CCC Intelligent Solutions Holdings Inc. (CCC) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the CCC Intelligence Solutions Conference Call. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Bill Warmington.

Thank you, operator. Good morning, and thank you all for joining us today to review CCC's Second Quarter 2026 Financial Results, which we announced in the press release issued earlier this morning. Joining me on the call are Githesh Ramamurthy, CCC's Chairman and CEO; Rod Christo, CCC's Interim CFO; Tim Welsh, CCC's President; and Katie Coleman, CCC's Treasurer and GVP Finance. The forward-looking statements we make today about the company's results and plans are subject to risks and uncertainties that may cause the actual results and the implementation of the company's plans to vary materially. These risks are discussed in the earnings releases available on our Investor Relations website and under the heading Risk Factors in our 2025 annual report on Form 10-K filed with the SEC. Further, these comments and the Q&A that follows are copyrighted today by CCC Intelligent Solutions Holdings, Inc. Any recording, retransmission or reproduction or other use of the same, for profit or otherwise without prior consent of CCC is prohibited in the violation of the United States copyright and other laws. Additionally, while we will provide a transcript of portions of this call and we've approved the publishing of a transcript of this call by a third party, 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. A reconciliation of GAAP to non-GAAP measures is available in our earnings release and is available on our Investor Relations website. Thank you. And now I'll turn the call over to Githesh.

