CCC Intelligent Solutions Holdings Inc. Price & Performance (CCCS)

Further, these comments and the Q and A that follows are copyrighted today by CCC Intelligent Solutions Holdings Incorporated. Any recording, retransmission or reproduction or other use of the same for profit or otherwise without prior consent of CCCs prohibited a violation of United States copyright Additionally, while we will provide a transcript of portions of this call and we've approved publishing of the transcript of this call by a third party, which we take no responsibility for inaccuracies that may appear in the transcripts. Please note that the discussion on today's call includes certain non GAAP financial measures as defined by the SEC. The company believes these non GAAP financial measures provide useful information to management and investors regarding certain financial and business trends relating to the company's financial condition and the results of operations.

As reconciliation of GAAP to non GAAP measures is available on our earnings release is available on our Investor Relations website. Thank you. And now, I'll turn the call over to Kitesh. Thank you, Bill, and thanks to all of you for joining us today.

I'm pleased to report that CCC delivered another quarter of strong top and bottom line performance to complete another record year in 2024. For the fourth quarter of twenty twenty four, CCC's total revenue was $246,000,000 up 8% year over year and at the high end of our guidance range. Adjusted EBITDA for the fourth quarter was $106,000,000 ahead of our guidance range. And adjusted EBITDA margin was 43%. Looking at the full year 2024 revenue was $945,000,000 up 9% year over year.

Adjusted EBITDA $397,000,000 up 12% year over year with an adjusted EBITDA margin of 42% up about 130 basis points year over year. This solid financial performance reflects our durable business model and the ability to balance margin expansion with investments in innovation, that help position CCC for our next phases of growth. In 2024, we also made significant progress in strengthening and expanding the scope of the CCC CCC. With several key renewals and new customer additions, including the onboarding of over 1,000 new collision repair facilities to our platform. We also continue to grow our industry leading partner ecosystem and now have over 200 active technology and service providers in our network.

Our leadership in product innovation and AI also continued to advance in 2024. With the launch of several new solutions as well as our IX Cloud event based architecture, and with our AI now in production, at over 100 insurers, and over 10,000 collision repairs. We took that a step further through our acquisition of Evolution IQ, a fantastic business which expanded our addressable markets into disability and workers' compensation while also deepening and strengthening our AI and casualty capabilities. As we look to 2025 and beyond, we continue to be incredibly excited about the numerous growth opportunities ahead of us. Which I will now cover in three topics. The first is our conviction in the digitization of the insurance economy and the transformational impact we believe it will have on the industry. The second is the real world results customers are seeing from our most recent innovations And third is the actions we're taking to accelerate our customers' journey along this transformation. Which we believe will also accelerate CCC's growth.

Now let me start with my first topic, We believe the multi trillion dollar insurance economy is in the early innings of digital transformation and CCC is well positioned to be our customers' partner of choice for the transformation. Our clients continue to face significant operational challenges as the many forms of complexity they deal with continue their persistent rise. Vehicle technology labor shortages and scale gaps, medical treatments, natural disasters, data proliferation, changing regulations, and much more. These inflationary pressures have driven record premium increases in recent years and are also extending claims repair cycle times. In my conversations with customers, whether with management teams or Boards of Directors, they are increasingly describing these trends as unsustainable within their current operations. And as a result, our increasingly determined to deploy AI driven transformation across their businesses. We believe the fusion of our industry leading AI deep multi sided network, and our scalable multi tenant platform positions us as the partner of choice for this digital transformation and for more and more of a clean and repairs lifecycle to be processed using CCC solutions over time. And with the depth and breadth of the investments we have already made across our product portfolio, we are ready to help our customers achieve this level of end to end transformation.

For auto insurers, that means helping them all the way upfront at first notice of loss as they work to accurately and efficiently triage a claim and then helping them navigate the many downstream steps from vehicle appraisal to injury resolution and even subrogation.

For collision repairs, it means first helping them to drive business by optimizing their web presence, or by collaborating with insurers and then supporting them through the entire repair process including accessing repair procedures, scheduling technicians ordering parts and we can even support the business office in processing payroll and other tasks through integrations into our partner ecosystem. Fully unlocking the value of these capabilities requires a holistic approach to transformation which we are seeing customers increasingly embrace they can build and deploy the intelligent experiences that matter most [indiscernible] Intelligent experiences are to us the next phase in tech enabled business transformation. It means using rich data and state of the art AI, to identify the best outcome for a given claim or repair, based on customer specific configurations and then making that happen, by connecting the many different participants across the ecosystem, who are involved in resolving that event. Industry professionals facing ever higher demands, with an all around increase in complexity, helping them identify and implement the next best action for their work and doing that at scale is going to become a defining feature of AI enabled vertical software. Evolution IQ pioneered the use of AI enabled claims guidance in disability and workers' comp.

