GlobeNewswire Inc | Jul 8, 2021 04:05PM EDT

July 08, 2021

-- Third Quarter Fiscal 2021 Subscription revenue grew 56% year-over-year -- SaaS Annual Recurring Revenue grew 64% year-over-year

BOSTON, July 08, 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 nine months ended May31, 2021.

Duck Creek continued to perform at a high level in the third quarter, highlighted by 56% subscription revenue growth, said Michael Jackowski, Duck Creeks Chief Executive Officer. We signed several important wins with new and existing customers, including a substantial expansion with a Tier 1 carrier that is deploying Duck Creek OnDemand to additional lines of business.

Mr. Jackowski added, Our growing roster of successful Duck Creek OnDemand deployments is a clear demonstration that the P&C insurance industry is recognizing that our SaaS core systems platform can provide greater flexibility, faster innovation and a better customer experience than legacy systems. We remain at the early stages of this transformation and believe Duck Creek is well positioned to benefit for years to come.

Third Quarter 2021 Financial Highlights

Revenue

-- Total revenue for the third quarter of fiscal year 2021 was $67.9 million, an increase of 26% from the comparable period in fiscal year 2020. Subscription revenue was $33.6 million, an increase of 56%; services revenue was $25.6 million, an increase of 6%; license revenue was $2.5 million, an increase of 15%; and maintenance revenue was $6.3 million, an increase of 4%. -- SaaS annual recurring revenue, or SaaS ARR, was $124.1 million as of May 31, 2021, an increase of 64% from the comparable period in fiscal year 2020.

Profitability

-- GAAP loss from operations was $0.5 million for the third quarter of fiscal year 2021, compared with a GAAP loss from operations of $1.4 million for the comparable period in fiscal year 2020. -- Non-GAAP income from operations was $4.8 million for the third quarter of fiscal year 2021, compared with non-GAAP income from operations of $2.9 million for the comparable period in fiscal year 2020. -- GAAP net loss was $0.4 million for the third quarter of fiscal year 2021, compared with GAAP net loss of $2.0 million for the comparable period in fiscal year 2020. -- Non-GAAP net income was $4.0 million for the third 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 $0.00, based on basic weighted average shares outstanding of approximately 131.6 million shares as of May 31, 2021. Non-GAAP net income per share was $0.03 based on fully diluted weighted average shares outstanding of approximately 135.2 million shares as of May 31, 2021. -- Adjusted EBITDA was $5.5 million for the third quarter of fiscal 2021, compared with adjusted EBITDA of $3.8 million for the comparable period in fiscal year 2020.

Liquidity

-- As of May 31, 2021, Duck Creek had $115.6 million in cash and cash equivalents, $256.0 million in short term investments and no debt. The Company had $6.9 million in cash provided by operating activities and had free cash flow of $6.6 million during the third quarter of fiscal year 2021, compared with $18.2 million in cash provided by operating activities and free cash flow of $16.8 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 fourth quarter of fiscal 2021 and full year of fiscal 2021 based on current expectations as of July8, 2021:

Fourth Quarter Fiscal 2021 Full Year Fiscal 2021Revenue $68.5million to $258.0million to $69.5million $259.0millionSubscription $32.0million to $124.0million toRevenue $32.5million $124.5millionAdjusted EBITDA $3.5million to $15.6million to $4.5million $16.6million

Conference Call Information

Duck Creek Technologies will host a conference call today, July8, 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 5077088. 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 fourth 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 except share and per share amounts)