Thank you, Bill, and thanks to all of you for joining us today. I'm pleased to report that CCC delivered another quarter of solid top and bottom line results. These results reinforce our belief that CCC is becoming the connective layer for the insurance economy, helping participants make informed decisions take action and operate more effectively across an increasingly complex ecosystem. In the second quarter of 2026, total revenue grew 10% year-over-year to $286 million, above the high end of our guidance range. Adjusted EBITDA was $115 million, also above the high end of our guidance range. Today, I'd like to focus on 3 themes that continue to frame both our near-term momentum and our long-term opportunity. The first, how CCC is thriving in an AI-driven world. The second is how that is translating into strong customer and revenue momentum. And third is how solving for rising complexity gives us confidence in CCC's long-term growth opportunity. Let me start with how CCC is winning in an AI-driven world. We are a scaled player in AI today, generating more than $120 million of annualized revenue from AI-based solutions that are growing at nearly 50% year-over-year. But the more meaningful takeaway is what that growth tells us about how our customer behavior is evolving. Customers are increasingly focused on deploying CCC's AI to generate measurable business outcomes. Just as importantly, these deployments are frequently backed by multiyear commitments, providing further evidence that customers view AI as a strategic priority and CCC as a long-term technology partner. Customers are not buying a model. They are buying business outcomes. They care about accuracy, efficiency customer experience and economic value. We believe the greatest value from AI comes when it is embedded directly in customer workflows and decision points. That is where CCC's combination of AI, proprietary data, ecosystem connectivity and deeply integrated workflows can help customers operate more efficiently and make more informed decisions. To understand why this matters, I'll walk you through 2 examples. When a repair facility asks an insurer to approve a change to an estimate, the request triggers a review process that has historically been slow, manual and pass back and forth by [ Ann ]. CCC sits inside that exchange. As a result, customers can configure our AI-based tools based on their own rules and workflows and to automate routine request handling and route exceptions for review when appropriate. The result is fewer manual reviews, faster decisions when the review is needed, and greater efficiency, all without asking customers to change how they work, ensures selling claims faster, repair facilities move cars through their base more efficiently and drivers get back on the road sooner. Another example is parts. CCC sits at the center of the parts procurement process, connecting OEMs and suppliers, insurers and repairers through a common platform. Nearly every major OEM now participates in CCC's parts network, and we are embedding AI throughout the procurement process, to out streamline sourcing workflows and reduce administrative effort. By simplifying coordination across multiple participants and systems, CCC helps customers operate more efficiently while improving consistency and compliance with buyer policies. These are just 2 of dozens of essential business processes supported on the CCC platform. We help run day-to-day operations for over 900,000 users, powered by AI, trained on tens of millions of claims and refined through years of real-world use. That combination of proprietary data and better decision points and ecosystem connectivity is difficult to replicate and helps make CCC the network of action for the insurance economy. My second theme is how this positioning is translating into strong customer and revenue momentum. The strongest evidence of customer confidence is what customers demonstrate through multiyear deployments, contract expansions and adoption of new workflows. Last quarter, we highlighted several important customer wins with [ Liberty Mutual ] at [ Allstate ]. [ Liberty Mutual ] decided to deploy a significant portion of this casualty business of the CCC platform and [ Allstate ] selected CCC for its third-party casualty operations. This momentum continued during the second quarter with additional customer expansions and AI adoption milestones. For example, this quarter, we had 2 top 5 insurers, expand their use of CCC's AI-enabled claims workflows through their deployment of our First Look solution. One of these carriers added First Look in conjunction with a multiyear extension of its Auto Physical Damage solutions, while the other added it under an existing multiyear agreement. These wins highlight the operational value of the solution by identifying total loss earlier in the process insurers can reduce rental and storage costs, repair facilities can focus capacity on repairable vehicles and consumers receive faster claim resolution. In addition, last quarter, we highlighted a top 5 insurer that renewed and expanded its partnership with CCC through a new multiyear enterprise agreement covering our core APD platform and the full suite of AI-enabled APD solutions. This quarter, that same insurer further expanded its relationship with CCC, becoming the largest carrier yet to adopt our AI-powered subrogation solution with deployment, scaling rapidly. These decisions by the industry's largest carriers underscore a broader trend. Insurers are increasingly moving AI from pilot programs to production scale deployment across complex, high-value workflows where consistency and productivity matter most. Importantly, these deployments are occurring at renewal and mid-cycle. As customers gain confidence in the business value our solutions deliver, they're more frequently expanding their use of CCC's AI capabilities during existing contract terms. We are seeing similar adoption trends across repair facilities, especially large multi-store operators or MSOs. The second quarter, we renewed and expanded our multiyear agreement with one of the nation's largest independent collision repair operators. This MSO has been a leader in