Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read together with our audited consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from the forward-looking statements included herein. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the section titled "Special Note Regarding Forward-Looking Statements and Risk Factors" and "Risk Factors" as set forth elsewhere in this Annual Report on Form 10-K.

Business Overview

Founded in 1980, CCC is a leading Software-as-a-Service ("SaaS") and AI platform provider for the multi-trillion-dollar insurance economy powering operations for insurers, repairers, automakers, part suppliers, and more. CCC cloud technology connects more than 35,000 businesses digitizing mission-critical workflows, commerce, and customer experiences. A trusted leader in AI, customer experience, network and workflow management, CCC delivers technology that turns crucial moments into intelligent experiences, with the goal of shaping a world where life just works.

Our business has been built upon two foundational pillars: automotive insurance claims and automotive collision repair. For decades we have delivered leading software solutions to both the insurance and repair industries, including pioneering Direct Repair Programs ("DRP") in the United States ("U.S.") beginning in 1992. DRP connects auto insurers and collision repair shops to create business value for both parties, and requires digital tools to facilitate interactions and manage partner programs. Insurer-to-shop DRP connections have created a strong network effect for CCC's platform, as insurers and repairers both benefit by joining the largest network to maximize opportunities. This has led to a virtuous cycle in which more insurers on the platform drives more value for the collision shops on the platform, and vice versa.

We believe we have become a leading insurance and repair SaaS and AI provider in the U.S. by increasing the depth and breadth of our SaaS offerings over many years. Our insurance solutions help insurance carriers manage mission-critical workflows across the claims lifecycle, while building intelligent experiences for their customers. Our software integrates seamlessly with both legacy and modern systems and enables insurers to rapidly innovate on our platform. Our repair solutions help collision repair facilities achieve better performance throughout the collision repair cycle by digitizing processes to drive business growth, streamline operations, and improve repair quality. We have more than 300 insurers on our network, connecting with more than 30,500 repair facilities through our multi-tenant cloud platform. We believe our software is the architectural backbone of insurance DRP systems and is a primary driver of material revenue for our collision repair shop customers and a source of material efficiencies for our insurance carrier customers.

Our platform is designed to solve the "many-to-many" problem faced by the insurance economy. There are numerous internally and externally developed insurance software solutions in the market today, with the vast majority of applications focused on insurance-only use cases and not on serving the broader insurance ecosystem. We have prioritized building a leading network around our automotive insurance and collision repair pillars to further digitize interactions and maximize value for our customers. We have tens of thousands of companies on our platform that participate in the insurance economy, including insurers, repairers, parts suppliers, and automotive manufacturers. Our solutions create value for each of these parties by enabling them to connect to our vast network to collaborate with other companies, streamline operations, and reduce processing costs and dollars lost through claims management inefficiencies, or claims leakage. Expanding our platform has added new layers of network effects, further accelerating the adoption of our software solutions.

We have processed more than $2 trillion of historical data across our network, allowing us to build proprietary data assets that leverage insurance claims, vehicle repair, automotive parts and other vehicle-specific information. We believe we are uniquely positioned to provide data-driven insights, analytics, and AI-enhanced workflows that strengthen our solutions and improve business outcomes for our customers. Our AI solutions streamline existing insurance and repair processes including vehicle damage detection, claim triage, claim handling, repair estimating, intelligent claim review, and claim subrogation. We deliver real-world AI with more than 125 U.S. insurers and more than 15,000 U.S. collision repairers actively using AI-powered solutions in production environments.

One of the primary obstacles facing the insurance economy is increasing complexity which is driven by technological advancements, supply-chain disruption, social inflation, medical inflation, and Internet-of-Things ("IOT") data. We believe digitization plays a critical role in managing this growing complexity while meeting consumer expectations. Our technology investments are focused on digitizing complex processes and interactions across our ecosystem, and we believe we are well positioned to power the insurance economy of the future with our data, network, and platform.

While our position in the insurance economy is grounded in the automotive insurance sector, the largest Property & Casualty ("P&C") insurance sector in the U.S. representing nearly half of P&C Direct Written Premiums ("DWP"), we believe our integrations and cloud platform are capable of driving innovation across the broader insurance economy. Our customers are increasingly looking for CCC to expand its solutions to other parts of their business where they can benefit from our technology, service, and partnership. In response, we are investing in new solutions that we believe will enable us to digitize the entire automotive claims lifecycle, and over time expand into adjacencies including other insurance lines. For example, CCC's acquisition of EvolutionIQ Inc. ("EvolutionIQ") in January 2025 added claims solutions in disability and workers' compensation insurance lines to CCC's solution suite.

We have strong customer relationships in the end-markets we serve, and these relationships are a key component of our success given the long-term nature of our contracts and the interconnectedness of our network. We have customer agreements with more than 300 insurers (including carriers, self-insurers and other entities processing insurance claims), including 27 of the top 30 automotive insurance carriers, and 9 of the top 15 disability insurance carries in the U.S., based on DWP, and hundreds of regional carriers. We have more than 35,000 total customers, including more than 30,500 automotive collision repair facilities (including repairers and other entities that estimate damaged vehicles), more than 6,000 parts and diagnostics suppliers, 14 of the top 15 automotive manufacturers based on vehicles in operation, and numerous other companies that participate in the insurance economy.

We generate revenue through the sale of software subscriptions and other revenue, primarily from professional services. We generated $1,057.0 million of revenue for the year ended December 31, 2025, an increase of 11.9% from the prior year. Net income for the year ended December 31, 2025 was $1.7 million, compared to net income for the year ended December 31, 2024 of $31.2 million. Adjusted EBITDA increased $38.7 million, or 9.7%, year-over-year to $436.0 million. See our reconciliation of net income (loss) to Adjusted EBITDA within the section titled "Non-GAAP Financial Measures."

Basis of Presentation

The Company's consolidated financial statements and accompanying notes included elsewhere in this Annual Report on Form 10-K include the accounts of the Company and its consolidated subsidiaries and were prepared in accordance with GAAP. Intercompany transactions and balances are eliminated in consolidation. The consolidated financial statements include 100% of the accounts of wholly-owned and majority-owned subsidiaries. The ownership interest of the minority investor is recorded as a non-controlling interest in CCCIS Cayman Holdings Limited ("CCC Cayman"), the parent of the Company's China operations. As of December 31, 2024, there is not any non-controlling interest in a subsidiary as of December 31, 2025.

The Company organizes its segments around its operations by geographic region and operates in one reportable segment. The chief operating decision maker for the Company is the Chief Executive Officer. The Chief Executive Officer reviews financial information presented on a consolidated basis, accompanied by information about revenue by type of service and geographic region, for purposes of allocating resources and evaluating financial performance.

Recent Developments

Business Acquisition

During January 2025, the Company completed its acquisition of EvolutionIQ, a privately held company that provides AI-powered guidance for disability and injury claims management. Leveraging EvolutionIQ's platform, the acquisition will broaden the Company's portfolio of AI-based solutions available to its insurance customers.

The Company acquired all the outstanding shares of EvolutionIQ in exchange for total consideration of $674.3 million upon closing of the acquisition, subject to certain post-closing adjustments. Before post-closing adjustments, the total consideration paid to the selling shareholders consisted of 62.4% in cash and 37.6% in shares of CCC's common stock. The cash consideration paid to the selling shareholders was funded through cash on hand and an incremental term loan in an aggregate principal amount of $225 million (the "Incremental Term Loan").

