Greetings and welcome to CCC Intelligent Solutions Third Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Brian Denyeau from ICR..

Good afternoon, and thank you for joining us today to review CCC's third quarter 2021 financial results, which we announced in our press release issuing after the closing of market today. During the call, we've got Githesh Ramamurthy, CCC's Chairman and CEO; Brian Herb, CCC's CFO.

The forward-looking statements we make today are the Company results and plans are subject to risks and uncertainties that cause the actual results and the implementation on the Company's plan to vary materially.

These risks are discussed in our earnings release is available on our Investor Relations website under the heading Risk Factors in the definitive proxy statement/prospectus filed by Dragoneer Growth Opportunities Corp. with the SEC on July 6, 2021.

Further these comments in the Q&A that follows are copyrighted today by CCC Intelligent Solutions Holdings Incorporated. Any recording, retransmission or reproduction or other use of the same for profit or otherwise, without prior consent of CCC, is prohibited and the violation of the United States copyright and other laws.

Additionally, we'll either prove the policy or transcript of this call by a third-party we take no responsibility for inaccuracies that may appear in that transcript. Please note the discussions on today's call include certain non-GAAP financial measures as defined by the SEC.

The Company believes these non-GAAP financial measures provide useful information of management and investors regarding certain financial and business trends relating the Company's financial condition and results of operations. A reconciliation of GAAP to non-GAAP measures is available on earnings releases available on our Investor Relations website.

Thank you. And now I'll turn it over to Githesh..

Thanks, Brian, and thanks to all of you for joining us today. I'm pleased to report that CCC delivers terrific top and bottom line results in third quarter. I'd like to start by summarizing our financial results. Revenue was $176.6 million, up 18% adjusted for divestiture last year.

This was ahead of our guidance and the fifth consecutive quarter of accelerated growth. Adjusted EBITDA was $70.1 million, which represents a 40% margin of nearly 400 basis points from the third quarter of 2020.

This was ahead of our guidance higher than we wanted due to some favorable timing impacts related to the rank of investment in some of our growth initiatives. We plan to continue to invest in our future growth opportunities and the power of our business model allows us to do that while generating high levels of profitability.

Overall, our business is performing well and is benefiting from three positive trends coming together that are driving demand for our solutions. The first is our CCC cloud platform, and the growing demand for this flexible and scalable deployment model.

Second is a powerful network effects, we are able to create by delivering value to each of the participants across the entire P&C insurance economy. The third is our expanding set of AI solutions that leverage more than $1 trillion of historical data on our platform.

The combination of these three trends allows us to innovate and deployment capabilities relatively quickly and increase sales. The trend towards digitization, the P&C insurance economy is still in its early stages, providing CCC plenty of opportunity to continue delivering strong growth and profitability going forward.

I'd like to spend a few minutes reviewing some of the key highlights from the quarter. First, I'll start by reviewing how our customers are adopting new innovations. Our cross-sell strategy delivered great results in the quarter.

In recent years, we have significantly expanded the breadth and depth of our cloud-based product portfolio, which is now providing additional avenues for growth across the business. In Q3, we continue to see new business activity trend positively. Many of our customers expanded the use of CCC solutions this quarter.

For example, a top five insurer who has been a CCC customer for more than 25 years meaningfully expanded the range of solutions that deployed from CCC as part of a multi year renewal. In this latest transaction, they'll be rolling out additional solutions including several of our mobile and traditional solutions.

We believe these additional solutions will further enhance customer satisfaction and drive greater efficiency across their claims management workforce. This increase in the number of CCC products they have deployed nearly double our revenue from this customer since 2019, when this latest expansion is fully rolled out.

It's important to note that even with this significant product expansion, this customer has not yet deployed many products within our AI suite. We also sign long-term renewals with two other notable insurers, each of which added new solutions, including a suite of CCC smart solutions that embeds AI into their workflows to drive efficiencies.

In the repair facility market, we signed a renewal with one of the country's largest multi-store operators for MSO. As part of this multi-year agreement, this customer increased its annual revenue commitment to CCC for the next several years and has rolled out our Engage solution across all of their repair facilities.

Each of these examples demonstrates the growing number of ways we create value for our clients.

This in turn powers our growth model that combines best-in-class retention rates, with increased adoption of our product innovations over time, whether it's new AI capabilities, mobile solutions, or applications that seamlessly connect network partners to existing workflows.

