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spk01: Good day, and thank you for standing by. Welcome to the CCC Intelligent Solutions first quarter fiscal 2024 earnings conference call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to your speaker for today, Bill Warmington, Vice President of Investor Relations. Please go ahead, sir.
spk09: Thank you, Operator.
spk14: Good afternoon, and thank you all for joining us today to review CCC's first quarter 2024 financial results, which we announced in the press release issued following the close of the market today. Burt Lazarin- Joining me on the call are the test runner Murphy CCC chairman and CEO and Brian herb CCC CFO. Burt Lazarin- 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 very materially. Burt Lazarin- These risks are discussed in the earnings releases. available on our investor relations website and under the heading Risk Factors in our 2023 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, retransmission, or reproduction or other use of the same for profit or otherwise without prior consent of CCC is prohibited and a violation of the United States copyright and other laws. Additionally, while we will provide a transcript of portions of this call and 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 the transcripts. Please note that the discussion on today's call includes 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 Kitesh.
spk04: Thank you, Bill, and thanks to all of you for joining us today. I am pleased to report that CCC began 2024 on a strong note. In the first quarter of 2024, CCC's total revenue was $227 million, up 11% year-over-year and ahead of our guidance range. Adjusted EBITDA was $94 million, also ahead of our guidance range, and our adjusted EBITDA margin was 41%. Our industry continues to be in the early innings of digital transformation, and CCC is well positioned to be our customer's partner of choice for that transformation. On today's call, I'd like to share how the CCC Intelligent Experience Cloud is helping our customers navigate this journey and the growing adoption we are seeing across our recent innovations. I'll also provide an update on the continued progress we have made in broadening our shareholder base. My first topic is the role of the CCC Intelligent Experience Cloud in enabling our customers' digital transformation. CCC was an early pioneer in SaaS and cloud computing with the initial launch of our cloud platform back in 2003. Since then, we have continuously expanded and strengthened our capabilities And today, our hyperscale 100% multi-tenant platform connects more than 35,000 companies and processes well over $100 billion of commerce annually. This technology backbone powers a wide range of mission-critical applications for the customers we serve, insurers, collision repairers, auto manufacturers, parts suppliers, and more, and is a key enabler of our ability to provide continuous innovation to customers with a rapid return on investment and minimal effort on deployment. Our cloud platform is also highly efficient. In 2023, our engineering teams deployed more than 1,400 releases to customers with high operating leverage, scalability, and reliability. Our transition from private to public cloud infrastructure last year further reinforced these advantages. Across the markets we serve, customers are increasingly looking to CCC to make it faster and easier to adopt our solutions and drive innovation into their business. This trend is being driven by a wide variety of forces, including macroeconomic changes, labor shortages, and increasing complexity in day-to-day operations, challenges that can best be addressed through a highly integrated, highly connected AI-enabled platform. And critically, they're looking to rapidly transform and simplify their businesses without disrupting their existing operations. Doing this at scale requires intelligently orchestrating the data and workflows not just within a customer's four walls, but across the consumers and businesses they interact with. And with the recent introduction of the CCC Intelligent Experience Cloud, or IX Cloud for short, we are enhancing our customers' ability to solve this many-to-many problem with a cloud platform they already use every day. The CCC IX Cloud overlays a new event-driven architecture into CCC's existing cloud applications, customer workflows, and customer and partner systems. This microservices-based approach will make it faster and easier for customers to deploy new CCC solutions and will also increase the number of ways customers can use multiple CCC solutions together. Customers do not need to upgrade as the CCC IX Cloud represents an enhancement to their existing CCC Cloud platform. It just gets better. Throughout our history, CCC has helped customers navigate the complexity of our industry and use advanced, highly connected technology to solve the most pressing business problems. The CCC IX Cloud is designed to accelerate this journey in a way that is purpose-built to solve for the substantial increase in complexity in the P&C insurance economy we see today. Unlike most industries, where an existing supply chain converts raw materials into finished products and distributes them in a predetermined and repeatable manner, instead in the P&C insurance economy, The supply chain is created spontaneously after an accident occurs. Each insurance claim and collision repair is unique, and so are the hundreds of different decisions, tasks, and data flows that go into those claims and repairs. These are crucial moments for our customers and their customers, and our new event-driven architecture helps to align this highly complex supply chain so our customers can drive a step function improvement in their operating performance and consumer and employee experience. We are excited to see what they invent. My second topic is a growing adoption of our solutions. Our solid performance in Q1 was driven by the continued expansion of our multi-sided network and traction from new and existing solutions. In addition, we began rolling out the new top 20 APD insurance client we announced last year and had multiple insurers renewing and expanding their relationships with CCC. We have also continued to add new repair facilities and parts suppliers to the CCC network. We also saw strong demand and adoption of our AI-enabled solution across our different customer groups. For estimate STP, for example, we continue to see progress across volume, adoption, and the number of clients testing, piloting, and rolling out. Other examples are CCC subrogation, our suite of solutions that applies AI and workflow automation to both outbound and inbound subrogation, as well as impact dynamics, which uses computer vision to predict potential injuries to the occupants of a vehicle involved in an accident based on photos of a damaged vehicle. Both of these solutions continue to deliver significantly positive results for customers using them, often in the multiple millions of dollars, resulting in growing interest from more customers. We expect these positive demand and adoption trends to continue given the significant bottom line benefits insurers are seeing from these solutions. For repair facilities, we are continuing to add new rooftops and are seeing strong adoption of new products like Mobile Jumpstart, the solution we launched at the end of 2023 that uses AI to dramatically reduce the time it takes an estimator at the repair facility to generate an initial estimate, from an industry average of half an hour or more to less than two minutes. In Q1, almost 5,000 repair facilities used Jumpstart to complete tens of thousands of repair estimates. We're also continuing to see strong interest in the expansion of CCC One beyond its traditional focus on repair operations to help our customers run their businesses overall. Two examples of such solutions are Amplify, a quick and easy way for repair facilities to set up a modern, professional-looking website with deep integration into CCC One, and our consumer payment solution, which has already enabled over a billion dollars in partner payment collections for our repair facility customers. We feel good about the early traction and growth potential for both of these solutions and see many additional category expansion opportunities for repair facilities given our platform, network, and AI capabilities. The progression of these and other new solutions follows a pattern of innovation that we have observed over multiple decades. Building a great product grounded in tangible customer value with a rapid ROI provides a long-term runway for growth and strong referenceable customer relationships, which in turn leads to additional opportunities. The credibility we establish with our original product, a tool to help insurers assess total losses, provided a pathway for us to deploy a state-of-the-art solution estimating damage to repairable vehicles. We then extended those same estimated capabilities to repair facilities, establishing direct repair in the expansive insurer repair facility network that exists today. In the years since, a steady stream of industry-first innovations has extended our platform and delivered additional value to customers. Workflow tools for insurers to manage the appraisal process, an advanced operating system for repair facilities to help them manage their day-to-day operations, integrated parts ordering with thousands of connected parts suppliers, mobile and then AI-based digital solutions that range from first notice of loss to appraisal to casualty and even subrogation, and more. Our track record of delivering these and other innovations has, at its core, been enabled by the depth of our customer relationships with insurers, collision repairers, parts suppliers, and auto manufacturers. The result is an innovation flywheel that lets us incubate new concepts, test them with initial customers, and then deploy reference level solutions at scale across our customer base. And because we have such a broad portfolio of innovation, different customers can adopt different solutions in different increments based on their particular needs over time. This dynamic is at the heart of our durable long-term business model and enables us to consistently invest in R&D across economic cycles. $150 million last year and well over a billion dollars in the past decade. And with our projected 2024 revenue representing a fraction of the $10 billion plus market opportunity we see in digitizing the PNC insurance economy, we believe we have decades of growth ahead of us. My third and final topic is an update on the continued progress we have made in broadening our shareholder base. Since going public, we have made significant advances in expanding our shareholder base and increasing the liquidity of our shares. The secondary offerings and block trades from our private equity investors over the past six months have increased our public float as a percent of total shares outstanding as measured from Bloomberg from about 30% in October of last year to about 60% currently. We see this as an important development towards fulfilling our commitment to our shareholders. Let me conclude by saying that we are excited about what we have planned for 2024, the rising demand for AI-based solutions across our customer base, combined with our track record of driving growth through innovation and increasing the ease of adopting our solutions via the CCC IX Cloud gives us confidence 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.
