Docusign, Inc. (DOCU) reported impressive second-quarter fiscal 2025 results, wherein earnings per share (EPS) and revenues surpassed the Zacks Consensus Estimate. The stock price has not witnessed any significant impact of the earnings beat since the company released results on Sept. 5, 2024. DOCU's EPS (excluding $3.29 from non-recurring items) was 97 cents per share, which surpassed the Zacks Consensus Estimate by 21.3% and increased 34.7% from the year-ago quarter. Total revenues of $736 million beat th ...

Revenue Growth - Total revenue for the three months ended July 31, 2024, was $736.0 million, an increase from $687.7 million for the same period in 2023, representing a growth of approximately 7.0%[95] - Subscription revenue accounted for 97% of total revenue for both the three and six months ended July 31, 2024, and 2023, indicating a stable revenue model[91] - The number of customers increased to approximately 1.6 million as of July 31, 2024, up from over 1.4 million a year earlier, reflecting a growth of about 14.3%[93] - Subscription revenue increased by $48.0 million, or 7%, in the three months ended July 31, 2024, and by $100.2 million, or 8%, in the six months ended July 31, 2024[114] - Total revenue for the three months ended July 31, 2024, was $736.0 million, a 7% increase compared to $687.7 million in the same period of 2023[114] - Total billings for the period reflect strong sales to new customers and subscription renewals, contributing to the overall revenue growth[144] Profitability - Net income for the three months ended July 31, 2024, was $888.2 million, significantly higher than $7.4 million for the same period in 2023[95] - Gross profit for the three months ended July 31, 2024, was $580.6 million, representing a gross margin of 79%[112] - Non-GAAP gross profit for the three months ended July 31, 2024, was $605,036, compared to $565,791 for the same period in 2023, reflecting an increase of 6.9%[146] - GAAP income from operations for the three months ended July 31, 2024, was $57,801, significantly up from $6,612 in the same period of 2023[147] - Non-GAAP income from operations for the six months ended July 31, 2024, was $439,245, compared to $345,635 for the same period in 2023, representing a growth of 27.1%[147] - GAAP net income for the three months ended July 31, 2024, was $888,211, a substantial increase from $7,395 in the same period of 2023[148] - Non-GAAP net income for the six months ended July 31, 2024, was $373,837, compared to $299,835 for the same period in 2023, indicating a rise of 24.7%[148] - Free cash flow for the three months ended July 31, 2024, was $197,928, up from $183,637 in the same period of 2023[149] Expenses and Cost Management - Total costs and expenses for the three months ended July 31, 2024, were $678.2 million, slightly lower than $681.1 million for the same period in 2023, reflecting cost management efforts[95] - Total operating expenses for the three months ended July 31, 2024, were $522.8 million, a decrease of 2% compared to $535.5 million in the same period of 2023[112] - Research and development expenses increased to $147.6 million, or 20% of total revenue, compared to $136.0 million, or 20% of total revenue, in the same period of 2023[112] - Sales and marketing expenses decreased to $287.5 million, or 39% of total revenue, compared to $294.8 million, or 43% of total revenue, in the same period of 2023[118] - Cost of subscription revenue increased by $16.2 million, or 14%, in the three months ended July 31, 2024[115] - Cost of professional services revenue decreased by $6.3 million, or 21%, in the three months ended July 31, 2024[117] - General and administrative expenses decreased by $16.8 million, or 16%, in the three months ended July 31, 2024, primarily due to reductions in professional fees and stock-based compensation[121] Cash and Liquidity - The company had approximately $1.0 billion in cash, cash equivalents, restricted cash, and investments as of July 31, 2024, providing a strong liquidity position[95] - As of July 31, 2024, the company had $938.4 million in cash and cash equivalents and short-term investments, with no outstanding borrowings under its $500 million credit facility[123] - Cash provided by operating activities was $475.0 million for the six months ended July 31, 2024, compared to $444.7 million for the same period in 2023[130][131] - Net cash used in investing activities was $236.9 million for the six months ended July 31, 2024, primarily due to the acquisition of Lexion for $143.6 million[132] - Cash used in financing activities was $408.9 million for the six months ended July 31, 2024, mainly for repurchasing 6.3 million shares of common stock at an average price of $55.02 per share[133] - The company repurchased 6.3 million shares for $350.8 million during the six months ended July 31, 2024, as part of its stock repurchase program[127] Strategic Initiatives - Docusign's IAM platform was introduced on a user-based subscription basis, with plans for continued rollout across additional segments and geographies, enhancing product offerings[90] - The company plans to continue investing in research and development to accelerate product innovation and enhance operational efficiency, supporting long-term growth strategies[96] - The company continues to focus on operational efficiency and strategic investments to drive future growth and market expansion[143] - Future capital requirements will depend on growth rate, customer retention, and potential acquisitions, with a possibility of seeking additional equity or debt financing[125] Tax and Regulatory - The company recognized a $837.7 million income tax benefit due to the release of a valuation allowance related to U.S. deferred tax assets[111] - The provision for income taxes showed a significant benefit of $(816.3) million in the three months ended July 31, 2024, primarily due to the release of $837.7 million of valuation allowance related to U.S. deferred tax assets[122] - The projected non-GAAP tax rate for fiscal 2024 and 2025 is set at 20%, providing consistency across reporting periods[142] Market and Foreign Currency - International revenue represented 28% of total revenue for the three and six months ended July 31, 2024, compared to 26% for the same periods in 2023, showing an increase in global market penetration[100] - A hypothetical 100 basis point increase in interest rates would lead to an approximate $2.7 million decrease in the fair value of the investment portfolio[152] - The company has not engaged in hedging foreign currency transactions to date, although it may consider this in the future[153] - Foreign currency translation adjustments are accounted for as a component of "Accumulated other comprehensive loss" within "Stockholders' equity"[153] - The company does not believe that a 10% increase or decrease in the relative value of the U.S. dollar to other currencies would have a material effect on its operating results[153]

