CCC Intelligent Solutions Holdings Inc.

Thank you for standing by, and welcome to CCC Intelligent Solutions' fourth quarter and fiscal 2022 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. I would now like to hand the call over to Vice President, Investor Relations, Bill Warmington. Please go ahead.

Good afternoon, and thank you for joining us today to review CCC's fourth quarter 2022 financial results, which we announced in the press release issued following the close of the market today. 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 risks and uncertainties that may cause the actual results and the implementation of the company's plans to vary materially. These risks are discussed in the earnings releases available on our Investor Relations website and under the heading Risk Factors in our 2022 Annual Report on Form 10-K filed today with the SEC. Further, these comments and the Q&A that follows are copyrighted today by CCC Intelligence Solutions Holdings Incorporated. Any recording of retransmission or reproduction or other use of the same is for profit or otherwise without prior consent of CCC is prohibited in a violation of United States copyright and other laws. Additionally, while 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 that transcript. Please note the discussion on today's call include 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 GAAP to non-GAAP measures is available in our earnings release that is available on our investor relations website. Thank you. And now I'll turn the call over to Kadesh.

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 performance to complete another record year in 2022. For the fourth quarter of 2022, CCC's total revenue was $204 million, up 9% year over year, and ahead of our guidance range. Adjusted EBITDA was $80 million, also ahead of our guidance range. Adjusted EBITDA margin for the fourth quarter was 39%. Revenue for the full year 2022 was $782 million, up 14% year-over-year, 2% above the high end of our initial 2022 guidance range. Adjusted EBITDA for the full year 2022 was $305 million, 4% above the high end of our initial guidance range. And more than twice our 2018 adjusted EBITDA of $148 million. for a compounded annual growth rate of 20%. We believe our strong performance reflects both the non-discretionary nature of the PNC insurance economy we serve and the durability of our business as we continue to deliver innovation and operational efficiency for our customers. Based on our performance in 2022 and the confidence in our growth trajectory, We are providing revenue and adjusted EBITDA guidance for the first quarter and full year 2023, which Brian will walk through. Today, I'd like to discuss three important topics with you. CCC's focus on growth, innovation, and our industry-leading AI platform. Our customers continue to face a difficult operating environment with multiple challenges. Once a challenge is a severe labor shortage, of claims adjusters at insurers and repair technicians at collision repair facilities. Another challenge is inflation across labor rates, parts prices, medical costs, new and used vehicle prices, as well as supply chain issues affecting the availability of parts. You can add to that increasing complexity of the vehicles themselves. that now require more parts and labor hours to fix, as well as diagnostic scans and recalibration of the growing number of cameras and sensors on the vehicles. The average time to get a vehicle repaired after an accident has gone up from about four weeks in 2019 to about 10 weeks currently, a real headwind for consumer satisfaction. These are important challenges for our customers. the solutions to which require them to find ways to do more with less while simultaneously improving their consumer experience. To solve these problems in a seamlessly integrated way, our customers are adopting a broader suite of CCC solutions. These solutions increasingly leverage CCC's AI capabilities and interconnected network to deliver operational efficiency and a more holistic experience for their customers. We are delivering solutions to our customers at scale, touching more claims with more solutions than ever before. Our insurance customers, for example, processed more claims using CCC solutions in 2022 than in any other year in the company's 42-year history. The number of claims processed by our insurance customers using four or more of CCC's AI applications doubled year over year in 2022. During Q4, we also renewed one of our top 10 insurers based on Direct Premium Certain for a five-year extension. Q4 also saw numerous successes delivering additional solutions to existing customers, including several insurance clients who added casualty solutions to their portfolio of existing CCC products for the first time. Casualty remains one of our biggest growth opportunities with insurers. We added over a thousand rooftops in our repair facility customer group in 2022, ending the year with over 28,000 repair facilities in our network. In addition to new rooftops, we also delivered a number of incremental solutions, which were important drivers of growth for our repair facility customer group. In Q4, for example, we expanded our relationship with a leading multi-store operator, or MSO, looking to bring platform standardization across the collision, fleet, and paint operations for an additional 400 locations. In addition, the number of shops using four or more solutions has increased by 20% since 2020. An example of an emerging solution that we believe can continue our growth in average annual revenue per repair facility is diagnostics. Today, only about 10% of industry repairs are being scanned through integrated solutions with CCC. As adoption increases, we believe diagnostics could become a $50 to $100 million revenue opportunity for CCC. Our parts customer group now has over 4,500 parts suppliers in its network. We are still in the early stages of adoption for electronic parts ordering, but that adoption is growing quickly. The industry volume of parts ordered electronically by repair facilities in the CCC network increased from about 10% in 2020 to about 15% in 2022. We continue to believe parts is an attractive growth opportunity. Innovation, the