CCC Intelligent Solutions (CCCS) - 2024 Q2 - Quarterly Report

Platform and Network - CCC's platform connects over 35,000 businesses and processes more than 1 trillion of historical data, leveraging AI and IoT for insurance and repair solutions[95] - The company has over 300 insurers and 30,000 repair facilities on its network, with 27 of the top 30 U.S. automotive insurance carriers as customers[97] - CCC's platform includes more than 5,500 parts suppliers and 13 of the top 15 automotive manufacturers based on new vehicle sales[97] AI and Technology Investments - CCC's AI solutions are actively used by over 100 U.S. auto insurers and 8,000 U.S. collision repairers in production environments[95] - The company is investing in new solutions to digitize the entire automotive claims lifecycle and expand into adjacent insurance lines[97] - CCC's technology investments focus on digitizing complex processes and interactions across the P&C insurance ecosystem[95] Financial Performance - Revenues increased by 20.9 million to $232.6 million, or 9.9$223.0 million, or 96% of total revenue for the three months ended June 30, 2024[114] - Gross profit increased by $24.7 million to$177.3 million, or 16.2%, with a gross profit margin of 76.2%[116] - Operating income improved to $22.5 million from a loss of$73.2 million in the prior year[112] - Net income attributable to common stockholders was $20.2 million, compared to a loss of$97.7 million in the prior year[112] - Revenue increased by $43.2 million (10.4$459.9 million for the six months ended June 30, 2024 compared to the same period in 2023[136] - Gross profit rose by $44.8 million (14.9$345.2 million for the six months ended June 30, 2024[136] - Net income attributable to common stockholders improved by $114.0 million to$18.5 million for the six months ended June 30, 2024 compared to a loss of $95.5 million in the same period of 2023[136] - Adjusted Gross Profit increased to$359.1 million, with an Adjusted Gross Profit Margin of 78% for the six months ended June 30, 2024[160] - Adjusted EBITDA for the six months ended June 30, 2024, was $189.5 million, compared to$160.4 million for the same period in 2023[169] - Adjusted EBITDA margin for the six months ended June 30, 2024, was 41%, compared to 39% for the same period in 2023[165] - Adjusted operating income for the six months ended June 30, 2024, was $170.1 million, compared to$142.1 million for the same period in 2023[168] - Net income for the six months ended June 30, 2024, was $20.8 million, compared to a net loss of$95.2 million for the same period in 2023[169] - Adjusted Net Income for Q2 2024 was $56.2 million, compared to$47.8 million in Q2 2023[171] Customer Retention and Growth - CCC's Software Net Dollar Retention Rate (NDR) was 107% as of June 30, 2024, indicating strong revenue retention and growth from existing customers[101] - The Software Gross Dollar Retention Rate (GDR) was 99% as of June 30, 2024, reflecting high customer retention[109] - The company's Software NDR and GDR metrics exclude smaller customers representing less than 5% of total revenue within specific sales channels[102][107] - The company's customer agreements include long-term contracts, contributing to the stability of its revenue base[97] Expenses and Costs - Cost of revenues decreased by $3.8 million to$55.3 million, or 6.4%, primarily due to lower amortization of acquired technologies[115] - Research and development expense increased by $5.9 million to$49.3 million, or 13.6%, mainly due to higher stock-based compensation[117] - Selling and marketing expense increased by $0.4 million to$36.3 million, or 1.1%, driven by higher marketing costs[118] - General and administrative expense increased by $5.1 million to$51.3 million, or 11.1%, primarily due to higher personnel-related costs[119] - Amortization of acquired technologies decreased by $4.6 million, or 68.6$2.1 million[115] - Operating expenses decreased by $45.4 million (12.6$314.9 million for the six months ended June 30, 2024[136] - Research and development expenses increased by $14.4 million (17.0$98.7 million for the six months ended June 30, 2024[136] - General and administrative expenses rose by $20.3 million (23.1$108.3 million for the six months ended June 30, 2024[136] - Total stock-based compensation expense increased by $20.4 million (31.5$85.1 million for the six months ended June 30, 2024[136] - Selling and marketing expense increased by $2.4 million to$71.9 million, or 3.5%, for the six months ended June 30, 2024[147] - General and administrative expense increased by $20.3 million to$108.3 million, or 23.1%, for the six months ended June 30, 2024[148] - Interest expense increased by $5.2 million to$33.1 million, or 18.7%, for the six months ended June 30, 2024[152] Cash Flow and Liquidity - Free Cash Flow for Q2 2024 was $36.2 million, down from$55.0 million in Q2 2023[172] - The company generated $107.0 million in cash flows from operating activities in the first six months of 2024[173] - As of June 30, 2024, the company had$237.9 million in cash and cash equivalents[174] - The company has $780.0 million in outstanding term loan principal as of June 30, 2024[174] - The weighted-average interest rate on the Term B Loan was 7.8$249.3 million available to borrow under the 2021 Revolving Credit Facility as of June 30, 2024[179] - Net