Earnings Call Transcript - CCC Q1 2026

Operator, Operator

Good day, and thank you for joining us. Welcome to the CCC Intelligent Solutions First Quarter Fiscal 2026 Earnings Call. Please be advised today's conference is being recorded. I would now like to hand the conference over to your speaker today, Bill Warmington, Vice President of Investor Relations. Please go ahead.

Bill Warmington, Vice President, Investor Relations

Thank you, operator. Good morning, and thank you all for joining us today to review CCC's first quarter 2026 financial results, which we announced in the press release issued earlier this morning. Joining me on the call are Githesh Ramamurthy, CCC's Chairman and CEO; Brian Herb, CCC's CFO; and Tim Welsh, CCC's President. The forward-looking statements that we make today about the company's results and plans are subject to risks and uncertainties that may cause the actual results and the implementation of the company's plans to vary materially. These risks are discussed in the earnings releases available on our Investor Relations website and under the heading Risk Factors in our 2025 annual report on Form 10-K filed with the SEC. Further, these comments and the Q&A that follows are copyrighted today by CCC Intelligent Solutions Holdings Inc. Any recording, retransmission or reproduction or other use of the same for profit or otherwise without prior consent of CCC is prohibited and a violation of the United States copyright and other laws. Additionally, while we will provide a transcript of portions of this call, and we've approved the publishing of a transcript of this call by a third party, we take no responsibility for inaccuracies that may appear in the transcripts. Please note that the discussion on today's call includes certain non-GAAP financial measures as defined by the SEC. The company believes these non-GAAP financial measures provide useful information to management and investors regarding certain financial and business trends relating to the company's financial condition and the results of operations. A reconciliation of GAAP to non-GAAP measures is available in our earnings release that is available on our Investor Relations website. Thank you. And now I'll turn the call over to Githesh.

