GlobeNewswire Inc | Jan 6, 2022 04:05PM EST

January 06, 2022

-- First Quarter Fiscal 2022 revenue grew 25% year-over-year -- SaaS Annual Recurring Revenue grew 40% year-over-year

BOSTON, Jan. 06, 2022 (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 first quarter ended November 30, 2021.

Duck Creeks first quarter results were a good start to fiscal 2022, with 40% SaaS ARR growth and profitability that was well ahead of expectations. We continue to see strong demand activity amongst new and existing customers that are making meaningful investments in their core systems to drive better, more profitable performance across their businesses, said Michael Jackowski, Duck Creeks Chief Executive Officer.

Mr. Jackowski added, We remain focused on executing on our key strategic priorities, which will enable us to fully capitalize on the generational opportunity to modernize insurers core systems with our SaaS platform. The early, notable success we had internationally in the quarter was an exciting example of the numerous levers we have to deliver high levels of growth over time.

First Quarter 2022 Financial Highlights

Revenue

-- Total revenue for the first quarter of fiscal year 2022 was $73.4 million, an increase of 25% from the comparable period in fiscal year 2021. Subscription revenue was $35.7 million, an increase of 28%; professional services revenue was $29.5 million, an increase of 26%; license revenue was $1.9 million, an increase of 42%; and maintenance and support revenue was $6.3 million, an increase of 1%.

Profitability

-- GAAP income from operations was $1.9 million for the first quarter of fiscal year 2022, compared with a GAAP loss from operations of $4.2 million for the comparable period in fiscal year 2021. -- Non-GAAP income from operations was $7.1 million for the first quarter of fiscal year 2022, compared with non-GAAP income from operations of $2.8 million for the comparable period in fiscal year 2021. -- GAAP net income was $0.7 million for the first quarter of fiscal year 2022, compared with GAAP net loss of $4.7 million for the comparable period in fiscal year 2021. -- Non-GAAP net income was $4.8 million for the first quarter of fiscal year 2022, compared with non-GAAP net income of $2.1 million for the comparable period in fiscal year 2021. -- GAAP net income per share was $0.01, on both a basic and fully diluted basis. Non-GAAP net income per share was $0.04. Basic and fully diluted weighted average shares outstanding were approximately 132.0 million shares and 134.2 million shares, respectively, for the quarter ended November 30, 2021. -- Adjusted EBITDA was $7.8 million for the first quarter of fiscal 2022, compared with adjusted EBITDA of $3.6 million for the comparable period in fiscal year 2021.

Liquidity

-- As of November 30, 2021, Duck Creek had $251.7 million in cash and cash equivalents, $95.9 million in short term investments and no debt. Duck Creek used $24.6 million of cash in operating activities and had free cash flow of ($25.5) million during the first quarter of fiscal year 2022, compared with $22.2 million in cash used in operating activities and free cash flow of ($22.9) million in the comparable period in fiscal year 2021.

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 2022 and full year of fiscal 2022 based on current expectations as of January6, 2022:

Second Quarter Fiscal Full Year Fiscal 2022 2022Revenue $71.5million to $298.0million to $73.5million $304.0millionSubscription $37.0million to $152.5million to $155.5Revenue $38.0million millionAdjusted $1.5million to $19.0million toEBITDA $2.5million $21.0million

Conference Call Information

Duck Creek Technologies will host a conference call today, January6, 2022, at 5:00 p.m. (Eastern Time) to discuss Duck Creeks financial results and business outlook. A live webcast of the call will be available on the Investor Relations page of the Duck Creeks 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 8253524. 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 2022 and full year fiscal 2022, 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 are set forth in Duck Creeks most recent Annual Report on Form 10-K that was filed with the Securities and Exchange Commission on October 29, 2021, as supplemented by Duck Creeks 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; and the significant influence of Duck Creeks largest shareholders on the composition of its board of directors, its management, business plans, and policies and any conflicts of interests therewith.

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

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

Non-GAAP Financial Measures and Other Metrics

This press release contains the following non-GAAP financial measures: non-GAAP gross margin, non-GAAP income from operations, adjusted EBITDA, non-GAAP net income, non-GAAP net income per share, and free cash flow. Adjusted EBITDA excludes provision for income taxes, other (income) expense, interest 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 Duck Creek. 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.