Long-Term Debt and Refinancing

In conjunction with the acquisition of EvolutionIQ, the Company entered into Amendment No.3 to the 2021 Credit Agreement ("Third Amendment") that provided the Company with an Incremental Term Loan for $225 million. Immediately after the Third Amendment, the Incremental Term Loan was repayable in quarterly installments in an amount equal to 0.25% of the original principal amount, with the balance payable at maturity, on September 21, 2028.

Immediately after the Third Amendment, the interest rate per annum applicable to the Incremental Term Loan was based on a fluctuating rate of interest, determined by the Company's leverage ratio, as defined in the 2021 Credit Agreement, as amended. In connection with the Fourth Amendment (as defined below), the Incremental Term Loan was refinanced together with other term loans on the terms outlined in the following paragraph.

On January 23, 2025, the Company entered into Amendment No. 4 (the "Fourth Amendment") to the 2021 Credit Agreement. Pursuant to the terms of the Fourth Amendment, (i) the Company incurred incremental term loans in an aggregate principal amount of $225 million, which were used to refinance certain outstanding incremental term loans (including the Incremental Term Loan), (ii) the maturity of all term loans under the 2021 Credit Agreement was extended to January 23, 2032, (iii) the credit spread adjustment applicable to Secured Overnight Financing Rate ("SOFR") loans under the 2021 Credit Agreement was removed, and (iv) the interest rate margin applicable to all term loans under the 2021 Credit Agreement was removed. From and after the Fourth Amendment, the interest rate per annum applicable to the Term Loan is based on a fluctuating rate of interest equal to the sum of an applicable rate and, at the Company's election from time to time, either:

(1) 1.00% in the case of base rate loans, and 2.00% in the case of SOFR (or Euro Interbank Offered Rate ("EURIBOR") or Sterling Overnight Index Average ("SONIA")) loans, and 2.00%, in the case of SOFR (or EURIBOR or SONIA) loans, if S&P and Moody's Debt First Lien Leverage Ratio Ratings (as defined in the Credit Agreement) are below BB- (with a stable outlook) or below Ba3 (with a stable outlook) (or if for any reason this category does not apply, including if the Borrower has only one Debt Rating or the Borrower does not have any Debt Rating); or

(2) 0.75%, in the case of base rate loans, and 1.75%, in the case of SOFR (or EURIBOR or SONIA) loans, if S&P and Moody's Debt First Lien Leverage Ratio Ratings are both BB- (with a stable outlook) or better and Ba3 (with a stable outlook) or better.

Beginning March 31, 2025, the term loans are repayable in quarterly installments in an amount equal to 0.25% of the original principal amount of the term loans with the balance payable at maturity, January 23, 2032.

As a result of the extended maturity date of the term loans to January 23, 2032, the Company's 2021 Revolving Credit Facility matures on September 23, 2029.

On December 12, 2025, the Company entered into Amendment No. 5 (the "Fifth Amendment") to the 2021 Credit Agreement.

Pursuant to the terms of the Fifth Amendment, the Company incurred incremental term loans in an aggregate principal amount $300.0 million, which were used to fund the Accelerated Share Repurchase ("ASR") program.

Interest Rate Swaps

In February 2025, the Company entered into two floating to fixed interest rate swap agreements (the "Swap Agreements") to reduce its exposure to the variability from future cash flows resulting from interest rate risk related to its floating rate long-term debt. Pursuant to the terms of the Swap Agreements, beginning on the effective date, July 31, 2025, the Company will pay an average fixed interest rate of 3.94% on an aggregate notional amount corresponding to borrowings of $750.0 million in exchange for receipts on the same notional amount at a floating interest rate based on the applicable SOFR at the time of payment. The Swap Agreements expire on July 31, 2027.

Accelerated Share Repurchase Program

On December 12, 2025, the Company entered into an ASR with a third-party financial institution to repurchase $300.0 million of its common stock. At inception, the Company paid the financial institution $300.0 million using proceeds from the Fifth Amendment and cash on hand, and received an initial delivery of 33,240,998 shares, which were immediately retired. The shares received were equal to 80% of the prepayment amount based on the closing price of the common stock on December 11, 2025 of $7.22 per share. The Company expects to receive additional shares upon settlement of the ASR no later than June 30, 2026.

Key Performance Measures and Operating Metrics

In addition to our GAAP and non-GAAP financial measures, we rely on Software Net Dollar Retention Rate ("Software NDR") and Software Gross Dollar Retention Rate ("Software GDR") to measure and evaluate our business and to make strategic decisions. Software NDR and Software GDR may not be comparable to or calculated in the same way as other similarly titled measures used by other companies.

Software NDR

We believe that Software NDR provides our management and our investors with insight into our ability to retain and grow revenue from our existing customers, as well as their potential long-term value to us. We also believe the results shown by this metric reflect the stability of our revenue base, which is one of our core competitive strengths. We calculate Software NDR by dividing (a) annualized software revenue recorded in the last month of the measurement period, for example, December for a quarter ending December 31, for unique billing accounts that generated revenue during the corresponding month of the prior year by (b) annualized software revenue as of the corresponding month of the prior year. The calculation includes changes for these billing accounts, such as changes in the solutions purchased, changes in pricing and transaction volume, but does not reflect revenue for new customers added. The calculation excludes: (a) changes in estimates related to the timing of one-time revenue and other revenue, including professional services, and (b) annualized software revenue for smaller customers with annualized software revenue below the threshold of $100,000 for carriers and $4,000 for shops. The customers that do not meet the revenue threshold are small carriers and shops that tend to have different buying behaviors, with a narrower solution focus, and different tenure compared to our core customers (excluded small carriers and shops represent less than 5% of total revenue within these sales channels). Our Software NDR includes carriers and shops who subscribe to our auto physical damage solutions, which account for most of the Company's revenue, and excludes revenue from smaller emerging solutions with

international subsidiaries or other ecosystem solutions, such as parts suppliers and other automotive manufacturers, and excludes CCC casualty solutions which are largely usage and professional service based.

Beginning with the quarter ended March 31, 2025, our Software NDR calculation includes EvolutionIQ's software revenue. The new calculation is a result of the acquisition of EvolutionIQ and not the result of a change in the methodology applicable to our pre-acquisition business. The calculation of Software NDR as of and following the quarter ended March 31, 2025 is consistent with the methodology described above, using Software NDR on a combined company basis for the prior year annualized software revenue to determine annualized revenue growth, and, with respect to EvolutionIQ's software revenue, excludes (a) changes in estimates related to the timing of one-time revenue and other revenue, including professional services, and (b) annualized software revenue for smaller customers with annualized software revenue below the threshold of $100,000 for carriers (with shops not applicable to the EvolutionIQ business).

