Duck Creek Technologies, Inc.

Q3 2021 Earnings Conference Call


spk_0: standing by and welcome to the duck prick technologies third quarter and fiscal year two thousand twenty one earnings conference call at this time all participants are and listen only mode after the speakers presentation there will be a question and answer session to ask a question during the session you'll need to press dar one on your telephone as a reminder to this program may be recorded i would now like to introduce your hosted the these programs brain dead you invest relations please go ahead
spk_1: that afternoon and welcome a duck craig's are you can't recall for the third quarter of physically or twenty twenty one ended on may thirty first on the golf into they are like to cathy that creek chief executive officer and when he to parry dot craigs cfl a complete closure are knocked me down and are practically issue today the veil bobby investor relations section of our website this call is being recorded and the replay will be available for the conclusion of the call they muslim of call may include forward looking statements regarding our financial results products cause heard the man operations the impact of coven nineteen on our business and other matters the a sandwich or subjects are risks uncertainties on assumptions are based amendments her expectations as of life and may not be updated the future therefore the same cannot be relied upon a representing our views of have any subsequent day we also offered us are not yeah financial measures to provide additional information to investors i conflation of not gap to get measures and providing are priceless with a primer dems of things got the as compensation expenses elevation of intangibles cage and fair value contingent are now liability and the related taxes fact that these adjustments but that limits on the hologram mike
spk_2: thank you brian and good afternoon everyone and please report the dupree continues to perform in a high level in the third quarter underpinned by the growing demand of our sas platform dupree gundam in the global pnc industry continues to embrace a move to the club in our staff market leadership puts us in a great position to this before gently benefit from this trend i'll begin with a quick overview of our financial results for the third quarter which are well ahead of our guidance for all metrics we reported total revenue of sixty seven point nine million dollars of twenty six percent year over year and this was underpinned by subscription revenue which is our revenue derived from sas of thirty three point six million dollars which grew fifty six percent year over year and we were also profitable in the quarter with adjusted ebitda a five point five million dollars we continue to see strong demand across all segments of the pnc market some of the deals we sign during the quarter included a meaningful when with axis insurance a leading global provider a specialty lines insurance and reinsurance as an existing duck read on premise customer axis is expanding it's that him with us using decreed on the man to drive growth in their business by bringing new products to market faster than they could if they launch his products with their on premises installation with this new deal axis is taking the important first step towards the club and is utilizing duckweed on the man as it's that platform of choice we also had a significant duck dupree on demand by up with an existing tier one customer who is expanding the scope of their deployment on our on demand platform this builds on the great success of this tier one carrier who rapidly deployed a new product line on our staff platform in under six months is important expansion is an example of tier one insurers continuing to adopt staff technology and of the open ended opportunity in front of us that we had with are larger
spk_3: customers
spk_2: also during the quarter we announce it argo group in underwriter especially insurance products is currently engaged in the implementation of duck creek on demand palsy building claims industry content in insights solutions argos deploying duck regard man as a component of it's multiyear initiative to integrate and simple by it's technology and application stack to improve productivity and reduce expenses our partner ecosystem has been leveraging the power of death creaks open architecture to enable customers the easily integrate with partner solutions we built an extensive collection of prioritize integrations to the most widely utilized pnc industry data and service solutions which helps to reduce time to market and deliver compelling industry capabilities for our customers during the quarter we had several of sell wins where customers opted to take advantage of these new capabilities two i would know or builders mutual and course special the insurance additionally we had to new carriers adopt a creek standalone ancillary on demand products in the quarter texas mutual appear to leading provider of workers' compensation insurance in the state of texas selected duck redistribution management the man is he on boarding compliance and compensation of their more than nine thousand agents toba insurance especially insurance carrier writing business and thirty four states will leverage dupree reinsurance management to manage their seated reinsurance we look forward to working with bogeys carriers to support the risk active business strategies each of these wins represents a carrier that is looking for the right tools to help them deliver more value to their customers quicker than ever this type of thinking was front and center at a recent annual the formation users conference which was held virtually in early june since moving to a virtual experience last year we have built a vibrant community of more than three thousand attendees that are engaging with one another on an ongoing basis to share best practices and learn more about the creek ability to improve their business the theme of this year's event was creating the new standard which focused on the emerge urging transition to a flexible business approach that enables carriers to reinvent their businesses to meet the needs of customers now and in the future we don't view the new standard is a technical document or a checklist of tasks instead it is the the ma servile ability for carriers to move from existing static business strategies to flexible and predictable service models the consistency back we get from customers is at their current id stack and rigid hard coded business rules prevent them for responding to the accelerated pace of the change in their markets some eye opening step that i discussed in my keynote speech included nearly forty percent of all premium dollars in the us are being consumed annually by operating and last adjustment expenses this has a materially change in a decade which means carriers are no longer driving efficiency gains from their current technology solutions sixty percent of legacy t system upgrade ended up disrupting some aspect of the carriers business during the modernization process sixty one percent of cares