All right. Good morning, everyone. My name is Josh Baer, Software Analyst at Morgan Stanley. And we have CCC Intelligent Solutions here with us today. Before we get started, a brief disclosure. For important disclosures, please see the Morgan Stanley Research Disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representatives. We have the CFO, Brian Herb, and Head of IR, Bill Warmington, here today. Thank you very much for joining. Thanks for having us, Josh. Appreciate it. Thank you. So to kick it off, for those who may be newer to the story, I was hoping, Brian, you could provide an overview of the business and really how CCC fits into the overall P&C insurance economy, looking to understand who your customers are, what are your core products. Yep. Sounds good. So yeah, we are a SaaS platform for the insurance economy. Today, revenue is largely focused on U.S. auto claims. And so we have a connected network through our platform that connects insurance companies. So we have 300 insurance companies to repair facilities. We have over 30,000 repair facilities. To To parts suppliers, we have over 5,000 parts suppliers, all on our network. And we're connecting them, and our software and AI tools are helping them with facilitating claim resolution. So that's where the business largely is. We have moved into some adjacency. So in January, we closed an acquisition, EvolutionIQ. They are focused at businesses focused on disability and workers' comp. So using AI to help through claim resolution in disability and workers' comp as well. So those are new expansions for us. The business is about $1 billion in revenue. We have margins of 40%. We're a Rule of 50 company with a high percent of revenue coming from subscription and a really strong gross dollar retention, 98%, 99%. So that's kind of the profile of the business. Perfect overview. How should everyone think about the opportunity, the TAM, both what it was before the acquisition and what EIQ did to expand that opportunity? Yeah. So at the broadest level, we operate in $35 billion global TAM. When you click down and you look at our U.S. auto business, that's a $10 billion TAM. When we acquired the business and moved into some additional lines, we're now stepping into a larger TAM, about $15 billion TAM for U.S. across the different lines of insurance. Today, our products and solutions cover about $7 billion. So if we sold all of our products across the client base in our space, it's about $7 billion. And then the remaining space is innovation roadmap as we continue to bring new products and solutions into the market. So as I said, we're about $1 billion today. Current products and solutions about $7 billion. So a lot of white space in front of us. Excellent. Let's jump right into some of the most asked about topics: so one being claims frequency. And maybe you could also sort of touch on the composition of the business model: subscription, recurring revenue versus more transactional. And really, for this question, I am interested in that more volume-based piece around claims. And wanted to ask about the trends that you're seeing around 2024, the impact from claims, and then also how you're thinking about or what assumptions are embedded into the 2025 Outlook as far as claims frequency. Yep. Got it. Eight questions there. Yeah. I got it. Business model, claims frequency, impact on your business. Yeah. So kind of on the first point, we were talking about high amount of subscription revenue. So we're over 80% subscription, 20% transactional or volume-based. It really comes into three parts. About half of it is our casualty business, which is reviewing bill reviews, medical bills that are part of auto claims. Then there's a component in our parts business. Our parts business is about half subscription and half transactional. We get 1% of GMV. And then some of the smaller carriers pay transactionally. So those are kind of the three parts of the volume base, which makes up, as I said, 20% of overall revenue. When you look at the volume and claim frequency in 2024, for us, it was down about 5%. So if you just do simple math and say 20% is transactional, 5% down, it's got about a point of headwind. It's not perfectly correlated to frequency because there's some lagging, casualties lagging in some of the other products. It depends on client mix, product mix. But that gives a direction of kind of how frequency played through 2024. As we set up 2025 and we think about the impact, we're assuming a relatively neutral position relative to 2024. We're not assuming further decline. We're not assuming recovery on the claims. We'll keep that updated and give investors updates as we go through the year. But we're assuming a neutral position on volumes. In your longer-term targets, your 7%-10% organic growth, is it the same assumption of claims pressure longer term? What we're seeing today and what's driving the claims pressure is not necessarily the longer-term macro trend of kind of moderating frequency through ADAS. What we're seeing more is some economic factors that are playing through with how much premiums have gone up, cost of repair, and things like that. What we're looking at today that drove down to 5% in 2024, we look at that as pretty specific and not necessarily a long-term trend. We think that will moderate and over time get back to more normalized levels. In fact, what you've seen is sort of a gap open up between the accident frequency and the claim frequency. I think what you're seeing is basically the pressure of inflation on the consumer. So the consumers have seen basically over the last two years a 35%-40% increase in their auto premiums. And that along with rent, typically the two biggest costs for consumers. And so in response, the consumers have increased their deductibles. So you don't see a lot of smaller claims flowing through the shops. And then they've also just either pocketed the money they've been given for the repair and they live with the dents, or they'll just not do anything with it. And what