CCC Intelligent Solutions Holdings Inc Q4 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Alexei Gogolev - J.P. Morgan Securities LLC - Analyst : Brian, I had a follow-up question about the organic revenue growth. It seems like based on the midpoint of the EvolutionIQ contribution, you're suggesting that the organic growth in Q1 may be roughly 5%, 6% and then accelerating to about 7% for the year. Can you explain what is driving the deceleration versus the organic growth you reported in 2024? Brian Herb - CCC Intelligent Solutions Holdings Inc - Executive Vice President, Chief Financial and Administrative Officer Alexei, it's Brian. So the way to think about EvolutionIQ is it's going to scale as we go through the year, so you can't look at the 5 points in each quarter. So we get to 5 points of contribution from EvolutionIQ at the full year. We are guiding towards the lower end of the long-term range in each quarter. If you remember, the long-term range is 7% to 10%. We are, in Q1, 7% to 10%. So EvolutionIQ is the balance to get to the 10% total. Does that make sense?

Question: Alexei Gogolev - J.P. Morgan Securities LLC - Analyst : And how much did it generate in 2024? Brian Herb - CCC Intelligent Solutions Holdings Inc - Executive Vice President, Chief Financial and Administrative Officer Yeah. We didn't give that number specifically. We did highlight an NDR number of 150% when we announced the deal. We talked about the contributions this year for about $45 million to $50 million. So those give you the data points to understand the contribution from EvolutionIQ.

Question: Alexei Gogolev - J.P. Morgan Securities LLC - Analyst : And one final, if I may squeeze one more. Are you still seeing softness in the claims volume that you talked about in the past? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 25, 2025 / 10:00PM, CCCS.OQ - Q4 2024 CCC Intelligent Solutions Holdings Inc Earnings Call Brian Herb - CCC Intelligent Solutions Holdings Inc - Executive Vice President, Chief Financial and Administrative Officer Yeah. On the volume side, Alexei, we had talked last time about 6% year-to-date when we looked at it last on total claims. It moderated a bit in Q4. Some of what we saw was the declines that we had seen were partially offset by some weather-related events and had a partial offset. So in Q4,

Question: Josh Baer - Morgan Stanley & Co. LLC - Analyst : I was hoping you could revisit pricing and philosophy there on efforts to lean more into pricing and wondering how much of the growth, when thinking about 2025, is coming from taking price. Brian Herb - CCC Intelligent Solutions Holdings Inc - Executive Vice President, Chief Financial and Administrative Officer Josh, it's Brian. So we haven't called out a specific pricing component or part of the growth that comes from pricing specific. It will be embedded in our NDR number, so it's a factor there. Like all SaaS companies, we do look at the pricing and the value that's created from the software, make sure that we're balancing the value being generated from our clients and that we're getting compensated fairly for that. So that pricing review is ongoing and we always evaluate the packaging and solutions. So that's how I'd give you the pricing strategy as we think about the '25 impact.

Question: Dylan Becker - William Blair & Company L.L.C - Analyst : Maybe to continue on the topic of the claims volume side. Githesh, for you, do you still feel like -- I mean, obviously, there's sort of directionally a proxy, but it feels like there are some nuances in particular in 2024 that somewhat muddy that metric. So is that a fair characterization? And then how to reconcile that with the increasing, it seems like, perpetual complexity associated with the cost of repair in the process itself that can offset that as well, too.

Question: Dylan Becker - William Blair & Company L.L.C - Analyst : And so probably fair to say then that, that mix shift should, in theory, contribute to some level of growth in claims volumes as well, too, as that normalizes. Okay. Maybe on the comment around the go-to-market resource allocation as well, too. It feels like that that's something that's coming from a position of strength given the interest and value that you're seeing from a lot of the larger top carriers. How should we think about effectively the benefits of having more dedicated focus, and teams, too, towards some of those customers and maybe learnings from, I think you called out a top 20, that had a significant expansion as well, too, to accelerate their digital transformation change?

Question: Samad Samana - Jefferies LLC - Analyst : Maybe for just on the rollout of the new packages and pricing, can you maybe help us understand more clearly how you're thinking about the impact to maybe net revenue retention from the changes in 2025? What have you baked in? How should we think about maybe flowing to revenue? And have you made any maybe conservative assumptions just since there's an unknown around it or are you very confident in those assumptions? Brian Herb - CCC Intelligent Solutions Holdings Inc - Executive Vice President, Chief Financial and Administrative Officer Yeah. On the way to think about pricing, I mean as I said before, we don't explicitly break out the pricing point on NDR. We actually don't guide on NDR as well. I mean, if you look at NDR and how it's been trending, it's roughly 60% to 70% of total revenue so you can look at that as the ratio. We have had packages or reset the packages in the repair facilities market for a while, and we've more recently rolled out solutions in insurance. Pricing is a component. I would say on the insurance side, it's not overly material as a driver of growth. But we feel good on the solutions set that we're taking in the market and our go-to-market approach. But I wouldn't highlight a material part of growth related to insurance pricing.