Githesh Ramamurthy, Chairman and Chief Executive Officer

Thank you, Bill, and thanks to all of you for joining us today. We had a strong start to 2026 driven by continued customer demand and adoption. The first quarter total revenue grew 12% to $281 million, above the high end of our guidance. Adjusted EBITDA was $120 million, also above the high end of our guidance and adjusted EBITDA margin expanded approximately 300 basis points year-over-year to 43%. We are now more than a year past the acquisition of EvolutionIQ, and we continue to see strong momentum across the combined business. Today, I want to focus on three themes that frame both our near-term momentum and our long-term opportunity. First, why CCC is positioned to thrive in an AI-driven world; second, how the positioning is translating into strong tangible revenue momentum with several of the biggest companies in the world increasing their commitments to both our core and AI solutions; and third, while solving the problems caused by rising complexity for our customers, the insurance economy is a durable long-term growth driver for CCC. Let me start with why CCC is positioned to thrive in an AI-driven world. We can do this by first understanding the work our customers need to get done. The insurance economy spans many thousands of companies conducting hundreds of billions of dollars in commerce across tens of millions of unique claim events every year. They operate in a complex, highly regulated industry and may interact with dozens of other companies for any given claim. The work they need CCC to help them get done are the things that directly drive the operating performance of their business. Take auto insurers, for example, who, on average, pay out about 75% of their revenues on claims. They use the decision engines built into our solutions, uniquely configured for their specific needs, to help them pay what they owe. They use the CCC network to activate the tens of thousands of companies they need to integrate with to get consumers back to their lives and they use the CCC platform to manage that work end to end. In fact, they rely on CCC to manage the most complex, mission-critical and consequential work they do. This is true not only across our auto insurance customers, but also each of the more than 35,000 businesses we work with. That translates to CCC's economic model. We price our products on the measurable value we provide, typically on a 5:1 ROI basis. We have cumulatively invested billions of dollars in our platform and have deep industry-leading functionality, but customers buy our technology because of the real-world outcomes they're able to achieve only by using our solutions to impact the hundreds of billions of dollars we help them process annually. CCC's data is unique in its combination of scale, depth and recency. We have over $2 trillion of historical data that simply does not exist anywhere else. The data is broad, deep and continuously updated in real-time, allowing us to provide benchmarks customers use to assess their operations and to provide hyper-local, up-to-the-minute inputs that inform hundreds of billions of dollars in individual payouts and repairs. We also take special pride in the trust our customers place in us as partners in their business. Our role connecting the ecosystem has been built on decades of consistent, high-quality execution where each participant can feel confident in being able to deliver the best outcome for them and the consumer. Importantly, the outputs generated using our solutions are already accepted and embedded in the core operations of their trading partners. It is, therefore, no surprise that customers are increasingly looking to accelerate their AI ambitions by leveraging the CCC Intelligent Experience Cloud. Our AI solutions have been the fastest-growing part of our portfolio for some time, with scale that has few equals in vertical software. In Q1, our AI-based solutions drove approximately one-third of our overall year-over-year growth, growing at roughly 3.5x the total company growth rate. AI solutions are now approximately 10% of revenue or about $120 million in run rate. These solutions are entirely incremental to our core products with discrete value propositions and ROI that customers validate through intense piloting and testing, demonstrating both the durability of our core solutions and the rapid adoption of our AI tools. While we are tremendously excited about the growth in our AI products, the benefits of marrying AI with deterministic software are becoming increasingly evident to customers. It's not an either/or. It is an and. Governance and trust are our bedrock principles in our industry and the efficiency of the CCC platform is particularly well suited to helping customers manage AI at scale. Our systems efficiently process almost six billion transactions per day, giving customers a battle-tested platform that flexibly handles volume spikes and constant adjustments to their operating rules. To summarize our first theme, CCC is positioned to thrive in an AI-driven world because we combine unique, real-time data, embedded workflows and a trusted scale platform that allows customers to deploy AI safely, govern it effectively and realize measurable economic value. My second theme is the strong tangible revenue momentum across the business as several of the biggest companies in the world