indicated it is taking them six to twelve months to take a new product from idea to implementation which is simply too long in today's dynamic market and three quarters of ensures believe they need a reengineered customer experiences to bring technology and people together in a more human centric manner simply put the status quo and core systems is not sustainable carriers increasingly recognize at their core systems must provide them with the flexibility and ease of use needed to respond and new customer preferences and behaviors quickly and at scale carriers will take different approaches the digital transformation and we design dupree god man to make it easy for them to follow the path the best fit their specific circumstances our local platform is designed to externalize process rule development and let carriers establish a repeatable customizable end end product factory which allows in the it or a product rules and quickly and seamlessly a great example of this approach and action is you pc insurance who has use duct print on demand to know not only launch a new digital platform with new products for their core agency business but it announced the launch of a new insurance starter skyway technologies skyway is an entirely new sales channel for u p c selling direct to consumer through an army channel experience the takes a consumer to a streamlined easy to use digital buying process they can issue a binder full quote within two minutes i leveraging decrease modern digital platform you pc is able to launch a new business model in a matter of months this is a great example of how customers are able to quickly find new ways to drive value from their existing investments made on top of that creek we're also very pleased with the continued adoption a customer success that we're seeing on our deck read on the man platform during the quarter we had twenty customers successfully go live with duck create products including notable industry leaders like ivy t auto owner's insurance american national and the doctors company i'd like to highlight some specific examples the demonstrate our insurance technology leadership we are proud to announce a geico the second largest private passenger auto insurance united states completed the rollout of their auto a motorcycle business on the creek across all fifty states douglas executed a very ambitious strategy to modernize or core platforms for palsy and billing to support their ongoing focus to deliver exceptional customer service geico license decorate palsy and villain and deployed our solution in the microsoft azure cloud as a foundation to deliver a customized yet simplified user experience for their customers and their policy holders geico it continued to expand their use of decorate since they started and twenty seventy this commitment builds on our ongoing partnership and proven successful geico today geico as tens of billions of dollars of written premium deployed under creek which we believe that the new benchmark among large tier one personal lines insurers for the pulling a new course system across the enterprise this successful roll positions geico to react quickly to future changes and cassar demands and provide exceptional customer service we also continue the show's success outside of the united states as a successful deployment at locker a provider of professional and dem the insurance the law firms as we announce that our fourth quarter of fiscal twenty twenty earnings call law have selected the full the creek on demand sweet for their core system modernization effort we're proud to announce a law cover has successfully gone live on our coarsely palsy building and claims in just eleven months finally during this task quarter we hit a significant milestone with the hartford as they successfully deployed their new personal auto product in two states on our agreed on the man's ass platform this new modern technology platform combined with the hartford's product design is critical to improving the hartford's growth and personalized by providing a contemporary digital inflexible experience with their customers we are proud to partner with the hartford and their product launch represents an important step in our journey together it's not only our customers that are recognizing the power of the creeks platform we are pleased to have recently won to awards from south a leading independent industry analysts for daiquiri claims as a leading claims technology and service in the amir property casually sector so excited discussions with duct reclaims users who prays of functionality and speed of the system and our overall approach to partnering with customers as key differentiator is as good as are solutions are today we continue to invest in our platform and products to increase the value that we deliver to our customers one example is he and it we are making an on demand operations and development capabilities to provide our customers with tools and solutions aimed at streamlining and improving their ip operations and debauched prophecies we recently announced the availability of our on demand control her a utility that enables our customers i t operations teams to independently deploy changes monitor and control their decrease applications as well as a extensions and integrations they built around those applications the control have serves as a one stop shop for operators to manager sas environments and see the status in hell to their death creek applications in one central location we also continue to focus on expanding the functionality of our products and deliver incremental capabilities specific the some common insurance lines of businesses we recently released several incremental enhancements aimed at the workers' compensation market that allows users to more effectively approved medical invoices calculate injured worker benefits and report dated to regulatory bodies as we look at the fourth quarter and beyond we are incredibly excited about the opportunity ahead for duck treat interesting move into the cloud has never been higher among pnc insurance industry has established itself as a sas platform of choice in the industry we will continue to make investments in our local platform they will further expand valley the the carriers and enabled them to deliver the product innovation and service experience of their customers require we remain early in this multi billion dollar market opportunity to we feel very good about our ability to to deliver high levels of profitable growth for the foreseeable future i will now turn it over to our cfl been each apart dinning over to you
spk_4: thanks mike
