Awesome. Thank you, everybody, for joining today, day one. Pleasure to have the CCC management team here, CEO, Githesh Ramamurthy, and CFO, Brian Herb. I'm Dylan Becker, the Research Analyst that covers CCC here at William Blair. For all the necessary disclosures, you can find those at williamblair.com. Gentlemen, thank you for joining us today. Bill has slides that he'll be flipping through as well, just as a reference point for context of what we're speaking about today. But maybe as a way to kick it off, Githesh, for those that aren't as familiar with CCC here in the room today, can you give us a quick context, kind of what CCC does, the value proposition you bring to the auto insurance ecosystem, and we'll dig into kind of the network dynamics and the benefits of that?
Super. So first, I have to ask you, how many people have a car? How many people have insurance? Okay, same number, okay. So that tells me that on balance, $350 billion are collected as premiums, and $300+ billion are spent in auto claims. So what CCC does, in a nutshell, is to make that whole process efficient. So we have 35,000 customers, from insurance companies, collision repairers, parts providers, car companies. It takes an orchestra to have a seamless process end to end. So that's really what we help deliver those efficiencies to those customers, and at the end, allows those customers to serve their policyholders, which clearly most people in this room are.
Maybe, Brian, piggybacking off of that, too. We've got close to 40,000 ecosystem players here. What does that equate to from a financial perspective? Obviously, a lot of scale in the business, but think about kind of the revenue profile, the financial profile, maybe some metrics to kind of peg that as well.
Yeah, absolutely. So we are a Rule 50 company. So if you look at the last five years, we've averaged revenue growth on an organic basis of 11%. Last year, we finished with margins over 40%. If you go back five years, the margins were thirty, thirty percent. So we've seen 1,000 basis points over a five-year period as well. So we've been scaling the top line. At the same time, we have been scaling EBIT, EBITDA as well. We operate in a large, underpenetrated market, so we think about the TAM at about $10 billion. And our revenue is coming up to about $1 billion, so we're, we're just under 10% penetrated in our TAM.
When you look at our current solutions that we have in the market or will be in the market this year, we look about half the TAM is covered on existing solutions, so about $5 billion, if we sold our existing solutions into the market. Couple other metrics to hit on. We very much are a cross-sell story, up-sell. NDR is 108, which is where we ended NDR last year. We have long relationships with our clients, and we—they have very... The network and software is very sticky. We have a gross dollar retention of 99% as well. So those are some of the key metrics that we look at as across the business.
Fantastic. And obviously, that's a, that's a very unique profile in and of itself. Githesh, you touched on this ecosystem's dynamic kind of coming out. Obviously, working with the insurance carriers, working with the repair facilities, working with the parts providers. There's a lot of complexity in this ecosystem. Can you help us kind of get a sense of what's driving change across that ecosystem today and how that complexity creates opportunity?
Sure. So if you look at the average car, complexity has increased pretty dramatically. Cars have more sensors, more parts, more computer chips, cameras, and the whole bit. So what that has done is increased a dramatic increase in the complexity of what it takes to evaluate, how should I process this claim? Should I repair this car? Should I total this car? What parts should be purchased? And which repair facility can actually repair this car? It's got aluminum. So it creates a massive amount of complexity, and there's massive model proliferation. Then by then, you add electric, you add hybrids, powertrains, a lot more complexity. At the same time, the industry is facing a very secular challenge, shortage of labor. Quick show of hands, how many of you have friends who've gone into the collision repair industry recently? Not many.
So the influx of people going into collision repair is also less. So at the same time, people with 20-30 years of experience are retiring. So what we've been able to do is to really help our customers across the board manage these three things colliding in state. A substantial increase, inflation as cost, and increase in quote, "The cost of insurance," primarily driven by the cost of claims, complexity of the vehicles, and a labor pool that is getting tighter and tighter across the industry. So technology is seen, and our technology is seen increasingly as a way to solve this.
And that probably drives benefits throughout the data network that we've talked about as well, right? How do you think about the scale of the data that you guys are ingesting, what you guys can cover to address this complexity, and what that means for delivering value, automation capabilities, and things of that like for the insurance industry?
