CCC Intelligent Solutions Holdings Inc.

Good day, and thank you for standing by. Welcome to the CCC Intelligence Solutions second quarter fiscal 2023. At this time, all participants are in 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 star 1-1 on your telephone. You will then hear an automated message advising your hand is free. 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 conference over to Bill Warmington. Please go ahead.

Thank you, operator. Good afternoon, and thank you for joining us today to review CCC's second quarter 2023 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 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 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 with the SEC. Further, these comments and the Q&A that follows are copyrighted today by CCC Intelligence Solutions Holdings, Incorporated. Any recording and retransmission or reproduction or other use of the same, for profit or otherwise, without prior consent of CCC is prohibited and 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 that the discussion on today's call includes certain non-GAAP financial measures as defined by the SEC. The company believes that these non-GAAP financial measures provide useful information to management and investors regarding certain financial and business trends related 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 Kitesh.

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, reflecting both the predictability and mission-critical nature of our solutions. The second quarter of 2023, CCC's total revenue was $212 million. up 10% year-over-year and ahead of our guidance range. Adjusted EBITDA was $81 million, also ahead of our guidance range. Our adjusted EBITDA margin was 38%. On today's call, I'd like to highlight three themes that underpin our performance. The first is CCC's durable business model. The second is innovation. And third, the growing adoption of CCC solutions. First, our durable business model. As you know from previous earnings calls and media reports, the auto insurance economy is being impacted by multiple headwinds, including staffing shortages, inflation, supply chain issues, increasing vehicle complexity, and rising consumer expectations. These challenges are being compounded by claim counts that have rebounded significantly from the pandemic and are now less than 10% below 2019 levels. The net result of these trends has been a significant increase in repairable total loss and casualty cycle times. We recently did a deep dive into a metric we first discussed back in 2021. the cumulative days of cycle time for automotive claims in a year. And by cycle time, I mean the number of days from a claim being open to a claim being closed. Back in 2019, the cumulative days of cycle time for automotive claims in the US was more than 1 billion days per year, a staggering figure. With the accelerating macro pressures facing the industry, However, in 2022, that figure rose to more than 2 billion days. To put that in perspective, 2 billion days is more than 70,000 human lifespans. This increase to 2 billion days underscores our clients in the P&C insurance economies need to address operational efficiency. We are uniquely positioned to help because our multi-sided cloud-native network with dozens of solutions links together companies across the entire auto insurance ecosystem. The breadth of our network is unmatched with over 35,000 customers consisting of over 29,000 repair facilities, over 4,500 parts suppliers, more than 300 insurers, and 13 of the top 15 automotive OES. By connecting these companies and digitizing processes across the ecosystem, our platform increases their ability to be productive, reduce inefficiency, and improve communications throughout the claims process, which ultimately can result in claims being resolved faster. Estimate STP, our AI-based estimating solution for insurers that can pre-populate a complete line-level repair estimate on a qualified claim in seconds using photos from a mobile phone, is a great example of how our solutions speed time to resolution. Today, a repair estimate prepared manually by an adjuster can take hours or even days to schedule and complete. which can negatively impact customer satisfaction, as well as costing the insurer over $150 a claim. It also typically involves driving on the part of the consumer and or the adjuster, as well as plenty of paper forms. Estimate STPs, multiple AI models, by contrast, can prepare their pair estimate in seconds or minutes, 100% digitally, thereby reducing the cycle time administrative expense, and the environmental impact of the claims process. Today, the information to prepare repair estimates is collected through three channels, known in the industry as method of inspection, or MOI. Roughly 30% of claims are inspected by consumers via the mobile phone cell service channel, about 45% are inspected in a repair facility, and approximately 25% are inspected by insurance staff in the field. While Estimate STP's initial application was using photos from a consumer's mobile phone to prepare an estimate, we want every inspection channel to be able to take advantage of this groundbreaking technology. Toward that end, we are working to expand our Estimate STP solution and to inject AI-based computer vision technology into the repair facility and field adjuster channels. Using these technologies to assist consumers, repair technicians, and field appraisers with inspection has the potential to reduce cycle time in estimate preparation and improve operating efficiency across a much larger set of claims. We believe our decades-long track record of helping clients with the mission-critical operations is a cornerstone of our durable business model and why customers typically adopt more of our products over time. A great example of