☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~January 11,~~July 13, 2021, the registrant had ~~130,917,656~~131,712,321 shares of common stock, $0.01 par value per share, outstanding.

Some of the information contained in the sections entitled “Item 1. Business” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in this Quarterly Report on Form 10-Q contain forward-looking statements that reflect our current views with respect to, among other things, future events and financial performance. You can identify these forward-looking statements by the use of forward-looking words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “could,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates,” “target,” “projects,” “contemplates” or the negative version of those words or other comparable words. Any forward-looking statements contained in this report are based upon our historical performance and on our current plans, estimates and expectations in light of information currently available to us. The inclusion of this forward-looking information should not be regarded as a representation by us that the future plans, estimates or expectations contemplated by us will be achieved. Such forward-looking statements are subject to various risks and uncertainties and assumptions relating to our operations, financial results, financial condition, business, prospects, growth strategy and liquidity. For more information regarding these risks and uncertainties as well as certain additional risks that we face, refer to Part II, “Item 1A. Risk Factors” as well as the factors more fully described in “Item 2. Management’s Discussion and Analysis of Financial Conditions and Results of Operations,” in our Annual Report on Form 10-K for the year ended August 31, 2020, and those described from time to time in our future reports filed with the Securities and Exchange Commission. Accordingly, there are, or will be, important factors that could cause our actual results to differ materially from those indicated in these statements. We believe that these factors include, but are not limited to:

These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this report. The forward-looking statements made in this report relate only to events as of the date on which the statements are made. We do not undertake any obligation to publicly update or review any forward-looking statement except as required by law, whether as a result of new information, future developments or otherwise.

If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, our actual results may vary materially from what we may have expressed or implied by these forward-looking statements. We caution that you should not place undue reliance on any of our forward-looking statements. You should specifically consider the factors identified in this report that could cause actual results to differ before making an investment decision to purchase our common stock. Furthermore, new risks and uncertainties arise from time to time, and it is impossible for us to predict those events or how they may affect us.

As used in this Quarterly Report on Form 10-Q unless the context otherwise requires, references to “we,” “us,” “our,” the “Company,” “Duck Creek,” and similar references refer to Duck Creek Technologies, Inc. together with its subsidiaries, and the following terms have the meanings or are calculated as set forth below:

Certain monetary amounts, percentages, and other figures included in this Quarterly Report on Form 10-Q have been subject to rounding adjustments. Percentage amounts included in this Quarterly Report on Form 10-Q have not in all cases been calculated on the basis of such rounded figures, but on the basis of such amounts prior to rounding. For this reason, percentage amounts in this Quarterly Report on Form 10-Q may vary from those obtained by performing the same calculations using the figures in our consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. Certain other amounts that appear in this Quarterly Report on Form 10-Q may not sum due to rounding. When we state that we are the leading SaaS provider of core systems for the P&C insurance industry, we are basing our leadership on our subscription revenue for fiscal 2020.

Our fiscal year ends on August 31. Unless otherwise noted, any reference to a year preceded by the word “fiscal” refers to the fiscal year ended August 31 of that year. For example, references to “fiscal 2019” refer to the fiscal year ended August 31, 2019. Any reference to a year not preceded by “fiscal” refers to a calendar year. Accordingly, our first three fiscal quarters are the successor three-month periods following August 31 (i.e., November 30, February 28 and ~~April 30)~~May 31).

	November 30,			August 31,			May 31,			August 31,
	2020			2020			2021			2020
Assets
Current assets:
Cash and cash equivalents	$	361,160		$	389,878		$	115,637		$	389,878
Short-term investments								256,028			—
Accounts receivable, net		27,854			29,149			37,177			29,149
Unbilled revenue		19,850			18,121			22,491			18,121
Prepaid expenses and other current assets		11,838			12,186			11,838			12,186
Total current assets		420,702			449,334			443,171			449,334
Property and equipment, net		17,552			18,113			16,008			18,113
Operating lease assets		17,368			18,171			15,498			18,171
Goodwill		272,455			272,455			272,455			272,455
Intangible assets, net		77,599			81,687			69,425			81,687
Deferred tax assets		1,721			1,550			2,226			1,550
Unbilled revenue, net of current portion		3,489			3,487			2,576			3,487
Other assets		16,318			16,303			16,679			16,303
Total assets	$	827,204		$	861,100		$	838,038		$	861,100
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	1,432		$	1,802		$	1,693		$	1,802
Accrued liabilities		32,895			58,202			42,485			58,202
Contingent earnout liability		5,172			3,701			4,878			3,701
Lease liability		3,439			3,611			3,007			3,611
Deferred revenue		25,978			30,397			28,743			30,397
Total current liabilities		68,916			97,713			80,806			97,713
Contingent earnout liability, net of current portion		—			3,391			—			3,391
Lease liability, net of current portion		20,946			21,739			18,342			21,739
Deferred revenue, net of current portion		240			379			4			379
Other long-term liabilities		5,720			4,121			4,285			4,121
Total liabilities		95,822			127,343			103,437			127,343
Commitments and contingencies (Note 13)
Stockholders' Equity
Common stock, 133,411,494 shares issued and 130,854,463 shares outstanding at November 30, 2020, 133,269,301 shares issued and 130,713,745 shares outstanding at August 31, 2020, 300,000,000 shares authorized at November 30, 2020 and August 31, 2020, par value $0.01 per share		1,334			1,333
Preferred stock, 0 shares outstanding, 50,000,000 shares authorized at November 30, 2020 and August 31, 2020, par value $0.01 per share		—			—
Treasury stock, common shares at cost; 2,557,031 shares at November 30, 2020 and 2,555,556 shares at August 31, 2020		(64,745	)		(64,688	)
Stockholders' equity
Common stock, 134,217,410 shares issued and 131,660,379 shares outstanding at May 31, 2021, 133,269,301 shares issued and 130,713,745 shares outstanding at August 31, 2020, 300,000,000 shares authorized at May 31, 2021 and August 31, 2020, par value $0.01 per share								1,342			1,333
Preferred stock, 0 shares outstanding, 50,000,000 shares authorized at May 31, 2021 and August 31, 2020, par value $0.01 per share								—			—
Treasury stock, common shares at cost; 2,557,031 shares at May 31, 2021 and 2,555,556 shares at August 31, 2020								(64,745	)		(64,688	)
Accumulated deficit		(28,985	)		(24,334	)		(35,706	)		(24,334	)
Accumulated other comprehensive income								79			—
Additional paid in capital		823,778			821,446			833,631			821,446
Total stockholders' equity		731,382			733,757			734,601			733,757
Total liabilities and stockholders' equity	$	827,204		$	861,100		$	838,038		$	861,100

	For the Three Months Ended November 30,						For the Three Months Ended May 31,						For the Nine Months Ended May 31,
	2020			2019			2021			2020			2021			2020
Revenue:
Subscription	$	27,909		$	17,537		$	33,552		$	21,555		$	92,069		$	59,368
License		1,350			1,045			2,474			2,160			7,412			5,431
Maintenance and support		6,190			5,926			6,329			6,064			18,404			17,791
Professional services		23,457			22,062			25,583			24,174			71,611			70,760
Total revenue		58,906			46,570			67,938			53,953			189,496			153,350
Cost of revenue:¹
Cost of revenue:
Subscription		10,084			7,277			12,045			8,721			33,540			24,871
License		388			326			535			506			1,369			1,347
Maintenance and support		842			878			855			710			2,556			2,475
Professional services		13,716			12,042			14,315			13,459			42,857			38,839
Total cost of revenue		25,030			20,523			27,750			23,396			80,322			67,532
Gross margin		33,876			26,047			40,188			30,557			109,174			85,818
Operating expenses:¹
Operating expenses:
Research and development		11,104			9,219			12,255			10,197			36,040			29,424
Sales and marketing		12,597			10,571			13,628			11,723			40,390			33,539
General and administrative		14,418			9,985			15,238			10,184			44,273			29,916
Change in fair value of contingent consideration		3			44			(389	)		(190	)		(291	)		21
Total operating expenses		38,122			29,819			40,732			31,914			120,412			92,900
Loss from operations		(4,246	)		(3,772	)		(544	)		(1,357	)		(11,238	)		(7,082	)
Other (expense) income, net		(47	)		373
Other income (expense), net								546			(316	)		1,009			(96	)
Interest expense, net		(43	)		(281	)		(6	)		(60	)		(87	)		(386	)
Loss before income taxes		(4,336	)		(3,680	)		(4	)		(1,732	)		(10,316	)		(7,564	)
Provision for income taxes		315			334			353			267			1,056			889
Net loss	$	(4,651	)	$	(4,014	)	$	(357	)	$	(1,999	)	$	(11,372	)	$	(8,453	)
Net loss per share information¹
Net loss per share of common stock, basic and diluted	$	(0.04	)				$	0.00		$	—		$	(0.08	)	$	—
Weighted average shares of common stock - basic and diluted		130,788,359			—
Weighted average shares of common stock, basic and diluted								131,613,003			—			130,992,672			—

~~Consolidated Statements of Stockholders’ Equity/Redeemable Partners’ Interest and Partners’ Capital~~

Total
redeemable
partners’
interest
and partners'

Common stock

Treasury Stock

Additional
paid-in

Accumulated

Total
stockholders'
equity/
redeemable
partners'
interest and
partners'

capital

Shares

Amount

Shares

Amount

capital

deficit

capital

Balance at August 31, 2020

$
—

133,269,301

$
1,333

2,555,556

$
(64,688
)

$
821,446

$
(24,334
)

$
733,757

Net loss

—

—

—

—

—

—

(4,651
)

(4,651
)
Repurchase of common stock

—

1,475

(57
)

—

—

(57
)
Share-based compensation expense

—

—

—

—

—

2,333

—

2,333

Vesting of restricted stock awards

—

142,193

1

—

—

(1
)

—

—

Balance at November 30, 2020

$
—

133,411,494

$
1,334

2,557,031

$
(64,745
)

$
823,778

$
(28,985
)

$
731,382

Consolidated Statements of Stockholders’ Equity/Redeemable Partners’ Interest and Partners’ Capital

Total limited partners' interest

Units

Amount

General
partner
interest

Total
redeemable
partners'
interest

Total
partners'
capital

Balance, at August 31, 2019

470,210,869

$
389,066

—

$
389,066

—

Class A units redeemed

(20,292,029
)

(58,800
)

—

(58,800
)

—

Class B units redeemed

(13,528,013
)

(39,200
)

—

(39,200
)

—

Class D units and Phantom Units granted

-

—

—

—

—

Class D and Phantom Units forfeited

(622,031
)

—

—

—

—

Class E units issued

41,412,296

115,454

—

115,454

—

Equity-based compensation

-

436

—

436

—

Net loss

-

(4,014
)

—

(4,014
)

—

Balance, at November 30, 2019

477,181,092

$
402,942

—

$
402,942

—

	Total redeemable partners’ interest and partners'		Common stock				Treasury Stock					Additional paid-in			Accumulated Other Comprehensive			Accumulated			Total stockholders' equity/ redeemable partners' interest and partners'
	capital		Shares		Amount		Shares		Amount			capital			(Loss) Income			deficit			capital
Balance at August 31, 2020	$	—		133,269,301	$	1,333		2,555,556	$	(64,688	)	$	821,446		$	—		$	(24,334	)	$	733,757
Net loss		—		—		—		—		—			—			—			(4,651	)		(4,651	)
Repurchase of common stock		—		—		—		1,475		(57	)		—			—			—			(57	)
Share-based compensation expense		—		—		—		—		—			2,333			—			—			2,333
Vesting of restricted stock awards		—		142,193		1		—		—			(1	)		—			—			—
Balance at November 30, 2020	$	—		133,411,494	$	1,334		2,557,031	$	(64,745	)	$	823,778		$	—		$	(28,985	)	$	731,382
Net loss	$	—		—	$	—		—	$	—		$	—		$	—		$	(6,364	)	$	(6,364	)
Proceeds from follow-on offering, net of issuance costs		—		90,000		1		—		—			3,452			—			—			3,453
Share-based compensation expense		—		—		—		—		—			2,478			—			—			2,478
Issuance of common stock upon exercise of stock options		—		36,809		—		—		—			993			—			—			993
Vesting of restricted stock awards		—		543,170		6		—		—			(6	)		—			—			—
Unrealized loss on available-for-sale securities		—		—		—		—		—			—			(6	)		—			(6	)
Balance at February 28, 2021	$	—		134,081,473	$	1,341		2,557,031	$	(64,745	)	$	830,695		$	(6	)	$	(35,349	)	$	731,936
Net loss	$	—		—	$	—		—	$	—		$	—		$	—		$	(357	)	$	(357	)
Share-based compensation expense		—		—		—		—		—			1,974			—			—			1,974
Issuance of common stock upon exercise of stock options		—		35,674		—		—		—			963			—			—			963
Vesting of restricted stock awards		—		100,263		1		—		—			(1	)		—			—			—
Unrealized gain on available-for-sale securities		—		—		—		—		—			—			85			—			85
Balance at May 31, 2021	$	—		134,217,410	$	1,342		2,557,031	$	(64,745	)	$	833,631		$	79		$	(35,706	)	$	734,601

Consolidated Statements of Stockholders’ Equity/Redeemable Partners’ Interest and Partners’ Capital

	Total redeemable partners’ interest and partners' capital						Common stock				Treasury Stock				Additional paid-in		Accumulated		Non- controlling		Total stockholders' equity/ redeemable partners' interest and partners'
	Units			Amount			Shares		Amount		Shares		Amount		capital		deficit		interests		capital
Balance at August 31, 2019		470,210,869		$	389,066			—	$	—		—	$	—	$	—	$	—	$	—	$	389,066
Class A units redeemed		(20,292,029	)		(58,800	)		—		—		—		—		—		—		—		(58,800	)
Class B units redeemed		(13,528,013	)		(39,200	)		—		—		—		—		—		—		—		(39,200	)
Class D units and Phantom Units granted		—			—			—		—		—		—		—		—		—		—
Class D and Phantom Units forfeited		(622,031	)		—			—		—		—		—		—		—		—		—
Class E units issued		41,412,296			115,454			—		—		—		—		—		—		—		115,454
Equity-based compensation		—			436			—		—		—		—		—		—		—		436
Net loss		—			(4,014	)		—		—		—		—		—		—		—		(4,014	)
Balance at November 20, 2019		477,181,092		$	402,942			—	$	—		—	$	—	$	—	$	—	$	—	$	402,942
Class A units redeemed		(18,133,278	)		(60,000	)		—		—		—		—		—		—		—		(60,000	)
Class B units redeemed		(12,088,848	)		(40,000	)		—		—		—		—		—		—		—		(40,000	)
Class D units and Phantom Units granted		3,110,000			—			—		—		—		—		—		—		—		—
Class D and Phantom Units forfeited		(59,375	)		—			—		—		—		—		—		—		—		—
Class E units issued		30,222,126			97,437			—		—		—		—		—		—		—		97,437
Equity-based compensation		-			488			—		—		—		—		—		—		—		488
Net loss		-			(2,440	)		—		—		—		—		—		—		—		(2,440	)
Balance at February 28, 2020		480,231,717		$	398,427			—	$	—		—	$	—	$	—	$	—	$	—	$	398,427
Class D units and Phantom Units granted		660,000			—			—		—		—		—		—		—		—		—
Class D and Phantom Units forfeited		(155,781	)		—			—		—		—		—		—		—		—		—
Class E Units issuance costs		—			(64	)		—		—		—		—		—		—		—		(64	)
Equity-based compensation		—			480			—		—		—		—		—		—		—		480
Net loss		—			(1,999	)		—		—		—		—		—		—		—		(1,999	)
Balance at May 31, 2020		480,735,936		$	396,844			—	$	—		—	$	—	$	—	$	—	$	—	$	396,844

