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Duck Creek Technologies IPO – 8 Things to Know

Written by Donnie Nguyen

August 13, 2020

Duck Creek Technologies IPO is expected to hit the markets on the NASDAQ this Friday (8/14/2020) under the stock ticker symbol DCT. 15 million shares of common stock are being offered and expected to price between $23.00 and $25.00 per share. This is up from the previous price of $19.00 and $21.00 per share.

Here are 8 things to know about Duck Creek Technologies.

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1) WHAT IS DUCK CREEK TECHNOLOGIES?

Duck Creek Technologies is a leading provider of enterprise property and casualty (P&C) software. Its Duck Creek Suite includes Duck Creek Policy, Duck Creek Billing, and Duck Creek Claims. Its Duck Creek OnDemand is sold via a software-as-a-service (SaaS) subscription model.

In the nine months ended May 31, 2020, its SaaS bookings represented 95% of its total bookings.

2) WHO ARE ITS CUSTOMERS?

Duck Creek has over 150 insurance customers worldwide, including the top five North American carriers. Some notable customers are AIG, The Hartford, Liberty Mutual, Progressive, GEICO, and Berkshire Hathaway Specialty Insurance.

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Note: GEICO and Berkshire Hathaway Specialty Insurance are subsidiaries of Berkshire Hathaway (NYSE: BRK.B)

3) IT’S NOT LIKE LEMONADE

Lemonade (NYSE: LMND) was another insurance-related IPO that hit the markets last month. Other than being in the insurance industry, there are very few similarities between the two companies.

Duck Creek is a technology company that enables P&C insurance companies to streamline their core processes. Lemonade is a P&C insurance company that competes with many of Duck Creek’s customers, such as GEICO and Progressive.

4) WHO ARE ITS COMPETITORS?

Although the S1/A (dated 8/12/2020) states several, Duck Creek’s most notable competitors are Guidewire (NYSE: GWRE) and Majesco (NASDAQ: MJCO). All three are recognized as Leaders in the Gartner Magic Quadrant in 2019 for P&C Core Insurance Platforms, North America.

5) KEY STATS

In the nine months ended May 31, 2020:

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  • Total revenues increased 24.3% from $123.4 million to $153.4 million.
  • Subscription revenue increased 48.7% from $39.9 million to $59.4 million.
  • Losses decreased by 39.9% from -$14.1 million to -$8.5 million.
  • Total cost of revenue increased 30% from $51.9 million to $67.5 million.
  • Total operating expenses increased 11.7% from $83.2 million to $92.9 million.
  • Free cash flow: $2.64 million
  • Total liabilities / Total assets: 20.1%
  • Current ratio: 1.00

Immediately after the IPO:

Shares outstanding: 128,314,016

Shares outstanding (if underwriters exercise all of their options): 130,564,016

Market cap based on the midpoint of $24.00 (if no options exercised): $3.1 billion

Estimated 2020 revenues: $204.5 million

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P/S ratio estimate: 15.1

6) TOTAL ADDRESSABLE MARKET (TAM)

The TAM is estimated at approximately $6 billion in the United States and $15 billion worldwide. This leaves a lot of room for Duck Creek to grow its market share.

7) WHO IS ITS CEO

Michael Jackowski has been the CEO and member of the Board of Directors since 2016. He was also a managing partner at Accenture. Prior to joining Duck Creek, he held several leadership roles at Allstate.

8) PRINCIPAL STOCKHOLDERS

At the completion of the IPO, Duck Creek will be a “controlled company”. Apax will own approximately 34% of shares and Accenture will own approximately 23%.

MY TAKE

Duck Creek Technologies is a solid SaaS company with a lot of room to grow. It is already a market leader and has a great customer base. It’s 48.7% subscription revenue growth is impressive. Its expected P/S ratio of 15.1 will be higher than its main competitor Guidewire. Guidewire sports a P/S ratio of 12.6.

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M1Finance.com

I’m going to take a wait-and-see approach to this stock. It appears to have the makings of a great business. But I’d like to see how it performs as a public company. I’m adding Duck Creek Technologies to my watchlist. I’ll be following them in the news, listening to the earnings conference calls, and reviewing the post-IPO financial statements.

DISCLAIMER: I'm not a financial advisor. These are my opinions and provided "as-is". It is not an offer to buy or sell securities. Read the Terms and Conditions.

So what do you think about DCT? Leave me a comment below. Thanks for reading.

Disclosure

I/we do not own shares of DCT and do not plan on purchasing shares within 3 days after posting this article.

I/we own shares of BRK.B

Except for Wolves of Investing, I/we are not receiving any compensation from and do not have any business dealings with any companies whose stocks are discussed in this article.

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Donnie Nguyen
Donnie Nguyen
3 months ago

DCT opened at $42.00 on the first day of trading. That’s incredible demand for the stock!

Donnie Nguyen

Donnie Nguyen

Donnie Nguyen is the founder and CEO of Wolves of Investing. He started investing in the stock market in the early 2000s. He follows the teachings of Peter Lynch, Warren Buffett, and other investing legends. When he's not investing or blogging, he loves spending time with his family traveling and experiencing the world.

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