Yeah. So the other thing we benefited from is that, you know, having wonderful customers across the entire ecosystem means we have about $1 trillion of historical data. That means data about cars, about parts footprint, about labor, about every medical claims. So that also feeds. For about a decade, we've been investing in Artificial Intelligence for about a decade. We released our first commercial products in 2021. So that data set is increasingly helping deliver Artificial Intelligence, which is based on the data sets that we have. So that's been of enormous value in addition to helping our customers benchmark performance.
With that as well, too, that would obviously, in turn, I would think, drive a lot of competitive differentiation. How do you think about kind of the competitive landscape off of that? Is this data something that really you guys have only been able to build out, or are there other competitors out there that are doing something similar?
There are really two dimensions, right? On the data front. The first dimension is that given the breadth of the customer base we have, we operate the largest network in the industry by far of insurer, network of insurers, repairers, parts providers, and all of that. So by nature, it is the largest network with the most amount of transactions, and it generates a maximum value of each participant. If you're an insurance company, you want to be on the network that gives you the broadest number of suppliers. If you're a repairer, you want to have the broadest number of insurers, and so on. So that has been extraordinarily valuable in terms of the data set. The second element of the network is the latency of the data.
So that means on a given day, the amount of data that we see, the amount of information flows that we see, is substantial. So when we look at artificial intelligence, we look at drift in AI and the ability to correct and provide accuracy, that latency. So if part prices change in Tifton, Georgia, or Nashua, New Hampshire, we can reflect those capabilities in a statistically valid sort of way very quickly. So scale, granularity, and latency are all very important factors.
Yeah, it's almost at like hyper-local precision-
Exactly.
-that you guys can provide.
Exactly.
Brian, you touched on some of the financial metrics, the emphasis on cross-sell. Any pairing with the data network, how we should think about kind of the core solution set, that has been built out over time, but more of some of the emerging solutions, maybe the contribution, the sliding scale?
Yeah, absolutely. So if you look at the last quarter that we delivered, we did 11% top-line growth. We break it down, we had three points that came from new logos. We had eight points that came from cross-sell, up-sell. Within the eight, seven, about one-- one point was emerging new solutions. So new solutions are just starting to contribute and just starting to scale. The way we frame new solutions, they will be diagnostics, our subrogation solution. Estimate- STP are kind of the three flagship. Then there's other releases that are-- have just recently come into market, and there'll be more releases that come into market, this year.
We do expect the emerging solution set to continue to scale, and we've highlighted that today at one point of growth and contribution, that will continue to have a larger contribution if you go to the second half of the year. This year, we think about more like two points at the end of the year. Over time, it's gonna look more like 50/50 cross-sell, up-sell coming from the emerging solutions versus solutions that we've established and had in market for years.
Githesh, maybe give us a sense of kind of what some of those new emerging opportunities or initiatives are and how that's been enabled by, by the ecosystem and data scale that you've built out.
Yeah, you can see on the slide, there's a number of new emerging solutions.
Yeah, they're from that, yeah.
That we're building. We've actually increased the amount of R&D in the number of solutions now. And, Estimate-STP is a great example of that. We released a product where once you... I don't know how many people in this room have had an auto claim, but the old way, somebody had been waiting for somebody to come out to see your car. Today, the carrier sends a link through CCC, you can actually go around your car, go click, click, click, click, click. The AI will guide you through the taking of the photo, and literally within seconds tell you that, "Hey, this car can be repaired for exactly this amount," a detailed estimate. And we have the largest network of repair facilities to connect the drop and appointment to the calendar of the repair facility.
So if you do a search on Google, even on Google search, you can drop an appointment into the calendar through CCC Repair. So all of those capabilities. So Estimate-STP is now, you know, we've gone from about 1% of claims to about 3%. So which is still in the low billions of dollars because we process substantially more than $100 billion a year. But what's exciting is that, you know, a year ago, we had about 20 customers using this capability. We today have 30 customers using this capability. So almost doubled. And so that is an example of a solution enabled by the network, enabled by the data. Artificial Intelligence now has the capability to actually give you a blind list of what it takes. And then there are solutions like diagnostics, where every car now, after an auto claim, needs a diagnostic.
five or 10 years ago, maybe 3% of cars were scanned. Now, every new car in the last few years has to be scanned before it's repaired. That creates added complexity, a data set that we manage, then newer solutions like subrogation, which we just released-... Yeah, so there's a number of new solutions we're asking.
