GlobeNewswire Inc | Oct 20, 2020 04:15PM EDT

October 20, 2020

-- Fourth Quarter Fiscal 2020 Subscription revenue grew 54% year-over-year -- SaaS Annual Recurring Revenue (ARR) grew 85% year-over-year

BOSTON, Oct. 20, 2020 (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 fourth quarter and fiscal year ended August 31, 2020.

Duck Creeks fourth quarter was an excellent finish to an incredible year for the company, highlighted by 54% growth in subscription revenue, said Michael Jackowski, Duck Creeks Chief Executive Officer. During the quarter we signed eight Duck Creek OnDemand wins, with a healthy mix of new and existing customers and a number of multi-product wins. We believe we have established Duck Creek OnDemand, which is approaching $100 million in SaaS ARR, as the SaaS platform of choice for the global P&C insurance industry.

Jackowski added, The success of our recent IPO was the latest important milestone for Duck Creek. We are at an exciting time in our history with the global P&C insurance industry at what we believe is the early stages of a generational shift to cloud technologies for their core systems. We believe Duck Creek is well positioned to partner with the worlds leading carriers on this digital transformation, delivering significant value for our customers and shareholders.

Fourth Quarter Fiscal Year 2020 Financial Highlights

Revenue

-- Total revenue for the fourth quarter of fiscal year 2020 was $58.3 million, an increase of 22% from the fourth quarter in fiscal year 2019. Subscription revenue was $24.6 million, an increase of 54%; services revenue was $23.3 million, an increase of 6%; license revenue was $4.5 million, an increase of 6%; and maintenance revenue was $5.9 million, an increase of 2%.

Profitability

-- GAAP loss from operations was $21.6 million for the fourth quarter of fiscal year 2020, compared with a GAAP loss from operations of $2.4 million for the comparable period in fiscal year 2019. -- Non-GAAP income from operations was $2.2 million for the fourth quarter of fiscal year 2020, compared with non-GAAP income from operations of $2.9 million for the comparable period in fiscal year 2019. -- GAAP net loss was $21.5 million for the fourth quarter of fiscal year 2020, compared with a GAAP net loss of $2.8 million for the comparable period in fiscal year 2019. -- Non-GAAP net income was $2.3 million for the fourth quarter of fiscal year 2020, compared with non-GAAP net income of $2.5 million for the comparable period in fiscal year 2019. -- GAAP net loss per share is not meaningful because it would only represent results for the 17-day period following our IPO. Non-GAAP net income per share was $0.02, based on basic weighted average shares outstanding of 129.3 million. -- Adjusted EBITDA was $3.0 million for the fourth quarter of fiscal 2020, compared with adjusted EBITDA of $3.6 million for the comparable period in fiscal year 2019.

Full Year Fiscal 2020 Financial Highlights

Revenue

-- Total revenue for the full year fiscal 2020 was $211.7 million, an increase of 24% from fiscal year 2019. Subscription revenue was $84.0 million, an increase of 50%; services revenue was $94.1 million, an increase of 21%; license revenue was $9.9 million, a decrease of 28%; and maintenance revenue was $23.7 million, which remained relatively flat. -- SaaS annual recurring revenue, or SaaS ARR, was $95.6 million as of August31, 2020, an increase of 85% from fiscal year 2019.

Profitability

-- GAAP loss from operations was $28.7 million for the full year fiscal 2020, compared with a GAAP loss from operations of $14.2 million in fiscal year 2019. -- Non-GAAP income from operations was $8.6 million for the full year fiscal 2020, compared with non-GAAP income from operations of $4.4 million in fiscal year 2019. -- GAAP net loss was $29.9 million for the full year fiscal 2020, compared with a GAAP net loss of $16.9 million in fiscal year 2019. -- Non-GAAP net income was $7.3 million for the full year fiscal 2020, compared with non-GAAP net income of $1.7 million in fiscal year 2019. -- GAAP net loss per share is not meaningful because it would only represent results for the 17-day period following our IPO. Non-GAAP net income per share was $0.06, based on basic weighted average shares outstanding of 127.4 million. -- Adjusted EBITDA was $11.7 million for the full year fiscal 2020, compared with adjusted EBITDA of $6.8 million in fiscal year 2019.