spk10: Thanks, Kitesh. As Kitesh highlighted, we are seeing strong innovation and momentum across the business as reflected in our track record of driving growth through category expansions and cross-selling. Our IX cloud architecture enables easier client adoption of our solutions and our durable business model. We are pleased with both top and bottom line performance, which reflects a balance between investment in our growth initiatives and ongoing margin discipline. Now, as we turn to the numbers, I will review first quarter, 2024 results, and then provide guidance for the second quarter in full year of 2024. Total revenue in the first quarter was $227.2 million, up 11% from the prior year period. Approximately eight points of our growth in Q1 was driven by cross-sell, upsell, and adoption of our solutions across our client base, including repair shop package upgrades, continued adoption of our digital solutions, and the ongoing strength in casualty and parts. Approximately three points of growth came from our new logos, mostly with repair facilities and parts suppliers. About one point of growth in Q1 came from our emerging solutions, mainly diagnostics, estimate STP, and subrogation. Now turning to our key metrics, software gross dollar retention, or GDR, captures the amount of revenue retained from our client base compared to the prior year period. In Q1 2024, our GDR was 99%, which is in line with last quarter. Note that since the first quarter of 2020, Our GDR has been between 98% and 99% and is either rounded up or down, driven primarily by repair shop industry churn. We believe our strong GDR reflects the value we provide and the significant benefits that accrue to our customers from participating in the broader CCC network. Our strong GDR is a core tenant to our predictable and resilient business model. Software Net Dollar Retention, or NDR, captures the amount of cross-sell and up-sell from our existing customers compared to the prior year period, as well as volume movements in our auto physical damage client base. In Q1 2024, our NDR was 107, consistent with our average across 2023. Now I'll review the income statement in more detail. As a reminder, unless otherwise noted, all metrics are non-GAAP. We provide a reconciliation of GAAP to non-GAAP metrics in our press release. Adjusted gross profit in the quarter was $177 million. Adjusted gross profit margin was 78%, down slightly from 79% in Q4 and up against 76% in Q1 of 2023. The stronger year-over-year adjusted gross profit margin primarily reflects operating leverage on the incremental revenue. Overall, we feel good about the operating leverage and scalability of our business model and our ability to deliver against our long-term adjusted gross profit margin target of 80%. In terms of expenses adjusted, operating expense in Q1 2024 was $92.9 million, which is up 8% year over year. This was mainly driven by higher IT-related costs as well as investment in our customer-facing functions. Adjusted EBITDA for the quarter was 93.7 million, up 18% year-over-year, with an adjusted EBITDA margin of 41%. Now, turning to the balance sheet and cash flows, we ended the quarter with 191 million in cash and cash equivalents, 782 million of debt. At the end of the quarter, our net leverage was 1.6 times adjusted EBITDA. Free cash flow in Q1 was $39.6 million compared to $18.5 million in the prior year period. Free cash flow on a trailing 12-month basis was $216 million, which is up 56% year over year. Our trailing 12-month free cash flow margin in Q1 2024 was 24% compared to 17% a year ago. Unlevered free cash flow in Q1 was $52 million or approximately 55% of our adjusted EBITDA. Q1 is usually our lowest conversion quarter because it's when we pay our annual incentives. While our level of free cash flow can vary quarter to quarter, we expect it to continue to average out in the mid 60% range of our adjusted EBITDA on an annual basis. I'll now cover guidance beginning in Q2 2024. We expect total revenue of $228.5 to $230.5 million, which represents 8% to 9% growth year over year. We expect adjusted EBITDA of $89 to $91 million, a 39% adjusted EBITDA margin at the midpoint. For the full year 2024, we expect revenue of $944 to $950 million, which represents 9% to 10% year over year growth. We expect adjusted EBITDA of $389 to $395 million, which represents 41% adjusted EBITDA margin at the midpoint. So three things to keep in mind as you think about our second quarter and full year guidance for 2024. The first point is that we remain confident in our 2024 financial target and have increased the midpoint of our guidance ranges. We're pleased with the broad-based strength that we saw across the business in Q1. But keep in mind that year-over-year revenue growth rates can vary quarter to quarter because of contract timings, variations in subscription revenue contracts with volume-based elements, and the pace of client adoption of new solutions. The second point is that the emerging solutions contributed about one point of growth in Q1, and we expect the upsell, cross-sell of these new solutions will contribute about two points of growth in 2024 as they continue to scale. Kitesh mentioned in his remarks, we are seeing positive feedback in client engagement around these emerging solutions. And this gives us confidence about the contribution to growth in the back half of 2024. The third point is that in prior years, we experienced seasonality in our adjusted EBITDA margin with the second half levels being above our first half levels and Q2 being the low point for the year. We expect 2024 to be consistent with this pattern. with the first half margins being constrained by the reset of employee related expenses and the cost of our industry conference. Overall, the strong trends we're seeing in renewals, relationship expansions, and new solution adoptions reinforces our competence in the underlying strength of the business. The combination of our durable business model, advanced AI capabilities, interconnected network, and the broad solution set puts us in a unique position to help our customers in the P&T insurance economy reduce their cycle times and administrative costs while improving their consumers' experience throughout the claims process. We are confident in our ability to deliver against our long-term target of 7% to 10% organic revenue growth and mid-40s adjusted EBITDA margin as we continue to execute on our strategic priorities and generate value for both our customers and our shareholders. With that, operator, we're now ready to take questions. Thank you.
spk01: Thank you. As a reminder, if you would like to ask a question, please press star 11 on your telephone. Please wait for your name and company to be announced before you proceed with your question. As well, we ask that you limit yourself to one question and one follow-up. One moment for our first question. Our first question comes from Saket Kalia of Barclays. Your line is open.
spk02: Okay, great. Hi, guys. Thanks for taking my questions here, and nice strong start to the year. Thanks. Sure. Gitesh, maybe to start with you, listen, the quarter and the guide are pretty straightforward to the earlier point, so maybe I'll just start with a higher-level educational question. Can we just talk a little bit about the competitive environment in the casualty market? You know, I think you've talked about how There's plenty of room for adoption for casualty within your APD customer base. What types of solutions do you need to displace to make that happen? And maybe just qualitatively, how are those conversations sounding maybe more recently?
spk04: Sure. Just to kind of dial back, like you said, a little further. So first and foremost, what we're seeing across the board for our customers is complexity of managing medical claims and the dollars involved. are increasing significantly, and they vary by geography, vary by jurisdiction. There's a lot more complexity, a lot more costs starting to creep in. And one of the key advantages that we bring to the table that is fairly unique is that one in every five auto claim results in a medical claim. So when you have visibility to the breadth of the auto physical damage claims that we have, The physics of the accident actually help inform what may or may not happen downstream, and that's a very important connection between the auto-physical damage side of the business and what happens when you have to deal with a medical claim. So there are some very unique things we have visibility to. One of the examples of that is when we introduced impact dynamics, which is an AI-based solution that takes the physics of the accident, the photos of the accident, imputes, you know, the potential impact of medical claims and projections down the road, that's a very, very unique offering. And that is one that can be adopted by whether, you know, existing or, you know, existing customers or not, people can adopt it. And I think we mentioned in the last, probably last call, that we had a top five carrier adopt that solution and saw significant impact. So that's the linkage. I would just say on a broader basis, we have continued to see over the last year, more clients adopt our casualty solutions. And there's always some unique aspect in terms of challenges that they're trying to solve. And that's really where we've been very focused is working with customers to solve those problems. So that's really kind of the overall view. of what we're seeing, but bottom line is we are continuing to see adoption of customers on casualty.
spk02: Got it. That's very clear, very helpful. Brian, maybe for my follow-up for you, you know, you've talked about sort of the growing contribution from emerging solutions. I think we said it will go from one point of growth here in Q1 to maybe two points for the year. Can you just talk a little bit about what degree of visibility you kind of have into that, you know, is that, is that growth? I mean, that's, that's very healthy growth, of course, off a small base, but is that sort of dependent on, on volume usage or is there some element of sort of contracted visibility that you, that you have into that, which, which gives you confidence into that, into that increasing growth contribution?
spk10: Yeah, sure. Sure. Second. So, so just on the metrics, So Q1, as you said, we had one point of growth from the emerging solutions. We do expect that to step up and continue to scale as we go through the year. We're expecting two points of growth contribution from emerging for the full year. To the question around visibility, you know, we look at it around three areas. is existing clients that are using the product, paying for the product, that they continue to adopt volume and ramp up their volume, and we have visibility into that. We also have clients that are testing the product and will move from test into pay and full production rollout, which again, there's good visibility. And then the third is converting pipelines, assigning new clients onto these new solutions. Across those three areas, we have good visibility and feel confident in the step up that we're expecting in the second half. As Kitesh made in his remarks, you know, the positive feedback from clients that are using the product or testing the product, the operating metrics that we're seeing as they're testing it is all very, is going well. And we do feel that the step up, you know, as we get into the second half year, And then towards the long term, we talk about the emerging solutions being more like three to four points of growth, and that will develop over time.
spk27: Great to hear. Thanks, guys. Thank you.
spk01: Thank you. One moment for the next question. And our next question will be coming from Michael Funk of Bank of America.
spk26: Your question is open. Thank you. Yeah, great. Thank you for the question tonight, guys. So, Gitesh, first one is for you. You mentioned a few times in the call, customers are very early in the cloud transformation and obviously highlighted the benefit from the emerging solutions. So, you know, maybe just, you know, remind us of the revenue opportunity from the products like S2 and FTP and subrogation. I mean, clearly, these highly repeatable, you know, human interaction events are very, you know, very attractive to replace with AI. So, you know, where are we in that transformation? And do you expect we'll see a tipping point in the adoption as you ramp towards the revenue opportunity you've talked about? Maybe you want to highlight again tonight?