Software GDR

We believe that Software GDR provides our management and our investors with insight into the value our solutions provide to our customers as represented by our ability to retain our existing customer base. We believe the results shown by this metric reflect the strength and stability of our revenue base, which is one of our core competitive strengths. We calculate Software GDR by dividing (a) annualized software revenue recorded in the last month of the measurement period in the prior year, reduced by annualized software revenue for unique billing accounts that are no longer customers as of the current period end by (b) annualized software revenue as of the corresponding month of the prior year. The calculation reflects only customer losses and does not reflect customer expansion or contraction for these billing accounts and does not reflect revenue for new customer billing accounts added. Our Software GDR calculation represents our annualized software revenue that is retained from the prior year and demonstrates that the vast majority of our customers continue to use our solutions and renew their subscriptions. The calculation excludes: (a) changes in estimates related to the timing of one-time revenue and other revenue, including professional services, and (b) annualized software revenue for smaller customers with annualized software revenue below the threshold of $100,000 for carriers and $4,000 for shops. The customers that do not meet the revenue threshold are small carriers and shops that tend to have different buying behaviors, with a narrower solution focus, and different tenure compared to our core customers (excluded small carriers and shops which represent less than 5% of total revenue within these sales channels). Our Software GDR includes carriers and shops who subscribe to our auto physical damage solutions, which account for most of the Company's revenue, and excludes revenue from smaller emerging solutions with international subsidiaries or other ecosystem solutions, such as parts suppliers and other automotive manufacturers, and excludes CCC casualty solutions which are largely usage and professional service based.

Beginning with the quarter ended March 31, 2025, our Software GDR calculation includes EvolutionIQ's software revenue. The new calculation is a result of the acquisition of EvolutionIQ and not the result of a change in methodology applicable to our pre-acquisition business. The calculation of Software GDR as of and following the quarter ended March 31, 2025 is consistent with the methodology described above, using Software GDR on a combined company basis for the prior year annualized software revenue to determine annualized revenue growth, and, with respect to EvolutionIQ's software revenue excludes (a) changes in estimates related to the timing of one-time revenue and other revenue, including professional services, and (b) annualized software revenue for smaller customers with annualized software revenue below the threshold of $100,000 for carriers (with shops not applicable to the EvolutionIQ business).

Key Factors Affecting Operating Results

The following are key factors affecting our operating results in the years ended December 31, 2025, 2024 and 2023:

Components of Results of Operations

Revenue

Revenue is derived from the sale of SaaS subscriptions and other revenue, primarily professional and other non-software services. Software subscription revenues are comprised of fees from customers for the right to use the hosted software over the contract period without taking possession of the software. These revenues are billed on either a subscription or transactional basis with subscription revenue recognized ratably over the contract period and transactional revenue recognized when the transaction for the related service occurs. We generally invoice software subscription agreements monthly either in advance or in arrears, over the subscription period. Software subscription revenue accounted for $1,013.9 million, $906.5 million and $830.1 million, or 96%, of total revenue during the years ended December 31, 2025, 2024 and 2023, respectively. We continue to expect software subscription revenue to be a high percentage of total revenue as software subscription revenue continues to be a key strategic priority.

Other revenue primarily consists of professional services and other non-software services revenue that is generally transaction-based (where a fee per transaction is charged). Revenues related to such services that are billed on a transaction basis are recognized when the transaction for the related service occurs, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services.

Costs and Expenses

Cost of Revenues

Cost of Revenues, Exclusive of Amortization and Impairment of Acquired Technologies

These costs include costs of software subscription and professional services revenue. Our cost of revenues is primarily comprised of personnel costs, including stock-based compensation and costs of external resources used in the delivery of services to customers, including software configuration, integration and implementation services, and customer support activities, third party costs related to hosting the Company's software for its customers, internal support of production infrastructure, IT security and production environment expenses, depreciation expense related to investments in new and enhanced customer solutions and platform development, and professional service, license and royalty fees paid to third parties. We expect cost of revenues, exclusive of amortization and impairment of acquired technologies, to increase in absolute dollars as we continue to hire personnel, require additional cloud infrastructure and incur data licensing and royalty fees in support of our revenue growth.

Amortization of Acquired Technologies

We amortize to cost of revenues the capitalized costs of technologies acquired in connection with business acquisitions.

Impairment of Acquired Technologies

Impairment of acquired technologies consists of the impairment charges recognized on our China reporting unit's acquired technologies intangible assets.

Operating expenses

Operating expenses are categorized as follows:

Research and Development

Our research and development expenses consist primarily of personnel-related costs, including stock-based compensation, and costs of external development resources involved in the engineering, design and development of new solutions, as well as expenses associated with

significant ongoing improvements to existing solutions. Research and development expenses also include costs for certain IT expenses supporting development environments.

We capitalize research and development costs associated with the software development of our new and enhanced customer solutions and platform development. Research and development costs, other than software development costs qualifying for capitalization, are expensed as incurred.

We expect research and development expenses to increase in absolute dollars as we continue to dedicate substantial resources to develop, improve and expand the functionality of our solutions.

Selling and Marketing

Our selling and marketing expenses consist primarily of personnel-related costs for our sales and marketing functions, including sales commissions and stock-based compensation. Additional expenses include advertising costs, marketing costs and event costs, including the Company's annual industry conference.

We expect our selling and marketing expenses to increase in absolute dollars as we continue to increase investments to support the growth of our business.

General and Administrative

Our general and administrative expenses consist primarily of personnel-related costs, including stock-based compensation, for our executive management and administrative employees, including finance and accounting, human resources, internal systems IT, facilities and legal functions. Additional expenses include professional service fees, insurance premiums, and other corporate expenses that are not allocated to the above expense categories.

We expect our general and administrative expenses to increase in absolute dollars as we continue to expand our operations, hire additional personnel, and incur costs to support the growth of our business.

Amortization of Intangible Assets

Our amortization of intangible assets consists of the capitalized costs of customer relationships in connection with business acquisitions.

Non-operating income (expense)

Non-operating income (expense) is categorized as follows:

Interest Expense

Interest expense comprises interest incurred on our indebtedness (Note 15), and the Promissory Note to a minority investor (Note 18). We expect interest expense to vary each reporting period depending on the amount of outstanding indebtedness and prevailing interest rates.

Interest Income

Interest income comprises interest earned on our cash and cash equivalents balances. We expect interest income to vary each reporting period depending on the amount of our balances in interest bearing accounts and prevailing interest rates.

Change in Fair Value of Warrant Liabilities

Change in fair value of warrant liabilities comprises fair value adjustments of the private warrants assumed in connection with the Business Combination. In May 2024, we redeemed all of our outstanding private warrants and none were outstanding as of December 31, 2024. As all outstanding private warrants were redeemed in May 2024, no gain or loss on remeasurement of the private warrants was recognized for the year ended December 31, 2025.

Other (Expense) Income-Net

Other (expense) income-net consists primarily of changes in fair value of our interest rate swap and cap derivative instruments and income received from our interest rate swap and cap derivative instruments, as well as foreign currency transaction gains and losses related to the impact of transactions denominated in a foreign currency.

Income Tax Provision

Income tax provision consists of U.S. federal and state income taxes and income taxes in certain foreign jurisdictions in which we conduct business. Earnings from our non-U.S. activities are subject to local country income tax and may be subject to current U.S. income tax. Due to cumulative losses, we maintain a full valuation allowance for deferred tax assets in foreign jurisdictions. We expect to maintain this full valuation allowance for the foreseeable future.

Results of Operations

Comparison of Fiscal Year Ended December 31, 2025 to Fiscal Year Ended December 31, 2024

NM-Not Meaningful

(1) Includes stock-based compensation expense as follows (in thousands):

Revenues

Revenue increased by $112.2 million to $1,057.0 million, or 11.9%, for the year ended December 31, 2025, compared to the year ended December 31, 2024. The increase in revenue was primarily a result of 5% growth from existing customer upgrades and expanding solution offerings to these existing customers, 4% growth as a result of the acquisition of EvolutionIQ, and 3% growth from new customers.

