Q2 2024 CCC Intelligent Solutions Holdings Inc Earnings Call
Good day and thank you for standing by. Welcome to the CCC Intelligent Solutions second quarter fiscal 2024 earnings conference call.
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Speaker Change: After the speaker's presentation, there will be a question-and-answer session. To ask a question during this session, you will need to press star-one-one on your telephone. You will then hear an automated message advising you your hand is raised.
Operator: To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Bill Wormington, Vice President of Investor Relations. Please go ahead, sir.
Speaker Change: To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Bill Warmington, Vice President of Investor Relations. Please go ahead, sir.
William Arthur Warmington: Thank you, operator. Good afternoon, and thank you all for joining us today to review CCC's second quarter 2024 financial results, which we announced in the press release issued following the close of the market. Joining me on the call are Githesh Ramamurthy, CCC's Chairman and CEO, and Brian Herb, CCC's CFO. The forward-looking statements we make today about the company's results and plans are subject to risk and uncertainties that may cause the actual results and the implementation of the company's plans to vary materially.
William Arthur Warmington: Thank you, Operator. Good afternoon and thank you all for joining us today to review CCC's second quarter 2024 financial results, which we announced in the press release issued following the close of the market today.
Speaker Change: Joining me on the call are Githesh Ramamurthy, CCC's Chairman and CEO , and Brian Herb, CCC's CFO .
Speaker Change: The forward-looking statements we make today about the company's results and plans are subject to risk and uncertainties that may cause the actual results and the implementation of the company's plans to vary materially.
William Arthur Warmington: These risks are discussed in the earnings releases available on our Investor Relations website and under the heading Risk Factors in our 2023 Annual Report on Form 10-K filed with the SEC. Further, these comments in the Q&A that follows are copyrighted today by CCC Intelligent Solutions Holdings, Inc. Any recording, retransmission, or reproduction or other use of the same for profit or otherwise without prior consent of CCC is prohibited, in violation of United States copyright and other laws.
Speaker Change: These risks are discussed in the earnings releases available on our Investor Relations website and under the heading Risk Factors in our 2023 Annual Report on Form 10-K filed with the SEC.
Speaker Change: Further.
Speaker Change: These comments and the Q&A that follows are copyrighted today by CCC Intelligence Solutions Holdings Incorporated.
Speaker Change: Any recording, retransmission, or reproduction or other use of the same
Speaker Change: For profit or otherwise, without prior consent of CCC, is prohibited in violation of United States copyright and other laws.
William Arthur Warmington: Additionally, while we will provide a transcript of portions of this call and we've approved the publication of a transcript of this call by a third party, we take no responsibility for inaccuracies that may appear in the transcript. Please note that the discussion on today's call includes certain non-GAAP financial measures as defined by the SEC. The company believes these non-GAAP financial measures provide useful information to management and investors regarding certain financial and business trends relating to the company's financial condition and the results of operations. A Reconciliation of Gap to Non-Gap Measures is available in our earnings release that is available on the Investor Relations website. Thank you. I'll now turn the call over to Githesh.
Speaker Change: Additionally, while we will provide a transcript of portions of this call, and we've approved the publishing of a transcript of this call by a third party, we take no responsibility for inaccuracies that may appear in the transcripts.
Speaker Change: Please note that the discussion on today's call includes certain non-GAAP financial measures as defined by the SEC.
Speaker Change: The company believes these non-GAAP financial measures provide useful information to management and investors regarding certain financial and business trends relating to the company's financial condition and the results of operations.
Speaker Change: A reconciliation of GAAP to non-GAAP measures is available in our earnings release that is available on our investor relations website. Thank you. I'll now turn the call over to Githesh.
Githesh Ramamurthy: Thank you, Bill, and thanks to all of you for joining us today. I'm pleased to report that CCC delivered another quarter of strong top and bottom line results. In the second quarter of 2024, total revenue was $233 million, up 10% year-over-year and ahead of our guidance. Adjusted EBITDA was $96 million, up 18% over the last year, and also ahead of our guidance. Our adjusted EBITDA margin was 41%.
Githesh Ramamurthy: Thank you, Bill, and thanks to all of you for joining us today. I'm pleased to report that CCC delivered another quarter of strong top and bottom line results.
Githesh Ramamurthy: The second quarter of 2024, total revenue was $233 million, up 10% year-over-year and ahead of our guidance range.
Githesh Ramamurthy: Adjusted EBITDA was $96 million, up 18% over the last year, and also ahead of our guidance range.
Githesh Ramamurthy: Our adjusted EBITDA margin was 41%.
Githesh Ramamurthy: On today's call, I would like to highlight three themes that underpin how we are helping our customers usher in a generational change in operations. The first is CCC's Durable Business Model. The second is our innovation engine, which at its core has created over 300 unique AI models. And the third is a view into the pace of adoption as customers transition to this next generation of CCC solutions. My first topic is CCC's Durable Business Model.
Githesh Ramamurthy: On today's call, I would like to highlight three themes that underpin how we are helping our customers usher in a generational change in operating performance.
Githesh Ramamurthy: The first is CCC's Durable Business Model.
Githesh Ramamurthy: The second is our innovation engine, which at its core has created over 300 unique AI models. And the third is a view into the pace of adoption as customers transition to this next generation of CCC solutions.
Githesh Ramamurthy: Our solid financial performance in Q2 was a result of continued new business wins, renewals, and contracts. We also completed the successful on schedule rollout of our full suite of auto physical damage, or APD, solution for a top 20 insurer as they transition from multiple vendors to the CCC platform. In our insurance business, the first half of this year has seen us renew multiple clients, add a number of new logos, and cross-sell a variety of incremental products across our customers. We've also added over 600 new repair facilities so far in 2024. This growth has pushed us across a major milestone. We now have over 30,000 repair facilities on the CCC platform.
Githesh Ramamurthy: My first topic is CCC's Durable Business Model.
Githesh Ramamurthy: Our solid financial performance in Q2 was a result of continued new business wins, renewals, and contract expansions.
Githesh Ramamurthy: We also completed the successful on-schedule rollout of our full suite of autophysical damage, or APD, solutions for a top 20 insurer as they transition from multiple vendors to the CCC platform.
Githesh Ramamurthy: In our insurance business, the first half of this year has seen us renew multiple clients, add a number of new logos, and cross-sell a variety of incremental products across our customer base.
Githesh Ramamurthy: We've also added over 600 new repair facilities so far in 2024.
Githesh Ramamurthy: This growth pushed us across a major milestone.
Githesh Ramamurthy: We now have over 30,000 repair facilities on the CCC platform.
Githesh Ramamurthy: Our diverse customer base, broad range of mission-critical solutions, and growing Multi-Sided Network have helped create a business model that has both revenue, predictability, and margin. This balanced profile has served us well as we continue to invest in AI-enabled innovation because of the deep decade plus experience we have in building AI solutions.
Githesh Ramamurthy: Our diverse customer base, broad range of mission-critical solutions, and growing multi-sided network have helped create a business model that has both revenue predictability and margin expansion.
Githesh Ramamurthy: This balanced profile has served us well as we continue to invest in AI-enabled innovation.
Githesh Ramamurthy: Because of the deep decade-plus experience we have in building AI solutions, we have an infrastructure and development model that provides tremendous scale and efficiency as customer volumes ramp.
Githesh Ramamurthy: We have an infrastructure and development model that provides tremendous scale and efficiency as customer volumes grow. To date, our customers have processed tens of millions of unique claims using a CCC AI-enabled solution, and the economic profile of these AIs is similar to the rest of our software. We believe the scale and efficiency of our AI deployment model will be a significant competitive and economic advantage in the future. And the foundation of our durable business model is the deep trust our customers place in us to help them solve their most pressing business problems.
Githesh Ramamurthy: To date, our customers have processed tens of millions of unique claims using a CCC AI-enabled solution.
Githesh Ramamurthy: And the economic profile of these AI solutions is similar to the rest of our SAS portfolio.
Githesh Ramamurthy: We believe the scale and efficiency of our AI deployment model will be a significant competitive and economic advantage in the future.
Githesh Ramamurthy: And the foundation of our durable business model is the deep trust our customers place in us to help them solve their most pressing business problems.
Githesh Ramamurthy: We believe delivering top-tier day-to-day performance, coupled with a vision and tangible pathway to innovation, is the best way to build lasting relationships. These principles have served us well for decades, and are the key enablers to our 99% GDR and industry-leading net promoter score of 80%. A hallmark of our customer-focused culture is our ability to understand our customers and to design, develop, and implement new solutions that address tangible problems they are facing across their businesses. The amount of time it takes for different solutions to gain critical mass can vary.
Githesh Ramamurthy: We believe that delivering top-tier day-to-day performance coupled with a vision and tangible pathway to innovation is the best way to build lasting relationships with customers.
Githesh Ramamurthy: These principles have served us well for decades and are the key enablers to our 99% GDR and industry-leading net promoter score of 83.
Githesh Ramamurthy: A hallmark of our customer-focused culture is our ability to understand our customers' pain points and to design, develop, and implement new solutions that address tangible problems they are facing across their businesses.
Githesh Ramamurthy: While the amount of time it takes for different solutions to gain critical mass can vary, we have consistently found that demonstrable value delivery is the key to achieving successful launches with long runways for growth.
Githesh Ramamurthy: We have consistently found that demonstrable value delivery is the key to achieving successful launches with long runways for growth. And while this can sometimes make quarter-to-quarter predictions..., on the Adoption of New Solutions Challenge, around tangible product ROI is what gives us the confidence to invest in game-changing solutions over the long term. And that is precisely what we're seeing across our portfolio of innovation. This leads me to my second topic, innovation, as we approach the $1 billion mark in annual revenue. It is important to note that almost all of this growth has come from innovation.
Githesh Ramamurthy: And while this can sometimes make quarter-to-quarter predictions.
Githesh Ramamurthy: on the adoption of new solutions challenging our conviction.
Githesh Ramamurthy: Around tangible product ROI is what gives us the confidence to invest in game-changing solutions over the long term. And that is precisely what we're seeing across our portfolio of innovation.
Githesh Ramamurthy: This leads me to my second topic, innovation.
Githesh Ramamurthy: As we approach the $1 billion mark in annual revenue.
Githesh Ramamurthy: It is important to note that almost all of this growth has come from innovation.
Githesh Ramamurthy: Innovation that substantially improved operating performance for our customer sector. As we look forward, we believe that our investments over the last three years... have created an exciting pipeline of new solutions, with greater breadth and depth than at any time in our history, and, critically, this portfolio of innovation is not meant to deliver modest incremental improvements to customers.
Githesh Ramamurthy: Innovation that substantially improved operating performance for our customer segments.
Githesh Ramamurthy: As we look forward, we believe that our investments over the last three years have created an exciting pipeline of new solutions with greater breadth and depth than at any time in our history.
Githesh Ramamurthy: And critically, this portfolio of innovation is not meant to deliver modest incremental improvements to customers.
Githesh Ramamurthy: We believe our solutions are transformational. And over many years, we have found that laying the foundation for transformational change yields decades-long runways for growth. A good example of this is the evolution of our automotive repair platform, CCC-1, which today contributes over $400 million in annual revenue. Leveraging the Power of Cloud Computing
Githesh Ramamurthy: We believe our solutions are transformational for them.
Githesh Ramamurthy: And over many years, we have found that laying the foundation for transformational change
Githesh Ramamurthy: yields decades-long runways for growth.
Githesh Ramamurthy: A good example of this is the evolution of our automotive repair platform, CCC1, which today contributes over $400 million in annual revenue.
Githesh Ramamurthy: We used the launch of CCC1 to reinvent estimating and shop management, and over time, we have added a series of industry-leading innovations to a platform that serves everyone from single-store independence to the largest multi-store operation. Our state-of-the-art CCC One platform has pushed thousands of software releases over the past decade and is now the trusted operating system for more than 30,000 collision repair facilities across the United States. The CCC One platform is the gateway to estimating, parts ordering, repair management, diagnostics, customer communications, and much more.
