Docu Accelerating

I wrote the following in my investment notes.

9/16/20
Couldn’t get into SNOW, waiting for a pullback I put what cash I had set aside,4.5%, into Docu - it’s currently down 30% from ATH and it’s SSI’s #2 at 17% of his port due to the Agreement Cloud Products with 25B greenfield and Adobe ramping up its eSignatures product that will likely utilize Docu’s Agreement’s Cloud Product ( e-Sig 25B TAM only 4% penetrated by all players Docu one of them). If it doesn’t go up and still can’t get SNOW I’ll likely add more to Docu.

Docusign . RevGr. GM. Total Cust Billings Gr
Q4FY20. 37.6%. 78%. +40%
FCF margin. 11% Guide
Q1FY21. 39%. 79%. +661k 30%y/y. +59%
FCF margin. 32.8m14% Guide 32.3%
Q2FY21. 45%. 78%. +88k 55%y/y. +61%
FCF. 100m

I know Saul’s Porfolio Post referenced ‘companies growing more than 50%’; but, I’m thinking Docusign just might get there soon, as it has been accelerating, no?

I’m wonderimg what you all might be thinking about DOCU?
Jason

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Thanks for bringing it up, Jason. I had taken a position back in June: https://discussion.fool.com/thanks-for-the-write-up-kyle-on-the-… but I exited in July after it went from $140 to $200+ in a month on no news (I bought it when it went down after earnings, but then it reversed course and went straight up). At the time I sold, I said I don’t think there’s much upside at this point. It’s a $41 billion e-signature company.

Well, now I feel I was wrong. Let’s look back to the numbers I cited when I bought in June. I’ll add the most recent quarter:

Percentage Revenue Growth YoY:
37 33 37 34
37 41 40 38
39 45

Percentage Billings Growth YoY:
33 32 40 31
27 47 36 40
59 61

Here’s how many customers they’ve added the last several quarters:

Oct 2018: 25k
Jan 2019: 23k
Apr 2019: 31k
Jul 2019: 29k
Oct 2019: 25k
Jan 2020: 27k
Apr 2020: 68k
Jul 2020: 88k

I think it’s clear now, this wasn’t a one quarter bump. This is a very extreme level-shift. No one is going back to paper for signing documents. Times are changing. I would like to change my tune as well. I now very much do think there’s upside remaining for DOCU.

Bear

PS - Docusign has a lot of other things going on as well, besides just esignatures.

PPS - If you want even more numbers, check out this post from stocknovice: https://discussion.fool.com/docu-q2-34609983.aspx

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Percentage Revenue Growth YoY:
37 33 37 34
37 41 40 38
39 45

and based on the midpoint of management’s most recent guidance, implies Q3 revenue growth will be 44% and Q4 growth of 41%.

Three is almost certainly some sandbagging in the guidance, so I think the odds are very good that we’ll see a continuing acceleration of revenue growth in the next couple of quarters.

I freed up some funds earlier this month to reallocate to some of my highest conviction SAAS companies that were down off their highs, and DOCU was one that I added to.

My original DOCU shares have more than quadrupled since I bought them just a little over a year ago, but I feel like the company still has years of high growth ahead and felt comfortable to add, even after that run up. On the last earnings conference call, management said that most of their NRR is coming almost entirely from e-signature growth at their existing customers and it will still be at least a couple more quarters before we start to really see it get impacted positively by other offerings such as the agreement cloud. That is one of the things that makes me feel like their future will keep getting brighter.

mekong

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I have been into DOCU since 2018 the initial fool rec. And have added over time. In 2017 I first used DOCU to buy a house in Oakland California from high in the Andes Mtns at Machu Picchu. 143 pages of disclosure each needing initials or signature across a very poor internet connection using my mobile phone. I was very impressed.

The ease of use for real estate transactions is fantastic and very sticky from a service provider perspective. Even very small lenders in small towns are using this tool. They can live and work remote. I think the Contract Life Cycle and new Live Oak notary services will each do great. Last June we re-financed and the Covid masked notary came to our backyard for signatures. The notary looked older than the wind and I think they are a dying breed in the US. In the 2018 refinance, we went to the lenders office and signed using Docusign. I inquired why they could not just use our personal information from the initial 2017 purchase mortgage. They said they did not have a DB to store this kind of contract information.

After this month’s market pullback, most of the Q2 earnings stock gains are gone. So now I am buying some more for myself and family. This is a long term growth story with a high, unknown TAM as the new products come out. International growth is just starting and growing very fast. I do not see where competitor Adobe has impacted DOCU revenues.

The term docusign is now used like Zooming and Kleenex.

-zane

28 Likes

Bear

“PS - Docusign has a lot of other things going on as well, besides just esignatures.”

This advance today on Docusign offerings does appear to be significant when considering that every enterprise in the world must not only sign contracts; but, they must prepare them, do analyses, follow (up selling being just one benefit here), and renewing contracts as needed. Looks like Docusign now has all these bases covered with their AI/ML enabled offerings.

PR Newswire
SAN FRANCISCO, Sept. 30, 2020 /PRNewswire/ – As part of its drive to bring the power of artificial intelligence to the broader agreement process, DocuSign (DOCU) (NASDAQ:DOCU) today released DocuSign Analyzer, the AI-powered contract analytics solution designed for incoming agreements. (I’m not able to just copy and past links from SA Pro, sorry). This information is also on DOCU website https://www.docusign.com/live-webinar/negotiate-with-the-pow…

Jason

11 Likes

I’ve built up a 7% position since the beginning of June at prices ranging from $147 to $209 per share. The world really needs a dedicated high-quality agreement lifecycle management platform. Having the whole process in one trusted place shouldn’t be underestimated.