Cost of Revenues

Cost of revenues increased by $49.2 million to $280.2 million, or 21.3%, for the year ended December 31, 2025, compared to the year ended December 31, 2024.

Cost of Revenues, Exclusive of Amortization and Impairment of Acquired Technologies

Cost of revenues, exclusive of amortization and impairment of acquired technologies, increased $40.7 million to $262.7 million, or 18.3%, for the year ended December 31, 2025, compared to the year ended December 31, 2024. The increase was primarily due to a $15.9 million

increase in depreciation expense related to investments in new and enhanced customer solutions and platform development, $9.5 million increase in third party fees and direct costs associated with our revenue growth, a $8.1 million increase in personnel-related costs, including stock-based compensation, and a $8.3 million increase in IT related costs.

Amortization of Acquired Technologies

Amortization of acquired technologies was $17.5 million and $9.0 million for the years ended December 31, 2025 and 2024, respectively. The increase was primarily due to amortization recognized on acquired technologies as part of the acquisition of EvolutionIQ in January 2025, partially offset by certain acquired technology intangible assets reaching the end of their useful life in April 2024.

Gross Profit

Gross profit increased by $63 million to $776.8 million, or 8.8%, for the year ended December 31, 2025, compared to the year ended December 31, 2024. Our gross profit margin was 73.5% for the year ended December 31, 2025 compared to 75.6% for the year ended December 31, 2024. The increase in gross profit reflects higher software subscription revenues and enhanced economies of scale from fixed cost arrangements, including contributions from the January 2025 EvolutionIQ acquisition. These factors were partially offset by an increase in cost of revenue.

Research and Development

Research and development expense increased by $26 million to $227.5 million, or 12.9%, for the year ended December 31, 2025, compared to the year ended December 31, 2024. The increase was primarily due to a $46.1 million increase in personnel-related costs, including a $9.9 million increase in stock-based compensation, primarily due to the acquisition of EvolutionIQ in January 2025, partially offset by a $10.0 million decrease in IT related costs, a $9.2 million increase in the amount of capitalized time on new and enhanced customer solutions and platform development, and a $0.8 million decrease in consulting and professional service costs.

Selling and Marketing

Selling and marketing expense increased by $32.6 million to $174.8 million, or 22.9%, for the year ended December 31, 2025, compared to the year ended December 31, 2024. The increase was primarily due to a $27.5 million increase in personnel-related costs, including a $16.1 million increase in stock-based compensation, primarily due to the acquisition of EvolutionIQ in January 2025, and a $3.1 million increase in consulting and professional service costs.

General and Administrative

General and administrative expense decreased by $11.6 million to $206.6 million, or -5.3%, for the year ended December 31, 2025, compared to the year ended December 31, 2024. The decrease was primarily due to a $23.5 million decrease in stock-based compensation, partially offset by a $7.1 million increase in personnel-related costs, a $1.7 million increase in IT related costs, a $1.5 million increase in office rent, primarily due to the acquisition of EvolutionIQ in January 2025, and a $1.5 million increase in other business taxes.

Amortization of Intangible Assets

Amortization of intangible assets was $74.0 million and $71.8 million for the years ended December 31, 2025 and 2024, respectively. The increase in amortization of intangible assets was due to the intangible assets recognized as part of the acquisition of EvolutionIQ in January 2025.

Interest Expense

Interest expense increased by $6.4 million to $71.0 million, or 9.9%, for the year ended December 31, 2025, compared to the year ended December 31, 2024. The increase was due to interest incurred on the Promissory Note Payable by CCC Cayman and its subsidiaries issued to a minority investor in May 2025 and interest incurred on an additional $225.0 million term loan as part of the third amendment for the 2021 Credit Agreement, entered into in January 2025, partially offset by lower variable interest rates during the year ended December 31, 2025, compared to the year ended December 31, 2024.

Interest Income

Interest income decreased $7.3 million to $4.9 million for the year ended December 31, 2025. The decrease was due to lower average balances within interest bearing accounts and money market funds during the year ended December 31, 2025.

Other (Expense) Income-Net

For the year ended December 31, 2025, we incurred other expense-net of $6.2 million, compared to other income-net of $2.2 million for the year ended December 31, 2024. The change was primarily attributable to a $5.4 million reduction in income from derivative instruments and a $3.2 million change in the fair value of derivative instruments.

Income Tax Provision

Income tax provision is $19.8 million for the year ended December 31, 2025, compared to $13.1 million for the year ended December 31, 2024. The income tax provision for the year ended December 31, 2025 was due to the Company's taxable income, after the effect of

permanent differences related to stock-based compensation expense. The income tax provision for the year ended December 31, 2024 was primarily due to the Company's pretax income.

Comparison of Fiscal Year Ended December 31, 2024 to Fiscal Year Ended December 31, 2023

Refer to Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations located in our Annual Report on Form 10-K for the year ended December 31, 2024, filed on February 25, 2025, for the discussion of the comparison of the year ended December 31, 2024 to the year ended December 31, 2023, the earliest of the three fiscal years presented in the consolidated financial statements.

Non-GAAP Financial Measures

In addition to our results determined in accordance with GAAP, we believe that Adjusted Gross Profit, Adjusted Operating Expenses, Adjusted Operating Income, Adjusted EBITDA, Adjusted Net Income and Adjusted Earnings Per Share, and Free Cash Flow, which are each non-GAAP measures, are useful in evaluating our operational performance. We use this non-GAAP financial information to evaluate our ongoing operations and for internal planning, budgeting and forecasting purposes and setting management bonus programs. We believe that non-GAAP financial information, when taken collectively with GAAP measures, may be helpful to investors in assessing our operating performance and comparing our performance with competitors and other comparable companies, which may present similar non-GAAP financial measures to investors. Our computation of these non-GAAP measures may not be comparable to other similarly titled measures computed by other companies, because all companies may not calculate these measures in the same fashion. We endeavor to compensate for the limitation of the non-GAAP measure presented by also providing the most directly comparable GAAP measure and a description of the reconciling items and adjustments to derive the non-GAAP measure. These non-GAAP measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using non-GAAP measures on a supplemental basis.

Adjusted Gross Profit

We believe that Adjusted Gross Profit, as defined below, provides meaningful supplemental information regarding our performance by excluding certain items that may not be indicative of our recurring core business operating results. Adjusted Gross Profit is defined as gross profit adjusted for amortization of acquired technologies, stock-based compensation and related employer payroll tax and impairment of acquired technologies. The Adjusted Gross Margin is defined as Adjusted Gross Profit divided by Revenue.

The following table reconciles Gross Profit to Adjusted Gross Profit for the years ended December 31, 2025, 2024 and 2023:

Adjusted Operating Expenses

We believe that Adjusted Operating Expenses, as defined below, provides meaningful supplemental information regarding our performance by excluding certain items that may not be indicative of our recurring core business operating results. Adjusted Operating Expenses is defined as operating expenses adjusted for amortization of intangible assets, stock-based compensation expense and related employer payroll tax, costs associated with the acquisition and integration of completed and potential mergers and acquisitions ("M&A"), litigation proceeds (costs), net

and costs in legal matters in which we were the plaintiff and related antitrust matters, equity transaction and related costs, including secondary offering costs, debt refinancing costs, change in fair value of contingent consideration and goodwill and intangible asset impairment charges.