Thitima Uthaiburom/iStock via Getty Images Investment Thesis DocuSign, Inc.'s (NASDAQ:DOCU) FY 2025 Q2 results gave investors a strong performance despite the market's pessimism on this COVID darling. The digital signature and contracts management company exceeded expectations in terms of revenue and adjusted earnings per share (it was a really solid quarter all around). As of the time of this writing, shares are up slightly today (Friday), up 2.46% as I think investors are starting to price in the concept ...

Shares of Docusign Inc DOCU were climbing over 3.2% in early trading on Friday, after the company reported upbeat second-quarter results. The company reported its results amid an exciting earnings season. Here are some key analyst takeaways. RBC Capital Markets analyst Rishi Jaluria reiterated a Sector Perform rating, while raising the price target from $52 to $57. JPMorgan analyst Mark Murphy maintained an Underweight rating and price target of $50. JMP Securities analyst Patrick Walravens reaffirmed a Mar ...

Core Insights - DocuSign Inc reported better-than-expected second-quarter financial results, with revenue of $736 million, surpassing the consensus estimate of $727.36 million, and adjusted earnings of 97 cents per share, exceeding analyst estimates of 80 cents per share [1][2] Financial Performance - The company achieved record operating profit due to improved business stability and increased efficiency [2] - For the third quarter, DocuSign expects revenue in the range of $743 million and second-quarter billings between $710 million and $720 million [2] - The fiscal year 2025 revenue guidance has been raised to a new range of $2.94 billion to $2.952 billion [2] Stock Performance and Analyst Ratings - DocuSign shares fell 0.9% to close at $56.93 following the earnings announcement [2] - The consensus price target for DocuSign is $63.18 based on ratings from 20 analysts, with a high of $86 from Citigroup and a low of $42 from HSBC [4] - Recent analyst ratings indicate an average price target of $55.33, suggesting an implied downside of -6.37% from these ratings [4] Analyst Actions - Baird analyst William Power maintained a Neutral rating and raised the price target from $55 to $59 [5] - Wells Fargo analyst Michael Turrin maintained an Underweight rating and increased the price target from $48 to $50 [5] - RBC Capital analyst Rishi Jaluria maintained a Sector Perform rating and raised the price target from $52 to $57 [5]

