REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of CCC Intelligent Solutions Holdings Inc.
Opinion on the Financial Statements
We have audited the
accompanying consolidated balance sheets of CCC Intelligent Solutions Holdings Inc. and subsidiaries (the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive loss,
mezzanine equity and stockholders equity, and cash flows, for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the financial statements). In our opinion, the
financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended
December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
Change in Accounting Principle
As discussed in Note 10 to the financial statements, the Company has changed its method of accounting for leases effective January 1, 2021 due to
the adoption of FASB ASC Topic 842, Leases, using the modified retrospective approach.
Basis for Opinion
These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on the Companys financial
statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance
with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not
required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of
expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion.
Our
audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the
financial statements. We believe that our audits provide a reasonable basis for our opinion.
Emphasis of Matter
As discussed in Note 2 and Note 3 to the financial statements, the Company consummated a merger on July 30, 2021, which has been accounted for as a
reverse recapitalization. The Companys common stock was adjusted retroactively to give effect to the exchange ratio.
/s/ Deloitte & Touche LLP
Chicago, IL
March 1, 2022
We have served as the Companys auditor since 2006.
F-2
CCC INTELLIGENT SOLUTIONS HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2021 AND 2020
(In thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
December 31, |
|
|
|
2021 |
|
|
2020 |
|
ASSETS |
|
|
|
|
|
|
|
|
CURRENT ASSETS: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
182,544 |
|
|
$ |
162,118 |
|
Accounts receivableNet of allowances of $3,791 and $4,224 as of December 31, 2021 and
2020, respectively |
|
|
78,793 |
|
|
|
74,107 |
|
Income taxes receivable |
|
|
318 |
|
|
|
2,037 |
|
Deferred contract costs |
|
|
15,069 |
|
|
|
11,917 |
|
Other current assets |
|
|
46,181 |
|
|
|
31,586 |
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
322,905 |
|
|
|
281,765 |
|
|
|
|
|
|
|
|
|
|
SOFTWARE, EQUIPMENT, AND PROPERTYNet |
|
|
135,845 |
|
|
|
101,438 |
|
OPERATING LEASE ASSETS |
|
|
37,234 |
|
|
|
|
|
INTANGIBLE ASSETSNet |
|
|
1,213,249 |
|
|
|
1,311,917 |
|
GOODWILL |
|
|
1,466,884 |
|
|
|
1,466,884 |
|
DEFERRED FINANCING FEES, REVOLVERNet |
|
|
2,899 |
|
|
|
746 |
|
DEFERRED CONTRACT COSTS |
|
|
22,117 |
|
|
|
14,389 |
|
EQUITY METHOD INVESTMENT |
|
|
10,228 |
|
|
|
|
|
OTHER ASSETS |
|
|
26,165 |
|
|
|
18,416 |
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
$ |
3,237,526 |
|
|
$ |
3,195,555 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS EQUITY |
|
|
|
|
|
|
|
|
CURRENT LIABILITIES: |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
12,918 |
|
|
$ |
13,164 |
|
Accrued expenses |
|
|
66,691 |
|
|
|
52,987 |
|
Income taxes payable |
|
|
7,243 |
|
|
|
5,129 |
|
Current portion of long-term debt |
|
|
8,000 |
|
|
|
25,381 |
|
Current portion of long-term licensing agreementNet |
|
|
2,703 |
|
|
|
2,540 |
|
Operating lease liabilities |
|
|
8,052 |
|
|
|
|
|
Deferred revenues |
|
|
31,042 |
|
|
|
26,514 |
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
136,649 |
|
|
|
125,715 |
|
|
|
|
|
|
|
|
|
|
LONG-TERM DEBT: |
|
|
|
|
|
|
|
|
First Lien Term LoanNet |
|
|
|
|
|
|
1,292,597 |
|
Term B LoanNet |
|
|
780,610 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term debt |
|
|
780,610 |
|
|
|
1,292,597 |
|
|
|
|
|
|
|
|
|
|
DEFERRED INCOME TAXESNet |
|
|
275,745 |
|
|
|
322,348 |
|
LONG-TERM LICENSING AGREEMENTNet |
|
|
33,629 |
|
|
|
36,331 |
|
OPERATING LEASE LIABILITIES |
|
|
56,133 |
|
|
|
|
|
WARRANT LIABILITIES |
|
|
62,478 |
|
|
|
|
|
OTHER LIABILITIES |
|
|
5,785 |
|
|
|
32,770 |
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
1,351,029 |
|
|
|
1,809,761 |
|
|
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES (Notes 22 and 23) |
|
|
|
|
|
|
|
|
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; 609,768,296 and 504,274,890 shares
issued and outstanding at December 31, 2021 and 2020, respectively |
|
|
61 |
|
|
|
50 |
|
Additional paid-in capital |
|
|
2,618,924 |
|
|
|
1,501,206 |
|
Accumulated deficit |
|
|
(746,352 |
) |
|
|
(129,370 |
) |
Accumulated other comprehensive loss |
|
|
(315 |
) |
|
|
(271 |
) |
|
|
|
|
|
|
|
|
|
Total stockholders equity |
|
|
1,872,318 |
|
|
|
1,371,615 |
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
$ |
3,237,526 |
|
|
$ |
3,195,555 |
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
F-3
CCC INTELLIGENT SOLUTIONS HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019
(In thousands, except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
REVENUES |
|
$ |
688,288 |
|
|
$ |
633,063 |
|
|
$ |
616,084 |
|
COST OF REVENUES |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues, exclusive of amortization and impairment of acquired technologies |
|
|
169,335 |
|
|
|
182,414 |
|
|
|
191,868 |
|
Amortization of acquired technologies |
|
|
26,320 |
|
|
|
26,303 |
|
|
|
27,797 |
|
Impairment of acquired technologies |
|
|
|
|
|
|
|
|
|
|
5,984 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of revenues |
|
|
195,655 |
|
|
|
208,717 |
|
|
|
225,649 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS PROFIT |
|
|
492,633 |
|
|
|
424,346 |
|
|
|
390,435 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
|
165,991 |
|
|
|
109,508 |
|
|
|
114,005 |
|
Selling and marketing |
|
|
148,861 |
|
|
|
74,710 |
|
|
|
82,109 |
|
General and administrative |
|
|
250,098 |
|
|
|
90,838 |
|
|
|
78,128 |
|
Amortization of intangible assets |
|
|
72,358 |
|
|
|
72,310 |
|
|
|
81,329 |
|
Impairment of goodwill |
|
|
|
|
|
|
|
|
|
|
25,797 |
|
Impairment of intangible assets |
|
|
|
|
|
|
|
|
|
|
175,269 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
637,308 |
|
|
|
347,366 |
|
|
|
556,637 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING (LOSS) INCOME |
|
|
(144,675 |
) |
|
|
76,980 |
|
|
|
(166,202 |
) |
INTEREST EXPENSE |
|
|
(58,990 |
) |
|
|
(77,003 |
) |
|
|
(89,475 |
) |
GAIN (LOSS) ON CHANGE IN FAIR VALUE OF INTEREST RATE SWAPS |
|
|
8,373 |
|
|
|
(13,249 |
) |
|
|
(22,432 |
) |
CHANGE IN FAIR VALUE OF WARRANT LIABILITIES |
|
|
(64,501 |
) |
|
|
|
|
|
|
|
|
LOSS ON EARLY EXTINGUISHMENT OF DEBT |
|
|
(15,240 |
) |
|
|
(8,615 |
) |
|
|
|
|
OTHER INCOME Net |
|
|
114 |
|
|
|
332 |
|
|
|
476 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PRETAX LOSS |
|
|
(274,919 |
) |
|
|
(21,555 |
) |
|
|
(277,633 |
) |
INCOME TAX BENEFIT |
|
|
26,000 |
|
|
|
4,679 |
|
|
|
67,293 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS INCLUDING NON-CONTROLLING INTEREST |
|
|
(248,919 |
) |
|
|
(16,876 |
) |
|
|
(210,340 |
) |
Less: net loss attributable to non-controlling
interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS ATTRIBUTABLE TO CCC INTELLIGENT SOLUTIONS HOLDINGS INC. |
|
$ |
(248,919 |
) |
|
$ |
(16,876 |
) |
|
$ |
(210,340 |
) |
Net loss per share attributable to common stockholdersbasic and diluted |
|
$ |
(0.46 |
) |
|
$ |
(0.03 |
) |
|
$ |
(0.42 |
) |
Weighted-average shares used in computing net loss per share attributable to common
stockholdersbasic and diluted |
|
|
543,558,222 |
|
|
|
504,115,839 |
|
|
|
503,453,127 |
|
COMPREHENSIVE LOSS: |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss including non-controlling interest |
|
|
(248,919 |
) |
|
|
(16,876 |
) |
|
|
(210,340 |
) |
Other comprehensive (loss) incomeForeign currency translation adjustment |
|
|
(44 |
) |
|
|
126 |
|
|
|
(89 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE LOSS INCLUDING NON-CONTROLLING
INTEREST |
|
|
(248,963 |
) |
|
|
(16,750 |
) |
|
|
(210,429 |
) |
Less: comprehensive loss attributable to non-controlling
interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE LOSS ATTRIBUTABLE TO CCC INTELLIGENT |
|
|
|
|
|
|
|
|
|
|
|
|
SOLUTIONS HOLDINGS INC. |
|
$ |
(248,963 |
) |
|
$ |
(16,750 |
) |
|
$ |
(210,429 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
F-4
CCC INTELLIGENT SOLUTIONS HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF MEZZANINE EQUITY AND STOCKHOLDERS EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019
(In thousands, except number of shares)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable
Non-Controlling |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued Preferred Stock |
|
|
CCCIS Issued Common Stock |
|
|
|
|
|
|
|
|
Additional
Paid-In |
|
|
Retained
Earnings
(Accumulated |
|
|
Accumulated
Other
Comprehensive |
|
|
Total
Stockholders |
|
|
|
Interest |
|
|
|
|
|
|
|
|
Series A |
|
|
Series B |
|
|
Common Stock |
|
|
|
|
|
|
|
|
|
Number of |
|
|
Par |
|
|
Number of |
|
|
Par |
|
|
Number of |
|
|
Par |
|
|
Number of |
|
|
Par |
|
|
|
|
|
|
|
|
|
Shares |
|
|
Value |
|
|
Shares |
|
|
Value |
|
|
Shares |
|
|
Value |
|
|
Shares |
|
|
Value |
|
|
Capital |
|
|
Deficit) |
|
|
Loss |
|
|
Equity |
|
BALANCEDecember 31, 2018 (as previously reported) |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
1,450,978 |
|
|
$ |
1 |
|
|
|
27,405 |
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
1,484,182 |
|
|
$ |
85,950 |
|
|
$ |
(308 |
) |
|
$ |
1,569,825 |
|
Retrospective application of the recapitalization due to |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business Combination (Note 3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,450,978 |
) |
|
|
(1 |
) |
|
|
(27,405 |
) |
|
|
|
|
|
|
503,464,378 |
|
|
|
50 |
|
|
|
(49 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCEDecember 31, 2018, effect of Business |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combination |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
503,464,378 |
|
|
|
50 |
|
|
|
1,484,133 |
|
|
|
85,950 |
|
|
|
(308 |
) |
|
|
1,569,825 |
|
Cumulative effect of change in accounting principle related to revenue recognition |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,896 |
|
|
|
|
|
|
|
11,896 |
|
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,124 |
|
|
|
|
|
|
|
|
|
|
|
7,124 |
|
Exercise of stock optionsnet of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
234,299 |
|
|
|
|
|
|
|
595 |
|
|
|
|
|
|
|
|
|
|
|
595 |
|
Repurchase and cancellation of common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(42,909 |
) |
|
|
|
|
|
|
(148 |
) |
|
|
|
|
|
|
|
|
|
|
(148 |
) |
Exchange of Series A common stock for Series B common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(89 |
) |
|
|
(89 |
) |
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(210,340 |
) |
|
|
|
|
|
|
(210,340 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCEDecember 31, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,486 |
|
|
|
|
|
|
|
|
|
|
|
7,486 |
|
Exercise of stock optionsnet of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
330,675 |
|
|
|
|
|
|
|
692 |
|
|
|
|
|
|
|
|
|
|
|
692 |
|
Repurchase and cancellation of common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(52,104 |
) |
|
|
|
|
|
|
(236 |
) |
|
|
|
|
|
|
|
|
|
|
(236 |
) |
Foreign currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
126 |
|
|
|
126 |
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(16,876 |
) |
|
|
|
|
|
|
(16,876 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable
Non-Controlling |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued Preferred Stock |
|
|
CCCIS Issued Common Stock |
|
|
|
|
|
|
|
|
Additional
Paid-In |
|
|
Retained
Earnings
(Accumulated |
|
|
Accumulated
Other
Comprehensive |
|
|
Total
Stockholders |
|
|
|
Interest |
|
|
|
|
|
|
|
|
Series A |
|
|
Series B |
|
|
Common Stock |
|
|
|
|
|
|
|
|
|
Number of |
|
|
Par |
|
|
Number of |
|
|
Par |
|
|
Number of |
|
|
Par |
|
|
Number of |
|
|
Par |
|
|
|
|
|
|
|
|
|
Shares |
|
|
Value |
|
|
Shares |
|
|
Value |
|
|
Shares |
|
|
Value |
|
|
Shares |
|
|
Value |
|
|
Capital |
|
|
Deficit) |
|
|
Loss |
|
|
Equity |
|
BALANCEDecember 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 |
|
|
|
|
|
|
|
254,965 |
|
|
|
|
|
|
|
|
|
|
|
254,965 |
|
Net equity infusion from the Business Combination |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
97,740,002 |
|
|
|
10 |
|
|
|
704,831 |
|
|
|
|
|
|
|
|
|
|
|
704,841 |
|
Exercise of stock optionsnet of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,922,019 |
|
|
|
|
|
|
|
5,180 |
|
|
|
|
|
|
|
|
|
|
|
5,180 |
|
Exercise of WarrantsNet |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,836,977 |
|
|
|
1 |
|
|
|
60,461 |
|
|
|
|
|
|
|
|
|
|
|
60,462 |
|
Dividends to CCCIS stockholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(269,178 |
) |
|
|
|
|
|
|
(269,178 |
) |
Deemed distribution to CCCIS option holders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9,006 |
) |
|
|
|
|
|
|
|
|
|
|
(9,006 |
) |
Company Vesting Shares granted to CCCIS stockholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
98,885 |
|
|
|
(98,885 |
) |
|
|
|
|
|
|
|
|
Tax effect of Business Combination transaction costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,395 |
|
|
|
|
|
|
|
|
|
|
|
1,395 |
|
Foreign currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(44 |
) |
|
|
(44 |
) |
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(248,919 |
) |
|
|
|
|
|
|
(248,919 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCEDecember 31, 2021 |
|
$ |
14,179 |
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
609,768,296 |
|
|
$ |
61 |
|
|
$ |
2,618,924 |
|
|
$ |
(746,352 |
) |
|
$ |
(315 |
) |
|
$ |
1,872,318 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
F-6
CCC INTELLIGENT SOLUTIONS HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(248,919 |
) |
|
$ |
(16,876 |
) |
|
$ |
(210,340 |
) |
Adjustments to reconcile net loss to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization of software, equipment, and property |
|
|
24,451 |
|
|
|
17,749 |
|
|
|
18,391 |
|
Amortization of intangible assets |
|
|
98,678 |
|
|
|
98,613 |
|
|
|
109,126 |
|
Impairment of goodwill and intangible assets |
|
|
|
|
|
|
|
|
|
|
207,050 |
|
Deferred income taxes |
|
|
(46,883 |
) |
|
|
(11,124 |
) |
|
|
(84,280 |
) |
Stock-based compensation |
|
|
261,995 |
|
|
|
11,336 |
|
|
|
7,124 |
|
Amortization of deferred financing fees |
|
|
3,682 |
|
|
|
4,630 |
|
|
|
4,837 |
|
Amortization of discount on debt |
|
|
604 |
|
|
|
738 |
|
|
|
633 |
|
Change in fair value of interest rate swaps |
|
|
(8,373 |
) |
|
|
13,249 |
|
|
|
22,432 |
|
Change in fair value of warrant liabilities |
|
|
64,501 |
|
|
|
|
|
|
|
|
|
Loss on early extinguishment of debt |
|
|
15,240 |
|
|
|
8,615 |
|
|
|
|
|
Non-cash lease expense |
|
|
6,279 |
|
|
|
|
|
|
|
|
|
Gain on divestiture |
|
|
(600 |
) |
|
|
(3,800 |
) |
|
|
|
|
Other |
|
|
541 |
|
|
|
114 |
|
|
|
51 |
|
Changes in: |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivableNet |
|
|
(4,725 |
) |
|
|
(10,558 |
) |
|
|
(4,494 |
) |
Deferred contract costs |
|
|
(3,152 |
) |
|
|
(1,110 |
) |
|
|
(4,281 |
) |
Other current assets |
|
|
(12,273 |
) |
|
|
(6,483 |
) |
|
|
(4,139 |
) |
Deferred contract costsNon-current |
|
|
(7,728 |
) |
|
|
(1,926 |
) |
|
|
(3,031 |
) |
Other assets |
|
|
(7,838 |
) |
|
|
(9,187 |
) |
|
|
(1,778 |
) |
Operating lease assets |
|
|
6,354 |
|
|
|
|
|
|
|
|
|
Income taxes |
|
|
3,833 |
|
|
|
6,724 |
|
|
|
(1,277 |
) |
Accounts payable |
|
|
(1,052 |
) |
|
|
(2,256 |
) |
|
|
4,465 |
|
Accrued expenses |
|
|
8,347 |
|
|
|
165 |
|
|
|
1,296 |
|
Operating lease liabilities |
|
|
(8,398 |
) |
|
|
|
|
|
|
|
|
Deferred revenues |
|
|
4,513 |
|
|
|
1,376 |
|
|
|
2,306 |
|
Extinguishment of interest rate swap liability |
|
|
(9,987 |
) |
|
|
|
|
|
|
|
|
Other liabilities |
|
|
(11,755 |
) |
|
|
3,954 |
|
|
|
2,210 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
127,335 |
|
|
|
103,943 |
|
|
|
66,301 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of software, equipment, and property |
|
|
(38,321 |
) |
|
|
(30,107 |
) |
|
|
(20,461 |
) |
Purchase of investment |
|
|
|
|
|
|
|
|
|
|
(435 |
) |
Purchase of equity method investment |
|
|
(10,228 |
) |
|
|
|
|
|
|
|
|
Purchase of intangible asset |
|
|
(49 |
) |
|
|
(560 |
) |
|
|
(159 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(48,598 |
) |
|
|
(30,667 |
) |
|
|
(21,055 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
Principal payments on long-term debt |
|
|
(1,336,153 |
) |
|
|
(388,846 |
) |
|
|
(10,000 |
) |
Proceeds from issuance of long-term debt, net of fees paid to lender |
|
|
789,927 |
|
|
|
369,792 |
|
|
|
|
|
Payment of fees associated with early extinguishment of long-term debt |
|
|
(4,821 |
) |
|
|
(29 |
) |
|
|
|
|
Proceeds from borrowings on revolving lines of credit |
|
|
|
|
|
|
65,000 |
|
|
|
|
|
Repayment of borrowings on revolving lines of credit |
|
|
|
|
|
|
(65,000 |
) |
|
|
|
|
Net proceeds from equity infusion from the Business Combination |
|
|
763,300 |
|
|
|
|
|
|
|
|
|
Dividends to CCCIS stockholders |
|
|
(269,174 |
) |
|
|
|
|
|
|
|
|
Deemed distribution to CCCIS option holders |
|
|
(9,006 |
) |
|
|
|
|
|
|
|
|
Tax effect of Business Combination transaction costs |
|
|
1,395 |
|
|
|
|
|
|
|
|
|
Proceeds from exercise of stock options |
|
|
5,085 |
|
|
|
(236 |
) |
|
|
720 |
|
Proceeds from issuance of common stock |
|
|
1,007 |
|
|
|
719 |
|
|
|
|
|
Repurchases of common stock |
|
|
|
|
|
|
|
|
|
|
(148 |
) |
Proceeds from issuance of non-controlling interest in
subsidiary |
|
|
|
|
|
|
14,179 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities |
|
|
(58,440 |
) |
|
|
(4,421 |
) |
|
|
(9,428 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
NET EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS |
|
|
129 |
|
|
|
62 |
|
|
|
(70 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CHANGE IN CASH AND CASH EQUIVALENTS |
|
|
20,426 |
|
|
|
68,917 |
|
|
|
35,748 |
|
CASH AND CASH EQUIVALENTS: |
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of period |
|
|
162,118 |
|
|
|
93,201 |
|
|
|
57,453 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
End of period |
|
$ |
182,544 |
|
|
$ |
162,118 |
|
|
$ |
93,201 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NONCASH INVESTING AND FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
Unpaid liability related to software, equipment, and property |
|
$ |
8,035 |
|
|
$ |
239 |
|
|
$ |
7,279 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leasehold improvements acquired by tenant improvement allowance |
|
$ |
16,924 |
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of assumed common stock warrants exercised |
|
$ |
60,481 |
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: |
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest, excluding extinguishment of interest rate swap liability |
|
$ |
54,980 |
|
|
$ |
71,649 |
|
|
$ |
87,215 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash (paid) received for income taxesNet |
|
$ |
(15,233 |
) |
|
$ |
917 |
|
|
$ |
(17,958 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
F-7
CCC INTELLIGENT SOLUTIONS HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. |
ORGANIZATION AND NATURE OF OPERATIONS |
On February 2, 2021, Cypress Holdings Inc. (CCCIS), a Delaware corporation, entered into a business combination agreement (the
Business Combination Agreement) with Dragoneer Growth Opportunities Corp. (Dragoneer), a Cayman Islands exempted company. In connection with the closing of the business combination (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 (the Domestication) on July 30, 2021 (the
Closing Date), upon which Dragoneer changed its name to CCC Intelligent Solutions Holdings Inc. (CCC or the Company).
