And – so, I do think there’s a stronger appetite that we see from our customers to adopt change processes, especially when you see significant improvements.
Dylan Becker: Okay, got it. That makes a ton of sense. And then maybe that’s a good segue to thinking about the Impact Dynamics offering and maybe how carriers are thinking about the convergence of those APD and casualty workflows by connecting more of that early stage data. Maybe those solutions operated independently in the past, but are you seeing kind of more of that convergence coming into play in those lines, kind of blurring, obviously creating some longer term opportunity as you think about that cross-seller attach as well? Thank you.
Githesh Ramamurthy: Well, over the long term, the answer is yes. In the short term, Impact Dynamics can work for any customer, regardless of what traditional casualty solutions they’re using. So I would say there’s probably a quicker ramp for something like Impact Dynamics, and the linkages are increasing that the more of these components that can work together to let you manage the entire ecosystem of a claim from end to end, from loss — from the first notice of loss, all the way through settlement. And that’s really where I think we differentiate ourselves in that we are in those workflows. We have applied artificial intelligence very heavily and we’ve continued to build out the ecosystem. So that’s kind of how we see it playing out.
Dylan Becker: Very helpful. Thanks, guys. Congrats again.
Operator: Thank you. One moment for questions. Our next question comes from Josh Baer with Morgan Stanley. You may proceed.
Josh Baer: Great. Thanks for the question. The upside in the quarter was higher than typical, even after adjusting for the true-ups. So I was just wondering, were the results in line with your expectations, like with this adjustment or anything specific to call out that positively surprised you versus your internal plan?
Brian Herb: Yes. Hi, Josh, it’s Brian. Yes, so we were really happy with the performance in the quarter. So 12 points, and even when you normalize the year end true-ups and the one-off revenue, that was a point. So it was 11. And as you said, it came in a lot stronger than we had put out in the guidance. I’d say it was broad-based. So we saw strength across many of our APD clients. We saw strength in casualty. We saw strength in parts. Very good ASG. So on the repair facility, up-sells and upgrades into packages. So there’s nothing really one area to highlight as kind of the driver for the overperformance. It was a very broad-based set of results, really across the portfolio. So we were pleased with the performance overall.
Josh Baer: Great. And one on the repair facility opportunity, obviously a lot more that you can sell back into your base. But wanted to ask about the penetration as far as new repair facilities. Like where are they coming from? What’s the profile of that repair facility? Are they — are those new customers spending like more or less than average? Just wondering for some more context there and if like 1000 per year is still a good number to think about going forward.
Githesh Ramamurthy: Yes, a couple of things. So first, when I look back in 2010, we probably had about 20,000 repair facilities. We’re now clicking towards pretty close to 30,000 repair facilities. And then when you look at how many of our repair facilities used one or two solutions, right, even as far back, even a few years back, we only had repair facilities using two or more of our solutions, about half of them. Today, I would say, just three, four years later, we see that half of our repair facilities are using four or more of our solutions. So there’s a large install base, and as we continue to deliver new solutions that really help them with their business, as they have capacity issues and trying to look for more efficiencies, so that’s really one very important path.
Back to your second part of your question. We do feel good about continuing to add repair facilities at the rate at which — at the rate at which you saw. Our estimate is there’s probably roughly 40,000 repair facilities in the industry overall, and we still think there is ways to go to continue to grow.
Josh Baer: Okay. Thank you very much.
Operator: Thank you. One moment for questions. Our next question comes from Mike Funk with Bank of America. You may proceed.
Matt Bullock: Hi, Githesh and Brian, this is Matt Bullock on for Mike Funk. I had a quick one on Estimate-STP. Are you seeing a material improvement in Estimate-STP functionality as volumes have ramped with customers and you continue to fine tune those models? And if so, can you help us quantify it? And then secondarily, has this led to a sort of flywheel with adoption? Thanks.