you can see in the shops is that the level of consumer self-pay has gone from maybe 12%-13% four years ago to something closer to 22%-23% today. The consumer is just opting to not file the claim. Got it. Brian, you mentioned two other topics, so two-parter. Well, and they go together, jointly, ADAS and the increasing complexity of cars. What is your assumption or your view on ADAS? And also, how do you help your customers navigate the higher costs and complexity of repair? Yeah. So there's kind of three macro trends we look at and we think about for the business. One is frequency and what frequency will do over time, meaning kind of the number of claims, number of accidents. Number two is severity, the cost to return policyholders back to pre-accident condition. Severity has been going up and will continue to rise. And then the third is complexity, which also is rising. When you think about complexity with the cars, the cars have all these ADAS features, cameras. There's a lot more technology. There's a lot more parts per repair that are happening. There's also some of the experience, both adjusters at the insurance companies and the technicians in the shops are retiring out. So there's skill gaps and labor charges. All that is driving complexity. And our solutions and the solutions we bring in the market help address that. So from electronic parts ordering or repair methods in the shops to help them manage the repair in the car to putting AI in the carriers to help manage the claim process, all that is helping them address complexity. So that is a rising trend that we feel our solutions are in a good place and good position to help our clients manage through complexity. Great. And you brought up AI, so maybe that's a great segue. How is CCC positioned to deliver AI innovation relative to peers? Yeah. Yeah, I mean, we've been doing AI for years now. We have AI embedded in solutions that are out in the clients and solving client problems, real-world problems today. So we're doing that. We have meaningful revenue streams associated with AI. So it's real. It's starting to scale. We're still in the very early innings of the AI scaling, but we feel really good on the solution set, the early feedback, the ROI that is driving it at the clients. Things we differentiate around with AI is one is we have this large data set, hyper-local data that really is the fuel behind the AI that drives the accuracy but really helps the AI be efficient and effective. So that's a key part of it. The second is it's embedded in our workflow. So AI is not being used kind of outside of the core systems. It's an integrated piece of the workflow. So it's really seamless in how our clients use the AI. And then third, it's really around this connected network to embed AI in the use cases that drive the biggest impact. And that can touch carriers, that can touch repair facilities. And yeah, those are the things that we think about with AI and why it's differentiated for us. Great. Let's stick to this topic, and then we'll circle back to a few other more established areas. But focusing on AI, emerging solutions, I think it would be really interesting to lay out the value proposition of Estimate STP straight-through processing, definitely one of the most interesting products that's in everyone's focus. Yeah. I mean, it was our initial launch of AI. And what it does is, I mean, go back in old world where you have a policyholder has an accident, they call their carrier, the carrier sends out an adjuster, they look at the car, and they write up an estimate. And what we've done is we've now deployed AI. That same scenario, a policyholder gets in an accident, they can reach out to the carrier, the carrier will send them a link, they'll go around with their mobile device and have AI will guide them through taking pictures of the car. And then the AI will write a line item estimate for the policyholder and the carrier. And that happens in real time. And so the policyholder will now see the cost to repair, and they can work with the carrier to determine the best way to take it to a shop, get paid out on the repair. But we're replacing kind of staffing and scheduling with deploying the technology and allowing AI to write this line item estimate. And so we've seen good traction. There's about 40 clients that are using Estimate STP. We're still in the early innings of volume. So about 4% of total claims are going through Estimate STP. But we are seeing that continue to scale and grow. And we feel really good on the opportunity that that will drive. When we think about the economics of it, the numbers we talk about is about $15 incremental per claim that Estimate STP runs. And so that's an incremental fee that we get as we deploy Estimate STP. Under the old school, when you have somebody driving around, they can do maybe five or six appointments in a day. The implied cost to the carrier is $150-$200 per claim. So it's a tenth of that. Yeah. And it's a good point. Our solutions are really driven on an ROI model. So we look at kind of what was happening before we deployed our solutions, look at the cost to the carrier. And then when we deploy the tool, we think about a five to one ROI. So the clients are getting great value, and we feel like we're getting paid fairly for the value that we're driving. That's how the salespeople joke. They say, "You like money? Pay us a dollar. We'll give you five. Excellent. From my understanding and talking to some of those 40 customers, there's certain accidents that are great for Estimate STP. And then there's others that are more complex when it starts dealing with internal damage. We're not there yet. And there's also thresholds from a dollar value that your customers are comfortable putting through AI. Where are we? How should we think about the types of accidents that are prime today? And where is that going to be in one or three, five years? Yeah. I'd say the way we framed it out is out of the repairable claims, we think Estimate STP claims will be over 50% are