Where does customer success fit into the CCC story as well, too? Because I know Net Promoter Score is a big metric you guys focus on-
Yeah.
But it should also incentivize willingness for, for these customers to try some of these newer solutions.
Yes, because at the heart of every product we've ever built or delivered is a very fundamental ROI for the customer. Whether you're a repair facility, parts provider, an insurance company, we deliver a bottom-line ROI, and that is tangible, that's measurable, and on every solution we deliver also reduces cycles almost across the board by nature. And the third thing is, when you look at it from a policy holder standpoint, are we impacting, are we making that process easier? Because you look at everybody's lives are getting much more complex. So you, you're comparing your claim experience to what maybe your bank provides or what Amazon provides or what Netflix provides, and that's really what we're helping our customers deliver as well.
That makes a ton of sense. Maybe, Brian, from a financial perspective and how you kind of contract, right? What does a typical customer look like for you guys? Kind of how much of the revenue is recurring? What's the right way of thinking about financial-
Yeah.
Metrics there?
Yeah. So, the vast majority of our revenue is subscription-based. About 80% is subscription-based, 20% is transactional. But even the transactional are part of long-term contracts, and so that is recurring revenue, the transactional part as well. Most of our deals are three to five- year deals. So we have really good predictability around the revenue model. It's a cross-sell, upsell story that we're really focused on. Kind of the adoption of new solutions is really the build of the revenue going forward. But it's a durable revenue model. It's predictable, and it is a, because of the cross-sell, upsell, it also helps drop through margin as we do scale business.
Right. Okay. Githesh, going back to you here. Thinking about obviously bringing value to this overall ecosystem, we talked about subrogation and some of these newer initiatives as well. What does that unlock for some of the challenges carriers are facing, too? Whether it's fraud detection, obviously, providing context around what actually happened in the physical damage or the accident in and of itself.
So that's actually quite a number of things that we are now. We can get, you know, back data from the vehicles themselves that can inform it. We can take, you know, maybe take photos, or the customer send us photos of the accident. We can actually impute the physical injury or the injury from that. We actually do very sophisticated physics around the impact forces of the accident and the likelihood of bodily injury from that. So we have those capabilities. So the innovation that we're doing on a very clean tech stack allows us to really do a range of innovations that all the different pieces connect to. Because you think about a single claim, single claim, I start with, how do I handle the first, you know, the reporting of the claim?
And then every facet of scheduling, the repair, the payments, subrogation. So we link all of these solutions in a way that delivers a very unique value to our customers.
Where does this transition, if you want to call it that, to the IX Cloud help-
Yeah.
unlock and enable the connectivity of that?
Yeah. So, we just, as you know, announced the IX Cloud at our conference a few weeks ago. A few weeks ago. So IX Cloud sits on top of our cloud-based infrastructure. So we've been on the web for about 20 years.
Mm-hmm.
Our repair facility customers, we moved them over to the internet, to the web platform, about 15 years or so. So IX Cloud is an event-driven architecture that sits across the entire industry and enables information instantaneously, a decision about whether the car should be towed, whether, you know, what parts are ordered, the implications, and makes the data available to all the different places, and also, we believe, enables the speed at which we can innovate for our customers and solve many, many, many more problems by linking all of these different sets, but in a very, very quick, streamlined. So think of it as an amplifier-
Sure.
of our capabilities.
Sure.
We're not going to charge for the IX platform, so it really is a platform that clients will roll out. Then our applications, we believe, is to test that as an amplifier, what will drive adoption of the applications. So that, that's what we're really excited about.
So supporting again across that-
Exactly.
And that's where the customer success-
Yeah
really comes from the fact that we can now link all of these things together.
Right. Right. So, Brian, you touched on kind of where the historical operating model has been, and where we can go with some of these new solutions-
Yeah
-that are introduced as well, too. What's the right way of thinking about kind of the long-term financial profile and how all of these components integrate?
