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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended November 30, 2022

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________ to ________________

Commission File Number: 001-39449

Duck Creek Technologies, Inc.

(Exact Name of Registrant as Specified in its Charter)

Delaware	84-3723837
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
Duck Creek Technologies, Inc. 22 Boston Wharf Road, Floor 10 Boston, MA	02210
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (888) 724-3509

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $0.01 par value per share	DCT	The Nasdaq Stock Market LLC

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. Yes ☒ No ☐

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). Yes ☒ No ☐

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.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

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 ☐ No ☒

As of January 3, 2023, the registrant had 132,888,209 shares of common stock, $0.01 par value per share, outstanding.

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:

•our history of losses;

•changes in our product revenue mix as we continue to focus on sales of our Software-as-a-service (“SaaS”) solutions, which will cause fluctuations in our results of operations and cash flows between periods;

•our reliance on orders and renewals from a relatively small number of customers for a substantial portion of our revenue, and the substantial negotiating leverage customers have in renewing and expanding their contracts for our solutions;

•the success of our growth strategy focused on SaaS solutions and our ability to develop or sell our solutions into new markets or further penetrate existing markets;

•our ability to manage our expanding operations, including our ability to attract and retain our key professional employees;

•intense competition in our market;

•third parties may assert we are infringing or violating their intellectual property rights;

•U.S. and global market and economic conditions (including the recent economic downturn, inflationary pressures and international political instabilities), particularly adverse in the insurance industry;

•additional complexity, burdens and volatility in connection with our international sales and operations;

•the length and variability of our sales and implementation cycles;

•data breaches, unauthorized access to customer data or other disruptions of our solutions;

•the significant influence that Apax VIII Fund, a global private equity fund (collectively, with its affiliates, “Apax”) and Accenture plc, a public limited company incorporated in Ireland (collectively, with its affiliates, “Accenture”), will have on the composition of our board of directors, our management, business plans and policies, and any conflicts of interest between Apax and Accenture, on the one hand, and our other stockholders, on the other hand; and

•the other risks and uncertainties described under Part II, “Item 1A. Risk Factors.”

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:

•We define “subscription revenue” as the revenue derived from the sale of our SaaS solutions through recurring fee arrangements for the period indicated.

•We define “ACV” as the committed total contract value of new software sales in dollar terms divided by the corresponding minimum number of committed months, with the resultant minimum monthly commitment being multiplied by twelve.

•We define “carriers” as property and casualty (“P&C”) insurance carriers.

•We define “core systems” as the following key functions of carriers: policy administration, claims management and billing.

•We define “customers” as buying entities that contract individually for our products and services. For example, multiple subsidiaries of a single carrier may each constitute a customer if each entity contracts with us separately. By contrast, a carrier that uses our products across multiple subsidiaries under a single enterprise license agreement would constitute a single customer.

•We define “DWPs” as the gross dollar value of total premiums paid to carriers by policyholders.

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

		Page
PART I.	FINANCIAL INFORMATION	1
Item 1.	Financial Statements (Unaudited)	1
	Consolidated Balance Sheets	1
	Consolidated Statements of Operations	2
	Consolidated Statements of Other Comprehensive Income (Loss)	3
	Consolidated Statements of Stockholders’ Equity	4
	Consolidated Statements of Cash Flows	6
	Notes to Unaudited Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34
Item 4.	Controls and Procedures	34
PART II.	OTHER INFORMATION	35
Item 1.	Legal Proceedings	35
Item 1A.	Risk Factors	35
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35
Item 3.	Defaults Upon Senior Securities	35
Item 4.	Mine Safety Disclosures	35
Item 5.	Other Information	35
Item 6.	Exhibits	36
Signatures		37

iii

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

DUCK CREEK TECHNOLOGIES, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(In thousands, except share information)

(Unaudited)