eligible for using Estimate STP out of those claims. But that's also improving. I mean, where we were two years ago, we had a more limited set of claims that we could run through Estimate STP. And so the models keep improving as they get more photos, as they get more use. And so we're seeing more and more opportunities to grow the type of claims that we're putting through it. So yeah, we see that continuing to expand as we go forward. But right now, we talk about 15% of repairables that it makes sense to deploy Estimate STP. Excellent, so STP is just one solution in what makes up emerging solutions. Maybe I'll throw it over to you between subrogation, payments, diagnostics, or maybe I'll ask the question. I think subrogation is maybe most interesting or obvious as far as your great position to provide a lot of value to your customers, and it also touches on the theme of AI as well, so can you talk a little bit about that opportunity? Is it replacing an existing solution? Where are we today around subrogation? Yeah. So subrogation, just for those that don't know, I mean, subrogation is carrier to carrier on liability. So one carrier is collecting from another carrier because the other carrier's policyholder was at fault. And so what that looks like today is largely it's teams that are pulling together demand packages of all these files, accident reports, estimates to repair the car, and all this documentation. And they're sending that over to the other carrier. And a team is accepting that inbound subrogation and reviewing it, looking at areas they agree with, looking at areas that they will challenge to come up with a resolution of that claim. And so today, it is very paper-focused, people-focused. It takes a long time, long cycle times. And so we've deployed a platform to help automate that and use AI to take that data in, to review that information, to highlight areas that they agree with, areas that the insurer should go back and push back on. And so it's improving cycle times as part of the process. So it's an area that's very ripe for digitization. And we're in the very early stages of rolling that out. We have about 20 clients that are on the platform, but we feel really good on the opportunity on subrogation. Crazy. The industry is spending $2 billion plus a year to manage that. It's really a pain point for them. And a dollar saved in Subro is a dollar to the bottom line. So it has a real impact. So bigger picture, these emerging solutions, they contributed 1% to growth in 2024. And that's how you're framing the expectation for 2025. Over the long term or medium term or long-term targets, that's got to step up to 3%-4% contribution. So what's it going to take? Which of these products are going to get you there? Yeah. I would say you're exactly right. So today, we've assumed emerging is about 3% of total revenue. We're assuming that will drive one point of growth contribution. That's what it did in 2024. That's what our guide's assuming in 2025 as well. We are expecting over time for that to step up and hit an inflection point and drive more meaningful growth as a% of overall growth. And so that's what the plan is. We are making progress across the solution set. We feel really good on the progress we were. If you look at where we were versus a year ago, the number of pilots that are happening, proof of concepts, test signing. And so we're seeing that momentum across many of those emerging solutions. We're feeling we're getting closer to the inflection point and kind of pushing up beyond that one point of growth contribution. We're just not at a point to call it. I'd say there is a portfolio approach. We have five, six solutions that fit into emerging. We're not calling one is going to be the ultimate driver of this inflection point. We look at it as there's several opportunities to win, and that we're seeing momentum across the solution sets. One of the topics that comes up with regard to the contribution from emerging solutions is change management, and that's that some of your customers are thinking about adopting these products that are going to completely change the way that their organizations run. How much of that is sort of the cause for the slower ramp? I'm also just wondering what you can do to help accelerate these proof of concepts, deployments, adoption? Yeah. Change management is definitely a driver in the adoption. There's a lot of focus for things we can do to help. I mean, one is the learnings that we've taken from kind of earlier clients to clients that are now just starting to test or pilot and really help them understand the change management that's in front of them and so do that in a more proactive way upfront. So that's one area that we're focused on. The second is selling higher and getting at a higher level of the organization that can help drive the change management versus selling at lower levels. We're also bundling some of the solutions to come into the client at a higher sale, more strategic sale with a bundled approach rather than coming with a handful of individual solutions. And then we're doing things internally around how we're set up, how we're organized between our sales organization, our markets organization, our service operations team to have a more seamless engagement with the client. And so how we're organizing ourselves as well. So we're doing several things to help accelerate the adoption curve on these emerging solutions. And we feel like these are the right things to get us to that inflection point. Great. Let's double. I was just going to say, as part of that, you may have seen last week we announced that we were hiring Tim Welsh to be the president and really oversee both the sales and the service organization to try to bring it more tightly, and he comes in with over 25 years at McKinsey as a senior partner, part of their board. Githesh, our CEO, had actually hired him 20 years ago to help him on a project, and they'd stayed in touch, and he was very impressed with his work, and he's also gone on and