10-Q 1 cccs-20240331.htm 10-Q 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

FORM 10-Q

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________ to ________________

 

 

CCC INTELLIGENT SOLUTIONS HOLDINGS INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

001-39447

98-1546280

(State or other jurisdiction

of incorporation or organization)

(Commission

File Number)

(IRS Employer

Identification No.)

 

167 N. Green Street, 9th Floor

Chicago, Illinois

(Address Of Principal Executive Offices)

 

60607

(Zip Code)

(800) 621-8070

Registrant’s telephone number, including area code

Not Applicable

(Former name or former address, if changed since last report)

 

 

Securities registered pursuant to Section 12(b) of the Act:

 


Title of each class

 

Trading
Symbol(s)

 


Name of each exchange on which registered

Common stock, par value $0.0001 per share

 

CCCS

 

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

Smaller reporting company

 

 

 

 

Emerging growth company

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No

As of April 23, 2024, 614,584,238 shares of common stock, $0.0001 par value per share, were issued and outstanding.

 


 

CCC INTELLIGENT SOLUTIONS HOLDINGS INC.

Form 10-Q

For the Quarter Ended March 31, 2024

Table of Contents

 

 

 

Page

PART I. FINANCIAL INFORMATION`

 

 

 

 

 

Cautionary Statement Regarding Forward-Looking Statements

3

 

Item 1.

 

Financial Statements (Unaudited)

5

 

Condensed Consolidated Balance Sheets as of March 31, 2024 (unaudited) and December 31, 2023

5

 

Unaudited Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income for the three months ended March 31, 2024 and 2023

6

 

Unaudited Condensed Consolidated Statements of Mezzanine Equity and Stockholders’ Equity for the three months ended March 31, 2024 and 2023

7

 

Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and 2023

9

 

Notes to Condensed Consolidated Financial Statements

10

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

25

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

35

Item 4.

Controls and Procedures

35

 

 

 

PART II. OTHER INFORMATION

 

 

 

Item 1.

Legal Proceedings

36

Item 1A.

Risk Factors

36

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities

36

Item 3.

Defaults Upon Senior Securities

36

Item 4.

Mine Safety Disclosures

36

Item 5.

Other Information

36

Item 6.

Exhibits

36

 

 

 

2


 

FORWARD-LOOKING STATEMENTS

The section titled "Management’s Discussion and Analysis of Financial Condition and Results of Operations" as well as other parts of this Quarterly Report on Form 10-Q contain "forward-looking statements" for purposes of the federal securities laws. Our forward-looking statements include, but are not limited to, statements regarding our or our management team’s expectations, hopes, beliefs, intentions or strategies regarding the future, including those relating to the future financial performance and business strategies and expectations for our business. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words "anticipate," "believe," "contemplate," "continue," "could," "estimate," "expect," "intends," "may," "might," "plan," "possible," "potential," "predict," "project," "should," "will," "would" and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements may include information concerning our possible or assumed future results of operations, client demand, business strategies, technology developments, financing and investment plans, competitive position, our industry and regulatory environment, potential growth opportunities and the effects of competition.

Important factors that could cause actual results to differ materially from our expectations include:

our revenues, the concentration of our customers and the ability to retain our current customers;
our ability to negotiate with our customers on favorable terms;
our ability to maintain and grow our brand and reputation cost-effectively;
the execution of our growth strategy;
the impact of public health outbreaks, epidemics or pandemics on our business and results of operations;
our projected financial information, growth rate and market opportunity;
the health of our industry, claim volumes, and market conditions;
changes in the insurance and automotive collision industries, including the adoption of new technologies;
global economic conditions and geopolitical events;
competition in our market and our ability to retain and grow market share;
our ability to develop, introduce and market new enhanced versions of our solutions;
our sales and implementation cycles;
the ability of our research and development efforts to create significant new revenue streams;
changes in applicable laws or regulations;
changes in international economic, political, social and governmental conditions and policies, including corruption risks in China and other countries;
our reliance on third-party data, technology and intellectual property;
changes in our customers' or the public's perceptions regarding the use of artificial intelligence ("AI");
our ability to protect our intellectual property;
our ability to keep our data and information systems secure from data security breaches;
our ability to acquire or invest in companies or pursue business partnerships;
our ability to raise financing in the future and improve our capital structure;
our success in retaining or recruiting, or changes required in, our officers, key employees or directors;
our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;
our ability to expand or maintain our existing customer base; and
our ability to service our indebtedness.