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

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

To the extent that Duck Creek 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 Duck Creeks reconciliation of historic numbers, the amount of which, based on historical experience, could be significant.

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

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

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

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

As of As of November August 30, 31, 2021 2021 Assets Current assets: Cash and cash equivalents $ 251,739 $ 185,657 Short-term investments 95,996 191,981 Accounts receivable, net 39,771 34,629 Unbilled revenue 27,611 24,423 Prepaid expenses and other current assets 16,895 14,381 Total current assets 432,012 451,071 Property and equipment, net 14,107 14,305 Operating lease assets 16,970 17,798 Goodwill 272,455 272,455 Intangible assets, net 61,386 65,359 Deferred tax assets 1,042 2,331 Unbilled revenue, net of current portion 1,327 1,401 Other assets 19,199 19,413 Total assets $ 818,498 $ 844,133 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 1,321 $ 2,070 Accrued liabilities 28,102 46,437 Contingent earnout liability ? 5,462 Lease liability 3,999 4,110 Deferred revenue 27,197 29,577 Total current liabilities 60,619 87,656 Lease liability, net of current portion 20,096 21,273 Deferred revenue, net of current portion 68 ? Other long-term liabilities 3,826 4,466 Total liabilities 84,609 113,395 Stockholders' equity Common stock, 134,690,424 shares issued and132,062,061 shares outstanding at November 30, 2021,134,625,379 shares issued and 132,000,317 shares 1,347 1,346 outstanding at August 31, 2021, 300,000,000 sharesauthorized at November 30, 2021 and August 31, 2021,par value $0.01 per sharePreferred stock, 0 shares outstanding, 50,000,000shares authorized at November 30, 2021 and August 31, ? ? 2021, par value $0.01 per shareTreasury stock, common shares at cost; 2,628,363shares at November 30, 2021 and (67,905 ) (67,764 )2,625,062 shares at August 31, 2021Accumulated deficit (40,573 ) (41,265 )Accumulated other comprehensive income 51 64 Additional paid in capital 840,969 838,357 Total stockholders' equity 733,889 730,738 Total liabilities and stockholders' equity $ 818,498 $ 844,133

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

Three Months Ended November 30, (dollars in thousands) 2021 2020 Revenue Subscription $ 35,705 $ 27,909 License 1,912 1,350 Maintenance and support 6,277 6,190 Professional services 29,527 23,457 Total revenue 73,421 58,906 Cost of revenue Subscription 14,585 10,084 License 244 388 Maintenance and support 880 842 Professional services 15,242 13,716 Total cost of revenue 30,951 25,030 Gross margins 42,470 33,876 Operating expenses Research and development 12,321 11,104 Sales and marketing 13,167 12,597 General and administrative 15,035 14,418 Change in fair value of contingent 67 3 considerationTotal operating expense 40,590 38,122 Income (loss) from operations 1,880 (4,246 )Other expense, net (696 ) (47 )Interest expense, net (118 ) (43 )Income (loss) before income taxes 1,066 (4,336 )Provision for income taxes 374 315 Net income (loss) $ 692 $ (4,651 )Net loss per share information Net earnings (loss) per share of common $ 0.01 $ (0.04 )stock, basicNet earnings per share of common stock, $ 0.01 $ (0.04 )dilutedWeighted average shares of common stock, 132,038,274 130,788,359 basicWeighted average shares of common stock, 134,212,210 130,788,359 diluted

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

Three Months Ended November 30, 2021 2020 Cost of subscription revenue $ 42 $ 80 Cost of maintenance and support revenue 8 7 Cost of services revenue (100 ) 610 Research and development 229 511 Sales and marketing (60 ) 899 General and administrative 1,093 985 Total share-based compensation expense $ 1,212 $ 3,092