increased their commitments to both our traditional and AI products. CCC's customer base includes 27 of the top 30 auto insurers in the U.S. by 2024 Direct Written Premium as well as multibillion-dollar repair facility chains. These are some of the largest and most discerning companies in the world with incredible access to leading-edge technology capabilities. We are thrilled that one of the top five auto insurers in the U.S. by Direct Written Premium renewed and extended its partnership with CCC through a new multiyear enterprise agreement. This agreement covers our entire auto physical damage suite as well as our entire portfolio of AI solutions related to auto physical damage following an extensive two-year test of those capabilities. The insurer consolidated its APD business onto CCC several years ago, and this new agreement both renews the core software relationship and adds the full AI layer, resulting in a meaningful step-up in the value of the partnership. Our largest and most sophisticated customers are also deepening their commitment to the CCC platform by expanding the scope of their relationship into casualty. Casualty remains one of the largest growth opportunities for CCC. Our acquisition of EvolutionIQ expanded our capabilities in this area through the creation of MedHub for auto casualty and an AI document insight solution now embedded within the CCC platform. MedHub adds meaningful new functionality that is helping customers manage complex casualty workflows and is helping to advance our pipeline. Last quarter, we announced that Liberty Mutual, the sixth largest auto insurer in the United States and one of the largest P&C insurers globally, selected us. They have since begun deploying a significant portion of their casualty business on the CCC platform. In April, we signed a multiyear agreement with Allstate for their third-party casualty business. All of these wins validate that large customers increasingly recognize that CCC's platform and comprehensive suite of solutions represent their best path to embracing an AI-driven future. This dynamic is playing out across our entire business, including on the repair facility side. Adoption of our core and AI solutions in the market continues to grow with more than 6,500 repair facilities now using our AI estimating capability. At our industry conference next month, we plan to introduce even more innovations for repair facilities. In summary, we are seeing this differentiated positioning translate into tangible revenue momentum as some of the largest insurers and repair organizations in the world deepen and expand their relationships with CCC across both our core software and AI solutions. My third theme is how solving for rising complexity is expanding CCC's value proposition and driving long-term growth. The most important structural trend in the insurance economy is rising complexity. Vehicles are more sophisticated; medical and casualty claims are more involved. Regulatory requirements continue to increase. Every claim requires more decisions, more coordination and more judgment all the time. We see advancing vehicle technology as a significant tailwind for CCC over time with many new product possibilities on the horizon. The multi-decade trend in advancing vehicle safety technology has shown a repeated pattern of frequency reductions being more than offset by increases in severity to fix these systems when they're damaged. That causes claim dollars and complexity to rise, which grows the industry and creates additional growth opportunities for CCC. Over the past decade, personal auto claim counts declined by less than 1% annually while average dollars per claim grew approximately 6% per year, driving about 5% annual growth in total claims dollars paid. We believe that going forward, claims cost growth is going to outpace claim frequency moderation, and our insurance customers will be managing an increasing level of total claims spend. That means our software and AI capabilities remain mission-critical as customers manage growing claim complexity and spend over time. The rising complexity inherent in our industry, combined with the growing appetite across our customer base to adopt both our core and AI solutions, gives us confidence in our long-term growth outlook. Stepping back, the common trend across all three themes is rising complexity. As claims become more complex, and customer appetite for AI increases, CCC's platform, data and workflows become even more essential giving us confidence in our long-term growth opportunity. To help us navigate towards that future, we have added another experienced technology leader to our Board of Directors, John Schweitzer. John brings more than three decades of leadership experience across enterprise technology and global go-to-market organizations, including senior roles at Salesforce, Informatica, SAP and Oracle. With the addition of John, Neil de Crescenzo and Barak Eilam over the last 18 months, we have deliberately strengthened our Board to support platform strength, AI innovation and durable value creation while preserving neutrality across the ecosystem we serve. We are pleased with our strong start to the year and continue to be incredibly excited by our near-term momentum and the long-term opportunity in front of us. With that, I'll turn the call over to Brian, who will walk you through our results in more detail.

