CCC INTELLIGENT SOLUTIONS HOLDINGS INC. – 10-Q – Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of
operations should be read together with our unaudited condensed consolidated
financial statements and related notes appearing elsewhere in this Quarterly
Report on Form
10-Q.
This discussion contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from the
forward-looking statements included herein. Factors that could cause or
contribute to such differences include, but are not limited to, those identified
below and those discussed in the section titled "Cautionary Note Regarding
Forward-Looking Statements" and "Risk Factors" as set forth elsewhere in this
Quarterly Report on Form
10-Q.
Unless otherwise indicated or the context otherwise requires, references to
"CCC," the "Company," "we," "us," "our" and other similar terms refer to Cypress
Holdings Inc. and its consolidated subsidiaries prior to the Business
Combination and to CCC Intelligent Solutions Holdings Inc. and its consolidated
subsidiaries after giving effect to the Business Combination.
Business Overview
Founded in 1980, CCC is a leading provider of innovative cloud, mobile,
telematics, hyperscale technologies and applications for the property and
casualty ("P&C") insurance economy. Our SaaS platform connects trading partners,
facilitates commerce, and supports mission-critical,
AI-enabled
digital workflows. Leveraging decades of deep domain experience, our
industry-leading platform processes more than $100 billion in annual transaction
value across this ecosystem, digitizing workflows and connecting more than
31,500 companies across the P&C insurance economy, including insurance carriers,
collision repairers, parts suppliers, automotive manufacturers, financial
institutions and others.
Our business has been built upon two foundational pillars: automotive insurance
claims and automotive collision repair. For decades we have delivered leading
software solutions to both the insurance and repair industries, including
pioneering Direct Repair Programs ("DRP") in the United States ("U.S.")
beginning in 1992. Direct Repair Programs connect auto insurers and collision
repair shops to create business value for both parties, and require digital
tools to facilitate interactions and manage partner programs.
Insurer-to-shop
DRP connections have created a strong network effect for CCC's platform, as
insurers and repairers both benefit by joining the largest network to maximize
opportunities. This has led to a virtuous cycle in which more insurers on the
platform drives more value for the collision shops on the platform, and vice
versa.
We believe we have become a leading insurance and repair SaaS provider in the
U.S. by increasing the depth and breadth of our SaaS offerings over many years.
Our insurance solutions help insurance carriers manage mission-critical
workflows, from claims to underwriting, while building smart, dynamic
experiences for their own customers. Our software integrates seamlessly with
both legacy and modern systems alike and enables insurers to rapidly innovate on
our platform. Our repair solutions help collision repair facilities achieve
better performance throughout the collision repair cycle by digitizing processes
to drive business growth, streamline operations, and improve repair quality. We
have more than 300 insurers on our network, connecting with over 26,500 repair
facilities through our multi-tenant cloud platform. We believe our software is
the architectural backbone of insurance DRP programs and is the primary driver
of material revenue for our collision shop customers and a source of material
efficiencies for our insurance carrier customers.
Our platform is designed to solve the
many-to-many
problem faced by the insurance economy. There are numerous internally and
externally developed insurance software solutions in the market today, with the
vast majority of applications focused on insurance-only use cases and not on
serving the broader insurance ecosystem. We have prioritized building a leading
network around our automotive insurance and collision repair pillars to further
digitize interactions and maximize value for our customers. We have tens of
thousands of companies on our platform that participate in the insurance
economy, including insurers, repairers, parts suppliers, automotive
manufacturers, and financial institutions. Our solutions create value for each
of these parties by enabling them to connect to our vast network to collaborate
with other companies, streamline operations, and reduce processing costs and
dollars lost through claims management inefficiencies, or claims leakage.
Expanding our platform has added new layers of network effects, further
accelerating the adoption of our software solutions.

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We have processed more than $1 trillion of historical data across our network,
allowing us to build proprietary data assets that leverage insurance claims,
vehicle repair, automotive parts and other vehicle-specific information. We are
uniquely positioned to provide data-driven insights, analytics, and
AI-enhanced
workflows that strengthen our solutions and improve business outcomes for our
customers. Our Smart Suite of AI solutions increases automation across existing
insurer processes including vehicle damage detection, claim triage, repair
estimating, and intelligent claims review. We deliver real-world AI solutions,
and have more than 300 AI models deployed in production environments across more
than 75 insurers.
One of the primary obstacles facing the P&C insurance economy is increasing
complexity. Complexity in the P&C insurance economy is driven by technological
advancements, Internet of Things ("IoT") data, new business models, and changing
customer expectations. We believe digitization plays a critical role in managing
this growing complexity while meeting customer expectations. Our technology
investments are focused on digitizing complex processes and interactions across
our ecosystem, and we believe we are well positioned to power the P&C insurance
economy of the future with our data, network, and platform.
While our position in the P&C insurance economy is grounded in the automotive
insurance sector, the largest insurance sector in the U.S. representing nearly
half of Direct Written Premiums ("DWP"), we believe our integrations and cloud
platform are capable of driving innovation across the entire P&C insurance
economy. Our customers are increasingly looking for CCC to expand its solutions
to other parts of their business where they can benefit from our technology,
service, and partnership. In response, we are investing in new solutions that we
believe will enable us to digitize the entire automotive claims lifecycle, and
over time expand into adjacencies including other insurance lines.
We have strong customer relationships in the
end-markets
we serve, and these relationships are a key component of our success given the
long-term nature of our contracts and the interconnectedness of our network. We
have customer agreements with more than 300 insurers (including carriers,
self-insurers and other entities processing insurance claims), including 18 of
the top 20 automotive insurance carriers in the U.S., based on DWP, and hundreds
of regional carriers. We have more than 31,500 total customers, including over
26,500 automotive collision repair facilities (including repairers and other
entities that estimate damaged vehicles), thousands of automotive dealers, 13 of
the top 15 automotive manufacturers, based on new vehicle sales, and numerous
other companies that participate in the P&C insurance economy.
Key Performance Measures and Operating Metrics
In addition to our GAAP and
non-GAAP
financial measures, we rely on Software Net Dollar Retention Rate ("Software
NDR") and Software Gross Dollar Retention Rate ("Software GDR") to measure and
evaluate our business to make strategic decisions. Software NDR and Software GDR
may not be comparable to or calculated in the same way as other similarly titled
measures used by other companies.
Software NDR
We believe that Software NDR provides our management and our investors with
insight into our ability to retain and grow revenue from our existing customers,
as well as their potential long-term value to us. We also believe the results
shown by this metric reflect the stability of our revenue base, which is one of
our core competitive strengths. We calculate Software NDR by dividing
(a) annualized software revenue recorded in the last month of the measurement
period, for example, September for a quarter ending September 30, for unique
billing accounts that generated revenue during the corresponding month of the
prior year by (b) annualized software revenue as of the corresponding month of
the prior year. The calculation includes changes for these billing accounts,
such as change in the solutions purchased, changes in pricing and transaction
volume, but does not reflect revenue for new customers added. The calculation
excludes: (a) changes in estimates related to the timing of
one-time
revenue and other revenue, including professional services, and (b) annualized
software revenue for smaller customers with annualized software revenue below
the threshold of $100,000 for carriers and $4,000 for shops. The customers that
do not meet the revenue threshold are small carriers and shops that tend to have
different buying behaviors, with a narrower solution focus, and different tenure
compared to our core customers (excluded small carriers and shops represent less
than 5% of total revenue within these sales channels). Our Software NDR includes
carriers and shops who subscribe to our auto physical damage solutions, which
account for most of the Company's revenue, and excludes revenue from smaller
emerging solutions with international subsidiaries or other ecosystem solutions,
such as parts suppliers and other automotive manufacturers, and also excludes
CCC Casualty which are usage and professional service based solutions.