And by delivering proven results has been growing rapidly with multimillion dollar annual contracts from many of the largest insurers in The United States. By helping claims professionals identify the highest value tasks to do next from among hundreds of possible tasks they are bringing the future of AI guided next best actions to life The nature of this transformational impact is very clear from my meetings with the leadership of Evolution IQ customers. The addition of Evolution IQ to our portfolio continues CCC's track record of delivering tangible real world impact from AI through an attractive and highly scalable economic model. We believe the digitization of the insurance economy through intelligent experiences is inevitable. And while the exact progression is hard to predict, we expect it to provide CCC This brings me to my second topic, which is the real world ROI clients are realizing from our newer solutions as they make this transition.

Throughout our history, success has always been driven by reference level products that deliver a high and demonstrable ROI with results from early launch customers setting the path for wider adoption across our customer base. And we are now consistently seeing this ROI play out in our priority areas of growth. Within our Insurance Auto Physical Damage or APD business, customers are realizing tremendous benefits from the capabilities and our intelligent APD suite, a set of AI enabled solutions that dramatically improves effectiveness and efficiency in APD claim sampling and resolution. Many of these solutions leverage proven computer vision AI to extract insight from photos and then deploy those insights across customer and partner workflows. This includes helping insurance appraisers prepare vehicle damage estimate that is on average 30% less time than before. To more rapidly identify a potential total loss regardless of where that vehicle is located. Making that total loss determination as early as possible can eliminate hundreds of dollars avoidable rental, storage and other charges. While also greatly improving a carrier's customer and employee experience. Today, it takes an insurer about thirteen days on average to make the total loss determination. By using the capabilities in our intelligent APD suite, one national insurer has seen a 30% lift in early total loss identifications with an average reduction of three to seven days in cycle time for vehicles located within their direct repair program.

Our casualty and subrogation solutions are also driving significant real world ROI for our clients. In casualty, innovations in our third party bill review solutions delivered an almost 40% increase in identified improvements for our top 10 insurer last year. And in subrogation our AI enabled inbound solution has enabled some carriers to settle more than 40% of demands the same day they CCC them.

Versus days or weeks [indiscernible] We now have over 20 insurers using one of our subrogation solutions, including multiple in the top 20. Priority growth areas in our automotive business are also delivering substantial benefits to repair facilities along with the broader ecosystem of auto manufacturers, dealers part suppliers and other partners they do business with. Several of our newer repair facility solutions improve shop productivity by standardizing operating procedures and streamlining manual tasks. For example, our recent introduction of bill sheets leverages as manufactured vehicle data to quickly identify the exact part that should be used in a repair. With so many vehicle trims and options to choose from, This data can filter the choices for say, ad lab, from dozens down to one. In addition to saving time during the estimating process, real world results show another benefit. Reduced [indiscernible] from ordering the wrong parts. Parts returns for customers using these solutions are 25% lower by quantity and more than 50% lower by dollar value. Customers of the solution are also CCC higher satisfaction scores as improved accuracy in part selection upfront improved cycle time, along with other aspects of the customer experience. The clear and demonstrable value of this solution has led to rapid adoption with thousands of repair facilities now using it despite being in the market for less than a year.

We are also delivering real world ROI impact to companies in the broader automotive ecosystem that do business with their repair facility For example, part suppliers continue to CCC strong results from their integration into CCC, because it allows repair facilities to electronically order parts in the operating system they use every day. In fact, the efficiencies are so significant that one major OEM recently decided to use our parts solution As their exclusive platform for managing promotional part sales to collision repair facilities they are the second OEM to do so. We also continue to integrate new diagnostics providers into CCC, reducing the administrative burden on shops in managing and performing diagnostic related tasks. This benefits the repair facility, diagnostics provider, and in many cases also the insurer and OEM. And we now have about 20% of repair facility customers taking advantage of this functionality. As I said earlier, Evolution IQ is also delivering substantial in some cases, multi point combined ratio impact to its clients. And because of those results, clients are excited to do more. Since announcing the acquisition two months ago, I've seen from my own personal meetings with both Evolution IQ and CCC clients that their reaction has been overwhelmingly positive.

A sentiment that has also been reinforced in day to day customer interactions with our account teams. We see tremendous opportunity in evolution IQ's core disability and workers' comp markets and Evolution IQ's capabilities including medical document summarization, are also highly complementary to our existing casualty business which is one of our largest growth opportunities and also one of our fastest growing product lines overall.

Across our portfolio, the ROI from our newer solutions is generating strong demand and a robust customer pipeline. With emerging products collectively representing the fastest growing part of our portfolio. This gives us confidence in the market opportunity for these solutions and as a result focusing more on accelerating their revenue velocity in 2025. [indiscernible] This brings me to my third topic, which is a set of actions we have taken to help our customers more rapidly adopt our new solutions and accelerate the transformation journeys as we head into 2025. I will start with technology and last year's introduction of the CCC Intelligent Experience Cloud. As you heard me describe before, IX Cloud is an overlay that sits on top of CCC's existing cloud applications customer workflows and customer and partner systems. It is essentially a distribution system is able to handle our AI enabled workflows and massive amounts of data from multiple sources in real time. IX Cloud employs an event driven architecture which means it uses a managed published and subscribed model that enables companies to set up notifications for relevant business events and configure actions based on those events using AI. This architecture is designed to make it faster and easier for customers to deploy new CCC solutions, and it also increases the number of ways customers can use multiple CCC solutions together.

