Categories Analysis, Technology

After impressive Q1 results, DocuSign (DOCU) sees a mixed year ahead

The company expects headwinds like muted customer buying patterns, amid macro uncertainties, to impact its expansion rates going forward

DocuSign, Inc. (NASDAQ: DOCU) had a good start to the year and reported positive first-quarter results, in a sign that the e-signature provider is getting back on track after a slowdown. The company recently embarked on a restructuring and rightsizing drive as the pandemic-induced demand boom continued to cool off and economic uncertainties weighed on the business.

The San Francisco-headquartered tech firm’s stock rallied this week when it reported strong first-quarter results and provided positive guidance. After making steady gains in recent weeks and rising above their 52-week average, the company’s shares closed the last session at $58.48. They have been languishing at a multi-year low for more than a year, after retreating from the 2021 perak and entering a downward spiral.

Investing in DOCU

A few years ago, DOCU soared after the COIVD-related movement restrictions accelerated the adoption of electronic signature services. But the stock has disappointed long-term shareholders since then as it pulled back and struggled to regain the lost momentum. In the absence of definite cues on a near-term recovery, the stock remains a slightly risky investment option right now.

From DocuSign’s Q1 2024 earnings conference call:

“We continue to see headwinds impacting our expansion rates, coupled with muted customer buying patterns in a tough macro environment as budgets remain under scrutiny and customers optimize existing spend. Looking ahead, we expect the Q2 dollar net retention rate to continue to experience downward pressure. From a vertical perspective, we saw pockets of relative strength within insurance and business services, highlighting the importance of our diverse customer base and durability of our model, while we continue to see headwinds across financial services and real estate.”

DocuSign Q1 2024 earnings infographicDocuSign Q1 2024 earnings infographic

Over the years, DocuSign has significantly expanded its market share outside the US and has a presence in 180 countries now. International revenues grew around 17% in the most recent quarter. The company had over 1 billion users as of April 30, which includes 1.4 million paying users.

Updates

The company recently strengthened its executive team with new hires, including the appointment of Blake Grayson as the chief financial officer. Blake comes to DocuSign from The Trade Desk. Its new product offerings include WebForms, which is an interactive solution enabling organizations to capture data and generate dynamic agreements for signature, and EHR Interoperability that allows integration between DocuSign eSignature and certified electronic health records in the US market.

DocuSign’s earnings exceeded Wall Street’s projections for six straight quarters. At $0.72 per share, first-quarter adjusted earnings were up 89% year-over-year. On a reported basis, the bottom line returned to the positive territory from last year’s losses. The improvement reflects a 12% growth in revenues to $661.4 million – both Subscription and Professional Services & Other revenues grew in double digits. Revenues also topped expectations. Total billing came in at $674.8 million, up 10%.

Outlook

For the second quarter of 2024, the management expects revenues to be in the range of $675 million to $679 million and billings between $646 million and $656 million. For fiscal 2024, revenue is expected to be in the $2.713-2.725 billion range. The forecast for full-year billings is between $2.737 billion and $2.757 billion.

DOCU started Friday’s trading sharply higher, after closing the last session up 2.2%. It has gained 19% in the past 30 days.

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