Fools:
DocuSign reported its Fiscal Year 2019 Q4 and Year End Results on March 14th after the close of the market. The company beat analysts estimates with Non-GAAP earning per share of $0.06 (beats by $0.05) and Revenue of $199.73M (beats by $6.13M).
Share price opened down on March 15th and ended the day down 4%.
Below are the key metrics I follow for DOCU. While the company continues to perform quite well in all areas, there are two metrics I want to keep an especially close eye on: Dollar Based Net Retention, which was reported at 112% for Q4. This is at the bottom end of DOCU’s goal of 112%-119% on a quarterly basis. Anything lower than 112% might suggest that the DocuSign’s land and expand strategy is not as robust as I would like. Additionally, revenue growth is slowing year over year. Over time I want to see this re-accelerate as the company implements is strategy to implement its System of Agreement platform.
Here are the numbers:
**Total Customers:**
Q1 Q2 Q3 Q4
400k 429k 454k 477k
**Customers with annual contract value (ACV) >$300K:**
Q1 Q2 Q3 Q4
215 246 285 310
**Dollar Based Net Retention**
Q1 Q2 Q3 Q4
114% 115% 114% 112%
**Revenue (rounded):**
Q1 Q2 Q3 Q4 Sum
2016 250
2017 84 92 97 108 381
2018 113 125 131 149 518
2019 156 167 178 200 701
**Revenue Growth (Y/Y):**
2017 52%
2018 36%
2019 34%
**Billings:**
Q1 Q2 Q3 Q4
2019 169 172 198 262
**Gross Margin (Non-GAAP):**
2019 Q1 Q2 Q3 Q4
80% 81% 79% 80%
**Earning per Diluted Shares (non-GAAP):**
2019 Q1 Q2 Q3 Q4
$.01 $.03 $.00 $.06
**Free Cash Flow (mil):**
2019 Q1 Q2 Q3 Q4
89 18 (-4.3) 23
**Net Cash from Ops (mil):**
2019 Q1 Q2 Q3 Q4
15 23 4 34
**Cash & Equivalents (mil):**
2019 Q1 Q2 Q3 Q4
270M 819M 1Bil 934M
Highlights from DocuSign Press Release:
https://investor.docusign.com/investors/press-releases/press…
Fourth Quarter Financial
Total revenue was $199.7 million, an increase of 34% year-over-year. Subscription revenue was $187.6 million, an increase of 37% year-over-year. Professional services and other revenue was $12.2 million, an increase of 5% year-over-year.
Billings were $262.4 million, an increase of 31% year-over-year.
GAAP gross margin was 74%, compared to 79% in the same period last year. Non-GAAP gross margin was 78% compared to 80% in the same period last year.
GAAP net loss per basic and diluted share was $0.40 on 167 million shares outstanding compared to GAAP net loss per share of $0.20 in the fourth quarter of fiscal 2018 on 34 million shares outstanding.
Non-GAAP net income per diluted share was $0.06 based on 188 million shares outstanding compared to non-GAAP net income per share of $0.01 in the fourth quarter of fiscal 2018 based on 42 million shares outstanding.
Net cash provided by operating activities was $34.1 million, compared to $32.0 million in the same period last year.
Free cash flow was $22.8 million compared to free cash flow of $28.7 million in the same period last year.
Cash, cash equivalents, restricted cash and investments were $933.6 million at the end of the quarter.
Fiscal 2019 Financial Highlights
Total revenue was $701.0 million, an increase of 35% year-over-year. Subscription revenue was $663.7 million, an increase of 37% year-over-year. Professional services and other revenue was $37.3 million, an increase of 10% year-over-year.
Billings were $801.4 million, an increase of 34% year-over-year.
GAAP gross margin was 73%, compared to 77% in fiscal 2018. Non-GAAP gross margin was 80% compared to 79% in fiscal 2018.
GAAP net loss per basic and diluted share was $3.16 on 135 million shares outstanding compared to GAAP net loss per share of $1.66 in fiscal 2018 on 32 million shares outstanding.
Non-GAAP net income per diluted share was $0.09 based on 159 million shares outstanding compared to non-GAAP net loss per share of $0.43 in fiscal 2018 based on 32 million shares outstanding.
A reconciliation of GAAP to non-GAAP financial measures has been provided in the tables included in this press release. An explanation of these measures is also included below under the heading “Non-GAAP Financial Measures and Other Key Metrics.”
Operational and Other Financial Highlights
DocuSign for Salesforce Essentials. The company announced the launch of DocuSign for Salesforce Essentials on the Salesforce AppExchange. Paired with Salesforce Essentials, the product helps small businesses accelerate the completion of agreements, ranging from quotes to contracts to sales orders and more.
DocuSign for Forests Initiative. The company will commit $1.5 million this year to support organizations doing critical work to preserve the world’s forests-and it plans to donate more over time. DocuSign will also invite new and existing customers to improve their environmental practices by moving more of their paper-based processes onto DocuSign. In return, the company will donate 1% of the expanded revenue to forest-protection causes.
DocuSign Winter 2019 Product Release. The company announced several product updates, including a new user experience for the DocuSign app for Apple iOS devices, enhancements to the 21 CFR Part 11 module for life sciences industries regulated by the U.S. Food and Drug Administration, and accessibility enhancements for eSignature sending and signing.