	For the Three Months Ended November 30,						For the Nine Months Ended May 31,
	2020			2019			2021			2020
Operating activities:
Net loss	$	(4,651	)	$	(4,014	)	$	(11,372	)	$	(8,453	)
Adjustments to reconcile net loss to cash used in operating activities:
Adjustments to reconcile net loss to cash (used in) provided by operating activities:
Depreciation of property and equipment		787			737			2,377			2,350
Amortization of capitalized software		498			—			1,506			205
Amortization of intangible assets		4,087			4,267			12,262			12,803
Amortization of deferred financing fees		28			11			85			106
Share-based compensation expense		3,092			436			9,305			1,404
Loss on change in fair value of contingent earnout liability		3			44			(291	)		21
Bad debt expense		14			(40	)		664			65
Deferred taxes		(171	)		19			(676	)		(146	)
Other non-cash items								(37	)		—
Changes in operating assets and liabilities
Accounts receivable		1,280			(1,339	)		(8,693	)		(4,301	)
Unbilled revenue		(1,730	)		(1,169	)		(3,459	)		(1,182	)
Prepaid expenses and other current assets		319			987			262			96
Other assets		(15	)		87			(376	)		(4,101	)
Accounts payable		712			(230	)		895			(304	)
Accrued liabilities		(16,629	)		(4,700	)		(6,402	)		9,323
Deferred revenue		(4,558	)		(3,642	)		(2,029	)		214
Operating leases		(161	)		312			(1,328	)		199
Cash settlement of vested phantom stock		(6,677	)		—			(9,075	)		—
Other long-term liabilities		1,600			93			164			(52	)
Net cash used in operating activities		(22,172	)		(8,141	)
Net cash (used in) provided by operating activities								(16,218	)		8,247
Investing activities:
Purchase of short-term investments								(287,912	)		—
Maturities of short-term investments								32,000			—
Capitalized internal-use software		(536	)		(862	)		(864	)		(2,440	)
Purchase of property and equipment		(188	)		(1,636	)		(834	)		(3,164	)
Net cash used in investing activities		(724	)		(2,498	)		(257,610	)		(5,604	)
Financing activities:
Proceeds from follow-on offering, net of issuance costs								3,452			—
Payment of deferred IPO costs		(3,650	)		(735	)		(3,650	)		—
Payment of deferred Class E offering costs		(192	)		—			(192	)		(2,552	)
Proceeds from issuance of Class E Units, net of issuance costs		—			115,454			—			212,888
Payment on redemption of Class A and Class B Units		—			(98,000	)		—			(198,000	)
Purchase of treasury stock		(57	)		—			(57	)		—
Proceeds from stock option exercises								1,957			—
Payments of contingent earnout liability		(1,923	)		(3,182	)		(1,923	)		(3,555	)
Proceeds from revolving credit facility		—			5,000			—			5,000
Payments on revolving credit facility		—			(5,000	)		—			(9,000	)
Payment of deferred financing costs		—			(228	)		—			(228	)
Net cash (used in) provided by financing activities		(5,822	)		13,309			(413	)		4,553
Net (decrease) increase in cash and cash equivalents		(28,718	)		2,670			(274,241	)		7,196
Cash and cash equivalents – beginning of period		389,878			11,999			389,878			11,999
Cash and cash equivalents – end of period	$	361,160		$	14,669		$	115,637		$	19,195
Supplemental disclosure of other cash flow information:
Cash paid for income taxes		730			577			2,373			1,566
Cash paid for interest		—			187			—			269
Fair value of contingent consideration		5,529			7,377			5,028			6,981
Deferred IPO costs in accounts payable and accrued liabilities		—			1,450			—			5

Duck Creek Technologies, Inc (the Company) is a provider of Software-as-a-Service (SaaS) core systems to the property and casualty (P&C) insurance industry, through Duck Creek OnDemand. Products offered include Duck Creek Policy, Duck Creek Billing, Duck Creek Claims, Duck Creek Rating, Duck Creek Insights, Duck Creek Distribution Management, Duck Creek Reinsurance Management, Duck Creek Anywhere Managed Integrations, and Duck Creek Industry Content. The Company also provides its products via perpetual and term license arrangements to customers with legacy systems that have yet to upgrade to SaaS.

The Company was formed as a Delaware corporation on November 15, 2019, with no operating assets or operations for the purpose of facilitating an initial public offering (the IPO) and related Reorganization Transactions (as described below) in order to carry on the business of Disco Topco Holdings (Cayman), L.P. and its subsidiaries (the Operating Partnership). Unless otherwise indicated or the context otherwise requires, references to “Duck Creek Technologies” and the “Company” refer to (a) prior to the consummation of the Reorganization Transactions and the IPO, to Disco Topco Holdings (Cayman), L.P., and its subsidiaries, and (b) after the consummation of the Reorganization Transactions and IPO to Duck Creek Technologies, Inc, and its subsidiaries.

On August 14, 2020, the Company completed its IPO. It sold 17,250,000 shares of common stock (including shares issued pursuant to the exercise in full of the underwriters’ option to purchase additional shares) at a public offering price of $27.00 per share for net proceeds of $429.2 million, after deducting underwriting discounts, commissions, and estimated offering expenses.

The Company used (i) $43.1 million of the net proceeds received from the IPO to redeem all of the outstanding LP Units of the Operating Partnership retained by Accenture plc (Accenture) and RBW Investment GmbH & Co. (RBW), after giving effect to the contributions that were part of the Reorganization Transactions, at a redemption price per LP Unit equal to the IPO price less underwriting discounts and commissions, (ii) $64.7 million of the net proceeds received from the IPO to repurchase from Apax Partners L.P. (Apax) a portion of the shares in the Company received by Apax in the Reorg Merger (as described below) at a repurchase price per share equal to the IPO price less underwriting discounts and commissions, and (iii) $6.7 million of net proceeds received from the IPO to cash settle outstanding equity awards of certain international employees.

The Company and the Operating Partnership completed a series of transactions concurrently with or immediately following the completion of the IPO (Reorganization Transactions) which are described below:

The Reorganization Transactions are considered transactions between entities under common control. As a result, Disco Topco Holdings (Cayman), L.P., is considered the predecessor of Duck Creek Technologies, Inc. for accounting purposes. This has resulted in the presentation of Disco Topco Holdings (Cayman), L.P.’s historical consolidated financial statements as the historical consolidated financial statements of Duck Creek Technologies, Inc. Duck Creek Technologies, Inc., has accounted for Disco Topco Holdings (Cayman), L.P.’s assets and liabilities at their historical carrying amounts.

The consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (GAAP) set by the Financial Accounting Standards Board (FASB), and pursuant to the rules and regulations of the Securities and Exchange Commission regarding interim financial reporting. Accordingly, certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted. In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the results of operations, financial position and cash flows for the periods presented have been reflected. References to GAAP issued by the FASB in these notes are to the FASB Accounting Standards Codification (FASB ASC). ~~The Company has no items of other comprehensive income or loss; therefore, the Company’s net loss is identical to its comprehensive loss.~~

These consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended August 31, 2020 filed with the SEC on November 3, 2020. Operating results for interim periods are not necessarily indicative of the results that may be expected for any future period or the entire fiscal year.

The global pandemic resulting from the novel strain of coronavirus known as COVID-19, and certain intensified preventative or protective public health measures undertaken by governments, businesses and individuals to contain the spread of COVID-19, have, and continue to, result in global business disruptions that adversely affect workforces, organizations, economies, and financial markets globally, leading to an economic downturn and increased market volatility. While the Company did not experience a material disruption in bookings or sales from the COVID-19 pandemic in the three and nine months ended ~~November 30, 2020,~~May 31, 2021, a continued or intensifying outbreak over the short- or medium-term could result in delays in services delivery, delays in implementations, delays in critical development and commercialization activities, including delays in the introduction of new products and services and further international expansion, interruptions in sales and marketing activity, furloughs of employees and disruptions of supply chains. Additionally, the Company may incur increased costs in the future when employees return to work and the Company implements measures to ensure their safety. The magnitude of the effect of COVID-19 on the Company’s business will depend, in part, on the length and severity of the restrictions (including the effects of recently announced “re-opening” plans following a recent slowdown of the virus infection rate in certain countries and localities) and other limitations on the Company’s ability to conduct its business in the ordinary course. The longer the pandemic continues or resurges, the more severe the impacts of COVID-19 will be on the Company’s business. The extent, length and consequences of the pandemic are uncertain and impossible to predict, but could be material. COVID-19 and other similar outbreaks, epidemics or pandemics could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows and prospects and could cause significant volatility in the trading prices of the Company’s common stock as a result of any of the risks described above and other risks that the Company is not able to predict.

The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

The Company’s significant accounting policies are described in Note 2, Summary of Significant Accounting Policies, to the consolidated financial statements included ~~elsewhere~~ in the Company’s Annual Report on Form 10-K for the year ended August 31, 2020. There have been no material changes to the significant accounting policies during the ~~three-month~~nine-month period ended ~~November 30, 2020,~~May 31, 2021, other than those noted below relating to the adoption of ASU 2016-13, Financial Instruments Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASU 2016-13) effective September 1, 2020 and the accounting for investments.

The Company maintains an allowance for expected credit losses for its accounts receivable balance. The allowance reflects the expected collectability of the balance and is based on historical losses, customer-specific factors, and current economic conditions. Credit losses are recorded in general and administrative expense while billing and other revenue adjustments are recorded as a reduction to revenue.

At the time of purchase, the Company determines the appropriate classification of investments based upon its intent with regard to such investments. All of the Company’s investments are classified as available-for-sale. The Company classifies investments as short-term when theirremaining contractual maturities are one year or less from the balance sheet date, and as long-term when the investment has a remaining contractual maturity of more than one year from the balance sheet date. The Company recordsinvestments at fair value with unrealized gains and losses recorded as a component of other comprehensive income (loss).

In June 2016, the FASB issued ASU 2016-13, Financial Instruments Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASU 2016-13). The new standard requires companies to measure credit losses utilizing a methodology that reflects expected credit losses and requires a consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The Company adopted this new standard on September 1, 2020. The impact to the consolidated financial statements as a result of adoption was not material.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (ASU 2017-04). This new guidance simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. Under the new standard, entities will perform goodwill impairment tests by comparing the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. The Company adopted this new standard on September 1, 2020. The impact to the consolidated financial statements as a result of adoption was not material.

In August 2018, the FASB issued ASU No. 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract (ASU 2018-15). This new guidance requires a customer in a cloud computing arrangement that is a service contract to follow the internal-use software guidance in Accounting Standards Codification 350-40 to determine which implementation costs to defer and recognize as an asset. ASU 2018-15 generally aligns the guidance on recognizing implementation costs incurred in a cloud computing arrangement that is a service contract with that for implementation costs incurred to develop or obtain internal-use software, including hosting arrangements that include an internal-use software license. The Company adopted this new standard on September 1, 2020. The impact to the consolidated financial statements as a result of adoption was not material.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (ASU 2019-12). The new standard is intended to simplify various aspects related to accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and clarifying certain aspects of the current guidance to promote consistency among reporting entities. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years, with early adoption permitted. An entity that elects early adoption must adopt all the amendments in the same period. Most amendments within ASU 2019-12 are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective

basis. The Company does not expect the adoption of this new standard to have a material impact on its consolidated financial statements

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (ASU 2020-04). The new standard provides temporary optional expedients and exceptions to GAAP guidance on contract modifications to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (LIBOR) to alternative reference rates. The Company may elect to apply the amendments prospectively through December 31, 2022. The Company does not expect the adoption of this new standard to have a material impact on its consolidated financial statements.

Other recent accounting pronouncements that are or will be applicable to the Company did not, or are not expected to, have a material impact on the Company’s present or future financial statements.

The Company derives its revenues primarily from the following four sources, which represent performance obligations of the Company:

In accordance with ASC 606, the Company recognizes revenue from the identified performance obligations, as determined in its contracts with customers, as control is transferred to the customer in an amount that reflects the consideration the Company expects to receive. The Company applies the following five steps to achieve the core principle of ASC 606:

The Company considers the terms and conditions of the contracts and its customary business practices in identifying contracts under ASC 606. The Company has determined that a contract with a customer exists when the contract is approved, each party’s rights regarding the services to be transferred can be identified, payment terms for the services can be identified, the customer has the ability and intent to pay, and the contract has commercial substance. The Company applies judgment in determining the customer’s ability and intent to pay, which is based on a variety of factors, including the customer’s historical payment experience or, in the case of a new customer, credit and financial information pertaining to the customer.

Performance obligations promised in a contract are identified based on the products and services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the product or service either on its own or together with other resources that are readily available from third-parties or from the Company, and are distinct in the context of the contract, whereby the transfer of the products or services is separately identifiable from other promises in the contract.

The transaction price is determined based on the consideration to which the Company expects to be entitled in exchange for transferring products or services to the customer. Variable consideration is included in the transaction price if, in the Company’s judgment, it is probable that no significant future reversal of cumulative revenue under the contract will occur. The sale of the Company’s software and SaaS products may include variable consideration relating to changes in a customer’s direct written premium (DWP) managed by these solutions. The Company estimates variable consideration based on historical DWP usage to the extent that a significant revenue reversal is not probable to occur.

In instances where the timing of revenue recognition differs from the timing of invoicing, the Company has determined that contracts generally do not include a significant financing component. The primary purpose of the

Company’s invoicing terms is to provide customers with simplified and predictable ways of purchasing our products and services, not to receive financing from customers or to provide customers with financing.

If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative standalone selling price (SSP).

Revenue is recognized at the time the related performance obligation is satisfied by transferring the promised product or service to a customer. Revenue is recognized when control of the products or services are transferred to the Company’s customers, in an amount that reflects the consideration that it expects to receive in exchange for those products or services.

The Company records revenue net of applicable sales taxes collected. Sales taxes collected from customers are recorded as part of accounts payable in the accompanying consolidated balance sheets and are remitted to state and local taxing jurisdictions based on the filing requirements of each jurisdiction.

The Company provides disaggregation of revenue based on product and service type on the consolidated statements of operations as it believes these categories best depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

The following table summarizes revenue by geographic area based on the location of the contracting entity, regardless of where the products or services are used, for the three and nine months ended ~~November 30, 2020~~May 31, 2021 and ~~2019:~~May 31, 2020:

The transaction price allocated to subscription arrangements is recognized as revenue over time throughout the term of the contract as the services are provided on a continuous basis, beginning after the SaaS environment is provisioned and made available to customers. The Company’s subscription arrangements generally have terms of three to seven years and are generally payable on a monthly basis over the term of the subscription arrangement, which is typically noncancelable. Revenue is recognized ratably using contractual DWP as the measure of progress.

The Company has concluded that its software licenses provide the customer with the right to functional intellectual property (IP), and are distinct performance obligations as the customer can benefit from the software licenses on their own. The transaction price allocated to perpetual and term license arrangements is recognized as revenue at a point in time when control is transferred to the customer, which generally occurs at the time of delivery. Perpetual software license fees are generally payable when the contract is executed. Term license fees are generally payable in advance on an annual basis over the term of the license arrangement, which is typically noncancelable. Perpetual and term license arrangements are delivered before related services are provided, including maintenance and support services, and are functional without such services.

Maintenance and support contracts associated with the Company’s software licenses entitle customers to receive technical support and software updates, on a when and if available basis, during the term of the maintenance and support contract. Technical support and software updates are considered distinct from the related software licenses but accounted for as a single performance obligation as they each constitute a series of distinct services that are substantially the same and have

the same pattern of transfer to the customer. The transaction price allocated to software maintenance and support is recognized as revenue over time on a straight-line basis over the term of the maintenance and support contract. Maintenance and support fees are generally payable in advance on a monthly, quarterly, or annual basis over the term of the maintenance and support contract. Maintenance and support contracts are priced as a percentage of the associated software license.

The Company’s professional services revenue is primarily comprised of implementation services provided to customers. The majority of professional services engagements are billed to customers on a time and materials basis. The Company has determined that professional services provided to customers represent distinct performance obligations. These services may be provided on a stand-alone basis or bundled with other performance obligations, including subscription arrangements, software licenses, and maintenance and support services. The transaction price allocated to these performance obligations is recognized as revenue over time as the services are performed. In those limited instances where professional services arrangements are sold on a fixed price basis, revenue is recognized over time using an input measure of time incurred to date relative to total estimated time to be incurred at project completion. ~~Invoices for all professional~~Professional services arrangements are generally invoiced monthly in arrears.

