GlobeNewswire Inc | Jan 7, 2021 04:05PM EST

January 07, 2021

-- First Quarter Fiscal 2021 Subscription revenue grew 59% year-over-year -- SaaS Annual Recurring Revenue (ARR) grew 72% year-over-year

BOSTON, Jan. 07, 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 months ended November30, 2020.

Duck Creeks strong business momentum continued into fiscal year 2021, with first quarter financial and operational results that were highlighted by 59% subscription revenue growth, said Michael Jackowski, Duck Creeks Chief Executive Officer. We signed 4 new Duck Creek OnDemand deals, including a Tier 1 customer, and a number of add-on transactions during the quarter, further solidifying our position as the clear SaaS leader for the P&C industry.

Mr. Jackowski added, P&C carriers are increasingly recognizing the benefits of SaaS-based core systems as they look to deliver on their digital transformation programs to improve their operational outcomes and customer experiences. We believe Duck Creek is in a great position to be a primary beneficiary of the P&C industrys move to the cloud, which we expect will enable us to continue delivering strong revenue growth and margin expansion over the long-term.

First Quarter 2021 Financial Highlights

Revenue

-- Total revenue for the first quarter of fiscal year 2021 was $58.9 million, an increase of 26% from the first quarter in fiscal year 2020. Subscription revenue was $27.9 million, an increase of 59%; services revenue was $23.5 million, an increase of 6%; license revenue was $1.4 million, an increase of 29%; and maintenance revenue was $6.2 million, an increase of 4%. -- SaaS annual recurring revenue, or SaaS ARR, was $103.9 million as of November 30, 2020, an increase of 72% from the comparable period in fiscal year 2020.

Profitability

-- GAAP loss from operations was $4.2 million for the first quarter of fiscal year 2021, compared with a GAAP loss from operations of $3.8 million for the comparable period in fiscal year 2020. -- Non-GAAP income from operations was $2.8 million for the first quarter of fiscal year 2021, compared with non-GAAP income from operations of $0.7 million for the comparable period in fiscal year 2020. -- GAAP net loss was $4.7 million for the first quarter of fiscal year 2021, compared with GAAP net loss of $4.0 million for the comparable period in fiscal year 2020. -- Non-GAAP net income was $2.4 million for the first quarter of fiscal year 2021, compared with non-GAAP net income of $0.5 million for the comparable period in fiscal year 2020. -- GAAP net loss per share was $0.04, based on basic weighted average shares outstanding of 130.8 million as of November 30, 2020. Non-GAAP net income per share was $0.02. -- Adjusted EBITDA was $3.6 million for the first quarter of fiscal 2021, compared with adjusted EBITDA of $1.4 million for the comparable period in fiscal year 2020.

Liquidity

-- Duck Creek had $361.2 million in cash and cash equivalents at November30, 2020. The Company used $22.2 million in cash from operating activities and had free cash flow of $(22.9) million during the first quarter of fiscal 2021, compared with $(10.6) 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 second quarter of fiscal 2021 and full year of fiscal 2021 based on current expectations as of January7, 2021:

Second Quarter Fiscal 2021 Full Year Fiscal 2021Revenue $58.5million to $246.0million to $59.5million $251.0millionSubscription $28.0million to $117.0million toRevenue $29.0million $119.0millionAdjusted EBITDA $(1.5)million to $(2.5) $3.5million to million $5.5million