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               Quarter Ending   2021       2020
Software NDR   March 31           106 %      105 %
               June 30            110 %      103 %
               September 30       113 %      103 %
               December 31                   103 %


Software GDR
We believe that Software GDR provides our management and our investors with
insight into the value our solutions provide to our customers as represented by
our ability to retain our existing customer base. We believe the results shown
by this metric reflect the strength and stability of our revenue base, which is
one of our core competitive strengths. We calculate Software GDR by dividing
(a) annualized software revenue recorded in the last month of the measurement
period in the prior year, reduced by annualized software revenue for unique
billing accounts that are no longer customers as of the current period end by
(b) annualized software revenue as of the corresponding month of the prior year.
The calculation reflects only customer losses and does not reflect customer
expansion or contraction for these billing accounts and does not reflect revenue
for new customer billing accounts added. Our Software GDR calculation represents
our annualized software revenue that is retained from the prior year and
demonstrates that the vast majority of our customers continue to use our
solutions and renew their subscriptions. The calculation excludes: (a) changes
in estimates related to the timing of
one-time
revenue and other revenue, including professional services, and (b) annualized
software revenue for smaller customers with annualized software revenue below
the threshold of $100,000 for carriers and $4,000 for shops. The customers that
do not meet the revenue threshold are small carriers and shops that tend to have
different buying behaviors, with a narrower solution focus, and different tenure
compared to our core customers (excluded small carriers and shops which
represent less than 5% of total revenue within these sales channels). Our
Software GDR includes carriers and shops who subscribe to our auto physical
damage solutions, which account for most of the Company's revenue, and excludes
revenue from smaller emerging solutions with international subsidiaries or other
ecosystem solutions, such as parts suppliers and other automotive manufacturers,
and excludes CCC's casualty solutions which are usage and professional service
based solutions.

               Quarter Ending   2021       2020
Software GDR   March 31            98 %       98 %
               June 30             98 %       98 %
               September 30        98 %       98 %
               December 31                    98 %


Recent Developments
The Business Combination
On July 30, 2021, we consummated the previously announced business combination
transaction pursuant to the Business Combination Agreement dated February 2,
2021, as amended, between CCC and Dragoneer.
Upon the closing of the Business Combination, Dragoneer was renamed "CCC
Intelligent Solutions Holdings Inc." and the Company became a wholly owned
subsidiary of CCC Intelligent Solutions Holdings Inc.
The Business Combination was accounted for as a reverse recapitalization in
accordance with GAAP. Under this method of accounting, Dragoneer was treated as
the acquired company for accounting purposes and the Business Combination was
treated as the equivalent of CCCIS issuing stock for the net assets of
Dragoneer, accompanied by a recapitalization.

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The board of directors of CCCIS approved a modification that resulted in vesting
of the performance-based awards with a market condition and the Phantom Shares
upon Closing of the Business Combination. At the time of modification, the
Company estimated a new fair value of the modified awards and the Company
recognized $203.9 million of stock-based compensation expense based on the fair
value of the performance-based awards with a market condition and $6.0 million
of stock-based compensation expense based on the fair value of the Phantom
Shares.
As a result of the Business Combination, we received net cash contributions from
the Business Combination of $763.3 million from the Dragoneer trust account,
funds received for issuance of common stock pursuant to forward purchase
agreements and private investment in public equity investors.
See Note 3 to the condensed consolidated financial statements included in this
Quarterly Report on
Form 10-Q
for additional information on the Business Combination.
COVID-19
In March 2020, the World Health Organization declared the outbreak of the new
strain of the coronavirus to be a pandemic. The
COVID-19
pandemic is having widespread, rapidly evolving, and unpredictable impacts on
global society, economies, financial markets, and business practices. The
COVID-19
pandemic has resulted in federal and state governments implementing measures in
an effort to contain the virus, including social distancing, travel
restrictions, border closures, limitations on public gatherings, work from home,
supply chain logistical changes, and closure of
non-essential
businesses. To protect the health and well-being of its employees, suppliers,
and customers, the Company has made substantial modifications to employee travel
policies, implemented office closures as employees are advised to work from
home, and cancelled or shifted the majority of its conferences and other
marketing events to virtual-only. The
COVID-19
pandemic has impacted and may continue to impact our business operations,
including our employees, customers, partners, and communities, and there is
substantial uncertainty in the nature and degree of its continued effects over
time.
Components of Results of Operations
Revenue
Revenue is derived from the sale of software subscriptions and other revenue,
primarily professional services. Software subscription revenues are comprised of
fees from customers for the right to use the hosted software over the contract
period without taking possession of the software. These revenues are billed on
either a subscription or transactional basis with subscription revenue
recognized ratably over the contract period and transactional revenue recognized
when the transaction for the related service occurs. We generally invoice
software subscription agreements monthly either in advance or in arrears, over
the subscription period. Software subscription revenue accounted for
$170.0 million and $143.8 million, or 96% and 91%, of total revenue during the
three months ended September 30, 2021 and 2020, respectively. Software
subscription revenue accounted for $481.8 million and $422.8 million, or 96% and
90%, of total revenue during the nine months ended September 30, 2021 and 2020,
respectively.
Revenues from professional services include fees from customers for the
Company's First Party Clinical Services, and other
non-software
services. First Party Clinical Services revenue and other
non-software
services revenue is recognized in the period the service is performed. In
December 2020, we sold our First Party Clinical Services to a third-party buyer.
First Party Clinical Services revenue was $7.8 million for the three months
ended September 30, 2020 and $26.1 million for the nine months ended
September 30, 2020.
Costs and Expenses
Cost of Revenue
Cost of Revenue, exclusive of amortization of acquired technologies
These costs include costs of software subscription and professional services
revenue. Our cost of software subscription revenue is primarily comprised of
cloud infrastructure costs, software production costs, information technology
("IT") security costs, license and royalty fees paid to third parties and
personnel-related expenses, including salaries, other direct personnel-related
costs and stock-based compensation, and depreciation expense. We expect cost of
revenue, exclusive of amortization of acquired intangibles, to increase in
absolute dollars as we continue to hire personnel, require additional cloud
infrastructure and incur higher royalty fees in support of our revenue growth.

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Our cost of professional services revenue is primarily comprised of
personnel-related expenses for our customer support teams and contractors,
including salaries, direct personnel-related costs and stock-based compensation,
and fees paid to third parties. We expect our cost of professional services to
decline with the expected decrease in professional services revenue and
following the divestiture of our First Party Clinical Services in December 2020.
First Party Clinical Services cost of revenue was $7.2 million for the three
months ended September 30, 2020 and $23.0 million for the nine months ended
September 30, 2020.
Amortization of Acquired Technologies
We amortize to cost of revenue the capitalized costs of technologies acquired in
connection with historical acquisitions.
Operating expenses
Operating expenses are categorized into the following categories:
Research and development
Our research and development expenses consist primarily of personnel-related
costs, including stock-based compensation, and costs of external development
resources involved in the engineering, design and development of new solutions,
as well as expenses associated with significant ongoing improvements to existing
solutions. Research and development expenses also include costs for certain IT
expenses.
Research and development costs, other than software development costs qualifying
for capitalization, are expensed as incurred. Capitalized software development
costs consist primarily of personnel-related costs.
We expect research and development expenses to increase in absolute dollars as
we continue to dedicate substantial resources to develop, improve and expand the
functionality of our solutions. We also expect an increase in the rate of
capitalization of our investments in research and development for the
foreseeable future.
Selling and Marketing
Our selling and marketing expenses consist primarily of personnel-related costs
for our sales and marketing functions, including sales commissions and
stock-based compensation. Additionally, selling and marketing expenses include
advertising costs, marketing costs and event costs, including the Company's
annual industry conference.
We expect our selling and marketing expenses to increase on an absolute dollar
basis as we continue to increase investments to support the growth of our
business.
General and Administrative
Our general and administrative expenses consist primarily of personnel-related
costs, including stock-based compensation, for our executive management and
administrative employees, including finance and accounting, human resources,
information technology, facilities and legal functions. Additionally, general
and administrative expenses include professional service fees, insurance
premiums, and other corporate expenses that are not allocated to the above
expense categories.
We expect our general and administrative expenses to increase in absolute
dollars as we continue to expand our operations, hire additional personnel, and
incur costs as a public company.

