GlobeNewswire Inc | Apr 5, 2021 04:05PM EDT

April 05, 2021

-- Second Quarter Fiscal 2021 Subscription revenue grew 51% year-over-year -- SaaS Annual Recurring Revenue grew 75% year-over-year

BOSTON, April 05, 2021 (GLOBE NEWSWIRE) -- Duck Creek Technologies (NASDAQ: DCT), a provider of SaaS-delivered enterprise software to the property& casualty (P&C) insurance industry, today announced its financial results for the three and six months ended February28, 2021.

Duck Creek delivered strong second quarter results, as our continued market momentum drove 51% subscription revenue growth, said Michael Jackowski, Duck Creeks Chief Executive Officer. Our growing number of SaaS wins, across all segments of the market, highlights that Duck Creek OnDemand can successfully scale from solutions for regional insurers to serving as the global platform for the most demanding Tier 1 Insurers.

Mr. Jackowski added, Many P&C carriers have embraced the need for true digital transformation and have recognized that a SaaS-based core systems platform is a competitive differentiator. We believe our continued success demonstrates that Duck Creek OnDemand is the leading SaaS platform of choice for the global P&C industry.

Second Quarter 2021 Financial Highlights

Revenue

-- Total revenue for the second quarter of fiscal year 2021 was $62.7 million, an increase of 19% from the comparable period in fiscal year 2020. Subscription revenue was $30.6 million, an increase of 51%; services revenue was $22.6 million, a decrease of 8%; license revenue was $3.6 million, an increase of 61%; and maintenance revenue was $5.9 million, an increase of 1%. -- SaaS annual recurring revenue, or SaaS ARR, was $118.1 million as of February 28, 2021, an increase of 75% from the comparable period in fiscal year 2020.

Profitability

-- GAAP loss from operations was $6.4 million for the second quarter of fiscal year 2021, compared with a GAAP loss from operations of $2.0 million for the comparable period in fiscal year 2020. -- Non-GAAP income from operations was $2.2 million for the second quarter of fiscal year 2021, compared with non-GAAP income from operations of $2.7 million for the comparable period in fiscal year 2020. -- GAAP net loss was $6.4 million for the second quarter of fiscal year 2021, compared with GAAP net loss of $2.4 million for the comparable period in fiscal year 2020. -- Non-GAAP net income was $2.0 million for the second quarter of fiscal year 2021, compared with non-GAAP net income of $1.9 million for the comparable period in fiscal year 2020. -- GAAP net loss per share was $(0.05), based on basic weighted average shares outstanding of approximately 131.0 million shares as of February 28, 2021. Non-GAAP net income per share was $0.01 based on fully diluted weighted average shares outstanding of approximately 134.8 million shares as of February 28, 2021. -- Adjusted EBITDA was $3.0 million for the second quarter of fiscal 2021, compared with adjusted EBITDA of $3.5 million for the comparable period in fiscal year 2020.

Liquidity

-- As of February 28, 2021 Duck Creek had $76.1 million in cash and cash equivalents, $287.9 million in short term investments and no debt. The Company used $0.9 million in cash from operating activities and had free cash flow of $(1.6) million during the second quarter of fiscal year 2021, compared with $1.8 million used in cash from operating activities and free cash flow of $(3.6) million in the comparable period in fiscal year 2020.

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 third quarter of fiscal 2021 and full year of fiscal 2021 based on current expectations as of April5, 2021:

Third Quarter Fiscal Full Year Fiscal 2021 2021Revenue $62.5million to $250.0million to $64.5million $254.5millionSubscription $31.0million to $120.0million toRevenue $31.5million $121.5millionAdjusted $(0.5)million to $6.5million toEBITDA $0.5million $8.0million