Liquidity

-- Duck Creek had $389.9 million in cash and cash equivalents at August 31, 2020. The Company generated $25.7 million in cash from operations and had free cash flow of $19.0million in fiscal year 2020, compared with $14.8 million and $6.6 million, respectively, in fiscal year 2019.

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 reconcilations 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 first quarter of fiscal 2021 and full year of fiscal 2021 based on current expectations as of October 20, 2020:

First Quarter Fiscal 2021 Full Year Fiscal 2021Revenue $55.0 million to $56.0 $244.0 million to $249.0 million millionSubscription Revenue $25.5 million to $26.0 $114.5 million to $116.5 million millionAdjusted EBITDA $0.0 million to $1.5 $3.0 million to $5.0 million millionNon-GAAPNet Loss Per $(0.01) to$0.00 $(0.04) to$(0.02)Share

Conference Call Information

Duck Creek Technologies will host a conference call today, October 20, 2020, 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 3139619. 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 first 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 Creek's recent Annual Report on Form 10-K that will be filed with the Securities and Exchange Commission 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; control of Duck Creek by its controlling shareholders and perceived conflicts of interests; and Duck Creeks status as a controlled company within the meaning of the corporate governance standards of Nasdaq.

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 gross margin excludes share-based compensation expense, amortization of intangible assets, and amortization of capitalized internal-use software. Non-GAAP income from operations excludes share-based compensation expense, amortization of intangible assets and change in fair value of contingent earnout liability. 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. Subscription revenue excluded from the calculations relate to one legacy contract for a service no longer offered separately by the Company. SaaS ARR is calculated by annualizing revenue recorded in the last month of the measurement period. SaaS Net Dollar Retention is a rate calculated by annualizing 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 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 measures and other metrics to manage our 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 DenyeauICR646-277-1251Brian.denyeau@icrinc.com

Media Contact:Paul RechichiRacepoint Global617 624 3295prechichi@racepointglobal.com

Sam A. ShayDuck Creek Technologies857 201 5784sam.shay@duckcreek.com

Duck Creek Technologies, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (unaudited, in thousands) August, 31 August 31, 2020 2019Assets Current assets: Cash and cash equivalents $ 389,878 $ 11,999Accounts receivable 29,149 25,450Unbilled revenue 18,121 15,293Prepaid expenses and other current assets 12,186 5,772Total current assets 449,334 58,514 Property and equipment, net 18,113 17,058Operating lease assets 18,171 -Goodwill 272,455 272,455Intangible assets, net 81,687 98,756Unbilled revenue, net of current portion 3,487 8,045Other assets 17,853 12,449Total assets 861,100 467,277 Liabilities and Stockholders' Equity/Partners' CapitalCurrent liabilities: Accounts payable 1,802 1,362Accrued liabilities 58,202 31,003Contingent earnout liability 3,701 4,055Lease liability 3,611 -Deferred revenue 30,397 23,470Total current liabilities 97,713 59,890 Contingent earnout liability, net of current 3,391 6,460portionBorrowings under credit facility - 4,000Deferred rent, net of current portion - 5,388Lease liability, net of current portion 21,739 -Deferred revenue, net of current portion 379 692Other long-term liabilities 4,121 1,781Total liabilities 127,343 78,210 Total stockholders' equity/partners' capital 733,757 389,066Total liabilities and stockholders' equity/ $ 861,100 $ 467,277partners' capital

