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Duck Creek Technologies Posts Strong Q3 Results, Updates Outlook

Duck Creek Technologies (DCT) reported stronger-than-expected fiscal Q3 results, topping both earnings and revenue estimates.  However, shares of the SaaS-based software provider to the P&C insurance industry were down 2.4% on July 9 to close at $40.22.

The company reported adjusted earnings of $0.03 per share, beating analysts’ expectations of a loss of $0.01 per share. Revenues of $67.9 million exceeded the consensus estimate of $63.8 million.

Total revenues grew 26% on a year-over-year basis, driven by 56% growth in subscription revenues. Furthermore, SaaS annual recurring revenue grew 64% to $124.1 million.

Based on its Q3 results, management revised the financial guidance for FY2021. The company now forecasts adjusted EBITDA in the range of $15.6 – $16.6 million, versus the $6.5 – $8 million expectation announced in April. Revenues are forecast to be in the range of $258 – 259 million versus a prior forecast of $250 –254.5 million.

For the fiscal fourth quarter, adjusted EBITDA is likely to range between $3.5 million and $4.5 million. Revenues are projected to be in the range of $68.5 – $69.5 million, versus analysts’ expectations of $67.5 million. (See DCT stock charts on TipRanks)

Duck Creek’s CEO Michael Jackowski commented, “Our growing roster of successful Duck Creek OnDemand deployments is a clear demonstration that the P&C insurance industry is recognizing that our SaaS core systems platform can provide greater flexibility, faster innovation and a better customer experience than legacy systems. We remain at the early stages of this transformation and believe Duck Creek is well positioned to benefit for years to come.”

Following the earnings results announcement, Barclays analyst Saket Kalia decreased the price target from $49 to $43 (6.9% upside potential) and maintained a Hold rating on the stock.

The analyst said that over and above the lower net new annual recurring revenue reported during the quarter, the legacy contract roll-off will negatively impact subscriptions by $6 – $8 million.  

Overall, the stock has a Strong Buy consensus rating based on 6 Buys and 1 Hold. The average Duck Creek Technologies price target of $49.71 implies 23.6% upside potential from current levels.

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