Yeah, so our long-term target that we've put out there is 7%-10%. That is an organic revenue number. We've broken it down. Shift goes from where we've been to kind of the going from 30% new logos, 80, or 30% new logos, 70% cross-sell, upsell. It will transition over time, where 20% will be coming from new logos, instead, 80% will be cross-sell, upsell. And then what we're seeing is within the cross-sell, upsell, half of it will be these emerging solutions that have more recently come to market, and then half the growth will come from established solutions that have been in the market for a period of time. So that's on the revenue side.
On the margin side, as well as the overall profile, we're expecting about 100 basis points of margin improvement per year. So we ended last year at 41% margin. We're targeting mid-40s in the guide. There isn't a ceiling on that margin. We're just putting a guide in the market that sets out a target that we feel comfortable we can deliver in a reasonable period of time. And then the third is gross profit margins moving towards 80% as well. So those are some of the metrics that we put out as part of the modeling guide forecast.
You've done a phenomenal job executing against those, over the past several years as well, too. Maybe, Githesh, where does casualty? That's, or excuse me, not casualty, the medical side of things within-
Yeah.
working into this as well. We haven't really touched on it.
Yeah.
What does that mean from an opportunity perspective, Brian?
Sure.
Yeah.
So first and foremost, one out of every five auto claims has casualty. And traditionally, historically, for many, many years, we focused primarily on auto physical damage, building out the network, scaling that out across the customer base. Over the last several years, we've started to put a little more emphasis on the casualty side of the operation and frankly, linking those two things together. So if you look at the dollar payments for the industry, the industry pays out in aggregate dollars about the same for auto physical damage or losses as it does for casualty. So from a scale standpoint, the same number of customers we have also using casualty solution, it should be very comparable to our physical damage business. So it's a great opportunity. We've spent significantly on beefing up the platform, put a lot of innovation in it.
Impact Dynamics is an example of that, where we've taken our the physics of the accident and converted that into the implications for the medical claim from a photo using physics and AI. So there are many different innovations, so we're quite excited about the what we can do for our customers and grow.
Yeah, in terms, from a financial profile, casualty today is about 10% of revenue. It is growing faster than the total company, so it contributed about one point of growth last year. As we continue to see it scale, you know, if you think about it, as it converts and becomes as mature as our auto physical damage, it could be a $300 million five line for us. So, it's really around further client adoption and cross-selling to our installed base, and also bringing out these new solutions, which we believe are differentiated. So we feel really good on the momentum and the progress we've seen.
Mm-hmm. And maybe for both of you as well, too, Brian, I think you mentioned $5 billion of the TAM is kinda like readily addressable.
Yeah.
That implies that there's, there's a lot more room to deliver value and innovation across the ecosystem. It's maybe picked up the last few years, but, but what's the right way of thinking about the future and maybe customers that are coming to you with challenges, how that kind of fuels your product development program?
You first.
Yeah, so we look at the $10 billion, as we said, the $5 billion addressing existing solutions that we have in the market or will be out. We also look at the $5 billion that is really driving how we can help clients be more efficient, how we can help clients with accuracy and taking leakage out of the claims, and also how we continue to scale the business across the broader ecosystem. So, our roadmap really will inform product solutions that come out, and we'll address that incremental $5 billion. And we feel, you know, we have— you want to talk about the advisory council and how we get the feedback?
Yeah. So a lot of what we see is really... If you look at the banking industry, for instance, the amount of dollars spent in upgrading technology in banking, the insurance industry is typically not spent that level of quality on technology. So all our customers are now seeing, especially as inflation over the last several years has picked up, a real deep desire to upgrade technology. Many, many components of claims, of claims processes are still very manual. So by digitizing much, much more of the capability, we, you know, there's a tremendous opportunity. And it's, for example, at our customer conference, we bring our customers in. We have very intimate working relationships with customers. So the very high likelihood you're working with a customer who saw every new product, every new solution. So the feedback loops are very tight. Our release cycles are tight.
We delivered one, you know, well over 1,000 releases of software last year, and the velocity at which we can deliver results.
