Brasada Capital Management: CCC Intelligent Solutions ($CCCS) Investment Case – Q2 2024

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Brasada Capital Management: CCC Intelligent Solutions ($CCCS) Investment Case – Q2 2024

Investment Highlight: CCC Intelligent Solutions (CCCS)

Brasada Capital Management provides an in-depth analysis of $CCCS, a recent addition to their Friedberg Focused Equity and GCI Select Equity strategies.

Business Overview

  • $CCCS is central to the automotive insurance ecosystem, connecting autobody repair shops with parts suppliers and insurance carriers.
  • Its software systems streamline the claims settlement process, getting cars off the lot and back to owners more quickly and efficiently.
  • This efficiency is valuable to insurers (reduced rental days) and repair shops (improved labor hour throughput).

Market Position

  • Dominant position with ~80%+ of all US Auto Claims running on the $CCCS platform.
  • Installed base includes all but 3 of the top 30 insurance carriers in the U.S.
  • Serves approximately 30,000 out of 35,000 autobody repair shops.

Competitive Advantages

  1. Network Effects: Direct Repair Program (DRP) connects insurers and repair shops, creating a virtuous cycle.
  2. Switching Costs: High barrier to switching due to widespread adoption by both insurers and repair shops.
  3. Scale and Data Advantage:
    • Larger R&D budget than competitors.
    • $1 trillion of granular, real-time crash data to train models.
  4. Customer Satisfaction: High Net Promoter Scores, top percentile for Software benchmarks.

Growth Runway

Management targets 7-10% organic topline growth, with potential for 13-15% through new initiatives:

  1. Automotive Repair Side:
    • Upselling existing customers to higher-tier packages (e.g., adding workflow tools).
    • Expanding diagnostics product as scanning rates increase.
  2. Insurance Side:
    • Adoption of Straight Through Processing (STP) for automated claims processing.
    • Expansion into casualty claims (bodily injury in car crashes).
  3. Parts Marketplace:
    • Potential to integrate with STP for automated parts procurement.

Market Dynamics and Opportunities

  • Increasing complexity in the auto industry (e.g., vehicle parts proliferation, advanced technologies, electrification) drives demand for $CCCS’s solutions.
  • Insurance industry facing challenges with combined loss ratios over 100%, creating need for efficiency improvements.
  • Digitization is key to managing increasing complexity and costs in the claims process.

Valuation and Expected Returns

  • At current valuation, Brasada expects double-digit returns with low risk of permanent business value impairment.
  • They believe the economics are fairly locked in for the next few years, with upside potential from successful execution of growth initiatives.

Other Key Points from Brasada’s Q2 2024 Commentary

  • Market Reflections: Discussion of the “Magnificent 1” (Nvidia) and its outsized impact on market returns.
  • Historical Perspective: Caution against overvaluing current market leaders based on past trends.
  • Investment Philosophy: Focus on fundamental analysis, long-term business value, and concentrated portfolios of well-understood companies.
  • Market Outlook: Optimism about opportunities for active stock picking, particularly in businesses not caught up in the current AI hype cycle.

Click here for the full pro investor letter.


Disclaimer: The information provided in this blog post is for informational and educational purposes only and does not constitute financial, investment, or other professional advice. The content is based on a third-party investor letter and does not represent an endorsement, recommendation, or solicitation to buy or sell any particular security or investment product mentioned.

Investing involves risk, including the potential loss of principal. Past performance is not indicative of future results. Investors should carefully consider their investment objectives, risk tolerance, and financial situation before making any investment decisions. It is strongly recommended to conduct thorough research and due diligence, and to consult with a qualified financial advisor or professional before making any investment decisions based on the information provided in this blog post or the referenced investor letter. The author of this blog post and the owners of this website are not responsible for any investment decisions made by readers and disclaim any liability for any actions taken based on the content presented herein.


Disclaimer: Third party content is provided for informational purposes only and should not be construed as an offer to sell or a solicitation of an offer to buy or sell any security. Third party content is not intended to serve as a recommendation to buy or sell any security and is not intended to serve as investment advice. Third party content creators are not affiliated with BBAE Holdings LLC, (“BBAE”) Redbridge Securities LLC (“Redbridge Securities”) or BBAE Advisors LLC (“BBAE Advisors”). All investments involve risk, including the possibility of total loss of principal. For additional important information, please click here.

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