The Company records reimbursable out-of-pocket expenses associated with professional services contracts in both revenue and cost of revenue.

The Company’s contracts with customers can include multiple performance obligations, where the transaction price is allocated to each identified performance obligation based on their relative SSP. The Company’s contracts may also grant the customer an option to acquire additional products or services, which the Company assesses to determine whether or not any discount on the products or services is in excess of levels normally available to similar customers and, if so, accounts for the optional product or service as an additional performance obligation.

The Company typically determines SSP based on the observable prices of the promised goods or services charged when sold separately to customers, which are determined using contractually stated prices. In instances where SSP is not directly observable, the Company determines SSP based on its overall pricing objectives, taking into consideration market conditions and other factors, including customer size and geography. The various products and services comprising contracts with multiple performance obligations are typically capable of being distinct and accounted for as separate performance obligations. The Company allocates revenue to each of the performance obligations included in a contract with multiple performance obligations at the inception of the contract.

The SSP for perpetual or term license arrangements sold in contracts with multiple performance obligations is determined using the residual approach. The Company utilizes the residual approach because the selling prices for software licenses is highly variable and a SSP is not discernible from past transactions or other observable evidence. Periodically, the Company evaluates whether the use of the residual approach remains appropriate for performance obligations associated with software licenses when sold as part of contracts with multiple performance obligations. As a result, if the SSP analysis illustrates that the selling prices for software licenses are no longer highly variable, the Company will utilize the relative allocation method for such arrangements.

The Company may enter into amendments to previously executed contracts which constitute a contract modification. The effect of a contract modification on the transaction price when the remaining products or services are not distinct is recognized to revenue on a cumulative catch-up basis. Contract modifications are accounted for prospectively when it results in the promise to deliver additional products and services that are distinct and the increase in the price of the contract corresponds to the SSP of the additional products or services.

Contract assets and liabilities are presented net at the contract level for each reporting period. Contract assets consist of unbilled revenue and represent amounts under contracts with customers where revenue recognized exceeds the amount billed to the customer. Contract liabilities consist of deferred revenue and include billings and payments received in advance of revenue recognized. Deferred revenue that will be realized during the succeeding 12-month period is recorded as current, and the remaining balance is recorded as noncurrent.

~~For~~During the ~~three~~quarter and nine months ended ~~November 30, 2020 and 2019 $10.5 million and $4.9 million, respectively,~~May 31, 2021, a portion of the Company’s unbilled revenue balance that was included in the corresponding unbilled revenue balance at the beginning of the period ~~presented~~ became an unconditional right to payment and was billed to its customers.

~~For~~ During the three months ended ~~November 30,~~May 31, 2021 and 2020 ~~and 2019,~~ the ~~Company recognized revenue of $14.8~~amounts were $2.4 million and ~~$11.7~~$3.0 million, respectively, and for the nine months ended May 31, 2021 and 2020 they were $15.7 million and $12.6 million, respectively.

The Company also recognized revenue that was included in the corresponding deferred revenue balance at the beginning of the period ~~presented.~~during the three and nine months ended May 31, 2021 and 2020. For the three months ended May 31, 2021 and 2020, the amounts were $3.8 million and $4.3 million, respectively. For the nine months ended May 31, 2021 and 2020, the amounts were $27.9 million and $20.7 million, respectively.

Remaining performance obligations represent contracted revenue that has not yet been recognized, which includes deferred revenue and amounts that will be invoiced and recognized as revenue in future periods. As of ~~November 30, 2020,~~May 31, 2021, approximately ~~$458.1~~$453.3 million of revenue is expected to be recognized from remaining performance obligations in the amount of approximately ~~$104.5~~$40.5 million in fiscal 2021 and approximately ~~$353.6~~$412.8 million thereafter. The estimated revenues do not include unexercised contract renewals. The Company applied the practical expedient in accordance with ASC 606 to exclude amounts related to professional services contracts that are on a time and materials basis.

The following table summarizes the changes in fair value of the Company’s contingent earnout liability during the ~~three~~nine months ended ~~November 30, 2020:~~May 31, 2021:

Available-for-sale investments within cash equivalents and investments consist of the following (in thousands):

The Company has recorded the securities at fair value in its consolidated balance sheet and unrealized gains and losses are reported as a component of accumulated other comprehensive income (loss). The amount of realized gains and losses reclassified into earnings are based on the specific identification of the securities sold or securities that reached maturity date. There were 0 sales and 2 maturities of securities in the periods presented.

The Company measures certain financial assets and liabilities at fair value. Fair value is determined based upon the exit price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants, as determined by either the principal market or the most advantageous market.

Inputs used in the valuation techniques to derive fair values are classified based on a three-level hierarchy, as follows:

The following tables present the Company’s financial assets and liabilities measured and recorded at fair value on a recurring basis using the above input categories as of ~~November 30, 2020~~May 31, 2021 and August 31, 2020:

The contingent earnout liability related to business combinations is recorded at fair value on the acquisition date and is adjusted each reporting period for changes in fair value, which can result from changes in anticipated payments and changes in assumed discount periods and rates. These inputs are unobservable in the market and therefore categorized as level 3 inputs as defined above. Quoted prices for liability classified stock appreciation rights are not readily available. Accordingly, the Company uses

a Black-Scholes model to estimate the fair value of these awards, which utilizes level three inputs. The following table summarizes the changes in the estimated fair value of the Company’s level 3 categorized liability classified awards for the ~~three~~nine months ended ~~November 30, 2020:~~May 31, 2021:

The Company had no0 assets measured and recorded at fair value on a recurring basis as of ~~November 30, 2020 and~~ August 31, 2020.

Prepaid expenses and other current assets as of ~~November 30, 2020~~May 31, 2021 and August 31, 2020 consisted of the following:

Property and equipment, net as of ~~November 30, 2020~~May 31, 2021 and August 31, 2020 consisted of the following:

Depreciation expense related to property and equipment was $0.8 millionand ~~$0.7~~$0.8 million for the three months ended ~~November 30,~~May 31, 2021 and 2020, respectively, and ~~November 30, 2019,~~$2.4 million and $2.4 million,for the nine months ended May 31, 2021 and 2020, respectively.

Amortization expense related to internal-use software was $0.5 million and$1.5 millionfor the three and nine months ended ~~November 30, 2020~~May 31, 2021, respectively and ~~no amortization expense was recorded~~ $0.2 millionfor both the three and nine months ended ~~November 30, 2019 since the initial amortization period began during the second quarter of fiscal~~May 31, 2020.

The Company’s goodwill is the result of its acquisitions of other businesses and represents the excess of purchase consideration over the fair value of assets acquired and liabilities assumed. There has been no change to the $272.5 million carrying amount of goodwill since August 31, 2020.

Intangible assets as of ~~November 30, 2020~~May 31, 2021 and August 31, 2020 consisted of the following:

Amortization expense was $4.1 million and $4.3 million for the three months ended ~~November 30,~~May 31, 2021 and 2020, respectively, and ~~2019,~~$12.3 million and $12.8 million for the nine months ended May 31, 2021 and 2020, respectively.Amortization expense is recorded on a straight-line basis over the estimated useful lives of the assets. Amortization expense associated with the backlog intangible asset is classified as a reduction of revenue in the accompanying consolidated statements of operations.

As of ~~November 30, 2020,~~May 31, 2021, the estimated future amortization of purchased intangible assets is as follows:

The Company calculates basic earnings per share by dividing the net income (loss) by the weighted average number of shares of common stock outstanding for the period. The diluted earnings per share is computed by assuming the exercise, settlement, and vesting of all potential dilutive common stock equivalents outstanding for the period using the treasury stock method.

The following table sets forth a reconciliation of the numerator and denominator used to compute basic earnings per share of common stock.

Prior to the IPO, there were no0 shares of common stock outstanding, and the membership structure of Duck Creek Technologies consisted of limited partnership units. The Company analyzed the calculation of earnings per unit for periods prior to the IPO and determined that it resulted in values that would not be meaningful to the users of these consolidated financial statements. Therefore, earnings per share information has not been presented for the three-month ~~period~~and nine months periods ended ~~November 30, 2019.~~May 31, 2020.

As of ~~November 30, 2020, 4,451,120~~May 31, 2021, 3,575,928 shares outstanding of potential common stock, prior to the use of the treasury stock method, were excluded from the computation of diluted weighted-average shares of common stock outstanding because their effect would have been ~~antidilutive.~~antidilutive.

Other assets as of ~~November 30, 2020~~May 31, 2021 and August 31, 2020 consisted of the following:

The amortization related to deferred contracts costs was $0.6 million and ~~$0.7~~$0.4 million for the three months ended ~~November 30,~~May 31, 2021 and 2020, respectively, and ~~2019,~~$1.6 million and $1.0 millionfor the nine months ended May 31, 2021 and 2020, respectively, and there was no0 impairment loss in relation to the costs capitalized.

Accounts receivable, net as of ~~November 30, 2020~~May 31, 2021 and August 31, 2020, consisted of the following:

The following table presents changes to the allowance for credit losses during the ~~three~~nine months ended ~~November 30, 2020:~~May 21, 2021:

Accrued liabilities as of ~~November 30, 2020~~May 31, 2021 and August 31, 2020 consisted of the following:

On October 2, 2019, the Company extended the maturity date of its credit agreement for a revolving credit facility from October 4, 2019 to October 2, 2021. The $30.0 million maximum borrowing capacity under the revolving credit facility was unchanged.

The revolving credit facility is secured by substantially all of the Company’s tangible assets. Interest accrues on the revolving credit facility at a variable rate based upon the type of borrowing made by the Company. Borrowings can either incur interest at a rate of LIBOR plus an applicable margin, or incur interest at the higher of: (i) the Prime Rate, (2) the Fed Funds Rate plus 0.5%, or (3) LIBOR plus 1.0%, plus an applicable margin. The applicable margin ranges from 2.0% to 3.0% depending on the interest rate basis and type of borrowing elected. In addition to interest on the revolving credit facility, the Company pays a commitment fee of 0.5% per annum on the unused portion of the revolving credit facility. Repayment of any amounts borrowed are not required until maturity of the revolving credit facility, however the Company may repay any amounts borrowed at any time, without premium or penalty.

The Company is required to meet certain financial and nonfinancial covenants under the terms of the revolving credit facility. These covenants include limits on the creation of liens, limits on making certain investments, limits on incurring additional indebtedness, maintaining a minimum level of consolidated EBITDA, and maintaining a leverage ratio at or below a maximum level. The Company was in compliance with these financial and nonfinancial covenants as of ~~November 30, 2020.~~May 31, 2021.

There was no0 outstanding balance under the revolving credit facility at ~~November 30, 2020~~May 31, 2021 or August 31, 2020. Letters of credit of $0.9 million and $1.0 million were outstanding under the revolving credit facility ~~were outstanding~~ at ~~both November 30, 2020~~May 31, 2021 and August 31, ~~2020.~~2020, respectively.

The Company incurred $0.2 million of costs directly related to the maturity extension, which were deferred and will be amortized over the term of the extension.

From time to time, the Company is a party to or can be threatened with litigation in the ordinary course of business. The Company regularly analyzes current information, including, as applicable, the Company’s defenses and insurance coverage and, as necessary, provides accruals for probable and estimable liabilities for the eventual disposition of any matters. The Company was not a party to any material legal proceedings as of ~~November 30, 2020~~May 31, 2021 or ~~2019.~~2020.

The Company’s products are typically warranted to perform in a manner consistent with general industry standards that are reasonably applicable and substantially in accordance with the Company’s product documentation under normal use and circumstances. The Company’s services are generally warranted to be performed in a professional manner and to materially conform to the specifications set forth in the related customer contract. The Company’s arrangements also include certain provisions for indemnifying customers against liabilities if its products or services infringe a third-party’s intellectual property rights.

To date, the Company has not incurred any material costs as a result of such indemnifications or commitments and has not accrued any liabilities related to such obligations in the accompanying consolidated financial statements.

Share-based compensation expense has been recorded in the accompanying consolidated statements of operations as follows for the three and nine months ended ~~November 30, 2020~~May 31, 2021 and ~~2019:~~2020:

Upon closing of the underwritten public offering of the Company’s common stock on February 2, 2021, a market condition was achieved relating to Class D Restricted Common Stock, Leverage Restoration Options, Class D Phantom Stock and Leverage Restoration SARs. Accordingly, all remaining unrecognized share-based compensation expense associated with these awards totaling $1.2 million was immediately recognized on that date.

During the quarter ended February 28, 2021, the Company modified the vesting conditions for a subset of its share-based awards. The modification resulted in incremental share-based compensation expense of $0.6 million that will be recognized over the remaining requisite service period of the awards.

The Company considers operating segments to be components of the Company for which separate financial information is available and evaluated regularly by the Company’s chief operating decision maker in deciding how to allocate resources and in assessing performance. The chief operating decision maker for the Company is the chief executive officer. The chief executive officer reviews financial information presented on a consolidated basis, accompanied by information about revenue by product and geographic region, for purposes of allocating resources and evaluating financial performance. Accordingly, the Company has determined that it has a single operating segment.

Revenues by geographic area presented based upon the location of the customer are included in Note 2(g).

As of ~~November 30, 2020,~~May 31, 2021, Accenture held ~~19.2%~~16.0% of the outstanding shares of common stockof the Company. The Company provides certain professional services and software maintenance services ~~and SaaS products~~ to end customers as a subcontractor to Accenture as part of its typical revenue generating arrangements. During the three and nine months ended ~~November 30,~~May 31, 2021 and 2020, ~~and 2019,~~ the Companyrecognized immaterial amounts of revenuerelating to services performed in this subcontractor capacity.

In addition, the Company also engages Accenture to provide certain professional services on behalf of the Company as part of its typical revenue generating arrangements. During both the three and nine months ended ~~November 30,~~May 31, 2021 and 2020, the Company ~~had~~ incurred noimmaterial expenditures relating to services performed by ~~Accenture and incurred an immaterial amount during the three months ended November 30, 2019.~~Accenture.

The Company recognized revenue from customers that invested in the Company’s Class E Preferred Units during the year ended 2020 whose shares converted to common stock in our IPO. During the three and nine months ended ~~November 30, 2020,~~May 31, 2021, the Company recognized aggregate revenue of ~~$7.5~~$5.6 million and $21.2 million, respectively, from these customers.

As of ~~November 30, 2020,~~May 31, 2021, the Company had deferred revenue of ~~$4.1~~$1.1 million and outstanding accounts receivables due from these customers of ~~$4.8~~$8.6 million.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from the forward-looking statements included herein. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the section entitled Part II, “Item 1A. Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q.

We are the leading SaaS provider of core systems for the P&C insurance industry. We have achieved our leadership position by combining over twenty years of deep domain expertise with the differentiated SaaS capabilities and low-code configurability of our technology platform. We believe we are the first company to provide carriers with an end-to-end suite of enterprise-scale core system software that is purpose-built as a SaaS solution. Our product portfolio is built on our modern technology foundation, the Duck Creek Platform, andworks cohesively to improve the operational efficiency of carriers’ core processes (policy administration, claims management and billing) as well as other critical functions. The Duck Creek Platform enables our customers to be agile and rapidly capitalize on market opportunities, while reducing their total cost of technology ownership.

Our deep understanding of the P&C insurance industry has enabled us to develop a single, unified suite of insurance software products that is tailored to address the key challenges faced by carriers. Our solutions promote carriers’ nimbleness by enabling rapid integration and streamlining the ability to capture, access and utilize data more effectively. The Duck Creek Suite includes several products that support the P&C insurance process lifecycle, such as:

In addition, we offer other innovative solutions, such as Duck Creek Rating, Duck Creek Insights, Duck Creek Digital Engagement, Duck Creek Distribution Management, Duck Creek Reinsurance Management, Duck Creek Anywhere Managed Integrations and Duck Creek Industry Content,which provide additional features and functionalities that further help our customers meet the increasing and evolving demands of the P&C industry. Our customers purchase and deploy Duck Creek OnDemand, our SaaS solution, either individually or as a suite.