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Amortization of Intangible Assets
Our amortization of intangible assets consists of the capitalized costs of
customer relationships and favorable lease terms acquired in connection with
historical acquisitions.
Non-operating
income (expense)
Non-operating
income (expense) is categorized into the following categories:
Interest Expense
Interest expense comprises interest expense accrued or paid on our indebtedness.
We expect interest expense to vary each reporting period depending on the amount
of outstanding indebtedness and prevailing interest rates.
Gain (Loss) on Change in Fair Value of Interest Rate Swaps
Gain (loss) on change in fair value of interest rate swaps comprises fair value
adjustments of our interest rate swap agreements at the end of each reporting
period.
In September 2021, we extinguished the interest rate swaps and do not expect to
recognize any gain or loss on the change in fair value of interest rate swaps in
subsequent periods.
Change in Fair Value of Warrant Liabilities
Change in fair value of warrant liabilities comprises fair value adjustments of
the Public Warrants and Private Warrants assumed in connection with the Business
Combination. We expect the change in fair value of warrant liabilities to vary
each reporting period depending on the fair value adjustments and number of
exercises of outstanding Public Warrants and Privates Warrants during each
reporting period.
Loss on Early Extinguishment of Debt
Loss on early extinguishment of debt comprises the
write-off
of deferred financing fees and original issue discount associated with the
Company's long-term debt at the time of early extinguishment.
Other Income (Expense), Net
Other income (expense), net consists primarily of interest income on the
Company's cash balances and foreign currency transaction gains and losses
related to the impact of transactions denominated in a foreign currency.
Income Tax Benefit (Provision)
Income tax benefit (provision) consists of U.S. and state income taxes and
income taxes in certain foreign jurisdictions in which we conduct business.
Earnings from our
non-U.S.
activities are subject to local country income tax and may be subject to current
U.S. income tax. Due to cumulative losses, we maintain a full valuation
allowance for deferred tax assets for our operations in foreign jurisdictions.
We expect to maintain this full valuation allowance for the foreseeable future.

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Results of Operations
Comparison of the Three Months Ended September 30, 2021 to the Three Months
Ended September 30, 2020

                                                                       Three Months Ended September 30,                      Change
(dollar amounts in thousands, except share and per share data)            2021                    2020                 $                %
Revenue                                                             $         176,628         $     157,754        $   18,874            12.0 %

Cost of revenue, exclusive of amortization of acquired
technologies

                                                                   51,273                43,879             7,394            16.9 %
Amortization of acquired technologies                                           6,580                 6,576                 4             0.1 %

Cost of revenue                                                                57,853                50,455             7,398            14.7 %

Gross profit                                                                  118,775               107,299            11,476            10.7 %
Operating expenses:
Research and development                                                       67,016                26,816            40,200           149.9 %
Selling and marketing                                                          80,382                17,427            62,955           361.2 %
General and administrative                                                    142,511                21,893           120,618           550.9 %
Amortization of intangible assets                                              18,078                18,078                -              0.0 %

Total operating expenses                                                      307,987                84,214           223,773           265.7 %

Operating (loss) income                                                      (189,212 )              23,085          (212,297 )            NM
Other income (expense):
Interest expense                                                              (13,878 )             (19,788 )           5,910            29.9 %
Gain on change in fair value of interest rate swaps                             2,007                 3,894            (1,887 )         -48.5 %
Change in fair value of warrant liabilities                                   (26,889 )                  -            (26,889 )            NM
Loss on early extinguishment of debt                                          (15,240 )                  -            (15,240 )            NM
Other (expense) income, net                                                       (93 )                  49              (142 )            NM

Total other income (expense)                                                  (54,093 )             (15,845 )         (38,248 )        -241.4 %
(Loss) income before income taxes                                            (243,305 )               7,240          (250,545 )            NM
Income tax benefit (provision)                                                 53,523                (2,520 )          56,043              NM

Net (loss) income                                                   $        (189,782 )       $       4,720        $ (194,502 )            NM

Net (loss) income per share attributable to common
stockholders:
Basic                                                               $           (0.34 )       $        0.01
Diluted                                                             $           (0.34 )       $        0.01
Weighted-average shares used in computing net (loss) income
per share attributable to common stockholders:
Basic                                                                     566,454,782           504,212,021
Diluted                                                                   566,454,782           510,694,493


NM-Not Meaningful
Revenues
Revenue increased by $18.9 million to $176.6 million, or 12.0%, for the three
months ended September 30, 2021, compared to the three months ended
September 30, 2020. The increase in revenue was primarily a result of 12% growth
from existing customer upgrades and expanding solution offerings to these
existing customers as well as 5% growth from new customers and 1% increase in
other transaction revenue, partially offset by a 5% impact in professional
services revenues due to the divestiture of the First Party Clinical Services in
December 2020.
Cost of Revenue
Cost of revenue increased by $7.4 million to $57.9 million, or 14.7%, for the
three months ended September 30, 2021, compared to the three months ended
September 30, 2020.

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Cost of Revenue, exclusive of amortization of acquired technologies
Cost of revenue, exclusive of amortization of acquired technologies, increased
$7.4 million to $51.3 million, or 16.9%, for the three months ended
September 30, 2021, compared to the three months ended September 30, 2020. The
increase was due to a $12.0 million increase in stock-based compensation mainly
from a vesting term modification of outstanding stock options completed in
conjunction with the Business Combination and a $2.7 million increase in
personnel costs, partially offset by a decrease of $7.2 million of costs related
to the divestiture of First Party Clinical Services in December 2020.
Amortization of Acquired Technologies
Amortization of acquired technologies was $6.6 million for each of the three
months ended September 30, 2021 and 2020.
Gross Profit
Gross profit increased by $11.5 million to $118.8 million, or 10.7%, for the
three months ended September 30, 2021, compared to the three months ended
September 30, 2020. The increase in absolute dollars was due to increased
software subscription revenues and economies of scale resulting from fixed cost
arrangements. Our gross profit margin decreased to 67.2% for the three months
ended September 30, 2021 compared to 68.0% for the three months ended
September 30, 2020. The decrease in gross profit margin was due to a
$12.0 million, or 6.8%, increase in stock-based compensation expense from the
vesting term modification completed in conjunction with the Business
Combination, offset by increased software subscription revenues and economies of
scale resulting from fixed cost arrangements.
Research and Development
Research and development expense increased by $40.2 million to $67.0 million, or
149.9%, for the three months ended September 30, 2021, compared to the three
months ended September 30, 2020. The increase was due to a $35.2 million
increase in stock-based compensation mainly from a vesting term modification of
outstanding stock options completed in conjunction with the Business
Combination, a $5.0 million increase in personnel costs and a $0.9 million
increase in IT costs, partially offset by a $1.2 million increase in the amount
of capitalized time on development projects.
Selling and Marketing
Selling and marketing expense increased by $63.0 million to $80.4 million, or
361.2%, for the three months ended September 30, 2021, compared to the three
months ended September 30, 2020. The increase was primarily due to a
$58.4 million increase in stock-based compensation mainly from a vesting term
modification of outstanding stock options completed in conjunction with the
Business Combination, a $3.6 million increase in personnel costs, including
sales incentives, and a $0.5 million increase in employee travel costs.
General and Administrative
General and administrative expense increased by $120.6 million to
$142.5 million, or 550.9%, for the three months ended September 30, 2021,
compared to the three months ended September 30, 2020. The increase was
primarily due to a $112.5 million increase in stock-based compensation mainly
from a vesting term modification of outstanding stock options completed in
conjunction with the Business Combination, a $1.3 million increase in insurance
costs, a $1.6 million increase in personnel costs and a $1.0 million increase in
technology and communication costs. Additionally, the Company recognized
$2.5 million of additional depreciation expense during the three months ended
September 30, 2021 primarily related to the acceleration of depreciation on
leasehold improvements at the Company's corporate headquarters and facilities
costs increased $1.1 million due to the Company's overlapping corporate
headquarters leases and due to the acceleration of rent expense from the planned
move from its current to its new headquarters in the fourth quarter of 2021.