Githesh Ramamurthy: Leveraging the power of cloud computing, we used the launch of CCC One to reinvent estimating and shop management, and over time, have added a series of industry-leading innovations.
Githesh Ramamurthy: to a platform that serves everyone from single-store independents to the largest multi-store operators.
Githesh Ramamurthy: Our state-of-the-art CCC1 platform has pushed thousands of software releases over the past decade and is now the trusted operating system for more than 30,000 collision repair facilities across the United States.
Githesh Ramamurthy: The CCC One platform is the gateway to estimating, parts ordering, repair management, diagnostics, customer communications, and much more.
Githesh Ramamurthy: Today we see our decade plus investments in AI enabling an even larger growth opportunity across the broader PNC insurance economy. While each of our customers is different, they share a common challenge in managing the rapidly increasing complexity that has become the norm in this. CCC is leading the way in investing to address this challenge. Over the past decade, we have invested over $1 billion in R&D, including about $150 million in 2025.
Githesh Ramamurthy: Today we see our decade-plus investments in AI enabling an even larger growth opportunity across the broader PNC insurance economy.
Githesh Ramamurthy: While each of our customers is different, they share a common challenge in managing the rapidly increasing complexity that has become the norm in this industry.
Githesh Ramamurthy: and CCC is leading the way in investing to address this challenge.
Githesh Ramamurthy: Over the past decade, we have invested over $1 billion in R&D, including about $150 million in 2023 and 17% of year-to-date 2024 revenue to develop new high ROI solutions for our customers.
Githesh Ramamurthy: 17% of year-to-date 2024 revenue to develop new high ROI solutions for our customers, and we work closely with our clients to help them rapidly integrate our new innovations and also navigate the change management that is sometimes needed to fully realize the benefits of these powerful innovations. For example, in November 2021.
Githesh Ramamurthy: and we work closely with our clients to help them rapidly integrate our new innovations and also navigate the change management that is sometimes needed to fully realize the benefits of these powerful innovations.
Githesh Ramamurthy: We deployed Estimate STP, the world's first production AI that can pre-populate on qualified repairable vehicles, a full line level effort, from a photo in SAC. And today, we have over 30 insurers using this solution, while volume from revenue-generating clients in production is still just 3% of annual claims through our deep engagement model. We have helped one of the top 10 carriers, Beyond Fry, process nearly 20% of their repairable claims on a run rate basis through this technology.
Githesh Ramamurthy: For example, in November 2021, we deployed EstimateSTP, the world's first production AI that can pre-populate, on qualified repairable vehicles, a full line-level estimate from a photo, in seconds.
Githesh Ramamurthy: And today we have over 30 insurers using this solution.
Githesh Ramamurthy: While volume from revenue-generating clients in production is still just 3% of annual claims,
Githesh Ramamurthy: Through our deep engagement model, we have helped one top 10 carrier be on track to process nearly 20% of their repairable claims on a run rate basis through this technology.
Githesh Ramamurthy: AI is now embedded in a wide variety of insurance solutions across the entire CCC portfolio, from AI-enabled insurance solutions like first look, intelligent Reinspection, impact dynamics, and subrogation to repair focus solutions like repair cost predictor and mobile jumps.
Githesh Ramamurthy: AI is now embedded in a wide variety of solutions.
Githesh Ramamurthy: across the entire CCC portfolio.
Githesh Ramamurthy: from AI-enabled insurance solutions like First Look, Intelligent Reinspection, Impact Dynamics.
Githesh Ramamurthy: and Subrogation to repair-focused solutions like Repair Cost Predictor and Mobile Jumpstart.
Githesh Ramamurthy: The recently introduced CCC Intelligent Experience Cloud, or IX Cloud for short, is designed to accelerate our customers' digital transformation journey in a way that is purpose-built to solve for the inherent complexity of the PNC insurance economy. The IX Cloud overlays a new event-driven architecture onto CCC's existing cloud app, and Customer and Partner Systems. This microservices-based approach is designed to make it faster and easier for customers to deploy new CCC solutions and will also increase the number of ways customers can use multiple CCC solutions together. Tens of billions of dollars are wasted annually across the PNC Insurance economy due to administrative inefficiency. Unnecessary Delays and Other Forms of Leaking
Githesh Ramamurthy: The recently introduced CCC Intelligent Experience Cloud, or IX Cloud for short, is designed to accelerate our customers' digital transformation journey in a way that is purpose-built.
Githesh Ramamurthy: to solve for the inherent complexity of the PNC insurance economy.
Githesh Ramamurthy: The IX cloud overlays a new event-driven architecture onto CCC's existing cloud applications, customer workflows.
Githesh Ramamurthy: and Customer and Partner Systems.
Githesh Ramamurthy: This microservices-based approach is designed to make it faster and easier for customers to deploy new CCC solutions.
Githesh Ramamurthy: and we'll also increase the number of ways customers can use multiple CCC solutions together.
Githesh Ramamurthy: Tens of billions of dollars are wasted annually across the PNC insurance economy due to administrative inefficiency, unnecessary delays, and other forms of leakage. The IX cloud provides a step-level change.
Githesh Ramamurthy: The IX cloud provides a step-level change to address this. Another important point of validation for our product portfolio was our recent annual customer conference in Atlanta this past May. We heard firsthand from more than 300 attendees, representing insurers, repair facilities, parts providers, automotive OEMs, and other members of CCC's multi-sided network.
Githesh Ramamurthy: to address this inefficiency.
Githesh Ramamurthy: Another important point of validation for our product portfolio was our recent annual customer conference in Atlanta this past May.
Githesh Ramamurthy: We heard firsthand from more than 300 customers representing insurers, repair facilities, parts providers, automotive OEMs, and other members of CCC's multi-sided network.
Githesh Ramamurthy: We also had representatives from across the 200 partners in the CCC ecosystem sharing how the iXcloud platform can help customers extend into new areas, and the positive feedback we received from our product demo. Reinforcer Cut and the investment we're making, and I thought I'd discuss two of the exciting innovations we have. The first of these is CCC Intelligent Reinspecting, which continues the AI theme I noted earlier. Insurers receive millions of shop written estimates each year.
Githesh Ramamurthy: We also had representatives from across the 200 partners in the CCC ecosystem sharing how the iXcloud platform can help customers extend into new areas.
Githesh Ramamurthy: The positive feedback we received from our product demos reinforced our confidence in the investments we're making, and I thought I'd discuss two of the exciting innovations we showed.
Githesh Ramamurthy: The first of these is CCC Intelligent Reinspection.
Githesh Ramamurthy: which continues the AI theme I noted earlier.
Githesh Ramamurthy: Insurers receive millions of shop written estimates each year, and while we have several tools in place to make the review of those estimates more efficient, the added complexity of vehicles
Githesh Ramamurthy: And while we have several tools in place to make the review of those estimates, the added complexity of vehicles requires a step change solution to make this process as seamless as possible, with Intelligent Reinspection. AI Helps Insurers Prioritize the review by flagging specific individual line items that fall outside the normal rules so they can quickly engage with the shop and resolve the claim.
Githesh Ramamurthy: requires step change solutions to make this process as seamless as possible.
Githesh Ramamurthy: With intelligent re-inspection, AI helps insurers prioritize their review by flagging the specific individual line items that fall outside the normal rules so they can quickly engage with the shop and resolve the claim.
Githesh Ramamurthy: The second is CCC bullshit. Legal complexity has gotten to a point where a number of possible replacement part options have negatively impacted ordering. Take a driver's side mirror as an example.
Githesh Ramamurthy: The second is CCC Bill Sheets.
Githesh Ramamurthy: Vehicle complexity has gotten to a point where the number of possible replacement part options
Githesh Ramamurthy: is negatively impacting ordering accuracy.
Githesh Ramamurthy: Ten years ago, all you had to worry about was paint color. Today, the matrix of choices includes heated vs. unheated, paint color vs. chrome, auto folding, blind spot detection, and a 360-degree view camera.
Githesh Ramamurthy: Take a driver's side mirror as an example.
Githesh Ramamurthy: Ten years ago, all you had to worry about was paint color.
Githesh Ramamurthy: Today the matrix of choices includes heated vs. unheated, paint color vs. chrome, auto-folding, blind spot detection, 360 degree view camera,
Githesh Ramamurthy: This creates dozens of possible Bill Sheets denote the exact factory installed after the war, on an individual vehicle as manufactured, and having access to them during estimate creation means an estimator can accurately filter to the correct replacement part from potentially dozens of available versions of that part for the exact model, and make of the vehicle being repaired. We recently launched CCC Build as an add-on for CCC One customers, so they can have this data online while they're writing the essay.
Githesh Ramamurthy: This creates dozens of possible combinations.
Githesh Ramamurthy: Bill sheets denote the exact factory-installed options.
Githesh Ramamurthy: on an individual vehicle as manufactured.
Githesh Ramamurthy: And having access to them during estimate creation means an estimator can accurately filter to the correct replacement part from potentially dozens of available versions of that part for the exact model.
Githesh Ramamurthy: and make of the vehicle being repaired.
Githesh Ramamurthy: We recently launched CCC Buildsheets as an add-on for CCC One customers so they can have this data online while they're writing the estimate.
Githesh Ramamurthy: That means fewer part returns, fewer supplements, and a reduced cycle time because the repair facility is writing a more accurate estimate, the first. Both of these solutions have been getting strong early interest from customers. My third and final topic is the adoption of CCC solutions. We will continue to see. Strong demand for our solutions across our customers, including high levels of customer engagement and pilots for new solutions. But we're also seeing the duration of Pilot Conversion for our Emerging Solutions take longer than anticipated to convert into in-year revenue.
Githesh Ramamurthy: That means fewer part returns, fewer supplements, and reduced cycle time. Because the repair facility is writing a more accurate estimate the first time.
Githesh Ramamurthy: Both of these solutions have been getting strong early interest from customers.
Githesh Ramamurthy: My third and final topic is the adoption of CCC solutions.
Githesh Ramamurthy: We continue to see strong demand for our solutions across our customer base.
Githesh Ramamurthy: including high levels of customer engagement and pilots for new solutions.
Githesh Ramamurthy: But we're also seeing the duration of pilot conversion for our emerging solutions take longer than anticipated to convert into in-year revenue.
Githesh Ramamurthy: Last year, Emerging Solutions contributed about one point to revenue growth, and in our Q4 earnings call, we discussed our expectation that emerging solutions would contribute two points of growth in 2024. We now expect emerging solutions to continue to contribute about one point of growth in 2024. With growth contribution from these solutions playing out more materially in 2025, our confidence in the long-term opportunity from these solutions is based on the strong engagement we are having with customers and the value delivery that we see from early results. Each of our emerging solutions is being evaluated by multiple top 10 insurers, and nearly all of our top 20 insurance accounts are piloting and or evaluating one or more of these products. Live contracted customers are also experiencing significant positive impacts on performance. Within subrogation, for example, we now have double digit contracts using one or more solutions.
Githesh Ramamurthy: Last year, Emerging Solutions contributed about 1 point to revenue growth, and in our Q4 earnings call, we discussed our expectation that Emerging Solutions would contribute 2 points of growth in 2024.
Githesh Ramamurthy: We now expect emerging solutions.
Githesh Ramamurthy: to continue to contribute about one point of growth in 2024 with growth contributions of these solutions playing out more materially in 2025.
Githesh Ramamurthy: Our confidence in the long-term opportunity from these solutions is based on the strong engagement we are having with customers and the value delivery that we see from early results.
Githesh Ramamurthy: Each of our emerging solutions is being evaluated by multiple top 10 insurers, and nearly all of our top 20 insurance accounts are piloting and or evaluating one or more of these products.