The forward-looking statements contained in this Quarterly Report on Form 10-Q are based on current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are

3


 

beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described above and under the heading "Risk Factors." Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. There may be additional risks that we consider immaterial or which are unknown. It is not possible to predict or identify all such risks. We do not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

4


 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

 

CCC INTELLIGENT SOLUTIONS HOLDINGS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

 

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

 

 

(Unaudited)

 

 

 

 

ASSETS

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

Cash and cash equivalents

 

$

191,188

 

 

$

195,572

 

Accounts receivable—Net of allowances of $4,792 and $5,574 as of March 31, 2024 and
   December 31, 2023, respectively

 

 

102,007

 

 

 

102,365

 

Income taxes receivable

 

 

 

 

 

1,798

 

Deferred contract costs

 

 

18,693

 

 

 

17,900

 

Other current assets

 

 

31,294

 

 

 

32,364

 

Total current assets

 

 

343,182

 

 

 

349,999

 

SOFTWARE, EQUIPMENT, AND PROPERTY—Net

 

 

164,825

 

 

 

160,416

 

OPERATING LEASE ASSETS

 

 

30,486

 

 

 

30,456

 

INTANGIBLE ASSETS—Net

 

 

990,537

 

 

 

1,015,046

 

GOODWILL

 

 

1,417,724

 

 

 

1,417,724

 

DEFERRED FINANCING FEES, REVOLVER—Net

 

 

1,518

 

 

 

1,672

 

DEFERRED CONTRACT COSTS

 

 

21,460

 

 

 

22,302

 

EQUITY METHOD INVESTMENT

 

 

10,228

 

 

 

10,228

 

OTHER ASSETS

 

 

43,700

 

 

 

43,197

 

TOTAL

 

$

3,023,660

 

 

$

3,051,040

 

LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

Accounts payable

 

$

23,718

 

 

$

16,324

 

Accrued expenses

 

 

39,503

 

 

 

71,478

 

Income taxes payable

 

 

9,126

 

 

 

3,689

 

Current portion of long-term debt

 

 

8,000

 

 

 

8,000

 

Current portion of long-term licensing agreement—Net

 

 

3,109

 

 

 

3,061

 

Operating lease liabilities

 

 

7,136

 

 

 

6,788

 

Deferred revenues

 

 

45,254

 

 

 

43,567

 

Total current liabilities

 

 

135,846

 

 

 

152,907

 

LONG-TERM DEBT—Net

 

 

765,874

 

 

 

767,504

 

DEFERRED INCOME TAXES—Net

 

 

183,310

 

 

 

195,365

 

LONG-TERM LICENSING AGREEMENT—Net

 

 

26,896

 

 

 

27,692

 

OPERATING LEASE LIABILITIES

 

 

50,066

 

 

 

50,796

 

WARRANT LIABILITIES

 

 

53,086

 

 

 

51,501

 

OTHER LIABILITIES

 

 

7,347

 

 

 

6,414

 

Total liabilities

 

 

1,222,425

 

 

 

1,252,179

 

COMMITMENTS AND CONTINGENCIES (Notes 18 and 19)

 

 

 

 

 

 

MEZZANINE EQUITY:

 

 

 

 

 

 

Redeemable non-controlling interest

 

 

17,726

 

 

 

16,584

 

STOCKHOLDERS’ EQUITY:

 

 

 

 

 

 

Preferred stock—$0.0001 par; 100,000,000 shares authorized; no shares issued or outstanding

 

 

 

 

 

 

Common stock—$0.0001 par; 5,000,000,000 shares authorized; 614,257,735 and
   
603,128,781 shares issued and outstanding as of March 31, 2024 and December 31,
   2023, respectively

 

 

61

 

 

 

60

 

Additional paid-in capital

 

 

2,911,660

 

 

 

2,909,757

 

Accumulated deficit

 

 

(1,127,064

)

 

 

(1,126,467

)

Accumulated other comprehensive loss

 

 

(1,148

)

 

 

(1,073

)

Total stockholders’ equity

 

 

1,783,509

 

 

 

1,782,277

 

TOTAL

 

$

3,023,660

 

 

$

3,051,040

 

 

See notes to condensed consolidated financial statements.

