Docusign: remembered

At the end of May I wrote in my portfolio review: [Docusign is] an example of a company the market seems to have forgotten. You can see that the stock price has just bounced around in the low $200’s, but revenue is rapidly increasing. I know revenue isn’t everything, but it’s a good place to start. Docusign’s revenue growth has accelerated to 50%+, and I expect that will continue for another quarter or two. It will eventually settle back to the 40’s, but that’s stellar considering the size of the revenue base. Of course I expect a beat and raise on revenue when they report this Thursday. I’ll be watching billings closely too – it seems to be a good leading indicator. Their 37% lowball guide certainly hasn’t excited the market. I’ll be happy with something over 40%, but 45%+ would be a huge beat and very welcome. Billings guidance for the next quarter will also be worth watching, although of course they will lowball it – higher than 37% would be a nice uptick, though.

The market has finally remembered Docusign. I should say, Docusign has made them remember. The quarter they just turned in was monstrous. Comparing to the hopes I had (bolded above):

Revenue did stay above 50% – they turned in 58%.
That was a big beat, and they also raised FY guide by $66m (from $1.973b to $2.039b).
Not only did billings beat the lowball guide of 37% – it crushed my 45% hope, as billings grew 54%!
And the raise in FY billings guide was even more than the revenue raise. They raised it $69m (from $1.896b to $1.965b).
I even got my uptick for next quarter billings guide (although it doesn’t seem to have any real meaning as they always beat it by a mile) from 37% to 38%.

I didn’t even mention customer adds because I figured they would trend down slowly, but they had a record quarter for new customers! They added 96,000 new ones. Wow! They also had record growth in customers that spend $300,000+ per year, as well as a record NRR of 125%, which means not only are new customers adopting Docusign at a record pace, but current customers are using them more and more.

This wasn’t just a good quarter. This was a revelation (billings especially). The market was lumping Docusign in with companies that benefited in 2020 from the environment but wouldn’t see that benefit carry through in 2021. The market was wrong. This quarter proved that things aren’t slowing back down for them at all. Companies are spending more and more with Docusign, and they aren’t looking back.

The stock which had been revisiting $200 which it first hit 11 months ago, has finally started moving up again. Borrowing once more from my month-end review:

11/30/2020: 227.88 (Market Cap Approx: $47b, TTM Revenue: $1.164b)
12/31/2020: $222.30 (Market Cap Approx: $47b, TTM Revenue: $1.297b)
01/29/2021: $232.89 (Market Cap Approx: $49b, TTM Revenue: $1.297b)
02/26/2021: $226.66 (Market Cap Approx: $48b, TTM Revenue: $1.297b)
03/31/2021: $202.45 (Market Cap Approx: $43b, TTM Revenue: $1.453b)
04/30/2021: $222.94 (Market Cap Approx: $47b, TTM Revenue: $1.453b)
05/28/2021: $201.62 (Market Cap Approx: $42b, TTM Revenue: $1.453b)
06/11/2021: $253.01 (Market Cap Approx: $53b, TTM Revenue: $1.625b)

Easy math tells you that the PS ratio is around 33…which is nowhere near the 50ish range of many of our other beloved companies. I think it’s a pretty reasonable valuation, relatively speaking.

All in all, not much bad to say for ole Docusign. I added quite a bit, and it’s now roughly tied with CRWD as my second largest position. Both of these are right behind Datadog.

I’ll continue to watch billings as a leading indicator, and my hope is that it stays near 50% if not above. I think renewals will be helping with that for many quarters. Companies that use Docusign are using them more and more, and they’re adding tons of new companies as well. It all bodes well for continued success for the company and the investment.