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, AI,
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 30,000 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 27,500 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.

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 suite of AI solutions increases automation across existing
insurer processes including vehicle damage detection, claim triage, repair
estimating, intelligent claims review, and subrogation. We deliver real-world AI
with more than 95 U.S. auto insurers actively using AI-powered solutions in
production environments. We have processed more than 9 million unique claims
using CCC deep learning AI as of December 31, 2021, an increase of more than 80
percent over December 31, 2020.

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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 30,000 total customers, including over
27,500 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, March for a quarter ending March 31, 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 diagnostic
providers, 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 largely usage and professional service
based solutions.
               Quarter Ending   2022   2021
Software NDR   March 31         114%   106%
               June 30          111%   110%
               September 30            113%
               December 31             115%




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

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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 diagnostic
providers, 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 largely usage and professional
service based solutions.
               Quarter Ending   2022   2021
Software GDR   March 31         99%    98%
               June 30          99%    98%
               September 30            98%
               December 31             98%


Results of Operations

Comparison of the three months ended June 30, 2022 to the three months ended
June 30, 2021

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                                          Three Months Ended June 30,
(dollar amounts in thousands,
except share and per share data)             2022              2021              $             %
Revenues                                $      192,786     $     166,789     $  25,997          15.6 %
Cost of revenues, exclusive of
amortization of
  acquired technologies                         46,095            38,932         7,163          18.4 %
Amortization of acquired
technologies                                     6,750             6,580           170           2.6 %
Cost of revenues(1)                             52,845            45,512         7,333          16.1 %
Gross profit                                   139,941           121,277        18,664          15.4 %
Operating expenses:
Research and development(1)                     38,758            31,253         7,505          24.0 %
Selling and marketing(1)                        31,091            21,551         9,540          44.3 %
General and administrative(1)                   39,509            28,394        11,115          39.1 %
Amortization of intangible assets               18,066            18,078           (12 )        -0.1 %
Total operating expenses                       127,424            99,276        28,148          28.4 %
Operating income                                12,517            22,001        (9,484 )       -43.1 %
Other income (expense):
Interest expense                                (7,944 )         (18,903 )      10,959          58.0 %
Change in fair value of interest
rate
  swaps                                              -             3,089        (3,089 )          NM
Change in fair value of warrant
liabilities                                     21,004                 -        21,004            NM
Other income, net                                  112                 4           108            NM
Total other income (expense)                    13,172           (15,810 )      28,982            NM
Income before income taxes                      25,689             6,191        19,498         314.9 %
Income tax provision                           (10,125 )          (2,375 )      (7,750 )      -326.3 %
Net income                              $       15,564     $       3,816     $  11,748         307.9 %
Net income per share attributable
to common

stockholders:

Basic                                   $         0.03     $        0.01
Diluted                                 $         0.02     $        0.01
Weighted-average shares used in
computing net
  income per share attributable to
common
  stockholders:
Basic                                      605,948,628       505,430,380
Diluted                                    639,964,696       523,687,498


(1) Includes stock-based
compensation expense as follows (in
thousands):
                                          Three Months Ended June 30,
                                             2022              2021
Cost of revenues                        $        1,661     $         176
Research and development                         5,530               700
Sales and marketing                              6,611               735
General and administrative                      14,601             1,272
Total stock-based compensation
expense                                 $       28,403     $       2,883




NM-Not Meaningful

Revenues

Revenue increased by $26.0 million to $192.8 million, or 15.6%, for the three
months ended June 30, 2022, compared to the three months ended June 30, 2021.
The Company's software subscription revenues accounted for $185.5 million and
$159.8 million, or 96% and 96%, of total revenue during the three months ended
June 30, 2022 and 2021, respectively.

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 4% growth from new customers.

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Cost of Revenues

Cost of revenues increased by $7.3 million to $52.8 million, or 16.1%, for the
three months ended June 30, 2022, compared to the three months ended June 30,
2021.