5


 

CCC INTELLIGENT SOLUTIONS HOLDINGS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME

(In thousands, except share and per share data)

(Unaudited)

 

 

For the Three Months Ended

 

 

 

March 31,

 

 

 

2024

 

 

2023

 

REVENUES

 

$

227,237

 

 

$

204,919

 

COST OF REVENUES

 

 

 

 

 

 

Cost of revenues, exclusive of amortization of acquired technologies

 

 

52,808

 

 

 

50,447

 

Amortization of acquired technologies

 

 

6,567

 

 

 

6,685

 

Total cost of revenues

 

 

59,375

 

 

 

57,132

 

GROSS PROFIT

 

 

167,862

 

 

 

147,787

 

OPERATING EXPENSES:

 

 

 

 

 

 

Research and development

 

 

49,477

 

 

 

40,996

 

Selling and marketing

 

 

35,586

 

 

 

33,531

 

General and administrative

 

 

57,060

 

 

 

41,865

 

Amortization of intangible assets

 

 

17,942

 

 

 

18,066

 

Total operating expenses

 

 

160,065

 

 

 

134,458

 

OPERATING INCOME

 

 

7,797

 

 

 

13,329

 

INTEREST EXPENSE

 

 

(16,452

)

 

 

(13,832

)

INTEREST INCOME

 

 

2,467

 

 

 

3,259

 

CHANGE IN FAIR VALUE OF WARRANT LIABILITIES

 

 

(1,585

)

 

 

1,195

 

OTHER INCOME (EXPENSE)—Net

 

 

2,939

 

 

 

(2,550

)

PRETAX (LOSS) INCOME

 

 

(4,834

)

 

 

1,401

 

INCOME TAX BENEFIT

 

 

4,237

 

 

 

783

 

NET (LOSS) INCOME INCLUDING NON-CONTROLLING
   INTEREST

 

 

(597

)

 

 

2,184

 

LESS: ACCRETION OF REDEEMABLE NON-CONTROLLING INTEREST

 

 

(1,142

)

 

 

 

NET (LOSS) INCOME ATTRIBUTABLE TO CCC INTELLIGENT
   SOLUTIONS HOLDINGS INC. COMMON STOCKHOLDERS

 

$

(1,739

)

 

$

2,184

 

Net (loss) income per share attributable to common stockholders:

 

 

 

 

 

 

Basic

 

$

(0.00

)

 

$

0.00

 

Diluted

 

$

(0.00

)

 

$

0.00

 

Weighted-average shares used in computing net (loss) income per share
   attributable to common stockholders:

 

 

 

 

 

 

Basic

 

 

598,279,377

 

 

 

616,217,176

 

Diluted

 

 

598,279,377

 

 

 

646,380,961

 

COMPREHENSIVE (LOSS) INCOME:

 

 

 

 

 

 

Net (loss) income including non-controlling interest

 

 

(597

)

 

 

2,184

 

Other comprehensive (loss) income—Foreign currency translation
   adjustment

 

 

(75

)

 

 

34

 

COMPREHENSIVE (LOSS) INCOME INCLUDING
   NON-CONTROLLING INTEREST

 

 

(672

)

 

 

2,218

 

Less: accretion of redeemable non-controlling interest

 

 

(1,142

)

 

 

 

COMPREHENSIVE (LOSS) INCOME ATTRIBUTABLE TO CCC
   INTELLIGENT SOLUTIONS HOLDINGS INC. COMMON STOCKHOLDERS

 

$

(1,814

)

 

$

2,218

 

See notes to condensed consolidated financial statements.