second topic I'd like to talk to you about today, has been a key factor in how we continually identify additional ways we can help our customers improve their operational performance. Each new insurance claim leads to hundreds of decisions. Our goal is to develop new solutions that help our clients bring greater efficiency to more and more decision points in the insurance claims lifecycle. Innovation is foundational to CCC's success, which is why we have invested over $1 billion in R&D over the past 10 years. But it's not just capital that has made our product development efforts successful. I believe an organization needs three things to produce innovation on a sustained basis. is close relationships with customers. Before we can solve our customers' problems, we need to understand them. We spend a lot of time with our customers trying to understand the challenges they face at both an industry and company-specific level, including consulting projects, quarterly business reviews, semiannual advisory councils. We believe the intimacy of our customer relationships is a part of what drives our 99% gross dollar retention and industry-leading net promoter score, or NPS. CCC's NPS increased from 80 to 82 in 2022, a year in which the national average NPS declined four points. For context, an NPS of 82 is about four and a half times higher than the insurance industry average of 18 and about six times higher than the software industry average, NPS, of 14. The second thing an organization needs to produce innovation is a technology platform on which we can develop and deliver solutions to address our customers' problems. Our multi-tenant cloud architecture is highly scalable with 99.95% uptime that enables us to deliver new products and well over a thousand new releases per year quickly and cost effectively. Our sizable R&D investment over the past decade has enabled us to build a significant lead in the development and application of artificial intelligence capabilities. The third element is a strong customer-focused culture that emphasizes innovation. Our 2022 survey results place CCC in the top quartile for employee engagement, and I believe that is an important component in how we achieve a strong net promoter score. We are focused on expanding our innovation culture by adding world-class talent across the organization especially in product development and product management. During 2022, we grew our engineering staff month capacity by about 20% and we view the current disruption in the technology markets as an opportunity for us to continue to attract best in class talent. The confirmation that our strategy around innovation is working is that in 2022, About one-third of our revenue came from products introduced in the last five years. The third and final topic I'd like to discuss with you today is our industry-leading AI platform, where we have put a significant portion of our R&D spend over the last 10 years. A key requirement in building large-scale AI models is massive data sets, and more than $1 trillion of accident-related data has been processed across our network you also need to find recruit and retain the best talent which we have been able to do because we offer people the opportunity to work on industrial grade real world commercial ai applications that are changing how the auto insurance economy operates as a result we are increasingly using ai across our solution sets to help our clients make decisions faster today over 100 of our 300 plus insurance customers are actively using ccc's ai powered capabilities application of advanced computer vision ai for claims processing increased 60 percent year over year and a total of over 14 million unique claims have been processed using a CCC AI solution with 2022 at three times the level of 2019. We are still early in the adoption cycle for AI-driven solutions. These solutions are poised for even greater adoption going forward as the P&C insurance economy moves increasingly towards straight-through processing to drive operating efficiency and better consumer experiences. In a survey of over 100 insurance executives in September 2022, for example, 90% of respondents stated that implementing straight-through processing is a high priority for them. In late 2021, we introduced the auto insurance industry's first AI-powered touchless estimating solution, Estimate STP. This industrial strength AI solution can auto-generate a complete repair estimate on a qualified repairable claim in seconds without human intervention. We announced our first customer in November 2021 and have since signed up 15 insurers, including seven of the top 10 carriers. representing over 50% of U.S. auto claims volume. Volumes are growing quickly, but still remain a small fraction of the overall claim volumes as insurers align their internal processes to leverage the new technology. Another reason the adoption of Estimate STP is so significant for our customers and for CCC is that it is an important proof point for much broader adoption of AI-driven straight-through processing solutions that improve speed and consumer experience across the auto insurance economy. Increasingly, these new solutions rely on a combination of our artificial intelligence and our interconnected network to deliver results. CCC's interconnected network is large and complex and includes a growing number of participants, including insurers, collision repair facilities, parts suppliers, lenders, OEMs and more. Last year, our network connected over 30,000 of our customers to tens of millions of their customers. generating value for all participants and supporting mission-critical processes across more than $100 billion of commerce. We believe that CCC's interconnected network is an essential enabler of the auto insurance economy's digital transformation and a great way for our customers to address the rapidly increasing complexity they face. Let me conclude by saying that we are incredibly proud of what our team accomplished in 2022. We're excited about what we have planned for 2023, and we remain confident in our ability to continue to deliver on our strategic and financial objectives. I will now turn the call over to Brian. We'll walk you through our results.