Q3 2021 CCC Intelligent Solutions Holdings Inc Earnings Call

November 10, 2021

Githesh Ramamurthy: market and increase the potential size of our relationship with customers. I'd like to provide an update on some of the early feedback on a few of our newest solutions. We are seeing exciting success with our Estimate STP or straight-through processing solution that we released earlier this year. We have received fantastic early feedback from customers and prospects, including a recent article I participated for in The Wall Street Journal, where the president of USAA's PNC division noted that with Estimate STP, USAA can now provide its first wholly touchless claims offering to its members, a long-standing goal, especially as this storied institution reaches a hundred years of service next year. Estimate STP is designed to provide an end-to-end solution that fully digitizes the estimating process for qualified repairable claims and shortens the estimating process from days to seconds.

Githesh Ramamurthy: Market and increase the potential size of our relationship with customers. I'd like to provide an update on some of the early feedback on a few of our newest solutions. We are seeing exciting success with our Estimate STP or straight-through processing solution that we released earlier this year. We have received fantastic early feedback from customers and prospects, including a recent article I participated for in The Wall Street Journal, where the president of USAA's PNC division noted that with Estimate STP, USAA can now provide its first wholly touchless claims offering to its members, a long-standing goal, especially as this storied institution reaches a hundred years of service next year. Estimate STP is designed to provide an end-to-end solution that fully digitizes the estimating process for qualified repairable claims and shortens the estimating process from days to seconds.

<unk> market and increase the potential size of our relationship with customers.

I'd like to provide an update on some of the early feedback on a few of our newest solutions.

We are seeing exciting <unk> without.

With that estimate SPP are straight through processing solution that we released earlier this year.

We have received fantastic early feedback from customers and prospects include.

Including a recent article participated for in.

In the Wall Street Journal, where the President of Usa's P&C Division.

Noted that with estimate STP USAA can now provide its first whole lead touchless claims offering to its members.

A long standing goal, especially at the storied institution reaches 100 years of service next year.

Estimate STP is designed to provide an end to end solution that fully digitizes. The estimating process for qualified repairable claims and shortening the estimating process from days to seconds.

Githesh Ramamurthy: It links our network of insurers, repair facilities, automakers, parts suppliers, and other service providers to deliver a highly personalized digital experience to our customers' policyholders. At the heart of this capability are a range of sophisticated AI algorithms we have developed using $1 trillion of historical claims data, as well as 1 billion photos, to accurately assess damage, identify which parts need to be repaired or replaced, and what is or is not covered by the owner's insurance policy. A second success factor has been the deep integrations we have built over the years from the CCC cloud to our customer systems and workflows. This has been instrumental to deployment and implementation. Four national carriers, including USAA, have deployed Estimate STP and are actively processing estimates for those claims in a low to no-touch manner.

It links them network of insurers repair facilities automakers parts suppliers.

And other service providers to deliver a highly personalized digital experience to our customers policyholders.

At the heart of this capability a range of sophisticated AI algorithms, we have developed.

Using a trillion dollars of historical claims data as well as a 1 billion photos to accurately assess damage.

Ratify which parts need to be repaired or replaced.

What is.

Or is not covered by the owners insurance policy.

A second success factor has been the deep integrations, we have built over the years from the CTC cloud through our customer systems and workflows.

This has been instrumental.

To deployment and implementation.

Four national carriers, including USAA have deployed estimate STP and are actively processing estimates for those claims.

A low to no touch manner.

Githesh Ramamurthy: The business improvement these carriers are realizing are striking and represent an orders of magnitude improvement. These customers are now able to provide line-level estimates from photos and automatically initiate and populate detailed and actionable estimates in seconds. Almost 80% of all vehicle incidents result in a repair. At the same time, these repairs are getting more complex as vehicle sophistication grows. On top of this, the industry is being impacted by a significant shortage of qualified workers, so the need for speed and efficiency of Estimate STP has never been greater. Another area where we are generating good traction is with our diagnostic solution, which provides repair facilities an easy and effective way to integrate their diagnostics and calibration partners into their operational and financial workflow.

The business improvement these carriers are realizing.

Pricing and represent and orders of magnitude improvement.

These customers are now able to provide line level estimates from photos and automatically initiate and populate.

Detailed and actionable estimates in seconds.

Almost 80% of all vehicle incidents.

The results from a repair.

At the same time these repairs are getting more complex.

Vehicles sophistication grows.

On top of this the industry is being impacted.

By a significant shortage of qualified workers so the need for speed and efficiency of estimate SDP has never been greater.

Another area, where we are generating good traction is with our diagnostic solution.

Which provides prepare facilities and easy and effective way to integrate their diagnostics and calibration partners into their operational and financial workflow.

Githesh Ramamurthy: Repair facilities need to properly analyze the increasingly sophisticated systems in today's vehicles to assess what needs to be fixed as part of the repair process. Additionally, they need to build in standard operating procedures. CCC Diagnostics greatly simplifies the process by importing the diagnostics report and provider invoice, which greatly improves efficiency and creates a better experience for the repair facility, including process compliance and revenue recognition. We are in the early stages with diagnostics, but are seeing strong early adoption, with around 5% of our repair facilities currently deployed, including two of the top multi-store operators using the solution. We also recently released the first iteration of CCC Payments, which enables B2B payments through our integration with Nvoicepay, a payment processing partner.

Repair facilities need to properly analyze the increasingly sophisticated systems in today's vehicles.

To SaaS.

What needs to be fixed as part of the repair process.

Additionally, they need to build in standard operating procedures.

CTC diagnostics greatly simplifies the process by importing the diagnostics report and provider invoice, which greatly improves efficiency and creates a better experience for the repair facility, including process compliance and revenue recognition.

We are in the early stages with diagnostics, but are seeing strong early adoption.

With around 5%.

Of our repair facilities currently deployed.

Including two of the top multi store operators using the solution.

We also recently released the first iteration of CCC payments, which enables BTB payments.

Through our integration with invoice pay.

Payment processing partner.

Githesh Ramamurthy: This is an important first step in the rollout of our payment solution, and our early conversations with customers reinforce our belief in the long-term opportunity in payments and the significant value that CCC Payments can deliver. We remain confident on the growth potential for payments and are on track with this rollout. As a reminder, this is an important long-term opportunity for CCC, but it will not be a material revenue contributor in 2022. Our focus next year is to refine the product and begin to scale customer adoption. The third area I'd like to provide an update on is how we continue to expand our network.... We believe we have developed the most comprehensive platform in the market that generates tremendous amounts of data, that allows us to extend our reach to emerging areas of the market.

This is an important first step in the rollout of our payment solution and our early conversations with customers.

<unk> believe.

In the long term opportunity in payments and the significant value that.

<unk> payments can deliver.

We remain confident on the growth potential for payments.

And are on track with its rollout.

As a reminder, this is an important long term opportunity for CCC, but it will not be a material revenue contributor in 2022.

Our focus next year is to refine the product and begin to scale customer adoption.

The third area I would like to provide an update on is how we continue to expand our network.

We believe we have developed the most comprehensive platform in the market that generates tremendous amounts of data that allows us to extend our reach to emerging areas of the market.

Githesh Ramamurthy: This allows us to offer our solutions to a broader array of customers, from financial institutions to OEMs, and rental fleet providers, among others. An emerging area for CCC is the OEM channel. During the quarter, we added a key domestic OEM as the newest OEM customer and expanded our existing relationships with two other OEMs. We now have 13 of the top 15 OEMs as customers on our platform. In August, Toyota announced the launch of its Collision Assistance app, which is built with CCC's technology and is available within the Toyota and Lexus owners apps, and provides step-by-step instructions on how to navigate the post-collision repair process. We believe this is a great example of the opportunity in the OEM space and the value of the connectivity our platform provides to participants across the auto insurance economy.