spk_2: today our you a third quarter fiscal twenty twenty one results in detail and provide guidance for the fourth quarter and four year fiscal twenty one total revenue for the third quarter with sixty seven point nine million up twenty six percent from the prior year period within total revenue subscription revenue which is comprised solely of subscription source as products with thirty three point six million up fifty six percent year over year in cute three subscriptions represented seventy nine percent of our software revenue and forty nine percent of our total revenue revenues from on from a software licenses of two point five million and maintenance of six point three million are showing modest growth as expected and are down to thirteen percent of total revenue services revenue was twenty five point six million up six percent year over year services revenue was in line with our expectation and reflects a notable step up from the prior quarter with the launch of several large service engagements sas a are which we calculate by analyzing returning subscription revenue recognized in the last month of the period was one hundred and twenty four million dollars as of may thirty first twenty twenty one up sixty four percent from the prior year sas our continues to show strong momentum and reflects the strength of our citizens as a reminder sat there are as a snapshot in time of such kept contracts that are generating revenue during the last month of a period and can be impacted by time and for example our largest the on the quarter did not begin generating revenue within a quarter and was not included in our our number as of may thirty first that that dollar retention as it may thirty first twenty twenty one was one hundred and thirty three percent well above or recent store orange over the preceding a quarters or quarterly fastnet dollars attention has been in the range of one hundred and thirteen to one hundred and twenty one percent driven by a combination of high groceries generates cells of new products to existing customers and growth of dwp for products already operating on our south platform this quarter thousand dollar retention was well above this range driven primarily by several large cells to existing customers in racing quarters and the core system up sell to a customer who initially but distribution management as mentioned on our prior calls while ourselves over time include a relatively balanced mix of land and expand opportunities it can vary period into period based on pipeline progression we currently expect that net dollars retention will return to historical leveled into for now let's review the income statement in more detail these metrics or non gap unless otherwise noted and we provided a reconciliation of gap to non gap financials and our press release first on a gap exists are gross profit for the quarter was forty point two million dollars and we had lost my operations five hundred and forty four thousand we had a net loss in the quarter of three hundred and fifty seven thousand or zero cents per share based on weighted average basic shares outstanding of one hundred and thirty one point six million turning to our non gaap results gross profit in a corner with forty two point two million or gross margin of sixty two point two percent compared to fifty nine point two percent in the third quarter of fiscal twenty subscription margin in the corner with sixty eight point five percent driven by certain timing items and scale benefit as we continue to generate strong subscription revenue growth gross margin favorability from the timing of new hires and resourcing for new deals is expected to diminishing queue for we are pleased with the continued strength in subscription margin but i want to remind you there can be quarterly variation due to time you when revenue recognition begin for certain contracts and the timing of expenses at the early stages
spk_5: of new deployments
spk_2: we believe our subscription margin are an important demonstration of the scale ability and performance of our sat platform service margin the forty five percent in the quarter can ahead of our expectations driven by a combination of sequential growth and professional services revenue and the timing of headcount additions in the script we remain committed to bringing down our services margin my several points in the near term and longer time into the high thirties which we believe reflects a sustainable utilization rate for professional services teams tell you the operating expenses are indy costs were twelve point five million dollars by eighteen percent of revenue down slightly year over year as a percentage of revenue the twenty two percent growth and id cards from the prior year reflect our continued investment products solutions and features that would generate additional value customers thousand and marketing expenses were ten point nine million or sixteen percent of revenue down slightly with the prior year as a percentage of revenue expense growth of twenty percent from the prior year reflects continued expansion of our go to market resourcing in both us and international markets while travel related costs and certain marketing programs can hinder one below normal levels due to cover nineteen impacts jin expense was fourteen point one million more twenty one percent of revenue up from eighteen percent in the prior year period and in line with expectations the growth and gene expense year over year is related primarily to public company cause that we began incurring following our ip on aug over the course of this fiscal year are je a expenses have begun decreasing as a percentage revenue and we expect us to be a highly leveraged will cost area moving forward adjusted you with after the third quarter with five point five million which is well ahead of our guidance due primarily to a combination of better than expected revenue and lower than estimated costs and expenses tied to the pace of new hires in a bit ah marjan with a percent for the quarter up from seven percent in the prior year period this represents our tenth consecutive quarter of adjusted ebitda profitability important indication of our ability to profitably generate high levels of subscription revenue growth
spk_6: non gaap net income per share for the quarter was three sons based on approximately one hundred and thirty five point two million fully diluted weighted average shares outstanding
spk_2: turning to the balance sheet and cashflow we ended the corner with three hundred and seventy two million dollars in cash cash equivalents and short term investments and we remain debt free free cash flow for the quarter with six point six million which was in line with our expectations i'd like to finish by providing guidance for the fourth fiscal quarter we expect total revenue of sixty eight point five to sixty nine point five million subscription revenue is expected to be thirty two to thirty two and a half million adjusted gross margins are projected at fifty nine to fifty nine a half percent we expect adjusted even thought of three and a half to four and a half million and are non gaap net income is expected to range from one point five million to two point five million or one to two cents per fully the lead a chair
spk_6: for the full year fiscal twenty one we are increasing our outlook to the following
