According to an Allied Market Research report, the global digital signature market is estimated to grow 30% annually over the next few years to reach $3.44 billion by 2022. DocuSign (Nasdaq: DOCU), a leading player in the segment, recently announced its quarterly performance that missed the market expectations. However, it made up for it by announcing a stellar outlook that sent the stock soaring.
DocuSign’s Financials
DocuSign’s second quarter revenues grew 41% to $235.6 million, ahead of the Street’s estimates of $221 million. Billings grew 47% to $252.4 million. Earnings of $0.01 per share were below the market’s forecast of $0.04 for the quarter.
By segment, Subscription revenues grew 39% to $220.8 million and Professional services and other revenues grew 72% to $14.8 million.
For the third quarter, DocuSign forecast revenue of $237-$241 million, significantly ahead of the market’s forecast of $231.9 million. It expects to end the year with revenues of $947-$951 million and billings of $1.063-$1.083 billion. The Street had forecast revenues of $920.4 million for the year.
DocuSign’s Product Expansion
DocuSign continued to expand its product offerings and recently announced several enhancements to its Agreement Cloud. The latest features include DocuSign Rooms for Mortgage, which is focused on the mortgage sector and accelerates closing times and improves the borrower experience with a secure, digital workspace. DocuSign realizes the importance of a pen-and-paper world as well and has designed the service so that it is flexible enough to support traditional closings as well as hybrid and digital closings. The service allows for users to set up Conditional Recipients so that the users can automate their existing workflows by configuring the rules on an envelope and automatically routing it to different recipients. Its eWitness feature now allows the people signing the documents to identify a witness and capture their information as part of agreements and deeds.
DocuSign’s platform already has more than 350 pre-built integrations that help organizations connect and automate the entire agreement process. As part of its platform upgrade, the company released an eSignature API v2.1, which offers developers the ability to access the same API that DocuSign uses internally and grants them access to features including comments and bulk envelopes.
The market is very pleased with DocuSign’s performance. It may have missed the mark on the earnings for the quarter, but its operational metrics suggest a strong future. For the quarter, it declared a net expansion rate of 113%, suggesting that customers are growing their spend with DocuSign. It also expanded its customer base by 25%, with the number of contracts with annual value over $300,000 growing at more than 50% over the year.
Its stock is currently trading at year high levels of $63.30 with a market capitalization of $8.6 billion. It hit a 52-week low of $35.06 nearly a year ago. DocuSign’s valuation has soared since it listed last year. At the time of its IPO, DocuSign had sold shares at $29 apiece at a valuation of $4.4 billion. Prior to listing, it had raised $500 million with the last disclosed valuation of $3 billion in 2015.
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