Conference Call Information

Duck Creek Technologies will host a conference call today, January7, 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 6316238. 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 second 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 SubsidiariesConsolidated Balance Sheets (unaudited, in thousands) November August 30, 31, 2020 2020 Assets Current assets: Cash and cash equivalents $ 361,160 $ 389,878 Accounts receivable, net 27,854 29,149 Unbilled revenue 19,850 18,121 Prepaid expenses and other current assets 11,838 12,186 Total current assets 420,702 449,334 Property and equipment, net 17,552 18,113 Operating lease assets 17,368 18,171 Goodwill 272,455 272,455 Intangible assets, net 77,599 81,687 Deferred tax assets 1,721 1,550 Unbilled revenue, net of current portion 3,489 3,487 Other assets 16,318 16,303 Total assets $ 827,204 $ 861,100 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 1,432 $ 1,802 Accrued liabilities 32,895 58,202 Contingent earnout liability 5,172 3,701 Lease liability 3,439 3,611 Deferred revenue 25,978 30,397 Total current liabilities 68,916 97,713 Contingent earnout liability, net of current ? 3,391 portionLease liability, net of current portion 20,946 21,739 Deferred revenue, net of current portion 240 379 Other long-term liabilities 5,720 4,121 Total liabilities 95,822 127,343 Stockholders' Equity Common stock, 133,411,494 shares issued and130,854,463 shares outstanding at November 30,2020, 133,269,301 shares issued and 130,713,745 1,334 1,333 sharesoutstanding at August 31, 2020, 300,000,000shares authorized at November 30, 2020 and August31, 2020, par value $0.01 per sharePreferred stock, 0 shares outstanding, 50,000,000shares authorized at November 30, 2020 and August ? ? 31, 2020, par value $0.01 per shareTreasury stock, common shares at cost; 2,557,031shares at November 30, 2020 and 2,555,556 shares at (64,745 ) (64,688 )August 31, 2020Accumulated deficit (28,985 ) (24,334 )Additional paid in capital 823,778 821,446 Total stockholders' equity 731,382 733,757 Total liabilities and stockholders' equity $ 827,204 $ 861,100

Duck Creek Technologies, Inc. and SubsidiariesConsolidated Statements of Operations (unaudited, in thousands except share and per share amounts) For the Three Months Ended November 30, 2020 2019 Revenue: Subscription $ 27,909 $ 17,537 License 1,350 1,045 Maintenance and support 6,190 5,926 Professional services 23,457 22,062 Total revenue 58,906 46,570 Cost of revenue:^1 Subscription 10,084 7,277 License 388 326 Maintenance and support 842 878 Professional services 13,716 12,042 Total cost of revenue 25,030 20,523 Gross margin 33,876 26,047 Operating expenses:^1 Research and development 11,104 9,219 Sales and marketing 12,597 10,571 General and administrative 14,418 9,985 Change in fair value of contingent consideration 3 44 Total operating expenses 38,122 29,819 Loss from operations (4,246 ) (3,772 )Other (expense) income, net (47 ) 373 Interest expense, net (43 ) (281 )Loss before income taxes (4,336 ) (3,680 )Provision for income taxes 315 334 Net loss $ (4,651 ) $ (4,014 )Net loss per share information^2 Net loss per share of common stock, basic and $ (0.04 ) dilutedWeighted average shares of common stock - basic 130,788,359 ? and diluted

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

Three Months Ended November 30, 2020 2019 Cost of subscription revenue $ 80 $ ? Cost of maintenance and support revenue 7 1 Cost of services revenue 610 26 Research and development 511 90 Sales and marketing 899 77 General and administrative 985 242 Total share-based compensation expense $ 3,092 $ 436

