Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM

10-Q

☒

☒

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

For the quarterly period ended September 30, 2021

2022

OR

☐

☐

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

For the transition period from

________________ to
________________

CCC INTELLIGENT SOLUTIONS HOLDINGS INCINC..

(Exact name of registrant as specified in its charter)

Delaware

001-39447

001-39447

98-1546280

(State or other jurisdiction

of incorporation or organization)

(Commission

File Number)

(IRS Employer

Identification No.)

222 Merchandise Mart Plaza Suite 900

167 N. Green Street, 9th Floor

Chicago IL,

60654
Illinois

(Address Of Principal Executive Offices)

60607

(Zip Code)

(800)

(800) 621-8070

Registrant’s telephone number, including area code

Not Applicable

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

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


Title of each class

Trading


Symbol(s)


Name of each exchange

on which registered

Common stock, par value $0.0001 per share

CCCS

The New York Stock Exchange

Warrants to purchase one share of common stock at an exercise price of $11.50
CCCS WS
The New York Stock Exchange

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation

S-T
(§ (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a

non-accelerated
filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule
12b-2
of the Exchange Act.

Large accelerated filer☐Accelerated filer☐
Non-accelerated

Large accelerated filer

☐

☒

Accelerated filer

☒

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☒

☒

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule

12b-2
of the Exchange Act). Yes ☐ No ☒

As of November

5
, 2021, 603,696,825October 28, 2022, 620,711,455 shares of common stock, $0.0001 par value per share, were issued and outstanding.

Table of Contents

CCC INTELLIGENT SOLUTIONS HOLDINGS INC.

Form

10-Q

For the Quarter Ended September 30, 2021

2022

Table of Contents

Page

PART I. FINANCIAL INFORMATION

`

Cautionary Statement Regarding Forward-Looking Statements

1

3

Item 1.

Financial Statements (Unaudited)

2

5

Condensed Consolidated Balance Sheets as of September 30, 20212022 (unaudited) and December 31, 20202021

2

5

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) Income for the three and nine months ended September 30, 20212022 and September 30, 20202021

3

6

Unaudited Condensed Consolidated Statements of Mezzanine Equity and Stockholders’ Equity for the three and nine months ended September 30, 20212022 and September 30, 20202021

4

7

Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 20212022 and September 30, 20202021

6

10

Notes to Condensed Consolidated Financial Statements

7

11

Item 2.

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

39

30

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

58

46

Item 4.

Controls and Procedures

58

46

PART II. OTHER INFORMATION

PART II. OTHER INFORMATION

59
Item 1. Legal Proceedings

59

Item 1A. Risk Factors

1.

Legal Proceedings

59

47

Item 1A.

Risk Factors

47

Item 2.

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

59

47

Item 3.

Defaults Upon Senior Securities

59

47

Item 5. Other Information

4.

Mine Safety Disclosures

59

47

Item 5.

Other Information

47

Item 6. Exhibits

Exhibits

��

47

59

In this Quarterly Report on

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

2

Table of Contents

FORWARD-LOOKING STATEMENTS

The section titled “

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

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

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

3

•
our ability to expand or maintain its existing customer base; and
•
the effect of global economic conditions or political transitions on our customers and their ability to continue to purchaseservice our products.indebtedness.

The forward-looking statements contained in this Quarterly Report on Form

10-Q
are based on current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described above and under the heading “Risk Factors.” Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. Some of these risks and uncertainties may in the future be amplified by
the COVID-19 outbreak
and there may be additional risks that we consider immaterial or which are unknown. It is not possible to predict or identify all such risks. We do not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
1

4

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1.
Consolidated Financial Statements (Unaudited)

Item 1. Financial Statements (Unaudited)

CCC INTELLIGENT SOLUTIONS HOLDINGS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

   
September 30,
2021
(Unaudited)
  
December 31,
2020
 
ASSETS
   
CURRENT ASSETS:
   
Cash and cash equivalents
  $160,465  $162,118 
Accounts receivable—Net of allowances of $3,972 and $4,224 for September 30, 2021 and December 31, 2020, respectively
   82,367   74,107 
Income taxes receivable
   6,915   2,037 
Deferred contract costs
   13,833   11,917 
Other current assets
   36,261   31,586 
   
 
 
  
 
 
 
Total current assets
   299,841   281,765 
   
 
 
  
 
 
 
SOFTWARE, EQUIPMENT, AND PROPERTY—Net
   121,018   101,438 
OPERATING LEASE ASSETS
   38,774   —   
INTANGIBLE ASSETS—Net
   1,237,950   1,311,917 
GOODWILL
   1,466,884   1,466,884 
DEFERRED FINANCING FEES, REVOLVER—Net
   3,053   746 
DEFERRED CONTRACT COSTS
   18,893   14,389 
EQUITY METHOD INVESTMENT
   10,228   —   
OTHER ASSETS
   21,584   18,416 
   
 
 
  
 
 
 
TOTAL
  
$
 3,218,225
 
 
$
 3,195,555
 
   
 
 
  
 
 
 
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY
         
CURRENT LIABILITIES:
         
Accounts payable
  $16,083  $13,164 
Accrued expenses
   81,771   52,987 
Income taxes payable
   7,161   5,129 
Current portion of long-term debt
   8,000   25,381 
Current portion of long-term licensing agreement—Net
   2,661   2,540 
Operating lease liabilities
   8,855   —   
Deferred revenues
   29,384   26,514 
   
 
 
  
 
 
 
Total current liabilities
   153,915   125,715 
   
 
 
  
 
 
 
LONG-TERM DEBT:
         
First Lien Term Loan—Net
   —     1,292,597 
Term B Loan—Net
   780,218   —   
   
 
 
  
 
 
 
Total long-term debt
   780,218   1,292,597 
   
 
 
  
 
 
 
DEFERRED INCOME TAXES—Net
   255,849   322,348 
LONG-TERM LICENSING AGREEMENT—Net
   34,320   36,331 
OPERATING LEASE LIABILITIES
   50,550   —   
WARRANT LIABILITIES
   85,348   —   
OTHER LIABILITIES
   6,808   32,770 
   
 
 
  
 
 
 
Total liabilities
   1,367,008   1,809,761 
   
 
 
  
 
 
 
COMMITMENTS AND CONTINGENCIES (Notes 22 and 23)
   0   0 
MEZZANINE EQUITY:
         
Redeemable
non-controlling
interest
   14,179   14,179 
STOCKHOLDERS’ EQUITY:
         
Preferred stock, $0.0001 par; 100,000,000 shares authorized; 0 shares issued or outstanding
   0—     0—   
Common stock—$0.0001 par; 5,000,000,000 shares authorized; 603,170,380 and 504,274,890 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively
   60   50 
Additional
paid-in
capital
   2,525,750   1,501,206 
Accumulated deficit
   (688,483)   (129,370) 
Accumulated other comprehensive loss
   (289)   (271) 
   
 
 
  
 
 
 
Total stockholders’ equity
   1,837,038   1,371,615 
   
 
 
  
 
 
 
TOTAL
  
$
3,218,225
 
 
$
3,195,555
 
   
 
 
  
 
 
 

 

 

September 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

 

 

(Unaudited)

 

 

 

 

ASSETS

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

Cash and cash equivalents

 

 

248,153

 

 

 

182,544

 

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

 

 

98,194

 

 

 

78,793

 

Income taxes receivable

 

 

71

 

 

 

318

 

Deferred contract costs

 

 

15,788

 

 

 

15,069

 

Other current assets

 

 

33,898

 

 

 

46,181

 

Total current assets

 

 

396,104

 

 

 

322,905

 

SOFTWARE, EQUIPMENT, AND PROPERTY—Net

 

 

147,531

 

 

 

135,845

 

OPERATING LEASE ASSETS

 

 

34,901

 

 

 

37,234

 

INTANGIBLE ASSETS—Net

 

 

1,143,630

 

 

 

1,213,249

 

GOODWILL

 

 

1,494,267

 

 

 

1,466,884

 

DEFERRED FINANCING FEES, REVOLVER—Net

 

 

2,439

 

 

 

2,899

 

DEFERRED CONTRACT COSTS

 

 

18,818

 

 

 

22,117

 

EQUITY METHOD INVESTMENT

 

 

10,228

 

 

 

10,228

 

OTHER ASSETS

 

 

49,999

 

 

 

26,165

 

TOTAL

 

 

3,297,917

 

 

 

3,237,526

 

LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

Accounts payable

 

 

14,579

 

 

 

12,918

 

Accrued expenses

 

 

63,873

 

 

 

66,691

 

Income taxes payable

 

 

17,025

 

 

 

7,243

 

Current portion of long-term debt

 

 

8,000

 

 

 

8,000

 

Current portion of long-term licensing agreement—Net

 

 

2,832

 

 

 

2,703

 

Operating lease liabilities

 

 

3,713

 

 

 

8,052

 

Deferred revenues

 

 

33,602

 

 

 

31,042

 

Total current liabilities

 

 

143,624

 

 

 

136,649

 

LONG-TERM DEBT—Net

 

 

775,770

 

 

 

780,610

 

DEFERRED INCOME TAXES—Net

 

 

222,370

 

 

 

275,745

 

LONG-TERM LICENSING AGREEMENT—Net

 

 

31,488

 

 

 

33,629

 

OPERATING LEASE LIABILITIES

 

 

58,111

 

 

 

56,133

 

WARRANT LIABILITIES

 

 

39,026

 

 

 

62,478

 

OTHER LIABILITIES

 

 

2,729

 

 

 

5,785

 

Total liabilities

 

 

1,273,118

 

 

 

1,351,029

 

COMMITMENTS AND CONTINGENCIES (Notes 19 and 20)

 

 

 

 

 

 

MEZZANINE EQUITY:

 

 

 

 

 

 

Redeemable non-controlling interest

 

 

14,179

 

 

 

14,179

 

STOCKHOLDERS’ EQUITY:

 

 

 

 

 

 

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

 

 

—

 

 

 

—

 

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

 

 

62

 

 

 

61

 

Additional paid-in capital

 

 

2,720,695

 

 

 

2,618,924

 

Accumulated deficit

 

 

(709,018

)

 

 

(746,352

)

Accumulated other comprehensive loss

 

 

(1,119

)

 

 

(315

)

Total stockholders’ equity

 

 

2,010,620

 

 

 

1,872,318

 

TOTAL

 

 

3,297,917

 

 

 

3,237,526

 

See notes to condensed consolidated financial statements.

2

5

Table of Contents

CCC INTELLIGENT SOLUTIONS HOLDINGS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) INCOME

(In thousands, except share and per share data)

(Unaudited)

   
For the Three Months Ended
September 30,
  
For the Nine Months Ended
September 30,
 
              
   
2021
  
2020
  
2021
  
2020
 
              
REVENUES
  $176,628  $157,754  $501,205  $467,677 
COST OF REVENUES
                 
Cost of revenues, exclusive of amortization of acquired technologies
   51,273   43,879   128,218   135,674 
Amortization of acquired technologies
   6,580   6,576   19,740   19,725 
   
 
 
  
 
 
  
 
 
  
 
 
 
Total cost of revenues
   57,853   50,455   147,958   155,399 
   
 
 
  
 
 
  
 
 
  
 
 
 
GROSS PROFIT
   118,775   107,299   353,247   312,278 
   
 
 
  
 
 
  
 
 
  
 
 
 
OPERATING EXPENSES:
                 
Research and development
   67,016   26,816   128,894   82,131 
Selling and marketing
   80,382   17,427   121,350   56,608 
General and administrative
   142,511   21,893   208,745   66,460 
Amortization of intangible assets
   18,078   18,078   54,232   54,232 
   
 
 
  
 
 
  
 
 
  
 
 
 
Total operating expenses
   307,987   84,214   513,221   259,431 
   
 
 
  
 
 
  
 
 
  
 
 
 
OPERATING (LOSS) INCOME
   (189,212)   23,085   (159,974)   52,847 
INTEREST EXPENSE
   (13,878)   (19,788)   (51,548)   (57,588) 
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)   —   
LOSS ON EARLY EXINGUISHMENT OF DEBT
   (15,240)   —     (15,240)   (8,615) 
OTHER (EXPENSE) INCOME—Net
   (93)   49   1   304 
   
 
 
  
 
 
  
 
 
  
 
 
 
PRETAX (LOSS) INCOME
   (243,305)   7,240   (245,277)   (29,685) 
INCOME TAX BENEFIT (PROVISION)
   53,523   (2,520)   54,227   7,191 
   
 
 
  
 
 
  
 
 
  
 
 
 
NET (LOSS) INCOME INCLUDING
NON-CONTROLLING
INTEREST
   (189,782)   4,720   (191,050)   (22,494) 
Less: net (loss) income attributable to
non-controlling
interest
   0     0     0     0   
   
 
 
  
 
 
  
 
 
  
 
 
 
NET (LOSS) INCOME ATTRIBUTABLE TO CCC INTELLIGENT SOLUTIONS HOLDINGS INC.
  $(189,782)  $4,720  $(191,050)  $(22,494) 
Net (loss) income per share attributable to common stockholders:
                 
Basic
  $(0.34)  $0.01  $(0.36)  $(0.04) 
Diluted
  $(0.34)  $0.01  $(0.36)  $(0.04) 
Weighted-average shares used in computing net (loss) income per share attributable to common stockholders:
                 
Basic
   566,454,782   504,212,021   525,877,533   504,062,587 
Diluted
   566,454,782   510,694,493   525,877,533   504,062,587 
COMPREHENSIVE (LOSS) INCOME:
                 
Net (loss) income including
non-controlling
interest
   (189,782)   4,720   (191,050)   (22,494) 
Other comprehensive income (loss)—Foreign currency translation adjustment
   11   83   (18)   65 
   
 
 
  
 
 
  
 
 
  
 
 
 
COMPREHENSIVE (LOSS) INCOME INCLUDING
NON-CONTROLLING
INTEREST
   (189,771)   4,803   (191,068)   (22,429) 
Less: comprehensive (loss) income attributable to
non-controlling
interest
   0     0     0     0   
   
 
 
  
 
 
  
 
 
  
 
 
 
COMPREHENSIVE (LOSS) INCOME ATTRIBUTABLE TO CCC INTELLIGENT SOLUTIONS HOLDINGS INC.
  $(189,771)  $4,803  $(191,068)  $(22,429) 
   
 
 
  
 
 
  
 
 
  
 
 
 

 

 

For the Three Months Ended

 

 

For the Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

REVENUES

 

$

198,734

 

 

$

176,628

 

 

$

578,342

 

 

$

501,205

 

COST OF REVENUES

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues, exclusive of amortization of acquired technologies

 

 

46,379

 

 

 

51,273

 

 

 

135,174

 

 

 

128,218

 

Amortization of acquired technologies

 

 

6,748

 

 

 

6,580

 

 

 

20,193

 

 

 

19,740

 

Total cost of revenues

 

 

53,127

 

 

 

57,853

 

 

 

155,367

 

 

 

147,958

 

GROSS PROFIT

 

 

145,607

 

 

 

118,775

 

 

 

422,975

 

 

 

353,247

 

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

40,273

 

 

 

67,016

 

 

 

114,711

 

 

 

128,894

 

Selling and marketing

 

 

30,838

 

 

 

80,382

 

 

 

88,731

 

 

 

121,350

 

General and administrative

 

 

39,376

 

 

 

142,511

 

 

 

123,093

 

 

 

208,745

 

Amortization of intangible assets

 

 

18,066

 

 

 

18,078

 

 

 

54,212

 

 

 

54,232

 

Total operating expenses

 

 

128,553

 

 

 

307,987

 

 

 

380,747

 

 

 

513,221

 

OPERATING INCOME (LOSS)

 

 

17,054

 

 

 

(189,212

)

 

 

42,228

 

 

 

(159,974

)

INTEREST EXPENSE

 

 

(10,501

)

 

 

(13,878

)

 

 

(25,786

)

 

 

(51,548

)

CHANGE IN FAIR VALUE OF DERIVATIVE INSTRUMENTS

 

 

5,991

 

 

 

2,007

 

 

 

5,991

 

 

 

8,373

 

CHANGE IN FAIR VALUE OF WARRANT LIABILITIES

 

 

312

 

 

 

(26,889

)

 

 

23,452

 

 

 

(26,889

)

GAIN ON SALE OF COST METHOD INVESTMENT

 

 

9

 

 

 

—

 

 

 

3,587

 

 

 

—

 

LOSS ON EARLY EXTINGUISHMENT OF DEBT

 

 

—

 

 

 

(15,240

)

 

 

—

 

 

 

(15,240

)

OTHER INCOME (LOSS)—Net

 

 

382

 

 

 

(93

)

 

 

576

 

 

 

1

 

PRETAX INCOME (LOSS)

 

 

13,247

 

 

 

(243,305

)

 

 

50,048

 

 

 

(245,277

)

INCOME TAX (PROVISION) BENEFIT

 

 

(3,452

)

 

 

53,523

 

 

 

(12,714

)

 

 

54,227

 

NET INCOME (LOSS) INCLUDING NON-CONTROLLING
   INTEREST

 

 

9,795

 

 

 

(189,782

)

 

 

37,334

 

 

 

(191,050

)

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

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

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

 

$

9,795

 

 

$

(189,782

)

 

$

37,334

 

 

$

(191,050

)

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

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.02

 

 

$

(0.34

)

 

$

0.06

 

 

$

(0.36

)

Diluted

 

$

0.02

 

 

$

(0.34

)

 

$

0.06

 

 

$

(0.36

)

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

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

609,421,073

 

 

 

566,454,782

 

 

 

606,181,316

 

 

 

525,877,533

 

Diluted

 

 

643,582,922

 

 

 

566,454,782

 

 

 

642,208,622

 

 

 

525,877,533

 

COMPREHENSIVE INCOME (LOSS):

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) including non-controlling interest

 

 

9,795

 

 

 

(189,782

)

 

 

37,334

 

 

 

(191,050

)

Other comprehensive income (loss)—Foreign currency translation
   adjustment

 

 

(510

)

 

 

11

 

 

 

(804

)

 

 

(18

)

COMPREHENSIVE INCOME (LOSS) INCLUDING
   NON-CONTROLLING INTEREST

 

 

9,285

 

 

 

(189,771

)

 

 

36,530

 

 

 

(191,068

)

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

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

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

 

$

9,285

 

 

$

(189,771

)

 

$

36,530

 

 

$

(191,068

)

See notes to condensed consolidated financial statements.

3

6

Table of Contents

CCC INTELLIGENT SOLUTIONS HOLDINGS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY

(In thousands, except number of shares)

(Unaudited)

  
Redeemable
                                     
  
Non-Controlling
  
Issued Preferred Stock
  
CCCIS Issued Common Stock
           
Retained
  
Accumulated
    
  
Interest
     
Series A
  
Series B
  
Common Stock
  
Additional
  
Earnings
  
Other
  
Total
 
     
Number of
  
Par
  
Number of
  
Par
  
Number of
  
Par
  
Number of
  
Par
  
Paid-In
  
(Accumulated
  
Comprehensive
  
Stockholders’
 
     
Shares
  
Value
  
Shares
  
Value
  
Shares
  
Value
  
Shares
  
Value
  
Capital
  
Deficit)
  
Loss
  
Equity
 
BALANCE—December 31, 2020 (as previously reported)
  14,179   0    $ 0     1,450,978  $1   29,785  $ 0     0    $ 0    $ 1,501,255  $ (129,370)  $ (271)  $1,371,615 
Retrospective application of the recapitalization due to Business Combination (Note 3)
  —     —     —     (1,450,978)   (1)   (29,785)   —     504,274,890   50   (49)   —     —     —   
 
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
BALANCE—December 31, 2020, effect of Business Combination (Note 3)
  14,179   —     —     —     —     —     —     504,274,890   50   1,501,206   (129,370)   (271)   1,371,615 
Issuance of common stock
  —     —     —     —     —     —     —     110,679   —     1,007   —     —     1,007 
Stock-based compensation expense
  —     —     —     —     —     —     —     883,729   —     11,838   —     —     11,838 
Exercise of stock options—net of tax
  —     —     —     —     —     —     —     161,080   —     444   —     —     444 
Dividend to CCCIS stockholders
  —     —     —     —     —     —     —     —     —     —     (134,551)   —     (134,551) 
Foreign currency translation adjustment
  —     —     —     —     —     —     —     —     —     —     —     7   7 
Net loss
  —     —     —     —     —     —     —     —     —     —     (5,084)   —     (5,084) 
 
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
BALANCE—March 31, 2021
  14,179   0     0     0     0     0     0     505,430,378   50   1,514,495   (269,005)   (264)   1,245,276 
Stock-based compensation expense
  —     —     —     —     —     —     —     —     —     2,579   —     —     2,579 
Foreign currency translation adjustment
  —     —     —     —     —     —     —     —     —     —     —     (36)   (36) 
Net income
  —     —     —     —     —     —     —     —     —     —     3,816   —     3,816 
 
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
BALANCE—June 30, 2021
  14,179   0     0     0     0     0     0     505,430,378   50   1,517,074   (265,189)   (300)   1,251,635 
Stock-based compensation expense
  —     —     —     —     —     —     —     —     —     213,966   —     —     213,966 
Net equity infusion from the Business Combination
  —     —     —     —     —     —     —     97,740,002   10   704,831   —     —     704,841 
Dividend to CCCIS stockholders
  —     —     —     —     —     —     —     —     —     —     (134,627)   —     (134,627) 
Deemed distribution to CCCIS option holders
  —     —     —     —     —     —     —     —     —     (9,006)   —     —     (9,006) 
Company Vesting Shares granted to CCCIS stockholders
  —     —     —     —     —     —     —     —     —     98,885   (98,885)   —     —   
Foreign currency translation adjustment
  —     —     —     —     —     —     —     —     —     —     —     11   11 
Net loss
  —     —     —     —     —     —     —     —     —     —     (189,782)   —     (189,782) 
 
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
BALANCE—September 30, 2021
 $ 14,179   0    $0     0    $0   0    $0     603,170,380  $60  $2,525,750  $ (688,483)  $ (289)  $ 1,837,038 
 
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 

 

 

Redeemable

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-Controlling

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

Interest

 

 

 

Preferred Stock—Issued and Outstanding

 

 

Common Stock—Issued and Outstanding

 

 

Additional

 

 

 

 

 

Other

 

 

Total

 

 

 

 

 

 

 

Number of

 

 

Par

 

 

Number of

 

 

Par

 

 

Paid-In

 

 

Accumulated

 

 

Comprehensive

 

 

Stockholders’

 

 

 

 

 

 

 

Shares

 

 

Value

 

 

Shares

 

 

Value

 

 

Capital

 

 

Deficit

 

 

Loss

 

 

Equity

 

BALANCE—December 31, 2021

 

$

14,179

 

 

 

 

—

 

 

$

—

 

 

 

609,768,296

 

 

$

61

 

 

$

2,618,924

 

 

$

(746,352

)

 

$

(315

)

 

$

1,872,318

 

  Stock-based compensation expense

 

 

—

 

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

23,644

 

 

 

—

 

 

 

—

 

 

 

23,644

 

  Exercise of stock options—net of tax

 

 

—

 

 

 

 

—

 

 

 

—

 

 

 

3,961,270

 

 

 

—

 

 

 

10,633

 

 

 

—

 

 

 

—

 

 

 

10,633

 

  Exercise of warrants—net

 

 

—

 

 

 

 

—

 

 

 

—

 

 

 

1,246

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

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

 

 

—

 

 

 

 

—

 

 

 

—

 

 

 

27,314

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

  Foreign currency translation
   adjustment

 

 

—

 

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

9

 

 

 

9

 

  Net income

 

 

—

 

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

11,975

 

 

 

—

 

 

 

11,975

 

BALANCE—March 31, 2022

 

 

14,179

 

 

 

 

—

 

 

 

—

 

 

 

613,758,126

 

 

 

61

 

 

 

2,653,201

 

 

 

(734,377

)

 

 

(306

)

 

 

1,918,579

 

  Stock-based compensation expense

 

 

—

 

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

28,403

 

 

 

—

 

 

 

—

 

 

 

28,403

 

  Exercise of stock options—net of tax

 

 

—

 

 

 

 

—

 

 

 

—

 

 

 

1,713,991

 

 

 

1

 

 

 

4,722

 

 

 

—

 

 

 

—

 

 

 

4,723

 

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

 

 

—

 

 

 

 

—

 

 

 

—

 

 

 

29,834

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

  Foreign currency translation
   adjustment

 

 

—

 

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(303

)

 

 

(303

)

  Net income

 

 

—

 

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

15,564

 

 

 

—

 

 

 

15,564

 

BALANCE—June 30, 2022

 

 

14,179

 

 

 

 

—

 

 

 

—

 

 

 

615,501,951

 

 

 

62

 

 

 

2,686,326

 

 

 

(718,813

)

 

 

(609

)

 

 

1,966,966

 

 Stock-based compensation expense

 

 

—

 

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

28,722

 

 

 

—

 

 

 

—

 

 

 

28,722

 

 Exercise of stock options—net of tax

 

 

—

 

 

 

 

—

 

 

 

—

 

 

 

2,685,029

 

 

 

—

 

 

 

7,455

 

 

 

—

 

 

 

—

 

 

 

7,455

 

  Issuance of common stock under
   employee stock purchase plan

 

 

—

 

 

 

 

—

 

 

 

—

 

 

 

408,879

 

 

 

—

 

 

 

3,197

 

 

 

—

 

 

 

—

 

 

 

3,197

 

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

 

 

—

 

 

 

 

—

 

 

 

—

 

 

 

1,521,166

 

 

 

—

 

 

 

(5,005

)

 

 

—

 

 

 

—

 

 

 

(5,005

)

  Foreign currency translation
   adjustment

 

 

—

 

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(510

)

 

 

(510

)

 Net income

 

 

—

 

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

9,795

 

 

 

—

 

 

 

9,795

 

BALANCE—September 30, 2022

 

$

14,179

 

 

 

 

—

 

 

$

—

 

 

 

620,117,025

 

 

$

62

 

 

$

2,720,695

 

 

$

(709,018

)

 

$

(1,119

)

 

$

2,010,620

 

See notes to condensed consolidated financial statements.

