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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

FORM 10-Q

 

 

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

For the quarterly period ended September 30, 2022

OR

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

For the transition period from ________________ to ________________

 

 

CCC INTELLIGENT SOLUTIONS HOLDINGS INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

001-39447

98-1546280

(State or other jurisdiction

of incorporation or organization)

(Commission

File Number)

(IRS Employer

Identification No.)

 

167 N. Green Street, 9th Floor

Chicago, Illinois

(Address Of Principal Executive Offices)

 

60607

(Zip Code)

(800) 621-8070

Registrant’s telephone number, including area code

Not Applicable

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

 

 

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

 


Title of each class

 

Trading
Symbol(s)

 


Name of each exchange on which registered

Common stock, par value $0.0001 per share

 

CCCS

 

The New York Stock Exchange

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

 

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

 

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

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

Smaller reporting company

 

 

 

 

Emerging growth company

 

 

 

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

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

As of October 28, 2022, 620,711,455 shares of common stock, $0.0001 par value per share, were issued and outstanding.

 


 

CCC INTELLIGENT SOLUTIONS HOLDINGS INC.

Form 10-Q

For the Quarter Ended September 30, 2022

Table of Contents

 

 

 

Page

PART I. FINANCIAL INFORMATION`

 

 

 

 

 

Cautionary Statement Regarding Forward-Looking Statements

3

 

Item 1.

 

Financial Statements (Unaudited)

5

 

Condensed Consolidated Balance Sheets as of September 30, 2022 (unaudited) and December 31, 2021

5

 

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the three and nine months ended September 30, 2022 and 2021

6

 

Unaudited Condensed Consolidated Statements of Mezzanine Equity and Stockholders’ Equity for the three and nine months ended September 30, 2022 and 2021

7

 

Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021

10

 

Notes to Condensed Consolidated Financial Statements

11

Item 2.

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

30

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

46

Item 4.

Controls and Procedures

46

 

 

 

PART II. OTHER INFORMATION

 

 

 

Item 1.

Legal Proceedings

47

Item 1A.

Risk Factors

47

Item 2.

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

47

Item 3.

Defaults Upon Senior Securities

47

Item 4.

Mine Safety Disclosures

47

Item 5.

Other Information

47

Item 6.

Exhibits

47

 

 

 

In this Quarterly Report on Form 10-Q, the terms “we,” “us,” “our,” the “Company” and “CCC” mean CCC Intelligent Solutions Holdings Inc. (formerly Dragoneer Growth Opportunities Corp.) and our subsidiaries. On July 30, 2021, Dragoneer Growth Opportunities Corp., a Cayman Islands exempted company (“Dragoneer”), consummated a business combination (the “Business Combination”) pursuant to the terms of the Business Combination Agreement, dated as of February 2, 2021 (the “Business Combination Agreement”), as amended, by and among Dragoneer and Cypress Holdings Inc., a Delaware corporation (“CCCIS”). Immediately upon the consummation of the Business Combination and the other transactions contemplated by the Business Combination Agreement (collectively, the “Transactions”, and such completion the “Closing”), CCCIS merged with and into Chariot Merger Sub, a wholly-owned direct subsidiary of Dragoneer, with CCCIS surviving the Business Combination as a wholly-owned direct subsidiary of Dragoneer (the “Merger”). In connection with the Transactions, Dragoneer changed its name to “CCC Intelligent Solutions Holdings Inc.”

2


 

FORWARD-LOOKING STATEMENTS

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

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

our revenues, the concentration of our customers and the ability to retain our current customers;
our ability to negotiate with our customers on favorable terms;
our ability to maintain and grow our brand and reputation cost-effectively;
the execution of our growth strategy;
our projected financial information, growth rate and market opportunity;
the health of our industry, claim volumes, and market conditions;
changes in the insurance and automotive collision industries, including the adoption of new technologies;
global economic conditions and geopolitical events;
competition in our market and our ability to retain and grow market share;
our ability to develop, introduce and market new enhanced versions of our solutions and products;
our sales and implementation cycles;
the ability of our research and development efforts to create significant new revenue streams;
changes in applicable laws or regulations;
changes in international economic, political, social and governmental conditions and policies, including corruption risks in China and other countries;
currency fluctuations;
our reliance on third-party data, technology and intellectual property;
our ability to protect our intellectual property;
our ability to keep our data and information systems secure from data security breaches;
our ability to acquire or invest in companies or pursue business partnerships, which may divert our management’s attention or result in dilution to our stockholders, and we may be unable to integrate acquired businesses and technologies successfully or achieve the expected benefits of such acquisitions, investments or partnerships;
our ability to raise financing in the future and improve our capital structure;
our success in retaining or recruiting, or changes required in, our officers, key employees or directors;
our officers and directors allocating their time to other businesses and potentially having conflicts of interest with our business;
our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;
our financial performance;

3


 

our ability to expand or maintain its existing customer base; and
our ability to service our indebtedness.