Cost of Revenues, exclusive of amortization of acquired technologies

Cost of revenues, exclusive of amortization of acquired technologies, increased
by $7.2 million to $46.1 million, or 18.4%, for the three months ended June 30,
2022, compared to the three months ended June 30, 2021. The increase was due to
a $3.3 million increase in personnel costs, including an increase of $1.5
million in stock-based compensation, a $2.0 million increase in third party
license and royalty fees and a $1.3 million increase in consulting and other
professional service costs.

Amortization of Acquired Technologies

Amortization of acquired technologies was $6.8 million for the three months
ended June 30, 2022, compared to a $6.6 million for the three months ended June
30, 2021.

Gross Profit

Gross profit increased by $18.7 million to $139.9 million, or 15.4%, for the
three months ended June 30, 2022, compared to the three months ended June 30,
2021. Our gross profit margin was 72.6% for the three months ended June 30, 2022
compared to 72.7% for the three months ended June 30, 2021. The increase in
gross profit was due to increased software subscription revenues and economies
of scale resulting from fixed cost arrangements.

Research and Development

Research and development expense increased by $7.5 million to $38.8 million, or
24.0%, for the three months ended June 30, 2022, compared to the three months
ended June 30, 2021. The increase was primarily due to an $8.9 million increase
in personnel costs, including an increase of $4.8 million in stock-based
compensation, and a $1.6 million increase in consulting and other professional
service costs, partially offset by a $3.9 million increase in the amount of
capitalized time on development projects.

Selling and Marketing

Selling and marketing expense increased by $9.5 million to $31.1 million, or
44.3%, for the three months ended June 30, 2022, compared to the three months
ended June 30, 2021. The increase was primarily due to an $8.3 million increase
in personnel costs, including an increase of $5.9 million in stock-based
compensation, and a $0.7 million increase in marketing and event costs, mainly
from the Company's annual Industry Conference, held in person in 2022 while held
virtually in 2021.

General and Administrative

General and administrative expense increased by $11.1 million to $39.5 million,
or 39.1%, for the three months ended June 30, 2022, compared to the three months
ended June 30, 2021. The increase was primarily due to a $13.9 million increase
in personnel costs, including an increase of $13.3 million in stock-based
compensation, and a $1.7 million increase in insurance costs, partially offset
by a $3.4 million decrease in consulting and other professional service costs
and a $1.9 million decrease in the Company's facilities costs due to the closure
of the Company's previous headquarters in March 2022.

Amortization of Intangible Assets

Amortization of intangible assets was $18.1 million for the three months ended
June 30, 2022 and 2021.

Interest Expense

Interest expense decreased by $11.0 million to $7.9 million, or 58.0%, for the
three months ended June 30, 2022, compared to the three months ended June 30,
2021 primarily due to less outstanding long-term debt and a lower variable
interest rate during the three months ended June 30, 2022.

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Change in Fair Value of Interest Rate Swaps

The change in fair value of interest rate swaps recognized during the three
months ended June 30, 2021 was due to the proximity of the maturity date of the
swap agreements prior to the extinguishment of the interest rate swaps in
September 2021. The Company did not recognize any change in fair value of
interest rate swaps during the three months ended June 30, 2022.

Change in Fair Value of Warrant Liabilities

Change in fair value of warrant liabilities was $21.0 million for the three
months ended June 30, 2022. The warrant liabilities were recorded as part of the
Business Combination and therefore did not exist during the three months ended
June 30, 2021. The income from the change in fair value was due to the decrease
in the estimated fair value of the Private Warrants, primarily from the lower
price of the Company's common stock at June 30, 2022, compared to March 31,
2022.


Income Tax Provision

Income tax provision was $10.1 million for the three months ended June 30, 2022,
compared to $2.4 million for the three months ended June 30, 2021. The increase
in the income tax provision was primarily due to the Company having higher
pretax income during the three months ended June 30, 2022 compared to the three
months ended June 30, 2021.