(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 SubsidiariesConsolidated Statements of Cash Flows (unaudited, in thousands) For the Three Months Ended November 30, 2020 2019 Operating activities: Net loss $ (4,651 ) $ (4,014 )Adjustments to reconcile net loss to cash used in operating activities:Depreciation of property and equipment 787 737 Amortization of capitalized software 498 ? Amortization of intangible assets 4,087 4,267 Amortization of deferred financing fees 28 11 Share-based compensation expense 3,092 436 Loss on change in fair value of contingent earnout 3 44 liabilityBad debt expense 14 (40 )Deferred taxes (171 ) 19 Changes in operating assets and liabilities Accounts receivable 1,280 (1,339 )Unbilled revenue (1,730 ) (1,169 )Prepaid expenses and other current assets 319 987 Other assets (15 ) 87 Accounts payable 712 (230 )Accrued liabilities (16,629 ) (4,700 )Deferred revenue (4,558 ) (3,642 )Operating leases (161 ) 312 Cash settlement of vested phantom stock (6,677 ) ? Other long-term liabilities 1,600 93 Net cash used in operating activities (22,172 ) (8,141 )Investing activities: Capitalized internal-use software (536 ) (862 )Purchase of property and equipment (188 ) (1,636 )Net cash used in investing activities (724 ) (2,498 )Financing activities: Payment of deferred IPO costs (3,650 ) (735 )Payment of deferred Class E offering costs (192 ) ? Proceeds from issuance of Class E Units, net of ? 115,454 issuance costsPayment on redemption of Class A and Class B Units ? (98,000 )Purchase of treasury stock (57 ) ? Payments of contingent earnout liability (1,923 ) (3,182 )Proceeds from revolving credit facility ? 5,000 Payments on revolving credit facility ? (5,000 )Payment of deferred financing costs ? (228 )Net cash (used in) provided by financing activities (5,822 ) 13,309 Net (decrease) increase in cash and cash (28,718 ) 2,670 equivalentsCash, cash equivalents ? beginning of period 389,878 11,999 Cash, cash equivalents ? end of period $ 361,160 $ 14,669 Supplemental disclosure of other cash flow information:Cash paid for income taxes 730 577 Cash paid for interest ? 187 Fair value of contingent consideration 5,529 7,377 Deferred IPO costs in accounts payable and accrued ? 1,450 liabilities

Duck Creek Technologies, Inc. and SubsidiariesReconciliation of GAAP to Non-GAAP Financial Measures (unaudited) Three Months Ended November 30,($ in thousands) 2020 2019 GAAP Gross Margin $ 33,876 $ 26,047 Share-based compensation expense 697 27 Amortization of intangible assets 1,186 1,186 Amortization of capitalized internal-use software 498 ? Non-GAAP Gross Margin $ 36,257 $ 27,260

Three Months Ended November 30,($ in thousands) 2020 2019 GAAP Loss from Operations $ (4,246 ) $ (3,772 )Share-based compensation expense 3,092 436 Amortization of intangible assets 3,994 3,994 Change in fair value of contingent earnout 3 44 liabilityNon-GAAP Income from Operations $ 2,843 $ 702

Three Months Ended November 30,($ in thousands) 2020 2019 GAAP Net Loss $ (4,651 ) $ (4,014 )Provision for income taxes 315 334 Other (income) expense 47 (373 )Interest expense, net 43 281 Depreciation of property and equipment 787 737 Amortization of intangible assets 3,994 3,994 Share-based compensation expense 3,092 436 Change in fair value of contingent earnout 3 44 liabilityAdjusted EBITDA $ 3,630 $ 1,439

Three Months Ended November 30,($ in 2020 2019 thousands)GAAP Net Loss $ (4,651 ) $ (4,014 )Share-basedcompensation 3,092 436 expenseAmortization ofintangible 3,994 3,994 assetsChange in fairvalue ofcontingent 3 44 earnoutliabilityTax effect of ? ? adjustments (1)Non-GAAP Net $ 2,438 $ 460 Income Non-GAAP NetIncome per $ 0.02 nm Share (Basic)(2) Shares used incomputingNon-GAAP Net 130,788,359 nm Income perShare (Basic)(2) Our 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. (1) Accordingly, there is no tax impact associated with the non-GAAP adjustments in the U.S. We have not included the insignificant tax benefit associated with the non-GAAP adjustments related to our foreign jurisdictions that are taxed on a cost-plus basis. Prior to Duck Creek?s initial public offering in August 2020, there were no shares of common stock outstanding, and the membership (2) 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 Company?s consolidated financial statements.

Three Months Ended November 30,($ in thousands) 2020 2019 Net cash provided by operating activities $ (22,172 ) $ (8,141 )Purchases of property and equipment (188 ) (1,636 )Capitalized internal-use software (536 ) (862 )Free Cash Flow $ (22,896 ) $ (10,639 )