DocuSign Q2 earnings miss estimates but raise FY20 revenue forecast

DocuSign (NASDAQ: DOCU) reported a wider loss in the second quarter of fiscal 2020 due to higher costs and expenses. The bottom line missed analysts’ expectations while the top line exceeded consensus estimates. However, the e-signature technology company guided third-quarter revenue above the Street’s view and raised its full-year revenue forecast.

Net loss was $68.63 million or $0.39 per share compared to a loss of $36.71 million or $0.22 per share in the previous year quarter. Adjusted earnings plunged by 67% to $0.01 per share. Total revenues surged by 41% to $235.6 million.

Subscription revenue jumped by 39% and professional services and other revenue soared by 72%. Billings climbed by 47% to $252.4 million. The results reflected its clear position in e-signature and increasing adoption of its broader Agreement Cloud offering.

For the third quarter, the company expects total revenues in the range of $237 million to $241 million and billings in the range of $260 million to $270 million. Adjusted gross margin is predicted to be in the range of 78% to 80%.

For fiscal 2020, the company lifted its revenue outlook to the range of $947 million to $951 million from the prior range of $917 million to $922 million, and its billings forecast to the range of $1.063 billion to $1.083 billion from the previous range of $1.01 billion to $1.03 billion. Adjusted gross margin is now projected to be 78% to 80% for the full year.

In the second quarter, the company added 29,000 new customers onto the platform, bringing its total to 537,000 worldwide. DocuSign is highly focused on continuing to acquire new customers to support its long-term growth after investing heavily in sales and marketing efforts.

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The company is expected to increase its market penetration, business growth, and potential future business opportunities. This is based on its ability to grow the number of customers on its software suite, particularly the number of enterprise and commercial customers.

DocuSign has incurred net losses since inception and its accumulated deficit reached $1.04 billion as of July 31, 2019. In order to become profitable, the company is expected to generate and sustain increased revenue levels in the future. DocuSign is not likely to increase its revenue enough to offset higher operating expenses as the company’s efforts to grow business is costlier than expected.

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