Comparison of the six months ended June 30, 2022 to the six months ended June
30, 2021

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                                           Six Months Ended June 30,
(dollar amounts in thousands,
except share and per share data)            2022              2021              $             %
Revenue                                 $     379,609     $     324,578     $  55,031          17.0 %
Cost of revenue, exclusive of
amortization of
  acquired technologies                        88,795            76,945        11,850          15.4 %
Amortization of acquired
technologies                                   13,445            13,160           285           2.2 %
Cost of revenues(1)                           102,240            90,105        12,135          13.5 %
Gross profit                                  277,369           234,473        42,896          18.3 %
Operating expenses:
Research and development(1)                    74,438            61,877        12,561          20.3 %
Selling and marketing(1)                       57,894            40,968        16,926          41.3 %
General and administrative(1)                  83,717            66,233        17,484          26.4 %
Amortization of intangible assets              36,146            36,155            (9 )         0.0 %
Total operating expenses                      252,195           205,233        46,962          22.9 %
Operating income                               25,174            29,240        (4,066 )       -13.9 %
Other income (expense):
Interest expense                              (15,285 )         (37,669 )      22,384          59.4 %
Change in fair value of interest
rate
  swaps                                             -             6,366        (6,366 )          NM
Change in fair value of warrant
liabilities                                    23,140                 -        23,140            NM
Gain on sale of cost method
investment                                      3,578                 -         3,578            NM
Other income, net                                 194                91           103         113.2 %
Total other income (expense)                   11,627           (31,212 )      42,839            NM
Income (loss) before income taxes              36,801            (1,972 )      38,773            NM
Income tax (provision) benefit                 (9,262 )             704        (9,966 )          NM
Net income (loss)                       $      27,539     $      (1,268 )   $  28,807            NM
Net income (loss) per share
attributable to common

stockholders:

Basic                                   $        0.05     $       (0.00 )
Diluted                                 $        0.04     $       (0.00 )
Weighted-average shares used in
computing net
  income (loss) per share
attributable to common
  stockholders:
Basic                                     604,534,589       505,252,635
Diluted                                   640,650,297       505,252,635

(1) Includes stock-based
compensation expense as follows (in
thousands):
                                           Six Months Ended June 30,
                                            2022              2021
Cost of revenues                        $       2,510     $         394
Research and development                        9,060             1,275
Sales and marketing                            11,441             1,289
General and administrative                     29,036            12,579
Total stock-based compensation
expense                                 $      52,047     $      15,537



NM-Not Meaningful

Revenues

Revenue increased by $55.0 million to $379.6 million, or 17.0%, for the six
months ended June 30, 2022, compared to the six months ended June 30, 2021. The
Company's software subscription revenues accounted for $365.3 million and $311.9
million, or 96% and 96%, of total revenue during the six months ended June 30,
2022 and 2021.

The increase in revenue was primarily a result of 14% growth from existing
customer upgrades and expanding solution offerings to these existing customers
as well as 3% growth from new customers.

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Cost of Revenues

Cost of revenues increased by $12.1 million to $102.2 million, or 13.5%, for the
six months ended June 30, 2022, compared to the six months ended June 30, 2021.

Cost of Revenues, exclusive of amortization of acquired technologies

Cost of revenues, exclusive of amortization of acquired technologies, increased
by $11.9 million to $88.8 million, or 15.4%, for the six months ended June 30,
2022, compared to the six months ended June 30, 2021. The increase was due to a
$4.9 million increase in personnel costs, including an increase of $2.1 million
in stock-based compensation, a $3.9 million increase in third party license and
royalty fees and a $2.1 million increase in consulting and other professional
service costs.

Amortization of Acquired Technologies

Amortization of acquired technologies was $13.4 million for the six months ended
June 30, 2022, compared to a $13.2 million for the six months ended June 30,
2021.

Gross Profit

Gross profit increased by $42.9 million to $277.4 million, or 18.3%, for the six
months ended June 30, 2022, compared to the six months ended June 30, 2021. Our
gross profit margin increased to 73.1% for the six months ended June 30, 2022
compared to 72.2% for the six months ended June 30, 2021. The increase in both
gross profit and gross profit margin was due to increased software subscription
revenues and economies of scale resulting from fixed cost arrangements.