Brian Herb, Chief Financial Officer

Thanks, Githesh. As Githesh outlined, Q1 was a strong start to the year with revenue growth and profitability ahead of expectations, increasing adoption of our AI solutions across our largest and most sophisticated clients and continued execution on our capital allocation priorities, including return of capital to shareholders. Now let's turn to the numbers. I'll review our first quarter 2026 results and then provide guidance for the second quarter and the full year. Total revenue in the first quarter was $281 million, up 12% from the prior year period and above the high end of our revenue range. Please note that all of this growth is organic. Of the 12% growth, 9% was driven by cross-sell, upsell and the adoption of solutions across our existing client base; approximately 3 points of growth came from new logos. Within this composition, we did see more than 1 point of impact from a combination of timing and one-time items, including true-ups on subscription contracts and transactional strength in casualty. In the quarter, emerging solutions contributed about 4 points of growth, primarily driven by EvolutionIQ, our AI-based APD solutions, diagnostics and build sheets. Emerging solutions continue to represent an important and expanding part of the portfolio, accounting for approximately 11% of total revenue in the first quarter of 2026 and growing approximately 50% year-over-year with the largest contribution from our AI solutions. Turning to our key metrics of software gross dollar retention, or GDR, and software net dollar retention, or NDR. GDR captures the amount of revenue retained from our client base compared to the prior year period. In Q1 2026, our GDR was 98%, down from 99% last quarter. Please note that since we started reporting this metric, GDR has been between 98% and 99% and is either rounded up or down primarily by repair shop industry churn. We believe the consistency is evidence of the value we deliver and the benefit of participating in the CCC network. Our strong GDR is a core tenet of our predictable and resilient revenue model. Net dollar retention captures the amount of cross-sell and upsell from our existing client base compared to the prior year period as well as volume movements in our auto physical damage client base. In Q1 2026, our NDR was 107%, up compared to our full year NDR in 2025 of 106%. Now I'd like to turn to the income statement in more detail. As a reminder, unless otherwise noted, all metrics are non-GAAP. We provide a reconciliation of GAAP to non-GAAP metrics in our press release. Adjusted gross profit was $216 million for the quarter with an adjusted gross profit margin of 77%, which is up sequentially from 76% and flat year-over-year. The underlying economics of the business continue to demonstrate leverage and scalability, and we remain confident in our ability to progress towards our long-term target of approximately 80% as our newer solutions revenue scale and offsets the impact of higher depreciation from recent investments. In terms of expenses, adjusted operating expense in Q1 2026 was $109 million, which is up 2% year-over-year, reflecting strong cost discipline, nearly flat year-over-year headcount and some phasing benefits of costs that moved into Q2. Adjusted EBITDA for the quarter was $120 million, up 20% year-over-year with an adjusted EBITDA margin of 43%. This was above the high end of the range, reflecting cost efficiencies, some phasing benefits and the flow-through from revenue overperformance in the quarter. Q1 adjusted EBITDA margin expanded over 300 basis points year-over-year. Stock-based compensation as a percent of revenue was 11% in Q1 of 2026. That's consistent with Q4 2025. We expect full-year stock-based compensation in 2026 to be approximately 13% of revenue with a path to single digits as we move into 2027. Now let's turn to the balance sheet and cash flow. We ended the quarter with $37 million in cash and cash equivalents and $1.3 billion of debt. At the end of the quarter, net leverage was 2.7x adjusted EBITDA. We continue to deliver strong free cash flow generation and return capital to shareholders through share repurchases. Free cash flow in Q1 was $42 million compared to $44 million in the prior year period. Free cash flow on a trailing 12-month basis was $252 million, which is up 7% year-over-year, and a trailing 12-month free cash flow margin as of Q1 2026 was 23%, down modestly from 24% as of Q1 2025. We are committed to a disciplined capital allocation framework, which balances investment in the business and capital return to shareholders to deliver long-term shareholder value. In December 2025, we announced a $500 million share repurchase authorization and a $300 million accelerated share repurchase program under that authorization. During Q1, we completed the ASR under which we purchased a total of approximately 43 million shares. Following the completion of the ASR, we repurchased an additional $100 million of stock in the open market during Q1. At the end of Q1, we have returned more than $1 billion to shareholders through repurchases over the last 2.5 years and have $100 million remaining available under the current $500 million Board authorization. I'll now turn to guidance. For Q2 2026, we expect revenue between $283 million to $285 million, representing 9% year-over-year growth at the midpoint. We expect adjusted EBITDA of $111 million to $113 million, a 39% adjusted EBITDA margin at the midpoint. For the full year 2026, we expect total revenue of $1.155 billion to $1.163 billion, which represents approximately 10% year-over-year growth at the midpoint. For adjusted EBITDA, we expect between $484 million to $490 million, which implies a 42% adjusted EBITDA margin at the midpoint. So three points to keep in mind as you think about the Q2 and full year guide. First, we have raised the full year revenue guidance from 8.5% to 9.5% to now 9% to 10% growth on the back of Q1 strong results and the momentum that we're seeing across the business. Second, in terms of the cascade of revenue growth through 2026, Q1 included more than 1 point of impact from a combination of one-time items and transactional strength in casualty. In addition, in the second half, we're expecting approximately a 1 point revenue headwind as an insurance carrier transitions away their legacy first-party casualty business from us. Third, we remain confident in our ability to drive margin expansion in 2026, consistent with our demonstrated track record. As we've stated on our Q4 call, we expected adjusted EBITDA margin to decline sequentially in Q2 due to phasing of spend and then resume year-over-year margin expansion in the second half of the year. We manage our adjusted EBITDA margin on an annual basis, and the progression is driven by continued cost discipline and the operating leverage in the business. The high end of the guide reflects approximately 100 basis points of margin expansion in both the first and second half of the year. In closing, we feel very good about the financial position of the business and the durability of our operating model. We delivered strong revenue growth, margin expansion and free cash flow, enabling meaningful capital return to shareholders through repurchases, while maintaining a prudent leverage profile. Our capital allocation framework remains disciplined, prioritizing organic investment, balance sheet strength and return of excess capital to shareholders, while remaining highly selective on M&A. Taken together, our predictable operating model, strong cash generation and margin discipline positions us well as we move through 2026. I'll now turn the call back over to Githesh for some additional comments before we begin with Q&A. Thanks.