There is minimal effort to leverage the new architecture and there is no additional cost to the client. We are already seeing benefits from this approach with customers and we anticipate becoming an even more important catalyst moving forward we have also taken several steps to streamline and upgrade our go to market activities The first of these initiatives has been the rollout of new insurance packages that better align existing and new solutions within and across our solution sets. For example, have found that many customers prefer to buy a complete intelligent APD solution suite to maximize cross product synergies and also streamline their internal rollouts. In many cases, these new packages are also improving adoption of our existing solutions. As is the case of a recent top 20 insurer who not only contracted for new solutions as part of their multiyear renewal, but also added several established solutions as part of migrating to a more holistic package based offering.

We are employing this approach for all new and renewal insurance contracts in 2025. I've also spoken in recent quarters about the impact of change management on the adoption and ramp up of our newer solutions. And we are making changes to improve our support for customers in this area as well. CCC has always been A deeply trusted partner to our customers has been our support for implementation and change management at a very granular level. But we have found that change management support needed for our newer solutions can sometimes be different in important ways. First, the productivity impact of our newer solutions often does not just warrant a customer's streamlining their operations, but instead transforming them altogether. For example, our AI enabled subrogation solution has led some insurers to consider realigning their entire subrogation operation which demonstrates the value of the solution but also requires a different duration and form of support than if we were helping an insurer migrate an existing process. Second, we've also seen variations in how quickly customers will scale a new solution across their operations. For example, while paid volume on Estimate STP a component of our intelligent estimating solution, is still just 4% of our annual claims overall we announced in 2024 that a top 10 insurer was on track to process 20% of their repairable claims on a run rate basis using this product.

By replicating the learnings from that initiative, we are helping other carriers set similar goals.

And that first insurer that was on track to process 20% they feel very good.

About their results. As a hyper growth AI startup, Evolution IQ has been particularly effective providing AI specific change management support to its customers. During my visits with Evolution IQ's clients, they told me directly how important these change management capabilities have been for them to get results these approaches more broadly across CCC. Lastly, we have taken steps to realign our customer facing functions so we can be better partners in accelerating our customers' transformation journeys overall.

Starting next month, all of CCC's market facing and service functions will operate under Tim Welch, who will be joining as President. Tim brings a wealth of experience to CCC including twenty five plus years of P and C and life insurance leadership and McKinsey where he served as a senior partner and member of McKinsey's Board of Directors. Tim has worked with many of the top insurers in the world and most recently Tim spent seven years as Vice Chairman of Consumer Business Banking Tim has a deep understanding of the broader insurance economy as well as transformation including a recent digital transformation of U. S. Banks 20,000 plus employee retail banking system. I know Tim has followed CCC for a long time and is excited about the growth opportunities in front of us. We look forward to Tim helping our teams adviser customers, on their own transformations and advancing the digitization of the entire insurance economy. Welcome, Tim, As we look ahead to 2025, we remain confident that the global insurance economy is still in the early stages of a generational digital upgrade cycle and that CCC is well positioned to help our customers navigate this transition. About the long term growth potential this opportunity represents and look forward to supporting our customers and partners on this journey in the months and years ahead.

I will now turn the call over to Brian who will walk you through our results in more detail. Thanks, Kitash. 2024 was a year of solid revenue growth margin expansion and free cash flow generation that reflect our ability to effectively balance between investments in our growth initiatives and ongoing margin discipline, it also highlights the strength of our durable business model. Now as we turn to the numbers, I'd like to review our fourth quarter and fiscal year twenty twenty four results and provide guidance for the first quarter and full year twenty twenty five. Total revenue for the fourth quarter was $246,500,000.0 which is up 8% from the prior year period Total revenue for the fiscal year twenty twenty four was $944,800,000 which was up 9% over 2023.

In the fourth quarter of twenty twenty four, approximately five percentage points of our growth was driven by cross sell, up sell and adoption of our solutions across our client base including repair shop upgrades, the continued adoption of our emerging solutions the ongoing strength in casualty and other ecosystem customers Approximately three points of growth came from new logos, mostly from our repair facilities and part suppliers. About one point of growth in Q4 came from our emerging solutions mainly Diagnostics, field sheets, estimate STP.

