DocuSign (NASDAQ: DOCU) shares proceed to tread water regardless of the digital signature-solutions supplier not too long ago reporting better-than-expected second-quarter outcomes. The inventory is down about 5% 12 months thus far.
Let’s dive into the corporate’s most up-to-date quarterly outcomes to see if this can be a shopping for alternative.
Stable income development, however bookings steering disappoints
For it fiscal second quarter, DocuSign’s income jumped 7% 12 months over 12 months to $736 million. Subscription income additionally elevated by 7% to $717.4 million, whereas professional-service income edged up 2% to $18.7 million. Administration beforehand issued steering for complete Q2 income of between $725 million and $729 million, and repair income of between $705 million to $709 million, so it simply topped that forecast.
Worldwide markets as soon as once more led the best way, with income climbing 15% and representing 28% of complete income.
Billings got here in at $724.5 million, up 2% from a 12 months in the past and inside its steering vary of $715 million to $725 million. The corporate stated the billings quantity was impacted by the timing of some contracts.
It ended the quarter with 1.6 million clients, up 11% versus a 12 months in the past. The variety of clients with annualized-contracted worth of $300,000 rose from 1,059 in Q1 to 1,066 in Q2. Greenback-net retention within the quarter was 99%, the identical as in Q1.
Gross margin remained sturdy, coming in at 78.9% versus 78.8% a 12 months in the past. In the meantime, the corporate lowered quite a lot of working bills, together with gross sales and market and basic and administration. As such, adjusted earnings per share (EPS) soared 35% to $0.97.
DocuSign produced $220.2 million of working money stream within the quarter, with free money stream of $197.9 million. It ended the quarter with money and investments of $1 billion and no debt after shopping for again $200 million in shares within the quarter.
Trying forward, the corporate barely boosted its full-year income and billings steering. It now expects income to be within the vary of $2.94 billion to $2.95 billion, with subscription income of $2.86 billion to $2.88 billion. Billings are anticipated to land between $2.99 billion and $3.03 billion.
| Metric | Earlier 2024 Steerage | New 2024 Steerage |
|---|---|---|
| Income |
$2.92 billion to $2.932 billion |
$2.94 billion to $2.952 billion |
| Subscription Income |
$2.844 billion to $2.856 billion |
$2.864 billion to $2.876 billion |
| Billings |
$2.98 billion and $3.03 billion |
$2.99 billion and $3.03 billion |
Supply: DocuSign Q2 Earnings Launch
For Q3, the corporate is on the lookout for income between $743 million and $747 million, representing development of about 6%. Billings are forecast to be between $710 million and $720 million, which might be about 3% development on the midpoint of steering.
Picture supply: Getty Photos.
Time to purchase the inventory?
Buying and selling at a forward price-to-earnings (P/E) ratio of simply over 15 occasions primarily based on subsequent 12 months’s analyst estimates and simply over 3.5 occasions price-to-sales (P/S), DocuSign trades at bargain-bin costs given its high-margin, largely recurring subscription market.
DOCU PE Ratio (Forward 1y) information by YCharts.
Essentially the most enticing factor concerning the firm is its prodigious free money stream, which is on tempo to high $850 million this 12 months. For an organization with an enterprise worth of about $12 billion, it’s throwing off loads of money.
Now finally, buyers wish to see income development decide up, they usually haven’t been overly keen about DocuSign’s billings development not too long ago, which is usually a future indicator of income development. Nonetheless, the corporate simply launched its new Clever Settlement Administration (IAM) platform, which it referred to as an important launch in its latest historical past. After launching the answer in Q2 to small and midsized clients, it stated win charges and common deal sizes have been larger and the time to shut offers quicker.
If IAM can reinvigorate development subsequent 12 months and past, DocuSign can be a pretty funding, given its valuation and strong money stream. With its low valuation and robust free cash flow, buyers ought to really feel comfy shopping for the inventory at present ranges. That ought to assist restrict the draw back in its share worth as they wait to see if IAM can enhance development.
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Geoffrey Seiler has positions in Docusign. The Motley Idiot has positions in and recommends Docusign. The Motley Idiot has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the writer and don’t essentially mirror these of Nasdaq, Inc.