The Company 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 enabled digital workflows.
Our platform digitizes workflows and connects companies across the P&C insurance economy, including insurance carriers, collision repairers, parts suppliers, automotive manufacturers, financial institutions, and others.
The Company is headquartered in Chicago, Illinois. The Companys primary operations are in the United States (US) and it also
has operations in China.
2. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Basis of PresentationThe consolidated balance sheets as of December 31, 2021 and 2020, the consolidated statements of
operations and comprehensive loss, the consolidated statements of mezzanine equity and stockholders equity and the consolidated statements of cash flows for the years ended December 31, 2021, 2020 and 2019, have been prepared in
conformity with accounting principles generally accepted in the United States (GAAP).
The Business Combination (see 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 results of operations prior to the reverse recapitalization are those of CCCIS. The shares and
corresponding capital amounts and losses per share, prior 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.
Risk and UncertaintiesIn 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 a hybrid working model of in-person and remote work, 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 Companys 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.
F-8
Basis of AccountingThe accompanying 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 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 EstimatesThe preparation of the consolidated financial statements requires management to make estimates and assumptions
that affect the reported amounts, and the disclosures of contingent amounts in the Companys consolidated financial statements and the accompanying notes. 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. Although the Company regularly assesses its estimates, actual results could differ from managements estimates
if past experience or other assumptions are not substantially accurate. Significant estimates in these 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 estimates and assumptions associated with the valuation of the warrant liabilities, and the estimates and assumptions associated with stock incentive plans, including the fair value of
common stock prior to the Business Combination.
Cash and Cash EquivalentsThe Company considers all highly liquid investments
purchased with an original maturity of three months or less at the date of purchase to be cash and cash equivalents. Cash and cash equivalents are carried at cost, which approximates fair value. The Company believes it is not exposed to any
significant credit risk on cash and cash equivalents. While the Company has deposits that exceed federally insured limits at financial institutions, the Company places its cash and cash equivalents in highly rated institutions. The Company
has never experienced any losses related to these balances.
Foreign CurrencyThe Companys functional currency is the US
dollar; however, for operations located in China, the functional currency is the local currency. Assets and liabilities of the foreign operations are translated to US dollars at exchange rates in effect at the consolidated balance sheet date, while
statement of operations accounts are translated to US dollars at the average exchange rates for the period. Translation gains and losses are recorded and remain as a component of accumulated other comprehensive loss in stockholders equity
until transactions are settled or the foreign entity is sold or liquidated. Gains and losses resulting from transactions that are denominated in a currency that is not the functional currency are recorded to other incomenet, in the
consolidated statements of operations and comprehensive loss.
Significant Customers and Concentration of Credit RisksThe
Company is potentially subject 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 managements 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 Companys customer base.
Significant customers are those that represent more than 10% of the Companys total revenue or accounts receivable. For each significant
customer, revenue as a percentage of total revenue is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
Customer A |
|
|
* |
|
|
|
* |
|
|
|
12 |
% |
Customer B |
|
|
* |
|
|
|
11 |
% |
|
|
11 |
% |
F-9
As of December 31, 2021, no customer accounted for over 10% of accounts receivable. As
of December 31, 2020, one customer had an accounts receivable balance of 12% of net receivables
Revenue RecognitionThe
Companys 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 Companys 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 years ended
December 31, 2021, 2020 and 2019. 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.
Other Revenue-Other revenues consist of professional services and other non-software services,
including the Companys First Party Clinical Services which was divested in December 2020 (see Note 27) and are recognized over time as the services are performed. 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.
F-10
Contracts with Multiple Performance Obligations-The Companys 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 years ended December 31 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
Software subscriptions |
|
$ |
662,300 |
|
|
$ |
573,608 |
|
|
$ |
540,219 |
|
Other |
|
|
25,988 |
|
|
|
59,455 |
|
|
|
75,865 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
$ |
688,288 |
|
|
$ |
633,063 |
|
|
$ |
616,084 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 December 31, 2021, approximately $1,316 million of revenue
is expected to be recognized from remaining performance obligations with approximately $506 million impacting the next twelve months, and approximately $810 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 consolidated balance sheets.
During the years ended December 31, 2021, 2020 and 2019,
$26.5 million, $25.1 million and $22.8 million, respectively, that was included in the deferred revenue balance at the beginning of each period was recognized as revenue.
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.
Cost of RevenuesCost of revenues is primarily composed of personnel costs, including share-based compensation, and costs of
external resources used in the delivery of services to customers, including software configuration, integration services, customer support activities, third party costs related to hosting the Companys software for its customers, internal
support of production infrastructure, information
F-11
technology (IT) security costs, depreciation expense, cost of software production, and license and royalty fees paid to third parties. Cost of revenues also includes amortization of
internal use software, amortization of acquired technologies, and impairment charges on acquired technologies.
Research and
DevelopmentResearch and development expenses consist primarily of personnel-related costs, including share-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 information technology expenses. Research and development costs, other than
software development costs qualifying for capitalization, are expensed as incurred.
Selling and MarketingSelling and
marketing expenses consist primarily of personnel-related costs for our sales and marketing functions, including sales commissions and share-based compensation. Additional expenses include advertising costs, marketing costs and event costs,
including the Companys annual industry conference.
The Company expenses advertising and other promotional expenditures as incurred.
Advertising expenses were $1.1 million, $1.6 million and $1.3 million for the years ended December 31, 2021, 2020 and 2019, respectively.
General and AdministrativeGeneral and administrative expenses consist primarily of personnel-related costs, including share-based
compensation, for our executive management and administrative employees, including finance and accounting, human resources, information technology, facilities and legal functions. Additional expenses include professional service fees, insurance
premiums, and other corporate expenses that are not allocated to the above expense categories.
Amortization of Intangible
AssetsAmortization of intangible assets consists of the capitalized costs of intangible assets. These intangible assets are amortized on a straight-line basis over their estimated useful lives (Note 10).
Stock-Based CompensationThe Companys 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 awards expected to vest, based on an estimated forfeiture rate.
The Company recognizes stock-based compensation expense for time-based 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 restricted stock units with only a time-based vesting component or a performance-based vesting component is determined using
the quoted price of our common stock on the date of grant.
The fair value of the Companys stock options with only a time-based
component is estimated using the Black Scholes option pricing model.
The fair value of the Companys 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.
Accounts ReceivableNetAccounts receivable, as
presented in the consolidated balance sheets, are net of customer sales allowances and doubtful accounts. The Company determines allowances for its sales reserves and doubtful accounts based on specific identification of customer accounts and
historical experience to the remaining accounts receivable balance. The Companys assessment of doubtful accounts
F-12
includes using historical information and the probability of collection from customers. Doubtful accounts are charged to general and administrative expenses in the consolidated statements of
operations and comprehensive loss.
Software, Equipment, and PropertyNetSoftware, equipment, and property are stated at
cost, net of accumulated depreciation and amortization. Depreciation and amortization are computed on a straight-line basis over the assets estimated useful lives, which are as follows:
|
|
|
Software, equipment, and property |
|
Estimated Useful Life |
Software and licenses |
|
2-5 years |
Computer equipment |
|
3 years |
Furniture and other equipment |
|
5 years |
Database |
|
25 years |
Building |
|
39 years |
Leasehold improvements |
|
Lesser of the estimated useful life or life of lease |
Land |
|
Indefinite |
Maintenance and repairs are expensed as incurred. Major betterments are capitalized.
Internal Use SoftwareThe Company capitalizes the direct costs incurred in developing or obtaining internal use software, including
platform development, infrastructure and tools, as well as certain payroll and payroll-related costs of employees who are directly associated with internal use computer software projects. The amount of capitalized payroll costs with respect to these
employees is limited to the time directly spent on such projects. The costs associated with preliminary project stage activities, training, maintenance, and all other post-implementation activities are expensed as incurred. Additionally, the Company
expenses internal costs related to minor upgrades and enhancements as it is impractical to separate these costs from normal maintenance activities. Capitalized internal use software costs are recorded within software, equipment, and property on the
Companys consolidated balance sheets.
Goodwill and Intangible AssetsGoodwill and intangible assets deemed to have
indefinite lives are not amortized, but are subject to an annual impairment test as of September 30 of each fiscal year, or more frequently if events or changes in circumstances indicate that the carrying value may not be recoverable. Testing
goodwill and intangible assets for impairment involves comparing the fair value of the reporting unit or intangible asset to its carrying value. If the carrying amount of a reporting unit or intangible asset exceeds its fair value, an
impairment loss is recognized in an amount equal to the excess, up to the carrying value of the goodwill or intangible asset.
The Company
performed the impairment test of its reporting units for the years ended December 31, 2021, 2020 and 2019. For the years ended December 31, 2021 and 2020, the Company determined no impairment existed. For the year ended December 31,
2019, the Company recognized a goodwill impairment charge of $25.8 million (see Note 11).
Long-Lived AssetsLong-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 no impairment charges were recognized
during the years ended December 31, 2021 and 2020. During the year ended December 31, 2019, the Company recognized an impairment charge of $181.3 million on its definite lived intangible assets (see Note 11).
Equity Method InvestmentThe Company accounts for its 7% investment in a limited partnership using the equity method of accounting.
Under the equity method of accounting, the investees accounts are not
F-13
reflected within the Companys consolidated balance sheets and consolidated statements of operations and comprehensive loss. The Companys investment is initially recognized at cost and
adjusted thereafter for the post acquisition changes in the Companys share of the investees earnings.
The Companys share
of the investees earnings is reported within other income-net in the Companys consolidated statements of operations and comprehensive loss.
Deferred Financing CostsDeferred financing costs are capitalized and amortized over the life of the underlying financing agreement
(see Note 15).
Fair Value of Financial Instruments and Fair Value MeasurementsFair 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 1Valuations based on quoted prices for identical
assets and liabilities in active markets.
Level 2Valuations 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 3Valuations based on unobservable inputs reflecting the
Companys own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.
Warrant LiabilityThe Company assumed publicly-traded warrants (Public Warrants) and warrants sold in a private
placement (Private Warrants) upon consummation of the Business Combination.
The Company accounts for its Public Warrants and
Private Warrants under ASC 815-40, Derivatives and Hedging-Contracts in Entitys Own Equity, in conjunction with the SEC Division of Corporation Finances April 12, 2021 Public
Statement, Staff Statement on 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 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 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 consolidated statement of operations and comprehensive loss at each reporting date.
During November 2021, the Company announced that it had elected to redeem its outstanding Public Warrants and as of December 31, 2021,
there were no Public Warrants outstanding (see Note 21). Prior to redemption, the Public Warrants were publicly traded and thus had an observable market price in an active market and were valued at 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 TaxesDeferred 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.
F-14
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. The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense.
Accrual for Self-Insurance CostsThe Company maintains a self-insured group medical program. The program contains stop loss
thresholds with amounts in excess of the self-insured levels fully insured by third-party insurers. Liabilities associated with this program are estimated in part by considering historical claims experience and medical cost trends.
LeasesEffective January 1, 2021, the Company adopted Accounting Standards Update (ASU) 2016-02 which created a new topic, ASC 842 Leases.
In accordance with ASC 842, the Company,
at the inception 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 asset 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 rate 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.
Some of the
Companys 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 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. Lease related costs, which are variable rather than fixed, are expensed in the period incurred. 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 consolidated balance sheets.
Recently Adopted Accounting PronouncementsAs 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 Companys 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.
In February 2016, the Financial Accounting
Standards Board (FASB) issued ASU 2016-02 which created a new topic, ASC 842 Leases.
The Company early 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 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
F-15
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 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. The Company did not elect the hindsight practical expedient.
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 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 (accumulated deficit) as a result of the adoption of the guidance. The adoption of this new guidance did not have a
material impact on the Companys results of operations and comprehensive loss, cash flows, liquidity, or the Companys covenant compliance under its existing credit agreement.
Recently Issued Accounting PronouncementsIn 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 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 on January 1, 2023 and early adoption is permitted. The Company is currently assessing the impact of this update on
its consolidated financial statements.
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 if certain criteria are met. Adoption of the expedients and exceptions is permitted upon
issuance of ASU 2020-04 through December 31, 2022. The Company is evaluating the impact of the adoption of this guidance on its consolidated financial statements.
On December 18, 2019, the FASB issued ASU 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
transaction that is not a business combination, separate financial statements of legal entities not subject to tax, intraperiod tax allocation, ownership changes in investments, interim-period accounting for enacted changes in
tax law, and year-to-date loss limitation in interim-period tax accounting. The ASU is effective for public business entities in fiscal years beginning after
December 15, 2020, including interim periods within that reporting period. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after
December 15, 2022. The Company does not anticipate the provisions within the ASU having a material impact on its consolidated financial statements.
ReclassificationsCertain amounts in prior periods have been reclassified to conform with the report classifications of the year
ended December 31, 2021, noting the Company has reflected the reverse recapitalization pursuant to the Business Combination for all periods presented within the consolidated balance sheets and consolidated statements of mezzanine equity and
stockholders equity. These reclassifications had no effect on reported net loss and comprehensive loss, cash flows, total assets or stockholders equity as previously reported.
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
F-16
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 other transactions contemplated by the Business Combination Agreement
(collectively, 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). 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 CCCISs capital stock and equity awards prior to the Business Combination have been retroactively restated reflecting the Exchange Ratio.
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 Companys 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 Companys 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; |
|
|
|
each of Dragoneers redeemable Class A ordinary shares and Class B ordinary shares that was issued
and outstanding immediately prior to the Effective Time was exchanged for an equal number of shares of the Companys 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 Companys common stock at a purchase price of
$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
F-17
purchase units, each consisting of one common share and one-fifth of one warrant to purchase one common share for $11.50 per share, for a purchase price of
$10.00 per unit.
Effective upon Closing, 8,625,000 shares 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 Companys
common stock has been greater than or equal to $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, 15.0 million shares of the Companys 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 Companys common stock have traded for greater than or equal to $15.00 per share for any twenty trading days within any thirty consecutive trading day period commencing after the Closing 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 are 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 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).
The Company Earnout Shares are not issued shares and are excluded from the table of common stock outstanding below.
The total number of shares of the Companys 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 |
|
|
|
|
|
|
In connection with the Business Combination, the Company incurred underwriting fees and other costs considered
direct and incremental to the transaction totaling $11.1 million (before tax), consisting of legal, accounting, financial advisory and other professional fees. These amounts are treated as a reduction of the cash proceeds and are deducted from
the Companys additional paid-in capital.
F-18
The following table reconciles the elements of the Business Combination to the consolidated
statement of cash flows for the year ended December 31, 2021 and the consolidated statement of mezzanine equity and stockholders equity for the year ended December 31, 2021 (in thousands).
|
|
|
|
|
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 |
|
|
|
|
|
|
On January 1, 2019, the Company adopted Topic 606, applying the modified retrospective method to all contracts that were not completed as
of that date. There was no impact to revenue for the year ended December 31, 2019 as a result of adopting Topic 606.
The opening and
closing balances of the Companys receivables, contract assets and contract liabilities from contracts with customers are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021 |
|
|
December 31, 2020 |
|
|
December 31, 2019 |
|
|
January 1, 2019 |
|
Accounts receivables-Net of allowances |
|
$ |
78,793 |
|
|
$ |
74,107 |
|
|
$ |
63,613 |
|
|
$ |
59,252 |
|
Deferred contract costs |
|
|
15,069 |
|
|
|
11,917 |
|
|
|
10,807 |
|
|
|
6,526 |
|
Long-term deferred contract costs |
|
|
22,117 |
|
|
|
14,389 |
|
|
|
12,463 |
|
|
|
9,432 |
|
Deferred revenues |
|
|
31,042 |
|
|
|
26,514 |
|
|
|
25,096 |
|
|
|
22,787 |
|
Other liabilities (deferred revenues,
non-current) |
|
|
1,574 |
|
|
|
2,001 |
|
|
|
1,160 |
|
|
|
|
|
A summary of the activity impacting deferred revenue balances during the years ended December 31, 2021,
2020 and 2019, is presented below (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
Balance at beginning of period |
|
$ |
28,515 |
|
|
$ |
26,256 |
|
|
$ |
22,787 |
|
Revenue recognized1 |
|
|
(334,524 |
) |
|
|
(305,812 |
) |
|
|
(283,383 |
) |
Additional amounts deferred1 |
|
|
338,625 |
|
|
|
308,071 |
|
|
|
286,852 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period |
|
$ |
32,616 |
|
|
$ |
28,515 |
|
|
$ |
26,256 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Classified as: |
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
$ |
31,042 |
|
|
$ |
26,514 |
|
|
$ |
25,096 |
|
Non-current |
|
|
1,574 |
|
|
|
2,001 |
|
|
|
1,160 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred revenue |
|
$ |
32,616 |
|
|
$ |
28,515 |
|
|
$ |
26,256 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 Companys assessment of whether an estimate of variable consideration is constrained. For the years ended December 31,
2021, 2020 and 2019, the impact on revenue
F-19
recognized in the current period, from performance obligations partially or fully satisfied in the previous period, was not significant.