adopting AI technology across its [ Super ] facility organization and was the first MSO to adopt Mobile Jumpstart back in 2025. Today, the organization uses Jumpstart to initiate approximately 98% of its repair estimates and is an early adopter of Mobile Jumpstart 2.0 which leverages a genic AI to support faster, more consistent estimate creation. These investments reflect the organization's continued commitment using AI-enabled workflows to improve efficiency, support teammates and enhance the consumer experience. We are seeing strong adoption of AI-based solutions across other large MSOs as well, including double-digit increases and participating repair facilities and estimates initiated through Jumpstart. Importantly, this adoption is occurring across some of the industry's largest repair organizations, reinforcing our view that AI-enabled workflows are becoming embedded in day-to-day operations at enterprise scale. Taken together, these examples demonstrate how AI adoption is moving beyond pilots into production across the industry's largest and most sophisticated insurers and repair organizations. Because these organizations typically conduct extensive testing before deploying new technologies at scale, their move from evaluation to enterprise-wide adoption provides a powerful signal to the rest of the industry that AI-enabled workflows are delivering measurable business value. My third theme is how solving for rising complexity gives us confidence in CCC's long-term growth opportunity. Every claim creates its own supply chain, towing, diagnostics, part sourcing, repair, calibration, rent, medical care, payments and subrogation, coordinated across insurers, repairs, suppliers, OEMs and consumers. As vehicles, medical procedures and regulatory requirements continue to evolve and become more complex, orchestrating that ecosystem is becoming more challenging. That is where CCC's platform becomes even more valuable. Customers want integrated solutions that bring participants together to solve shared business problems. As a result, the ability to help participants coordinate across the ecosystem is becoming a more important strategic differentiator. Over the past 5 years, we have invested heavily in building a robust partner ecosystem. Today, we work with more than 250 ecosystem partners across the insurance economy, helping our over 35,000 customers navigate more complex workflows while maintaining consistent processes. These partner relationships span over 20 different business areas ranging from towing and salvage to consumer engagement. One example of how connected workflows are creating value is our partnership with [ Sun bit ], which offers consumers an integrated financing option when they drop off their vehicles for repair. As insurance deductibles and repair costs continue to increase, this solution can help consumers manage out-of-pocket expenses while enabling repair facilities to convert more estimates into repair orders because the financing option is embedded directly into the repair workflow, consumers can access financing at the point of service without leaving the process. We have seen rapid adoption since launching the solution in April with more than 2,000 shops onboarded and millions of dollars financed. In addition, one of the nation's largest MSOs has deployed the solution across its coast-to-coast network. Another example is our work with [ Tempus ], a partner that helps insurers analyze, evaluate and resolve medical claims, rather than requiring adjusters to lead their claims workflow and engage separate vendors, these services are integrated directly into CCC's platform, allowing referrals, reviews and outcomes to flow automatically through the process. Today, approximately 20 carriers use the integrated solution, including multiple top 10 insurers. A third example of how CCC helps coordinate increasingly specialized repair workflows is our expanding network of diagnostics partners. Diagnostic scans after an accident are key to modern vehicle repair, which often requires coordination among insurers, repair facilities, diagnostic providers, OEMs and parts suppliers, each with information the others need to make decisions. Today, we work with 10 diagnostics partners across the ecosystem. Our diagnostic solutions helped create greater consistency in reporting improve scan verification and increased transparency between repairs and insurers. OEM customers have strongly endorsed these capabilities as critical to both repair quality and vehicle safety. In addition, several OEMs have extended their relationships with CCC through connected car initiatives such as our [ Accident Advisor ] solution which helps create a more seamless experience for drivers following an accident. As you can see from the examples we've discussed today, CCC is becoming the network of action for the insurance economy. For the past several years, we have developed the core components of the network across Auto Physical Damage, casualty, subrogation and adjacent works. As customers shift their AI expectations and deployments from insight generation to operational execution, we see opportunities for agentic orchestration to connect our deeply embedded workflows, improved coordination, streamline operations and help our customers create better outcomes across the insurance economy. In closing, the common threat we see across all 3 themes is that customers are operationalizing AI through trusted workflows that connect the insurance economy. AI adoption, customer momentum and rising complexity are reinforcing one another, strengthening CCC's leadership position and creating additional opportunities for growth. As AI becomes more deeply embedded in day-to-day claims operations, the value of CCC's trusted workflows, ecosystem connectivity and decision enabling capabilities continues to increase. We believe these trends position CCC to deepen customer relationships, expand our role across the insurance economy and create long-term value for customers and shareholders alike. Taken together, they reinforce our confidence in the durability of our business and the long-term growth opportunity ahead. With that, I'll turn the call over to Rod.