spk04: Sure. Sure, Michael. Let me kind of start with first, you know, broad-based patterns that we've really seen with our customers over literally the last two or three decades. So what typically happens is that customers are continuously looking to deal with complexity. I'll give you a couple of minor examples that lead into some major decisions. The number of parts per vehicle used to be eight parts per vehicle. Today, we're up to 14 parts per vehicle. So the complexity on a whole range of fronts is increasing, And at the same time, the macro trend we've talked about, which is the number of experienced people in the industry is decreasing, both for our insurance customers, repair facilities. The demand for experienced people is strong, whereas the supply of really talented and capable people is less. So across the board, our customers are trying to solve more complex problems, in a more effective and more efficient manner. And that is the big, broad macro trend that we have seen. And what we are now seeing, especially as pricing starts to normalize, what we are seeing is customers start to be much, much more thoughtful about digital transformation in a broader way. So we are seeing more interest in digital transformation. If you remember when we introduced our first AI solution, which went from photo to an estimate, I think that was in November of 2021, AI was not widely talked about as it has been, let's say, in the last 12 to 18 months. So people are starting to really get comfortable that AI as a capability that amplifies their people's capability to handle more decisions more quickly across the board. So that macro view of digitizing, using technology to make decisions is happening. So now getting to the specifics of your question, so when you look at something like estimate, so when you look at something like estimate SDP, what you're seeing is that it really speeds the ability for staff appraisers, for consumers to send in pictures, get an estimate, or jumpstarted the repair facility really substantially reduces speed at which estimates can be produced. And then when you think of solutions like subrogation where you might get a 200-page demand for inbound and our solution in a matter of a minute or two can really give you a very fast and very precise response that increases the accuracy. every single solution we're developing has these characteristics in terms of efficiency, the effectiveness, increasing the productivity of people, and a very specific ROI. And hence, you know, that's why we, you know, focused on innovating across so many different solutions.
spk26: No, thank you for that, Kitesh. Maybe one more, Brian, if I could quickly You've talked about the cloud infrastructure transition that you undertook moving from private to public. Any comment on how to think about that impacting operating leverage or margin as you've made that transition?
spk10: Yeah. Hey, Mike. Yeah, we have fully transitioned, so we are on the new infrastructure and serving clients and deploying solutions through that. Um, we do still have some legacy cloud environment that we are winding down. Um, and we'll be doing that over time. And so we talk about. The it hosting costs, um, being up in the, in the quarter part of that is just the growth of the business and building out against the pipeline and innovation. And then part of it is the decommissioning of the legacy platform, uh, environment that will wind down, um, as, as we go forward. Overall, we're still really happy with the margin progression. We had about 240 basis points of margin progression quarter over quarter or year over year. So again, within that, we feel like we're in a really good spot within our cost base.
spk26: Great. Thank you both.
spk10: Thank you.
spk01: Thank you for your question. One moment for the next question. And our next question is coming from Tyler. Brad King of Civi, your line is open.
spk07: Hey, good afternoon. Thanks for taking the question. I wanted to ask you, Jitesh, about the new event-driven architecture you referenced on the call. I'm sure we'll hear a lot more about that out at the conference here in a couple weeks. But can you just talk about the theoretical future use cases, what you're doing from a back-end perspective, technology perspective to enable that? And if there's an opportunity for monetization, either price increases or new SKUs with this new architecture?
spk04: Sure, Tyler. Happy to take that question. So what we have done over the years, as you know, we have been running a multi-tenant cloud platform for many years. And one of the key things that we see in terms of giving our customers a step up in performance is really taking events and decisions that are taking place across the network. What do I mean by that? That means you might have a repair at a repair facility that is not actually a repair but might turn out to be a total loss. You might have some other decision on the medical front. You might have a consumer who changed his or her mind about something that needs to be reflected downstream. So many of these decisions and events would take a lot of time to move from one place to the other. And what we have developed is an event-based architecture that really very quickly moves events from one place to the other, maximizing essentially the overall performance of the claim. because there are literally hundreds of decisions that have to be made in every claim, and the permutations can be intense, and the data that's needed can be pretty intense. And what we're seeing with our AI, which has been delivered in line with existing workflows, is the combination of AI and this event-driven architecture, we think, as a major way to really deliver more functionality and capability. And this platform, which we call the CCC IX Cloud, is an overlay on our existing architecture. So customers will get it automatically. It's already included. There's no upgrade path. It works. Everything works without disrupting what they have and works in line. But what it really does is gives us the ability to deliver many, many more innovations across the entire supply chain with those solutions having very unique and specific ROIs, and those solutions will be deployed by customers, and they'll have their own unique ROI and pricing, but not for this architecture.
spk07: Very helpful. If I could ask a question... follow up for you, Brian. So just on the emerging solutions contribution, you know, the one point this quarter sounds like two points for the full year. I guess that's the path to get there. Should we think about an exit rate of three points or something above two? Or is the way to think about it is it ramps up to two points by Q4? Thank you.
spk10: TAB, Mark McIntyre, yeah it's a tower yeah as I said we're going to continue to see the step up as we go through the year and the contributions can be larger in the second half what we're not specifically breaking down kind of exit run rate, I would just reiterate the two points for the full year we feel good on over time. we're expecting and have talked about within the long-term guide that's stepping up to three to four points. And we'll see that progress as we go from how we exit this year into 25 and beyond. So we're not going to get more specific than that at this stage.
spk04: Hey, Tyler, there's just one more thing I'd add to what Brian said. You know, from my vantage point, all the revenue we deliver today were an emerging solution at one point or the other, right? So when you think about it, all of these solutions, in fact, they all have very long runways. And what I get excited about is that some of the solutions which were emerging at one point, 10 years later, 15 years later, they're still continuing to grow. And some 25 years later are continuing to grow very nicely. So our focus often is on building and delivering those solutions with long runways. And I just want to make sure that, you know, I add that piece as well. Very helpful. Thank you.
spk01: Thank you. One moment for our next question. And our next question is coming from Alexi Gogovlev of JP Morgan. Your line is open.
spk15: Hello, everyone. Thank you for letting me ask a question. Kitesh, I wanted to ask you about payments. You've mentioned on today's call, once again, the $100 billion in transactions on your platform. When do you expect to see a more pronounced tailwind to revenue growth from greater involvement in the payments world?
spk04: You know, Alexei, good to hear from you. And as I've said before, The opportunities and the complexities of what our payment solutions can solve, we are seeing that every day with customers. There's a lot of complexity. It will run, we think, at a slower pace compared to our other solutions for sure. And we don't think, you know, I think towards the latter part of the year we can hopefully give you more of an update on that. But we have continued to expand the capabilities of that solutions and a broader set of problems our customers want us to solve. So we've been continuing to work on that, but that's where we are.
spk15: Thank you, Gitesh. And Brian, could I ask you to elaborate a bit more on the sequential increase in stock-based compensation in the quarter?
spk09: Yeah, absolutely.
spk10: So, yes, stock-based comp did go up in the quarter versus where it's been trending more recently. Q1 is what we expect to be the high watermark for the quarter as a percent of revenue. We do expect it to step down and move down as we go through the year. As we get into 2025, it will look like a more normalized rate. and be more like 12 to 14% of revenue. That's what we expect kind of running from 25 going forward. So we do expect the step up that we saw in Q1 to moderate and to normalize when we get into next year.
spk16: Perfect. Thank you, Brian.
spk01: Thank you. One moment for the next question. And our next question will be coming from Josh Baer of Morgan Stanley. Your line is open.
spk12: Thanks, and congrats on a strong quarter. Another question on the growth algorithm. Emerging solutions increasing contribution is definitely exciting. It's a clear positive. I think it's a key to the durability of growth. The questions on the rest of the parts of the growth algorithm, if emerging solutions was a one-point, Contribution on 11% overall growth this quarter going to two points on 9% total that's several points of growth coming away so just wondering where you know where's that coming from and and you know and why wouldn't the growth in logos are established solutions be more durable.
spk10: Yeah, absolutely. So the way maybe we start at the long-term guide and then we can walk backwards because the way we frame the long-term, so we talk about 7 to 10 organic revenue growth over time. We say 80% of that will be from existing clients with cross-sell, up-sell, and 20% from new logo. So that's where we set the expectation as we're moving towards Where we are today, as you highlighted, we're seeing about 30% growth from new logo. And then out of the remaining growth from cross-sell upsell, you know, high percentages from established. Over time, we just expect the emerging to become more, to be a larger part of the equation going forward. So it's more of a glide path than it is a hard cutover. but how we see it playing out over time.
spk12: Okay. I guess another way to put it on a more positive spin, if new logo growth or established solutions held in a bit more durable over the next few quarters and you have confidence in the step-up in emerging solutions, that would be upside for the full year. Does that make sense?
spk10: Yeah, it does. I mean, we're always looking to deliver against the guide or outperform the guide that we have in the market. So, you know, we're pushing on all sides of it, you know, driving hard at the core and the established solutions, driving hard at new logos and continuing to remain strong and then building out the, you know, getting the momentum behind the emerging. So, you know, we're driving all three of those. So, yeah, that's a good way of framing it.
spk18: Great. Thank you.
spk01: Yep. Thank you for that question. One moment, please, for the next question. And our next question will be coming from Dylan Becker of William Blair. Your line is open.
spk24: Hi, guys. It's Faith on for Dylan. If I could start with my first question being a more high-level industry trend that we're seeing. So as we continue to see premiums increase, we're also seeing an uptick in issues with drivers either being uninsured or underinsured. How is this playing into the overall level of complexity in the claims ecosystem? And how are you seeing the different stakeholders react to this?