A summary of the activity impacting the deferred contract costs during the years ended December 31, 2021, 2020 and 2019 is presented below
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
Balance at beginning of period |
|
$ |
26,306 |
|
|
$ |
23,270 |
|
|
$ |
|
|
Adoption of ASC 606 |
|
|
|
|
|
|
|
|
|
|
15,958 |
|
Costs amortized |
|
|
(15,384 |
) |
|
|
(12,446 |
) |
|
|
(9,375 |
) |
Additional amounts deferred |
|
|
26,264 |
|
|
|
15,482 |
|
|
|
16,687 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period |
|
$ |
37,186 |
|
|
$ |
26,306 |
|
|
$ |
23,270 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Classified as: |
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
$ |
15,069 |
|
|
$ |
11,917 |
|
|
$ |
10,807 |
|
Non-current |
|
|
22,117 |
|
|
|
14,389 |
|
|
|
12,463 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred contract costs |
|
$ |
37,186 |
|
|
$ |
26,306 |
|
|
$ |
23,270 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5. |
FAIR VALUE MEASUREMENTS |
Assets and Liabilities Measured at Fair Value on a Recurring BasisAs of December 31, 2021, the Companys Private
Warrants are recognized as liabilities and measured at fair value on a recurring basis.
The Private Warrants are valued using Level 1
and Level 2 inputs within 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 Private Warrants. Accordingly, the Private Warrants are classified within Level 2 of the fair value hierarchy.
The valuation of the Private Warrants as of December 31, 2021 was determined using the Black-Scholes option-pricing model using the
following assumptions:
|
|
|
|
|
Expected term (in years) |
|
|
4.6 |
|
Expected volatility |
|
|
35 |
% |
Expected dividend yield |
|
|
0 |
% |
Risk-free interest rate |
|
|
1.20 |
% |
Fair value at valuation date |
|
$ |
3.51 |
|
The following table presents the fair value of the assets and liabilities measured at fair value on a recurring
basis at December 31, 2021 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
Fair Value |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
Private Warrants |
|
$ |
62,478 |
|
|
$ |
|
|
|
$ |
62,478 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
62,478 |
|
|
$ |
|
|
|
$ |
62,478 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the year ended December 31, 2021, the Companys Public Warrants were fully redeemed or
exercised. At December 31, 2021, there are no Public Warrants outstanding and they are no longer subject to recurring fair value measurements.
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
F-20
of $18.4 million and were classified within other liabilities in the accompanying consolidated balance sheet.
The following table presents the fair value of the assets and liabilities measured at fair value on a recurring basis at December 31, 2020
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
Fair Value |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
Interest rate swaps |
|
$ |
18,359 |
|
|
$ |
|
|
|
$ |
18,359 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
18,359 |
|
|
$ |
|
|
|
$ |
18,359 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In September 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 BasisThe
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 years ended December 31, 2021 and 2020, the Company recognized no impairment related to these
assets. During the year ended December 31, 2019, the Company recognized an impairment charge related to both goodwill and definite-lived intangible assets (see Note 11).
Fair Value of Other Financial InstrumentsThe following table presents the carrying amounts, net of debt discount, and estimated
fair values of the Companys financial instruments that are not recorded at fair value on the consolidated balance sheets (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021 |
|
|
December 31, 2020 |
|
Description |
|
Carrying Amount |
|
|
Estimated Fair Value |
|
|
Carrying Amount |
|
|
Estimated Fair Value |
|
Term B Loan, including current portion |
|
$ |
798,073 |
|
|
$ |
799,000 |
|
|
$ |
|
|
|
$ |
|
|
First Lien Term Loan, including current portion |
|
|
|
|
|
|
|
|
|
|
1,333,366 |
|
|
|
1,332,433 |
|
The fair value of the Companys 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.
On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (CARES Act) was signed into law. The CARES Act
includes provisions relating to refundable payroll tax credits, deferment of the employer portion of certain payroll taxes, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction
limitations and technical corrections to tax depreciation methods for qualified improvement property.
Under ASC 740, Income Taxes,
the effects of the new legislation are recognized in the period of enactment. Therefore, the effects of the CARES Act are recognized during the year ended December 31, 2020. The modification to the net interest deduction limitation resulted in
a benefit of $16.8 million during the year ended December 31, 2020. The other provisions of the CARES Act did not result in a material impact on the Companys provision for income taxes for the year ended December 31, 2020.
The components of pretax loss attributable to domestic and foreign operations are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
Domestic |
|
$ |
(261,900 |
) |
|
$ |
(15,117 |
) |
|
$ |
(270,428 |
) |
Foreign |
|
|
(13,019 |
) |
|
|
(6,438 |
) |
|
|
(7,205 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Pretax loss |
|
$ |
(274,919 |
) |
|
$ |
(21,555 |
) |
|
$ |
(277,633 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
F-21
The income tax benefit consists of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
Current provision (benefit): |
|
|
|
|
|
|
|
|
|
|
|
|
Federal |
|
$ |
15,263 |
|
|
$ |
1,539 |
|
|
$ |
13,685 |
|
State |
|
|
5,620 |
|
|
|
4,906 |
|
|
|
3,302 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current provision |
|
|
20,883 |
|
|
|
6,445 |
|
|
|
16,987 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred provision (benefit): |
|
|
|
|
|
|
|
|
|
|
|
|
Federal |
|
|
(35,284 |
) |
|
|
(7,536 |
) |
|
|
(67,874 |
) |
State |
|
|
(11,599 |
) |
|
|
(3,588 |
) |
|
|
(16,406 |
) |
Foreign |
|
|
(2,080 |
) |
|
|
(1,710 |
) |
|
|
(1,873 |
) |
Change in valuation allowance |
|
|
2,080 |
|
|
|
1,710 |
|
|
|
1,873 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred benefit |
|
|
(46,883 |
) |
|
|
(11,124 |
) |
|
|
(84,280 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax benefit |
|
$ |
(26,000 |
) |
|
$ |
(4,679 |
) |
|
$ |
(67,293 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
The Companys effective income tax rate differs from the federal statutory rate as follows (in thousands,
except percentages):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
Federal income tax benefit at statutory rate |
|
$ |
(57,733 |
) |
|
|
21.0 |
% |
|
$ |
(4,527 |
) |
|
|
21.0 |
% |
|
$ |
(58,303 |
) |
|
|
21.0 |
% |
State and local taxes-net of federal income tax
effect |
|
|
(4,723 |
) |
|
|
1.7 |
|
|
|
288 |
|
|
|
(1.3 |
) |
|
|
(13,797 |
) |
|
|
5.0 |
|
Impairment of goodwill |
|
|
|
|
|
|
0.0 |
|
|
|
|
|
|
|
0.0 |
|
|
|
5,417 |
|
|
|
(2.0 |
) |
Foreign rate difference |
|
|
(493 |
) |
|
|
0.2 |
|
|
|
(227 |
) |
|
|
1.1 |
|
|
|
(284 |
) |
|
|
0.1 |
|
Research and experimental credit |
|
|
(2,914 |
) |
|
|
1.1 |
|
|
|
(3,058 |
) |
|
|
14.2 |
|
|
|
(2,401 |
) |
|
|
0.9 |
|
Other nondeductible expenses |
|
|
756 |
|
|
|
(0.3 |
) |
|
|
854 |
|
|
|
(4.0 |
) |
|
|
451 |
|
|
|
(0.2 |
) |
Stock-based compensation |
|
|
(3,647 |
) |
|
|
1.3 |
|
|
|
(42 |
) |
|
|
0.2 |
|
|
|
(10 |
) |
|
|
0.0 |
|
Uncertain tax positions |
|
|
594 |
|
|
|
(0.2 |
) |
|
|
589 |
|
|
|
(2.7 |
) |
|
|
574 |
|
|
|
(0.2 |
) |
Valuation allowance |
|
|
2,080 |
|
|
|
(0.8 |
) |
|
|
1,572 |
|
|
|
(7.3 |
) |
|
|
1,926 |
|
|
|
(0.7 |
) |
Fair value of warrants |
|
|
13,545 |
|
|
|
(4.9 |
) |
|
|
|
|
|
|
0.0 |
|
|
|
|
|
|
|
0.0 |
|
Executive compensation |
|
|
25,362 |
|
|
|
(9.2 |
) |
|
|
|
|
|
|
0.0 |
|
|
|
|
|
|
|
0.0 |
|
Othernet |
|
|
1,173 |
|
|
|
(0.4 |
) |
|
|
(128 |
) |
|
|
0.5 |
|
|
|
(866 |
) |
|
|
0.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit |
|
$ |
(26,000 |
) |
|
|
9.5 |
% |
|
$ |
(4,679 |
) |
|
|
21.7 |
% |
|
$ |
(67,293 |
) |
|
|
24.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company made income tax payments of $15.2 million, $9.5 million and $18.4 million for
the years ended December 31, 2021, 2020 and 2019, respectively. The Company received refunds from the Internal Revenue Service and various states totaling $16 thousand, $10.4 million and $0.5 million, for the years ended
December 31, 2021, 2020 and 2019, respectively.
F-22
The approximate income tax effect of each type of temporary difference giving rise to
deferred income tax assets and liabilities as of December 31, 2021 and 2020 was as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2021 |
|
|
2020 |
|
Deferred income tax assets: |
|
|
|
|
|
|
|
|
Stock-based compensation |
|
$ |
39,135 |
|
|
$ |
6,558 |
|
Operating lease liabilities |
|
|
16,301 |
|
|
|
|
|
Net operating lossesforeign |
|
|
11,427 |
|
|
|
9,347 |
|
Accrued compensation |
|
|
9,743 |
|
|
|
7,020 |
|
Disallowed interest expense |
|
|
1,553 |
|
|
|
2,086 |
|
Research and experimental credit |
|
|
1,250 |
|
|
|
2,005 |
|
Sales allowances and doubtful accounts |
|
|
959 |
|
|
|
1,074 |
|
Net operating lossesdomestic (state) |
|
|
733 |
|
|
|
716 |
|
Interest rate swaps |
|
|
|
|
|
|
4,685 |
|
Other |
|
|
1,443 |
|
|
|
2,685 |
|
|
|
|
|
|
|
|
|
|
Total deferred income tax assets |
|
|
82,544 |
|
|
|
36,176 |
|
Valuation allowance for deferred tax asset |
|
|
(11,427 |
) |
|
|
(9,347 |
) |
|
|
|
|
|
|
|
|
|
Net deferred income tax assets |
|
|
71,117 |
|
|
|
26,829 |
|
|
|
|
|
|
|
|
|
|
Deferred income tax liabilities: |
|
|
|
|
|
|
|
|
Intangible asset amortization |
|
|
307,654 |
|
|
|
331,941 |
|
Software, equipment and property depreciation and amortization |
|
|
20,313 |
|
|
|
10,526 |
|
Deferred contract costs |
|
|
9,456 |
|
|
|
6,710 |
|
Operating lease assets |
|
|
9,439 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred income tax liabilities |
|
|
346,862 |
|
|
|
349,177 |
|
|
|
|
|
|
|
|
|
|
Net deferred income tax liabilities |
|
$ |
275,745 |
|
|
$ |
322,348 |
|
|
|
|
|
|
|
|
|
|
Valuation AllowanceThe Company has accumulated net operating losses related to its foreign
subsidiaries of $11.4 million and $9.3 million at December 31, 2021 and 2020, respectively. A valuation allowance equal to 100% of the related tax benefit has been established as of December 31, 2021 and 2020. The valuation
allowance increased $2.0 million, $1.7 million and $1.4 million during the years ended December 31, 2021, 2020 and 2019, respectively, due to the net operating losses of the foreign subsidiaries. No amounts were released
during the years ended December 31, 2021, 2020 and 2019. The net operating losses are set to expire in 2022 through 2026 as China allows for a five-year carryforward.
The state net operating losses of $0.7 million are expected to be more likely than not fully utilized. Most states allow for a 20-year carryforward of net operating losses. All losses will expire in 2035-2040 if not fully utilized.
The change in unrecognized tax benefits excluding interest and penalties for the years ended December 31, 2021 and 2020 was as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
2021 |
|
|
2020 |
|
Balance at beginning of year |
|
$ |
3,045 |
|
|
$ |
2,306 |
|
Additions based on tax positions related to the current year |
|
|
663 |
|
|
|
719 |
|
Additions based on adjustments to tax positions related to prior years |
|
|
32 |
|
|
|
91 |
|
Reductions for tax positions of prior years |
|
|
(18 |
) |
|
|
(71 |
) |
|
|
|
|
|
|
|
|
|
Balance at end of year |
|
$ |
3,722 |
|
|
$ |
3,045 |
|
|
|
|
|
|
|
|
|
|
F-23
As of December 31, 2021, the Company believes the liability for unrecognized tax
benefits, excluding interest and penalties, could decrease by approximately $917 thousand in 2022 due to lapses in the statute of limitations. Due to the various jurisdictions in which the Company files tax returns, it is possible that there
could be significant changes in the amount of unrecognized tax benefits in 2022, but the amount cannot be reasonably estimated.
The
Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense. As of December 31, 2021, and 2020, the amount accrued for interest and penalties was not material. The Company reflects the liability for
unrecognized tax benefits as current income tax liabilities in its consolidated balance sheets. The amounts included in reductions for tax positions of prior years represent decreases in the unrecognized tax benefits relating to
settlements reached with taxing authorities during each year shown.
With few exceptions, the major jurisdictions subject to examination by
the relevant tax authorities and open tax years, stated as the Companys fiscal years, are as follows:
|
|
|
|
|
Jurisdiction |
|
Open Tax Years |
|
US Federal |
|
|
2018 - 2020 |
|
US States |
|
|
2018 - 2020 |
|
China |
|
|
2018 - 2020 |
|
Canada |
|
|
2018 - 2020 |
|
Accounts receivablenet as of December 31, 2021 and 2020, consists of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2021 |
|
|
2020 |
|
Accounts receivable |
|
$ |
82,584 |
|
|
$ |
78,331 |
|
Allowance for doubtful accounts and sales reserves |
|
|
(3,791 |
) |
|
|
(4,224 |
) |
|
|
|
|
|
|
|
|
|
Accounts receivablenet |
|
$ |
78,793 |
|
|
$ |
74,107 |
|
|
|
|
|
|
|
|
|
|
Changes to the allowance for doubtful accounts and sales reserves during the years ended December 31, 2021
2020 and 2019, consists of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
Balance at beginning of period |
|
$ |
4,224 |
|
|
$ |
3,970 |
|
|
$ |
3,024 |
|
Charges to bad debt and sales reserves |
|
|
3,634 |
|
|
|
3,814 |
|
|
|
3,113 |
|
Write-offs, net |
|
|
(4,067 |
) |
|
|
(3,560 |
) |
|
|
(2,167 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period |
|
$ |
3,791 |
|
|
$ |
4,224 |
|
|
$ |
3,970 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-24
Other current assets as of December 31, 2021 and 2020, consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2021 |
|
|
2020 |
|
Prepaid service fees |
|
$ |
8,623 |
|
|
$ |
3,969 |
|
Non-trade receivables |
|
|
8,321 |
|
|
|
9,095 |
|
Prepaid software and equipment maintenance |
|
|
7,593 |
|
|
|
7,499 |
|
Prepaid SaaS costs |
|
|
5,909 |
|
|
|
4,290 |
|
Prepaid insurance |
|
|
4,416 |
|
|
|
517 |
|
Other |
|
|
11,319 |
|
|
|
6,216 |
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
46,181 |
|
|
$ |
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 a gain from the divestiture of $3.8 million. During 2021, the Company reassessed
the estimated contingent consideration and recognized a $0.6 million gain from the divestiture. At December 31, 2021 and 2020, the receivable balance related to the Asset Purchase Agreement was $2.6 million and $3.8 million,
respectively, included within non-trade receivables.
9. |
SOFTWARE, EQUIPMENT, AND PROPERTY |
Software, equipment, and property as of December 31, 2021 and 2020, consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2021 |
|
|
2020 |
|
Software, licenses and database |
|
$ |
140,692 |
|
|
$ |
109,967 |
|
Leasehold improvements |
|
|
34,880 |
|
|
|
13,397 |
|
Computer equipment |
|
|
31,635 |
|
|
|
27,733 |
|
Furniture and other equipment |
|
|
5,343 |
|
|
|
5,000 |
|
Building and land |
|
|
4,910 |
|
|
|
4,910 |
|
|
|
|
|
|
|
|
|
|
Total software, equipment, and property |
|
|
217,460 |
|
|
|
161,007 |
|
Less accumulated depreciation and amortization |
|
|
(81,615 |
) |
|
|
(59,569 |
) |
|
|
|
|
|
|
|
|
|
Net software, equipment, and property |
|
$ |
135,845 |
|
|
$ |
101,438 |
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization expense related to software, equipment and property was $24.5 million,
$17.7 million and $18.4 million for the years ended December 31, 2021, 2020 and 2019, respectively.
The Company adopted ASC 842 on January 1, 2021 using the modified retrospective transition method. Due to the adoption of ASC 842, 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.
Results for reporting periods prior to adoption are presented under ASC 840 as it was the accounting standard in effect for such periods.
The Company leases real estate in the form of office space and data center facilities. The Company additionally leases equipment in the form of
information technology equipment. Generally, the term for real estate leases ranges from 1 to 17 years at inception of the contract. Generally, the term for equipment leases is 1 to 3 years at inception of the contract. Some real estate leases
include options to renew that can extend the original term by 5 to 10 years.
F-25
Operating lease costs are included within cost of revenues, exclusive of amortization and
impairment of acquired technologies, research and development and general and administrative expenses on the consolidated statements of operations and comprehensive loss. The Company does not have any finance leases.
The components of lease expense for the year ended December 31, 2021 were as follows (in thousands):
|
|
|
|
|
|
|
Year Ended December 31, 2021 |
|
Operating lease costs |
|
$ |
16,386 |
|
Variable lease costs |
|
|
2,110 |
|
|
|
|
|
|
Total lease costs |
|
$ |
18,496 |
|
|
|
|
|
|
The lease term and discount rate consisted of the following at December 31, 2021:
|
|
|
|
|
Weighted-average remaining lease term (years) |
|
|
12.9 |
|
Weighted-average discount rate |
|
|
6.3 |
% |
Supplemental cash flow and other information related to leases for the year ended December 31, 2021 were
as follows (in thousands):
|
|
|
|
|
|
|
Year Ended December 31, 2021 |
|
Cash payments for operating leases |
|
$ |
11,403 |
|
Operating lease assets obtained in exchange for lease liabilities |
|
|
2,876 |
|
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 consolidated balance sheet as of December 31, 2021.
|
|
|
|
|
Years Ending December 31: |
|
|
|
2022 |
|
$ |
8,559 |
|
2023 |
|
|
6,124 |
|
2024 |
|
|
7,325 |
|
2025 |
|
|
7,317 |
|
2026 |
|
|
6,843 |
|
Thereafter |
|
|
61,636 |
|
|
|
|
|
|
Total Lease Payments |
|
|
97,804 |
|
Less: Interest |
|
|
(33,619 |
) |
Total |
|
$ |
64,185 |
|
|
|
|
|
|
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 recognized the tenant improvement allowance as an increase to the operating lease liability and to leasehold improvements as and when such leasehold improvements were paid for by the lessor. As of December 31, 2021, the Company has
recognized the full amount of the tenant improvement allowance.
F-26
Under ASC 840, rent expense was $9.7 million and $9.5 million during the years
ended December 31, 2020 and 2019, respectively. The Companys noncancelable operating lease agreements that required future minimum cash lease payments were 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 |
GoodwillGoodwill 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).
The Company performs its annual impairment
assessment as of September 30 of each year. For the years ended December 31, 2021 and 2020, the annual impairment assessment indicated no impairment and there was no change to the carrying amount of goodwill.
During the year ended December 31, 2019, the Company performed its annual goodwill impairment test by comparing the fair value of each
reporting unit to its carrying value, including goodwill. When performing the assessment, the Company determined the fair value of its reporting units based on forecasted future cash flow. Based on the Companys forecast which included downward
revisions to future projected earnings and cash flows of one of its reporting units, it was determined that the carrying value of goodwill for that reporting unit was impaired. As a result, the Company recorded an impairment charge to goodwill of
$25.8 million.
