f
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
For the quarterly period ended
OR
For the transition period from ________________ to ________________
Commission File Number:
(Exact Name of Registrant as Specified in its Charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer |
Duck Creek Technologies, Inc. |
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(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol(s) |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of January 3, 2023, the registrant had
Special Note Regarding Forward-Looking Statements
Some of the information contained in the section entitled “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in this Quarterly Report on Form 10-Q contain forward-looking statements that reflect our current views with respect to, among other things, future events and financial performance. You can identify these forward-looking statements by the use of forward-looking words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “could,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates,” “target,” “projects,” “contemplates” or the negative version of those words or other comparable words. Any forward-looking statements contained in this report are based upon our historical performance and on our current plans, estimates and expectations in light of information currently available to us. The inclusion of this forward-looking information should not be regarded as a representation by us that the future plans, estimates or expectations contemplated by us will be achieved. Such forward-looking statements are subject to various risks and uncertainties and assumptions relating to our operations, financial results, financial condition, business, prospects, growth strategy and liquidity. For more information regarding these risks and uncertainties as well as certain additional risks that we face, refer to Part II, “Item 1A. Risk Factors” as well as the factors more fully described in “Item 2. Management’s Discussion and Analysis of Financial Conditions and Results of Operations,” those described in our Annual Report on Form 10-K for the year ended August 31, 2022, and those described from time to time in our future reports filed with the Securities and Exchange Commission (the “SEC”). Accordingly, there are, or will be, important factors that could cause our actual results to differ materially from those indicated in these statements. We believe that these factors include, but are not limited to:
These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this report. The forward-looking statements made in this report relate only to events as of the date on which the statements are made. We do not undertake any obligation to publicly update or review any forward-looking statement except as required by law, whether as a result of new information, future developments or otherwise.
If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, our actual results may vary materially from what we may have expressed or implied by these forward-looking statements. We caution that you should not place undue reliance on any of our forward-looking statements. You should specifically consider the factors identified in this report that could cause actual results to differ before making an investment decision to purchase our common stock. Furthermore, new risks and uncertainties arise from time to time, and it is impossible for us to predict those events or how they may affect us.
i
Basis of Presentation
As used in this Quarterly Report on Form 10-Q unless the context otherwise requires, references to “we,” “us,” “our,” the “Company,” “Duck Creek,” and similar references refer to Duck Creek Technologies, Inc. together with its subsidiaries, and the following terms have the meanings or are calculated as set forth below:
Certain monetary amounts, percentages, and other figures included in this Quarterly Report on Form 10-Q have been subject to rounding adjustments. Percentage amounts included in this Quarterly Report on Form 10-Q have not in all cases been calculated on the basis of such rounded figures, but on the basis of such amounts prior to rounding. For this reason, percentage amounts in this Quarterly Report on Form 10-Q may vary from those obtained by performing the same calculations using the figures in our consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. Certain other amounts that appear in this Quarterly Report on Form 10-Q may not sum due to rounding. When we state that we are the leading cloud-based SaaS provider of core systems for the global property and casualty (P&C) insurance industry, we are basing our leadership on our subscription revenue for fiscal 2022.
Our fiscal year ends on August 31. Unless otherwise noted, any reference to a year preceded by the word “fiscal” refers to the fiscal year ended August 31 of that year. For example, references to “fiscal 2023” refer to the fiscal year ended August 31, 2023. Any reference to a year not preceded by “fiscal” refers to a calendar year. Accordingly, our first three fiscal quarters are the successor three-month periods following August 31 (i.e., November 30, February 28 and May 31).
ii
Table of Contents
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PART I. |
1 |
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Item 1. |
1 |
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1 |
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2 |
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Consolidated Statements of Other Comprehensive Income (Loss) |
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4 |
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6 |
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7 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
19 |
Item 3. |
34 |
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Item 4. |
34 |
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PART II. |
35 |
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Item 1. |
35 |
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Item 1A. |
35 |
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Item 2. |
35 |
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Item 3. |
35 |
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Item 4. |
35 |
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Item 5. |
35 |
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Item 6. |
36 |
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37 |
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iii
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
DUCK CREEK TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except share information)
(Unaudited)
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November 30, |
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August 31, |
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2022 |
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2022 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Short-term investments |
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Accounts receivable, net |
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Unbilled revenue |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Operating lease assets |
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Goodwill |
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Intangible assets, net |
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Deferred tax assets |
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Unbilled revenue, net of current portion |
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Other assets |
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Total assets |
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$ |
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$ |
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Liabilities and Stockholders’ Equity |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued liabilities |
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Lease liability |
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Deferred revenue |
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Total current liabilities |
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Lease liability, net of current portion |
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Deferred income taxes |
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Deferred revenue, net of current portion |
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Other long-term liabilities |
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Total liabilities |
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Stockholders’ equity |
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Common stock, |
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Preferred stock, |
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Treasury stock, common shares at cost; |
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( |
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Accumulated deficit |
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( |
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( |
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Accumulated other comprehensive income (loss) |
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( |
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Additional paid in capital |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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See accompanying notes to consolidated financial statements.
