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CCC Intelligent Solutions Holdings Inc (CCCS) (Q1 2024) Earnings Call Transcript Highlights: ...

  • Total Revenue: $227 million, up 11% year-over-year.

  • Adjusted EBITDA: $94 million, with a margin of 41%.

  • Free Cash Flow: $39.6 million for Q1, up from $18.5 million year-over-year.

  • Net Leverage: 1.6x adjusted EBITDA.

  • Software Gross Dollar Retention (GDR): 99%.

  • Software Net Dollar Retention (NDR): 107%.

  • Adjusted Gross Profit: $177 million, with a margin improvement to 78% from 76% year-over-year.

  • Adjusted Operating Expense: $92.9 million, up 8% year-over-year.

Release Date: April 30, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Q & A Highlights

Q: Can you discuss the competitive environment in the casualty market and the types of solutions CCC needs to displace to increase adoption within your APD customer base? A: (Githesh Ramamurthy, Chairman & CEO) - The complexity and costs of managing medical claims are increasing, and CCC's unique advantage lies in its visibility into auto physical damage claims, which informs medical claim outcomes. CCC's AI-based solution, Impact Dynamics, predicts potential medical claims based on accident physics and photos, offering a unique value proposition. Adoption of casualty solutions is on the rise, with a focus on solving specific customer challenges.

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Q: What degree of visibility do you have into the growth contribution from emerging solutions, and is it dependent on volume usage or contracted visibility? A: (Brian Herb, Executive VP, CFO & Chief Administrative Officer) - CCC has visibility into emerging solutions' growth through existing clients ramping up volume, clients moving from testing to full production, and signing new clients. The company expects a step-up in growth contribution from these solutions in the second half of the year, supported by positive client feedback and operational metrics.

Q: Could you remind us of the revenue opportunity from products like Estimate-STP and Subrogation in the context of AI replacing repeatable human interactions? A: (Githesh Ramamurthy, Chairman & CEO) - CCC's AI solutions like Estimate-STP enhance efficiency by speeding up estimate processes and subrogation solutions increase accuracy in claims handling. These innovations are designed to improve productivity and provide specific ROI, aligning with broader trends of increasing complexity and a need for more efficient problem-solving in the industry.

Q: Can you elaborate on the new event-driven architecture mentioned during the call and its potential for monetization or new SKUs? A: (Githesh Ramamurthy, Chairman & CEO) - The CCC IX Cloud, an overlay on CCCs existing architecture, enhances performance by quickly moving events across the network, which is crucial for optimizing claims processing. This platform will allow CCC to deliver more innovations seamlessly, with specific ROIs and pricing for new solutions, but not for the architecture itself.

Q: How is the transition from private to public cloud infrastructure impacting operating leverage or margins? A: (Brian Herb, Executive VP, CFO & Chief Administrative Officer) - The transition to public cloud infrastructure is complete, and CCC is winding down its legacy cloud environment. This transition is included in the IT hosting costs and is expected to normalize over time, contributing to margin progression and supporting long-term targets.

Q: What impact do uninsured or underinsured drivers have on the complexity of the claims ecosystem, and how are stakeholders reacting? A: (Githesh Ramamurthy, Chairman & CEO) - The increase in uninsured or underinsured drivers adds complexity, particularly in subrogation processes. While it hasn't materially changed the frequency or cost of claims for CCC's customers, it has necessitated more complex recovery processes, which CCC's solutions are equipped to handle.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.