spk04: Sure. You know, a couple of things. We are seeing some variation state by state as well in that mix. So customers are noticing and have started to deal with that both at first notice of loss and also in terms of how that makes its way into medical claims and a variety of other places. And it's not had a material change on, you know, what our customers really pay for is frequency times cost of claim. So it hasn't impacted that number for our customers, but it has, like you pointed out, increased the complexity and essentially In something like subrogation, how they recover those dollars, that is really where we're seeing some specific differences in how you recover dollars, especially when your policyholder is not at fault. And that's where we're seeing more complexity.
spk23: Okay, cool. That's helpful, Color.
spk24: And then for my second question, throughout the call, there's been a lot of talk about the different AI advancements between inbound subrogation and the IX cloud. how are these all fitting together to kind of drive those better outcomes for the ecosystem? And what's really ahead on the AI roadmap as more stakeholders get more comfortable with this technology and look to adapt it?
spk04: Yes. The short answer is yes. We've had the benefit of taking this industry from books, paper, and pencil to write collision estimates, to laptop computers, to CD-ROMs, to artificial intelligence. And so we've kind of continued to work closely with our customers. And if you look at, for example, adoption by various segments of our customer base, obviously our OEM customers have very sophisticated needs. and understanding. Our repair facility customers, I think I just said that we had over 5,000 of our repair facility customers adopt and use Jumpstart, which really allows them to take pictures, write an estimate in seconds, and then augment that. So we are starting to get a comfort level from the repair facilities. And obviously, for the last two to three years, we've had these solutions deployed with insurance companies. And we are seeing customers very carefully and thoughtfully continue to adopt. And this is where transparency becomes really important and traceability of how those algorithms came about. All those things are really important. And the accuracy of what we can deliver also becomes extraordinarily important. So that comfort and confidence we can give to our customers that when we produce something, we also produce a confidence interval about how confident we are about an answer that then people are using to make those decisions on. So the short answer is yes. Overall, we continue to see very strong interest.
spk19: All right, awesome.
spk01: Thank you. One moment for the next question. And our next question will be coming from Gary Stopino of Barrington Research. Your line is open.
spk11: Hey, Gitesh. Hi, Brian. Hey, Gary.
spk13: A couple of questions. With the introduction of the inbound subrogation, did that automatically attach to entities that were using the outbound subrogation, or is that sold a la carte? you know, inbound and outbound sold a la carte?
spk04: Hey, Gary. The short answer is yes. It can be adopted individually. So we have customers that have chosen to adopt both inbound and outbound at the same time. We have customers that started out, starting out with outbound. And so it can work any way. And that's generally how all our solutions work. You can adopt any components because it works seamlessly with all the other components.
spk13: Are you finding that the ones that we're using outbound are rapidly adopting inbound too to have that end-to-end solution?
spk04: It's actually more the other way around. We are seeing much more interest in inbound because of the complexity, and then many of those customers are choosing to also say, hey, once we get this rolled out, we want to move to your outbound solutions. Some are actually starting with both.
spk13: And then just one question on this cloud IX. We're talking about taking events and decisions across the network to improve claims processing. Would that also be applicable to if there was a dispute at who was at fault at an accident? Can this product help with that since you've got a whole data set of various accidents that show who was at fault if fault was determined?
spk04: Yeah, those are things that we'll probably come up with because what you're fundamentally talking about is liability determinations. So when you think about liability determination, there are a number of factors that actually come in. For example, we have intersection data. We have weather data. You know, was someone taking a left turn? You know, who had the right of way when a certain accident took place? We also have some pieces that can do accident reconstruction. So these are all capabilities that we can introduce. And the power of the IX cloud is to put all of these pieces together in a seamless, easy-to-absorb manner so that at an individual claim level, you can get optimum performance.
spk01: Thank you. Thank you for your question. One moment for the next question. Our next question will be coming from Samad Samana of Jefferies. Your line is open.
spk08: Hey guys, thanks for taking my question. This is Jeremy on FirstCod. A lot of my questions have already been asked. Maybe one more quick one on emerging products. So in order to achieve that three to four points of growth in the longer term, I guess, what percent of the client base do you see as likely having to adopt these products? I guess, what's the penetration that you need there and what's that terminal penetration?
spk10: David Miller- yeah hey good question yeah I mean we look at it as a deployment of the solutions across the existing Bay, so you know when we think about kind of where we are with the ecosystem and all the participants of the ecosystem. David Miller- Many of them have the established solution, so we just see them stepping up the penetration across the emerging. So we're not kind of calling out a percent of our existing clients to convert. It's more that as they step into the adoption that it will ramp up over time.
spk08: Gotcha. That's helpful. And then maybe a quick one. You mentioned you began rolling out the new top 20 APD insurance clients that you announced last year. I guess you maybe remind us what does a rollout like this look like and when do you expect the full revenue contribution from this insurer? Sure.
spk10: Yeah, absolutely. It will start to fully contribute in the second half of the year. It will start to play into the Q2 numbers, but not fully rolled out. So it will partially come into Q2 and then fully roll out in the second half. We just started.
spk08: Gotcha. That's a useful color. Thanks for taking my questions, guys. Yeah, absolutely.
spk01: Thank you for your question. One moment for the next question. The next question is coming from Kirk. Matt Jones.
spk06: This is Dylan for Kirk, and thanks for taking my question. The auto insurance has been up recently based on inflation. With that in mind, how are companies thinking about IT spend in your industry?
spk04: In fact, I was just talking to a customer in my office just today, and what they are looking for is any solutions that can give them rapid ROI. So people are very open to more solutions. They're not looking at this as should I increase my IT spend or should I decrease my IT spend? What people are saying is solutions that I can deploy easily that give me ROI, I am ready to put that in place. And the last two years have shown that people need to be competitive.
spk17: Great, thanks.
spk01: Thank you for your question. The next question will be coming from Chris Moore of CJ Securities. Your line is open.
spk05: Hey, good afternoon, guys. Thanks for taking the question. Most might have been answered, but obviously, you know, given the conversation you started with on the investment, you're making an IX cloud. you know, and across the board, R&D was, you know, higher than normal, close to, I don't know, 22% this quarter, almost 50 million, just trying to understand if this is kind of the new normal level moving forward or, you know, kind of how we should think about that at this stage.
spk03: That might include stock comp.
spk05: Yeah, it does, Chris.
spk10: So it's Brian. Yeah, you have to look at it kind of in a excluding the stock comp. So that will be the biggest driver. If you exclude stock comp, it does continue to grow, but it's pretty moderate. We talked about in the past that we had a meaningful step up in capacity that's built into the system, and we feel like that capacity is what we need to drive innovation going forward. And so we're comfortable that R&D will continue to grow, but grow at a reasonable pace and continue to drive leverage across the business. And we're very comfortable on the margin progression that we're talking about for the full year, and we're comfortable about the margin progression to our targets of getting to the mid-40s over time.
spk05: Got it. I appreciate it. I'll leave it there. Thanks, Chris.
spk01: Thank you. One moment for the next question. Our next question will be coming from Gabriella Borges of Goldman Sachs. Your line is open.
spk22: Hi, good afternoon. Thank you. Good question, Brian. I wanted to ask the new logo question in a couple of different ways. The first part is around the success that you're having in the repair shop community. Remind us how to think about penetration there and what the limiting factor is to the number of new logos that you can get in any given year within that ecosystem, given there is a little bit of a network effect, as you read.
spk10: Yeah. Hey, Gabriella. So the way we look at the shop network is about 40,000 repair shops that are kind of the marketplace. Today we have 29,500. We've been adding, if you look back over the past several years, about 1,000 net new logos a year, and we continue to see that pacing and very comfortable with that pacing for the year and in the near term. So really good momentum, continue to see strength in new logo adoption at the shops.
spk22: That's helpful. And the second part of the new logo question is, In the past, when you've talked about expanding overseas, it's been with a lens towards M&A. So my question to you is, what is the limiting factor to expanding new logos overseas organically? And maybe give us an update as to when you think the timing might be right to become more aggressive with M&A and expanding internationally. Thank you.
spk04: Hey, Gabriella, this is Gitesh. I just say that, you know, our first priority when we look at M&A is domestic, is to look at the opportunities we have in expanding our product set. For example, with subrogation, if you remember, you know, a little over, it's been almost about two years now. And that was a great example where we took a fantastic team and then really built it out. And those kinds of expansions we look at. On the international front, we are not at this stage. We continue to spend time looking at it, both in terms of Europe, we're already in China, as you know, but not a major focus right now in terms of international.
spk21: Thank you.
spk01: Thank you, everyone. Thank you. Thank you for your question. There are no more questions in the queue, and I would like to turn the call over to Gitesh for closing remarks. Please go ahead, sir.
spk04: Thank you all for joining us today. I'd just like to thank our customers, our CCC team members, and our shareholders for a great start to 24. And as you hopefully saw, the durability of our business model continues to come through. We remain confident in our ability to deliver on our strategic and financial objectives while helping our customers and investing in future solutions at the same time. We look forward to talking to you again in late July when we report our second quarter results, if not sooner. Again, thank you so much for your continued interest and your support of CCC.
