DocuSign's Stronger Than Expected Earnings Were Not Enough To Impress Investors

Despite reporting better-than-expected results for its fiscal fourth quarter that ended January 31, DocuSign, Inc. DOCU didn't deliver what investors hoped for. The e-signature company also provided strong guidance for both the next quarter and the whole year, but this wasn't good enough for investors as its stock lost almost 4% of its value in the after-hours trading session, after rising almost 6% in the regular session.

Fourth Quarter Earnings

Revenue amounted to $430.9 million, up 57% from a year ago, exceeding Street consensus estimate for $407.7 million. Billings were $534.9 million, up 46% YoY. Billings are the cash that customers paid and revenue refers to the income earned when the service was actually provided. Subscription revenue was $410.2 million, up 59% whereas professional services and other revenue was $20.7 million, which is a 23% YoY increase. Free cash flow was $44 million compared to $15.5 million in last year's quarter. Cash and cash equivalents were $866.5 million at the end of the quarter.

Fiscal 2021

Total revenue increased 49% YoY as it amounted to $1.5 billion. Subscription revenue rose even more or more precisely 50% YoY as it amounted to $1.4 billion. The world's #1 eSignature solution company can thank the global pandemic for helping it smash its earnings and revenue targets once again as doing deals remotely became a new norm.

Forecast

The dominant player in the e-signature market was capitalizing on secular tailwinds even before COVID-19 started its relentless march across the globe last year. Therefore, it can be argued that the pandemic merely accelerated its growth in 2020. For the undergoing first quarter, it's forecasting revenue of in the range from $432 million to $436 million, exceeding analyst estimates of $419 million. As for the full fiscal 2022, revenue guidance is in the the range between $1.963 billion and $1.973 billion, greatly above Wall Street's $1.46 billion forecast.

Outlook

Without the slightest doubt, fiscal 2021 was a milestone year for the company as it became a pillar of the ‘anywhere economy' that lets people do anything from whichever place on the planet. The e-signature provider shows no sign of slowing down anytime soon as billings that indicate future business jumped 46% in the latest quarter. The biggest challenge for the company has been to manage this growth, as its costs grew faster than revenue which made it less profitable. Therefore, DocuSign will have to show better cost management as it continues on the path of its stellar growth in 2021.

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