This allows us to offer our solutions to a broader array of customers from financial institutions to Oems and rental fleet providers among others.

An emerging area for CCC is the OEM channel.

During the quarter, we added a key domestic OEM.

As the newest OEM customer and expanded our existing relationships with two other Oems.

We now have 13 of the top 15 Oems as customers on our platform.

In August Toyota announced the launch of its pollution assistance.

Which is built with Ccc's technology and.

And is available within the Toyota and Lexus owners apps and provides step by step instructions on how to navigate the post collision repair process.

We believe this is a great example of the opportunity in the OEM space and the value of the connectivity our platform provides to participants across the auto insurance economy.

Githesh Ramamurthy: Another exciting example is our recent announcement with Sedgwick, the leading provider of high-quality auto and heavy equipment appraisal solutions, with a network of more than 1,000 independent appraisers. Sedgwick signed a multiyear agreement to deploy CCC's mobile and AI claim solutions to power its auto appraisal offering and related workflows, from first notice of loss all the way to resolution. We launched our Total Loss Care Lender pilot program, which is designed to digitize and automate the total loss process, from lender payoff requests to letters of guarantee and lien and title resolution. We have multiple top five carriers piloting our lien release solutions, and we have some of the largest auto lenders integrated into the platform. These are just a few examples.

Another exciting example.

Is our recent announcement.

With February the leading provider of high quality auto and heavy equipment appraisal solutions with a network of more than 8000 independent appraisers.

<unk> signed a multiyear agreement to deploy Ccc's mobile and AI claims solutions to power its auto appraisal offering and related workflows.

From first notice of loss all the way to resolution.

We launched our total loss care lender pilot program, which is designed to digitize and automate the total loss process.

From lender payoff requests the letters of guarantee and the <unk>.

Entitled Resolution.

We have multiple top five carriers piloting our lean release solutions and we have some of the largest auto lenders integrated into the platform.

These are just a few examples.

Githesh Ramamurthy: In prior earnings calls, we have also discussed signing agreements with large fleet providers or emerging tech-enabled companies like Buckle that are focused on gig economy drivers. What all of these examples show is our ability to leverage our platform to generate more value for the P&C insurance economy and create potential future growth opportunities for CCC. We pride ourselves in taking a long-term view of the market and identifying how the needs of our customers will evolve. We plan to continue to make meaningful investments in additional solutions that will deepen our relationships with current customers and make CCC an attractive partner for prospects outside of our traditional insurer and repair facility markets. I would like to wrap up by saying how excited we are about how well the business is performing.

In prior earnings calls we have also discussed signing agreements with large fleet providers are emerging tech enabled companies like bustle that are focused on gig economy drivers.

What all of these examples show.

Is our ability to leverage our platform to generate more value for the P&C insurance economy, and create potential future growth opportunities for CCC.

We pride ourselves and taking a long term view of the market.

And at that define how the needs of our customers will evolve.

We plan to continue to make meaningful investments in additional solutions.

Deepened our relationships with current customers and.

And make CCC and attractive partner for prospects outside of our traditional insurer and repair facility in markets.

I would like to wrap up by saying how excited we are about how well the business is performing.

Githesh Ramamurthy: We are ahead of both our growth and profitability targets and are again raising our guidance for the year. Market interest in digitization and adopting cloud-based technologies has never been greater in the P&C insurance economy, providing a favorable spending environment for our solutions. We are thrilled with the pace of product innovation and the quality of the customer feedback we are receiving, which gives us great confidence in their future growth potential. Now, I'd like to turn over the call to Brian, after which we'll be happy to take your questions.

We are ahead of both our growth and profitability targets.

And are again, raising our guidance for the year.

Market interest in Digitization and adopting cloud based technologies has never been greater and the P&C insurance economy.

Providing a favorable spending environment for our solutions.

And we are thrilled with the pace of product innovation and the quality of the customer feedback, we are receiving which gives us great confidence in that future growth potential.

Now I would like to turn it over the call to Brian after which we'll be happy to take your questions.

Brian Herb: Thanks, Githesh, and thanks all for joining us today. Today, I'll review our Q3 2021 results and provide guidance for the Q4 and full year of 2021. Total revenue for the third quarter was $176.6 million, up 18% from the prior year period on an adjusted basis. We look at growth on an adjusted basis, which excludes from our 2020 revenue, a portion of our casualty product line, clinical professional services, that was divested at the end of last year. We believe this provides the best view into the underlying growth of the business, so our quarterly performance can be looked at on a like-for-like basis. From a trend perspective, 18% growth is the fifth sequential quarter of accelerating year-over-year revenue growth.

Thanks <unk>.

And thanks, all for joining us today.

Today, I'll review, our third quarter 'twenty, one results and provide guidance for the fourth quarter and full year of 2021.

Total revenue for the third quarter was 176.

$6 million up 18% from the prior year period on an objective basis.

We look at growth on an adjusted basis, which excludes from our 2020 revenue a portion of our casualty product line.

Clinical professional services.

Divested at the end of last year.

We believe this provides the best view into the underlying growth of the business. So our quarterly performance can be looked at on a like for like basis.

From a trend perspective, 18% growth as the fifth sequential quarter of accelerating year over year revenue growth.

Brian Herb: Our growth is being primarily driven by cross-sell and upsell into our installed client base across our product portfolio, including the adoption of newer digital solutions, coupled with solid growth from new logos, largely within the repair facilities and parts supplier customer segment. While we do continue to see some increases from claim transactional recovery, it is a relatively small impact on the quarter, and volume recovery remains on track to contribute approximately 1% of total growth for the full year. Turning now to our key metrics. Software gross dollar retention, or GDR, captures the amount of revenue retained from our client base compared to the prior year period. In Q3 2021, it was 98%, which is consistent with our historical levels. We believe our software GDR reflects the value we provide our customers and the stickiness of the network effect.

Our growth has been primarily driven by cross sell and up sell into our installed client base.

Across our product portfolio, including the adoption of newer digital solutions coupled.

Coupled with solid growth from new logos, largely within the repair facilities and parts supplier customer segment.

While we do continue to see some increases from claim transactional recovery.

It is a relatively small impact on the quarter and volume recovery remains on track to contribute approximately 1% of total growth for the full year.

Turning now to our key metrics software gross dollar retention or GDR captures the amount of revenue retained from our client base compared to the prior year period.

In Q3, 'twenty, one it was 98% which is consistent with our historical levels.

We believe our software GDR reflects the value we provide our customers and the stickiness of the network in fact <unk>.

Brian Herb: Software GDR is a core tenet of our predictable and resilient revenue model. Software net dollar retention, or NDR, captures the amount of cross-sell and upsell from our existing customers compared to the prior year period, as well as volume movement within our APB client base. In Q3 2021, software NDR was 113%. Similar to last quarter, software NDR was above our historical range. Few factors underpinning this performance, including the large renewals Githesh referenced, which had significant cross-sell and upsell components. We also saw strong adoptions of new solutions like Engage, Mobile, AI across our installed client base. Transactional volumes had about 1 point of impact, a combination of COVID recovery and some impact from hurricane activity at the end of the quarter.

Software GDR as a core tenant of our predictable and resilient revenue model.

SaaS, where our net dollar retention or MBR captures the amount of cross sell and up sell from our existing customers compared to the prior year period.

As well as volume movement within our Apd client base.

In Q3, 'twenty, one software MBR was 113%.

Similar to last quarter software NTR was above our historical range.

Few factors underpinning this performance <unk>.