Research and Development

Research and development expense increased by $12.6 million to $74.4 million, or
20.3%, for the six months ended June 30, 2022, compared to the six months ended
June 30, 2021. The increase was due to a $15.4 million increase in personnel
costs, including an increase of $7.8 million in stock-based compensation, a $2.6
million increase in consulting costs, and a $1.3 million increase in IT costs,
partially offset by a $7.6 million increase in the amount of capitalized time on
development projects.


Selling and Marketing

Selling and marketing expense increased by $16.9 million to $57.9 million, or
41.3%, for the six months ended June 30, 2022, compared to the six months ended
June 30, 2021. The increase was primarily due to a $14.8 million increase in
personnel-related costs, including sales incentives and travel costs, and
including an increase of $10.2 million in stock-based compensation, and a $0.9
million increase in marketing and event costs mainly due to the Company's annual
Industry Conference, held in person in 2022 while held virtually in 2021.

General and Administrative

General and administrative expense increased by $17.5 million to $83.7 million,
or 26.4%, for the six months ended June 30, 2022, compared to the six months
ended June 30, 2021. The increase was primarily due to a $17.7 million increase
in personnel costs, including an increase of $16.5 million in stock-based
compensation, and a $3.5 million increase in insurance costs, partially offset
by a $3.7 million decrease in consulting and other professional service costs.

Amortization of Intangible Assets

Amortization of intangible assets was $36.1 million for the six months ended
June 30, 2022, compared to a $36.2 million for the six months ended June 30,
2021.

Interest Expense

Interest expense decreased by $22.4 million to $15.3 million, or 59.4%, for the
six months ended June 30, 2022, compared to the six months ended June 30, 2021
primarily due to less outstanding long-term debt and a lower variable interest
rate during the six months ended June 30, 2022.

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Change in Fair Value of Interest Rate Swaps

The change in fair value of interest rate swaps recognized during the six months
ended June 30, 2021 was due to the proximity of the maturity date of the swap
agreements prior to the extinguishment of the interest rate swaps in September
2021. The Company did not recognize any change in fair value of interest rate
swaps during the six months ended June 30, 2022.

Gain on Sale of Cost Method Investment

Gain on sale of cost method investment was $3.6 million for the six months ended
June 30, 2022. The gain recognized was due to the $3.9 million payment received
in exchange for its equity interest in an investee as a result of the
acquisition of the investee. The Company did not recognize any gain or loss on
sale of cost method investment during the six months ended June 30, 2021.

Change in Fair Value of Warrant Liabilities

Change in fair value of warrant liabilities was $23.1 million for the six months
ended June 30, 2022. The warrant liabilities were recorded as part of the
Business Combination and therefore did not exist during the six months ended
June 30, 2021. The income from the change in fair value was due to the decrease
in the estimated fair value of the Private Warrants, primarily from the lower
price of the Company's common stock at June 30, 2022, compared to December 31,
2021.

Income Tax (Provision) Benefit

Income tax provision was $9.3 million for the six months ended June 30, 2022,
compared to an income tax benefit of $0.7 million for the six months ended June
30, 2021. The change was primarily due to the Company having pretax income
during the six months ended June 30, 2022, compared to a pretax loss during the
six months ended June 30, 2021.

Non-GAAP Financial Measures

In addition to our results determined in accordance with GAAP, we believe that
Adjusted Gross Profit, Adjusted Operating Expenses, Adjusted Operating Income,
Adjusted EBITDA, Adjusted Net Income and Adjusted Earnings Per Share, and Free
Cash Flow 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 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.

Adjusted Gross Profit

Adjusted Gross Profit is defined as gross profit, adjusted for amortization of
acquired technologies and stock-based compensation and related employer payroll
tax, which are not indicative of our recurring core business operating results.
Adjusted Gross Profit Margin is defined as Adjusted Gross Profit divided by
Revenue.