The Company used a quantitative approach to measure the fair value of its reporting units in 2019, using a discounted
cash flow approach, which is a Level 3 measurement. The discounted cash flow analysis requires significant judgments, including estimates of future cash flows, which are dependent on internal forecasts and determination of the Companys
weighted average cost of capital, which is risk-adjusted to reflect the specific risk profile of the reporting unit being tested. Upon completion of the analysis, the fair value of one of its reporting units was substantially less than the carrying
value, resulting in an impairment of goodwill for that reporting unit. The weighted average cost of capital used for the impaired reporting unit in the Companys analysis was 11.5%.
Changes in the carrying amount of goodwill were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of goodwill carrying amount |
|
Cost |
|
|
Accumulated Impairment Loss |
|
|
Net Carrying Value |
|
Balance as of December 31, 2021 |
|
$ |
1,492,681 |
|
|
$ |
(25,797 |
) |
|
$ |
1,466,884 |
|
Balance as of December 31, 2020 |
|
|
1,492,681 |
|
|
|
(25,797 |
) |
|
|
1,466,884 |
|
Balance as of December 31, 2019 |
|
|
1,492,681 |
|
|
|
(25,797 |
) |
|
|
1,466,884 |
|
Intangible AssetsThe Companys intangible assets are primarily the result of the Acquisition.
During the years ended December 31, 2021 and 2020, the Company did not record an impairment charge.
During the year ended December 31, 2019, the Company recorded an impairment charge to one of its reporting units Customer
Relationships and Acquired Technology intangible assets. The Companys forecasted future revenue and expense cash flow projections indicated the carrying amounts of the
F-27
intangible assets were not recoverable and therefore the Company recorded an impairment charge of $181.3 million.
In December 2019, the Company entered into an asset purchase agreement and acquired technology, for $0.8 million. The acquired technology
is being amortized on a straight-line basis over three years.
The intangible assets balance as of December 31, 2021, is reflected
below (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Useful Life (Years) |
|
|
Weighted- Average Remaining Useful Life (Years) |
|
|
Gross Carrying Amount |
|
|
Accumulated Amortization |
|
|
Net Carrying Amount |
|
Intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer relationships |
|
|
1618 |
|
|
|
13.3 |
|
|
$ |
1,299,750 |
|
|
$ |
(337,831 |
) |
|
$ |
961,919 |
|
Acquired technologies |
|
|
37 |
|
|
|
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 |
|
Trademarksindefinite life |
|
|
|
|
|
|
|
|
|
|
190,470 |
|
|
|
|
|
|
|
190,470 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intangible assets |
|
|
|
|
|
|
|
|
|
$ |
1,673,664 |
|
|
$ |
(460,415 |
) |
|
$ |
1,213,249 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The intangible assets balance as of December 31, 2020, is reflected below (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Useful Life (Years) |
|
|
Weighted- Average Remaining Useful Life (Years) |
|
|
Gross Carrying Amount |
|
|
Accumulated Amortization |
|
|
Net Carrying Amount |
|
Intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer relationships |
|
|
1618 |
|
|
|
14.3 |
|
|
$ |
1,299,750 |
|
|
$ |
(265,567 |
) |
|
$ |
1,034,183 |
|
Acquired technologies |
|
|
37 |
|
|
|
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 |
|
Trademarksindefinite life |
|
|
|
|
|
|
|
|
|
|
190,470 |
|
|
|
|
|
|
|
190,470 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intangible assets |
|
|
|
|
|
|
|
|
|
$ |
1,673,654 |
|
|
$ |
(361,737 |
) |
|
$ |
1,311,917 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization expense for intangible assets was $98.7 million, $98.6 million and
$109.1 million for the years ended December 31, 2021, 2020 and 2019, respectively.
Future amortization expense for each of the
next five years and thereafter for intangible assets as of December 31, 2021, is as follows (in thousands):
|
|
|
|
|
Years Ending December 31: |
|
|
|
2022 |
|
$ |
98,602 |
|
2023 |
|
|
98,318 |
|
2024 |
|
|
80,731 |
|
2025 |
|
|
72,263 |
|
2026 |
|
|
72,263 |
|
Thereafter |
|
|
600,602 |
|
|
|
|
|
|
Total |
|
$ |
1,022,779 |
|
|
|
|
|
|
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
Companys principal equity owners. The Company invested $10.2 million, including related fees and expenses, for an approximate 7% interest of the Investee.
F-28
The change in the carrying value of the investment during the year ended December 31,
2021 is summarized below as follows (in thousands):
|
|
|
|
|
Equity method investment carrying value at December 31, 2020 |
|
$ |
|
|
Cash contributions |
|
|
10,228 |
|
Share of net income (loss) from the Investee |
|
|
|
|
|
|
|
|
|
Equity method investment carrying value at December 31, 2021 |
|
$ |
10,228 |
|
|
|
|
|
|
Accrued expenses as of December 31, 2021 and 2020, consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2021 |
|
|
2020 |
|
Compensation |
|
$ |
49,510 |
|
|
$ |
37,696 |
|
Software license agreements |
|
|
3,265 |
|
|
|
1,430 |
|
Royalties and licenses |
|
|
2,640 |
|
|
|
2,301 |
|
Employee insurance benefits |
|
|
2,443 |
|
|
|
1,979 |
|
Professional services |
|
|
2,371 |
|
|
|
2,753 |
|
Sales tax |
|
|
2,296 |
|
|
|
2,294 |
|
Other |
|
|
4,166 |
|
|
|
4,534 |
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
66,691 |
|
|
$ |
52,987 |
|
|
|
|
|
|
|
|
|
|
Other liabilities as of December 31, 2021 and 2020, consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2021 |
|
|
2020 |
|
Software license agreements |
|
$ |
4,211 |
|
|
$ |
234 |
|
Deferred
revenue-non-current |
|
|
1,574 |
|
|
|
2,001 |
|
Fair value of interest rate swaps |
|
|
|
|
|
|
18,359 |
|
Deferred rent |
|
|
|
|
|
|
4,461 |
|
Phantom stock incentive plan |
|
|
|
|
|
|
3,217 |
|
Payroll tax deferment |
|
|
|
|
|
|
3,152 |
|
Other |
|
|
|
|
|
|
1,346 |
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
5,785 |
|
|
$ |
32,770 |
|
|
|
|
|
|
|
|
|
|
On September 21, 2021, CCC Intelligent Solutions Inc., an indirect wholly owned subsidiary of the Company, together with certain of the
Companys subsidiaries acting as guarantors entered into a credit agreement (the 2021 Credit Agreement).
The 2021 Credit
Agreement replaces the Companys 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 and cash on hand were used to repay all outstanding borrowings under the First Lien Credit Agreement.
F-29
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 consolidated statement of operations and consolidated loss during the year ended December 31, 2021.
2021 Credit AgreementThe 2021 Credit Agreement consists of an $800.0 million term loan (Term B Loan) and a
revolving credit facility for an aggregate principal amount of $250.0 million (the 2021 Revolving Credit Facility). 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. At December 31, 2021, the unamortized debt discount was $1.9 million.
The Company incurred $9.8 million 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. At December 31, 2021, the unamortized financing costs related to the Term B Loan were $9.5 million.
The Company incurred $3.1 million in financing costs related to the 2021 Revolving Credit Facility. These costs were recorded as deferred
financing fees and are being amortized to interest expense over the term of the 2021 Revolving Credit Facility using the effective interest method. At December 31, 2021, the unamortized deferred financing fees balance was $2.9 million.
Beginning with the quarter ending March 31, 2022, the Term B Loan requires quarterly principal payments of $2.0 million until
June 30, 2028, with the remaining outstanding principal amount required to be paid on the maturity date, September 21, 2028. Beginning with fiscal year ending December 31, 2022, the Term B Loan requires a prepayment of principal,
subject to certain exceptions, in connection with the receipt of proceeds from certain asset sales, casualty events, and debt issuances by the Company, and up to 50% of annual excess cash flow, as defined in and as further set forth in the 2021
Credit Agreement. When a principal prepayment is required, the prepayment offsets the future quarterly principal payments of the same amount. The Company is not subject to the annual excess cash flow calculation in fiscal year 2021 and no such
principal prepayments are required.
As of December 31, 2021, the amount outstanding on the Term B Loan is $800.0 million, of
which, $8.0 million is classified as current in the accompanying consolidated balance sheet.
Borrowings under the 2021 Credit
Facility bear interest at rates based on the ratio of the Companys and its subsidiaries consolidated first lien net indebtedness to the Companys and its subsidiaries consolidated EBITDA for applicable periods specified in the
2021 Credit Facility. The interest rate per annum applicable to the loans under the 2021 Credit Facility are based on a fluctuating rate of interest equal to the sum of an applicable rate and, at the Companys election from time to time,
either:
|
(1) |
a base rate determined by reference to the highest of (a) the rate last quoted by the Wall Street Journal as
the prime rate, (b) the federal funds effective rate plus 0.50%, (c) one-month LIBOR plus 1.00% and (d) with respect to the Term B Loans, 1.50% and with respect to the Revolving Credit Facility, 1.00%, or |
|
(2) |
a Eurocurrency rate determined by reference to LIBOR (other than with respect to Euros, Euribor and with
respect to British Pounds Sterling, SONIA) with a term as selected by the Company, of one, three or six months (subject to (x) in the case of term loans, a 0.50% per annum floor and (y) in the case of revolving loans, a 0.00% per annum floor).
|
A quarterly commitment fee of up to 0.50% is payable on the unused portion of the 2021 Revolving Credit Facility.
During the year ended December 31, 2021, the weighted-average interest rate on the outstanding borrowings under the Term B Loan was 3.0%.
The Company made Term B Loan interest payments of $6.7 million during the year ended December 31, 2021.
F-30
During the year ended December 31, 2021, the Company issued a standby letter of credit
for $0.7 million which reduces the amount available to be borrowed under the 2021 Revolving Credit Facility and at December 31, 2021, $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 ending 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 exceeds 35% of the aggregate commitments, the
Companys leverage ratio cannot exceed 6.25 to 1.00. As of December 31, 2021, the Company was not subject to the financial covenant.
First Lien Credit AgreementIn April 2017, the Company entered into the First Lien Credit Agreement. The First Lien Credit
Agreement initially consisted of a $1.0 billion term loan (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.
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 Agreements revolving credit facilities. The proceeds of the incremental term loan were used to repay all outstanding borrowings under the 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 debt in the consolidated statements of operations and comprehensive loss during the year ended December 31, 2020.
The First Lien Amendment provided an incremental term loan in the amount of $375.0 million. The Company received proceeds from the
incremental term loan of $373.1 million, net of debt discount of $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 consisted of commitments of $8.1 million and $4.4 million, respectively, which were scheduled to mature on April 27, 2022. The extended
Dollar Revolver and extended Multicurrency Revolver consisted of commitments of $51.2 million and $27.6 million, respectively, which were scheduled to mature on October 27, 2023. The First Lien Revolvers continued to have a sublimit
of $30.0 million for letters of credit.
The Company incurred $27.6 million and $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
F-31
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 consolidated
statement operations and comprehensive loss during the year ended December 31, 2021.
The First Lien Term Loan required (after giving
effect to the First Lien Amendment) quarterly principal payments of approximately $3.5 million until March 31, 2024, with the remaining outstanding principal amount required to be paid on the maturity date, April 27, 2024. The First
Lien Term Loan required a prepayment of principal, subject to certain exceptions, in connection with the receipt of proceeds from certain asset sales, casualty events, and debt issuances by the Company, and up to 50% of annual excess cash flow, as
defined in and as further set forth in the First Lien Credit Agreement. When a principal prepayment was required, the prepayment offset the future quarterly principal payments of the same amount. As of December 31, 2020, subject to the request of
the lenders of the First Lien Term Loan, a principal prepayment of up to $21.9 million was required. In April 2021, the Company made a principal prepayment of $1.5 million to those lenders who made such a request.
The Company made a principal prepayment of $525.0 million on July 30, 2021. In conjunction with the prepayment, the Company
recognized a loss on early extinguishment of debt of $6.0 million in the consolidated statement of operations and comprehensive loss during the year ended December 31, 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
$804.2 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 consolidated balance sheet.
Amounts outstanding under the First Lien Credit Agreement bore interest at a variable rate of LIBOR, plus up to 3.00% per annum based upon the
Companys leverage ratio, as defined in the First Lien Credit Agreement. A quarterly commitment fee of up to 0.50% was payable on the unused portion of the First Lien Revolvers.
During the years ended December 31, 2021, 2020 and 2019, the weighted-average interest rate on the outstanding borrowings under the First
Lien Term Loan was 4.1%, 4.2% and 5.2%, respectively. The Company made interest payments of $36.1 million, $53.6 million and $50.7 million during the years ended December 31, 2021, 2020 and 2019, respectively.
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 no outstanding borrowings on the First Lien Revolvers at December 31, 2021 and 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. The letter of credit was extinguished in October 2021.
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
F-32
the prior four fiscal quarters exceeded 35% of the aggregate commitments under those revolving credit facilities, the Companys 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 AgreementIn 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%. During the years ended
December 31, 2020 and 2019, the weighted-average interest rate on the Second Lien Term Loan was 8.6% and 9.1%, respectively. The Company made interest payments of $4.0 million and $34.3 million during the years ended December 31,
2020 and 2019, respectively.
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 Companys 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.
Long-term debt as December 31, 2021 and 2020, consists of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2021 |
|
|
2020 |
|
Term B Loan |
|
$ |
800,000 |
|
|
$ |
|
|
Term B Loandiscount |
|
|
(1,926 |
) |
|
|
|
|
Term B Loandeferred financing fees |
|
|
(9,464 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Term B Loannet of discount & fees |
|
|
788,610 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Term Loan |
|
|
|
|
|
|
1,336,154 |
|
First Lien Term Loandiscount |
|
|
|
|
|
|
(2,788 |
) |
First Lien Term Loandeferred financing fees |
|
|
|
|
|
|
(15,388 |
) |
|
|
|
|
|
|
|
|
|
First Lien Term Loannet of discount & fees |
|
|
|
|
|
|
1,317,978 |
|
|
|
|
|
|
|
|
|
|
Less: Current portion |
|
|
(8,000 |
) |
|
|
(25,381 |
) |
|
|
|
|
|
|
|
|
|
Total long-term debtnet of current portion |
|
$ |
780,610 |
|
|
$ |
1,292,597 |
|
|
|
|
|
|
|
|
|
|
F-33
The table below is a rollforward of the Companys deferred financing fees and discount
(contra debt) (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Deferred |
|
|
Discount |
|
|
|
Financing |
|
|
Contra |
|
|
|
Fees |
|
|
Debt |
|
BalanceDecember 31, 2019 |
|
$ |
23,960 |
|
|
$ |
3,694 |
|
Fees written off of due to early extinguishment of debt |
|
|
(6,558 |
) |
|
|
(2,043 |
) |
Payment of fees and discount |
|
|
3,362 |
|
|
|
1,875 |
|
Amortization of fees and discount |
|
|
(4,630 |
) |
|
|
(738 |
) |
|
|
|
|
|
|
|
|
|
BalanceDecember 31, 2020 |
|
|
16,134 |
|
|
|
2,788 |
|
Fees written off of due to early extinguishment of debt |
|
|
(12,982 |
) |
|
|
(2,258 |
) |
Payment of fees and discount |
|
|
12,893 |
|
|
|
2,000 |
|
Amortization of fees and discount |
|
|
(3,682 |
) |
|
|
(604 |
) |
|
|
|
|
|
|
|
|
|
BalanceDecember 31, 2021 |
|
$ |
12,363 |
|
|
$ |
1,926 |
|
|
|
|
|
|
|
|
|
|
As of December 31, 2021, the deferred financing fees asset balance included $2.9 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.
Scheduled Payments for DebtPrincipal amounts due in each of the next five years and thereafter, as of December 31, 2021, are
as follows (in thousands):
|
|
|
|
|
Years Ending December 31: |
|
|
|
2022 |
|
$ |
8,000 |
|
2023 |
|
|
8,000 |
|
2024 |
|
|
8,000 |
|
2025 |
|
|
8,000 |
|
2026 |
|
|
8,000 |
|
Thereafter |
|
|
760,000 |
|
|
|
|
|
|
Total |
|
$ |
800,000 |
|
|
|
|
|
|
Interest Rate Swaps In June 2017, the Company entered into three floating to fixed interest rate
swap agreements (Swap Agreements) to reduce its exposure to the variability from future cash flows resulting from interest rate risk related to our floating rate long-term debt. The aggregate notional amount of the Swap Agreements
totaled $777.7 million at December 31, 2020. On September 21, 2021, the Company made an aggregate payment of $10.0 million to extinguish the Swap Agreements that were scheduled to expire in June 2022.
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 Companys software. The Company has included the present value of the future payments required as a long-term licensing agreement within the accompanying
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 December 31, 2021, the remaining liability, net of the discount was $36.3 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.
F-34
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 years ended December 31, 2021, 2020 and 2019, the Company recognized $2.4 million, $2.5 million and $2.7 million, respectively, in interest
expense related to the Licensing Agreement. At December 31, 2021 and 2020, $12.8 million and $15.2 million, respectively, of the discount was not yet amortized.
Principal amounts due in each of the next five years and thereafter for the Licensing Agreement as of December 31, 2021, are as follows
(in thousands):
|
|
|
|
|
Years Ending December 31: |
|
|
|
2022 |
|
$ |
2,703 |
|
2023 |
|
|
2,876 |
|
2024 |
|
|
3,061 |
|
2025 |
|
|
3,257 |
|
2026 |
|
|
3,466 |
|
Thereafter |
|
|
20,969 |
|
|
|
|
|
|
Total |
|
$ |
36,332 |
|
|
|
|
|
|
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 Companys 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 Companys 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 December 31, 2021 and 2020, the Investors 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 Investors 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 Investors 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.
F-35
At December 31, 2021 and 2020, the carrying value of the redeemable non-controlling interest was $14.2 million.
The 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
StockThe Company is authorized to issue up to 100,000,000 shares of undesignated preferred stock with a par value of $0.0001 per share with such designations, voting and other rights and preferences as may be determined from time to time
by the Companys board of directors. As of December 31, 2021, there were no shares of preferred stock issued or outstanding.
Common StockThe Company is authorized to issue up to 5,000,000,000 shares of common stock with a par value of $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 Certificate of 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.
There were 609,768,296 and 504,274,890 shares of common stock
issued and outstanding as of December 31, 2021 and 2020, respectively.
Capital Stock Activity Prior to the Business Combination
DividendsIn July 2021, the board of directors of CCCIS declared a cash dividend on common stock. The aggregate cash
dividend of $134.6 million was paid on August 3, 2021.
In March 2021, the board of directors of CCCIS declared a cash dividend
on common stock. The aggregate cash dividend of $134.5 million was paid on March 17, 2021.
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 IssuancesIn 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 Companys contributions that are based on percentages of employees contributions. The defined contribution expense for the years ended December 31, 2021, 2020 and 2019 was $5.3 million, $4.6 million and
$4.9 million, respectively.
F-36
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 CCCISs 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 requirement 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 occurrence 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 stock-based compensation based
on the fair value of the performance-based awards with a market condition and $6.0 million of stock-based compensation based on the fair value of the Phantom Shares.
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) was adopted and approved by the Companys board of directors. 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 enable the Company to attract, retain, and
motivate employees, consultants, and independent members of the board of directors of the Company and its subsidiaries by allowing them to become owners of common stock enabling them to benefit directly from the growth, development, and financial
successes of the Company.
The total number of shares of common stock that will be reserved and that may be issued 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.