spk01: This does conclude today's conference call. Thank you for your participation. You may all disconnect. Thank you. Thank you. Thank you.
spk20: Thank you.
spk01: Good day, and thank you for standing by. Welcome to the CCC Intelligent Solutions first quarter fiscal 2024 earnings conference call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to your speaker for today, Bill Warmington, Vice President of Investor Relations. Please go ahead, sir.
spk14: Thank you, Operator. Good afternoon, and thank you all for joining us today to review CCC's first quarter 2024 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 2023 annual report on Form 10-K filed with the SEC. David Miller- Further these comments and the Q amp a that follows are copyrighted today by CCC intelligence solutions holdings incorporated. David Miller- Any recording retransmission or reproduction or other use of the same for profit or otherwise without prior consent of CCC is prohibited and a violation of the United States copyright and other laws, additionally, while we. will provide a transcript of portions of this call, and 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 the transcripts. Please note that the discussion on today's call includes 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 Kitesh.
spk04: Thank you, Bill, and thanks to all of you for joining us today. I am pleased to report that CCC began 2024 on a strong note. In the first quarter of 2024, CCC's total revenue was $227 million, up 11% year-over-year and ahead of our guidance range. Adjusted EBITDA was $94 million, also ahead of our guidance range, and our adjusted EBITDA margin was 41%. Our industry continues to be in the early innings of digital transformation, and CCC is well-positioned to be our customers' partner of choice for that transformation. On today's call, I'd like to share how the CCC Intelligent Experience Cloud is helping our customers navigate this journey and the growing adoption we are seeing across our recent innovations. I'll also provide an update on the continued progress we have made in broadening our shareholder base. My first topic is the role of the CCC Intelligent Experience Cloud in enabling our customers' digital transformation. CCC was an early pioneer in SaaS and cloud computing with the initial launch of our cloud platform back in 2003. Since then, we have continuously expanded and strengthened our capabilities. And today, our hyperscale, 100% multi-tenant platform connects more than 35,000 companies, and processes well over $100 billion of commerce annually. This technology backbone powers a wide range of mission-critical applications for the customers we serve, insurers, collision repairers, auto manufacturers, parts suppliers, and more, and is a key enabler of our ability to provide continuous innovation to customers with a rapid return on investment and minimal effort on deployment. Our cloud platform is also highly efficient. In 2023, our engineering teams deployed more than 1,400 releases to customers with high operating leverage, scalability, and reliability. Our transition from private to public cloud infrastructure last year further reinforce these advantages. Across the markets we serve, customers are increasingly looking to CCC to make it faster and easier to adopt our solutions and drive innovation into their business. This trend is being driven by a wide variety of forces, including macroeconomic changes labor shortages, and increasing complexity in day-to-day operations, challenges that can best be addressed through a highly integrated, highly connected AI-enabled platform. And critically, they're looking to rapidly transform and simplify their businesses without disrupting their existing operations. Doing this at scale requires intelligently orchestrating the data and workflows not just within a customer's four walls, but across the consumers and businesses they interact with. And with the recent introduction of the CCC Intelligent Experience Cloud, or IX Cloud for short, we are enhancing our customers' ability to solve this many-to-many problem with a cloud platform they already use every day. The CCC IX Cloud overlays a new event-driven architecture into CCC's existing cloud applications, customer workflows, and customer and partner systems. This microservices-based approach will make it faster and easier for customers to deploy new CCC solutions and will also increase the number of ways customers can use multiple CCC solutions together. Customers do not need to upgrade as the CCC IX Cloud represents an enhancement to their existing CCC Cloud platform. It just gets better. Throughout our history, CCC has helped customers navigate the complexity of our industry and use advanced, highly connected technology to solve the most pressing business problems. The CCC IX Cloud is designed to accelerate this journey in a way that is purpose-built to solve for the substantial increase in complexity in the P&C insurance economy we see today. Unlike most industries, where an existing supply chain converts raw materials into finished products and distributes them in a predetermined and repeatable manner, instead in the P&C insurance economy, The supply chain is created spontaneously after an accident occurs. Each insurance claim and collision repair is unique, and so are the hundreds of different decisions, tasks, and data flows that go into those claims and repairs. These are crucial moments for our customers and their customers, and our new event-driven architecture helps to align this highly complex supply chain so our customers can drive a step function improvement in their operating performance and consumer and employee experience. We are excited to see what they invent. My second topic is a growing adoption of our solutions. Our solid performance in Q1 was driven by the continued expansion of our multi-sided network and traction from new and existing solutions. In addition, we began rolling out the new top 20 APD insurance client we announced last year and had multiple insurers renewing and expanding their relationships with CCC. We have also continued to add new repair facilities and parts suppliers to the CCC network. We also saw strong demand and adoption of our AI-enabled solution across our different customer groups. For estimate STP, for example, we continue to see progress across volume, adoption, and the number of clients testing, piloting, and rolling out. Other examples are CCC subrogation, our suite of solutions that applies AI and workflow automation to both outbound and inbound subrogation, as well as impact dynamics, which uses computer vision to predict potential injuries to the occupants of a vehicle involved in an accident based on photos of a damaged vehicle. Both of these solutions continue to deliver significantly positive results for customers using them, often in the multiple millions of dollars, resulting in growing interest from more customers. We expect these positive demand and adoption trends to continue given the significant bottom line benefits insurers are seeing from these solutions. For repair facilities, we are continuing to add new rooftops and are seeing strong adoption of new products like Mobile Jumpstart, the solution we launched at the end of 2023 that uses AI to dramatically reduce the time it takes an estimator at the repair facility to generate an initial estimate, from an industry average of half an hour or more to less than two minutes. In Q1, almost 5,000 repair facilities used Jumpstart to complete tens of thousands of repair estimates. We're also continuing to see strong interest in the expansion of CCC One beyond its traditional focus on repair operations to help our customers run their businesses overall. Two examples of such solutions are Amplify, a quick and easy way for repair facilities to set up a modern, professional-looking website with deep integration into CCC One, and our consumer payment solution, which has already enabled over a billion dollars in partner payment collections for our repair facility customers. We feel good about the early traction and growth potential for both of these solutions and see many additional category expansion opportunities for repair facilities given our platform, network, and AI capabilities. The progression of these and other new solutions follows a pattern of innovation that we have observed over multiple decades. Building a great product grounded in tangible customer value with a rapid ROI provides a long-term runway for growth and strong referenceable customer relationships, which in turn leads to additional opportunities. The credibility we established with our original product, a tool to help insurers assess total losses, provided a pathway for us to deploy a state-of-the-art solution estimating damage to repairable vehicles. We then extended those same estimated capabilities to repair facilities, establishing direct repair in the expansive insurer repair facility network that exists today. In the years since, a steady stream of industry-first innovations has extended our platform and delivered additional value to customers. Workflow tools for insurers to manage the appraisal process. An advanced operating system for repair facilities to help them manage their day-to-day operations. Integrated parts ordering with thousands of connected parts suppliers. Mobile and then AI-based digital solutions that range from first notice of loss to appraisal to casualty and even subrogation and more. Our track record of delivering these and other innovations has, at its core, been enabled by the depth of our customer relationships with insurers, collision repairers, parts suppliers, and auto manufacturers. The result is an innovation flywheel that lets us incubate new concepts, test them with initial customers, and then deploy reference level solutions at scale across our customer base. And because we have such a broad portfolio of innovation, different customers can adopt different solutions in different increments based on their particular needs over time. This dynamic is at the heart of our durable long-term business model and enables us to consistently invest in R&D across economic cycles. $150 million last year and well over a billion dollars in the past decade. And with our projected 2024 revenue representing a fraction of the $10 billion plus market opportunity we see in digitizing the PNC insurance economy, we believe we have decades of growth ahead of us. My third and final topic is an update on the continued progress we have made in broadening our shareholder base. Since going public, we have made significant advances in expanding our shareholder base and increasing the liquidity of our shares. The secondary offerings and block trades from our private equity investors over the past six months have increased our public float as a percent of total shares outstanding as measured from Bloomberg from about 30% in October of last year to about 60% currently. We see this as an important development towards fulfilling our commitment to our shareholders. Let me conclude by saying that we are excited about what we have planned for 2024, the rising demand for AI-based solutions across our customer base, combined with our track record of driving growth through innovation and increasing the ease of adopting our solutions via the CCC IX Cloud gives us confidence 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.