The following table reconciles Gross Profit to Adjusted Gross Profit for the
three and six months ended June 30, 2022 and 2021:

                                          Three Months Ended June 30,            Six Months Ended June 30,
(amounts in thousands, except
percentages)                               2022                 2021              2022               2021
Gross Profit                          $      139,941       $      121,277     $     277,369       $   234,473
Amortization of acquired
technologies                                   6,750                6,580            13,445            13,160
Stock-based compensation and
related employer payroll tax                   1,680                  176             2,613               394
Adjusted Gross Profit                 $      148,371       $      128,033     $     293,427       $   248,027
Gross Profit Margin                               73 %                 73 %              73 %              72 %
Adjusted Gross Profit Margin                      77 %                 77 %              77 %              76 %




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Adjusted Operating Expenses

Adjusted Operating Expenses is defined as operating expenses adjusted for
amortization, stock-based compensation expense and related employer payroll tax,
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 merger and acquisition ("M&A") and integration costs.

The following table reconciles operating expenses to Adjusted Operating Expenses
for the three and six months ended June 30, 2022 and 2021:

                                            Three Months Ended June 30,           Six Months Ended June 30,
(dollar amounts in thousands)                2022                 2021              2022               2021
Operating expenses                      $      127,424       $       99,276     $     252,195       $  205,233
Stock-based compensation expense
and related employer payroll tax               (26,973 )             (2,707 )         (50,695 )        (15,143 )
Lease abandonment                                    -                 (925 )          (1,338 )         (1,850 )
Lease overlap costs                                  -                 (909 )          (1,222 )         (1,817 )
Net income (costs) related to
divestiture                                          6               (1,494 )             (53 )         (2,266 )
Business combination transaction
and related costs                                 (324 )             (1,953 )          (1,056 )         (4,955 )
M&A and integration costs                         (348 )                  -            (1,756 )              -
Amortization of intangible assets              (18,066 )            (18,078 )         (36,146 )        (36,155 )
Adjusted operating expenses             $       81,719       $       73,210 

$ 159,929 $ 143,047

Adjusted Operating Income

Adjusted Operating Income is defined as operating income adjusted for
amortization, stock-based compensation expense and related employer payroll tax,
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 M&A and integration costs.

The following table reconciles operating income to Adjusted Operating Income for
the three and six months ended June 30, 2022 and 2021:

                                            Three Months Ended June 30,     

Six Months Ended June 30,

(dollar amounts in thousands)                2022                 2021               2022               2021
Operating income                        $       12,517       $       22,001      $      25,174       $    29,240
Stock-based compensation expense
and related employer payroll tax                28,653                2,883             53,308            15,537
Lease abandonment                                    -                  925              1,338             1,850
Lease overlap costs                                  -                  909              1,222             1,817
Net (income) costs related to
divestiture                                         (6 )              1,494                 53             2,266
Business combination transaction
and related costs                                  324                1,953              1,056             4,955
Amortization of intangible assets               18,066               18,078             36,146            36,155
M&A and integration costs                          348                    -              1,756                 -
Amortization of acquired
technologies-Cost of revenue                     6,750                6,580             13,445            13,160
Adjusted operating income               $       66,652       $       54,823      $     133,498       $   104,980


Adjusted EBITDA

Adjusted EBITDA is defined as net income (loss) adjusted for interest, taxes,
depreciation, amortization, gain on change in fair value of interest rate swaps,
change in fair value of warrant liabilities, stock-based compensation expense
and related employer payroll tax, 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, M&A and
integration costs and gain on sale of cost method investment.

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The following table reconciles net income (loss) to Adjusted EBITDA for the
three and six months ended June 30, 2022 and 2021:

                                            Three Months Ended June 30,           Six Months Ended June 30,
(dollar amounts in thousands)                2022                 2021              2022               2021
Net income (loss)                       $        15,564       $       3,816     $      27,539       $   (1,268 )
Interest expense                                  7,944              18,903            15,285           37,669
Income tax provision (benefit)                   10,125               2,375             9,262             (704 )
Amortization of intangible assets                18,066              18,078            36,146           36,155
Amortization of acquired
technologies-Cost of
  revenue                                         6,750               6,580            13,445           13,160
Depreciation and amortization of
software,
  equipment and property                          6,683               5,314            13,490           10,467
EBITDA                                           65,132              55,066           115,167           95,479
Change in fair value of interest
rate
  swaps                                               -              (3,089 )               -           (6,366 )
Change in fair value of warrant
liabilities                                     (21,004 )                 -           (23,140 )              -
Stock-based compensation expense
and related employer payroll tax                 28,653               2,883            53,308           15,537
Business combination transaction
and related costs                                   324               1,953             1,056            4,955
Lease abandonment                                     -                 925             1,338            1,850
Lease overlap costs                                   -                 909             1,222            1,817
Net (income) costs related to
divestiture                                          (6 )             1,494                53            2,266
M&A and integration costs                           348                   -             1,756                -
Gain on sale of cost method
investment                                            -                   -            (3,578 )              -
Adjusted EBITDA                         $        73,447       $      60,141     $     147,182       $  115,538
Adjusted EBITDA Margin                             38.1 %              36.1 %            38.8 %           35.6 %

Adjusted Net Income and Adjusted Earnings Per Share

Adjusted Net Income is defined as net income (loss) adjusted for the after-tax
effects of amortization, gain on change in fair value of interest rate swaps,
change in fair value of warrant liabilities, stock-based compensation expense
and related employer payroll tax, 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, M&A and
integration costs and gain on sale of cost method investment.

                                       38
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The following table reconciles net income (loss) to Adjusted Net Income and
Adjusted Earnings per Share for the three and six months ended June 30, 2022 and
2021:
                                          Three Months Ended June 30,           Six Months Ended June 30,
(dollar amounts in thousands)                2022              2021              2022              2021
Net income (loss)                       $       15,564     $       3,816     $      27,539     $      (1,268 )
Amortization of intangible assets               18,066            18,078            36,146            36,155
Amortization of acquired
technologies-
  Cost of revenue                                6,750             6,580            13,445            13,160
Change in fair value of
  interest rate swaps                                -            (3,089 )               -            (6,366 )
Change in fair value of warrant
liabilities                                    (21,004 )               -           (23,140 )               -
Stock-based compensation expense
and related employer payroll tax                28,653             2,883            53,308            15,537
Business combination transaction
and related costs                                  324             1,953             1,056             4,955
Lease abandonment                                    -               925             1,338             1,850
Lease overlap costs                                  -               909             1,222             1,817
Net (income) costs related to
divestiture                                         (6 )           1,494                53             2,266
M&A and integration costs                          348                 -             1,756                 -
Gain on sale of cost method
investment                                           -                 -            (3,578 )               -
Tax effect of adjustments                      (11,287 )          (7,223 )         (22,867 )         (16,774 )
Adjusted net income                     $       37,408     $      26,326     $      86,278     $      51,332
Adjusted net income per share
attributable to
  common stockholders:
Basic                                   $         0.06     $        0.05     $        0.14     $        0.10
Diluted                                 $         0.06     $        0.05     $        0.13     $        0.10
Weighted average shares
outstanding:
Basic                                      605,948,628       505,430,380       604,534,589       505,252,635
Diluted                                    639,964,696       523,687,498       640,650,297       523,438,612




Free Cash Flow

Free Cash Flow is defined as net cash provided by operating activities less cash
used for the purchases of software, equipment and property, and purchase of
intangible assets.

The following table reconciles net cash provided by operating activities to Free
Cash Flow for the three and six months ended June 30, 2022 and 2021:

                                          Three Months Ended June 30,            Six Months Ended June 30,
(dollar amounts in thousands)              2022                 2021              2022               2021
Net cash provided by operating
activities                            $        40,820       $      21,586     $      87,685       $    59,820
Less: Purchases of software,
equipment, and property                       (11,189 )            (8,521 )         (25,469 )         (13,158 )
Less: Purchase of intangible assets                 -                   -                 -               (49 )
Free Cash Flow                        $        29,631       $      13,065     $      62,216       $    46,613

Liquidity and Capital Resources

We have financed our operations with cash flows from operations. The Company
generated $87.7 million of cash flows from operating activities during the six
months ended June 30, 2022. As of June 30, 2022, the Company had cash and cash
equivalents of $227.6 million, a working capital surplus of $212.1 million and
an accumulated deficit totaling $718.8 million. As of June 30, 2022, the Company
had $796.0 million aggregate principal outstanding on its term loan.