The following table summarizes the shares of common stock reserved for future issuance
under the 2021 Plan as of December 31, 2021:
|
|
|
|
|
Stock options outstanding |
|
|
55,644,495 |
|
Restricted stock units outstanding |
|
|
18,558,211 |
|
Restricted stock units available for future grant |
|
|
72,175,815 |
|
Reserved for Employee Stock Purchase Plan |
|
|
6,031,704 |
|
|
|
|
|
|
Common stock reserved for future issuance |
|
|
152,410,225 |
|
|
|
|
|
|
Stock OptionsDuring the year ended December 31, 2021, prior to the Business Combination, the
Company granted 2,822,484 stock options, of which 2,754,374 have time-based vesting and 68,110 have performance-based with a market condition vesting. The exercise price of all stock options granted during the year ended December 31, 2021 was
equal to the fair value of the underlying shares at the grant date.
F-37
The valuation of time-based stock options granted during the years ended December 31
was determined using the Black-Scholes option valuation model using the following assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
Expected term (in years) |
|
|
6.5 |
|
|
|
6.5 |
|
|
|
6.5 |
|
Expected volatility |
|
|
40 |
% |
|
|
40 |
% |
|
|
40 |
% |
Expected dividend yield |
|
|
0 |
% |
|
|
0 |
% |
|
|
0 |
% |
Risk-free interest rate |
|
|
0.62 - 0.67 |
% |
|
|
0.39 - 0.45 |
% |
|
|
1.62 - 2.38 |
% |
Fair value at valuation date |
|
$ |
3.67 |
|
|
$ |
1.83 |
|
|
$ |
1.39 |
|
For performance-based awards with 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 technique that best fits the circumstances of an award. In order to reflect the substantive characteristics of the performance-based awards with a market
condition, a Monte Carlo simulation valuation model was used to calculate the grant date fair value of such stock options. Monte Carlo approaches are a class of computational algorithms that rely on repeated random sampling to compute their results.
This approach allows the calculation of the fair value of such stock options based on a 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 years ending December 31 was determined through the Monte Carlo simulation model using the following assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
Expected term (in years) |
|
|
5.5 |
|
|
|
5.5 |
|
|
|
6.5 |
|
Expected volatility |
|
|
33 |
% |
|
|
33 |
% |
|
|
40 |
% |
Expected dividend yield |
|
|
0 |
% |
|
|
0 |
% |
|
|
0 |
% |
Risk-free interest rate |
|
|
0.44 |
% |
|
|
0.44 |
% |
|
|
2.38 |
% |
Fair value at valuation date |
|
$ |
0.88 |
|
|
$ |
0.88 |
|
|
$ |
0.67 |
|
Expected TermThe expected term represents the period that the 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.
Expected VolatilityThe Company has limited trading history of its common stock and the expected
volatility was estimated based on the average volatility for comparable publicly traded companies over a period equal to the expected term of the stock option grants.
Expected DividendHistorically, 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 RateThe 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 Companys historical turnover rate.
F-38
The table below summarizes the option activity for the years ended December 31, 2021,
2020 and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares |
|
|
Weighted- Average Exercise Price |
|
|
Weighted-Average Remaining Contractual Life (in years) |
|
|
Aggregate Intrinsic Value (in thousands) |
|
Options outstandingDecember 31, 2018 |
|
|
50,782,237 |
|
|
$ |
2.85 |
|
|
|
8.6 |
|
|
$ |
30,652 |
|
Granted |
|
|
4,331,805 |
|
|
|
3.57 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(315,350 |
) |
|
|
2.84 |
|
|
|
|
|
|
|
|
|
Forfeited and canceled |
|
|
(2,078,040 |
) |
|
|
2.84 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstandingDecember 31, 2019 |
|
|
52,720,652 |
|
|
|
2.91 |
|
|
|
7.7 |
|
|
|
88,271 |
|
Granted |
|
|
4,210,228 |
|
|
|
4.58 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(476,090 |
) |
|
|
2.85 |
|
|
|
|
|
|
|
|
|
Forfeited and canceled |
|
|
(884,751 |
) |
|
|
3.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstandingDecember 31, 2020 |
|
|
55,570,039 |
|
|
|
3.03 |
|
|
|
6.9 |
|
|
|
337,358 |
|
Granted |
|
|
2,822,484 |
|
|
|
8.58 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(1,924,063 |
) |
|
|
2.70 |
|
|
|
|
|
|
|
|
|
Forfeited and canceled |
|
|
(823,965 |
) |
|
|
3.66 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstandingDecember 31, 2021 |
|
|
55,644,495 |
|
|
$ |
2.95 |
|
|
|
6.0 |
|
|
$ |
469,591 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisableDecember 31, 2021 |
|
|
46,037,351 |
|
|
$ |
2.69 |
|
|
|
5.8 |
|
|
$ |
400,511 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options vested and expected to vestDecember 31, 2021 |
|
|
55,182,838 |
|
|
$ |
2.93 |
|
|
|
6.0 |
|
|
$ |
466,792 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The weighted-average grant-date fair value for time-based options granted during the years ended
December 31, 2021, 2020 and 2019, was $3.67, $1.83 and $1.54, respectively. The weighted-average grant-date fair value for performance-based awards with a market condition granted during the years ended December 31, 2021, 2020 and 2019,
was $0.88, $0.88 and $0.67, respectively.
As discussed above, the outstanding performance-based awards with a market condition were
modified upon Closing of the Business Combination and the Company recognized stock-based compensation expense for the increase in the fair value of the awards.
During the year ended December 31, 2021, the Company issued 1,922,019 shares of common stock upon exercise of 1,924,063 stock options. As
part of cashless exercises, 2,044 shares were applied to the exercise price and tax obligations of the option holders.
During the year
ended December 31, 2020, the Company issued 330,675 shares of common stock upon exercise of 476,090 stock options. As part of cashless exercises, 145,415 shares were applied to the exercise price and tax obligations of the option holders.
During the year ended December 31, 2019, the Company issued 234,299 shares of common stock upon exercise of 315,350 stock options. As
part of cashless exercises, 81,051 shares were applied to the exercise price and tax obligations of the option holders.
The fair value of
the options vested during the year ended December 31, 2021 was $213.4 million, of which, $203.9 million was attributable to the modified awards that vested upon the Closing of the Business Combination.
Company Earnout SharesPursuant 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 shares and 1,500,000 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 twenty trading 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.
F-39
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 is recorded ratably over the implied service period of five months beginning on July 30, 2021. During the year ended December 31, 2021, the
Company recognized $19.5 million of stock-based compensation expense related to the Company Earnout Shares granted to the CCCIS option holders.
Phantom StockPhantom 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 Companys common stock.
No Phantom Shares were granted during the years ended December 31, 2021, 2020 and 2019.
Upon consummation of the Business Combination on July 30, 2021, all outstanding Phantom Shares vested and were subsequently settled in
cash for $10.2 million.
During the years ended December 31, 2021, 2020 and 2019, the Company recognized stock-based compensation
expense of $7.0 million, $2.2 million and $0.6 million, respectively, related to the Phantom Shares.
At December 31,
2020, the outstanding liability for the Phantom Shares was $3.2 million and classified within other liabilities in the accompanying consolidated balance sheet.
Restricted Stock UnitsRestricted Stock Units (RSUs) are convertible into shares of the Companys common stock
upon vesting.
During the year ended December 31, 2021, the Company granted 18,677,411 RSUs, of which 7,730,019 have time-based
vesting requirements, 5,473,701 have performance-based vesting requirements and 5,473,691 have performance-based with a market condition vesting requirements.
The grant date fair value of each RSU with time-based vesting and performance-based vesting is determined using the fair value of the
underlying common stock on the date of grant. The grant date fair value of each RSU with performance-based with a market condition vesting is estimated on the date of grant using the Monte Carlo simulation model.
Stock-based compensation for RSUs with time-based vesting is recognized on a straight-line basis over the requisite service period for the
number of RSUs that are probable vesting. Stock-based compensation for RSUs with performance-based vesting and performance-based with a market condition vesting is recognized on a straight-line basis over the performance period based on the number
of RSUs that are probable of vesting.
The table below summarizes the RSU activity for the year ended December 31, 2021:
|
|
|
|
|
|
|
|
|
|
|
Shares |
|
|
Weighted- Average Fair Value |
|
Non-vested RSUsDecember 31, 2020 |
|
|
|
|
|
$ |
|
|
Granted |
|
|
18,677,411 |
|
|
|
10.74 |
|
Canceled |
|
|
(119,200 |
) |
|
|
11.59 |
|
|
|
|
|
|
|
|
|
|
Non-vested RSUsDecember 31, 2021 |
|
|
18,558,211 |
|
|
$ |
10.74 |
|
|
|
|
|
|
|
|
|
|
Employee Stock Purchase PlanIn October 2021, the Companys Board of Directors adopted the CCC
2021 Employee Stock Purchase Plan (ESPP). The ESPP is intended to qualify as an employee stock purchase plan under Section 423 of the Internal Revenue Code of 1986, as amended. Under the ESPP, employee purchases occur at the end of
discrete offering periods. The first offering period begins on January 1, 2022 and ends on June 30, 2022. Subsequent six-month offering periods begin on July 1 and January 1 (or such
other date determined by the Board of Directors).
Under the ESPP, eligible employees can acquire shares of the Companys common stock
by accumulating funds through payroll deductions. Employees generally are eligible to participate in the ESPP if they are a
F-40
U.S. employee and are employed for at least 20 hours per week. The Company may impose additional restrictions on eligibility. Eligible employees can select a rate of payroll deduction
between 1% and 15% of their compensation. The purchase price for shares of common stock purchased under the ESPP is 85% of the lesser of the fair market value of the Companys common stock on (i) the first day of the
applicable offering period or (ii) the last day of the purchase period in the applicable offering period. An employees participation automatically ends upon termination of employment for any reason.
As of December 31, 2021, 6,031,704 shares of common stock are reserved for sale under the 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 December 31, 2021, no shares had been sold under the ESPP.
Stock-Based CompensationStock-based compensation expense has been recorded in the accompanying consolidated statements of
operations and comprehensive loss as follows for the years ended December 31, 2021, 2020 and 2019 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
Cost of revenues |
|
$ |
13,644 |
|
|
$ |
494 |
|
|
$ |
485 |
|
Research and development |
|
|
40,681 |
|
|
|
1,174 |
|
|
|
1,216 |
|
Sales and marketing |
|
|
65,045 |
|
|
|
2,024 |
|
|
|
1,858 |
|
General and administrative |
|
|
142,625 |
|
|
|
7,644 |
|
|
|
3,565 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stock-based compensation expense |
|
$ |
261,995 |
|
|
$ |
11,336 |
|
|
$ |
7,124 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2021, there was $95.7 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 3.5 years. As of December 31, 2021, there was $103.5 million of unrecognized stock-based compensation
expense related to non-vested performance-based awards.
Upon consummation of the Business Combination (see Note 3), the Company assumed the outstanding Public Warrants and Private Warrants issued by
Dragoneer.
As of December 31, 2021, the Company had 17,800,000 Private Warrants outstanding and no Public Warrants outstanding.
Public Warrants were only able to be exercised for a whole number of shares of the Companys common stock. All Public Warrants had an
exercise price of $11.50 per share, subject to adjustment, beginning on August 29, 2021, and were to expire on July 30, 2026 or earlier upon redemption or liquidation.
Redemptions of warrants when the price per share equals or exceeds $18.00At 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 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 Companys common shares equals or exceeds $18.00 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 and when the warrants become redeemable 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.
F-41
Redemptions of warrants when the price per share equals or exceeds $10.00At 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 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 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 Companys common stock; and
|
|
|
|
if, and only if, the closing price of the Companys 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 called the Public Warrants for redemption, as described above, the Company had the option to require any holder that wished to
exercise the Public Warrants to do so on a cashless basis, as described in the warrant agreement. The exercise price and number of common shares issuable upon exercise of the Public Warrants were to be adjusted in certain circumstances including in
the event of a share dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation. The Public Warrants were not to be adjusted for issuances of the common stock at a price below its exercise price and in no event was
the Company required to net cash settle the Public Warrants.
The Private Warrants are identical to the Public Warrants underlying the
shares sold in Dragoneers 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
Companys common stock. Each whole Private Warrant entitles the registered holder to purchase one share of the Companys 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.
On November 29, 2021, the
Company announced that it had elected to redeem all of the outstanding Public Warrants on December 29, 2021. Each Public Warrant not exercised before 5:00 p.m. Eastern Daylight Time on December 29, 2021 was redeemed by the Company for
$0.10 and the Public warrants subsequently ceased trading on the New York Stock Exchange.
Of the 17,299,983 Public Warrants that 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 in exchange for an aggregate of 4,826,339 shares of common stock. The
Company paid $0.1 million to redeem the remaining 1,413,004 unexercised Public Warrants. As of December 31, 2021, there were no Public Warrants outstanding.
There were no exercises or redemptions of the Private Warrants during the year ended December 31, 2021.
The Company recognized an expense of $64.5 million as a change in fair value of warrant liabilities in the consolidated statements of
operations and comprehensive loss for year ended December 31, 2021. The Company determined the Public Warrants and 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. At December 31, 2021, the Companys warrant liability was $62.5 million.
Purchase ObligationsThe Company has long-term agreements with suppliers and other parties related to licensing data used in its
solutions and services, outsourced data center, disaster recovery, and software as a
F-42
service that expire at various dates through 2031. Under the terms of these agreements with suppliers, the Company has future minimum obligations as of December 31, 2021 as follows (in
thousands):
|
|
|
|
|
Years Ending December 31: |
|
|
|
2022 |
|
$ |
23,560 |
|
2023 |
|
|
17,143 |
|
2024 |
|
|
11,384 |
|
2025 |
|
|
10,247 |
|
2026 |
|
|
10,254 |
|
Thereafter |
|
|
50,987 |
|
|
|
|
|
|
Total |
|
$ |
123,575 |
|
|
|
|
|
|
GuaranteesThe Companys 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 Companys services and solutions documentation under normal use and circumstances. The Companys 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 Companys arrangements also include certain provisions for indemnifying customers
against liabilities if its services and solutions infringe a third partys 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 AgreementsThe 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 under certain circumstances.
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 Companys consolidated financial condition and/or results of operations. The Companys management
believes, based on current information, matters currently pending or threatened are not expected to have a material adverse effect on the Companys consolidated financial position or results of operations.
The Company has engaged in transactions within the ordinary course of business with entities affiliated with its principal equity owners.
The Company recognized revenue from a customer that is affiliated with one of its principal equity owners. The Company recognized revenue of
$0.4 million and $0.1 million from the related party customer during the years ended December 31, 2021 and 2020, respectively. The amount of revenue recognized during the year ended December 31, 2019 and the associated accounts
receivable from the customer at December 31, 2021 and 2020 were de minimis.
The Company incurred expenses for employee health
insurance benefits with an entity affiliated with one of its principal equity owners. During the year ended December 31, 2021, the Company incurred expenses of $3.2 million, of which $0.2 million was payable at December 31, 2021.
The Company was not affiliated with the entity prior to 2021.
The Company incurred expenses for human resource support services with an
entity affiliated with one of its principal equity owners. During the years ended December 31, 2021, 2020 and 2019, the Company incurred
F-43
expenses of $0.2 million. The associated payable for the human resource support services was de minimis at December 31, 2021 and 2020.
The Company incurred expenses for sales tax processing services with an entity affiliated with one of its board members. During the year ended
December 31, 2021, the Company incurred expenses with the affiliated entity of $0.3 million. There was no associated payable at December 31, 2021. The incurred expenses and associated payable prior to the year ended December 31,
2021 were de minimis.
The Company reimburses its principal equity owners for services and any related travel and out-of-pocket expenses. During the years ended December 31, 2021, 2020 and 2019, the Company had expenses for services, travel and out-of-pocket expenses to its principal equity owners of $0.2 million, $0.2 million and $0.1 million, respectively.
During the year ended December 31, 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 an approximate 7% interest (see Note 12). The limited partnership is affiliated with one of the Companys 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 year ended December 31, 2021.
During the year ended December 31, 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 Companys consolidated balance sheet.
The Company calculates basic earnings per share by dividing the net income (loss) 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 exclude 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 at December 31, 2021 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 earnings per share of common stock (in
thousands, except for share and per share data).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
Numerator |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(248,919 |
) |
|
$ |
(16,876 |
) |
|
$ |
(210,340 |
) |
Denominator |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares of common stockbasic and diluted |
|
|
543,558,222 |
|
|
|
504,115,839 |
|
|
|
503,453,127 |
|
Net loss per share - basic and diluted |
|
$ |
(0.46 |
) |
|
$ |
(0.03 |
) |
|
$ |
(0.42 |
) |
Common stock equivalent shares of 32,061,021, 15,632,980 and 5,328,256 were excluded from the computation of
diluted per share amounts for the years ended December 31, 2021, 2020 and 2019, respectively, because their effect was anti-dilutive.
F-44
26. |
SEGMENT INFORMATION AND INFORMATION ABOUT GEOGRAPHIC AREAS |
The Company operates in one 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.
Revenues by geographic area presented based upon the location of the customer are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
United States |
|
$ |
680,609 |
|
|
$ |
626,101 |
|
|
$ |
610,591 |
|
China |
|
|
7,679 |
|
|
|
6,962 |
|
|
|
5,493 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
$ |
688,288 |
|
|
$ |
633,063 |
|
|
$ |
616,084 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software, equipment and property, net by geographic area are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2021 |
|
|
2020 |
|
United States |
|
$ |
135,784 |
|
|
$ |
101,370 |
|
China |
|
|
61 |
|
|
|
68 |
|
|
|
|
|
|
|
|
|
|
Total software, equipment and property-net |
|
$ |
135,845 |
|
|
$ |
101,438 |
|
|
|
|
|
|
|
|
|
|
On December 31, 2020 the Company closed an Asset Purchase Agreement with a third-party buyer (the Buyer) to transfer its
obligation of providing certain services and related assets and liabilities to the Buyer for total consideration of $3.8 million, including $1.8 million of contingent consideration. The Company has received aggregate payments from the
Buyer of $3.5 million through December 31, 2021.
The divestiture did not constitute a discontinued operation or the sale of a
business.
The Company recognized a gain on disposition of $3.8 million during the year ended December 31, 2020 within general
and administrative expenses in the consolidated statement of operations and comprehensive loss. During 2021, the Company reassessed the estimated contingent consideration and recognized a $0.6 million gain from the divestiture.