cash provided by operating activities was $107.0 million for the six months ended June 30, 2024, compared to$102.6 million in 2023[180] - Net cash used in investing activities was $31.2 million for the six months ended June 30, 2024, primarily due to capitalized internally developed software projects and purchases of software, equipment, and property[180] - Net cash used in financing activities was$33.3 million for the six months ended June 30, 2024, mainly due to $52.7 million payments for employee tax liabilities related to the net share settlement of employee equity awards[180] - Change in cash and cash equivalents was$42.3 million for the six months ended June 30, 2024, compared to $79.8 million in 2023[180] - Proceeds from stock option exercises were$21.6 million for the six months ended June 30, 2024[180] Debt and Financing - The company entered into a $800.0 million Term B Loan and a$250.0 million Revolving Credit Facility under the 2021 Credit Agreement[61] - As of June 30, 2024, the outstanding amount on the Term B Loan was $780.0 million, with$8.0 million classified as current[61] - The weighted-average interest rate on the Term B Loan was 7.8% for the three months ended June 30, 2024[63] - The company has an outstanding standby letter of credit for $0.7 million, reducing the available borrowing under the Revolving Credit Facility to$249.3 million as of June 30, 2024[63] - The interest rate cap agreements have an aggregate notional amount of $600.0 million with a one-month SOFR cap rate of 4.00$4.0 million for the six months ended June 30, 2024[65] - The aggregate fair value of the interest rate cap agreements was $6.1 million as of June 30, 2024[65] - The company entered into interest rate cap agreements with a$600.0 million notional amount and a 4.00% SOFR cap rate[179] Assets and Liabilities - Accounts receivable net of allowance for credit losses was $120.9 million as of June 30, 2024[45] - The allowance for credit losses and sales reserves was$4.1 million as of June 30, 2024[47] - No customer accounted for more than 10% of accounts receivable as of June 30, 2024[47] - Other current assets decreased from $32.36 million in December 2023 to$26.59 million in June 2024[48] - Software, equipment, and property increased from $285.42 million in December 2023 to$314.68 million in June 2024[49] - Depreciation and amortization expense for software, equipment, and property was $19.2 million for the six months ended June 30, 2024, up from$18.0 million in the same period in 2023[51] - Total lease costs for the six months ended June 30, 2024 were $4.90 million, compared to$4.89 million in the same period in 2023[52] - Goodwill impairment charge of $77.4 million was recorded for the China reporting unit in May 2023[54] - Intangible assets net carrying amount was$970.51 million as of June 30, 2024, down from $1.02 billion in December 2023[56] - Future amortization expense for intangible assets is projected to be$780.04 million from 2024 onwards[57] Stock and Compensation - Common stock issued and outstanding increased from 603.13 million shares in December 2023 to 622.80 million shares in June 2024[74] - Secondary offerings resulted in the sale of 141.45 million shares of common stock during the six months ended June 30, 2024[75] - The company granted 10,047,960 RSUs in the six months ended June 30, 2024, with 7,791,614 having time-based vesting and 2,256,346 having performance-based vesting[76] - 12,334,980 RSUs vested in the six months ended June 30, 2024, with 4,537,417 withheld for employee tax obligations[76] - Modifications to performance-based RSUs resulted in an incremental stock-based compensation expense of $67.0 million, recognized ratably over the modified performance periods[76] - The company granted 761,743 stock options under the Cayman Incentive Plans in the six months ended June 30, 2024, with an exercise price equal to the fair value of the underlying shares at the grant date[78] - As of June 30, 2024, there was$209.5 million of unrecognized stock compensation expense related to unvested time-based awards, expected to be recognized over a weighted-average period of 2.7 years[78] - As of June 30, 2024, there was $70.2 million of unrecognized stock-based compensation expense related to unvested performance-based awards, expected to be recognized over a weighted-average period of 1.3 years[78] - Stock-based compensation expense was$85.1 million for the six months ended June 30, 2024[180] Non-Cash Items and Adjustments - The company recognized a $16.0 million income from change in fair value of warrant liabilities for the three months ended June 30, 2024 compared to a$20.4 million expense in the same period of 2023[132] - The company recognized income of $14.4 million from a change in fair value of warrant liabilities for the six months ended June 30, 2024[154] - Net income for the six months ended June 30, 2024, was$20.8 million, adjusted for $111.2 million of non-cash items[180] - Depreciation and amortization expenses were$63.7 million for the six months ended June 30, 2024[180] - Increase in accounts receivable was $18.6 million due to timing of payments for the six months ended June 30, 2024[180] - Decrease in accrued expenses was$12.7 million due to timing of cash disbursements and employee incentive plan payments for the six months ended June 30, 2024[180]