Financial Data and Key Metrics Changes - Total revenue for Q2 was $736 million, representing a 7% year-over-year increase, marking the second consecutive quarter of growth [6][17] - Non-GAAP operating margins increased to 32%, an all-time high, compared to 25% in Q2 fiscal 2024 [6][21] - Free cash flow generation was strong, approaching $200 million, resulting in a 27% yield for the quarter [6][23] - Non-GAAP diluted EPS for Q2 was $0.97, up from $0.72 last year, while GAAP diluted EPS was $4.26 compared to $0.04 last year [25] Business Line Data and Key Metrics Changes - Subscription revenue was $717 million, also growing 7% year-over-year [17] - Dollar net retention rate remained consistent at 99% [19] - The number of large customers spending over $300,000 annually increased to 1,066 in Q2 [20] Market Data and Key Metrics Changes - International revenue represented 28% of total revenue and grew at approximately double the rate of overall revenue [18] - Digital revenue growth outpaced overall growth, indicating a positive impact from e-commerce initiatives [18][14] Company Strategy and Development Direction - The company is focusing on three strategic pillars: accelerating product innovation, evolving omnichannel go-to-market capabilities, and improving operating efficiency [6][27] - The launch of the Intelligent Agreement Management (IAM) platform is seen as a significant opportunity for future growth, addressing a $2 trillion market in lost economic value from agreement management [7][9] - The company aims to enhance its partner and self-serve channels, with strategic relationships strengthened with Microsoft, SAP, and Salesforce [12][13] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the early traction and customer feedback for the IAM platform, indicating larger deal sizes and faster closes [31][35] - The company anticipates continued growth opportunities in international markets and plans to roll out IAM to additional segments and geographies [18][52] - Management expects operating margins to decline slightly in the second half of the year due to investments in IAM, but still anticipates year-over-year improvements [21][26] Other Important Information - The company repurchased $200 million worth of shares during Q2, effectively redeploying 100% of its quarterly free cash flow generation back to shareholders [24] - The company ended Q2 with $1 billion in cash and no debt on the balance sheet, allowing for continued investment in the business [23] Q&A Session Summary Question: What are the main reasons for confidence in sustaining growth? - Management highlighted stabilization in the core business and positive trends in operating metrics, with international and CLM providing short-term growth, while IAM is seen as a long-term growth lever [30][31] Question: What is the ceiling for operating margins in the next year or two? - Management noted significant improvements in operating margins and emphasized the balance between productivity and growth, particularly focusing on the IAM growth engine [32][33] Question: What early feedback has been received for IAM? - Customers have expressed satisfaction with the ease of use and quick deployment of IAM, with many reporting significant organizational benefits [34][35] Question: What changes are expected in the sales strategy with the new Chief Revenue Officer? - The strategy remains focused on direct sales, partnerships, and self-serve channels, with the new CRO expected to accelerate execution [39] Question: Why is dollar net retention not expected to expand? - Management indicated that the impact of pandemic renewal cohorts is diminishing, and future improvements in dollar net retention will rely on enhancing renewals and leveraging IAM [64] Question: How is the pricing model for IAM evolving? - The pricing model is shifting from envelope-based billing to a seat-based model with additional features, reflecting the value delivered to customers [48]

Core Insights - DocuSign reported revenue of $736.03 million for the quarter ended July 2024, reflecting a 7% increase year-over-year and surpassing the Zacks Consensus Estimate of $726.15 million by 1.36% [1] - The company's EPS was $0.97, up from $0.72 in the same quarter last year, exceeding the consensus EPS estimate of $0.80 by 21.25% [1] Financial Performance Metrics - Non-GAAP billings reached $724.51 million, slightly above the six-analyst average estimate of $720.57 million [3] - Total customers remained stable at 1.6 million, matching the average estimate based on two analysts [4] - Revenue from professional services and other was $18.66 million, below the average estimate of $19.41 million, but showed a year-over-year increase of 1.9% [5] - Subscription revenue was reported at $717.37 million, exceeding the average estimate of $706.75 million, with a year-over-year growth of 7.2% [6] - Non-GAAP subscription gross profit was $604.25 million, surpassing the six-analyst average estimate of $591.58 million [7] - Non-GAAP professional services and other gross profit was $0.79 million, significantly better than the average estimate of -$2.40 million [8] Stock Performance - Over the past month, DocuSign shares have returned +12.5%, outperforming the Zacks S&P 500 composite's +3.4% change [8] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [8]

| --- | --- | --- | --- | |---------------------|-------|-------|-------| | | | | | | | | | | | | | | | | | | | | | Bringing Agreements | | | | | to Life | | | | | | | | | | Q2 FY25 | | | | | | | | | | | | | | | | | | | Safe Harbor This presentation contains "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that are based on our management's beliefs and assumptions and on information c ...

Group 1: Earnings Performance - DocuSign reported quarterly earnings of $0.97 per share, exceeding the Zacks Consensus Estimate of $0.80 per share, and up from $0.72 per share a year ago, representing an earnings surprise of 21.25% [1] - The company has surpassed consensus EPS estimates for four consecutive quarters [2] - DocuSign's revenues for the quarter ended July 2024 were $736.03 million, surpassing the Zacks Consensus Estimate by 1.36%, and up from $687.69 million year-over-year [2] Group 2: Stock Performance and Outlook - DocuSign shares have declined approximately 3.4% since the beginning of the year, while the S&P 500 has gained 15.7% [3] - The future performance of DocuSign's stock will largely depend on management's commentary during the earnings call and the earnings outlook [4][6] - The current consensus EPS estimate for the upcoming quarter is $0.80 on revenues of $738.47 million, and for the current fiscal year, it is $3.23 on revenues of $2.93 billion [7] Group 3: Industry Context - The Technology Services industry, to which DocuSign belongs, is currently ranked in the top 28% of over 250 Zacks industries, indicating a favorable outlook compared to the bottom 50% [8] - The performance of DocuSign's stock may also be influenced by the overall industry outlook [8]