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Amortization of Intangible Assets
Amortization of intangible assets was $18.1 million during the three months
ended September 30, 2021 and 2020.
Interest Expense
Interest expense decreased by $5.9 million to $13.9 million, or 29.9%, for the
three months ended September 30, 2021, compared to the three months ended
September 30, 2020 primarily due to less outstanding long-term debt during the
three months ended September 30, 2021.
Gain on Change in Fair Value of Interest Rate Swaps
Gain on change in fair value of interest rate swaps decreased by $1.9 million
for the three months ended September 30, 2021, compared to the three months
ended September 30, 2020. The decrease was attributable to the proximity of the
maturity date of the swap agreements and the timing of the extinguishment of the
interest rate swaps in September 2021.
Change in Fair Value of Warrant Liabilities
Change in fair value of warrant liabilities was $26.9 million for the three
months ended September 30, 2021. The warrant liabilities were recorded as part
of the Business Combination and therefore did not exist in the prior year. The
expense was due to the increase in the estimated fair value of the Public
Warrants and Private Warrants between July 30, 2021, the closing date of the
Business Combination and September 30, 2021.
Loss on Early Extinguishment of Debt
Loss on early extinguishment of debt during the three months ended September 30,
2021 was $15.2 million due to the early repayments of the total balance
outstanding under the Company's First Lien Term Loan. There was no loss on early
extinguishment of debt during the three months ended September 30, 2020.
Income Tax Benefit (Provision)
Income tax benefit (provision) was a benefit of $53.5 million for the three
months ended September 30, 2021, compared to a provision of $2.5 million for the
three months ended September 30, 2020. The change in the income tax benefit
(provision) was due to the Company's pretax loss during the three months ended
September 30, 2021, primarily due to higher stock-based compensation expense,
compared to the pretax income during the three months ended September 30, 2020.

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Comparison of the Nine Months Ended September 30, 2021 to the Nine Months Ended
September 30, 2020

                                                                        Nine Months Ended September 30,                       Change
(dollar amounts in thousands, except share and per share data)            2021                    2020                  $                 %
Revenue                                                             $        501,205          $     467,677         $   33,528              7.2 %

Cost of revenue, exclusive of amortization of acquired
technologies

                                                                 128,218                135,674             (7,456 )           -5.5 %
Amortization of acquired technologies                                         19,740                 19,725                 15              0.1 %

Cost of revenue                                                              147,958                155,399             (7,441 )           -4.8 %

Gross profit                                                                 353,247                312,278             40,969             13.1 %
Operating expenses:
Research and development                                                     128,894                 82,131             46,763             56.9 %
Selling and marketing                                                        121,350                 56,608             64,742            114.4 %
General and administrative                                                   208,745                 66,460            142,285            214.1 %
Amortization of intangible assets                                             54,232                 54,232                 -               0.0 %

Total operating expenses                                                     513,221                259,431            253,790             97.8 %

Operating (loss) income                                                     (159,974 )               52,847           (212,821 )             NM
Other income (expense):
Interest expense                                                             (51,548 )              (57,588 )            6,040             10.5 %
Gain (loss) on change in fair value of interest rate swaps                     8,373                (16,633 )           25,006               NM
Change in fair value of warrant liabilities                                  (26,889 )                   -             (26,889 )             NM
Loss on early extinguishment of debt                                         (15,240 )               (8,615 )           (6,625 )          -76.9 %
Other (expense) income, net                                                        1                    304               (303 )          -99.7 %

Total other income (expense)                                                 (85,303 )              (82,532 )           (2,771 )           -3.4 %
Loss before income taxes                                                    (245,277 )              (29,685 )         (215,592 )         -726.3 %
Income tax benefit                                                            54,227                  7,191             47,036            654.1 %

Net loss                                                            $       (191,050 )        $     (22,494 )       $ (168,556 )         -749.3 %

Net loss per share attributable to common stockholders-basic
and diluted

                                                         $       

(0.36 ) $ (0.04 )
Weighted-average shares used in computing net loss per share
attributable to common stockholders-basic and diluted

525,877,533            504,062,587


NM-Not Meaningful
Revenues
Revenue increased by $33.5 million to $501.2 million, or 7.2%, for the nine
months ended September 30, 2021, compared to the nine months ended September 30,
2020. The increase in revenue was primarily a result of a 8% growth from
existing customer upgrades and expanding solution offerings to these existing
customers as well as 4% growth from new customers and 1% increase in other
transaction revenue, partially offset by a 6% impact on professional services
revenues due to the divestiture of the First Party Clinical Services in December
2020.
Cost of Revenue
Cost of revenue decreased by $7.4 million to $148.0 million, or 4.8%, for the
nine months ended September 30, 2021, compared to the nine months ended
September 30, 2020.
Cost of Revenue, exclusive of amortization of acquired technologies
Cost of revenue, exclusive of amortization of acquired technologies, decreased
$7.5 million to $128.2 million, or 5.5%, for the nine months ended September 30,
2021, compared to the nine months ended September 30, 2020. The decline was due
to a reduction of $23.0 million of costs related to the divestiture of First
Party Clinical Services in December 2020 and a $1.8 million decrease in
consulting costs, partially offset by a $12.2 million increase in stock-based
compensation mainly from a vesting term modification of outstanding stock
options completed in conjunction with the Business Combination and a
$4.8 million increase in personnel costs.

