DocuSign Banks On Agreement Cloud

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Recently, eSignature player DocuSign (Nasdaq: DOCU) announced its second quarter results that surpassed market expectations. Analysts have been concerned that as businesses begin to open up, companies like DocuSign will see their growth slow down. But DocuSign’s results appear to be proving otherwise.

DocuSign’s Financials

Revenues for the second quarter grew 50% to $511.8 million, ahead of the market’s estimates of $487.99 million. Billings grew 47% to $595.4 million. Non GAAP net income was $0.47 per share, compared with the market’s expectations of $0.40 per share.

By segment, Subscription revenues grew 52.25% to $492.8 million. Professional services and other revenue grew 2.8% to $19.1 million.

Total billings of $595.4 million was ahead of the market’s consensus of $557.2 million.

For the quarter, DocuSign forecast revenues of $526-$532 million, compared with the Street’s forecast of $487.5 million with an EPS of $0.40. DocuSign expects to end the year with revenues of $2.078-$2.088 billion, ahead of the market’s forecast of $2.05 billion with an EPS of $1.67.

DocuSign’s Agreement Cloud Growth

Many had forecast that DocuSign’s growth will begin to slow down after the pandemic. However, its recent reports suggest otherwise. Billings did decelerate but still maintain a healthy clip. First quarter billings growth rate was 54% vs the recent quarter’s billing growth of 45%. Full year billings guidance was increased by $19 million, and the company is now looking for a 40% growth this year, compared with 56% this year.

To continue to drive the growth, DocuSign has been looking beyond the traditional e-signature market. Last year, it focused on the growth of its contract lifestyle management (CLM) service offered through its “Agreement Cloud”. Agreement Cloud is helping prepare contracts and take their documents through the entire process. Its eSign product continues to deliver the biggest share of its revenues, but the company has made investments across the cost structure to support the Agreement Cloud. Although the numbers are still small, analysts noted that the segment is starting to add to the reported NRR numbers. Its?net dollar retention rate was 125%, up from 112% a couple years ago.?Looking ahead, as the company continues to build out its Agreement Cloud, this rate will become even more important.

Its stock is trading at $281.64 with a market capitalization of $55.4 billion. It hit a 52-week low of $179.49 in May and a 52-week high of $314.76 in August.

Disclosure:?All investors should make their own assessments based on their own research, informed interpretations, and risk appetite. This article expresses my own opinions based on my own research of product-market fit, channel execution, and other factors. My primary interest is in product strategy. While this may have bearing on stock movements, my writings tend to focus on long-term implications. The information presented is illustrative and educational, but should not be regarded as a complete analysis nor recommendation to buy or sell the securities mentioned herein. I am not a registered investment adviser and I am not receiving compensation for this article. I am an investor in this company.

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