Run rate from emerging solution overall was about 3% of our total revenue in Q4 twenty twenty four and these solutions continue to be our fastest portion of the portfolio. Now turning to our key metrics. Software gross dollar retention or GDR captures the amount of revenue retained from our client base compared to the prior year period. In Q4 twenty twenty four, our GDR was 99% four quarters. Note that since the first quarter of twenty twenty, our GDR has been between 9899% and is either rounded up or down primarily driven by repair shop industry churn. Believe that the GDR reflects the value we provide and the significant benefits that accrue to our participating in the broader CCC network Our strong GDR is a core tenant our predictable and resilient revenue model. Software net dollar retention or NDR captures the amount of cross sell and up sell from our existing compared to the prior year period as well as volume movements in our auto physical damage client base. In Q4 twenty twenty four, our NDR was 105, down modestly from 106 in Q3 twenty twenty four. Now I'd like to turn to the income statement in more detail As a reminder, unless otherwise noted, all metrics are non GAAP.

Provide a reconciliation of GAAP to non GAAP metrics in our press release. Adjusted gross profit in the quarter was $188,000,000 Adjusted gross profit margin was 76%, was down from 79% in Q4 twenty twenty three. The lower adjusted gross profit margin primarily reflects two factors.

The first is an increase in depreciation expense from capitalized projects recently put into service. The second is driven by mix. As we've seen faster growth from certain casualty solutions that carry a lower margin profile. Overall, we feel good about the operating leverage and the scalability of the business model and our ability to deliver against our long term adjusted gross profit margin of 80%. In terms of expenses, adjusted operating expense in Q4 twenty twenty four was $95,000,000 which is up 4% year over year Most of the $4,000,000 year over year expense growth was the result of lapping a one time $3,000,000 insurance claim reimbursement in Q4 of twenty twenty three, which we highlighted last year. Adjusted EBITDA for the quarter was $106,000,000 which is up 6% year over year with an adjusted EBITDA margin of 43%.

Now turning to the balance sheet and cash flow. We ended the quarter with $399,000,000 in cash and cash equivalents $776,000,000 of debt At the end of the quarter, our net leverage was 0.9x adjusted EBITDA.

After the close of the acquisition of Evolution IQ in January 6, total debt outstanding was 1,000,000,000 and net leverage approximately two times adjusted EBITDA. Free cash flow in Q4 was $106,000,000 compared to $75,000,000 in the prior year period. Free cash flow on a trailing twelve month basis was $231,000,000 which is 18% up year over year. On a trailing twelve month free cash flow margin as of Q4 twenty twenty four, was 24% from 23% in Q4 of twenty twenty three, While our free cash flow levels will vary quarter to quarter, we do expect it to trend up over time.

Before we turn the page on 2024, I want to say that it was a year of solid financial performance across multiple metrics. Revenue grew 9% organically. Adjusted EBITDA margin expanded 130 basis points Free cash flow margin increased almost 200 basis points. And also on the capital markets front, our stock liquidity improved significantly as private equity ownership decreased about 70% to just over 20%.

Now looking at 2025, I'll discuss guidance beginning in Q1 twenty twenty five we expect revenue of $249,000,000 to $250,500,000 which represents 10% growth year over year at the midpoint expect adjusted EBITDA of 92,500,000.0 to 94,000,000 a 37% adjusted EBITDA margin at the midpoint For the full year 2025, we expect total revenue of $1,055,000,000 to $1,065,000,000 which is a 12% year over year growth at the midpoint We expect Evolution IQ to contribute $45,000,000 to $50,000,000 in 2025 as we discussed back in December we announced the deal.

For adjusted EBITDA, we expect $417,000,000 to $427,000,000 a 40% adjusted EBITDA margin at the midpoint, which includes absorbing a moderate EBITDA loss from Evolution IQ. So three points to keep in mind as you think about the Q1 and full year guide for 2025.

The first point, as Kitesh mentioned, is that the actions we are taking give us confidence in our ability to help our customers advance more rapidly on their digital transformations. As we experienced in 2024 and not unique to launching new solutions, timing of adoption can be hard to predict as new solutions take time to roll out gain adoptions [indiscernible] For that reasons, we are assuming growth excluding Evolution IQ in 2025 remains towards the lower end of our seven to ten long term range And then emerging solutions continue to contribute about one point of growth. The second point is that Evolution IQ is a high growth business. So we are expecting that revenue contribution from Evolution IQ to increase as 2025 progresses and the business continues to scale.

We also expect that Evolution IQ's EBITDA loss will moderate as we go through the year based on the front loading of integration efforts and the scaling of revenue. The third point is that the adjusted EBITDA margin should be up about 75 basis points year over year to about 43% excluding Evolution IQ. On a reported basis, which includes the dilution from Evolution IQ, full year 2025 adjusted EBITDA margins will be down about 200 basis points at the midpoint to roughly 40%. We do expect margins to improve from the initial Q1 guide throughout the year and continued expansion on a full year basis in '26 and beyond.

One additional comment, before the acquisition of Evolution IQ, we are on track to reduce stock based compensation as a percent of revenue from 18% in Q4 twenty twenty four to roughly 12% in 2025.

