Please refer to our disclaimers, which can be found in the footnote of this page and here.

Contents

• Contents
• Performance
• Portfolio Discussion
• Year-End Reflections
• CCC Intelligent Solutions (”CCC”)
• Business Overview
• Business Quality & Cost of Capital
• Why do we own it?
• Strong value proposition with good innovation track record
• Dominant vertical SaaS business overlaid with network effect
• Dependable core growth with emerging upside potential
• Strong, long-tenured, aligned management team with innovation culture
• Key Risks
• Emerging solutions underperform
• Leadership succession
• Risk of a take-private
• Declining insurance claims
• Valuation
• Business Update
• Footnotes

Performance

Performance for 2025 was +12.0% gross / +9.7% net (vs. the MSCI ACWI at +22.3%). Since inception (1 Jan 2019), the portfolio has compounded at +17.9% gross / +15.2% net (vs. the MSCI ACWI at +14.0%), representing +3.9% gross (+1.2% net) annualised outperformance. The top contributors were Alphabet, Alibaba, Visa, Meta Platforms, and Microsoft. The top detractor was Charter Communications. A further material headwind relative to the MSCI ACWI was USD depreciation, with the dollar down 8% versus a global basket.

We started the quarter with 18% cash and ended with 8%. During the quarter we acquired a new position, CCC Intelligent Solutions, which we discuss below. We also added to Salesforce and Visa.

Portfolio Discussion

Year-End Reflections

Our expected investment cadence is 1 new name per year and 3-4 adjustment trades per quarter. Things were on track here in 2025. We added CCC Intelligent Solutions (see below) and sold Snowflake (discussed in our 2Q 2025 Investor Letter).

Other material portfolio changes in 2025 included:

• Selling half the Alibaba position in Q1
• Adding to various positions in the April sell-off including Alphabet, Microsoft, Block, Meta Platforms, and Salesforce
• Selling half the Alphabet position in May/June/July (though the remaining stake was still large; discussed in our 2Q 2025 Investor Letter)
• Adding to Salesforce in August and October

Overall, 2025 was frustrating in relative terms. Reflecting on the year, we feel good about our temperament and decision-making during the April sell-off, when we deployed about 9% of capital, ignoring the short-term macro noise around tariffs that we did not believe would affect the long-term prospects of our portfolio companies. It was also a good, contrarian decision to continue backing — and add to — Alphabet during this period, when market concerns around AI and the antitrust case weighed on the share price. Following the subsequent rally, we reduced the position though it remained substantial. While the stock has continued to perform, we view this as a prudent risk-management decision given its increased portfolio size and declining forward risk-reward.

What could we have done better? There is no single large mistake to highlight. Rather, a series of smaller position-sizing decisions cumulatively detracted from performance. For example, while we remain positive on Salesforce (as discussed in our previous letter) and are comfortable that we continued holding and adding to it, the position was likely too large at the start of the year given the forward return profile at that time. Charter Communications was also close to being sold in May, and in hindsight we could have exited the position then but are comfortable maintain the position at today’s valuation. We are far less worried about missing out on other stocks that drove the index. Mistakes of commission matter more to us than mistakes of omission.

CCC Intelligent Solutions (”CCC”)

We learned about CCC while underwriting Guidewire some time ago. At that time, we asked insurance customers who their most powerful suppliers were other than Guidewire. Two businesses often came up, Copart and CCC. We underwrote CCC but didn’t like the valuation. We got an opportunity recently when Advent, the former private equity sponsor, announced a sale of its stake.

Business Overview

CCC Intelligent Solutions (“CCC”) is a vertical software provider for automotive insurance claims, reducing cost and administrative complexity across the claims and repair lifecycle. It serves 300+ insurers (including 27 of the top 30), 31,000+ repair shops, 5,500+ parts suppliers, and vehicle OEMs, coordinating the interactions among them. The business is underpinned by strong network effects layered on top of traditional vertical-software moats such as high switching costs and entrenched distribution. Given the concentration of the insurance market (the top 20 insurers control ~80% of premiums), insurers are the dominant node in the network; some mandate CCC usage by repair shops. As a result, CCC processes ~75% of the ~20 million annual U.S. auto claims (≈75% repairable, 25% total loss). CCC also supports auto-related casualty claims, which represent ~10% of revenue.