We have a significant runway for growth with almost every customer we serve and significant opportunity to accelerate their digital transformation objectives. With each of these renewals we expanded the customer's annual revenue commitment to CCC as they broadened the number of solutions they utilize for our platform.

We are pleased our customers continue to select additional solutions from us and believe there are still terrific growth opportunities with each of our customers. This leads into the second area I want to highlight, which is our product innovation.

We have built an innovation personalization with a passion for solving the most challenging business problems facing our customers. Coupled with the deep front we have developed in many cases over the course of decades, we have a great insight into how to prioritize a product development efforts and confidence that will be market demand.

We believe we have built the most comprehensive cloud platform in the industry, and it is a foundation that enables us to quickly bring to market additional solutions that expand our market and increase the potential size of our relationship with customers. I'd like to provide an update on some of the early feedback on a few of our newest solutions.

We are seeing exciting success to the Estimate-STP or straight-through processing solution that we released earlier this year.

We have received fantastic early feedback from customers and prospects, including a recent article I participated for in The Wall Street Journal, where the President of USAA P&C division noted that we Estimate-STP USAA can now provide its first wholly touchless claims offering to its members.

A longstanding goal especially at this story institution reaches 100 years of service names here. Estimate-STP is designed to provide an end-to-end solution that fully disguises the estimating process for qualified repairable claims and shortens the estimating process from days to seconds.

It leaves a network of insurers, repair facilities, automakers, parts suppliers, and other service providers to deliver a highly personalized digital experience to our customers' policyholders.

At the heart of this capability our range of sophisticated AI algorithms, we have developed using a trillion dollars of historical claims data as well as a billion photos to accurately assess damage, identify which parts need to be repaired or replaced and what is or is not covered by the owners insurance policy.

A second success factor has been the deep integrations we have built over the years from the CCC cloud to our customers systems and workflows. This has been instrumental to deployment and implementation. Four national carriers including USAA have deployed Estimate-STP and are actively processing customers for those claims in a low to no touch manner.

The business improvements these carriers are realizing are striking and represent an orders of magnitude improvement. These customers are now able to provide line level estimates from photos and automatically initiate and populate detailed and actionable estimates in seconds. Almost 80% of all vehicle incidents result in a repair.

At the same time, these repairs are getting more complex as vehicle sophistication grows. On top of this, the industry is being impacted by a significant shortage of qualified workers. So the need for speed and efficiency of Estimate-STP has never been greater.

Another area where we are generating good traction is with our diagnostic solution, which provides repair facilities an easy and effective way to integrate the diagnostics and calibration partners into their operational and financial workflow.

Repair facilities need to properly analyze the increasingly sophisticated systems in today's vehicles to assess what needs to be fixed as part of the repair process. Additionally, they need to build in standard operating procedures.

CCC diagnostics greatly simplifies the process by importing the diagnostics report and provider invoice, which greatly improves efficiency and creates a better experience for the repair facility, including process compliance and revenue recognition.

We are in the early stages with diagnostics, but are seeing strong early adoption with around 5% of our repair facilities currently deployed, including two of the top multi-tour operators using the solution.

We also recently released the first iteration of CCC payments, which enables billing tenants through our integration with invoice pay a payment processing partner. This is an important first step in the rollout of our payment solution.

And our early conversations with customers reinforce our belief in the long-term opportunity in payments and the significant value that CCC payments can deliver. We remain confident on the growth potential for payments and are on track with its rollout.

As a reminder, this is an important long-term opportunity for CCC, but it will not be a material revenue contributor in 2022. Our focus next year is to refine the product and begin to scale customer adoption. The third area I'd like to provide an update on is how we continue to expand our network.

We believe, we have developed the most comprehensive platform in the market that generates tremendous amounts of data that allows us to extend our reach to emerging areas of the market. This allows us to offer our solutions to a broader array of customers from financial institutions to OEMs and rental fleet providers, among others.

An emerging area for CCC is the OEM channel. During the quarter, we added a key domestic OEM as the newest OEM customer and expanded our existing relationships with two other OEMs. We now have 13 of the past 15 OEMs as customers on our platform.

In August, Toyota announced the launch of its Collision Assistance apps, which is built with CCC technology, and is available within the Toyota and Lexus owners' apps, and provides step by step instructions on how to navigate the post-collision repair process.

We believe this is a great example of the opportunity in the OEM space and the value of the connectivity our platform provides the participants across the auto insurance economy.