Mm-hmm. Maybe, maybe a question we get fairly often, or used to get, maybe not as much so anymore, but what's the right way of thinking about autonomous or autonomous, driving-
Yeah.
in the ecosystem today? Is that a, is that an opportunity for you that's, that's tied to complexity? Is that a threat around where claims mitigation comes into play? Well, how should we-
... And to your point, it, you know, people used to ask us that question more often because the-- what we have seen in the medium, when we say medium-term, we think about the next 10, 15 years, is the complexity of the vehicles because of more cameras, lane departure warning systems, calibration, diagnostics. That's increased a massive amount of complexity that we are helping to solve. And meanwhile, what we've seen over the last 30, 40 years, the claim frequency across the industry, that has been relatively flat. So we think that the complexity factor will continue to increase, and you're going to need more solutions like ours to be able to solve and handle that complexity.
We today are the largest processor of electronic, you know, EVs, hybrids for our customers, so we see all the different data sets and but the claim frequency, we've not seen any significant change.
Mm-hmm. So yeah, and maybe, as a component of that, too, the age of vehicles on the road continues to get older. Obviously-
Yes.
There's a refresh cycle.
The refresh cycle, yes, exactly like you said. The refresh cycle is well.
Yes.
Right? A few years ago, the average age in the industry was about 11.5 years. That then increased to 12. It's now creeping up to 12.5, 12.6, and as costs of cars. So there's another whole churn of how many years it will take to actually get the whole installed base to change.
Right. Right. Okay. That's really helpful. Brian, maybe if we go back to kind of the cash generation profitability profile that you touched on, very, very high quality. How should we think about sources and uses of capital within that as well, too? Where does expansion into other P&C lines come into play? Obviously, U.S. business today, how do you think about international? Where does M&A fit into the equation, if at all?
Yeah, so we have a very efficient balance sheet. We're 2x levered with net debt. When we think about putting the capital to work, M&A is a big focus area. We think about M&A across product expansion, so subrogation, as Githesh mentioned, is a solution we're really excited about in the market. We acquired a business that is the platform for our subrogation solution. That was a small business, but it was a product extension that we see or look at from a cross-sell opportunity to our install base. I think when we look at other adjacency in the P&C, M&A will play a part into that. We also think for an international play, M&A would be an important part.
So we do expect M&A to be a larger player in going forward than it has historically. And certainly, our balance sheet gives us flexibility both on those.
Sure. Again, obviously, it's not like anything that's accountable.
Exactly. When we set the 7-10 guide, that's an organic position, and so M&A would be in line with that position.
Okay. We've covered a lot today, gentlemen. And obviously, there's a lot to get excited about. But maybe as a parting word before we go to the break, after you get Githesh, Brian, what excites you most about the next decade of opportunity for CCC?
Yeah, I, I would say, you know, the single biggest piece of excitement for us is we worked for decades to really build out the customer base, the network capabilities, the, the data sets we have. And with, you know, with the releases of AI and the investments we've made, the opportunities we see across the board are substantial.
Mm-hmm.
So the innovation potential is substantial. So it's a more exciting time than any that I can think of, and also, customers are excited about adopting faster and we've seen.
You know, I would just add the innovation funnel has never been larger. The new solutions that we've recently brought into the market, the pipeline of new incremental solutions that will be coming into the market this year, is really robust, and so we're really excited about the adoption of these solutions, and the future innovation funnel that's out there.
I admired it in saying that that was the last one, but you sparked another question, Githesh, too. Obviously, AI and obviously, what you guys are investing in is coming top of mind for a lot of years. How is that influencing how they manage process and kinda shedding light on leveraging data to become more efficient?
In fact, you know, because we are in existing workflows already, we've been able to introduce the AI inside those workflows. So it's actually amplifying our, the capability of their own people. So our customers might have... A small end repair facility customer might have three employees, our largest repair facility customer has 35,000 employees. Our carriers might have a few hundred employees to tens of thousands. And so what we've seen is in those existing workflows, the introduction of AI, that has taken the cognitive load of looking at 200 pages of documents, to be able to do that in seconds, be able to take a photo and say, "This is exactly what we have to do." So all of those things are allowing our customers to then solve, you know, hold the hands of their policyholders.
Right.
That is, that is truly, truly exciting.
Awesome. I think that's a great place to wrap. Thank you both for joining us.