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CCC Intelligent Solutions Holdings Inc. (CCCS)·Q3 2024 Earnings Summary

Executive Summary

  • Q3 revenue was $238.5M (+8% YoY) and adjusted EBITDA was $101.6M (43% margin), both above company guidance; Q3 guide was $236–$238M revenue and $97–$99M adjusted EBITDA, implying a top-line beat (~$0.5M above the range) and a margin/EBITDA beat (>$2.5M above the range) .
  • Management maintained FY24 revenue guidance at $941–$945M but raised FY24 adjusted EBITDA to $394–$396M (up $2M at the midpoint), and guided Q4 revenue to $242.5–$246.5M and adjusted EBITDA to $103–$105M (43% margin midpoint) .
  • KPIs remained resilient: software GDR 99% and NDR 106% in Q3; cash $286.3M, total debt $778.0M, free cash flow $49.4M, net leverage ~1.3x adjusted EBITDA .
  • Near-term headwind: claim volume softness (~6% YTD, ~1pt revenue headwind with ~20% of revenue transactional), and emerging solutions revenue conversion pacing slower than anticipated; management attributes volume softness to premium-driven claim deferrals rather than structural changes and expects normalization over the next couple quarters .

What Went Well and What Went Wrong

  • What Went Well

    • Beat and raised: Q3 revenue and adjusted EBITDA exceeded guidance; FY24 adjusted EBITDA guidance raised while revenue unchanged, reinforcing margin expansion trajectory .
    • Gross margin expansion and operating leverage: GAAP gross margin improved to 77% (from 74% YoY); adjusted gross margin held at 78% .
    • Product traction and network effects: Build Sheets reached 2,000+ shops within three months; Intelligent Reinspection and CCC Payroll launched; IX Cloud and AI portfolio highlighted as key growth vectors. CEO: “AI is now an 8-figure business…”; “thousands of repair facilities [are] generating hundreds of thousands of estimates using Jumpstart.” .

  • What Went Wrong

    • Volume headwind: Year-to-date claim volumes down ~6%, creating ~1pt revenue headwind given ~20% transactional exposure; Q3 NDR dipped to 106% (from 107% in Q2) .
    • Slower conversion on emerging solutions: Management reiterated that pilot-to-revenue conversion is taking longer as clients execute broader change management to capture ROI, tempering 2024 contribution to ~1pt of growth .
    • Elevated SBC in 2024 due to TSR modification: SBC at ~18% of revenue in Q3, expected to normalize to ~12–14% in 2025 once the modification rolls off .

Financial Results

MetricQ3 2023Q2 2024Q3 2024
Revenue ($M)$221.1 $232.6 $238.5
GAAP Gross Margin %74% 76% 77%
Adjusted Gross Margin %78% 78% 78%
Adjusted EBITDA ($M)$92.9 $95.8 $101.6
Adjusted EBITDA Margin %42% 41% 43%
GAAP Net Income (Loss) ($M)$(21.2) $21.4 $4.1
Adjusted Net Income ($M)$57.2 $56.2 $62.6
Adjusted Diluted EPS ($)$0.09 $0.09 $0.10

KPI and Balance Sheet Snapshot

KPI / Balance SheetQ3 2024
Software GDR (%)99%
Software NDR (%)106%
Free Cash Flow ($M)$49.4
Cash & Equivalents ($M)$286.3
Total Debt ($M)$778.0
Net Leverage (x Adj. EBITDA)~1.3x

Company Guidance vs. Actuals (Q3) and Forward Guide

ItemCompany Guidance (Issued 7/30/24)Actual Q3 2024Q4 2024 GuidanceFY2024 Guidance (Prior)FY2024 Guidance (Current)
Revenue ($M)$236–$238 $238.5 $242.5–$246.5 $941–$945 $941–$945
Adjusted EBITDA ($M)$97–$99 $101.6 $103–$105 $391–$395 $394–$396

Non-GAAP note: Adjusted metrics exclude items such as SBC, amortization, litigation, equity transaction costs, and other items; see reconciliations in company materials .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($M)FY 2024$941–$945 $941–$945 Maintained
Adjusted EBITDA ($M)FY 2024$391–$395 $394–$396 Raised
Revenue ($M)Q4 2024N/A$242.5–$246.5 New
Adjusted EBITDA ($M)Q4 2024N/A$103–$105 New

Color on compares and modeling considerations:

  • Q4 comp headwinds: Q4’23 had ~1pt revenue benefit from nonrecurring items and a $3M insurance reimbursement benefiting margins (~1ppt impact when lapping in Q4’24) .
  • Claims volumes: YTD down ~6% implying ~1pt revenue headwind; ~20% of revenue has transactional components .