Financial Performance - Total revenue for Q2 FY2025 was $736.0 million, a 7% increase year-over-year[1] - Subscription revenue reached $717.4 million, also a 7% increase year-over-year[1] - Billings amounted to $724.5 million, reflecting a 2% year-over-year increase[1] - GAAP net income per diluted share was $4.26, compared to $0.04 in the same period last year[1] - Non-GAAP net income per diluted share was $0.97, up from $0.72 year-over-year[1] - Free cash flow for the quarter was $197.9 million, compared to $183.6 million in the same period last year[1] - Total revenue for the three months ended July 31, 2024, was $736,027,000, representing a 7% increase from $687,687,000 in the same period of 2023[18] - Subscription revenue increased to $717,366,000 for the three months ended July 31, 2024, compared to $669,367,000 in the prior year, marking an increase of 7%[18] - Net income for the three months ended July 31, 2024, was $888,211,000, significantly higher than $7,395,000 in the same period of 2023[18] - Basic net income per share attributable to common stockholders was $4.34 for the three months ended July 31, 2024, compared to $0.04 in the same period of 2023[18] - The company reported a total revenue of $1,445,667,000 for the six months ended July 31, 2024, compared to $1,349,075,000 for the same period in 2023, marking an increase of approximately 7.1%[31] Guidance and Projections - The company expects total revenue for Q3 FY2025 to be between $743 million and $747 million[3] - Non-GAAP gross margin guidance for Q3 FY2025 is projected to be between 81.0% and 82.0%[3] Operational Changes - Docusign launched its Intelligent Agreement Management platform, with applications now available in the U.S. and select international markets[2] - Docusign appointed Paula Hansen as President and Chief Revenue Officer and Sagnik Nandy as Chief Technology Officer[2] Assets and Liabilities - Total assets increased to $3,753,941,000 as of July 31, 2024, from $2,971,290,000 as of January 31, 2024, representing a growth of 26%[20] - Cash and cash equivalents decreased to $619,064,000 as of July 31, 2024, down from $797,060,000 as of January 31, 2024[20] - Total liabilities decreased to $1,792,535,000 as of July 31, 2024, from $1,841,551,000 as of January 31, 2024[20] - Stockholders' equity increased to $1,961,406,000 as of July 31, 2024, compared to $1,129,739,000 as of January 31, 2024, reflecting a growth of 74%[20] Cash Flow and Expenses - Net cash provided by operating activities for the six months ended July 31, 2024, was $475,034, compared to $444,651 for the same period in 2023, reflecting an increase of about 6.8%[22] - Total cash, cash equivalents, and restricted cash at the end of the period was $628,027, down from $1,022,980 at the end of the same period in 2023[22] - Stock-based compensation expense for the three months ended July 31, 2024, was $164,656, compared to $151,707 in the same period of 2023, marking an increase of about 8.5%[22] - The company reported a net cash used in investing activities of $176,110 for the three months ended July 31, 2024, compared to $64,723 for the same period in 2023[22] - Total cash used in financing activities for the six months ended July 31, 2024, was $(408,942), compared to $(90,251) for the same period in 2023[29] Profitability Metrics - Non-GAAP gross profit for the three months ended July 31, 2024, was $605,036, up from $565,791 in the same period last year, indicating a growth of approximately 6.9%[24] - GAAP gross margin for the three months ended July 31, 2024, was 78.9%, slightly up from 78.8% in the same period of 2023[24] - Non-GAAP subscription gross profit for the three months ended July 31, 2024, was $604,249, compared to $569,248 in the same period last year, showing an increase of approximately 6.1%[24] - GAAP subscription gross profit for the three months ended July 31, 2024, was $584,994, up from $553,182 in the same period last year, indicating a growth of approximately 5.7%[24] - Non-GAAP operating margin for the three months ended July 31, 2024, was 32.2%, compared to 24.7% for the same period in 2023[27] - GAAP income from operations for the three months ended July 31, 2024, was $57,801, significantly higher than $6,612 for the same period in 2023[27] Contractual Obligations - Contract liabilities and refund liability at the end of the period were $1,334,461,000, up from $1,233,894,000 at the end of the previous year, indicating a growth of approximately 8.2%[31] - Contract assets and unbilled accounts receivable at the beginning of the period were $17,179,000, down from $22,936,000, showing a decrease of about 25.3%[31] - The beginning balance of contract liabilities and refund liability was $1,340,680,000, compared to $1,210,965,000 in the previous year, reflecting an increase of approximately 10.7%[31] - The company experienced a decrease in contract assets and unbilled accounts receivable at the end of the period to $17,461,000 from $22,358,000, a decline of about 21.5%[31] - Total non-GAAP billings for the six months ended July 31, 2024, were $1,434,046,000, compared to $1,385,957,000 for the same period in 2023, indicating an increase of approximately 3.5%[31]