Thanks, Githesh. As Gitesh outlined, Q2 was a solid quarter with revenue growth and profitability ahead of expectations. We continue to see momentum in the adoption of our AI-based solutions across many of our large clients. Now turning to the numbers. I'll review our second quarter '26 results and then provide guidance for the third quarter and full year. Total revenue in the second quarter was $286 million, up 10% from Q2 2025 and above the high end of our revenue guidance range. Of the 10% growth, approximately 7.5 points was driven by cross-sell, upsell and the adoption of our AI solutions across our client base. About 2.5 points of growth came from new logos. In the quarter, revenue from AI-based solutions contributed 4 points of growth. This was primarily driven by our APD solutions, subrogation and EvolutionIQ. AI-based solutions continue to represent an important and expanding part of our portfolio, accounting for approximately 11% of total revenue in the second quarter and growing approximately 45% year-over-year. Now turning to our key metrics for software gross dollar retention or GDR and software net dollar retention, or NDR. GDR captures the amount of revenue retained for our client base compared to the prior year period. In Q2 2026, our GDR was 98%, in line with last quarter. Please note that since we started reporting this metric 5 years ago, GDR has been between 98% and 99% and have either rounded up or rounded down primarily because of the churn in the repair shop industry. We view the consistency of this metric as evidence of the value we deliver and the multiple benefits of participating in the CCC network. Our strong GDR is a core tenet of our predictable and resilient revenue model. Net dollar retention captures an amount of cross-sell and upsell from our existing clients compared to the prior year period, as well as volume movements in our auto physical damage client base. In Q2 2026, our NDR was 107 and in line with Q1 2026 and up from the full year 2025 level of 106%. Now I'd like to review the income statement in more detail. As a reminder, unless otherwise noted, all metrics are non-GAAP. We provide a reconciliation of GAAP to non-GAAP metrics in our press release. Adjusted gross profit was $217 million in the quarter, with an adjusted gross margin of 76% and which is down modestly from 77% last quarter and from 78% from a year ago. The underlying economics of the business continues to demonstrate leverage and scalability. We remain confident in our ability to progress towards our long-term target of approximately 80% as newer solution revenue scale and offset recent investments. In terms of expenses, Q2 2026 adjusted operating expenses were $116 million, up 7% year-over-year, which was due to higher resource-related expenses, professional service fees and technology investments. Adjusted EBITDA for the quarter was $115 million, up 7% year-over-year and above the high end of our guidance range. Adjusted EBITDA margins were 40% and down about 110 basis points year-over-year. However, when you normalize for a $2 million onetime benefit related to the exit of a tender relationship in Q2 of 2025, margins were roughly flat year-over-year. Through the first half of 2026, adjusted EBITDA margins were 41.6%, up about 110 basis points year-over-year and up about 150 basis points excluding the vendor benefit. Stock-based compensation as a percent of revenue was 11% in Q2 of 2026, consistent with Q1 of '26 and Q4 2025. We now expect full year stock-based compensation in 26 to be in the range of 11% to 12% of revenue, down from our earlier estimate of 13%. We are on a path to high single digits as we move into 2027. Now let's turn to the balance sheet and cash flow. We ended the quarter with $116 million in cash and cash equivalents and $1.3 billion of debt. At the end of the quarter, net leverage was 2.5x adjusted EBITDA. Our track record of strong cash flow generation continued in Q2. We generated $82 million in free cash flow during the quarter compared to $27 million in Q2 of 2025. On a trailing 12-month basis, free cash flow totaled $308 million, an increase of 36% year-over-year and free cash flow margin expansion of 500 basis points to 28% versus 23% a year ago. Approximately 200 basis points of this expansion was the result of favorable timing of tax payments as Q2 of 2026. We are [ admitted ] to existing capital allocation framework that balances investment in the business, balance sheet strength and the return of excess capital to shareholders in order to drive long-term shareholder value. Our strong cash flow generation provides us with significant flexibility to execute against these priorities while maintaining a prudent leverage profile. I'll now turn to guidance. For Q3 2026, we expect revenue of $289.5 million to $291.5 million, which represents 9% growth year-over-year at the midpoint. We expect adjusted EBITDA of $118 million to $120 million a 41% adjusted EBITDA margin at the midpoint. For the full year 2026, we expect revenue of $1.158 billion to $1.164 billion which represents approximately 10% year-over-year growth at the midpoint. For adjusted EBITDA, we expect $485 million to $491 million, which implies a 42% adjusted EBITDA margin at the midpoint. So 3 points to keep in mind as we think about the Q3 and full year guide. We have nearing and raised the midpoint of our full year revenue growth guidance range from 9% to 10% to 9.5% to 10%, reflects Q2's solid performance and the momentum we continue to see across the business. Second, the guide implies year-over-year revenue growth for Q3 and Q4 of about 9%. This is consistent with the guidance we provided in April. This reflects approximately 1 point of headwind from the roll-off of legacy first-party cat fleet business we discussed last quarter. Third, our guidance reflects continued progress on our margin expansion objectives. For the second half of 2026, adjusted EBITDA margin is expected to be approximately 42.5%, up roughly 50 basis points year-over-year. As a reminder, we manage the business to full year profitability objectives an individual quarter can be affected by the timing of investment activities and expenses relative to prior quarter and prior year. At the high end of our full year guidance range, adjusted EBITDA margin expansion is expected to approach 100 basis points year-over-year and we remain confident in our ability to deliver continued margin expansion through operating leverage and disciplined expense management. In closing, we feel very good about the financial position of the business and the durability of our operating model. The continued growth of our AI-based solutions, which now represent approximately 11% of revenue and are growing substantially faster than the overall business, provides additional confidence in our ability to drive durable revenue growth over time. We delivered solid revenue growth and profitability while delivering exceptional free cash flow generation during the quarter and maintaining a prudent leverage profile. Our strong cash flow generation, reoccurring revenue model and disciplined expense management continue to provide meaningful financial flexibility as we invest in the business and execute against our long-term growth objectives. Operator, we are now ready to take some questions. Thank you.

