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Duck Creek Technologies Announces First Quarter Fiscal 2023 Financial Results

PRESS RELEASE: Paid content from Globe Newswire
Press release content from Globe Newswire. The AP news staff was not involved in its creation.
January 5, 2023 GMT

  • First Quarter Fiscal 2023 Subscription revenue increased to $43.8 million, up 23% year-over-year
  • SaaS Annual Recurring Revenue (“SaaS ARR”) increased to $180.6 million, up 24% year-over-year

BOSTON, Jan. 05, 2023 (GLOBE NEWSWIRE) -- Duck Creek Technologies (NASDAQ: DCT), the intelligent SaaS solutions provider defining the future of property and casualty (“P&C”) insurance, today announced its financial results for the first quarter ended November 30, 2022.

“Duck Creek started fiscal 2023 strong, highlighted by nine SaaS wins for a variety of core and strategic insurance solutions with new and existing carrier customers of all sizes. We believe customer interest in core systems modernization will continue to be a top investment priority in the P&C industry and is viewed as essential to their success,” said Michael Jackowski, Duck Creek’s Chief Executive Officer.

Jackowski added, “We are encouraged by our recent performance and the opportunity ahead of us for the remainder of fiscal 2023. We are mindful of how fluid the macro environment is, but we are confident in Duck Creek’s ability to drive continued, profitable growth. Our recent announcement to acquire Imburse Payments is another proof point that Duck Creek is a well-positioned industry leader, enabling carriers’ digital transformation goals with modern tools.”

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First Quarter 2023 Financial Highlights

Revenue

  • Total revenue for the first quarter of fiscal year 2023 was $80.6 million, an increase of 10% from the comparable period in fiscal year 2022. Subscription revenue was $43.8 million, an increase of 23%; professional services revenue was $27.9 million, a decrease of 6%; license revenue was $1.8 million, a decrease of 7%; and maintenance and support revenue was $7.2 million, an increase of 14%.
  • SaaS ARR was $180.6 million as of November 30, 2022, an increase of 24% from the comparable period in fiscal year 2022.

Profitability

  • GAAP loss from operations was $6.6 million for the first quarter of fiscal year 2023, compared with a GAAP income from operations of $1.9 million for the comparable period in fiscal year 2022.
  • Non-GAAP income from operations was $2.6 million for the first quarter of fiscal year 2023, compared with non-GAAP income from operations of $7.1 million for the comparable period in fiscal year 2022.
  • GAAP net loss was $5.2 million for the first quarter of fiscal year 2023, compared with GAAP net income of $0.7 million for the comparable period in fiscal year 2022.
  • Non-GAAP net income was $2.6 million for the first quarter of fiscal year 2023, compared with non-GAAP net income of $4.8 million for the comparable period in fiscal year 2022.
  • GAAP net loss per share was $0.04 for the first quarter of fiscal year 2023, compared with a GAAP net earnings per share of $0.01 for the comparable period in fiscal year 2022. Basic and diluted weighted average shares outstanding were approximately 132.7 million shares for the quarter ended November 30, 2022. Basic and diluted weighted average shares outstanding were approximately 132.0 million shares and 134.2 million shares, respectively, for the quarter ended November 30, 2021.
  • Non-GAAP net earnings per share was $0.02 for the first quarter of fiscal year 2023, compared with a non-GAAP net earnings per share of $0.04 for the comparable period in the fiscal year 2022, based on fully diluted weighted average shares outstanding of approximately 137.4 million shares and 134.2 million shares, respectively.
  • Adjusted EBITDA was $3.2 million for the first quarter of fiscal 2023, compared with adjusted EBITDA of $7.8 million for the comparable period in fiscal year 2022.

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Liquidity

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  • As of November 30, 2022, Duck Creek had $263.9 million in cash, cash equivalents and short-term investments and no debt. Duck Creek used $5.9 million of cash in operating activities and had free cash flow of ($7.4) million during the first quarter of fiscal year 2023, compared with $24.6 million of cash used in operating activities and free cash flow of ($25.5) million in the comparable period in fiscal year 2022.

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The information presented above includes non-GAAP financial measures such as “non-GAAP income from operations,” “adjusted EBITDA,” “non-GAAP net income,” “non-GAAP net income per share,” and “free cash flow.” Refer to “Non-GAAP Financial Measures and Other Metrics” for a discussion of these measures and reconciliations of each non-GAAP financial measure to the most directly comparable GAAP financial measure.