28. |
QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Quarter Ended |
|
|
|
(in thousands, except per share data) |
|
|
|
March 31 2021 |
|
|
June 30 2021 |
|
|
September 30, 2021 |
|
|
December 31, 2021 |
|
Revenue |
|
$ |
157,789 |
|
|
$ |
166,789 |
|
|
$ |
176,628 |
|
|
$ |
187,083 |
|
Cost of revenue |
|
|
44,593 |
|
|
|
45,512 |
|
|
|
57,853 |
|
|
|
47,697 |
|
Gross Profit |
|
|
113,196 |
|
|
|
121,277 |
|
|
|
118,775 |
|
|
|
139,386 |
|
Income (loss) from operations |
|
|
7,239 |
|
|
|
22,001 |
|
|
|
(189,212 |
) |
|
|
15,299 |
|
Net (loss) income |
|
|
(5,084 |
) |
|
|
3,816 |
|
|
|
(189,782 |
) |
|
|
(57,869 |
) |
Net (loss) income per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.01 |
) |
|
$ |
0.01 |
|
|
$ |
(0.34 |
) |
|
$ |
(0.10 |
) |
Diluted |
|
$ |
(0.01 |
) |
|
$ |
0.01 |
|
|
$ |
(0.34 |
) |
|
$ |
(0.10 |
) |
F-45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Quarter Ended |
|
|
|
(in thousands, except per share data) |
|
|
|
March 31 2020 |
|
|
June 30 2020 |
|
|
September 30, 2020 |
|
|
December 31, 2020 |
|
Revenue |
|
$ |
159,208 |
|
|
$ |
150,716 |
|
|
$ |
157,754 |
|
|
$ |
165,385 |
|
Cost of revenue |
|
|
54,962 |
|
|
|
49,982 |
|
|
|
50,455 |
|
|
|
53,318 |
|
Gross Profit |
|
|
104,246 |
|
|
|
100,734 |
|
|
|
107,299 |
|
|
|
112,067 |
|
Income (loss) from operations |
|
|
14,147 |
|
|
|
15,616 |
|
|
|
23,085 |
|
|
|
24,132 |
|
Net (loss) income |
|
|
(25,252 |
) |
|
|
(1,961 |
) |
|
|
4,720 |
|
|
|
5,617 |
|
Net (loss) income per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.05 |
) |
|
$ |
(0.00 |
) |
|
$ |
0.01 |
|
|
$ |
0.01 |
|
Diluted |
|
$ |
(0.05 |
) |
|
$ |
(0.00 |
) |
|
$ |
0.01 |
|
|
$ |
0.01 |
|
Gain on InvestmentDuring February 2022, the Company received cash proceeds of $3.9 million in exchange for its equity
interest in an investee as a result of the acquisition of the investee. The Company had been accounting for its investment using the cost method and recognized a gain of $3.6 million upon receipt of the cash. The investments carrying
value was $0.3 million and included within other assets on the accompanying consolidated balance sheets at December 31, 2021 and 2020. The Company no longer has any ownership interest in the investee.
Business Acquisition On February 8, 2022, the Company completed its acquisition of Safekeep, Inc. (Safekeep), a
privately held company that applies AI to support the digitization of subrogation claims for insurers. Leveraging Safekeeps AI-enabled subrogation solutions, the acquisition will broaden the
Companys portfolio of cloud-based solutions available to its insurance customers.
In exchange for all the outstanding shares of
Safekeep, the Company paid total consideration of $31.9 million upon closing, subject to adjustment for certain post-closing indemnities.
As additional consideration for the shares, the acquisition agreement includes a contingent earn-out
for additional cash consideration based on the achievement of certain revenue targets during the year ending December 31, 2024.
The
initial accounting for the acquisition of Safekeep, including the estimated fair value of the assets acquired, liabilities assumed and contingent earn-out consideration, is incomplete as a result of the
proximity of the acquisition date to the date these financial statements were issued.
F-46
CCC INTELLIGENT SOLUTIONS HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
March 31, 2022 |
|
|
December 31, 2021 |
|
|
|
(Unaudited) |
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
CURRENT ASSETS: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
195,497 |
|
|
$ |
182,544 |
|
Accounts receivableNet of allowances of $4,161 and $3,791 for March 31, 2022
and December 31, 2021, respectively |
|
|
76,746 |
|
|
|
78,793 |
|
Income taxes receivable |
|
|
71 |
|
|
|
318 |
|
Deferred contract costs |
|
|
15,645 |
|
|
|
15,069 |
|
Other current assets |
|
|
44,013 |
|
|
|
46,181 |
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
331,972 |
|
|
|
322,905 |
|
|
|
|
|
|
|
|
|
|
SOFTWARE, EQUIPMENT, AND PROPERTYNet |
|
|
139,801 |
|
|
|
135,845 |
|
OPERATING LEASE ASSETS |
|
|
34,690 |
|
|
|
37,234 |
|
INTANGIBLE ASSETSNet |
|
|
1,193,275 |
|
|
|
1,213,249 |
|
GOODWILL |
|
|
1,494,252 |
|
|
|
1,466,884 |
|
DEFERRED FINANCING FEES, REVOLVERNet |
|
|
2,746 |
|
|
|
2,899 |
|
DEFERRED CONTRACT COSTS |
|
|
21,303 |
|
|
|
22,117 |
|
EQUITY METHOD INVESTMENT |
|
|
10,228 |
|
|
|
10,228 |
|
OTHER ASSETS |
|
|
36,630 |
|
|
|
26,165 |
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
$ |
3,264,897 |
|
|
$ |
3,237,526 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS EQUITY |
|
|
|
|
|
|
|
|
CURRENT LIABILITIES: |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
16,935 |
|
|
$ |
12,918 |
|
Accrued expenses |
|
|
50,257 |
|
|
|
66,691 |
|
Income taxes payable |
|
|
27,366 |
|
|
|
7,243 |
|
Current portion of long-term debt |
|
|
8,000 |
|
|
|
8,000 |
|
Current portion of long-term licensing agreementNet |
|
|
2,745 |
|
|
|
2,703 |
|
Operating lease liabilities |
|
|
5,821 |
|
|
|
8,052 |
|
Deferred revenues |
|
|
33,395 |
|
|
|
31,042 |
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
144,519 |
|
|
|
136,649 |
|
|
|
|
|
|
|
|
|
|
LONG-TERM DEBTNet |
|
|
778,996 |
|
|
|
780,610 |
|
DEFERRED INCOME TAXESNet |
|
|
254,208 |
|
|
|
275,745 |
|
LONG-TERM LICENSING AGREEMENTNet |
|
|
32,926 |
|
|
|
33,629 |
|
OPERATING LEASE LIABILITIES |
|
|
56,378 |
|
|
|
56,133 |
|
WARRANT LIABILITIES |
|
|
60,342 |
|
|
|
62,478 |
|
OTHER LIABILITIES |
|
|
4,770 |
|
|
|
5,785 |
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
1,332,139 |
|
|
|
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; 613,758,126 and
609,768,296 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively |
|
|
61 |
|
|
|
61 |
|
Additional paid-in capital |
|
|
2,653,201 |
|
|
|
2,618,924 |
|
Accumulated deficit |
|
|
(734,377 |
) |
|
|
(746,352 |
) |
Accumulated other comprehensive loss |
|
|
(306 |
) |
|
|
(315 |
) |
|
|
|
|
|
|
|
|
|
Total stockholders equity |
|
|
1,918,579 |
|
|
|
1,872,318 |
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
$ |
3,264,897 |
|
|
$ |
3,237,526 |
|
|
|
|
|
|
|
|
|
|
See notes to condensed consolidated financial statements.
F-47
CCC INTELLIGENT SOLUTIONS HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(In thousands, except share and per share data)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, |
|
|
|
2022 |
|
|
2021 |
|
REVENUES |
|
$ |
186,823 |
|
|
$ |
157,789 |
|
COST OF REVENUES |
|
|
|
|
|
|
|
|
Cost of revenues, exclusive of amortization of acquired technologies |
|
|
42,701 |
|
|
|
38,013 |
|
Amortization of acquired technologies |
|
|
6,695 |
|
|
|
6,580 |
|
|
|
|
|
|
|
|
|
|
Total cost of revenues |
|
|
49,396 |
|
|
|
44,593 |
|
|
|
|
|
|
|
|
|
|
GROSS PROFIT |
|
|
137,427 |
|
|
|
113,196 |
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
Research and development |
|
|
35,681 |
|
|
|
30,624 |
|
Selling and marketing |
|
|
26,802 |
|
|
|
19,417 |
|
General and administrative |
|
|
44,207 |
|
|
|
37,839 |
|
Amortization of intangible assets |
|
|
18,080 |
|
|
|
18,077 |
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
124,770 |
|
|
|
105,957 |
|
|
|
|
|
|
|
|
|
|
OPERATING INCOME |
|
|
12,657 |
|
|
|
7,239 |
|
INTEREST EXPENSE |
|
|
(7,341 |
) |
|
|
(18,766 |
) |
GAIN ON CHANGE IN FAIR VALUE OF INTEREST RATE SWAPS |
|
|
|
|
|
|
3,277 |
|
GAIN ON SALE OF COST METHOD INVESTMENT |
|
|
3,578 |
|
|
|
|
|
CHANGE IN FAIR VALUE OF WARRANT LIABILITIES |
|
|
2,136 |
|
|
|
|
|
OTHER INCOMENet |
|
|
82 |
|
|
|
87 |
|
|
|
|
|
|
|
|
|
|
PRETAX INCOME (LOSS) |
|
|
11,112 |
|
|
|
(8,163 |
) |
INCOME TAX BENEFIT |
|
|
863 |
|
|
|
3,079 |
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) INCLUDING NON-CONTROLLING
INTEREST |
|
|
11,975 |
|
|
|
(5,084 |
) |
Less: net income (loss) attributable to non-controlling
interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) ATTRIBUTABLE TO CCC INTELLIGENT SOLUTIONS HOLDINGS INC. |
|
$ |
11,975 |
|
|
$ |
(5,084 |
) |
Net income (loss) per share attributable to common stockholders: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.02 |
|
|
$ |
(0.01 |
) |
Diluted |
|
$ |
0.02 |
|
|
$ |
(0.01 |
) |
Weighted-average shares used in computing net income (loss) per share attributable to common
stockholders: |
|
|
|
|
|
|
|
|
Basic |
|
|
603,104,839 |
|
|
|
505,072,914 |
|
Diluted |
|
|
641,028,410 |
|
|
|
505,072,914 |
|
COMPREHENSIVE INCOME (LOSS): |
|
|
|
|
|
|
|
|
Net income (loss) including non-controlling
interest |
|
|
11,975 |
|
|
|
(5,084 |
) |
Other comprehensive incomeForeign currency translation adjustment |
|
|
9 |
|
|
|
7 |
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE INCOME (LOSS) INCLUDING NON-CONTROLLING
INTEREST |
|
|
11,984 |
|
|
|
(5,077 |
) |
Less: comprehensive income (loss) attributable to
non-controlling interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO CCC INTELLIGENT SOLUTIONS HOLDINGS INC. |
|
$ |
11,984 |
|
|
$ |
(5,077 |
) |
|
|
|
|
|
|
|
|
|
See notes to condensed consolidated financial statements.
F-48
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 Interest |
|
|
Issued Preferred Stock |
|
|
Common Stock |
|
|
Additional Paid-In Capital |
|
|
Accumulated Deficit |
|
|
Accumulated Other Comprehensive Loss |
|
|
Total Stockholders Equity |
|
|
|
|
|
|
Number of Shares |
|
|
Par Value |
|
|
Number of Shares |
|
|
Par Value |
|
BALANCEDecember 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 optionsnet of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,961,270 |
|
|
|
|
|
|
|
10,633 |
|
|
|
|
|
|
|
|
|
|
|
10,633 |
|
Exercise of warrantsnet |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,246 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock upon vesting of RSUsnet of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,314 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9 |
|
|
|
9 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,975 |
|
|
|
|
|
|
|
11,975 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCEMarch 31, 2022 |
|
$ |
14,179 |
|
|
|
|
|
|
$ |
|
|
|
|
613,758,126 |
|
|
$ |
61 |
|
|
$ |
2,653,201 |
|
|
$ |
(734,377 |
) |
|
$ |
(306 |
) |
|
$ |
1,918,579 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to condensed consolidated financial statements.
F-49
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 Interest |
|
|
Issued Preferred Stock |
|
|
Common Stock |
|
|
Additional Paid-In Capital |
|
|
Accumulated Deficit |
|
|
Accumulated Other Comprehensive Loss |
|
|
Total Stockholders Equity |
|
|
|
|
|
|
Number of Shares |
|
|
Par Value |
|
|
Number of Shares |
|
|
Par Value |
|
BALANCEDecember 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 optionsnet 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 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCEMarch 31, 2021 |
|
$ |
14,179 |
|
|
|
|
|
|
$ |
|
|
|
|
505,430,378 |
|
|
$ |
50 |
|
|
$ |
1,514,495 |
|
|
$ |
(269,005 |
) |
|
$ |
(264 |
) |
|
$ |
1,245,276 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to condensed consolidated financial statements.
F-50
CCC INTELLIGENT SOLUTIONS HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, |
|
|
|
2022 |
|
|
2021 |
|
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
11,975 |
|
|
$ |
(5,084 |
) |
Adjustments to reconcile net loss to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization of software, equipment, and property |
|
|
6,807 |
|
|
|
5,153 |
|
Amortization of intangible assets |
|
|
24,775 |
|
|
|
24,657 |
|
Deferred income taxes |
|
|
(21,223 |
) |
|
|
(6,079 |
) |
Stock-based compensation |
|
|
23,644 |
|
|
|
12,654 |
|
Amortization of deferred financing fees |
|
|
474 |
|
|
|
1,150 |
|
Amortization of discount on debt |
|
|
65 |
|
|
|
194 |
|
Change in fair value of interest rate swaps |
|
|
|
|
|
|
(3,277 |
) |
Change in fair value of warrant liabilities |
|
|
(2,136 |
) |
|
|
|
|
Non-cash lease expense |
|
|
1,228 |
|
|
|
909 |
|
Loss on disposal of software, equipment and property |
|
|
795 |
|
|
|
|
|
Gain on sale of cost method investment |
|
|
(3,578 |
) |
|
|
|
|
Other |
|
|
26 |
|
|
|
15 |
|
Changes in: |
|
|
|
|
|
|
|
|
Accounts receivableNet |
|
|
2,043 |
|
|
|
6,184 |
|
Deferred contract costs |
|
|
(576 |
) |
|
|
41 |
|
Other current assets |
|
|
2,187 |
|
|
|
(1,061 |
) |
Deferred contract costsNon-current |
|
|
814 |
|
|
|
(288 |
) |
Other assets |
|
|
(10,805 |
) |
|
|
2,106 |
|
Operating lease assets |
|
|
1,316 |
|
|
|
2,372 |
|
Income taxes |
|
|
20,370 |
|
|
|
(907 |
) |
Accounts payable |
|
|
4,825 |
|
|
|
4,344 |
|
Accrued expenses |
|
|
(16,460 |
) |
|
|
(4,348 |
) |
Operating lease liabilities |
|
|
(1,986 |
) |
|
|
(1,655 |
) |
Deferred revenues |
|
|
2,353 |
|
|
|
1,580 |
|
Other liabilities |
|
|
(68 |
) |
|
|
(426 |
) |
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
46,865 |
|
|
|
38,234 |
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
Purchases of software, equipment, and property |
|
|
(14,280 |
) |
|
|
(4,637 |
) |
Acquisition of Safekeep, Inc., net of cash acquired |
|
|
(32,227 |
) |
|
|
|
|
Proceeds from sale of cost method investment |
|
|
3,892 |
|
|
|
|
|
Purchase of intangible asset |
|
|
|
|
|
|
(49 |
) |
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(42,615 |
) |
|
|
(4,686 |
) |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Dividend to CCCIS stockholders |
|
|
|
|
|
|
(134,549 |
) |
Principal payments on long-term debt |
|
|
(2,000 |
) |
|
|
(3,462 |
) |
Proceeds from issuance of common stock |
|
|
|
|
|
|
1,007 |
|
Proceeds from exercise of stock options |
|
|
10,691 |
|
|
|
503 |
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities |
|
|
8,691 |
|
|
|
(136,501 |
) |
|
|
|
|
|
|
|
|
|
NET EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS |
|
|
12 |
|
|
|
9 |
|
|
|
|
|
|
|
|
|
|
NET CHANGE IN CASH AND CASH EQUIVALENTS |
|
|
12,953 |
|
|
|
(102,944 |
) |
CASH AND CASH EQUIVALENTS: |
|
|
|
|
|
|
|
|
Beginning of period |
|
|
182,544 |
|
|
|
162,118 |
|
End of period |
|
$ |
195,497 |
|
|
$ |
59,174 |
|
|
|
|
|
|
|
|
|
|
NONCASH INVESTING AND FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Unpaid liability related to software, equipment, and property |
|
$ |
|
|
|
$ |
24 |
|
|
|
|
|
|
|
|
|
|
Contingent consideration related to business acquisition |
|
$ |
200 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: |
|
|
|
|
|
|
|
|
Cash paid for interest |
|
$ |
6,783 |
|
|
$ |
17,422 |
|
|
|
|
|
|
|
|
|
|
Cash received (paid) for income taxesNet |
|
$ |
45 |
|
|
$ |
(3,906 |
) |
|
|
|
|
|
|
|
|
|
See notes to condensed consolidated financial statements.
F-51
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. |
ORGANIZATION AND NATURE OF OPERATIONS |
CCC Intelligent Solutions Holdings Inc., 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 suppliers, automotive
manufacturers, financial institutions, and others.
The Company is headquartered in Chicago, Illinois. The Companys 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 |
Basis of PresentationThe condensed consolidated balance sheets as of March 31, 2022 and December 31, 2021, the condensed
consolidated statements of operations and comprehensive income (loss) for the three months ended March 31, 2022 and 2021, the condensed consolidated statements of mezzanine equity and stockholders equity for the three months ended
March 31, 2022 and 2021, and the condensed consolidated statements of cash flows for the three months ended March 31, 2022 and 2021 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 generally 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 (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 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 Companys
audited consolidated financial statements and notes thereto included in the Companys Annual Report on Form 10-K for the year ended December 31, 2021.
The Companys significant accounting policies are described in Note 2, Summary of Significant Accounting Policies, to the consolidated
financial statements included in the Companys Annual Report on Form 10-K
F-52
for the year ended December 31, 2021. There have been no material changes to the significant accounting policies during the three months ended March 31, 2022.
Basis of AccountingThe 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 EstimatesThe 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 Companys condensed consolidated financial statements and the accompanying notes. Although the Company regularly assesses these estimates, actual
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 managements 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, the estimates and assumptions associated with stock incentive
plans, and the preliminary measurement of expected contingent consideration in connection with business acquisitions.
Revenue
RecognitionThe Companys 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 RevenuesSoftware 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 Companys 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
F-53
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 months ended March 31, 2022 and 2021. 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.
Other RevenueOther revenues are recognized over time as the services are performed and consist of professional services and other non-software services. 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 ObligationsThe Companys 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 RevenueThe 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 months ended March 31, 2022 and 2021 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, |
|
|
|
2022 |
|
|
2021 |
|
Software subscriptions |
|
$ |
179,818 |
|
|
$ |
152,026 |
|
Other |
|
|
7,005 |
|
|
|
5,763 |
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
$ |
186,823 |
|
|
$ |
157,789 |
|
|
|
|
|
|
|
|
|
|
Transaction Price Allocated to the Remaining Performance ObligationsRemaining 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 March 31, 2022, approximately $1,327 million of
revenue is expected to be recognized from remaining performance obligations in the amount of approximately $525 million during the following twelve months, and approximately $802 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.
F-54
Contract LiabilitiesContract 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 March 31, 2022 from amounts in deferred revenue as of December 31, 2021 was $29.7 million. Revenue recognized for the three months ended March 31, 2021 from amounts in deferred revenue as of
December 31, 2020 was $25.0 million.
Costs to Obtain and Fulfill the ContractThe 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 CompensationThe Companys stock-based compensation plans are described in Note 17. 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 awards expected to vest, based on an estimated forfeiture rate.
The Company recognizes stock-based compensation expense for time-based 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 restricted stock units with only a time-based vesting component or a performance-based vesting component is determined using
the quoted price of our common stock on the date of grant.
The fair value of the Companys stock options with only a time-based
component is estimated using the Black-Scholes option pricing model.
The fair value of the Companys 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.
Stock-based compensation expense related to purchase rights issued under
the 2021 Employee Stock Purchase Plan (ESPP) is based on the Black-Scholes option-pricing model fair value of the estimated number of awards as of the beginning of the offering period. Stock-based compensation expense is recognized using
the straight-line method over the offering period.