spk_2: total revenue of two hundred and fifty eight to two hundred fifty nine million subscription revenue and expected to be one twenty four to one twenty four and a half million adjusted gross margins are projected at sixty point five to sixty one percent we expect adjusted ebitda of fifteen point six million for sixteen points six million and are non gaap net income is expected to range from nine point six million to ten point six million were seven to eight cents per fully diluted share please note that our fourth quarter guidance reflects the impact of the contract that we have been excluding from our sas error are calculation coming to an end we've long on his contract was winding down and has been incorporated in our guide and draft got twenty one in the near term to will have an impact on our you over year subscription revenue growth rate as we comp against prior year period that include this contract to finish up the creek the live in another strong quarter were pleased with how the business is performing and how are position for the future we are benefiting from broad based adoption and interesting that creep on demand as the moved to the cloud by the pnc insurance industry gains momentum we are in the early stages of the three platforming and believe we're in a great position to deliver strong subscription revenue growth and improving profitability for years to come we now like to open up the call to qnx operator
spk_0: thirdly ladies and gentlemen few have a question at this time please press star that one on your touchstone telephone if your question has been answered and you like to remove yourself from the cute please press the pound key and our first question comes from the line of stealing money from jp morgan your question please
spk_7: yeah thanks hi guys i'm kind of curious how well known through the industry is the geico deployment in if it is well known have you started to see an increase in inbound call volume similar to what guidewire experience when nationwide went live you know all those years ago
spk_8: hey thanks sterling yeah i would say that it is well known we did do a public press release i can't remember the exact date
spk_2: several years ago am i would say that we started this journey it was not well known because your guy go wanted to wait to have some proven success on our platform before we were allowed to disclose the publicly ah but then we did make the announcement or but we are very proud and very excited to be announcing that they've completed the
spk_9: roll out across all fifty states
spk_2: i'm you know when i go look at what other top tier one carriers in the personalized space have done relative to our ability to get this full deployment done and under a five year period with geico you know we think this is industry leading and we think it's really the monster vol of what capable all on the duck creek platform so we're very very proud of it
spk_6: that makes sense one follow up you've announced at as has guidewire there's been a number of companies that have used you guys to launch new products into the market on the club platform how should we think about the increasing revenue contribution that could potentially come from those contracts as though
spk_7: those businesses grow themselves
spk_2: yeah i think when we look at the revenue contribution of those new start a businesses sometimes sterling there and the palm yo and that's how maker a line of businesses is running with full autonomy so the initial subscription opportunity start relatively small and then grows over time but most the time were doing this with large tier one carriers that are starting with a smaller book of business and they're trying to get experience in the cloud and then we know that the real opportunity is a to eventually convert or your migrate existing books of businesses over to our on demand platform so you know again i think i've i've highlighted this in the past but yeah we're seeing a lot of tier one carriers start with new start up lines of businesses are smaller blocks of books of businesses to get experience with the cloud and then we know that those will lead to larger opportunities for us here at approved
spk_10: that makes sense that you guys
spk_11: yeah thank him
spk_0: the queue our next question comes from a line of tom roderick fifty for your question please
spk_12: great and think a gentle appreciate jet that's a question of i just wanted to get feedback and steroids questioned on geico because the point about it being across deployed on on multiple line but the across all fifty states it brings up the regulatory question of a challenge carriers have and building from state to state can you talk a little bit about some of the complexity that you worked your way through and and how that might scale to other carriers that are thinking about such expansion the then you know how did the cloud how to play into that angle
spk_2: oh thanks for the question and you know i don't want to get into the specifics of the guy go deployment but what i will do is highlight the advantages of dupree and how we can execute and state to state deployments faster than i think our competitors can and we talk a lot about a local platform and one element of our local platform underneath that if the technical term called inheritance and what it allows carriers to do is take a whole products that in a products that are rules inherit from it and then derived cottage a small changes to the they can launch either new derivative products or it a new state it's so and legacy technology what we find as carriers have a lot of hard cut a coded logic if then logic if you will state by state if it's the state of new york then do this and issue this document if the state account california than you know issue this document and in our overall platform a we can do is more seamlessly reuse a common rules set so the carriers can launch across multiple states very very quickly and with minimal effort so it reduces that launch time and i think that's a true advantage of our local platform
spk_1: yeah that's great that's excellent detail and in video you your highlighted in nam in the guidance and in the discussion point poitier one of the long anticipated contract is rolling off the books is a factory so next quarter and seemed like the subscription revenue guiding scene of certainly baked that in up how would you encourage us to think started directly about lead dollar attention they are our mother is larry metrics that go to at as you as you can work your way through that and them with that particular customer is that you know now kind of off the books are there still opportunity on going to you know it's and to maintain and extend that relationship in the future with different rock like
spk_6: yes saddam our just the first time the question that might to jump in on the on the customer relationship end of it so ah you know since we knew from the time we carve out of accenture that this was ultimately going away we've always purposely excluded that account from both our airline at all retention metrics so and the departure of that you know that revenue stream for that particular contract won't impact the to reported metrics i'm what it will do is you know that the the gap that has existed between error growth and subscription revenue growth doubtless are coming together over the course of the next year or so i had that contract you know the impact of their contract winds off though i think your as you suggested young it has been in know would have been considered nor guidance of course on it will you know i'm and won't be impacting the other two metrics other than subscription revenue
