DocuSign shares soar after earnings expectations are thwarted

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    Specialist in digital documentation and electronic signature DocuSign (NASDAQ: DOCU) announced its fiscal first quarter results Thursday evening, and the results slightly exceeded Wall Street’s expectations. Billing growth was strong and the company was also optimistic.

    On Friday at 12 p.m. EDT, the stock rose 15%.

    A blowout neighborhood

    Total revenue for the fiscal first quarter increased 58% to $ 469.1 million, of which $ 451.9 million was from subscription income. The consensus estimate had called for sales of just $ 437.7 million. According to DocuSign, bills rose 54% to $ 527.4 million. All of this resulted in adjusted earnings per share of $ 0.44, which exceeded the adjusted earnings of $ 0.28 per share that analysts modeled.

    DocuSign posted free cash flow of $ 123 million for the quarter and ended the period with $ 875.8 million on balance sheet. The company now has 988,000 total customers, including 136,000 corporate and commercial customers. The number of customers with an annual contract value (ACV) greater than $ 300,000 is now 673. DocuSign continues to build relationships, reporting a net dollar retention rate of 125%. This metric measures the spending of existing customers.

    The international growth was also impressive: international sales rose by 84%. Overseas sales reached a new milestone, exceeding sales of over $ 100 million in the first quarter, CEO Dan Springer noted in the conference call with analysts. This geographic segment now accounts for 21% of total sales.

    On the product side, DocuSign introduced DocuSign Notary, a remote notarization service, during the quarter. It’s early days for this offering, but Springer said the initial uptake was encouraging, especially for large financial institutions that use their own notaries. DocuSign is currently focusing on first-time notaries, but plans to approach third-party notaries later (where a transaction requires notarial certification, but neither party has their own).

    What’s next

    In terms of guidance, DocuSign projects total revenue of $ 479 million to $ 485 million for the second fiscal quarter, well above the consensus estimate of $ 474.7 million in revenue. Subscription revenue is projected to be $ 459 to $ 465 million of total revenue, and billing should be in the range of $ 549 to $ 561 million. The company expects an adjusted operating margin of 16% to 18%.

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

    Some investors have feared that DocuSign’s growth will slow after the COVID-19 pandemic ends, as the company benefits from companies adapting to the crisis while trying to maintain productivity. Springer said these fears are exaggerated as DocuSign’s outlook remains good as the company uses a capacity-based model and customers are not going back to paper-based processes when they appreciate the benefits of digital transformation.

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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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