Duck Creek (DCT) Stock Plunges 20% on Soft Guidance, Results Seen as Disappointing

June 30, 2022 6:35 AM EDT
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Price: $14.11 --0%

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Shares of Duck Creek (NASDAQ: DCT) are down nearly 20% in premarket trading Thursday after the company trimmed its revenue outlook for the full year, missing the consensus estimates.

DCT reported Q3 adjusted EPS of 1c, down from 3c in the year-ago period, while analysts were expecting $0 per share. Total revenue came in at $72.4 million, up 6.6% YoY and above the consensus projection of $72.2 million.

Adjusted EBITDA in the quarter stood at $2.41 million, down 56% YoY and topping the analyst consensus of $1.13 million.

For the fourth quarter, Duck Creek expects revenue in the range of $72.8 million to $74.8 million, while analysts were estimating $80.4 million.

Duck Creek reported SaaS annual recurring revenue growth of 25% from the year-ago period. Subscription revenue is expected to range between $36.7 million to $38.2 million.

The company anticipates Q4 adjusted EBITDA to be in the range of $3 million to $5 million, compared to the analysts’ estimates of $5.17 million.

For the full fiscal year, Duck Creen expects revenue in the range of $295 million to $297 million, down from the previous forecast range of $301 million to $305 million, and compared to the consensus estimates of $304.7 million.

The company estimates FY subscription revenue to be in the range of $150 million to $151.5 million, down from the previous outlook of $151 million to $153 million. FY adjusted EBITDA is estimated to land between $20.5 million and $22.5 million, while analysts were projecting $21.4 million.

“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,” said the company’s CEO Mike Jackowski.

RBC analyst Rishi Jaluria cut the price target to $18.00 per share from $25.00.

“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,” Jaluria told clients in a note.

Stifel analyst J. Parker Lane slashed the price target to $20.00 per share from $30.00.

“The combination of lengthening sales cycles and the renegotiation of contracts with select customers is pressuring bookings and SaaS ARR respectively. Management maintained an optimistic tone around the deal pipeline and the opportunity in front of the company, but thinks it will take at least a quarter before a more normalized environment presents itself (sometime during FY23). Overall, we believe the P&C insurance industry is undoubtedly moving to cloud, which should benefit DCT, and the key debates center around 1) the defensibility of technology spend in the P&C insurance industry in a recessionary environment, and 2) DCT's ability to capitalize on the cloud migration opportunity,” Parket Lane wrote.

By Senad Karaahmetovic

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