6


 

CCC INTELLIGENT SOLUTIONS HOLDINGS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY

(In thousands, except number of shares)

(Unaudited)

 

 

Redeemable

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-Controlling

 

 

 

Preferred Stock—Issued and Outstanding

 

 

Common Stock—Issued and Outstanding

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

Interest

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Other

 

 

Total

 

 

 

 

 

 

 

Number of

 

 

Par

 

 

Number of

 

 

Par

 

 

Paid-In

 

 

Accumulated

 

 

Comprehensive

 

 

Stockholders’

 

 

 

 

 

 

 

Shares

 

 

Value

 

 

Shares

 

 

Value

 

 

Capital

 

 

Deficit

 

 

Loss

 

 

Equity

 

BALANCE—December 31, 2023

 

$

16,584

 

 

 

 

 

 

$

 

 

 

603,128,781

 

 

$

60

 

 

$

2,909,757

 

 

$

(1,126,467

)

 

$

(1,073

)

 

$

1,782,277

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

44,971

 

 

 

 

 

 

 

 

 

44,971

 

Exercise of stock options

 

 

 

 

 

 

 

 

 

 

 

 

3,346,599

 

 

 

 

 

 

8,822

 

 

 

 

 

 

 

 

 

8,822

 

Issuance of common stock under
   employee stock purchase plan

 

 

 

 

 

 

 

 

 

 

 

 

194,307

 

 

 

 

 

 

1,833

 

 

 

 

 

 

 

 

 

1,833

 

Issuance of common stock upon
   vesting of RSUs—net of tax

 

 

 

 

 

 

 

 

 

 

 

 

7,588,048

 

 

 

1

 

 

 

(52,581

)

 

 

 

 

 

 

 

 

(52,580

)

Accretion of redeemable non-controlling interest

 

 

1,142

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,142

)

 

 

 

 

 

 

 

 

(1,142

)

Foreign currency translation
   adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(75

)

 

 

(75

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(597

)

 

 

 

 

 

(597

)

BALANCE—March 31, 2024

 

$

17,726

 

 

 

 

 

 

$

 

 

 

614,257,735

 

 

$

61

 

 

$

2,911,660

 

 

$

(1,127,064

)

 

$

(1,148

)

 

$

1,783,509

 

See notes to condensed consolidated financial statements.

 

 

7


 

CCC INTELLIGENT SOLUTIONS HOLDINGS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY

(In thousands, except number of shares)

(Unaudited)

 

 

Redeemable

 

 

 

 

Preferred Stock—Issued and Outstanding

 

 

Common Stock—Issued and Outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-Controlling

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

Interest

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Other

 

 

Total

 

 

 

 

 

 

 

 

Number of

 

 

Par

 

 

Number of

 

 

Par

 

 

Paid-In

 

 

Accumulated

 

 

Comprehensive

 

 

Stockholders’

 

 

 

 

 

 

 

 

Shares

 

 

Value

 

 

Shares

 

 

Value

 

 

Capital

 

 

Deficit

 

 

Loss

 

 

Equity

 

BALANCE—December 31, 2022

 

$

14,179

 

 

 

 

 

 

 

$

 

 

 

622,072,905

 

 

$

62

 

 

$

2,754,055

 

 

$

(707,946

)

 

$

(884

)

 

$

2,045,287

 

  Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

28,930

 

 

 

 

 

 

 

 

 

28,930

 

  Exercise of stock options—net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

3,214,093

 

 

 

1

 

 

 

8,242

 

 

 

 

 

 

 

 

 

8,243

 

   Issuance of common stock under employee stock purchase plan

 

 

 

 

 

 

 

 

 

 

 

 

 

179,338

 

 

 

 

 

 

1,326

 

 

 

 

 

 

 

 

 

1,326

 

  Issuance of common stock upon
   vesting of RSUs—net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

2,217,379

 

 

 

 

 

 

(11,449

)

 

 

 

 

 

 

 

 

(11,449

)

  Foreign currency translation
   adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

34

 

 

 

34

 

  Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,184

 

 

 

 

 

 

2,184

 

BALANCE—March 31, 2023

 

$

14,179

 

 

 

 

 

 

 

$

 

 

 

627,683,715

 

 

$

63

 

 

$

2,781,104

 

 

$

(705,762

)

 

$

(850

)

 

$

2,074,555

 

See notes to condensed consolidated financial statements.