As I mentioned on the Evolution IQ call in December, we will be absorbing about three points of stock based compensation for a total of about 15% of revenue in 2025 impact of this will be front end loaded. We believe that the grants for Revolution IQ were important for alignment and retention of our new team members. We expect share based comp as a percent of revenue to decline from that 15% level beginning in 2026.

So as we wrap up, I'd like to reiterate our confidence in our ability to deliver against our long term revenue growth and adjusted EBITDA margin targets we believe that our durable business multi sided network and the growing portfolio of AI enabled solutions will enable us to continue to execute on our strategic priorities and generate significant value for both our customers and our shareholders. With that, operator, we're now ready to take questions. Thank you. [indiscernible] Our first question comes from the line of CCC Gagoula with JPMorgan. Your line is open. Please go ahead. [indiscernible] Good evening, everyone.

Brian, I had a follow-up question about the organic revenue growth. It seems like based on the midpoint of CCC Evolution IQ contribution, you're suggesting that the organic growth in Q1 maybe roughly sort of 5%, 6% and then accelerating to about 7% for the year.

Can you explain, what is driving this deceleration versus the organic growth you reported in 2024?

Yes. Hey, Alexi, it's Brian. CCC way to think about Evolution IQ is it's going to scale as we go through the year. So you can't look at the five points in each quarter. So we get to five points points of contribution from Evolution IQ at the full year. We are guiding towards the lower end of the long term range. In each quarter. So that's if you remember, the long term range is seven to 10.

We are in Q1 seven to 10. So Evolution IQ is the balance to get to the 10% total.

Does that make sense?

And can you explain why that is? Is there some sort of seasonality [indiscernible] Revenues No, it's just it's a hyper growth business and we're expecting it to continue to scale as we go through the year. So we'll start at a smaller base and then build as we go sequentially through the year. And how much did it generate in 2024? Yes, 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 $45,000,000 to $50,000,000 So those give you the data points to kind of understand the The contribution from Evolution IQ Okay.

You, Brian. And then with regards to your comment about the contribution of emerging solutions. I think you've highlighted again that they'll contribute about one percentage points to total revenue When do you expect that contribution to [indiscernible] process of adoption right now among those solutions.

Yes, I'll talk about the numbers and I'll let Kitash add some color on what we're seeing on emerging. So just as a reminder, emerging is about 3% of total revenue. At this stage for the company. Is contributing about one point of growth for the company. So think about that as about $10,000,000 So this part of the portfolio is growing. 30 plus percent. It's the fastest growing part outside of Evolution IQ. We have a lot of engagement with our top clients working through proof of concepts, pilots, test and signing of contracts so we feel like we're getting close to the inflection point on emerging moving from one point of growth contribution to something more. We're just not calling it yet. So as we talked about in the prepared remarks, there's a lot of activity and actions that we're driving across the business. And we're feeling really good on the progress we're making and we'll keep you updated on emerging solutions as we go through the year. Gitesh, if you want to add any color on that? Yes, let's say the only thing I wanted to add is as I said in my comments, we are seeing continued adoption and increase in volume pretty much across the board on all our solutions.

And as you know, 2024 as we ended the year, it was the largest launch of new products and new solutions across our entire portfolio And we feel very good, but we are not going to call anything more than what Brian called out inflection point of all of these solutions starting to ramp towards the left. Later on.

Thank you, Gitesh. 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? Yes. On the volume side, Alex, 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, we saw the moderation to about minus 3% of total claims. And so we ended the year at 5% down year over year in 2024.

Very clear. Thank you very much for your answers.

Thank you. And one moment as we move on to our next question. Our next question is going to come from the line of Josh Baer with Morgan Stanley. Your line is open. Please go ahead.

Thanks for the question. I was hoping you could revisit pricing and philosophy on on efforts to lean more into pricing. And wondering how much of the growth when thinking about 2025 is coming from taking price? Yes. Hey, 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 and 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 why how I'd give you kind of the pricing strategy is as we think about the $25,000,000 impact.

Okay. Thanks, Brian. And just a follow-up on the claims volume comment. Just wondering like now with January and February mostly done, what what you're seeing there on the claims side? And wondering if like the Q4 moderate improvement was is a trend that we should carry through to 2025 when thinking about transactional piece of the business or is like a down five down down five, down six the right level? You think Or like in your guidance essentially?

Yes. This is Gitesh. January always has some weather related [indiscernible] So we don't try to extrapolate off of January. We have the January data. It has it does look a little moderated. But it's a little too early to call it one way or the other. And as you know, the vast majority of our revenues are not impacted by Yes. Just to follow-up on Josh, we're not assuming anything really moving on '25. We're not assuming that we're going to get a lift or a drag. It's kind of baking in the '24 performance. It's the baseline and then we'll adjust from there. Okay. That's helpful. Thank you. Yes.