Githesh Ramamurthy: Live contracted customers are also experiencing significant positive impacts to performance.
Githesh Ramamurthy: Within subrogation, for example, we now have double-digit contracted customers using one or more solutions.
Githesh Ramamurthy: With tens of millions of dollars of impact already realized from using our recently introduced inbound subrogation solution alone, with many more customers in active pilot, we're also seeing continued progress in Adoption for Estimate SDP and Diagnostics Work. Though, in aggregate, the rate at which these new solutions contribute to in-year revenue has been slower than anticipated, as customers have pursued larger-than-expected change management activities aimed at fully maximizing the value of newer, more transformative solutions at scale.
Githesh Ramamurthy: With tens of millions of dollars of impact already realized from using our recently introduced inbound subrogation solution alone, with many more customers in active pilots.
Githesh Ramamurthy: We're also seeing continued progress in adoption for ESTIMATE-STP and diagnostics workflow.
Githesh Ramamurthy: Though, in aggregate, the rate at which these new solutions contribute to in-year revenue has been slower than anticipated, as customers have pursued larger-than-expected change management activities
Githesh Ramamurthy: aimed at fully maximizing the value of a newer, more transformative solutions at scale.
Githesh Ramamurthy: In my 30 plus years at CCC, the most exciting growth opportunities have always come on the cusp of a transformational industry. I believe we are in a similar place today, except that the number of solutions is the greatest I have ever seen.
Speaker Change: In my 30 plus years at CCC, the most exciting growth opportunities have always come on the cusp of a transformational industry change.
Speaker Change: I believe we were in a similar place today, except that the number of solutions and the transformational nature of these solutions is the greatest I have ever seen.
Githesh Ramamurthy: We are investing accordingly to capitalize on this generational opportunity and are confident in our position, as our customers' trusted partner of choice, to help them navigate this journey. We believe doing so will deliver substantial benefits to our customers and also allow us to deliver against our strategic and financial objectives over the near and long term. I'll now turn the call over to Brian, who will walk you through our results in more detail. Thanks, Githesh.
Speaker Change: We are investing accordingly to capitalize on this generational opportunity and are confident in our position as our customers' trusted partner of choice to help them navigate this journey.
Speaker Change: We believe doing so will deliver substantial benefits to our customers and also allow us to deliver against our strategic and financial objectives over the near and long term. I'll now turn the call over to Brian , who will walk you through our results in more detail.
Brian Herb: As Githesh has highlighted, we are seeing strong innovation and client engagement across our solutions. We are pleased with our top and bottom lines, which reflect a balance between investment in our growth initiatives and ongoing margin discounts. Now as we turn to the numbers, I'd like to review our second quarter 2024 results and then provide guidance for the third quarter and full year 2020. Total revenue in the second quarter was $232.6 million, up 10% from the prior year.
Brian Herb: Thanks, Githesh. As Githesh has highlighted, we are seeing strong innovation and client engagement across our solution set. We are pleased with our top and bottom line performance.
Brian Herb: which reflects a balance between investment in our growth initiatives and ongoing margin discipline. Now as we turn to the numbers, I'd like to review our second quarter 2024 results and then provide guidance for the third quarter in full year 2024.
Brian Herb: Approximately 7% of our growth in Q2 was driven by cross-cell, up-cell, and adoption of our solutions across our... including repair shop upgrades, continued adoption of our digital solutions, and ongoing strength in casualty and. Approximately three points of growth came from our new logos, mostly our repair facilities and parts suppliers. About one point of growth in Q2 came from our emerging solutions, mainly Diagnostics, Estimate STP, and the new Adja
Brian Herb: Total revenue in the second quarter was $232.6 million, up 10% from the prior year period. Approximately 7% of our growth in Q2 was driven by cross-sell, up-sell, and adoption of our solutions across our client base.
Brian Herb: including repair shop upgrades, continued adoption of our digital solutions, and ongoing strength in casualty and parts.
Brian Herb: Approximately three points of growth came from our new logos, mostly our repair facilities and parts suppliers.
Brian Herb: About one point of growth in Q2 came from our emerging solutions, mainly diagnostics, estimate STP, and the new adjacent casualty solutions.
Brian Herb: Now turning 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 Q2 2024, our GDR was 99%, which is in line with last quarter. Note that since the first quarter of 2020, our GDR has been between 98 and 99% and is either rounded up or down driven primarily by repair shop industry churn. We believe our GDR reflects the value we provide and the significant benefits that accrue to our customers from participating in the broader CCC network.
Speaker Change: Now, turning 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 Q2 2024, our GDR was 99%, which is in line with last quarter.
Speaker Change: Note that since the first quarter 2020, our GDR has been between 98 and 99% and is either rounded up or down, driven primarily by repair shop industry churn.
Speaker Change: We believe our GDR reflects the value we provide and the significant benefits that accrue to our customers.
Brian Herb: Our 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 movements in our auto physical damage client base.
Speaker Change: from participating in the broader CCC network.
Speaker Change: Our GDR is a core tenant of our predictable and resilient revenue model.
Speaker Change: Software Net Dollar Retention, or NDR, captures the amount of cross-sell and up-sell from our existing customers.
Brian Herb: In Q2 2024, our NDR was 107, which is in line with Q1 2024 and consistent with our average across 2023. Now I'll review the income statement in more detail. As a reminder, unless otherwise noted, all metrics are non-GAAP. We provide a reconciliation of GAAP to non-GAAP metrics in our press release. Adjusted gross profit in the quarter was $182 million.
Speaker Change: compared to the prior year period, as well as volume movements in our auto-physical damage client base. In Q2 2024, our NDR was 107, which is in line with Q1 2024 and consistent with our average across 2023.
Brian Herb: Adjusted gross profit margin was 78%, which is flat sequentially and up against 77% in Q2 of 2020. The stronger year-over-year adjusted gross profit margin primarily reflects operating leverage on the incremental revenue. Overall, we feel good about the operating leverage and the scalability of the business model and our ability to deliver against our long-term adjusted gross profit target of 80%. In terms of expenses, adjusted operating expense in Q2 2024 was 96 million, which is up 7% year over year.
Speaker Change: Now I'll review the income statement in more detail. As a reminder, unless otherwise noted, all metrics are non-GAAP . We provide a reconciliation of GAAP to non-GAAP metrics in our press release.
Speaker Change: Adjusted gross profit in the quarter was $182 million.
Speaker Change: A JustGrowth profit margin was 78%, which is flat sequentially and up against 77% in Q2 of 2023.
Speaker Change: The stronger year-over-year adjusted gross profit margin primarily reflects operating leverage on the incremental revenue. Overall, we feel good about the operating leverage and the scalability of the business model and our ability to deliver against our long-term adjusted gross profit target of 80%.
Brian Herb: This was mainly driven by higher IT-related costs, as well as investment in our customer facing technologies. Adjusted EBITDA for the quarter was 96 million, up 18% year over year with an adjusted EBITDA margin of 41%. Now turning to the balance sheet and cash flow. We ended the quarter with $238 million in cash and cash equivalents, and $780 million in debt. At the end of the quarter, our net leverage was 1.4 times adjusted EBIT. Free cashflow in Q2 was $36 million, compared to $55 million in the prior year period.
Speaker Change: In terms of expenses, adjusted operating expense in Q2 2024 was $96 million, which is up 7% year-over-year. This was mainly driven by higher IT-related costs, as well as investment in our customer-facing functions.
Speaker Change: Adjusted EBITDA for the quarter was 96 million, up 18% year-over-year, with an adjusted EBITDA margin of 41%.
Speaker Change: Now turning to the balance sheet and cash flow, we ended the quarter with $238 million in cash and cash equivalents, $780 million of debt. At the end of the quarter, our net leverage was 1.4 times adjusted EBITDA.
Speaker Change: Free cash flow in Q2 was $36 million, compared to $55 million in the prior year period.
Brian Herb: Free cashflow on a trailing 12-month basis was $197 million, which is up 11% year-over-year. Our trailing 12-month free cashflow margin as of Q2 2024 was 22%. That is up from 20% as of Q2 a year ago. Unlevered free cash flow in Q2 was $48 million, or approximately 50% of our adjusted EBITDA. While our level of free cash flow can vary quarter to quarter, we expect it to continue to average out in the mid-60s range of our adjusted EBITDA on an annual basis. In May, we issued 3.8 million shares to redeem 17.8 million in private sponsor warrants.
Speaker Change: Free cash flow on a trailing 12-month basis was $197 million, which is up 11% year-over-year. Our trailing 12-month free cash flow margin as of Q2 2024 was 22%. That is up from 20% as of Q2 a year ago.
Speaker Change: Unlevered free cash flow in Q2 was $48 million, or approximately 50% of our adjusted EBITDA. While our level of free cash flow can vary quarter to quarter, we expect it to continue to average out in the mid-60s range of our adjusted EBITDA on an annual basis.
Speaker Change: In May, we issued 3.8 million shares to redeem 17.8 million in private sponsor warrants. The transaction helped simplify our capital structure going forward. In addition, our private equity owners completed two secondary offerings since our last earning call.
Brian Herb: The transaction helped simplify our capital structure going forward. In addition, our private equity owners completed two secondary offerings since our last earnings call. 50 million shares in May and 30 million shares in July. Our free float, as measured by Bloomberg, is currently over 70% of shares outstanding.
Speaker Change: 50 million shares in May and 30 million shares in July . Our free float, as measured by Bloomberg, is currently over 70% of shares outstanding. That's up from about 30% in October , a significant improvement in stock liquidity over the last nine months.
Brian Herb: That's up from about 30% in October, a significant improvement in stock liquidity over the last nine. I'll now cover guidance beginning in Q3 2024. We expect total revenue of $236 million to $238 million, which represents 7 to 8% growth year over year. We expect adjusted EBITDA of $97 to $99 million, a 41% adjusted EBITDA margin at the mid. For the full year 2024, we expect total revenue of $941 to $945 million versus our previous range of $944 to $950 million and adjusted EBITDA of $391 to $395 million versus our previous range of $389 to $395 million.
Speaker Change: I'll now cover guidance beginning in Q3 2024. We expect total revenue of $236 million to $238 million, which represents 7% to 8% growth year-over-year. We expect adjusted EBITDA.
Speaker Change: of $97 to $99 million, a 41% adjusted EBITDA margin at the midpoint. For the full year 2024, we expect total revenue of $941 to $945 million versus our previous range of $944 to $950 million.
Speaker Change: An adjusted EBITDA of $391 to $395 million versus our previous range of $389 to $395 million.
Brian Herb: The midpoint of our new range represents about a half percent reduction in year-over-year revenue growth to 9% and a half percent increase in adjusted EBITDA margin to 42%. So, three things to keep in mind as you think about our third quarter and full year guidance for 2020. The first point is that, as Gitesh referenced in his remarks, we expected emerging solutions to increase their contribution to revenue growth in the second half and make up about two percentage points of our full year 2024 revenue growth versus one point of contribution in 2020.
Speaker Change: The midpoint of our new range represents about a half a percent reduction in year-over-year revenue growth to 9% and a half a percent increase in adjusted EBITDA margin to 42%.
Speaker Change: So three things to keep in mind as you think about our third quarter and full year guide for 2024.
Speaker Change: The first point is that, as Githesh referenced in his remarks, we expected emerging solutions to increase their contribution to revenue growth in the second half and make up about two percentage points of our full year 2024 revenue growth versus one point contribution in 2023.
Brian Herb: While client engagement around our emerging solutions continues to be very strong, it is taking longer to convert pilots to revenue than we had originally forecasted. As a result, we are now expecting the contribution from emerging solutions to remain at about 1% for 2024.
