According to a ResearchandMarkets report, the global digital signature market is estimated to grow at 37% CAGR to $5.5 billion by 2023 from $1.2 billion in 2018. Recently, DocuSign (Nasdaq: DOCU), a leading player in the segment announced its first-quarter results. But while the company surpassed market expectations for the quarter, slowdown in billings and growing competition have the analysts worried. Post its result announcement, its stock slid 20% in the after-hours trading.

DocuSign’s Financials

DocuSign’s revenues grew 37% over the year to $214 million, ahead of the market’s estimates of $201.5 million. Net loss was $46 million, or $0.27 per share compared with a loss of $271 million, or $7.46 a share a year ago. Non GAAP net income was $13.5 million, or $0.07 per share, compared with non-GAAP net income of $1.5 million, or $0.01 per share a year ago. The market had forecast adjusted earnings of $0.05 per share for the quarter.

By segment, Subscription revenues grew 36% to $201.5 million and Professional services and other revenues grew 64% to $12.5 million.

For the current quarter, DocuSign forecast revenues of $218-$222 million, compared with the Street’s forecast of $220 million. DocuSign expects to end the year with revenues of $917-$922 million, ahead of the market’s forecast of $914 million.

DocuSign’s Product Growth

The market was concerned by the slowdown of billings for the company. During the quarter, DocuSign’s billings grew 27% to $215 million, significantly lower than the more than 40% growth rates that it was recording nearly a year ago. Analysts had forecast billings of $217.2 million. They weren’t too pleased with the slowdown in billing, but the company believes that the slowdown reflects the shift from e-signature tools to a broader suite of document and contract management services.

As part of this expanding service offering, DocuSign recently announced the release of the DocuSign Agreement Cloud. The DocuSign Agreement Cloud is an entire suite of more than a dozen of its products and over 350 integrations that help organizations prepare, sign, act on, and manage their agreements. It includes its flagship e-signature product, other DocuSign product offerings, and its recently acquired SpringCM offering for contract life cycle management. It also includes the recently launched new products – DocuSign Gen, DocuSign Click, and DocuSign Identify.

DocuSign Gen is focused on the SMB sector and caters to the Salesforce ecosystem. It enables sales reps and other users to automatically generate signature ready contracts directly from within Salesforce. DocuSign Click allows organizations to capture consent to standard agreement terms on websites such as the privacy policy with just a single click. Finally, DocuSign Identify allows companies to automate the verification of government-issued IDs and European eID for transactions that require them. DocuSign believes that its Agreement Cloud will help it expand beyond a pure digital signature service provider to a solution provider that caters to the entire agreement process both before and after that signature, thus significantly increasing its addressable market size.

DocuSign’s transition to the document management market will slow down its sales and billing cycle, as is evident from its recent results. Plus, there is growing competition from players such as Adobe.

Earlier this year, Adobe announced an enhanced document cloud solution when it partnered with Nintex. As part of the new offering, users can provide signatures electronically from a mobile device or browser using drag-and-drop functionality. The integration with Nintex will allow Adobe users to track the workflow of the signatures on the document.

Like DocuSign, Adobe too has been focused on the entire document management life cycle. By integrating their services, Nintex and Adobe customers can now prepare automated documents like quotes and contracts; include information from Salesforce in these documents; create and send document packages that can contain Word documents, spreadsheets, presentations, and PDF files; and finally, include the signature workflow. With these capabilities, Adobe will surely be a tough player for DocuSign to compete with. Its Agreement Cloud is a small step in its battle against Adobe.

I am very bullish on DocuSign given its current leadership position in the market. It is witnessing adoption of its services by larger enterprise customers as was evident through its higher deal size. During the quarter, the enterprise/commercial customer segment revenues delivered 33% growth and deals with annual contract value (ACV) more than $300,000 grew 51%. The Agreement Cloud may slow down billing rates in the shorter term, but it will continue to grow DocuSign’s deal size in the quarters to come.

Its stock is currently trading at $47.90 with a market capitalization of $8.3 billion. It had touched a 52-week high of $68.35 in August last year. It has climbed back from the 52-week low of $35.06 that it had fallen to in December last year when most tech stocks had taken a beating.

Just over a year ago, DocuSign had listed $29 at a valuation of $4.4 billion. Prior to listing, it had raised $500 million from investors including Dell Ventures, Intel Capital, Bain Capital Ventures, Founders Circle Capital, Sands Capital Ventures, Wellington Management, Wasatch Advisors, Iconiq Capital, Recruit Strategic Partners, BBVA Ventures, Salesforce, Telstra, Visa, MKI, EquityZen, SharesPost Investment Management, Cross Creek Advisors, Sigma West, Comcast Ventures, Kleiner Perkins Caufield & Byers, Accel Partners, Sapphire Ventures, Google Ventures, Frazier Technology Ventures, and Scale Venture Partners. A funding round held in May 2015 had pegged it at a $3 billion valuation.