May 31, August 31, 2021 2020 Assets Current assets: Cash and cash equivalents $ 115,637 $ 389,878 Short-term investments 256,028 ? Accounts receivable, net 37,177 29,149 Unbilled revenue 22,491 18,121 Prepaid expenses and other current assets 11,838 12,186 Total current assets 443,171 449,334 Property and equipment, net 16,008 18,113 Operating lease assets 15,498 18,171 Goodwill 272,455 272,455 Intangible assets, net 69,425 81,687 Deferred tax assets 2,226 1,550 Unbilled revenue, net of current portion 2,576 3,487 Other assets 16,679 16,303 Total assets $ 838,038 $ 861,100 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 1,693 $ 1,802 Accrued liabilities 42,485 58,202 Contingent earnout liability 4,878 3,701 Lease liability 3,007 3,611 Deferred revenue 28,743 30,397 Total current liabilities 80,806 97,713 Contingent earnout liability, net of current portion ? 3,391 Lease liability, net of current portion 18,342 21,739 Deferred revenue, net of current portion 4 379 Other long-term liabilities 4,285 4,121 Total liabilities 103,437 127,343 Commitments and contingencies (Note 13) Stockholders' equity Common stock, 134,217,410 shares issued and131,660,379 shares outstanding at May 31, 2021, 133,269,301 shares issued and130,713,745 shares 1,342 1,333 outstanding at August 31, 2020, 300,000,000 sharesauthorized at May 31, 2021 and August 31, 2020, par value $0.01 per sharePreferred stock, 0 shares outstanding, 50,000,000shares authorized at May 31, 2021 ? ? and August 31, 2020, par value $0.01 per shareTreasury stock, common shares at cost; 2,557,031shares at May 31, 2021 and (64,745 ) (64,688 ) 2,555,556 shares at August 31, 2020Accumulated deficit (35,706 ) (24,334 )Accumulated other comprehensive income 79 ? Additional paid in capital 833,631 821,446 Total stockholders' equity 734,601 733,757 Total liabilities and stockholders' equity $ 838,038 $ 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 Nine Months Ended May 31, May 31, 2021 2020 2021 2020 Revenue: Subscription $ 33,552 $ 21,555 $ 92,069 $ 59,368 License 2,474 2,160 7,412 5,431 Maintenance and 6,329 6,064 18,404 17,791 supportProfessional 25,583 24,174 71,611 70,760 servicesTotal revenue 67,938 53,953 189,496 153,350 Cost of revenue^ 1:Subscription 12,045 8,721 33,540 24,871 License 535 506 1,369 1,347 Maintenance and 855 710 2,556 2,475 supportProfessional 14,315 13,459 42,857 38,839 servicesTotal cost of 27,750 23,396 80,322 67,532 revenueGross margin 40,188 30,557 109,174 85,818 Operating expenses^1:Research and 12,255 10,197 36,040 29,424 developmentSales and 13,628 11,723 40,390 33,539 marketingGeneral and 15,238 10,184 44,273 29,916 administrativeChange in fairvalue of (389 ) (190 ) (291 ) 21 contingentconsiderationTotal operating 40,732 31,914 120,412 92,900 expensesLoss from (544 ) (1,357 ) (11,238 ) (7,082 )operationsOther income 546 (316 ) 1,009 (96 )(expense), netInterest (6 ) (60 ) (87 ) (386 )expense, netLoss before (4 ) (1,732 ) (10,316 ) (7,564 )income taxesProvision for 353 267 1,056 889 income taxesNet loss $ (357 ) $ (1,999 ) $ (11,372 ) $ (8,453 )Net loss pershare information^2Net loss pershare of common $ 0.00 $ ? $ (0.08 ) $ ? stock, basic anddilutedWeighted averageshares of common 131,613,003 ? 130,992,672 ? stock, basic anddiluted

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

Three Months Nine Months Ended Ended May 31, May 31, 2021 2020 2021 2020 Cost of subscription revenue $ 90 $ ? $ 302 $ 10 Cost of maintenance and support 7 1 22 3 revenueCost of services revenue 253 36 2,003 103 Research and development 285 97 1,505 285 Sales and marketing 199 93 2,493 257 General and administrative 863 253 2,980 747 Total share-based compensation $ 1,697 $ 480 $ 9,305 $ 1,404 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 Nine Months Ended Ended May 31, May 31, 2021 2020 2021 2020 Operating activities: Net loss $ (357 ) $ (1,999 ) $ (11,372 ) $ (8,453 )Adjustments toreconcile net loss tocash provided by (used in) operatingactivities:Depreciation of 790 828 2,377 2,350 property and equipmentAmortization of 510 154 1,506 205 capitalized softwareAmortization of 4,087 4,268 12,262 12,803 intangible assetsAmortization ofdeferred financing 28 67 85 106 feesShare-based 1,697 480 9,305 1,404 compensation expenseLoss on change in fairvalue of contingent (389 ) (190 ) (291 ) 21 earnout liabilityBad debt expense 654 137 664 65 Deferred taxes (161 ) (169 ) (676 ) (146 )Other non-cash items (37 ) ? (37 ) ? Changes in operating assets and liabilitiesAccounts receivable (3,093 ) 1,823 (8,693 ) (4,301 )Unbilled revenue (100 ) 2,756 (3,459 ) (1,182 )Prepaid expenses and 3,373 1,697 262 96 other current assetsOther assets 303 (465 ) (376 ) (4,101 )Accounts payable 387 (472 ) 895 (304 )Accrued liabilities 4,269 7,983 (6,402 ) 9,323 Deferred revenue (1,706 ) (50 ) (2,029 ) 214 Operating leases 565 1,514 (1,328 ) 199 Cash settlement of (2,171 ) ? (9,075 ) ? vested phantom stockOther long-term (1,774 ) (166 ) 164 (52 )liabilitiesNet cash provided by(used in) operating 6,875 18,196 (16,218 ) 8,247 activitiesInvesting activities: Purchase of short-term ? ? (287,912 ) ? investmentsMaturities of 32,000 ? 32,000 ? short-term investmentsCapitalized (114 ) (885 ) (864 ) (2,440 )internal-use softwarePurchase of property (162 ) (470 ) (834 ) (3,164 )and equipmentNet cash used in 31,724 (1,355 ) (257,610 ) (5,604 )investing activitiesFinancing activities: Proceeds fromfollow-on offering, ? ? 3,452 ? net of issuance costsPayment of deferred ? ? (3,650 ) ? IPO costsPayment of deferred ? ? (192 ) (2,552 )Class E offering costsProceeds from issuanceof Class E Units, net ? (2,780 ) ? 212,888 of issuance costsPayment on redemptionof Class A and Class B ? ? ? (198,000 )UnitsPurchase of treasury ? ? (57 ) ? stockProceeds from stock 964 ? 1,957 ? option exercisesPayments of contingent ? (374 ) (1,923 ) (3,555 )earnout liabilityProceeds fromrevolving credit ? ? ? 5,000 facilityPayments on revolving ? ? ? (9,000 )credit facilityPayment of deferred ? (480 ) ? (228 )financing costsNet cash provided by(used in) financing 964 (3,634 ) (413 ) 4,553 activitiesNet increase(decrease) in cash and 39,563 13,207 (274,241 ) 7,196 cash equivalentsCash and cashequivalents ? 76,074 5,988 389,878 11,999 beginning of periodCash and cashequivalents ? end of $ 115,637 $ 19,195 $ 115,637 $ 19,195 period