We believe that our existing cash and cash equivalents, our cash flows from
operating activities and our borrowing capacity under our 2021 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
businesses, applications or technologies, we may enter into these types of
arrangements, which could reduce our cash

                                       39
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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.

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 a credit agreement (the "2021 Credit
Agreement").

The 2021 Credit Agreement replaced the Company's 2017 First Lien Credit
Agreement (the "First Lien Credit Agreement"), dated as of April 27, 2017, as
amended as of February 14, 2020.

The proceeds of the 2021 Credit Agreement were used to repay all outstanding
borrowings under the First Lien Credit Agreement.

2021 Credit Agreement-The 2021 Credit Agreement consists of the $800.0 million
Term B Loan and 2021 Revolving Credit Facility for an aggregate principal amount
of $250.0 million. The 2021 Revolving Credit Facility has a sublimit of $75.0
million for letters of credit. The Company received proceeds of $798.0 million,
net of debt discount of $2.0 million, related to the Term B Loan.

Beginning with the quarter ending March 31, 2022, 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 the 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 June 30, 2022, the Company is not subject to
the annual excess cash flow calculation and no such principal prepayments are
required.

As of June 30, 2022, the amount outstanding on the Term B Loans was $796.0
million, of which, $8.0 million is classified as current.

Borrowings under the 2021 Credit Facility bear interest at rates based on the
ratio of the Company's and its subsidiaries' consolidated first lien net
indebtedness to the Company's and its subsidiaries' consolidated EBITDA for
applicable periods specified in the 2021 Credit Facility.

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 June 30, 2022, the weighted-average interest rate
on the outstanding borrowings under the Term B Loan was 3.3%. The Company made
interest payments of $6.6 million during the three months ended June 30, 2022.

During the six months ended June 30, 2022, the weighted-average interest rate on
the outstanding borrowings under the Term B Loan was 3.2%. The Company made
interest payments of $12.5 million during the six months ended June 30, 2022.

The Company has an outstanding standby letter of credit for $0.7 million which
reduces the amount available to be borrowed under the 2021 Revolving Credit
Facility. At June 30, 2022, $249.3 million was available to be borrowed under
the 2021 Revolving Credit Facility.

In addition, beginning with the three months ended June 30, 2022, the terms of
the 2021 Credit Agreement include a financial covenant which requires that, at
the end of each fiscal quarter, if the aggregate amount of borrowings under the
2021 Revolving Credit Facility exceeds 35% of the aggregate commitments, the
Company's leverage ratio cannot exceed 6.25 to 1.00. As of June 30, 2022, the
Company was not subject to the financial covenant.

First Lien Credit Agreement-In April 2017, the Company entered into the First
Lien Credit Agreement.

The First Lien Credit Agreement initially consisted of a $1.0 billion term loan
and revolving credit facilities for an aggregate principal amount of $100.0
million, with a sublimit of $30.0 million for letters of credit under the First
Lien Revolvers.

In February 2020, the Company refinanced its long-term debt and entered into the
First Amendment to the First Lien Credit Agreement. 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.

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The First Lien Amendment provided an incremental term loan in the amount of
$375.0 million and reduced the amount of commitments under the First Lien
Revolvers to an aggregate principal amount of $91.3 million. The First Lien
Revolvers continued to have a sublimit of $30.0 million for letters of credit.

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 the maturity date, 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 the Company, 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 was required, the prepayment offset the future quarterly principal
payments of the same amount. As of December 31, 2020, subject to the request of
the lenders of the First Lien Term Loan, a principal prepayment of up to $21.9
million was required. In April 2021, the Company made a principal prepayment of
$1.5 million to those lenders who made such a request.