Duck Creek Technologies, Inc. and SubsidiariesConsolidatedStatements of Operations(unaudited, in thousands) Three Months Ended August Twelve Months Ended August 31 31 2020 2019 2020 2019 Revenue: Subscription $ 24,631 $ 15,977 $ 83,999 $ 55,909 License 4,483 4,237 9,914 13,776 Maintenance and 5,889 5,798 23,680 23,896 supportProfessional 23,319 21,908 94,079 77,692 servicesTotal revenue 58,322 47,920 211,672 171,273 Cost of revenue (1):Subscription 10,031 7,211 34,902 24,199 License 506 503 1,853 1,970 Maintenance and 863 610 3,338 2,781 supportProfessional 18,243 11,924 57,082 43,228 servicesTotal cost of 29,643 20,247 97,175 72,178 revenue Gross margin 28,679 27,672 114,497 99,095 Operating expenses (1):Research and 14,628 9,597 44,052 35,936 developmentSales and 16,766 10,227 50,305 40,189 marketingGeneral and 18,746 9,417 48,662 36,493 administrativeChange in fairvalue of 112 840 133 628 contingentconsideration Total operating 50,252 30,081 143,152 113,246 expenses Loss from (21,573 ) (2,409 ) (28,655 ) (14,151 ) operations Other income 737 (252 ) 641 (565 ) (expense), netInterest income 30 (19 ) (356 ) (1,030 ) (expense), netLoss before income (20,806 ) (2,681 ) (28,370 ) (15,746 ) taxesProvision for 673 143 1,562 1,150 income taxesNet loss $ (21,479 ) $ (2,823 ) $ (29,932 ) $ (16,896 ) (1) Amounts include share-based compensation expense as disclosed in the following table: Three Months Ended August Twelve Months Ended August 31 31 2020 2019 2020 2019 Share-basedcompensation expense:Cost ofsubscription 405 8 415 20 revenueCost of license - - - - revenueCost ofmaintenance and 24 2 28 9 support revenueCost of services 4,581 41 4,683 123 revenueResearch and 3,844 132 4,128 397 developmentSales and 5,326 101 5,581 418 marketingGeneral and 5,524 292 6,273 1,103 administrativeTotal share-basedcompensation $ 19,704 $ 576 $ 21,108 $ 2,070 expense As part of the Company's re-organization in conjunction with the IPO,Limited Partnership interests, including Class D units held by employees,were converted into restricted common stock (the "conversion"). Insubstitution for part of the economic benefit of the Class D units that wasnot reflected in the conversion, options were granted to holders of Class D units ("leverage restoration options"). Share-based compensation expense("SBC") recorded during the quarter ended August 31, 2020 includes amodification charge of $11.3 million associated with these leveragerestoration options. SBC during the quarter also includes a charge of $6.7million for cash-settled phantom Class D units held by non-U.S. employees.

Duck CreekTechnologies, Inc. and SubsidiariesCondensedConsolidated Statements of CashFlows(unaudited, in thousands) Three Months Ended August Twelve Months Ended August 31 31 2020 2019 2020 2019 Operating activities: Net loss $ (21,479 ) $ (2,823 ) $ (29,932 ) $ (16,896 ) Adjustments to reconcile net lossto net cash provided by operating activities:Depreciation ofproperty and 793 668 3,143 2,398 equipmentAmortization of 4,765 4,348 17,773 17,594 intangible assetsImpairment of right 2,792 - 2,792 - of use assetAmortization ofdeferred financing 28 (66 ) 134 136 feesShare-based 19,704 576 21,108 2,070 compensation expenseChange in fair valueof contingent earnout 112 840 133 628 liabilityPayment of contingentearnout liability in - - - (2,350 )excess of acquisitiondate fair valueBad debt expense 32 158 97 182 Deferred taxes (544 ) 211 (690 ) 188 Changes in operatingassets and liabilitiesAccounts receivable 505 1,897 (3,796 ) (6,285 )Unbilled revenue 2,912 5,065 1,730 4,481 Prepaid expenses and (6,396 ) (624 ) (6,300 ) 198 other current assetsOther assets (1,663 ) (1,335 ) (5,764 ) (3,788 )Accounts payable 123 189 (181 ) (783 )Accrued liabilities 7,070 7,459 16,393 9,150 Deferred revenue 6,400 (205 ) 6,614 5,972 Deferred rent - 779 - 1,661 Operating leases (67 ) - 132 - Other long-term 2,391 (45 ) 2,339 277 liabilitiesNet cash provided by 17,478 17,092 25,725 14,833 operating activities Investing activities: Acquisition of - - - (9,814 )Outline Systems LLCAcquisition of - (1,827 ) - (1,827 )CedeRight ProductsCapitalized (453 ) (781 ) (2,893 ) (2,956 )internal-use softwarePurchase of property (690 ) (3,517 ) (3,854 ) (5,314 )and equipmentNet cash used in (1,143 ) (6,125 ) (6,747 ) (19,911 )investing activities Financing activities: Net cash provided by(used in) financing 354,348 (8,802 ) 358,901 3,198 activities Net increase(decrease) in cash 370,683 2,165 377,879 (1,880 )and cash equivalents Cash and cashequivalents - 19,195 9,834 11,999 13,879 beginning of periodCash and cashequivalents - end of $ 389,878 $ 11,999 $ 389,878 $ 11,999 period