Business Outlook

Duck Creek is issuing the following outlook for the second quarter of fiscal 2023 and full year of fiscal 2023 based on current expectations as of January 5, 2023:

   
  Second Quarter Fiscal 2023
Full Year Fiscal 2023
Revenue$79.5 million to $81.5 million$331.0 million to $338.0 million
Subscription Revenue$43.5 million to $44.5 million$177.0 million to $181.0 million
Adjusted EBITDA$4.0 million to $5.0 million$26.0 million to $28.0 million
Non-GAAP net (loss) income$3.0 million to $4.0 million$17.0 million to $19.0 million
Non-GAAP EPS$0.02 to $0.03$0.13 to $0.14
   
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The foregoing business outlook is a forward-looking statement. Refer to the Forward-Looking Statements safe harbor below for information on the factors that could cause actual results to differ materially from these forward-looking statements.

Conference Call Information

Duck Creek Technologies will host a conference call today, January 5, 2023, at 5:00 p.m. (Eastern Time) to discuss Duck Creek’s financial results and business outlook. A live webcast of the call will be available on the “Investor Relations” page of the Duck Creek’s website at https://ir.duckcreek.com/. To access the call by phone, please go to this link ( registration link ), and you will be provided with dial in details. To avoid delays, we encourage participants to dial into the conference call fifteen minutes ahead of the scheduled start time. A replay of the webcast will also be available for a limited time at https://ir.duckcreek.com/.

About Duck Creek Technologies

Duck Creek Technologies (NASDAQ: DCT) is the intelligent solutions provider defining the future of the property and casualty (P&C) and general insurance industry. We are the platform upon which modern insurance systems are built, enabling the industry to capitalize on the power of the cloud to run agile, intelligent, and evergreen operations. Authenticity, purpose, and transparency are core to Duck Creek, and we believe insurance should be there for individuals and businesses when, where, and how they need it most. Our market-leading solutions are available on a standalone basis or as a full suite, and all are available via Duck Creek OnDemand. Visit www.duckcreek.com to learn more. Follow Duck Creek on our social channels for the latest information – LinkedIn and Twitter.

Forward Looking Statements

This press release includes certain disclosures which contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including the Company’s business outlook. You can identify forward-looking statements because they contain words such as “expect,” “believe,” “target,” “project,” “goals,” “estimate,” “potential,” “predict,” “may,” “will,” “might,” “could,” “forecast,” “outlook” and variations of these terms or the negative of these terms and similar expressions. Forward-looking statements, including statements regarding Duck Creek’s expected outlook for second quarter fiscal 2023 and full year fiscal 2023, are based on Duck Creek’s current expectations and assumptions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that may differ materially from those contemplated by the forward-looking statements, which are neither statements of historical fact nor guarantees or assurances of future performance. Important factors that could cause actual results to differ materially from those in the forward-looking statements are set forth in Duck Creek’s most recent Annual Report on Form 10-K that was filed with the Securities and Exchange Commission on October 28, 2022, as supplemented by Duck Creek’s subsequent public filings. In particular, the following factors, among others, could cause results to differ materially from those expressed or implied by such forward-looking statements: the impact of pandemics, including the on-going COVID-19 pandemic, on U.S. and global economies, Duck Creek’s business and results and financial condition, its employees, demand for its products, sales and implementation cycles, and the health of its customers’ and partners’ businesses; Duck Creek’s history of losses; changes in Duck Creek’s product revenue mix as it continues to focus on sales of its SaaS solutions, which will cause fluctuations in its results of operations and cash flows between periods; Duck Creek’s reliance on orders and renewals from a relatively small number of customers for a substantial portion of its revenue, and the substantial negotiating leverage customers have in renewing and expanding their contracts for Duck Creek’s solutions; the success of Duck Creek’s growth strategy focused on SaaS solutions and its ability to develop or sell its solutions into new markets or further penetrate existing markets; Duck Creek’s ability to manage its expanding operations; intense competition in Duck Creek’s market; third parties may assert Duck Creek is infringing or violating their intellectual property rights; U.S. and global market and economic conditions, particularly adverse in the insurance industry; additional complexity, burdens and volatility in connection with Duck Creek’s international sales and operations; the length and variability of Duck Creek’s sales and implementation cycles; data breaches, unauthorized access to customer data or other disruptions of Duck Creek’s solutions; and the significant influence of Duck Creek’s largest shareholders on the composition of its board of directors, its management, business plans, and policies and any conflicts of interests therewith.

Any forward-looking statement in this release speaks only as of the date of this release. Duck Creek undertakes no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by any applicable laws.

Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance unless expressed as such, and should only be viewed as historical data.

Non-GAAP Financial Measures and Other Metrics

This press release contains the following non-GAAP financial measures: non-GAAP gross margin, non-GAAP income from operations, adjusted EBITDA, non-GAAP net income, non-GAAP net income per share, and free cash flow. Adjusted EBITDA excludes provision for income taxes, other (income) expense, interest (income) expense, net, depreciation of property and equipment, amortization of intangible assets, share-based compensation expense, change in fair value of contingent earnout liability, acquisition-related expenses, and severance expenses related to a workforce reduction. Non-GAAP income from operations excludes share-based compensation expense, amortization of intangible assets, change in fair value of contingent earnout liability, acquisition-related expenses, and severance expenses related to a workforce reduction. Non-GAAP gross margin excludes share-based compensation expense, amortization of intangible assets, amortization of capitalized internal-use software, and severance expenses related to a workforce reduction. Non-GAAP net income excludes share-based compensation expense, amortization of intangible assets, change in fair value of contingent earnout liability, acquisition-related expenses, and severance expenses related to a workforce reduction and the tax effect of such adjustments. Free cash flow consists of net cash provided by operating activities adjusted for purchases of property and equipment, capitalized internal-use software, and acquisition-related payments. See below for a reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure.

Other metrics include SaaS ARR and SaaS Net Dollar Retention, which are calculated for our portfolio of SaaS agreements. SaaS ARR is calculated by annualizing the recurring subscription revenue for each of our active SaaS agreements, which may not be the same as the timing and amount of revenue recognized. SaaS Net Dollar Retention is a rate calculated by annualizing the recurring subscription revenue for each of our active SaaS agreements, as of a specific date, for those customers in place throughout the entire measurement period (the last twelve-month period). We divide the result by annualized subscription revenue from the date that is immediately prior to the beginning of the measurement period, for all customers in place at the beginning of the measurement period.

Duck Creek believes that these non-GAAP financial measures and other metrics provide useful information to management and investors regarding certain financial and business trends relating to Duck Creek’s financial condition and results of operations. Duck Creek’s management uses these non-GAAP financial measures and other metrics to manage its business, make planning decisions, evaluate its performance and allocate resources. Duck Creek believes that the use of these non-GAAP financial measures and other metrics help investors and analysts in comparing its results across reporting periods on a consistent basis by excluding items that Duck Creek does not believe are indicative of its core operating performance. These non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation from, or as a substitute for, the analysis of other GAAP financial measures, including net income and cash flows from operating activities.

These non-GAAP financial measures are not universally consistent calculations, limiting their usefulness as comparative measures. Other companies may calculate similarly titled financial measures differently than Duck Creek does or may not calculate them at all. Additionally, these non-GAAP financial measures are not measurements of financial performance or liquidity under GAAP. In order to facilitate a clear understanding of its consolidated historical operating results, readers should examine Duck Creek’s non-GAAP financial measures in conjunction with its historical GAAP financial information.

Duck Creek is providing certain guidance on a non-GAAP basis, but is not providing reconciliations of such forward-looking non-GAAP measures to GAAP due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliation, including adjustments that could be made for the charges reflected in Duck Creek’s reconciliation of historic numbers, the amount of which, based on historical experience, could be significant.

Investor Contact:
Brian Denyeau
ICR
646 277 1251
Brian.denyeau@icrinc.com

Media Contact:
Paul Rechichi
Racepoint Global
617 624 3295
prechichi@racepointglobal.com

Drake Manning
Duck Creek Technologies
860 877 3609
drake.manning@duckcreek.com

 
Duck Creek Technologies, Inc. and Subsidiaries
Consolidated Balance Sheets
(unaudited, in thousands except share and per share amounts)
       