Githesh Ramamurthy: Yes, I would say initially we had restricted it way back to private passenger vehicles. We added pickup trucks. Then we restricted it to front impacts and back impacts. Now we’ve opened it up for side impacts. We’ve extended it across all the models. The accuracy is significantly better. We’re making more parts predictions, more subtle, very subtle damage versus obvious damage. So the feedback loop we have with really the scale of the feedback loop and the size of the data set we have with both photos coming in and repairs and estimates flowing through, has really allowed us to improve quality substantially. And that’s helped customers continue to expand to more and more states. And as well as from a reference standpoint, there have been great references to other customers continuing to expand. So we just see that adoption continuing to happen. And in terms of….
Brian Herb: Yes, so I mean, as far as the — it’s Brian here. As far as the claim volume, we are still, even though, as Githesh said, we’re making progress with new clients on and the expansion of those existing clients, we’re still at low rates. So if you think about kind of the total claims that are coming through, we’re still in the single digit percentages. But as we sit here today, we feel really good about the opportunity that we’ve talked about in the medium-long term, as we think about the overall opportunity for Estimate-STP.
Githesh Ramamurthy: And this levels the runways that we have across all of our different solution sets, is that even if you look at how we delivered Q4, much of that growth came from products and solutions that have been around for a long time. So we see all of these new solutions we’re developing to have fairly long runways in terms of growth.
Matt Bullock: Super helpful. Thank you.
Brian Herb: Thanks.
Operator: Thank you. One moment for questions. Our next question comes from Chris Moore with CJS Securities. You may proceed.
Unidentified Analyst: Hi. This is [indiscernible] on for Chris Moore. Congrats on a great year. Free cash flow margin has increased from 19.4% in ’22 to 22.5% in 2023. And based on your adjusted EBITDA guidance, it seems to be heading quickly into the mid-20s range. Can you give us any more color on how to think about this metric in 2024 and beyond?
Brian Herb: Yes, good question. Yes, you’re thinking about it the right way. I mean, it is — we’re generating strong free cash flow. We’ve seen it progress from 19%, 23% last year. When you do the math that you just did and you look at the EBITDA and our unlevered free cash flow guidance that we’ve given out, which is roughly in the mid-60s of unlevered free cash flow to EBITDA, you get to the mid-20s. So you’re doing the math right. We’re certainly just seeing as the revenue scales and the strong free cash flow that this will continue to grow. And so we feel really good on that performance and the opportunity in front of us with it.
Unidentified Analyst: All right, that’s all I have. Thank you very much.
Brian Herb: Thank you.
Githesh Ramamurthy: Thank you.
Operator: One moment for questions. Next question comes from Shlomo Rosenbaum with Stifel. You may proceed.
Adam Parrington: Hi, it’s Adam Parrington on for Shlomo. Could you talk a little bit about how payments adoption is progressing? I believe last quarter you mentioned adoption was tracking a little bit slower than subrogation and Estimate-STP, given the higher than expected complexity around the buildout of specific customer use cases, are those buildouts complete now and just kind of just general thoughts on how payments are trending? Thanks.
Brian Herb: Yes, I would just say that it is slower than the other products that you’re seeing. This is why we have a mix of a broad set of portfolio of solutions we have, because the adoption rates will vary. But at the very fundamental level, what we are seeing and the work we’re doing with customers is that many of the problems we saw with payments in the claims process have not been solved. And so the problems and the complexities are there. Our product has improved. The breadth of what we’ve built has improved, and we just think it’ll take a little longer.
Adam Parrington: Okay, thanks.
Operator: Thank you. I would now like to turn the call back over to Githesh Ramamurthy for any closing remarks.
Githesh Ramamurthy: Hi, I just want to take the opportunity to thank everybody for your interest in CCC. I also would like to take the opportunity to thank the broader CCC team for incredible delivery in 2023 and our customers for their trust and the confidence they have in us as we go forward. And we remain very excited about the opportunities in front of us. And again, thank you all for joining. And we look forward to giving you updates as we go forward.
Operator: Thank you for your participation. You may now disconnect.