We sell our SaaS solutions through recurring fee arrangements where revenue is recognized on a monthly basis following deployment to the customer, which we refer to as subscription revenue. Substantially all of our new bookings come from the sale of SaaS subscriptions of Duck Creek OnDemand . For the ~~three~~nine months ended ~~November 30,~~May 31, 2021 and 2020, ~~and 2019,~~ SaaS ACV bookings represented ~~95%~~94% and ~~98%~~95% of our total ACV bookings, respectively. Historically, we have also sold our products through perpetual and term license arrangements, most commonly installed on-premise, where license revenue is typically recognized in full upon delivery of the software to the customer. We generally price our SaaS and license arrangements at individually negotiated rates based on the amount of a customer’s DWP that will be managed by our solutions with pre-determined fee adjustments as the customer’s DWP increases over the term of the contract, which typically ranges from three to seven years for our SaaS arrangements. We typically invoice our customers monthly, in advance, for SaaS fees whereas our term licenses are typically invoiced annually, in advance. The total cost of a perpetual license is billed in full upon contract signing.

We also derive revenue from maintenance and support services on our perpetual and term license products (primarily software updates, rights to unspecified software upgrades on a when-and-if-available basis and remote support services). We recognize revenue on a monthly basis as maintenance and support services are provided to customers. We generate revenue by providing professional services for both our SaaS solutions and perpetual and term license products (primarily related to implementation services) to the extent requested by our customers. The vast majority of our professional services revenue is recognized on a time and materials basis as the work is delivered to our customers. Our customers may also choose to obtain implementation services through our network of third-party SI partners who provide implementation and other related services to our customers. Our partnerships with leading SIs allow us to grow our business more efficiently by giving us scale to service our growing customer base. We continue to grow our services organization, including increasing the number of qualified consultants we employ and investing time and resources to develop relationships with new SI partners in existing and new markets.

We sell our products and services to a wide variety of carriers, including many of the largest and most recognizable brands in the P&C insurance industry, as well as smaller national and regional carriers. Our direct sales team focuses on obtaining new customers, which includes carriers that currently operate internally developed or competing systems, as well as selling into our existing customer base, which includes marketing our SaaS solutions to our term and perpetual license customers to drive adoption of our SaaS solutions and cross-selling additional applications. We are committed to continued training and development in order to increase the productivity of our sales team, with regional sales centers in North America, Europe and Australia. Our sales team is complemented by our partnerships with third-party partners, including leading SIs and solution partners. These partners provide additional market validation to our offerings, enhance our sales force through co-marketing efforts and offer greater speed and efficiency of implementation capabilities and related services to our customers. We also engage in a variety of traditional and online marketing activities designed to provide sales support and build brand recognition and enhance our reputation as an industry leader.

We believe our strong customer relationships are a result of our ability to develop innovative technology and incorporate our deep domain expertise into products that serve mission critical functions in our customers’ day-to-day operations. We have over 150 insurance customers, of which over 60 have purchased one or more of our SaaS solutions. For customer concentration purposes, customers are assessed two ways: individual entities (customers) and combining customers that are under common control (consolidated entities). We had ~~one~~no consolidated ~~entity~~entities that accounted for more than 10% of our total revenue in the ~~first~~third quarter of fiscal 2021 and ~~a different~~one consolidated entity that represented approximately ~~13%~~11% of our total revenue during the ~~first~~third quarter of fiscal 2020. These consolidated entities are large multinational corporations that do business with us through multiple subsidiaries.

Increased focus on the sale of our SaaS solutions and resulting changing revenue mix. A central part of our strategy is to continue to grow our subscription revenue by signing new SaaS customers and increasing sales to our existing SaaS customers. Additionally, over time we also expect to migrate existing term and perpetual license customers to our SaaS solutions. As a result, our software revenue mix will continue to change over time as the portion of license revenue (primarily recognized up-front) decreases and the portion of subscription revenue (recognized monthly) increases, which may make our results in any one period difficult to compare to any other period. For the three months ended ~~November 30,~~May 31, 2021 and 2020, ~~and 2019,~~ subscription revenue was 79% and 72% of software revenue, respectively. For the nine months ended May 31, 2021 and 2020, subscription revenue was 78% and 72% of software revenue, respectively.

Continued and increased adoption of our solutions by customers. Strong customer relationships are a key driver of our success given the importance of customer references for new sales. Our long-term relationships with existing customers provide us with significant opportunities to reach customer decision-makers and sell our product offerings that address the specific customer’s needs, allowing us to recognize incremental sales with lower sales and marketing spend than for a new customer. With the continued launch of new functionality for the Duck Creek Suite, we have the opportunity to realize incremental value by selling additional functionality to customers that do not currently utilize our full product portfolio and by encouraging existing term and perpetual license customers to adopt our SaaS solutions. As we demonstrate our value to customers, we believe we will have the opportunity to sell them additional solutions. Moreover, because our products are priced on the basis of the amount of DWP generated by our customers, we expect our revenue will grow as our customers grow their businesses.

Timing of license revenue recognition and changing contract terms. Because our offerings are typically priced based on a customer’s DWP, and our business relies on a relatively small number of high-value contracts, the license revenues recognized in any fiscal period in which we sign a term license with a large global carrier may be disproportionally higher than revenues recognized in a period in which we only sign term licenses with smaller carriers. We generally experience lengthy sales cycles because potential customers typically undertake a rigorous pre-purchase decision-making and evaluation process. Additionally, our license revenue may significantly increase in any given period in which a new license contract is signed. In fiscal 2018, we revised our contracting practices and began to sell our term licenses with an initial two-year committed term and optional annual renewals instead of our historical three to six year committed terms. This contracting change has impacted historical period-over-period revenue comparisons. However, because of our revenue mix shift to subscription and since our existing newer contracts have, and our contracts going forward are expected to have, initial two-year committed terms, this change has not had, and is not expected to have a material impact on the comparability of our results presented herein and in future periods. Our term license revenue accounted for 4%6% and 3%7% of software revenue during both the three and nine months ended ~~November 30,~~May 31, 2021 and 2020, ~~and 2019,~~ respectively.

Investment in sales and marketing organization. We plan to continue to invest in our sales and marketing efforts to grow our customer base, increase sales of additional functionality to existing customers and encourage carriers who currently operate legacy systems or use one or more of our competitor’s applications to adopt our SaaS solutions. We expect to add sales personnel and expand our marketing activities. We also intend to continue to expand our international sales and marketing organization, which we believe will be an important factor in our continued growth. Our sales and marketing expenses totaled ~~$12.6~~$13.6 million and ~~$10.6~~$11.7 million in the three months ended ~~November 30,~~May 31, 2021 and 2020, respectively, and ~~2019,~~$40.4 million and $33.5 million in the nine months ended May 31, 2021 and 2020, respectively. We expect sales and marketing expenses to continue to increase in absolute dollars for the foreseeable future.

Investment in SaaS operations. We will continue to invest in Duck Creek OnDemand, including through our ~~new~~ SaaS operations center and continued growth in the number of our cloud and SaaS operations experts, to further our goal of delivering the best experience for our SaaS customers. Personnel related costs of our SaaS operations team is the fastest growing component of our cost of subscription revenue. Our cost of subscription revenue totaled ~~$10.1~~$12.0 million and ~~$7.3~~$8.7 million in the three months ended ~~November 30,~~May 31, 2021 and 2020, respectively, and ~~2019,~~$33.5 million and $24.9 million for the nine months ended May 31, 2021 and 2020, respectively.

Investment in technology and research and development efforts. We are committed to continuing to deliver market-leading software to carriers and believe that maintaining our product leadership is critical to driving further revenue growth. As a result, we intend to continue to make significant investments in our research and development efforts to extend the functionality and breadth of our current solutions as well as develop and launch new products and tools to address the evolving needs of the P&C insurance industry. Our research and development expenses totaled ~~$11.1~~$12.3 million and ~~$9.2~~$10.2 million during the three months ended ~~November 30,~~May 31, 2021 and 2020, respectively, and ~~2019,~~$36.0 million and $29.4 million for the nine months ended May 31, 2021 and 2020, respectively. We expect research and development expenses to increase in absolute dollars for the foreseeable future.

Mix of professional services revenue. Our professional services teams ensure the successful configuration and integration of our solutions and provide continuous support to our customers. We recognize most of our professional services revenue during initial deployment and recognize additional revenue for services provided over the lifetime of a customer’s use of our software. Over time, a customer’s spend on professional services decreases as a percentage of their overall spend with us. In addition, although we plan on increasing our professional services headcount in the long-term, we expect to shift an increasing percentage of implementation work to our network of third-party SIs to better enable us to meet growing market demand. As a result, we expect our overall professional services revenue to increase in absolute dollars due to the growth in the number of our SaaS customers, but to decrease as a percentage of total revenue. During the three months ended ~~November 30,~~May 31, 2021 and 2020, ~~and 2019,~~ our professional services revenue was ~~$23.5~~$25.6 million and ~~$22.1~~$24.2 million, respectively. During the nine months ended May 31, 2021 and 2020, our professional services revenues was $71.6 million and $70.8 million, respectively.

COVID-19 expenses. In March 2020, we implemented various measures in response to the ongoing COVID-19 pandemic to ensure the safety of our employees. Over a two-day period, we shifted 100% of our employee base to work from home and suspended international and domestic travel. As a result, we have experienced a decrease in our sales and marketing expenses since the onset of the pandemic, primarily related to a decrease in travel costs. We expect this trend to continue at least in the near term, however such savings may be offset by increased costs when employees return to work and we implement measures to ensure their safety.

We generate our revenue from selling subscriptions to our SaaS solutions, licensing our term and perpetual software applications, providing maintenance and support services (primarily software updates, rights to unspecified software upgrades on a when-and-if-available basis and remote support services) to our term and perpetual license customers and providing professional services (primarily related to implementation services) to the extent requested by either our SaaS or term and perpetual license customers. We generally price our SaaS and licenses arrangements based on the amount of a customer’s DWP that will be managed by our software solutions and may include volume-based pricing for customers managing a higher amount of DWP with our solutions. Our SaaS and license contracts generally include provisions for additional fees when the amount of the customer’s DWP managed by our software solutions exceed agreed-upon caps within defined reporting periods, which are recognized on an as incurred basis. Software revenue is comprised of subscription revenue and revenue from licenses and maintenance and support services. Total revenue is comprised of software revenue plus revenue from our professional services.

Our subscription revenue is comprised of fees from customers accessing our Duck Creek OnDemand platform and other SaaS solutions. Revenue for a reporting period is generally recognized ratably in proportion to the total contractual DWP, beginning when the service has been made available to the customer. Our subscription revenue accounted for 79% and 72% of software revenue during the three months ended ~~November 30,~~May 31, 2021 and 2020, respectively, and ~~2019,~~78% and 72% during the nine months ended May 31, 2021 and 2020, respectively.

On an increasingly limited basis, we sell licenses for our solutions on either a renewable term basis or a perpetual basis. The total contractual consideration allocated to the license is recognized as revenue upon delivery of the software to a customer, assuming all other revenue recognition criteria are satisfied. Historically, our term license contracts had terms of three to six years. We began revising our contracting practices in fiscal 2018 by selling our term licenses with an initial two-year committed term and optional annual renewals, with the revenue allocated to the initial two-year license period recognized in full upon delivery of the license. As a result of our revenue mix shift to subscription, this change did not have, and is not expected to have a material impact on our results presented herein or going forward. There is potential volatility across quarters for our license revenue due to the timing of license sales

and renewals. Our license revenue accounted for 4%6% and 7% of software revenue during the both the three and nine months ended ~~November 30,~~May 31, 2021 and 2020, ~~and 2019.~~respectively.

In connection with our term and perpetual license arrangements, we offer maintenance and support under renewable, fee-based contracts that include unspecified software updates and upgrades released when and if available, software patches and fixes and email and phone support. Our maintenance and support fees are typically priced as a fixed percentage of the associated license fees. We recognize maintenance and support revenue from customers ratably over the committed term of the contract. Substantially all term and perpetual license customers purchase an agreement for maintenance and support. We expect to continue to generate a relatively consistent stream of revenue from the maintenance and support services we provide to our existing license customers. However, we expect revenue from maintenance and support services to decrease as a percentage of software revenue as we continue to deemphasize license sales in favor of our SaaS solutions. This decrease will be partially offset by a decrease in backlog revenue amortization, a contra-revenue purchase accounting adjustment. Our maintenance and support revenue accounted for ~~17%~~15% and ~~24%~~20% of software revenue during the three months ended May 31, 2021 and 2020, respectively, and ~~2019, respectively.~~16% and 22% during the nine months ended May 31, 2021 and2020.

We offer professional services, primarily related to implementation of our products, in connection with both our SaaS solutions and software license products. The vast majority of professional services engagements are billed to customers on a time and materials basis and revenue is generally recognized upon delivery of our services. We expect our professional services revenue to grow over time in absolute dollars due to customer growth and an increasing need for implementation services, but decrease as a percentage of total revenue. We believe the rate at which we sell our software will drive a greater need for implementation services that will support both an increase in our professional services revenue and an increase in demand for the services provided by our third-party SIs. Our professional services revenue generates lower gross margins than our software revenue and accounted for ~~40%~~38% and ~~47%~~45% of our total revenue the three months ended ~~November 30,~~May 31, 2021 and 2020, respectively. It accounted for 38% and ~~2019,~~46% of our total revenue during the nine months ended May 31, 2021 and 2020, respectively.

Our cost of revenue has fixed and variable components and depends on the type of revenue earned in each period. Cost of revenue includes amortization expense associated with acquired technology and other operating expenses directly related to the cost of products and services, including depreciation expense. We expect our cost of revenue to increase in absolute dollars as we continue to hire personnel, to provide hosting services, technical support and consulting services to our growing customer base.

Our cost of subscription revenue is primarily comprised of cloud infrastructure costs, royalty fees paid to third-parties, amortization of acquired technology intangible assets and personnel-related expenses for our SaaS operations teams, including salaries and other direct personnel-related costs.

Our cost of license revenue is primarily comprised of royalty fees paid to third-parties and amortization of acquired technology intangible assets.

Our cost of maintenance and support revenue is comprised of personnel-related expenses for our technical support team, including salaries and other direct personnel-related costs. While we expect the cost of maintenance and support revenue will increase in the near term, it may decrease in the future if we successfully transition our term and perpetual license customers to our SaaS solutions.

Our cost of professional services revenue is primarily comprised of personnel-related expenses for our professional service employees and contractors, including salaries and other direct personnel-related costs.

Gross margins have been and will continue to be affected by a variety of factors, including the average sales price of our products and services, DWP volume growth, the mix of revenue between SaaS solutions, software licenses, maintenance and support and professional services and changes in cloud infrastructure and personnel costs. We expect near term gross margin declines based on investments in additional personnel in both SaaS operations and professional services. Over time, we expect gross margins to increase as we onboard additional customers, achieve growth within existing customers and realize greater economies of scale.

Our research and development expenses consist primarily of costs incurred for personnel-related expenses for our technical staff, including salaries and other direct personnel-related costs. Additional expenses include consulting and professional fees for third-party development resources. We expect our research and development expenses to increase in absolute dollars for the foreseeable future as we continue to dedicate substantial resources to develop, improve and expand the functionality of our solutions. Costs incurred in the preliminary design and development stages of our SaaS projects are generally expensed as incurred in accordance with FASB ASC 350-40, Internal-Use Software. Once a SaaS project has reached the application development stage, certain internal, external, direct and indirect costs may be subject to capitalization. Generally, costs are capitalized until the technology is available for its intended use. Subsequent costs incurred for the development of future upgrades and enhancements, which are expected to result in additional functionality, follow the same protocol for capitalization.

