Though DocuSign's (DOCU -3.69%) shares surged following its initial public offering earlier this year, the e-signature and cloud-based document company hasn't been exempt from a big sell-off in tech stocks recently. Shares have slid about 17% since Oct. 1.
The stock's decline makes the company's upcoming quarterly earnings release all the more interesting. Set to report its fiscal 2019 third-quarter results on Dec. 6, the company will get a chance to impress investors amid this slump in its stock price. Can DocuSign deliver?
Ahead of the company's third-quarter results next week, here are some key areas to watch.
Though DocuSign continues to see strong top-line momentum, the company's revenue growth has been decelerating recently. In the company's second quarter of fiscal 2019, revenue rose 33% year over year. This was slower than the 37% year-over-year revenue growth DocuSign posted in its first quarter.
For DocuSign's fiscal third quarter, management expects revenue between $172 million and $175 million -- up from $167 million in the second quarter of fiscal 2019. Analysts, on average, expect DocuSign to post third-quarter revenue of about $173.6 million.
Non-GAAP earnings per share
With its non-GAAP earnings per share coming in higher than consensus analyst estimates in both DocuSign's first and second quarter of fiscal 2019, investors will be watching this key profitability metric closely when DocuSign reports its third-quarter results.
On average, analysts expect DocuSign to report a third-quarter non-GAAP loss per share of $0.02, down from a non-GAAP profit per share of $0.03 in Q2.
Non-GAAP gross profit margin
One area where the strength of DocuSign's business model has been on display for the company's first two quarters as a publicly traded company is its non-GAAP gross profit margin. The company saw year-over-year improvements in this metric in both periods. In addition, DocuSign's non-GAAP gross profit margin has improved on a sequential basis as well, rising from 80% in Q1 to 81% in Q2.
For its third quarter, management guided for a non-GAAP gross profit margin between 78% and 81%. Given the company's recent strong performance with this metric, investors should look for it to come in at the high end of management's guidance range for the period.
Another aspect of the company's revenue worth watching will be its subscription revenue. Accounting for 95% of the total, the company's subscription revenue highlights DocuSign's software-as-a-service business model.
In DocuSign's second quarter, subscription revenue was up 35% year over year. Though this outpaced the 33% year-over-year growth DocuSign saw in its total revenue during the period, it was lower than the 39% growth in its subscription revenue in Q1.
Investors should look for this deceleration in DocuSign's subscription revenue to moderate in Q3. Specifically, they should look for subscription revenue to rise about 29% to 31% year over year during the period.
The company will release its third-quarter results after market close on Dec. 6.