Goodwill and Intangible AssetsGoodwill and intangible assets deemed to
have indefinite lives are not amortized, but are subjected to an annual impairment test as of September 30 of each fiscal year, or more frequently if events or changes in circumstances indicate that the carrying value may not be recoverable. Testing
goodwill and intangible assets for impairment involves comparing the fair value of the reporting unit or intangible asset to its carrying value. If the carrying amount of a reporting unit or intangible asset exceeds its fair value, an impairment
loss is recognized in an amount equal to the excess, up to the carrying value of the goodwill or intangible asset. There were no events or changes in circumstances that indicated the carrying value may not be recoverable and no impairment charges
related to goodwill or indefinite-lived intangible assets were recognized for the three months ended March 31, 2022 and 2021.
F-55
Business CombinationsThe Company allocates the purchase consideration of
acquired companies to tangible and intangible assets acquired and liabilities assumed based on their estimated fair values at the acquisition date, with the excess recorded to goodwill. These estimates are inherently uncertain and subject to
refinement. During the measurement period, which may be up to one year from the acquisition date, adjustments may be recorded 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 corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the fair value of assets acquired or
liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the condensed consolidated statements of operations and comprehensive income (loss).
The Company 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 remeasured each reporting period, with any change in the fair value recorded within the condensed consolidated statements of operations and comprehensive income (loss).
Recently Adopted Accounting PronouncementsEffective January 1, 2022, the Company adopted
ASU 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 transaction that is not a business combination, separate financial statements of legal entities not subject to tax, intra period tax allocation,
ownership changes in investments, interim-period accounting for enacted changes in tax law, and year-to-date loss limitation in interim-period tax accounting. The
adoption of ASU 2019-12 did not have a material impact on the Companys condensed consolidated financial statements.
Recently Issued Accounting PronouncementsIn 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 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 on January 1, 2023 and early adoption is permitted. The Company is currently assessing the impact of this update on
its condensed consolidated financial statements.
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 if certain criteria are met. Adoption of the expedients and exceptions is
permitted upon issuance of ASU 2020-04 through December 31, 2022. The Company is currently assessing the impact of this update on its condensed consolidated financial statements.
On July 30, 2021, 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 (Merger). In connection with the Transactions, Dragoneer changed its name to CCC Intelligent
Solutions Holdings Inc.
F-56
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.
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 CCCISs capital stock and equity awards prior to the Business Combination have been retroactively restated reflecting the exchange ratio of 1:340.5507 (Exchange Ratio).
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 Companys 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 Companys 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; |
|
|
|
each of Dragoneers redeemable Class A ordinary share and Class B ordinary share that was issued
and outstanding immediately prior to the Effective Time was exchanged for an equal number of shares of the Companys 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 Companys common stock at a purchase price of $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 Public Warrant to purchase one common share for $11.50 per share, for a
purchase price of $10.00 per unit.
Effective upon Closing, 8,625,000 shares 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 Companys common stock has been greater than or equal to $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, 15.0 million shares of the Companys 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 Companys common stock have traded for greater than or equal to $15.00 per share for any twenty
trading days within any thirty consecutive trading day period commencing after the closing 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 are forfeited.
F-57
The Company Earnout Shares are not issued shares and are excluded from the Companys
issued and outstanding shares within its condensed consolidated statements of mezzanine equity and stockholders equity.
Upon
Closing, the Company received net cash contributions of $763.3 million and had 603,170,380 shares of common stock outstanding.
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 Safekeeps AI-enabled subrogation
solutions, the acquisition will broaden the Companys 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
preliminary 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 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 Companys preliminary 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.
F-58
The following table summarizes the preliminary 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 assetacquired technology |
|
|
4,800 |
|
Deferred tax assets |
|
|
314 |
|
|
|
|
|
|
Total assets acquired |
|
|
5,264 |
|
Liabilities assumed: |
|
|
|
|
Current liabilities |
|
|
132 |
|
|
|
|
|
|
Total liabilities assumed |
|
|
132 |
|
|
|
|
|
|
Net assets acquired |
|
|
5,132 |
|
Goodwill |
|
|
27,368 |
|
|
|
|
|
|
Total purchase price |
|
$ |
32,500 |
|
|
|
|
|
|
The developed technology intangible asset acquired has an estimated useful life of seven years. The acquired
technology intangible asset is being amortized on a straight-line basis.
The fair value of the acquired technology intangible asset was
determined by valuation models based on estimates of future operating projections as well as judgments on the discount rates 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 approximately
$1.1 million, which are included in general and administrative expenses within the condensed consolidated statement of operations and comprehensive income (loss) for the three months ended March 31, 2022.
The opening and closing balances of the Companys receivables, contract assets and contract liabilities from contracts with customers are
as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
March 31, 2022 |
|
|
December 31, 2021 |
|
Accounts receivables-net of allowances |
|
$ |
76,746 |
|
|
$ |
78,793 |
|
Deferred contract costs |
|
|
15,645 |
|
|
|
15,069 |
|
Long-term deferred contract costs |
|
|
21,303 |
|
|
|
22,117 |
|
Other assets (accounts receivable, non-current) |
|
|
12,186 |
|
|
|
8,622 |
|
Deferred revenues |
|
|
33,395 |
|
|
|
31,042 |
|
Other liabilities (deferred revenues,
non-current) |
|
|
1,505 |
|
|
|
1,574 |
|
F-59
A summary of the activity impacting deferred revenue balances during the three months ended
March 31, 2022 and 2021, is presented below (in thousands):
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, |
|
|
|
2022 |
|
|
2021 |
|
Balance at beginning of period |
|
$ |
32,615 |
|
|
$ |
28,515 |
|
Revenue recognized1 |
|
|
(89,432 |
) |
|
|
(80,963 |
) |
Additional amounts deferred1 |
|
|
91,717 |
|
|
|
82,557 |
|
|
|
|
|
|
|
|
|
|
Balance at end of period |
|
$ |
34,900 |
|
|
$ |
30,109 |
|
|
|
|
|
|
|
|
|
|
Classified as: |
|
|
|
|
|
|
|
|
Current |
|
$ |
33,395 |
|
|
$ |
28,100 |
|
Non-current |
|
|
1,505 |
|
|
|
2,009 |
|
|
|
|
|
|
|
|
|
|
Total deferred revenue |
|
$ |
34,900 |
|
|
$ |
30,109 |
|
|
|
|
|
|
|
|
|
|
|
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 Companys assessment of whether an estimate of variable consideration is constrained. For the three months ended March 31,
2022 and 2021, the impact on revenue recognized in the current period, from performance obligations partially or fully satisfied in the previous period, was not significant.
A summary of the activity impacting the deferred contract costs during the three months ended March 31, 2022 and 2021 is presented below
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, |
|
|
|
2022 |
|
|
2021 |
|
Balance at beginning of period |
|
$ |
37,186 |
|
|
$ |
26,306 |
|
Costs amortized |
|
|
(4,221 |
) |
|
|
(3,705 |
) |
Additional amounts deferred |
|
|
3,983 |
|
|
|
3,953 |
|
|
|
|
|
|
|
|
|
|
Balance at end of period |
|
$ |
36,948 |
|
|
$ |
26,554 |
|
|
|
|
|
|
|
|
|
|
Classified as: |
|
|
|
|
|
|
|
|
Current |
|
$ |
15,645 |
|
|
$ |
11,876 |
|
Non-current |
|
|
21,303 |
|
|
|
14,678 |
|
|
|
|
|
|
|
|
|
|
Total deferred contract costs |
|
$ |
36,948 |
|
|
$ |
26,554 |
|
|
|
|
|
|
|
|
|
|
6. |
FAIR VALUE MEASUREMENTS |
Assets and Liabilities Measured at Fair Value on a Recurring BasisAs of March 31, 2022, the Companys Private Warrants
and contingent consideration liability related to a business acquisition are measured at fair value on a recurring basis.
The Private
Warrants are valued using Level 1 and Level 2 inputs within 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 Private Warrants. Accordingly, the Private Warrants are classified within Level 2 of the fair value hierarchy.
F-60
The valuation of the Private Warrants as of March 31, 2022 was determined using the
Black-Scholes option pricing model using the following assumptions:
|
|
|
|
|
Expected term (in years) |
|
|
4.3 |
|
Expected volatility |
|
|
35 |
% |
Expected dividend yield |
|
|
0 |
% |
Risk-free interest rate |
|
|
2.43 |
% |
Fair value at valuation date |
|
$ |
3.39 |
|
The contingent consideration liability related to the acquisition of Safekeep (see Note 4) is recorded at our
preliminary estimate of fair value on the acquisition date and 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 preliminary estimated fair value of the contingent consideration at
March 31, 2022 was determined using probability-weighted discounted cash flows and a Monte Carlo simulation model. The discount rate, based on the Companys estimated cost of debt, was 9.0%.
There were no changes in the estimated fair value of the Companys contingent consideration liability from the date of the business
acquisition to March 31, 2022.
The following table presents the fair value of the assets and liabilities measured at fair value on a
recurring basis at March 31, 2022 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
Fair Value |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
Contingent consideration related to business acquisition |
|
$ |
200 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
200 |
|
Private warrants |
|
|
60,342 |
|
|
|
|
|
|
|
60,342 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
60,542 |
|
|
$ |
|
|
|
$ |
60,342 |
|
|
$ |
200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table presents the fair value of the assets and liabilities measured at fair value on a recurring
basis at December 31, 2021 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
Fair Value |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
Private warrants |
|
$ |
62,478 |
|
|
$ |
|
|
|
$ |
62,478 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
62,478 |
|
|
$ |
|
|
|
$ |
62,478 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets and Liabilities Measured at Fair Value on a Nonrecurring BasisThe 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 months ended March 31, 2022 and 2021, the Company recognized no impairment related to these assets.
Fair Value of Other Financial InstrumentsThe following table presents the carrying amounts, net of debt discount, and estimated
fair values of the Companys financial instruments that are not recorded at fair value on the condensed consolidated balance sheets (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2022 |
|
|
December 31, 2021 |
|
Description |
|
Carrying Amount |
|
|
Estimated Fair Value |
|
|
Carrying Amount |
|
|
Estimated Fair Value |
|
Term B Loan, including current portion |
|
$ |
796,139 |
|
|
$ |
791,018 |
|
|
$ |
798,073 |
|
|
$ |
799,000 |
|
The fair value of the Companys 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
F-61
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.
The Companys effective tax benefit rate for the three months ended March 31, 2022 was (7.8)% compared to the effective tax rate for
the three months ended March 31, 2021 of 37.7%.
The effective tax rate for the three months ended March 31, 2022 was lower than
the March 31, 2021 effective tax rate primarily due to the tax benefit received related to share-based compensation expense as well as the tax benefit associated with the re-measurement of the
companys deferred tax liability for changes in state tax rates.
The Company made income tax payments of $5 thousand and
$3.9 million for the three months ended March 31, 2022 and 2021, respectively. The Company received refunds from various states totaling $50 thousand and $16 thousand for the three months ended March 31, 2022 and 2021,
respectively.
As of March 31, 2022, unrecognized tax benefits were materially consistent with the amount at December 31, 2021.
We anticipate this amount will decrease to $3.4 million over the following twelve months, as the increase related to fiscal year 2022 is offset by decreases related to statute expirations.
Accounts receivablenet as of March 31, 2022 and December 31, 2021, consists of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
March 31, 2022 |
|
|
December 31, 2021 |
|
Accounts receivable |
|
$ |
80,907 |
|
|
$ |
82,584 |
|
Allowance for doubtful accounts and sales reserves |
|
|
(4,161 |
) |
|
|
(3,791 |
) |
|
|
|
|
|
|
|
|
|
Accounts receivablenet |
|
$ |
76,746 |
|
|
$ |
78,793 |
|
|
|
|
|
|
|
|
|
|
Changes to the allowance for doubtful accounts and sales reserves during the three months ended March 31,
2022 and 2021, consists of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, |
|
|
|
2022 |
|
|
2021 |
|
Balance at beginning of period |
|
$ |
3,791 |
|
|
$ |
4,224 |
|
Charges to bad debt and sales reserves |
|
|
1,232 |
|
|
|
1,066 |
|
Write-offs, net |
|
|
(862 |
) |
|
|
(1,359 |
) |
|
|
|
|
|
|
|
|
|
Balance at end of period |
|
$ |
4,161 |
|
|
$ |
3,931 |
|
|
|
|
|
|
|
|
|
|
F-62
Other current assets as of March 31, 2022 and December 31, 2021, consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
March 31, 2022 |
|
|
December 31, 2021 |
|
Non-trade receivables |
|
$ |
9,409 |
|
|
$ |
8,321 |
|
Prepaid service fees |
|
|
8,457 |
|
|
|
8,623 |
|
Prepaid software and equipment maintenance |
|
|
6,241 |
|
|
|
7,593 |
|
Prepaid SaaS costs |
|
|
5,344 |
|
|
|
5,909 |
|
Prepaid insurance |
|
|
2,513 |
|
|
|
4,416 |
|
Other |
|
|
12,049 |
|
|
|
11,319 |
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
44,013 |
|
|
$ |
46,181 |
|
|
|
|
|
|
|
|
|
|
10. |
SOFTWARE, EQUIPMENT, AND PROPERTY |
Software, equipment, and property as of March 31, 2022 and December 31, 2021, consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
March 31, 2022 |
|
|
December 31, 2021 |
|
Software, licenses and database |
|
$ |
148,097 |
|
|
$ |
140,692 |
|
Leasehold improvements |
|
|
32,558 |
|
|
|
34,880 |
|
Computer equipment |
|
|
32,248 |
|
|
|
31,635 |
|
Furniture and other equipment |
|
|
3,340 |
|
|
|
5,343 |
|
Building and land |
|
|
4,910 |
|
|
|
4,910 |
|
|
|
|
|
|
|
|
|
|
Total software, equipment, and property |
|
|
221,153 |
|
|
|
217,460 |
|
Less accumulated depreciation and amortization |
|
|
(81,352 |
) |
|
|
(81,615 |
) |
|
|
|
|
|
|
|
|
|
Net software, equipment, and property |
|
$ |
139,801 |
|
|
$ |
135,845 |
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization expense related to software, equipment and property was $6.8 million and
$5.2 million for the three months ended March 31, 2022 and 2021, respectively.
The Company leases real estate in the form of office space and data center facilities. Generally, the term for real estate leases ranges from 1
to 17 years at inception of the contract. Generally, the term for equipment leases is 1 to 3 years at inception of the contract. Some real estate leases include options to renew that can extend the original term by 3 to 5 years.
The components of lease expense for the three months ended March 31, 2022 and 2021 were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, |
|
|
|
2022 |
|
|
2021 |
|
Operating lease costs |
|
$ |
3,566 |
|
|
$ |
4,594 |
|
Variable lease costs |
|
|
837 |
|
|
|
602 |
|
|
|
|
|
|
|
|
|
|
Total lease costs |
|
$ |
4,403 |
|
|
$ |
5,196 |
|
|
|
|
|
|
|
|
|
|
F-63
Supplemental cash flow and other information related to leases for the three months ended
March 31, 2022 and 2021 were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, |
|
|
|
2022 |
|
|
2021 |
|
Cash payments for operating leases |
|
$ |
2,516 |
|
|
$ |
2,968 |
|
Operating lease assets obtained in exchange for lease liabilities |
|
|
|
|
|
|
2,365 |
|
12. |
GOODWILL AND INTANGIBLE ASSETS |
GoodwillGoodwill was recorded in connection with business acquisitions.
No goodwill impairments were recorded during the three months ended March 31, 2022 and 2021.
For the year ended December 31, 2021, the Company performed its annual impairment assessment as of September 30, 2021, which
indicated no impairment and there was no change to the carrying amount of goodwill.
Changes in the carrying amount of goodwill during the
three months ended March 31, 2022 were as of follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost |
|
|
Accumulated Impairment Loss |
|
|
Net Carrying Amount |
|
Balance as of December 31, 2021 |
|
|
1,492,681 |
|
|
|
(25,797 |
) |
|
|
1,466,884 |
|
Acquisition of Safekeep, Inc. |
|
|
27,368 |
|
|
|
|
|
|
|
27,368 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2022 |
|
|
1,520,049 |
|
|
|
(25,797 |
) |
|
|
1,494,252 |
|
Intangible AssetsThe Companys intangible assets are primarily the result of business
acquisitions.
During the three months ended March 31, 2022 and 2021, the Company did not record an impairment charge.
During the three months ended March 31, 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 March 31, 2022, is reflected below (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Useful Life (Years) |
|
|
Weighted- Average Remaining Useful Life (Years) |
|
|
Gross Carrying Amount |
|
|
Accumulated Amortization |
|
|
Net Carrying Amount |
|
Customer relationships |
|
|
1618 |
|
|
|
13.1 |
|
|
$ |
1,299,750 |
|
|
$ |
(355,897 |
) |
|
$ |
943,853 |
|
Acquired technologies |
|
|
37 |
|
|
|
2.5 |
|
|
|
187,965 |
|
|
|
(129,013 |
) |
|
|
58,952 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal |
|
|
|
|
|
|
|
|
|
|
1,487,995 |
|
|
|
(485,190 |
) |
|
|
1,002,805 |
|
Trademarksindefinite life |
|
|
|
|
|
|
|
|
|
|
190,470 |
|
|
|
|
|
|
|
190,470 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intangible assets |
|
|
|
|
|
|
|
|
|
$ |
1,678,465 |
|
|
$ |
(485,190 |
) |
|
$ |
1,193,275 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-64
The intangible assets balance as of December 31, 2021, is reflected below (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Useful Life (Years) |
|
|
Weighted- Average Remaining Useful Life (Years) |
|
|
Gross Carrying Amount |
|
|
Accumulated Amortization |
|
|
Net Carrying Amount |
|
Customer relationships |
|
|
1618 |
|
|
|
13.3 |
|
|
$ |
1,299,750 |
|
|
$ |
(337,831 |
) |
|
$ |
961,919 |
|
Acquired technologies |
|
|
37 |
|
|
|
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 |
|
Trademarksindefinite life |
|
|
|
|
|
|
|
|
|
|
190,470 |
|
|
|
|
|
|
|
190,470 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intangible assets |
|
|
|
|
|
|
|
|
|
$ |
1,673,664 |
|
|
$ |
(460,415 |
) |
|
$ |
1,213,249 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization expense for intangible assets was $24.8 million and $24.7 million for the three
months ended March 31, 2022 and 2021, respectively.
Future amortization expense for the remainder of the year ended December 31,
2022 and the following four years ended December 31 and thereafter for intangible assets as of March 31, 2022, is as follows (in thousands):
|
|
|
|
|
Years Ending December 31: |
|
|
|
|
2021 |
|
$ |
74,455 |
|
2022 |
|
|
99,003 |
|
2023 |
|
|
81,417 |
|
2024 |
|
|
72,949 |
|
2025 |
|
|
72,949 |
|
Thereafter |
|
|
602,032 |
|
|
|
|
|
|
Total |
|
$ |
1,002,805 |
|
|
|
|
|
|
Accrued expenses as of March 31, 2022 and December 31, 2021, consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
March 31, 2022 |
|
|
December 31, 2021 |
|
Compensation |
|
$ |
32,666 |
|
|
$ |
49,510 |
|
Professional services |
|
|
3,396 |
|
|
|
2,371 |
|
Software license agreement |
|
|
3,270 |
|
|
|
3,265 |
|
Sales tax |
|
|
2,949 |
|
|
|
2,296 |
|
Royalties and licenses |
|
|
2,822 |
|
|
|
2,640 |
|
Employee insurance benefits |
|
|
2,136 |
|
|
|
2,443 |
|
Other |
|
|
3,018 |
|
|
|
4,166 |
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
50,257 |
|
|
$ |
66,691 |
|
|
|
|
|
|
|
|
|
|
F-65
Other liabilities as of March 31, 2022 and December 31, 2021, consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
March 31, 2022 |
|
|
December 31, 2021 |
|
Software license agreement |
|
$ |
3,065 |
|
|
$ |
4,211 |
|
Deferred
revenue-non-current |
|
|
1,505 |
|
|
|
1,574 |
|
Contingent consideration |
|
|
200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
4,770 |
|
|
$ |
5,785 |
|
|
|
|
|
|
|
|
|
|
On September 21, 2021, CCC Intelligent Solutions Inc., an indirect wholly-owned subsidiary of the Company, together with certain of the
Companys subsidiaries acting as guarantors entered into a credit agreement (the 2021 Credit Agreement).