done he was at U.S. Bank, the fifth largest bank in the U.S., where he basically drove their digitization automation program across an organization of 20,000. So he's got strategy. He's got operations. To Brian's point, there's someone who has strong relationships within insurance at basically all our top clients and can help tell the CCC story at a high level. Perfect. Let's stick to go-to-market. I wanted to double-click on the bundling and sort of sweet selling. When did the sales organization start to sort of take that approach? And really, what should we expect the impact to be? And what products are being bundled? How are you going to market that way? Yeah. Bundling is not a new concept. I mean, we've done bundling in the past. When you look at some of our kind of core solutions in auto physical damage, we've bundled workflow with estimating total loss into kind of a bundle that the carriers will buy. When we kind of deployed these new emerging solutions, we were bringing them into market as they were getting developed and ready for GA, and they were coming into the clients kind of on an individual SKU level, and we still can do that today. If a client is very focused on one set of capabilities or a use case, we can still sell it at that individual level, but trying to bring the conversation at a higher level, really talk about the carrier's need at a platform level, bring these solutions together. And they can be a combination of the emerging solutions, but it also can get bundled in with some of the established core solutions that allows us just to simplify the story and the message and improve the velocity of closing the deals. And so we've started to do that. As I said, it's both a bundle solution. We can still sell it kind of à la carte. And we're seeing some real success with it and feel good on the pipeline and the engagement we're having with clients. Excellent. Let's talk a little bit more about EIQ and the acquisition. We talked about the TAM expansion piece of it, but did want to just cover overall. What did you like about that business? And what should we expect as far as synergies overlap with your existing business? Yeah. I mean, it's a great business. It's a high-quality asset. It's hyper-growth. It closed at the end of last year, and NDR was over 150. Our business has been set up to help drive resolution for auto claims. This business is using AI to help carriers manage disability and workers' comp claims, and so there's a lot of just synergy of what they're doing with their client base and what we help our clients. We think about revenue synergies. It's not a cost synergy play. Our initial opportunity with the product synergy is they have a medical summarization platform that takes unstructured data, brings it in, summarizes that information, and gives tools for the claim handler to manage the claim. That's something that's interesting to our casualty clients. They have a similar dynamic. They're dealing with a lot of information, a lot of unstructured data, bringing that unstructured data in through the summarization platform. So that's an early opportunity for us to drive revenue synergies. But we're really excited about the business. It's a great management team. And we think it's going to have strong contributions this year and into the future. Yeah. And thinking about into the future, just given its rapid growth, obviously, you have four quarters of inorganic contribution. But after that, you should be left with an asset that's accretive to your growth profile, helping. Yeah, that's right. Yeah. So we framed this year that the asset will drive about $45 million-$50 million of revenue. Beyond this year, when you get to 2026 and beyond, we're talking about one to two points of growth contribution. Then we think about that incremental to the long-term range that we put out there. Yeah. So it's going to be accretive on revenue going forward. Great. And then on the cost side, you mentioned not thinking about this cost synergy as we see the margin compression this year as you integrate that asset. I did want to ask. I believe you called out that without the acquisition, EBITDA margin expansion would have been 75 basis points, which is great. I think what everyone has in their heads is 100 basis points of annual expansion. Why the difference between 75 and 100? Yeah. I mean, if you look at the last four years, four or five years, we've been averaging well over 100 basis points. Probably been more like 200 basis points. Last year, we did 130 basis points improvement year over year. It won't be perfectly linear at 100 basis points per year. Some years will be a bit stronger. Some years will be slightly under. There's nothing structural going on or any change. It's just kind of where we're starting the guide for the year and, again, making progress towards our ultimate goals of where we can take margin over time. But yeah, you have to think about it more on a kind of multi-year average versus an individual year relative to the 100 basis points that we talk about. I guess part of the EBITDA margin is where you start as far as gross margins. And there are some headwinds there. Could you talk through that just as you're ramping some of these emerging solutions? Yeah. Yeah. So we ended the year at 78% gross margin. Q4 was softer. There were kind of two factors that drove the softness. One is as we're bringing these new emerging solutions out to market along with some of the platform upgrades that we've done, when we bring them into service, depreciation and the amortization starts to hit gross profit. And there's also support costs to support the emerging solutions. And the revenue hasn't scaled to a stage that's really covering those costs. And so it does have a drag on gross profit in the near term. Over time, when we think about those emerging solutions getting to scale, they're going to have a similar gross profit characteristic as our more mature established. So we don't think about it as a long-term drag. We think about it more as a