spk10: Thanks, Kitesh. As Kitesh highlighted, we are seeing strong innovation and momentum across the business, as reflected in our track record of driving growth through category expansions and cross-selling. Our IX cloud architecture enables easier client adoption of our solutions and our durable business model. We are pleased with both top and bottom line performance, which reflects a balance between investment in our growth initiatives and ongoing margin discipline. Now, as we turn to the numbers, I will review first quarter, 2024 results, and then provide guidance for the second quarter in full year of 2024. Total revenue in the first quarter was $227.2 million, up 11% from the prior year period. Approximately eight points of our growth in Q1 was driven by cross-sell, up-sell, and adoption of our solutions across our client base, including repair shop package upgrades, continued adoption of our digital solutions, and the ongoing strength in casualty and parts. Approximately three points of growth came from our new logos, mostly with repair facilities and parts suppliers. About one point of growth in Q1 came from our emerging solutions, mainly diagnostics, estimate STP, and subrogation. Now turning to our key metrics, software gross dollar retention, or GDR, captures the amount of revenue retained from our client base compared to the prior year period. In Q1 2024, our GDR was 99%, which is in line with last quarter. Note that since the first quarter of 2020, Our GDR has been between 98 and 99% and is either rounded up or down, driven primarily by repair shop industry churn. We believe our strong GDR reflects the value we provide and the significant benefits that accrue to our customers from participating in the broader CCC network. Our strong GDR is a core tenant to our predictable and resilient business model. Software Net Dollar Retention, or NDR, captures the amount of cross-sell and up-sell from our existing customers compared to the prior year period, as well as volume movements in our auto physical damage client base. In Q1 2024, our NDR was 107, consistent with our average across 2023. Now I'll review the income statement in more detail. As a reminder, unless otherwise noted, all metrics are non-GAAP. We provide a reconciliation of GAAP to non-GAAP metrics in our press release. Adjusted gross profit in the quarter was $177 million. Adjusted gross profit margin was 78%, down slightly from 79% in Q4 and up against 76% in Q1 of 2023. The stronger year-over-year adjusted gross profit margin primarily reflects operating leverage on the incremental revenue. Overall, we feel good about the operating leverage and scalability of our business model and our ability to deliver against our long-term adjusted gross profit margin target of 80%. In terms of expenses, adjusted operating expense in Q1 2024 was $92.9 million, which is up 8% year over year. This was mainly driven by higher IT-related costs as well as investment in our customer-facing functions. Adjusted EBITDA for the quarter was 93.7 million, up 18% year-over-year, with an adjusted EBITDA margin of 41%. Now, turning to the balance sheet and cash flows, we ended the quarter with 191 million in cash and cash equivalents, 782 million of debt. At the end of the quarter, our net leverage was 1.6 times adjusted EBITDA. Free cash flow in Q1 was $39.6 million compared to $18.5 million in the prior year period. Free cash flow on a trailing 12-month basis was $216 million, which is up 56% year over year. Our trailing 12-month free cash flow margin in Q1 2024 was 24% compared to 17% a year ago. Unlevered free cash flow in Q1 was $52 million or approximately 55% of our adjusted EBITDA. Q1 is usually our lowest conversion quarter because it's when we pay our annual incentives. While our level of free cash flow can vary quarter to quarter, we expect it to continue to average out in the mid 60% range of our adjusted EBITDA on an annual basis. I'll now cover guidance beginning in Q2 2024. We expect total revenue of $228.5 to $230.5 million, which represents 8% to 9% growth year-over-year. We expect adjusted EBITDA of $89 to $91 million, a 39% adjusted EBITDA margin at the midpoint. For the full year 2024, we expect revenue of $944 to $950 million, which represents 9% to 10% year-over-year growth. We expect adjusted EBITDA of $389 to $395 million, which represents 41% adjusted EBITDA margin at the midpoint. So three things to keep in mind as you think about our second quarter and full year guidance for 2024. The first point is that we remain confident in our 2024 financial target and have increased the midpoint of our guidance ranges. We're pleased with the broad-based strength that we saw across the business in Q1. But keep in mind that year-over-year revenue growth rates can vary quarter to quarter because of contract timings, variations in subscription revenue contracts with volume-based elements, and the pace of client adoption of new solutions. The second point is that the emerging solutions contribute about one point of growth in Q1, and we expect the upsell, cross-sell of these new solutions will contribute about two points of growth in 2024 as they continue to scale. Gitesh mentioned in his remarks, we are seeing positive feedback in client engagement around these emerging solutions. And this gives us confidence about the contribution to growth in the back half of 2024. The third point is that in prior years, we experienced seasonality in our adjusted EBITDA margin with the second half levels being above our first half levels and Q2 being the low point for the year. We expect 2024 to be consistent with this pattern. with the first half margins being constrained by the reset of employee related expenses and the cost of our industry conference. Overall, the strong trends we're seeing in renewals, relationship expansions, and new solution adoptions reinforces our competence in the underlying strength of the business. The combination of our durable business model, advanced AI capabilities, interconnected network, and the broad solution set puts us in a unique position to help our customers in the P&C insurance economy reduce their cycle times and administrative costs while improving their consumers' experience throughout the claims process. We are confident in our ability to deliver against our long-term target of 7% to 10% organic revenue growth and mid-40s adjusted EBITDA margin as we continue to execute on our strategic priorities and generate value for both our customers and our shareholders. With that, operator, we're now ready to take questions. Thank you.
spk01: Thank you. As a reminder, if you would like to ask a question, please press star 11 on your telephone. Please wait for your name and company to be announced before you proceed with your question. As well, we ask that you limit yourself to one question and one follow-up. One moment for our first question. Our first question comes from Saket Kalia of Barclays. Your line is open.
spk02: Okay, great. Hi, guys. Thanks for taking my questions here, and nice strong start to the year. Thanks. Sure. Gitesh, maybe to start with you, listen, the quarter and the guide are pretty straightforward to the earlier point, so maybe I'll just start with a higher-level educational question. Can we just talk a little bit about the competitive environment in the casualty market? You know, I think you've talked about how There's plenty of room for adoption for casualty within your APD customer base. What types of solutions do you need to displace to make that happen? And maybe just qualitatively, how are those conversations sounding maybe more recently?
spk04: Sure. Just to kind of dial back, like you said, a little further. So first and foremost, what we're seeing across the board for our customers is complexity of managing medical claims and the dollars involved. are increasing significantly, and they vary by geography, vary by jurisdiction. There's a lot more complexity, a lot more costs starting to creep in. And one of the key advantages that we bring to the table that is fairly unique is that one in every five auto claim results in a medical claim. So when you have visibility to the breadth of the auto physical damage claims that we have, The physics of the accident actually help inform what may or may not happen downstream. And that's a very important connection between the auto physical damage side of the business and what happens when you have to deal with a medical claim. So there are some very unique things we have visibility to. One of the examples of that is when we introduced impact dynamics. which is an AI-based solution that takes the physics of the accident, the photos of the accident, imputes the potential impact of medical claims and projections down the road. That's a very, very unique offering, and that is one that can be adopted by whether existing customers or not, people can adopt it. And I think we mentioned in the last, probably last call, that we had a top five carrier adopt that solution and saw significant impact. So that's the linkage. I would just say on a broader basis, we have continued to see over the last year more clients adopt our casualty solutions. And, you know, there's always some unique aspect in terms of challenges they're trying to solve. And that's really where we've been very focused is working with customers to solve those problems. So that's really kind of the overall view of what we're seeing. But bottom line is we are continuing to see adoption of customers on casualty.
spk02: Got it. That's very clear, very helpful. Brian, maybe for my follow-up for you, you know, you've talked about sort of the growing contribution of from emerging solutions. I think we said it will go from one point of growth here in Q1 to maybe two points for the year. Can you just talk a little bit about what degree of visibility you kind of have into that? You know, is that growth? I mean, that's very healthy growth, of course, off a small base, but is that sort of dependent on volume usage, or is there some element of sort of contracted visibility that you have into that which gives you confidence into that increase in growth contribution.
spk10: Yeah, sure, Saket. So just on the metrics, so Q1, as you said, we had one point of growth from the emerging solutions. We do expect that to step up and continue to scale as we go through the year. We're expecting two points of growth contribution from emerging for the full year. To the question around visibility, you know, we look at it around three areas. One is existing clients that are using the product, paying for the product, that they continue to adopt volume and ramp up their volume, and we have visibility into that. We also have clients that are testing the product and will move from test into pay and full production rollout, which, again, there's good visibility. And then the third is converting pipelines, assigning new clients onto these new solutions. So across those three areas, we have good visibility and feel confident in the step-up that we're expecting in the second half. As Gitesh made in his remarks, you know, the positive feedback from clients that are using the product or testing the product The operating metrics that we're seeing as they're testing it is all very – is going well, and we do feel that the step up, you know, as we get into the second half year. And then towards the long term, we talk about the emerging solutions being more like three to four points of growth, and that will develop over time.
spk27: Great to hear. Thanks, guys. Thank you.
spk01: Thank you. One moment for the next question. And our next question will be coming from Michael Funk of Bank of America. Your room is open.
