DocuSign (NASDAQ:DOCU) has been among the group of companies that inadvertently benefited from the COVID-19 pandemic this year. The public health crisis accelerated adoption of its core electronic signature products as businesses had to adapt to unprecedented conditions while maintaining productivity and digitally inking paperwork.

But investors weren't too impressed with the company's second-quarter release in early September -- mostly due to concerns around billings deceleration -- causing shares to reach record highs only to immediately pull back. The electronic signature specialist just put those fears to rest.

Person looking at a laptop displaying DocuSign interface

Image source: DocuSign.

Billings bouncing back

DocuSign reported fiscal third-quarter results last week, and they showed an impressive 53% jump in revenue to $382.9 million, easily beating the consensus estimate of $361.3 million in sales. That all resulted in adjusted earnings per share of $0.22, similarly crushing the $0.10 per share in adjusted profits that Wall Street analysts were modeling for.

Perhaps more encouraging was that billings growth accelerated on a sequential basis, soaring 63% to $440.4 million. Billings had grown 61% in the fiscal second quarter to $405.7 million, and DocuSign's guidance had called for a sequential dip in billings to $385 million at the midpoint. That predicted slowdown was a meaningful contributor to investor pessimism in recent months, but the third-quarter results show that the concerns were overblown.

Billings is an important metric for software-as-a-service (SaaS) companies because it serves as a proxy for future revenue that is in the pipeline waiting to be recognized. The rebound was driven in part by new customer additions. DocuSign added approximately 73,000 clients during the quarter to bring its total to 822,000. Of that total, around 113,000 are enterprise and commercial customers.

There's more where that came from

Better yet, DocuSign's billings forecast for fiscal Q4 calls for another sequential jump. Billings are expected to be in the range of $512 million to $522 million next quarter. While that guidance does represent deceleration when measured by year-over-year growth rates -- 41% growth at the midpoint -- sequential gains are arguably more relevant this year due to the transformational effects that the pandemic has had on DocuSign's business. The world was quite different a year ago.

Chart showing quarterly billings and guidance

Data source: SEC filings. Chart by author. Fiscal quarters shown.

Here's how DocuSign's guidance for the full fiscal 2021 year compares to fiscal 2020.

Metric

Fiscal 2020 Actual

Fiscal 2021 Guidance

Growth (YOY)

Revenue

$974 million

$1.43 billion

47%

Subscription revenue

$918.5 million

$1.36 billion

48%

Billings

$1.1 billion

$1.7 billion

55%

Data source: SEC filings. YOY = year over year.

Billings growth topping revenue growth is an encouraging sign because it shows that the revenue pipeline is robust. Some companies that have benefited from COVID-19 may not see those gains sustain once vaccines are available, but the good news for DocuSign is that once enterprise and commercial customers have experienced the benefits of digital transformations, they're unlikely to revert to their old ways.

"When customers go from paper-based processes to digital agreement processes, they do not go back," CEO Dan Springer said on the conference call with analysts. "We believe that trend will hold when the pandemic subsides, and the DocuSign's value will persist no matter how the future of work unfolds."