Greetings, and welcome to the CCC Intelligent Solutions First Quarter 2022 Earnings Conference Call [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Brian Denyeau from ICR. Please go ahead.

Good afternoon, and thank you for joining us today for CCC's First Quarter 2022 Financial Results, which we announced in a press release issued after the close of the market today. Joining me on the call today are Githesh Ramamurthy, CCC's Chairman and CEO; and Brian Herb, CCC's CFO. The forward-looking statements about made today on the company's results and plans are subject to risks and uncertainties [could cause] of the actual results and implementation of the company's plans to vary materially. These risks are discussed in the earnings release, [which] is available on our Investor Relations website and under the heading Risk Factors in our 2021 annual report on Form 10-K filed [with] the SEC. Further, these comments and the Q&A that files are copyrighted today by CCC Intelligence Solutions Holding Inc. Any recording or retransmission, reproduction or other use of the same for profit or otherwise without prior consent of CCC is prohibited [and in] violation of United States Copyright and other laws. Additionally, while we have approved the publishing of a transcript of this call by a third party, we take no responsibility for inaccuracies that may appear in our transcript. 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 regarding the company's financial condition and 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 it over to Githesh.

Thanks, Brian, and thanks to all of you for joining us today. I'm pleased to report that CCC delivered strong top- and bottom-line results in the first quarter. We had solid performance across all parts of our business as customers continued to invest in our solutions to digitize their operations. I'd like to start by summarizing our financial results for the first quarter. Revenue was $186.8 million, up 18% year-over-year and ahead of our guidance range. Adjusted EBITDA was $73.7 million, which grew 33% year-over-year. This represents a 39% margin, up more than 400 basis points from the first quarter of 2021. Our ability to deliver consistent and profitable growth across our business is driven in large part by our ability to solve the most pressing operational problems facing our customers' businesses. For them, digital transformation is not a nice-to-have, but critical to their long-term success, given several challenging macro factors, including rising inflation across the ecosystem, labor shortages made worse by increasing levels of retirement, and difficulties hiring technical staff who understand vehicle complexity in the tight labor market; and of course, supply chain challenges. We increasingly hear from customers that these challenges are mission-critical issues that must be addressed to operate profitably. Adapting their businesses to address these challenges are an important background to what we believe are 3 key factors driving the digital transformation of the auto insurance economy that will underpin CCC's growth for years to come. First is the need for our customers to deliver a better experience to the consumer. Many of the current processes in the auto insurance economy are inefficient and leave significant room for improvement. These process gaps can drive less than optimal engagement with policyholders and create unnecessary friction among insurers, repair facilities and other industry participants. CCC's suite of…

Thanks, Githesh. As Githesh outlined, we feel like we are in a strong position to deliver on the industry's vision for Straight-Through Processing and to deliver exceptional value to our client base. In turn, this will drive durable long-term growth and opportunities to scale with both the more mature products, like casualty, and the more recent launches, like diagnostics, Total Loss Care, payments and the other solutions that Githesh talked about today. Our existing products provide a long runway for growth. In that, if we sold these solutions to our eligible customers, we'd be roughly 3x the size we are today. And we also believe these newer solutions that have recently launched add more than another $1 billion in future market opportunity. As the industry continues to digitize, there will be many more organic and inorganic opportunities ahead for us. Now, let me turn to our first quarter 2022 results and provide guidance for the second quarter and the full year of 2022. Total revenue for the first quarter was $186.8 million, up 18% from the prior year period. Our growth is being driven primarily by cross-sell and upsell into our installed client base, including the large expansion deals that we've talked about over the last couple of quarters, which contributed approximately 5 points of growth, also the broad-based adoption of our new digital solutions such as mobile, AI and Engage, as well as growth from new logos, which was primarily driven from repair facilities and parts suppliers. 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 '22 it was 99%, up 1 point from historical levels. We believe our software GDR reflects the value we provide our customers and…

[Operator Instructions] Our first question is from Dylan Becker from William Blair.

Maybe I guess first for you, Githesh. As you think about some of the inflation dynamics that are impacting some of your repair facility customers, insurance carriers having to navigate and manage that profitability headwind, you've talked a lot about kind of those key platform adjacencies. How much has that need for better input cost visibility, right, the repair dynamics driven the accelerated demand you're seeing around the platform expansion, and then some of those earlier-stage tools like diagnostics and total loss that you talked about as well?

A couple of things, right? The need for precision to really manage repairs, to manage claims, there's an incredible need to manage precision and to really understand how the supply chain is developing. So we've had tons of requests from customers across our customer base to really understand the analytics, the data, and we published a crash course. And then, of course, for each customer, we provide unique insights into what is going on. So I would say that inflation has clearly been running heavy, also with shortage of labor. So all of these things have really made these mission-critical solutions that you can deploy and get very quick ROI, particularly important. So I would not say that it has accelerated anything in particular. But the long-term secular demand for the products and solutions we have continues to be emphasized pretty heavily by what we're seeing.