spk_2: itself yeah and then time to jump in on the second half your question i'm i'll say that they not renewed or old off of this because they had a change in strategy and this was consumed is a larger part of an accent your contract when carved out but we do maintain a strong relationship with his customer and they continue to use the other duck creek products in other areas of the business
spk_12: i'm and we're very hopeful of expanding the relationship with in the accounts are we do think they're shooter opportunity
spk_13: wonderful great detail my job in the quarter thank you gentlemen
spk_0: right thank you
spk_14: like you are next question comes from line at christmas when from goldman sachs your question please
spk_15: okay thank you for taking my question
spk_14: and it wanted to ask one accurately to decision making process of your larger customers and you don't with a geiger go easier to mention the the big in there for for somebody larger logo is are you starting to see a more centralized process around picking vendors cute cute to migrate systems to the quo loud as opposed to i think what it is dorothy been more of a very decentralized approach with certain owners of had been making their own decisions about which systems to use
spk_2: he that pattern painting at all or how how how how best to think about the think that you're having a enlarge weather's like like ico thanks yeah chris i would say that we see both i think there's a trend to have a bit more of centralized decision making obviously insurance companies as long as much as all companies are investing more in procurement and getting organized across the enterprise but then also remember there there are some insurance carriers especially some large dear ones that very much pride themselves around having pm elves are distributing operating businesses that can make their own decisions so i think in those types of carriers will find that there is distributed decision making and they have their own this decision making rights they may share information across the enterprise in that case but i think with some larger tier ones where we are expanding it's because you know we are working with their a group leadership or their enterprise leadership and they see that success and a creek and in making broader commitments in a more centralized manner so i think that boating well for some of the
spk_14: expansions that were undertaking right now
spk_16: perfect thank you and an idiot the power for add that he any the air are on yelp it group i think that six nine sequentially and that out the big well in the corner it'd sequential when it was a little at the your gadgets just wondering you know that add add that to think that the see it now to hear any other puts and takes around your deals moving and out of the core
spk_6: of defending of of know to as a related cab fare thanks yet at present good thing at the other thing i'd and reiterate is other the i'm on one quarter basis we don't get too focused on the sequential changes and because of the you know a large deal five small deal volume on that said to three is is typically a little bit seasonally low for us que tem que four hours
spk_2: on the seasonal quarters
spk_1: am i
spk_17: and into three in particular if you remember we had a pretty strong quarter last quarter and que to when on large que to deal actually made it into cute to error and on our larger cute retail did not make it into que three so i'd i'd kind of chalk it up to timing i'm and just continued to encourage people
spk_0: a look at the air or changes over a longer period just one quarter
spk_1: understood that lot
spk_6: your
spk_2: but you are next question come to a line outs the cat you from barclays your question please okay great hey guys thanks for taking my questions here
spk_13: met mike maybe maybe first for you
spk_2: i was running to pick talk a little bit about sort of the ebb and flow of of conversion activity over the last couple of quarters you know you've been pretty clear to say that convergence are going to be customer driven might not necessarily the creature of him but i'm curious if you seen any teams in the pace of those conversion conversations that oldest porter the make sense it it does make sense that it and and i would say that i'm not sure that i would say that there's a change of pace i'm but i will say that and i'm glad that you're highlighted our strategy which is really for us to focus on our customers strategy what are the business objectives that they have and really align our efforts to perhaps move them from on premise into the cloud or ended up creek on demand when they have a certain dick inflection point where they want to bring a new thing to market or do a digital transformation a different way or launch in a new channel and that we're finding that that strategy is working well we're having very meaningful conversations with our customers about them adopting the cloud ah were having very meaningful conversations where customers about their business strategies and how we can help accelerate those business strategies like we did with this case and we just announced with access insurance and am i'd i would say that we're making meaningful progress with the announcement of access we now have seven on premise core customers
spk_15: some that are now migrating or adopting duck creek on demand course solutions in a meaningful way so we think is showing good progress but you know that because of this approach we're not in control of the timing our customers are in control the timing and i think that's the way that we're going to continue
spk_6: to drive our strategy
spk_2: got it got it then maybe my full of for you have a few lot of focus on that geico contract it's great to sort of feet across fifty states but you don't i think adding mike mentioned earlier that it was are adding under a five year sort of rollout so he'll talk about how the iraq our contribution they are sort of of hundred eighty the want to get into the kind of particular concern
spk_6: but you know is is that the completion of are a lot mean a meaningful error our contribution this quarter or have we seen most of that era contribution sort of happen in the past as as the role that was happening well versed in the typically relate to geico sack and i would point out that was a license deal back and twenty seventeen are so that's that's not in our our our number i'm but not more generally speaking i'm you know the way in we'd seen continual increases in our larger to
spk_2: you're what you're in a lot of accounts with particularly or tier one account and they add either new products or more dwp on to the system so you're one easy know another point of reference on that is happens to be net dollars tension and a lot of times when you seen it all retention moving up it's based on a continued rollout or you know a continues incur