Our sales and marketing expenses consist primarily of personnel related costs for our sales and marketing functions, including salaries and other direct personnel-related costs. Additional expenses include marketing program costs, including costs related to our annual Formation conference and amortization of acquired customer relationships intangible assets. While we expect our sales and marketing expenses to increase on an absolute dollar basis in the near term as we continue to increase investments to support our growth, we also anticipate that sales and marketing expenses will remain relatively consistent as a percentage of total revenue.

Our general and administrative expenses consist primarily of personnel-related costs for our executive, finance, human resources, information technology and legal functions, including salaries and other direct personnel-related costs. Additional expenses include professional fees, amortization of acquired trademarks, tradenames and domain name intangible assets, insurance and acquisition-related costs. While we expect other general and administrative expense to increase on an absolute dollar basis in the near term as we continue to increase investments to support our growth and as a result of our becoming a public company, we also anticipate that general and administrative expenses will decrease as a percentage of total revenue.

Certain of our acquisitions have included a component of contingent consideration to be paid to the sellers if certain performance levels are achieved by the acquired entity over a specific period of time. Contingent consideration is initially recorded at fair value on the acquisition date based, in part, on a range of estimated probabilities for achievement of these performance levels. The fair value is periodically adjusted as actual performance levels become known and updates are made to the estimated probabilities for future performance. A gain or loss is recognized in the income statement for fair value adjustments. As a result of additional acquisitions, it is possible that we will incur gains or losses in the future due to the change in the fair value of contingent consideration.

Other income (expense), net consists primarily of foreign exchange gains and losses resulting from fluctuations in foreign exchange rates on receivables and payables denominated in currencies other than the U.S. dollar.

Interest expense, net ~~comprise~~comprises interest expense accrued or paid on our indebtedness, net of interest income earned on our cash, ~~balances.~~cash equivalents, and investments. We expect interest income (expense) to vary each reporting period depending on the amount of outstanding indebtedness, ~~average~~ cash, cash equivalents, and investment balances, and prevailing interest rates.

We are subject to taxes in the United States as well as other tax jurisdictions or countries in which we conduct business. Earnings from our non-U.S. activities are subject to local country income tax and may be subject to current U.S. income tax. Due to cumulative losses, we maintain a valuation allowance against our deferred tax assets, except in certain foreign subsidiaries that generate income. We consider all available evidence, both positive and negative, in assessing the extent to which a valuation allowance should be applied against our deferred tax assets. Realization of our U.S. deferred tax assets depends upon future earnings, the timing and amount of which are uncertain.

Comparison of the Three Months Ended ~~November 30,~~May 31, 2021 and May 31, 2020 ~~and 2019~~

The following table sets forth our consolidated results of operations for the periods indicated, expressed in total dollar terms and as a percentage of total revenue:

	Three Months Ended November 30,										Three Months Ended May 31,
(dollars in thousands)	2020					2019					2021						2020
														Percent of Total Revenue						Percent of Total Revenue
Revenue
Subscription	$	27,909		47	%	$	17,537		38	%	$	33,552			49	%	$	21,555			40	%
License		1,350		2			1,045		2			2,474			4			2,160			4
Maintenance and support		6,190		11			5,926		13			6,329			9			6,064			11
Professional services		23,457		40			22,062		47			25,583			38			24,174			45
Total revenue		58,906		100			46,570		100			67,938			100			53,953			100
Cost of revenue
Subscription		10,084		17			7,277		16			12,045			18			8,721			16
License		388		1			326		1			535			1			506			1
Maintenance and support		842		1			878		2			855			1			710			1
Professional services		13,716		23			12,042		26			14,315			21			13,459			25
Total cost of revenue		25,030		42			20,523		44			27,750			41			23,396			43
Gross margins		33,876		58			26,047		56			40,188			59			30,557			57
Operating expenses
Research and development		11,104		19			9,219		20			12,255			18			10,197			19
Sales and marketing		12,597		21			10,571		23			13,628			20			11,723			21
General and administrative		14,418		25			9,985		21			15,238			22			10,184			19
Change in fair value of contingent consideration		3		—			44		—			(389	)		—			(190	)		—
Total operating expense		38,122		65			29,819		64			40,732			60			31,914			59
Loss from operations		(4,246	)	(7	)		(3,772	)	(8	)		(544	)		(1	)		(1,357	)		(2	)
Other (expense) income, net		(47	)	—			373		1
Other income (expense), net												546			1			(316	)		(1	)
Interest expense, net		(43	)	—			(281	)	(1	)		(6	)		—			(60	)		—
Loss before income taxes		(4,336	)	(7	)		(3,680	)	(8	)		(4	)		—			(1,732	)		(3	)
Provision for income taxes		315		—			334		1			353			1			267			1
Net loss	$	(4,651	)	(7	)%	$	(4,014	)	(9	)%	$	(357	)		(1	)%	$	(1,999	)		(4	)%

The following table sets forth share-based compensation expense included in our results of operations for the periods indicated:

Subscription revenue increased ~~$10.4~~$12.0 million, or ~~59%~~56%, during the three months ended ~~November 30, 2020~~May 31, 2021 versus the three months ended ~~November 30, 2019,~~May 31, 2020, due to a combination of sales to new customers and increased revenue generated from existing customers, which includes ~~the full quarter impact of prior quarter sales,~~ sales of new services ~~to existing customers~~ and contractual growth.

License revenue increased $0.3 million, or ~~29%~~15%, during the three months ended ~~November 30, 2020~~May 31, 2021 versus the three months ended ~~November 30, 2019~~May 31, 2020 primarily due to ~~a new~~the timing of multi-year term license ~~sale to an existing customer.~~renewals.

Maintenance and support revenue increased $0.3 million, or 4%, during the three months ended ~~November 30, 2020~~May 31, 2021 versus the three months ended ~~November 30, 2019~~May 31, 2020 primarily due to a $0.2 million decrease in backlog revenue amortization, a contra-revenue purchase accounting adjustment.

Professional services revenue increased $1.4 million, or 6%, during the three months ended ~~November 30, 2020~~May 31, 2021 versus the three months ended ~~November 30, 2019~~May 31, 2020 primarily due to ~~growth~~an increase of ~~our existing software customer base~~$8.8 million from the launch of several large implementation projects, partially offset by a decrease of $7.2 million from completed project implementations, and ~~new customer implementations.~~a $0.1 million decrease in travel and entertainment expenses.

Cost of revenue increased ~~$4.5~~$4.4 million, or ~~22%~~19%, in the three months ended ~~November 30, 2020~~May 31, 2021 compared to the three months ended ~~November 30, 2019.~~May 31, 2020.

Cost of subscription revenue increased ~~$2.8~~$3.3 million, or ~~39%~~38%, during the three months ended ~~November 30, 2020~~May 31, 2021 versus the three months ended ~~November 30, 2019~~May 31, 2020 primarily due to an increase in SaaS customers, and is comprised of a $1.3 million increase in hosting costs, a $0.8 million increase in payroll and related costs as we added employees to build out the SaaS operations team, a ~~$0.9~~$0.5 million increase in ~~hosting costs, and~~professional services, a ~~$0.5~~$0.4 million increase in amortization expense associated with capitalized internal-use software ~~costs.~~costs, and a $0.3 million increase in computer software.

Cost of license revenue increased ~~$0.1 million, or 19%~~6% in the three months ended ~~November 30, 2020~~May 31, 2021 versus the three months ended ~~November 30, 2019~~May 31, 2020 primarily due to an increase in royalties paid to third ~~parties resulting from the increase in license revenue.~~parties.

Cost of maintenance and support revenue ~~decreased $0.04~~increased $0.1 million, or ~~(4%)~~20%, in the three months ended ~~November 30 2020~~May 31, 2021 versus the three months ended ~~November 30, 2019~~May 31, 2020 primarily due to ~~a decrease~~an increase in personnel-related ~~costs required to support our term and perpetual license customers, and a decrease in travel and entertainment expenses.~~costs.

Cost of professional services revenue increased ~~$1.7~~$0.9 million, or ~~14%~~6%, in the three months ended ~~November 30, 2020~~May 31, 2021 versus the three months ended ~~November 30, 2019 primarily~~May 31, 2020. Payroll-related costs increased $1.2 million, driven by a product development project, partly staffed by professional services personnel, that generated $1.7 million of reimbursements from a third party during the three months ended November 30, 2019. This project was completed in December 2019. Share-basedincreased headcount, and share-based compensation expense increased ~~$0.6~~$0.2 million in the three months ended ~~November 30, 2020~~May 31, 2021 compared to the prior year ~~period, but this increase was~~period. These increases were offset by a ~~$0.7~~$0.3 million decrease in contingent labor, as well as a $0.2 million decrease in travel and entertainment expenses.

Gross margins increased ~~$7.8~~$9.6 million, or ~~30%~~32%, in the three months ended ~~November 30, 2020~~May 31, 2021 versus the three months ended ~~November 30, 2019,~~May 31, 2020, primarily due to a ~~$7.6~~$8.7 million increase in subscription gross margin, a $0.6 million increase in professional services gross margin, a $0.3 million increase in license gross margin, and a ~~$0.3~~$0.1 million increase in maintenance and support gross ~~margin, and a $0.2 million~~margin.. The increase in ~~license~~subscription gross ~~margin, partially offset~~margins was driven by ~~a $0.3 million decrease~~scale benefits from strong growth in ~~professional services gross margin.~~ subscription revenue, as well as cost growth below expected levels primarily based on the timing of new hires.

Our gross margin percentage increased from ~~56%~~57% for the three months ended ~~November 30, 2019~~May 31, 2020 to ~~58%~~59% for the three months ended ~~November 30, 2020~~ May 31, 2021 due to increases in subscription gross margin percentage, professional services gross margin percentage,license gross margin percentage and maintenance and support gross margin ~~percentage, partially offset by a decrease in~~ ~~professional services gross margin~~percentage.

Research and development expense increased ~~$1.9~~$2.1 million, or 20%, during the three months ended ~~November 30, 2020~~May 31, 2021 versus the three months ended ~~November 30, 2019,~~May 31, 2020, primarily due to a ~~$1.2~~$1.3 million increase in salaries and payroll-related costs from increased headcount and bonuses, a ~~$0.4 million increase in share-based compensation, a $0.3~~$0.8 million decrease in capitalized software costs, a $0.3 million increase in hosting costs, and a $0.2 million increase in ~~data center costs.~~share-based compensation. These increases were partially offset by a ~~$0.2~~$0.4 million ~~reduction~~decrease in ~~travel and entertainment expenses.~~contingent labor, as well as a $0.1 million decrease in professional fees.

Sales and marketing expense increased ~~$2.0~~$1.9 million, or ~~19%~~16%, during the three months ended ~~November 30, 2020~~May 31, 2021 versus the three months ended ~~November 30, 2019~~May 31, 2020, primarily due to a $~~1.3~~1.6 million increase in salaries and payroll-related costs from increased headcount and bonuses, a ~~$0.8~~$0.2 million increase in marketing programs, a $0.1 million increase in commission expense, and a $0.1 million increase in share-based compensation, ~~a $0.4 million increase in marketing programs, and a $0.2 million increase in commission expense,~~ partially offset by a ~~$0.6~~$0.1 million decrease in travel and entertainment expenses.

General and administrative expense increased ~~$4.4~~$5.1 million, or ~~44%~~50%, in the three months ended ~~November 30, 2020~~May 31, 2021 versus the three months ended ~~November 30, 2019~~May 31, 2020, primarily due to a $1.5 million increase in professional fees ~~relating~~related to ~~the follow-on offering,~~IT, audit, tax and legal. In addition, there was a $1.5 million increase in insurance expense as a result of becoming a public company, a ~~$0.7~~$0.9 million increase in salaries and payroll-related costs from increased headcount, a $0.6 million increase in share-based compensation, and a ~~$0.4~~$0.5 million increase in ~~legal and audit fees, and $0.6 million of increases across various expenses, including depreciation~~bad debt expense ~~partially offset by a $0.3 million reduction in~~ ~~travel and entertainment expenses.~~.

Change in fair value of contingent consideration ~~reflected minor expense values in both comparison periods and~~ is due to changes in estimated contingent consideration as well as present value calculations related to the contingent consideration estimates of the acquisition of Outline Systems LLC, a provider of P&C distribution channel management software and longstanding member of our partner ecosystem (now Duck Creek Distribution Management).

Other income (expense), net ~~decreased $0.4~~increased $0.9 million during the three months ended ~~November 30, 2020~~May 31, 2021 as compared to the three months ended ~~November 30, 2019,~~ May 31, 2020, primarily due to a $0.5 million gain on the derecognition of a lease liability resulting from a sublease transaction, as well as fluctuations in foreign exchange rates on receivables and payables denominated in currencies other than the U.S. dollar.Foreign currencies fluctuated more during the current period as compared to the prior year.

Interest expense, net decreased ~~$0.2 million~~slightly in the three months ended ~~November 30, 2020~~May 31, 2021 versus the three months ended ~~November 30, 2019 primarily due~~May 31, 2020. Interest expense consists of fees paid to maintain the revolving credit facility, though there were no outstanding ~~net revolver~~ borrowings ~~during the three months ended November 30, 2020.~~in either period. These expenses were partially offset by interest income received from cash, cash equivalents, and short-term investments.

Provision for income taxes ~~was relatively consistent~~increased 32% in the three months ended ~~November 30, 2020~~May 31, 2021 versus the three months ended ~~November 30, 2019.~~May 31, 2020 due to the impact of higher profits in foreign subsidiaries.

The following table sets forth our consolidated results of operations for the periods indicated, expressed in total dollar terms and as a percentage of total revenue:

	Nine Months Ended May 31,
(dollars in thousands)	2021						2020
				Percent of Total Revenue						Percent of Total Revenue
Revenue
Subscription	$	92,069			48	%	$	59,368			39	%
License		7,412			4			5,431			3
Maintenance and support		18,404			10			17,791			12
Professional services		71,611			38			70,760			46
Total revenue		189,496			100			153,350			100
Cost of revenue
Subscription		33,540			17			24,871			16
License		1,369			1			1,347			1
Maintenance and support		2,556			1			2,475			2
Professional services		42,857			23			38,839			25
Total cost of revenue		80,322			42			67,532			44
Gross margins		109,174			58			85,818			56
Operating expenses
Research and development		36,040			19			29,424			19
Sales and marketing		40,390			21			33,539			22
General and administrative		44,273			23			29,916			20
Change in fair value of contingent consideration		(291	)		—			21			—
Total operating expense		120,412			63			92,900			61
Loss from operations		(11,238	)		(5	)		(7,082	)		(5	)
Other income (expense), net		1,009			—			(96	)		—
Interest expense, net		(87	)		—			(386	)		—
Loss before income taxes		(10,316	)		(5	)		(7,564	)		(5	)
Provision for income taxes		1,056			(1	)		889			1
Net loss	$	(11,372	)		(6	)%	$	(8,453	)		(6	)%

The following table sets forth share-based compensation expense included in our results of operations for the periods indicated:

Subscription revenue increased $32.7 million, or 55%, during the nine months ended May 31, 2021 versus the nine months ended May 31, 2020, due to a combination of sales to new customers, increased revenue generated from existing customers, sales of new services to existing customers and contractual growth.

License revenue increased $2.0 million, or 36%, during the nine months ended May 31, 2021 versus the nine months ended May 31, 2020 primarily due to the timing of multi-year term license sales and renewals.

Maintenance and support revenue increased $0.6 million, or 3%, during the nine months ended May 31, 2021 versus the nine months ended May 31, 2020 primarily due to a $0.6 million decrease in backlog revenue amortization, a contra-revenue purchase accounting adjustment.

Professional services revenue increased $0.9 million, or 1% , during the nine months ended May 31, 2021 versus the nine months ended May 31, 2020 primarily due to the absence of reimbursable expenses in 2021 due to the halt of travel during the COVID-19 pandemic.

Cost of revenue increased $12.8 million, or 19%, in the nine months ended May 31, 2021 compared to the nine months ended May 31, 2020.