The forward-looking statements contained in this Quarterly Report on Form 10-Q are based on current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described above and under the heading “Risk Factors.” Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. It is not possible to predict or identify all such risks. We do not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

4


 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

 

CCC INTELLIGENT SOLUTIONS HOLDINGS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

 

 

 

 

 

September 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

 

 

(Unaudited)

 

 

 

 

ASSETS

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

Cash and cash equivalents

 

 

248,153

 

 

 

182,544

 

Accounts receivable—Net of allowances of $4,690 and $3,791 as of September 30, 2022 and
   December 31, 2021, respectively

 

 

98,194

 

 

 

78,793

 

Income taxes receivable

 

 

71

 

 

 

318

 

Deferred contract costs

 

 

15,788

 

 

 

15,069

 

Other current assets

 

 

33,898

 

 

 

46,181

 

Total current assets

 

 

396,104

 

 

 

322,905

 

SOFTWARE, EQUIPMENT, AND PROPERTY—Net

 

 

147,531

 

 

 

135,845

 

OPERATING LEASE ASSETS

 

 

34,901

 

 

 

37,234

 

INTANGIBLE ASSETS—Net

 

 

1,143,630

 

 

 

1,213,249

 

GOODWILL

 

 

1,494,267

 

 

 

1,466,884

 

DEFERRED FINANCING FEES, REVOLVER—Net

 

 

2,439

 

 

 

2,899

 

DEFERRED CONTRACT COSTS

 

 

18,818

 

 

 

22,117

 

EQUITY METHOD INVESTMENT

 

 

10,228

 

 

 

10,228

 

OTHER ASSETS

 

 

49,999

 

 

 

26,165

 

TOTAL

 

 

3,297,917

 

 

 

3,237,526

 

LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

Accounts payable

 

 

14,579

 

 

 

12,918

 

Accrued expenses

 

 

63,873

 

 

 

66,691

 

Income taxes payable

 

 

17,025

 

 

 

7,243

 

Current portion of long-term debt

 

 

8,000

 

 

 

8,000

 

Current portion of long-term licensing agreement—Net

 

 

2,832

 

 

 

2,703

 

Operating lease liabilities

 

 

3,713

 

 

 

8,052

 

Deferred revenues

 

 

33,602

 

 

 

31,042

 

Total current liabilities

 

 

143,624

 

 

 

136,649

 

LONG-TERM DEBT—Net

 

 

775,770

 

 

 

780,610

 

DEFERRED INCOME TAXES—Net

 

 

222,370

 

 

 

275,745

 

LONG-TERM LICENSING AGREEMENT—Net

 

 

31,488

 

 

 

33,629

 

OPERATING LEASE LIABILITIES

 

 

58,111

 

 

 

56,133

 

WARRANT LIABILITIES

 

 

39,026

 

 

 

62,478

 

OTHER LIABILITIES

 

 

2,729

 

 

 

5,785

 

Total liabilities

 

 

1,273,118

 

 

 

1,351,029

 

COMMITMENTS AND CONTINGENCIES (Notes 19 and 20)

 

 

 

 

 

 

MEZZANINE EQUITY:

 

 

 

 

 

 

Redeemable non-controlling interest

 

 

14,179

 

 

 

14,179

 

STOCKHOLDERS’ EQUITY:

 

 

 

 

 

 

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

 

 

 

 

 

 

Common stock—$0.0001 par; 5,000,000,000 shares authorized; 620,117,025 and
   
609,768,296 shares issued and outstanding at September 30, 2022 and December 31,
   2021, respectively

 

 

62

 

 

 

61

 

Additional paid-in capital

 

 

2,720,695

 

 

 

2,618,924

 

Accumulated deficit

 

 

(709,018

)

 

 

(746,352

)

Accumulated other comprehensive loss

 

 

(1,119

)

 

 

(315

)

Total stockholders’ equity

 

 

2,010,620

 

 

 

1,872,318

 

TOTAL

 

 

3,297,917

 

 

 

3,237,526

 

 

 

See notes to condensed consolidated financial statements.

5


 

CCC INTELLIGENT SOLUTIONS HOLDINGS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(In thousands, except share and per share data)

(Unaudited)

 

 

 

For the Three Months Ended

 

 

For the Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

REVENUES

 

$

198,734

 

 

$

176,628

 

 

$

578,342

 

 

$

501,205

 

COST OF REVENUES

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues, exclusive of amortization of acquired technologies

 

 

46,379

 

 

 

51,273

 

 

 

135,174

 

 

 

128,218

 

Amortization of acquired technologies

 

 

6,748

 

 

 

6,580

 

 

 

20,193

 

 

 

19,740

 

Total cost of revenues

 

 

53,127

 

 

 

57,853

 

 

 

155,367

 

 

 

147,958

 

GROSS PROFIT

 

 

145,607

 

 

 

118,775

 

 

 

422,975

 

 

 

353,247

 

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

40,273

 

 

 

67,016

 

 

 

114,711

 

 

 

128,894

 

Selling and marketing

 

 

30,838

 

 

 

80,382

 

 

 

88,731

 

 

 

121,350

 

General and administrative

 

 

39,376

 

 

 

142,511

 

 

 

123,093

 

 

 

208,745

 

Amortization of intangible assets

 

 

18,066

 

 

 

18,078

 