The Company made a principal prepayment of $525.0 million on July 30, 2021.
Subsequently, in September 2021, using the proceeds from the Term B Loan
provided in the 2021 Credit Agreement, the Company fully repaid the remaining
$804.2 million of outstanding borrowings on the First Lien Term Loan.

Amounts outstanding under the First Lien Credit Agreement bore interest at a
variable rate of LIBOR, plus up to 3.00% per annum based upon the Company's
leverage ratio, as defined in the First Lien Credit Agreement. A quarterly
commitment fee of up to 0.50% was payable on the unused portion of the First
Lien Revolvers.

During the three months ended June 30, 2021 the weighted-average interest rate
on the outstanding borrowings under the First Lien Term Loan was 4.1%. The
Company made interest payments of $13.5 million during the three months ended
June 30, 2021.

During the six months ended June 30, 2021 the weighted-average interest rate on
the outstanding borrowings under the First Lien Term Loan was 4.1%. The Company
made interest payments of $26.8 million during the six months ended June 30,
2021.

Cash Flows

The following table provides a summary of cash flow data for the six months
ended June 30, 2022 and 2021:

                                                        Six Months Ended June 30,
(dollar amounts in thousands)                             2022              

2021

Net cash provided by operating activities             $      87,685       $ 

59,820

Net cash used in investing activities                       (53,819 )        (23,396 )
Net cash provided by (used in) financing activities          11,511         (139,962 )
Net effect of exchange rate change                             (281 )            (74 )
Change in cash and cash equivalents                   $      45,096       $ (103,612 )




Net cash provided by operating activities was $87.7 million for the six months
ended June 30, 2022. Net cash provided by operating activities consists of net
income of $27.5 million, adjusted for $48.8 million of non-cash items, $21.8
million for changes in working capital and ($10.4) million for the effect of
changes in other operating assets and liabilities. Significant non-cash
adjustments include depreciation and amortization of $63.1 million, stock-based
compensation expense of $52.0 million, non-cash lease expense of $2.2 million,
deferred income tax benefits of ($43.7) and a change in fair value of warrant
liabilities of ($23.1) million. The change in net operating assets and
liabilities was primarily a result of a decrease of $15.5 million in other
current assets due to timing of cash receipts of non-trade receivables and
timing of payments for other deferred costs and an increase in income taxes of
$13.9 million, partially offset by decrease in accrued expenses of $8.0 million
due to timing of cash disbursements and employee incentive plan payments, an
increase in other assets of $9.9 million due to timing of payments and other
deferred costs, and an increase in accounts receivable of $4.0 million due to
timing of receipts of payments from customers.

Net cash used in investing activities was $53.8 million for the six months ended
June 30, 2022. Net cash used in investing activities was due to $32.2 million
for a business acquisition and $25.5 million of capitalized internally developed
software projects and purchases of software, equipment and property, partially
offset by $3.9 million of proceeds from the sale of a cost method investment.

Net cash provided by financing activities was $11.5 million for the six months
ended June 30, 2022. Net cash provided by financing activities was due to $15.5
million of proceeds from stock option exercises, partially offset by $4.0
million of principal payments of long-term debt.

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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 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 estimates as compared to the critical accounting policies and
estimates disclosed in our audited consolidated financial statements and notes
thereto for the year ended December 31, 2021, included in our Annual Report on
Form 10-K.

Fair Value of Contingent Consideration

Earnout liabilities arising from business acquisitions represent contingent
consideration that may be payable in cash and recorded as a liability at fair
value upon acquisition and re-measured at fair value in each subsequent
reporting period. Changes in fair value are recorded in the consolidated
statements of operations.

Determining the fair value of contingent consideration requires us to make
assumptions and judgments. We estimate the fair value of contingent
consideration using a Monte Carlo simulation model. These estimates involve
inherent uncertainties and if different assumptions had been used, including but
not limited to forecast inputs and discount rates, the fair value of contingent
consideration could have been materially different from the amounts recorded. We
have estimated the fair value of the contingent consideration associated with
the acquisition of Safekeep as of the acquisition date and reassess our estimate
each reporting period.