Cost of subscription revenue increased $8.7 million, or 35%, during the nine months ended May 31, 2021 versus the nine months ended May 31, 2020 primarily due to an increase in SaaS customers, and is comprised of a $2.8 million increase in payroll and related costs as we added employees to build out the SaaS operations team, a $2.6 million increase in hosting costs, a $1.3 million increase in amortization expense associated with capitalized internal-use software costs, a $1.1 million increase in professional services fees, a $0.6 million increase in computer software, and a $0.3 million increase in share-based compensation.

Cost of license revenue increased 2% in the nine months ended May 31, 2021 versus the nine months ended May 31, 2020 primarily due to an increase in royalties paid to third parties.

Cost of maintenance and support revenue increased 3%, in the nine months ended May 31, 2021 versus the nine months ended May 31, 2020 primarily due to an increase in personnel-related costs.

Cost of professional services revenue increased $4.0 million, or 10%, in the nine months ended May 31, 2021 versus the nine months ended May 31, 2020 primarily driven by a $4.7 million increase in payroll-related costs from increased headcount and bonuses, and a $1.8 million increase in share-based compensation. These increases were offset by a $1.4 million decrease in travel and entertainment expenses and a $1.0 million decrease in contingent labor.

Gross margins increased $23.4 million, or 27%, in the nine months ended May 31, 2021 versus the nine months ended May 31, 2020, primarily due to a $24.0 million increase in subscription gross margin, a $2.0 million increase in license gross margin, and a $0.5 million increase in maintenance and support gross margin, partially offset by a $3.2 million decrease in professional services gross margin. The increase in subscription gross margins was driven by scale benefits from strong growth in subscription revenue, as well as cost growth below expected levels primarily based on the timing of new hires.

Our gross margin percentage increased from 56% for the nine months ended May 31, 2020 to 58% for the nine months ended May 31, 2021 due to increases in subscription gross margin percentage, license gross margin percentage, and maintenance and support gross margin percentage, partially offset by a decrease in professional services gross margin percentage.

Research and development expense increased $6.6 million, or 22%, during the nine months ended May 31, 2021 versus the nine months ended May 31, 2020, primarily due to a $4.1 million increase in salaries and payroll-related costs from increased headcount and bonuses, a $1.6 million decrease in capitalized software costs, a $1.2 million increase in share-based compensation, and a $0.5 million increase in hosting costs. These increases were partially offset by a $0.3 million reduction in travel and entertainment expenses and a $0.1 million decrease in professional fees.

Sales and marketing expense increased $6.9 million, or 20%, during the nine months ended May 31, 2021 versus the nine months ended May 31, 2020 primarily due to a $5.2 million increase in salaries and payroll-related costs from increased headcount, a $2.2 million increase in share-based compensation, and a $0.9 million increase in marketing programs, partially offset by a $1.4 million decrease in travel and entertainment expenses.

General and administrative expense increased $14.4 million, or 48%, in the nine months ended May 31, 2021 versus the nine months ended May 31, 2020 primarily due to a $4.6 million increase in insurance expense as a result of becoming a public company, a $2.8 million increase in professional fees, a portion of which is related to becoming compliant with certain provisions of The Sarbanes-Oxley Act, a $2.5 million increase in salaries and payroll-related costs from increased headcount, a $2.2 million increase in share-based compensation, $1.5 million in legal and audit fees related to the follow-on offering of our common stock in the first quarter, and a $0.6 million increase in expense associated with the allowance for credit losses. These costs are partially offset by a $0.4 million reduction in travel and entertainment expenses.

Change in fair value of contingent consideration is due to changes in estimated contingent consideration as well as present value calculations related to the contingent consideration estimates of the acquisition of Outline Systems LLC, a provider of P&C distribution channel management software and longstanding member of our partner ecosystem (now Duck Creek Distribution Management).

Other income (expense), net increased $1.1 million during the nine months ended May 31, 2021 as compared to the nine months ended May 31, 2020, primarily due to a $0.5 million gain on the derecognition of a lease liability resulting from a sublease transaction as well as fluctuations in foreign exchange rates on receivables and payables denominated in currencies other than the U.S. dollar.Foreign currencies fluctuated more during the nine months ended May 31, 2021 as compared to the prior year.

Interest expense, net decreased $0.3 million in the nine months ended May 31, 2021 versus the nine months ended May 31, 2020 primarily due to no outstanding net revolver borrowings during the nine months ended May 31, 2021.

Provision for income taxes increased 19% in the nine months ended May 31, 2021 versus the nine months ended May 31, 2020 due to the impact of higher profits in foreign subsidiaries.

To date, we have financed our operations primarily through cash provided by operating activities, our revolving credit facility, and, most recently, through ~~a portion of the~~ net proceeds received from our IPO. As of ~~November 30, 2020,~~May 31, 2021, we had ~~$361.2~~$83.6 million in cash and cash equivalents, $288.0 million of short-term investments, no outstanding borrowings under our revolving credit facility and ~~$1.0~~$0.9 million of outstanding letters of credit. We also had ~~$29.0~~$29.1 million of additional principal availability under our revolving credit facility. We believe that our existing cash and cash equivalents and short-term investments, together with cash provided by operating activities and amounts available under our revolving credit facility, will be sufficient to meet our operating working capital and capital expenditure requirements over at least the next twelve months. Our future cash requirements will depend on many factors, including our rate of revenue growth, the expansion of our sales and marketing activities, the timing and extent of our spending to support our research and development efforts, investments in cloud infrastructure and operating costs, and expansion into other markets. At any given time, we may be evaluating one or more potential investments in, or acquisitions of, businesses or technologies, which could require us to seek

additional equity or debt financing. Additional sources of liquidity and capital resources, including equity or debt financing, may not be available on terms favorable to us or at all.

As of ~~November 30, 2020, $18.1~~May 31, 2021, $23.2 million of cash was held by our foreign subsidiaries. We currently do not anticipate a need to repatriate these funds to finance our U.S. operations and it is our intention to indefinitely reinvest these funds outside the United States.

Summary of Cash Flows for the ~~Three~~Nine Months Ended ~~November 30,~~May 31, 2021 and May 31, 2020 ~~and 2019~~

The following summarizes our cash flows from operating, investing and financing activities for the periods indicated:

We used ~~$22.2~~$16.2 million of cash from operating activities during the ~~three~~nine months ended ~~November 30, 2020,~~May 31, 2021, compared to cash ~~used in~~provided by operating activities of ~~$8.1~~$8.2 million during the ~~three~~nine months ended ~~November 30, 2019.~~May 31, 2020. This ~~$14.1~~$24.5 million decrease in operating cash was primarily due to an increase in annual employee bonus payments of $7.6 million and the ~~$6.7~~$9.1 million cash settlement of phantom equity awards ~~that vested as~~and a ~~result of our IPO.~~decrease in accrued hosting fees.

Non-cash charges in all periods include depreciation and amortization, share-based compensation expense, deferred taxes, and change in fair value of contingent earn-out liability.

Net cash used in investing activities consists of purchases of property and equipment, ~~and~~ capitalization of internal use software ~~costs.~~costs, and investments in short-term, government backed securities.

We used ~~$0.7~~$257.6 million of cash in investing activities during the ~~three~~nine months ended ~~November 30, 2020~~May 31, 2021 compared to ~~$2.5~~$5.6 million in the ~~three~~nine months ended ~~November 30, 2019.~~May 31, 2020. During the second quarter of 2021, we invested $287.9 million of the cash received in the IPO in short-term, government-backed securities. Of these investments, $32.0 million matured during the nine months ended May 31, 2021. Such investing and maturities did not occur in the prior year period. In the ~~first quarter of fiscal 2020,~~nine months ended May 31, 2021, we spent approximately ~~$1.3~~$0.8 million on ~~leasehold improvements for several~~purchases of ~~our office locations, both new~~property, plant and ~~existing. Such spending was not repeated in~~equipment, compared to $3.2 million during the ~~first quarter of 2021.~~nine months ended May 31, 2020. Additionally, our capitalized costs for internal use software were ~~$0.3~~$1.6 million less during the ~~three~~nine months ended ~~November 30, 2020~~May 31, 2021 compared to the prior year period.

We used ~~$5.8~~$0.4 million in financing activities during the ~~three~~nine months ended ~~November 30, 2020,~~May 31, 2021, compared to cash generated from financing activities of ~~$13.3~~$4.6 million during the ~~three~~nine months ended ~~November 30, 2019.~~May 31, 2020. Cash used in financing activities during the nine months ended May 31, 2021 primarily related to $3.7 million in payments ~~for~~of deferred IPO costs, a $1.9 million payment of contingent earnout liability and a $0.2 million payment for deferred Class E units offering costs. These payments were offset by net proceeds of $3.5 million from the February 2021 follow-on offering and $2.0 million received from stock option exercises.

Cash generated from financing activities during the ~~three~~nine months ended ~~November 30, 2019~~May 31, 2020 consisted of ~~$115.5~~$212.9 million of net proceeds from the issuance of Class E Units and borrowings under our revolving credit facility of $5.0 million partially offset by a ~~$58.8~~$118.8 million payment for the redemption of Class A Units and a ~~$39.2~~$79.2 million payment for the redemption of Class B Units, payments of principal on our revolving credit facility of ~~$5.0~~$9.0 million, payments of contingent earnout liabilities of ~~$3.2~~$3.5 million and costs of ~~$0.7~~$2.6 million relating to proceeding with our initial public offering.

We report our financial results in accordance with accounting principles generally accepted in the United States (“GAAP”); however, management believes evaluating the Company’s ongoing operating results may be enhanced if investors have additional non-GAAP financial measures. Specifically, management reviews Adjusted EBITDA, Free Cash Flow, Non-GAAP Gross Margin, Non-GAAP Income from Operations and Non-GAAP Net Income (Loss), each of which is a non-GAAP financial measure, to manage our business, make planning decisions, evaluate our performance and allocate resources and, for the reasons described below, considers them to be effective indicators, for both management and investors, of our financial performance over time.

We believe that Adjusted EBITDA, Free Cash Flow, Non-GAAP Gross Margin, Non-GAAP Income from Operations and Non-GAAP Net Income (Loss) help investors and analysts in comparing our results across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. These non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation from, or as a substitute for, the analysis of other GAAP financial measures, including net income and cash flows from operating activities. For example, with respect to Adjusted EBITDA, some of these limitations include:

These non-GAAP financial measures are not universally consistent calculations, limiting their usefulness as comparative measures. Other companies may calculate similarly titled financial measures differently than we do or may not calculate them at all. Additionally, these non-GAAP financial measures are not measurements of financial performance or liquidity under GAAP. In order to facilitate a clear understanding of our consolidated historical operating results, you should examine our non-GAAP financial measures in conjunction with our historical combined financial statements and notes thereto included elsewhere in this ~~prospectus.~~10-Q.

The non-GAAP financial measures and principal metrics we use in managing our business are set forth below:

Adjusted EBITDA. We define Adjusted EBITDA as net loss before interest expense, net; other income (expense), net; provision for income taxes; depreciation of property and equipment; amortization of intangible assets; share-based compensation expense; and the change in fair value of contingent consideration. We believe Adjusted EBITDA provides investors and other users of our financial information consistency and comparability with our past financial performance and facilitates period-to-period comparisons of operations. Adjusted EBITDA was ~~$3.6~~$5.5 million and ~~$1.4~~$3.8 million for the three months ended ~~November 30,~~May 31, 2021 and 2020, respectively and ~~2019,~~$12.1 million and $8.7 million for the nine months ended May 31, 2021 and 2020, respectively. A reconciliation of Adjusted EBITDA to net loss, the most directly comparable GAAP financial measure, is presented below for the periods indicated.

	Three Months Ended November 30,						Three Months Ended May 31,						Nine Months Ended May 31,
($ in thousands)	2020			2019			2021			2020			2021			2020
GAAP Net Loss	$	(4,651	)	$	(4,014	)	$	(357	)	$	(2,000	)	$	(11,372	)	$	(8,453	)
Provision for income taxes		315			334			353			267			1,056			889
Other (income) expense		47			(373	)		(546	)		316			(1,009	)		96
Interest expense, net		43			281			6			60			87			386
Depreciation of property and equipment		787			737			790			828			2,377			2,350
Amortization of intangible assets		3,994			3,994			3,994			3,994			11,982			11,982
Share-based compensation expense		3,092			436			1,697			480			9,305			1,404
Change in fair value of contingent earnout liability		3			44			(389	)		(190	)		(291	)		21
Adjusted EBITDA	$	3,630		$	1,439		$	5,548		$	3,755		$	12,135		$	8,675
Adjusted EBITDA as a percent of total revenue								8	%		7	%		6	%		6	%

Free Cash Flow. We define Free Cash Flow as net cash provided by operating activities, less purchases of property and equipment and capitalized internal use software. We consider Free Cash Flow to be an important measure in facilitating period-to-period comparisons of liquidity. We use Free Cash Flow in conjunction with traditional GAAP measures as part of our overall assessment of liquidity. Free Cash Flow was ~~($22.9)~~$6.6 million and ~~($10.6)~~$16.8 million for the three months ended ~~November 30,~~May 31, 2021 and May 31, 2020, respectively, and ~~2019,~~($18.0) million and $2.6 million for the nine months ended May 31, 2021 and 2020, respectively. A reconciliation of Free Cash Flow to net cash provided by operating activities, the most directly comparable GAAP financial measure, is presented below for the periods indicated.

Non-GAAP Gross Margin. We define Non-GAAP Gross Margin as GAAP gross margin before the portion of share-based compensation expense; amortization of intangible assets; and amortization of capitalized internal-use software that is included in cost of revenue. We believe Non-GAAP Gross Margin provides investors and other users of our financial information consistency and comparability with our past financial performance and facilitates period-to-period comparisons of gross margin. Non-GAAP Gross Margin was ~~$36.3~~$42.2 million and ~~$27.3~~$31.9 million for the three months ended ~~November 30,~~May 31, 2021 and 2020, respectively, and ~~2019,~~$116.6 million and $89.7 million for the nine months ended May 31, 2021 and 2020, respectively. A reconciliation of Non-GAAP Gross Margin to gross margin, the most directly comparable GAAP financial measure, is presented below for the periods indicated.

Non-GAAP Income from Operations. We define Non-GAAP Income from Operations as GAAP loss from operations before share-based compensation expense; amortization of intangible assets; and the change in fair value of contingent consideration. We believe Non-GAAP Income from Operations provides investors and other users of our financial information consistency and comparability with our past financial performance and facilitates period-to-period comparisons of operations. Non-GAAP Income from Operations was ~~$2.8~~$4.8 million and ~~$0.7~~$2.9 million for the three months ended ~~November 30,~~May 31, 2021 and 2020, respectively, and ~~2019, respectively.~~$9.8 million and $6.3 million for the nine months ended May 31, 2021 and 2020. A ~~reconciliations~~reconciliation of Non-GAAP Income from Operations to loss from operations, the most directly comparable GAAP financial measure, is presented below for the periods indicated.

Non-GAAP Net Income (Loss). We define Non-GAAP Net Income as GAAP net loss before share-based compensation expense; amortization of intangible assets; and change in fair value of contingent earnout liability. We believe Non-GAAP Net Income provides investors and other users of our financial information consistency and comparability with our past financial performance and facilitates period-to-period comparisons of operations. Non-GAAP Net Income was ~~$2.4~~$4.0 million and ~~$0.5~~$1.9 million for the three months ended ~~November 30,~~May 31, 2021 and 2020, respectively, and ~~2019,~~$8.1 million and $4.4 million for the nine months ended May 31, 2021 and 2020, respectively. A reconciliation of Non-GAAP Net Income to net loss, the most directly comparable GAAP financial measure, is presented below for the periods indicated.