Duck CreekTechnologies, Inc. and SubsidiariesReconciliation of GAAP to Non-GAAP Financial Measures(unaudited, in thousands) Three Months Ended August Twelve Months Ended August 31 31 2020 2019 2020 2019 Non-GAAP Gross Margin: GAAP Gross Margin $ 28,679 $ 27,672 $ 114,497 $ 99,095 Share-based compensation 5,010 51 5,125 151 expense Amortization of 1,186 1,164 4,746 4,680 intangible assets Amortization of capitalized 497 - 703 - internal-use software Non-GAAP Gross $ 35,372 $ 28,887 $ 125,071 $ 103,926 Margin Non-GAAP Income from Operations: GAAP Loss from $ (21,573 ) $ (2,409 ) $ (28,655 ) $ (14,151 ) Operations Share-based compensation 19,704 576 21,108 2,070 expense Amortization of 3,994 3,921 15,975 15,884 intangible assets Change in fair value of 112 840 133 628 contingent earnout liability Non-GAAP Income $ 2,237 $ 2,927 $ 8,561 $ 4,431 from Operations Adjusted EBITDA: GAAP Net Loss $ (21,479 ) $ (2,823 ) $ (29,932 ) $ (16,896 ) Provision for 673 143 1,562 1,150 income taxes Other (income) (737 ) 252 (641 ) 565 expense Interest expense, (30 ) 19 356 1,030 net Depreciation of property and 793 668 3,143 2,398 equipment Amortization of 3,994 3,921 15,975 15,884 intangible assets Share-based compensation 19,704 576 21,108 2,070 expense Change in fair value of 112 840 133 628 contingent earnout liability Adjusted EBITDA $ 3,030 $ 3,595 $ 11,704 $ 6,829 Non-GAAP Net Income: GAAP Net Loss $ (21,479 ) $ (2,823 ) $ (29,932 ) $ (16,896 ) Share-based compensation 19,704 576 21,108 2,070 expense Amortization of 3,994 3,921 15,975 15,884 intangible assets Change in fair value of 112 840 133 628 contingent earnout liability Tax effect of - - - - adjustments (1) Non-GAAP Net $ 2,331 $ 2,513 $ 7,284 $ 1,686 Income Non-GAAP Net Income per Share $ 0.02 nm $ 0.06 nm (Basic) (2) Shares used in computing Non-GAAP 129,264,149 nm 127,367,969 nm Net Income per Share (Basic) (2) (1) 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. 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. The Company previously computed the tax effect of non-GAAP adjustments by multiplying the adjustments by an estimated effective tax rate of 27%. The Company has revised the August 31, 2019 prior year presentation in the table above in order to conform to the current year method of computing the tax effect of non-GAAP adjustments. (2) Prior to the IPO, there were no shares of common stock outstanding, and the membership structure of Duck Creek Technologies consisted of limited partnership units. The Company analyzed the calculation of earnings per unit for periods prior to the IPO and determined that it resulted in values that would not be meaningful to the users of the Company?s consolidated financial statements. In addition, GAAP earnings per share for Q4 2020 and fiscal year 2020 has not been presented as it resulted in values that would not be meaningful to the users of this earnings release because it only reflects the operations of the Company for the 17 day period subsequent to the IPO. For purposes of this earnings release, the Company has performed a calculation of Non-GAAP earnings per share for Q4 2020 and fiscal year 2020 by using a consistent exchange ratio for all pre-IPO limited partnership units and assuming that common stock sold in the IPO was outstanding for the entire fiscal year. Free Cash Flow: Net cash provided by operating $ 17,478 $ 17,092 $ 25,725 $ 14,833 activities Purchases of property and (690 ) (3,517 ) (3,854 ) (5,314 ) equipment Capitalized internal-use (453 ) (781 ) (2,893 ) (2,956 ) software Free Cash Flow $ 16,335 $ 12,794 $ 18,978 $ 6,563