October 5, 2022

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DocuSign’s stock plunges on weak revenue guidance

3 min read

Shares of DocuSign Inc. fell quite dramatically in extended trading today even after its fourth-quarter earnings met estimates and revenue beat expectations.

What shook investors was its guidance for the next quarter and fiscal year, which came in well below what analysts were looking for, raising fears that its COVID-19-related growth is fading.

The company reported earnings before certain costs such as stock compensation of 48 cents on revenue of $ 580.8 million, up 35% from a year ago. Wall Street had also been looking for a profit of 48 cents per share, on a lower revenue of $ 562 million.

DocuSign’s net loss for the period came to $ 30.5 million. Subscription revenue in the quarter rose 37%, to $ 564 million. Meanwhile, its billings, the amount it has invoiced for that is due shortly, rose 25%, to $ 670.1 million.

For fiscal 2022, DocuSign reported revenue of $ 2.1 billion, up 45% from a year ago.

The company’s stock had already fallen 4% in the regular trading session, only to lose more than 16% in the after-hours session that followed its guidance.

DocuSign Chief Executive Dan Springer (pictured) highlighted the company’s strong fiscal revenue growth and its billings growth of 37%, adding that it generated record operating and cash flow margins too.

“While the year unfolded differently than expected, we are proud of the ongoing performance and resilience of our team as we scaled to become a multi-billion dollar company,” Springer said. “Together, we helped another 280,000 new customers begin digitizing how they agree as we surpassed 1.17 million total customers overall.”

DocuSign sells tools that enable businesses and individuals to sign documents electronically without meeting anyone face-to-face. It also sells software that automates the filing of contracts over the internet.

DocuSign’s tools certainly spent their worth during the height of the COVID-19 pandemic in 2020 and 2021, when the company enjoyed massive revenue and customer growth. However, it seems that demand for its products and services is now in decline as many businesses resume in-person meetings.

Springer insisted that digital transformation remains a high priority for organizations across the world and that companies will not return to using paper-based contracts. But the company’s guidance suggests that in reality, digital transformation isn’t proceeding quite as fast as some of its investors had hoped.

For the current quarter, DocuSign expects revenue of between $ 579 million and $ 583 million, well below Wall Street’s forecast of $ 596 million. For the full year, DocuSign said it sees revenue of $ 2.47 billion to $ 2,482 billion, some way off the consensus estimate of $ 2.6 billion in sales.

Analyst Holger Mueller of Constellation Research Inc. told SiliconANGLE that DocuSign’s record quarter and full year has helped it deliver well over $ 2 billion in annual revenue. He also praised the company for reducing its losses to around a quarter of its 2021 level.

“It looks like the cost management tried to cover all regular expenses – sales and marketing, R&D and G&A – so the loss comes from other costs such as interest, debt and income expense,” Mueller said. “Looking forward we will see if DocuSign’s growth was all about the pandemic, or because economies are standardizing on a high rate of digitization. Springer seems to be on the former side, as he has lowered expectations on growth for the new year. ”

Photo: DocuSign / Facebook

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