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Amortization of Acquired Technologies
Amortization of acquired technologies was $19.7 million for the nine months
ended September 30, 2021 and 2020.
Gross Profit
Gross profit increased by $41.0 million to $353.2 million, or 13.1%, for the
nine months ended September 30, 2021, compared to the nine months ended
September 30, 2020. Our gross profit margin increased to 70.5% for the nine
months ended September 30, 2021 compared to 66.8% for the nine months ended
September 30, 2020. The increase in absolute dollars and gross profit margin was
due to increased software subscription revenues and economies of scale resulting
from fixed cost arrangements, partially offset by an increase in stock-based
compensation.
Research and Development
Research and development expense increased by $46.8 million to $128.9 million,
or 56.9%, for the nine months ended September 30, 2021, compared to the nine
months ended September 30, 2020. The increase was primarily due to a
$35.9 million increase in stock-based compensation mainly from a modification in
the vesting terms of stock options completed in conjunction with the Business
Combination, a $11.5 million increase in personnel-related costs and a
$3.8 million increase in IT costs, partially offset by a $1.4 million decrease
in consulting costs and a $2.1 million increase in the amount of capitalized
time on development projects.
Selling and Marketing
Selling and marketing expense increased by $64.7 million to $121.4 million, or
114.4%, for the nine months ended September 30, 2021, compared to the nine
months ended September 30, 2020. The increase was primarily due to a
$58.7 million increase in stock-based compensation mainly from a modification in
the vesting terms of stock options completed in conjunction with the Business
Combination and a $7.5 million increase in personnel costs, including sales
incentives, partially offset by a $0.8 million decrease in consulting costs and
impacts from
COVID-19,
including a $0.6 million decrease in travel costs.
General and Administrative
General and administrative expense increased by $142.3 million to
$208.7 million, or 214.1%, for the nine months ended September 30, 2021,
compared to the nine months ended September 30, 2020. The increase was primarily
due to a $121.4 million increase in stock-based compensation mainly from a
vesting term modification of outstanding stock options completed in conjunction
with the Business Combination, a $3.3 million increase in personnel costs, a
$1.3 million increase in insurance costs, and $6.3 million for the business
combination transaction and. Additionally, the Company recognized $2.8 million
of additional depreciation expense during the nine months ended September 30,
2021 primarily related to the acceleration of depreciation on leasehold
improvements at the Company's corporate headquarters and facilities costs
increased $4.2 million due to the Company's overlapping corporate headquarters
leases and due to the acceleration of rent expense from the planned move from
its current to its new headquarters in the fourth quarter of 2021.
Amortization of Intangible Assets
Amortization of intangible assets was $54.2 million during the nine months ended
September 30, 2021 and 2020.

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Interest Expense
Interest expense decreased by $6.0 million to $51.5 million, or 10.5%, for the
nine months ended September 30, 2021, compared to the nine months ended
September 30, 2020 primarily due to less outstanding long-term debt during the
nine months ended September 30, 2021.
Gain (Loss) on Change in Fair Value of Interest Rate Swaps
Gain on change in fair value of interest rate swaps was $8.4 million for the
nine months ended September 30, 2021, compared to a loss on change in fair value
of interest rate swaps of $16.6 million for the nine months ended September 30,
2020. The gain recognized for the nine months ended September 30, 2021 was due
to the proximity of the maturity date and timing of the extinguishment of the
interest rate swaps in September 2021. The loss recognized in the prior period
was mainly attributable to the decline in the forward yield curve during the
nine months ended September 30, 2020.
Change in Fair Value of Warrant Liabilities
Change in fair value of warrant liabilities was $26.9 million for the nine
months ended September 30, 2021. The warrant liabilities were recorded as part
of the Business Combination and therefore did not exist in the prior year. The
expense was due to the increase in the estimated fair value of the Public
Warrants and Private Warrants between July 30, 2021, the closing date of the
Business Combination, and September 30, 2021.
Loss on Early Extinguishment of Debt
Loss on early extinguishment of debt during the nine months ended September 30,
2020 was $15.2 million due to the early repayments of the total balance
outstanding under the Company's First Lien Term Loan. Loss on early
extinguishment of debt during the nine months ended September 30, 2020 was
$8.6 million due to the early repayment of the total balance outstanding under
the Company's Second Lien Term Loan.
Income Tax Benefit
Income tax benefit increased by $47.0 million to $54.2 million, or 654.1%, for
the nine months ended September 30, 2021, compared to the nine months ended
September 30, 2020. Income tax benefit increased primarily due to higher pretax
losses, primarily due to higher stock-based compensation expense.
Non-GAAP
Financial Measures
In addition to our results determined in accordance with U.S. GAAP, we believe
that Adjusted Gross Profit, and EBITDA and Adjusted EBITDA, which are each
non-GAAP
measures, are useful in evaluating our operational performance. We use this
non-GAAP
financial information to evaluate our ongoing operations and for internal
planning, budgeting and forecasting purposes and, starting in 2021, for setting
management bonus programs. We believe that
non-GAAP
financial information, when taken collectively, may be helpful to investors in
assessing our operating performance and comparing our performance with
competitors and other comparable companies, which may present similar
non-GAAP
financial measures to investors. Our computation of these
non-GAAP
measures may not be comparable to other similarly titled measures computed by
other companies, because all companies may not calculate these measures in the
same fashion. We endeavor to compensate for the limitation of the
non-GAAP
measure presented by also providing the most directly comparable GAAP measure
and a description of the reconciling items and adjustments to derive the
non-GAAP
measure. These
non-GAAP
measures should be considered in addition to results prepared in accordance with
GAAP, but should not be considered in isolation or as a substitute for
performance measures calculated in accordance with GAAP. We compensate for these
limitations by relying primarily on our GAAP results and using
non-GAAP
measures on a supplemental basis.

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Adjusted Gross Profit
We believe that Adjusted Gross Profit, as defined below, provides meaningful
supplemental information regarding our performance by excluding certain items
that may not be indicative of our recurring core business operating results.
Adjusted Gross Profit is defined as gross profit, adjusted for the gross profit
associated with First Party Clinical Services which was divested as of
December 31, 2020, amortization of acquired technologies, business combination
transaction costs, and stock-based compensation, which are not indicative of our
recurring core business operating results. The Adjusted Gross Profit Margin is
defined as Adjusted Gross Profit divided by Revenue, less First Party Clinical
Services divested revenue of $0 and $7,830 for the three months ended
September 30, 2021 and 2020, respectively, and $0 and $26,057 for the nine
months ended September 30, 2021 and 2020 (amounts in thousands). Gross profit is
the most directly comparable GAAP measure to Adjusted Gross Profit, and you
should review the reconciliation of Gross Profit to Adjusted Gross Profit below
and not rely on any single financial measure to evaluate our business.
The following table reconciles Gross Profit to Adjusted Gross Profit for the
three and nine months ended September 30, 2021 and 2020, respectively:

                                                Three months ended September 30,              Nine months ended September 30,
(amounts in thousands, except percentages)        2021                    2020                 2021                    2020
Gross Profit                                 $       118,775         $      

107,299 $ 353,247 $ 312,278
First Party Clinical Services-Gross Profit

                -                     (645 )                 -                   (3,035 )
Amortization of acquired technologies                  6,580                   6,576               19,740                  19,725
Business combination transaction costs                   905                      -                   905                      -
Stock-based compensation                              12,169                     141               12,563                     380

Adjusted Gross Profit                        $       138,429         $      

113,371 $ 386,455 $ 329,348

Gross Profit Margin                                       67 %                    68 %                 70 %                    67 %
Adjusted Gross Profit Margin                              78 %                    76 %                 77 %                    75 %


For the three months ended September 30, 2021, Adjusted Gross Profit increased
$25.1 million or 22.1%, while Adjusted Gross Profit Margin increased 2% to 78%.
For the nine months ended September 30, 2021, Adjusted Gross Profit increased
$57.1 million or 17.3%, while Adjusted Gross Profit Margin increased 2% to 77%.
Each of these increases in Adjusted Gross Profit and Adjusted Gross Profit
Margin were primarily due to an increase in software subscription revenue and
economies of scale resulting from fixed cost arrangements.
EBITDA and Adjusted EBITDA
We believe that EBITDA and Adjusted EBITDA, as defined below, are useful in
evaluating our operational performance distinct and apart from financing costs,
certain expenses and
non-operational
expenses. EBITDA is defined as net (loss) income adjusted for interest, taxes,
depreciation and amortization. Adjusted EBITDA is EBITDA adjusted for (gain)
loss on change in fair value of interest rate swaps, change in fair value of
warrant liabilities, stock-based compensation expense, loss on early
extinguishment of debt, business combination transaction costs, lease
abandonment charges, lease overlap costs for the incremental expenses associated
with the Company's new corporate headquarters prior to termination of its
existing headquarters' lease, net costs related to divestiture and less revenue
and related cost of revenue associated with First Party Clinical Services, which
was divested as of December 31, 2020. Net (loss) income is the most directly
comparable GAAP measure to Adjusted EBITDA, and you should review the
reconciliation of net (loss) income to adjusted EBITDA below and not rely on any
single financial measure to evaluate our business.
EBITDA and Adjusted EBITDA are intended as supplemental measures of our
performance that are neither required by, nor presented in accordance with,
GAAP. You should be aware that when evaluating EBITDA and Adjusted EBITDA, we
may incur future expenses similar to those excluded when calculating these
measures. In addition, our presentation of these measures should not be
construed as an inference that our future results will be unaffected by unusual
or
non-recurring
items.