The following table reconciles operating expenses to Adjusted Operating Expenses for the years ended December 31, 2025, 2024 and 2023:

Adjusted Operating Income

We believe that Adjusted Operating Income, as defined below, provides meaningful supplemental information regarding our performance by excluding certain items that may not be indicative of our recurring core business operating results. Adjusted Operating Income is defined as operating income (loss) adjusted for amortization, stock-based compensation expense and related employer payroll tax, costs associated with the acquisition and integration of completed and potential M&A, litigation (proceeds) costs, net and costs in legal matters in which we are the plaintiff and related antitrust matters, equity transaction and related costs, including secondary offering costs, debt refinancing costs, change in fair value of contingent consideration and goodwill and intangible asset impairment charges.

The following table reconciles operating income (loss) to Adjusted Operating Income for the years ended December 31, 2025, 2024 and 2023:

Adjusted EBITDA

We believe that Adjusted EBITDA, as defined below, is useful in evaluating our operational performance distinct and apart from financing costs, certain expenses that may not be indicative of our recurring core business operating results and non-operational expenses. Adjusted EBITDA is defined as net income (loss) adjusted for interest, taxes, amortization, depreciation, stock-based compensation expense and related employer payroll tax, costs associated with the acquisition and integration of completed and potential M&A, litigation (proceeds) costs, net and costs in legal matters in which we are the plaintiff and related antitrust matters, equity transaction and related costs, including secondary offering costs, change in fair value of derivative instruments, income from derivative instruments, debt refinancing costs, change in fair value of contingent consideration, change in fair value of warrant liabilities, goodwill and intangible asset impairment charges. Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by Revenue.

The following table reconciles net income (loss) to Adjusted EBITDA for the years ended December 31, 2025, 2024 and 2023:

Adjusted Net Income and Adjusted Earnings Per Share

We believe that Adjusted Net Income, as defined below, and Adjusted Earnings Per Share are useful in evaluating our operational performance distinct and apart from certain expenses that may not be indicative of our recurring core business operating results. Adjusted Net Income is defined as net income (loss) adjusted for the after-tax effects of amortization, stock-based compensation expense and related employer payroll tax, costs associated with the acquisition and integration of completed and potential M&A, litigation (proceeds) costs, net and costs in legal matters in which we are the plaintiff and related antitrust matters, equity transaction and related costs, including secondary offering costs, change in fair value of derivative instruments, debt refinancing costs change in fair value of contingent consideration, change in fair value of warrant liabilities and goodwill and intangible asset impairment charges.

The following table reconciles net income (loss) to Adjusted Net Income and Adjusted Earnings per Share for the years ended December 31, 2025, 2024 and 2023.

Free Cash Flow

We believe that Free Cash Flow, as defined below, provides meaningful supplemental information regarding our ability to generate cash and fund our operations and capital expenditures. Free Cash Flow is defined as net cash provided by operating activities less cash used for the purchases of software, equipment and property.

The following table reconciles net cash provided by operating activities to Free Cash Flow for the years ended December 31, 2025, 2024 and 2023:

Liquidity and Capital Resources

We have financed our operations with cash flows from operations. The Company generated $315.5 million of cash flows from operating activities for the year ended December 31, 2025. As of December 31, 2025, the Company had cash and cash equivalents of $111.2 million and a working capital surplus of $101.0 million. As of December 31, 2025, the Company had an accumulated deficit totaling $1,695.1 million and $1,291.0 million principal outstanding on our term loan.

We believe that our existing cash and cash equivalents, our cash flows from operating activities and our borrowing capacity under our 2021 Revolving Credit Facility will be sufficient to fund our operations, fund required long-term debt repayments and meet our commitments for capital expenditures for at least the next twelve months.

We are not currently a party to any material definitive agreement regarding potential investments in, or acquisitions of, complementary business, applications or technologies. However, we may enter into these types of arrangements, which could reduce our cash and cash equivalents or require us to seek additional equity or debt financing. Additional funds from financing arrangements may not be available on terms favorable to us or at all. We may require additional borrowings under our credit arrangements and alternative forms of financings or investments to achieve our longer-term strategic plans.

Debt

On September 21, 2021, CCC Intelligent Solutions Inc., an indirect wholly owned subsidiary of the Company, together with certain of the Company's subsidiaries acting as guarantors entered into a credit agreement (as amended, the "2021 Credit Agreement").

2021 Credit Agreement- The 2021 Credit Agreement originally consisted of an $800.0 million term loan, the proceeds of which, with cash on hand were used to repay all outstanding borrowings under the Company's previous credit agreement. The 2021 Credit Agreement also includes a revolving credit facility ("2021 Revolving Credit Facility") for an aggregate principal amount of $250.0 million. The 2021 Revolving Credit Facility has a sublimit of $75.0 million for letters of credit.

2024 Refinancing - In September 2024, the Company entered into Amendment No. 2 to the 2021 Credit Agreement (the "Second Amendment") to (i) remove the secured overnight financing rate ("SOFR") credit adjustment applicable to the 2021 Revolving Credit Facility and (ii) reduce the applicable interest rate for the 2021 Revolving Credit Facility by 0.25%. Additionally, the maturity date for the 2021 Revolving Credit Facility was extended to September 23, 2029, subject to a springing maturity date of June 22, 2028 if greater than $234.0 million of the initial Term Loan B remains outstanding as of such date.

At the time of entering into the 2021 Credit Agreement, the Company incurred $3.1 million in financing costs related to the 2021 Revolving Credit Facility. The Company incurred $0.7 million in financing costs related to the Second Amendment. These costs were recorded to a deferred financing fees asset account and are being amortized to interest expense over the term of the 2021 Revolving Credit Facility. As of December 31, 2025 and December 31, 2024, the deferred financing fees asset balance was $1.4 million and $1.7 million, respectively.

2025 Additional Borrowing and Refinancing - On January 6, 2025, in conjunction with the acquisition of EvolutionIQ (Note 3), the Company entered into the Third Amendment to the 2021 Credit Agreement that provided the Company with incremental term loans in an aggregate principal amount of $225.0 million (the "Incremental Term Loans"). Immediately after the Third Amendment, the Incremental Term Loans were repayable in quarterly installments in an amount equal to 0.25% of the original principal amount, with the balance payable at maturity, September 21, 2028.

Immediately after the Third Amendment, the interest rate per annum applicable to the Incremental Term Loans were based on a fluctuating rate of interest, determined by the Company's leverage ratio, as defined in the 2021 Credit Agreement. In connection with the Fourth Amendment (as defined below), the Incremental Term Loans were refinanced together with other term loans outlined in the following paragraphs.

On January 23, 2025, the Company entered into the Fourth Amendment to the 2021 Credit Agreement.

Pursuant to the terms of the Fourth Amendment, (i) the Company incurred incremental term loans in an aggregate principal amount of $225.0 million, which were used to refinance certain outstanding incremental term loans (including the Incremental Term Loans), (ii) the maturity of

all term loans under the 2021 Credit Agreement was extended to January 23, 2032, (iii) the credit spread adjustment applicable to SOFR loans under the 2021 Credit Agreement was removed, and (iv) interest rate margin applicable to all term loans under the 2021 Credit Agreement was removed.

