Duck Creek Technologies, Inc.

Duck Creek reported first-quarter fiscal 2023 total revenue of $80.6 million, up 10% year over year, with subscription revenue of $43.8 million, up 23% year over year. SaaS ARR ended at $180.6 million, up 24% year over year and up $11.3 million sequentially. On a GAAP basis, gross profit was $43.4 million, operating loss was $6.6 million, and net loss was $5.2 million, or $0.04 per share. On a non-GAAP basis, gross profit was $46.5 million with gross margin of 57.7% versus 60.1% in the prior-year quarter, and adjusted EBITDA was $3.2 million. For Q2 fiscal 2023, management guided to total revenue of $79.5 million to $81.5 million, subscription revenue of $43.5 million to $44.5 million, adjusted EBITDA of $4 million to $5 million, and non-GAAP EPS of $0.02 to $0.03. For full-year fiscal 2023, Duck Creek raised guidance to total revenue of $331 million to $338 million, subscription revenue of $177 million to $181 million, adjusted gross margin of 60%, adjusted EBITDA of $26 million to $28 million, and non-GAAP EPS of $0.13 to $0.14.

Mike Jackowski said the company is seeing continued demand for insurance modernization despite a cautious macro backdrop, and he framed insurance as relatively resilient because it is often a nondiscretionary expense. He emphasized land-and-expand execution, cloud migrations, and the increasing importance of strategic products like Distribution Management, Reinsurance Management, and Policyholder. His tone was confident and upbeat, but still measured about elongated deal cycles and a fluid environment.

Kevin Rhodes highlighted the quarter’s outperformance versus guidance and said SaaS ARR benefited from strong starts to the year plus about $1.8 million from late-quarter contracts under the new ARR definition. He noted GAAP net loss of $5.2 million, non-GAAP gross margin of 57.7%, subscription margin of 65.3%, services margin of 35.8%, and adjusted EBITDA of $3.2 million. On cash flow, he said the company ended with $264 million in cash, cash equivalents and short-term investments, remained debt free, and posted negative free cash flow of $7.4 million, an improvement from negative $25.5 million a year earlier. He also said the modest workforce reduction at the end of November should create annualized cost savings of several million dollars, and that Imburse is expected to contribute several hundred thousand dollars of subscription revenue and about a $3 million EBITDA drag this year.

Analysts pressed on whether easing inflation, rising rates, and insurer behavior are improving the modernization environment; management said carriers are adapting, commercial lines are seeing rate actions faster, and the environment is better than a year ago but still cautious with elongated deal cycles. Questions also focused on the new strategic products and cross-sell opportunity: management said Distribution Management and Reinsurance Management are usually sold as standalone but integrate tightly with core products and can also land against competitors. On migrations, Kevin Rhodes said on-prem customers are showing strong interest, that migrations are not fully captured in NDR but do show up in ARR, and that the uplift from maintenance to SaaS is roughly 2.5x to 3x on average. Management also clarified that the workforce reduction was not in go-to-market, and that the Imburse acquisition is mainly a technology and product fit with modest near-term revenue but strategic long-term upside.