Conference Call Information

Duck Creek Technologies will host a conference call today, April5, 2021, at 5:00 p.m. (Eastern Time) to discuss the Companys financial results and business outlook. A live webcast of the call will be available on the Investor Relations page of the Companys website at https://ir.duckcreek.com/. To access the call by phone, dial 1-833-570-1119 (domestic) or 1-914-987-7066 (international). A replay of this conference call will be available for a limited time at 1-855-859-2056 (domestic) or 1-404-537-3406 (international) using conference ID 5074509. 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 is a leading provider of core system solutions to the P&C and General insurance industry. By accessing Duck Creek OnDemand, the companys enterprise Software-as-a-Service solution, insurance carriers are able to navigate uncertainty and capture market opportunities faster than their competitors. Duck Creeks functionally-rich solutions are available on a standalone basis or as a full suite, and all are available via Duck Creek OnDemand.

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. 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 Creeks expected outlook for third quarter fiscal 2021 and full year fiscal 2021, are based on Duck Creeks 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 will be set forth in Duck Creeks most recent Annual Report on Form 10-K that was filed with the Securities and Exchange Commission on November 3, 2020 and any 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 Creeks 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 Creeks history of losses; changes in Duck Creeks 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 Creeks 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 Creeks solutions; the success of Duck Creeks growth strategy focused on SaaS solutions and its ability to develop or sell its solutions into new markets or further penetrate existing markets; Duck Creeks ability to manage its expanding operations; intense competition in Duck Creeks 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 Creeks international sales and operations; the length and variability of Duck Creeks sales and implementation cycles; data breaches, unauthorized access to customer data or other disruptions of Duck Creeks solutions; the significant influence of Duck Creeks largest shareholders on its management, business plans, and policies and any conflicts of interests therewith; and Duck Creeks continued reliance on controlled company exemptions under the corporate governance standards of Nasdaq during the applicable phase-in periods.

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 expense, net, depreciation of property and equipment, amortization of intangible assets, share-based compensation expense, and change in fair value of contingent earnout liability. Non-GAAP income from operations excludes share-based compensation expense, amortization of intangible assets and change in fair value of contingent earnout liability. Non-GAAP gross margin excludes share-based compensation expense, amortization of intangible assets, and amortization of capitalized internal-use software. Non-GAAP net income excludes share-based compensation expense, amortization of intangible assets and change in fair value of contingent earnout liability and the tax effect of such adjustments. Free cash flow consists of net cash provided by operating activities less cash used for purchases of property and equipment and capitalized internal-use software. 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 all SaaS continuing software services, excluding the subscription revenue related to one legacy contract for a service no longer offered separately by the Company. SaaS ARR is calculated by annualizing recurring revenue recorded in the last month of the measurement period. SaaS Net Dollar Retention is a rate calculated by annualizing recurring revenue recorded in the last month of the measurement period for those customers in place throughout the entire measurement period. We divide the result by annualized recurring revenue from the month that is one year prior to the end of the measurement period, for all customers in place at the beginning of the measurement period.

The Company 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 Creeks financial condition and results of operations. The Companys management uses these non-GAAP financial measures and other metrics to manage its business, make planning decisions, evaluate its performance and allocate resources. The Company 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 the Company 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 the Company 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 the Companys non-GAAP financial measures in conjunction with its historical GAAP financial information.

To the extent that the Company provides guidance on a non-GAAP basis, it does not provide 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 the Companys 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

Sam A. Shay Duck Creek Technologies 857 201 5784 sam.shay@duckcreek.com

Duck Creek Technologies, Inc. and Subsidiaries Consolidated Balance Sheets (unaudited, in thousands)

