DocuSign's Surprising Q3 Results: A Turning Point or Temporary Triumph?

Needham analyst Scott Berg had a Hold rating on DocuSign, Inc DOCU.

DocuSign said third-quarter revenue increased 9% year-over-year to $700.42 million, which beat the consensus estimate of $690.13 million. The company reported quarterly earnings of 79 cents per share, which beat analyst estimates of 63 cents per share.

DocuSign reported better than feared 3QF24 results with a ~1.7% beat on subscription revenue, but more impressively, significant upside to margin estimates and record free cash flow of $240 million. 

While billings growth beat conservative expectations, the 4QF24 outlook still entails low single-digit development as the macro limits expansion opportunities due to customers optimizing spending and budgets. 

NDR compressed to 100%, and management suggested this will fall below 100% in 4Q, suggesting sustained down-sell pressure. 

Enterprise additions increased sequentially as a bright spot. Sales execution appears to be modestly improving the mix, while the company sees slightly better billings and a more efficient GTM motion. 

However, the capacity right-sizing back-drop led to the Hold rating.

The analyst expects Q4 revenue and EPS of $698.02 million (versus estimates of $693.73 million) and $0.65 (consensus of $0.58).

Price Action: DOCU shares traded higher by 5.63% at $50.11 on the last check Friday.