CCC (originally Certified Collateral Corporation) was founded in 1980 by Howard Tullman and IPO’d in 1983. It began as an automotive data business, providing near-real-time Blue Book-style vehicle values. Dealers supplied inventory and pricing data in exchange for referrals of insured buyers. In 1989, the company was taken private in a leveraged buyout led by David M. Phillips. Under Phillips, CCC expanded into insurance claims estimation and built the first digital link between insurers and repair shops.

The business recently went public again in 2020 via a Dragoneer led SPAC transaction. We are not big fans of SPACs but the cap table has been cleaned up since then.

The current CEO, Githesh Ramamurthy, took over in 1999, after previously serving as the CTO for 7 years. Since then, the business has significantly expanded its product suite. Its solutions include:

• Insurance Solutions (48% of revenue)
• CCC provides end-to-end claims workflow (CCC Workflow) and insurance estimating (CCC Estimating), underpinned by a large, proprietary dataset that has expanded from vehicle valuation into detailed repair-cost intelligence. Its AI-driven processing tool (Estimate-STP) generates estimates from photos alone, materially reducing adjuster handling time. CCC also supports total-loss determinations through CCC Total Loss analytics.
• Casualty (~10% of total revenue): Extends similar capabilities to auto-related personal injury claims, a more complex administrative domain due to medical verification. While Mitchell remains the market leader, CCC is gaining traction, particularly in third-party claims.
• Subrogation: Manages liability recovery between first-party insurers and at-fault third-party carriers.
• The acquisition of EvolutionIQ expands CCC into disability and workers’ compensation, primarily leveraging its AI-based document intelligence capabilities.
• Repair Shop Solutions (44% revenue)
• CCC One is CCC’s cloud platform for repair shops, consolidating estimation, real-time parts pricing and availability, insurer approvals, vehicle specifications, repair workflow coordination, and payroll into a single system. CCC Build Sheets integrates diagnostic data from industry providers, while CCC Network Management connects repair shops directly with insurers.
• Ecosystem & Other (7% revenue)
• CCC’s range of ecosystem solutions allows parts suppliers, OEMs, and diagnostic service providers to connect and provide parts sales and data to the network.
• CCC also has a payments solution but, like most vertical SaaS payments businesses, it has not been successful as it cannot serve a wide enough payment set for its customers.

CCC’s revenue represents a small fraction of total claims-management spend. Approximately 80% is subscription-based and 20% is transactional revenue from from casualty, parts ordering, and smaller insurers on transaction-based contracts.

The core auto physical damage (”APD”) software business is mature, growing at mid-single digits, driven by claim frequency, severity, and complexity. Frequency has declined cyclically as higher deductibles suppress claim volumes, while severity and complexity continue to rise. Incremental growth is concentrated in casualty and emerging APD solutions and EvolutionIQ.

Business Quality & Cost of Capital

Why do we own it?

Strong value proposition with good innovation track record

At its core, CCC helps customers reduce complexity, lower manual effort, and standardise processes with measurable outcomes. Customers speak highly not only of the product but also of management and its ongoing reinvestment in the customer value proposition, in some cases citing this as a reason for selecting and remaining with CCC. While straight-through AI processing still requires improvement, customers appreciate CCC’s long-standing investment in AI and view the product roadmap as directionally sound. CCC’s high net promoter score of 80+ reflects this. Multiple customers also highlighted CCC’s collaborative approach to product development, with solutions frequently built using real-time feedback from core customers.

It would be easy for a company in such a dominant position to underinvest, particularly after extended private-equity ownership. We believe CCC’s continued investment is largely cultural, shaped by a CEO with a strong engineering background who previously served as CTO. Another contributing factor is that CCC did not win the core APD market through a single greenfield opportunity; instead, it steadily out-innovated competitors and gained share over time.

CCC’s network of repair shops and insurers, as well as other stakeholders, is a moat but it is also a core part of the customer value proposition.