<unk> the large renewals detached reference which had significant cross sell and up sell components. We also saw a strong adoption of new solutions like engage mobile AI across our installed client base and.

And transactional volumes had about one point of impact a combination of COVID-19 recovery and some impact from hurricane activity at the end of the quarter.

Brian Herb: Software NDR is a key driver of our growth, given that the majority of our subscription revenue comes from our existing customer base. Now to review the income statement in more detail. As a reminder, unless otherwise noted, all metrics are non-GAAP. We've provided a reconciliation of GAAP to non-GAAP financials in our press release. Adjusted gross profit in the quarter was $138.4 million, with gross profit margin of 78%, compared to a gross profit margin of 76% in Q3 of last year. Gross profit margin was notably strong in the quarter and reflects the increased economies of scale and the relatively fixed and semi-fixed cost base within cost of revenue. Turning to our operating expenses, non-GAAP operating expenses were $71 million for the quarter, up 14% compared to a year ago.

Software <unk> is a key driver of our growth given that the majority of our subscription revenue coming from our existing customer base.

Now to review the income statement in more detail as a reminder, unless otherwise noted all metrics are non-GAAP. We've provided a reconciliation of GAAP to non-GAAP financials in our press release.

Adjusted gross profit in the quarter with $138 4 million with gross profit margin of 78% compared to a gross profit margin of 76% in the third quarter of last year.

Gross profit margin was notably strong in the quarter and reflects the increase economies of scale and the relatively fixed and semi fixed cost base within cost of revenue.

Turning to our operating expenses non-GAAP operating expenses were $71 million for the quarter up 14% compared to a year ago.

Brian Herb: Expense growth was somewhat slower than we anticipated due to hiring being lower in the quarter, coupled with lower discretionary costs, like travel, due to the ongoing effects of COVID. We expect to continue to hire aggressively within our core investment areas and expect to see sequential step-up of growth in operating expenses going forward. Adjusted EBITDA for the quarter was $70.1 million, which is a 40% adjusted EBITDA margin. Adjusted EBITDA grew 31% year-over-year. This performance reflects the revenue outperformance and the lower spending levels that I just outlined. While we've performed well on EBITDA in 2021, which highlights the strength of the business model, we do remain very focused on investing for future growth. We remain confident in our long-term margin objectives that we've outlined. However, we do not expect margin to remain at the 40% level in the upcoming quarters.

Expense growth was somewhat slower than we anticipated due to hiring being lower in the quarter, coupled with lower discretionary costs like travel.

The ongoing effects of Covid.

We expect to continue to hire aggressively within our core investment areas and expect to see sequential step up of growth in operating expenses going forward.

Adjusted EBITDA for the quarter was $70 1 million, which is a 40% adjusted EBITDA margin.

Adjusted EBITDA grew 31% year over year.

This performance reflects the revenue outperformance in the lower spending levels that I just outlined.

While we performed well on EBITDA in 'twenty one.

Which highlights the strength of the business model, we do remain very focused on investing for future growth.

We remain confident in our long term margin objectives that we've outlined however, we do not expect margin to remain at the 40% level in the upcoming quarters.

Brian Herb: Turning now to the balance sheet and cash flow. We ended the quarter with $160.5 million in cash and cash equivalents and $800 million of debt. At the end of the quarter, our net leverage was approximately 2.6 times. During the quarter, we successfully completed the refinancing of our existing secured credit facility with a new $800 million senior secured term loan and a $250 million revolving credit facility. This also reduced our effective interest rate from 4% to 3%. This further strengthened our balance sheet, and together with the proceeds from our business combination transaction, we have reduced leverage by more than 50% in annual cash interest payments, more than $40 million compared to run rate prior to the business combination and the refinancing of debt.

Turning now to the balance sheet and cash flow.

We ended the quarter with $165 million in cash and cash equivalents and $800 million of debt.

At the end of the quarter, our net leverage was approximately two six times.

During the quarter, we successfully completed the refinancing of our existing secured credit facility.

With a new 800 million senior secured term loan and a $250 million revolving credit facility.

Also reduced our effective interest rate from 4% to 3%.

This further strengthened our balance sheet and together with the proceeds from our business combination transaction, we have reduced leverage by more than 50%.

And annual cash interest payments more than $40 million compared to a run rate prior to the business combination and the refinancing of debt free.

Brian Herb: Free cash flow for the quarter was $25 million, compared to $32 million in the prior year. Cash flow in the prior year did include a one-time benefit related to a tax refund associated with the federal COVID relief program. Looking at cash flow on an unlevered basis, year to date, we converted approximately 61% of adjusted EBITDA into unlevered free cash flow. Now, I'd like to finish with guidance beginning in Q4. We expect total revenue of $182 to 184 million for the quarter. This represents 17% year-over-year growth on an adjusted revenue basis at the midpoint. We expect adjusted EBITDA between $69 to 71 million for the quarter, which represents a 38% adjusted EBITDA margin at the midpoint. For the full year 2021, we are raising our outlook for the year.

Free cash flow for the quarter was $25 million compared to $32 million in the prior year.

Cash flow in the prior year did include a one time benefit related to a tax refund associated with the federal Covid relief program.

Looking at cash flow on an unlevered basis year to date, we've converted approximately 61% of adjusted EBITDA into Unlevered free cash flow.

Now I'd like to finish with guidance beginning in the fourth quarter we.

We expect total revenue of $182 million to $184 million for the quarter. This represents 17% year over year growth on an adjusted revenue basis at the midpoint.

We expect adjusted EBITDA between $69 million to $71 million for the quarter, which represents a 38% adjusted EBITDA margin at the midpoint.

For the full year 'twenty, one we are raising our outlook for the year.

Brian Herb: We are now expecting revenue between $683 to 685 million, or 14% year-over-year growth on an adjusted revenue basis at the midpoint. We now expect adjusted EBITDA between $255 to 257 million, which represents 37% adjusted EBITDA margin at the midpoint. To wrap up, a few final points to consider. We are experiencing strong underlying momentum across the business, and it performed well year to date. This quarter performance highlights the combination of growth, both revenue and profitability, within our business model. Our innovation engine continues to generate value-add solutions that our customers are adopting to address their business goals and drive efficiencies as they continue to focus on their digital journeys. And finally, we believe we are well positioned to continue to deliver significant value to both our customers and our shareholders over time.

We are now expecting revenue between $683 million to $685 million or 14% year over year growth on an adjusted revenue basis at the midpoint.

We now expect adjusted EBITDA between 255 to 257 million, which represents 37% adjusted EBITDA margin at the midpoint.

To wrap up a few final points to consider.

We are experiencing strong underlying momentum across the business and it performed well year to date.

This quarter performance highlights the combination of growth.

Both revenue and profitability within our business model.

Our innovation engine continues to generate value add solutions that our customers are adopting to address their business goals and drive efficiencies as they continue to focus on their digital journeys.

And finally, we believe we are well positioned to continue to deliver significant value to both our customers and our shareholders over time.

Brian Herb: With that, operator, we are now ready to take some questions. Thank you.

With that operator, we are now ready to take some questions. Thank you.

Operator: Thank you. We will now be conducting a question and answer session. If you'd like to ask a question, please press star one on your telephone keypad, and a confirmation tone will indicate that your line is in the queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Our first question comes from Bhavan Suri with William Blair. Please proceed.

Thank you.

We will now be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad and a confirmation tone will indicate that your volumes in Q <unk>.

You May press Star two if you would like to remove your question from the queue.

For participants using speaker equipment that may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.

Our first question comes from Bhavan, Suri with William Blair. Please proceed.

