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Why DocuSign Management Doesn't See Coronavirus Headwinds in its Business

By Billy Duberstein - Mar 14, 2020 at 2:45PM

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The company posted strong earnings and offered reasons it should withstand the impacts of COVID-19.

E-Signature pioneer DocuSign (DOCU 6.70%) reported its fourth-quarter and full-year 2020 earnings on Thursday, March 12 -- a day on which the stock market dropped by the highest percentage since the 1987 Black Monday crash.

Despite the inauspicious timing, DocuSign's management hasn't seen any impacts on its business thus far, though it is still obviously early days. However, even if coronavirus leads to a global recession, DocuSign management still believes it can keep up its impressive growth trajectory. Here's why.

Cartoon  image of small business people electronically signing a huge contract with an electronic stylus.

Image source: Getty Images.

The results

DocuSign capped of an impressive fiscal 2020 (its fiscal year ends on Jan. 31), with strong revenue and billings growth along with impressive guidance:

Metric

FY 2020

FY 2021 Guidance

Revenue

39%

31%

Billings

38%

30%

Non-GAAP operating margin

5%

7%

Data source: DocuSign earnings presentation and conference call. Guidance calculations by author.

While the upcoming year would mark a deceleration, it's not that much of a slowdown, considering DocuSign is growing off a larger base. The company is set to cross a $1 billion revenue run rate this year, putting it in an elite group of new software-as-a-service companies. On the conference call with analysts, management reiterated its estimate of a $25 billion total addressable market for its core eSignature products, and a $50 billion overall market when counting all products from its Agreement Cloud suite.

What about COVID-19?

Some may wonder how DocuSign can project such confidence in the face of the COVID-19 outbreak. First, implementation at customers in a remote way doesn't appear to be an issue, with CEO Dan Springer saying:

[T]he vast majority of our implementations are done remote. And of course, if you think about the perfect example of that it's our web and mobile customers, where they never actually have to speak. Not only do they don't have to have us in person they don't need to speak to us to onboard. ... We do find with some of our larger enterprise customers that they get more value when some of the installation is done on their premises. But we have not had the opportunity in the past to consider doing that completely remotely. And it may be in the new way of business over the next X period of time here then we'll do more of it. 

Springer followed that up with some figures from the company's recent Momentum conference. Despite having to conduct the conference virtually, it still appeared to be a success.

Normally, we'd expect from the San Francisco event, maybe 1,000, 2,000 people would be here and it would be great. When we move to virtual, we basically had five times that number of people participate. So we had a big increase. And we also saw that there was a higher absolute number of leads generated than last year's in-person event. 

Finally, one analyst asked if management expects DocuSign's growth to be affected by a global recession, should one happen as a result of COVID-19. Springer responded:

I don't. Because, I think, for most of our customers, at least half of the focus is around efficiency. And people see the incredibly high ROI. And I can't speak for all-digital transformation programs, of course, but as I think about the ones that are DocuSign-centric, people are laser-focused on the ROI they get from getting rid of those manual processes, the wasted labor, getting rid of things like the transportation cost, the shipping, et cetera. 

Increasing innovation and efficiency should keep DocuSign going

Management also announced it was acquiring Seal Software, an artificial intelligence start-up that's been a partner of DocuSign's for the past two years, with DocuSign reselling Seal's software as DocuSign Intelligence Insights. Seal's product is an exciting example of the extent to how much DocuSign can save its customers time and money.  

Seal's advanced AI engine can "rapidly search large collections of agreements by legal concept rather than just by keywords," meaning it can "automatically extract, analyze, and compare contract terms, and it can even identify areas of risk and business opportunity for our customers."

As an example, one customer reduced the time it spent on contract legal reviews by 75%. And as anyone who has ever paid lawyers knows, they can be quite expensive!

For those looking to put money to work during this market swoon, identifying digital transformation companies like DocuSign, which save business customers time and money, sounds like a good place to start.

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