Githesh Ramamurthy, Chairman and Chief Executive Officer

Before we move into Q&A, I'd like to share one update. As you saw this morning from our announcement, Brian Herb, after more than six years with the company, has decided to pursue another opportunity outside of CCC and will be stepping down as our CFO at the end of May. We will certainly miss Brian. During his tenure, Brian played a critical role in our evolution, including helping take the company public and serving as a key leader through a period of significant growth and transformation. His leadership helped scale our organization and especially as we advance the commercialization of our AI capabilities, positioning us really well for the future. On behalf of our Board and the entire CCC team, I want to thank Brian for his many contributions and wish him continued success. Brian remains a strong believer in the business, a shareholder and a close friend. Rod Christo, Senior Vice President of Finance and Chief Accounting Officer and a 30-year veteran of CCC, will become Interim CFO upon Brian's departure. To ensure a smooth transition, Brian will also continue to support the company as an adviser following his departure. On today's Q&A, we are joined by our President, Tim Welsh. As you will remember, Tim joined about a year ago and his positive impact on our go-to-market execution is evident in the momentum we're seeing across the business today. Operator, we are now ready to take questions. Thank you.

Operator, Operator

Our first question comes from Saket Kalia with Barclays.

Alyssa Lee, Analyst, Barclays (on behalf of Saket Kalia)

This is Alyssa on for Saket. Great start to the year and congratulations, Brian. We'll miss working with you. Githesh, maybe for you. You called out some nice casualty wins. Can you dig into that business a little bit and talk about who you're replacing here?

Githesh Ramamurthy, Chairman and Chief Executive Officer

Yes. I would say the thing that I can talk about is what we do exceptionally well, which is that our third-party solution replaced an incumbent that the customer was using. We have been working very deeply and closely with the customer, and the impact and the investments that we've been talking about for the last several years are truly coming through on the differentiation of our product and our solutions. After a fair amount of testing, the customer has moved forward with us, and we're truly excited about it. Tim, I don't know if you wanted to add anything to that.

Timothy Welsh, President

Yes. I would just add a couple of things. First of all, this is an area of long-term strategic focus for us. As Githesh just alluded to, we've been making investments in the casualty business broadly and specifically the third-party business for some time. We've been paying very close attention to customer needs. Given that strategic focus over a long period, the combination of our tools with the EvolutionIQ tools and consistent listening to customers and adapting our products accordingly has really helped us have this continued success. We're excited about what we've seen so far and look forward to continued momentum.

Alyssa Lee, Analyst, Barclays (on behalf of Saket Kalia)

Very helpful. And maybe, Brian, my follow-up for you. Just to stay on the theme of casualty here. You mentioned there was some element of volume-based benefit. Can you remind us how the pricing there works and maybe refresh us on how big that business is as a percentage of total?

Brian Herb, Chief Financial Officer

Yes, happy to. Casualty represents about 10% of total revenue. It's important to note it is one of the fastest-growing parts of the portfolio as we've talked about the investment that we've put in that product and also the momentum that's building. As far as the revenue mix, it is a combination of subscription deals, but we also have some deals that are transactional and some deals will have true-ups as well. What we saw in Q1 on some parts of the transactional business was strength that we highlighted. From a pricing perspective, it's similar to our other products in that we price on an ROI basis and show the value to clients as we roll those products out.

Operator, Operator

Our next question comes from Dylan Becker with William Blair.