On December 12, 2025, the Company entered into the Fifth Amendment to the 2021 Credit Agreement.

Pursuant to the terms of the Fifth Amendment, the Company incurred incremental term loans in an aggregate principal amount $300.0 million, which were used to fund the ASR program (Note 19).

All other terms and conditions within the Company's 2021 Credit Agreement were unchanged as part of the Amendments.

Upon execution of the Fifth Amendment, the Company had outstanding borrowings under all term loans under the 2021 Credit Agreement of $1,291 million (the "Term Loan") and a revolving credit facility for an aggregate principal amount of $250.0 million (the "2021 Revolving Credit Facility" and together with the Term Loan, the "2021 Credit Facilities").

The Company incurred $6.5 million in costs related to the Third Amendment and Fourth Amendment, recorded as contra debt. The Company incurred $1.2 million in costs related to the Fifth Amendment, recorded as contra debt. These costs are being amortized to interest expense over the term of the Term Loan using the effective interest method.

The Term Loan requires quarterly principal payments of $3.3 million until December 31, 2031, with the remaining outstanding principal amount required to be paid on the maturity date, January 23, 2032. If the Company's leverage ratio, as defined in the 2021 Credit Agreement is greater than 3.5, the Term Loan requires a prepayment of principal, subject to certain exceptions, in connection with the receipt of proceeds from certain asset sales, casualty events, and debt issuances by the Company, and up to 50% of annual excess cash flow, as defined in and as further set forth in the 2021 Credit Agreement. When a principal prepayment is required, the prepayment offsets the future quarterly principal payments of the same amount. As of December 31, 2025 and 2024, the Company's leverage ratio did not exceed the 3.5 threshold and the Company was not subject to the annual excess cash flow calculation, and as such, not required to make a prepayment of principal.

As of December 31, 2025 and 2024, the amount outstanding on the Term Loan is $1,291.0 million and $776.0 million, respectively, of which $13.0 million and $8.0 million, respectively, is classified as current in the accompanying consolidated balance sheets.

Borrowings under the 2021 Credit Facilities bore interest at rates based on the ratio of CCC Intelligent Solutions Inc. and certain of its subsidiaries' consolidated first lien net indebtedness to consolidated EBITDA for applicable periods specified in the 2021 Credit Agreement.

From and after the Fourth Amendment, the interest rate per annum applicable to the Term Loan is based on a fluctuating rate of interest equal to the sum of an applicable rate and, at the Company's election from time to time, either:

(1) 1.00% in the case of base rate loans, and 2.00%, in the case of SOFR (or the Euro Interbank Offer Rate ("EURIBOR") or the Sterling Overnight Indexed Average ("SONIA")) loans, if S&P and Moody's Debt First Lien Leverage Ratio Ratings (as defined in the Credit Agreement) are below BB- (with a stable outlook) or below Ba3 (with a stable outlook) (or if for any reason this category does not apply, including if the Borrower has only one Debt Rating or the Borrower does not have any Debt Rating); or

(2) 0.75%, in the case of base rate loans, and 1.75%, in the case of SOFR (or EURIBOR or SONIA) loans, if S&P and Moody's Debt First Lien Leverage Ratio Ratings are both BB- (with a stable outlook) or better and Ba3 (with a stable outlook) or better.

Prior to the Fourth Amendment, the interest rate per annum applicable to the loans is based on a fluctuating rate of interest equal to the sum of an applicable rate and term SOFR (or EURIBOR or SONIA) with a term, as selected by the Company, of one, three or six months (subject to (x) in the case of term loans, a 0.50% per annum floor and (y) in the case of revolving loans, a 0.00% per annum floor).

A quarterly commitment fee of up to 0.50% is payable on the unused portion of the 2021 Revolving Credit Facility.

During the years ended December 31, 2025, 2024, and 2023, the weighted-average interest rate on the outstanding borrowings under the Term B Loan was 6.2%, 7.6% and 7.5%, respectively.

As of December 31, 2025 and December 31, 2024, the Company has an outstanding standby letter of credit for $1.1 million and $0.7 million, respectively, which reduces the amount available to be borrowed under the 2021 Revolving Credit Facility. As of December 31, 2025 and 2024, $248.9 million and $249.3 million, respectively, was available to be borrowed.

Borrowings under the 2021 Credit Agreement are guaranteed by Cypress Holdings Intermediate Holdings II, LLC., and certain of its US subsidiaries by a perfected first priority lien on the stock of CCC Intelligent Solutions Inc., and substantially all of its assets, subject to various limitations and exceptions.

The 2021 Credit Agreement contains representations and warranties, and affirmative and negative covenants, that among other things, restrict, subject to certain exceptions, our ability to: incur additional indebtedness, incur liens, engage in mergers, consolidations, liquidations or dissolutions; pay dividends and distributions on, or redeem, repurchase or retire our capital stock; and make certain investments, acquisitions, loans, or advances.

The terms of the 2021 Credit Agreement include a financial covenant which requires that, at the end of each fiscal quarter, if the aggregate amount of borrowings under the 2021 Revolving Credit Facility exceeds 35% of the aggregate commitments of the Company, the leverage ratio of CCC Intelligent Solutions Inc. and certain of its subsidiaries cannot exceed 6.25 to 1.00. Borrowings under the 2021 Revolving Credit Facility did not exceed 35% of the aggregate commitments and the Company was not subject to the leverage test as of December 31, 2025 and 2024.

Interest Rate Caps-In August 2022, the Company entered into two interest rate cap agreements to reduce its exposure to increases in interest rates applicable to its floating rate long-term debt. The interest rate cap agreements had an aggregate notional amount of $600.0 million and a one-month SOFR cap rate of 4.00%.

The fair value of the interest rate cap agreements was estimated using inputs that were observable or that could be corroborated by observable market data and therefore, was classified within Level 2 of the fair value hierarchy as of December 31, 2024. The Company did not designate its interest rate cap agreements as hedging instruments and records the changes in fair value within earnings. As of December 31, 2025, the interest rate cap agreements had no fair value within the accompanying consolidated balance sheet. The interest rate cap agreements expired in July 2025.

Cash received related to the interest rate cap agreements was $1.4 million, $7.2 million, and $6.5 million for the years ended December 31, 2025, 2024, and 2023, respectively, recorded within other (expense) income-net on the consolidated statement of operations and comprehensive income (loss).

Interest Rate Swaps-In February 2025, the Company entered into three interest rate swap agreements (the "Swaps") to reduce its exposure to variability from future cash flows resulting from interest rate risk related to its floating rate long-term debt. Pursuant to the terms of the Swaps, beginning on July 31, 2025, the Company will pay an average fixed interest rate of 3.94% on an aggregate notional amount corresponding to borrowings of $750.0 million in exchange for receipts on the same notional amount at a floating interest rate based on the applicable SOFR at the time of payment. The Swaps expire on July 31, 2027.

The fair value of the interest rate swap agreements was estimated using inputs that were observable or that could be corroborated by observable market data and therefore, was classified within Level 2 of the fair value hierarchy as of December 31, 2025. The Company does not designate its interest rate swap agreements as hedging instruments and records the changes in fair value within earnings. As of December 31, 2025, the aggregate fair value of the Swaps was a liability of $7.4 million (see Note 5).