Speaker Change: While client engagement around our emerging solutions continues to be very strong, it is taking longer to convert pilots to revenue than we had originally forecasted. As a result, we are now expecting the contribution from emerging solutions will remain at about 1% for 2024. That said, our medium to long-term view of the growth contributions from these solutions
Brian Herb: That said, our medium to long-term view of the growth contributions from these solutions has not changed. The second point is that, as we discussed in our earnings call last year, we had a one percentage point benefit in Q3 and a one percentage point benefit in Q4 of last year from non-recurring items. One point came from catch-up revenue on a subscription contract in Q3, and one point came from one-time items in year-end true-ups in Q4 of last year.
Speaker Change: has not changed.
Speaker Change: The second point is that as we discussed in our earnings call last year, we had a 1% point benefit in Q3 and a 1% point benefit in Q4 of last year from non-recurring items.
Speaker Change: One point came from catch-up revenue on a subscription contract in Q3, and one point came from one-time items in year-end true-ups in Q4 of last year. Note that our year-over-year revenue growth can be impacted by contract timing and solutions with volume components.
Brian Herb: Note that our year over year revenue growth can be impacted by contract timing and solutions with volume. The third point is that Q2 of this year's adjusted EBITDA margin of 41.2% was up about 300 BPS year-over-year. The increase was stronger than initially expected largely because of the phasing of cost benefits in the first half of the year.
Speaker Change: The third point is that Q2 of this year adjusted EBITDA margin of 41.2% was up about 300 BPS year over year.
Speaker Change: The increase was stronger than initially expected, largely because of phasing of cost benefit in the first half of the year. Margin of the second half will be impacted by the pace of hiring and phasing of cost in the second half.
Brian Herb: Margin of the second half will be impacted by the pace of hiring and the phasing of costs in the second. For the full year of 2024, we expect margin expansion of about 100 basis points year over year to about 42%, and margins for the second half of the year to expand sequentially over margins in the first. Overall, the strong trends we're seeing in renewals, relationship expansion, and engagement around new solutions reinforce our confidence in the underlying strength of the business.
Speaker Change: For the full year of 2024, we expect margin expansion of about 100 basis points year-over-year to about 42%, and margins for the second half of the year to expand sequentially over margins in the first half.
Speaker Change: Overall, the strong trends we're seeing in renewals, relationship expansion, and engagement around new solutions reinforces our confidence in the underlying strength of the business.
Brian Herb: The combination of our durable business model, advanced AI capabilities, interconnected network, and broad solution set puts us in a unique position to help our customers in the P&C insurance economy reduce their cycle times and administration costs while improving their consumer experiences throughout the claims process. We are confident in our ability to deliver against our long-term target of 7-10% organic revenue growth and mid-40% adjusted EBITDA margin as we continue to execute on our strategic priorities and generate significant value for both our customers and our shareholders.
Speaker Change: The combination of our durable business model, advanced AI capabilities,
Speaker Change: Interconnected Network and a broad solution set puts us in a unique position to help our customers in the PNC insurance economy.
Speaker Change: reduced their cycle times and administration costs while improving their consumer experiences throughout the claims process.
Speaker Change: We are confident in our ability to deliver against our long-term target of 7-10% organic revenue growth and mid-40% adjusted EBITDA margin as we continue to execute on our strategic priorities.
Speaker Change: and generate significant value for both our customers and our shareholders. With that, Operator, we are now ready to take questions.
Brian Herb: With that, Operator, we are now ready to take questions. Thank you. Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.
Speaker Change: Thank you.
Speaker Change: Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. We ask that you please limit yourself to one question and one follow-up question. One moment while we compile our Q&A roster.
Speaker Change: And our first question is going to come from the line of Dylan Becker with William Blair. Your line is open. Please go ahead.
Operator: We ask that you please limit yourself to one question and one follow-up question. One moment while we compile our Q&A roster. And our first question is going to come from the line of Dylan Becker with William Blair. Your line is open.
Dylan Tyler Becker: Please go ahead. Hey guys, I appreciate the question here. Maybe Brian, starting with you, and maybe also for Githesh here.
Dylan Tyler Becker: Hey guys, appreciate the question here. Maybe Brian , starting with you and maybe also for Githesh here. It sounds like that decisioning and elongation is playing out and you called out maybe the change management aspect that's driving that.
Speaker Change: I get that there's some near-term implications there, but wondering how you guys are thinking about what that means for the long-term of the business with the healthy pipeline you've called out and maybe the opportunity for that to unlock kind of incremental capacity to adopt more of the platform over time.
Dylan Tyler Becker: It sounds like that decisioning and elongation is playing out, and you called out, maybe, the change management aspect that's driving that. I get that there's some near-term implications there, but I'd like to know how you guys are thinking about what that means for the long term of the business with the healthy pipeline you've called out and maybe the opportunity for that to unlock kind of incremental capacity to adopt more of the platform over time. Yeah, sure. Hey Dylan, it's Brian.
Speaker Change: Yeah, sure. Hey Dylan, it's Brian . I'll start and then Githesh can add.
Brian Herb: I'll start and then Gitesh can add. So, the position over the medium to long term is not changing. We've talked about the emerging solutions and how they will contribute to the long-term growth target. We still feel very strong and confident about that position.
Gitesh: The position over the medium to long-term is not changing. We've talked about the emerging solutions and how they will contribute to the long-term growth target. We still feel very strong and confident about that position. We talked about them scaling to about three to four points of growth.
Brian Herb: We talked about them scaling to about three to four points of growth within the long-term target, and we still believe that that is a good target, and we're confident that we'll move towards that over time. Hey, yeah, the one thing I would add to that is the number of customers, I think, as we pointed out, in, you know, if you look at our top 20 carriers, whether they're evaluating or testing one or multiple solutions. So it's very, very healthy in terms of the energy our customers are spending.
Gitesh: Within the long-term target and we still believe that that is a good target and we're confident that we'll move towards that over time.
Gitesh: Yeah, the one thing I would add to that is the...
Speaker Change: Number of customers, I think, as we pointed out in, you know, if you look at our top 20 carriers.
Speaker Change: whether they're evaluating, testing one or multiple solutions.
Githesh Ramamurthy: But more, perhaps even more important than that, the ROI and the impact that we're seeing in these solutions are substantial. And so to the point you made about change management, where what we see is customers putting even more focus on saying, I can see some significant impact. So maybe I will make more process changes or changes to take advantage of the solutions. So that is taking a little bit longer. Okay, great. That's really helpful.
Speaker Change: So it's very, very healthy in terms of the energy our customers are spending. But more, perhaps even more important than that, is the ROI and the impact that we're seeing in these solutions.
Speaker Change: are substantial.
Speaker Change: And so, to the point you made about change management.
Speaker Change: where what we see is customers putting even more focus saying I can see some significant impact. So maybe I make more process changes or changes to take advantage of the solutions. So that is taking a little bit longer.
Dylan Tyler Becker: Maybe for Gitesh, here too, you called out kind of the innovation engine here, and it's hard not to notice what seems to be kind of continued acceleration on product rollouts, given you do offer so much value, and it's pretty tangible, and there's room for continued adoption. How should we think about that potential product roadmap as well? And how much more white space is out there that you guys can potentially solve or digitize from that workflow perspective? Thanks.
Speaker Change: Okay, great. That's really helpful. Maybe for Gitesh here too, you called out kind of the innovation engine here and hard not to notice what seems to be kind of continued acceleration on product rollouts.
Speaker Change: Given you do offer so much value and it's pretty tangible and there's room for continued adoption, how should we think about kind of that potential product roadmap as well and how much more white spaces are out there that you guys can potentially solve or digitize from that workflow perspective? Thanks.
Githesh Ramamurthy: So if you step back, and we started this effort, as you may recall, about two to three years ago. We said, we'll continue to make sure that our core business continues to perform, and continue to increase the profitability of the business. But at the same time, we said we'd increase the velocity and delivery of new solutions, and a lot of it is stemming from our core AI capability that we started building up a decade ago.
Speaker Change: So if you step back, and you know, we started this effort, as you may recall, about two to three years ago, we said, we'll continue to make sure that our core business continues to perform, you know, continue to increase profitability of the business.
Speaker Change: At the same time, we said we'd increase the velocity and delivery of new solutions.
Speaker Change: And a lot of it is stemming from our core AI capability that we've started building up a decade ago.
Githesh Ramamurthy: So what we see from these solutions that we've introduced, whether you call them in the last six months, the last two years, that TAM for these solutions is in the $2 billion range. So if you think about the expansion opportunity for these solutions, it's in that $2 billion TAM. Great. Thanks, guys.
Speaker Change: So what we see from these solutions that we've introduced, whether you call it in the last six months, last two years,
Speaker Change: The TAM for these solutions is in the $2 billion range. So if you think about the expansion opportunity for these solutions is in that $2 billion TAM range.
Dylan Tyler Becker: Thank you, and one moment as we move on to our next question. Our next question comes from the line of Alexei Gogolev with J.P. Morgan. Your line is open. Please go ahead. Hi Githesh.
Speaker Change: Great. Thanks, guys.
Speaker Change: Thank you and one moment as we move on to our next question.
Speaker Change: Our next question comes from the line of Alexei Gogolev with JP Morgan. Your line is open. Please go ahead.
Alexei Mihaylovich Gogolev: Hi Brian. Thank you for taking my question. I realize that you've already mentioned that there is no direct impact on CCCS from the CrowdStrike outage. Can you elaborate on how some of your big clients are impacted by the event? And would you agree that the companies in your industry that are having the biggest issues are the ones that don't have their arms around their infrastructure? Do you think this outage could trigger broader issues for your customer base?
Alexei Mihaylovich Gogolev: Hi, Githesh. Hi, Brian . Thank you for taking my question.
Speaker Change: I realize that you've already mentioned that there is no direct impact on CCCS from CrowdStrike outage.
Alexei Mihaylovich Gogolev: Can you elaborate how some of your big clients are impacted from the event?
Speaker Change: Would you agree that companies in your industry that are having the biggest issues are the ones that don't have their arms around their infrastructure? Do you think this outage can trigger broader issues for your customer base?
Alexei Mihaylovich Gogolev: I'd like to thank you for the question. I would say that, exactly as you pointed out, there's been no impact on our business because we do not use CrowdStrike, and as you know, we're also in the public cloud. So with the one incident that we talked about, we immediately disconnected from that one provider who had the problem, and so we disconnected all the interfaces.
Speaker Change: I'd like to thank you for the question. I would say that
Speaker Change: Exactly as you pointed out there's been no impact on our business because we do not use CrowdStrike and as you know we're also in the public cloud so with the one incident that we talked about we immediately disconnected from that one provider who had the problem.
Githesh Ramamurthy: So that caused, honestly, a little bit of disruption for several weeks, as it impacted some of the parts ordering that is done from dealers out of the dealer management systems. It had an impact on some, you know, about 10% of our repair facilities are owned by dealers, and also parts ordering. I would say for our insurance customers, for the most part, there was almost minimal to no impact whatsoever. So that's the answer to your question, Alexei. Thank you, Githesh.
Speaker Change: And so we disconnected all the interfaces. So that caused, honestly, a little bit of disruption for several weeks.
Speaker Change: as an impacted.
Speaker Change: Some of the parts ordering that is done from dealers out of the dealer management systems. It caused impact for some, you know, some, about 10% of our repair facilities are owned by dealers, and also parts ordering.
Speaker Change: I would say for our insurance customers, for the most part, there was almost minimal to no impact whatsoever. So that's the answer to your question, Alexei.
Githesh Ramamurthy: And have you seen any incremental growth from ixcloud? Are customers placing more of their operations on CCC because of this increased connectivity? We are seeing that more customers are now working to integrate more solutions. ixCloud accelerates that ability to put more solutions together. For example, if you look at solutions like Estimate SDP, working with First Look, working with Impact Dynamics, these are examples where multiple solutions can work better and closer together, and ixCloud helps with that, and we are seeing customers excited about that. Thank you, Githesh.
Alexei: Thank you, Githesh. And have you seen any incremental growth from ixCloud, i.e. are customers placing more of their operations on CCC because of this increased connectivity?