4

7

Table of Contents

CCC INTELLIGENT SOLUTIONS HOLDINGS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY

(In thousands, except number of shares)

(Unaudited)

  
Redeemable

Non-Controlling
  
Issued Preferred Stock
  
CCCIS Issued Common Stock
           
Retained
Earnings
  
Accumulated
Other
    
  
Interest
  
 
  
 
  
Series A
  
Series B
  
Common Stock
  
Additional
Paid-In
  
Total
Stockholders’
 
     
Number of
  
Par
  
Number of
  
Par
  
Number of
  
Par
  
Number of
  
Par
  
(Accumulated
  
Comprehensive
 
     
Shares
  
Value
  
Shares
  
Value
  
Shares
  
Value
  
Shares
  
Value
  
Capital
  
Deficit)
  
Loss
  
Equity
 
BALANCE—December 31, 2019
  0     0    $ 0     1,450,978  $1   27,967  $0     0    $0    $1,491,753  $(112,494)  $(397)  $1,378,863 
Retrospective application of the recapitalization due to Business Combination (Note 3)
  —     —     —     (1,450,978)   (1)   (27,967)   —     503,655,768   50   (49)   —     —     —   
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
BALANCE—December 31, 20
19
, effect of Business Combination (Note 3)
  0     —     —     —     —     —     —     503,655,768   50   1,491,704   (112,494)   (397)   1,378,863 
Issuance of
non-controlling
interest in subsidiary
  14,179   —     —     —     —     —     —     —     —     —     —     —     —   
Issuance of common stock
  —     —     —     —     —     —     —     340,551   —     1,560   —     —     1,560 
Stock-based compensation expense
  —     —     —     —     —     —     —     —     —     1,629   —     —     1,629 
Exercise of stock options—net of tax
  —     —     —     —     —     —     —     127,025   —     268   —     —     268 
Repurchase and cancellation of common stock
  —     —     —     —     —     —     —     (18,730)   —     (86)   —     —     (86) 
Foreign currency translation adjustment
  —     —     —     —     —     —     —     —     —     —     —     (17)   (17) 
Net loss
  —     —     —     —     —     —     —     —     —     —     (25,252)   —     (25,252) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
BALANCE—March 31, 2020
  14,179   0     0     0     0     0     0     504,104,614   50   1,495,075   (137,746)   (414)   1,356,965 
Stock-based compensation expense
  —     —     —     —     —     —     —     —     —     2,272   —     —     2,272 
Exercise of stock options—net of tax
  —     —     —     —     —         —     65,386   —     29   —     —     29 
Repurchase and cancellation of common stock
  —     —     —     —     —         —     (28,266)   —     (127)   —     —     (127) 
Foreign currency translation adjustment
  —     —     —     —     —     —     —     —     —     —     —     (1)   (1) 
Net loss
  —     —     —     —     —     —     —     —     —     —     (1,962)   —     (1,962) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
BALANCE—June 30, 2020
  14,179   0     0     0     0     0     0     504,141,734   50   1,497,249   (139,708)   (415)   1,357,176 
Stock-based compensation expense
  —     —     —     —     —     —     —     —     —     1,799   —     —     1,799 
Exercise of stock options—net of tax
  —     —     —     —     —     —     —     138,264   —     395   —     —     395 
Repurchase and cancellation of common stock
  —     —     —     —     —     —     —     (5,108)   —     (23)   —     —     (23) 
Foreign currency translation adjustment
  —     —     —     —     —     —     —     —     —     —     —     83   83 
Net loss
  —     —     —     —     —     —     —     —     —     —     4,720   —     4,720 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
BALANCE—September 30, 2020
 $ 14,179   0    $0     0    $0     0    $0     504,274,890  $50  $1,499,420  $(134,988)  $(332)  $1,364,150 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 

 

 

Redeemable

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-Controlling

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

Interest

 

 

 

Preferred Stock—Issued and Outstanding

 

 

Common Stock—Issued and Outstanding

 

 

Additional

 

 

 

 

 

Other

 

 

Total

 

 

 

 

 

 

 

Number of

 

 

Par

 

 

Number of

 

 

Par

 

 

Paid-In

 

 

Accumulated

 

 

Comprehensive

 

 

Stockholders’

 

 

 

 

 

 

 

Shares

 

 

Value

 

 

Shares

 

 

Value

 

 

Capital

 

 

Deficit

 

 

Loss

 

 

Equity

 

BALANCE—December 31, 2020

 

$

14,179

 

 

 

 

—

 

 

$

—

 

 

 

504,274,890

 

 

$

50

 

 

 

1,501,206

 

 

 

(129,370

)

 

$

(271

)

 

$

1,371,615

 

  Issuance of common stock

 

 

—

 

 

 

 

—

 

 

 

—

 

 

 

110,679

 

 

 

—

 

 

 

1,007

 

 

 

—

 

 

 

—

 

 

 

1,007

 

  Stock-based compensation expense

 

 

—

 

 

 

 

—

 

 

 

—

 

 

 

883,729

 

 

 

—

 

 

 

11,838

 

 

 

—

 

 

 

—

 

 

 

11,838

 

  Exercise of stock options—net of tax

 

 

—

 

 

 

 

—

 

 

 

—

 

 

 

161,080

 

 

 

—

 

 

 

444

 

 

 

—

 

 

 

—

 

 

 

444

 

  Dividend to CCCIS stockholders

 

 

—

 

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(134,551

)

 

 

—

 

 

 

(134,551

)

  Foreign currency translation
   adjustment

 

 

—

 

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

7

 

 

 

7

 

  Net loss

 

 

—

 

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(5,084

)

 

 

—

 

 

 

(5,084

)

BALANCE—March 31, 2021

 

 

14,179

 

 

 

 

—

 

 

 

—

 

 

 

505,430,378

 

 

 

50

 

 

 

1,514,495

 

 

 

(269,005

)

 

 

(264

)

 

 

1,245,276

 

  Stock-based compensation expense

 

 

—

 

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

2,579

 

 

 

—

 

 

 

—

 

 

 

2,579

 

  Foreign currency translation
   adjustment

 

 

—

 

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(36

)

 

 

(36

)

  Net income

 

 

—

 

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

3,816

 

 

 

—

 

 

 

3,816

 

BALANCE—June 30, 2021

 

 

14,179

 

 

 

 

—

 

 

 

—

 

 

 

505,430,378

 

 

 

50

 

 

 

1,517,074

 

 

 

(265,189

)

 

 

(300

)

 

 

1,251,635

 

  Stock-based compensation expense

 

 

—

 

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

213,966

 

 

 

 

 

 

 

—

 

 

 

213,966

 

  Net equity infusion from the Business
   Combination

 

 

—

 

 

 

 

—

 

 

 

—

 

 

 

97,740,002

 

 

 

10

 

 

 

704,831

 

 

 

—

 

 

 

—

 

 

 

704,841

 

  Dividend to CCCIS stockholders

 

 

—

 

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(134,627

)

 

 

—

 

 

 

(134,627

)

  Deemed distribution to CCCIS option
   holders

 

 

—

 

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(9,006

)

 

 

—

 

 

 

—

 

 

 

(9,006

)

  Company Vesting Shares granted to
    CCCIS stockholders

 

 

—

 

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

98,885

 

 

 

(98,885

)

 

 

—

 

 

 

—

 

  Foreign currency translation
   adjustment

 

 

—

 

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

11

 

 

 

11

 

  Net loss

 

 

—

 

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(189,782

)

 

 

—

 

 

 

(189,782

)

BALANCE—September 30, 2021

 

$

14,179

 

 

 

 

—

 

 

$

—

 

 

 

603,170,380

 

 

$

60

 

 

$

2,525,750

 

 

$

(688,483

)

 

$

(289

)

 

$

1,837,038

 

See notes to condensed consolidated financial statements.

5

8

Table of Contents

9

CCC INTELLIGENT SOLUTIONS HOLDINGS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

   
For the Nine Months Ended
September 30,
 
     
   
2021
  
2020
 
        
CASH FLOWS FROM OPERATING ACTIVITIES:
         
Net loss
  $(191,050)  $(22,494) 
Adjustments to reconcile net loss to net cash provided by operating activities:
         
Depreciation and amortization of software, equipment, and property
   18,161   13,039 
Amortization of intangible assets
   73,972   73,957 
Deferred income taxes
   (66,499)   (18,018) 
Stock-based compensation
   235,413   7,471 
Amortization of deferred financing fees
   3,204   3,475 
Amortization of discount on debt
   537   553 
Change in fair value of interest rate swaps
   (8,373)   16,633 
Change in fair value of warrant liabilities
   26,889   —   
Loss on early extinguishment of debt
   15,240   8,615 
Non-cash
lease expense
   5,029   —   
Other
   54   42 
Changes in:
         
Accounts receivable—Net
   (8,332)   (12,644) 
Deferred contract costs
   (1,916)   (507) 
Other current assets
   (4,673)   (755) 
Deferred contract
costs—Non-current
   (4,504)   (1,246) 
Other assets
   (3,221)   (10,795) 
Operating lease assets
   5,133   —   
Income taxes
   (2,846)   11,597 
Accounts payable
   1,399   2,080 
Accrued expenses
   17,051   (5,183) 
Operating lease liabilities
   (5,935)   —   
Deferred revenues
   2,861   580 
Extinguishment of interest rate swap liability
   (9,987)   —   
Other liabilities
   (882)   389 
   
 
 
  
 
 
 
Net cash provided by operating activities
   96,725   66,789 
   
 
 
  
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES:
         
Purchases of software, equipment, and property
   (25,022)   (23,815) 
Purchase of equity method investment
   (10,228)   —   
Purchase of intangible asset
   (49)   (560) 
   
 
 
  
 
 
 
Net cash used in investing activities
   (35,299)   (24,375) 
   
 
 
  
 
 
 
CASH FLOWS FROM FINANCING ACTIVITIES:
         
Proceeds from issuance of
non-controlling
interest in subsidiary
   —     14,179 
Deemed distribution to CCCIS option holders
   (9,006)   —   
Net proceeds from equity infusion from the Business Combination
   763,300   —   
Principal payments on long-term debt
   (1,336,154)   (385,385) 
Proceeds from issuance of long-term debt, net of fees paid to lender
   789,927   369,792 
Proceeds from borrowings on revolving lines of credit
   —     65,000 
Repayment of borrowings on revolving lines of credit
   —     (65,000) 
Proceeds from issuance of common stock
   1,007   —   
Payment of fees associated with early extinguishment of long-term debt
   (3,320)   (29) 
Proceeds from exercise of stock options
   503   618 
Repurchases of common stock
   —     (123) 
Dividends to CCCIS stockholders
   (269,174)   —   
   
 
 
  
 
 
 
Net cash used in financing activities
   (62,917)   (948) 
   
 
 
  
 
 
 
NET EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
   (162)   108 
   
 
 
  
 
 
 
NET CHANGE IN CASH AND CASH EQUIVALENTS
   (1,653)   41,574 
CASH AND CASH EQUIVALENTS:
         
Beginning of period
   162,118   93,201 
   
 
 
  
 
 
 
End of period
  $160,465  $134,775 
   
 
 
  
 
 
 
NONCASH INVESTING AND FINANCING ACTIVITIES:
         
Unpaid liability related to software, equipment, and property
  $4,054  $—   
   
 
 
  
 
 
 
Leasehold improvements acquired by tenant improvement allowance
  $10,556  $—   
   
 
 
  
 
 
 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
         
Cash paid for interest, excluding extinguishment of interest rate swap liability
  $47,312  $52,217 
   
 
 
  
 
 
 
Cash received (paid) for income taxes—Net
  $(15,119)  $770 
   
 
 
  
 
 
 

 

 

For the Nine Months Ended

 

 

 

September 30,

 

 

 

2022

 

 

2021

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

Net income (loss)

 

$

37,334

 

 

$

(191,050

)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization of software, equipment, and property

 

 

20,155

 

 

 

18,161

 

Amortization of intangible assets

 

 

74,405

 

 

 

73,972

 

Deferred income taxes

 

 

(53,061

)

 

 

(66,499

)

Stock-based compensation

 

 

80,769

 

 

 

235,413

 

Amortization of deferred financing fees

 

 

1,424

 

 

 

3,204

 

Amortization of discount on debt

 

 

196

 

 

 

537

 

Change in fair value of derivative instruments

 

 

(5,991

)

 

 

(8,373

)

Change in fair value of warrant liabilities

 

 

(23,452

)

 

 

26,889

 

Loss on early extinguishment of debt

 

 

—

 

 

 

15,240

 

Non-cash lease expense

 

 

3,076

 

 

 

5,029

 

Loss on disposal of software, equipment and property

 

 

795

 

 

 

—

 

Gain on sale of cost method investment

 

 

(3,587

)

 

 

—

 

Other

 

 

101

 

 

 

54

 

Changes in:

 

 

 

 

 

 

Accounts receivable—Net

 

 

(19,532

)

 

 

(8,332

)

Deferred contract costs

 

 

(719

)

 

 

(1,916

)

Other current assets

 

 

12,321

 

 

 

(4,673

)

Deferred contract costs—Non-current

 

 

3,299

 

 

 

(4,504

)

Other assets

 

 

(18,227

)

 

 

(3,221

)

Operating lease assets

 

 

1,623

 

 

 

5,133

 

Income taxes

 

 

10,029

 

 

 

(2,846

)

Accounts payable

 

 

2,466

 

 

 

1,399

 

Accrued expenses

 

 

(2,664

)

 

 

17,051

 

Operating lease liabilities

 

 

(4,687

)

 

 

(5,935

)

Deferred revenues

 

 

2,557

 

 

 

2,861

 

Extinguishment of interest rate swap liability

 

 

—

 

 

 

(9,987

)

Other liabilities

 

 

(192

)

 

 

(882

)

Net cash provided by operating activities

 

 

118,438

 

 

 

96,725

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

Purchases of software, equipment, and property

 

 

(38,844

)

 

 

(25,022

)

Acquisition of Safekeep, Inc., net of cash acquired

 

 

(32,242

)

 

 

 

 

Purchase of equity method investment

 

 

—

 

 

 

(10,228

)

Proceeds from sale of cost method investment

 

 

3,901

 

 

 

 

 

Purchase of intangible asset

 

 

—

 

 

 

(49

)

Net cash used in investing activities

 

 

(67,185

)

 

 

(35,299

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

Proceeds from exercise of stock options

 

 

22,814

 

 

 

503

 

Proceeds from employee stock purchase plan

 

 

3,197

 

 

 

—

 

Payments for employee taxes withheld upon vesting of equity awards

 

 

(5,005

)

 

 

—

 

Principal payments on long-term debt

 

 

(6,000

)

 

 

(1,336,154

)

Deemed distribution to CCCIS option holders

 

 

—

 

 

 

(9,006

)

Net proceeds from equity infusion from the Business Combination

 

 

—

 

 

 

763,300

 

Proceeds from issuance of long-term debt, net of fees paid to lender

 

 

—

 

 

 

789,927

 

Proceeds from issuance of common stock

 

 

—

 

 

 

1,007

 

Payment of fees associated with early extinguishment of long-term debt

 

 

—

 

 

 

(3,320

)

Dividends to CCCIS stockholders

 

 

—

 

 

 

(269,174

)

Net cash provided by (used in) financing activities

 

 

15,006

 

 

 

(62,917

)

NET EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

 

 

(650

)

 

 

(162

)

NET CHANGE IN CASH AND CASH EQUIVALENTS

 

 

65,609

 

 

 

(1,653

)

CASH AND CASH EQUIVALENTS:

 

 

 

 

 

 

Beginning of period

 

 

182,544

 

 

 

162,118

 

End of period

 

$

248,153

 

 

$

160,465

 

NONCASH INVESTING AND FINANCING ACTIVITIES:

 

 

 

 

 

 

Noncash purchases of software, equipment, and property

 

$

—

 

 

$

4,054

 

Leasehold improvements acquired by tenant improvement allowance

 

$

—

 

 

$

10,556

 

Contingent consideration related to business acquisition

 

$

200

 

 

$

—

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

 

 

 

 

 

 

Cash paid for interest

 

$

24,150

 

 

$

47,312

 

Cash paid for income taxes—Net

 

$

55,526

 

 

$

15,119

 

See notes to condensed consolidated financial statements.

6

10

Table of Contents
CCC INTELLIGENT SOLUTIONS HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.
ORGANIZATION AND nature of operations
(Unaudited)
1.
ORGANIZATION AND NATURE OF OPERATIONS
On February 2, 2021, CCCIS, a Delaware corporation, entered into the Business Combination Agreement with Dragoneer, a Cayman Islands exempted company. In connection with the Closing of the Business Combination (see Note 3), Dragoneer changed its jurisdiction of incorporation by deregistering as an exempted company in the Cayman Islands and continuing and domesticating as a Delaware corporation on July 30, 2021 (the “Domestication”), upon which Dragoneer changed its name to

CCC Intelligent Solutions Holdings Inc..

The CompanyInc., a Delaware corporation, is a leading provider of innovative cloud, mobile, telematics, hyperscale technologies, and applications for the property and casualty (“P&C”) insurance economy. Our cloud-based software as a service (“SaaS”) platform connects trading partners, facilitates commerce, and supports mission-critical, artificial intelligence ("AI") enabled digital workflows. Our platform digitizes workflows and connects companies across the P&C insurance economy, including insurance carriers,
collision repairers, parts suppli
e
rs,suppliers, automotive manufacturers, financial institutions, and other
s.
others.

The Company is headquartered in Chicago, Illinois. The Company’s primary operations are in the United States (“US”) and it also has operations in China.

The Company was originally incorporated as a Cayman Islands exempted company on July 3, 2020 as a special purpose acquisition company under the name Dragoneer Growth Opportunities Corp. On February 2, 2021, CCCIS entered into the Business Combination Agreement with Dragoneer. In connection with the closing of the Business Combination (see Note 3), Dragoneer changed its jurisdiction of incorporation by deregistering as an exempted company in the Cayman Islands and continuing and domesticating as a Delaware corporation on July 30, 2021, upon which Dragoneer changed its name to CCC Intelligent Solutions Holdings Inc.

2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

—The condensed consolidated balance sheets as of September 30, 20212022 and December 31, 2020,2021, the condensed consolidated statements of operations and comprehensive income (loss) income for the three and nine months ended September 30, 20212022 and 2020,2021, the condensed consolidated statements of mezzanine equity and stockholders’ equity for the three and nine months ended September 30, 20212022 and 2020,2021, and the condensed consolidated statements of cash flows for the nine months ended September 30, 20212022 and 20202021 have been prepared by the Company and have not been audited. In the opinion of management, all adjustments (which include only normal recurring adjustments except where disclosed) necessary for the fair presentation of the financial position, results of operations and cash flows have been made. The results of operations for any interim period are not necessarily indicative of the results to be expected for the full year or any future period.

The accompanying condensed consolidated financial statements have been prepared in accordance with GAAPgenerally accepted accounting principles (“GAAP”) for interim financial information and in accordance with the instructions to Form

10-Q
and Regulation
S-X
of the Securities and Exchange Commission (the “SEC”(“SEC”). The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with generally accepted accounting principles (“GAAP”)GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, the condensed consolidated financial statements may not include all the information and footnotes necessary for a complete presentation of financial position, results of operations or cash flows. These condensed consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements and notes thereto included in the Proxy Statement/Prospectus filedCompany's Annual Report on July 6,Form 10-K for the year ended December 31, 2021.

The Business Combination (seeCompany's significant accounting policies are described in Note 3) was accounted for as a reverse recapitalization in accordance with GAAP with Dragoneer treated as the acquired company and CCCIS treated as the acquirer.

The consolidated assets, liabilities, and results2, Summary of operations priorSignificant Accounting Policies, to the reverse recapitalization are those of CCCIS. The shares and corresponding capital amounts and losses per share, priorconsolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021. There have been no material changes to the reverse recapitalization, have been retroactively restated based on shares reflecting the exchange ratio of 1:340.5507 (the “Exchange Ratio”) established in the business combination.
significant accounting policies since December 31, 2021.

7
Table of Contents
Risk and Uncertainties—
In March 2020, the World Health Organization declared the outbreak of the new strain of the coronavirus
(“COVID-19”)
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 through the date the financial statements were issued. 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.
COVID-19
and other similar outbreaks, epidemics or pandemics could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows and prospects as a result of any of the risks described above and other risks that the Company is not able to predict.

Basis of Accounting

—The accompanying condensed consolidated financial statements are prepared in accordance with GAAP and include the accounts of the Company and its wholly-owned subsidiaries and majority-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The condensed consolidated financial statements include 100% of the accounts of wholly-owned and majority-owned subsidiaries and the ownership interest of the minority investor is recorded as a
non-controlling
interest in a subsidiary.

Use of Estimates

—The preparation of the condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts, and the disclosures of contingent amounts in the Company’s condensed consolidated financial statements and the accompanying notes. Although the Company regularly assesses these estimates, actual

11

results could differ from those estimates. Changes in estimates are recorded in the period in which they become known. The Company bases its estimates on historical experience and various other assumptions that it believes to be reasonable under the circumstances. Actual results could differ from management’s estimates if past experience or other assumptions are not substantially accurate. Significant estimates in these condensed consolidated financial statements include the estimation of contract transaction prices, the determination of the amortization period for contract assets, the valuation of goodwill and intangible assets, the valuation of the warrant liabilities, and the estimates and assumptions associated with stock incentive plans, and the fair valuemeasurement of common stock.

expected contingent consideration in connection with business acquisitions.

Significant Customers and Concentration of Credit Risks

Business Combinations—The Company is potentially subjectallocates the purchase consideration of acquired companies to concentration of credit risk primarily through its accounts receivable. The Company performs ongoing credit evaluations of its customers and maintains allowances for potential credit losses which, when realized, have been within the range of management’s expectations. The Company generally does not require collateral. Credit risk on accounts receivables is minimized as a result of the large and diverse nature of the Company’s customer base.

8
Table of Contents
Significant customers are those that represent more than 10% of the Company’s total revenue or accounts receivable. For each significant customer, revenue as a percentage of total revenue is as follows:
   
For the Three Months Ended
September 30,
  
For the Nine Months Ended
September 30,
 
   
2021
   
2020
  
2021
   
2020
 
Customer A
   *    *   *    * 
Customer B
   *    11%   *    11% 
*
Below 10%
For each significant customer, accounts receivable as a percentage of net accounts receivable is as follows:
   
September 30,
2021
  
December 31,
2020
 
Customer A
   11%   12% 
Customer B
   11%   * 
*
Below 10%
Revenue Recognition
— The Company’s revenue recognition policy follows guidance from Accounting Standards Codification (“ASC”) 606,
Revenue from Contracts with Customers.
The Company generates revenue from contracts that are generally billed either on a monthly subscription or transactional basis. Other revenue primarily consists of professional services revenue that is generally transaction-based (where a fee per transaction is charged). Revenues are recognized as control of these services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services.
The Company determines revenue recognition based on the application of the following steps:
Identification of the contract, or contracts, with a customer
Identification of the performance obligation(s) in the contract
Determination of the transaction price
Allocation of the transaction price to the performance obligation(s) in the contract
Recognition of revenue when, or as a performance obligation is satisfied
Software Subscription Revenues
-Software services are hosted and provide customers with the right to use the hosted software over the contract period without taking possession of the software and are generally billed on either a monthly subscription or transactional basis. Revenues related to services billed on a subscription basis are recognized ratably over the contract period as this is the time period over which services are transferred to the customer, generally between three and five years.
Revenues from subscription services represent a stand-ready obligation to provide access to the Company’s platform. As each day of providing services is substantially the same and the customer simultaneously receives and consumes the benefits as access is provided, subscription arrangements include a series of distinct services. The Company may provide certain of its customers with implementation activities such as basic setup, installation and initial training that the Company must undertake to fulfill the contract. These are considered fulfillment activities that do not transfer the service to the customer.
For contracts with fixed and variable consideration, to the extent that customers’ usage exceeds the committed contracted amounts under their subscriptions, they are charged for their incremental usage. For such overage fees, the Company includes an estimate of the amount it expects to receive for the total transaction price if it is probable that a significant reversal of cumulative revenue recognized will not occur. Revenue recognized from overage fees was not material during the three and nine months ended September 30, 2021 and 2020. When customers’ usage falls below the committed contracted amounts, the customer does not receive any credits or refunds for the shortfall.
For contracts where fees are solely based on transaction volume, the amount invoiced corresponds directly with the value provided to the customer, and revenue is recognized when invoiced using the
as-invoiced
practical expedient.
9
Table of Contents
Other Revenue
-Other revenues are recognized over time as the services are performed and consist of professional services and other
non-software
services, including the Company’s First Party Clinical Services which was divested in December 2020 (see Note 27). Other revenues are generally invoiced monthly in arrears.
Revenues related to such services that are billed on a transactional basis are recognized when the transaction for the related service occurs. Transaction revenue is primarily comprised of fees for professional services applied to the volume of transactions. These are typically based on a
per-unit
rate and are invoiced for the same period in which the transactions were processed and as the performance obligation is satisfied. For contracts with transaction fees, the amount invoiced corresponds directly with the value provided to the customer, and revenue is recognized when invoiced using the
as-invoiced
practical expedient.
Contracts with Multiple Performance Obligations
-The Company’s contracts with customers can include access to different software applications such as CCC workflow, estimating, valuation and analytics, each of which is its own performance obligation. These additional services are either sold on a standalone basis or could be used on their own with readily available resources. For these contracts, the Company accounts for individual performance obligations separately, if they are distinct. The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis. The standalone selling price for distinct performance obligations is generally based on directly observable pricing. In instances where standalone selling price is not directly observable, the Company determines standalone selling price based on overall pricing objectives, which take into consideration observable data, market conditions and entity-specific factors.
Disaggregation of Revenue-
The Company provides disaggregation of revenue based on type of service as it believes these categories best depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.
The following table summarizes revenue by type of service for the three and nine months ended September 30 (in thousands):
   
For the Three Months Ended
September 30,
   
For the Nine Months Ended
September 30,
 
   
2021
   
2020
   
2021
   
2020
 
Software subscriptions
  $169,958   $143,761   $481,822   $422,799 
Other
   6,670    13,993    19,383    44,878 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total revenues
  $176,628   $157,754   $501,205   $467,677 
   
 
 
   
 
 
   
 
 
   
 
 
 
Transaction Price Allocated to the Remaining Performance Obligations-
Remaining performance obligations represent contracted revenue that has not yet been recognized, which includes deferred revenue and amounts that will be invoiced and recognized as revenue in future periods. As of September 30, 2021, approximately $936 million of revenue is expected to be recognized from remaining performance obligations in the amount of approximately $437 million during the following twelve months, and approximately $499 million thereafter. The estimated revenues do not include unexercised contract renewals. The remaining performance obligations exclude future transaction revenue where revenue is recognized as the services are rendered and in the amount to which the Company has the right to invoice.
Contract Liabilities
-Contract liabilities consist of deferred revenue and include customer billings in advance of revenues being recognized from subscription contracts and professional services. Deferred revenue that is expected to be recognized during the succeeding twelve-month period is recorded as current, and the remaining portion is recorded as noncurrent and included within other liabilities on the condensed consolidated balance sheets.
Revenue recognized for the three months ended September 30, 2021 from amounts in deferred revenue as of June 30, 2021 was $27.5 million. Revenue recognized for the three months ended September 30, 2020 from amounts in deferred revenue as of June 30, 2020 was $24.8 million.
Revenue recognized for the nine months ended September 30, 2021 from amounts in deferred revenue as of December 31, 2020 was $26.6 million. Revenue recognized for the nine months ended September 30, 2020 from amounts in deferred revenue as of December 31, 2019 was $25.0 million.
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Costs to Obtain and Fulfill the Contract
-The Company defers costs that are considered to be incremental and recoverable costs of obtaining a contract with a customer, including sales commissions. Costs to fulfill contracts are capitalized when such costs are direct and related to implementation activities for hosted software solutions. Capitalized costs to obtain a contract and costs to fulfill a contract are generally amortized over a period between three and five years, which represents the expected period of benefit of these costs and corresponds to the contract period. In instances where the contract term is significantly less than three years, costs to fulfill are amortized over the contract term which the Company believes best reflects the period of benefit of these costs.
Stock-Based Compensation
—The Company’s stock-based compensation plans are described in Note 20. The Company accounts for stock-based payment awards based on the grant date fair value. The incremental fair value of modifications to stock-based payment awards is estimated at the date of modification. Stock-based payment awards that are settled in cash are accounted for as liabilities. The Company recognizes stock-based compensation expense for only the portion of options expected to vest, based on an estimated forfeiture rate.
The Company recognizes stock-based compensation expense for time-bas
e
d awards on a straight-line basis over the requisite service period, which is generally the vesting period of the respective awards. Stock-based compensation expense for performance-based awards with a market condition is not recognized until the performance condition is probable of occurring.
The fair value of the Company’s stock options with only a time-based component is estimated using the Black Scholes option pricing model. The fair value of the Company’s performance-based awards with a market condition is estimated using a Monte Carlo simulation model. The assumptions utilized under these methods require judgments and estimates. Changes in these inputs and assumptions could affect the measurement of the estimated fair value of the related compensation expense of these stock-based payment awards.
Goodwill and Intangible Assets
— Goodwilltangible and intangible assets deemedacquired and liabilities assumed based on their estimated fair values at the acquisition date, with the excess recorded to have indefinite livesgoodwill. These estimates are not amortized, but are subjectedinherently uncertain and subject to an annual impairment test as of September 30 of each fiscalrefinement. During the measurement period, which may be up to one year or more frequently if events or changes in circumstances indicate thatfrom the carrying valueacquisition date, adjustments may not be recoverable. Testing goodwill and intangible assets for impairment involves comparingrecorded to the fair value of these tangible and intangible assets acquired and liabilities assumed, including uncertain tax positions and tax-related valuation allowances, with the reporting unitcorresponding offset to goodwill. Upon the conclusion of the measurement period or intangible asset to its carrying value. Iffinal determination of the carrying amount of a reporting unit or intangible asset exceeds its fair value an impairment loss is recognized in an amount equalof assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the excess, up to the carrying value of the goodwill or intangible asset. The Company performed the impairment test of its reporting units and indefinite lived tradename intangible asset as of September 30, 2021 and 2020 and determined no impairment existed at either date.
Long-Lived Assets
—Long-lived assets, other than goodwill, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets might not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the asset or asset group to estimated undiscounted future cash flows expected to be generated by such assets. If the carrying amount of the assets exceeds their estimated future cash flows, an impairment charge is recognized equal to the amount by which the carrying amount of the assets exceeds their fair value. There were no events or changes in circumstances that indicated the carrying value may not be recoverable and 0 impairment charges were recognized during the three and nine months ended September 30, 2021 and 2020.
Equity Method Investment
—The Company accounts for its 7% investment in a limited partnership using the equity method of accounting. Under the equity method of accounting, the investee’s accounts are not reflected within the Company’s condensed consolidated balance sheets and condensed consolidated statements of operations and comprehensive income (loss) income. .