Net cash received related to the Swaps was $0.4 million for the years ended December 31, 2025, recorded within other (expense) income-net on the consolidated statement of operations and comprehensive income (loss).

Contractual Obligations and Commitments

Our estimated future contractual obligations and commitments as of December 31, 2025 consist of:

Refer to Note 6 "Income Taxes," Note 10 "Leases," Note 15 "Long-Term Debt," Note 16 "Long-Term Licensing Agreement," and Note 23 "Commitments" to our consolidated financial statements included in this Annual Report on Form 10-K for more information regarding our material contractual obligations and commitments.

Cash Flows

The following table provides a summary of cash flow data for the years ended December 31, 2025, and 2024:

2025

Net cash provided by operating activities was $315.5 million for the year ended December 31, 2025. Net cash provided by operating activities consists of net income of $1.7 million, adjusted for $356.8 million of non-cash items, $(32.0) million for changes in working capital and $(11.0) million for the effect of changes in other operating assets and liabilities. Significant non-cash adjustments include stock-based compensation expense of $175.4 million, depreciation and amortization of $150.3, change in fair value of derivative instruments of $8.4 million and deferred income tax benefits of $18.5 million. The change in working capital was primarily a result of a $30.1 million increase in accounts receivable due to revenue growth and the timing of payments, a $25.9 million change in income taxes due to timing of payments, partially offset by a $12.1 million increase in accounts payable, a $8.1 million increase in accrued expenses and costs and a $6.4 million increase in deferred revenue.

Net cash used in investing activities was $471.4 million for the year ended December 31, 2025. Net cash used in investing activities was due to $410.4 million used for the acquisition of EvolutionIQ and $61.0 million of capitalized internally developed software projects and purchases of software, equipment, and property.

Net cash used in financing activities was $132.1 million for the year ended December 31, 2025. Net cash used by financing activities was primarily due to $600.6 million for the repurchase of common stock, $48.5 million of payments for employee tax liabilities related to the net

share settlement of employee equity awards, $10.0 million of principal payments of long-term debt, and $7.7 million of payments for fees associated with a debt modifications, partially offset by $525.0 million of incremental term loans used for the acquisition of EvolutionIQ and the Accelerated Share Repurchase program, $5.0 million of proceeds from the issuance of stock under the employee stock purchase plan, and $4.7 million of proceeds from stock option exercises.

2024

Net cash provided by operating activities was $283.9 million for the year ended December 31, 2024. Net cash provided by operating activities consists of net income of $31.2 million, adjusted for $257.6 million of non-cash items, $(7.3) million for changes in working capital and $2.3 million for the effect of changes in other operating assets and liabilities. Significant non-cash adjustments include stock-based compensation expense of $171.0 million, depreciation and amortization of $123.7, change in fair value of warrant liabilities of $(14.3) million, change in fair value of derivative instruments of $5.2 million and deferred income tax benefits of $(30.5) million. The change in working capital was primarily a result of a $7.1 million change in income taxes due to timing of payments, a $4.5 million increase in deferred contract costs due to amounts deferred on new contracts and a $4.2 million increase in accounts receivable due to revenue growth, partially offset by a $4.3 million decrease in other current assets due to timing of payments for prepaid and other deferred costs and an increase in accounts payable of $2.1 million.

Net cash used in investing activities was $53.0 million for the year ended December 31, 2024. Net cash used in investing activities was due to purchases of software, equipment and property, primarily from capitalized time on new and enhanced customer solutions and platform development.

Net cash used in financing activities was $27.3 million for the year ended December 31, 2024. Net cash used in financing activities was primarily due to $57.8 million of payments for employee tax liabilities related to the net share settlement of employee equity awards and $8.0 million of long-term debt payments, partially offset by $33.5 million of proceeds from stock option exercises and $5.7 million of proceeds from shares purchased through the Company's Employee Stock Purchase Plan.

Recent Accounting Pronouncements

See Note 2 to our audited consolidated financial statements for more information about recent accounting pronouncements, the timing of their adoption, and our assessment, to the extent we have made one, of their potential impact on our financial condition and our results of operations.

Critical Accounting Estimates

Our consolidated financial statements are prepared in accordance with GAAP. The preparation of these financial statements requires our management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenue, costs, and expenses and related disclosures. Our estimates are based on our historical experience, trends and various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these judgments and estimates under different assumptions or conditions and any such differences may be material.

For information on our significant accounting policies, see Note 2 to our audited consolidated financial statements.

We believe the following critical accounting policies affect our most significant judgments and estimates used in preparation of our consolidated financial statements:

Revenue Recognition

Revenue recognition requires judgment and the use of estimates. The Company generates revenue from subscription-based contracts that are billed either on a subscription or transactional basis. Revenue is derived from the sale of SaaS subscriptions, and other revenue, primarily professional and non-software services.

The estimates and assumptions requiring significant judgment under our revenue recognition policy in accordance with Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers, are as follows:

Determine the transaction price

The transaction price is determined based on the consideration to which we expect to be entitled in exchange for services to the customer. Variable consideration is included in the transaction price if, in our judgment, it is probable that no significant future reversal of cumulative revenue under the contract will occur. The sale of our SaaS subscriptions may include variable consideration related to usage-based contracts and provisions for additional fees when the volume of a customer's transactions exceeds agreed upon maximums within defined reporting periods. We estimate variable consideration based on the most likely amount, to the extent that a significant revenue reversal is not probable to occur.

The Company may occasionally recognize an adjustment in revenue in the current period for performance obligations partially or fully satisfied in the previous periods resulting from changes in estimates for the transaction price, including any changes to the Company's assessment of whether an estimate of variable consideration is constrained. For the years ended December 31, 2025, 2024 and 2023, the impact on revenue recognized in the respective period, from performance obligations partially or fully satisfied in the previous period, was not significant.

Determine the amortizable life of contract assets

Sales commissions earned by our sales force are considered incremental and recoverable costs of obtaining a contract with a customer. Sales commissions for initial contracts are deferred and then amortized on a straight-line basis over a period of benefit that we have determined to generally be between three and five years. We determined the period of benefit by taking into consideration our customer contracts, our technology, and other factors. Most often with larger customers, a new contract or amended master agreement will not include a renewal period that requires assessment of whether the new business and renewal business commissions are commensurate. This is because the solutions and services offered as part of the new contract or amended agreement will be different from the original due to changes in technology and offerings. While the renewal period may be reached, most often a new multi-year agreement is signed that includes new services and features which will pay out a commission on the new services and features at the new business percentage and the renewal services and features at the renewal commission percentage. In situations when the renewal period is triggered, it is typically with smaller customers where the sales commission paid is insignificant. Thus, sales commissions are amortized on a systematic basis over three to five years which corresponds to the period and pattern in which revenue is recognized. Sales commissions for renewal contracts are deferred and then amortized on a straight-line basis over the related contractual renewal period. Amortization expense is included in selling and marketing expenses on the consolidated statements of operations and comprehensive income (loss).

Valuation of Goodwill and Intangible Assets

We perform an annual assessment for impairment of goodwill and indefinite-lived intangible assets each fiscal year, or whenever events occur or circumstances indicate that it is more likely than not that the fair value of a reporting unit or indefinite-lived intangible asset is below its carrying value.

