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No. of Recommendations: 107

Look at all this acceleration - of top line (39% to 45% to now 53% over past 3Qs), as well as billings growth, enterprise customer growth.

It's a network effect company. People use their e-sig for something, get hooked and implement it at their business. That has driven the huge wave of re-acelleration during the pandemic. Then Docusign can upsell from there into Agreement Cloud (CLM), and now into AI and the coming Notary features. Int'l is also very untapped, and they promoted their CFO to lead that effort.

Slide deck:
CC transcript:

First Q from new CFO... back in Sept, CFO was promoted to President of International, board member added as new CFO (former CFO of Pivotal)

Revenue 383M +53% ^^, +800bps seq !!
- Int'l 76M +77% (20% of rev)
- Sub Rev 367M +54%
Billings 440M +63% ^^, +200bps seq !!
Adj Gross Margin 79% flat
- Adj Sub GM 84% flat
Adj Op Inc 49M +188%
... margin 13% (vs 7%), +300bps seq !!
Opex 253M +40%
CFFO 57M (was -2M)
... margin 15% (vs -1%)
FCF 38M (was -14M)
... margin 10% (vs -6%)
Custs 822K +46% ^^, +700bps seq !!
- Enterprise Custs 113K +64% ^^, +900bps seq !!
-- Custs >300K 542 +35%
Empl 5364 +44%
$NER 122%
Cash 676M

* huge strength in int'l
* have tripled customer adds vs last yr
* acquisitions are for CLM platform features, not revenue [reminds me of Coupa's stance]
* new product DocuSign Analyzer, to analyze language in new contracts to highlight risks and suggest changes -- powered by DocuSign Insights (AI engine over contract language) from Seal Software acq
* beta coming Q4 of DocuSign Notary, from LiveOak Tech acq
* 350 ISV integrations, added Slack and Facebook Workplace
* increased interest from SIs integrating DocuSign directly into business processes in Salesforce, Oracle, SAP and Workday

- e-sig is the gateway to CLM and other features (Notary, AI), all the growth re-acceleration in pandemic is from e-sig
- beyond e-sig continually to expand (int'l!), CEO sees next wave of growth from:
* AI
* Notary
* CLM (Agreement Cloud)

Strong customer growth drives the next wave [e-signature is the gateway to CLM]:

CFO: "We saw broad-based demand across the customer base, whether it was in new customers or in the expansions and upsells. And so I think, as Dan said, when you think about the TAM and the market penetration, we’re really just scratching the surface. And the kind of new customer growth that we’re seeing really creates the foundation for kind of future expansions in upsell kind of across the platform, which we’re pretty excited about. That being said, I do want to point out Q3 was exceptionally strong, and we did see early renewals and expansions and timing of deals that made some of the metrics in Q3 particularly strong on a relative basis year-on-year, and so just something to consider kind of as you look to the future."

AI capabilities are just beginning:

CEO: "I think the way we have traditionally thought about the first phase of AI was things like the Analyzer product I described earlier which said this now gives our legal and business teams the ability to very quickly and efficiently understand where there are sort of outlier clauses and things they should pay particular attention to. But I actually think the more exciting part about AI is where you’re going with your question, which is once we have do a CLM that’s enhanced with our AI capabilities. Now companies have the ability to really learn about their business and make intelligent insights about their business based on that body of contracts that they have."

All the pandemic acceleration is from e-signature (the gateway):

CEO: "We’re at a position right now where if you look at our financials, it’s going to be a while before I believe the non-signature part of our business will be meaningful enough to sort of warrant that kind of breakout. ... The challenge is initially I thought it would be sooner when we’d be having that conversation. But the reality is if this reacceleration of signature that’s occurred this year... We’re still seeing this demand is just so strong in signature."

AI Insights is driving next wave of SI service partnerships (expect Service rev to drop as they gain integrated parters to do it):

CEO: "And I think people realize there’s a lot of opportunity to deliver fantastic value for our end joint customers if they’re providing services there. So one of these you’ve heard us talk about is we’re actually trying to decrease even though it’s a smaller, we’re talking about 4% of our revenue being services, decreasing that as a percentage going forward. Not because we’re going to reduce the services we do, but we’re just going to move so much more of the growth into the partner ecosystem. So that’s kind of how we look at it. We think it’s going to be a significant piece. We see a lot of excitement about partners and particularly SIs that want to leverage insight into the work they do with our joint customers."

long DOCU 7%
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