The Company’s investmentCompany estimates the fair value of contingent consideration related to business combinations on the date of acquisition (see Note 4). The fair value of the contingent consideration is initially recognized at cost and adjusted thereafter for the post acquisition changesremeasured each reporting period, with any change in the Company’s share offair value recorded within the investee’s earnings.

The Company’s share of the investee’s earnings is reported within other income (expense) in the Company’s condensed consolidated statements of operations and comprehensive income (loss) income.
.

Fair Value of Financial Instruments and Fair Value Measurements
—Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value.
Level
 1
—Valuations based on quoted prices for identical assets and liabilities in active markets.
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Level
 2
—Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.
Level
 3
—Valuations based on unobservable inputs reflecting the Company’s own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.
Warrant Liability
—The Company’s outstanding warrants include publicly-traded warrants (“Public Warrants”) and warrants sold in a private placement (“Private Warrants”).
The Company accounts for its Public Warrants and Private Warrants under ASC
815-40,
 Derivatives and Hedging-Contracts in Entity’s Own Equity
, in conjunction with the SEC Division of Corporation Finance’s April 12, 2021 Public Statement,
 Staff Statement on

Recently Adopted Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”)

. The Company determined the Public Warrants and Private Warrants do not meet the criteria to be classified in stockholders’ equity. Specifically, the terms of the warrants provide for potential changes to the settlement amounts dependent upon the characteristics of the warrant holder, and, because the holder of a warrant is not an input into the pricing of a
fixed-for-fixed
option on equity shares, such provision would preclude the warrant from being classified in equity and thus the warrant should be classified as a liability. Accordingly, the Company recorded the warrants as long-term liabilities on its condensed consolidated balance sheet at fair value upon the closing of the Business Combination (see Note 3), with subsequent changes in the fair value of the warrants recognized in the condensed consolidated statement of operations and comprehensive (loss) income at each reporting date.
The Public Warrants are publicly traded and thus have an observable market price in an active market and are valued on their trading price as of each reporting date.
The Private Warrants are valued using the Black Scholes option pricing model. The assumptions utilized under the Black Scholes option pricing model require judgments and estimates. Changes in these inputs and assumptions could affect the measurement of the estimated fair value of the related fair value of the Private Warrants.
Income Taxes
—Deferred income tax assets and liabilities are recognized for the expected future tax effects of temporary differences between the financial and income tax reporting basis of assets and liabilities using tax rates in effect for the years in which the differences are expected to reverse. Deferred income taxes relate to the timing of recognition of certain revenue and expense items, and the timing of the deductibility of certain reserves and accruals for income tax purposes that differs from the timing for financial reporting purposes. The Company establishes a tax valuation allowance to the extent that it is more likely than not that a deferred tax asset will not be realizable against future taxable income.
A tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation process, based on its technical merits. Income tax positions must meet a
more-likely-than-not
recognition threshold to be recognized.
Leases
Pronouncements—Effective January 1, 2021,2022, the Company adopted Accounting Standards Update (“ASU”("ASU")
2016-02
which created 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This ASU is intended to reduce the complexity of accounting for income taxes. Changes include treatment of hybrid tax regimes, tax basis step-up in goodwill obtained in a new topic, ASC 842 “Leases.”
In accordance with ASC 842, the Company, at the inceptiontransaction that is not a business combination, separate financial statements of the contract, determines whether a contract is or contains a lease. For leases with terms greater than 12 months, the Company records the related operating or finance right of use assetlegal entities not subject to tax, intra period tax allocation, ownership changes in investments, interim-period accounting for enacted changes in tax law, and lease liability at the present value of lease payments over the lease term. The Company is generally not able to readily determine the implicit rateyear-to-date loss limitation in the lease and therefore uses the determined incremental borrowing rate at lease commencement to determine the present value of lease payments. The incremental borrowing rate represents an estimate of the market interest rate the Company would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of a lease. Renewal options are not included in the measurement of the right of use assets and lease liabilities unless the Company is reasonably certain to exercise the optional renewal periods. Some leases also include early termination options, which can be exercised under specific conditions. Additionally, certain leases contain incentives, such as construction allowances from landlords. These incentives reduce the
right-of-use
asset related to the lease.
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Some of the Company’s leases contain rent escalations over the lease term. The Company recognizes expense for operating leases on a straight-line basis over the lease term. The Company’s lease agreements contain variable lease payments for increases in rental payment as a result of common area maintenance, utility,interim-period tax and equipment maintenance charges. The Company has elected the practical expedient to combine lease and
non-lease
components for all asset categories. Therefore, the lease payments used to measure the lease liability for these leases include fixed minimum rentals along with fixed non lease component charges. The Company does not have significant residual value guarantees or restrictive covenants in the lease portfolio.
For periods prior to the adoption of ASC 842, the Company recorded rent expense on a straight-line basis over the term of the related lease. The difference between the straight-line rent expense and the payments made in accordance with the operating lease agreements were recognized as a deferred rent liability within other liabilities on the accompanying condensed consolidated balance sheets.
Recently Adopted Accounting Pronouncements
—In February 2016, the Financial
Accounting Standards Board (“FASB”) issued ASU
2016-02
which created a new topic, ASC 842 Leases.
The Company adopted ASC 842 effective January 1, 2021 using the modified retrospective transition method as allowed under ASU
2018-11
which includes the ability to recognize the cumulative effect of the adoption being recorded as an adjustment to retained earnings on January 1, 2021. Prior period results will continue to be presented under ASC 840 as it was the accounting standard in effect for such periods. The Company elected to apply the package of practical expedients that allows entities to forgo reassessing at the transition date: (1) whether any expired or existing contracts are or contain leases; (2) lease classification for any expired or existing leases; and (3) whether unamortized initial direct costs for existing leases meet the definition of initial direct costs under the new guidance. The Company did not elect the hindsight practical expedient. The Company also elected to use the practical expedient that allows the combination of lease and
non-lease
contract components in all of its underlying asset categories.
Due to the adoption of this guidance, the Company recognized operating
right-of-use
assets and operating lease liabilities of $47.1 million and $53.0 million, respectively, as of the date of adoption. The difference between the
right-of-use
assets and lease liabilities on the accompanying condensed consolidated balance sheet is primarily due to the accrual for lease payments as a result of straight-line lease expense and unamortized tenant incentive liability balances. The Company did not have any impact to opening retained earnings as a result of the adoption of the guidance.accounting. The adoption of this new guidanceASU 2019-12 did not have a material impact on the Company’s results of operations and comprehensive (loss) income, cash flows, liquidity, or the Company’s covenant compliance under its existing credit agreement.Company's condensed consolidated financial statements.

As an “emerging growth company,” the Jumpstart Our Business Startups Act, or the JOBS Act, allows the Company to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. The Company has elected to use the adoption dates applicable to private companies. As a result, the Company’s financial statements may not be comparable to the financial statements of issuers who are required to comply with the effective date for new or revised accounting standards that are applicable to public companies.

Recently Issued Accounting Pronouncements

—In June 2016, the FASB issued ASU
2016-13,
Financial Instruments — Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments
, and subsequent amendments to the initial guidance: ASU
2018-19,
ASU
2019-04,
ASU
2019-05,
and ASU
2020-03.
The guidance amends the current accounting guidance and requires the measurements of all expected losses based on historical experience, current conditions and reasonable and supportable forecasts. The This new guidance replaces the existing incurred loss impairment model with an expected credit loss model and requires a financial asset measured at amortized cost to be presented at the net amount expected to be collected. The guidance is effective for the Company plans to adopt ASU 2016-13 on January 1, 2023 and earlydoes not expect its adoption is permitted. The Company is currently assessing theto have a material impact of this update on its condensed consolidated financial statements.

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In March 2020, the FASB issued ASU

2020-04,
Reference
Rate
Reform
(Topic 848): Facilitation of the Effects of Reference
Rate
Reform
on Financial Reporting
, and in January 2021 subsequently issued ASU
2021-01,
which refines the scope of Topic 848. These ASUs provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions, affected by reference rate reform ifsubject to meeting certain criteria, are met. Adoption ofthat reference the expedients and exceptionsLondon Interbank Offered Rate ("LIBOR"), or another rate that is permittedexpected to be discontinued. ASU 2020-04 was effective upon issuance of ASU
2020-04
and can generally be applied through December 31, 2022. The Company is evaluating the impact of the adoption of this guidance on itsWhile there has been no material effect to our condensed consolidated financial statements.statements, the guidance will potentially be applicable when we modify the current reference rate of LIBOR to another reference rate in our First Lien Credit Agreement and related interest rate cap (see Note 15).

3.
ReclassificationsBUSINESS COMBINATION
—Certain amounts in prior periods have been reclassified to conform with the report classifications of the three months and nine months ended September

On July 30, 2021, noting the Company has reflected the reverse recapitalization pursuant to the Business Combination for all periods presented within the unaudited condensed consolidated balance sheets and condensed consolidated statements of mezzanine equity and stockholders’ equity. These reclassifications had no effect on reported net (loss) income and comprehensive (loss) income, cash flows, total assets or stockholders’ equity as previously reported.

3.
BUSINESS COMBINATION
On the Closing Date, the Company consummated the previously announced Business Combination pursuant to the terms of the Business Combination Agreement, dated as of February 2, 2021, as amended, by and among Dragoneer, Chariot Opportunity Merger Sub, Inc. (“Chariot Merger Sub”), a Delaware corporation, and CCCIS, a Delaware corporation.

Immediately upon the consummation of the Business Combination and the Transactions, Chariot Merger Sub, a wholly-owned direct subsidiary of Dragoneer, merged with and into CCCIS, with CCCIS surviving the Business Combination as a wholly-owned direct subsidiary of Dragoneer (the “Merger”(“Merger”). In connection with the Transactions, Dragoneer changed its name to “CCC Intelligent Solutions Holdings Inc.”

The Merger 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.

CCCIS was determined to be the accounting acquirer based on the following predominant factors among others:
the
pre-Closing
CCCIS stockholders continue to control the Company following the Closing of the Business Combination;
the board of directors and management of the Company following the Business Combination are composed of individuals associated with CCCIS;
CCCIS was the larger entity based on historical operating activity, assets, revenues, and employee base at the time of the Closing of the Transactions; and
the ongoing operations of the Company following the Business Combination comprise those of CCCIS.

The net assets of Dragoneer are stated at historical cost, with no goodwill or other intangible assets recorded. Reported shares and earnings per share available to holders of CCCIS’s capital stock and equity awards prior to the Business Combination have been retroactively restated reflecting the exchange ratio of 1:340.5507 ("Exchange Ratio.

Ratio").

12

Pursuant to the Merger, at the Effective Time of the Merger (the “Effective Time”):

•
each share of CCCIS common stock that was issued and outstanding immediately prior to the Effective Time was automatically canceled and converted into the right to receive shares of the Company’s common stock based on the Exchange Ratio, rounded down to the nearest whole number of shares;
•
each option to purchase shares of CCCIS common stock, whether vested or unvested, that was outstanding and unexercised as of immediately prior to the Effective Time was assumed by the Company and became an option (vested or unvested, as applicable) to purchase a number of shares of the Company’s common stock equal to the number of shares of CCCIS common stock subject to such option immediately prior to the Effective Time multiplied by the Exchange Ratio, rounded down to the nearest whole number of shares, at an exercise price equal to the exercise price per share of such option immediately prior to the Effective Time divided by the Exchange Ratio and rounded up to the nearest whole cent;
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•
each of Dragoneer’s redeemable Class A ordinary shareshares and Class B ordinary shareshares that waswere issued and outstanding immediately prior to the Effective Time was exchanged for an equal number of shares of the Company’s common stock.

Concurrently with the execution of the Business Combination Agreement, the Company entered into subscription agreements with certain institutional investors (the “PIPE Investors”), pursuant to which the PIPE Investors purchased, immediately prior to the Closing, an aggregate of 15,000,000 shares of the Company’s common stock at a purchase price of $10.00$10.00 per share.

Prior to the Closing, the Company entered into forward purchase agreements with Dragoneer Funding LLC and Willett Advisors LLC, pursuant to which the Company issued an aggregate of 17,500,000 forward purchase units, each consisting of one common share and

one-fifth
of one warrantPublic Warrant to purchase one common share for $11.50$11.50 per share, for a purchase price of $10.00$10.00 per unit.
The public warrants were redeemed in December 2021 (see Note 18).

Effective upon Closing, 8,625,000 shares issued and held by Dragoneer Growth Opportunities Holdings (the “Sponsor Vesting Shares”) became

non-transferable
and subject to forfeiture on the tenth anniversary of Closing if neither of the following triggering events has occurred: (a) the share price of the Company’s common stock has been greater than or equal to $13.00$13.00 per share for any twenty trading days within any thirty consecutive trading day period beginning after Closing, or (b) a change in control as defined in the Business Combination Agreement. The Sponsor Vesting Shares do not meet the criteria to be classified as a liability and are presented within stockholders’ equity.

As part of the Business Combination, 15,000,00015.0 million shares of the Company’s common stock (the “Company Earnout Shares”) shall be issued to CCCIS shareholders existing as of immediately prior to Closing and holders of vested and unvested equity awards of CCCIS as of the date of the Business Combination Agreement (subject to continued employment), following a triggering event (“CCC Triggering Event”). A CCC Triggering Event is defined as the earlier of (a) the first date on which the shares of the Company’s common stock have traded for greater than or equal to $15.00$15.00 per share for any twenty trading days within any thirty consecutive trading day period commencing after the Closingclosing or (b) a change in control as defined in the Business Combination Agreement. If a CCC Triggering Event does not occur within ten years after Closing, the CCC Earnout Shares arewill be forfeited.

Of the 15.0 million Company Earnout Shares, 13.5 million shares are reserved for issuance to CCCIS shareholders. The Company Earnout Shares do not meet the criteria to be classified as a liability and the fair value of the shares reserved for shareholders of $98.9$98.9 million was charged to additional

paid-in
capital during the three months ended September 30, 2021. The remaining 1.5 million Company Earnout Shares are reserved for issuance to CCCIS option holders (see Note 20).
holders.

The Company Earnout Shares are not issued shares and are excluded from the tableCompany's issued and outstanding shares within its condensed consolidated statements of common stock outstanding below.

The total number of shares of the Company’s common stock outstanding immediately following the Closing was 603,170,380, comprised as follows:
Shares issued to Dragoneer public shareholders and Sponsor
56,615,002
Sponsor Vesting Shares
8,625,000
Shares issued to Legacy CCC shareholders
505,430,378
Shares issued to Forward Purchasers
17,500,000
Shares issued to PIPE Investors
15,000,000
Total shares of common stock outstanding immediately following the Business Combination
603,170,380
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mezzanine equity and stockholders' equity.

In connection with the Business Combination, the Company incurred underwriting fees and other costs considered direct and incremental to the transaction totaling $11.1$11.1 million (before tax), consisting of legal, accounting, financial advisory and other professional fees. These amounts arewere treated as a reduction of the cash proceeds and are deducted from the Company’s additional paid-in capital.

paid-in
capital.

The following table reconciles the elements of the Business Combination to the condensed consolidated statement of cash flows for the nine months ended September 30, 2021 and the condensed consolidated statement of mezzanine equity and stockholders’ equity for the periodthree and nine months ended September 30, 2021 (in thousands):

13

Cash - Dragoneer trust and cash

 

$

449,441

 

Cash - PIPE Financing

 

 

150,000

 

Cash - Forward Purchase Agreements

 

 

175,000

 

Less: transaction costs and advisory fees

 

 

(11,141

)

Net cash contributions from Business Combination

 

 

763,300

 

Less: non-cash fair value of Public Warrants and Private Warrants

 

 

(58,459

)

Net equity infusion from Business Combination

 

$

704,841

 

4.
BUSINESS ACQUISITION

On February 8, 2022, the Company completed its acquisition of Safekeep, Inc. (“Safekeep”), a privately held company that leverages AI to streamline and improve subrogation management across auto, property, workers’ compensation and other insurance lines of business. Leveraging Safekeep’s AI-enabled subrogation solutions, the acquisition will broaden the Company’s portfolio of cloud-based solutions available to its insurance customers.

In exchange for all the outstanding shares of Safekeep, the Company paid total cash consideration of $32.3 million upon closing. In accordance with the acquisition agreement, the Company placed $6.0 million in escrow for a general indemnity holdback to be paid to the sellers within 15 months of closing subject to reduction for certain indemnifications and other potential obligations of the selling shareholders.

As additional consideration for the shares, the acquisition agreement includes a contingent earnout for additional cash consideration. The potential amount of the earnout is calculated as a multiple of revenue, above a defined floor, during the 12-month measurement period ending December 31, 2024 and is not to exceed $90.0 million. The fair value of the contingent consideration as of the acquisition date of $0.2 million was estimated using a Monte Carlo simulation model that relies on unobservable inputs, including management estimates and assumptions. Thus, the contingent earnout is a Level 3 measurement.

The acquisition date fair value of the consideration transferred was $32.5 million, which consisted of the following (in thousands):

Cash paid through closing

 

$

32,300

 

Fair value of contingent earnout consideration

 

 

200

 

Total acquisition date fair value of the consideration transferred

 

$

32,500

 

The acquisition was accounted for as a business combination and reflects the application of acquisition accounting in accordance with Accounting Standards Codification ("ASC") Topic 805, Business Combinations. The total purchase consideration was allocated to the assets acquired and liabilities assumed based on their fair values as of the acquisition date with the excess purchase price assigned to goodwill. The goodwill was primarily attributable to the expected synergies from the combined service offerings and the value of the acquired workforce. The goodwill is not deductible for tax purposes.

The Company’s estimates of the fair values of the assets acquired, liabilities assumed and contingent consideration are based on information that was available at the date of the acquisition and the Company is continuing to evaluate the underlying inputs and assumptions used in its valuations. Accordingly, these preliminary estimates are subject to change during the measurement period, which is up to one year from the date of acquisition. There have been no material changes to the preliminary purchase price allocation.

The following table summarizes the allocation of the consideration to the fair values of the assets acquired and liabilities assumed at the acquisition date (in thousands):

Assets acquired:

 

 

 

Current assets

 

$

150

 

Intangible asset - acquired technology

 

 

4,800

 

Deferred tax assets

 

 

314

 

Total assets acquired

 

 

5,264

 

Liabilities assumed:

 

 

 

Current liabilities

 

 

147

 

Total liabilities assumed

 

 

147

 

Net assets acquired

 

 

5,117

 

Goodwill

 

 

27,383

 

Total purchase price

 

$

32,500

 

14

The acquired technology intangible asset has an estimated useful life of seven years and is being amortized on a straight-line basis.

The fair value of the acquired technology intangible asset was determined by a valuation model based on estimates of future operating projections as well as judgments on the discount rate and other variables. This fair value measurement is based on significant unobservable inputs, including management estimates and assumptions and thus represents a Level 3 measurement.

The transaction costs associated with the acquisition were $1.2 million and are included in general and administrative expenses within the condensed consolidated statements of operations and comprehensive income (loss) for the nine months ended September 30, 2022.

5.
REvenue
Cash - Dragoneer trust and cash
  $449,441 
Cash - PIPE Financing
   150,000 
Cash - Forward Purchase Agreements
   175,000 
Less: transaction costs and advisory fees
   (11,141) 
   
 
 
 
Net cash contibutions from Business Combination
   763,300 
Less:
non-cash
fair value of Public Warrants and Private Warrants
   (58,459) 
   
 
 
 
Net equity infusion from Business Combination
  $704,841 
   
 
 
 

Disaggregation of Revenue—The Company provides disaggregation of revenue based on type of service as it believes these categories best depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

The following table summarizes revenue by type of service for the three and nine months ended September 30, 2022 and 2021 (in thousands):

 

 

For the Three Months Ended

 

 

For the Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Software subscriptions

 

$

191,154

 

 

$

169,958

 

 

$

556,470

 

 

$

481,822

 

Other

 

 

7,580

 

 

 

6,670

 

 

 

21,872

 

 

 

19,383

 

Total revenues

 

$

198,734

 

 

$

176,628

 

 

$

578,342

 

 

$

501,205

 

4.
REVENUE

Transaction Price Allocated to the Remaining Performance Obligations—Remaining performance obligations represent contracted revenue that has not yet been recognized, which includes deferred revenue and amounts that will be invoiced and recognized as revenue in future periods. As of September 30, 2022, approximately $1,345 million of revenue is expected to be recognized from remaining performance obligations in the amount of approximately $529 million during the following twelve months, and approximately $816 million thereafter. The estimated revenues do not include unexercised contract renewals. The remaining performance obligations exclude future transaction revenue where revenue is recognized as the services are rendered and in the amount to which the Company has the right to invoice.

Deferred Revenue—Revenue recognized for the three months ended September 30, 2022 from amounts in deferred revenue as of June 30, 2022 was $32.2 million. Revenue recognized for the three months ended September 30, 2021 from amounts in deferred revenue as of June 30, 2021 was $27.5 million.

Revenue recognized for the nine months ended September 30, 2022 from amounts in deferred revenue as of December 31, 2021 was $30.7 million. Revenue recognized for the nine months ended September 30, 2021 from amounts in deferred revenue as of December 31, 2020 was $26.6 million.

Contract Assets and Liabilities—The opening and closing balances of the Company’s receivables, contract assets and contract liabilities from contracts with customers are as follows (in thousands):

 

 

September 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Accounts receivables-net of allowances

 

$

98,194

 

 

$

78,793

 

Deferred contract costs

 

 

15,788

 

 

 

15,069

 

Long-term deferred contract costs

 

 

18,818

 

 

 

22,117

 

Other assets (accounts receivable, non-current)

 

 

17,091

 

 

 

8,622

 

Deferred revenues

 

 

33,602

 

 

 

31,042

 

Other liabilities (deferred revenues, non-current)

 

 

1,340

 

 

 

1,574

 

15

   
September 30,
   
December 31,
 
   
2021
   
2020
 
Accounts
receivables-Net
of allowances
  $82,367   $74,107 
Deferred contract costs
   13,833    11,917 
Long-term deferred contract costs
   18,893    14,389 
Deferred revenues
   29,384    26,514 
Other liabilities (deferred revenues,
non-current)
   1,739    2,001 

A summary of the activity impacting deferred revenue balances during the three and nine months ended September 30, 20212022 and 2020,2021, is presented below (in thousands):

   
For the Three Months Ended
   
For the Nine Months Ended
 
   
September 30,
   
September 30,
 
   
2021
   
2020
   
2021
   
2020
 
Balance at beginning of period
  $30,756   $28,678   $28,515   $26,256 
Revenue recognized
1
   (87,649)    (76,376)    (250,379)    (225,902) 
Additional amounts deferred
1
   88,016    75,539    252,987    227,487 
   
 
 
   
 
 
   
 
 
   
 
 
 
Balance at end of period
  $31,123   $27,841   $31,123   $27,841 
   
 
 
   
 
 
   
 
 
   
 
 
 
Classified as:
                    
Current
  $29,384   $25,693   $29,384   $25,693 
Non-current
   1,739    2,148    1,739    2,148 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total deferred revenue
  $31,123   $27,841   $31,123   $27,841 
   
 
 
   
 
 
   
 
 
   
 
 
 

 

For the Three Months Ended

 

 

For the Nine Months Ended

 

 

September 30,

 

 

September 30,

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Balance at beginning of period

$

34,742

 

 

$

30,756

 

 

$

32,616

 

 

$

28,515

 

Revenue recognized1

 

(94,997

)

 

 

(87,649

)

 

 

(277,250

)

 

 

(250,379

)

Additional amounts deferred1

 

95,197

 

 

 

88,016

 

 

 

279,576

 

 

 

252,987

 

Balance at end of period

$

34,942

 

 

$

31,123

 

 

$

34,942

 

 

$

31,123

 

 

 

 

 

 

 

 

 

 

 

 

 

Classified as:

 

 

 

 

 

 

 

 

 

 

 

Current

$

33,602

 

 

$

29,384

 

 

$

33,602

 

 

$

29,384

 

Non-current

 

1,340

 

 

 

1,739

 

 

 

1,340

 

 

 

1,739

 

Total deferred revenue

$

34,942

 

 

$

31,123

 

 

$

34,942

 

 

$

31,123

 

 

 

 

 

 

 

 

 

 

 

 

 

1

Amounts include total revenue deferred and recognized during each respective period.