Speaker Change: We are seeing that more customers are now working to integrate more solutions.
Speaker Change: Ixcloud accelerates that ability.
Speaker Change: to implement more solutions together. For example, if you look at solutions like Estimate SDP, working with First Look, working with Impact Dynamics.
Speaker Change: So, these are examples where multiple solutions can work better and closer together. And IXCloud helps with that, and we are seeing customers also excited about that.
Speaker Change: Thank you, Githesh. Thank you, Alexei. Thank you, and one moment as we move on to our next question.
Alexei Mihaylovich Gogolev: Thank you, Alexei. Thank you and one moment as we move on to our next question. And our next question comes from the line of Samad Samana with Jeff Rees. Your line is open.
Speaker Change: And our next question comes from the line of Samad Samana with Jeffries. Your line is open, please go ahead.
Samad Saleem Samana: Please go ahead. Hi, good evening, and thanks for taking my questions. Maybe first, just on the emergent solutions taking longer to go from pilot to conversion, straightforward there. I guess, Brian, my question would be, should we then assume that we'll track closer just over time to assume the lower end of the long-term target range as well, as long as it's taking longer?
Samad Saleem Samana: Hi, good evening, and thanks for taking my questions. Maybe first, just...
Samad Saleem Samana: on the emergency solutions taking longer to go from pilot to conversion. Straightforward there. I guess, Brian , my question would be...
Brian Herb: Should we then assume that we'll track closer just over, you know, over time to assume the lower end of the long term?
Samad Saleem Samana: Is this something that you view as transitory? I'm just trying to recalibrate what we should assume, not just for the rest of this year but maybe how you want us to think about it on a go-forward basis, that pilot to conversion timeline. Yeah, hey, Samad, it's Brian.
Speaker Change: Target range as well, as long as it's taking longer. Is this something that you view as transitory? I'm just trying to recalibrate what we should assume, not just for the rest of this year, but maybe how you want us to think about it on a go-forward basis, that pilot to conversion timeline.
Brian Herb: Thanks for the question. Yeah, I mean, we're setting the guide in the second half of the year, in a place where we're comfortable and confident based on the reset on emerging and the time. When we think about 25 next year, we are expecting more material contribution from emerging. So we do see it continuing to step up going into next year. We're not going to get specific within the guide.
Speaker Change: Yeah, hey Samad, it's Brian . Thanks for the question. Yeah, I mean, we're setting the guide in the second half of the year.
Speaker Change: in a place we're comfortable and confident on based on the reset on emerging and the time.
Speaker Change: When we think about 2025 next year, we are expecting more material contribution.
Speaker Change: Off Emerging. So we do see it continuing to step up going into next year. We're not going to get specific within the guide, but we are very comfortable with the long term range that we've put out in the market.
Brian Herb: But we are very comfortable with the long-term range that we've put out in the market. Great. And then Gitesh, maybe a follow up for you.
Samad Saleem Samana: Just, you know, it's a big number that the one customer that you referenced is processing 20% on a run rate basis of their claims using one of the AI solutions. I guess I was wondering if you could give us maybe some more information there in terms of how are they defining the ROI that they're seeing by processing that high percentage of volume? And then Has there been any kind of consequent change to the economics of their contract?
Speaker Change: Great, and then Githesh, maybe a follow-up for you, just...
Speaker Change: It's a big number, the one customer that you referenced, it's processing.
Speaker Change: 20% on a run rate basis of their claims.
Githesh Ramamurthy: using one of the AI solutions. I guess I was.
Speaker Change: I was seeing if you could give us maybe some more information there in terms of how are they defining the ROI that they're seeing.
Speaker Change: by processing that high percentage of volume.
Speaker Change: And then, has there been any kind of consequent change to the economics of their contract?
Speaker Change: and what that looks like versus a typical CCCS customer and what it benefit you.
Githesh Ramamurthy: And what that looks like versus a typical CCCS customer and how does it benefit you? Sure, so let me just first talk about the customer themselves. So this customer actually implemented our AI, you know, estimate STP and its predecessor in late 2021. That's when they really started.
Speaker Change: Sure, so let me just first talk about the customer themselves.
Speaker Change: So this customer actually implemented our AI, you know, Estimate SDP and its precursor.
Githesh Ramamurthy: So they started out going to about a few states, expanded to multiple states, and then expanded to multiple vehicle types and continued and then moved to about 50 states. And as they got more and more comfortable with the solution and the AI and the precision, the accuracy of the AI, and most importantly, the two things the solution was doing were handling consistency and complexity of new vehicles that were coming in. So they were starting to see that in many instances, hate to get mathematical on you, but the bell curve, you've got a much narrower distribution in terms of how they were dealing with it.
Speaker Change: in late 2021. That's when they really started. So they started out going to about a few states, expanded to multiple states, and then expanded to multiple vehicle types and continued and then moved to about 50 states.
Speaker Change: And as they got more and more comfortable with the solution and the AI and the precision, the accuracy of the AI, and most importantly, the two things the solution was doing,
Speaker Change: is handling consistency.
Speaker Change: and complexity of new vehicles that were coming in. So they were starting to see that in many instances,
Speaker Change: I hate to get mathematical on you, but the bell curve, you know, you've got a much narrower distribution in terms of how they were dealing with it.
Githesh Ramamurthy: And they started to apply the solution to different mixes of their book across different states, and the results continue to be really good. So, on a run rate basis, they are now tracking towards 20%. Our entire customer base, in aggregate, is tracking towards that 3%, but this is a top 10 carrier who now has three years of experience and is now tracking towards that 20%, and they're very excited about the results.
Speaker Change: And they started to apply the solution to different mixes of their book across different states, and the results continued to be really good.
Speaker Change: So, on a run rate basis, they are now tracking towards 20%.
Speaker Change: Our entire customer base in aggregate is tracking towards the 3%, but this is a top 10 carrier who now has three years of experience.
Speaker Change: and is now tracking towards that 20% and they're very excited about the results.
Githesh Ramamurthy: And then, in terms of contracts, obviously, there's an incremental amount of revenue that comes out of this solution being fully deployed, but we don't break out any individual customers, as you know. Great. Appreciate the call, as always. Thank you. Thanks a lot.
Speaker Change: And then, in terms of contracts, obviously there's an incremental amount of revenue that comes out of this solution being fully deployed, but we don't break out any individual customers, as you know.
Speaker Change: Great. Appreciate the call, as always.
Speaker Change: Thanks Samad. Thank you and one moment as we move on to our next question.
Samad Saleem Samana: Thank you. And one moment as we move on to our next question. Our next question comes from the line of Saket Kalia with Barclays. Your line is open.
Speaker Change: Our next question comes from the line of Saket Kalia with Barclays. Your line is open. Please go ahead.
Saket Kalia: Please go ahead. Okay, great. Hey, Githesh.
Saket Kalia: Okay, great. Hey, Gitesh. Hey, Brian . Thanks for taking my questions here.
Saket Kalia: Hey, Brian. Thanks for taking my questions here. Hey, guys. Githesh, maybe to start with you, the explanation around emerging solutions was pretty straightforward in terms of timing and RevRec. Can you just maybe go one level deeper and talk about whether any specific emerging solutions were maybe seeing more scrutiny? Like, you know, was it Estimate SCP, for example, that customers were maybe evaluating for a longer time? Or was it diagnostics or subrogation?
Saket Kalia: Hey guys, Githesh, maybe to start with you.
Saket Kalia: It sounds like it was in the aggregate, but maybe you could go one level deeper and speak to which part of the emerging portfolio maybe saw that additional kind of timing. Yeah, I think there are slight differences between each one of them that are slightly different, given the nuances. So rather than go through all of them, I'll just pick one as an example.
Saket Kalia: You know the explanation around emerging solutions was pretty straightforward in terms of of timing and and rev rec
Saket Kalia: Can you just maybe go one level deeper and talk about whether any specific emerging solutions was maybe seeing more of the scrutiny?
Speaker Change: You know, is it estimate SCP, for example, that customers were maybe evaluating for a longer time, or was it diagnostics or separation? It sounds like it was in the aggregate, but maybe you could go one level deeper and speak to which part of the emerging portfolio maybe saw that additional kind of time.
Speaker Change: Yeah, I you know, I think there's slight differences between each one of them are slightly different given the nuances
Githesh Ramamurthy: And I'll pick on subrogation as an example for you. So subrogation is one where we literally have, at this stage, double-digit customers in contract. And what we're seeing with subrogation, back to the value proposition, is that we saw an 80% decrease in cycle time. This is for inbound subrogation.
Speaker Change: So rather than to go through all of them, I'll just pick one as an example, and I'll pick on subrogation as an example.
Speaker Change: for you. So, subrogation is one where we literally have, at this stage, double-digit customers in contract. And what we're seeing with subrogation, back to the value proposition, is that we saw an 80% decrease in cycle time.
Githesh Ramamurthy: Notice that outbound subrogation is still not fully rolled out, so this is for inbound subrogation. And these customers have processed tens of millions of dollars, and I've seen tens of millions of dollars of improvement in accuracy and how the demand dollars are coming in and how they're responding. That increase has been somewhere between 20 and 50%. So, a substantial impact, and significant cycle time improvement. So this is an example where the customers have said, "We are excited about what we're seeing. Sometimes we've had decentralized or distributed teams.
Speaker Change: This is for inbound subrogation. Notice that outbound subrogation is still not fully rolled out. So this is for inbound subrogation.
Speaker Change: And these customers have processed tens of millions of dollars and have seen tens of millions of dollars of improvement.
Speaker Change: and the impact on accuracy or how the demand dollars are coming in and how they're responding. That increase has been somewhere between 20 and 50 percent. So substantial impact, significant cycle time improvements.
Speaker Change: So this is an example where the customers have said...
Speaker Change: We, you know, we are excited about what we're seeing. Sometimes, you know, we've had decentralized or distributed teams. With this solution, we can centralize the teams. There's more change management we can execute. And there's more that we can do, but it requires...
Githesh Ramamurthy: With this solution, we can centralize the teams. There's more change management that we can do. And there's more that we can do, but it requires some level of training and reorganizing to capture the opportunities that are in front of us. So this is an example of just picking one solution, and each one has slightly different nuances.
Speaker Change: Some level of training, reorganizing to capture the opportunities that are in front of us.
Speaker Change: So this is an example of just picking one solution, and each one has slightly different nuances.
Githesh Ramamurthy: So, and by the way, in addition to the, you know, double-digit customer base, we also have a long list of customers also evaluating, piloting, and testing, and the early references from these customers, I think some of this might even be public, but the early references from these customers are also helping with newer customers who are piloting and testing. So we feel very good about it. Does that answer your question? Yeah, it does. It does. It definitely gives it more, more, more color.
Speaker Change: And by the way, in addition to the, you know, double-digit customer base, we also have a long list of customers also evaluating, piloting, testing, and the early references from these customers.
Speaker Change: I think some of this might even be public, but the early references from the customers is also helping with newer customers who are piloting and testing, so we feel very good about that.
Speaker Change: Does that answer your question?
Brian Herb: Yeah, it does. It does. It definitely gives it gives it more, more, more color. Brian , maybe the follow up for you, you know, at one point of growth, I mean, clearly, the emerging solutions are still scaling. And so maybe this is going to be an unfair question to ask. But how do you sort of think about even just anecdotally, the margin differences?
Saket Kalia: Brian, maybe the follow up for you. Unknown Speaker At one point of growth, I mean, clearly, emerging solutions are still scaling. And so maybe this is going to be an unfair question to ask, but how do you sort of think about, even just anecdotally, the margin differences between, you know, the big scale established solutions versus emerging, because of course, of the revenue guide just maybe getting adjusted a little bit? It was good to see the EBITDA guide go up a little bit.