8


 

CCC INTELLIGENT SOLUTIONS HOLDINGS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

For the Three Months Ended

 

 

 

March 31,

 

 

 

2024

 

 

2023

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

Net (loss) income

 

$

(597

)

 

$

2,184

 

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization of software, equipment, and property

 

 

9,442

 

 

 

9,206

 

Amortization of intangible assets

 

 

24,509

 

 

 

24,751

 

Deferred income taxes

 

 

(12,055

)

 

 

(6,763

)

Stock-based compensation

 

 

44,971

 

 

 

29,234

 

Amortization of deferred financing fees

 

 

462

 

 

 

427

 

Amortization of discount on debt

 

 

62

 

 

 

56

 

Change in fair value of derivative instruments

 

 

(718

)

 

 

2,604

 

Change in fair value of warrant liabilities

 

 

1,585

 

 

 

(1,195

)

Non-cash lease expense

 

 

 

 

 

942

 

Loss on disposal of software, equipment and property

 

 

253

 

 

 

 

Other

 

 

71

 

 

 

58

 

Changes in:

 

 

 

 

 

 

Accounts receivable—Net

 

 

370

 

 

 

6,084

 

Deferred contract costs

 

 

(793

)

 

 

(783

)

Other current assets

 

 

992

 

 

 

1,726

 

Deferred contract costs—Non-current

 

 

842

 

 

 

(51

)

Other assets

 

 

144

 

 

 

(8,519

)

Operating lease assets

 

 

(710

)

 

 

(417

)

Income taxes

 

 

7,235

 

 

 

5,778

 

Accounts payable

 

 

7,395

 

 

 

(11,897

)

Accrued expenses

 

 

(31,153

)

 

 

(25,690

)

Operating lease liabilities

 

 

298

 

 

 

415

 

Deferred revenues

 

 

1,697

 

 

 

5,033

 

Other liabilities

 

 

933

 

 

 

(105

)

Net cash provided by operating activities

 

 

55,235

 

 

 

33,078

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

Purchases of software, equipment, and property

 

 

(15,663

)

 

 

(14,534

)

Net cash used in investing activities

 

 

(15,663

)

 

 

(14,534

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

Proceeds from exercise of stock options

 

 

8,901

 

 

 

8,109

 

Proceeds from employee stock purchase plan

 

 

1,833

 

 

 

1,326

 

Payments for employee taxes withheld upon vesting of equity awards

 

 

(52,581

)

 

 

(11,449

)

Principal payments on long-term debt

 

 

(2,000

)

 

 

(2,000

)

Net cash used in financing activities

 

 

(43,847

)

 

 

(4,014

)

NET EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

 

 

(109

)

 

 

36

 

NET CHANGE IN CASH AND CASH EQUIVALENTS

 

 

(4,384

)

 

 

14,566

 

CASH AND CASH EQUIVALENTS:

 

 

 

 

 

 

Beginning of period

 

 

195,572

 

 

 

323,788

 

End of period

 

$

191,188

 

 

$

338,354

 

NONCASH INVESTING AND FINANCING ACTIVITIES:

 

 

 

 

 

 

Noncash purchases of software, equipment, and property

 

$

646

 

 

$

626

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

 

 

 

 

 

 

Cash paid for interest

 

$

15,908

 

 

$

13,446

 

Cash paid for income taxes—Net

 

$

576

 

 

$

202

 

See notes to condensed consolidated financial statements.