Customer dissatisfaction is concentrated around newer products and pricing. For newer products, some customers felt functionality was incomplete, though most acknowledged a positive direction of travel. On pricing, CCC was slow to raise prices historically and has recently undertaken a price rationalisation, which has understandably frustrated some customers. Despite its strong market position, CCC remains cautious in exercising pricing power given its large insurer customers and their direct influence over repair shops.

Dominant vertical SaaS business overlaid with network effect

CCC holds a strong, defensible position as the market leader in APD claims management.

First, switching costs are high on both the insurer and repair-shop sides, driven by deep technical integrations and embedded business and people processes. Rebuilding these integrations and retraining staff is disruptive, costly, and typically takes six to nine months.

Second, CCC benefits from long-standing, trusted relationships, particularly with insurers. This is evident in attendance at CCC’s industry conference, which draws senior executives from nearly all major carriers. In our software experience, these relationships and entrenched go-to-market structures are difficult to replicate.

Third, CCC has amassed a large, granular dataset spanning many years of repair data. A true data moat depends on whether the data is critical, replicable, and durable. Insurers require highly accurate estimates to approve pay outs, which requires component-level repair data across most vehicles on the road, including the long-tail scenarios. CCC is uniquely positioned here, processing roughly 75% of claims, versus sub-20% for even the largest insurers. Given the long life of vehicles, this data also has longevity. That said, we are cautious on data moats: CCC’s data may be less differentiated at a state level and lacks certain valuable datasets held by OEMs.

Finally, and most compelling, CCC has built a network effect layered on top of these moats. The core participants are insurers, repair shops, parts suppliers, and OEMs. Insurers are the most critical node, given their scale and control over repair-shop selection. Once insurers adopt the platform, repair shops are strongly incentivised—and sometimes required—to follow. Insurers also benefit from broader repair-shop participation, which improves customer choice. For insurers and repair shops, the network is effectively exclusive, as the cost and complexity of maintaining multiple systems is prohibitive. Parts suppliers follow repair-shop demand; while participation is not exclusive for them, they benefit from being present where volume resides.

Given insurers’ central role, CCC has managed these relationships carefully. It has been disciplined rather than aggressive on pricing, generally taking price only where it is supported by clear value creation.

Dependable core growth with emerging upside potential

As noted above, CCC’s core business is APD claims management. Given its market dominance, incremental customer growth in the core is limited: insurer volumes are essentially flat, while repair-shop growth runs at roughly 1–2%. Core growth is therefore driven by inflation-linked pricing and cross-sell/upsell of adjacent offerings (e.g., package upgrades and casualty claims management). The strength of the platform keeps churn low at ~1–2%, largely reflecting underlying repair-shop industry churn. In our base case, we assume mid-single-digit growth for the core.

There is potential upside from the casualty business. CCC serves ~60 casualty insurers, representing ~10% of revenue today and growing around 10%. Management estimates a ~$5bn US TAM, compared with ~$10bn for US auto. Progress has been gradual due to Mitchell’s entrenched position and strong network effects, potentially even stronger than in APD. Insurers are also cautious about switching first-party casualty providers, given the risk of it being perceived as an attempt to reduce pay out estimates. While there is some overlap with APD, casualty and APD claims are largely separate operational workflows, and insurers are reluctant to over-consolidate vendors. That said, the opportunity is meaningful: around 15% of APD claims also include a casualty component, yet casualty accounts for roughly 50% of total claim pay outs due to liability exposure. Customer feedback on CCC’s third-party casualty product was positive. Feedback on first-party was mixed.

CCC’s “Emerging Solutions” account for ~4% of revenue and contribute 1–2% to annual growth. The key products are Estimate-STP, Diagnostics, and Subrogation.

