Possible Docusign Red Flag

Investment Analysis Clubs Saul’s Investing Discussions
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I’m going through the latest earnings call. Just as I stated earlier DOCU’s CEO touted their existing market leading integrations in regard to enhancing their ability to sell systems of agreement. Hey, good call by me then.

However, one also gets sensitive to hyperbole. The call stated 37% revenue growth to $178 million including Spring, and without Spring revenue growth was 34%. Thus one can calculateSpring revenue. The answer is Talend like and not consistent w the world dominating hyperbolus language The math indicates Spring had $4 million in revenues or 2% of total revenues for the quarter.

Now I don’t know if this counts for a full quarter of revenue for Spring, but if so Spring is quite a tiny business. I compete against law firms w more revenue. Rarely, it it happens.

That implies that around 13x revenues was paid for Spring. But this needs to be looked into. Talend is the poster boy for exaggerating economic reality w hyperbole, TTD is doing the same with CTVat the moment, both by implication, and I refuse to invest in a company that must resort to hyperbole to maintain its perception of growth. $4 million a quarter hardly justifies an equal billing statement for future growth prospects.

I am going to follow this up. While, my way anyways, is to pay less attention to valuation specifics, I pay obsessed attention to growth relative to expected/perceived growth. It is this that enables these upside surprises.

TBD and market not opens until Tuesday either to examinetbis issue.

Just doing my due diligence to check my enthusiasms.

Tinker

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Tinker,

You are right on the revenue Springcm is adding. In the earnings call, when they give the forecast for next quarter, they say Spring is adding $4-5 M in revenue.

SO about 10-12x revenue is what they paid for Spring.

I might be wrong, but I thought Docusign already had a systems of agreement product they were working on/selling and then added Spring to improve the functionality and capabilities.

Jim

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Here is what the CEO said in the 1st quarter earnings call, before the Spring acquisition:

“We also saw strong growth, expansion and development of our international business. And we continue to deliver product innovation across our evolving System of Agreement platform in the areas of preparing, signing, acting on and managing agreements. I believe these results highlight the commitment, passion and drive that DocuSign has for the next big platform opportunity in cloud computing.”

So Spring is an add on to the system of agreement platform they were already working on/selling.

Don’t think they have ever broken out how big this business is separately, so we don’t know if Spring was bigger or smaller than the system of agreement business they already had going.

Jim

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