I decided to sell my DOCU shares this morning.
At first glance, I thought the report was good and couldn’t understand the drop.
As I dug into the details, I’m concerned the billings deceleration forecasts slowing revenue growth on the horizon. It at least increased the probability of slowing growth in the future.
- Subscription revenue grew an average of 37% over the 4 Q’s last year, billings grew 34%.
- last quarter, subscription rev. grew 37%, billings grew 31%
- this quarter, subscription rev. grew 36%, billings grew 27%
- the “longer sales lead time” explanation is BS, billings have been slowing for awhile
- next quarter guidance is for Rev. of 218-222, and billings of 215-225.
- have you even seen a billings guide equal to revenue? forecasting continued slowing of billings
- the only way rev. growth can continue with billings slowing, is if the contract period is shrinking.
- shrinking contract length, means companies are less committed to DOCU, and can change quicker to a competitor
-net retention rate of 112%, same as last quarter and at the low end of the range
-no increase in net retention rate means the current customers aren’t adding on the system of agreement yet
Bottom line: I see increased risk of slowing revenue growth, signs that customers aren’t committing to DOCU long term,and no sign yet that the “system of agreement” is working.
I’m going to keep an eye on DOCU, and will be interested again if I see proof in billings improvement (customers showing commitment to lock in long term) and that the new system of agreement is being purchased by customers.
Jim