Bhavan Suri: Thanks for taking my question, and, congrats on a, on a really, really solid quarter. Nice job there, Githesh, Frank and team. I guess I want to touch a little bit about, the AI module. We've seen really nice adoption of the AI module, really around sort of, carrier shops streamlining the repair process. Obviously, this drives a lot of value, but I'd love to understand sort of what is, what has the feedback been, and, more importantly, sort of as you think about the integration, what, what percentage of your customer base, both on the insurance side and the repair shop side, have adopted the module or are planning to adopt the module say in the next 12 months?

Thanks for taking my question and congrats on a really really solid quarter nice job, there can touch and team.

I guess I wanted to touch a little bit about.

Module <unk> seen really nice adoption of the module.

Really around sort of carrier.

Carrier shops, streamline the repair process.

Obviously that drives a lot of value, but I'd love to understand sort of.

What has the feedback been and more importantly, sort of as you think about innovation, what what percentage of your customer base. Both on the insurance side and the refresh upsides has adopted the module are planning it up modestly in the next 12 months.

Githesh Ramamurthy: Hey, Bhavan, good to have you on the call. I'll start with the second part of your question. The answer to the second part of your question is very, very, very few. In other words, as we outlined, we just have four carriers starting to use the solution. We also have announced Estimate STP, which is our AI solution for the collision repairers, and-

Hey, Brian good to have you on the call I'll start with the second part of your question.

The answer to the second part of your question is very very very few in other words as we outlined we just have four.

Carriers starting to use the solution.

We also have announced estimate STP, which is our AI solution for collision repairs.

Yes.

Bhavan Suri: Yeah.

Githesh Ramamurthy: It's extremely early in its adoption. So I kind of want to start with that. Now, we've had other solutions where, you know, where we've had AI assisting the ability to write an estimate. We call that smart estimate. What we announced with Estimate STP is a very fundamental breakthrough that, you know, is literally something we've been working on for years, and we're, like, super excited to have this done. So what this does is it allows a consumer to take photos. You know, first of all, consumer calls the carrier. And then carrier sends a link through CCC. Our AI guides the photo-taking process and then uploads the photo.

Extremely early.

So kind of want to start with that.

Now we've had other solutions where.

Where we've had AI assisting the ability to write an estimate we call that smart customer.

What we announced with estimate STP is a very fundamental breakthrough.

<unk> is in is literally something we've been working on for years and we're super excited to have this done so.

What this does is it allows a consumer to take photos.

First of all consumer culture carrier.

And then carrier center linked to CCC.

AI guides photo taking process.

And then upload a photo.

Githesh Ramamurthy: So the claims that are eligible, so there's a fairly large number of sophisticated rules, so which claims can go through this, which cannot go through this. And then we literally have an authoring engine, which is built in our AI, that authors a line-level estimate in seconds, and that can be routed. So that it creates a touchless experience. I don't know if you saw the Wall Street Journal article?

The claims that are eligible so theres a fairly large number of sophisticated rules, which claims can go through bids which cannot go through this.

Then we literally have an offering engine, which is built in our AI that offered a line level estimates.

And that can be routed.

So it creates a touchless experience. So I don't know if you saw the Wall Street Journal article.

Bhavan Suri: I did, yeah.

Githesh Ramamurthy: Yeah, with the president of USAA, you know, he said, "Look, this is the first time they've been able to do a whole, you know, a complete touchless claim." Does that answer your question?

Yes.

Where the president of USAA.

But the first time, we've been able to do a whole.

A complete touchless clean.

That answer your question.

Bhavan Suri: It does. It does. I guess the follow-up, right? And then I'll turn it over to the next person. But you think about the challenges carriers and repair facilities face, right, with the complexity around number of parts-

It does it does I guess as a follow up right.

And then I'll turn it over.

So that's the next person, but do you think about the challenges carriers and repair facilities face right. When the complexity around number of parts and especially as you move to electrical number of sensors all of those.

Githesh Ramamurthy: Yep.

Bhavan Suri: and especially as you move to electric, the number of sensors and all of this, it's just while there's-

Githesh Ramamurthy: Yep.

Bhavan Suri: and especially as you move to electric, the number of sensors and all of this, it's just while there's-

Githesh Ramamurthy: Yeah.

While there is.

Bhavan Suri: There's, you know, a bunch of complexity in what's happening here. I guess I'd love for you to talk a little bit about how the platform benefits from hyperlocal data that can streamline that claims life cycle and minimize the claims leakage, like figuring out exactly what parts, which facilities, inventory. There's a bigger network effect here, especially in hyperlocal data, and I'd love to for you to talk about some of the three- to five-year trajectory as we get more complex with more electric and more electromagnetic, fluid dynamics, et cetera.

Just a bunch of complexity and what's happening here I guess I'd love for you to talk a little bit of how the platform benefits from hyper local data that can streamline our claims lifecycle and minimize the claims leakage like figuring out exactly what parks, which facilities inventory, there's a bigger network effect here, especially in hyper local data I'd love for you to talk about some of the three to five years.

Victory as we get more complex with more electric more electromagnetic.

Dynamics et cetera.

Githesh Ramamurthy: Sure. I would say, you know, very specifically, there are really three very fundamental things that we think will drive this. So the first, I would say, is the sheer number of amount of complexity in the parts. So what might have been a bumper a few years ago might have had, you know, 15 parts. Now the same bumper is made up of 30 parts. So the average car has over 20,000 parts. So the complexity of how you take apart the car, how do you repair the car, so there's a massive amount of inherent vehicle complexity. So that's one aspect of it. And so if you're a collision repairer or an adjuster, you may never have seen this particular repair combination in front of you.

Sure.

I would say very specific needs that are really the very fundamental things that we think will drive. This so the first I would say is the sheer number of amount of complexity in the parts. So what might have been a bumper a few years ago.

15 parts notwithstanding bumper is made up of 30 parts. So the average car is over 20000 parts.

The complexity of how you would take a part of the card how do you repair the car.

So there's a massive amount of inherent vehicle complexity.

So thats one aspect of it.

And so if you're a collision repair or a gesture.

You may never have seen this particular repair combination in furniture. So as you look at the permutations and combinations.

Githesh Ramamurthy: So as you look at the permutations and combinations, you know, this particular vehicle in this geography, this type of accident, you may never have seen. So you need AI assisting that complexity is extraordinarily important. Second, exactly as you pointed out, given the breadth of our scale and the fact that we process a massive amount of claims in every zip code, every CBSA, the hyperlocal data becomes extraordinarily important. That means local part prices, local labor rates, all kinds of other local data, become extremely important as a second factor into it. I'd say third, you know, what we are seeing across the board and why customers are super excited about this, is this produces tremendous efficiencies for them. And also, you know, everyone's got a huge shortage of labor, right?

This particular vehicle in this geography this type of accidents in the number I've seen so you need.

Assisting that complexity is extraordinarily important second exactly as you pointed out.

Given the breadth of our scale and the fact that we process a massive amount of claims every ZIP code every CBS say.

A hyper local data becomes extraordinarily important that means local part prices local labor rates.

All kinds of other local data.

Im extremely important.

As a second factor into it.

I would say a third.

What we are seeing across the board and why customers are Super excited about this is this produces tremendous efficiencies for them and also.

Everyone's got a huge shortage of labor right. These are complex repairs and hiring technicians and people who can deal with this complexity is huge.

Githesh Ramamurthy: These are complex repairs, and hiring technicians and people who can deal with this complexity is huge. And so, so we're seeing, you know, that third element also come in. And exactly as you said, you know, the second point I was mentioning, you know, EVs, ADAS, sensors, there's all kinds of things continuing to add complexity and cost.

So so we're seeing that third element also come in.

Exactly as you said.

Second point I was mentioning.

<unk> a das sensors, there's all kinds of things continuing to add complexity and cost.