Yes, I think that that's fair. And obviously, adding that visibility is the key value driver at the end of the day. I guess if you think about the evolution as well of your overall ecosystem, you've got a lot of the key constituents today. There's also a lot of white space going after the lender dynamic maybe more on the medical claims side that you've talked about as well. There's multiple counterparties involved here, right? So how do you think about the progression of that broader platform expansion and the opportunity to drive value and competitive strength by adding more components to that ecosystem over time, as well?

Yes. I would say you've got to think about it in really a couple of dimensions. So when you look at our overall macro view, our overall macro view is our vision of STP, or Straight-Through Processing. So from the moment at which a claims happens, and then [indiscernible] runs all the way through, deciding whether it's a total or repair and running all the way through to the end. And then, when you look at specific components, each of these has multiple ecosystems. So when you look at repair, you've got repair facilities, you've got parts providers, you've got insurers. When you look at casualty, you've got medical providers, you've got insurers, you've got other parties. When you look at total losses, you've got banks, lien holders. So what we are doing is our vision of STP really involves stitching together a seamless experience across all of these different ecosystems. That's where the power of the network, and frankly, years of having delivered solutions to our customers, really comes in. I hope that answers your question.

The next question [we have is from] Chris Moore from CJS Securities.

It was a very interesting discussion on casualty. I had no idea that insurers has spent that much there. Are there any unique challenges within the penetration that you're seeking there that could be helped through M&A?

We actually did the M&A a few years ago, and we acquired a company years ago, and we have actually been investing significantly in the platform over the last several years and have a number of customers. Again, penetration, as I pointed out, is significantly less than it is in auto fiscal damage. But we have several top 20 carriers, and we have a number of carriers with significantly less penetration. And I think, as I pointed out, we've added a couple of customers during the quarter, as well. And again, stitching all of this together into a seamless experience with Straight-Through Processing, artificial intelligence, all of these capabilities becomes super important. So yes, we did the M&A a few years back.

And from where you are now, is it kind of a couple of years before it's a meaningful contributor to revenue?

Today, it's about roughly 10% of our revenue.

That underrepresented part I guess was just in terms of the potential market, so helpful. And just maybe a little bit more on CCC. You talked about the first carrier. Are there any other kind of specific milestones that you could point to for the balance of '22 into '23 that we should be thinking about?

We have built the business to be quite resilient to any particular event. So if you look at our customer base, right, we've got insurers, we've got parts providers, we've got repair facilities. And so we've got a broad mix of folks, and we are bringing every -- various products have different milestones. But are you talking, Chris, specifically about payments?

Yes.

Okay. On payments, in particular, yes, we are actually working through 4 use cases, right? So last year, we said our first goal was to get the payments infrastructure in place. We did that. Second, we said we're going to work with early customers to refine use cases, and we've been doing that. And then, third, we said, look, we're going to get a first customer on board, and which is what we just did. And we are continuing to work with a number of cases as, again, payments is an important component. So I wouldn't call out any particular big macro particular point. And as we pointed out in the call, we do not expect payments to contribute in any meaningful way in '22.

[Operator Instructions] The next question we have is from Kirk Materne from Evercore ISI.

This is actually Peter Burkly on for Kirk. So first one, I guess, you guys are doing a lot of innovation. You talked a little bit about diagnostics today. I'm curious, last quarter you were discussing the Safekeep a little bit and kind of excitement about all the subrogation capabilities and how that can kind of open up more of the P&C insurance economy outside of auto. So I'm just curious, is some of that outside of auto is something you guys are thinking about in terms of future products or your roadmap, even if not near term, even just later down the line?

Yes. Exactly, as you pointed out, Subrogation is one of those solutions that extends well beyond auto. Subrogation exists in property, exists in workers. It's across a range of solutions. Payments solutions also extends outside of auto as there are needs to make payments well outside of auto. So this is what we refer to as when we say horizontal solutions, those are 2 solutions in particular that extend us beyond auto.

And Brian, maybe one just a quick one for you. Last quarter, you called out hiring maybe being a little bit behind schedule, and that is helping driving some of that margin expansion. And it sounds like hiring is pending pretty nicely in the quarter now this quarter. So I'm just curious, any more color how it's going this quarter and then how you guys are thinking about hiring for the rest of the year here?

Yes, hey, Peter. Yes, so we have been making progress across our plans. So we've brought in heads around product development, around product management. We also highlighted that we've invested in some of our partnership capabilities. So we're making additions. We will continue to do that as we go through the year. We are very focused on balancing investments against our strategic priorities at the same time delivering against our long-term margin goals, as well. So those are the things we're really focused on balancing, but we feel good about the hires that we've made in our operational capabilities as we go forward.

The next question is from Gabriela Borges from Goldman Sachs.

This is Jake Titleman on for Gabriela. STP is obviously a key part of the long-term vision. You announced Estimate STP recently. Can you comment on some early success there? And then maybe talk about what are the other key technical challenges and innovations that need to be solved to get you closer to a full STP solution down the road?

