. OTHER INFORMATION Legal Proceedings 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 operations18369 Risk Factors 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 risks184 Other Information 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 arrangements187