Since going public in April, DocuSign's (DOCU 2.29%) business has seen some impressive growth. In fact, revenue growth reaccelerated in the company's recently reported fiscal third quarter as the company added 25,000 customers.
But there's more to the e-signature and cloud-based document company's story than its third-quarter results. To dive beyond the financial results and better understand the company, look no further than DocuSign's third-quarter earnings call. Three interesting topics discussed during the call include the company's addressable market, growth in $300,000 customers, and billings.
Image source: DocuSign.
A $50 billion-plus TAM
DocuSign CEO Daniel Springer believes DocuSign has substantial room for growth.
"First, every organization on the planet signs agreement -- big businesses, small businesses, government agencies and not for profit," Springer said. "As a result, our [total addressable market (TAM)] is substantial. We estimate our core eSignature business' TAM at $25 billion, which is largely under-penetrated."
"This TAM is becoming available as organizations worldwide make the transformation from paper to eSignature," Springer added.
Notably, however, this addressable market only represents the opportunity Springer sees in its e-signature business. Including DocuSign's complementary document offerings and its broader set of products made possible through its recent acquisition of cloud-based document and contract management company SpringCM, Springer believes the company's TAM "at least" doubles.
Huge growth in large customers
One of the key drivers to DocuSign's 37% year-over-year revenue growth in its third quarter of fiscal 2019 was impressive growth in customers with annual contract value (ACV) of $300,000 or greater, management said.
CFO Michael Sheridan explained:
We continue to achieve strong upsell in Q3, resulting in a net dollar retention rate of 114%. Strong upselling was also reflected in the number of customers at ACV greater than $300,000 which grew 57% year-over-year to a total of 285 customers.
Making a good case for DocuSign's ability to grow customer spend, most of this growth in customers with ACV over $300,000 came from existing customers who increased their volume and expanded their uses cases, Sheridan said.
Strength in billings
DocuSign's billings, or payments collected in advance of revenue recognition, surged 40% year over year in its fiscal third quarter. This was a significant acceleration compared to DocuSign's 32% increase in billings in its second quarter of fiscal 2019. Asked during the earnings call if there was a one-time driver for this variance, such as the renewal of a very large client, Sheridan said this wasn't the case.
"[Billings were] definitely driven by strength of quarterly performance," Sheridan noted. But the CFO reminded investors that this metric isn't a perfect indicator of revenue trends. "As we've talked about, we guide billings, but it is the statistic that can be a bit more variable than others."
Given DocuSign's impressive addressable market and its strength with large customers and billings, strong growth looks poised to persist.