The Company may occasionally recognize an adjustment in revenue in the current period for performance obligations partially or fully satisfied in the previous periods resulting from changes in estimates for the transaction price, including any changes to the Company’s assessment of whether an estimate of variable consideration is constrained. For the three and nine months ended September 30, 2021 and 2020, the impact on revenue recognized in the current period, from performance obligations partially or fully satisfied in the previous period, was not significant.
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Table of Contents

A summary of the activity impacting the deferred contract

costs during the three and nine months ended September 30, 20212022 and 20202021 is presented below (in thousands):

 

 

For the Three Months Ended

 

 

For the Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Balance at beginning of period

 

$

35,890

 

 

$

28,667

 

 

$

37,186

 

 

$

26,361

 

Costs amortized

 

 

(4,444

)

 

 

(4,164

)

 

 

(13,072

)

 

 

(11,481

)

Additional amounts deferred

 

 

3,160

 

 

 

8,223

 

 

 

10,492

 

 

 

17,846

 

Balance at end of period

 

$

34,606

 

 

$

32,726

 

 

$

34,606

 

 

$

32,726

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Classified as:

 

 

 

 

 

 

 

 

 

 

 

 

Current

 

$

15,788

 

 

$

13,833

 

 

$

15,788

 

 

$

13,833

 

Non-current

 

 

18,818

 

 

 

18,893

 

 

 

18,818

 

 

 

18,893

 

Total deferred contract costs

 

$

34,606

 

 

$

32,726

 

 

$

34,606

 

 

$

32,726

 

6.
FAIR VALUE measurements
   
For the Three Months Ended
   
For the Nine Months Ended
 
   
September 30,
   
September 30,
 
   
2021
   
2020
   
2021
   
2020
 
Balance at beginning of period
  $28,667   $24,084   $26,361   $23,270 
Costs amortized
   (4,164)    (3,132)    (11,481)    (9,184) 
Additional amounts deferred
   8,223    4,070    17,846    10,936 
   
 
 
   
 
 
   
 
 
   
 
 
 
Balance at end of period
  $32,726   $25,022   $32,726   $25,022 
   
 
 
   
 
 
   
 
 
   
 
 
 
Classified as:
                    
Current
  $13,833   $11,314   $13,833   $11,314 
Non-current
   18,893    13,708    18,893    13,708 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total deferred contract costs
  $32,726   $25,022   $32,726   $25,022 
   
 
 
   
 
 
   
 
 
   
 
 
 
5.
FAIR VALUE MEASUREMENTS

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Private Warrants—As of September 30, 2021,2022, the Company had PublicCompany's Private Warrants and Private Warrants recognized ascontingent consideration liability related to a liability andbusiness acquisition are measured at fair value on a recurring basis.

The Public Warrants are classified within Level 1 of the fair value hierarchy as they are traded in active public markets.

The Private Placement Warrants are valued using Level 1 and Level 2 inputs within the Black-Scholes option-pricing model. The assumptions utilized under the Black ScholesBlack-Scholes option pricing model require judgments and estimates. Changes in these inputs and assumptions could affect the measurement of the estimated fair value of the Private Warrants. Accordingly, the Private Warrants are classified within Level 2 of the fair value hierarchy.

The valuation of the Private Warrants as of September 30, 2022 and December 31, 2021 was determined using the Black-Scholes option valuationpricing model using the following assumptions:

 

 

September 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Expected term (in years)

 

 

3.8

 

 

 

4.6

 

Expected volatility

 

 

35

%

 

 

35

%

Expected dividend yield

 

 

0

%

 

 

0

%

Risk-free interest rate

 

 

4.17

%

 

 

1.20

%

The estimated fair value of each Private Warrant using the Company's stock price on the valuation date and above assumptions was $2.19 and $3.51 as of September 30, 2022 and December 31, 2021, respectively.

16

Contingent Consideration Liability—The contingent consideration liability related to the acquisition of Safekeep (see Note 4), recognized within other liabilities on the condensed consolidated balance sheet, is adjusted each reporting period for changes in fair value, which can result from changes in anticipated payments and changes in assumed discount rates. These inputs are unobservable in the market and therefore categorized as Level 3 inputs.

The estimated fair value of the contingent consideration at the date of acquisition was determined using probability-weighted discounted cash flows and a Monte Carlo simulation model. The discount rate, based on the Company's estimated cost of debt, was 9.0%.

Since the date of the business acquisition of Safekeep, there has been no change in the estimated fair value of the Company's contingent consideration liability and the Company has not recognized any gain or loss for a change in the estimated fair value of contingent consideration since the date of acquisition.

Interest Rate Cap—In August 2022, the Company entered into two interest rate cap agreements to reduce its exposure to increases in interest rates applicable to its floating rate long-term debt (See Note 15). The fair value of the interest rate cap agreements was estimated using inputs that were observable or that could be corroborated by observable market data and therefore, was classified within Level 2 of the fair value hierarchy as of September 30, 2022.

The Company did not designate its interest rate cap agreements as hedging instruments and records the changes in fair value within earnings. As of September 30, 2022, the interest rate cap agreements had a fair value of $12.3 million, classified within other assets in the accompanying condensed consolidated balance sheet.

Expected term (in years)
   4.8 
Expected volatility
   30% 
Expected dividend yield
   0% 
Risk-free interest rate
   0.94% 
Fair value at valuation date
  $2.54 

The following table presents the fair value of the assets and liabilities measured at fair value on a recurring basis atas of September 30, 20212022 (in thousands):

Liabilities
  
Fair Value
   
Level 1
   
Level 2
   
Level 3
 
Public warrants
  $40,136   $40,136   $—     $ —   
Private warrants
   45,212    —      45,212    0 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
  $85,348   $40,136   $45,212   $0 
   
 
 
   
 
 
   
 
 
   
 
 
 
As of December 31, 2020, the Company had interest rate swaps recognized as either assets or liabilities and measured at fair value on a recurring basis.
The fair value of the interest rate swaps was estimated using inputs that were observable or that could be corroborated by observable market data and, therefore, were classified within Level 2 of the fair value hierarchy as of December 31, 2020. At December 31, 2020, the interest rate swaps had a fair value liability of $18.4 million and were classified within other liabilities in the accompanying condensed consolidated balance sheet.
17
Table of Contents

 

 

Fair Value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate cap

 

 

12,279

 

 

 

—

 

 

 

12,279

 

 

 

—

 

Total Assets

 

$

12,279

 

 

$

—

 

 

$

12,279

 

 

$

—

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Contingent consideration related to business acquisition

 

$

200

 

 

$

—

 

 

$

—

 

 

$

200

 

Private warrants

 

 

39,026

 

 

 

—

 

 

 

39,026

 

 

 

—

 

Total Liabilities

 

$

39,226

 

 

$

—

 

 

$

39,026

 

 

$

200

 

The following table presents the fair value of the assets and liabilities measured at fair value on a recurring basis atas of December 31, 20202021 (in thousands):

Liabilities

 

Fair Value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Private warrants

 

$

62,478

 

 

$

—

 

 

$

62,478

 

 

$

—

 

Total

 

$

62,478

 

 

$

—

 

 

$

62,478

 

 

$

—

 

Liabilities
  
Fair Value
   
Level 1
   
Level 2
   
Level 3
 
Interest rate swaps
  $18,359   $ 0     $18,359   $ 0   
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
  $18,359   $0     $18,359   $0   
   
 
 
   
 
 
   
 
 
   
 
 
 
On September 21, 2021, the Company made a payment of $10.0 million to extinguish the interest rate swaps prior to their scheduled expiration date in June 2022.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

—The Company has assets that under certain conditions are subject to measurement at fair value on a nonrecurring basis. These assets include those associated with acquired businesses, including goodwill and other intangible assets. For these assets, measurement at fair value in periods subsequent to their initial recognition is applicable if one or more is determined to be impaired. During the three and nine months ended September 30, 20212022 and the year ended December 31, 2020,2021, the Company recognized 0no impairment related to these assets.

Fair Value of Other Financial Instruments

—The following table presents the carrying amounts, net of debt discount, and estimated fair values of the Company’s financial instruments that are not recorded at fair value on the condensed consolidated balance sheets (in thousands):

 

 

September 30, 2022

 

 

December 31, 2021

 

 

 

Carrying

 

 

Estimated

 

 

Carrying

 

 

Estimated

 

Description

 

Amount

 

 

Fair Value

 

 

Amount

 

 

Fair Value

 

Term B Loan, including current portion

 

$

792,270

 

 

$

768,195

 

 

$

798,073

 

 

$

799,000

 

   
September 30, 2021
   
December 31, 2020
 
   
Carrying
   
Estimated
   
Carrying
   
Estimated
 
Description
  
Amount
   
Fair Value
   
Amount
   
Fair Value
 
Term B Loan, including current portion
  $798,007   $799,000   $—     $—   
First Lien Term Loan, including current portion
   —      —      1,333,366    1,332,433 

The fair value of the Company’s long-term debt, including current maturities, was estimated based on the quoted market prices for the same or similar instruments and fluctuates with changes in applicable interest rates among other factors. The fair value of long-term debt is classified as a Level 2 measurement in the fair value hierarchy and is established based on observable inputs in less active markets.

17

7.
INCOME TAXES
6.
INCOME TAXES

On August 16, 2022, President Biden signed the Inflation Reduction Act of 2022 (“IRA”) into law. The IRA contains several revisions to the Internal Revenue Code, including a 15% corporate minimum income tax and a 1% excise tax on corporate stock repurchases in tax years beginning after December 31, 2022. While these tax law changes have no immediate effect on our results of operations and are not expected to have a material adverse effect on our results of operations going forward, we will continue to evaluate its impact as further information becomes available.

The Company’s effective tax rate for the three months ended September 30, 2022 and 2021 was 22.0% compared to26.1% and 22.0%, respectively. The effective tax rate for the three months ended September 30, 2022 was higher than the effective tax rate for the three months ended September 30, 2020 of 34.8%.

2021 primarily due to non-deductible executive compensation.

The Company's effective tax rate for the nine months ended September 30, 2022 and 2021 was 25.4% and 22.1%, respectively. The effective tax rate for the threenine months ended September 30, 2022 was higher than the effective tax rate for the nine months ended September 30, 2021 was lower than the September 30, 2020 effective tax rate primarily due to the increase in stocknon-deductible executive compensation, expense in the current quarter which diluted the effects of permanent differences on the tax rate, partially offset by the prior period benefit being limitedrelated to the amount that would be recognized if

re-measurement of the year-to-date ordinary
loss were the anticipated ordinary lossCompany's deferred tax liability for the fiscal year.
changes in state tax rates.

The Company made income tax payments of $4.7$16.6 million and $8.5$4.7 million for the three months ended September 30, 20212022 and 2020,2021, respectively. The Company received negligible refunds from the Internal Revenue Service ("IRS") and various states for the three months ended September 30, 2021,2022 and $9.0 million for the three months ended September 30, 2020.

The Company’s effective tax rate for the nine months ended September 30, 2021 was 22.1% compared to the effective tax rate for the nine months ended September 30, 2020 of 24.2%.
The effective tax rate for the nine months ended September 30, 2021 was lower than the September 30, 2020 effective tax rate primarily due to the increase in stock compensation expense in the current period which diluted the effects of permanent differences on the tax rate, partially offset by the period benefit being limited to the amount that would be recognized if
the year-to-date ordinary
loss were the anticipated ordinary loss for the fiscal year.
18
Table of Contents
2021.

The Company made income tax payments of $15.1$55.5 million and $9.6$15.1 million for the nine months ended September 30, 20212022 and 2020,2021, respectively. The Company received negligible refunds from the Internal Revenue ServiceIRS and various states totaling $16 thousand and $10.4 million for the nine months ended September 30, 2021,2022 and 2020, respectively.

2021.

As of September 30, 2021,2022, unrecognized tax benefits were materially consistent with the amount atas of December 31, 2020.2021. We anticipate this amount will decrease from $3.6 million to $3.5 million over the following twelve months, as the increase related to $3.6 millionfiscal year 2022 is offset by December 31, 2021.decreases related to statute expirations.

8.
accounts receivable
7.
ACCOUNTS RECEIVABLE

Accounts receivable–netNet as of September 30, 20212022 and December 31, 2020,2021, consists of the following (in thousands):

 

 

September 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Accounts receivable

 

$

102,884

 

 

$

82,584

 

Allowance for doubtful accounts and sales reserves

 

 

(4,690

)

 

 

(3,791

)

Accounts receivable–net

 

$

98,194

 

 

$

78,793

 

   
September 30,
   
December 31,
 
   
2021
   
2020
 
Accounts receivable
  $86,339   $78,331 
Allowance for doubtful accounts and sales reserves
   (3,972)    (4,224) 
   
 
 
   
 
 
 
Accounts receivable–net
  $82,367   $74,107 
   
 
 
   
 
 
 
19
Table

As of Contents

September 30, 2022, one customer represented 16% of the Company's net accounts receivable. As of December 31, 2021, no customer represented more than 10% of the Company's net accounts receivable.

Changes to the allowance for doubtful accounts and sales reserves during the three and nine months ended September 30, 2022 and 2021, and 2020, consistsconsist of the following (in thousands):

 

 

For the Three Months Ended

 

 

For the Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Balance at beginning of period

 

$

4,296

 

 

$

4,218

 

 

$

3,791

 

 

$

4,224

 

Charges to bad debt and sales reserves

 

 

1,100

 

 

 

818

 

 

 

3,036

 

 

 

2,524

 

Write-offs, net

 

 

(706

)

 

 

(1,064

)

 

 

(2,137

)

 

 

(2,776

)

Balance at end of period

 

$

4,690

 

 

$

3,972

 

 

$

4,690

 

 

$

3,972

 

18

9.
OTHER CURRENT ASSETS
   
For the Three Months Ended
   
For the Nine Months Ended
 
   
September 30,
   
September 30,
 
   
2021
   
2020
   
2021
   
2020
 
Balance at beginning of period
  $4,218   $3,918   $4,224   $3,970 
Charges to bad debt and sales reserves
   818    1,328    2,524    3,191 
Write-offs, net
   (1,064)    (906)    (2,776)    (2,821) 
   
 
 
   
 
 
   
 
 
   
 
 
 
Balance at end of period
  $3,972   $4,340   $3,972   $4,340 
   
 
 
   
 
 
   
 
 
   
 
 
 
8.
OTHER CURRENT ASSETS

Other current assets as of September 30, 20212022 and December 31, 2020,2021, consist of the following (in thousands):

 

 

September 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Prepaid SaaS costs

 

 

6,606

 

 

 

5,909

 

Prepaid insurance

 

 

5,820

 

 

 

4,416

 

Prepaid service fees

 

 

5,113

 

 

 

8,623

 

Prepaid software and equipment maintenance

 

 

3,912

 

 

 

7,593

 

Non-trade receivables

 

 

1,109

 

 

 

8,321

 

Other

 

 

11,338

 

 

 

11,319

 

Total

 

$

33,898

 

 

$

46,181

 

10.
SOFTWARE, EQUIPMENT, AND PROPERTY
   
September 30,
   
December 31,
 
   
2021
   
2020
 
Prepaid software and equipment maintenance
  $3,981   $7,499 
Prepaid SaaS costs
   7,600    4,290 
Prepaid service fees
   4,114    3,969 
Prepaid insurance
   6,379    517 
Non-trade
receivables
   5,901    9,095 
Other
   8,286    6,216 
   
 
 
   
 
 
 
Total
  $36,261   $31,586 
   
 
 
   
 
 
 
On December 31, 2020, the Company executed an Asset Purchase Agreement with a third-party buyer to transfer its obligation of providing certain services included within existing customer contracts to the third-party buyer (see Note 27). The Company recognized proceeds on a gain from the divestiture of $3.8 million, included within
non-trade
receivables at December 31, 2020. As of September 30, 2021, the Company has received aggregate payments from the Buyer of $2.9 million.
20
Table of Contents
9.
SOFTWARE, EQUIPMENT, AND PROPERTY

Software, equipment, and property as of September 30, 20212022 and December 31, 2020,2021, consist of the following (in thousands):

 

 

September 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Software, licenses and database

 

$

167,235

 

 

$

140,692

 

Leasehold improvements

 

 

33,102

 

 

 

34,880

 

Computer equipment

 

 

32,948

 

 

 

31,635

 

Building and land

 

 

4,910

 

 

 

4,910

 

Furniture and other equipment

 

 

2,780

 

 

 

5,343

 

Total software, equipment, and property

 

 

240,975

 

 

 

217,460

 

Less accumulated depreciation and amortization

 

 

(93,444

)

 

 

(81,615

)

Software, equipment, and property—Net

 

$

147,531

 

 

$

135,845

 

   
September 30,
   
December 31,
 
   
2021
   
2020
 
         
Software, licenses and database
  $131,493   $109,967 
Computer equipment
   29,897    27,733 
Leasehold improvements
   24,278    13,397 
Furniture and other equipment
   5,347    5,000 
Building and land
   4,910    4,910 
   
 
 
   
 
 
 
Total software, equipment, and property
   195,925    161,007 
Less accumulated depreciation and amortization
   (74,907)    (59,569) 
   
 
 
   
 
 
 
Net software, equipment, and property
  $121,018   $101,438 
   
 
 
   
 
 
 

Depreciation and amortization expense related to software, equipment and property was $7.7$6.7 million and $4.5$7.7 million for the three months ended September 30, 20212022 and 2020,2021, respectively. Depreciation and amortization expense related to software, equipment and property was $18.2$20.2 million and $13.0$18.2 million for the nine months ended September 30, 2022 and 2021, and 2020, respectively.

11.
LEASES
10.
LEASES

The Company leases real estate in the form of office space and data center facilities. The Company additionally leases equipment inGenerally, at the forminception of information technology equipment. Generally,the contract, the term for real estate leases ranges from 1 to 17 years at inception of the contract. Generally,and the term for equipment leases is 1 to 3 years at inception of the contract.years. Some real estate leases include options to renew that can extend the original term by 3 to 5 to 10 years.

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Table of Contents
Operating lease costs are included within cost of revenues, exclusive of amortization of acquired technologies, research and development and general and administrative expenses on the condensed consolidated statements of operations and comprehensive (loss) income. The Company does not have any finance leases.

The components of lease expense for the three and nine months ended September 30, 2022 and 2021 were as follows (in thousands):

 

 

For the Three Months Ended

 

 

For the Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Operating lease costs

 

$

1,871

 

 

$

4,043

 

 

$

7,545

 

 

$

13,179

 

Variable lease costs

 

 

585

 

 

 

552

 

 

 

1,996

 

 

 

1,615

 

Total lease costs

 

$

2,456

 

 

$

4,595

 

 

$

9,541

 

 

$

14,794

 

19

   
For the Three Months Ended
   
For the Nine Months Ended
 
   
September 30, 2021
   
September 30, 2021
 
         
Operating lease costs
  $4,043   $13,179 
Variable lease costs
   552    1,615 
   
 
 
   
 
 
 
Total lease costs
  $4,595   $14,794 
   
 
 
   
 
 
 
The lease term and discount rate consisted of the following at September 30, 2021:
Weighted-average remaining lease term (years)
12.7
Weighted-average discount rate
6.2% 

Supplemental cash flow and other information related to leases for the three and nine months ended September 30, 2022 and 2021 were as follows (in thousands):

 

 

For the Three Months Ended

 

 

For the Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Cash payments for operating leases

 

$

1,287

 

 

$

2,872

 

 

$

7,033

 

 

$

8,870

 

Operating lease assets obtained in exchange for lease liabilities

 

 

2,257

 

 

 

—

 

 

 

2,366

 

 

 

2,365

 

12.
GOODWILL AND INTANGIBLE ASSETS
   
For the Three Months Ended
   
For the Nine Months Ended
 
   
September 30, 2021
   
September 30, 2021
 
Cash payments for operating leases
  $2,872   $8,870 
Operating lease assets obtained in exchange for lease liabilities
   0      2,365 
The table below reconciles the undiscounted future minimum lease payments (in thousands) under noncancelable operating leases with terms of more than one year to the total operating lease liabilities recognized on the condensed consolidated balance sheet as of September 30, 2021.
Years Ending December 31:    
    
Remainder of 2021
  $2,575 
2022
   8,599 
2023
   6,092 
2024
   7,195 
2025
   7,243 
Thereafter
   68,416 
   
 
 
 
Total Lease Payments
   100,120 
Less: Interest
   (34,403) 
Less: Lease incentive recognized as offset to lease liability
   (6,312) 
   
 
 
 
Total
  $59,405 
   
 
 
 
During the year ended December 31, 2020, the Company entered into a new operating lease agreement for its corporate headquarters in Chicago, Illinois. The lease term commenced in January 2021 and included a landlord provided tenant improvement allowance of up to $16.9 million to be applied to the costs of the construction of leasehold improvements. The Company determined that it owns the leasehold improvements, and as such, reflects the $16.9 million lease incentive as a reduction of the rental payments used to measure the operating lease liability and operating lease asset as of the lease commencement date in January 2021. The Company will record an increase to the operating lease liability and to leasehold improvements as and when such leasehold improvements are paid for by the lessor. As of September 30, 2021, the Company has recorded $10.6 million of the lease incentive as an increase to the operating lease liability and leasehold improvements.
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Under ASC 840, rent expense was $2.3 million during the three months ended September 30, 2020 and $6.8 million during the nine months ended September 30, 2020. The Company’s noncancelable operating lease agreements required future minimum cash lease payments as follows at December 31, 2020 (in thousands):
Years Ending December 31:    
    
2021
  $7,143 
2022
   6,090 
2023
   5,180 
2024
   7,059 
2025
   7,243 
Thereafter
   68,415 
   
 
 
 
Total
  $101,130 
   
 
 
 
11.
GOODWILL AND INTANGIBLE ASSETS

Goodwill

—Goodwill was recorded in connection with the acquisition of the parent company of CCC Intelligent Solutions Inc., formerly known as CCC Information Services Inc., by CCCIS in 2017 (the “Acquisition”).
NaNbusiness acquisitions.

No goodwill impairments were recorded during the three and nine months ended September 30, 20212022 and 2020.

2021.

The Company performs its annual impairment assessment as of September 30 of each fiscal year. As of September 30, 2021 and 2020,2022, the annual impairment assessment indicated 0no impairment and there was no change to the carrying amount of goodwill.

goodwill due to impairment.

Based on the quantitative assessment as of September 30, 2022, the Company determined that its China reporting unit had an estimated fair value that was not significantly in excess of its carrying value. While it was concluded that the goodwill assigned to the China reporting unit was not impaired, it could be at risk of future impairment if the Company's long-term financial objectives are not achieved or if there are changes to estimates and assumptions from a number of factors, many of which are outside the Company's control. As a result of the assessment, the Company did not recognize an impairment charge related to the China reporting unit.

As of September 30, 2021, the annual impairment assessment indicated no impairment and there was no change to the carrying amount of goodwill due to impairment.

Changes in the net carrying amount of goodwill during the nine months ended September 30, 2022 were as follows (in thousands):

 

 

Net

 

 

 

Carrying

 

 

 

Amount

 

 

 

 

 

Balance as of December 31, 2021

 

$

1,466,884

 

Acquisition of Safekeep, Inc.

 

 

27,383

 

Balance as of September 30, 2022

 

$

1,494,267

 

Intangible Assets

—The Company’s intangible assets are primarily the result of the Acquisition.business acquisitions.

During the three and nine months ended September 30, 20212022 and 2020,2021, the Company did 0tnot record an impairment charge.

20

The Company performs its annual impairment assessment of indefinite life intangible assets as of September 30 of each fiscal year. As of September 30, 2022 and 2021, the annual impairment assessment indicated no impairment.

During February 2022, the Company recorded $4.8 million of acquired technology intangible assets as a result of the acquisition of Safekeep (see Note 4).

The intangible assets balance as of September 30, 2021,2022, is reflected below (in thousands):

       
Weighted-
            
       
Average
            
   
Estimated
   
Remaining
   
Gross
      
Net
 
   
Useful Life
   
Useful Life
   
Carrying
   
Accumulated
  
Carrying
 
   
(Years)
   
(Years)
   
Amount
   
Amortization
  
Amount
 
                    
Intangible assets:
                        
Customer relationships
   16–18    13.5   $1,299,750   $(319,764)  $979,986 
Acquired technologies
   3–7    2.5    183,159    (115,738)   67,421 
Favorable lease terms
   6    1.5    280    (207)   73 
             
 
 
   
 
 
  
 
 
 
Subtotal
             1,483,189    (435,709)   1,047,480 
Trademarks—indefinite life
             190,470    —     190,470 
             
 
 
   
 
 
  
 
 
 
Total intangible assets
            $1,673,659   $(435,709)  $1,237,950 
             
 
 
   
 
 
  
 
 
 
23
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Weighted-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average

 

 

 

 

 

 

 

 

 

 

 

 

Estimated

 

Remaining

 

 

Gross

 

 

 

 

 

Net

 

 

 

Useful Life

 

Useful Life

 

 

Carrying

 

 

Accumulated

 

 

Carrying

 

 

 

(Years)

 

(Years)

 

 

Amount

 

 

Amortization

 

 

Amount

 

Customer relationships

 

16–18

 

 

12.6

 

 

$

1,299,750

 

 

$

(392,029

)

 

$

907,721

 

Acquired technologies

 

3–7

 

 

2.0

 

 

 

187,950

 

 

 

(142,511

)

 

 

45,439

 

Subtotal

 

 

 

 

 

 

 

1,487,700

 

 

 

(534,540

)

 

 

953,160

 

Trademarks—indefinite life

 

 

 

 

 

 

 

190,470

 

 

 

—

 

 

 

190,470

 

Total intangible assets

 

 

 

 

 

 

$

1,678,170

 

 

$

(534,540

)

 

$

1,143,630

 

The intangible assets balance as of December 31, 2020,2021, is reflected below (in thousands):

 

 

 

 

 

Weighted-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average

 

 

 

 

 

 

 

 

 

 

 

 

 

Estimated

 

 

Remaining

 

 

Gross

 

 

 

 

 

 

Net

 

 

 

Useful Life

 

 

Useful Life

 

 

Carrying

 

 

 

Accumulated

 

 

Carrying

 

 

 

(Years)

 

 

(Years)

 

 

Amount

 

 

 

Amortization

 

 

Amount

 

Customer relationships

 

16–18

 

 

 

13.3

 

 

$

1,299,750

 

 

 

$

(337,831

)

 

$

961,919

 

Acquired technologies

 

3–7

 

 

2.3

 

 

 

183,164

 

 

 

 

(122,318

)

 

 

60,846

 

Favorable lease terms

 

6

 

 

 

0.3

 

 

 

280

 

 

 

 

 

(266

)

 

 

14

 

Subtotal

 

 

 

 

 

 

 

 

1,483,194

 

 

 

 

(460,415

)

 

 

1,022,779

 

Trademarks—indefinite life

 

 

 

 

 

 

 

 

190,470

 

 

 

 

—

 

 

 

190,470

 

Total intangible assets

 

 

 

 

 

 

 

$

1,673,664

 

 

 

$

(460,415

)

 

$

1,213,249

 

       
Weighted-
            
       
Average
            
   
Estimated
   
Remaining
   
Gross
      
Net
 
   
Useful Life
   
Useful Life
   
Carrying
   
Accumulated
  
Carrying
 
   
(Years)
   
(Years)
   
Amount
   
Amortization
  
Amount
 
                    
Intangible assets:
                        
Customer relationships
   16–18    14.3   $1,299,750   $(265,567)  $1,034,183 
Acquired technologies
   3–7    3.3    183,154    (95,998)   87,156 
Favorable lease terms
   6    2.3    280    (172)   108 
             
 
 
   
 
 
  
 
 
 
Subtotal
             1,483,184    (361,737)   1,121,447 
Trademarks—indefinite life
             190,470    —     190,470 
             
 
 
   
 
 
  
 
 
 
Total intangible assets
            $1,673,654   $(361,737)  $1,311,917 
             
 
 
   
 
 
  
 
 
 

Amortization expense for intangible assets was $24.7$24.8 million and $24.7 million for the three months ended September 30, 2022 and 2021, and 2020.respectively. Amortization expense for intangible assets was $74.0$74.4 million and $74.0 million for the nine months ended September 30, 2022 and 2021, and 2020.

respectively.