9


 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.
ORGANIZATION AND nature of operations

CCC Intelligent Solutions Holdings Inc. (the "Company"), a Delaware corporation, is a leading software as a service ("SaaS") platform for the multi-trillion-dollar property and casualty ("P&C") insurance economy, powering operations for insurers, repairers, automakers, parts suppliers, lenders and more. CCC's cloud technology connects businesses digitizing mission-critical workflows, commerce and customer experiences.

Our cloud-based SaaS platform connects trading partners, facilitates commerce and supports mission-critical artificial intelligence ("AI") enabled digital workflows.

The Company is headquartered in Chicago, Illinois. The Company’s primary operations are in the United States ("US") and it also has operations in China.

The Company was originally incorporated as a Cayman Islands exempted company on July 3, 2020 as a special purpose acquisition company under the name Dragoneer Growth Opportunities Corp ("Dragoneer"). On February 2, 2021, Cypress Holdings Inc. ("CCCIS"), a Delaware corporation, entered into a Business Combination Agreement (the "Business Combination Agreement") with Dragoneer. In connection with the closing of the business combination ("Business Combination"), Dragoneer changed its jurisdiction of incorporation by deregistering as an exempted company in the Cayman Islands and continuing and domesticating as a Delaware corporation on July 30, 2021, upon which Dragoneer changed its name to CCC Intelligent Solutions Holdings Inc.

2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation—The condensed consolidated balance sheets as of March 31, 2024 and December 31, 2023, the condensed consolidated statements of operations and comprehensive (loss) income for the three months ended March 31, 2024 and 2023, the condensed consolidated statements of mezzanine equity and stockholders’ equity for the three months ended March 31, 2024 and 2023, and the condensed consolidated statements of cash flows for the three months ended March 31, 2024 and 2023 have been prepared by the Company and have not been audited. In the opinion of management, all adjustments (which include only normal recurring adjustments except where disclosed) necessary for the fair presentation of the financial position, results of operations and cash flows have been made. The results of operations for any interim period are not necessarily indicative of the results to be expected for the full year or any future period.

The accompanying condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles ("GAAP") for interim financial information and in accordance with the instructions to Form 10-Q and Regulation S-X of the Securities and Exchange Commission ("SEC"). The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, the condensed consolidated financial statements may not include all the information and footnotes necessary for a complete presentation of financial position, results of operations or cash flows. These condensed consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2023.

The Company's significant accounting policies are described in Note 2, Summary of Significant Accounting Policies, to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2023. There have been no material changes to the significant accounting policies since December 31, 2023.

Basis of Accounting—The accompanying condensed consolidated financial statements are prepared in accordance with GAAP and include the accounts of the Company and its wholly-owned and majority-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The condensed consolidated financial statements include 100% of the accounts of wholly-owned and majority-owned subsidiaries and the ownership interest of the minority investor is recorded as a non-controlling interest in a subsidiary.

Use of Estimates—The preparation of the condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts, and the disclosures of contingent amounts, in the Company’s condensed consolidated financial statements and the accompanying notes. Although the Company regularly assesses these estimates, actual

10


 

results could differ from those estimates. Changes in estimates are recorded in the period in which they become known. The Company bases its estimates on historical experience and various other assumptions that it believes to be reasonable under the circumstances. Actual results could differ from management’s estimates if past experience or other assumptions are not substantially accurate. Significant estimates in these condensed consolidated financial statements include the estimation of contract transaction prices, the determination of the amortization period for contract assets, the valuation of goodwill and intangible assets, the valuation of the warrant liabilities, and the estimates and assumptions associated with stock incentive plans.

ReclassificationsCertain reclassifications of prior period amounts have been made to conform to the current period presentation. For the three months ended March 31, 2024, changes in the fair value of the Company's interest rate cap agreements are recognized within other income (expense)—net in the condensed consolidated statements of operations and comprehensive (loss) income. Corresponding amounts recognized during the three months ended March 31, 2023, were previously classified as a change in fair value of derivative instruments and have been reclassified to conform to the current period presentation. The amounts reclassified had no impact on net (loss) income.