Brian Herb: Great. Super helpful. Thanks for that really in-depth answer there. That was great. Congrats, guys.

Bhavan Suri: Great. Super helpful. Thanks for that really in-depth answer there. That was great. Congrats, guys.

Great Super helpful. Thanks for that really in depth answer there were those great congrats guys not hurting.

Githesh Ramamurthy: All right. Great. Thank you.

Githesh Ramamurthy: All right. Great. Thank you. Thank you, Bhavan.

[Analyst] (Citi): Thank you, Pavan.

Alright, thank you.

Operator: Our next question comes from Jackson Ader with J.P. Morgan. Please proceed.

Operator: Our next question comes from Jackson Ader with JPMorgan. Please proceed.

Our next question comes from Jackson Ader with Jpmorgan. Please proceed.

Brian Herb: Great. Good evening, guys. Thanks for taking our questions. The first question is on Engage, the big repair facility that is rolling out, or I guess maybe has rolled out Engage to every single location. I'm curious what the implementation looks like for that. Is it all in one shot? We see in some other, you know, software implementations, these things kind of go in waves. So I'm curious what the Engage rollout looks like when someone adopts it across their entire.

Jackson Ader: Great. Good evening, guys. Thanks for taking our questions. The first question is on Engage, the big repair facility that is rolling out, or I guess maybe has rolled out Engage to every single location. I'm curious what the implementation looks like for that. Is it all in one shot? We see in some other, you know, software implementations, these things kind of go in waves. So I'm curious what the Engage rollout looks like when someone adopts it across their entire.

Great. Good evening guys. Thanks for taking my questions.

The first question is on engage the big.

Repair facility that is rolling out or I guess, maybe has rolled out engage to every single location.

<unk>.

Im curious what the implementation looks like for that is it all in one shot.

And from other software implementation.

These things kind of go in waves. So I'm curious what the engage rollout looks like adopted across their entire.

Githesh Ramamurthy: Yeah. We can typically get a large, even a large MSO with, you know, lots of locations across the country, start to finish, we can get this done in 90 days. Again, part of the reason is our platform at the repair facilities is fundamentally cloud based, so there is no hardware to add, there's no local software to install. None of these things come in. And since this is all deployed over the cloud, Engage also allows insurers, the policyholders, to schedule an appointment. So we have the production schedules of the collision repair facilities in our cloud. So when a consumer says, "I need to schedule a collision repair," they can go directly... You know, they can go directly into to the cloud and drop that appointment on the calendar of the repair facility.

We can typically get a large even a large MSR with.

Lots of locations across the country start to finish we can get this done in 90 days.

Again part of the reason is our platform at the repair facilities is fundamentally cloud base.

There is no hardware to add there is no local software to install none of these things come in.

And.

Since this is all deployed over the cloud.

Engage also allows insurers the policyholders to schedule an appointment.

So we have the production schedules of the collision repair facilities not cloud so when a consumer says I need to schedule a collision repair.

And they can go directly.

They can go directly into.

To the cloud and drop that appointment on the calendar of the repair facility.

Githesh Ramamurthy: So the rollouts are generally pretty straightforward and inside a quarter.

So we can so the rollouts are generally pretty straightforward.

Githesh Ramamurthy: So the rollouts are generally pretty straightforward and inside a quarter.

Inside a quarter.

Brian Herb: Okay, awesome. That's great. And then, so, big step in payments, right? It's kind of first step. That's great. Can you just remind us, you know, what, if we're thinking about the payment stack, where are the biggest pain points? Like, who is dying to have their payments integrated into the capabilities right now so that they can be paid faster?

Jackson Ader: Okay, awesome. That's great. And then, so, big step in payments, right? It's kind of first step. That's great. Can you just remind us, you know, what, if we're thinking about the payment stack, where are the biggest pain points? Like, who is dying to have their payments integrated into the capabilities right now so that they can be paid faster?

Okay awesome.

Great and then so big step in payments right.

First up that's great.

Just remind us.

<unk>.

And we're thinking about the payment stack, where are the biggest pain points are going to have their payments integrated into the capabilities right now so they would be paid faster.

Githesh Ramamurthy: Sure. Sure. So again, exactly as we said, we said in the second half of 2021, we were gonna have stand up our payments platform, which we did exactly that. We stood up our payments platform with our partners. We did some of the integration, got the platform up and running. What we're doing now is working with insurers on some very specific use cases, and those use cases involve: How do I pay certain types of repair facilities? How do I pay the banks that hold my lien? There are opportunities inside medical claims that we process. At the same time, we also have, you know, early versions of our payment solutions working for the repair facilities, where they can, you know, get payments from the consumers for deductibles and the like.

Sure. So again exactly as we said we said in the second half of 'twenty. One we were going to have stand up our payments platform, which we did exactly that we stood up our payments platform with our partners with some of the integration got the platform up and running what we're doing now is working with.

Insurers on some very specific use cases, and those use cases involved hardware paid certain types of repair facilities or the web page.

The the.

Banks that hold by mean, there are opportunities inside medical claims that we process at the same time, we also have.

Early versions of our payment solutions working for the repair facilities, where they can get payments from the consumers will deductibles and the like.

Githesh Ramamurthy: So we are working with early customers on specific use cases, and that's really what we're trying to do, is to get those use cases defined, get them piloted, get them tested, refine the product. And this is frankly why we've been able to deliver a, you know, a substantial Net Promoter Score, is that mindset of just focus on getting it right on those pain points.

So we are working with early customers on specific use cases, and that's really what we're trying to do is to get <unk>.

We get those use cases defined get them piloted get them tested required.

Find the product and this is frankly, why we've been able to deliver.

Substantial net promoter score is that mindset of just focus on getting it right on those pinpoints.

Yes.

Brian Herb: That makes a ton of sense. Thanks, guys.

Jackson Ader: That makes a ton of sense. Thanks, guys.

Does that make sense.

Thanks, guys.

Githesh Ramamurthy: All right.

Good morning.

Operator: Our next question comes from Gary Prestopino with Barrington Research. Please proceed.

Our next question comes from Gary <unk> with Barrington Research. Please proceed.

Gary Prestopino: Hey, good afternoon, all.

Good afternoon all.

Brian Herb: Hey, Gary.

Eric.

Gary Prestopino: Brian, did you give what the organic growth and new logo breakdown was in the quarter, or are you gonna give that, or can you give that?

Brian did you give what the organic growth and new logo break downloads in the quarter or are you going to give that or can you give that.

Brian Herb: Yeah, happy to, Gary. So we posted 18% on adjusted revenue basis. So within that 18%, 5% of the growth was from new logos, and that's largely driven from repair facilities and our parts suppliers. And then our software NDR, as I mentioned, was 113, representing, you know, cross-sell and upsell across the base. So if you think about 13% from cross-sell, upsell and then 5% from new logos, that gets you the 18% adjusted revenue for the quarter.

Yes happy to Gary.

So we we posted 18% on an adjusted revenue basis. So within that 18, 5% of the growth was from new logos and thats, largely driven from repair facilities and our parts suppliers.

And then our software and <unk> as I mentioned was 113, representing cross sell and up sell across the Bay. So do you think about 13% from cross sell upsell and.

Then 5% from new logos that gets you the 18% adjusted revenue for the quarter.

Gary Prestopino: ... Okay, that's great. And then, Githesh, last quarter, you kind of gave some statistics about, well, the amount of claims that were processed through mobile. It was about 20%. Did that-

Gary Prestopino: Okay, that's great. And then, Githesh, last quarter, you kind of gave some statistics about, well, the amount of claims that were processed through mobile. It was about 20%. Did that-

That's great and then detached last quarter, you kind of gave some statistics about.

