Earnings preview: Billings in focus as DocuSign prepares for Q2 report

Though DocuSign (NASDAQ: DOCU) entered 2019 on a positive note after last year’s relatively weak performance, the stock is yet to shrug off the volatility. After showing signs of a turnaround in the first quarter, with positive results, the company will be releasing the second-quarter numbers on September 5 after the closing bell.

DocuSign, which provides cloud-based e-signature service, is currently in the process of expanding beyond its core solutions to become a multi-product business.

For the July quarter, market watchers predict a 32% growth in revenues to $220.93 million, while earnings are forecast to edge up to $0.04 per share from last year’s $0.03 per share. The estimate is broadly in line with the management’s expectations.

Pros & Cons

The company’s go-to-market initiatives and efforts to retain the customer base are expected to contribute to revenue this time. Meanwhile, bottom-line growth will be restricted by higher SG&A expenses, which will include $10 million of expenses related to a patent infringement lawsuit.

Also see: What to expect in American Eagle’s Q2 report

With new players like Adobe entering the digital signature space, DocuSign is busy consolidating its market with new solutions. For the company, maintaining stable billing growth is pivotal to its overall financial health. If the weakness seen at the beginning of the year persists in the second quarter, it will give a wrong signal to the market and ultimately affect the stock’s performance.

Agreement Cloud

The recent launch of DocuSign Agreement Cloud, designed to make the agreement process more convenient, was an important step towards retaining market share in the long term. It will strengthen the portfolio of the company, whose eSignature solutions rule the market in the key regions.

Looking Back

In the April-quarter, the bottom-line performance improved on the back of a 37% growth in revenues to $214 million. Adjusted earnings per share moved up to $0.07 from $0.01 a year earlier. However, the weaker-than-expected billings growth disappointed the market.

Related: DocuSign Q1 2020 Earnings Conference Call Transcript

During the last trading session of August, DocuSign’s stock hovered near the levels seen at the beginning of the year. Since hitting a record high a year ago, the shares lost about 26%.

Listen to publicly listed companies’ earnings conference calls along with the edited closed caption text