Welcome, and thank you for attending the CCC Intelligent Solutions Second Quarter 2021 Earnings Conference Call. [Operator Instructions] I would now like to pass the conference over to your host, Brian Denyeau. Thank you. You may proceed.

Good afternoon, and thank you for joining us today to review CCC's Second Quarter 2021 Financial Results, which we announced in our press release issued after the close of the market today. Joining me on the call today are Githesh Ramamurthy, CCC's Chairman and CEO; and Brian Herb, CCC's CFO. The forward-looking statements we make today about the company's results and plans are subject to risks and uncertainties that could cause the actual results and the implementation of the company's plans to vary materially. These risks are discussed in our earnings release that's available on our Investor Relations website and under the heading Risk Factors in the definitive proxy statement/prospectus followed by Dragoneer Growth Opportunities Corp. with the SEC on July 6, 2021. Further, these comments and the Q&A that follows are copyrighted today by CCC Intelligent Solutions, Inc. Any recording, retransmission, reproduction or other use of the same for profit or otherwise without prior consent of CCC is prohibited in the violation of United States copyright and other laws. Additionally, while we have approved the publishing of a transcript of this call by a third party, we take no responsibility for inaccuracies that may appear in that transcript. Please note that the discussion on today's call includes certain non-GAAP financial measures as defined by the SEC. The company believes these non-GAAP financial measures provide useful information to management and investors regarding certain financial and business trends related to the company's financial condition and results of operations. A reconciliation of GAAP to non-GAAP measures is available in our earnings release that is available on our Investor Relations website. Thank you. And now I'll turn it over to Githesh.

Thanks, Brian, and thanks to all of you for joining us today. We're excited to have recently completed our business combination with Dragoneer, returning CCC to the public markets under the ticker CCCS. I'd like to thank Dragoneer for their incredible partnership during the merger process, and we look forward to their continued support as one of our largest shareholders. Being able to partner with one of the world's most successful investment firms on this journey was an important validation of our differentiated market position and how we manage the business for the long term. I'd also like to thank everyone at CCC. Becoming a publicly traded company is an important milestone for our business that would not have been possible without the hard work and dedication of every single CCC-er. As part of this process, we renamed the company CCC Intelligent Solutions, which reflects our emergence as a SaaS technology partner focused on applying AI, IoT and advanced analytics across the insurance economy. In the 6 months since we announced our business combination with Dragoneer, we've met with over 70 investment firms and learned a great deal about what shareholders are most focused on. In particular, we recognize that there is great interest in understanding how the different opportunities we are targeting could enable us to grow above our 7% to 10% long-term revenue growth objectives. On today's call and going forward, one of our goals is to explain what we are putting in place by way of growth objectives, how this supports our customers' digitization journeys and why we are optimistic about the future. I'd like to start by summarizing our financial results for the second quarter. Revenue was $166.8 million, up 11% year-over-year on a reported basis and 16% adjusted for a divestiture last year. This was…

Thanks, Githesh. I'm pleased to be with you all today and look forward to working with you now that we have completed our transition to a public company. Today, I'll review our second quarter '21 results and provide guidance for the third quarter and full year '21. Turning now to the operating results. Total revenue for the second quarter was $166.8 million, up 16% from the prior year on an adjusted basis. We look at growth on an adjusted basis, which excludes from our 2020 results revenue from a portion of our casualty product line, clinical professional services, that was divested at the end of last year. We believe this provides the view into the underlying growth of the business, so our quarterly performance can be looked at on a like-for-like basis. From a trend perspective, 16% growth is the fourth sequential quarter of accelerating year-over-year revenue growth. We have now fully lapped the impact of COVID within our financial results. Our growth is being primarily driven by cross-sell and upsell activities into our installed base with a heightened focus on newer digital solutions, also new logo wins driven across repair facilities and parts suppliers, increasing trends in claim frequency, and lapping easier comps in prior year. Turning now to our key metrics. Software gross dollar retention, or GDR, which captures the amount of revenue retained from our client base compared to the prior year. In Q2 '21, GDR was 98%, which is consistent with the historical levels. We believe our software GDR reflects the value we provide our customers and the stickiness of the network effect. Software GDR is a core tenet with our predictable and resilient revenue model. Software net dollar retention, or NDR, the amount of cross-sell and upsell from our existing customers compared to the prior…

[Operator Instructions] The first question comes from the line of Jackson Ader with JPMorgan.