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

For the Three Months Ended November 30, 2021 2020 Operating activities: Net income (loss) $ 692 $ (4,651 )Adjustments to reconcile net loss to cash provided by (used in) operating activities:Depreciation of property and equipment 704 787 Amortization of capitalized software 561 498 Amortization of intangible assets 3,973 4,087 Amortization of deferred financing fees 18 28 Share-based compensation expense 1,212 3,092 Loss on change in fair value of contingent earnout 67 3 liabilityPayment of contingent earnout liability in excess of (1,650 ) ? acquisition date fair valueBad debt expense 817 14 Deferred taxes 1,288 (171 )Changes in operating assets and liabilities Accounts receivable (5,959 ) 1,280 Unbilled revenue (3,115 ) (1,730 )Prepaid expenses and other current assets (2,428 ) 319 Other assets 604 (15 )Accounts payable (909 ) 712 Accrued liabilities (16,891 ) (16,629 )Deferred revenue (2,312 ) (4,558 )Operating leases (460 ) (161 )Cash settlement of vested phantom stock (175 ) (6,677 )Other long-term liabilities (640 ) 1,600 Net cash used in operating activities (24,603 ) (22,172 )Investing activities: Maturities of short-term investments 95,967 ? Capitalized internal-use software (366 ) (536 )Purchase of property and equipment (540 ) (188 )Net cash provided by (used in) investing activities 95,061 (724 )Financing activities: Payment of deferred IPO costs ? (3,650 )Payment of deferred Class E offering costs ? (192 )Purchase of treasury stock (141 ) (57 )Proceeds from stock option exercises 132 ? Payments of contingent earnout liability (3,879 ) (1,923 )Payment of deferred financing costs (488 ) ? Net cash used in financing activities (4,376 ) (5,822 )Net increase (decrease) in cash and cash equivalents 66,082 (28,718 )Cash and cash equivalents ? beginning of period 185,657 389,878 Cash and cash equivalents ? end of period $ 251,739 $ 361,160

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

Three Months Ended November 30,($ in thousands) 2021 2020 GAAP Gross Margin $ 42,470 $ 33,876 Share-based compensation expense (50 ) 697 Amortization of intangible assets 1,121 1,186 Amortization of capitalized internal-use 561 498 softwareNon-GAAP Gross Margin $ 44,102 $ 36,257

Three Months Ended November 30,($ in thousands) 2021 2020 GAAP Income (Loss) from Operations $ 1,880 $ (4,246 )Share-based compensation expense 1,212 3,092 Amortization of intangible assets 3,929 3,994 Change in fair value of contingent earnout 67 3 liabilityNon-GAAP Income from Operations $ 7,088 $ 2,843

Three Months Ended November 30,($ in thousands) 2021 2020 GAAP Net Income (Loss) $ 692 $ (4,651 )Provision for income taxes 374 315 Other expense, net 696 47 Interest income, net 118 43 Depreciation of property and equipment 704 787 Amortization of intangible assets 3,929 3,994 Share-based compensation expense 1,212 3,092 Change in fair value of contingent earnout 67 3 liabilityAdjusted EBITDA $ 7,792 $ 3,630 Adjusted EBITDA as a percent of total revenue 11 % 6 %

Three Months Ended November 30,($ in thousands) 2021 PerShare 2020 PerShare GAAP Net Income $ 692 $ 0.01 $ (4,651 ) $ (0.04 )(Loss) ^(1)Add: GAAP tax 374 315 provisionGAAP pre-tax 1,066 (4,336 ) income (loss)Share-basedcompensation 1,212 3,092 expenseAmortization ofintangible 3,929 3,994 assetsChange in fairvalue ofcontingent 67 3 earnoutliabilityNon-GAAP pre-tax 6,274 2,753 incomeNon-GAAP taxprovision 1,506 661 applied at a 24%tax rate ^(1)Non-GAAP Net $ 4,768 $ 0.04 $ 2,092 $ 0.02 Income ^(1) Shares used incomputingNon-GAAP income per shareamounts:GAAPweighted-average 132,038,274 130,788,359 shares - basicGAAP dilutive 2,173,936 ? sharesNon-GAAPdilutive sharesexcluded fromGAAPloss per share ? 3,227,281 calculation(using thetreasury stockmethod)Non-GAAPweighted-average 134,212,210 134,015,640 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.

Three Months Ended November 30,($ in thousands) 2021 2020 Net cash used in operating activities $ (24,603 ) $ (22,172 )Purchases of property and equipment (540 ) (188 )Capitalized internal-use software (366 ) (536 )Free Cash Flow $ (25,509 ) $ (22,896 )