  November 30,  August 31, 
  2022  2022 
Assets      
Current assets:      
Cash and cash equivalents $255,456  $155,265 
Short-term investments  8,432   117,823 
Accounts receivable, net  28,570   29,939 
Unbilled revenue  36,006   31,696 
Prepaid expenses and other current assets  16,303   13,355 
Total current assets  344,767   348,078 
Property and equipment, net  13,877   14,076 
Operating lease assets  15,636   16,502 
Goodwill  357,260   355,498 
Intangible assets, net  79,490   82,888 
Deferred tax assets  1,316   1,132 
Unbilled revenue, net of current portion  23   209 
Other assets  20,814   21,293 
Total assets $833,183  $839,676 
Liabilities and Stockholders’ Equity      
Current liabilities:      
Accounts payable $3,433  $2,577 
Accrued liabilities  38,980   41,747 
Lease liability  4,669   4,552 
Deferred revenue  26,509   29,618 
Total current liabilities  73,591   78,494 
Lease liability, net of current portion  16,660   17,877 
Deferred income taxes  8,827   8,654 
Deferred revenue, net of current portion  49   39 
Other long-term liabilities  2,753   2,207 
Total liabilities  101,880   107,271 
Commitments and contingencies      
Stockholders’ equity      
Common stock, 135,597,678 shares issued and 132,858,647 shares outstanding at November 30, 2022, 135,370,279 shares issued and 132,686,867 shares outstanding at August 31, 2022, 300,000,000 shares authorized at November 30, 2022 and August 31, 2022, par value $0.01 per share  1,355   1,353 
Preferred stock, 0 shares outstanding, 50,000,000 shares authorized at November 30, 2022 and August 31, 2022, par value $0.01 per share      
Treasury stock, common shares at cost; 2,739,031 shares at November 30, 2022 and
2,684,316 shares at August 31, 2022
  (69,437)  (68,784)
Accumulated deficit  (54,758)  (49,597)
Accumulated other comprehensive income (loss)  830   (393)
Additional paid in capital  853,313   849,826 
Total stockholders’ equity  731,303   732,405 
Total liabilities and stockholders’ equity $833,183  $839,676 
         
 
Duck Creek Technologies, Inc. and Subsidiaries
Consolidated Statements of Operations
(unaudited, in thousands except share and per share amounts)
    
   Three Months Ended
November 30,
 
  2022  2021 
       
Revenue:      
Subscription $43,790  $35,705 
License  1,782   1,912 
Maintenance and support  7,159   6,277 
Professional services  27,855   29,527 
Total revenue  80,586   73,421 
Cost of revenue:      
Subscription  17,091   14,585 
License  261   244 
Maintenance and support  1,185   880 
Professional services  18,605   15,242 
Total cost of revenue  37,142   30,951 
Gross margin  43,444   42,470 
Operating expenses:      
Research and development  16,197   12,321 
Sales and marketing  16,211   13,167 
General and administrative  17,597   15,035 
Change in fair value of contingent consideration     67 
Total operating expenses  50,005   40,590 
Income (loss) from operations  (6,561)  1,880 
Other income (expense), net  (402)  (696)
Interest income (expense), net  1,253   (118)
Income (loss) before income taxes  (5,710)  1,066 
Provision for (benefit from) income taxes  (549)  374 
Net income (loss) $(5,161) $692 
Net income (loss) per share information      
Net earnings (loss) per share of common stock, basic $(0.04) $0.01 
Net earnings (loss) per share, diluted $(0.04) $0.01 
Weighted average shares of common stock, basic  132,748,831   132,038,274 
Weighted average shares of common stock, diluted  132,748,831   134,212,210 
         

Cost of revenue and operating expenses amounts in the Consolidated Statements of Operations include share-based compensation expense as disclosed in the following table:

   Three Months Ended
November 30,
 
  2022  2021 
Cost of subscription revenue $139  $42 
Cost of maintenance and support revenue  13   8 
Cost of services revenue  642   (100)
Research and development  653   229 
Sales and marketing  568   (60)
General and administrative  1,474   1,093 
Total share-based compensation expense $3,489  $1,212 
         
 
Duck Creek Technologies, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(unaudited, in thousands)
    
   Three Months Ended
November 30,
 
  2022  2021 
Operating activities:      
Net income (loss) $(5,161) $692 
Adjustments to reconcile net income (loss) to cash used in operating activities:      
Depreciation of property and equipment  653   704 
Amortization of capitalized software  611   561 
Amortization of intangible assets  4,440   3,973 
Amortization of deferred financing fees  36   18 
Share-based compensation expense  3,489   1,212 
Change in fair value of contingent earnout liability     67 
Payment of contingent earnout liability in excess of acquisition date fair value     (1,650)
Changes to allowance for credit losses  6   817 
Deferred taxes  (10)  1,288 
Changes in operating assets and liabilities      
Accounts receivable  1,532   (5,959)
Unbilled revenue  (4,125)  (3,115)
Prepaid expenses and other current assets  (3,003)  (2,428)
Other assets  481   604 
Accounts payable  1,234   (909)
Accrued liabilities  (2,708)  (16,891)
Deferred revenue  (3,099)  (2,312)
Operating leases  (235)  (460)
Cash settlement of vested phantom stock  (39)  (175)
Other long-term liabilities  12   (640)
Net cash used in operating activities  (5,886)  (24,603)
Investing activities:      
Purchase of short-term investments  (8,417)   
Maturities of short-term investments  117,481   95,967 
Capitalized internal-use software  (1,891)  (366)
Purchase of property and equipment  (443)  (540)
Net cash provided by investing activities  106,730   95,061 
Financing activities:      
Purchase of treasury stock  (653)  (141)
Proceeds from stock option exercises     132 
Payments of contingent earnout liability     (3,879)
Payment of deferred financing costs     (488)
Net cash used in financing activities  (653)  (4,376)
Net increase in cash and cash equivalents  100,191   66,082 
Cash and cash equivalents – beginning of period  155,265   185,657 
Cash and cash equivalents – end of period $255,456  $251,739 
         