Saket Kalia: Maybe just talk about the margin differences between established versus emerging. Yeah, absolutely. I would say, I mean, where we're going to get to when these products are mature, and they're at scale, they will have a similar margin profile as our established and core solutions. And we are seeing efficiency in the AI.
Speaker Change: between, you know, the big scale established solutions versus emerging, because of course of the revenue guide just maybe getting adjusted a little bit, it was good to see the EBITDA guide go up a little bit, maybe just talk to the margin differences between established versus emerging to the extent you can.
Brian Herb: So there's nothing at a margin level that will really look different than our current solutions today when they get to scale. We are seeing early stage costs that will be different on them before they scale. We have set up costs, the amortization starts to come through the cost of revenue when we launch the product, and it's open for GA. So there is some cost that gets in front of the revenue.
Speaker Change: Yeah, absolutely. I would say...
Speaker Change: When these products are mature and they're at scale, they will have a similar margin profile as our established and core solutions, and we are seeing efficiency in the AI.
Speaker Change: There's nothing at a margin level that will really look different than our current solutions today when they get to scale. We are seeing early stage costs that will be different on them before they scale. We have set up costs.
Brian Herb: And then once the revenue gets to scale and gets to a tipping point, the margin profile will be consistent with the broader margin profile of CCC. So that's how you think about it. I would just say, in general, we're happy with where margins are. The first half had, you know, close to 300 basis points of margin improvement. And we're, you know, guiding to a full year of around 100 basis points of margin improvement. Super helpful.
Speaker Change: The amortization starts to come through cost of revenue when we launch the product and it's open for GA.
Speaker Change: So there is some cost that gets in front of the revenue, and then once the revenue gets to scale and gets to a tipping point...
Speaker Change: The Margin Profile will be consistent with...
Speaker Change: The broader margin profile of CCC. So that's how to think about it. I would just say in general, we're happy with where margins are. The first half had close to 300 basis points of margin improvement. We're guiding to a full year of around 100 basis points of margin improvement.
Saket Kalia: Thank you. Thank you, and one moment for our next question. And our next question is going to come from the line of Gabriela Borges with Goldman Sachs. Your line is open. Please go ahead. Hi, good afternoon.
Speaker Change: Super helpful. Thanks, guys.
Speaker Change: Thank you. Thanks, Saket. Thank you, and one moment for our next question.
Speaker Change: And our next question is going to come from the line of Gabriela Borges with Goldman Sachs. Your line is open. Please go ahead.
Gabriela Borges: Thank you for taking the question. Githesh, we would welcome your perspective here. At any time in the last 40 years, we could have made the argument that the portfolio is split between more established products and newer emerging products. So help us understand what's different this time for how you're thinking about the forecasting and the adoption of emerging products? Or do you just think that at any given time, you have a mix in your portfolio between more established and newer? Hey, Gabriela.
Gabriela Borges: Hi, good afternoon. Thank you for taking the question.
Gabriela Borges: Githesh, we'd welcome your perspective here. At any time in the last 40 years, we could have made the argument that the portfolio is split between more established products and newer emerging products. So help us understand, what's different this time to how you're thinking about the forecasting and the adoption of emerging products?
Githesh Ramamurthy: I just think that at any given time you have a mix in your portfolio between more established and ramping.
Githesh Ramamurthy: Sure. As you can imagine, from my perspective, right, 90% of the revenue we just reported, you know, we're almost up to a billion dollars in revenue, and 90% of this revenue we reported started at zero, right? So very little of this has come through acquisitions.
Githesh Ramamurthy: Hey Gabriela, sure.
Githesh Ramamurthy: As you can imagine from my perspective, right, 90% of the revenue we just reported
Gabriela Borges: You know, we're almost up to a billion dollars in revenue, and 90% of this revenue we reported started at zero, right? So very little of this has come through acquisitions. So we have, back to your 20-year perspective, almost all of these products have come essentially from zero.
Githesh Ramamurthy: So we have, back to your 20-year perspective, almost all of these products have come essentially from zero. So the pattern recognition we have around this is really a handful of some very, very fundamental things, which is, what is the ROI? What's the impact?
Gabriela Borges: So the pattern recognition we have around this is really a handful of some very, very fundamental things, which is, what is the ROI? What's the impact? What are we seeing?
Githesh Ramamurthy: What are we seeing? So this is also, as I pointed out, you know, unlike, you know, here's some core differences between what we've seen and your question about what we've seen over 20 years, where we are today. There are some but two or three fundamental differences. One, We are now 10 years into execution and development of AI, and the range of solutions we can deliver using our AI is very different from solutions that we could have ever delivered through traditional deterministic software development. So the solutions are different in nature.
Gabriela Borges: So, this is also, as I pointed out, you know, unlike, you know, here's some core differences between what we've seen to your question about what we've seen over 20 years with where we are today.
Gabriela Borges: Some, about two or three fundamental differences. One...
Gabriela Borges: We are now 10 years of execution and development on AI.
Gabriela Borges: And the range of solutions we can deliver using our AI are very different from solutions that we could have ever delivered through traditional deterministic software development.
Gabriela Borges: So the solutions themselves are different in nature.
Githesh Ramamurthy: The ROI is very strong. The second thing I would say is very different is that I cannot recall at any point in our history where the breadth of our products, if you look at what we've delivered for insurance in terms of our insurance customers, from Estimate STP to First Look, Impact Dynamics, Intelligent Reinspection, and Subrogation. Extensions to Casualty, and then the same thing with our repair facility customers, where we have a whole series of new solutions.
Gabriela Borges: The ROI is very strong. The second thing I would say is very different is that I cannot recall at any point in our history
Gabriela Borges: where the breadth of our products, if you look at what we've delivered for insurance in terms of our new insurance customers, from Estimate STP to First Look, Impact Dynamics, Intelligent Reinspection, Subrogation.
Gabriela Borges: Extensions to Casualty and then same thing with our repair facility customers where we have a whole series of new solutions.
Githesh Ramamurthy: The breadth of the solutions we have and the solutions' abilities to work with each other and deliver greater impact, that's the second thing that is fundamentally different. The third thing I would say is different is that our customers went through an exogenous shock in the 22-23 time, so when you looked at our customers' profitability, especially our insurance customers' profitability. Twenty-two and twenty-three were years where inflation, the cost of parts, and inflation in claims costs were substantial, and many of our customers went through some fairly, you know, tough challenges.
Gabriela Borges: The breadth of the solutions we have and the solutions' abilities to work with each other and deliver greater impact, that's the second thing that is fundamentally different.
Gabriela Borges: The third thing I would say is different is that our customers went through an exogenous shock in the 22-23 timeframe.
Gabriela Borges: So when you looked at our customers' profitability, especially our insurance customers' profitability,
Gabriela Borges: Twenty-two and twenty-three were years where inflation, cost of parts, inflation in claims costs were substantial, and many of our customers went through some fairly tough challenges.
Githesh Ramamurthy: And then as that started to correct itself in early 2024, what we're seeing from our customers is that they say that they would rather go bigger in terms of making changes and get ready for a broader, bigger set of changes as opposed to incremental changes. Because if you make incremental changes and a situation like 22 or 23 repeats itself, then it is a real problem.
Gabriela Borges: And then, as that started to correct itself into early 2024,
Gabriela Borges: What we're seeing from our customers is that they're saying that we would rather go bigger in terms of making changes.
Gabriela Borges: and get ready for a broader, bigger set of changes as opposed to incremental changes. Because if you make incremental changes and a situation like 22 or 23 repeats itself, then it is a real problem.
Githesh Ramamurthy: So the changes that our customers have undergone are leading them and causing them to think bigger and broader and bolder changes, which we are excited about. And this is actually also, that's why we also said. Almost every one of our top 20 customers, carriers, is testing one or multiple solutions with us right now. Gabriela, did that answer your question? Yes, yes, very much. Githesh, when you talk about bigger transformational changes, to me, that also signals longer-term changes, which seems consistent with what you're saying.
Gabriela Borges: So, the changes that our customers have undergone is leaning them and causing them to think bigger and broader and bolder changes, which we are excited about. And this is actually also, that's why we also said.
Gabriela Borges: Almost every one of our top 20 customers, carriers, are testing one or multiple solutions with us right now.
Gabriela Borges: Gabriela, did that answer your question? Yes, yes, very much. Githesh, when you talk about bigger transformational changes...
Speaker Change: To me, that also signals longer-term changes, which seems consistent with what you're saying.
Gabriela Borges: I'm not sure if that longer-term timeframe is tied to perhaps the technology needing to be iterated upon more. So to what extent are customers saying, well, we can see the potential that these particular products have, but from a roadmap standpoint, we're even more enthusiastic to see what it looks like a year from now. So maybe that is creating a little bit of a pause as well?
Speaker Change: I'm not sure if that longer-term timeframe is tied to perhaps the technology needing to be iterated upon more, so to what extent a customer is saying, well, we can see the potential that these particular products have, but from a roadmap standpoint, we're even more enthusiastic to see what it looks like a year from now, so maybe is that creating a little bit of a pause as well, help us understand that dynamic.
Gabriela Borges: Help us understand that dynamic. Yeah, I would parse that out and phrase that question slightly differently. So what we are seeing, this is why I gave the subrogation example.
Speaker Change: Yeah, I would parse that, I would parse that question slightly differently.
Speaker Change: So what we are seeing, this is why I gave the subrogation example.
Githesh Ramamurthy: So what we're seeing is, first of all, to be very blunt, initially, there's skepticism, right? How is it possible that AI and a whole new set of tools can do things very dramatically differently from what has been possible before?
Speaker Change: So what we're seeing is...
Speaker Change: First of all, you know, to be very blunt, initially there's skepticism, right? How is it possible that the AI and a whole new set of tools can do things very dramatically differently from what has been possible before?
Githesh Ramamurthy: And once people start putting it in, using it, and seeing numbers like an 80% decrease in cycle time, and a 20 to 50% increase in accuracy, what that says is... It's not that people need longer times to prove it out, because you can see those results literally in 90 days, because we have integration, we're cloud-based. You can see all of that, what people are not coming back and saying in order to fully maximize the capability this thing offers. If I make adjustments to the way my staff, my process flows are structured, I can capture more of these capabilities, and I can train people differently, and that is where we are Thanks Gabrielle. Thank you and one moment as we move on to our next question. And our next question comes from the line of Shlomo Rosenbaum with Stiefel. Your line is open.
Speaker Change: And once people start putting it, using it, and see numbers like an 80% decrease in cycle time, a 20 to 50% increase in accuracy, what that says is...
Speaker Change: It's not that people need longer times to prove it out, because you can see those results literally in 90 days, because we have integration, we're cloud-based, you can see all of that.
Speaker Change: Well, people are not coming back and saying, in order to fully maximize...
Speaker Change: The capability this thing offers, if I make adjustments to my...
Speaker Change: The way my staff, my process flows are structured, I can capture more of these capabilities and I can train people differently and that is where we are seeing, you know, the lengthening of time.
Speaker Change: Thank you for the comments.
Speaker Change: Thanks Gabriela. Thank you and one moment as we move on to our next question.
Speaker Change: And our next question comes from the line of Shlomo Rosenbaum with Stiefel. Your line is open. Please go ahead.
Shlomo H. Rosenbaum: Please go ahead. Hi. Thank you for taking my questions. Just to confirm, everything that we're talking about here is emerging solutions. Are there any changes at all in terms of sales cycles or the market environment or anything on, excuse me, the, you know, the legacy, I guess you'd call it the vast majority of the business that you guys are working on? And then, maybe, for Brian, maybe you could talk a little bit about what you did with the warrant liabilities in terms of getting them off the balance sheet and whether that affects the trajectory of the share of the sharecrate. Yeah First, it's straightforward. Yeah, we converted the remaining warrants. So there were private sponsor warrants. There are about 17.8 million of those.