Dylan Becker, Analyst, William Blair

Appreciated, really nice job here. Maybe, Githesh, I appreciate all the color on the industry drivers and the secular drivers supporting the long-term growth outlook. But I was wondering if you could delineate a little bit further. What's driving the outsized adoption from the larger carriers relative to their preference and need given everything going on with AI and needing a viable solution? Is it paired with your maturity of the platform and conviction in your solution delivering value and resonating alongside maybe even the final factor of the industry not being able to lean in on price and the lever of claims efficiency and supporting profitability? Maybe all three are coming together, but would love your take.

Githesh Ramamurthy, Chairman and Chief Executive Officer

Sure, Dylan. Thank you. First and foremost, we have been building our AI capabilities for well over a decade, which has allowed us to develop highly accurate models only possible when you have $2 trillion of historical data. Our customers that we announced today are some of the largest and most sophisticated companies in the world, and they have access to many external AI tools. Over the last few years they have worked closely with us and seen the accuracy, the performance and specifically the ROI of our solutions. The differentiation we have is that these are highly accurate AI solutions deeply embedded into existing workflows where thousands of decisions are made by thousands of people, and those workflows extend across the network. This combination of world-class AI, sophisticated data and a strong feedback loop helps us manage drift and maintain accuracy on a real-time basis as we touch 20 million cars a year. Connecting that into embedded workflows in a regulated environment and providing hyperlocal decisions specific to ZIP codes and geography is critical. The testing and evaluation over two to three years in some instances has given customers the confidence to pursue multiyear agreements. That testing process has taken time, but it's why we saw momentum in Q4 and increased momentum in Q1.

Timothy Welsh, President

Yes. To add, what we're seeing across organizations is that customers are trying to adopt AI quickly in many venues. They've been working closely with us for years to develop and test these solutions. We are optimistic that the enthusiasm seen in the example Githesh highlighted will continue across other customers because we've been developing and testing with many of them in a similar way.

Dylan Becker, Analyst, William Blair

That's very helpful. And then maybe, Brian, one for you, too. I think you called it out at the end, the momentum is resonating. On the casualty side, I know we saw some true-ups in the first quarter, but I think you also called out a first-party 1-point headwind throughout the balance of the year. Can you dive into segmentation between third-party and first-party and the puts and takes there?

Brian Herb, Chief Financial Officer

Yes. We haven't broken out the revenue mix between third-party and first-party publicly. As Githesh highlighted, we've invested a lot in third-party and are seeing momentum, including the Allstate win and Liberty Mutual coming on board. We're also continuing to invest in first-party and feel good about that product position. Overall, we're very encouraged by the momentum in casualty and how it sets up for the balance of the year and beyond.

Dylan Becker, Analyst, William Blair

Very helpful. Congrats, Brian.

Brian Herb, Chief Financial Officer

Appreciate it.

Operator, Operator

Our next question comes from Tyler Radke with Citi.

Tyler Radke, Analyst, Citi

Brian, it's been a pleasure working with you. Best of luck going forward. I wanted to dive into the true-up dynamics that you saw in Q1. Can you remind us the contracting dynamics that drive that? Was it outsized renewals? Did customers undercommit on volumes or products that drove that? And is there anything to read through in terms of folks signing up and expanding post that true-up event?

Brian Herb, Chief Financial Officer

Thanks, Tyler, and I appreciate the kind words. As a reminder, 85% of our revenue is subscription. In some subscriptions, customers commit to a certain level of volume, and if they exceed that level, we true them up and take that true-up in the period. What we saw in Q1 is a customer exceeded the minimum volume threshold, resulting in a true-up. That doesn't necessarily mean a new contract; as they move through the year or into the next year, the level of commitment can reset. We highlighted the phasing impact in the quarter because it influenced the 12% growth, but it's a natural part of how some deals are structured.

Tyler Radke, Analyst, Citi

Got it. And Githesh, I believe you talked about a pretty large top-five insurer renewal that stepped up by adding a lot of AI capabilities. Can you talk about what that did to the contract expansion, and is that replicable across other major renewals?