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

Maybe Githesh or Tim as well for you here. We talked a lot about customers looking to buy outcomes and their ability to now move to the deployment stage. You got evidence in the top 5 momentum you guys are seeing. But your perspective on how this validates kind of the value of your ecosystem? And maybe to the extent conviction in those outcomes being even more clear in conversations that you're having with large carriers kind of the conviction those large carriers have and continuing to progress down these conversations?

Dylan, I think Tim was going to take this question.

Terrific. Thanks, Dylan. I really appreciate your question on this. So as Githesh alluded to in his comments, when carriers pick our solutions. They have done so after extensive testing of the -- typically, the AI solutions at this point. And you can imagine they want to make sure that they are getting real value for these, however they define value. And -- so what we're seeing is a rapid adoption of those because it's becoming clearer and clearer that the tools are robust and really generate value in the near term. But your second point is also important, which it connects broadly to the network. And Githesh in his comments highlighted an interaction between a repair facility and insurer, which is much more efficient because of our tools. And so that would be an example of the value that gets created. So you're absolutely right. What we're seeing is focus on the value creation for the -- all of our customers in the system and that we're demonstrating that value, and that is leading to the increased adoption that you're seeing across our various products and across the whole ecosystem. I hope that's helpful.

Yes, very much so. And then maybe if I could follow up on that, too. I appreciate the disclosure around AI being 11% of the business and growing kind of 45%, so very clear on that pace of adoption. But I guess -- just if we think about kind of the internal change management components, customers kind of committing and signing up for these products, but how quickly can they actually deploy and ramp those deployments, maybe more importantly? And as we think about that, the near-term implications as that ramp builds relative to kind of the long-term visibility you have once that gets to a broader deployment.

Yes, sure. Look, this is the benefit of having done this for a very long period of time, right? We are 10 years into our AI journey. And we have been working with many of our customers with our first commercial rollout in -- 5 years ago. So we've been working closely with customers and this is where your earlier point that you made about outcomes are extraordinarily important. Because just having an AI versus delivering actual cycle time reduction, customer experience differences, efficiency gains, so our customers have actually tested, deployed and have gained confidence because we have literally tens of thousands of users who have now gotten more comfortable with our AI and the results it's producing. And as a result, as our customers have gone through the extensive pilots that Tim talked about in evaluations, they're also starting to look at how do I deploy this? How do I deploy this? What changes should I make to my process? And we've also made significant investments in our go-to-market teams in terms of change management, how we execute the change management. As a result, you are seeing our AI starting to generate a larger and larger percentage of our growth, it is all of those things exactly as you pointed out, working in concert.

Our next question comes from Tyler Radke from Citi.

So you talked about the back half guidance in Q4, specifically implying about exit rate, and I know there's some moving pieces there, adjusting for some parts of the portfolio. But how should we think about how you're looking at the underlying momentum of the business heading into next year? And I guess what I'm wondering, I mean, obviously, the AI momentum, 45% growth is very healthy. So at what point do you think that gets us back to sort of a double-digit growth profile and as you think about the conversations and pipeline that you're having with your customers around AI, do you think 2027 is the year we really start to see it meaningfully accelerate the top line? Or -- or maybe that's still a bit too early. I just would love your thoughts there.

I'm going to turn it over to Katie to take that one.

Tyler, yes, I think when you look at the performance of the business right now, we've seen meaningful growth acceleration this year. So if you think about last year, organic revenue growth was 7%. Now we're guiding to 10%. That's all organic growth for the full year. Our AI revenue is contributing in a more meaningful way. But the core remains very consistent. So I think you are seeing that play through. The dynamics that we're seeing in the second half of the year, there's really no change to the underlying growth profile of the business other than we've talked about the 1 point of headwind from the transition of the casualty customer. So if you normalize that in the second half, you're still looking at a 10% growth for the guide that we expect. We're not going to guide or provide expectations for 2027 at this point in time, but we feel really good about the momentum of the business and how our solutions both across the core the core side as well as the AI of being able to deliver solid growth as we go forward.

Our next question comes from Alex Gogolev from JPMorgan.

This is [ Bala Kanon ] on for Alex. So just zooming in on the roughly 4 points of growth coming from AI this quarter, just breaking that down, how much is that coming from deeper rollout or through customers that are already live versus new module attach? And which of those 2 factors do you expect to be the larger driver in the back half?

Your line was breaking up a little bit. I think you were looking for more color around the 4% growth and whether that's coming from either existing customers or new customers adopting new modules, the short answer is both. We are seeing -- we're seeing both, right? Existing customers expanding, adding new solutions, like, for example, a large top 5 carrier that we announced not only renewed all of their core solutions, but added a brand-new AI solution, that will start getting added. In the first quarter, we talked about a customer at a very large customer that renewed all our core but then start -- and then added a whole layer of our full suite of AI. In the second quarter, we saw that customer actually now at our subrogation solution. So the answer -- the short answer is customers are continuing to convert from evaluations and pilots as well as adding some of our newer solutions like First Look and [indiscernible] and some of our newer solutions.