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The following table reconciles net (loss) income to Adjusted EBITDA for the
three and nine months ended September 30, 2021 and 2020, respectively:

                                                        Three months ended September 30,              Nine months ended September 30,
(dollar amounts in thousands)                             2021                     2020                 2021                    2020
Net (loss) income                                   $        (189,782 )       $        4,720      $       (191,050 )       $      (22,494 )
Interest expense                                               13,878                 19,788                51,548                 57,588
Income tax provision (benefit)                                (53,523 )                2,520               (54,227 )               (7,191 )
Amortization of intangible assets                              18,078                 18,078                54,232                 54,232
Amortization of acquired technologies-Cost of
revenue                                                         6,580                  6,576                19,740                 19,725
Depreciation and amortization related to
software, equipment and property                                7,694                  4,496                18,161                 13,039

EBITDA                                                       (197,075 )               56,178              (101,596 )              114,899
(Gain) loss on change in fair value of interest
rate swaps                                                     (2,007 )               (3,894 )              (8,373 )               16,633
Change in fair value of warrant liabilities                    26,889                     -                 26,889                     -
Stock-based compensation expense                              219,876                  1,869               235,413                  7,471
Loss on early extinguishment of debt                           15,240                     -                 15,240                  8,615
Business combination transaction costs                          5,516                     93                10,471                     93
Lease abandonment                                                 438                     -                  2,256                     -
Lease overlap costs                                               924                     -                  2,773                     -
Net costs related to divestiture                                  338                     -                  2,605                     -
First Party Clinical Services-Revenue                              -                  (7,830 )                  -                 (26,083 )
First Party Clinical Services-Cost of revenue                      -                   7,185                    -                  23,048

Adjusted EBITDA                                     $          70,139         $       53,601      $        185,678         $      144,676



Adjusted EBITDA increased $16.5 million, or 30.9%, for the three months ended
September 30, 2021, compared to the three months ended September 30, 2020.
Adjusted EBITDA increased $41.0 million, or 28.3%, for the nine months ended
September 30, 2021, compared to the nine months ended September 30, 2020. These
increases were driven primarily by increased software subscription revenues from
expanding solution adoption among existing customers, existing customer upgrades
and sales to new customers and economies of scale resulting from fixed cost
arrangements.
Adjusted Net Income and Adjusted Earnings Per Share
We believe that Adjusted Net Income, as defined below, and Adjusted Earnings Per
Share are useful in evaluating our operational performance distinct and apart
from financing costs, certain expenses and
non-operational
expenses. Adjusted Net Income is defined as net (loss) income adjusted for the
after-tax
effects of amortization, (gain) loss on change in fair value of interest rate
swaps, change in fair value of warrant liabilities, stock-based compensation
expense, loss on early extinguishment of debt, business combination transaction
costs, lease abandonment charges, lease overlap costs for the incremental
expenses associated with the Company's new corporate headquarters prior to
termination of its existing headquarters' lease, net costs related to
divestiture, less revenue and related cost of revenue associated with First
Party Clinical Services, which was divested as of December 31, 2020. Net (loss)
income is the most directly comparable GAAP measure to Adjusted Net Income, and
you should review the reconciliation of net (loss) income to Adjusted Net Income
below and not rely on any single financial measure to evaluate our business.
Adjusted Net Income and Adjusted Earnings Per Share are intended as supplemental
measures of our performance that are neither required by, nor presented in
accordance with, GAAP. You should be aware that when evaluating Adjusted Net
Income and Adjusted Earnings Per Share, we may incur future expenses similar to
those excluded when calculating these measures. In addition, our presentation of
these measures should not be construed as an inference that our future results
will be unaffected by unusual or
non-recurring
items.

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The following table reconciles net (loss) income and GAAP basic and diluted
earnings per share to Adjusted Net Income and Adjusted Earnings per Share for
the three and nine months ended September 30, 2021 and 2020, respectively.

                                             Three months ended September 30,                 Nine months ended September 30,
(dollar amounts in thousands)                  2021                     2020                    2021                    2020

Net (loss) income                        $        (189,782 )        $       

4,720 $ (191,050 ) $ (22,494 )
Amortization of intangible assets

                   18,078                 18,078                   54,232                 54,232
Amortization of acquired
technologies-Cost of revenue                         6,580                  6,576                   19,740                 19,725
(Gain) loss on change in fair value
of interest rate swaps                              (2,007 )               (3,894 )                 (8,373 )               16,633
Change in fair value of warrant
liabilities                                         26,889                     -                    26,889                     -
Stock-based compensation expense                   219,876                  1,869                  235,413                  7,471
Loss on early extinguishment of
debt                                                15,240                     -                    15,240                  8,615
Business combination transaction
costs                                                5,516                     93                   10,471                     93
Lease abandonment                                      438                     -                     2,256                     -
Lease overlap costs                                    924                     -                     2,773                     -
Net costs related to divestiture                       338                     -                     2,605                     -
First Party Clinical
Services-Revenue                                        -                  (7,830 )                     -                 (26,083 )
First Party Clinical Services-Cost
of revenue                                              -                   7,185                       -                  23,048
Tax effect of adjustments                          (72,360 )               (5,716 )                (89,134 )              (26,947 )

Adjusted net income                      $          29,730          $      21,081         $         81,062          $      54,293
Adjusted net income per share
attributable to common stockholders
Basic                                    $            0.05          $        0.04         $           0.15          $        0.11
Diluted                                  $            0.05          $        0.04         $           0.15          $        0.11
Weighted average shares outstanding
Basic                                          566,454,782            504,212,021              525,877,533            504,062,587
Diluted                                        599,675,416            510,694,493              554,818,300            510,252,470


Adjusted Net Income increased $8.6 million, or 41.0%, for the three months ended
September 30, 2021, compared to the three months ended September 30, 2020.
Adjusted Net Income increased $26.8 million, or 49.3% for the nine months ended
September 30, 2021, compared to the nine months ended September 30, 2020. These
increases were driven primarily by increased software subscription revenues from
expanding solution adoption among existing customers, existing customer upgrades
and sales to new customers and economies of scale resulting from fixed cost
arrangements.
Liquidity and Capital Resources
We have financed our operations from cash flows from operations. As of
September 30, 2021, the Company had cash and cash equivalents of $160.5 million.
The Company had a working capital surplus of $145.9 million at September 30,
2021 and had an accumulated deficit at September 30, 2021 totaling
$688.5 million. As of September 30, 2021, the Company had $800.0 million
aggregate principal amount outstanding on term loans.
We believe that our existing cash and cash equivalents, our cash flows from
operating activities and our borrowing capacity under our revolving credit
facility will be sufficient to fund our operations, fund required long-term debt
repayments and meet our commitments for capital expenditures for at least the
next twelve months.
Although we are not currently a party to any material definitive agreement
regarding potential investments in, or acquisitions of, complementary business,
applications or technologies, we may enter into these types of arrangements,
which could reduce our cash and cash equivalents or require us to seek
additional equity or debt financing. Additional funds from financing
arrangements may not be available on terms favorable to us or at all.