Future amortization expense for the remainder of the year ended December 31, 20212022 and the following four years ended December 31 and thereafter for intangible assets as of September 30, 2021,2022, is as follows (in thousands):

Years Ending December 31:

 

 

 

2022

 

$

24,818

 

2023

 

 

99,003

 

2024

 

 

81,417

 

2025

 

 

72,949

 

2026

 

 

72,949

 

Thereafter

 

 

602,024

 

Total

 

$

953,160

 

21

13.
ACCRUED EXPENSES
Years Ending December 31:
    
2021
  $24,660 
2022
   98,627 
2023
   98,333 
2024
   80,731 
2025
   72,263 
Thereafter
   672,866 
   
 
 
 
Total
  $1,047,480 
   
 
 
 
12.
EQUITY METHOD INVESTMENT
In June 2021, the Company completed an investment in a limited partnership (the “Investee”), which is affiliated with one of the Company’s principal equity owners. The Company invested $10.2 million, including related fees and expenses, for an approximately 7% interest of the Investee.
The change in the carrying value of the investment during the nine months ended September 30, 2021 is summarized below as follows (in thousands):
   
Equity Method
 
   
Investment
 
     
Equity method investment carrying value at December 31, 2020
  $0   
Cash contributions
   10,228 
Share of net income (loss) from the Investee
   —   
   
 
 
 
Equity method investment carrying value at September 30, 2021
  $10,228 
   
 
 
 
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13.
ACCRUED EXPENSES

Accrued expenses as of September 30, 20212022 and December 31, 2020,2021, consist of the following (in thousands):

 

 

September 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Compensation

 

$

43,263

 

 

$

49,510

 

Professional services

 

 

4,178

 

 

 

2,371

 

Software license agreement

 

 

2,567

 

 

 

3,265

 

Royalties and licenses

 

 

4,543

 

 

 

2,640

 

Employee insurance benefits

 

 

3,586

 

 

 

2,443

 

Sales tax

 

 

2,411

 

 

 

2,296

 

Other

 

 

3,325

 

 

 

4,166

 

Total

 

$

63,873

 

 

$

66,691

 

14.
OTHER LIABILITIES
   
September 30,
   
December 31,
 
   
2021
   
2020
 
         
Compensation
  $45,940   $37,696 
Professional services
   12,262    2,753 
Phantom stock incentive plan
   10,220    —   
Royalties and licenses
   2,777    2,301 
Sales tax
   2,404    2,294 
Employee insurance benefits
   2,035    1,979 
Software license agreement
   2,304    —   
Other
   3,829    5,964 
   
 
 
   
 
 
 
Total
  $81,771   $52,987 
   
 
 
   
 
 
 
14.
OTHER LIABILITIES

Other liabilities as of September 30, 20212022 and December 31, 2020,2021, consist of the following (in thousands):

 

 

September 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

 

 

 

 

 

 

 

Deferred revenue-non-current

 

$

1,340

 

 

$

1,574

 

Software license agreement

 

 

1,189

 

 

 

4,211

 

Contingent consideration

 

 

200

 

 

 

—

 

Total

 

$

2,729

 

 

$

5,785

 

15.
LONG-TERM DEBT
   
September 30,
   
December 31,
 
   
2021
   
2020
 
         
Payroll tax deferment
  $3,152   $3,152 
Software license agreement
   1,917    234 
Deferred
revenue-non-current
   1,739    2,001 
Deferred rent
   —      4,461 
Phantom stock incentive plan
   —      3,217 
Fair value of interest rate swaps
   —      18,359 
Other
   —      1,346 
   
 
 
   
 
 
 
Total
  $6,808   $32,770 
   
 
 
   
 
 
 
15.
LONG-TERM DEBT

On September 21, 2021, CCC Intelligent Solutions Inc., an indirect wholly ownedwholly-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 replacesreplaced 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.

The repayment of outstanding borrowings under the First Lien Credit Agreement was determined to be a debt extinguishment and the Company recognized a $9.2 million loss on early extinguishment of debt in the condensed consolidated statement of operations and consolidated (loss) income during the three months ended September 30, 2021.

2021 Credit Agreement

—The 2021 Credit Agreement consists of an $800.0$800.0 million term loan (“Term B Loan”) and a revolving credit facility for an aggregate principal amount of $250.0$250.0 million (the “2021 Revolving Credit Facility”). The 2021 Revolving Credit Facility has a sublimit of $75.0$75.0 million for letters of credit. The Company received proceeds of $798.0$798.0 million, net of debt discount of $2.0$2.0 million, related to the Term B Loan.
25
Table As of Contents
September 30, 2022 and December 31, 2021, the unamortized debt discount was $1.7 million and $1.9 million respectively.

The Company incurred $9.8 

$9.8million in financing costs related to the Term B Loan. These costs were recorded to a contra debt account and are being amortized to interest expense over the term of the Term B Loan using the effective interest method. AtAs of September 30, 2022 and December 31, 2021, the unamortized debt discount was
financing costs were $9.8 million.
8.5 million and $9.5 million, respectively.

The Company incurred $3.1$3.1 million in financing costs related to the 2021 Revolving Credit Facility. These costs were recorded to thea deferred financing fees asset account and are being amortized to interest expense over the term of the 2021 Revolving Credit Facility using the effective interest method. AtAs of September 30, 2022 and December 31, 2021, the unamortized deferred financing fees asset balance was $3.1 million.

The$2.4 million and $2.9 million, respectively.

Beginning with the quarter ended March 31, 2022, the Term B Loan requires quarterly principal payments of $2.0$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 fiscalthe 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%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. TheAs of

22

September 30, 2022, the Company iswas not subject to the annual excess cash flow calculation in fiscal year 2021 and 0no such principal prepayments are required.

As of September 30, 2022 and December 31, 2021, the amount outstanding on the Term B Loan is $800.0$794.0 million and $800.0 million, respectively. As of September 30, 2022 and December 31, 2021, $8.0 million of which, $8.0 millionthe amount outstanding on the Term B Loan is classified as current in the accompanying condensed consolidated balance sheet.

Amounts outstandingsheets.

Borrowings under the 2021 Credit AgreementFacility bear interest at a variable raterates based on the ratio of the London Interbank Offer Rate (“LIBOR”), plus upCompany’s and its subsidiaries’ consolidated first lien net indebtedness to 2.50% per annum based upon the Company’s leverage ratio, as definedand its subsidiaries’ consolidated EBITDA for applicable periods specified in the 2021 Credit Agreement. The applicable interest rate for amounts outstanding under the Term B Loan are subject to a 0.50% per annum floor.Facility. A quarterly commitment fee of up to 0.50%0.50% is payable on the unused portion of the 2021 Revolving Credit Facility.

During the three months ended September 30, 2022 and 2021, the weighted-average interest rate on the outstanding borrowings under the Term B Loan was 3.0%.4.6% and 3.0%, respectively. The Company did 0t make anymade interest payments of $9.2 million during the three months ended September 30, 2022. There were no interest payments made during the three months ended September 30, 2021.

During the nine months ended September 30, 2022 and 2021, the weighted-average interest rate on the outstanding borrowings under the Term B Loan was 3.6% and 3.0%, respectively. The Company made interest payments of $21.6 million during the nine months ended September 30, 2022. There were no interest payments made during the nine months ended September 30, 2021.

The Company issued a standby letter of credit for $0.7$0.7 million during the three months ended September 30, 2021 which reduces the amount available to be borrowed under the 2021 Revolving Credit Facility and atas of September 30, 2022 and December 31, 2021, $249.3$249.3 million was available to be borrowed.

Borrowings under the 2021 Lien Credit Agreement are guaranteed by Cypress Holdings Intermediate Holdings II, Inc., and certain of its US subsidiaries by a perfected 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, that among other things, restrict, subject to certain exceptions, our ability to: incur additional indebtedness, incur liens, engage in mergers, consolidations, liquidations or dissolutions; pay dividends and distributions on, or redeem, repurchase or retire our capital stock; and make certain investments, acquisitions, loans, or advances.

In addition, beginning with the fiscal quarter endingthree months ended March 31, 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 over the prior four fiscal quarters exceeds 35%35% of the aggregate commitments, the Company’s leverage ratio cannot exceed 6.25 to 1.00.1.00. As of September 30, 2021,2022, 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 consisted of a $1.0 billion term loan (“First Lien Term Loan”) and revolving credit facilities for an aggregate principal amount of $100.0 million (the “First Lien Revolvers”), with a sublimit of $30.0 million for letters of credit under the First Lien Revolvers. The Company received proceeds of $997.5 million, net of debt discount of $2.5 million, related to the First Lien Term Loan.

In February 2020, the Company refinanced its long-term debt (“2020 Refinancing”) and entered into the First Amendment to the First Lien Credit Agreement (“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 loanrefinance were used to repay allthe outstanding borrowings underbalance of the Company's Second Lien Credit Agreement, (“Second Lien Credit Agreement”).

The repayment of outstanding borrowings under the Second Lien Credit Agreement was determined to be a debt extinguishment and the Company recognized an $8.6 million loss on early extinguishment of debtentered into in the condensed consolidated statements of operations and comprehensive (loss) income during the nine months ended September 30, 2020.
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The First Lien Credit Agreement initially consisted of a $1.0 billion term loan (“First Lien Term Loan”), a $65.0 million dollar revolving credit facility (“Dollar Revolver”), and a $35.0 million multicurrency revolving credit facility (“Multicurrency Revolver” and together with the Dollar Revolver, the “First Lien Revolvers”), with a sublimit of $30.0 million for letters of credit under the First Lien Revolvers. The Company received proceeds of $997.5 million, net of debt discount of $2.5 million, related to the First Lien Term Loan.
April 2017.

The First Lien Amendment provided an incremental term loan in the amount of $375.0$375.0 million. The Company received proceeds from the incremental term loan of $373.1$373.1 million, net of debt discount of $1.9$1.9 million. At December 31, 2020, the unamortized debt discount was $2.8 million.

In addition, 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 consistedRevolvers to an aggregate principal amount of commitments of $8.1 million and $4.4 million, respectively, which were scheduled to mature on $April 27, 202291.3. 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. million. The First Lien Revolvers continued to have a sublimit of $30.0$30.0 million for letters
of credit.

The Company incurred $27.6$27.6 million and $3.4$3.4 million in financing costs related to the First Lien Credit Agreement and First Lien Amendment, respectively. These costs were recorded to a contra debt account and were being amortized to interest expense over the term of the First Lien Credit Agreement using the effective interest method. The unamortized costs at the time of extinguishment of the First Lien Credit Agreement were recognized as a loss on early extinguishment of debt in the condensed consolidated statement operations and comprehensive (loss) income during the three months ended September 30, 2021.

The First Lien Term Loan required (after giving effect to the First Lien Amendment) quarterly principal payments of approximately $3.5$3.5 million until March 31, 2024,, with the remaining outstanding principal amount required to be paid on the maturity date, April 27, 2024.2024. 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%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 $1.5up to $21.9 million was required and paid inrequired. In April 2021.

The2021, the Company made a principal prepayment of $525.0$1.5 million to those lenders who made such a request.

Using a portion of the proceeds of the Business Combination, the Company made a 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 of $6.0 millionSubsequently, in the condensed consolidated statement of operations and comprehensive (loss) income during the three months ended September 30, 2021.

In September 2021, using the proceeds from the Term B Loan provided in the 2021 Credit Agreement and cash on hand, the Company fully repaid $804.2the remaining $804.2 million of outstanding borrowings on the First Lien Term Loan.
As of December 31, 2020, the amount outstanding on the First Lien Term Loan was $1,336.2 million, of which, $25.4 million was classified as current in the accompanying condensed consolidated balance sheet.

23

Amounts outstanding under the First Lien Credit Agreement bore interest at a variable rate of LIBOR, plus up to 3.00%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%0.50% was payable on the unused portion of the First Lien Revolvers.

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.4.1%. The Company made interest payments of $9.3 million and $13.7$9.3 million during the three months ended September 30, 2021 and 2020, respectively.

2021.

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.4.1%. The Company made interest payments of $36.1 million and $40.0$36.1 million during the nine months ended September 30, 2021 and 2020, respectively.

2021.

27
Table of Contents
In March 2020, the Company borrowed $65.0 million on its First Lien Revolvers. The borrowings were fully repaid in June 2020 and there were 0 outstanding borrowings on the First Lien Revolvers at December 31, 2020.
In May 2020, the Company issued a standby letter of credit for $0.7 million in lieu of a security deposit upon entering into a lease agreement for its new corporate headquarters. The standby letter of credit reduced the amount available to be borrowed under the First Lien Revolvers and at December 31, 2020, $90.6 million was available to be borrowed.
Borrowings under the First Lien Credit Agreement were guaranteed by Cypress Holdings Intermediate Holdings II, Inc., and certain of its US subsidiaries by a perfected first priority lien on the stock of CCC Intelligent Solutions Inc. and substantially all of its assets, subject to various limitations and exceptions.
The First Lien Credit Agreement contained representations and warranties, and affirmative and negative covenants, that among other things, restricted, subject to certain exceptions, our ability to: incur additional indebtedness, incur liens, engage in mergers, consolidations, liquidations or dissolutions; pay dividends and distributions on, or redeem, repurchase or retire our capital stock; and make certain investments, acquisitions, loans, or advances.
In addition, the terms of the First Lien Credit Agreement included a financial covenant which required that, at the end of each fiscal quarter, if the aggregate amount of borrowings under the First Lien Revolvers over the prior four fiscal quarters exceeded 35% of the aggregate commitments under those revolving credit facilities, the Company’s leverage ratio could not exceed 8.30 to 1.00. The Company was in compliance with its financial covenant as of the quarter ended March 31, 2020. Borrowings under the First Lien Revolvers did not exceed 35% of the aggregate commitments and the Company was not subject to the leverage test for all fiscal quarters ending after March 31, 2020.
Second Lien Credit Agreement
—In April 2017, the Company entered into the Second Lien Credit Agreement.
The Second Lien Credit Agreement consisted of a $375.0 million term loan (“Second Lien Term Loan”). The Company received proceeds of $372.2 million, net of discount of $2.8 million. The discount was recorded to a contra debt account and was being amortized to interest expense over the life of the Second Lien Term Loan using the effective interest method. At the time of the 2020 Refinancing, the debt discount was written off to loss on early extinguishment of debt.
The Company incurred $8.9 million in financing costs related to the Second Lien Credit Agreement. These costs were recorded to a contra debt account and were being amortized to interest expense over the term of the Second Lien Term Loan using the effective interest method. At the time of the 2020 Refinancing, there were $6.6 million of unamortized financing costs which were written off to loss on early extinguishment of debt.
The Second Lien Term Loan required no principal payments and all outstanding principal was scheduled to be due upon maturity on April 25, 2025.
Amounts outstanding under the Second Lien Term Loan bore interest at a variable rate of LIBOR, plus 6.75%. Prior to extinguishment in February 2020, the weighted-average interest rate on the Second Lien Term Loan was 8.6% and the Company made interest payments of $4.0 million.
The Second Lien Term Loan was guaranteed by Cypress Holdings Intermediate Holdings II, Inc., and certain of its US subsidiaries by a perfected second priority lien on the stock of CCC Intelligent Solutions Inc. and substantially all of its assets, subject to various limitations and exceptions.
The Second Lien Credit Agreement contained representations and warranties, and affirmative and negative covenants, that among other things, restricted, subject to certain exceptions, the Company’s ability to: incur additional indebtedness, incur liens, engage in mergers, consolidations, liquidations or dissolutions; pay dividends and distributions on, or redeem, repurchase or retire out capital stock; and make certain investments, acquisitions, loans, or advances. The Second Lien Credit Agreement had no financial covenants.
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Table of Contents

Long-term debt as of September 30, 20212022 and December 31, 2020,2021, consists of the following (in thousands):

 

 

September 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Term B Loan

 

$

794,000

 

 

$

800,000

 

Term B Loan—discount

 

 

(1,730

)

 

 

(1,926

)

Term B Loan—deferred financing fees

 

 

(8,500

)

 

 

(9,464

)

Term B Loan—net of discount & fees

 

 

783,770

 

 

 

788,610

 

Less: Current portion

 

 

(8,000

)

 

 

(8,000

)

Total long-term debt—net of current portion

 

$

775,770

 

 

$

780,610

 

   
September 30,
   
December 31,
 
   
2021
   
2020
 
Term B Loan
  $ 800,000   $—   
Term B Loan—discount
   (1,992)    —   
Term B Loan—deferred financing fees
   (9,790)    —   
   
 
 
   
 
 
 
Term B Loan—net of discount & fees
   788,218    —   
   
 
 
   
 
 
 
First Lien Term Loan
   —      1,336,154 
First Lien Term Loan—discount
   —      (2,788) 
First Lien Term Loan—deferred financing fees
   —      (15,388) 
   
 
 
   
 
 
 
First Lien Term Loan—net of discount & fees
   —      1,317,978 
   
 
 
   
 
 
 
Less: Current portion
   (8,000)    (25,381) 
   
 
 
   
 
 
 
Total long-term debt—net of current portion
  $780,218   $ 1,292,597 
   
 
 
   
 
 
 

Interest Rate Cap—In August 2022, the Company entered into two interest rate cap agreements to reduce its exposure to increases in interest rates applicable to its floating rate long-term debt. The aggregate notional value of the interest rate cap agreements is $600.0 million with a cap rate of 4.0% and an expiration date of July 31, 2025. The premium paid for the interest rate cap agreements was $6.3 million and recognized in cash flows from operating activities in the accompanying condensed consolidated statement of cash flows. As of September 30, 2021,2022, the deferred financing fees asset balance includes $3.1 million in relation to the 2021 Revolving Credit Facility. As of December 31, 2020, the deferred financing fees asset balance included $0.7 million in relation to the First Lien Revolvers. The deferred financing fees are amortized to interest expense over the termsaggregate fair value of the underlying agreements.

interest rate cap agreements was $12.3 million (see Note 6).

Interest Rate Swaps

—In June 2017, the Company entered into three floating to fixed interest rate swap agreements (“("Swap Agreements”Agreements") to reduce ourits exposure to the variability from future cash flows resulting from interest rate risk related to ourits floating rate long-term debt. OnIn September 21, 2021, the Company made an aggregate payment of $10.0$10.0 million to extinguish the Swap Agreements thatwhich were scheduled to expire in June 2022. The aggregate notional amount of the Swap Agreements totaled $864.9 million at December 31, 2020.2022.

16.
Capital stock
16.
LONG-TERM LICENSING AGREEMENT
During 2018, the Company entered into a licensing agreement with a third party to obtain a perpetual software license (“Licensing Agreement”) for a database structure, tools, and historical data used within the Company’s software. The Company has included the present value of the future payments required as a long-term licensing agreement within the accompanying condensed consolidated balance sheets. The present value of the future payments was computed using an effective annual interest rate of 6.25%, and the Licensing Agreement requires the Company to make quarterly principal and interest installment payments of approximately $1.2 million through December 2031.
The present value of the future cash flows upon execution of the agreement was $45.6 million, which included an original discount of $23.2 million. At September 30, 2021, the remaining liability, net of the discount was $37.0 million, with $2.7 million classified as current. At December 31, 2020, the remaining liability, net of the discount was $38.9 million, with $2.5 million classified as current.
The discount was recorded to a contra liability account and is being amortized to interest expense over the term of the agreement using the effective interest method. During the three months ended September 30, 2021 and 2020, the Company recognized $0.6 million in interest expense related to the Licensing Agreement. During the nine months ended September 30, 2021 and 2020, the Company recognized $1.8 million and $1.9 million, respectively, in interest expense related to the Licensing Agreement. At September 30, 2021 and December 31, 2020, $13.4 million and $15.2 million, respectively, of the discount was not yet amortized.
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Table of Contents
17.
REDEEMABLE
NON-CONTROLLING
INTEREST
On March 12, 2020 (the “Close Date”), the Company closed a stock purchase agreement (the “Stock Purchase Agreement”) with a third-party investor (the “Investor”) for purchase by the Investor of Series A

Preferred Stock in CCCIS Cayman Holdings Limited (“CCC Cayman”), the parent of the Company’s China operations. On the Close Date, CCC Cayman, a subsidiary of the Company, issued 1,818 shares of Series A Preferred Stock (the “Preferred Shares”) at $7,854 per share to the Investor for net proceeds of $14.2 million. On an

as-converted
basis, the Preferred Shares represent an aggregate 10.7% initial ownership interest of the issued and outstanding capital stock of CCC Cayman, or 9.1% on a fully-diluted basis if all shares reserved for issuance under the Company’s CCC Cayman employee incentive plan were issued and outstanding.
The Preferred Shares are entitled to
non-cumulative
dividends at an annual rate of 8.0%, when and if declared.
At the option of the Investor, the Preferred Shares are convertible into ordinary shares of CCC Cayman, initially on a
one-for-one
basis but subject to potential adjustment, as defined by the Stock Purchase Agreement, at any time, or automatically upon the closing of an initial public offering.
The Preferred Shares are redeemable upon an actual or deemed redemption event as defined in the Stock Purchase Agreement or at the option of the Investor beginning on the five-year anniversary of the Close Date, if an actual or deemed redemption event has not yet occurred. The redemption price, as defined by the Stock Purchase Agreement, is equal to the original issue price of the Preferred Shares, plus 10.0% compound interest per annum on the Preferred Share issue price, plus any declared but unpaid dividends on the Preferred Shares.
The Preferred Shares are entitled to distributions upon the occurrence of a sale or liquidation of CCC Cayman representing an amount that is equal to the original issue price of the Preferred Shares, plus
10.0
% compound interest per annum on the Preferred Share issue price, plus any declared but unpaid dividends.
The Preferred Shares do not participate in net income or losses.
As of September 30, 2021 and December 31, 2020, the Investor’s ownership in CCC Cayman is classified in mezzanine equity as a redeemable
non-controlling
interest, because it is redeemable on an event that is not solely in the control of the Company. The Investor’s
non-controlling
interest is not remeasured to fair value because it is currently not probable that the
non-controlling
interest will become redeemable. If the Investor’s
non-controlling
interest becomes probable of being redeemable, the Company will be required to remeasure the
non-controlling
interest at fair value with changes in the carrying value recognized in additional
paid-in
capital.
At September 30, 2021 and December 31, 2020, the carrying value of the redeemable
non-controlling
interest was $14.2 million.
18.
CAPITAL STOCK
The condensed consolidated statements of mezzanine equity and stockholders’ equity reflect the Business Combination as of the Closing Date as discussed in Note 3. As CCCIS was determined to be the accounting acquirer in the Business Combination, all periods prior to the Closing Date reflect the balances and activity of CCCIS. The balances, share activity and per share amounts prior to the Closing Date were retroactively adjusted, where applicable, using the Exchange Ratio of the Business Combination.
Preferred Stock
—The Company is authorized to issue up to 100,000,000 shares of undesignated preferred stock with a par value of $0.0001$0.0001 per share with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. As of September 30, 2021,2022, there were 0no shares of preferred stock issued or outstanding.

Common Stock

—The Company is authorized to issue up to 5,000,000,000 shares of common stock with a par value of $0.0001$0.0001 per share. Each holder of common stock is entitled to one (1) vote for each share of common stock held of record by such holder on all matters voted upon by the stockholders, subject to the restrictions set out in the CertificateCompany's certificate of Incorporation.incorporation. Holders of common stock are entitled to receive any dividends as may be declared from time to time by the board of directors. Upon a liquidation event, subject to the rights of the holders of any Preferred Stock issued and outstanding at such time, any distribution shall be made on a pro rata basis to the common stockholders.
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Table of Contents

There were 603,170,380620,117,025 and 504,274,890609,768,296 shares of common stock issued and outstanding as of September 30, 20212022 and December 31, 2020,2021, respectively.

Capital Stock Activity Prior

During April 2022, certain existing shareholders completed a secondary offering where the selling shareholders sold 20,000,000 shares of common stock at a price to the Business Combination

public of $9.70 per share. The Company did not receive proceeds from the sale of the shares by the existing stockholders. In connection with the offering, the Company incurred $1.2 million of offering costs during the nine months ended September 30, 2022, which are included within general and administrative expenses on the condensed consolidated statements of operations and comprehensive income (loss).

Dividends

—In July 2021, the board of directors of CCCIS declared a cash dividend on its common stock. The aggregate cash dividend of $134.6$134.6 million was paid on August 3, 2021.

24

In March 2021, the board of directors of CCCIS declared a cash dividend on its common stock. The aggregate cash dividend of $134.5$134.5 million was paid on March 17, 2021.

17.
STOCK INCENTIVE PLANS

In connection with the dividends paid in March 2021 and August 2021, certain

CCCIS option holders received a strike price reduction of $66.40 per option to compensate for a reduction in the fair value of the underlying shares. The strike price reduction did not result in any incremental fair value and thus no additional stock-based compensation expense was recognized and the aggregate payment to the option holders of $9.0 million was recorded as a deemed distribution.
Share Issuances—
In February 2021, CCCIS issued 883,729 shares of common stock to an executive and recorded stock-based compensation expense of $8.0 million, equal to the fair value of the common shares at the time of issuance.
In January 2021, CCCIS issued 110,679 shares of common stock to a board member for aggregate cash proceeds of $1.0 million, equal to the fair value of the common shares at the time of issuance.
In February 2020, CCCIS issued 340,551 shares of common stock to an executive and recorded stock-based compensation expense of $1.6 million, equal to the fair value of the common stock at the time of issuance.
19.
EMPLOYEE BENEFIT PLANS
The Company sponsors a
tax-qualified
defined contribution savings and investment plan, CCC 401
(k) Retirement Savings and Investment Plan (the “Savings Plan”). Participation in the Savings Plan is voluntary with substantially all domestic employees eligible to participate. Expenses related to the Savings Plan consist primarily of the Company’s contributions that are based on percentages of employees’ contributions. The defined contribution expense for the three
months ended September 30
, 2021
and 2020
was $1.4 million and $1.1 million, respectively. The defined contribution expense for the nine
months ended September 30
, 2021
and 2020
was $4.2 million and $3.3 million,
respectively
.
20.
STOCK INCENTIVE PLANS
Prior to the Business
 Combination, the Company maintained its
2017
Stock Option Plan (the “
2017
Plan”).
Awards granted under the 2017 Plan have time-based vesting or performance-based with a market condition vesting requirement. Options expire on the tenth anniversary of the grant date.
Additionally, the Company maintained a Phantom Stock Plan (the “Phantom Plan”), which provided for the issuance of phantom shares of CCCIS’s common stock (“Phantom Shares”) to eligible employees under the 2017 Plan. Awards under the Phantom Plan are settled in cash and thus accounted for as liability awards.
Phantom shares vest under the same time-based or performance-based with a market condition as the stock options granted under the 2017 Plan.
Pursuant to the original terms of the 2017 Plan and the Phantom Plan, performance-based awards with a market condition and the Phantom Shares would not vest on occurrenceclosing of the Business Combination. However, 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. As such, at the time of such modification, the Company recognized $203.9 million of additional stock-based compensation based on the fair value of the performance-based awards with a market condition and $6.0 million of additional stock-based compensation based on the fair value of the Phantom Shares.
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Table of Contents
In connection with the Closing of the Business Combination, the Company adjusted the outstanding awards as described in Note 3 and the 2021 Equity Incentive Plan (the “2021 Plan”"2021 Plan") was adopted and approved by the Company’sCompany's board of directors.

Prior to the Business Combination, the Company maintained its 2017 Stock Option Plan (the “2017 Plan”).

Upon the adoption and approval of the 2021 Plan, the 2017 Plan was terminated and each outstanding vested or unvested option, as required under the 2017 Plan, was converted to the 2021 Plan, multiplied by the Exchange Ratio, with the same key terms and vesting requirements. All stock option activity prior to the closing of the Business Combination on July 30, 2021 has been retroactively restated to reflect the Exchange Ratio.