 

 

54,212

 

 

 

54,232

 

Total operating expenses

 

 

128,553

 

 

 

307,987

 

 

 

380,747

 

 

 

513,221

 

OPERATING INCOME (LOSS)

 

 

17,054

 

 

 

(189,212

)

 

 

42,228

 

 

 

(159,974

)

INTEREST EXPENSE

 

 

(10,501

)

 

 

(13,878

)

 

 

(25,786

)

 

 

(51,548

)

CHANGE IN FAIR VALUE OF DERIVATIVE INSTRUMENTS

 

 

5,991

 

 

 

2,007

 

 

 

5,991

 

 

 

8,373

 

CHANGE IN FAIR VALUE OF WARRANT LIABILITIES

 

 

312

 

 

 

(26,889

)

 

 

23,452

 

 

 

(26,889

)

GAIN ON SALE OF COST METHOD INVESTMENT

 

 

9

 

 

 

 

 

 

3,587

 

 

 

 

LOSS ON EARLY EXTINGUISHMENT OF DEBT

 

 

 

 

 

(15,240

)

 

 

 

 

 

(15,240

)

OTHER INCOME (LOSS)—Net

 

 

382

 

 

 

(93

)

 

 

576

 

 

 

1

 

PRETAX INCOME (LOSS)

 

 

13,247

 

 

 

(243,305

)

 

 

50,048

 

 

 

(245,277

)

INCOME TAX (PROVISION) BENEFIT

 

 

(3,452

)

 

 

53,523

 

 

 

(12,714

)

 

 

54,227

 

NET INCOME (LOSS) INCLUDING NON-CONTROLLING
   INTEREST

 

 

9,795

 

 

 

(189,782

)

 

 

37,334

 

 

 

(191,050

)

Less: net income (loss) attributable to non-controlling interest

 

 

 

 

 

 

 

 

 

 

 

 

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

 

$

9,795

 

 

$

(189,782

)

 

$

37,334

 

 

$

(191,050

)

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

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.02

 

 

$

(0.34

)

 

$

0.06

 

 

$

(0.36

)

Diluted

 

$

0.02

 

 

$

(0.34

)

 

$

0.06

 

 

$

(0.36

)

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

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

609,421,073

 

 

 

566,454,782

 

 

 

606,181,316

 

 

 

525,877,533

 

Diluted

 

 

643,582,922

 

 

 

566,454,782

 

 

 

642,208,622

 

 

 

525,877,533

 

COMPREHENSIVE INCOME (LOSS):

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) including non-controlling interest

 

 

9,795

 

 

 

(189,782

)

 

 

37,334

 

 

 

(191,050

)

Other comprehensive income (loss)—Foreign currency translation
   adjustment

 

 

(510

)

 

 

11

 

 

 

(804

)

 

 

(18

)

COMPREHENSIVE INCOME (LOSS) INCLUDING
   NON-CONTROLLING INTEREST

 

 

9,285

 

 

 

(189,771

)

 

 

36,530

 

 

 

(191,068

)

Less: comprehensive income (loss) attributable to non-controlling
   interest

 

 

 

 

 

 

 

 

 

 

 

 

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

 

$

9,285

 

 

$

(189,771

)

 

$

36,530

 

 

$

(191,068

)

 

See notes to condensed consolidated financial statements.

6


 

CCC INTELLIGENT SOLUTIONS HOLDINGS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY

(In thousands, except number of shares)

(Unaudited)

 

 

 

Redeemable

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-Controlling

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

Interest

 

 

 

Preferred Stock—Issued and Outstanding

 

 

Common Stock—Issued and Outstanding

 

 

Additional

 

 

 

 

 

Other

 

 

Total

 

 

 

 

 

 

 

Number of

 

 

Par

 

 

Number of

 

 

Par

 

 

Paid-In

 

 

Accumulated

 

 

Comprehensive

 

 

Stockholders’

 

 

 

 

 

 

 

Shares

 

 

Value

 

 

Shares

 

 

Value

 

 

Capital

 

 

Deficit

 

 

Loss

 

 

Equity

 

BALANCE—December 31, 2021

 

$

14,179

 

 

 

 

 

 

$

 

 

 

609,768,296

 

 

$

61

 

 

$

2,618,924

 

 

$

(746,352

)

 

$

(315

)

 

$

1,872,318

 

  Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

23,644

 

 

 

 

 

 

 

 

 

23,644

 

  Exercise of stock options—net of tax

 

 

 

 

 

 

 

 

 

 

 

 

3,961,270

 

 

 

 

 

 

10,633

 

 

 

 

 

 

 

 

 

10,633

 

  Exercise of warrants—net

 

 

 

 

 

 

 

 

 

 

 

 

1,246

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

27,314

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Foreign currency translation
   adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9

 

 

 

9

 

  Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11,975

 

 

 

 

 

 

11,975

 

BALANCE—March 31, 2022

 

 

14,179

 

 

 

 

 

 

 

 

 

 

613,758,126

 

 

 

61

 

 

 

2,653,201

 

 

 

(734,377

)

 

 

(306

)

 

 

1,918,579

 

  Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

28,403