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Debt
On September 21, 2021, CCC Intelligent Solutions Inc., an indirect wholly owned
subsidiary of the Company, together with certain of the Company's subsidiaries
acting as guarantors entered into the 2021 Credit Agreement, dated as of
September 21, 2021.
The 2021 Credit Agreement replaces the Company's First Lien Credit Agreement,
dated as of April 27, 2017, as amended as of February 14, 2020.
The 2021 Credit Agreement consists of the Term B Loan for an aggregate principal
amount of $800.0 million and the 2021 Revolving Credit Facility for an aggregate
principal amount of $250.0 million. The Company received proceeds of
$798.0 million, net of debt discount of $2.0 million, related to the Term B
Loan.
Using proceeds from the Term B Loan, we repaid the outstanding borrowings under
our First Lien Credit Agreement. The repayment was determined to be a debt
extinguishment and we recognized a $9.2 million loss on early extinguishment of
debt during the three months ended September 30, 2021.
The Term B Loan requires quarterly principal payments of $2.0 million until
June 30, 2028, with the remaining outstanding principal amount required to be
paid on the maturity date, September 21, 2028. Beginning with fiscal year ending
December 31, 2022, the Term B Loan requires a prepayment of principal, subject
to certain exceptions, in connection with the receipt of proceeds from certain
asset sales, casualty events, and debt issuances by the Company, and up to 50%
of annual excess cash flow, as defined in and as further set forth in the 2021
Credit Agreement. When a principal prepayment is required, the prepayment
offsets the future quarterly principal payments of the same amount. As of
September 30, 2021, the Company is not subject to the annual excess cash flow
calculation and no such principal prepayments are required.
As of September 30, 2021, the amount outstanding under the Term B Loans was
$800.0 million and there were no amounts outstanding on the Company's 2021
Revolving Credit Facility.
Amounts outstanding under the 2021 Credit Agreement bear interest at a variable
rate of LIBOR, plus up to 2.50% per annum based upon the Company's leverage
ratio, as defined in the 2021 Credit Agreement. A quarterly commitment fee of up
to 0.50% is payable on the unused portion of the 2021 Revolving Credit Facility.
During the three months ended September 30, 2021 the weighted-average interest
rate on the outstanding borrowings under the Term B Loan was 3.0%.
Borrowings under the 2021 Credit Agreement are guaranteed by Cypress
Intermediate Holdings II, Inc. and certain of its U.S. subsidiaries. The 2021
Credit Agreement is secured by a first priority lien on the stock of CCC
Intelligent Solutions Inc. and substantially all of its assets, subject to
various limitations and exceptions.
The 2021 Credit Agreement contains representations and warranties, and
affirmative and negative covenants, customary for a financing of this type. The
Company was in compliance with all affirmative and negative covenants during the
three months ended September 30, 2021. Beginning with the fiscal quarter ending
March 31, 2022, the Company is subject to a springing first lien leverage test
under the 2021 Credit Agreement with respect to the Revolving Credit Facility,
tested quarterly, only if a minimum of 35.0% of the Revolving Credit Facility
borrowings (subject to certain exclusions set forth in the 2021 Credit
Agreement) are outstanding at the end of a fiscal quarter. The Company is not
subject to the first lien leverage test as of September 30, 2021.
Prior to entering in to the 2021 Credit Agreement in September 2021, our
long-term debt was provided through our First Lien Credit Agreement and Second
Lien Credit Agreement, each entered into in April 2017.
On February 14, 2020, we refinanced our long-term debt and entered into the
First Lien Amendment. The First Lien Amendment provided an incremental term
loan, amended the amount of commitments and the maturity dates of the First Lien
Credit Agreement's revolving credit facilities. The proceeds of the incremental
term loan were used to repay all outstanding borrowings under the Second Lien
Credit Agreement.
The repayment of outstanding borrowings under the Second Lien Credit Agreement
was determined to be a debt extinguishment and we recognized an $8.6 million
loss on early extinguishment of debt during the nine months ended September 30,
2020.

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First Lien Credit Agreement
. The First Lien Credit Agreement initially consisted of the $1.0 billion First
Lien Term Loan, the $65.0 million Dollar Revolver, and the $35.0 million
Multicurrency Revolver, with a sublimit of $30.0 million for letters of credit
under the First Lien Revolvers. We received proceeds of $997.5 million, net of
debt discount of $2.5 million, related to the First Lien Term Loan.
The First Lien Amendment provided an incremental term loan in the amount of
$375.0 million. We received proceeds from the incremental term loan of
$373.1 million, net of debt discount of $1.9 million. The First Lien Amendment
reduced the amount of commitments under each of the Dollar Revolver and the
Multicurrency Revolver to $59.3 million and $32.0 million, respectively, and
extended the maturity of a portion of the commitments under each revolving
credit facility. Pursuant to the First Lien Amendment, the
non-extended
Dollar Revolver and
non-extended
Multicurrency Revolver consisted of commitments of $8.1 million and
$4.4 million, respectively, which were scheduled to mature on April 27, 2022.
The extended Dollar Revolver and extended Multicurrency Revolver consisted of
commitments of $51.2 million and $27.6 million, respectively, which were
scheduled to mature on October 27, 2023.
The First Lien Term Loan required (after giving effect to the First Lien
Amendment) quarterly principal payments of approximately $3.5 million until
March 31, 2024, with the remaining outstanding principal amount required to be
paid on April 27, 2024. The First Lien Term Loan required a prepayment of
principal, subject to certain exceptions, in connection with the receipt of
proceeds from certain asset sales, casualty events, and debt issuances by us,
and up to 50% of annual excess cash flow, as defined in and as further set forth
in the First Lien Credit Agreement. When a principal prepayment is required, the
prepayment offsets the future quarterly principal payments of the same amount.
The annual excess cash flow calculation for the year ended December 31, 2020
required a principal prepayment of $1.5 million, which was paid in April 2021.
The annual excess cash flow calculation for the year ended December 31, 2019 did
not require a principal prepayment.
In September 2021, using the proceeds from the Term B Loans provided in the
Credit Agreement, we fully repaid the outstanding balance on the First Lien Term
Loan.
The Company made a voluntary principal prepayment of $525.0 million on July 30,
2021. In conjunction with the prepayment, the Company recognized a loss on early
extinguishment of debt for $6.0 million, a
pro-rata
portion of the unamortized deferred financing costs and debt discount.
In March 2020, the Company borrowed $65.0 million on its First Lien Revolvers,
which was fully repaid in June 2020.
Outstanding borrowings under the First Lien Term Loan bore interest at a
variable rate of LIBOR, plus up to 3.00% per annum based upon the Company's
first lien leverage ratio. A quarterly commitment fee of up to 0.50% based upon
the Company's first lien leverage ratio (as defined in and as further set forth
in the First Lien Credit Agreement) was payable on the unused portion of the
First Lien Revolver.
During the three months ended September 30, 2021 and 2020 the weighted-average
interest rate on the outstanding borrowings under the First Lien Term Loan was
4.1% and 4.0%, respectively. During the nine months ended September 30, 2021 and
2020, the weighted-average interest rate on the outstanding borrowings under the
First Lien Term Loan was 4.1% and 4.2%, respectively.
The First Lien Credit Agreement contained representations and warranties, and
affirmative and negative covenants, customary for a financing of this type. We
were in compliance with all affirmative and negative covenants during the three
and nine months ended September 30, 2021 and 2020.
Second Lien Credit Agreement
. The Second Lien Credit Agreement consisted of the $375.0 million Second Lien
Term Loan. We received proceeds of $372.2 million, net of discount of
$2.8 million, related to the Second Lien Term Loan.
In February 2020, using the proceeds from the incremental term loan provided in
the First Lien Amendment, we fully repaid the outstanding balance on the Second
Lien Term Loan.

