CCC Intelligent Solutions (CCCS) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q3 2024, total revenue was $238 million, an 8% increase year-over-year, slightly above guidance [8][41] - Adjusted EBITDA for the quarter was$ 102 million, up 9% year-over-year, with an adjusted EBITDA margin of 43% [9][47] - Software gross dollar retention (GDR) was 99%, consistent with previous quarters, indicating strong customer retention [44] - Software net dollar retention (NDR) was 106%, down from 107% in Q2 2024 [45] Business Line Data and Key Metrics Changes - Approximately five percentage points of Q3 growth came from cross-sell, upsell, and adoption of solutions across the client base, including repair shop upgrades [42] - Emerging solutions contributed about 1 point of growth in Q3, with a run rate of approximately 3% of total revenue [43] Market Data and Key Metrics Changes - Claim volumes were down approximately 6% year-over-year, impacting revenue growth [53][79] - The company noted a slight increase in total losses, with a shift from 79% repairable vehicles to 76% [72] Company Strategy and Development Direction - The company is focused on the "Intelligent Experience" (IX) approach, leveraging AI and event-driven architecture to enhance operational performance and customer experience [16][38] - Continued investment in R&D, exceeding $150 million annually, is aimed at supporting the IX transition and enhancing technology capabilities [19][38] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to deliver long-term targets of 7% to 10% organic revenue growth and mid-40s adjusted EBITDA margin [55] - The company anticipates that the current softness in claim volume is not a permanent trend and expects recovery over time [94] Other Important Information - The company completed its transition to the public cloud and streamlined customer-facing organizations to enhance client engagement [25][96] - Free cash flow in Q3 was$ 49 million, with a trailing 12-month free cash flow margin of 22% [48] Q&A Session Summary Question: What needs to happen to improve the adoption of newer products? - Management indicated that substantial energy is required from customers to pilot and implement new solutions, and progress is being made [56] Question: Is there a slowdown in new business dynamics? - Management acknowledged some deceleration but emphasized that the full-year guidance remains consistent with previous expectations [78] Question: What is the impact of hurricanes on claims? - Management noted that while hurricanes can affect auto claims, the volumes seen to date have not been material [102] Question: What is the outlook for share-based compensation (SBC) as a percentage of revenue? - SBC is expected to be in the range of 12% to 14% of revenue for 2025, following a modification that impacted the current percentage [109]