DocuSign announces earnings on Thursday, September 2 after the market closes. DocuSign has grown into a big position for me and I’m a little antsy on what to expect given some of the reopening slowdowns that some COVID beneficiaries have guided for.
DocuSign had a pretty solid Q1 with 58% YoY revenue growth, 8.9% sequentially. They guided for $436, so this was a 7.6% beat. However, they are seeing a slowdown in sequential revenue % growth:
Q2 '21: 3.4%* (guidance)
Q1 '21: 8.9%
Q4 '20: 12.5%
Q3 '20: 11.9%
Q2 '20: 15.2%
Q1 '20: 8%
(Using calendar year quarters)
The bulk of the slowdown in sequential revenue slowdown is largely due to Services revenue slowing down which generally is pretty volatile for a software company. One point to note is that their guidance was for 3.4% QoQ vs. in the previous quarter they guided for 1.2% and came in at 8.9%, so assuming they have the same type of beat then QoQ it will come in at 11.1% but I’m a little hesitant on that.
Subscription revenue has been strong sequentially but is slowing down too, just not as much as the aggregate revenue slowdown:
Q1 '21: 10.2%
Q4 '20: 11.9%
Q3 '20: 13.3%
Q2 '20: 15.2%
Q1 '20: 8.8%
Billings came in at $527.4 M which was 54.2% YoY and down slightly sequentially (but they guided for $457-$467 M, so this was a big beat of 12.9% vs. the top end of their guidance) and likely the big reason why the stock skyrocketed after Q1 earnings.
Their customer growth has been strong, with total customers accelerating sequentially in the previous quarter to 10.8% vs. 8.5% in the previous quarter. Enterprise customers declined sequentially from 10.6% to 8.8% however > 300k ACV customers accelerated sequentially to 12.4% their highest % sequential growth in 1.5 years. So this is nice.
Finally, NRR has been steadily increasing going from 117% in 2020 to 123% in 2021 to 125% in Q1. So, this is likely a potential tailwind for the company.
My expectation in Q2 is revenue of $516 M (10.4% sequentially and 51.4% YoY) which would break down to be $498 M in subscription revenue (10.2% sequentially and 53.9% YoY) and $18 M in services revenue (in line with previous trends) with an NRR of 125%+. Billings would also have to come in at $600 M given historical trends. I think anything less than that would be disappointing relative to the performance of other companies that we’ve discussed and potentially could result in a 5-10% sell-off, especially if billings comes in light which has historically been the reason for sell-offs or surges.
I would really welcome your input/feedback!