Earnings Results: DocuSign beats on earnings amid remote-work boom but stock falls in late trading

Earnings Results: DocuSign beats on earnings amid remote-work boom but stock falls in late trading

3 Sep    Finance News

DocuSign Inc. easily topped expectations with its latest quarterly results as it continued to experience a boost from remote-work trends, but shares of the e-signature company fell in the extended session after a considerable run-up in recent weeks.

Shares of the company, which enables businesses and individuals to sign documents electronically, were up slightly in after-hours trading Thursday ahead of DocuSign’s earnings call but fell about 8% following the call. The stock sank 8.7% in the regular session in a weak day for tech stocks, particularly software stocks that had experienced big recent rallies.

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DocuSign DOCU, -8.73% gave a better-than-anticipated outlook for the current quarter and the full fiscal year, and Chief Executive Dan Springer told MarketWatch after the earnings call that while some technology companies benefitting from work-from-home trends may see diminished use cases once people can return to face-to-face encounters, DocuSign’s service will remain more effective than physical alternatives.

“With our situation, I really don’t see a regression to people saying ‘I want paper, I want manual processes,’” he said.

Still, there’s been some concern in the tech-investing world about whether work-from-home names would be able to maintain their momentum through the balance of the year, and RBC Capital Markets analyst Alex Zukin raised that point on DocuSign’s earnings call, describing the company’s first-half billings growth as “nothing short of extraordinary” but commenting that its “guidance for the second half does look like a pretty different kind of growth trajectory.”

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DocuSign’s billings increased 60% in the first half of the fiscal year, and the midpoint of its outlook calls for about 40% growth in the second half of the year.

“We feel very good about the second half,” Chief Financial Officer Michael Sheridan said in response to Zukin’s question, calling the outlook “reasonably balanced and positive.”

DocuSign has been focused on expanding beyond e-signatures into other areas of contract-management, and Springer told MarketWatch that the influx of digital contracts being signed during the COVID-19 period could prompt more businesses to experiment with the company’s analytical tools around contracts since they’ll have a repository of digitized documents from this period.

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The company also offers broader serves around contract-management focused on digitizing paper documents and conducting analysis based on those as well. Springer said that some businesses had started using that service for focused projects before paying up for an expanded version of the service. He gave the examples of banks holding old Libor contracts that need to figure out how many of their contracts were denominated that way, before the U.K. gets rid of Libor as a benchmark rate.

“The old model was a bunch of paralegals searching through documents,” he said, but DocuSign has worked with some banks that used the company’s analysis tools for this specific task before eventually exploring other ways of using the analytics.

Springer also discussed opportunities in remote-notary services, following its acquisition of LiveOak in July. “We love e-signatures, but when a notary is required after, saving on the signature time isn’t that great,” he said. The company is working to build out video-based notary solutions, first for first-party notary work, such as when banks have their own licensed representatives who need to notarize paperwork for some account openings, and ultimately for third-party notary work, so that independent notaries can fulfill their duties remotely.

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Twenty-plus states allow remote notary services today, according to Springer, who projects that 45 states could be on board by early next year.

DocuSign’s revenue for its fiscal second quarter climbed to $342.2 million from $235.6 million and came in above the FactSet consensus of $319 million. After adjusting for stock-based compensation and some other expenses, DocuSign earned an adjusted 17 cents a share, up from 1 cent a share a year prior. Analysts tracked by FactSet were modeling 8 cents a share in adjusted EPS.

The company’s billings for the quarter were $405.7 million, up from $252.4 million a year prior. The FactSet consensus called for $339.6 million.

For the current period, DocuSign expects revenue of $358 million to $362 million and billings of $380 million to $390 million, whereas analysts were expecting $335 million and $361.7 million, respectively.

Looking at the full fiscal year that ends in January, DocuSign models total revenue of $1.384 billion to $1.388 billion and billings of $1.623 billion to $1.643 billion. Analysts were looking for $1.317 billion in revenue and $1.529 billion in billings.

DocuSign’s stock has been a big winner amid the pandemic as the crisis has driven a greater need for digital services. Its shares have rallied 227% so far this year as the S&P 500 SPX, -3.51% has gained 7%.

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