this was a recent win with a top 20 insurer and a longtime CCC customer who was only using our casualty solutions and not our autophysical damage or APD solutions. Last month, This customer agreed to add our full suite of APD solutions, including estimate STP. This client will be transitioning services from multiple vendors to the CCC platform. We have begun the implementation planning for the migration and expect this new APD relationship to start contributing revenue in the first half of 2024. This is a great example of the significant opportunity and numerous ways we have to expand our solution set with the country's largest insurers. The second point I'd like to discuss with you today is innovation. While we are proud of the network and portfolio of solutions we have built today, we are still in the early innings of this industry's transformation and remain committed to investing in innovation that will increase the value we deliver to clients. A good example is investments we have made in recent years in our casualty solutions, which we believe can be a major growth opportunity for CCC. We recently rolled out a new AI-based computer vision technology for casualty claims that can predict potential physical injuries to the occupants of a vehicle involved in an accident based on photos of the damaged vehicles. This use case links our APD and casualty capabilities and enables insurers contracting for both sets of solutions to analyze claims early in the process using multiple AI models, helping insurers more efficiently and effectively identify risk reserve appropriately, and guide claims through the claims process. We have a long history of helping our APD clients improve their operating efficiency through early analysis of claims. The initial determination of likely total loss versus repair, for example. And we are now bringing that capability to our casualty clients as well. This is another example of our AI model development and deployment capabilities, which on a combined basis represent one of CCC's sustainable competitive advantages. In terms of model development, we have over a trillion dollars of historical accident data, which is continuously updated on a real-time hyperlocal basis across tens of millions of repair estimates annually. In terms of model deployment, we are already deeply embedded in the work streams of many of our customers across the auto insurance economy, enabling seamless deployment of our AI solutions with a minimum of effort. We continue to see a large growth opportunity for CCC in casualty. The insurance industry pays out the same amount in indemnity payments for casualty and auto fiscal damage each year, with the revenue opportunity in each market being roughly equal as well. Yet today, only about 50 of our more than 300 APD or auto fiscal damage customers also use our casualty solutions, and our revenue from APD is four times that from casualty. Delivering our growing set of casualty solutions into our APD customer base therefore represents one of our biggest growth opportunities with insurers. We're seeing early proof points that our strategy for casualty is working. In Q2, for example, we added and expanded relationships with multiple new and existing customers. We believe our investments in innovation, combined with our ability to integrate our data and solutions on the APD side of the business, position us to continue to drive growth in casualty. For my third and final point, the growing adoption of CCC solutions, I'd like to highlight our parts offering. While parts is currently only about 5% of revenue, it is growing significantly faster than CCC overall, and we believe it represents a large opportunity for us. Last year, the collision repair industry spent about $18 billion on parts. Based on our existing business model, we believe parts represents a multi-hundred million dollar annual revenue opportunity for CCC, or more than five times our current parts revenue. Today, Only about 15% of industry parts volume is ordered electronically through the CCC network. We believe that CCC has the opportunity to increase that percentage over time because our electronic parts ordering solutions help improve operational efficiency for automotive OEMs, parts suppliers, repair facilities, and insurers, through process simplification, integration, and automation. Our parts platform brings relevant parties together to increase visibility to buyers into parts availability and pricing, making the entire parts procurement process faster and more transparent. Surprisingly, a meaningful portion of parts are still ordered manually by fax machines and phone calls, which is obviously slow, inefficient, error prone, and emblematic of what needs to change to reduce the 2 billion days of annual cycle time. In a world where supply chain disruptions are a regular occurrence, knowing supply and availability at the time of part selection is critical to managing cycle time and total operating efficiency. Longer cycle times can mean higher rental car costs and lower customer satisfaction, lower shop and labor utilization for repair facilities, and a lower volume of parts sold for parts suppliers. This quarter, we further grew our parts network by expanding the participation of two leading automotive OEMs and signing a multi-year extension with one of the leading aftermarket parts suppliers. We are pleased with how our parts platform is scaling and are confident that a growing portion of the industry parts procurement will take place electronically on our network in the years to come. Let me conclude by saying that we are proud of what we achieved in the first half of 2023 and are excited about what we have planned for the second half of the year. 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, who will walk you through our results in more detail.