Thank you. And as a reminder, analysts, please limit yourself to one question and one follow-up. Our next question does come from the line of Dylan Becker with William Blair. Your line is open. Please ahead.

Hey, guys. Maybe to continue on the topic of the claims volume side. Kitesh for you, do you still feel like [indiscernible] feels like there's some nuances in particular in 2024 that that somewhat muddy that metric. So is that a fair characterization characterization? And then how to kind of reconcile that with the increasing CCC like perpetual complexity associated with the cost of repair in the process itself, that can offset that as well too. Thanks.

Yes. Sure. So what we did see over the last two plus years is the propensity for consumers to self pay. We saw a market increase in that number. Right? That is claims that are still being processed by repair facilities and the like, And that went from 10%, 12% used to be consumer self paid about two point five, three years ago, to where it's now 22%, 23% self pay and then we've now started to see that number start to come down, meaning consumers paying for repairs is still at that elevated level. And part of that has been the reluctance or the fear of increased rates and we are also hearing that from we're seeing that from customers and you can see that from some of our public customers as well. And so while that shift has taken place, we are also seeing that as rates, insurance the increase in insurance rates starts to moderate, the expectation is that that too shall normalize over time. But the underlying point that you're making about the increase in complexity That is absolutely the case, right, with calibrations, diagnostics, more complex parts, 13.5 parts per estimate, dollars 120 a part.

So all of the underlying complexities are continuing to increase and that's really where customers are saying they need significant help managing that.

Got it. Okay, too. And so probably fair to say then that that mix shift should in theory contribute to level of growth in claims volumes as well too as that normalizes.

Okay.

Maybe on the comment around the go to market kind of 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 kind of larger top carriers. How should we think about effectively the benefits of having kind of more dedicated focus and teams to towards some of those customers and maybe learnings from think you called out a top 20 that had a significant expansion, as well to kind of accelerate their digital transformation change.

Yes. I mean, without question, we now have essentially for almost every new solution we have customers in pilot or in production in various forms And what we are seeing is that more dedication in terms of change management, specific tuning to their processes, or some instances like the subrogation example I gave, people are saying, hey, I can get some real benefits very quickly. For example, in Sub Row, people see an 80% decrease in cycle time.

Those kind of things means I can actually restructure some of my operations to be to take full advantage of it So what we have learned as a result of these new solutions, especially the AI solutions, is that there is more effort and more energy in really working close So even our oldest solutions like when you look at Estimate STP, think we've announced that we have probably over 40 plus customers now an estimate as [indiscernible] volume is steadily increasing and we see some customers at higher levels. But we have learned a lot about the nuances and the specifics of each solution and change management and we're putting that effort into working closely with our customers.

Thank you. And one moment as we move on to our next question. Our next question comes from the line of Samad Samana with Jefferies. Your line is Maybe for just on the rollout of the new package [indiscernible] 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 How should we think about that maybe flowing through revenue?

You made any kind of maybe conservative assumptions just because there's an unknown around it or are you very confident in those assumptions?

Yes. 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 as the ratio 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. Our go to market approach. But I wouldn't highlight a material part of growth related to insurance pricing. In fact, the vast majority of our growth comes from new solutions and new products and adoption by new customers. That's how traditionally all our growth is most of our growth has come from.

Great.

And then as we think about Tom taking over Disney role, how should we think about what changes we may anticipate in that? And again, maybe just trying to [indiscernible] 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 current market changes? How should we think about how you can we update that to the outlook?

Yes. Look, I think we've factored we just completed our plan at the end of last year where six weeks into the plan. We feel very good about the customer pilots, testing, all of the activities that we described in the call, in terms of every single new solution Tim is going to be a fantastic addition And we're really excited about Tim coming on board for two very fundamental reasons. Tim has an extraordinarily deep understanding of the broader insurance economy. He understands the overall space very, very well, having served many of the customers for a long period of time. The second thing we're really excited about is that Tim has done a remarkable job in a digital transformation of a large scale operation And that's really what our customers are trying to do.

And in Tim's role, Tim's ability to guide our teams and guide our customers on their own digital transformation we think will be incredibly valuable. [indiscernible] Tim I know is excited about it. And so we're looking forward to Tim coming on board and helping with all of that.

Great. Also, apologies Tim for getting your name wrong the first time. Sorry about that.

No worries.

One moment as we move on to our next question. Our next question comes from the line of Gabriela Borges with Goldman Sachs. Your line is open. Please go ahead. Hi. This is Maura on for Gabriela. Thanks for taking the Sticking with the digital transformation and more specifically AI opportunities, As you're talking to customers, what are you hearing that might be different than this time last year just in terms of how fully baked the AI strategies are and willingness to invest? Sure. We are hearing really three three things that I would say when we talk to the management teams of our customers, our boards, with our EIQ team and talked to very senior levels of their customers. So here's I would say macro level three things. First and foremost, At the Board level, at the senior management level, all our customers are now saying we have got to be able to use AI to tame and manage complexity. So it has gone from hey, this could be an interesting concept, I don't know if this is going to work. I am really not interested in writing a poem with chat GPT, but how can I put AI in really production?