Recently Issued Accounting Pronouncements—In December 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This update requires entities to disclose disaggregated information about their effective tax rate reconciliation as well as expanded information on income taxes paid by jurisdiction. The disclosure requirements will be applied on a prospective basis, with the option to apply them retrospectively. The amendments in this update are effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is evaluating the disclosure requirements related to this update.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This update is intended to improve reportable segment disclosure requirements, primarily through additional disclosures about significant segment expenses. The amendments in this update are effective for fiscal years beginning after December 31, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The amendments should be applied retrospectively to all prior periods presented in the financial statements. The Company is evaluating the disclosure requirements related to this update.

3.
REvenue

Disaggregation of Revenue—The Company provides disaggregation of revenue based on type of service as it believes these categories best depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

The following table summarizes revenue by type of service for the three months ended March 31, 2024 and 2023 (in thousands):

 

 

 

For the Three Months Ended

 

 

 

March 31,

 

 

 

2024

 

 

2023

 

Software subscriptions

 

$

218,069

 

 

$

196,256

 

Other

 

 

9,168

 

 

 

8,663

 

Total revenues

 

$

227,237

 

 

$

204,919

 

 

Transaction Price Allocated to the Remaining Performance Obligations—Remaining performance obligations represent contracted revenue that has not yet been recognized, which includes deferred revenue and amounts that will be invoiced and recognized as revenue in future periods. As of March 31, 2024, approximately $1,533 million of revenue is expected to be recognized from remaining performance obligations in the amount of approximately $617 million during the following twelve months, and approximately $916 million thereafter. The estimated revenues do not include unexercised contract renewals. The remaining performance obligations exclude future transaction revenue where revenue is recognized as the services are rendered and in the amount to which the Company has the right to invoice.

Deferred Revenue—Revenue recognized for the three months ended March 31, 2024 from amounts in deferred revenue as of December 31, 2023 was $39.0 million. Revenue recognized for the three months ended March 31, 2023 from amounts in deferred revenue as of December 31, 2022 was $33.8 million.

Contract Assets and LiabilitiesThe opening and closing balances of the Company’s receivables, contract assets and contract liabilities from contracts with customers are as follows (in thousands):

11


 

 

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

Accounts receivables—Net of allowances

 

$

102,007

 

 

$

102,365

 

Deferred contract costs

 

 

18,693

 

 

 

17,900

 

Long-term deferred contract costs

 

 

21,460

 

 

 

22,302

 

Other assets (accounts receivable, non-current)

 

 

15,726

 

 

 

15,198

 

Deferred revenues

 

 

45,254

 

 

 

43,567

 

Other liabilities (deferred revenues, non-current)

 

 

2,306

 

 

 

1,373

 

A summary of the activity impacting deferred revenue balances during the three months ended March 31, 2024 and 2023 is presented below (in thousands):

 

For the Three Months Ended

 

 

March 31,

 

 

2024

 

 

2023

 

Balance at beginning of period

$

44,940

 

 

$

36,479

 

Revenue recognized1

 

(115,413

)

 

 

(103,187

)

Additional amounts deferred1

 

118,033

 

 

 

108,130

 

Balance at end of period

$

47,560

 

 

$

41,422

 

 

 

 

 

 

 

Classified as:

 

 

 

 

 

Current

$

45,254

 

 

$

40,272

 

Non-current

 

2,306

 

 

 

1,150

 

Total deferred revenue

$

47,560

 

 

$

41,422

 

1 Amounts include total revenue deferred and recognized during each respective period.

A summary of the activity impacting the deferred contract costs during the three months ended March 31, 2024 and 2023 is presented below (in thousands):

 

 

For the Three Months Ended

 

 

 

March 31,

 

 

 

2024

 

 

2023

 

Balance at beginning of period

 

$

40,202

 

 

$

36,717

 

Costs amortized

 

 

(5,249

)

 

 

(4,785

)

Additional amounts deferred

 

 

5,200

 

 

 

5,619

 

Balance at end of period

 

$

40,153

 

 

$

37,551

 

 

 

 

 

 

 

 

Classified as:

 

 

 

 

 

 

Current

 

$

18,693

 

 

$

17,339

 

Non-current

 

 

21,460

 

 

 

20,212

 

Total deferred contract costs

 

$

40,153

 

 

$

37,551

 

 

4.
FAIR VALUE measurements

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Private Warrants—Upon consummation of the Business Combination, the Company assumed warrants sold in a private placement ("Private Warrants") issued by Dragoneer.

