DocuSign Stock Skyrockets After Trouncing Earnings Expectations

Digital documentation and electronic signature specialist DocuSign (NASDAQ: DOCU) reported fiscal first quarter earnings on Thursday evening, and the results easily trounced Wall Street’s expectations. Billings growth was strong and the company also offered an optimistic forecast.

As of 12 p.m. EDT Friday, the stock was up by 15%.

A blowout quarter

Total revenue in the fiscal first quarter increased 58% to $469.1 million, of which $451.9 million was subscription revenue. The consensus estimate had called for sales of just $437.7 million. DocuSign said that billings jumped 54% to $527.4 million. That all resulted in adjusted earnings per share of $0.44, crushing the $0.28 per share in adjusted profits for which analysts were modeling.

DocuSign generated $123 million in free cash flow during the quarter and ended the period with $875.8 million in cash on its balance sheet. The company now has 988,000 total customers, including 136,000 enterprise and commercial customers. The number of customers that represent over $300,000 in annual contract value (ACV) now stands at 673. DocuSign continues to expand its relationships, reporting a net dollar retention rate of 125%. That metric measures spending from existing customers.

International growth was also impressive, with international revenue surging by 84%. Sales from abroad hit a new milestone, topping $100 million in revenue in the fiscal first quarter, CEO Dan Springer noted on the conference call with analysts. That geographic segment now accounts for 21% of total revenue.

On the product front, DocuSign introduced DocuSign Notary, a remote notarization service, during the quarter. It’s still early for that offering, but Springer said that the initial reception has been encouraging, particularly for large financial institutions that use their own first-party notaries. DocuSign is currently focusing on first-party notaries but plans to address third-party notaries (where a transaction must be notarized but neither party has their own) later.

What comes next

In terms of guidance, DocuSign is forecasting total revenue of $479 million to $485 million in the fiscal second quarter, comfortably ahead of the consensus estimate of $474.7 million in sales. Subscription revenue is expected to be $459 million to $465 million of total sales, and billings should be in the range of $549 million to $561 million. The company expects to report an adjusted operating margin of 16% to 18%.

Looking further out, DocuSign’s outlook for the full fiscal year 2022 calls for revenue in the range of $2.03 billion to $2.04 billion, while Wall Street is only looking for $1.99 billion. 

Some investors have worried that DocuSign’s growth will decelerate once the COVID-19 pandemic is over, as the company benefited from companies adapting to the crisis while trying to maintain productivity. Springer suggested that these fears are overblown, as DocuSign’s prospects remain strong since the company utilizes a capacity-based model and customers aren’t going back to paper-based processes once they appreciate the benefits of digital transformations.

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Evan Niu, CFA owns shares of DocuSign. The Motley Fool owns shares of and recommends DocuSign. Millennial Money is part of The Motley Fool network. Millennial Money has a disclosure policy.

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