Another exciting example is our recent announcement with Sedgwick, the leading provider of high quality auto and heavy equipment appraisal solutions with a network of more than 1,000 independent appraisers.

Sedgwick signed a multiyear agreement to deploy CCC's mobile and AI claims solutions to power its auto appraisal offering and related workflows from first notice of loss all the way to resolution.

We launched our Total Loss Care level pilot program, which is designed to digitize and automate the total loss process from lender payoff requests to letters of guarantee and the entitled resolution. We have multiple top five carriers piloting our lien release solutions, and we have some of the largest auto lenders integrated into the platform.

These are just a few examples. In prior earnings calls, we have also discussed signing agreements with large fleet providers or emerging tech-enabled companies like Buckle that are focused on gig economy drivers.

What all of these examples show is our ability to leverage our platform to generate more value for the P&C insurance economy and create potential future growth opportunities for CCC. We pride ourselves in taking a long-term view of the market and identifying how the needs of our customers will evolve.

We plan to continue to make meaningful investments in additional solutions that will deepen our relationships with current customers and make CCC, an attractive partner for prospects outside of our traditional insurer and repair facility markets. I would like to wrap up by saying how excited we are about how low the business is performance.

We are ahead of both our growth and profitability targets and our again raising our guidance for the year. Market interest in digitalization and adopting cloud-based technologies has never been greater in the P&C insurance economy, providing a favorable spending environment for our solutions.

And we are thrilled with the pace of product innovation and the quality of the customer feedback we are receiving, which gives us great confidence in that future growth potential. Now, I'd like to turn it over the call to Brian, after which we'll be happy to take your questions..

Thanks Githesh. And thanks all for joining us today. Today, I'll review our third quarter '21 results and provide guidance for the fourth quarter and full year of 2021. Total revenue for the third quarter was 176.6 million, up 18% from the prior year period on an adjusted basis.

We look at growth on an adjusted basis, which excludes from our 2020 revenue, a portion of our casualty product line, clinical professional services, that divested at the end of last year. We believe this provides the best view into the underlying growth of the business, so our quarterly performance can be looked at, on a like-for-like basis.

From a trend perspective, 18% growth is the fifth sequential quarter of accelerating year-over-year revenue growth. Our growth is being primarily driven by cross-sell and up-sell into our installed client base.

Across our product portfolio, including the adoption of newer digital solutions, coupled with solid gross from new logos, largely within the repair facilities, and parts supplier customer segment.

While we do continue to see some increases from playing transactional recovery, it is a relatively small impact on the quarter in volume recovery remains on track to contribute approximately 1% of total growth for the full year.

Turning now to our key metrics, software gross dollar retention or GDR captures the amount of revenue retained from our client base compared to the prior year period. In Q3 '21, it was 98%, which is consistent with our historical levels. We believe, our software GDR reflects the value we provide our customers and the stickiness of the network effect.

Software GDR is a core tenet of our predictable and resilient revenue model. Software net dollar retention or NDR captures the amount of cross-sell and up-sell from our existing customers compared to the prior year period, as well as volume movement within our APD client base. In Q3 '21, software NDR was 113%.

Similar to last quarter software NDR was above our historical range. Few factors underpinning this performance including the large renewals Githesh referenced, which had significant cross-sell and up-sell components. We also saw strong adoptions of new solutions like engage, mobile, AI across our installed client base.

In transactional volumes had about one point of impact, a combination of COVID recovery in some impact from hurricane activity at the end of the quarter. Software NDR is a key driver of our growth given the majority of our subscription revenue comes from our existing customer base. Now to review the income statement in more detail.

As a reminder, unless otherwise noted, all metrics are non-GAAP. We've provided a reconciliation of GAAP to non-GAAP financials in our press release. Adjusted gross profit in the quarter was 138.4 million, with gross profit margin of 78%, compared to the gross profit margin of 76% in the third quarter of last year.

Gross profit margin was notably strong in the quarter and reflects the increased economies of scale and the relatively fixed and semi-fixed cost base within cost of revenue. Turning to our operating expenses, non-GAAP operating expenses were 71 million for the quarter, up 14% in February a year ago.

Expense growth was somewhat slower than we anticipated, due to hiring being lower in the quarter, coupled with lower discretionary costs like travel to the ongoing effects of COVID. We expect to continue to hire aggressively within our core investment areas and expect to see sequential step-off of growth in operating expenses going forward.