spk26: Yeah, great. Thank you for the question tonight, guys. So, Gitesh, first one is for you. You mentioned a few times in the call, customers are very early in the cloud transformation and obviously highlighted the benefit from the emerging solutions. So, you know, maybe just, you know, remind us of the revenue opportunity from the products like S2MFTP and and subrogation i mean clearly these highly repeatable um you know human interaction events are very you know very attractive to replace with ai so you know where are we in that transformation and do you expect we'll see a tipping point in the adoption as you ramp towards the um the revenue opportunity you've talked about maybe you want to highlight again tonight uh sure uh sure michael
spk04: Let me kind of start with first broad-based patterns that we've really seen with our customers over literally the last two or three decades. So what typically happens is that customers are continuously looking to deal with complexity. I'll give you a couple of minor examples that lead into some major decisions, right? The number of parts per vehicle used to be eight parts per vehicle. eight parts per vehicle. Today, we're up to 14 parts per vehicle. So the complexity on a whole range of fronts is increasing. And at the same time, the macro trend we've talked about, which is the number of experienced people in the industry is decreasing, both for our insurance customers, their facilities, the demand for experienced people is strong. whereas the supply of really talented and capable people is less. So across the board, our customers are trying to solve more complex problems in a more effective and more efficient manner. And that is the big, broad macro trend that we have seen. And what we are now seeing, especially as pricing starts to normalize, what we are seeing is customers start to make be much, much more thoughtful about digital transformation in a broader way. So we're seeing more interest in digital transformation. If you remember when we introduced our first AI solution, which went from photo to an estimate, I think that was in November of 2021, AI was not widely talked about as it has been, let's say, in the last 12 to 18 months. So people are starting to really get comfortable that AI as a capability that amplifies their people's capability to handle more decisions more quickly across the board. So that macro view of digitizing, using technology to make decisions is happening. So now getting to the specifics of your question. So when you look at something like estimate SDP, what you're seeing is that it really speeds the ability for staff appraisers, for consumers to send in pictures, get an estimate, or jumpstart at the repair facility, really substantially reduces speed at which estimates can be produced. And then when you think at solutions like subrogation, where you might get a 200-page demand for inbound, And our solution, in a matter of a minute or two, can really give you a very fast and very precise response that increases the accuracy. So every single solution we're developing has these characteristics in terms of efficiency, the effectiveness, increasing the productivity of people, and a very specific ROI. And hence, that's why we've focused on innovating across so many different solutions.
spk26: Thank you for that, Kitesh. Maybe one more, Brian, if I could quickly. You've talked about the cloud infrastructure transition that you undertook moving from private to public. Any comment on how to think about that impacting operating leverage or margin as you've made that transition?
spk10: Yeah. Hey, Mike. Yeah, we have fully transitioned. So we are on the new infrastructure and serving clients and deploying solutions through that. We do still have some legacy cloud environment that we are winding down, and we'll be doing that over time. And so we talk about the IT hosting costs being up in the quarter. Part of that is just the growth of the business and building out against the pipeline and innovation. And then part of it is the decommissioning of the legacy platform environment that will wind down as we go forward. Overall, we're still really happy with the margin progression. We had about 240 basis points of margin progression quarter over quarter or year over year. So again, within that, we feel like we're in a really good spot within our cost base.
spk26: Great. Thank you both.
spk27: Thank you.
spk01: Thank you for your question. One moment for the next question. And our next question is coming from Tyler Radke of Citi. Your line is open.
spk07: Hey, good afternoon. Thanks for taking the question. I wanted to ask you, Jitesh, about the new event-driven architecture you referenced on the call. I'm sure we'll hear a lot more about that out at the conference here in a couple weeks. But can you just talk about the, you know, theoretical future use cases, what you're doing from a back-end technology perspective to enable that? And, you know, if there's an opportunity for monetization, either price increases or new SKUs with this new architecture.
spk04: Sure, Tyler. Happy to take that question. What we have done over the years, as you know, we have been running a multi-tenant cloud platform for many years. And one of the key things that we see in terms of giving our customers a step up in performance is really taking events and decisions that are taking place across the network. What do I mean by that? That means you might have a repair at a repair facility that is not actually a repair but might turn out to be a total loss. You might have some other decision on the medical front. You might have a consumer who changed his or her mind about something that needs to be reflected downstream. So many of these decisions and events would take a lot of time to move from one place to the other. And what we have developed is an event-based architecture that really very quickly moves events from one place to the other, maximizing essentially the overall performance of the claim, because there are literally hundreds of decisions that have to be made in every claim, and the permutations can be intense, and the data that's needed can be pretty intense. And what we're seeing with our AI, which has been delivered in line with existing workflows, is the combination of AI and this event-driven architecture, we think, as a major way to really deliver more functionality and capability. And this platform, which we call the CCC IX Cloud, is an overlay on our existing architecture. So customers will get it automatically. It's already included. There's no upgrade path. it works, everything works without disrupting what they have and works in line. But what it really does is gives us the ability to deliver many, many more innovations across the entire supply, across the entire supply chain with those solutions having very unique and specific ROIs. And those will be, you know, those solutions will be are deployed by customers, and they'll have their own unique ROI and pricing, but not for this architecture.
spk07: Very helpful. If I could ask a question, follow-up for you, Brian. So just on the emerging solutions contribution, the one point this quarter sounds like two points for the full year. I guess the path to get there, should we think about an exit rate of three points or something above two? Or is the way to think about it is it ramps up to two points by Q4? Thank you.
spk10: Yeah, it's, hey, Tyler. Yeah, as I said, we're going to continue to see the step up as we go through the year and the contributions can be larger in the second half. We're not specifically breaking down kind of exit run rate. I would just reiterate the two points for the full year we feel good on. Over time, we're expecting and have talked about within the long-term guide that's stepping up to three to four points. And we'll see that progress as we go from how we exit this year into 25 and beyond. So we're not going to get more specific than that at this stage.
spk04: Hey, Tyler, there's just one more thing I'd add to what Brian said. You know, from my vantage point, all the revenue we deliver today were an emerging solution at one point or the other. So when you think about it, all of these solutions, in fact, they all have very long runways. And what I get excited about is that some of the solutions which were emerging at one point, 10 years later, 15 years later, they're still continuing to grow. And some 25 years later are continuing to grow very nicely. So our focus often is on building and delivering those long, those solutions with long runways. And I just want to make sure that, you know, I add that piece as well. Very helpful. Thank you.
spk01: Thank you. One moment for our next question. And our next question is coming from Alexi Gogovlev of JP Morgan. Your line is open.
spk15: Hello, everyone. Thank you for letting me ask a question. Kitesh, I wanted to ask you about payments. You've mentioned on today's call, once again, the $100 billion in transactions on your platform. When do you expect to see a more pronounced tailwind to revenue growth from greater involvement in the payments world?
spk04: You know, as of, you know, Alexei, good to hear from you. And as I've said before, The opportunities and the complexities of what our payment solutions can solve, we are seeing that every day with customers. There's a lot of complexity. It will run, we think, at a slower pace compared to our other solutions for sure. And we don't think, you know, I think towards the latter part of the year, we can hopefully give you more of an update on that. But we have continued to expand the capabilities of that solutions and a broader set of problems our customers want us to solve. So we've been continuing to work on that, but that's where we are.
spk15: Thank you, Gitesh. And Brian, could I ask you to elaborate a bit more on the sequential increase in stock-based compensation in the quarter?
spk09: Yeah, absolutely.
spk10: So, yes, stock-based comp did go up in the quarter versus where it's been trending more recently. Q1 is what we expect to be the high watermark for the quarter as a percent of revenue. We do expect it to step down and move down as we go through the year. As we get into 2025, it will look like a more normalized rate. and be more like 12 to 14% of revenue. That's what we expect kind of running from 25 going forward. So we do expect the step up that we saw in Q1 to moderate and to normalize when we get into next year.
spk16: Perfect. Thank you, Brian.
spk01: Thank you. One moment for the next question. And our next question will be coming from Josh Baer of Morgan Stanley. Your line is open.
spk12: Thanks, and congrats on a strong quarter. Another question on the growth algorithm. Emerging solutions increasing contribution is definitely exciting. It's a clear positive. I think it's a key to the durability of growth. The question's on the rest of the parts of the growth algorithm. If emerging solutions was a one-point Contribution on 11% overall growth this quarter going to two points on 9% total that's several points of growth coming away so just wondering where you know where's that coming from and and you know, and why wouldn't the growth in logos are established solutions be more durable.
spk10: Yeah, absolutely. So the way maybe we start at the long-term guide and then we can walk backwards because the way we frame the long-term, so we talk about 7 to 10 organic revenue growth over time. We say 80% of that will be from existing clients with cross-sell, up-sell, and 20% from new logo. So that's where we set the expectation as we're moving towards Where we are today, as you highlighted, we're seeing about 30% growth from new logo. And then out of the remaining growth from cross-sell upsell, you know, high percentages from established. Over time, we just expect the emerging to become more to be a larger part of the equation going forward. So it's more of a glide path than it is a hard cutover. but how we see it playing out over time.
spk12: Okay. I guess another way to put it more positive has been if new logo growth or established solutions held in a bit more durable over the next few quarters and you have confidence in the step-up in emerging solutions, that would be upside for the full year. Does that make sense?
spk10: Yeah, it does. I mean, we're always looking to deliver against the guide or outperform the guide that we have in the market. So you know, we're pushing on all sides of it, you know, driving hard at the core and the established solutions, driving hard at new logos and continuing to remain strong and then building out the, you know, getting the momentum behind the emerging. So, you know, we're driving all three of those. So, yeah, that's a good way of framing it.
spk18: Great. Thank you.
spk01: Yep. Thank you for that question. One moment, please, for the next question. And our next question will be coming from Dylan Becker of William Blair. Your line is open.
spk24: Hi, guys. It's Faith on for Dylan. If I could start with my first question being a more high-level industry trend that we're seeing. So as we continue to see premiums increase, we're also seeing an uptick in issues with drivers either being uninsured or underinsured. How is this playing into the overall level of complexity in the claims ecosystem, and how are you seeing the different stakeholders react to this?