Sure. Exactly, as you pointed out, Estimate STP is a component of our overall STP vision, and I would argue one of the hardest things in that STP vision to pull off. What's been exciting is we announced Estimate STP. I think it was around October of last year. And literally, in the 6, 7 months since then, we've got 8 significant customers up and running on Estimate STP. And this involves very sophisticated AI, very sophisticated workflows, very sophisticated tuning of the AI parameters. And that's also giving us a lot of credibility for STP overall. In fact, been in 2 conversations with our team, one yesterday and one today with customers, exactly around this topic. And so, Estimate STP is going well, fairly quick adoption. It has significant ROI and fairly quick ROI. And it's also showing the power of how STP in general, as it extends across the different components of the claim that we talked about, has a huge impact. So yes, we are investing. Many of the people that we are hiring, recruiting, that Brian talked about are all around this [same] vision.

And just for my follow-up, you've talked about growth shifting more toward cross-sell and upsell versus the new logos. What are the implications for your unit economics and your margins? Is it fair to assume that the cost of customer acquisition on cross-sell is lower than on new logos?

Yes, happy to take that. Yes, so we have highlighted the shift. So if you go back, and just to give a few data points, we historically had about 2/3 of the growth was driven from cross-sell/upsell and about 1/3 from new logos. And we've highlighted that that will shift, and it will look like more like 80% of the growth coming from cross-sell/upsell and 20% new logos. And we started to see that play out. Second half of last year was more in the 70/30 shift, and it's going to continue to move towards that. We do see the opportunity with margin expansion with the ability to sell into our existing base and the efficiency that drives. So we do see that as being a tailwind to margin progression, and that's part of what gives us confidence as we look towards the long-term margins that we've highlighted, moving from where we are now to the mid-40s, over time. So yes, it absolutely is a helpful tailwind. That said, today, we don't spend a lot of money on customer acquisitions. We have a very efficient sales organization and have coverage across our customer groups. So although we see efficiency with the cross-sell, it's not as if today we're spending significant dollars on customer acquisition.

[Operator Instructions] The next question we have is from Gary Prestopino from Barrington Research.

A couple of questions here. First of all, on the payment business that you signed, you said you signed one customer, right, Githesh? You've got one out there that, I assume, is working kind of in a beta test with you now?

No. This is a signed customer. We have a number of customers that we're working with in the early stages, and the customer that we've converted over who's -- we're working on the implementation.

And this would be an insurance carrier?

Yes.

So in your mind, as you implement this, I mean, how quickly, once you implement this and it's out in the market, do you see kind of a cascading effect where something that it becomes "Maybe I might have it" to "It's necessary for me to have it."

As with many of our other solutions, right, we've been in this business, and I think you would notice, having known us for a long time, when I look back over the last 20-plus years of driving just growth, it is through new solutions. We are very focused on delivering a great experience. When you deliver a great experience in your first product, it really delivers an ROI for a customer, that really has a huge impact on how quickly things get adopted. So I am not going to make any predictions, Gary, on time and speed. But what we are focused enormously is delivering a great experience.

And just a couple of more questions here. What was the software NDR for last year, Brian? Do you have that handy?

Yes. So we ended last year at 115. But if you look across the year, of last year, it averaged around 113 if you average the 4 quarters of last year.

Well, I'm talking about for Q1 last year. I should have been a little bit more precise. Do you have that?

Yes, Q1 last year was 106%.

Okay. 106. That's fine. And then in terms of things like Engage and electronic parts ordering, I think you said about 30% of your rooftops have got Engage and 40% increase in Q4 last year of electronic parts ordering. Can you give us an idea of how much more uptake there was in Engage from the repair shops as well as with electronic parts ordering?

Yes. I mean we made progress on both fronts. So we continued to sign part suppliers up, and we're seeing growth both from new rooftops and part suppliers as well as electronic ordering just increasing as a percent of overall what parts are making it on a repair order, and we're seeing good progress on Engage and the number of rooftops that we have on Engage. I mean, one of the key drivers when we look at our NDR and see the strength, is Engage in the other digital solutions. So Mobile AI Engage, some of the early adoption on the Total Loss Care portfolio, those are all core drivers of our MDR performance.

The one other thing I'd point out is, when you look at Engage, many of our customers have integrated it into their websites and the like. So now, as customers are trying to just book appointments and try to get estimates, it is super-helpful to the process. So that word is also spreading pretty broadly. So we expect that Engage will continue to grow over the next couple of years for sure.

Ladies and gentlemen, we have reached the end of our question-and-answer session, and I would like to turn the call back to Githesh Ramamurthy for concluding remarks.

Well, thanks, everybody, for joining us. And again, as we've said before, we believe the industry is in the early stages of digitization. We have terrific credibility with our customers, having delivered a lot of solutions. We're investing in innovation that's being really well received. And I want to wrap up by saying thanks to all the [ CCCrers ] who make this possible day in, day out. Thanks very much to our customers who place their trust in us every day. And I also want to thank our investors for continuing to be a key part of what we do. We look forward to addressing you next quarter.

Ladies and gentlemen, that then concludes today's conference. Thank you for joining us. You may now disconnect your lines.