Great. The first one is on the net dollar retention that expanded a bit, taking the transaction volume out of it. What are you seeing as the most common cross-selling activities? And is it more common to see them with your interim customers? Or is it more common that net dollar retention is more coming from the mechanic or the body shops?

Yes. Jackson, it's Brian. Thanks for asking the question. When we look at NDR, we don't break it out between the different customer segments. That said, it's pretty consistent across both customer segments, and we're seeing strong activity. NDR, and we talked about this in Q1, will move as a function of revenue growth. And so the NDR we saw in the quarter at 110% was above our historical levels with 16% being a really strong quarter for us. So -- we continue to see NDR as the biggest driver of our growth for the quarter. And we also look at it with that view as we go forward in the second half and beyond.

Jackson, one thing I wanted to add is in terms of the products, we're continuing to see products like Engage, which is now adopted by 1/3 of our repair facility customer base. As we announced during the call, we added over 1,000 new repair facilities. But interestingly, 30% of our existing customer base have now adopted Engage. We also saw increased adoption of mobile. For example, last year, we're trending towards our customers in aggregate doing about 15% mobile. This year, we're seeing people already in the 20% of claims settled through the mobile channel that's insurers. So we're seeing adoption across both insurers, repairers, parts providers. So we're seeing that across in a pretty broad-based way as the digitization of this industry continues.

Okay. Awesome. Thank you for the specifics. That's what we are after. A quick follow-up. What, if anything, what impact from the Delta variant is baked into the guidance for the second half year?

Yes. So at this stage, Jackson, just to give you kind of context, we have not seen any impact, either operationally or within our financial performance. Clearly, we're monitoring it very closely. As far as how we look at the second half, we have some level of frequency increase assumed in H2 relative to what we did in Q2. But it is not a material step up from our recent volume run rates. So we have not assumed a major step-up in frequency nor have we assumed a major step-down based on Delta variant. So we're largely neutral.

And on a percentage basis, it's a pretty small number of our growth, just 1% to 2% of our full year growth.

Oh, you mean the step-up in frequency assumed?

Within the whole year. So when we set out the -- we talked about frequency being 1% to 2% of our total growth, and that remains consistent as we see the balance of the year.

We're forecasting 13% to 14% growth. Yes.

The next question will come from the line of Chris Moore with CJS Securities.

Percent increase in the number of claims that use 2 or more CCC solutions and a 50% increase in the number of claims that use AI embedded solutions. Have those trends continued in 2021?

Chris, we missed the first part of your question. We got the second part. Do you mind repeating the first part?

Absolutely. So you had something like a 100% increase in the number of claims in 2020 that use 2 or more CCC solutions and a 50% increase in the number of claims that use AI-embedded solutions. So I wasn't sure if 2020 was an anomaly or if those trends have continued into 2021.

Got it. I understand the question. Absolutely. So what we are seeing is that what our customers saw last year in terms of adopting new solutions and the benefits they got, we're really seeing 2 dimensions to this. One, our existing customers are continuing to adopt mobile, AI, continuing to adapt that at pace. And we're also seeing, as new customers come on board, we're also seeing that they are excited about the potential for these things. So we're not seeing any slowdown. Even as claims volumes and things get to normal levels, the benefits people have seen are continuing. So we're continuing to see growth. And that's one of the things being reflected in our third and fourth quarter guidance.

Got it. That's helpful. And maybe just one other. It looks like pro forma leverage is just below 3x. Maybe just kind of remind us kind of your comfort zone on leverage, one question. And then the second, assuming no significant acquisitions between now and say, the end of fiscal '22, just trying to get a sense as to where that leverage might be.

Yes. Sure, Chris. Yes. So that's right. So with the proceeds coming in from the transaction, we had about $600 million of net proceeds that came to the balance sheet. We did repay debt that moved our leverage from under 6x to under 3x. So we reduced our leverage about 50%. Certainly, it gives us flexibility in the balance sheet. We're very focused on investing for innovation that will drive value for our customers and also accelerate growth. Certainly, acquisition will be an important part of that as well. Timing and targets are hard to predict, so we don't have a view of what that looks like in the near term or the medium term. We are not coming out at this stage with a hard target around our leverage position. Certainly, if we don't make M&A through the balance of the year based on EBIT growth and the cash flow, we will delever further. But again, we're focused on using the balance sheet for strategic investments.

The next question comes from the line of Kirk Materne with Evercore ISI.