Githesh Ramamurthy, Chairman and Chief Executive Officer

Yes. The short answer is we believe we will see this pattern going forward. This customer renewed the core suite and had been deeply testing our AI solutions over the last couple of years. They decided to take an enterprise license across the board for the full suite of AI in addition to the core because there was significant incremental ROI for the AI solutions that work together with the core products. They saw the combined ROI in testing and moved forward. This is an indication of how customers are starting to approach these agreements.

Timothy Welsh, President

To build on that, we're seeing organizations try to adopt AI quickly in many areas. They have been working closely with us for years to develop and test these solutions. Given that experience, we're optimistic the enthusiasm in this case will continue across other clients who have been engaged in similar testing.

Tyler Radke, Analyst, Citi

Sorry to clarify: can you frame what type of expansion that drove in APD as they adopted the AI solutions?

Brian Herb, Chief Financial Officer

We don't discuss specific deal dynamics, but as a rule of thumb in the past we've said to think about our AI solutions within APD adding roughly 50% of what a client is paying us for the core software, so think of it as a 50% uplift on pricing for those AI capabilities.

Operator, Operator

Our next question comes from Kirk Materne with Evercore ISI.

S. Kirk Materne, Analyst, Evercore ISI

I was wondering if the groundswell of interest in AI—AI-native companies and labs reaching out—has slowed any of your pilots down or distracted customers? Or are things moving ahead at a cadence? It seems like in the case you described things are moving, but curious on a more holistic basis.

Timothy Welsh, President

Kirk, customers' interest in AI and the activity in the market creates many questions and enthusiasm. What we have that helps is years of relationships and trust with these customers. While everyone is interested in new innovations, they prefer innovations from partners who are deeply embedded in their workflows, understand regulatory and compliance requirements and have a track record of delivery. That trust and credibility position us well in the market.

S. Kirk Materne, Analyst, Evercore ISI

That is helpful. Brian, when you announce new casualty wins, what's the phasing of revenue? These projects take time to ramp, so how should we think about an announcement relative to when revenue begins to impact you?

Brian Herb, Chief Financial Officer

Good question. Once we sign and close a deal, it doesn't immediately convert to full run rate. Customers transition into our platform and volume ramps over time, typically building through the year and reaching fuller run rate in the second half of the year.

S. Kirk Materne, Analyst, Evercore ISI

And Brian, congrats on the new endeavor.

Brian Herb, Chief Financial Officer

Thanks, Kirk. It's been great working with you.

Operator, Operator

Our next question comes from Josh Baer with Morgan Stanley.

Josh Baer, Analyst, Morgan Stanley

Brian, congrats on the opportunity. I wanted to ask about pricing tied to the value you deliver. With increasing complexity and higher claim costs, you provide more value to customers. How do you capture that value in practice? Is it through selling new products, monetizing additional products, or renegotiating pricing at renewal?

Githesh Ramamurthy, Chairman and Chief Executive Officer

Josh, structurally think of the business as a core APD suite where we add enhancements and functionality over time and that ongoing ROI is reflected in renewals. On top of that sits a layer of AI solutions across many steps of the claims process; the AI layer has incremental ROI separate from the core. Independent solutions like subrogation and casualty are additional products with separate value propositions. On the automotive side, products like Diagnostics and Build Sheets are additional packages. That's the structural way to think about monetization. Brian can add how we capture value through pricing.

Brian Herb, Chief Financial Officer

To add, we sell on ROI, typically around a 5:1 ratio, and that is how products are priced. New solutions that prove ROI are sold incrementally and can be added to the bundle. Price adjustments can also occur at renewal depending on where a client is priced and the value they receive as they scale and roll out our software and AI solutions.

Operator, Operator

Our next question comes from Adam Hotchkiss with Goldman Sachs.

Adam Hotchkiss, Analyst, Goldman Sachs

Githesh, you've alluded to evaluation customers doing testing ahead of adopting emerging solutions. From a magnitude perspective, what portion of your base is testing with high intent today, especially across AI? Is it the entire base or segmented?