	Three Months Ended November 30,						Three Months Ended May 31,									Nine Months Ended May 31,
($ in thousands)	2020			2019			2021			Per Share			2020			2021			Per Share			2020
GAAP Net Loss(1)	$	(4,651	)	$	(4,014	)	$	(357	)	$	—	��	$	(1,999	)	$	(11,372	)	$	(0.08	)	$	(8,453	)
Add: GAAP tax provision								353						267			1,056						889
GAAP pre-tax loss								(4	)					(1,732	)		(10,316	)					(7,564	)
Share-based compensation expense		3,092			436			1,697						480			9,305						1,404
Amortization of intangible assets		3,994			3,994			3,994						3,994			11,982						11,982
Change in fair value of contingent earnout liability		3			44			(389	)					(190	)		(291	)					21
Tax effect of adjustments (1)		—			—
Non-GAAP Net Income	$	2,438		$	460
Non-GAAP pre-tax income								5,298						2,552			10,680						5,843
Non-GAAP tax provision applied at a 24% tax rate ⁽²⁾								1,272						612			2,563						1,402
Non-GAAP Net Income ⁽¹⁾							$	4,026		$	0.03		$	1,940		$	8,117		$	0.06		$	4,441

Non-GAAP Net Income per Share (Basic) (2)	$	0.02

Shares used in computing Non-GAAP Net Income per Share (Basic) (2)		130,788,359		nm
Shares used in computing Non-GAAP income per share amounts:⁽¹⁾
GAAP weighted-average shares - basic and diluted								131,613,003									130,992,672
Non-GAAP dilutive shares excluded from GAAP income (loss) per share calculation								3,575,928									3,575,928
Non-GAAP weighted-average shares - diluted								135,188,931									134,568,600

SaaS Net Dollar Retention Rate. We calculate SaaS Net Dollar Retention Rate by annualizing SaaS revenue recorded in the last month of the measurement period for those revenue-generating customers in place throughout the entire measurement period (the latest twelve-month period). We divide the result by annualized SaaS revenue from the month that is immediately prior to the beginning of the measurement period, for all revenue-generating customers in place at the beginning of the measurement period. Our SaaS Net Dollar Retention Rate was ~~118%~~133.1% and ~~113% for the three months ended November 30,~~113.0% as of May 31, 2021 and 2020, ~~and 2019,~~ respectively. Our calculation excludes one existing contract for a service no longer offered on a standalone basis by the Company. We believe SaaS Net Dollar Retention Rate is an important metric for the Company because, in addition to providing a measure of retention, it indicates our ability to grow revenue within existing customer accounts. SaaS Net Dollar Retention Rate is included in a set of metrics that we calculate quarterly to review with management as well as periodically with members of our board of directors.

SaaS Annual Recurring Revenue (“SaaS ARR”). We calculate SaaS ARR by annualizing the recurring subscription revenue recognized in the last month of the measurement period (the latest twelve-month period). Our SaaS ARR was ~~$103.9~~$124.1 million and ~~$60.4~~$75.8 million ~~for the three months ended November 30,~~as of May 31, 2021 and 2020, ~~and 2019,~~ respectively. Our calculation excludes one existing contract for a service no longer offered on a standalone basis by the Company. We believe SaaS ARR provides important information about our ability to acquire new subscription SaaS customers and to maintain and expand our relationship with existing subscription SaaS customers. SaaS ARR is included in a set of metrics that we calculate quarterly to review with management as well as periodically with members of our board of directors.

~~Non-GAAP Subscription Gross Margin.~~ We define Non-GAAP Subscription Gross Margin as GAAP subscription gross margin before the portion of amortization of intangible assets, amortization of capitalized internal-use software and share-based compensation expense that is included in subscription gross margin. We believe Non-GAAP Subscription Gross Margin provides investors and other users of our financial information consistency and comparability with our past financial performance and facilitates period-to-period comparisons of subscription gross margin. Non-GAAP Subscription Gross Margin was $19.3 million and $11.1 million for the three months ended November 30, 2020 and 2019, respectively. A reconciliation of Non-GAAP Subscription Gross Margin to subscription gross margin, the most directly comparable GAAP financial measure, is presented below for the periods indicated.

~~Non-GAAP Professional Services Gross Margin.~~ We define Non-GAAP Professional Services Gross Margin as GAAP professional services gross margin before the portion of share-based compensation expense that is included in professional services gross margin. We believe Non-GAAP Professional Services Gross Margin provides investors and other users of our financial information consistency and comparability with our past financial performance and facilitates period-to-period comparisons of professional services gross margin. Non-GAAP Professional Services Gross Margin was $10.4 million and $10.0 million for the three months ended November 30, 2020 and 2019, respectively. A reconciliation of Non-GAAP Professional Services Gross Margin to professional services gross margin, the most directly comparable GAAP financial measure, is presented below for the periods indicated.

~~Non-GAAP Sales and Marketing Expense.~~ We define Non-GAAP Sales and Marketing Expense as GAAP sales and marketing expense before the portion of amortization of intangible assets and share-based compensation expense that is included in sales and marketing expense. We believe Non-GAAP Sales and Marketing Expense provides investors and other users of our financial information consistency and comparability with our past financial performance and facilitates period-to-period comparisons of sales and marketing expense. Non-GAAP Sales and Marketing Expense was $9.1 million and $7.9 million for the three months ended November 30, 2020 and 2019, respectively. A reconciliation of Non-GAAP Sales and Marketing Expense to sales and marketing expense, the most directly comparable GAAP financial measure, is presented below for the periods indicated.

~~Non-GAAP Research and Development Expense.~~ We define Non-GAAP Research and Development Expense as GAAP research and development expense before the portion of share-based compensation expense that is included in research and development expense. We believe Non-GAAP Research and Development Expense provides investors and other users of our financial information consistency and comparability with our past financial performance and facilitates period-to-period comparisons of research and development expense. Non-GAAP Research and Development Expense was $10.6 million and $9.1 million for the three months ended November 30, 2020 and 2019, respectively. A reconciliation of Non-GAAP Research and Development Expense to research and development expense, the most directly comparable GAAP financial measure, is presented below for the periods indicated.

~~Non-GAAP General and Administrative Expense.~~ We define Non-GAAP General and Administrative Expense as GAAP general and administrative expense before the portion of amortization of intangible assets and share-based compensation expense that is included in general and administrative expense. We believe Non-GAAP General and Administrative Expense provides investors and other users of our financial information consistency and comparability with our past financial performance and facilitates period-to-period comparisons of general and administrative expense. Non-GAAP General and Administrative Expense was $13.2 million and $9.5 million for the three months ended November 30, 2020 and 2019, respectively. A reconciliation of Non-GAAP General and Administrative Expense to general and administrative expense, the most directly comparable GAAP financial measure, is presented below for the periods indicated.

On October 4, 2016, we entered into a credit agreement with a group of lenders for a revolving credit facility with a maximum borrowing capacity of $30.0 million that was originally scheduled to mature on October 4, 2019. On October 2, 2019, we amended certain of the financial covenants and extended our credit agreement for two years to a maturity date of October 2, 2021. Our revolving credit facility is guaranteed by the Company and certain of its domestic subsidiaries and secured by substantially all of our tangible and intangible assets. Interest accrues on our revolving credit facility at a variable rate based upon the type of borrowing made by us. Loans under our revolving credit facility bear interest at a rate of LIBOR plus an applicable margin, or incur interest at the higher of: (i) the Prime Rate, (2) the Fed Funds Rate plus 0.5%, or (3) LIBOR plus 1.0%, plus an applicable margin. The applicable margin ranges from 2.0% to 3.0% depending on the interest rate basis and type of borrowing elected (eurocurrency rate loan, base rate loan, swing rate loan or letter of credit). For the ~~three~~nine months ended ~~November 30, 2020,~~May 31, 2021, the effective interest rate under our revolving credit agreement was 6.9%. In addition to interest on our revolving credit facility, we pay a commitment fee of 0.5% per annum on the unused portion of our revolving credit facility, as well as customary letter of credit fees. Repayment of any amounts borrowed are not required until maturity of our revolving credit facility, however we may repay any amounts borrowed at any time, without premium or penalty.

The credit agreement contains a number of customary restrictive covenants, including limits on additional indebtedness, the creation of liens and limits on making certain investments. Limits on our revolving credit facility also require compliance with the following ratios: maintaining a minimum level of consolidated EBITDA (ranging from $5.0 million to $12.0 million depending on the applicable four quarter period), and maintaining a leverage ratio that does not exceed 3.25:1.00. We were in compliance with these financial and nonfinancial covenants as of ~~November 30, 2020.~~May 31, 2021.

We incurred $0.3 million of costs directly related to obtaining our revolving credit facility which have been recorded as deferred financing fees and are amortized to interest expense on a straight-line basis over the term of our revolving credit facility. During fiscal 2017, we executed an irrevocable standby letter of credit totaling $0.8 million against our revolving credit facility in lieu of a cash security deposit for one of our office leases. Two additional irrevocable standby letters of credit were executed during fiscal 2019 for $0.2 million and $0.1 million, respectively, against our revolving credit facility in lieu of cash deposits for two of our office leases. In fiscal 2020, the $0.2 million letter of credit was reduced by $0.1 million. Apart from the letters of credit, we did not have any borrowings outstanding on our revolving credit facility as of ~~November 30, 2020,~~May 31, 2021 and ~~had $4.0 million outstanding as of November 30, 2019.~~May 31, 2020.

We did not have any off-balance sheet arrangements, as defined in Regulation S-K, Item 303(a)(4)(ii) promulgated by the SEC under the Securities Act, in the ~~three~~nine months ended ~~November 30,~~May 31, 2021 and 2020, ~~and 2019,~~ respectively.

The process of preparing our financial statements in conformity with U.S. GAAP requires the use of estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses. These estimates and judgments are based on historical experience, future expectations and other factors and assumptions we believe to be reasonable under the circumstances. The most significant estimates and judgments are reviewed on an ongoing basis and are revised when necessary. Actual amounts may differ from these estimates and judgments. A summary of our significant accounting policies is contained in Note 2 of our unaudited consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. There have been no material changes in our critical accounting policies from those disclosed in our Annual Report on Form 10-K for the year ended August 31, 2020 filed with the SEC on November 3, 2020.

A summary of recent accounting pronouncements and our assessment of any expected impact of these pronouncements if known is included in Note 2 of our unaudited consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

In April 2012, the JOBS Act was enacted. Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this extended transition period.

We are in the process of evaluating the benefits of relying on other exemptions and reduced reporting requirements under the JOBS Act. Subject to certain conditions, as an emerging growth company, we intend to rely on certain of these exemptions, including without limitation, not having to (1) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act or (2) comply with any requirement that may be adopted by PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements, known as the auditor discussion and analysis. We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year in which we have more than $1.07 billion in annual revenue; (2) the date we qualify as a “large accelerated filer,” which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of the most recently completed second fiscal quarter; (3) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt securities; and (4) the last day of the fiscal year ending after the fifth anniversary of the IPO.

We are exposed to market risks in the ordinary course of our business, including interest rate and foreign currency exchange risks.

As of ~~November 30, 2020,~~May 31, 2021, our cash ~~balance did not include any~~and cash equivalents orbalance included one U.S. Treasury bill and no restricted cash, and we had no outstanding indebtedness under our revolving credit facility.

To date, we have not been exposed, nor do we anticipate being exposed, to material risks due to changes in interest rates. A hypothetical 10% change in interest rates during any of the periods presented would not have had a material impact on our consolidated financial statements.

Our reporting currency is the U.S. dollar, and the functional currency of each of our subsidiaries is the U.S. dollar. Gains or losses due to transactions in foreign currencies are included in “Other Income (Expense)” in our consolidated statements of operations. We have not engaged in the hedging of foreign currency transactions to date, although we may choose to do so in the future. We do not believe that a 10% increase or decrease in the relative value of the U.S. dollar to other currencies would have a material effect on operating results.

Our market risks, and the way we manage them, are summarized in Part II, Item 7A, "Quantitative and Qualitative Disclosures About Market Risk" of our Annual Report on Form 10-K for the fiscal year ended August 31, 2020 (filed November 3, 2020). There have been no material changes to our market risks or to our management of such risks as of ~~November 30, 2020.~~May 31, 2021.

Our management, with the participation of our CEO and CFO, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our CEO and CFO have concluded that as of ~~November 30, 2020,~~May 31, 2021, our disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

There was no change in our internal control over financial reporting (as defined in Rules 13a-15(d) and 15d-15(d) under the Exchange Act) during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

In the ordinary course of conducting our business, we have in the past and may in the future become involved in various legal actions and other claims. We may also become involved in other judicial, regulatory and arbitration proceedings concerning matters arising in connection with the conduct of our businesses. Some of these matters may involve claims of substantial amounts. These legal proceedings may be subject to many uncertainties and there can be no assurance of the outcome of any individual proceedings. ~~We do~~Although the outcomes of legal proceedings are inherently difficult to predict, we are not ~~presently anticipate~~currently involved in any material legal proceedings that, if determined adversely to us, would have a material adverse effect on our financial position, results of operations or cash flows.

Our business involves significant ~~risks, some of which are set forth below.~~risks. You should carefully consider the risks described in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended August 31, 2020, as updated ~~and supplemented below together with other information set forth~~ in ~~this~~the Quarterly Report on Form 10-Q for the quarter ended May 31, 2021, and in our other public filings. If any of ~~the following~~these risks or uncertainties actually occur, our business, financial condition, prospects, results of operations and cash flow could be materially and adversely affected. In that case, the market price of our common stock could decline. ~~The~~These risks ~~discussed below~~ are not the only risks we face. Additional risks or uncertainties not currently known to us, or that we currently deem immaterial, may also have a material adverse effect on our business, financial condition, prospects, results of operations or cash flows, as well as the market price of our securities. We cannot assure you that any of the events discussed in the risk factors ~~below~~ will not occur.

~~Public health outbreaks, epidemics or pandemics, including the global COVID-19 outbreak, could harm our business, results of operations, and financial condition.~~

Public health outbreaks, epidemics or pandemics, could materially and adversely impact our business. For example, in March 2020, the World Health Organization declared the COVID-19 virus outbreak a global pandemic, and numerous countries, including the United States, have declared national emergencies with respect to COVID-19. The outbreak and certain intensified preventative or protective public health measures undertaken by governments, businesses and individuals to contain the spread of COVID-19, including orders to shelter-in-place and restrictions on travel and permitted business operations, have, and continue to, result in global business disruptions that adversely affect workforces, organizations, economies, and financial markets globally, leading to an economic downturn and increased market volatility. The ongoing outbreak has disrupted, and will continue to disrupt, the normal operations of many businesses, including our customers, as well as the ability of our technical support teams and sales force to travel to existing customers and new business prospects, and the operations of our customers and SI partners. We have also limited our in-person marketing activities and expect this will continue for the foreseeable future. For example, we converted our 2020 user conference, Formation, into an online forum called Formation. While our business has not, to date, experienced a material disruption in bookings or sales from the COVID-19 pandemic, a continued or intensifying outbreak over the short- or medium-term could result in delays in services delivery, delays in implementations, delays in critical development and commercialization activities, including delays in the introduction of new products and services and further international expansion, interruptions in sales and marketing activity, furloughs of employees and disruptions of supply chains. Additionally, we may incur increased costs in the future when employees return to work and we implement measures to ensure their safety.

The related impact on the global economy could also decrease technology spending by our existing and prospective customers and adversely affect their demand for our solutions. Further, our sales and implementation cycles could increase, resulting in providing contract terms more favorable to customers and a potentially longer delay between incurring operating expenses and the generation of corresponding revenue or in difficulty in accurately predicting our financial forecasts. Additionally, the economic downturn and rising unemployment rates resulting from COVID-19 have the potential to significantly reduce individual and business disposable income and depress consumer confidence, which could limit the ability or willingness of some consumers to obtain and pay for insurance products in both the short- and medium-term, which may negatively impact the ability of our customers to pay for our services or require such customers to request amended payment terms for their outstanding invoices. Furthermore, we are unable to predict the impact that COVID-19 may have going forward on the business, results of operations or financial position of any of our major customers, which could impact each customer to varying degrees and at different times and could ultimately impact our own financial performance. Certain of our competitors may also be better equipped to weather the impact of COVID-19 both domestically and abroad and better able to address changes in customer demand.

