Thanks for the write up, Kyle. On the percentage growth you gave, I want to emphasize the number that to my eyes, came out of nowhere. I’ve done so below:
Revenue:
37 33 37 34
37 41 40 38
39
Billings:
33 32 40 31
27 47 36 40
59
In the call when asked to explain the spike in billings the CFO suggested focusing on TTM billings rather than on an outlying Q.
TTM billings growth% = 45.5%
59% billings growth! That was more than they’ve seen since they’ve been public…maybe since they were tiny. That’s a great number. You (and the CFO) are right to caution that one quarter of billings should not be overstated, good or bad. But it was enough to make me sit up in my chair.
The tick up to 39% YoY revenue growth wasn’t as eye-popping, but it was a big beat (they had guided for 33% growth). Looking forward, though, I think growth will be in the 40%+ range which IS significant acceleration! They raised guidance for full year revenue and billings significantly, but I believe they will be raising it more soon. Why?
Customer growth this quarter was off the charts. Here’s how many 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
This quarter they added more than twice as many customers as in any quarter before! Next quarter should naturally be strong, as it will be the first full quarter for all these new customers. And then of course there is also the “expand” to come.
I took a mid sized position between Thursday after hours, and Friday. I see them as kind of a freeroll. They’re reasonably valued now*, and I could even see them being bid up a bit. Any revenue acceleration would be gravy, as would any of their increased revenue that makes it to the bottom line (they already eke out a little EPS). This is no hyper-growth company, but they are in the enviable position of experiencing tailwinds instead of headwinds. This is allowing them to raise guidance when many other companies are lowering it. And this is why I believe they are set up for some strong quarters ahead.
Bear
*Docusign shares have almost doubled in 2020 already. I believe the market is starting to see them as an inevitable winner, like it does Shopify and Okta and Veeva. When this happens, these companies are never again classically underpriced. With more than $1b in annual revenue, Docusign seems pretty entrenched to me as well. With no issues like a business model transition looming over them, Docusign is rightly seen as simple, high margin SaaS.