short-term drag. And so we expect gross profit margins. We've talked about it moving towards 80 over time, and we still feel really good on that. When you look at EvolutionIQ and the acquisition, they have similar gross profit margins, so they're going to kind of come in and be relatively neutral to our gross profit margin. As I said, we feel good on the targets that we have out there for gross profit. For EBITDA margin, the target is 45%. So it's about five points, two coming from gross profit, as you just mentioned. Where's the rest of the leverage coming in the model? Yeah. It's just operating leverage from scale. We have a highly efficient operating model. A lot of the investments that we've put in is really around product development and capacity to build new stuff. We've made significant investment over the last several years, really building out that capacity and feel like we have the capacity that we need. We'll continue to add, but not at the same levels that we've added, and as you think about just sales and marketing is very efficient, G&A. Those are just areas of operating leverage as we continue to grow and scale the business. Perfect. So, game plan. I'll ask one more, poll the audience, see if there's any questions, and then in the last three minutes, we'll cover most of your entire business that we haven't covered. Sounds like a plan. So I did want to ask on M&A. So you just did this big deal. How should we think about your M&A philosophy going forward? I know maybe this is two little questions. You're not outside the U.S. We've always sort of talked about if you were to expand internationally, it would be through M&A. But how should we think about sort of M&A strategy now? Yeah. I mean, I'll pick up that one and then we'll come back to M&A. So yeah, so today, 99% of the revenue is U.S.-based. EvolutionIQ does have some sales opportunities internationally, but it's largely U.S.-based. We've said that we're not going to go organically and deploy a startup in another country. The more likely play for us internationally is to either partnership or buy into an existing business. So that remains kind of our view internationally. When you think about broader M&A, we'll continue to stay active. The deal we closed was a meaningful deal for us. And we're very focused on the integration and setting that business up to be successful. We do have strength in the balance sheet. We're two times levered. We will remain active in evaluating opportunities as they come in. If there's good fits from a strategic priority, we'll continue to focus on M&A. Yes, that's how I'd think frame the M&A opportunity. Great. Any questions out there? Mike is on the way. You're expecting $45 million-$50 million from EIQ this year. But I believe Q1, I think it's significantly less than that on a run rate basis. So I'm curious how you have visibility into that ramp. I know 150% NDR, but it's a pretty aggressive ramp. So I'm curious how you think about that. Yeah. That's a good question. I mean, some of it is already. We look at the calendar where they ended the year. Some of it's already contracted. It's in an implementation stage and has not turned into production. So there's a good view of stuff that has signed in implementation that will turn to production. And then there is new business to sign in year and convert into revenue, which is similar to our model. Every year, we start with new business that we need to sign, implement, and generate revenue in year. So there's a part of it, but there's also a part that is kind of backlog that we have good visibility into. So it's a mix of both. Maybe a quick question again on EIQ. So at the current time, I believe in 2025, there's no revenue synergies assumed. The thought is that EIQ will be integrated into your existing product suite and then sold. Over what time frame are you thinking that you will start to see the benefit of EIQ actually flow through your financials more as a cross-sell upsell option to your existing customers as opposed to more just as a staple standalone business? Thank you. Yeah. There is some revenue assumed on synergies in 2025. It's just not that meaningful. But we do assume that it starts to flow this year, and then it will ramp as we go forward. We're starting to engage in some of our casualty clients about EvolutionIQ's capabilities. And there's been really good reception and interest. So we feel good on that opportunity. As we talked about, the medical summarization platform is kind of the initial play. There'll be further opportunities as we think about kind of guided claims and what EvolutionIQ does with their client base and thinking about some of those opportunities in casualty. But those will be longer-term opportunities. So we started with one of the key debates, emerging solutions, the ramp of STP. Let's finish with another, which is the durability of organic growth. And I was hoping you could dig in a little bit on penetration in some of your different end customers and really the growth algorithm, thinking about more products, price. How do you sustain that 7% plus growth? Yeah. When we look at established solutions, solutions we've been in market for a while, and we look at the white space opportunity, it has as much white space opportunity as our emerging growth area. So that's why when we think about the longer-term model, we talk about there's equal opportunity for emerging and established to drive cross-sell and upsell. So a lot of untapped white space. You think about casualty, which is very early days in penetration of casualty, similar with parts. We're still at an early stage of the parts digitization. There's just about 15% of GMVs going through our platform. And then we see a big opportunity to continue to upgrade our repair shop packages. So those are three examples in our established that have long runways. But there's certainly more than that. Perfect. Thank you, Brian. Thank you, Bill. Really appreciate the time. Yeah. Thank you. Appreciate Appreciate it. Thank you for having us.