spk04: Sure. You know, a couple of things. We are seeing some variation state by state as well in that mix. So customers are noticing and have started to deal with that, both at first notice of loss and also in terms of how that makes its way into medical claims and a variety of other places. And it's not had a material change on what our customers really pay for is frequency times cost of claim. So it hasn't impacted that number for our customers, but it has, like you pointed out, increased the complexity. And essentially, in something like subrogation, how they recover those dollars is That is really where we're seeing some specific differences in how you recover dollars, especially when your policyholder is not at fault. And that's where we're seeing more complexity.
spk23: Okay, cool. That's helpful color.
spk24: And then for my second question, throughout the call there's been a lot of talk about the different AI advancements between inbound subrogation and the IX cloud. how are these all fitting together to kind of drive those better outcomes for the ecosystem? And what's really ahead on the AI roadmap as more stakeholders get more comfortable with this technology and look to adapt it?
spk04: Yes. The short answer is yes. We've had the benefit of taking this industry from books, paper, and pencil to write collision estimates, to laptop computers, to CD-ROMs, to artificial intelligence. And so we've kind of continued to work closely with our customers. And if you look at, for example, adoption by various segments of our customer base, obviously our OEM customers have very sophisticated needs. and understanding. Our repair facility customers, I think we just said that we had over 5,000 of our repair facility customers adopt and use Jumpstart, which really allows them to take pictures, write an estimate in seconds, and then augment that. So we are starting to get a comfort level from the repair facilities. And obviously, for the last two to three years, we've had these solutions deployed with insurance companies. And we are seeing customers very carefully and thoughtfully continue to adopt. And this is where transparency becomes really important and traceability of how those algorithms came about. All those things are really important. And the accuracy of what we can deliver also becomes extraordinarily important. So that comfort and confidence we can give to our customers that when we produce something, we also produce a confidence interval about how confident we are about an answer that then people are using to make those decisions on. So the short answer is yes. Overall, we continue to see very strong interest.
spk19: All right, awesome.
spk01: Thank you. One moment for the next question. And our next question will be coming from Gary Stapino of Barrington Research. Your line is open.
spk11: Hey, Gitesh. Hi, Brian. Hey, Gary.
spk13: A couple of questions. With the introduction of the inbound subrogation, did that automatically attach to entities that were using the outbound subrogation, or is that sold a la carte? you know, inbound and outbound sold a la carte?
spk04: Hey, Gary. The short answer is yes. It can be adopted individually. So we have customers that have chosen to adopt both inbound and outbound at the same time. We have customers that started out, starting out with outbound. And so it can work any way. And that's generally how all our solutions work. You can adopt any components because it works seamlessly with all the other components.
spk13: Are you finding that the ones that we're using outbound are rapidly adopting inbound too to have that end-to-end solution?
spk04: It's actually more the other way around. We are seeing much more interest in inbound because of the complexity, and then many of those customers are choosing to also say, hey, once we get this rolled out, we want to move to your outbound solutions. Some are actually starting with both.
spk13: And then just one question on this cloud IX. We're talking about taking events and decisions across the network to improve claims processing. Would that also be applicable to if there was a dispute at who was at fault at an accident? Can this product help with that since you've got a whole data set of various accidents that show who was at fault if fault was determined?
spk04: Yeah, those are things that we'll probably come up with because what you're fundamentally talking about is liability determinations. So when you think about liability determination, there are a number of factors that actually come in. For example, we have intersection data. We have weather data. You know, was someone taking a left turn? You know, who had the right of way when a certain accident took place? We also have some pieces that can do accident reconstruction. So these are all capabilities that we can introduce. And the power of the IX cloud is to put all of these pieces together in a seamless, easy to absorb manner so that at an individual claim level, you can get optimum performance. Thank you.
spk01: Thank you for your question. One moment for the next question. Our next question will be coming from Samad Samana of Jefferies. Your line is open.
spk08: Hey guys, thanks for taking my question. This is Jeremy on FirstCod. A lot of my questions have already been asked. Maybe one more quick one on emerging products. So in order to achieve that three to four points of growth in the longer term, I guess, what percent of the client base do you see as likely having to adopt these products? I guess, what's the penetration that you need there and what's that terminal penetration?
spk10: David Miller- yeah hey good question yeah I mean we look at it as a deployment of the solutions across the existing Bay, so you know when we think about kind of where we are with the ecosystem and all the participants of the ecosystem. David Miller- Many of them have the established solution, so we just see them stepping up the penetration across the emerging. So we're not kind of calling out a percent of our existing clients to convert. It's more that as they step into the adoption that it will ramp up over time.
spk08: Gotcha. That's helpful. And then maybe a quick one. You mentioned you began rolling out the new top 20 APD insurance clients that you announced last year. I guess you maybe remind us what does a rollout like this look like and when do you expect the full revenue contribution from this insurer? Sure.
spk10: Yeah, absolutely. It will start to fully contribute in the second half of the year. It will start to play into the Q2 numbers, but not fully rolled out. So it will partially come into Q2 and then fully roll out in the second half. We just started.
spk08: Gotcha. That's a useful color. Thanks for taking my questions, guys. Yeah, absolutely.
spk01: Thank you for your question. One moment for the next question. The next question is coming from Kirk. My turn.
spk06: Hi, this is Dylan for Kirk. And thanks for taking my question. The auto insurance has been up recently based on inflation. You know, with that in mind, how are companies thinking about IT spend in your industry?
spk04: In fact, you know, I was just talking to a customer in my office just today. And what they are looking for is, you know, any solutions that can give them rapid ROI. So people are very open to more solutions. They're not looking at this as should I increase my IT spend or should I decrease my IT spend? What people are saying is solutions that I can deploy easily that give me ROI, I am ready to put that in place. And the last two years, have shown that people need to be competitive.
spk17: Great, thanks.
spk01: Thank you for your question. The next question will be coming from Chris Moore of CJ Securities. Your line is open.
spk05: Hey, good afternoon, guys. Thanks for taking the question. Most might have been answered, but... obviously, you know, given the conversation you started with on on the investment, you're making an ax cloud, you know, and across the board, R&D was, you know, higher than normal close to 22% this quarter, almost 50 million, just trying to understand if this is kind of the new normal level moving forward, or, or, you know, kind of how we should think about that at this stage.
spk03: That might include stock comp.
spk05: Yeah, it does, Chris.
spk10: So it's Brian. Yeah, you have to look at it kind of in a excluding the stock comp. So that will be the biggest driver. If you exclude stock comp, it does continue to grow, but it's pretty moderate. We talked about in the past that we had a meaningful step up in capacity that's built into the system, and we feel like that capacity is what we need to drive innovation going forward. And so we're comfortable that R&D will continue to grow, but grow at a reasonable pace and continue to drive leverage across the business. And we're very comfortable on the margin progression that we're talking about for the full year, and we're comfortable about the margin progression to our targets of getting to the mid-40s over time.
spk05: Got it. I appreciate it. I'll leave it there. Thanks, Chris.
spk01: Thank you. One moment for the next question. Our next question will be coming from Gabriella Borges of Goldman Sachs. Your line is open.
spk22: Hi, good afternoon. Thank you. Good question, Brian. I wanted to ask the new logo question in a couple of different ways. The first part is around the success that you're having in the repair shop community. Remind us how to think about penetration there and what the limiting factor is to the number of new logos that you can get in any given year within that ecosystem, given there is a little bit of a network effect as you read.
spk10: Yeah. Hey, Gabriella. So the way we look at the shop network is about 40,000 repair shops that are kind of the marketplace. Today we have 29,500. We've been adding, if you look back over the past several years, about 1,000 net new logos a year, and we continue to see that pacing and very comfortable with that pacing for the year and in the near term. So really good momentum, continue to see strength in new logo adoption at the shops.
spk22: That's helpful. And the second part of the new logo question is, In the past, when you've talked about expanding overseas, it's been with a lens towards M&A. So my question to you is, what is the limiting factor to expanding new logos overseas organically? And maybe give us an update as to when you think the timing might be right to become more aggressive with M&A and expanding internationally. Thank you.
spk04: Hey, Gabriella, this is Gitesh. I just say that, you know, our first priority when we look at M&A is domestic, is to look at the opportunities we have in expanding our product set. For example, with subrogation, if you remember, you know, a little over, it's been almost about two years now. And that was a great example where we took a fantastic team and then really built it out. And those kinds of expansions we look at. On the international front, we are not at this stage. We continue to spend time looking at it, both in terms of Europe, we're already in China, as you know, but not a major focus right now in terms of international.
spk21: Thank you.
spk01: Thank you, everyone. Thank you. Thank you for your question. There are no more questions in the queue, and I would like to turn the call over to Katesh for closing remarks. Please go ahead, sir.
spk04: Thank you all for joining us today. I'd just like to thank our customers, our CCC team members, and our shareholders for a great start to 24. And as you hopefully saw, the durability of our business model continues to come through. We remain confident in our ability to deliver on our strategic and financial objectives while helping our customers and investing in future solutions at the same time. We look forward to talking to you again in late July when we report our second quarter results, if not sooner. Again, thank you so much for your continued interest and your support of CCC.
spk01: This does conclude today's conference call. Thank you for your participation. You may all disconnect.
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