spk_0: use deployment in a in a large account
spk_18: so i you know i think ah you see both add you know our dollars over time in in large accounts as they grow ah and contributor than a dollar attention
spk_2: got it very helpful thanks for take my questions here thank you are next question comes along of bread stills from bank of america your question please i'm sorry go on for about cells think surge in my class and and i wanted to ask that the international opportunity a particularly in europe and a pack and can use your any insights on a demand environment they're a lot of activity and in geography than a quarter think yeah hi sherrie of thanks to the question your we continue to make good progress on our international investments am i will still say that as a result of covered and the lack of business travel still not taking up yeah we're still cautious in terms of seeing progress in continental europe although we are seeing six continued success in asia pacific
spk_18: as we guy i talked about the go live at law cover ah in the pipeline is is your strengthening quite a bit in asia pacific and then an inner across europe were also very pleased with some the discussions with some of our larger tier one enterprise customers that are looking for new opportunities to launch the new products
spk_2: enable and do digital transformations and european regions and we think that will help us as we enter fiscal year twenty two as well so there's more to calm and we know that that with our current investments we knew that we weren't going to get results right away and some of these results would start to were take hold in fiscal year twenty two and beyond they think year and and
spk_19: during your when they're at selling it i love how much non core assets represent the products and why do you envision that the trend in a new and long term media yeah that's what i would say on the non core products fled is either we don't give quarterly numbers are details on it but we look over the
spk_0: the last year or two hour period of time and our bookings roughly speaking about seventy five percent of our bookings are from our core systems policy billing planes and then the noncore additional asset about twenty five percent of our bookings i'm and that's really what we have been seeing
spk_12: yeah i think right now i think that trend is gonna hold for a while yet we're looking at some opportunity to expand some of our noncore offerings so that may change over time by think right now that a safe assumption for us
spk_1: charlotte think out
spk_12: the queue our next question comes from a line up and theory from william blair your question please
spk_20: great thanks guys and the and nice job
spk_1: then i'm i want to touch a little bit on the expansion europe but books aren't from a product side
spk_12: oh historically have you seen europe typically lag the u s
spk_2: in terms of products septum growth and as you look at the wind that you've had some good when but but but that's an era of investment growth i guess how much of the sale there is evangelical feel like the idea of cloud but hopefully at a local know could write to look at no could be of the above the us you're having a whole new way of deploying and letting with measure on rules workflows temple clara how's that sort of conversation happened with client europe and is they're allowed or they started to get it and in sort of you don't start to see them ah the fly will act on their start to play a little how how the sort of thing you how that's going out more you single moms demand and acceptance inspectors as you invest in europe a great question and i would definitely say that there is a lag and you know i think it is one reason why were advancing more of these conversations with are larger global tier one customers because they have experience with the local platform they have confidence and sas now i will say that if the flywheel is starting to spin in europe though so if i went back four or five years ago i would say that in europe you know they will entertain sas with they really wanted and on premise offer when i went ask for today and i look at our pipeline they are very open to sas but they also one and on premise offer so they're balancing the two of which waking we will not provide and on premise offer so we will not have you know even give them an option with an on premise installation for a new customer and europe
spk_10: and dumb i think that is you know a little bit of a headwind for us but i think you know the market is gonna move fairly quick
spk_20: especially as we you know start to get beyond the pandemic start traveling start meeting in person start building our brand more effectively in europe i think that's gonna help because i really think our success here a duck create his help accelerate the acceptance of sas here in the us
spk_1: and i look forward to an opportunity of getting some momentum interaction in europe and i think once we get several proof points i think the market conditions will change considerably gotcha gotcha not self when and or what but but but but i sort of it would be playing other little bit down the lag parts i'm touch about that the cyber opportunity and you don't talk about the past but love to get an update here
spk_20: i'm you know it's becoming more and more common to hear about these cyberattacks ransom were excedrin
spk_2: and and again i guess two part question one are you seeing your customers say we need to have a cyber insurance products and then to like how to address that to do they have the algo the data the actuarial work done for that to the feel like that that's really early we don't know what them the drivers are like exposure to them you know how the network security based how much we met him to carry i don't i think whatever luckier than the other are your customer thing that products the offer there i'm it's more the other be obsolete say that but that could be no growth yeah and then how does doc ducking under man fit in from a product perspective in that and that skulk yeah and and i think i'm look we work with several very large and successful cyber writers that have cyber products in cyber coverages under creek and were very very proud of our success in the states when we work with those carriers we really focus and occupy the space of the product definition the pricing of the product the selling of the product you do as distribution on because every carrier if you look at how they look at analyzing the risk of cyber they use very very different techniques different data different providers some very by off and you'll find different mindsets in terms of how they think about cyber palm it is a rapidly growing product and i think i'm your our product configuration capability gives a lotta carriers confidence that they can tailor their products to fit their unique needs and how they want to go to market and i think that the strength of duck creek and then they're just looking to the ensure tech community for be you know there's a lot of providers that dumb really provide data and analytics in this domain