The amount of claims that were processed through mobile.

It was about 20% did that did that change materially in.

Githesh Ramamurthy: Yep.

Gary Prestopino: Did that change materially in Q3, or did it move the needle upwards a little bit?

In Q3 or did it didn't move the needle.

Upwards a little bit.

Githesh Ramamurthy: Yeah, it ticked up a little bit because, you know, we are starting to see... It went up a couple of percentage points. But what is really interesting is that these mobile claims are also the key funnel into our AI platform, right? You have to think about it in that context as well. So sequence-wise, you know, over 2, 3 years ago, as we implemented mobile for almost 100 carriers and as well as for repair facilities, it became very important, as a channel for funneling claims to the AI as well.

Yes, it ticked up a little bit because we.

We are starting to see it.

Went up a couple of percentage points, but what is really.

Interesting is that these mobile claims are also the key funnel into our AI platform right. So you have to think about it in that context as well so sequence wise or two or three years ago as we implemented mobile for almost 100 carriers and as well as for repair facility.

Gary Prestopino: Mm-hmm.

Githesh Ramamurthy: You have to think about it in that context as well.

Gary Prestopino: Mm-hmm.

Githesh Ramamurthy: So sequence-wise, you know, over 2, 3 years ago, as we implemented mobile for almost 100 carriers and as well as for repair facilities, it became very important, as a channel for funneling claims to the AI as well.

It became very important.

As a channel for.

Finally claims through the <unk> as well.

Yeah.

Gary Prestopino: Okay. And then, lastly, with some of these new AI products that you have out there, especially with electric cars or even cars that have ADAS, how do you handle anything having to do with calibration and even diagnostic on, you know, a collision repair? Do they take into account what may need to be calibrated? If, say, you're fixing a bumper, but, you know, there's something you have to do to get the calibration back to where it was.

Okay.

And then.

Lastly, with with some of these.

New AI products that you have out there.

Especially with electric cars or even cars that have a desk how do you handle.

Anything having to do with calibration.

And even diagnostic on.

Our collision repair.

Do they take into account what may need to be calibrated.

So you're you're fixing a bumper, but there is something you have to do too.

With the calibration back to where it was.

Githesh Ramamurthy: Yeah. In fact, Gary, what we're seeing is, you know, I would say that this is exactly why we offered our diagnostics solution. So the CCC Diagnostics Solutions allows you to actually take the scan from a vehicle, integrate that into CCC ONE, and that's been really important. I'll give you a couple of statistics. If you look at Q1 of 2017, Q1 of 2017, roughly 3% of all vehicles were going through a diagnostic scan. That means that you run the scan, it tells you what modules have issues, whether it's airbag deployed or other things that need to be calibrated. The diagnostics for the vehicle told you that. In Q3 of 2021, that number was 47% of all cars had a scan. So it's essentially a, you know, over the course of, from Q1 of 2017 to Q3 of 2021, you're going from 3% to 47%

Yes in fact, Gary what we're seeing is.

I would say that this is exactly why we offered our diagnostics solution.

So the CCC diagnostic solutions allows you to actually take the scan from a vehicle integrate that into CCC one.

Gary Prestopino: Mm-hmm.

Githesh Ramamurthy: That's been really important. I'll give you a couple of statistics. If you look at Q1 of 2017, Q1 of 2017, roughly 3% of all vehicles were going through a diagnostic scan. That means that you run the scan, it tells you what modules have issues, whether it's airbag deployed or other things that need to be calibrated.

And that's been really important I'll give you a couple of statistics. If you look at Q1 of 2017.

Q1 of 2017.

Roughly 3% of all vehicles, we're going through a diagnostic scan.

That means the.

We run the scan. It tells you one module separate issues there.

Airbag deployed or other things that need to be calibrated.

Gary Prestopino: Mm-hmm.

Githesh Ramamurthy: The diagnostics for the vehicle told you that. In Q3 of 2021, that number was 47% of all cars had a scan.

The minutes of the diagnostics for the vehicle told you that.

In Q3 of 2021.

That number was 47% of all cars at <unk>.

<unk>.

Gary Prestopino: Mm-hmm.

Githesh Ramamurthy: So it's essentially a, you know, over the course of, from Q1 of 2017 to Q3 of 2021, you're going from 3% to 47%.

So it's essentially a over the course of.

Q1 of 2017 to Q3 of 2021.

Youre going from 3% to 47%.

Gary Prestopino: Mm-hmm.

Githesh Ramamurthy: And I think as the earlier question Bhavan asked, as complexity increases, we see the scans will increase. This is why we're investing in our diagnostics capability. And as I mentioned, we have a couple of repair facilities and MSOs already starting to roll out our diagnostics capability.

I think as the earlier question below mask.

As complexity increases we see the scans will increase this is why we're investing in our diagnostics capability and as I mentioned, we have a couple of.

Repair facilities and that vessel is already starting to rollout our diagnostics capabilities.

Gary Prestopino: Okay, thank you very much.

Okay. Thank you very much.

Githesh Ramamurthy: Okay, you're welcome.

Okay Youre welcome.

Operator: Our next question is from Kirk Materne with Evercore ISI. Please proceed.

Our next question comes from Kirk <unk> with Evercore ISI. Please proceed hi.

Kirk Materne: Yeah, thanks very much, and congrats on the quarter. Hey, Githesh, on the sort of AI-powered estimate, estimation, platform, I was just kind of curious: How quickly can an existing customer get that embedded into their technology stack and, and get up and running with it? I was trying to get a sense on, you know, is there any friction involved, either from a technology, you know, maybe some legacy technology stacks or, you know, even just from a business process perspective? I was just kind of curious about sort of... I guess it gets down to, like, the time to value for your customers.

Alright, thanks, very much and congrats on the quarter. If you could touch on the sort of AI powered estimate estimation platform. I was just kind of curious how quickly tenant existing customer get that embedded into their technology stack and get up and running with it I was just trying to get a sense on is there any friction involved either from a technology.

Maybe some legacy technology stacks or even just from a business process perspective, I was just kind of curious about sort of I guess it gets sounded like the time to value for your customers.

Githesh Ramamurthy: Sure. So let me start with what we've done over the last 15 or 20 years to answer this question. So first and foremost, you know, we have built very deep integrations, real-time integrations between our cloud, the CCC cloud, and each of our carrier customers, so that real time we're integrated deep into their systems with data going back and forth, obviously with tremendous amounts of security. So we built those interfaces. So when a client then adopts our AI solution, they're actually running on our side of the integration. So the link being sent to the policyholder is going directly from the CCC cloud to the consumer. Consumer is sending the data back. Our AI models are running on our cloud.

Sure. So let me start with what we've done over the last 15 or 20 years.

To answer the questions. So first and foremost we've built very deep integrations.

Real time integration between our cloud the CCC cloud.

Each of our carrier customers.

So that real time, where integrated deep into their systems with data going back and forth AGA.

Obviously with tremendous amounts of security so we built those interfaces.

When a client.

<unk> adopt our AI solution.

They are actually running on our side of the integration.

So the link being sent to the policyholder this going directly but from the CCC cloud for the consumer consumers, sending the data back our AI models are running on our cloud we're producing the estimate and then what goes to the pipe back to the carrier is the same types, we have already been.

Githesh Ramamurthy: We're producing the estimate, and then what goes through the pipe back to the carrier is the same pipes we have already built for the last 10 or 15 years. So that is exactly why having all of these integrations built over the last 15 or 20 years really speeds the adoption of this capability. Otherwise, you'd have these massive multi- you know, 1, 2, 3-year integration efforts to get it up and running. It also allows customers to pilot and test this very quickly. Does that answer your question?