February August 28, 31, 2021 2020 Assets Current assets: Cash and cash equivalents $ 76,074 $ 389,878 Short-term investments 287,906 ? Accounts receivable, net 34,738 29,149 Unbilled revenue 22,143 18,121 Prepaid expenses and other current assets 15,240 12,186 Total current assets 436,101 449,334 Property and equipment, net 16,725 18,113 Operating lease assets 16,632 18,171 Goodwill 272,455 272,455 Intangible assets, net 73,512 81,687 Deferred tax assets 2,065 1,550 Unbilled revenue, net of current portion 2,824 3,487 Other assets 16,983 16,303 Total assets $ 837,297 $ 861,100 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 1,001 $ 1,802 Accrued liabilities 40,664 58,202 Contingent earnout liability 5,267 3,701 Lease liability 3,292 3,611 Deferred revenue 28,860 30,397 Total current liabilities 79,084 97,713 Contingent earnout liability, net of current ? 3,391 portionLease liability, net of current portion 20,196 21,739 Deferred revenue, net of current portion 23 379 Other long-term liabilities 6,058 4,121 Total liabilities 105,361 127,343 Commitments and contingencies (Note 13) Stockholders' equity Common stock, 134,081,473 shares issued and131,524,442 shares outstanding at February 28,2021, 133,269,301 shares issued and 130,713,745shares 1,341 1,333 outstanding at August 31, 2020, 300,000,000 sharesauthorized at February 28, 2021 and August 31,2020, par value $0.01 per sharePreferred stock, 0 shares outstanding, 50,000,000shares authorized at February 28, 2021 and August ? ? 31, 2020, par value $0.01 per shareTreasury stock, common shares at cost; 2,557,031shares at February 28, 2021 and 2,555,556 shares at (64,745 ) (64,688 )August 31, 2020Accumulated deficit (35,349 ) (24,334 )Accumulated other comprehensive income (loss) (6 ) ? Additional paid in capital 830,695 821,446 Total stockholders' equity 731,936 733,757 Total liabilities and stockholders' equity $ 837,297 $ 861,100

Duck Creek Technologies, Inc. and Subsidiaries Consolidated Statements of Operations (unaudited, in thousands except share and per share amounts)

For the Three Months Ended For the Six Months Ended February 28 and 29, February 28 and 29, 2021 2020 2021 2020 Revenue: Subscription $ 30,608 $ 20,276 $ 58,517 $ 37,813 License 3,588 2,226 4,938 3,271 Maintenance and 5,885 5,801 12,075 11,727 supportProfessional 22,571 24,524 46,028 46,586 servicesTotal revenue 62,652 52,827 121,558 99,397 Cost of revenue: Subscription 11,411 8,873 21,495 16,150 License 446 515 834 841 Maintenance and 859 887 1,701 1,765 supportProfessional 14,826 13,338 28,542 25,380 servicesTotal cost of 27,542 23,613 52,572 44,136 revenueGross margin 35,110 29,214 68,986 55,261 Operating expenses:Research and 12,681 10,008 23,785 19,227 developmentSales and 14,165 11,245 26,762 21,816 marketingGeneral and 14,617 9,747 29,035 19,732 administrativeChange in fairvalue of 95 167 98 211 contingentconsiderationTotal operating 41,558 31,167 79,680 60,986 expensesLoss from (6,448 ) (1,953 ) (10,694 ) (5,725 )operationsOther income 510 (153 ) 463 220 (expense), netInterest expense, (38 ) (45 ) (81 ) (326 )netLoss before (5,976 ) (2,152 ) (10,312 ) (5,832 )income taxesProvision for 388 288 703 622 income taxesNet loss $ (6,364 ) $ (2,440 ) $ (11,015 ) $ (6,454 )Net loss pershare information ^2Net loss pershare of common $ (0.05 ) $ (0.08 ) stock, basic anddilutedWeighted averageshares of common 130,982,116 ? 130,851,680 ? stock, basic anddiluted

(1) Amounts include share-based compensation expense as disclosed in the following table:

Three Months Ended Six Months Ended February 28 and 29, February 28 and 29, 2021 2020 2021 2020 Cost of subscription $ 132 $ 10 $ 212 $ 10 revenueCost of maintenance and 8 1 15 2 support revenueCost of services 1,139 41 1,750 67 revenueResearch and 709 98 1,220 188 developmentSales and marketing 1,395 87 2,294 164 General and 1,133 251 2,117 494 administrativeTotal share-based $ 4,516 $ 488 $ 7,608 $ 924 compensation expense

(2) Prior to Duck Creeks initial public offering in August 2020, there were no shares of common stock outstanding, and the membership structure of Duck Creek Technologies consisted of limited partnership units. Accordingly, comparable period net loss per share has not been presented because it would not be meaningful to the users of the Companys consolidated financial statements.