spk_12: i'm and yeah some of them are very compelling as some of them guild carriers will try and then move on to something else
spk_0: so for us work at the about embrace the are continuing to embrace the ecosystem easy to plug these providers in you know similar the way you'd plugin a pay as you drive a provider is well for usage based insurance or to be sure that carries can use the advances of advance algorithms for pricing so that can be or freddie
spk_1: he's to really maintain an open architecture approach to all these ensured that providers
spk_2: roger dodger about will think that appreciating the question the qr next question comes from a line of alex elkin from wolf research your question please
spk_1: a guy fixing the question admit it is the first one ah
spk_2: around gonna piggybacking on thrones question around new customers launching in new logo launching new brands ah what when they up the creek what roughly what will you think about the percentage of your to logo windsor lance what how many of those are resulting from that type of activity i'm vs may be like a poor system transformation a replacement well it's you would be difficult for me to put a percentage to it because we're just seeing that a variety of carriers are are taking on the of different strategies and and we're very pleased so for instance ya this work that we announce with axes your we've been working with them with his on prem this relationship for many years and your they have a new strategy of getting something new to the market very quickly and they saw on the man is a very very yo rapid way of which in young day get something done so with that that's an example of us working with an existing customer that had a lot of experience with our on premise products but in terms of a new logos i would say the majority of our new logos is not launching a new a
spk_21: business opportunity it's really read platforming what they have
spk_2: so when i go look at our pipeline and what's coming through our pipeline which i'm very excited about i would say a lot of the new logo opportunities are digital transformations you know we want to replace our policy billing your claim system or we want to have a new channel or distribution front end in a digital capability and i would say that still the vast majority of the opportunities that were saying got a bit super help on and that he maybe just tell digging in a little bit on on on to metrics is it possible to just get maybe a little bit more outside playing or order or kind of some just rough financial impact on our staff they are are this quarter from that comment about the larger largest the on there are not being in the number this quarter roughly what type of an impact you know the had a bit and but it it out animal were changed and apologies for the to a question but if you would get the guidance maybe just a rough reminder of how much of the on how how much of it you know deal that's coming off the books in subscription revenue if it if that you're like for like if that wasn't the case what would the sequential that a guide represent in terms of of a grocery
spk_22: yeah at alex at on the second question l with weirder yeah we really are nonexistent from a confidentiality perspective of giving any details on the on the dollar value of that contract controlling off i'm so i can't really do that yeah i can tell you that you know the impact on the growth rate if you look in a recent growth quarterly growth
spk_2: eight vs the queue for guide your that the majority of the change ah i'm
spk_5: ah but we're young we're not vision work even a specific details on the dollar value
spk_6: as it relates
spk_2: thank you remind me the first that the first one question
spk_10: earlier in our early early hours yeah i get no idea we want a common on and on the value of any one particular deal but i think if you look it's kind of over you know a longer time period than a quarter an e o two three four quarters and and look more in terms of what we've been averaging over the quarters yeah
spk_0: you can get the sense of how our deal can can swing from was recorded with the impact that might be so you know we yeah we did it young we have said before you know he he you know a core system deal tend to run into the millions you know low to mid yeah thing in a low to mid single digit millions i'm and
spk_12: yeah deal like that moving from quarter a quarter you know yeah okay can make it a little lumpy or ah yeah that's why we had you know in the big were in queue to and and not as much you drink
spk_23: makes us taking it thank you are next question comes from line of my aunt dented from the him your question please
spk_2: hey good afternoon guys actually computers not for my unc i'm just one for me but just want to see as a be upset well on progress he gets him and making he has been really strong as wondering if you guys could give any more detail on you in terms of how much of some of the up selling existing quiet it's coming from your client adding to stop rock products averse adding bring murder dpp on the platform i'm just so you get lot of sense of for what's driving accurate yeah i would say that dumb the first up were very very pleased with our ability to up selling cross cell and continue to show expansion particularly in these large tier one accounts and i think it's really demonstrates the success that they're having on duck creek and then upon that success going across and buying more i'm yeah we we don't have that information to give you a percentage around how we grow within an account and whether it's new product more premium or a new division or line of business but what i will say is in in order that i would rank it is you know really a new division within a company you know licensing and new geography or a new division it probably our primary up opportunity or then very close second would be cross licensing a major core product
spk_24: and i would say those are the two big drivers and then you know we get more
spk_0: revenue subscription revenue are quite often if carriers grow obviously they're their premium that because that is a stair step manner
spk_25: that would probably be third in line in terms of revenue contribution so that's really the rough that i would give it great that's really helpful i guess
spk_6: they qr next question comes from a line of robert simmons from rbc capital markets your question please
spk_2: hi thanks and on for rishi ah could you talk to what's akin to your was modern guy for for q i like a pretty steep decline or or or the just from the timing of buyers or is there something else their baylor
spk_25: ah well thanks the question the the queue for a margin decline is a step down a it's more about cute three being a you know unusually high the news about whether queue for his is norm beyond the is kind of more typical so we are you know big into that is an assumption that subscription
