Duck Creek stock drops 20% on Soft Guidance

Duck Creek Technologies (NASDAQ: DCTstock dropped almost 20% after the corporation trimmed its revenue guidance outlook for its full fiscal year, missing analyst consensus estimates. Duck Creek recorded an adjusted EPS of $0.01 in the third quarter, which was down 3 cents. The company reported total revenue of about $72.4 million, representing a 6.6% year-over-year increase, topping the $72.2 million consensus estimate.

It reported an adjusted EBITDA of $2.41 million in the quarter, representing a 56% year-over-year drop but topping the $1.13 million analyst estimate. In the fourth quarter, the company expects to bring in total revenue of around $72.8 to $74.8 million. However, analyst estimates come to about %80.4 million.

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Business highlights 

Duck Creek Technologies recorded a 25% growth in annual SaaS recurring revenue. They expect a subscription revenue of around $36.7 to $38.2 million. It anticipates that in the fourth quarter, it’ll get an adjusted EBITDA of between $3 to $5 million, which is lower than the $5.17 million customer estimates.

For the full financial year, the company expects a total revenue of between $295 million to $297 million, which is lower than the previous forecast of $301 to $305 million. It estimates a full-year adjusted EBITDA of around $20.5 to $22.5 million, lower than the $21.4 million analyst projections.

Management statements

Duck Creek’s Chief Executive Officer, Mike Jackowski, said;

While our updated outlook reflects the near-term uncertainty in the market, we continue to see strong customer engagement and interest in migrating core systems to the cloud, which gives us confidence in our long-term growth opportunity.

Rishi Jaluria, RBC financial analyst, cut the share price target from $25 to $18 per share. Jaluria told clients that:

Duck Creek reported a disappointing F3Q22 with ARR growth decelerating again and weak guidance, leading shares down 16% aftermarket. Our key takeaways include: 1) uncertainty continues to elongate sales cycles; 2) a second challenged customer contract was renegotiated ($2M ARR impact); 3) management remains optimistic for FY23 given strong pipeline and resiliency of P&C insurance industry; and 4) Prima XL expands opportunity to reinsurance and helps internationally.

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