Shlomo H. Rosenbaum: Hi, thank you for taking my questions. Just to confirm,
Shlomo H. Rosenbaum: Everything that we're talking about here is emerging solutions. Are there any changes at all in terms of sales cycles or the market environment or anything on excuse me the
Speaker Change: the, you know, the legacy, I guess you could call it legacy, but the vast majority of the business that that you guys are working on. And then afterwards, I just maybe for Brian , maybe you could talk a little bit about what you did with the warrant liabilities in terms of getting them off the balance sheet and whether that affects the trajectory of the share of the share creep.
Brian Herb: Yeah, Shlomo, I'll cover the warm one.
Brian Herb: We converted them to shares. There are about 3.8 million shares that we issued. Those are now in the outstanding count.
Brian Herb: First, it's straightforward. Yeah, we converted the remaining warrants. So there was private sponsor warrants. There's about 17.8 million of those. We converted them.
Speaker Change: There's about 3.8 million shares that we issued. Those are now in the outstanding count, and so that cleaned up the cap table. So we're happy with that.
Brian Herb: And so that cleaned up the cap table, so we were happy with that. And we were able to close the door on having warrants in the cap table.
Speaker Change: and be able to close the door on having warrants in the cap table.
Speaker Change: On the, your first question regarding kind of the established solutions in the core.
Speaker Change: When you look at what the second half guide is highlighting, the only change that's playing through the numbers is the emerging solutions, reducing the second half. Outside of that, the second half position is consistent with
Brian Herb: On your first question regarding the kind of established solutions in the core, when you look at what the second half guide is highlighting, the only change that's playing through the numbers is the emerging solutions reducing the second half. Outside of that, the second half position is consistent with the prior guide. So we're feeling good about the established solutions. We have a good pipeline and strong momentum. And so overall, we're happy with the performance of the core.
Speaker Change: We're feeling good on the established solutions. We have good pipeline and strong momentum. Overall, we're happy with the performance in the core.
Brian Herb: Thank you. Thank you. Thank you, and one moment as we move on to our next question. And our next question comes from the line of Chris Moore with CJS Securities. Your line is open.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Thank you and one moment as we move on to our next question.
Speaker Change: And our next question comes from the line of Chris Moore with CJS Securities. Your line is open. Please go ahead.
Christopher Paul Moore: Please go ahead. Hey, good afternoon guys. I will leave the emergency alone.
Christopher Paul Moore: Hey, good afternoon, guys. I will leave the...
Christopher Paul Moore: I just maybe want to talk about one that, for more information, visit www.thevenusproject.com. It looks like it's down a bit but still, you know, above that 12-14% of revenue that you talk about. Talk about that a little bit and, you know. And I know it just, you know, can jump around a little bit, kind of further thoughts on the normalization. Yeah, hey, Chris, Brian.
Speaker Change: Emergent Solutions alone. I just maybe want to talk about one that I get from clients a lot is on the stock comp side, just as a percentage of revenue.
Speaker Change: It looks like it's, you know, it's down a bit, but still, you know, above that 10 to, you know, 12 to 14% of revenue that you talk about. Can you...
Speaker Change: You know talk to that a little bit and and you know And I know it just it just you know can jump around a little bit Just just any kind of further thoughts on the normalization
Brian Herb: Yeah, so in the quarter, Q2 was 17%, which is down slightly from Q1. We do expect it to continue to move down as we go through the year. The one thing that's pushing it up is there is a modification to the TSRs that happened at the end of last year, and there is about a $67 million P&L impact with that change, and that largely runs through this year. When that runs out and we get into next year, it's going to look like the more normalized run rate, and that will be about 12% to 14% on a run rate.
Speaker Change: Yeah, hey Chris, it's Brian . Yeah, so in the quarter, Q2 was 17%.
Speaker Change: which is down slightly from Q1. We do expect to continue to move down as we go through the year.
Speaker Change: The one thing that's pushing it up is there is a modification to the TSRs that happened at the end of last year, and there's about a $67 million P&L impact.
Speaker Change: with that change, and that largely runs through this year. When that runs out and we get into next year, it's going to look like the more normalized run rate, and that will be about 12% to 14% on a run rate.
Brian Herb: So that's, that that's the way to think about the runway. The modification of the TSR, maybe just one other point is that there was no impact on shares being issued. It was an accounting P&L charge, and that's really the only impact that's been run through the numbers. Perfect. That's really helpful. I'll leave it there. Thank you. All right. Thanks, Chris. Thanks, Chris. Thank you. And one moment as we move on to our next question, and our next question comes from the line of Gary Prestopino with Barrington Research. Your line is open.
Speaker Change: That's the way to think about the runway. The modification on the TSR, maybe just one other point, is there was no impact on shares being issued. It was an accounting P&L charge, and that's really the only impact that's run through the numbers.
Speaker Change: Perfect. That's helpful. I'll leave it there. Thank you, guys. All right. Thanks, Chris. Thanks, Chris. Thank you. And one moment as we move on to our next question.
Speaker Change: And our next question comes from the line of Gary Prestopino with Barrington Research. Your line is open. Please go ahead.
Gary Frank Prestopino: Please go ahead. Hey, good afternoon, all. Hey, I'm interested in this new product you launched, Buildsheets. I mean, are you the first one out there with something of this nature?
Gary Frank Prestopino: Hey, good afternoon, all. Hey, I'm interested in this new product you launched, Buildsheets. I mean, are you the first one?
Gary Frank Prestopino: And how far back in terms of model years does this go for the vehicles that are out there? Hey, just to clarify, are you talking about build sheets? Yes, Bill Chief. Okay. You know, in terms of, I believe I'm not 100% certain, but I believe you're the first ones with build sheets at the repair facility level integrated, again, not 100% sure of that. But, What is really powerful about this is that it goes back many, many years, and we actually have done extensive work in making sure that build sheets have been integrated.
Gary Frank Prestopino: out there with something of this nature, and how far back, in terms of model years, does this go for the vehicles that are out there?
Speaker Change: Hey, just to clarify, are you talking about build sheets?
Speaker Change: Yes, build sheets.
Speaker Change: Okay,
Speaker Change: You know, in terms of, I believe, I'm not 100% certain, but I believe you're the first ones with bill sheets at the repair facility level integrated. Again, not 100% sure of that.
Speaker Change: What is really powerful about this is it goes back many, many years and we actually have
Speaker Change: have done extensive work in making sure that bill sheets have been integrated. So first of all, when you look at our, you know, you're familiar, Gary, with our total loss solutions and other solutions.
Gary Frank Prestopino: So first of all, when you look at our, you know, you're familiar, Gary, with our total loss solutions and other solutions, where we actually have integrated build sheets into those capabilities, but this is the first time it's being introduced to the repair facility market. And it covers, you know, the vast majority of all brands and goes back many, many years. And yeah, so that's basically the gist.
Gary Frank Prestopino: where we actually have integrated build sheets into those capabilities. But this is the first time it's being introduced to the repair facility market. And it covers, you know, the vast majority of all brands and goes back many, many years.
Gary Frank Prestopino: And yeah, so that's basically the gist of it.
Githesh Ramamurthy: I mean, do you feel that this has the potential to become fairly significant on the repair side? Yes, the early receptivity of what we've seen in the first 60 days has been pretty substantial in terms of uptake. It's also a solution where customers can essentially self-serve, go on the website, a couple of clicks, add it, and it has a pretty dramatic impact on simplification of the estimates and what you're ordering. And what it does is it continues the trajectory of CCC1. You go way back with us, and if you remember, CCC1 started out with almost nothing.
Speaker Change: I mean do you feel that this has has the potential to...
Speaker Change: become a fairly significant
Speaker Change: Yeah, a lot of need on the repair side.
Speaker Change: Yes, the early receptivity of what we've seen in the first 60 days.
Speaker Change: has been
Speaker Change: pretty substantial in terms of uptake. It's also a solution where customers can essentially self-service, go on the website, a couple of clicks, add it.
Speaker Change: And it has a pretty dramatic impact on simplification of the estimates and what you're ordering. And you know, and it's what it does is it continues.
Speaker Change: You know, the trajectory of CCC1, you go way back with us, and if you remember, CCC1 started at almost nothing. It's well north of $400 million today, and this continues to add to that trajectory of solutions.
Githesh Ramamurthy: It's well north of $400 million today, and this continues to add to that trajectory of growth. And then just one last question on this product. I mean, the data, do you get it from the manufacturers?
Gary Frank Prestopino: Or is this the data that you've been accumulating in house over the years that gives you the ability to produce these kind of build sheets? You know, without going into all the gory details, we would say that there are a variety of sources. And it is extraordinarily important to have actual manufactured data so that the options as the car came off the manufacturing line are down to that particular VIN number. So you're not chasing down 35 different types of mirrors, and you're getting the one mirror because that really affects parts ordering and cycle time.
Speaker Change: And then just one last question on this on this product. I mean, the data, do you get it from the manufacturers? Or is this the data that you've been accumulating in house over the years?
Speaker Change: that gives you the ability to produce these kind of build sheets.
Speaker Change: You know, without going into all the gory details,
Speaker Change: We would say that, you know, that there's a variety of sources.
Speaker Change: And this is extraordinarily important to have actual manufactured data so that the options as the car came off the manufacturing line.
Speaker Change: is down to that particular VIN number, so you're not chasing down 35 different types of mirrors and you're getting the one mirror, because that really affects parts ordering and cycle time.
Speaker Change: Okay, thank you.
Speaker Change: Thank you and one moment, sorry, one moment as we move on to our next question.
Githesh Ramamurthy: Okay, thank you. Thank you and one moment, sorry, one moment as we move on to our next question. Our next question comes from the line of Josh Baer with Morgan Stanley. Your line is open. Please go ahead. Great, thanks. This is Katie Heuser on tonight in place of Josh Baer.
Speaker Change #100: Our next question comes from the line of Josh Baer with Morgan Stanley . Your line is open. Please go ahead.
Joshua Phillip Baer: Maybe just more philosophically on margins, Iveta Upside was strong in the quarter against previous messaging for Q2 being that kind of low point in the year on margins. Impressive to see you move those up for the full year, even with revenue coming down slightly. I guess, through this lens, kind of looking across the model, where are you? Unknown Attendee.
Speaker Change #100: Great, thanks. This is Katie Heuser on tonight for Josh Baer.
Katie Heuser: Maybe just more philosophically on margins, Evita Upside was strong in the quarter against previous messaging for Q2 being that kind of low point in the year on margins. Impressive to see you move those up for the full year, even with revenue coming down slightly.
Speaker Change #102: I guess, through this lens, kind of looking across the model, where are you seeing the most leverage? And looking ahead, is there further room for leverage in these areas? Just kind of speaking to the durability in these areas as it relates to margin expansion would be helpful. Thanks a lot.
Katie Heuser: And looking ahead, is there further room for leverage in these areas? The durability of these areas as it relates to margin expansion would be helpful. Thanks a lot.
Brian Herb: Yeah, absolutely. Yeah, no, we feel good about the EBITDA position in the margin. And we did take up the midpoint within the updated guide, really on the strength we're seeing in the business. To your point about the sequential or seasonal components, we did have some cost phasing that benefited us in Q2, which helped the position, and that has some offset in the second half. And so that's why the margins have moved around a little bit from H1 to H2.
Speaker Change #103: Yeah, absolutely. Yeah, no, we feel good on on the EBITDA position in the margin. And we did take up the midpoint within the updated guide, really on the on the strength we're seeing in the business.
Speaker Change #103: To your point on the sequential or seasonal components, we did have some cost phasing that benefited us in Q2, which helped the position and that has some offset in the second half, and so that's why the margins have moved around a little bit, H1 to H2.
Brian Herb: But we did strengthen the guide for the full year. We see leverage across cost of revenue. We expect right now gross profits at about 78%. We expect that to move more like 80 over time.
Speaker Change #103: but we did strengthen the guide for the full year.