This is anecdotal but our family is going through a property sale and purchase. This combines roughly 4 major agreements: 2 transfers of ownership and 2 mortgages; some people go through even more when there is a bridge loan, for example. There can be even more loose documents to deal with depending on spousal situations and such. I’m working with some very high quality people at sizable companies and not once did we use digital collaboration! We had dozens of points of contact, some in person with our friend/agent who we interact with anyway so distancing wasn’t a concern, but many was the old print → sign → scan → send pattern. I use GoogleDrive to organize everything so at least we had a central file-share among all 4 parties (us, RE agent, legal, mortgage broker).

It wasn’t until the very end that our Mortgage broker recommended we try the “Adobe Fill & Sign” app. This was an amazing experience after the above pain.

  • My wife and I each downloaded the app.
  • I signed and initialed on paper and used the app’s photo option to capture these, which it digitized. My wife simply signed and initialed directly on the touch-screen and was happy.
  • I used the GoogleDrive app to pull the PDF to my phone and open it in Adobe Fill & Sign.
  • I signed and dated a dozen times, initialing every page, in minutes. Today’s date auto-completed so I didn’t have to type that out. In one spot the date had a box for each digit and the app detected and put the typed date right in the boxes.
  • When done I simply air-dropped the document to my wife who repeated the process on her phone!
  • We then uploaded the final PDF to GoogleDrive and let our Mortgage Broker know via WhatsApp that it was done.
  • He found something missing. Now if we did it the old way that would mean printing a 25 page document, fixing it, scanning each page by hand. Instead I just whipped out the app with the doc, added a signature, airdropped to my wife for her signature and uploaded it again. it took about 2 minutes to turn around the fix!

Note in this process we used:

  • GoogleDrive
  • Apple AirDrop
  • Adobe Fill & Sign

…We got it done, and it was a HUGE improvement over the paper way, BUT, I’m sure this wasn’t a very secure workflow and I really needed to know how each thing worked to make it happen, which is specialized knowledge and would be annoying to train a client let alone multiple professionals at different companies. It is dumb luck each was willing to share my Google Drive folder in the first place! Imagine if this was all in one TRUSTED platform! A place that would deliver notifications about the doc, allow for temporary markup, chat, video notary, etc, etc, etc.

Yes I know I used a competitor’s app here, but this is where the anecdotal part of this matters. It is the process we experienced here. I happen to use a competitor this one time but I’m not going to make an investment decision because of this one isolated experience. Instead I am taking what I learned in general and applying it to my thinking about Docusign as a small datapoint.

The Bottom Line
I no longer invest in stories or turnarounds or anything else that focuses on potential and future, yet I own shares of DOCU. This is because the business is doing well RIGHT NOW even without the contribution of the Agreement Cloud. I own the current business but the potential is also massive in my opinion. If they just keep doing what they are doing and also add best-in-breed collaborative tooling that, instead of 1 minute touch-points for a quick signature, captures multiple weeks of customer engagement, well that has to be a great thing!

35 Likes

I was listening to CNBC on my commute home this evening and Jim Cramer interviewed the DocuSign CEO. He talked about their new AI Contract Analyzer and it sounds very promising, particularly with respect to the legal profession.

Perhaps more interesting was the fact that the DOCU CEO casually mentioned he has had conversations with Zoom CEO Eric Yuan about potentially integrating Zoom and DocuSign in some way that would be extremely useful to businesses in a potentially disruptive way. As I have made great returns over the past 12-18 months on both ZM and DOCU and am still long on both companies, this was music to my ears. No guarantee that it will happen, but it makes a lot of sense and there’s really no downside for either company to a partnership between these amazing companies.

I dug around on the CNBC website and found a link to the interview - it’s worth a few minutes of your time as long as you can filter out Cramer’s cheerleading. Hopefully the link works:

https://www.cnbc.com/video/2020/09/30/docusign-ceo-on-digiti…

Thinking about adding to my DOCU position soon as it is down around 25% after great earnings.

Cheers,
Steve

16 Likes

Sstaylo, the link is a shortened version that doesn’t have the Anylyzer info or the Zm collaboration info. I did see it on YouTube TV minutes 17.13 to 21.28 (which starts with a little about the DocuNotary product.

It’s all basically a commercial; but, I do like hearing the CEO and the little he said was promising. I’ll paraphrase: Docu Analyser can do what a 5th year lawyer can do, what ever that means. The example was finding anything outside of best practices in a region or a particular industry. The Question if A Zoom call was going to have a place at the bottom to sign was answered by saying the Docu and Zm have been in negotiations ‘for some time’ for bringing in contract negotiations.

Thanks,

Jason

5 Likes

(Follow up to my reply above)

We had our big signing session yesterday. I noticed they use a pay-per-case software service for case admin so naturally I asked the lawyer/notary if they will switch to docusign at some point too. He said they can not use it for transfer of real property in Canada. Apparently it is due to the government office. This is from a law firm site so I am not including the link. It was a result of a general search and matches what our lawyer said:

While electronic signatures have made things much more efficient in a number of areas, they have not yet made their way to use for Land Title Office purposes. As a result, this means that we are not able to have clients sign their closing documents using AuthentiSign, DocuSign or other similar programs. In the majority of cases, it is a necessity that the buyer or seller sign documents in the physical presence of a lawyer, notary, or other approved witness in accordance with the Land Title Act and the Evidence Act of Canada.

So that final one-hour critical signing session still has to be done the old fashion way, but that is really a very small piece of the overall back-and-forth with so many offers, counteroffers, agreements, forms, waivers, applications, etc, which CAN be done digitally. Having them all in a standardized file structure and interface would be amazing!

I’d also like to see integrations with financial tracking software to replace my work with a spreadsheet to see all the numbers in one place. The need for transparency here is huge.

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