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

Three Months Ended Nine Months Ended May 31, May 31,($ in 2021 2020 2021 2020 thousands)GAAP Gross $ 40,188 $ 30,557 $ 109,174 $ 85,818 MarginShare-basedcompensation 350 39 2,327 116 expenseAmortizationof intangible 1,186 1,187 3,559 3,559 assetsAmortizationof capitalized 510 154 1,506 205 internal-usesoftwareNon-GAAP Gross $ 42,234 $ 31,937 $ 116,566 $ 89,698 Margin

Three Months Ended Nine Months Ended May 31, May 31,($ in 2021 2020 2021 2020 thousands)GAAP Loss from $ (544 ) $ (1,357 ) $ (11,238 ) $ (7,082 )OperationsShare-basedcompensation 1,697 480 9,305 1,404 expenseAmortization ofintangible 3,994 3,994 11,982 11,982 assetsChange in fairvalue ofcontingent (389 ) (190 ) (291 ) 21 earnoutliabilityNon-GAAP Income $ 4,758 $ 2,927 $ 9,758 $ 6,325 from Operations

Three Months Ended Nine Months Ended May 31, May 31,($ in 2021 2020 2021 2020 thousands)GAAP Net Loss $ (357 ) $ (1,999 ) $ (11,372 ) $ (8,453 )Provision for 353 267 1,056 889 income taxesOther (income) (546 ) 316 (1,009 ) 96 expenseInterest 6 60 87 386 expense, netDepreciation ofproperty and 790 828 2,377 2,350 equipmentAmortization ofintangible 3,994 3,994 11,982 11,982 assetsShare-basedcompensation 1,697 480 9,305 1,404 expenseChange in fairvalue ofcontingent (389 ) (190 ) (291 ) 21 earnoutliabilityAdjusted EBITDA $ 5,548 $ 3,756 $ 12,135 $ 8,675 Adjusted EBITDAas a percent of 8 % 7 % 6 % 6 %total revenue

Three Months Ended Nine Months Ended May 31, May 31,($ in thousands) 2021 PerShare 2020 2021 PerShare 2020 GAAP Net Loss ^ $ (357 ) $ ? $ (1,999 ) $ (11,372 ) $ (0.08 ) $ (8,453 )(1)Add: GAAP tax 353 267 1,056 889 provisionGAAP pre-tax (4 ) (1,732 ) (10,316 ) (7,564 )lossShare-basedcompensation 1,697 480 9,305 1,404 expenseAmortization ofintangible 3,994 3,994 11,982 11,982 assetsChange in fairvalue ofcontingent (389 ) (190 ) (291 ) 21 earnoutliabilityNon-GAAP pre-tax 5,298 2,552 10,680 5,843 incomeNon-GAAP taxprovision 1,272 612 2,563 1,402 applied at a 24%tax rate ^(2)Non-GAAP Net $ 4,026 $ 0.03 $ 1,940 $ 8,117 $ 0.06 $ 4,441 Income ^(1) Shares used incomputingNon-GAAP income per shareamounts:^(1)GAAPweighted-average 131,613,003 130,992,672 shares - basicand dilutedNon-GAAPdilutive sharesexcluded from 3,575,928 3,575,928 GAAP loss per sharecalculationNon-GAAPweighted-average 135,188,931 134,568,600 shares - diluted

(1)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.

(2)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.

Three Months Ended Nine Months Ended May 31, May 31,($ in 2021 2020 2021 2020 thousands)Net cashprovided by(used in) $ 6,875 $ 18,196 $ (16,218 ) $ 8,247 operatingactivitiesPurchases ofproperty and (162 ) (470 ) (834 ) (3,164 )equipmentCapitalizedinternal-use (114 ) (885 ) (864 ) (2,440 )softwareFree Cash Flow $ 6,599 $ 16,841 $ (17,916 ) $ 2,643