DocuSign: 33% FCF Margins, But Slowing Growth Is A Risk

Core Viewpoint - DocuSign reported better than expected first fiscal quarter results, but faces challenges with slowing top-line growth and persistent risks to its dollar net retention rate, which is crucial for software companies [2][3][11] Financial Performance - In the first fiscal quarter, DocuSign achieved adjusted earnings per share of $0.82, beating expectations by$ 0.03, and revenues of $710 million, exceeding consensus by$ 2.2 million [4][5] - The company experienced a year-over-year revenue growth rate of 7%, marking the fourth consecutive quarter of revenue deceleration [6][11] - Free cash flow for the quarter was $232 million, with a free cash flow margin of 33%, reflecting an 8% year-over-year growth [8][19] Customer Metrics - DocuSign's customer base grew to 1.56 million, representing an 11% year-over-year increase [6] - The dollar-based net retention rate was reported at 99%, indicating a slight increase but still suggesting that existing customers are not increasing their spending [7][11] Valuation Insights - DocuSign's shares are currently valued at a price-to-sales (P/S) ratio of 3.3X, significantly below its long-term average of 7.4X [19] - If the company improves its retention rate and revenue growth, shares could potentially reach a fair value of up to$ 95 based on an industry average P/S ratio of 6.3X [19]