Earnings Call Themes & Trends

TopicQ1 2024 (Prior-2)Q2 2024 (Prior-1)Q3 2024 (Current)Trend
AI/Technology initiatives (IX Cloud, AI)Launched IX Cloud; highlighted AI solutions (Estimate-STP, Subrogation, Impact Dynamics) Demonstrated Intelligent Reinspection and Build Sheets; IX Cloud accelerates multi-solution workflows “AI is now an 8-figure business”; IX Cloud as foundation for transformational shift Steadily expanding scope and articulated monetization runway
Claim volumes/macro——Claim volumes ~6% YTD lower; premium increases driving claim deferrals; expect normalization over next 1–2 quarters New negative in 2H24
Product performanceJumpStart at ~5,000 shops; accelerating repair estimate creation Early Build Sheets traction; top-10 full APD rollout reference; strong renewals >2,000 Build Sheets shops; Intelligent Reinspection pilots; Payroll launched; subrogation files/value up double-digits QoQ Strong adoption across repairer and insurer tools
R&D execution~$150M in 2023; ongoing investment Efficiency as AI scales; gross margin path to ~80% over time R&D to remain a key focus; SBC elevated by TSR mod but normalizing in 2025 Sustained investment with operating leverage
SubrogationIntroduced inbound subrogation; end-to-end AI-enabled suite Double-digit contracted customers; tens of millions of impact; 80% cycle-time reduction in inbound Inbound prioritized; outbound more complex; double-digit increases in files and value Scaling usage and ROI proofs

Management Commentary

  • “CCC delivered solid third quarter results, highlighted by 8% year-over-year revenue growth and 43% adjusted EBITDA margin.” — Githesh Ramamurthy, CEO .
  • “AI is now an 8-figure business for CCC… we are still just scratching the surface of what is possible.” — CEO .
  • “In Q3 2024, our GDR was 99%… our NDR was 106%.” — CFO .
  • “We have seen some softness affecting claim volume across 2024… we estimate claim volumes are down approximately 6% year-over-year, implying about a one point headwind.” — CFO .
  • “We are raising the full year 2024 [adjusted EBITDA] range to $394 million to $396 million… [revenue] unchanged versus our previous range.” — CFO .

Q&A Highlights

  • Adoption bottlenecks and timing: Pilot-to-production conversion for emerging solutions is slower due to customer change management; Estimate‑STP examples range from low single-digit to ~60% per customer; one top-10 carrier reached ~20% of repairable claims within ~3–4 quarters post full production .
  • Claim volume dynamics: Volume softness seen as consumer behavior driven by premium increases; management not assuming a rebound in guidance but views this as non-structural .
  • Natural disasters: Hurricanes have not been material to volumes; client mix and pricing constructs (flat fee vs transactional) drive limited impact .
  • SBC normalization: Elevated SBC (~18% of revenue) from TSR modification in 2024; normalizing to ~12–14% of revenue in 2025 .
  • Subrogation prioritization: Inbound subrogation is easier to implement and currently prioritized; outbound is more complex and earlier in rollout .
  • Pricing/ROI: CCC continues to price carrier solutions around a ~5:1 ROI rule of thumb; individual products vary (3:1 to 7:1) based on value delivered .

Estimates Context

  • Wall Street consensus (S&P Global) was unavailable at this time due to API request limits, so we cannot provide a consensus beat/miss comparison for Q3 or Q4 estimates.
  • Company guidance comparison: Q3 revenue ($238.5M) exceeded the $236–$238M guide; Q3 adjusted EBITDA ($101.6M) exceeded the $97–$99M guide. Q4 guide implies ~7% YoY growth at revenue midpoint and ~43% adjusted EBITDA margin; FY24 adjusted EBITDA midpoint raised by ~$2M while revenue unchanged .

Key Takeaways for Investors

  • Durable growth and expanding margins: Q3 printed above guide with YoY adjusted EBITDA growth (+9%) and margin at 43%; FY24 adjusted EBITDA guidance raised despite volume headwinds .
  • Near-term headwinds manageable: Claim volumes ~6% lower YTD represent a ~1pt growth headwind; management not banking on a recovery but views this as timing-related rather than structural .
  • Product flywheel strengthening: Rapid Build Sheets adoption (>2,000 shops in three months), new Payroll module, and Intelligent Reinspection pilots highlight cross‑sell/upsell momentum .
  • Emerging solutions runway intact: Despite slower in‑year conversion, subrogation, Estimate‑STP, First Look, and IX Cloud interoperability underpin a multi‑year growth vector with proven ROI and scaling references .
  • Cash generation and balance sheet provide flexibility: $286M cash, $778M debt, ~1.3x net leverage and improving TTM FCF support continued R&D and go-to-market investment .
  • Modeling notes: Expect Q4 to be peak margin quarter of the year (~43%); remember Q4’23 had nonrecurring benefits (revenue and a $3M insurance reimbursement) that create tougher comps .
  • Potential stock catalysts: Sustained EBITDA margin expansion, evidence of accelerating emerging solution conversions (notably inbound subrogation and Estimate‑STP), and continued repairer product adoption (Build Sheets/Payroll) .

Additional Context (Q3 Press Releases and Prior Quarters)

  • Q3 period insights: CCC’s Crash Course report cited continued total loss frequency uptick and rising repair complexity/costs; Moments of Truth study emphasized transparency/communications over speed in satisfaction drivers across insurer/repairer interactions .
  • Q2 reference points: Q2 revenue $232.6M (+10% YoY), adjusted EBITDA $95.8M (41% margin); Q3 guide initially set at $236–$238M revenue and $97–$99M adjusted EBITDA .
  • Q1 reference points: Q1 revenue $227.2M (+11% YoY), adjusted EBITDA $93.7M (41% margin); inbound subrogation introduced; IX Cloud unveiled .