This is Peter Burkly, on for Kirk. I guess, first one, just curious, you guys continue to broaden your solution set. Are you seeing initial land with new customers getting bigger?

Yes. The -- you're saying the initial land, was that your question?

Just when you're landing new customers, yes, net new customers.

Yes. Yes, exactly. So what we saw -- many of our customers have been customers for well over a decade, if not longer. And so the serial adoption of solutions has taken place and continues to take place as we introduce new solutions. What is actually very interesting is when we land a new customer, they are not going through the same serial process of adopting one solution, second solution, third solution. What we are seeing is that customers adopt a much broader bundle of solution that gives them digital capabilities. For example, if it's an insurance company that is a new insurance carrier that comes to our platform, they're not only adopting our traditional core, estimatics, total loss, workflow, connectivity, direct repair and the like, but they are also adding our mobile AI and other solutions. Same thing with repair facilities. As new repairers come on, they start with a much broader and larger bundle. Again, the huge benefit of being on the cloud allows us to kind of leverage. They get immediate benefit to -- connecting to a whole bunch of other participants.

Right. Makes sense. And then maybe just one quick follow-up. You guys are obviously excited about the payments opportunity in front of you and working on building -- continuing to build the pipe there. So just curious, do you have any feel for ultimately kind of what sort of uplift can that provide? Could that help net retention rates kind of stay at the high level that you're seeing now?

Yes. First of all, our retention rates have been very high for a very long time. Right? Net of it is one of the reasons we maintain a Net Promoter Score, an industry-leading Net Promoter Score of 80. And that alone results in a fabulous retention rate as well as people staying and participating in the network. What we are seeing is that as -- first of all, payments, what we're seeing on payments is there are significant pain points we are uncovering as we build the partnership on payments. For example, payments from the insurers to the repair facilities. There are significant pain points that we can see that we can start to address. We do believe that as the bundle of solutions and the broader our solutions, our retention rate will continue to increase. But again, we already have, as I said, substantially high investment rates and retention rates. And then on the payments itself, we continue to remain excited about what we're seeing in the payments opportunity.

The next question is from the line of Yitchuin Wong with Citi.

Congratulations guys on the listing. Looking forward to covering you guys in the future. I think first question is for Githesh. I think you talked about the net adds of like 1,000-plus of repair shops in, I think, this year and the quarter and then you also mentioned increasing growth there. I mean that's definitely lined up in some of the internal [ trends ] that we have. We're seeing some very positive business sentiment around strong hiring activity, auto participation, expanding the east car market. So I'm just wondering if you can give us some extra color of like what are some of the growth you're seeing, help us quantify some of the numbers there and how this could potentially help the full year numbers.

Sure. A number of things there. I think I'll try to address the roughly 3 things in that question. First and foremost, what we are -- what our repair customers are seeing is a significant return to activity. So if you look at -- we also, by the way, publish the Crash Course, which is on the cccis.com website that lays out a lot of traffic patterns. We just released the second quarter data, and that's on our website. If you look at what happened in Q2 of 2020, we saw that repair volume had dropped pretty significantly along with activity. As that starts to normalize, hiring, rehiring, rehiring, a lot of our repair facility customers continue to bring on more and more people. And as they brought on more and more people, what they're also finding is one of the hardest things for our repair customers is finding enough technicians, repair, because these are complex repairs. So as the demand for productivity gets higher, our customers are also saying that they need better tools in terms of productivity tools. So as I mentioned, in the first half of this year, we added over 1,000 new repair facility customers because of the trends repairers are seeing. In addition to that, as maintaining the -- if you are a repair facility customer, having access to a very broad network called parts providers, insurers, OEMs and the like, as that continues to strengthen, it provides even more benefit to our repair customers. So that's another reason for the growth. Plus I would say the third element would be the innovation we're delivering. I'll give you one example. We delivered a package last year called Engage, which allows a repair facility when a consumer says I have an accident, they can take pictures on their cellphone, route it to the repair facility, repair facility can write an estimate. They can literally put the appointment on their phone, right into the production schedule of the repair facility. All of these capabilities are really bringing more of a digital footprint to the shop, including search engine optimization, all of those connections. So that's also helping brand growth. Does that to answer your question?