	November 30,			August 31,
	2022			2022
Assets
Current assets:
Cash and cash equivalents	$	255,456		$	155,265
Short-term investments		8,432			117,823
Accounts receivable, net		28,570			29,939
Unbilled revenue		36,006			31,696
Prepaid expenses and other current assets		16,303			13,355
Total current assets		344,767			348,078
Property and equipment, net		13,877			14,076
Operating lease assets		15,636			16,502
Goodwill		357,260			355,498
Intangible assets, net		79,490			82,888
Deferred tax assets		1,316			1,132
Unbilled revenue, net of current portion		23			209
Other assets		20,814			21,293
Total assets	$	833,183		$	839,676
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	3,433		$	2,577
Accrued liabilities		38,980			41,747
Lease liability		4,669			4,552
Deferred revenue		26,509			29,618
Total current liabilities		73,591			78,494
Lease liability, net of current portion		16,660			17,877
Deferred income taxes		8,827			8,654
Deferred revenue, net of current portion		49			39
Other long-term liabilities		2,753			2,207
Total liabilities		101,880			107,271
Commitments and contingencies
Stockholders’ equity
Common stock, 135,597,678 shares issued and 132,858,647 shares outstanding at November 30, 2022, 135,370,279 shares issued and 132,686,867 shares outstanding at August 31, 2022, 300,000,000 shares authorized at November 30, 2022 and August 31, 2022, par value $0.01 per share		1,355			1,353
Preferred stock, 0 shares outstanding, 50,000,000 shares authorized at November 30, 2022 and August 31, 2022, par value $0.01 per share		—			—
Treasury stock, common shares at cost; 2,739,031 shares at November 30, 2022 and    2,684,316 shares at August 31, 2022		(69,437	)		(68,784	)
Accumulated deficit		(54,758	)		(49,597	)
Accumulated other comprehensive income (loss)		830			(393	)
Additional paid in capital		853,313			849,826
Total stockholders’ equity		731,303			732,405
Total liabilities and stockholders’ equity	$	833,183		$	839,676

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)

	Three Months Ended November 30,
	2022			2021
Revenue:
Subscription	$	43,790		$	35,705
License		1,782			1,912
Maintenance and support		7,159			6,277
Professional services		27,855			29,527
Total revenue		80,586			73,421
Cost of revenue:
Subscription		17,091			14,585
License		261			244
Maintenance and support		1,185			880
Professional services		18,605			15,242
Total cost of revenue		37,142			30,951
Gross margin		43,444			42,470
Operating expenses:
Research and development		16,197			12,321
Sales and marketing		16,211			13,167
General and administrative		17,597			15,035
Change in fair value of contingent consideration		—			67
Total operating expenses		50,005			40,590
Income (loss) from operations		(6,561	)		1,880
Other income (expense), net		(402	)		(696	)
Interest income (expense), net		1,253			(118	)
Income (loss) before income taxes		(5,710	)		1,066
Provision for (benefit from) income taxes		(549	)		374
Net income (loss)	$	(5,161	)	$	692
Net earnings (loss) per share information1
Net earnings (loss) per share of common stock, basic	$	(0.04	)	$	0.01
Net earnings (loss) per share, diluted	$	(0.04	)	$	0.01
Weighted average shares of common stock, basic		132,748,831			132,038,274
Weighted average shares of common stock, diluted		132,748,831			134,212,210

1.See Note 8—Net Loss Per Share for additional details.

See accompanying notes to consolidated financial statements.

2

DUCK CREEK TECHNOLOGIES, INC. AND SUBSIDIARIES

Consolidated Statements of Other Comprehensive Income (Loss)

(In thousands)

(Unaudited)

	Three Months Ended November 30,
	2022			2021
Net income (loss)	$	(5,161	)	$	692
Other comprehensive income (loss):
Foreign currency translation adjustments		1,550			—
Unrealized losses on available-for-sale securities		(327	)		(13	)
Total other comprehensive income (loss)		1,223			(13	)
Comprehensive income (loss)	$	(3,938	)	$	679

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)

	Common stock				Treasury Stock					Additional paid-in			Accumulated Other Comprehensive			Accumulated			Total stockholders'
	Shares		Amount		Shares		Amount			capital			Income (loss)			deficit			equity
Balance at August 31, 2022		135,370,279	$	1,353		2,684,316	$	(68,784	)	$	849,826		$	(393	)	$	(49,597	)	$	732,405
Net loss		—		—		—		—			—			—			(5,161	)		(5,161	)
Repurchase of common stock		—		—		54,715		(653	)		—			—			—			(653	)
Share-based compensation expense		—		—		—		—			3,489			—			—			3,489
Vesting of restricted stock awards		227,399		2		—		—			(2	)		—			—			—
Other comprehensive gain		—		—		—		—			—			1,223			—			1,223
Balance at November 30, 2022		135,597,678	$	1,355		2,739,031	$	(69,437	)	$	853,313		$	830		$	(54,758	)	$	731,303

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)

