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DocuSign (NASDAQ:DOCU) Delivers Strong Q2 Numbers, Upgrades Full Year Guidance


Adam Hejl /
2021/09/02 4:10 pm EDT
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E-signature company DocuSign (DOCU) reported Q2 FY2022 results topping analyst expectations, with revenue up 49.5% year on year to $511.8 million. DocuSign made a GAAP loss of $25.5 million, improving on its loss of $64.5 million, in the same quarter last year.

Is now the time to buy DocuSign? Access our full analysis of the earnings results here, it's free.

DocuSign (DOCU) Q2 FY2022 Highlights:

  • Revenue: $511.8 million vs analyst estimates of $487.9 million (4.88% beat)
  • EPS (non-GAAP): $0.47 vs analyst estimates of $0.40 (18.6% beat)
  • Revenue guidance for Q3 2022 is $529 million at the midpoint, above analyst estimates of $520.9 million
  • The company lifted revenue guidance for the full year, from $2.03 billion to $2.08 billion at the midpoint, a 2.45% increase
  • Free cash flow of $161.7 million, up 31.4% from previous quarter
  • Gross Margin (GAAP): 77.7%, in line with previous quarter

"I'm proud of how our team has continued to stay in front of the evolving COVID business environment, helping our over one million customers and over one billion users move forward. This has driven strong performance for our business, reflected in our 50% year-over-year Q2 revenue growth," said Dan Springer, DocuSign's CEO.

Founded in 2003, DocuSign is the pioneer of e-signature and offers software as a service that allows people and organisations to sign legally binding documents electronically.

The Covid pandemic has accelerated the digital transformation of how we work and do business and the e-signature products have been clear beneficiaries of it.

Sales Growth

As you can see below, DocuSign's revenue growth has been exceptional over the last year, growing from quarterly revenue of $342.2 million, to $511.8 million.

DocuSign Total Revenue

And unsurprisingly, this was another great quarter for DocuSign with revenue up an absolutely stunning 49.5% year on year. On top of that, revenue increased $42.7 million quarter on quarter, a solid improvement on the $38.1 million increase in Q1 2022, and even a sign of slight acceleration of growth.

Analysts covering the company are expecting the revenues to grow 31.3% over the next twelve months, although we would expect them to review their estimates once they get to read these results.

There are others doing even better than DocuSign. Founded by ex-Google engineers, a small company making software for banks has been growing revenue 90% year on year and is already up more than 400% since the IPO in December. You can find it on our platform for free.

Profitability

What makes the software as a service business so attractive is that once the software is developed, it typically shouldn't cost much to provide it as an ongoing service to customers. DocuSign's gross profit margin, an important metric measuring how much money there is left after paying for servers, licences, technical support and other necessary running expenses was at 77.7% in Q2.

DocuSign Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.77 left to spend on developing new products, marketing & sales and the general administrative overhead. Trending up over the last year, this is a good gross margin that allows companies like DocuSign to fund large investments in product and sales during periods of rapid growth and be profitable when they reach maturity.

Key Takeaways from DocuSign's Q2 Results

With a market capitalization of $57.9 billion, more than $822.8 million in cash and with free cash flow over the last twelve months being positive, the company is in a very strong position to invest in growth.

We were impressed by the exceptional revenue growth DocuSign delivered this quarter. And we were also excited to see that it outperformed Wall St’s revenue expectations. Overall, we think this was a really good quarter, that should leave shareholders feeling very positive. The company is down -1.8% on the results and currently trades at $289 per share.

DocuSign may have had a good quarter, so should you invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.