Question: Samad Samana - Jefferies LLC - Analyst : Great. And then as we think about Tom (sic - Tim) taking over his new role, how should we think about what changes we may anticipate in that? And again, maybe just trying to understand, have you taken any different type of approach to guidance this year just when considering what you talked about in terms of packaging changes and the impact of like some of the market changes? How should we think about how you restate that into the outlook?

Question: Samad Samana - Jefferies LLC - Analyst : Great. Apologies to Tim for getting your name wrong the first time. Sorry about that.

Question: Shlomo Rosenbaum - Stifel Nicolaus & Co., Inc. - Analyst : Githesh, I just wanted to ask you like holistically, when you look at the growth of the business, we're not going to have -- or at least it's not assumed in your guidance that the volume of claims is going to be impacting the revenue growth. And we're seeing the revenue growth migrate from the high end of the range to what's expected to be the low end of the range. What exactly is changing in the market? Is it the fact that there's so much need from the customers to make changes on their end, so you're ending up with bottlenecks? Or what exactly is changing that's resulting in the growth migrating from the upper end to the lower over the course of, frankly, a year?

Question: Shlomo Rosenbaum - Stifel Nicolaus & Co., Inc. - Analyst : Okay. And then in terms of the bundling to get more solutions, did that start just in the beginning of the year? And usually, when companies do that, especially with products that are proven, it usually is a great way for them to raise the price on existing solutions. You're adding new bells and whistles. And I'm just wondering, in the context of your starting the bundling here, are you testing it out first in order to see the adoption? Because I would think that it should drive just better growth just from the opportunity to price things well or to bundle things in a way that can drive additional sales.

Question: Chris Moore - CJS Securities, Inc. - Analyst : Mostly, I think, just modeling at this point in time. You probably went through it during the EvolutionIQ, but from an interest expense perspective, is there a reasonable level that we should be thinking about for fiscal '25? Brian Herb - CCC Intelligent Solutions Holdings Inc - Executive Vice President, Chief Financial and Administrative Officer Yes. So a couple of modeling points, Chris. So one, just to pick up the new debt level since we announced the transaction, the debt level's at $1 billion. The interest rate that we have will be consistent with what we've been running at. So there isn't much of a difference on the rate. So you can use the rate. We have 4% cap on $600 million of the debt. And then there's a spread on top of the cap. So think about the spread at like 200 basis points, 2.25%, depending on other factors. But that's how to model out the interest.

Question: Kirk Materne - Evercore ISI - Analyst : A related question on EvolutionIQ. Githesh, can you just talk about how you're thinking about -- I guess the question is can CCCS salespeople now cross-sell the EvolutionIQ product? You referred to it, but I'm just trying to get a sense on when can the individual salespeople start bringing other products into those existing customers. I realize there's only one overlapping customer right now, but I would imagine you'd want that to change fairly quickly. So I'm just trying to -- sorry, you answered this a little bit but I was just trying to get -- wondering if you could give us a little bit more color on that side.

Question: Kirk Materne - Evercore ISI - Analyst : And then, Brian, maybe one for you on the OpEx side. Obviously, you guys are adding a lot of AI functionality in your products. I'm just curious, within CCC SaaS, are you seeing benefits in terms of your own R&D development cycles? Are you getting any benefit yourself from the usage of AI internally? Brian Herb - CCC Intelligent Solutions Holdings Inc - Executive Vice President, Chief Financial and Administrative Officer Yes. We are, to some degree. I would say we're early stage and early days on it. Most of our AI that we've been focused on is really deploying into our solutions for customers and driving revenue. We have started to deploy AI internally to drive productivity. I would just say we're in the early innings of that, and it really hasn't driven much through the numbers. That said, we are always looking at areas of efficiency and opportunity within our cost base. But I'm sure Githesh has more to add.

Question: Alyssa Lee - Barclays Capital, Inc. - Analyst : This is Alyssa Lee on for Saket. Was wondering if you could speak to some of the margin differences between the emerging and established solution and how that might evolve in 2025. Brian Herb - CCC Intelligent Solutions Holdings Inc - Executive Vice President, Chief Financial and Administrative Officer Yeah. The biggest thing that's happening in the margin is really absorbing EvolutionIQ. So if you think about the margin profile, the business, before the acquisition, EvolutionIQ, we're adding about 75 basis points of margin improvement year-over-year. What then we've absorbed the moderate loss, EBITDA loss of EvolutionIQ, there's some integration costs that are upfront. And when you add that together, it's taking us to about 200 basis