No, that's perfect. That's more than I thought. So that one was kind of like the full year guidance looks like is increased approximately like $2.5 million at the midpoint, which is a little less than the beat in the quarter, say, versus your guide, $3 million to $4 million. Could you walk us through some of the rationale as to why -- what is the guidance that's already taken and why is the rate smaller? And how is your confidence on the pipeline heading into the back half of the year?

Just to be -- yes, I can handle. This is Brian. So just to be clear, we increased the top end of the range, the high end of the range, $4 million on revenue. We also increased the EBITDA for the full year $4 million. So both on the $4 million, we had -- I'm sorry, on both revenue and EBITDA, we increased both by $4 million. We had a Q2 of a beat of about $2.8 million, and then we increased the second half $1.3 million. So just to make sure the numbers are straight for you.

Okay. Got you. I might be calculating it slightly off. Yes. So can you just quickly like what's the guidance that they'll be and like the economy recovery, like your confidence in the pipeline?

Yes. So with -- we saw a strong performance in Q2. We beat the quarter a combination of really strong momentum in the business. We also saw volume recovery stronger than we expected. We had the recovery baked in, in the second half, but the recovery came faster than we expected in Q2. And so we saw upside within the quarter on that. So that drove the beat, both the momentum and the recovery. We have good confidence in the second half of the year. That's why we increased and raised against the second half. We have some implementations coming in. We have strong momentum between cross-sell and upsell. We have a strong pipeline. So we feel good about both the revenue for the full year and feel good about the EBITDA and the margin for the full year.

[Operator Instructions] The next question will come from the line of Gary Prestopino with Barrington Research.

Your net dollar retention, you gave that at 110% for Q2. How did that change year-over-year or sequentially?

Yes. Sure, Gary. Yes, net dollar retention was 106% in Q1, and it moved to 110% in Q2. When you look back at 2020, it was lower, clearly impacted by COVID. It was more in the 103% range of last year. When you look back into '19, it has been more in the 106%, 107% range. So just to give you some trending of net dollar retention. So that's the recent trend. As I said, Q1 was 106% and then 110% in Q2.

So if I understand this correctly, net dollar retention is going to be somewhat a measure of organic growth. So if it was 110% and you generated 16% growth, does that mean 600 basis points of growth came from new logos? Or am I wrong there?

No, no, you're directionally right. So that's right. The net dollar retention is really highlighting our cross-sell and upsell within our existing installed base. We also had 5 points of growth in the quarter related to new logos. And then we had a couple of points of growth related to casualty volume improvement and parts, which both casualty and parts are not in our NDR calculation. So that was part of the equation as well.

I would assume the 500 basis points of new logos is mostly new logos with repair facilities. Is that correct? Or is it a healthy mix between insurance companies and repair facilities?

Yes. It's a combination of repair facilities. It also has parts suppliers in there as well, and then there is insurance new adds. So it covers all client types.

And then, Brian, in terms of your balance sheet, I know you gave the leverage ratios, but you had like, I think, $1.27 billion worth of debt prior to the deal. Actually, it looks like $1.3 billion. So how much of that $600 million went to pay down debt that you received in the transaction?

Yes. We put about $500 million towards debt. So think about the $1.3 billion came down to about $800 million of gross debt.

Okay. Great. And then Githesh, just on the payment business. I know you talked about this earlier, but -- when do you think your -- I mean have you got that out in beta right now? And are you looking at a 2022 launch to the market?

Yes, Gary, what we're doing here with payments is making sure we understand all of the use cases and towards the latter part of the year, third quarter, fourth quarter, start running a series of betas, pilots, tests and the like. And we like to make sure that the solution really works well, can scale and the number of use cases. So as we go into next year, we'll continue to develop it further. So I would say this is, again, a significant growth area. And as we've talked about before, we are not putting any specific projections around payments for next year. And when we do guide it for next year, we may talk about it a little bit, but not right now.

At this time, there are no additional questions. So I would like to turn the call back over to Githesh Ramamurthy for closing remarks. You may proceed.

Well, first of all, I want to thank everybody for joining our first call trading under the CCCS symbol. Thanks to everyone for participating. We look forward to giving you regular updates as we move forward. And as you can tell from both Brian and my comments, we're excited about how the second quarter came out. We are particularly excited about how we feel the year will turn out, and look forward to our journey as a public company. Thanks, again. I also want to take the opportunity to thank everybody at CCC who has put in enormous amounts of effort for this company at this stage in terms of where we are today. With that, we will wrap up the call, operator.

That concludes today's conference call. Thank you for your participation, and enjoy the rest of your day.