The purpose of the 2021 Plan is to enableAdditionally, the Company to attract, retain, and motivate employees, consultants, and independent membersmaintained a Phantom Stock Plan (the “Phantom Plan”), which provided for the issuance of the boardphantom shares of directors of the Company and its subsidiaries by allowing them to become owners ofCCCIS’s common stock enabling them(“Phantom Shares”) to benefit directly from the growth, development, and financial successes of the Company.
As of September 30, 2021, 147,053,215 shares of common stock are reserved for issuance in accordance with the 2021 Plan. The total number of shares of common stock that will be reserved and that may be issuedeligible employees under the 2021 Plan will automatically increase on the first day of each fiscal year, beginning with fiscal year 2022, by a number of shares equal to 5.0% of the total number of shares of common stock outstanding on the last day of the prior fiscal year or such lesser amount as determined by the board of directors.
As of September 30, 2021, the Company has 89,181,807 shares available for grant2017 Plan.

Awards granted under the plan.

The Company records stock compensation expense for its time-based awards on a straight-line basis over the service-vesting period. Time-based awards generally vest ratably over a five-year period based on continued service. Vesting of the time-based awards can be accelerated in certain circumstances.
Stock Options
—During the nine months ended September 30, 2021, the Company granted 2,822,484 stock options, of which 2,754,374 have2017 Plan and Phantom Plan had time-based vesting and 68,110 haveor performance-based with a market condition vesting. vesting requirements.

The exercise priceboard of all stock options granted during the nine months ended September 30, 2021 is equal to the fair valuedirectors of the underlying shares at the grant date.

The valuation of time-based stock options granted during the nine months ended September 30, 2021 was determined using the Black-Scholes option valuation model using the following assumptions:
Expected term (in years)
   6.5 
Expected volatility
   40% 
Expected dividend yield
   0% 
Risk-free interest rate
   0.62 -0.67% 
Fair value at valuation date
  $3.67 
For performance-based awards withCCCIS approved a market condition, the market condition is required to be considered when calculating the grant date fair value. ASC Topic 718 requires the Company to select a valuation techniquemodification that best fits the circumstances of an award. In order to reflect the substantive characteristicsresulted 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 Monte Carlo simulation valuation model was used to calculate the grant datenew fair value of such stock options. Monte Carlo approaches are a classthe modified awards and recognized $203.9 million of computational algorithms that relystock-based compensation based on repeated random sampling to compute their results. This approach allows the calculation of the fair value of such stock options based on a large number of possible scenarios. Stock-based compensation expense for the performance-based awards with a market condition is not recognized until the performance condition is probable of occurring. The valuation of the performance-based awards with a market condition granted during the nine months ending September 30, 2021 was determined through the Monte Carlo simulation model using the following assumptions:
Expected term (in years)
5.5
Expected volatility
33% 
Expected dividend yield
0% 
Risk-free interest rate
0.44% 
Fair value at valuation date
$
0.88
Expected Term—The expected term represents the period that theand $6.0 million of stock-based awards are expected to be outstanding. The Company uses the simplified method to determine the expected term for its option grants. The simplified method calculates the expected term as the average of the
time-to-vesting
and the contractual life of the stock options. The Company uses the simplified method to determine its expected term because of its limited history of stock option exercise activity.
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Table of Contents
Expected Volatility—Prior to the Business Combination, the Company was privately held and did not have any trading history for its common stock. Thus, the expected volatility was estimatedcompensation based on the average volatility for comparable publicly traded companies over a period equal to the expected termfair value of the stock option grants.
Expected Dividend—Historically, the Company has not paid regular dividends on its common stock and has no plans to pay dividends on common stock on a regular basis. The Company does not have a dividend policy. Therefore, the Company used an expected dividend yield of zero.
Risk-Free Interest Rate—The risk-free interest rate is based on the US Treasury zero coupon issues in effect at the time of grant for periods corresponding with the expected term of awards.
The Company used a
pre-vesting
forfeiture rate to estimate the number of options that are expected to vest that was based on the Company’s historical turnover rate.
Phantom Shares.

Stock Options—The table below summarizes the option activity for the nine months

ended September 30, 2021:2022:

 

 

 

 

 

 

 

 

Weighted-

 

 

 

 

 

 

 

 

 

 

 

 

Average

 

 

 

 

 

 

 

 

 

Weighted-

 

 

Remaining

 

 

Aggregate

 

 

 

 

 

 

Average

 

 

Contractual

 

 

Intrinsic

 

 

 

 

 

 

Exercise

 

 

Life

 

 

Value

 

 

 

Shares

 

 

Price

 

 

(in years)

 

 

(in thousands)

 

Options outstanding—December 31, 2021

 

 

55,644,495

 

 

$

2.95

 

 

 

6.0

 

 

$

469,591

 

Exercised

 

 

(8,367,100

)

 

 

2.73

 

 

 

 

 

 

 

Forfeited and canceled

 

 

(272,295

)

 

 

4.64

 

 

 

 

 

 

 

Options outstanding—September 30, 2022

 

 

47,005,100

 

 

$

2.98

 

 

 

5.2

 

 

$

287,659

 

Options exercisable—September 30, 2022

 

 

43,168,788

 

 

$

2.73

 

 

 

4.9

 

 

$

274,947

 

Options vested and expected to vest—September 30, 2022

 

 

46,752,866

 

 

$

2.96

 

 

 

5.1

 

 

$

286,840

 

       
Weighted-
   
Weighted-Average
     
       
Average
   
Remaining
   
Aggregate
 
       
Exercise
   
Contractual Life
   
Intrinsic Value
 
   
Shares
   
Price
   
(in years)
   
(in thousands)
 
Options outstanding—December 31, 2020
   55,570,039   $ 3.03    6.9    337,358 
Granted
   2,822,484    8.58           
Exercised
   (163,124)    2.85           
Forfeited and canceled
   (614,012)    3.58           
   
 
 
                
Options outstanding—September 30, 2021
   57,615,387    2.95    6.2    435,840 
   
 
 
                
Options exercisable—September 30, 2021
   47,590,596    2.68    6.0    372,485 
   
 
 
                
Options vested and expected to vest—September 30, 2021
   57,038,128    2.93    6.2    432,717 
   
 
 
                
During the nine months ended September 30, 2021, the Company issued 161,080 shares of common stock upon exercise of 163,124 stock options. As part of cashless exercises, 2,044 shares were applied to the exercise price and tax obligations of the option holders.

The fair value of the options vested during the nine months ended September 30, 20212022 was $213.0 million,$8.4 million.

Restricted Stock Units—Restricted Stock Units (“RSUs”) are convertible into shares of the Company’s common stock upon vesting.

During the nine months ended September 30, 2022, the Company granted 15,824,517 RSUs, of which $203.9 million was attributable to the modified awards that vested upon the Closing14,445,917 have time-based vesting requirements, 689,325 have performance-based vesting requirements and 689,275 have performance-based with a market condition vesting requirements.

The valuation of the Business Combination.performance-based RSUs with a market condition granted during the nine months ended September 30, 2022 was determined using a Monte Carlo simulation model using the following assumptions:

Expected term (in years)

2.8

Expected volatility

35%

Expected dividend yield

0%

Risk-free interest rate

2.28%

The estimated fair value of the performance-based RSUs with a market condition granted during the nine months ended September 30, 2022 was $7.42.

The table below summarizes the RSU activity for the nine months ended September 30, 2022:

25

 

 

 

 

 

Weighted-

 

 

 

 

 

 

Average

 

 

 

Shares

 

 

Fair Value

 

Non-vested RSUs—December 31, 2021

 

 

18,558,211

 

 

$

10.74

 

Granted

 

 

15,824,517

 

 

 

10.13

 

Vested

 

 

(2,081,478

)

 

 

11.36

 

Forfeited

 

 

(963,556

)

 

 

11.02

 

Non-vested RSUs—September 30, 2022

 

 

31,337,694

 

 

 

10.38

 

Employee Stock Purchase Plan—As of September 30, 2022, 6,031,714 shares of common stock are reserved for sale under the Employee Stock Purchase Plan ("ESPP"). The aggregate number of shares reserved for sale under the ESPP increases on January 1 by the lesser of 1% of the total numbers of shares outstanding or a lesser amount as determined by the board of directors.

As of September 30, 2022, 408,879 shares had been sold under the ESPP.

The fair value of ESPP purchase rights sold during the nine months ended September 30, 2022 was estimated using the Black Scholes option pricing model with the following assumptions:

Expected term (in years)

0.5

Expected volatility

47%

Expected dividend yield

0%

Risk-free interest rate

0.2%

Company Earnout Shares

—Pursuant
t
o to the Business Combination Agreement, CCCIS shareholders and option holders, subject to continued employment, have the right to receive up to an additional 13,500,000 shares13.5 million and 1,500,000
1.5 million shares of common stock, respectively, if before the tenth anniversary of the Closing, (a) the share price has been greater than or equal to
$15.00 per share for any twentytrading days within any thirty
consecutive trading day period beginning after Closing, or (b) there is a change in control, as defined in the Business Combination Agreement.

The fair value of the Company Earnout Shares was estimated on the date of the grant, using the Monte Carlo simulation method. Compensation expense on the shares granted to option holders iswas recorded ratably over the implied service period of five months beginning on July 30,30. 2021. During the three months ended September 30, 2021, the Company recognized

$8.1
million of stock-based compensation expense related to the Company Earnout Shares granted to the CCCIS option holders.
Shares.

Phantom Stock
—Phantom Shares vest under the same time-based or performance-based with a market condition as the stock options granted under the 2017 Plan. The valuation of Phantom Shares is measured based on the fair value per share of the Company’s common stock.
33
Table of Contents
NaN Phantom Shares were granted during the nine months ended September 30, 2021. Upon consummation of the Business Combination on July 30, 2021, all outstanding Phantom Shares vested. As of September 30, 2021, there are 0 outstanding Phantom Shares.
During the three and nine months ended September 30, 2021, the Company recognized stock-based compensation expense of $5.9 million and $7.0 million, respectively, of which $5.9 million in each period was due to the modification of the vesting terms of the Phantom Shares. During the three and nine months ended September 30, 2020, the Company recognized stock-based compensation expense of $0.1 million and $0.2 million, respectively, related to the Phantom Shares. At September 30, 2021, the outstanding liability for the Phantom Shares is $10.2 million and is classified within accrued liabilities in the accompanying condensed consolidated balance sheet. At December 31, 2020, the outstanding liability for the Phantom Shares was $3.2 million, and was classified within other liabilities in the accompanying condensed consolidated balance sheet.

Stock-Based Compensation

—Stock-based compensation expense has been recorded in the accompanying condensed consolidated statements of operations and comprehensive income (loss) income as follows for the three and nine months ended September 30, 20212022 and 20202021 (in thousands):

 

 

For the Three Months Ended

 

 

For the Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Cost of revenues

 

$

1,657

 

 

$

12,169

 

 

$

4,167

 

 

$

12,563

 

Research and development

 

 

5,373

 

 

 

35,472

 

 

 

14,433

 

 

 

36,748

 

Sales and marketing

 

 

6,890

 

 

 

58,770

 

 

 

18,331

 

 

 

60,060

 

General and administrative

 

 

14,802

 

 

 

113,465

 

 

 

43,838

 

 

 

126,042

 

Total stock-based compensation expense

 

$

28,722

 

 

$

219,876

 

 

$

80,769

 

 

$

235,413

 

   
For the Three Months Ended
September 30,
   
For the Nine Months Ended
September 30,
 
   
2021
   
2020
   
2021
   
2020
 
Cost of revenues
  $12,169   $141   $12,563   $380 
Research and development
   35,472    274    36,748    895 
Sales and marketing
   58,770    480    60,060    1,554 
General and administrative
   113,465    975    126,042    4,641 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total stock-based compensation expense
  $ 219,876   $ 1,870   $ 235,413   $ 7,470 
   
 
 
   
 
 
   
 
 
   
 
 
 

As of September 30, 2021,2022, there was $15.5$185.6 million of unrecognized stock compensation expense related to

non-vested
time-based awards which is expected to be recognized over a weighted-average period of 3.1 years.
21.
WARRANTS
As of September 30, 2021,2022, there was $81.9 million of unrecognized stock-based compensation expense related to non-vested performance-based awards to be recognized over a weighted-average period of 1.6 years.

18.
WARRANTS

Upon consummation of the Business Combination (see Note 3), the Company had 86,500,000 Public Warrants and 17,800,000 Private Warrants outstanding.

assumed the outstanding Public Warrants and Private Warrants mayissued by Dragoneer.

Public Warrants were only able to be exercised for a whole number of shares of the Company’s common stock. No fractional shares will be issued upon exercise of theAll Public Warrants. Each whole Public Warrant entitles the registered holder to purchase

1-fifth
of 1 share of the Company’s common stock, and each whole Private Warrant entitles the registered holder to purchase one share of the Company’s common stock. All warrants haveWarrants had an exercise price of $11.50$11.50 per share, subject to adjustment, beginning on August 29, 2021, and willwere to expire on July 30, 2026 or earlier upon redemption or liquidation.
34

26

Table of Contents
Redemptions of warrants when the price per share equals or exceeds $18.00
—At any time while the warrants are exercisable,

On November 29, 2021, the Company mayannounced that it had elected to redeem not less than all of the outstanding warrants (except as described with respect to the Private Warrants):

at a price of $0.01 per warrant;
upon a minimum of 30 days prior written notice of redemption to each warrant holder; and
if, and only if, the closing price of the Company’s common shares equals or exceeds $18.00 per share (as adjusted)Public Warrants on the trading day prior to the dateDecember 29, 2021. Each Public Warrant not exercised before 5:00 p.m. Eastern Daylight Time on which the Company sends the notice of redemption to the warrant holders.
If and when the warrants become redeemableDecember 29, 2021 was redeemed by the Company the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
Redemptions of warrants when the price per share equals or exceeds $10.00
—At any time while the warrants are exercisable, the Company may redeem not less than all of the outstanding warrants (except as described with respect to the Private Placement Warrants):
at a price of $0.10 per warrant;
upon a minimum of 30 days prior written notice of redemption provided holders will be able to exercise their warrants on a “cashless basis” prior to redemption$0.10 and receive that number of shares determined by reference to an agreed table based on the redemption date and the fair market value of the Company’s common stock; and
if, and only if, the closing price of the Company’s common stock equals or exceeds $10.00 per share (as adjusted) on the trading day prior to the date on which the Company sends the notice of redemption to the warrant holders.
If the Company calls the Public Warrants for redemption, as described above,subsequently ceased trading on the Company will haveNew York Stock Exchange.

Of the option to require any holder that wishes to exercise the17,299,983 Public Warrants to do sothat were outstanding as of the closing of the Business Combination, 10,638 warrants were exercised for cash proceeds of $0.1 million and 15,876,341 were exercised on a cashless basis as described in the warrant agreement. The exercise price and numberexchange for an aggregate of 4,826,339 shares of common shares issuable upon exercisestock. The Company paid $0.1 million to redeem the remaining 1,413,004 unexercised Public Warrants. As of theDecember 31, 2021, there were no Public Warrants may be adjusted in certain circumstances including in the event of a share dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation. The Public Warrants will not be adjusted for issuances of the common stock at a price below its exercise price and in no event will the Company be required to net cash settle the Public Warrants.

outstanding.

The Private Warrants are identical to the Public Warrants underlying the shares sold in Dragoneer’s initial public offering. Additionally, the Private Warrants are exercisable on a cashless basis and are

non-redeemable,
except as described above, so long as they are held by the initial purchasers or their permitted transferees. If the Private Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.

Private Warrants may only be exercised for a whole number of shares of the Company’s common stock. Each whole Private Warrant entitles the registered holder to purchase one share of the Company’s common stock. All warrants have an exercise price of $11.50 per share, subject to adjustment, beginning on August 29, 2021, and will expire on July 30, 2026 or earlier upon redemption or liquidation.

There were no exercises or redemptions of the Public Warrants or Private Warrants during the periodthree and nine months ended September 30, 2021.

The2022. As of September 30, 2022 and December 31, 2021, the Company determined the Public Warrants andhad 17,800,000 Private Warrants do not meet the criteria to be classified in stockholders’ equity and the fair value of the warrants should be classified as a liability.
outstanding.

The Company recognized an expenseincome of $26.9$0.3 million and $23.5 million as a change in fair value of warrant liabilities in the condensed consolidated statements of operations and comprehensive income (loss) income for each of the three and nine months ended September 30, 2021. At2022, respectively.

The Company recognized an expense of $26.9 million as a change in fair value of warrant liabilities in the condensed consolidated statements of operations and comprehensive income (loss) for the three and nine months ended September 30, 2021.

As of September 30, 2022 and December 31, 2021, the Company’s warrant liability was $85.3 million.

$39.0 million and $62.5 million, respectively.

19.
COMMITMENTS
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22.
COMMITMENTS

Purchase Obligations

—The Company has long-term agreements with suppliers and other parties related to licensing data used in its products and services, outsourced data center, disaster recovery, and software as a service that expire at various dates through 2031.
During February 2021, the Company entered into a purchase agreement with a supplier. The agreement includes minimum purchase commitments of $15.5 million, $7.1 million, and $6.9 million during the twelve-month periods ending February 28, 2022, February 28, 2023, and February 29, 2024, respectively. 2031. As of September 30, 2021,2022, there were no other material changes from the amounts disclosed as of December 31, 2020.
2021.

Guarantees—The Company’s services and solutions are typically warranted to perform in a manner consistent with general industry standards that are reasonably applicable and substantially in accordance with the Company’s services and solutions documentation under normal use and circumstances. The Company’s services and solutions are generally warranted to be performed in a professional manner and to materially conform to the specifications set forth in the related customer contract. The Company’s arrangements also include certain provisions for indemnifying customers against liabilities if its services and solutions infringe a third party’s intellectual property rights.

To date, the Company has not incurred any material costs as a result of such indemnifications or commitments and has not accrued any liabilities related to such obligations in the accompanying consolidated financial statements.

Employment Agreements

—The Company is a party to employment agreements with key employees that provide for compensation and certain other benefits. These agreements also provide for severance payments and bonus payments under certain circumstances.

20.
LEGAL PROCEEDINGS AND CONTINGENCIES
23.
LEGAL PROCEEDINGS AND CONTINGENCIES

In the ordinary course of business, the Company is from time to time, involved in various pending or threatened legal actions. The litigation process is inherently uncertain, and it is possible that the resolution of such matters might have a material adverse effect upon the Company’s consolidated financial condition and/or results of operations. The Company’s management believes, based on current information, matters currently pending or threatened are not expected to have a material adverse effect on the Company’s consolidated financial position or results of operations.

27

21.
ReLATED PARTIES
24.
RELATED PARTIES
The Company reimburses its principal equity owners for services and any related travel and
out-of-pocket
expenses. During the three months ended September 30, 2021 and 2020, the Company had expenses for services, travel and
out-of-pocket
expenses to its principal equity owners of $50 thousand and $47 thousand, respectively. During the nine months ended September 30, 2021 and 2020, the Company had expenses for services, travel and
out-of-pocket
expenses to its principal equity owners of $0.2 million and $0.1 million, respectively.

The Company has engaged in transactions within the ordinary course of business with entities affiliated with its principal equity owners.

The following table summarizes revenues and incurred expenses with entities affiliated with one of its principal equity owners. The Company incurred expensesowners for human resource support services of $0.1 million and $0.2 million during the three and nine months ended September 30, 2022 and 2021 (in thousands):

 

 

For the Three Months Ended

 

 

For the Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

Credit card processing

 

$

233

 

 

$

122

 

 

$

574

 

 

$

269

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

Employee health insurance benefits

 

 

716

 

 

 

755

 

 

 

2,353

 

 

 

2,190

 

Human resources support services

 

 

59

 

 

 

53

 

 

 

196

 

 

 

194

 

Sales tax processing and license fees for tax information

 

 

245

 

 

*

 

 

 

443

 

 

*

 

*Not material

The following table summarizes amounts receivable and 2020, respectively. The associated payable for the human resource support services was de minimis at September 30, 2021 and December 31, 2020.

Additionally, the Company incurred expenses for employee health insurance benefits with an entitydue to entities affiliated with one of its principal equity owners as of $0.8 million during the three months ended September 30, 2021 and $2.2 million during the nine months ended September 30, 2021. At September 30, 2021, the associated payable was $0.2 million. The affiliated entity providing employee health insurance benefits was not a related party prior to January 2021.
The Company recognized revenue from a customer that is affiliated with one of its principal equity owners. The Company recognized revenue of $0.1 million and $0.3 million during the three and nine months ended September 30, 2021, respectively. Revenue recognized during the three and nine months ended September 30, 2020 was de minimis. At September 30, 20212022 and December 31, 2020, the associated receivables were de minimis.2021 (in thousands):

 

 

September 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Receivables

 

 

 

 

 

 

Credit card processing

 

*

 

 

*

 

Payables

 

 

 

 

 

 

Employee health insurance benefits

 

$

208

 

 

$

232

 

Human resources support services

 

*

 

 

*

 

Sales tax processing and license fees for tax information

 

*

 

 

*

 

*Not material

22.
NET INCOME (LOSS) PER SHARE
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In June 2021, the Company completed a strategic investment in a limited partnership (the “Investee”) in which the Company invested $10.0 million, plus related fees and expenses, for approximately 7% interest (see Note 12). The limited partnership is affiliated with one of the Company’s principal equity owners. The Company reimbursed its principal equity owner $0.2 million for its pro rata portion of related fees and expenses. The limited partnership recognized no income or loss during the three months ended September 30, 2021.
In January 2021, the Company issued 110,679 shares of Class B common stock to a board member for aggregate cash proceeds of $1.0 million.
During the year ended December 31, 2020, the Company entered into a note receivable for $0.7 million with an executive. The outstanding balance was repaid in full during February 2021. Prior to repayment, the note receivable bore interest at 1.58% per annum and required semiannual interest payments through the maturity date in February 2023. At December 31, 2020, the note receivable balance was $0.7 million and was recorded within other assets on the Company’s condensed consolidated balance sheet
.
25.
NET (LOSS) INCOME PER
SHARE

The Company calculates basic earnings per share by dividing the net income (loss) income by the weighted average number of shares of common stock outstanding for the period. The diluted earnings per share is computed by assuming the exercise, settlement and vesting of all potential dilutive common stock equivalents outstanding for the period using the treasury stock method. We excludeThe Company excludes common stock equivalent shares from the calculation if their effect is anti-dilutive. In a period where the Company is in a net loss position, the diluted loss per share is calculated using the basic share count.

The 8,625,000 Sponsor Vesting Shares that are issued and outstanding atas of September 30, 20212022 are excluded from the weighted average number of shares of common stock outstanding until the vesting requirement is met and the restriction is removed.

The following table sets forth a reconciliation of the numerator and denominator used to compute basic and diluted earnings per share of common stock (in thousands, except for share and per share data).

 

 

For the Three Months Ended

 

 

For the Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Numerator

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

9,795

 

 

$

(189,782

)

 

$

37,334

 

 

$

(191,050

)

Denominator

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares of common stock - basic

 

 

609,421,073

 

 

 

566,454,782

 

 

 

606,181,316

 

 

 

525,877,533

 

Dilutive effect of stock-based awards

 

 

34,161,849

 

 

 

—

 

 

 

36,027,306

 

 

 

—

 

Weighted average shares of common stock - diluted

 

 

643,582,922

 

 

 

566,454,782

 

 

 

642,208,622

 

 

 

525,877,533

 

Net income (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.02

 

 

$

(0.34

)

 

$

0.06

 

 

$

(0.36

)

Diluted

 

$

0.02

 

 

$

(0.34

)

 

$

0.06

 

 

$

(0.36

)

   
For the Three Months Ended

September 30,
   
For the Nine Months Ended

September 30,
 
   
2021
   
2020
   
2021
   
2020
 
Numerator
                    
Net (loss) income
  $(189,782)   $4,720   $(191,050)   $(22,494) 
Denominator
                    
Weighted average shares of common stock - basic
   566,454,782    504,212,021    525,877,533    504,062,587 
Dilutive effect of stock options
   0      6,482,472    0      0   
   
 
 
   
 
 
   
 
 
   
 
 
 
Weighted average shares of common stock - diluted
   566,454,782    510,694,493    525,877,533    504,062,587 
Net (loss) income per share:
                    
Basic
  $(0.34)   $0.01   $(0.36)   $(0.04) 
Diluted
  $(0.34)   $0.01   $(0.36)   $(0.04) 
Common stock equivalent shares of approximately

Approximately 8,224,561 and 33,220,634 were excluded from the computation of diluted per share amounts for the three months ended September 30, 2021, because their effect was anti-dilutive. NaN common stock equivalent shares were excluded from the computation of diluted per share amounts for the three months ended September 30, 2020.

Common2022 and 2021, respectively, because their effect was anti-dilutive.

28

Approximately 8,250,431 and 28,940,767 common stock equivalent shares of approximately 28,940,767 and 6,189,883 were excluded from the computation of diluted per share amounts for the nine months ended September 30, 20212022 and 2020,2021, respectively, because their effect was anti-dilutive.

23.
SEGMENT INFORMATION and information about geographic areas
26.
SEGMENT INFORMATION AND INFORMATION ABOUT GEOGRAPHIC AREAS

The Company operates in 1one operating segment. The chief operating decision maker for the Company is the chief executive officer. The chief executive officer reviews financial information presented on a consolidated basis, accompanied by information about revenue by type of service and geographic region, for purposes of allocating resources and evaluating financial performance.

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Table of Contents

Revenues by geographic area, presented based upon the location of the customer are as follows (in thousands):

 

 

For the Three Months Ended

 

 

For the Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

United States

 

$

196,727

 

 

$

175,297

 

 

$

572,417

 

 

$

496,784

 

China

 

 

2,007

 

 

 

1,331

 

 

 

5,925

 

 

 

4,421

 

Total revenues

 

$

198,734

 

 

$

176,628

 

 

$

578,342

 

 

$

501,205

 

   
For the Three Months Ended
September 30,
   
For the Nine Months Ended
September 30,
 
   
2021
   
2020
   
2021
   
2020
 
United States
  $ 175,297   $ 156,062   $ 496,784   $ 462,483 
China
   1,331    1,692    4,421    5,194 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total revenues
  $176,628   $157,754   $501,205   $467,677 
   
 
 
   
 
 
   
 
 
   
 
 
 

Software, equipment and property, net by geographic area are as follows (in thousands):

 

 

September 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

United States

 

$

147,477

 

 

$

135,784

 

China

 

 

54

 

 

 

61

 

Total software, equipment and property-net

 

$

147,531

 

 

$

135,845

 

24.
GAIN ON Sale of cost method investment
   
September 30,
2021
   
December 31,
2020
 
United States
  $ 120,953   $ 101,370 
China
   65    68 
   
 
 
   
 
 
 
Total software, equipment and
property-net
  $121,018   $101,438 
   
 
 
   
 
 
 
27.
DIVESTITURE
On December 31, 2020

During February 2022, the Company closedreceived cash proceeds of $3.9 million in exchange for its equity interest in an Asset Purchase Agreement withinvestee as a third-party buyer (the “Buyer”) to transfer its obligationresult of providing certain services and related assets and liabilities to the Buyer for total considerationacquisition of $3.8 million, including $1.8 million of contingent consideration.the investee. The Company has received aggregate payments fromhad been accounting for its investment using the Buyer of $2.9 million through September 30, 2021.