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Amounts outstanding under the Second Lien Term Loan prior to repayment during
February 2020 bore interest at a variable rate of LIBOR, plus 6.75%. During the
nine months ended September 30, 2020, the weighted-average interest rate on the
Second Lien Term Loan was 8.6%.
The Second Lien Credit Agreement contained representations and warranties, and
affirmative and negative covenants, customary for a financing of this type. We
were in compliance with all affirmative and negative covenants prior to
repayment in February 2020.
Interest Rate Swap Agreements.
In June 2017, we entered into three floating to fixed interest rate swap
agreements ("Swap Agreements") to reduce our exposure to the variability from
future cash flows resulting from interest rate risk related to our floating rate
long-term debt. On September 21, 2021, the Company made an aggregate payment of
$10.0 million to extinguish the Swap Agreements that were scheduled to expire in
June 2022. The aggregate notional amount of the Swap Agreements totaled
$864.9 million at December 31, 2020.
Cash Flows
The following table provides a summary of cash flow data for the nine months
ended September 30, 2021 and 2020:

                                                Nine months ended September 

30,

(dollar amounts in thousands)                    2021                    

2020

Net cash provided by operating activities $ 96,725 $

66,789

Net cash used in investing activities               (35,299 )               (24,375 )
Net cash used in financing activities               (62,917 )                  (948 )
Net effect of exchange rate change                     (162 )               

108

Change in cash and cash equivalents $ (1,653 ) $

41,574

Net cash provided by operating activities was $96.7 million for the nine months
ended September 30, 2021. Net cash provided by operating activities consists of
net loss of $191.1 million, adjusted for $303.6 million of
non-cash items,
$3.5 million for changes in working capital and ($19.3) million for the effect
of changes in other operating assets and liabilities.
Non-cash adjustments
include stock-based compensation expense of $235.4 million, depreciation and
amortization of $92.1 million, change in fair value of warrant liabilities of
$26.9 million, a loss on early extinguishment of debt of $15.2 million,
$5.0 million in
non-cash
lease expense, amortization of deferred financing fees and debt discount of
$3.7 million, deferred income tax benefits of ($66.4) million and a change in
fair value of interest rate swaps of ($8.4) million, . The change in net
operating assets and liabilities was primarily a result of an increase in
accounts receivable of $8.3 million due to timing of receipts of payments from
customers, an increase in prepayments and other current assets of $7.9 million
due to timing of payments for prepaid and other deferred costs, an increase in
deferred contract costs of $6.4 million due to higher employee sales incentives,
an increase in income taxes of $2.9 million due to timing of payments and a
$10.0 million payment for the early extinguishment of the Company's interest
rate swap agreements, partially offset by an increase in accounts payable of
$1.4 million due to timing of cash disbursements, an increase in accrued
expenses of $17.1 million due to timing of cash disbursements and employee
incentive plan accruals and an increase in deferred revenue of $2.9 million due
to timing of customer receipts and revenue recognition.
Net cash used in investing activities was $35.3 million for the nine months
ended September 30, 2021. Net cash used in investing activities is primarily
related to capitalized time on internally developed software projects and
purchases of software, equipment and property of $25.0 million and an investment
in a limited partnership of $10.2 million.
Net cash used in financing activities was $62.9 million for the nine months
ended September 30, 2021. Net cash used in financing activities was primarily
related to principal payments of long-term debt of $1,336.2 million, dividends
to shareholders prior to the Business Combination of $269.2 million and a deemed
distribution of $9.0 million, partially offset by additional borrowings from the
Term B Loans, net of fees paid to the lender, of $789.9 million, and net
proceeds from the Business Combination of $763.3 million.

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Off-Balance
Sheet Arrangements
During 2020, we issued a standby letter of credit for $0.7 million under our
First Lien Credit Agreement in association with the operating lease for our new
corporate headquarters. During September 2021, we issued an additional
$0.7 million standby letter of credit under our 2021 Credit Agreement. At
September 30, 2021, each standby letter of credit remains outstanding.
We have not engaged in any additional
off-balance sheet
arrangements, as defined in the rules and regulations of the SEC, as of and
during the nine months ended September 30, 2021.
Emerging Growth Company Status
In April 2012, the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act")
was enacted. Section 107 of the JOBS Act provides that an "emerging growth
company" can take advantage of the extended transition period provided in
Section 7(a)(2)(B) of the Securities Act for complying with new or revised
accounting standards. Thus, an emerging growth company can delay the adoption of
certain accounting standards until those standards would otherwise apply to
private companies.
The Company is an emerging growth company, as defined in the JOBS Act, and has
elected to use the extended transition period for complying with new or revised
accounting standards that have different effective dates for public and private
companies until the earlier of the date that it (a) is no longer an emerging
growth company or (b) affirmatively and irrevocably opts out of the extended
transition period provided in the JOBS Act. As a result, the CCC Consolidated
Financial Statements may not be comparable to companies that comply with the new
or revised accounting pronouncements as of public company effective dates. As
described in "Recently Adopted Accounting Policies" in CCC's audited
consolidated financial statements included in the Proxy Statement/Prospectus
filed on July 6, 2021 by Dragoneer Growth Opportunities Corp., the Company early
adopted multiple accounting standards, as the JOBS Act does not preclude an
emerging growth company from adopting a new or revised accounting standard
earlier than the time that such standard applies to private companies. The
Company expects to use the extended transition period for any other new or
revised accounting standards during the period in which it remains an emerging
growth company.
Recent Accounting Pronouncements
See Note 2 to our condensed consolidated financial statements included in this
Quarterly Report on Form
10-Q
for more information about recent accounting pronouncements, the timing of their
adoption, and our assessment, to the extent we have made one, of their potential
impact on our financial condition and our results of operations.
Critical Accounting Policies and Estimates
Our condensed consolidated financial statements are prepared in accordance with
GAAP. The preparation of these financial statements requires our management to
make estimates, judgments and assumptions that affect the reported amounts of
assets, liabilities, revenue, costs, and expenses and related disclosures. Our
estimates are based on our historical experience, trends and various other
assumptions that we believe are reasonable under the circumstances, the results
of which form the basis for making judgments about the carrying value of assets
and liabilities that are not readily apparent from other sources. Actual results
may differ from these judgments and estimates under different assumptions or
conditions and any such differences may be material.
Except as described below, there have been no material changes to our critical
accounting policies and estimates as compared to the critical accounting
policies and estimates disclosed in the CCCIS audited financial statements and
notes thereto for the year ended December 31, 2020 included in the Proxy
Statement/Prospectus filed on July 6, 2021 by Dragoneer Growth Opportunities
Corp.

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Fair Value of Warrant Liabilities
The warrant liabilities were recorded as part of the Business Combination
completed on July 30, 2021 and therefore did not exist in the prior year and
were not identified as a critical accounting policy and estimate in the Proxy
Statement/Prospectus filed on July 6, 2021 by Dragoneer Growth Opportunities
Corp.
We account for our warrants in accordance with the guidance contained in ASC
815-40 under
which the warrants do not meet the criteria for equity treatment and must be
recorded as liabilities. Accordingly, we classify the warrants as liabilities at
their fair value and adjust the warrants to fair value at each reporting period.
This liability is subject to
re-measurement
at each balance sheet date until exercised, and any change in fair value is
recognized in our condensed consolidated statement of operations and
comprehensive (loss) income. The fair value of the Public Warrants was
determined using the quoted market price as of the valuation date. The fair
value of the Private Warrants was determined using the Black-Scholes option
pricing model.