So that has been first and foremost that mindset shift. To lean into those solutions. Second thing we're seeing is that customers are now a year, two years into using our solutions. We have 300 plus different AI models. And the level of trust and the level of usability of these solutions I think I mentioned in the call over 10,000 repair facilities using it. 100 plus carriers using it. So the level of confidence and trust over time That has increased in both the solutions we announced earlier as well as the ROI the specific ROI people are seeing from solutions like First Look or Subrogation or these tools. So that's kind of the second bucket.

The third bucket is when you look at EIQ and what that team has done, you will see that many of their customers are actually [indiscernible] are reporting their results publicly are even referencing Evolution IQ as having had a significant impact on their bottom line results in the quarter. So So people are translating this into actual operating performance and that is actually making its way from a customer to customer and those references great execution gives us great references which are incredibly valuable. So those would be the three.

Great. Thanks for all the detail there.

And then on EIQ, you talked about the complementary nature to CCC. Existing products. Just higher level, how are you thinking about the timeline around synergies and faster adoption there?

We've kind of factored all of that in the guide. So first and foremost, let me start out by saying everything we thought about the team, We feel very, very good We've spent a lot of time in the integration. That feels fantastic. The reaction from Evolution IQ customers as well as the traditional CCC customers has been very, very positive. [indiscernible] [indiscernible] what we see is that they have a lot of growth in their core markets in 2020 going into 2025. And in addition to that, the one of the solutions, the ability to do medical summarization through a solution called MedHub. That solution is extraordinarily unique and capable that is very valuable for Evolution IQ customers but also applies to our casualty business. So it's really a product synergy and we've been world leader we've been Absolutely fantastic with our photo AI and all of the capabilities there. The Evolution IQ's ability to understand hundreds and hundreds of pages of medical information and documents and extract very specific actionable information useful to the CCC CCC business as well.

Yes, maybe it's Brian just to add a point. So as Gitesh said, there is certainly revenue products synergies. We are excited about the opportunities, specifically the 25 guide. There's not a meaningful part within the guide regarding the revenue synergies.

Got it. [indiscernible] And our next question is going to come from the line of Shlomo Rosenbaum with Stifel. Your line is open. Please go ahead.

Hi. Thank you very much.

Kitesh, I just want to ask you like We're 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've seen 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 Sure, 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.

Yes. I would say, it's level. So first and foremost, Having seen our been close to this for a very long period of time, I've seen this pattern multiple times over the years, especially as you go from one wave of solution to the next generation of solutions. And as you go as we went to the Internet platform, as we go to mobile capabilities, as you go to now the next generation of AI based solution there's always a transition period the adoption of customers a lot of work to be done to really put the products in production. It's also the broadest set of solutions we've So I would say it's a combination of both of those. It's a transition to the next wave of as well as [indiscernible] [indiscernible] [indiscernible] things that I talked about, which is helping with more change management and some of the things that we talked about. So that's why we are not calling an inflection point on the new solutions until we actually see CCC.

Okay. And then in terms of the bundling to get more so 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 where in the context of your starting the bundling here, are you kind of testing it out first in order 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 Yes, I think so first and foremost, as Brian described, pricing is not a material part of this. But what it is doing is that when you think of, for example, Estimate STP working with First Look, working with Intelligent Reinspection, they all rely on the same photo AI capabilities So customers that were either adopting mobile estimate STP intelligent reinspection and first look, it is sometimes easier for customers to align three, four, five different solutions together and implement them is the same amount of effort but the ROI is significantly greater.

So that's really what we're trying to do is to make it easy for customers to adopt with the ROI. That's really the primary purpose here.

Okay. Thanks.

Thank you. And one moment as we move on to our next question. Our next question comes from the line of Chris Moore with CJS Securities. Your line is open. Please go ahead.

Hey, good evening guys. Thanks for taking a couple. Most I think just modeling at this point in time, He probably went through it when during the Evolution IQ, but from an interest expense perspective, is there kind of reasonable level that we should be thinking about for fiscal twenty twenty five? 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 levels at $1,000,000,000 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 on the rate. So you can use the rate We have 4% cap [indiscernible] $600,000,000 of the debt. So, 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 Got it. Obviously, EBITDA margin is coming down a bit with Evolution IQ. Gross margins, adjusted gross margins, [indiscernible] No, no, go ahead, Chris. Sorry, go ahead, Fisher. No, yes, just why should we expect a little bit of expansion on adjusted gross margins or how should we be looking at that?