Speaker Change #103: We see leverage across cost of revenue. We expect...
Speaker Change #106: Right now, gross profit is about 78%. We expect that to move more like 80% over time.
Speaker Change #103: And we see good leverage in sales and marketing and G&A.
Brian Herb: And we see good leverage in sales and marketing and G&A. Revenue will continue to grow over those cost areas. R&D will be the fastest growing cost category over time, but we still believe there's leverage there as well.
Speaker Change #103: to grow over those cost areas. R&D will be the fastest growing cost category over time, but we still believe there's leverage there as well. We are seeing efficiency as we scale AI.
Speaker Change #103: across our solutions. And so that will be helpful on the margins playing out over time as well.
Brian Herb: And we are seeing efficiency as we scale AI across our solutions. And so that will be helpful on the margins playing out over time as well. Great, thank you.
Tyler Maverick Radke: Thank you. Thank you, and one moment as we move on to our next question. Our next question comes from the line of Tyler Radke with Citi. Your line is open. Please go ahead. Hey, this is Peter on the line for Tyler Radke.
Speaker Change #104: Great, thank you.
Speaker Change #105: Thank you. Thank you, and one moment as we move on to our next question.
Speaker Change #107: Our next question comes from the line of Tyler Radke with Citi. Your line is open. Please go ahead.
Peter John Burkly: Thanks for taking the question. You pointed out that insurers are undertaking large transformative architecture changes. Could you go a little bit more into detail on what those changes are that are slowing down the pace of emergent solution adoption? And then why is that a current trend given the strong pricing and market conditions in PNC? Thanks. Yeah, these are not architecture changes. These are more operational changes to become much more efficient. That's really what we're talking about.
Speaker Change #107: Hey, this is Peter on the line for Tyler Radke. Thanks for taking the question.
Peter: So you had called out that insurers are undertaking large transformative architecture changes. Could you go a little bit more into detail on what those changes are that are slowing down the pace of emergent solution adoption? And then why is that a current trend given like the strong pricing and market conditions in PNC?
Speaker Change #109: Thanks. Yeah, these are not architecture changes. These are more operational changes to become much more efficient. That's really what we're talking about.
Githesh Ramamurthy: Okay, and then on your new solution for Intelligent Reinspection, just curious how you expect the adoption curve for that to play out. And then could you give us an idea of where this stacks up on importance for customers looking to adopt new CCT solutions? Sure. So, what this solution does is, you know, I think there's a release out there today, and it speeds up the whole process of doing reviews for literally tens of billions of dollars of collision repairs that insurers are working with, you know, on their repair network.
Speaker Change #110: Okay, and then on your new solution to Intelligent Reinspection, just interested in how you expect the adoption curve to play out, and then could you give us an idea like where this stacks up on importance for customers looking to adopt new CCT solutions?
Speaker Change #110: Sure.
Speaker Change #111: So, what this solution does is, you know, I think there's a release out there today, and it speeds up the whole process of doing reviews.
Speaker Change #111: for literally tens of billions of dollars of collision repairs that insurers are working with repair, you know, on their repair networks.
Githesh Ramamurthy: And what this does is that the AI looks at the carrier's rules and can speed up a lot of the decision process because the AI can be quite detailed and look at a lot of the nuances. And, you know, essentially helping speed up and not hold up repair facilities to give approvals quicker and do a lot of those things. You know, you've got tens of billions of dollars in repair between getting assignments going to repair facilities, repairs being completed, and payments being made.
Speaker Change #111: And what this does is...
Speaker Change #111: that the AI is actually, looks at the carrier's rules and can speed up a lot of the decision process because the AI can be quite detailed and look at a lot of the nuances.
Speaker Change #111: and, you know, essentially helping speed up and not hold up repair facilities, to give approvals quicker, and do a lot of those things. And so at the heart of it...
Speaker Change #111: You know, you've got tens of billions of dollars of repair that between, you know, getting
Speaker Change #111: Assignments going to repair facilities, repairs being completed, payments being made. So you've got all of that going back and forth. So the nice thing about this solution is we have a previous version of this solution that's been there for a very long period of time.
Githesh Ramamurthy: So you've got all of that going back and forth. So the nice thing about this solution is we have a previous version of this solution that has been around for a very long period of time. This is a step function change in the solution, and it can be implemented essentially in line with the existing workflows. No change to existing workflows, no change to integration, and people can start using it right away and immediately.
Speaker Change #111: This is a step function change in the solution, and it can be implemented essentially in line with the existing workflows, no change to existing workflows, no change to integration, and people can start using it right away and immediately.
Githesh Ramamurthy: And the early feedback from customers who are testing it has been absolutely fantastic. And these are some of our largest customers who are testing it. Thank you. Thank you. I would now like to turn the conference back to CEO Gitesh Ramamurthy for closing remarks. Thank you all for joining us today. And, as you can probably see, the durability of our business model continues to come through, and we remain confident in our ability to deliver on our strategic and financial objectives while at the same time truly helping our customers on that transformative journey going forward.
Speaker Change #111: And the early feedback from customers who are testing it has been absolutely fantastic. And these are some of our largest customers who are testing it.
Speaker Change #112: Thank you.
Speaker Change #112: Thank you. I would now like to turn the conference back to CEO Gitesh Ramamurthy for closing remarks.
Githesh Ramamurthy: Thank you all for joining us today. And as you can probably see, the durability of our business model continues to come through, and we remain confident in our ability to deliver on our strategic and financial objectives.
Githesh Ramamurthy: while at the same time truly helping our customers in that transformative journey going forward. And this week also marks our three-year anniversary of returning to the public markets.
Githesh Ramamurthy: And this week also marks our three-year anniversary of returning to the public market. A very important milestone in our journey as a public company, and I'd really like to take this opportunity to thank our customers, our shareholders, and all our CCCers for the tremendous work they do day in and day out. We look forward to keeping you updated. Thank you so much.
Githesh Ramamurthy: A very important milestone in our journey as a public company.
Githesh Ramamurthy: And I'd really like to take this opportunity to thank our customers.
Githesh Ramamurthy: our shareholders
Githesh Ramamurthy: and all our CCC-ers for the tremendous work they do day in and day out, and we look forward to keeping you updated. Thank you so much.
Githesh Ramamurthy: This concludes today's conference call. Thank you for participating. You may now disconnect. [inaudible] ... ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? Good day and thank you for standing by.
Speaker Change #113: This concludes today's conference call. Thank you for participating. You may now disconnect.
Speaker Change #113: [inaudible]
Operator: Welcome to the CCC Intelligent Solutions second quarter fiscal 2024 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press * one on your telephone. You will then hear an automated message advising you that your hand is raised.
Speaker Change #114: Good day and thank you for standing by. Welcome to the CCC Intelligent Solutions second quarter fiscal 2024 earnings conference call.
Speaker Change #116: At this time, all participants are in a listen-only mode.
Speaker Change #115: After the speaker's presentation, there will be a question-and-answer session. To ask a question during this session, you will need to press star 11 on your telephone. You will then hear an automated message advising you your hand is raised.
Operator: To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Bill Warmington, Vice President of Investor Relations. Please go ahead, sir.
Speaker Change #114: To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Bill Warmington, Vice President of Investor Relations. Please go ahead, sir.
William Arthur Warmington: Thank you, operator. Good afternoon, and thank you all for joining us today to review CCC's second quarter 2024 financial results, which we announced in the press release issued following the close of the market. Joining me on the call are Gitesh Ramamurthy, CCC's Chairman and CEO, and Brian Herb, CCC's CFO. The forward-looking statements we make today about the company's results and plans are subject to risk and uncertainties that may cause the actual results and the implementation of the company's plans to vary materially.
William Arthur Warmington: Thank you, Operator. Good afternoon and thank you all for joining us today to review CCC's second quarter 2024 financial results, which we announced in the press release issued following the close of the market today.
Speaker Change #118: Joining me on the call are Githesh Ramamurthy, CCC's Chairman and CEO , and Brian Herb, CCC's CFO .
William Arthur Warmington: These risks are discussed in the earnings releases available on our Investor Relations website and under the heading Risk Factors in our 2023 Annual Report on Form 10-K filed with the SEC. Further, these comments in the Q&A that follows are copyrighted today by CCC Intelligent Solutions Holdings, Inc. Any recording, retransmission, or reproduction or other use of the same for profit or otherwise without prior consent of CCC is prohibited, in violation of United States copyright and other laws.
Speaker Change #117: The forward-looking statements we make today about the company's results and plans are subject to risk and uncertainties that may cause the actual results and the implementation of the company's plans to vary materially.
Speaker Change #117: These risks are discussed in the earnings releases available on our Investor Relations website and under the heading Risk Factors in our 2023 Annual Report on Form 10-K filed with the SEC.
Speaker Change #117: further.
Speaker Change #117: These comments and the Q&A that follows are copyrighted today by CCC Intelligence Solutions Holdings Incorporated.
Speaker Change #117: Any recording, retransmission, or reproduction, or other use of the same,
Speaker Change #117: For profit or otherwise, without prior consent of CCC, is prohibited in violation of United States copyright and other laws.
William Arthur Warmington: Additionally, while we will provide a transcript of portions of this call and we've approved the publication of a transcript of this call by a third party, we take no responsibility for inaccuracies that may appear in the transcript. Please note that the discussion on today's call includes certain non-GAAP financial measures as defined by the The company believes these non-GAAP financial measures provide useful information to management and investors regarding certain financial and business trends relating to the company's financial condition and the results of operations.
Speaker Change #117: Additionally, while we will provide a transcript of portions of this call, and we've approved the publishing of a transcript of this call by a third party, we take no responsibility for inaccuracies that may appear in the transcripts.
Speaker Change #119: Please note that the discussion on today's call includes certain non-GAAP financial measures as defined by the SEC. The company believes these non-GAAP financial measures provide useful information to management and investors regarding certain financial and business trends relating to the company's financial condition and the results of operations.
Speaker Change #117: A reconciliation of GAAP to non-GAAP measures is available in our earnings release that is available on our investor relations website. Thank you. I'll now turn the call over to Githesh.
William Arthur Warmington: A reconciliation of Gap to Non-Gap Measures is available in our earnings release that is available on our investor relations website. Thank you. I'll now turn the call over to Githesh. Thank you, Bill. And thanks to all of you for joining us today.
Githesh Ramamurthy: I'm pleased to report that CCC delivered another quarter of strong top and bottom line results. In the second quarter of 2024, total revenue was $233 million, up 10% year over year and ahead of our guidance. Adjusted EBITDA was $96 million, up 18% over the last year and also ahead of our guidance. Our adjusted EBITDA margin was 41%.
Githesh Ramamurthy: Thank you, Bill, and thanks to all of you for joining us today. I'm pleased to report that CCC delivered another quarter of strong top and bottom line results.
Githesh Ramamurthy: The second quarter of 2024, total revenue was $233 million, up 10% year-over-year and ahead of our guidance range.
Githesh Ramamurthy: Adjusted EBITDA was $96 million, up 18% over the last year, and also ahead of our guidance range.
Githesh Ramamurthy: Our adjusted EBITDA margin was 41 percent.
Githesh Ramamurthy: On today's call, I would like to highlight three themes that underpin how we are helping our customers usher in a generational change in operations. The first is CCC's Durable Business Model. The second is our innovation engine, which at its core has created over 300 unique AI models. And the third is a view into the pace of adoption, as customers transition to this next generation of CCC solutions. My first topic is CCC's Durable Business Model.
Githesh Ramamurthy: On today's call, I would like to highlight three themes that underpin how we are helping our customers usher in a generational change in operating performance.
Githesh Ramamurthy: The first is CCC's Durable Business Model.
Githesh Ramamurthy: The second is our innovation engine, which at its core has created over 300 unique AI models. The third is a view into the pace of adoption as customers transition to this next generation of CCC solutions.