Adjusted EBITDA for the quarter was 70.1 million, which is a 40% adjusted EBITDA margin. Adjusted EBITDA grew 31% year-over-year. This performance reflects the revenue outperformance and the lower spending levels that I just outlined.

While you performed well on EBITDA in '21, which highlights the strength of the business model, we do remain very focused on investing for future growth. We remain confident in our long-term margin objectives that we've outlined, however, we do not expect margin to remain at the 40% level in the upcoming quarters.

Turning now to the balance sheet and cash flow. We ended the quarter with 160.5 million in cash and cash equivalents and 800 million of debt. At the end of the quarter, our net leverage was approximately 2.6 times.

During the quarter we successfully completed the refinancing of our existing secured credit facility with a new 800 million senior secured term loan and a 250 million revolving credit facility. This also reduced our effective interest rate from 4% to 3%.

This further strengthened our balance sheet and together with the proceeds from our business combination transaction, we have reduced leverage by more than 50% in annual cash interest payments more than 40 million compared to run rate prior to the business combination and the refinancing of debt.

Free cash flow for the quarter was 25 million compared to 32 million in the prior year. Tax on the prior year did include a onetime benefit related to a tax refund associated with the federal COVID relief program.

Looking at cash flow on an unlevered basis, year-to-date we converted approximately 61% of adjusted EBITDA into our unlevered free cash flow. Now let's just finish with guidance beginning in the fourth quarter. We expect total revenue of 182 million to 184 million for the quarter.

This represents 17% year-over-year growth on an adjusted revenue basis at the point. We expect adjusted EBITDA between 69 million to 71 million for the quarter, which represents a 38% adjusted EBITDA margin at the point. For the full year '21 we are raising our outlook for the year.

We are now expecting revenue between 683 million to 685 million or 14% year-over-year growth on an adjusted revenue basis at the midpoint. We now expect adjusted EBITDA between 255 million to 257 million, which represents 37% adjusted EBITDA margin at the midpoint.

To wrap up a few final points to consider, we are experiencing strong underlying momentum across the business and it performs well year-to-date. This quarter performance highlights the combination the combination of growth, both revenue and profitability within our business model.

Our innovation engine continues to generate value-add solutions that our customers are adopting to address their business goals and drive efficiencies as they continue to focus on their digital journeys. And finally, we believe we are well positioned to continue to deliver a significant value to both our customers and our shareholders over time.

With that, operator, we are now ready to take some questions. Thank you..

Thank you. We will now be conducting a question-and-answer session. Our first question comes from Bhavan Suri with William Blair. Please proceed..

Thanks for taking my question and congrats on a really, really solid quarter. Nice job there, Githesh, Brian and team. I guess I want to touch a little bit about the AI module. You've seen really nice adoption in AI module really around the carrier shops streamline the repair process.

Obviously, this drives out of value, but I'd love to understand sort of, what is the feedback then and more importantly, sort of, as you think about innovation, what percentage of the customer base both on the insurance side and the repair shop size have adopted a module or planning to have adopted modules in the next 12 months?.

Hey, Bhavan, it's good to have you on the call. I'll start with the second part of your question. The answer to the second part of your question is very, very, very few. In other words, as we outline, we just have four carriers starting to use the solution.

We also have announced Estimate-STP, which is our AI solution for collision repairs and extremely early in its adoption. So kind of want to start with that. Now we have other solutions where we've had AI assisting, the ability to write an estimate, we call that smart estimate.

What we announced with Estimate-STP is a very fundamental breakthrough that is literally something we've been working on for years, and we're like super excited to have this done. So, what this does is it allows a consumer to take photos. First of all, consumer calls to the carrier.

And then carrier sends a link to CCC, our AI guides the photo taking process and then uploads the photo. So, the claims that are eligible. So there's a fairly large number of sophisticated rules, and which claims can go through this, which cannot go through this.

And then we literally have an offering engine is built in our AI that offers a line level estimate in seconds. And that can be routed so that, so it creates a touch less experience. I don't know if you saw The Wall Street Journal article. Well, the President of USA.

He said, look, this is the first time they've been able to do a whole, a complete touch less '20.

Does that answer your question?.

It does. I guess the follow-up, right? And I'll turn it over to the next person. But can you think about the challenges carriers and repair facilities face, right? When the complexity or number of parts and especially as you move to electric the number of sensors and all double-digit while there's a bunch of complexity in what's happening here.