1
DUCK CREEK TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands, except share and per share information)
(Unaudited)
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Three Months Ended |
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2022 |
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2021 |
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Revenue: |
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Subscription |
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$ |
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$ |
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License |
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Maintenance and support |
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Professional services |
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Total revenue |
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Cost of revenue: |
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Subscription |
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License |
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Maintenance and support |
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Professional services |
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Total cost of revenue |
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Gross margin |
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Operating expenses: |
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Research and development |
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Sales and marketing |
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General and administrative |
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Change in fair value of contingent consideration |
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— |
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Total operating expenses |
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Income (loss) from operations |
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( |
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Other income (expense), net |
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( |
) |
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( |
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Interest income (expense), net |
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( |
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Income (loss) before income taxes |
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( |
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Provision for (benefit from) income taxes |
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( |
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Net income (loss) |
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$ |
( |
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$ |
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Net earnings (loss) per share information1 |
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Net earnings (loss) per share of common stock, basic |
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$ |
( |
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$ |
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Net earnings (loss) per share, diluted |
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$ |
( |
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$ |
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Weighted average shares of common stock, basic |
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Weighted average shares of common stock, diluted |
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See accompanying notes to consolidated financial statements.
2
DUCK CREEK TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Other Comprehensive Income (Loss)
(In thousands)
(Unaudited)
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Three Months Ended |
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2022 |
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2021 |
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Net income (loss) |
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$ |
( |
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$ |
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Other comprehensive income (loss): |
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Foreign currency translation adjustments |
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— |
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Unrealized losses on available-for-sale securities |
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( |
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( |
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Total other comprehensive income (loss) |
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( |
) |
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Comprehensive income (loss) |
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$ |
( |
) |
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$ |
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See accompanying notes to consolidated financial statements.
3
DUCK CREEK TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders’ Equity
(In thousands, except share information)
(Unaudited)
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Common stock |
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Treasury Stock |
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Additional |
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Accumulated Other Comprehensive |
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Accumulated |
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Total |
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Shares |
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Amount |
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Shares |
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Amount |
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capital |
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Income (loss) |
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deficit |
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equity |
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Balance at August 31, 2022 |
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$ |
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$ |
( |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Repurchase of common stock |
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— |
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— |
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( |
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— |
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— |
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— |
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( |
) |
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Share-based compensation expense |
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— |
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— |
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— |
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— |
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— |
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— |
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Vesting of restricted stock awards |
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— |
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— |
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( |
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— |
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— |
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— |
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Other comprehensive gain |
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— |
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— |
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— |
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— |
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— |
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— |
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Balance at November 30, 2022 |
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$ |
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$ |
( |
) |
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$ |
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$ |
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$ |
( |
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$ |
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See accompanying notes to consolidated financial statements.
4
DUCK CREEK TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders’ Equity
(In thousands, except share information)
(Unaudited)
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Common stock |
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Treasury Stock |
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Additional |
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Accumulated Other Comprehensive |
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Accumulated |
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Total |
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Shares |
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Amount |
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Shares |
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Amount |
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capital |
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Income (loss) |
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deficit |
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equity |
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Balance at August 31, 2021 |
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$ |
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$ |
( |
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$ |
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$ |
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$ |
( |
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$ |
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Net income |
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— |
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— |
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— |
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— |
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— |
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— |
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Repurchase of common stock |
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— |
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— |
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( |
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— |
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— |
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— |
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( |
) |
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Share-based compensation expense |
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— |
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— |
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— |
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— |
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— |
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— |
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Issuance of common stock upon exercise of stock options |
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— |
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— |
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— |
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— |
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— |
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Vesting of restricted stock awards |
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— |
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— |
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( |
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— |
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— |
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— |
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Other comprehensive loss |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Balance at November 31, 2021 |
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$ |
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$ |
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$ |
( |
) |
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$ |
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$ |
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$ |
( |
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$ |
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See accompanying notes to consolidated financial statements.
5
DUCK CREEK TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
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Three Months Ended |
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2022 |
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2021 |
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Operating activities: |
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Net income (loss) |
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$ |
( |
) |
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$ |
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Adjustments to reconcile net income (loss) to cash used in operating activities: |
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Depreciation of property and equipment |
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Amortization of capitalized software |
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Amortization of intangible assets |
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Amortization of deferred financing fees |
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Share-based compensation expense |
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Change in fair value of contingent earnout liability |
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— |
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Payment of contingent earnout liability in excess of acquisition date fair value |
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— |
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( |
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Changes to allowance for credit losses |
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Deferred taxes |
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( |
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Changes in operating assets and liabilities |
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Accounts receivable |
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( |
) |
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Unbilled revenue |
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( |
) |
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( |
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Prepaid expenses and other current assets |
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( |
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( |
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Other assets |
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Accounts payable |
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( |
) |
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Accrued liabilities |
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( |
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( |
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Deferred revenue |
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( |
) |
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( |
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Operating leases |
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( |
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( |
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Cash settlement of vested phantom stock |
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( |
) |
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( |
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Other long-term liabilities |
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( |
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Net cash used in operating activities |
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( |
) |
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( |
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Investing activities: |
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Purchase of short-term investments |
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( |
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— |
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Maturities of short-term investments |
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Capitalized internal-use software |
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( |
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( |
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Purchase of property and equipment |
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( |
) |
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( |
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Net cash provided by investing activities |
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Financing activities: |
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Purchase of treasury stock |
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( |
) |
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( |
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Proceeds from stock option exercises |
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— |
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Payments of contingent earnout liability |
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— |
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( |
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Payment of deferred financing costs |
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— |
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( |
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Net cash used in financing activities |
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( |
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( |
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Net increase in cash and cash equivalents |
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Cash and cash equivalents – beginning of period |
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Cash and cash equivalents – end of period |
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$ |
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$ |
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Supplemental disclosure of other cash flow information: |
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Cash paid for income taxes |
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Purchases of property and equipment recorded in accounts payable and accrued liabilities |
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See accompanying notes to consolidated financial statements.
6
DUCK CREEK TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(amounts in thousands except unit and per unit and share and per share amounts)
(Unaudited)