Some interesting information from conference call:
https://www.fool.com/earnings/call-transcripts/2019/03/14/do…
On potential for big Federal Gov’t contract:
Sterling Auty – JP Morgan – Analyst
Yeah, thanks. Hi, guys. I wanted to touch upon one of the last elements you mentioned, the dedicated data center for federal. Given the passage of the legislation, it looks like you’re ramping up for that opportunity. Any insight you can give us in terms of what we should expect in terms of the uptake from that vertical in this fiscal year?
Dan Springer – Chief Executive Officer
Sure. I mean, I think the perspective we have, Sterling, is this is, as we’ve always said, a huge long-term opportunity for us, and when we looked at the opportunity getting fed-ramp certified, our perspective was this was an increase to our TAM. This gave us an opportunity to have just simply a bigger opportunity. One of the challenges with the federal government, as I’m sure you’ll understand, is the cycle time for getting things done can sometimes be slower than we see with some of our commercial segments. So we have a lot of enthusiasm with this opportunity and the idea that it’s gonna create even more. And I would argue some more urgency in that the agencies have six months to put together their plan, but it is to put together a plan. And we’re not gonna assume any significant change to our fiscal year '20 revenues from this, but we are looking at this again as a further opportunity to be more bullish about the TAM in the long term.
On integration of Spring CM:
Stan Zlotsky – Morgan Stanley – Analyst
All right. Perfect. Let me start off with Spring CM. So sounds like that acquisition is doing very well under the DocuSign umbrella. Dan, how are you thinking about Spring CM and the selling motion and the go-to-market there for fiscal '20? And then, Mike, did you – maybe I missed it – did you give us a contribution from Spring CM in the quarter? And then I have a quick follow-up.
Dan Springer – Chief Executive Officer
I’ll start, and then you can talk about your views. Yeah, so the way we’re thinking about it, our goal, Stan, was by the time we got to the field kickoff that I just referred to, our GKO that occurred this week, was we wanted to have the Springers, as I particularly affectionately call them given my name, fully integrated into DocuSign by kickoff, and we accomplished that. And so we have integrated the sales plans and the sales organization. We even have a seasoned sales leader from DocuSign that we’ve had move to Chicago, which is where Spring headquarters is located, and an opportunity to work closely and really bring the two businesses together. So going forward we’re thinking about it as one integrated business, and we’re really bullish that that’s gonna set us up for a fantastic 2020.
On Spring CM and System of Agreement roll out:
Walter Pritchard – Citigroup – Analyst
Hi, thanks. Two questions. First, maybe on Spring, you talked about benefits to core signing as well as selling Spring stand-alone. How do you think that will play out next year as you go to market kind of more deliberately with strategy that you set at sales kickoff and so forth in terms of selling the add-on versus the core as the benefit there? And then I did have a follow-up.
Dan Springer – Chief Executive Officer
Sure. Well, I think there’s a couple different motions. Look, as we talked about before, this construct of a system of agreement, every company has one, again whether they think about it that way or not. Many do. Many don’t. We have the ability and we have now trained up our sales team to go and talk about our broader solution set for that overall system of agreement that they have, and we will lead with that messaging and positioning.
At the same time, we realize we’re still gonna have plenty of customers that in the marketplace come out and say e-signature is a huge opportunity for us to digitally transform our company. And they wanna buy an e-signature solution. They know that DocuSign is the clear and strong leader in that space, and that’s what they’re gonna ask for. And in that situation we will smile and sell them an e-signature solution, right? That’s the logical thing to do. But we will have the opportunity in that process to say, “We’re excited to get you started with e-signature. Here’s our overall vision for how you should think in the long-term about that system of agreement.” And Spring will be a key part to showing them some of the other components of that overall system.
So I think you’re gonna see us have both of those sales motions, and I think the answer is we’re gonna be dictated by the individual customer and how they wanna buy. But the key is, whether we’re selling them a broader solution up front or not, we’re positioning them for the broader opportunity going forward.
On international growth:
Walter Pritchard – Citigroup – Analyst
And then, Dan, a follow-up, or just on international, how are you thinking about 2020 relative to countries that may be inflecting especially in Europe and any countries that we should be watching?
Dan Springer – Chief Executive Officer
Yeah. So a couple of things, and we did note the investment with the Toronto office, which we’re super excited about. We think Canada is a great opportunity for us within international in North America, and then I think you’re spot on. Europe is the biggest growth opportunity for us outside of North America, from a scale standpoint. It is the biggest theater we have today. But I would tell you, I’m also very excited about what we see in Latin America, and I also think that the overall APAC opportunity, you know, we’ve been very sort of Australia-centric as most software companies are when they head into Asia Pac. But we’ve seen some great successes moving further north, and I think you’re gonna see us investing pretty aggressively across the board. But you’re absolutely right that Europe will be the single largest contributor to that international growth.
Finally, I urge anyone interested in this company to review this presentation, it is chuck full of great information about DocuSign, where it is today and where it plans to go in the future:
https://s22.q4cdn.com/408980645/files/doc_financials/2019/Q4…
That’s all I got for now Fools. I hope this is helpful to all of you.
Best, Swift…
DOCU Ticker Guide
Long DOCU
Not uncommon with the SaaS companies we follow. Regarding law of large numbers: remember the company believes the runway is very long for their offerings. Springer consistently claims a $25B TAM just for the e-signature business and at least double that for SOA. So if they execute the way we hope they do, these are the early days for DocuSign.