I guess, I'd love for you to talk a little bit of how the platform benefits from hyper local data within streamline the claims lifecycle, and minimize the claims leakage, like figuring out exactly what parts which facilities inventory? There's a bigger network effect here, especially in hyper local data.

I'd love you for to talk about some of the three to five year trajectory, as you get more complex with more electrical more electromagnetic fluid dynamics, et cetera?.

Sure, I would say, very specifically, that are really three very fundamental things that we think will drive this. So, the first, I would say is the sheer number of amount of complexity in the parts. So what might have been a bumper a few years ago, but I've had 15 parts. Now the same bumper is made up of 30 parts.

So the average car is over 20,000 parts. So, the complexity of how you take apart the car, how do you repair the car. So, there's a massive amount of inherent vehicle complexity. So that's one aspect of it. And so, if you're a collision repair or an adjuster, you may never have seen this particular repair combination in front of you.

So as you look at the permutations and combinations, this particular vehicle in this geography, this type of accidents, you may never have seen. So you need, so AI assisting, that complexity is extraordinarily important.

Second, exactly, as you pointed out, given the breadth of our scale, and the fact that we process a massive amount of claims in every zip code, every CVSA, the hyper local data becomes extraordinarily important. That means local park prices, local labor rates. All kinds of other local data become extremely important as a second factor into it.

I've said third, what we are seeing across the board and why customers are super excited about this is this produces tremendous deficiencies for them. And also, everyone's got a huge shortage of labor, right? These are complex repairs, and hiring technicians and people can deal with this complexity is huge.

And so, we're seeing that third element also come in. And exactly as you said, the second point I was mentioning, EVs, ADAS, sensors, there's all kinds of things continue to add complexity and cost..

Our next question comes from Jackson Ader with JPMorgan. Please proceed..

Good evening guys. Thanks for taking our questions. The first question is on Engage, the big repair facility that is rolling out or I guess maybe has rolled out Engage to every single location. I'm curious what the implementation looks like for that? Is it all in one shot? We're seeing some other software implementations. These things can't go in waves.

So, I'm curious what the Engage rollout looks like when someone adopts the across empire?.

Yes, we can typically get a large, even a large MSO with lots of locations across the country. Start this initiative and get this done in 90 days. Again, part of the reason is our platform at the repair facilities is fundamentally cloud-based. So, there is no hardware to add. There's no local software to install. None of these things come in.

And as soon as this is all deployed over the cloud, Engage also allows insurers, the policyholders to schedule an appointment. So, we have the production schedules of the collision repair facilities in their cloud.

So when a consumer says, I need to schedule a collision repair, they can go directly into the cloud and drop it appointment on the calendar of the repair facility. So, we can -- so the rollouts are generally pretty straightforward and inside the quarter..

And then, so big steps in payments, right, kind of first step, that's great.

Can you just remind us what, we're thinking about the payments stack, where are the biggest pain points, like who's dying to have their payments integrated into the capabilities right now so that they can be paid faster?.

Sure. So again, exactly, as we said in the second half of '21, we were going to have stand up our payments platform, which we did exactly that. We stood up our payments platform with our partners, who did some of the integration got the platform up and running. What we're doing now is working with insurers on some very specific use cases.

And those use cases involved how do I pay certain types of repair facilities? How do I pay the banks that hold by liens? There are opportunities inside medical claims that we process.

At the same time, we also have early versions of our payment solutions, working for the repair facilities, where they can get payments from the consumers for deductibles and the like. So we're working with early customers on specific use cases.

And that's really what we're trying to do is to get those use cases defined, get them piloted, get them tested, refine the product. And this is, frankly, why we've been able to deliver a substantial Net Promoter Score is that mindset of just focus on getting it right on those pain points..

Our next question comes from Gary Prestopino with Barrington Research..

Brian, did you give what the organic growth in the logo breakdown was in the quarter? Or are you going to give that or can you give that?.

Happy to Gary. So, we posted 18% on adjusted revenue basis. So, we've been that 85% of the growth was from new logos. And that's largely driven from repair facilities, and our parts suppliers. And then our software NDR, as I mentioned, was 113 representing cross-sell and up-sell across the bay.

So if you think about 13% from cross-sell, up-sell, and then 5% from new logos that gets you the 18% adjusted revenue for the quarter?.

And then the Githesh last quarter, you kind of gave some statistics about the amount of claims that were processed through mobile, it was about 20%.