The divestiture did not constitute a discontinued operation or the sale of a business.
The Companycost method and recognized a gain on disposition of $3.8$3.6 million during the yearnine months ended December 31, 2020September 30, 2022. The investment’s carrying value was $0.3 million and was included within general and administrative expenses inother assets on the condensed consolidated statement of operations and comprehensive (loss) income.
28.
SUBSEQUENT EVENTS
Restricted Stock Grant
—During
October 2021
, the Company granted 18,377,978 restricted stock units to employees and members of the board of directors, of which 7,440,245 have time-based vesting and 10,937,733 have performance-based vesting. Time-based vesting awards vest based on continued service, generally four years. Performance-based vesting awards vest upon the occurrence of certain quantitative and qualitative criteria as defined in the award agreements.
Phantom Stock Payment
—In October 2021, the Company paid $10.2 million to the holders of the Phantom Shares that vested upon the Closing of the Business Combination, reflected in accrued expenses in theaccompanying condensed consolidated balance sheet at September 30,as of December 31, 2021. The Company no longer has any ownership interest in the investee.

38

29

Table

Item 2. Management’s Discussion and Analysis of Contents

Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
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 31,50030,000 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 26,50027,500 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 Suitesuite of AI solutions increases automation across existing insurer processes including vehicle damage detection, claim triage, repair estimating, and intelligent claims review.review, and subrogation. We deliver real-world AI solutions, and havewith more than 300 AI models deployed95 U.S. auto insurers actively using AI-powered solutions in production environments acrossenvironments. We have processed more than 75 insurers.
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.

30

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 31,50030,000 total customers, including over 26,50027,500 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, SeptemberMarch for a quarter ending September 30,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.
40
Table of Contents
   
Quarter Ending
  
2021
  
2020
 
Software NDR
  March 31   106%   105% 
  June 30   110%   103% 
  September 30   113%   103% 
  December 31    103% 

 

 

Quarter Ending

 

2022

 

2021

Software NDR

 

March 31

 

114%

 

106%

 

 

June 30

 

111%

 

110%

 

 

September 30

 

110%

 

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

31

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
  
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.
41
Table of Contents
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

 

 

Quarter Ending

 

2022

 

2021

Software GDR

 

March 31

 

99%

 

98%

 

 

June 30

 

99%

 

98%

 

 

September 30

 

99%

 

98%

 

 

December 31

 

 

 

98%

Results of Operations

Revenue

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

32

 

 

Three Months Ended September 30,

 

 

 

 

(dollar amounts in thousands, except share and per share data)

 

2022

 

 

2021

 

 

$

 

 

%

 

Revenues

 

$

198,734

 

 

$

176,628

 

 

$

22,106

 

 

 

12.5

%

Cost of revenues, exclusive of amortization of
   acquired technologies

 

 

46,379

 

 

 

51,273

 

 

 

(4,894

)

 

 

-9.5

%

Amortization of acquired technologies

 

 

6,748

 

 

 

6,580

 

 

 

168

 

 

 

2.6

%

Cost of revenues(1)

 

 

53,127

 

 

 

57,853

 

 

 

(4,726

)

 

 

-8.2

%

Gross profit

 

 

145,607

 

 

 

118,775

 

 

 

26,832

 

 

 

22.6

%

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development(1)

 

 

40,273

 

 

 

67,016

 

 

 

(26,743

)

 

 

-39.9

%

Selling and marketing(1)

 

 

30,838

 

 

 

80,382

 

 

 

(49,544

)

 

 

-61.6

%

General and administrative(1)

 

 

39,376

 

 

 

142,511

 

 

 

(103,135

)

 

 

-72.4

%

Amortization of intangible assets

 

 

18,066

 

 

 

18,078

 

 

 

(12

)

 

 

-0.1

%

Total operating expenses

 

 

128,553

 

 

 

307,987

 

 

 

(179,434

)

 

 

-58.3

%

Operating income (loss)

 

 

17,054

 

 

 

(189,212

)

 

 

206,266

 

 

NM

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(10,501

)

 

 

(13,878

)

 

 

3,377

 

 

 

24.3

%

Change in fair value of derivative instruments

 

 

5,991

 

 

 

2,007

 

 

 

3,984

 

 

 

198.5

%

Change in fair value of warrant liabilities

 

 

312

 

 

 

(26,889

)

 

 

27,201

 

 

NM

 

Loss on early extinguishment of debt

 

 

—

 

 

 

(15,240

)

 

 

15,240

 

 

NM

 

Gain on sale of cost method investment

 

 

9

 

 

 

—

 

 

 

9

 

 

NM

 

Other income (loss), net

 

 

382

 

 

 

(93

)

 

 

475

 

 

NM

 

Total other income (expense)

 

 

(3,807

)

 

 

(54,093

)

 

 

50,286

 

 

 

93.0

%

Income (loss) before income taxes

 

 

13,247

 

 

 

(243,305

)

 

 

256,552

 

 

NM

 

Income tax (provision) benefit

 

 

(3,452

)

 

 

53,523

 

 

 

(56,975

)

 

NM

 

Net income (loss)

 

$

9,795

 

 

$

(189,782

)

 

$

199,577

 

 

NM

 

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

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.02

 

 

$

(0.34

)

 

 

 

 

 

 

Diluted

 

$

0.02

 

 

$

(0.34

)

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

609,421,073

 

 

 

566,454,782

 

 

 

 

 

 

 

Diluted

 

 

643,582,922

 

 

 

566,454,782

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)  Includes stock-based compensation expense as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

 

 

 

 

 

 

 

 

2022

 

 

2021

 

 

 

 

 

 

 

Cost of revenues

 

$

1,657

 

 

$

12,169

 

 

 

 

 

 

 

Research and development

 

 

5,373

 

 

 

35,472

 

 

 

 

 

 

 

Sales and marketing

 

 

6,890

 

 

 

58,770

 

 

 

 

 

 

 

General and administrative

 

 

14,802

 

 

 

113,465

 

 

 

 

 

 

 

Total stock-based compensation expense

 

$

28,722

 

 

$

219,876

 

 

 

 

 

 

 

NM—Not Meaningful

Revenues

Revenue is derived fromincreased by $22.1 million to $198.7 million, or 12.5%, for the sale ofthree months ended September 30, 2022, compared to the three months ended September 30, 2021. The Company's 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$191.2 million and $143.8$170.0 million, or 96% and 91%96%, of total revenue during the three months ended September 30, 2022 and 2021, respectively.

33

The increase in revenue was primarily a result of 10% growth from existing customer upgrades and 2020, respectively. Softwareexpanding solution offerings to these existing customers as well as 3% growth from new customers.

Cost of Revenues

Cost of revenues decreased by $4.7 million to $53.1 million, or 8.2%, for the three months ended September 30, 2022, compared to the three months ended September 30, 2021.

Cost of Revenues, exclusive of amortization of acquired technologies

Cost of revenues, exclusive of amortization of acquired technologies, decreased by $4.9 million to $46.4 million, or 9.5%, for the three months ended September 30, 2022, compared to the three months ended September 30, 2021. The decrease was primarily due to a $10.5 million reduction in stock-based compensation, mainly from the vesting term modification completed in conjunction with the Business Combination in the prior year, partially offset by a $1.1 million increase in personnel-related costs, a $2.2 million increase in third party license and royalty fees, a $1.6 million increase in depreciation expense related to additional investments in platform and infrastructure enhancements and a $0.5 million increase in consulting and other professional service costs.

Amortization of Acquired Technologies

Amortization of acquired technologies was $6.7 million for the three months ended September 30, 2022, compared to $6.6 million for the three months ended September 30, 2021.

Gross Profit

Gross profit increased by $26.8 million to $145.6 million, or 22.6%, for the three months ended September 30, 2022, compared to the three months ended September 30, 2021. Our gross profit margin was 73.3% for the three months ended September 30, 2022 compared to 67.2% for the three months ended September 30, 2021. The increase in gross profit was due to a reduction in stock-based compensation, increased software subscription revenuerevenues and economies of scale resulting from fixed cost arrangements.

Research and Development

Research and development expense decreased by $26.7 million to $40.3 million, or 39.9%, for the three months ended September 30, 2022, compared to the three months ended September 30, 2021. The decrease was primarily due to a reduction of $30.1 million in stock-based compensation, mainly from the vesting term modification completed in conjunction with the Business Combination in the prior year and a $4.3 million increase in the amount of capitalized time on development projects, partially offset by a $6.8 million increase in resource costs.

Selling and Marketing

Selling and marketing expense decreased by $49.5 million to $30.8 million, or 61.6%, for the three months ended September 30, 2022, compared to the three months ended September 30, 2021. The decrease was primarily due to a reduction of $51.9 million in stock-based compensation, mainly from the vesting term modification completed in conjunction with the Business Combination in the prior year, partially offset by a $2.1 million increase in personnel-related costs, including sales incentives and travel costs.

General and Administrative

General and administrative expense decreased by $103.1 million to $39.4 million, or 72.4%, for the three months ended September 30, 2022, compared to the three months ended September 30, 2021. The decrease was primarily due to a reduction of $98.7 million in stock-based compensation, mainly from the vesting term modification completed in conjunction with the Business Combination in the prior year, a $1.6 million decrease in the Company's facilities costs due to the closure of the Company's previous headquarters in March 2022 and a $0.8 million decrease in consulting and other professional service costs.

Amortization of Intangible Assets

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

34

Interest Expense

Interest expense decreased by $3.4 million to $10.5 million, or 24.3%, for the three months ended September 30, 2022, compared to the three months ended September 30, 2021, due to less outstanding long-term debt, partially offset by higher interest rates during the three months ended September 30, 2022.

Change in Fair Value of Derivative Instruments

Change in fair value of derivative instruments was $6.0 million for the three months ended September 30, 2022, compared to $2.0 million for the three months ended September 30, 2021. The $6.0 million change in fair value recognized for the three months ended September 30, 2022 is related to the interest rate cap agreement entered into in August 2022 and driven by the increase in the forward yield curve since the inception of the agreement. The $2.0 million change in fair value of derivative instruments for the three months ended September 30, 2021 is related to the interest rate swap agreements in effect during the prior year. The interest rate swap agreements were extinguished in September 2021.

Change in Fair Value of Warrant Liabilities

We recognized income of $0.3 million from a change in fair value of warrant liabilities for the three months ended September 30, 2022, compared to expense of $26.9 million for the three months ended September 30, 2021. The income recognized for the three months ended September 30, 2022 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 as of September 30, 2022, compared to June 30, 2022. The expense for the three months ended September 30, 2021 was due to the increase in the estimated fair value of the Public Warrants and Private Warrants.

Loss on Early Extinguishment of Debt

There was no loss on early extinguishment of debt during the three months ended September 30, 2022. Loss on early extinguishment of debt for 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.

Income Tax (Provision) Benefit

Income tax provision was $3.5 million for the three months ended September 30, 2022, compared to a benefit of $53.5 million for the three months ended September 30, 2021. The income tax provision was due to the Company having pretax income during the three months ended September 30, 2022 compared to a pretax loss during the three months ended September 30, 2021.

Comparison of the nine months ended September 30, 2022 to the nine months ended September 30, 2021

35

 

 

Nine Months Ended September 30,

 

 

 

 

(dollar amounts in thousands, except share and per share data)

 

2022

 

 

2021

 

 

$

 

 

%

 

Revenue

 

$

578,342

 

 

$

501,205

 

 

$

77,137

 

 

 

15.4

%

Cost of revenue, exclusive of amortization of
   acquired technologies

 

 

135,174

 

 

 

128,218

 

 

 

6,956

 

 

 

5.4

%

Amortization of acquired technologies

 

 

20,193

 

 

 

19,740

 

 

 

453

 

 

 

2.3

%

Cost of revenues(1)

 

 

155,367

 

 

 

147,958

 

 

 

7,409

 

 

 

5.0

%

Gross profit

 

 

422,975

 

 

 

353,247

 

 

 

69,728

 

 

 

19.7

%

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development(1)

 

 

114,711

 

 

 

128,894

 

 

 

(14,183

)

 

 

-11.0

%

Selling and marketing(1)

 

 

88,731

 

 

 

121,350

 

 

 

(32,619

)

 

 

-26.9

%

General and administrative(1)

 

 

123,093

 

 

 

208,745

 

 

 

(85,652

)

 

 

-41.0

%

Amortization of intangible assets

 

 

54,212

 

 

 

54,232

 

 

 

(20

)

 

 

0.0

%

Total operating expenses

 

 

380,747

 

 

 

513,221

 

 

 

(132,474

)

 

 

-25.8

%

Operating income (loss)

 

 

42,228

 

 

 

(159,974

)

 

 

202,202

 

 

NM

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(25,786

)

 

 

(51,548

)

 

 

25,762

 

 

 

50.0

%

Change in fair value of derivative instruments

 

 

5,991

 

 

 

8,373

 

 

 

(2,382

)

 

 

-28.4

%

Change in fair value of warrant liabilities

 

 

23,452

 

 

 

(26,889

)

 

 

50,341

 

 

NM

 

Loss on early extinguishment of debt

 

 

—

 

 

 

(15,240

)

 

 

15,240

 

 

NM

 

Gain on sale of cost method investment

 

 

3,587

 

 

 

—

 

 

 

3,587

 

 

NM

 

Other income, net

 

 

576

 

 

 

1

 

 

 

575

 

 

NM

 

Total other income (expense)

 

 

7,820

 

 

 

(85,303

)

 

 

93,123

 

 

NM

 

Income (loss) before income taxes

 

 

50,048

 

 

 

(245,277

)

 

 

295,325

 

 

NM

 

Income tax (provision) benefit

 

 

(12,714

)

 

 

54,227

 

 

 

(66,941

)

 

NM

 

Net income (loss)

 

$

37,334

 

 

$

(191,050

)

 

$

228,384

 

 

NM

 

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

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.06

 

 

$

(0.36

)

 

 

 

 

 

 

Diluted

 

$

0.06

 

 

$

(0.36

)

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

606,181,316

 

 

 

525,877,533

 

 

 

 

 

 

 

Diluted

 

 

642,208,622

 

 

 

525,877,533

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)  Includes stock-based compensation expense as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30,

 

 

 

 

 

 

 

 

 

2022

 

 

2021

 

 

 

 

 

 

 

Cost of revenues

 

$

4,167

 

 

$

12,563

 

 

 

 

 

 

 

Research and development

 

 

14,433

 

 

 

36,748

 

 

 

 

 

 

 

Sales and marketing

 

 

18,331

 

 

 

60,060

 

 

 

 

 

 

 

General and administrative

 

 

43,838

 

 

 

126,042

 

 

 

 

 

 

 

Total stock-based compensation expense

 

$

80,769

 

 

$

235,413

 

 

 

 

 

 

 

NM—Not Meaningful

Revenues

Revenue increased by $77.1 million to $578.3 million, or 15.4%, for the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021. The Company's software subscription revenues accounted for $481.8$556.5 million and $422.8$481.8 million, or 96% and 90%96%, of total revenue during the nine months ended September 30, 2022 and 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.
42
Table of Contents
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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Table of Contents
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%3% 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.

customers.

36

Cost of Revenue

Revenues

Cost of revenuerevenues increased by $7.4 million to $57.9$155.4 million, or 14.7%5.0%, for the threenine months ended September 30, 2021,2022, compared to the threenine months ended September 30, 2020.

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2021.

Cost of Revenue,Revenues, exclusive of amortization of acquired technologies

Cost of revenue,revenues, exclusive of amortization of acquired technologies, increased $7.4by $7.0 million to $51.3$135.2 million, or 16.9%5.4%, for the threenine months ended September 30, 2021,2022, compared to the threenine months ended September 30, 2020.2021. The increase was due to a $12.0$6.1 million increase in third party license and royalty fees, a $3.3 million increase in depreciation expense related to additional investments in platform and infrastructure enhancements, a $2.6 million increase in consulting and other professional service costs and a $3.9 million increase in personnel-related costs, partially offset by a $8.4 million reduction in stock-based compensation, mainly from athe 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.

prior year.

Amortization of Acquired Technologies

Amortization of acquired technologies was $6.6$20.2 million for each of the threenine months ended September 30, 2021 and 2020.

2022, compared to $19.7 million for the nine months ended September 30, 2021.

Gross Profit

Gross profit increased by $11.5$69.7 million to $118.8$423.0 million, or 10.7%19.7%, for the threenine months ended September 30, 2021,2022, compared to the threenine months ended September 30, 2020.2021. Our gross profit margin increased to 73.1% for the nine months ended September 30, 2022 compared to 70.5% for the nine months ended September 30, 2021. The increase in absolute dollarsboth gross profit and gross profit margin was primarily due to a reduction in stock-based compensation, increased software subscription revenues and economies of scale resulting from fixed cost arrangements. Our gross profit margin

Research and Development

Research and development expense decreased by $14.2 million to 67.2%$114.7 million, or 11.0%, for the threenine months ended September 30, 20212022, compared to 68.0% for the threenine months ended September 30, 2020.2021. The decrease in gross profit margin was due to a $12.0$22.3 million or 6.8%, increasereduction in stock-based compensation, expensemainly 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%, forin 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 costsprior year and a $0.9 million increase in IT costs, partially offset by a $1.2$12.0 million increase in the amount of capitalized time on development projects.
projects, partially offset by a $17.5 million increase in resource costs and a $2.1 million increase in information technology related costs.

Selling and Marketing

Selling and marketing expense increaseddecreased by $63.0$32.6 million to $80.4$88.7 million, or 361.2%26.9%, for the threenine months ended September 30, 2021,2022, compared to the threenine months ended September 30, 2020.2021. The increasedecrease was primarily due to a $58.4$41.7 million increasereduction in stock-based compensation, mainly from athe vesting term modification of outstanding stock options completed in conjunction with the Business Combination in the prior year, partially offset by a $3.6$6.7 million increase in personnelof personnel-related costs including sales incentives and travel costs and a $0.5$1.1 million increase in employee travel costs.

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 increaseddecreased by $120.6$85.7 million to $142.5$123.1 million, or 550.9%41.0%, for the threenine months ended September 30, 2021,2022, compared to the threenine months ended September 30, 2020.2021. The increasedecrease was primarily due to a $112.5$82.2 million increasereduction in stock-based compensation, mainly from athe vesting term modification of outstanding stock options completed in conjunction with the Business Combination in the prior year, a $1.3$4.5 million decrease in consulting and other professional service costs and a $3.9 million decrease in in the Company's facilities costs due to the Company's closure of its previous headquarters in March 2022, partially offset by a $3.8 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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Table of Contents

Amortization of Intangible Assets

Amortization of intangible assets was $18.1$54.2 million duringfor the threenine months ended September 30, 20212022 and 2020.

2021.

37

Interest Expense

Interest expense decreased by $5.9$25.8 million to $13.9$25.8 million, or 29.9%50.0%, for the threenine months ended September 30, 2022, compared to the nine months ended September 30, 2021 compared to the three months ended September 30, 2020 primarily due to less outstanding long-term debt and a lower variable interest rate during the threenine months ended September 30, 2021.

Gain on 2022.

Change in Fair Value of Interest Rate Swaps

Gain onDerivative Instruments

The change in fair value of interest rate swaps decreased by $1.9derivative instruments was $6.0 million for the threenine months ended September 30, 2021,2022, compared to $8.4 million for the threenine months ended September 30, 2020.2021. The decrease$6.0 million change in fair value recognized for the nine months ended September 30, 2022 was attributablerelated to the proximity of the maturity date of the swap agreements and the timing of the extinguishment of the interest rate swapscap agreement the Company entered into in August 2022 and driven by the changes in the forward yield curve. The $8.4 million change in fair value of derivative instruments in the prior year was related to the interest rate swap agreements in effect during the prior year. The interest rate swap agreements were extinguished in September 2021.

Change in Fair Value of Warrant Liabilities

Change

We recognized income of $23.5 million from a change in fair value of warrant liabilities wasfor the nine months ended September 30, 2022, compared to expense of $26.9 million for the threenine months ended September 30, 2021. The warrant liabilities were recorded as partincome from the change in fair value was due to the decrease in the estimated fair value of the Business Combination and therefore did not exist inPrivate Warrants, primarily from the prior year.lower price of the Company's common stock as of September 30, 2022, compared to December 31, 2021. The expense for the nine months ended September 30, 2021 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.

Warrants.

Loss on Early Extinguishment of Debt

Loss

There was no loss on early extinguishment of debt during the threenine months ended September 30, 2022. Loss on early extinguishment of debt for the nine months ended September 30, 2021 was $15.2 million due to the early repayments of the total balance outstanding under the Company’sCompany's First Lien Term Loan. There

Gain on Sale of Cost Method Investment

Gain on sale of cost method investment 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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Table of Contents
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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Table of Contents
Amortization of Acquired Technologies
Amortization of acquired technologies was $19.7$3.6 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, 2020.2022. The increase in absolute dollars and gross profit margingain recognized was due to increased software subscription revenues and economiesthe $3.9 million payment received in exchange for its equity interest in an investee as a result of scale resulting from fixedthe acquisition of the investee. The Company did not recognize any gain or loss on sale of 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 expensemethod investment 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

Income Tax (Provision) Benefit

Income tax provision was $54.2 million during the nine months ended September 30, 2021 and 2020.

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Table of Contents
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$12.7 million for the nine months ended September 30, 2021,2022, compared to a loss on change in fair valuean income tax benefit 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$54.2 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 expenseincome tax provision 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 debtCompany having pretax income during the nine months ended September 30, 2020 was $15.2 million due2022, compared to the early repayments of the total balance outstanding under the Company’s First Lien Term Loan. Loss on early extinguishment of debta pretax loss 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.
2021.

Non-GAAP

Financial Measures

In addition to our results determined in accordance with U.S. GAAP, we believe that Adjusted Gross Profit, andAdjusted Operating Expenses, Adjusted Operating Income, Adjusted EBITDA, Adjusted Net Income and Adjusted EBITDA,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 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.
50

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Table of Contents

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 and related employer payroll tax, 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.

Revenue.

The following table reconciles Gross Profit to Adjusted Gross Profit for the three and nine months ended September 30, 20212022 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% 
For2021:

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

(amounts in thousands, except percentages)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Gross Profit

 

$

145,607

 

 

$

118,775

 

 

$

422,975

 

 

$

353,247

 

Amortization of acquired technologies

 

 

6,748

 

 

 

6,580

 

 

 

20,193

 

 

 

19,740

 

Business combination transaction costs

 

 

—

 

 

 

905

 

 

 

—

 

 

 

905

 

Stock-based compensation and related employer payroll
   tax

 

 

1,765

 

 

 

12,169

 

 

 

4,378

 

 

 

12,563

 

Adjusted Gross Profit

 

$

154,120

 

 

$

138,429

 

 

$

447,546

 

 

$

386,455

 

Gross Profit Margin

 

 

73

%

 

 

67

%

 

 

73

%

 

 

70

%

Adjusted Gross Profit Margin

 

 

78

%

 

 

78

%

 

 

77

%

 

 

77

%

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 then existing headquarters’ lease, net income (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 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 theand nine months ended September 30, 2021, 2022 and 2021:

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

(dollar amounts in thousands)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Operating expenses

 

$

128,553

 

 

$

307,987

 

 

$

380,747

 

 

$

513,221

 

Stock-based compensation expense and related
   employer payroll tax

 

 

(27,800

)

 

 

(207,707

)

 

 

(78,496

)

 

 

(222,850

)

Lease abandonment

 

 

—

 

 

 

(438

)

 

 

(1,222

)

 

 

(2,256

)

Lease overlap costs

 

 

—

 

 

 

(924

)

 

 

(1,338

)

 

 

(2,773

)

Net income (costs) related to divestiture

 

 

471

 

 

 

(338

)

 

 

418

 

 

 

(2,605

)

Business combination transaction and related costs

 

 

(101

)

 

 

(5,516

)

 

 

(1,156

)

 

 

(10,471

)

M&A and integration costs

 

 

(6

)

 

 

—

 

 

 

(1,761

)

 

 

—

 

Amortization of intangible assets

 

 

(18,066

)

 

 

(18,078

)

 

 

(54,212

)

 

 

(54,232

)

Adjusted operating expenses

 

$

83,051

 

 

$

74,986

 

 

$

242,980

 

 

$

218,034

 

Adjusted Gross Profit increased $57.1 million or 17.3%, while Operating Income

Adjusted Gross Profit Margin increased 2%Operating Income is defined as operating income (loss) 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 77%. Eachtermination of these increases inits then existing headquarters’ lease, net (income) costs related to divestiture and M&A and integration costs.

39

The following table reconciles operating income (loss) to Adjusted Gross ProfitOperating Income for the three and Adjusted Gross Profit Margin were primarily due to an increase in software subscription revenuenine months ended September 30, 2022 and economies of scale resulting from fixed cost arrangements.

EBITDA and 2021:

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

 

 

 

 

 

(dollar amounts in thousands)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Operating income (loss)

 

$

17,054

 

 

$

(189,212

)

 

$

42,228

 

 

$

(159,974

)

Stock-based compensation expense and related employer
   payroll tax

 

 

29,565

 

 

 

219,876

 

 

 

82,874

 

 

 

235,413

 

Lease abandonment

 

 

—

 

 

 

438

 

 

 

1,222

 

 

 

2,256

 

Lease overlap costs

 

 

—

 

 

 

924

 

 

 

1,338

 

 

 

2,773

 

Net (income) costs related to divestiture

 

 

(471

)

 

 

338

 

 

 

(418

)

 

 

2,605

 

Business combination transaction and related costs

 

 

101

 

 

 

5,516

 

 

 

1,156

 

 

 

10,471

 

M&A and integration costs

 

 

6

 

 

 

—

 

 

 

1,761

 

 

 

—

 

Amortization of intangible assets

 

 

18,066

 

 

 

18,078

 

 

 

54,212

 

 

 

54,232

 

Amortization of acquired technologies—Cost of revenue

 

 

6,748

 

 

 

6,580

 

 

 

20,193

 

 

 

19,740

 

Adjusted operating income

 

$

71,069

 

 

$

62,538

 

 

$

204,566

 

 

$

167,516

 

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 income (loss) income adjusted for interest, taxes, depreciation, and amortization. Adjusted EBITDA is EBITDA adjusted for (gain) loss onamortization, change in fair value of interest rate swaps,derivative instruments, change in fair value of warrant liabilities, stock-based compensation expense and related employer payroll tax, 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 then existing headquarters’ lease, net (income) costs related to divestiture, M&A and less revenueintegration costs and relatedgain on sale of 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 tomethod investment. 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 andMargin is defined as Adjusted EBITDA are intended as supplemental measures of our performance that are neither requireddivided 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.
51
Table of Contents
Revenue.