Over the last 10 or 15 years.

So that is exactly why having all of these integrations built over the last 15 or 20 years.

Really speeds the adoption of this capability otherwise you would have this massive multi 123 year integration efforts to get it up and running it also allows customers to pilot and test this very quickly.

That answer your question, Yes, that's super helpful. Thanks, and Brian maybe one for you obviously, you really nice expansion quarter for you. All obviously it would seem that the renewal process will be an obvious point for you all to start talking about expansion, both cross and up sell through with your clients is there any lumpiness to your renewal base meeting.

Kirk Materne: Yeah, that's super helpful. Thanks. And, Brian, maybe one for you. Obviously, a really nice expansion quarter for you all. Obviously, it would seem that the renewal process would be an obvious point for you all to start talking about expansion, both cross and upsell with your, with your clients. Is there any lumpiness to your renewal base? Meaning, you know, it, I realize you probably interact with your clients all the time, but I was just kind of curious if we should understand if there's any seasonality we should be aware of, either concentrated in Q4 or, you know, spread out, you know, it, or if there's multiyear deals, if that, you know, influences that opportunity at all.

I realize you probably interact with your comments all the time, but I was just kind of curious if we should understand if theres any seasonality, we should be aware of either concert in the fourth quarter or spread out.

Or if there's multiyear deals if that influences that opportunity at all.

Gary Prestopino: Yeah. Most of our carrier clients are on multiyear deals, and there's not really a seasonal-

Brian Herb: Yeah. Most of our carrier clients are on multiyear deals, and there's not really a seasonal-

Yes, most of our carrier clients.

On multiyear deals and there is not really is seasonal.

Brian Herb: ... that drives the renewals. They're spread out across the year. So there's not real lumpiness with that renewal. You know, we have really good renewal rates, right, with the Gross Dollar Retention of 98%. And so we're very confident in our ongoing ability to renew. And I think the other important point that Kitesh covered in his, you know, opening remarks is there is material expansion with the renewals, which, you know, we see as a core part of the growth opportunity in front of us as well.

Did that drive the renewals they're spread out.

Across the year.

So there is not real lumpiness with that renewal.

We have really good renewal rates vary with gross dollar retention of 98%.

So we're very confident in our ongoing ability to renew and I think the other important point. Thank you Kash covered in his opening remarks is there is a material expansion with the renewals, which we see as a core part of the growth opportunity in front of us as well.

Githesh Ramamurthy: Super. Thank you, all.

Kirk Materne: Super. Thank you, all.

Thank you all.

Brian Herb: Yep, thanks.

Yep. Thanks.

Operator: Our next question comes from Chris Moore with CJS Securities. Please proceed.

Our next question comes from Chris Moore with CJS Securities. Please proceed.

Chris Moore: Hey, good afternoon, guys. Yeah, my first is maybe just a follow-up on a prior question regarding the mobile penetration. So it was an interesting comment that, you know, kind of mobile is the funnel to AI. If the mobile penetration is, you know, in the low 20s now, do you target that? I mean, is there a 2 to 3-year kind of goal of mobile getting to 50% penetration? You know, just kind of trying to understand that, the kind of the chicken and egg there and what that mobile penetration, you know, could look like in a couple of years.

Hey, Good afternoon, guys. Yes. My first is maybe just a follow up on a prior question regarding the mobile penetration so.

It was an interesting comment that kind of mobile as the funnel to AI if the mobile penetration is in the low twenties now.

Do you do you target that I mean is there two to three year kind of goal of of mobile getting to 50% penetration just kind of trying to understand that that kind.

Kind of a chicken and egg Darrin.

What that mobile penetration.

Could look like in a couple of years.

Githesh Ramamurthy: Sure, Chris, good to have you on the call. What I gave you was an average number across our customer base. So we have some customers as high as 70% mobile adoption, 70, 75% mobile adoption. We have some customers in the 1% or 2% mobile adoption, and you will certainly see that, you know, this will continue to happen. So mobile is an accelerator for AI, but it is not a precondition. Does that-

Sure Chris Good to have you on the call.

I gave you was an average number across our customer base. So we have some customers as high as 70% mobile adoption 70, 75% below adoption you have some customers can be one or 2% mobile adoption.

And you will certainly see that.

This will continue to happen. So mobile is an accelerator for AI, but it is not a precondition.

Does that got it helps it helps for sure. It will continue to move because it produces the mobile channel produces a very high degree of customer satisfaction.

Chris Moore: Got it.

Githesh Ramamurthy: Help?

Chris Moore: Yeah, that helps for sure. Yeah.

Githesh Ramamurthy: So it'll continue to move because it produces, you know, the mobile channel produces a very high degree of customer satisfaction for consumers who want to be dealt with it in a digital way. And our mobile capabilities also work for collision repairers, and especially with social distancing and all of the other benefits mobile is going to provide, including off hours, by the way.

For consumers, who want to be dealt with it in a digital way and our mobile capabilities also worked for collision repairs, and especially with social distancing and all of the other benefits.

We can provide including off hours by the way.

Chris Moore: Got it. Maybe just one more on the numbers. So gross margin, just the gross margin, 78.4%, obviously very high. Brian talked about, you know, economies of scale. Were there other things in there? I mean, I'm assuming that this level is not gonna, we won't stay at this level, even with volumes being up there. Is there anything else we should think about on the gross margin side?

Got it maybe just one more on on the numbers. So gross margin adjusted gross margin was 78, 4%, obviously very high Brian talked about economies of scale.

Are there other things in there I mean I'm assuming that this level is not going to.

We want to stay at this level, even even with volumes being up there is there anything else, we should think about on the gross margin side.

Brian Herb: Yeah. Hey, Chris. Yeah. So when we've talked about the guidance, and setting up kind of long-term targets, we talked about, you know, gross margin getting to 80% over time. You know, so... And it will fluctuate, you know, quarter to quarter a bit. You know, the strong margin this quarter clearly highlights the power of the operating model and the leverage that we have against the cost base. The quarter did benefit from the strength and the scale of the 18% revenue growth. It had some impact by the hiring that we talked about being slightly lower. But as I said, it will also fluctuate quarter to quarter as well. But we do feel really good on the long-term guide as we think about moving towards 80% over time.

Yeah, Hey, Chris Yeah, So we've talked about the guidance and setting up kind of long term targets, we talked about gross margin getting to 80% over time.

And it will fluctuate quarter to quarter a bit.

Strong margin this quarter clearly highlights the power of the operating model and the leverage that we have against the cost base.

Quarter did benefit from the strength and the scale of the 18% revenue growth.

It had some impact by the hiring that we talked about being being slightly lower.

But.

But as I said, it will also fluctuate quarter to quarter as well, but we do feel really good on the long term guide as we think about moving towards the 80% overtime.

Chris Moore: Got it. I'll leave it there. Thanks, guys.

Got it I'll leave it there thanks guys.

Brian Herb: Great. Thank you.

Great. Thank you.

Operator: Our next question comes from Yichun Wang with Citi. Please proceed.

Operator: Our next question comes from Yitchuin Wong with Citi. Please proceed.

Our next question comes from Richard <unk> with Citi. Please proceed.

[Analyst] (Citi): Hi, good evening, guys. Congratulations on the result. Githesh, first I want to go to you. You talk about the growing trend in CCC cloud usage, and we've definitely been seeing very strong cloud usage among CSP providers and many of our cloud consumption model out there. Can you give us more colors on the growth that you're seeing, kind of what percentage of user, customer base are using in the cloud? And then kind of help us quantify the progress of CCC cloud and, opportunity going forward.