Duck Creek Technologies, Inc. and Subsidiaries Consolidated Statements of Cash Flows (unaudited, in thousands)

For the Three Months For the Six Months Ended Ended February 28 and 29, February 28 and 29, 2021 2020 2021 2020 Operating activities:Net loss $ (6,364 ) $ (2,440 ) $ (11,015 ) $ (6,454 )Adjustments toreconcile net lossto cash used in operatingactivities:Depreciation ofproperty and 800 785 1,587 1,522 equipmentAmortization ofcapitalized 498 51 996 51 softwareAmortization of 4,088 4,268 8,175 8,535 intangible assetsAmortization ofdeferred financing 29 28 57 39 feesShare-basedcompensation 4,516 488 7,608 924 expenseLoss on change infair value of 95 167 98 211 contingent earnoutliabilityBad debt expense (4 ) (32 ) 10 (72 )Deferred taxes (344 ) 4 (515 ) 23 Changes inoperating assets and liabilitiesAccounts receivable (6,880 ) (4,785 ) (5,600 ) (6,124 )Unbilled revenue (1,629 ) (2,769 ) (3,359 ) (3,938 )Prepaid expensesand other current (3,430 ) (2,588 ) (3,111 ) (1,601 )assetsOther assets (664 ) (3,723 ) (679 ) (3,636 )Accounts payable (204 ) 398 508 168 Accrued liabilities 5,958 6,040 (10,671 ) 1,340 Deferred revenue 2,665 2,342 (1,893 ) (1,300 )Operating leases (162 ) (63 ) (323 ) 249 Cash settlement ofvested phantom (227 ) ? (6,904 ) ? stockOther long-term 338 22 1,938 115 liabilitiesNet cash used inoperating (921 ) (1,807 ) (23,093 ) (9,948 )activitiesInvesting activities:Purchase ofshort-term (287,912 ) ? (287,912 ) ? investmentsCapitalizedinternal-use (214 ) (693 ) (750 ) (1,555 )softwarePurchase ofproperty and (484 ) (1,058 ) (672 ) (2,694 )equipmentNet cash used ininvesting (288,610 ) (1,751 ) (289,334 ) (4,249 )activitiesFinancing activities:Proceeds fromfollow-on offering, 3,452 ? 3,452 ? net of issuancecostsPayment of deferred ? ? (3,650 ) ? IPO costsPayment of deferredClass E offering ? (1,337 ) (192 ) (2,072 )costsProceeds fromissuance of Class E ? 100,214 ? 215,668 Units, net ofissuance costsPayment onredemption of Class ? (100,000 ) ? (198,000 )A and Class B UnitsPurchase of ? ? (57 ) ? treasury stockProceeds from stock 993 ? 993 ? option exercisesPayments ofcontingent earnout ? ? (1,923 ) (3,182 )liabilityProceeds fromrevolving credit ? ? ? 5,000 facilityPayments onrevolving credit ? (4,000 ) ? (9,000 )facilityPayment of deferred ? ? ? (228 )financing costsNet cash providedby (used in) 4,445 (5,123 ) (1,377 ) 8,186 financingactivitiesNet decrease incash and cash (285,086 ) (8,681 ) (313,804 ) (6,011 )equivalentsCash and cashequivalents ? 361,160 14,669 389,878 11,999 beginning of periodCash and cashequivalents ? end $ 76,074 $ 5,988 $ 76,074 $ 5,988 of period

