DocuSign Focuses on Diversifying Portfolio

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Recently eSignature player DocuSign (Nasdaq: DOCU) announced its third quarter results that surpassed market expectations. The company is looking to expand its use cases and diversify its product category to drive growth in the coming quarters.

DocuSign’s Financials

Revenues for the third quarter grew 18% to $645.5 million, ahead of the market’s estimates of $626.1 million. Billing grew 17% to $659.4 million. Adjusted net income was $0.57 per share, compared with the market’s expectations of $0.41 per share.

By segment, Subscription revenues grew 18% to $624.1 million. Professional services and other revenue grew 27% to $21.4 million.

It added 10,000 direct customers, bringing its total direct customer base to 202,000. Large customers with annual spend of over $300,000 increased by 60 to 1,052.

For the fourth quarter, DocuSign forecast revenues of $637-$641 million, compared with the Street’s forecast of revenues of $639.6 million and an EPS of $0.470. DocuSign expects to end the year with revenues of $2.493-$2.497 billion. The market forecasts revenues of $2.48 billion and an EPS of $1.64.

DocuSign’s Growth Focus

DocuSign realizes that while it is a leader in the digital signature market, there are still many areas of growth where it needs to focus. In the past, it did not fully address the changing market dynamics nor mature its operations and systems sufficiently. It is now committed to broadening the category by building a more clearly defined product road map that leverages its core e-signature strength and its focus on delivering easier, smarter, trusted agreements.

It sees opportunities beyond the replacement of paper signatures to deliver new experiences and integrate more deeply with partner applications. For instance, it believes that data capture for agreements should happen through digital forms on the web or in an app. The agreements themselves could be dynamically generated and the metadata automatically captured to enable personalization for future interactions. With its new web forms offering, which is currently in early beta, it is enabling its customers to transition from a PDF-centric experience to guided web-native experiences. DocuSign is looking at key areas to drive growth with expanded use cases to accelerate adoption and renewal expansion.

It is also continuing to innovate on the contract lifecycle management (CLM) front. Recently, it was named the leader in the Gartner 2022 Magic Quadrant for CLM for the third consecutive year. Its customers continue to adapt its CLM capabilities to enhance their workflows. For example, in the recently reported quarter, it expanded its relationship with one of the largest ride-sharing organizations. DocuSign’s team identified key areas of expansion using the signature and CLM product to support their evolving business needs. The expanded e-signature footprint has been integrated with its CLM offering to offer a more streamlined internal process offering. Over the next few quarters, it plans to expand the deployment to help manage workflows throughout the agreement lifecycle.

It is also working on simplifying its pricing and packaging strategy. It recently began rolling out new product bundles to enable customers to more easily access useful and differentiated productivity features. This represents an opportunity to expand customer value and distribution reach through its network of ISVs, resellers, system integrators, and developers.

Its stock is trading at $54.07 with a market capitalization of $10.9 billion. It had fallen to a 52-week low of $39.57 in October. It had climbed to a 52-week high of $159.73 in December last year.

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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