Did that change materially in Q3 or did it move the needle upwards a little bit?.

Yes, it ticked up a little bit because we are starting to see. It went up a couple of percentage points. But what is really interesting is that these mobile claims are also the key funnel into our AI platform, right. So you have to think about it in that context, as well.

So sequence wise or two, three years ago, as we implemented mobile for almost 100 carriers and as well as for repair facilities, it became very important as a channel for funneling claims to the AI as well..

And then, lastly, with some of these new AR products that you have out there, especially with electric cars or even cars that have ADAS, how do you handle anything having to do with calibration, and even diagnostic on a collision repair? Do they take into account what may need to be calibrated? So you're fixing a bumper, but there's something you have to do to get the calibration back to where it was?.

Yes, in fact, Gary, what we're seeing is, I would say that this is exactly why we offer our diagnostics solution. So the CCC diagnostic solutions allows you to actually take the scan from a vehicle integrate that into CCC one. And that's been really important. I'll give you a couple of statistics.

If you look at Q1 of 2017, roughly 3% of all vehicles are going through a diagnostic scan. That means that you understand it tells you what modules have issues, when it's airbag deployed or other things that need to be calibrated. And then midst of the diagnostics for the vehicle folded. In Q3 of 2021, that number was 47% of all cars at a scan.

So it's essentially a, over the course of from Q1 of 2017 to Q2 of 2021, there is you're going from 3% to 47% and nothing as the earlier question, but as complexity increases, we see the scans will increase. This is why we're investing in our diagnostics capability.

And as I mentioned, we have a couple of repair facilities and MSOs already starting to roll out our diagnostics capability..

Our next question is from Kirk Materne with Evercore ISI. Please proceed..

Githesh on the sort of AI-powered estimation platform, I was just kind of curious, how quickly can an existing customer get that embedded into their technology stack and get up and running with it? I was trying to get sense on.

It was there any friction involved, either from a technology, maybe some legacy technology stacks or even just from a business process perspective? Just kind of curious about sort of, I guess it gets done like the time to value for your customers?.

Sure. So let me start with what we've done over the last 10, 15 or 20 years to answer that question. So first and foremost, we've built very deep integrations, real time integrations between our cloud, the CCC cloud and each of our carrier customers.

So that real time we're integrated deep into their systems with data going back and forth, obviously with tremendous amounts of security, so we've built those interfaces. So when a client then adopts our AI solution, they're actually running on our side of the integration.

So the link being sent to the policyholder is going directly from the CCC cloud for the consumer, consumers sending the data back, our AI models are running on our cloud, we're producing the estimate. And then what goes through the pipe back to the carrier is the same types we have already built for the last 10 or 15 years.

So that is exactly why having all of these integrations built over the last 15 or 20 years really speeds the adoption of this capability. Otherwise, without these massive one, two, three year integration efforts to get it up and running, it also allows customers to pilot and test this very quickly.

Is that answered your question?.

Yes, that’s super helpful, thanks. And Brian, maybe one for you, obviously, a really nice expansion quarter for you all. Obviously, it seemed that the renewal process would be an obvious point for you all to start talking about expansion with cross and up-sell with your clients.

Is there any lumpiness to your renewal base meaning? I realize you probably inter-acted a complex all the time, but I was just kind of curious if we should understand if there's a seasonality we should be aware of either concert in the fourth quarter or spread out? Or if there's multiyear deals, if that influences that opportunity at all?.

Most of our carrier clients are on multiyear deals, and there's not really a seasonal, that drives the renewals, they're spread out across the year. So, there's not real lumpiness with that renewal. We have really good renewal rates with the gross dollar retention of 98%. So, we're very confident in our ongoing ability to renew.

And I think the other important point that Githesh covered in his opening remarks is there was material expansion with the renewals, which we see as a core part of the growth opportunity in front of us as well..

Our next question comes from Chris Moore with CJS Securities. Please proceed..

My first maybe just a follow-up on a prior question regarding the mobile penetration. So, it was an interesting comment that kind of mobile is the funnel to AI.

If the mobile penetration is in the low 20s now, do you do target that? I mean, is there a two to three year kind of goal of mobile getting to 50% penetration? I'm just kind of trying to understand that kind of chicken and egg there, and what that mobile penetration could look like in a couple of years?.

Sure, Chris. Good to have you on the call. When I gave you was an average number across our customer base. So we have some customers as high as 70% mobile adoption 70%, 75% mobile adoption. You have some customers in the 1% or 2% mobile adoption. And you will certainly see that this will continue to happen.