Estimate-STP is an AI-driven photo-based claims automation tool. After several years of development, adoption accelerated post-GenAI. It is used in ~4% of CCC claims today by 40+ of ~300 insurance customers, with usage ranging from ~1% to ~60% of claims by customer. Feedback indicates strong interest due to material claims-processing cost savings. Customers estimate the product can handle ~30% of claim types today, but only ~15% are currently economical, varying by insurer. It underperforms on complex claims and on very simple claims (e.g. windshield damage), where human processing remains cheaper, though customers were positive on the direction of travel. CCC earns ~$15 per transaction versus $150–$200 average claims processing costs. Our base case assumes penetration rises from 4% to 30% over five years, implying $80–$90m of annual revenue.

Diagnostics enables repair shops to manage required vehicle scans within CCC’s platform. About 20% of repair shops currently use it. CCC does not perform the scans; four major diagnostics providers do, and CCC earns a toll when scans are ordered through its system. Scan penetration has increased with vehicle complexity, reaching up to ~90% for cars three years old or newer, with liability risk for shops that fail to scan. We estimate CCC earns $15–$20 per scan. While shops could go direct, insurers value CCC’s verification that repaid shops actually spent the money, and the fee is paid by diagnostics providers from their ~$150 scan revenue. If adoption reaches 30% of repair shops as the existing US vehicle fleet approaches a 90% scan rate, this represents ~$75m of high-margin annual revenue.

Subrogation automates the liability recovery process between first-party and third-party at-fault insurers, which applies to ~15% of claims. This came to CCC via an acquisition and remains early-stage. The current process is manual and document-heavy, and CCC’s solution offers clear efficiency gains. Adoption is constrained by network effects: insurers are reluctant to adopt until enough relevant counterparties are live on the platform. There are 25+ insurers on the platform today, though usage levels are unclear. CCC may need to seed adoption with large carriers at low or zero profit. At 30% penetration of subrogation claims and a 15% value capture, the opportunity is ~$80m, though we heavily discount this in our base case given limited proof points.

EvolutionIQ, acquired at 14.5x NTM revenue, brings ~$50m of revenue (~150% net retention and ~5% churn). The AI-based platform supports disability and workers’ compensation claims by recommending next-best actions, delivering meaningful time savings that customers expect to improve over time. Management expects EvolutionIQ to add 1–2% to near-term growth, with broader applicability of its technology across CCC’s platform.

Putting this all together, our base case assumes a 9% five-year CAGR: ~5% from the core business and ~4% from Emerging Solutions and EvolutionIQ. This sits at the low end of management’s updated 8–12% long-term growth target (7–10% excluding the EvolutionIQ acquisition).

Strong, long-tenured, aligned management team with innovation culture

CCC has a strong, execution-oriented leadership team with a technical, customer-centric culture. CEO Githesh Ramamurthy is consistently cited by customers and employees as a core strength. His leadership is described as empowering, humble, and high-integrity, with a strong bias toward continuous improvement and not taking the company’s position for granted. He has been with CCC since 1992, serving as CTO before becoming CEO in 1999, and owns approximately $285m of stock, creating strong shareholder alignment. His engineering background is a key driver of CCC’s technology-led culture.

Our interviews also point to a solid senior bench. CFO Brian Herb is well regarded, particularly for the reliability of his market guidance. President Tim Welsh, who joined in 2025, oversees all market-facing and service functions. He brings a management-consulting background in financial services and insurance, and was hired, in part, for his experience leading large-scale digital transformations at CCC’s customers. He is well referenced across our network.

CCC has suffered some executive turnover over the past two years, most notably the departures of CTO/CPO John Goodson and Chief Strategy Officer Marc Fredman. Both were viewed as strong leaders, and the reasons for their exits are not fully clear.

At the board level, we were initially concerned by Advent’s influence, with three seats despite owning only ~15%. However, diligence suggests Advent and prior private-equity owners have been supportive of management and investment in the business, rather than pursuing short-term margin expansion through aggressive cost cuts. Advent is now exiting its stake, which has created a buying opportunity following the share-price decline on their secondary sale announcement. The company has also taken advantage of the weakness by initiating a larger share buyback.

Overall, management has a good track record of execution and delivering against stated objectives, even where outcomes have differed from initial expectations (e.g., emerging solutions growing more slowly than forecast, but with solid execution). The main area of concern is the payments opportunity: it has underperformed and feedback suggests a low probability of success, yet management continues to position it as a meaningful long-term opportunity.