The 2021 Credit
Agreement replaced the Companys 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 AgreementThe 2021 Credit Agreement consists of an $800.0 million term loan (Term B Loan) and a
revolving credit facility for an aggregate principal amount of $250.0 million (the 2021 Revolving Credit Facility). 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. At March 31, 2022 and December 31, 2021, the unamortized debt discount was $1.9 million.
The Company incurred $9.8 million 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. As of March 31, 2022 and December 31, 2021, the unamortized financing costs were $9.1 million and $9.5 million,
respectively.
The Company incurred $3.1 million in financing costs related to the 2021 Revolving Credit Facility. These costs were
recorded to a 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. As of March 31, 2022 and December 31, 2021, the
deferred financing fees asset balance was $2.7 million and $2.9 million, respectively.
Beginning with the quarter ending
March 31, 2022, the Term B Loan requires quarterly principal payments of $2.0 million until June 30, 2028, with the remaining outstanding principal amount required to be paid on the maturity date, September 21, 2028. Beginning
with the year ending December 31, 2022, the Term B Loan requires a prepayment of principal, subject to certain exceptions, in connection with the receipt of proceeds from certain asset sales, casualty events, and debt issuances by the Company,
and up to 50% of annual excess cash flow, as defined in and as further set forth in the 2021 Credit Agreement. When a principal prepayment is required, the prepayment offsets the future quarterly principal payments of the same amount. As of
March 31, 2022, the Company was not subject to the annual excess cash flow calculation and no such principal prepayments are required.
As of March 31, 2022 and December 31, 2021, the amount outstanding on the Term B Loan is $798.0 million and $800.0 million,
respectively. As of March 31, 2022 and December 31, 2021, $8.0 million of the amount outstanding on the Term B Loan is classified as current in the accompanying condensed consolidated balance sheets.
Borrowings under the 2021 Credit Facility bear interest at rates based on the ratio of the Companys and its subsidiaries
consolidated first lien net indebtedness to the Companys and its subsidiaries consolidated
F-66
EBITDA for applicable periods specified in the 2021 Credit Facility. The interest rate per annum applicable to the loans under the 2021 Credit Facility are based on a fluctuating rate of interest
equal to the sum of an applicable rate and, at the Companys election from time to time, either:
|
(1) |
a base rate determined by reference to the highest of (a) the rate last quoted by the Wall Street Journal
as the prime rate, (b) the federal funds effective rate plus 0.50%, (c) one-month LIBOR plus 1.00% and (d) with respect to the Term B Loans, 1.50% and with respect to the Revolving Credit
Facility, 1.00%, or |
|
(2) |
a Eurocurrency rate determined by reference to LIBOR (other than with respect to Euros, Euribor and with
respect to British Pounds Sterling, SONIA) with a term as selected by the Company, of one, three or six months (subject to (x) in the case of term loans, a 0.50% per annum floor and (y) in the case of revolving loans, a 0.00% per annum
floor). |
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 March 31, 2022, the weighted-average interest rate on the outstanding borrowings under the
Term B Loan was 3.0%. The Company made interest payments of $5.9 during the three months ended March 31, 2022.
The Company issued a
standby letter of credit for $0.7 million during 2021 which reduces the amount available to be borrowed under the 2021 Revolving Credit Facility and at March 31, 2022 and December 31, 2021, $249.3 million was available to be
borrowed.
Borrowings under the 2021 Lien Credit Agreement are guaranteed by Cypress 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 three 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 exceeds 35% of the aggregate commitments, the
Companys leverage ratio cannot exceed 6.25 to 1.00. As of March 31, 2022, the Company was not subject to the financial covenant.
First Lien Credit AgreementIn 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 and
entered into the First Amendment to the First Lien Credit Agreement (First Lien Amendment). The proceeds of the refinance were used to repay the outstanding balance of the Companys Second Lien Credit Agreement, entered into in
April 2017.
The First Lien Amendment provided an incremental term loan in the amount of $375.0 million. The Company received proceeds
from the incremental term loan of $373.1 million, net of debt discount of $1.9 million.
In addition, the First Lien Amendment
reduced the amount of commitments under the First Lien Revolvers to an aggregate principal amount of $91.3 million. The First Lien Revolvers continued to have a sublimit of $30.0 million for letters of credit.
F-67
The Company incurred $27.6 million and $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 First Lien Term Loan required (after giving effect to the First Lien Amendment) quarterly principal payments of approximately
$3.5 million until March 31, 2024, with the remaining outstanding principal amount required to be paid on the maturity date, April 27, 2024. The First Lien Term Loan required a prepayment of principal, subject to certain exceptions,
in connection with the receipt of proceeds from certain asset sales, casualty events, and debt issuances by the Company, and up to 50% of annual excess cash flow, as defined in and as further set forth in the First Lien Credit Agreement. When a
principal prepayment was required, the prepayment offset the future quarterly principal payments of the same amount. As of December 31, 2020, subject to the request of the lenders of the First Lien Term Loan, a principal prepayment of up to
$21.9 million was required. In April 2021, the Company made a principal prepayment of $1.5 million to those lenders who made such a request.
Using a portion of the proceeds of the Business Combination, the Company made a principal prepayment of $525.0 million on July 30,
2021. Subsequently, in September 2021, using the proceeds from the Term B Loan provided in the 2021 Credit Agreement, the Company fully repaid the remaining $804.2 million of outstanding borrowings on the First Lien Term Loan.
Amounts outstanding under the First Lien Credit Agreement bore interest at a variable rate of LIBOR, plus up to 3.00% per annum based upon the
Companys leverage ratio, as defined in the First Lien Credit Agreement. A quarterly commitment fee of up to 0.50% was payable on the unused portion of the First Lien Revolvers.
During the three months ended March 31, 2021, the weighted-average interest rate on the outstanding borrowings under the First Lien Term
Loan was 4.1%. The Company made interest payments of $13.4 million during the three months ended March 31, 2021.
Long-term debt
as of March 31, 2022 and December 31, 2021, consists of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
March 31, 2022 |
|
|
December 31, 2021 |
|
Term B Loan |
|
$ |
798,000 |
|
|
$ |
800,000 |
|
Term B Loandiscount |
|
|
(1,861 |
) |
|
|
(1,926 |
) |
Term B Loandeferred financing fees |
|
|
(9,143 |
) |
|
|
(9,464 |
) |
|
|
|
|
|
|
|
|
|
Term B Loannet of discount & fees |
|
|
786,996 |
|
|
|
788,610 |
|
|
|
|
|
|
|
|
|
|
Less: Current portion |
|
|
(8,000 |
) |
|
|
(8,000 |
) |
|
|
|
|
|
|
|
|
|
Total long-term debtnet of current portion |
|
$ |
778,996 |
|
|
$ |
780,610 |
|
|
|
|
|
|
|
|
|
|
Interest Rate SwapsIn June 2017, the Company entered into three floating to fixed interest rate
swap agreements (Swap Agreements) to reduce its exposure to the variability from future cash flows resulting from interest rate risk related to its floating rate long-term debt. In September 2021, the Company extinguished the Swap
Agreements which were scheduled to expire in June 2022.
Preferred StockThe Company is authorized to issue up to 100,000,000 shares of undesignated preferred stock with a par value of
$0.0001 per share with such designations, voting and other rights and preferences as may be determined from time to time by the Companys board of directors. As of March 31, 2022, there were no shares of preferred stock issued or
outstanding.
Common StockThe Company is authorized to issue up to 5,000,000,000 shares of common stock with a par value of
$0.0001 per share. Each holder of common stock is entitled to one (1) vote for each share of
F-68
common stock held of record by such holder on all matters voted upon by the stockholders, subject to the restrictions set out in the Companys certificate of 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.
There were 613,758,126 and 609,768,296 shares of common stock issued and
outstanding as of March 31, 2022 and December 31, 2021, respectively.
DividendIn March 2021, the board of directors
of CCCIS declared a cash dividend on common stock. The aggregate cash dividend of $134.5 million was paid on March 17, 2021.
17. |
STOCK INCENTIVE PLANS |
In connection with the closing of the Business Combination, the 2021 Equity Incentive Plan (the 2021 Plan) was adopted and approved
by the Companys 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.
Awards granted under the 2017 Plan had 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 CCCISs common stock (Phantom Shares) to eligible employees under the 2017 Plan. Awards under the Phantom Plan were settled in cash and thus accounted for as liability awards.
Phantom shares vested under the same time-based or performance-based with a market condition as the stock options granted under the 2017 Plan.
Upon consummation of the Business Combination, the outstanding Phantom Shares were settled in cash in November 2021.
Stock
OptionsThe table below summarizes the option activity for the three months ended March 31, 2022:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares |
|
|
Weighted- Average Exercise Price |
|
|
Weighted- Average Remaining Contractual Life (in years) |
|
|
Aggregate Intrinsic Value (in thousands) |
|
Options outstandingDecember 31, 2021 |
|
|
55,644,495 |
|
|
$ |
2.95 |
|
|
|
6.0 |
|
|
$ |
469,591 |
|
Exercised |
|
|
(3,968,080 |
) |
|
|
2.69 |
|
|
|
|
|
|
|
|
|
Forfeited and canceled |
|
|
(104,631 |
) |
|
|
3.69 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstandingMarch 31, 2022 |
|
|
51,571,784 |
|
|
$ |
2.97 |
|
|
|
5.8 |
|
|
$ |
416,210 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisableMarch 31, 2022 |
|
|
42,596,197 |
|
|
$ |
2.75 |
|
|
|
5.6 |
|
|
$ |
353,208 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options vested and expected to vestMarch 31, 2022 |
|
|
51,198,336 |
|
|
$ |
2.95 |
|
|
|
5.8 |
|
|
$ |
414,180 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The fair value of the options vested during the three months ended March 31, 2022 was $1.7 million.
Restricted Stock UnitsRestricted Stock Units (RSUs) are convertible into shares of the Companys common
stock upon vesting.
During the three months ended March 31, 2022, the Company granted 14,315,680 RSUs, of which 12,966,746 have
time-based vesting requirements, 674,491 have performance-based vesting requirements and 674,443 have performance-based with a market condition vesting requirements.
F-69
The valuation of the performance-based RSUs with a market condition granted during the three
months ended March 31, 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 |
% |
Fair value at valuation date |
|
$ |
7.42 |
|
The table below summarizes the RSU activity for the three months ended March 31, 2022:
|
|
|
|
|
|
|
|
|
|
|
Shares |
|
|
Weighted- Average Fair Value |
|
Non-vested RSUsDecember 31, 2021 |
|
|
18,558,211 |
|
|
$ |
10.74 |
|
Granted |
|
|
14,315,680 |
|
|
|
10.20 |
|
Vested |
|
|
(38,884 |
) |
|
|
10.25 |
|
Forfeited |
|
|
(153,849 |
) |
|
|
11.25 |
|
|
|
|
|
|
|
|
|
|
Non-vested RSUsMarch 31, 2022 |
|
|
32,681,158 |
|
|
|
10.50 |
|
|
|
|
|
|
|
|
|
|
Employee Stock Purchase PlanAs of March 31, 2022, 6,031,714 shares of common stock are
reserved for sale under the 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 March 31, 2022, no shares had been sold under the ESPP.
Stock-Based CompensationStock-based compensation expense has been recorded in the accompanying condensed consolidated statements
of operations and comprehensive income (loss) as follows for the three months ended March 31, 2022 and 2021 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, |
|
|
|
2022 |
|
|
2021 |
|
Cost of revenues |
|
$ |
849 |
|
|
$ |
219 |
|
Research and development |
|
|
3,530 |
|
|
|
575 |
|
Sales and marketing |
|
|
4,830 |
|
|
|
555 |
|
General and administrative |
|
|
14,435 |
|
|
|
11,305 |
|
|
|
|
|
|
|
|
|
|
Total stock-based compensation expense |
|
$ |
23,644 |
|
|
$ |
12,654 |
|
|
|
|
|
|
|
|
|
|
As of March 31, 2022, there was $214.7 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 3.6 years. As of March 31, 2022, there was $105.6 million of unrecognized stock-based compensation expense
related to non-vested performance-based awards.
Upon consummation of the Business Combination (see Note 3), the Company assumed the outstanding Public Warrants and Private Warrants issued by
Dragoneer.
As of March 31, 2022 and December 31, 2021, the Company had 17,800,000 Private Warrants outstanding and no Public
Warrants outstanding.
F-70
Public Warrants were only able to be exercised for a whole number of shares of the
Companys common stock. All Public Warrants had an exercise price of $11.50 per share, subject to adjustment, beginning on August 29, 2021, and were to expire on July 30, 2026 or earlier upon redemption or liquidation.
Redemptions of warrants when the price per share equals or exceeds $18.00At any time while the warrants were exercisable, the
Company could 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 Companys common shares equals or exceeds $18.00 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. |
When the warrants became redeemable by the Company, the Company could exercise its redemption right even if it was 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 $10.00At any time while the warrants were exercisable, the Company could redeem not less than all of the outstanding warrants (except as described with respect to the Private 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 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 Companys common stock; and
|
|
|
|
if, and only if, the closing price of the Companys 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. |
On November 29, 2021, the Company announced that it had elected to redeem all of the outstanding Public Warrants on December 29,
2021. Each Public Warrant not exercised before 5:00 p.m. Eastern Daylight Time on December 29, 2021 was redeemed by the Company for $0.10 and the Public Warrants subsequently ceased trading on the New York Stock Exchange.
Of the 17,299,983 Public Warrants that 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 in exchange for an aggregate of 4,826,339 shares of common stock. The Company paid $0.1 million to redeem the remaining 1,413,004 unexercised Public Warrants. As of
December 31, 2021, there were no Public Warrants outstanding.
The Private Warrants are identical to the Public Warrants underlying
the shares sold in Dragoneers 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
Companys common stock. Each whole Private Warrant entitles the registered holder to purchase one share of the Companys 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 Private Warrants during the three months ended March 31, 2022.
F-71
The Company recognized income of $2.1 million as a change in fair value of warrant
liabilities in the condensed consolidated statements of operations and comprehensive income (loss) for the three months ended March 31, 2022.
At March 31, 2022 and December 31, 2021, the Companys warrant liability was $60.3 and $62.5 million, respectively.
Purchase ObligationsThe 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. As of March 31, 2022, there were no material changes from the amounts disclosed as of December 31, 2021.
GuaranteesThe Companys 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 Companys services and solutions documentation under normal use and circumstances. The Companys 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 Companys arrangements also include certain provisions for indemnifying customers against liabilities if its
services and solutions infringe a third partys 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 AgreementsThe Company is a party to employment agreements with key employees that provide for compensation and certain
other benefits. These agreements also provide for severance and bonus payments under certain circumstances.
20. |
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 Companys consolidated financial condition and/or results of operations. The Companys management
believes, based on current information, matters currently pending or threatened are not expected to have a material adverse effect on the Companys consolidated financial position or results of operations.
The Company has engaged in transactions within the ordinary course of business with entities affiliated with its principal equity owners.
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 from the related party customer during the three months ended March 31, 2022. The amount of revenue recognized during the three months ended March 31, 2021 and the associated receivable from the customer at March 31,
2022 and December 31, 2021 were de minimis.
The Company incurred expenses for employee health insurance benefits with an entity
affiliated with one of its principal equity owners. During the three months ended March 31, 2022 and March 31, 2021, the Company incurred expenses of $0.8 and $0.7 million, respectively. The associated payable as of March 31,
2022 and December 31, 2021 was $0.2 million.
F-72
The Company incurred expenses for human resource support services with an entity affiliated
with one of its principal equity owners. During the three months ended March 31, 2022 and 2021, the Company incurred associated expenses of $0.1 million. The associated payable for the human resource support services was de minimis at
March 31, 2022 and December 31, 2021.
The Company incurred expenses for sales tax processing services and license fees for tax
information with an entity affiliated with one of its board members. During the three months ended March 31, 2022, the Company incurred expenses with the affiliated entity of $0.2 million. During the three months ended March 31, 2021,
the amount of expense recognized was de minimis. The associated payable for tax processing services was $0.1 million at March 31, 2022. There was no associated payable at December 31, 2021.
The Company reimburses its principal equity owners for services and any related travel and out-of-pocket expenses. During the three months ended March 31, 2022, the Companys expenses for services, travel and
out-of-pocket expenses were de minimis. During the three months ended March 31, 2021, the Company incurred expenses for reimbursement for services, travel, and out-of-pocket expenses of $0.1 million. The associated payable was de minimis as of March 31, 2022 and December 31, 2021.
22. |
NET INCOME (LOSS) PER SHARE |
The Company calculates basic earnings per share by dividing the net income (loss) 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. The 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 at March 31, 2022 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 March 31, |
|
|
|
2022 |
|
|
2021 |
|
Numerator |
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
11,975 |
|
|
$ |
(5,084 |
) |
Denominator |
|
|
|
|
|
|
|
|
Weighted average shares of common stockbasic |
|
|
603,104,839 |
|
|
|
505,072,914 |
|
Dilutive effect of stock-based awards |
|
|
37,923,571 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares of common stockdiluted |
|
|
641,028,410 |
|
|
|
505,072,914 |
|
Net income (loss) per share: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.02 |
|
|
$ |
(0.01 |
) |
Diluted |
|
$ |
0.02 |
|
|
$ |
(0.01 |
) |
Common stock equivalent shares of approximately 110,393 and 18,091,415 were excluded from the computation of
diluted per share amounts for the three months ended March 31, 2022 and 2021, respectively, because their effect was anti-dilutive.
F-73
23. |
SEGMENT INFORMATION AND INFORMATION ABOUT GEOGRAPHIC AREAS |
The Company operates in one 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.
Revenues by geographic area, presented based upon the location of the customer are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, |
|
|
|
2022 |
|
|
2021 |
|
United States |
|
$ |
184,839 |
|
|
$ |
155,986 |
|
China |
|
|
1,984 |
|
|
|
1,803 |
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
$ |
186,823 |
|
|
$ |
157,789 |
|
|
|
|
|
|
|
|
|
|
Software, equipment and property, net by geographic area are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
March 31, 2022 |
|
|
December 31, 2021 |
|
United States |
|
$ |
139,749 |
|
|
$ |
135,784 |
|
China |
|
|
52 |
|
|
|
61 |
|
|
|
|
|
|
|
|
|
|
Total software, equipment and property-net |
|
$ |
139,801 |
|
|
$ |
135,845 |
|
|
|
|
|
|
|
|
|
|
24. |
GAIN ON SALE OF COST METHOD INVESTMENT |
During February 2022, the Company received cash proceeds of $3.9 million in exchange for its equity interest in an investee as a result of
the acquisition of the investee. The Company had been accounting for its investment using the cost method and recognized a gain of $3.6 million upon receipt of the cash. The investments carrying value was $0.3 million and was
included within other assets on the accompanying condensed consolidated balance sheet at December 31, 2021. The Company no longer has any ownership interest in the investee.
Secondary OfferingDuring 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 public of $9.70 per share. In addition, the selling shareholders granted the underwriters a 30-day option to purchase up to an additional 3,000,000
shares of the Companys common stock at the same per share price. The Company did not receive any of the proceeds from the sale of the shares by the existing stockholders. In connection with the offering, the Company incurred costs of
$0.9 million during the three months ended March 31, 2022, included within general and administrative expenses on the condensed consolidated statement of operations and comprehensive income (loss).
F-74