The outbreak also presents operational challenges as our workforce is currently working remotely and assisting customers who are also generally working remotely. We have also suspended international and domestic travel. We depend on key officers and a small number of employees; should any of them become ill and unable to work, it could impact our productivity and business continuity. Although we continue to monitor the situation and may adjust our current policies as more information and public health guidance become available, it is not possible for us to predict the duration or magnitude of these business disruptions and the adverse results of the outbreak, which ultimately will depend on many factors, including the speed and effectiveness of containment efforts throughout the world. These disruptions could negatively affect our operations or internal controls over financial reporting and may require us to implement new processes, procedures and controls to respond to further changes in our business environment.

Additionally, COVID-19 could increase the magnitude of many of the other risks described herein and have other adverse effects on our operations that we are not currently able to predict. For example, we have, and may continue to delay or limit our internal strategies in the short- and medium-term by, for example, redirecting significant resources and management attention away from implementing our strategic priorities or executing opportunistic corporate development transactions (including our international expansion). We are also currently in contract renewal discussions with certain of the cloud providers that we rely on to provide our products and services. We cannot assure you of the final terms of any such discussions, including the length of any renewed commitment, especially in light of the uncertainties of COVID-19. In some cases, we may agree to a longer commitment than the contract being renewed for reasons such as improving the terms we obtain.

The magnitude of the effect of COVID-19 on our business will depend, in part, on the length and severity of the restrictions and other limitations on our ability to conduct our business in the ordinary course. The longer the pandemic continues or resurges, the more severe the impacts described above may be on our business. The extent, length and consequences of the pandemic on our business, including our customers’ purchasing decisions and other reactions, are uncertain and impossible to predict, but could be material. Any reopenings followed by subsequent restrictions or closings could also have a material impact on us. COVID-19 and other similar outbreaks, epidemics or pandemics could have a material adverse effect on our business, financial condition, results of operations, cash flows and prospects and could cause significant volatility in the trading prices of our common stock as a result of any of the risks described above and other risks that we are not able to predict.

To the extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in the section entitled “Risk Factors” in our Annual Report, which is incorporated by reference in this quarterly report on Form 10-Q, such as those relating to our liquidity.

Although we are not a controlled company within the meaning of the Nasdaq, during the phase-in period we may continue to rely on exemptions from certain corporate governance requirements that provide protection to stockholders of other companies.

Upon the completion of a secondary offering on November 13, 2020 by Apax and Accenture, we ceased to be a controlled company under the Nasdaq listing requirements. Under the Nasdaq listing requirements, a company that ceases to be a controlled company must comply with the independent board committee requirements as they relate to the nominating and corporate governance and compensation committees on the following phase-in schedule: (1) one independent committee member at the time it ceases to be a controlled company, (2) a majority of independent committee members within 90 days of the date it ceases to be a controlled company and (3) all independent committee members within one year of the date it ceases to be a controlled company. Additionally, the Nasdaq listing requirements provide a 12-month phase-in period from the date a company ceases to be a controlled company to comply with the majority independent board requirement.

Since ceasing to be a controlled company, a director nominated by Accenture resigned. We intend to appoint additional directors to our board of directors and committees and/or appoint current directors who are then deemed independent to additional committees within the time periods required by the Nasdaq listing requirements. Two directors nominated by Apax and one director nominated by Accenture remain on our board of directors.

During these phase-in periods, our stockholders will not have the same protections afforded to stockholders of companies of which the majority of directors are independent and, if, within the phase-in periods, we are not able to recruit additional directors who would qualify as independent, or otherwise comply with the Nasdaq listing requirements, we may be subject to enforcement actions by Nasdaq. In addition, a change in our board of directors and committee membership may result in a change in corporate strategy and operating philosophies, and may result in deviations from our current growth strategy.

Pursuant to the Stockholders’ Agreement, Apax and Accenture have significant influence through the voting power of the shares of our common stock eligible to vote in the election of our directors and on other matters submitted to a vote of our stockholders, and Apex’s and Accenture’s interests may conflict with ours or yours in the future.

Pursuant to the Stockholders’ Agreement, dated as of August 14, 2020, we are required to take all necessary action to cause our board of directors to include individuals designated by Apax and Accenture, with the number of directors so designated being subject to certain ownership thresholds. Apax and Accenture, individually, are required to vote all of their shares, and take all other necessary actions, to cause our board of directors to include the individuals designated as directors by Apax and Accenture (as applicable). For so long as Apax and Accenture continue to own a significant percentage of our common stock, Apax and Accenture, through their collective voting power and certain protective provisions, are able to significantly influence the composition of our board of directors and the approval of actions requiring stockholder approval. For example, each of Apax and Accenture have certain consent rights so long as such stockholder owns at least 5% of the outstanding equity securities of the Company that are not shares of our common stock awarded under the Company’s 2020 Omnibus Incentive Plan or other incentive equity plan. Accordingly, for such period of time, Apax and Accenture have significant influence with respect to our management, business plans, and policies, including the appointment and removal of our officers. In particular, Apax and Accenture are able to cause or prevent a change of control of us or a change in composition of our board of directors and could preclude any unsolicited acquisition of us. The concentration of voting power could deprive you of an opportunity to receive a premium for your shares of common stock as part of the sale of us and ultimately might affect the market price of our common stock.

If the ownership of our common stock continues to be highly concentrated, it may prevent you and other minority stockholders from influencing significant corporate decisions and may result in conflicts of interest.

Apax owns approximately 28.9% of our common stock and Accenture owns approximately 19.2% of our common stock. As a result, Apax and Accenture exercise significant influence over all matters requiring a stockholder vote, including: the election of directors; mergers, consolidations and acquisitions; the sale of all or substantially all of our assets and other decisions affecting our capital structure; the amendment of our amended and restated certificate of incorporation and our amended and restated bylaws; and our winding up and dissolution. This concentration of ownership may delay, deter or prevent acts that would be favored by our other stockholders. The interests of Apax and Accenture may not always coincide with our interests or the interests of our other stockholders. This concentration of ownership may also have the effect of delaying, preventing or deterring a change in control of us. Also, Apax and Accenture may seek to cause us to take courses of action that, in its judgment, could enhance its investment in us, but which might involve risks to our other stockholders or adversely affect us or our other stockholders. As a result, the market price of our common stock could decline or stockholders might not receive a premium over the then-current market price of our common stock upon a change in control. In addition, this concentration of share ownership may adversely affect the trading price of our common stock because investors may perceive disadvantages in owning shares in a company with significant stockholders.

~~The market price and trading volume of our common stock may be volatile, which could result in rapid and substantial losses for our stockholders.~~

The market price of our common stock may be highly volatile and could be subject to wide fluctuations. In addition, the trading volume in our common stock may fluctuate and cause significant price variations to occur. If the market price of our common stock declines significantly, you may be unable to resell your shares at or above your purchase price, if at all. The market price of our common stock may fluctuate or decline significantly in the future. Some of the factors that could negatively affect our share price or result in fluctuations in the price or trading volume of our common stock include:

• the timing of our customers’ buying decisions and reductions in our customers’ budgets for IT purchases and delays in their purchasing cycles, particularly in light of recent adverse global economic conditions;

• ~~changes in our earnings estimates (if provided) or differences between our actual financial and operating results and those expected by investors and analysts;~~

• ~~the contents of published research reports about us or our industry or the failure of securities analysts to cover our common stock;~~

• our ability to attract new customers, particularly larger customers, in both domestic and international markets and our ability to increase sales to and renew agreements with our existing customers, particularly larger customers, at comparable prices;

• ~~announcements and public filings by us or others and developments affecting us;~~

• ~~speculation or reports by the press or investment community with respect to us or our industry in general;~~

• ~~increases in market interest rates that may lead purchasers of our shares to demand a higher yield;~~

• ~~announcements by us or our competitors of significant contracts, acquisitions, dispositions, strategic relationships, joint ventures or capital commitments;~~

• ~~sales of substantial amounts of our common stock by Apax or other significant stockholders or our insiders (including the shares sold hereby), or the expectation that such sales might occur;~~

• volatility or economic downturns in the markets in which we, our customers and our SI partners are located caused by pandemics, including the COVID-19 pandemic, and related policies and restrictions undertaken to contain the spread of such pandemics or potential pandemics;

• ~~operating and stock performance of other companies that investors deem comparable to us (and changes in their market valuations) and overall performance of the equity markets;~~

• general market, political and economic conditions, in the insurance industry in particular, including any such conditions and local conditions in the markets in which any of our customers are located; and

• ~~the loss of our “controlled company” exemptions under Nasdaq listing standards and applicable phase-in periods with respect thereto.~~

These broad market and industry factors may decrease the market price of our common stock, regardless of our actual operating performance. The stock market in general has from time to time experienced extreme price and volume fluctuations, including in recent months. In addition, in the past, following periods of volatility in the overall market and the market price of a company’s securities, securities class action litigation has often been instituted against these companies. This litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources.

~~We are an “emerging growth company,” and the reduced disclosure requirements applicable to emerging growth companies may make our common stock less attractive to investors.~~

We are an “emerging growth company,” as defined in the JOBS Act and may remain an emerging growth company for up to four more years. For so long as we remain an emerging growth company, we are permitted and currently rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not emerging growth companies. These exemptions include not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board (“PCAOB”) regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements, reduced disclosure obligations regarding executive compensation, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. As a result, the information we provide stockholders is different than the information that is available with respect to other public companies. We cannot predict whether investors find our common stock less attractive because we rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock, and our stock price may be more volatile.

In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards, and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Delaware	84-3723837
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
Duck Creek Technologies, Inc. 22 Boston Wharf Road, Floor 10 Boston, MA	02210
(Address of principal executive offices)	(Zip Code)

		Page
PART I.	FINANCIAL INFORMATION	1
Item 1.	Financial Statements (Unaudited)	1
	Consolidated Balance Sheets	1
	Consolidated Statements of Operations	2
	Consolidated Statements of Other Comprehensive Loss	3
	Consolidated Statements of Stockholders’ Equity/Redeemable Partners’ Interest and Partners’ Capital	34
	Consolidated Statements of Cash Flows	56
	Notes to Unaudited Consolidated Financial Statements	67
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1820
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32
~~Item 4.~~	~~Controls and Procedures~~	33
~~PART II.~~	~~OTHER INFORMATION~~	34
~~Item 1.~~	~~Legal Proceedings~~	34
~~Item 1A.~~	~~Risk Factors~~	34
~~Item 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds~~	37
~~Item 3.~~	~~Defaults Upon Senior Securities~~	37
Item 4.	Controls and Procedures	37
PART II.	OTHER INFORMATION	38
Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	38
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38
Item 3.	Defaults Upon Senior Securities	38
Item 4.	Mine Safety Disclosures	3738
Item 5.	Other Information	3738
Item 6.	Exhibits	3839
Signatures		3940

	May 31, 2021
	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
Money market funds - presented in cash and cash equivalents	$	64,103	$	—	$	—	$	64,103
U.S. Government agency securities - presented in short-term investments		255,949		79		—		256,028
Total	$	320,052	$	79	$	—	$	320,131

	August 31, 2020
	Level 1		Level 2		Level 3		Total
Liabilities:
Liability classified awards	$	7,821	$	—	$	879	$	8,700
Contingent earnout liability		—		—		7,092		7,092
Total liabilities	$	7,821	$	—	$	7,971	$	15,792

Balance as of August 31, 2020	$	879	$	879
Additions due to new awards		—		—
Net change in the fair value		122		283
Cash settlement of awards		—		—
Balance as of November 30, 2020	$	1,001
Balance as of May 31, 2021			$	1,162

	Total limited partners' interest
	Units			Amount			General partner interest		Total redeemable partners' interest			Total partners' capital
Balance, at August 31, 2019		470,210,869		$	389,066			—	$	389,066			—
Class A units redeemed		(20,292,029	)		(58,800	)		—		(58,800	)		—
Class B units redeemed		(13,528,013	)		(39,200	)		—		(39,200	)		—
Class D units and Phantom Units granted		-			—			—		—			—
Class D and Phantom Units forfeited		(622,031	)		—			—		—			—
Class E units issued		41,412,296			115,454			—		115,454			—
Equity-based compensation		-			436			—		436			—
Net loss		-			(4,014	)		—		(4,014	)		—
Balance, at November 30, 2019		477,181,092		$	402,942			—	$	402,942			—

	Outline Systems, LLC			Outline Systems, LLC
Balance at August 31, 2020	$	7,092		$	7,092
Change in fair value, including accretion		3			(291	)
Payments to sellers		(1,923	)		(1,923	)
Balance at November 30, 2020	$	5,172
Balance at May 31, 2021				$	4,878

	November 30, 2020								May 31, 2021
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Money market funds - presented in cash and cash equivalents									$	64,103	$	—	$	—	$	64,103
U.S. Government agency securities - presented in short term investments										—		256,028		—		256,028
Total assets									$	64,103	$	256,028	$	—	$	320,131
Liabilities:
Liability classified awards	$	1,825	$	—	$	1,001	$	2,826	$	1,104	$	—	$	1,162	$	2,266
Contingent earnout liability		—		—		5,172		5,172		—		—		4,878		4,878
Total liabilities	$	1,825	$	—	$	6,173	$	7,998	$	1,104	$	—	$	6,040	$	7,144

	November 30,			August 31			May 31,			August 31
	2020			2020			2021			2020
Leasehold improvements	$	11,050		$	11,216		$	11,166		$	11,216
Internal-use software		7,840			7,304			8,169			7,304
Computer equipment		4,406			4,310			5,066			4,310
Furniture and fixtures		2,300			2,181			2,312			2,181
Office equipment		490			478			499			478
Assets under construction		111			—			111			—
Total property and equipment	$	26,197		$	25,489		$	27,323		$	25,489
Less accumulated depreciation and amortization		(8,645	)		(7,376	)		(11,315	)		(7,376	)
Property and equipment, net	$	17,552		$	18,113		$	16,008		$	18,113

	November 30, 2020							May 31, 2021
	Gross carrying amount		Accumulated amortization		Net carrying amount		Weighted average remaining life	Gross carrying amount		Accumulated amortization		Net carrying amount		Weighted average remaining life
Customer relationships	$	103,600		44,105	$	59,495	6.2 years	$	103,600		49,244	$	54,356	5.6 years
Acquired technology		32,235		19,971		12,264	2.7 years		32,235		22,344		9,891	2.1 years
Trademarks and tradenames		9,400		4,073		5,327	5.7 years		9,400		4,543		4,857	5.1 years
Domain name		100		43		57	5.7 years		100		48		52	5.1 years
Backlog		6,700		6,244		456	1.7 years		6,700		6,431		269	1.1 years
	$	152,035	$	74,436	$	77,599		$	152,035	$	82,610	$	69,425

Fiscal year:
2021	$	12,240	$	4,066
2022		15,793		15,793
2023		15,225		15,225
2024		11,453		11,453
2025 and thereafter		22,888		22,888
Total	$	77,599	$	69,425

	Three Months Ended November 30, 2020			Three Months Ended May 31, 2021			Nine Months Ended May 31, 2021
Numerator
Net loss	$	(4,651	)	$	(357	)	$	(11,372	)
Denominator
Weighted average shares of common stock - basic and diluted		130,788,359			131,613,003			130,992,672
Net loss per share - basic and diluted	$	(0.04	)	$	0.00		$	(0.08	)

Allowance, August 31, 2020	$	(355	)	$	(355	)
Net changes to credit losses		(14	)		(664	)
Write-offs, net		—			7
Allowance, November 30, 2020	$	(369	)
Allowance, May 31, 2021				$	(1,012	)

Exhibit Number		Description

31.1*		Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*		Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*		Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2*		Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

	Company Name

Date: ~~January 13.~~July 15, 2021	By:	/s/ Michael A. Jackowski
		Michael A. Jackowski
		Chief Executive Officer

Date: ~~January 13.~~July 15, 2021	By:	/s/ Vincent A. Chippari
		Vincent A. Chippari
		Chief Financial Officer

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company