So mobile is an accelerator for AI, but it is not a precondition.

Does that get it help?.

Yes, it helps for sure..

It'll continue to move because it produces, that mobile channel produces a very high degree of customer satisfaction for consumers who want to be dealt with it in a digital way, and our mobile capabilities also worked for collision repairs, and especially with social distancing, and all of the other benefits mobiles customer could provide including off hours by the way..

Maybe just one more on the number. So just the gross margin 78.4%, obviously, very high. Brian talked about economies of scale. Were there other things in there? I mean, I'm assuming that this level is not going to -- won’t stay at this level, even with up there.

Is there anything else we should think about on the gross margin side?.

Yes. So when we talked about the guidance and setting up kind of long-term targets, we talked about gross margin getting to 80% overtime, and it will fluctuate quarter to quarter a bit. The strong margin this quarter clearly highlights the power of the operating model and the leverage that we have begins to cost pace.

The quarter did benefit from the strength and the scale of the 18% revenue growth. It has some impact by the hiring that we talked about being slightly lower, but as I said, it will also fluctuate quarter to quarter as well. But we do feel really good on the long-term guide, as we think about moving towards 80% over time..

Our next question comes from Yitchuin Wong with Citi. Please proceed..

Githesh, first I want to go to you. You talk about the growing trend in CCC cloud usage and you've definitely been seeing very strong cloud usage of CSP providers and many of our consumption models out there.

Can you give us more colors on the growth that you're seeing kind of what percentage of use of customer data usage in the cloud, and then kind of help us quantify the progress of B2C cloud and opportunity going forward?.

Sure, I want to actually rewind the clock a little bit, because we've been a cloud based platform for well over a decade. In fact, we put all our retail facilities on a cloud platform and rolled them out nationally over 10 years ago. Every single insurer is on our cloud based platform going back 10, if not 15 years our parts providers.

So for us, we are a cloud first company and have been a cloud first company for well over a decade. So this is why we don't report any metrics that say, well, so many percent are cloud, so many percent are not cloud, because we are completely been in our cloud based platform.

Does that answer the question?.

Yes, I guess, more around your cloud growth or cloud usage across trends that you've seen among that, among your customer base.

Like how's that trending? Has there been more cloud usage or it's more around?.

I see you're saying about the customers themselves for other applications outside of CCC.

Is that what you mean?.

Yes..

Yes. Okay, because all of CCC applications for well over a decade have been cloud based. So we are completely cloud. So I would say for carriers. I would say it's a relatively slow adoption of moving their phone, internal platforms to the cloud. There are some people who are starting to move some components of it.

Most carriers still, for the most part, are running on-prem systems, which is where we integrate on our cloud to theirs.

So I would say several years, I probably, I would say somewhere between, I would say, probably, it's hard to put a precise percentage, but for the most part, that cloud transition is happening and we think it will go at fairly slow pace.

And this is why our customers like our solution, because what we're able to do is to give them the benefit of the cloud immediately, because when you connect the pipe from our customer systems to our systems, they essentially become cloud enabled instantly. And have been for many, many years..

And then next, Brian, you've mentioned your OpEx growth being lower than expected, because it lower hiring and just looking over some of the non-GAAP OpEx calculation, it looks like R&D expenses is down and might be calculating slightly off.

So, I'm just wondering, where do you see the most challenge in your hiring trends? Is it more engineering folks or more sales person? And finally, where's the biggest focus for you guys in terms of hiring? Thanks..

Yes. So, the common around hiring being lower than we had planned is broad based. That said, the biggest focus area for our hiring is in our R&D and engineering teams, as we focus on our strategic initiatives.

So that's where we will see the biggest growth, both for-- going forward is around R&D, engineering, focus on building and driving innovation, for new solutions coming out. So, that will be the focus of the growth across as we go forward across the Company..

Thank you. Ladies and gentlemen, we have reached the end of the question-and-answer session. I would like to turn the call back to Githesh Ramamurthy for any closing remarks..

Thanks everybody for joining in. As you probably heard from us, we're super excited about where we are. We have a fantastic base of customers. We're excited about the innovations we're working on and continue to see substantial number of opportunities to digitize the P&C insurance economy. Thank you for joining us on the call today..

This concludes today's conference. You may disconnect your lines at this time. Thank you very much for your participation and have a great day..