After a long wait, Billion Dollar Unicorn DocuSign (Nasdaq: DOCU), went public early this year. It recently announced its second-quarter results that beat market expectations. But despite the upbeat outlook, its stock has taken a beating.

DocuSign’s Offerings

DocuSign was founded in 2003 by Tom Gosner, “father of electronic signatures”, as a platform to help companies automate processes that needed physical signatures. The company enables organizations to eliminate the traditional paper-based agreement process to reduce turnaround time and costs and eliminate errors. Its cloud-based platform has been adopted by over 400,000 paying customers and has enabled more than 650 million successful transactions. Its customers range from large global enterprises to sole proprietorships across industries around the world.

DocuSign operates on a subscription-based model charging $10 per month for individuals to $40 per user per month for businesses. Its products have seen significant market adoption, driving rapid growth in revenues. For the year ended January 2018, its revenue grew 39% to $518.5 million. During the same period, losses narrowed from $115.4 million in 2017 to $52.3 million for fiscal 2018.

For the recently reported second quarter, DocuSign saw revenues grow 33% to $167 million compared to a 37% growth in the first quarter. Subscription revenue grew 35% to $158.5 million and Professional services and other revenues grew 7% to $8.6 million. It ended the quarter with a net loss of $0.22 per share on a GAAP basis and an income of $0.03 per share on an adjusted basis. This was the first quarter that DocuSign reported profitability on an adjusted basis. The Street was looking for revenues of $160.1 million for the quarter with an adjusted income of $0.01 per share.

DocuSign expects to end the current quarter with revenues of $172-$175 million. It expects to end the year with revenues of $683-$688 million. The market was looking for revenues of $165 million for the quarter.

DocuSign’s Acquisition

In July this year, DocuSign announced its plans to acquire SpringCM, a Chicago-based cloud document generation, and contract management company, for an estimated $220 million. SpringCM was already a partner for DocuSign and has helped DocuSign automate, manage, and store documents and contracts for earlier collaboration. DocuSign is hoping to leverage the acquisition to drive growth beyond its electronic signatures business by modernizing the System of Agreement. DocuSign claims the System of Agreement is an end-to-end process of preparing, signing, executing, and managing agreements. SpringCM was founded in 2005 and had been held privately so far. It had raised $128 million in funding from investors including Wellington Financial, Bluestem Capital, Foundation Capital, and Panorama Point Ventures. Its financials prior to the acquisition are not known.

DocuSign is not the only player in the contract management market. It will have to face tough competition from the likes of Oracle, Salesforce, and Apttus, all of whom have been in the contract management business for a while. But within the e-signature space, the company has surely made a mark for itself by being a first mover. According to a 2016 Forrester report, DocuSign accounted for 40% of the e-signature market share. But it still has to deal with several other players including Adobe, HelloSign, and eSign. Most of these companies offer a product that is similar to DocuSign. Market shares of the rival players are not known, but Gartner analysts believe that Adobe is giving DocuSign a tough competition. For now, DocuSign appears to be winning on account of its lower price point.

I would like to know from users who use DocuSign about the features that they most appreciate in the service. What is it that you believe DocuSign brings to the table that Adobe does not?

DocuSign’s stock had soared to a high of $68.35 in August this year but slid sharply following its results. The stock is currently trading at $43.83 with a market capitalization of $7 billion. It had listed on the stock exchange at $29 in April this year when it raised $629 million at a valuation of $4.4 billion.

Prior to the listing, DocuSign had raised $500 million in funding 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. Its last round of funding was held in May 2015 when it raised $233 million at a $3 billion valuation.