	Common stock				Treasury Stock					Additional paid-in			Accumulated Other Comprehensive			Accumulated			Total stockholders'
	Shares		Amount		Shares		Amount			capital			Income (loss)			deficit			equity
Balance at August 31, 2021		134,625,379	$	1,346		2,625,062	$	(67,764	)	$	838,357		$	64		$	(41,265	)	$	730,738
Net income		—		—		—		—			—			—			692			692
Repurchase of common stock		—		—		3,301		(141	)		—			—			—			(141	)
Share-based compensation expense		—		—		—		—			2,481			—			—			2,481
Issuance of common stock upon exercise of stock options		4,897		—		—		—			132			—			—			132
Vesting of restricted stock awards		60,148		1		—		—			(1	)		—			—			—
Other comprehensive loss		—		—		—		—			—			(13	)		—			(13	)
Balance at November 31, 2021		134,690,424	$	1,347	$	2,628,363	$	(67,905	)	$	840,969		$	51		$	(40,573	)	$	733,889

See accompanying notes to consolidated financial statements.

5

DUCK CREEK TECHNOLOGIES, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Three Months Ended November 30,
	2022			2021
Operating activities:
Net income (loss)	$	(5,161	)	$	692
Adjustments to reconcile net income (loss) to cash used in operating activities:
Depreciation of property and equipment		653			704
Amortization of capitalized software		611			561
Amortization of intangible assets		4,440			3,973
Amortization of deferred financing fees		36			18
Share-based compensation expense		3,489			1,212
Change in fair value of contingent earnout liability		—			67
Payment of contingent earnout liability in excess of acquisition date fair value		—			(1,650	)
Changes to allowance for credit losses		6			817
Deferred taxes		(10	)		1,288
Changes in operating assets and liabilities
Accounts receivable		1,532			(5,959	)
Unbilled revenue		(4,125	)		(3,115	)
Prepaid expenses and other current assets		(3,003	)		(2,428	)
Other assets		481			604
Accounts payable		1,234			(909	)
Accrued liabilities		(2,708	)		(16,891	)
Deferred revenue		(3,099	)		(2,312	)
Operating leases		(235	)		(460	)
Cash settlement of vested phantom stock		(39	)		(175	)
Other long-term liabilities		12			(640	)
Net cash used in operating activities		(5,886	)		(24,603	)
Investing activities:
Purchase of short-term investments		(8,417	)		—
Maturities of short-term investments		117,481			95,967
Capitalized internal-use software		(1,891	)		(366	)
Purchase of property and equipment		(443	)		(540	)
Net cash provided by investing activities		106,730			95,061
Financing activities:
Purchase of treasury stock		(653	)		(141	)
Proceeds from stock option exercises		—			132
Payments of contingent earnout liability		—			(3,879	)
Payment of deferred financing costs		—			(488	)
Net cash used in financing activities		(653	)		(4,376	)
Net increase in cash and cash equivalents		100,191			66,082
Cash and cash equivalents – beginning of period		155,265			185,657
Cash and cash equivalents – end of period	$	255,456		$	251,739
Supplemental disclosure of other cash flow information:
Cash paid for income taxes		339			1,001
Purchases of property and equipment recorded in accounts payable and accrued liabilities		29			161

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)

(1)Nature of Business

Duck Creek Technologies, Inc. (the Company) is the leading cloud-based SaaS provider of core systems for the global property and casualty (P&C) insurance industry. Products offered include Duck Creek Policy, Duck Creek Billing, Duck Creek Claims, Duck Creek Rating, Duck Creek Insights, Duck Creek Distribution Management, Duck Creek Reinsurance Management, Duck Creek Anywhere Managed Integrations, and Duck Creek Industry Content. The Company also provides its products via perpetual and term license arrangements to customers with legacy systems that have yet to move to the cloud.

The Company’s headquarters are located in Boston, Massachusetts. The Company also has sales offices in the United Kingdom, Spain, France and Australia, as well as a service center located in India.

(2)Basis of Presentation, Consolidation, and Summary of Significant Accounting Policies

(a)Basis of Presentation

The consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (GAAP) set by the Financial Accounting Standards Board (FASB), and pursuant to the rules and regulations of the Securities and Exchange Commission regarding interim financial reporting. Accordingly, certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted. In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the results of operations, financial position and cash flows for the periods presented have been reflected. References to GAAP issued by the FASB in these notes are to the FASB Accounting Standards Codification (FASB ASC).

These consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended August 31, 2022 filed with the SEC on October 28, 2022. Operating results for interim periods are not necessarily indicative of the results that may be expected for any future period or the entire fiscal year.

(b)Risk and Uncertainties

There have been no changes to the Company’s Risks and Uncertainties as disclosed in our Annual Report on Form 10-K, filed with the SEC on October 28, 2022, and incorporated herein by reference.

(c)Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

(d)