The following table reconciles net income (loss) income to Adjusted EBITDA for the three and nine months ended September 30, 20212022 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.
2021:

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

(dollar amounts in thousands)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net income (loss)

 

$

9,795

 

 

$

(189,782

)

 

$

37,334

 

 

$

(191,050

)

Interest expense

 

 

10,501

 

 

 

13,878

 

 

 

25,786

 

 

 

51,548

 

Income tax provision (benefit)

 

 

3,452

 

 

 

(53,523

)

 

 

12,714

 

 

 

(54,227

)

Amortization of intangible assets

 

 

18,066

 

 

 

18,078

 

 

 

54,212

 

 

 

54,232

 

Amortization of acquired technologies—Cost of
   revenue

 

 

6,748

 

 

 

6,580

 

 

 

20,193

 

 

 

19,740

 

Depreciation and amortization of software,
   equipment and property

 

 

6,665

 

 

 

7,694

 

 

 

20,155

 

 

 

18,161

 

EBITDA

 

 

55,227

 

 

 

(197,075

)

 

 

170,394

 

 

 

(101,596

)

Change in fair value of derivative
   instruments

 

 

(5,991

)

 

 

(2,007

)

 

 

(5,991

)

 

 

(8,373

)

Change in fair value of warrant liabilities

 

 

(312

)

 

 

26,889

 

 

 

(23,452

)

 

 

26,889

 

Loss on early extinguishment of debt

 

 

—

 

 

 

15,240

 

 

 

—

 

 

 

15,240

 

Stock-based compensation expense and related employer
   payroll tax

 

 

29,565

 

 

 

219,876

 

 

 

82,874

 

 

 

235,413

 

Business combination transaction and related costs

 

 

101

 

 

 

5,516

 

 

 

1,156

 

 

 

10,471

 

Lease abandonment

 

 

—

 

 

 

438

 

 

 

1,338

 

 

 

2,256

 

Lease overlap costs

 

 

—

 

 

 

924

 

 

 

1,222

 

 

 

2,773

 

Net (income) costs related to divestiture

 

 

(471

)

 

 

338

 

 

 

(418

)

 

 

2,605

 

M&A and integration costs

 

 

6

 

 

 

—

 

 

 

1,761

 

 

 

—

 

Gain on sale of cost method investment

 

 

(9

)

 

 

—

 

 

 

(3,587

)

 

 

—

 

Adjusted EBITDA

 

$

78,116

 

 

$

70,139

 

 

$

225,297

 

 

$

185,678

 

Adjusted EBITDA Margin

 

 

39.3

%

 

 

39.7

%

 

 

39.0

%

 

 

37.0

%

40

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 income (loss) income adjusted for the

after-tax
effects of amortization, (gain) loss on change in fair value of interest rate swaps,derivative instruments, change in fair value of warrant liabilities, stock-based compensation expense and related employer payroll tax, 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 then existing headquarters’ lease, net (income) costs related to divestiture, less revenueM&A and relatedintegration costs and gain on sale of 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.
52
Table of Contents
method investment.

The following table reconciles net (loss) income and GAAP basic and diluted earnings per share(loss) to Adjusted Net Income and Adjusted Earnings per Share for the three and nine months ended September 30, 20212022 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%,2021:

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

(dollar amounts in thousands)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net income (loss)

 

$

9,795

 

 

$

(189,782

)

 

$

37,334

 

 

$

(191,050

)

Amortization of intangible assets

 

 

18,066

 

 

 

18,078

 

 

 

54,212

 

 

 

54,232

 

Amortization of acquired technologies—
   Cost of revenue

 

 

6,748

 

 

 

6,580

 

 

 

20,193

 

 

 

19,740

 

Change in fair value of
   derivative instruments

 

 

(5,991

)

 

 

(2,007

)

 

 

(5,991

)

 

 

(8,373

)

Change in fair value of warrant liabilities

 

 

(312

)

 

 

26,889

 

 

 

(23,452

)

 

 

26,889

 

Loss on early extinguishment of debt

 

 

—

 

 

 

15,240

 

 

 

—

 

 

 

15,240

 

Stock-based compensation expense and related employer
   payroll tax

 

 

29,565

 

 

 

219,876

 

 

 

82,874

 

 

 

235,413

 

Business combination transaction and related costs

 

 

101

 

 

 

5,516

 

 

 

1,156

 

 

 

10,471

 

Lease abandonment

 

 

—

 

 

 

438

 

 

 

1,222

 

 

 

2,256

 

Lease overlap costs

 

 

—

 

 

 

924

 

 

 

1,338

 

 

 

2,773

 

Net (income) costs related to divestiture

 

 

(471

)

 

 

338

 

 

 

(418

)

 

 

2,605

 

M&A and integration costs

 

 

6

 

 

 

—

 

 

 

1,761

 

 

 

—

 

Gain on sale of cost method investment

 

 

(9

)

 

 

—

 

 

 

(3,587

)

 

 

—

 

Tax effect of adjustments

 

 

(10,894

)

 

 

(72,360

)

 

 

(34,193

)

 

 

(89,134

)

Adjusted net income

 

$

46,604

 

 

$

29,730

 

 

$

132,449

 

 

$

81,062

 

Adjusted net income per share attributable to
   common stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.08

 

 

$

0.05

 

 

$

0.22

 

 

$

0.15

 

Diluted

 

$

0.07

 

 

$

0.05

 

 

$

0.21

 

 

$

0.15

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

609,421,073

 

 

 

566,454,782

 

 

 

606,181,316

 

 

 

525,877,533

 

Diluted

 

 

643,582,922

 

 

 

599,675,416

 

 

 

642,208,622

 

 

 

554,818,300

 

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 nine months ended September 30, 2021, compared to the three months ended September 30, 2020. Adjusted Net Income increased $26.82022 and 2021:

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

(dollar amounts in thousands)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net cash provided by operating activities

 

$

30,753

 

 

$

36,905

 

 

$

118,438

 

 

$

96,725

 

Less: Purchases of software, equipment, and property

 

 

(13,375

)

 

 

(11,864

)

 

 

(38,844

)

 

 

(25,022

)

Less: Purchase of intangible assets

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(49

)

Free Cash Flow

 

$

17,378

 

 

$

25,041

 

 

$

79,594

 

 

$

71,654

 

41

Liquidity and Capital Resources

We have financed our operations with cash flows from operations. The Company generated $118.4 million or 49.3% forof cash flows from operating activities during 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.2022. As of September 30, 2021,2022, the Company had cash and cash equivalents of $160.5 million. The Company had$248.2 million, a working capital surplus of $145.9$252.5 million at September 30, 2021 and had an accumulated deficit at September 30, 2021 totaling $688.5$ 709.0 million. As of September 30, 2021,2022, the Company had $800.0$794.0 million aggregate principal amount outstanding on its term loans.
loan.

We believe that our existing cash and cash equivalents, our cash flows from operating activities and our borrowing capacity under our revolving credit facility2021 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,businesses, 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.

53
Table of Contents

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 2021a credit agreement (the "2021 Credit Agreement, dated as of September 21, 2021.

Agreement").

The 2021 Credit Agreement replacesreplaced 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 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 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.

Using proceeds from

Beginning with the Term B Loan, we repaidquarter ending March 31, 2022, 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 fiscalthe 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, 2021,2022, the Company is not subject to the annual excess cash flow calculation and no such principal prepayments are required.

As of September 30, 2021,2022, the amount outstanding underon the Term B Loans was $800.0$794.0 million, and there were no amounts outstanding on the Company’s 2021 Revolving Credit Facility.

Amounts outstandingof which, $8.0 million is classified as current.

Borrowings under the 2021 Credit AgreementFacility bear interest at a variable raterates based on the ratio of LIBOR, plus up to 2.50% per annum based upon the Company’s leverage ratio, as definedand its subsidiaries’ consolidated first lien net indebtedness to the Company’s and its subsidiaries’ consolidated EBITDA for applicable periods specified in the 2021 Credit Agreement. 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 September 30, 2022 and 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.4.6% 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.3.0%, respectively. The Company was in compliance with all affirmative and negative covenantsmade interest payments of $9.2 million during the three months ended September 30, 2022. There were no interest payments made during the three months ended September 30, 2021. Beginning

During the nine months ended September 30, 2022 and 2021, the weighted-average interest rate on the outstanding borrowings under the Term B Loan was 3.6% and 3.0%, respectively. The Company made interest payments of $21.6 million during the nine months ended September 30, 2022. There were no interest payments made during the nine months ended September 30, 2021.

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. As of September 30, 2022, $249.3 million was available to be borrowed under the 2021 Revolving Credit Facility.

42

In addition, beginning with the fiscal quarter endingthree months ended March 31, 2022, the Company is subject to a springing first lien leverage test underterms of the 2021 Credit Agreement with respect to the Revolving Credit Facility, tested quarterly, only ifinclude a minimum of 35.0% of the Revolving Credit Facility borrowings (subject to certain exclusions set forth in the 2021 Credit Agreement) are outstandingfinancial covenant which requires that, at the end of aeach fiscal quarter. Thequarter, 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 September 30, 2022, the Company iswas not subject to the first lien leverage test as of September 30, 2021.

Prior to entering in tofinancial covenant.

First Lien Credit Agreement—In April 2017, the 2021Company entered into the First Lien Credit Agreement in September 2021, our long-term debt was provided through ourAgreement.

The First Lien Credit Agreement initially consisted of a $1.0 billion term loan and Secondrevolving 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 Credit Agreement, each entered into in April 2017.

OnRevolvers.

In February 14, 2020, wethe Company refinanced ourits long-term debt and entered into the First Amendment to the First Lien Amendment.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. 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.
54
Table of Contents
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 Amendmentand 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 consistedRevolvers to an aggregate principal amount of commitments$91.3 million. The First Lien Revolvers continued to have a sublimit of $8.1$30.0 million and $4.4 million, respectively, which were scheduled to mature on April 27, 2022. The extended Dollar Revolver and extended Multicurrency Revolver consistedfor letters of commitments of $51.2 million and $27.6 million, respectively, which were scheduled to mature on October 27, 2023.
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 us,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 iswas required, the prepayment offsetsoffset the future quarterly principal payments of the same amount. The annual excess cash flow calculation for the year endedAs of December 31, 2020, requiredsubject 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 which was paid in April 2021. to those lenders who made such a request.

The annual excess cash flow calculation for the year ended December 31, 2019 did not requireCompany made a principal prepayment.

Inprepayment of $525.0 million on July 30, 2021. Subsequently, in September 2021, using the proceeds from the Term B LoansLoan provided in the 2021 Credit Agreement weand cash on hand, the Company fully repaid the remaining $804.2 million of outstanding balanceborrowings 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

Amounts outstanding under the First Lien Term LoanCredit Agreement bore interest at a variable rate of LIBOR, plus up to 3.00% per annum based upon the Company’s first lien leverage ratio.ratio, as defined in the First Lien Credit Agreement. 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.

Revolvers.

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. . The Company made interest payments of $9.3 million during the three months ended September 30, 2021.

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 consistedCompany made interest payments of the $375.0$36.1 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.
55
Table of Contents
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, 2020,2021.

Interest Rate Cap—In August 2022, the weighted-averageCompany entered into an interest rate oncap agreement to reduce its exposure to increases in interest rates applicable to its floating rate long-term debt. The aggregate notional value of the Second Lien Term Loan was 8.6%.

The Second Lien Credit Agreement contained representationsinterest rate cap agreements is $600.0 million with a cap rate of 4.0% and warranties, and affirmative and negative covenants, customary for a financingan expiration date of this type. We were in compliance with all affirmative and negative covenants prior to repayment in February 2020.
July 31, 2025.

Interest Rate Swap Agreements.

Swaps—In June 2017, wethe Company entered into three floating to fixed interest rate swap agreements (“Swap Agreements”) to reduce ourits exposure to the variability from future cash flows resulting from interest rate risk related to ourits floating rate long-term debt. OnIn September 21, 2021, the Company made an aggregate payment of $10.0 million to extinguish the Swap Agreements thatwhich were scheduled to expire in June 2022. The aggregate notional amount of the Swap Agreements totaled $864.9 million at December 31, 2020.

43

Cash Flows

The following table provides a summary of cash flow data for the nine months ended September 30, 20212022 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 
  
 
 
   
 
 
 
2021:

 

 

Nine Months Ended September 30,

 

(dollar amounts in thousands)

 

2022

 

 

2021

 

Net cash provided by operating activities

 

$

118,438

 

 

$

96,725

 

Net cash used in investing activities

 

 

(67,185

)

 

 

(35,299

)

Net cash provided by (used in) financing activities

 

 

15,006

 

 

 

(62,917

)

Net effect of exchange rate change

 

 

(650

)

 

 

(162

)

Change in cash and cash equivalents

 

$

65,609

 

 

$

(1,653

)

Net cash provided by operating activities was $96.7$118.4 million for the nine months ended September 30, 2021.2022. Net cash provided by operating activities consists of net lossincome of $191.1$37.3 million, adjusted for $303.6$94.8 million of

non-cash items,
$3.5 $4.5 million for changes in working capital and ($19.3)18.2) million for the effect of changes in other operating assets and liabilities.
Non-cash Significant non-cash adjustments
include depreciation and amortization of $94.6 million, stock-based compensation expense of $235.4$80.8 million, depreciationnon-cash lease expense of $3.1 million, deferred income tax benefits of ($53.1), a change in fair value of derivative instruments of ($6.0) million and amortization of $92.1 million,a 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, .23.5) million. The change in net operating assets and liabilities was primarily a result of an increase in accounts receivable of $8.3$19.5 million due to timing of receipts of payments from customers and an increase in prepayments and other current assets of $7.9$18.2 million due to timing of payments for prepaid and other deferred costs an increase in deferred contract costs of $6.4including the $6.3 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,cap premium payment, partially offset by an increasea decrease in accounts payableother current assets of $1.4$12.4 million due to timing of cash disbursements, an increase in accrued expensesreceipts of $17.1 million due tonon-trade receivables and timing of cash disbursements and employee incentive plan accruals and an increase inpayments for other deferred revenue of $2.9 million due to timing of customer receipts and revenue recognition.
costs.

Net cash used in investing activities was $35.3$67.2 million for the nine months ended September 30, 2021.2022. Net cash used in investing activities is primarily relatedwas due to $38.8 million of capitalized time on internally developed software projects and purchases of software, equipment and property and $32.2 million for a business acquisition, partially offset by $3.9 million of $25.0 million and an investment inproceeds from the sale of a limited partnership of $10.2 million.

cost method investment.

Net cash used inprovided by financing activities was $62.9$15.0 million for the nine months ended September 30, 2021.2022. Net cash used inprovided by financing activities was primarily relateddue to $22.8 million of proceeds from stock option exercises and $3.2 million of proceeds from shares purchased through the Company's ESPP, partially offset by $6.0 million of principal payments of long-term debt and $5.0 million of $1,336.2 million, dividends to shareholders priortax payments related to the Business Combinationnet share settlement 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.

56
Table of Contents
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.
employee equity awards.

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 CCCISour audited consolidated financial statements and notes thereto for the year ended December 31, 20202021, included in our Annual Report on Form 10-K.

Valuation of Goodwill and Intangible Assets

We perform an annual assessment for impairment of goodwill and indefinite-lived intangible assets as of September 30 each fiscal year, or whenever events occur or circumstances indicate that it is more likely than not that the Proxy Statement/Prospectus filedfair value of a reporting unit or indefinite-lived intangible asset is below its carrying value. For the three and nine months ended September 30, 2022 and 2021, our annual impairment analysis performed indicated no impairments of goodwill or changes in carrying values due to impairment.

The September 30, 2022 quantitative goodwill impairment test performed primarily uses an income approach based on July 6, 2021 by Dragoneer Growth Opportunities Corp.

57
Tablea number of Contents
Fair Valuekey estimates and assumptions, including revenue and expense growth factors along with applying a discount rate to the estimated

44

cash flows. The discount rates are based on the estimated weighted average cost of Warrant Liabilities

capital for each reporting unit and may change from year to year. Weighted average cost of capital includes certain assumptions such as market capital structures, market betas, risk-free rates of return and estimated costs of borrowing.

The warrant liabilities were recorded as partprocess of evaluating the Business Combination completedpotential impairment of goodwill is subjective and requires significant judgment. In estimating the fair value of a reporting unit for the purposes of our annual or periodic impairment analyses, we make estimates and significant judgments about the future cash flows of that reporting unit. Our cash flow forecasts are based on July 30, 2021assumptions that represent the highest 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 accountbest use for our warrantsreporting units. Changes in accordance withjudgment on these assumptions and estimates could result in goodwill impairment charges. We believe that the guidance contained in ASC
815-40 under
whichassumptions and estimates utilized are appropriate based on the warrants do not meetinformation available to management.

We have two reporting units, Domestic and China, for purposes of analyzing goodwill. As of September 30, 2022, the criteriaannual impairment assessment indicated no impairment for equity treatment and must be recorded as liabilities. Accordingly, we classifyour China reporting unit. The quantitative assessment for the warrants as liabilities at theirChina reporting unit had an estimated fair value and adjustthat exceeded its carrying value by approximately 10%. Key financial assumptions utilized to determine 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 usingreporting unit included revenue growth levels that reflect the quotedrollout of new services and solutions, improving profit margins and a 13.5% discount rate. The reporting unit’s fair value would approximate its carrying value with a 60 basis point increase in the discount rate.

As noted above, a considerable amount of management judgment and assumptions are required in performing the annual goodwill impairment assessment. While we believe our judgments and assumptions are reasonable, different assumptions could change the estimated fair values. A number of factors, many of which we have no ability to control, could cause actual results to differ from the estimates and assumptions we employed. These factors include:

•
continued negative impact from the COVID-19 pandemic;
•
a prolonged global or regional economic downturn;
•
a significant decrease in the demand for our services and solutions;
•
the inability to develop new and enhanced services and solutions in a timely manner;
•
a significant adverse change in legal factors or in the business climate;
•
an adverse action or assessment by a regulator;
•
successful efforts by our competitors to gain market price asshare in our markets;
•
disruptions to the Company's business;
•
unexpected or unplanned changes in the use of assets or entity structure; and
•
business divestitures

If management's estimates of future operating results change or if there are changes to other assumptions due to these factors, the estimate of the valuation date.fair value may change significantly. Such change could result in impairment charges in future periods, which could have a significant impact on our operating results and financial condition.

Intangible assets with finite lives and software, equipment and property are amortized or depreciated over their estimated useful life on a straight-line basis. We monitor conditions related to these assets to determine whether events and circumstances warrant a revision to the remaining amortization or depreciation period. We test these assets for potential impairment whenever our management concludes events or changes in circumstances indicate that the carrying amount may not be recoverable. The original estimate of an asset’s useful life and the impact of an event or circumstance on either an asset’s useful life or carrying value involve significant judgment regarding estimates of the future cash flows associated with each asset.

There was no impairment charge related to intangible assets recorded during the three and nine months ended September 30, 2022 and 2021.

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 Private Warrants was determined usingcontingent consideration associated with the Black-Scholes option pricing model.

Item 3.
Quantitative and Qualitative Disclosures About Market Risk
We are exposed to a varietyacquisition of marketSafekeep as of the acquisition date and other risks, including the effects ofreassess our estimate each reporting period.

45

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes in interest rates, and inflation, as well as risksour market risk compared to the availability of funding sources, hazard events, and specific asset risks.

Interest Rate Risk
We are exposed to market risk related to changesdisclosures in interest rates on $800.0 million of borrowings at September 30, 2021 that are floating rate obligations. These market risks result primarily from changes in LIBOR or prime rates.
Interest rate fluctuations can affect the fair valuePart II, Item 7A of our floating rate debt, as well as earningsAnnual Report on Form 10-K for the year ended December 31, 2021.

Item 4. Controls and cash flows. If market interest rates rise, our earnings and cash flows could be adversely affected by an increase in interest expense. In contrast, lower interest rates may reduce our borrowing costs and improve our operational results.

As of September 30, 2021, a
100-basis
point increase in interest rates would increase annual interest expense by $8.0 million after considering the effect of this hypothetical change on our floating rate debt.
Inflation Risk
CCC does not believe that inflation has had, or currently has, a material effect on its business.
Foreign Currency Risk
Our reporting currency is the U.S. dollar, however for operations located in China, the functional currency is the local currency. Although we have experienced and will continue to experience fluctuations in our net (loss) income as a result of transaction gains (losses) related to transactions denominated in currencies other than the U.S. dollar, we believe that a 10% change in foreign exchange rates would not have a material impact on our results of operations.
Item 4.
Controls and Procedures
Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules

13a-15(e)
and
15d-15(e)
under the Securities Exchange Act of 1934 (“Exchange Act”), as of the end of the period covered by this Quarterly Report on Form
10-Q.
Based on this evaluation, our principal executive officer and principal financial officer hashave concluded that during the period covered by this report,as of September 30, 2022, our disclosure controls and procedures were effective.
effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarterthree months ended September 30, 20212022 identified in management’s evaluation pursuant to in Rules

13a-15(d)
and
15d-15(d)
of the Exchange Act that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
58

46

Table of Contents

PART II - OTHER INFORMATION

Item 1.
Legal Proceedings

In the ordinary course of business, the Company is from time to time, involved in various pending or threatened legal actions. The litigation process is inherently uncertain, and it is possible that the resolution of such matters might have a material adverse effect upon the Company’s consolidated financial condition and/or results of operations. The Company’s management believes, based on current information, matters currently pending or threatened are not expected to have a material adverse effect on the Company’s consolidated financial position or results of operations.

Item 1A.
Risk Factors
As a result of the recent closing of the Business Combination on July 30, 2021, the risk factors previously described in our Annual Report on Form
10-K/A
for the fiscal year ended December 31, 2020, filed with the SEC on May 14, 2021 are generally no longer applicable.

Item 1A. Risk Factors

For risk factors relating to our business, following the Business Combination, please refer to the section entitled “Risk Factors” in our Proxy Statement/Prospectus filedAnnual Report on July 6,Form 10-K for the year ended December 31, 2021. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations.

Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.

Item 3.
Defaults upon Senior Securities

Item 3. Defaults upon Senior Securities

Not applicable.

Item 4.
Mine Safety Disclosures

Item 4. Mine Safety Disclosures

Not applicable.

Item 5.
Other Information

Item 5. Other Information

Not applicable.

Item 6.
Exhibits

Item 6. Exhibits

The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form

10-Q.

Exhibit


Number

Description

31.1*

2.1*

Business Combination Agreement, dated as of February 2, 2021, by and among Dragoneer Growth Opportunities Corp., Chariot Opportunity Merger Sub, Inc., and Cypress Holdings, Inc. (incorporated by reference to Annex A to the Proxy Statement/Prospectus).

2.2Amendment No. 1 to the Business Combination Agreement, dated as of April 22, 2020, by and among Dragoneer Growth Opportunities Corp., Chariot Opportunity Merger Sub, Inc., and Cypress Holdings, Inc. (incorporated by reference to Annex AA to the Proxy Statement/Prospectus).
2.3Amendment No. 2 to the Business Combination Agreement, dated July 6, 2021, by and among Dragoneer Growth Opportunities Corp., Chariot Opportunity Merger Sub, Inc., and Cypress Holdings, Inc. (incorporated by reference to Annex AAA to the Proxy Statement/Prospectus).
3.1Certificate of Incorporation of CCC Intelligent Solutions Holdings Inc. (incorporated by reference to Exhibit 3.2 of the Current Report on Form 8-K filed the Registrant on August 5, 2021).
3.2Bylaws of CCC Intelligent Solutions Holdings Inc. (incorporated by reference to Exhibit 3.3 of the Current Report on Form 8-K filed the Registrant on August 5, 2021).
4.1Specimen Unit Certificate (incorporated by reference to Exhibit 4.1 to the Registration Statement on Form S-1 filed by the Registrant on August 11, 2020).
4.2Specimen Ordinary Share Certificate (incorporated by reference to Exhibit 4.2 to the Registration Statement on Form S-1 filed by the Registrant on August 11, 2020).
4.3Specimen Warrant Certificate (incorporated by reference to Exhibit 4.3 to the Registration Statement on Form S-1 filed by the Registrant on August 11, 2020).
4.4Warrant Agreement between Continental Stock Transfer & Trust Company and Dragoneer Growth Opportunities Corp., dated August 13, 2020 (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed by the Registrant on August 19, 2020).
10.1Form of Subscription Agreement (incorporated by reference to Annex E to the Proxy Statement/Prospectus).
10.2Form of CCC Shareholder Transaction Support Agreement (incorporated by reference to Annex F to the Proxy Statement/Prospectus).
10.3Form of Dragoneer Shareholder Transaction Support Agreement (incorporated by reference to Annex G to the Proxy Statement/Prospectus).
10.4
Sponsor Letter Agreement, dated as of February 3, 2021 by and among Dragoneer Growth Opportunities Holding, certain other holders set forth on Schedule I thereto, Dragoneer Growth Opportunities Corp. and Cypress Holdings, Inc. (incorporated by reference to Annex H to the Proxy Statement/Prospectus).
10.5Shareholder Rights Agreement (incorporated by reference to Annex I to the Proxy Statement/Prospectus).
10.6
CCC 2021 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 of the Registration Statement on Form S-8 filed by the Registrant on October 14, 2021).
10.7
Forward Purchase Agreement, dated as of July 24, 2020, by and between Dragoneer and Willett Advisors LLC (incorporated by reference to Exhibit 10.9 to the Registration Statement on Form S-1 filed by the Registrant on August 11, 2020).
10.8Forward Purchase Agreement, dated as of August 12, 2020, by and between Dragoneer Growth Opportunities Corp. and Dragoneer Funding LLC (incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K filed by the Registrant on August 19, 2020).
10.9
Promissory Note, dated January 19, 2021, issued by Dragoneer Growth Opportunities Corp. to Dragoneer Growth Opportunities Holdings (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by the Registrant on January 22, 2021).
10.10
Credit Agreement, dated as of September 21, 2021, by and among CCC Intelligent Solutions Inc., CCC, Bank of America, N.A., as Administrative Agent, Collateral Agent and Swingline Lender, and each lender and issuing bank from time to time party thereto (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed the Registrant on September 24, 2021).
10.11
CCC 2021 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.2 of the Registration Statement on Form S-8 filed by the Registrant on October 14, 2021).
10.12†
Employment Agreement, dated April 27, 2017, by and between CCC Information Services Inc. (as successor by merger to Cypress Intermediate Holdings II, Inc.) and Githesh Ramamurthy (incorporated by reference to Exhibit 10.13 to the Registration Statement on Form S-4 filed by the Registrant on March 29, 2021).
10.13
Employment Agreement, dated April 27, 2017, by and between CCC Information Services Inc. (as successor by merger to Cypress Intermediate Holdings III, Inc.) and Barrett J. Callaghan (incorporated by reference to Exhibit 10.14 to the Registration Statement on Form S-4 filed by the Registrant on March 29, 2021).
10.14
Employment Agreement, dated January 8, 2020, by and between CCC Information Services Inc. and Brian Herb (incorporated by reference to Exhibit 10.15 to the Registration Statement on Form S-4 filed by the Registrant on March 29, 2021).
10.15
Form of Indemnification Agreement (incorporated by reference to Exhibit 10.16 of the Current Report on Form 8-K filed the Registrant on August 5, 2021).
31.1Certification of Chief Executive Officer (Principal Executive Officer) Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*

31.2

Certification of Chief Financial Officer (Principal Financial and Accounting Officer) Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1**

32.1

Certification of Chief Executive Officer (Principal Executive Officer) Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2**

32.2

Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS*

101.INS

Inline XBRL Instance Document

101.SCH*

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL*

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE*

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104*

Cover Page Interactive Data File - The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

*
Schedules and exhibits to this Exhibit omitted pursuant to Regulation S-K Item 601(b)(2). The Registrant agrees to furnish supplementally a copy of any omitted schedule or exhibit to the SEC upon request.
†
Schedules and exhibits to this Exhibit omitted pursuant to Regulation S-K Item 601(b)(10). The Registrant agrees to furnish supplementally a copy of any omitted schedule or exhibit to the SEC upon request.
59

__________

* Filed herewith

** Furnished herewith

47

Table of Contents

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Dated: November 10, 20214, 2022

CCC INTELLIGENT SOLUTIONS HOLDINGS INC.

By:

By:

/s/ Githesh Ramamurthy

Name:

Name:

Githesh Ramamurthy

Title:

Title:

Chief Executive Officer and Chairman of the Board of Directors

(Principal Executive Officer)

Dated: November 4, 2022

Dated: November 10, 2021

By:

By:

/s/ Brian Herb

Name:

Name:

Brian Herb

Title:

Title:

Executive Vice President, Chief Financial and Administrative Officer

(Principal Financial Officer)

60

48