Yes. I mean for the full year adjusted gross margin was 78%. We talked about the long term target of 80 Gross margins will bounce around a bit quarter to depending on product mix. And putting out new solutions into the market. As you think about eIQ and their impact, they have a similar gross margin profile to what what we have as kind of a software company. So Evolution IQ won't have an implication on our gross profit margin, but as I said, we feel good where we sit today at 78%. And the long term guide of moving towards 80% over time. Very helpful. I will leave it there. Thanks guys. Thanks, Chris. Thanks, Chris.

Thank you.

And one moment as we move on to our next question. Our next question is going to come from the line of Peter Griffith with Citi. Your line is open. Please go ahead.

Yes. This is Peter on the line for Tyler. Thanks for taking the question guys.

On Evolution IQ, I believe at the time of the announcement, you talked about TCC CCC one overlapping customer with Evolution IQ. Just wondering how long it will take for you guys to really be your stride going with prop selling into the customer base? And is there any additional changes you need to make to your selling motion as well?

Thanks.

Hey, thanks for the question, Peter. The The net net of it is in Evolution IQ's customer base in and really as you look at disability, workers' comp in that market, And as we talked about the product synergy, as we bring in the medical summarization capability into [indiscernible] that will be integrated into our casualty solution suite and sold to traditional customers. And the one customer where we do have an overlap, we've already started having conversations and made introductions and thus going forward, But for the most part, overlap is a relatively small piece of the overall puzzle.

For the question.

Thank you. And one moment as we move to the next question. Our next question comes from the line of Kurt Materne with Evercore ISI. Your line is open. Please go ahead.

Yes, thanks very much. Sort of a related question on Elition IQ. Gitesh, CCC you just talk about how you're thinking about can I guess the question is can CCCS CCC now cross sell the Evolution IQ product, you sort of referred to it, but I'm just kind of trying to get a sense on when can the 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 sorry, you answered us a little bit, but I was just trying wonder if you could give us a little bit more color on that idea.

Sure. So So first of all, the Evolution IQ team has a great model of how they work with customers and we have and as you know, one of the greatest things when it comes to bringing new customers on board is the quality of the references you have from existing customers who already rolled out. So that's a big piece of it. So Evolution IQ steam as really great customers. I've actually gone out and met with existing customers They are really thrilled with what they have.

So there is an already existing pipeline. The Evolution IQ team has been working on those. So that will continue as is. At the same time, we are doing product development and R and D as a team working closely together where we bring in some of the core AI summarized medical summarization capability but that will become part of the CCC casualty suite and as we've casualty, as I mentioned, In the And this adds to the casualty suite And as soon as that product is available, that will be ready for sale. By our the CCC sales team into our customer base.

Okay.

That's helpful. And then, Brian, maybe more for you on the OpEx side.

Obviously, you guys are adding a lot of AI functionality into your products. I was just kind of curious within CCCS CCC, are you seeing benefits in terms of your own R and D development cycles? Are you getting any benefit yourself from the usage of AI internally? [indiscernible] 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 and 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 looking always looking at areas of efficiency and opportunity within our cost base. But I'm sure Gitesh has more to add.

Yes. One particular area we're seeing is in development. [indiscernible] one of the most challenging parts of any large complex software development process and we do over 1,900 releases a year and is really building out test cases. And where AI is really helping us and our teams is really speed at which we can build test cases and AI is proving to be very effective at that. And so we have started to deploy it in our technology organization as well.

Thank you.

Thank you. And one moment as we move on to our next question. Our next question comes from the line of Saget Kalia with Barclays. Your line is open. Please go ahead.

Hi. This is Alyssa Lee on for Saket.

Thank you for the question. I 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?

Thank you.

Yes. Yes, the biggest thing that's happening in the margin is really absorbing Evolution IQ. So if you think about the margin profile, we're the business before the acquisition Evolution IQ, we're adding about 75 basis points of margin improvement year over year. What then we've absorbed the moderate loss EBITDA loss of Evolution IQ. There's some integration costs that are upfront. And when you add that together, it's taking us to about 200 basis points of margin decline year over year. So what you're really seeing there is Evolution IQ playing through the margin. As far as emerging and established, Emerging has an impact on the gross profit, because it has not scaled yet. But the depreciation is running through gross profit. So it does have a drag there. Over time, emerging when it gets to scale will have a similar margin profile as our established solution. So more of a temporary impact. And when you get merging to scale, it will look similar to our established solutions from a margin profile.

Thank you. That's very helpful.

Thank you. And I would like to hand the conference back to Kitesh Ramamurti for closing remarks.

Well, thank you all for joining us today. As we said, we are very optimistic about what we planned for 2025 and we remain confident in our ability deliver on our strategic and financial objectives, And our customers I know are excited about the digital transformation journeys they're on. And also in working with us and investing in future solutions. I'd like to take this opportunity to thank our customers for their trust and the confidence they placed in CCC And I'd also like to thank our CCC team members remain very excited about the opportunities in front of us look forward to updating you on our next quarterly call. And trust in CCC CCC.