As of March 31, 2024 and December 31, 2023, the Company's Private Warrants are recognized as liabilities and measured at fair value on a recurring basis.

The Private Warrants are valued using Level 1 and Level 2 inputs within the Black-Scholes option pricing model. The assumptions utilized under the Black-Scholes option pricing model require judgments and estimates. Changes in these inputs and assumptions could affect the measurement of the estimated fair value of the Private Warrants. Accordingly, the Private Warrants are classified within Level 2 of the fair value hierarchy.

The valuation of the Private Warrants as of March 31, 2024 and December 31, 2023 was determined using the Black-Scholes option pricing model using the following assumptions:

 

12


 

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

Expected term (in years)

 

 

2.3

 

 

 

2.6

 

Expected volatility

 

 

31

%

 

 

34

%

Expected dividend yield

 

 

0

%

 

 

0

%

Risk-free interest rate

 

 

4.53

%

 

 

4.10

%

The estimated fair value of each Private Warrant using the Company's stock price on the valuation date and above assumptions was $2.98 and $2.89 as of March 31, 2024 and December 31, 2023, respectively.

Contingent Consideration Liability—The contingent consideration liability relates to the acquisition of Safekeep, Inc. in February 2022. The contingent consideration liability, recognized within other liabilities on the condensed consolidated balance sheet, is adjusted each reporting period for changes in fair value, which can result from changes in anticipated payments and changes in assumed discount rates. These inputs are unobservable in the market and therefore categorized as Level 3 inputs.

The estimated fair value of the contingent consideration was determined using probability-weighted discounted cash flows and a Monte Carlo simulation model. The discount rate, based on the Company's estimated cost of debt, was 10%.

As of December 31, 2023, the contingent consideration liability had a fair value of $0.1 million. As of March 31, 2024, there were no significant changes to the inputs used within the Monte Carlo simulation model and the estimated fair value of the contingent consideration liability was $0.1 million. The Company did not recognize any change in the estimated fair value of the contingent consideration liability during the three months ended March 31, 2024 or the three months ended March 31, 2023.

Interest Rate Cap—In August 2022, the Company entered into two interest rate cap agreements to reduce its exposure to increases in interest rates applicable to its floating rate long-term debt (see Note 13). The fair value of the interest rate cap agreements was estimated using inputs that were observable or that could be corroborated by observable market data and therefore was classified within Level 2 of the fair value hierarchy as of March 31, 2024 and December 31, 2023.

The Company did not designate its interest rate cap agreements as hedging instruments and records the changes in fair value within other income (expense)net on the condensed consolidated statements of operations and comprehensive (loss) income. As of March 31, 2024 and December 31, 2023, the interest rate cap agreements had a fair value of $6.9 million and $6.2 million, respectively, classified within other assets in the accompanying condensed consolidated balance sheets.

The following table presents the fair value of the assets and liabilities measured at fair value on a recurring basis as of March 31, 2024 (in thousands):

 

 

 

Fair Value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate cap

 

$

6,926

 

 

$

 

 

$

6,926

 

 

$

 

Total Assets

 

$

6,926

 

 

$

 

 

$

6,926

 

 

$

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Contingent consideration related to business acquisition

 

$

100

 

 

$

 

 

$

 

 

$

100

 

Private Warrants

 

 

53,086

 

 

 

 

 

 

53,086

 

 

 

 

Total Liabilities

 

$

53,186

 

 

$

 

 

$

53,086

 

 

$

100

 

The following table presents the fair value of the assets and liabilities measured at fair value on a recurring basis as of December 31, 2023 (in thousands):

 

 

 

Fair Value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate cap

 

$

6,208

 

 

$

 

 

$

6,208

 

 

$

 

Total Assets

 

$