The process of evaluating the potential impairment of goodwill is subjective and requires significant judgment. In estimating the fair value of a reporting unit for the purposes of our annual or periodic impairment analyses, we make estimates and significant judgments about the future cash flows of that reporting unit. These estimates of future cash flows are dependent on internal forecasts and determination of the Company's weighted average cost of capital, which is risk-adjusted to reflect the specific risk profile of the reporting unit. Our cash flow forecasts are based on assumptions that represent the highest and best use for our reporting units. Changes in judgment on these assumptions and estimates could result in goodwill impairment charges. We believe that the assumptions and estimates utilized are appropriate based on the information available to management.

We have three reporting units, Domestic, EvolutionIQ, and China, for purposes of analyzing goodwill.

For the Domestic reporting unit, the Company performed a quantitative goodwill impairment assessment as of November 30, 2025. The fair value of the reporting unit exceeded its carrying value, and no impairment was recorded. For the years ended December 31, 2024, and December 31, 2023, the Company performed a qualitative assessment as of November 30, for its Domestic reporting unit's goodwill and trademark indefinite life intangible assets. For the qualitative analysis, the Company assessed several events and circumstances that could affect the significant inputs used to determine the fair values of the reporting unit and trademarks, including the significance of the amount of excess fair value over carrying value, consistency of operating margins and cash flows, budgeted-to-actual performance from prior year, overall change in economic climate, changes in the industry and competitive environment, key management turnover, and earnings quality and sustainability. There were no unanticipated changes or negative indicators in the above qualitative factors that would impact the fair values as of the annual impairment date. As such, the Company determined there were no indicators of impairment and that it is more likely than not that the fair value of the reporting unit and trademarks are greater than their carrying values and therefore performing the next step of the impairment test was unnecessary.

For the EvolutionIQ reporting unit, which was acquired in January 2025, the Company performed a quantitative goodwill impairment assessment as of November 30, 2025. The fair value of the reporting unit exceeded its carrying value, and no impairment was recorded. No goodwill impairment assessments were required for EvolutionIQ in 2024 or 2023, as the acquisition occurred in 2025.

During May 2023, as a result of adverse macroeconomic impacts due to changes in market conditions and increases in interest rates, which contributed to downward revisions to future projected earnings and cash flows, we performed an interim quantitative goodwill test of our China reporting unit. As a result of our quantitative impairment test, we determined the fair value of our China reporting unit was less than its carrying value and we recorded a goodwill impairment charge of $77.4 million during the year ended December 31, 2023.

If management's estimates of future operating results change or if there are changes to other assumptions due to these factors, the estimate of the fair value may change significantly. Such change could result in impairment charges in future periods, which could have a significant impact on our operating results and financial condition.

Intangible assets with finite lives are amortized over their estimated useful life on a straight-line basis. We monitor conditions related to these assets to determine whether events and circumstances warrant a revision to the remaining amortization period. We test these assets for potential impairment whenever our management concludes events or changes in circumstances indicate that the carrying amount may not be recoverable. The original estimate of an asset's useful life and the impact of an event or circumstance on either an asset's useful life or carrying value involve significant judgment regarding estimates of the future cash flows associated with each asset.

There was no impairment charge recorded during the years ended December 31, 2025 and 2024. During the year ended December 31, 2023, the Company recorded an impairment charge to its China reporting unit's customer relationships and acquired technologies intangible assets.

The Company's forecast of the China reporting unit's expected cash flows indicated the carrying amounts of the intangible assets were not recoverable and therefore the Company recorded an impairment charge of $5.3 million.

Stock-based Compensation

The Company accounts for stock-based compensation plans in accordance with ASC 718, Compensation-Stock Compensation, which requires the recognition of expense measured based on the grant date fair value of the stock-based awards. Our stock-based awards include stock options, restricted stock units ("RSUs"), restricted stock awards ("RSAs"), and shares issued through our employee stock purchase program. Stock-based payment awards that are settled in cash are accounted for as liabilities. Our stock-based awards have service-based vesting, performance-based vesting and performance-based vesting subject to a market condition.

The grant date fair value of our service-based awards, excluding RSUs and RSAs, is determined using the Black-Scholes option-pricing model. The fair value of each service-based and performance-based RSU is determined using the fair value of the underlying common stock on the date of grant. The fair value of each award with performance-based vesting subject to a market condition is determined using a Monte Carlo simulation model.

For stock-based awards with only service conditions, we recognize stock-based compensation expense on a straight-line basis over the requisite service period only for the portion of awards expected to vest, based on an estimated forfeiture rate. For stock-based awards with only performance conditions, we recognize stock-based compensation expense on a straight-line basis over the explicit performance period when the performance targets are probable of being achieved. As of each reporting period, we estimate the number of RSUs with a performance-based vesting component that are expected to vest based on our current estimate of performance compared to the target metrics and record a cumulative-effect adjustment to stock-based compensation expense when necessary. We recognize stock-based compensation expense on awards with performance-based vesting subject to a market condition when the performance targets are considered probable of being achieved. The determination of the grant date fair value for these awards is affected by assumptions regarding a number of complex and subjective variables, including expected stock price volatility over the expected term of the award, the risk-free interest rate for the expected term of the award and expected dividends. The market condition of these awards impacts the fair value at the grant date and is the reason the Monte Carlo simulation method is utilized to determine fair value. For stock-based awards that are accounted for as liabilities, we remeasure the fair value of the associated liability at each reporting date through settlement using the Black-Scholes option pricing model and recognize the adjustment as stock-based compensation expense.

See Note 21 to our consolidated financial statements for more information concerning certain of the specific assumptions we used in applying the Black-Scholes option pricing model and Monte Carlo simulation method to determine the estimated fair value of our stock-based awards with service vesting and performance vesting. Some of these assumptions involve inherent uncertainties and the application of significant judgment. As a result, if factors or expected outcomes change and we use significantly different assumptions or estimates, our stock-based compensation could be materially different.

Business Combinations

The results of a business acquired in a business combination are included in our consolidated financial statements as of the date of the acquisition. Purchase accounting results in assets and liabilities of an acquired business being recorded at their estimated fair values on the acquisition date. Any excess consideration over the fair value of assets acquired and liabilities assumed is recognized as goodwill.

We perform valuations of assets acquired and liabilities assumed and allocate the purchase price to the respective assets and liabilities. Determining the fair value of assets acquired and liabilities assumed requires significant judgment and estimates, including the selection of valuation methodologies, estimates of future revenue, costs and cash flows, discount rates, royalty rates, and selection of comparable companies. We engage third-party valuation specialists to assist in concluding on fair value measurements in connection with determining fair values of assets acquired and liabilities assumed in a business combination. The resulting fair values and useful lives assigned to acquisition-related intangible assets impact the amount and timing of future amortization expense.

These estimates are inherently uncertain and unpredictable, and if different estimates were used the purchase price for the acquisition could be allocated to the acquired assets and liabilities differently from the allocation that we have made. In addition, unanticipated events and circumstances may occur which may affect the accuracy or validity of such estimates, and if such events occur, we may be required to record a charge against the value ascribed to an acquired asset, an increase in the amounts recorded for assumed liabilities, or an impairment of some or all of the goodwill.

Goodwill and intangible assets recognized in connection with our acquisition of EvolutionIQ in January 2025 was $537.8 million and $167.9 million, respectively.