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

Three Months Ended Six Months Ended February 28 and 29, February 28 and 29,($ in 2021 2020 2021 2020 thousands)GAAP Gross $ 35,110 $ 29,214 $ 68,986 $ 55,261 MarginShare-basedcompensation 1,280 50 1,977 77 expenseAmortization ofintangible 1,186 1,186 2,372 2,372 assetsAmortization ofcapitalized 498 51 996 51 internal-usesoftwareNon-GAAP Gross $ 38,074 $ 30,501 $ 74,331 $ 57,761 Margin

Three Months Ended Six Months Ended February 28 and 29, February 28 and 29,($ in 2021 2020 2021 2020 thousands)GAAP Loss from $ (6,448 ) $ (1,953 ) $ (10,694 ) $ (5,725 )OperationsShare-basedcompensation 4,516 488 7,608 924 expenseAmortizationof intangible 3,994 3,994 7,988 7,988 assetsChange in fairvalue ofcontingent 95 167 98 211 earnoutliabilityNon-GAAPIncome from $ 2,157 $ 2,696 $ 5,000 $ 3,398 Operations

Three Months Ended Six Months Ended February 28 and 29, February 28 and 29,($ in 2021 2020 2021 2020 thousands)GAAP Net Loss $ (6,364 ) $ (2,440 ) $ (11,015 ) $ (6,454 )Provision for 388 288 703 622 income taxesOther (income) (510 ) 153 (463 ) (220 )expenseInterest 38 45 81 326 expense, netDepreciationof property 800 785 1,587 1,522 and equipmentAmortizationof intangible 3,994 3,994 7,988 7,988 assetsShare-basedcompensation 4,516 488 7,608 924 expenseChange in fairvalue ofcontingent 95 167 98 211 earnoutliabilityAdjusted $ 2,957 $ 3,480 $ 6,587 $ 4,919 EBITDAAdjustedEBITDA as a 5 % 7 % 5 % 5 %percent oftotal revenue

Three Months Ended Six Months Ended February 28 and 29, February 28 and 29,($ in thousands) 2021 Per 2020 2021 Per 2020 Share ShareGAAP Net Loss ^ $ (6,364 ) $ (0.05 ) $ (2,440 ) $ (11,015 ) $ (0.08 ) $ (6,454 )(2)Add: GAAP tax 388 288 703 622 provisionGAAP pre-tax (5,976 ) (2,152 ) (10,312 ) (5,832 )lossShare-basedcompensation 4,516 488 7,608 924 expenseAmortization ofintangible 3,994 3,994 7,988 7,988 assetsChange in fairvalue ofcontingent 95 167 98 211 earnoutliabilityNon-GAAP pre-tax 2,629 2,497 5,382 3,291 incomeNon-GAAP taxprovision 631 599 1,292 790 applied at a 24%tax rate ^(1)Non-GAAP Net $ 1,998 $ 0.01 $ 1,898 $ 4,090 $ 0.03 $ 2,501 Income ^(2) Shares used incomputingNon-GAAP income per shareamounts:^(2)GAAPweighted-average 130,982,116 130,851,680 shares - basicand dilutedNon-GAAPdilutive sharesexcluded from 3,814,530 3,814,530 GAAP income(loss) per sharecalculationNon-GAAPweighted-average 134,796,646 134,666,210 shares - diluted

(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 once we are profitable on a GAAP basis.

(2)Prior to Duck Creeks initial public offering in August 2020, there were no shares of common stock outstanding, and the membership structure of Duck Creek Technologies consisted of limited partnership units. Accordingly, comparable period net loss per share has not been presented because it would not be meaningful to the users of the Companys consolidated financial statements.

Three Months Ended Six Months Ended February 28 and 29, February 28 and 29,($ in 2021 2020 2021 2020 thousands)Net cash usedin operating $ (921 ) $ (1,807 ) $ (23,093 ) $ (9,948 )activitiesPurchases ofproperty and (484 ) (1,058 ) (672 ) (2,694 )equipmentCapitalizedinternal-use (214 ) (693 ) (750 ) (1,555 )softwareFree Cash $ (1,619 ) $ (3,558 ) $ (24,515 ) $ (14,197 )Flow