Yit-Chuin Wong: Hi, good evening, guys. Congratulations on the result. Githesh, first I want to go to you. You talk about the growing trend in CCC cloud usage, and we've definitely been seeing very strong cloud usage among CSP providers and many of our cloud consumption model out there. Can you give us more colors on the growth that you're seeing, kind of what percentage of user, customer base are using in the cloud? And then kind of help us quantify the progress of CCC cloud and, opportunity going forward?

Hi, Good afternoon, guys congratulations on the results.

First I want to go to you talk about the growing trend in CCP cotton deflation, we've definitely been seeing very strong cloud usage amount DSP providers and many.

Plenty of.

Consumption model.

Can you give us more colors on the growth that youre seeing kind of what percentage of the user.

Our customer base, our users in the cloud and then kind of help us quantify that progress.

So you can see cloud.

Opportunity going forward.

Sure I wonder actually rewind the clock a little bit.

Githesh Ramamurthy: Sure. I want to actually rewind the cloud a little bit, Yichun, because we've been a cloud-based platform for well over a decade. In fact, we put all our repair facilities on a cloud platform and rolled them out nationally over 10 years ago. Every single insurer is on a cloud-based platform going back 10, if not 15 years, our parts providers. So for us, we are a cloud-first company and have been a cloud-first company for well over a decade. So this is why we don't report any metrics that say, "Well, so many percent are cloud, so many percent are not cloud," because we are completely have been and are a cloud-based platform. Does that answer the question?

Because we've been a cloud based platform for well over a decade.

In fact, we put all our repair facilities on our cloud platform enrollment nationally over 10 years ago.

Every single insurer is on a cloud on our cloud based platform.

Going back 10, if not 15 years, our parks providers. So.

So for US we are a cloud first company and have been a cloud first company for well over a decade.

So this is why we don't report any metrics that say well so many percent of our cloud. So many person are not cloud because we're completely have been in our cloud based platform.

That answered the question.

[Analyst] (Citi): Yeah. I guess, more around your cloud growth or cloud usage among the cloud trend that you're seeing among that among your customer base, like, how's that trending? Has there been more cloud usage or it's more around the same for the quarter?

Yit-Chuin Wong: Yeah. I guess, more around your cloud growth or cloud usage among the cloud trend that you're seeing among that among your customer base, like, how's that trending? Has there been more cloud usage or it's more around the same for the quarter?

Yes, I guess more around your car.

Cloud growth.

Do you think the macro trend that you're seeing among that among your customer base like how is that trending out there being more.

Small around.

Githesh Ramamurthy: I see. You're saying about the customers themselves for other applications outside of CCC. Is that what you mean?

I see youre, saying about the customers themselves for other applications outside of CCC is that what you mean.

[Analyst] (Citi): Yeah.

Yit-Chuin Wong: Yeah.

Yeah.

Githesh Ramamurthy: Yeah. Okay, because all of CCC applications, you know, for well over a decade have been cloud-based, so we are completely cloud. So I would say for carriers, I would say it's a relatively slow adoption of moving their own internal platforms to the cloud. There are some people who are starting to move some components of it. Most carriers still, for the most part, are running on-prem systems, which is where we integrate from our cloud to theirs. So I would say that will take, you know, several years, probably, you know, I would say somewhere between, you know, I would say probably it's hard to put a precise percentage, but for the most part, the cloud transition is happening, and we think it'll go at a fairly slow pace.

Yes, okay, because all of CCC applications.

For well over a decade I've been cloud base. So we are completely cloud. So I would say four carriers I would say, it's a relatively slow adoption of moving their own internal platforms to the cloud.

There are some people who are starting to move some components of it most carriers still for the most part are running on Prem systems.

Which is where we integrate our cloud to bears so.

I would say that will take several years probably outfit somewhere between.

I would say probably it.

It's hard to put a precise percentage, but for the most part the cloud transitions happening and we think it will go at a fairly slow pace and this is why our customers like our solution because what we're able to do is to give them the benefit of the cloud immediately because when you connect the pipe from our customer systems.

Githesh Ramamurthy: This is why our customers like our solution, because what we're able to do is to give them the benefit of the cloud immediately, because when you connect the pipe from our customer systems to our systems, they essentially become cloud-enabled instantly and have been for many, many years.

Through our systems.

Essentially become cloud enabled instantly.

And have been for many many years.

[Analyst] (Citi): That's good. Thank you. And then next, Brian, can you-- you mentioned your OpEx growth being lower than expected because we have lower hiring, and I'm just kind looking over some of the non-GAAP OpEx calculation. It looks like, R&D expenses is down and might be calculating slightly off. So I'm just wondering, where do you see the most challenge in your hiring trends? Is it more on engineering folks or more salesperson? And finally, where is the, like, biggest focus for you guys in, in terms of hiring? Thanks.

Yit-Chuin Wong: That's good. Thank you. And then next, Brian, can you-- you mentioned your OpEx growth being lower than expected because we have lower hiring, and I'm just kind looking over some of the non-GAAP OpEx calculation. It looks like, R&D expenses is down and might be calculating slightly off. So I'm just wondering, where do you see the most challenge in your hiring trends? Is it more on engineering folks or more salesperson? And finally, where is the, like, biggest focus for you guys in, in terms of hiring? Thanks.

That's good thank you.

And then next Brian Ken you mentioned that opex growth being lower than expected because of the lower hiring and just kind of looking at what some of the non-GAAP opex calculation it looks like.

R&D expenses down I might be calculating slightly off so I'm, just wondering where do you see the most challenged in your hiring plans.

Mall engineering folks are more sales plus then and finally with the biggest focus for you guys in <unk>.

Thanks.

Brian Herb: Yeah. So the comment around hiring being lower than we had planned is broad-based. That said, the biggest focus area for our hiring is in our R&D and engineering teams as we focus on our strategic initiatives. So, that's where we will see the biggest growth going forward is around R&D, engineering, focus on building and driving innovation for new solutions coming out. So that will be the focus of the growth across, as we go forward across the company.

Yes, so the comment around hiring being lower.

Than we had planned it is broad based that said the biggest focus area for our hiring is in our R&D and engineering teams as we focus on our strategic initiatives. So.

That's where we will see the biggest growth.

Both for going forward is around R&D engineering.

<unk> on building and driving innovation for new solutions coming out so that will be the focus of the growth.

Cros as we.

Go forward across the company.

[Analyst] (Citi): Thank you.

Yit-Chuin Wong: Thank you.

Thank you.

Brian Herb: Thanks, Jason. Appreciate it.

Brian Herb: Thanks, Yitchuin. Appreciate it.

Thanks, Jason appreciate it.

Operator: Thank you. Ladies and gentlemen, we've reached the end of the question and answer session. I would like to turn the call back to Githesh Ramamurthy for any closing remarks.

Thank you ladies and gentlemen, we have reached the end of the question and answer session I would like to turn the call back to detach from a Murphy for any closing remarks.

Githesh Ramamurthy: Thanks, everybody, for joining in. As you probably heard from us, we're super excited about where we are. We have a fantastic base of customers. We're excited about the innovations we're working on, and continue to see a substantial number of opportunities to digitize the P&C insurance economy. Thank you for joining us on the call today.

Thanks to everybody for joining in.

As you probably heard from US we're super excited about where we are.

We have a fantastic base of customers. We're excited about the innovations we're working on and continue to see a substantial number of opportunities to digitize. The P&C insurance economy. Thank you for joining us on the call today.

Operator: This concludes today's conference. You may disconnect your lines at this time. Thank you very much for your participation, and have a great day.

This concludes today's conference you may disconnect. Your lines at this time. Thank you very much for your participation and have a great day.

Yes.

Q3 2021 CCC Intelligent Solutions Holdings Inc Earnings Call

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