Duck Creek Technologies, Inc. and Subsidiaries
Reconciliation of GAAP to Non-GAAP Financial Measures
(unaudited)

   Three Months Ended
November 30,
 
($ in thousands) 2022  2021 
GAAP Gross margin $43,444  $42,470 
Share-based compensation expense  794   (50)
Amortization of intangible assets  1,236   1,121 
Amortization of capitalized internal-use software  611   561 
Workforce reduction – severance expenses  392    
Non-GAAP Gross margin $46,477  $44,102 
   Three Months Ended
November 30,
 
($ in thousands) 2022  2021 
GAAP Income (loss) from operations $(6,561) $1,880 
Share-based compensation expense  3,489   1,212 
Amortization of intangible assets  4,440   3,929 
Change in fair value of contingent earnout liability     67 
Acquisition-related expenses  559    
Workforce reduction – severance expenses  645    
Non-GAAP Income from operations $2,572  $7,088 
   Three Months Ended
November 30,
 
($ in thousands) 2022  2021 
GAAP Net income (loss) $(5,161) $692 
Provision for (benefit from) income taxes  (549)  374 
Other income (expense), net  402   696 
Interest (income) expense, net  (1,253)  118 
Depreciation of property and equipment  653   704 
Amortization of intangible assets  4,440   3,929 
Share-based compensation expense  3,489   1,212 
Change in fair value of contingent earnout liability     67 
Acquisition-related expenses  559    
Workforce reduction – severance expenses  645    
Adjusted EBITDA $3,225  $7,792 
Adjusted EBITDA as a percent of total revenue  4%  11%
   Three Months Ended
November 30,
    
($ in thousands) 2022   Per
Share
  2021   Per
Share
 
GAAP Net income (loss) $(5,161) $(0.04) $692  $0.01 
Add: GAAP tax provision(1)  (549)     374    
GAAP pre-tax income (loss)  (5,710)     1,066    
Share-based compensation expense  3,489      1,212    
Amortization of intangible assets  4,440      3,929    
Change in fair value of contingent earnout liability        67    
Acquisition-related expenses  559          
Workforce reduction – severance expenses  645          
Non-GAAP pre-tax income  3,423      6,274    
Non-GAAP tax provision applied at a 24% tax rate(1)  822      1,506    
Non-GAAP Net Income(1) $2,601  $0.02  $4,768  $0.04 
             
Shares used in computing Non-GAAP net income per share
amounts:
            
GAAP weighted-average shares – basic  132,748,831      132,038,274    
GAAP dilutive shares        2,173,936    
Non-GAAP dilutive shares (using the treasury stock method)  4,608,361          
Non-GAAP weighted-average shares – diluted  137,357,192      134,212,210    

(1)  Our GAAP tax provision is primarily related to state taxes and income taxes in profitable foreign jurisdictions. We maintain a full valuation allowance against our deferred tax assets in the U.S. For purposes of determining our Non-GAAP Net Income, we have applied a tax rate of 24% which represents our estimated effective tax rate.

(2)  For the three months ended November 30, 2022, the Company had a GAAP net loss and non-GAAP net income. As such, outstanding potential shares of common stock are only included for the calculation of Non-GAAP earnings per share since these shares would be anti-dilutive for the calculation of GAAP earnings per share.

   Three Months Ended
November 30,
 
($ in thousands) 2022  2021 
Net cash provided by (used in) operating activities $(5,886) $(24,603)
Purchases of property and equipment  (443)  (540)
Capitalized internal-use software  (1,891)  (366)
Acquisition-related payments  862    
Free Cash Flow $(7,358) $(25,509)