Githesh Ramamurthy, Chairman and Chief Executive Officer

First, our most complex and largest customers operate across many jurisdictions and have many edge cases, so they conduct a fair amount of testing. The benefit for us is these customers allow us to tune and hone models for edge cases, drift and accuracy at scale. Once solutions work at that scale, adoption across the industry becomes easier. We've learned a lot through this process and the references we get are strong. Tim, do you want to add?

Timothy Welsh, President

Building on Githesh's points, we work intensively with the largest clients. Because these solutions are well tested in many places, we're seeing rapid interest across a wide range of clients. While adoption timing can vary, we're seeing many discussions and broad interest due to the long testing we've performed.

Adam Hotchkiss, Analyst, Goldman Sachs

Great. Brian, you mentioned emerging solutions generated four points of growth. How did that compare to expectations, and how should we think about that contribution for the rest of the year and going forward?

Brian Herb, Chief Financial Officer

We were really happy with the quarter and the 12% growth. Emerging delivered about 4 points of growth, with roughly 1 point attributable to EvolutionIQ. Emerging solutions remain one of the biggest growth opportunities. We expect that category to continue growing and to present further opportunities this year and over the long term. We're feeling good about the momentum in AI solutions and the pace of growth there.

Operator, Operator

Our next question comes from Alexei Gogolev with JPMorgan.

Alexei Gogolev, Analyst, JPMorgan

Githesh, you mentioned the recent appointment to Chief Product Officer. Can you talk about roadmap targets? Will the focus be helping customers deploy more AI at scale, or expanding into adjacencies like casualty?

Githesh Ramamurthy, Chairman and Chief Executive Officer

We're excited to have Josh on board. We're focused on two dimensions. The first is deepening and expanding product functionality across AI-enabled product segments and introducing additional components like subrogation, which we'll share more on at our upcoming NX customer conference. The second dimension is leveraging our unique ecosystem—the connections among insurers, repair facilities, parts providers, towers, and salvage yards—so the AI capabilities drive decision engines across the entire ecosystem. Customers are excited about this integration and the event management framework that ties the AI into workflows across participants.

Alexei Gogolev, Analyst, JPMorgan

Brian, thank you for your years. Quick question on international demand. In vertical SaaS, international expansion is often driven by customers themselves. Are you seeing customers push you internationally, and how does that inform appetite for expansion into Europe?

Githesh Ramamurthy, Chairman and Chief Executive Officer

First, there's significant TAM expansion in the U.S. across our core, AI solutions, subrogation, casualty, disability and workers' comp. Some EvolutionIQ solutions have landed large private employers as well. We are not seeing a shortage of opportunity domestically. The international opportunity is substantial and we will address it strategically. Tim can share additional perspective given his global experience.

Timothy Welsh, President

A couple of thoughts: there's enormous TAM expansion in the U.S., which is a major opportunity. Many of the companies we serve are primarily U.S. companies with limited international operations. When we think about international, we consider the TAM and whether there are companies in those markets that would benefit from our solutions but don't have a U.S. presence. You have to consider industry structure and TAM as you evaluate international expansion.

Operator, Operator

I'm not showing any further questions at this time. I'll turn the call back over to Githesh for any further remarks.

Githesh Ramamurthy, Chairman and Chief Executive Officer

Thanks, everybody, and really appreciate the thoughtful questions. We are truly encouraged by the strong operating momentum across the business that began at the end of 2025 and has continued into the first quarter of 2026. As complexity continues to increase in the insurance economy, our customers are turning to CCC to manage mission-critical workflows and apply AI that is trusted and scalable. Our unique data, embedded workflows and the depth and breadth of our network position us well to support customers and translate into sustained growth across the largest insurers, repair facilities and other parts of our customer base. We're focused on disciplined execution. I'd like to thank our employees, our customers and our shareholders for the deep trust everyone places in us. And a huge thank you again to Brian for all the years and the partnership you've been.

Brian Herb, Chief Financial Officer

Thanks, Githesh. It's been a true pleasure.

Operator, Operator

Thank you. Ladies and gentlemen, this concludes today's presentation. You may now disconnect and have a wonderful day.