spk_8: margins which have been running very high largely based on pay supplier and i did do come down and queue for two or more normalized range know in in the mid sixties and are running pushing any more in the high sixties i'm late ah i'm and in addition you know we've we've ah we don't then a slight anticipate
spk_2: aided decline in services margins in queue for am but i would say the in a while we're still committed to bringing down service margins of long term because or utilization rate are running so high right now i'm queue for will remain young reasonably young pretty strong i move my come down little belong come down much from two three got it okay and then i keep talk about i'm in gross margin how do we think about the difference between an and only gonna and how big of an african at the of next few years yeah i think right now wouldn't we are pleased with the success of our multi tenant offering and the take up of are multi multi tenant offering however many customers are still opting for a single ten an approach and we decide is a company will or not going to do is
spk_25: you know force an issue where a customer is not comfortable yeah it committing to are multi tenant platform so that puts us in a position there were in athens running in mixed mode right we have some customers a multi tenant we have some on singleton it with a lot of devolves and a lot of automation and when where and mixed mode we don't get
spk_0: get your the full on efficiencies of all multi tenancy so right now and our long term plans or is not a commitment to improve margins because i'm multi tenancy on the i've stated this in the past but i think as we look at buying behaviors and we look at migrations mostly tied to the maturity of the i t operate
spk_2: sins of the carriers that were serving and as if that starts to shift and we think we can get more progress a multi tennessee will of course revisit are margin profile but right now there's no commitment that were ready to make on that thank you very much thank you aren't next question comes to the line of alex gonna away from raymond james your question please great that you like a bigger picture industry question here but but what he say in terms of broader ip budgets and of those grown at all with with it with premiums the fear and then little wouldn't matter if the a treats wallet europe about the budget going towards core modern day she brought up ah glad you're asking about the industry it's important for me and dumb i would say that we're seeing that i t budgets are holding strong it's hard to tell if they've grown but dumb yeah i think they're holding strong just because you know a digital transformation and core system replacement is especially as the industry makes it's way through the pandemic is still a top priority for ya large ensures that are out there now we go look at the industry and the effect of the pandemic am i would say that the growth rate of the overall industry has dropped a little historically it's average in the us
spk_12: about four and a half to five and a half percent growth in premium when you look at twenty twenty a grew about two and a half percent on and that was mostly driven by the decline in personal lines auto printing and i declined about ten percent now what we are seeing in those carriers is they're not aggressively changing their budgets they're still investing in a
spk_6: digital transformation and the really channeling investments in the court transformations and awaited that has resulted for us is a strengthening in our overall pipeline so our pipeline is as strong as we've ever had it
spk_2: and it continues to grow quarter over quarter so we're quite pleased with the way the industry continues to look at digital transformations and technology investments
spk_26: okay great thank you and venue one more sat there are question for me but specifically the delta between subscription revenue annualized and fact they are are looks like the largest base with kind of four quarters ago there were know the one aspect that expiring contract but at the elaborate to prove anything else the might be impacting at spread
spk_0: i did nothing really other than than deal timing at the obviously the largest impact is the legacy contract
spk_1: impact and anything else is a simply timing related okay great thank you
spk_2: yep the you are final question for today comes in line of be directly from davidson your question please a good afternoon thanks for taking my questions just to go to that last point michael on on historical growth and ddb be given given that pricing in the market it it pardoning it it's really getting quite a bit harder certain lines would you expect you to repeat it the grow at a rate perhaps greater than that or five percent over the next deck couple years
spk_27: well a it's tough to say if the whole industry will peter i know i will expect commercial lines to grow and ya think of commercial lines is roughly half the market maybe a little bit less i'm now there has been a drag growth rate on the commercial side because a worker's comp worker's comp has shrunk about five percent over the last two years because is directly tied to payroll i'm but i do think and not in the hardening of the market we're going to see commercial lines premiums grow at a higher rate over the next year but it it's tough to say now the good news for duck creek is yeah i've said this in the past but in a hard market care
spk_1: these are trying to get more surgical in terms of where they take rate and how they take rate and increase rates and they want better technology to help them do that more flexibility in their product design more flexibility in the use of data and the visualization of data to drive their pricing algorithms and that always leads back to do you a technology conversation and i think and your this hard market is definitely helping with some of the conversation we're having with carriers on their technology back plane and how we can help them deliver on their strategies as they react to the hardening of the market
spk_6: okay that's for register every minor just at at wifi travel any it start to ramp back up posts pandemic if we go back to doing marketing
spk_2: with every that
spk_28: hundred basis points to get back to normal or or or might even be larger given a brief marketing efforts internationally
spk_0: now i don't think you'll be in necessarily larger and agreed commented a quarter to go that we got the impact on you know was probably a young roughly a point of revenue
spk_2: and you know that can have built back up it's almost all contained within the sales marketing line so i think as we can get through fiscal two twenty two will see that are coming back up a little bit as a percentage a retina
spk_29: okay thank you yeah the the one thing to add to that is your the will be a small effect on a professional services as well as we have big back in rebuild expenses which is a kind of a zero margin line item but that i'll be a small impact as well
spk_2: make this makes
spk_0: the queue and these include be question and answer session of today's program i'd like to hand the program back in my to county for any further remarks

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