Key Risks

Emerging solutions underperform

If emerging solutions underperform, growth will slow. Our base case assumes partial success in EstimateSTP and Diagnostics, with Subrogation treated as upside only. Even if emerging solutions delivered zero growth, this would reduce the 5-year revenue CAGR by ~2pp (to sub-8%) and lower the forward IRR from ~15% to ~11%, before any multiple impact [1]. If EvolutionIQ also delivered zero growth, revenue growth would fall further to ~6% and the IRR to ~8% [1]. The core business still provides meaningful downside protection through mid-single-digit compounding.

Leadership succession

The CEO has led the company for a long time and is central to our thesis given his alignment and execution record. He is 65 today. Some potential successors have left the business, though this does not preclude a return. We are comfortable underwriting at least another five years of leadership continuity.

Risk of a take-private

CCC has a history of private ownership and, at the current valuation, it is an attractive and feasible take-private candidate. While a take-private would likely deliver a short-term premium, it would cap long-term upside. A quick ~1.3x outcome is not what we are after. We want long-term many multiples of capital.

Declining insurance claims

Industry claim volumes have recently declined; 2025 volumes are likely down ~7%. The concern is that vehicle safety improvements reduce long-term claim frequency. We see several mitigants for how this impacts revenue. First, much of the recent decline appears cyclical, driven by inflation, higher premiums, and higher excesses discouraging small claims. Over a longer horizon, the decline is modest (claims are down ~4% from 2014–2024). Second, claim frequency is only one driver; severity and complexity continue to rise. Third, only ~20% of revenue is directly linked to claims volume (e.g. a 10% decline in claims equates to a ~2% revenue headwind). We believe opportunities to expand customer value outweigh the structural risk from lower claim volumes.

Valuation

Our valuation summary is set out below, with our valuation approach detailed in our founding letter. We model businesses to a steady state (typically over five years, sometimes longer) and anchor valuation on free cash flow generation. As of 8 January 2026, our forward IRRs in the downside, base, and upside cases are ~6%, ~15%, and ~21%, respectively [1]. Relative to our cost of capital for a business of this quality, we assign a valuation score of 2 out of 3 (3 out of 3 when we purchased as the stock is up 22% since our most recent purchase).

Our base-case growth assumptions, and the impact of underperformance in Emerging Solutions and EvolutionIQ, are discussed above. The upside case assumes an additional ~2pp to the 5-year revenue CAGR from greater success in the growth initiatives and a lower claims reduction headwind, pushing growth toward the upper end of management’s long-term target range.

In the base case, we assume 5–6pp of margin expansion in both non-GAAP operating margin and free cash flow margin, driven primarily by operating leverage as the business scales. GAAP operating margin expands more meaningfully as SBC declines as a percentage of revenue. While SBC is elevated today — exacerbated by the EvolutionIQ acquisition — we see credibility in management’s plan to reduce it over time.

Overall, our base case implies FCF per share compounding at ~15%. We assume a 5.5% exit forward-FCF yield (vs. ~5.0% today), reflecting the company’s quality, growth, and margin profile at exit.

Business Update

In January 2026, I spoke at the RV Capital conference in Engelberg. Thank you to Rob Vinall and Andreas Lechner for the invitation. Over many years, they have been exceptionally generous in supporting emerging managers, beginning with Rob’s widely circulated 2014 memo that offers ten pieces of advice to would-be fund managers. Following the strong response to that memo, Rob created the conference, which has since grown into a Berkshire Hathaway–style gathering that many attendees, myself included, treat as an annual pilgrimage. I met Rob while on a trip in China and was lucky to sit next to him on the bus for a couple of hours on the way to see various companies. It was fortuitous as this community played a meaningful role in inspiring me to launch Kalakau Avenue, and I count various attendees as my friends. It was therefore an honour to participate in the emerging manager panel. See here for a replay.

Matthew Brown

Founder & Chief Investment Officer

Footnotes

[1] Refer to our disclaimers, we make no guarantees of future performance, and our projections should not be relied upon