DocuSign (NASDAQ:DOCU) has certainly grown impressively, and investors have been handsomely rewarded. Since its 2018 IPO, shares are up by more than 500%.
However, there are still plenty of reasons to believe the best is yet to come. In this Jan. 7 Fool Live clip, Fool.com contributor Brian Withers walks investors through why the company's growth story could be just getting started.
Brian Withers: I will take over and pitch company that probably most people know, DocuSign. Just a quick run through on DocuSign's latest earnings report, which was Q3, you can see revenue up 53 percent, pretty astounding revenue growth off of the back of e-signature, its flagship e-signature service. What's even more exciting is the billings, which is essentially the annual contract value that they haven't fulfilled yet, is growing faster than revenue. That means more customers are signing up for longer, which is super exciting. Revenue visibility. Look at this, 96 percent on a subscription base. So they have a very stable, predictable revenue stream. Seventeen months contract, average dollar weighted contract, which means that companies are signing up for long term contracts which is also really cool. Customer growth, 46 percent total customers, but what I'm more excited about is the enterprise and commercial, which grew 64 percent. Over the nine months, over the three quarters since the coronavirus started, the company has increased its enterprise and commercial customers 50 percent. Customers has gone up 50 percent. So think about all the time that this company has been around over a decade and over the course of nine months, it increased its enterprise and commercial customers by 50 percent. Remember that. That's really important. We'll cover that a little bit later. Not only do customers sign up and are signing up for longer contracts, they're signing up for more every year. This 122 percent means customers pay 22 percent more every year for the service. They're expanding their usage of e-signature, they're embedding it in more processes across the business, and they're signing up for more services. They are also winning large customers and growing their largest customer base, over 300,000 in ACV as annual contract value. You can see that that's up 45 percent on a year-over-year basis. Let me talk a little bit about the next thing that DocuSign is getting into, which is why I'm excited about it for 2021. If you think about agreements and contracts, they're really across all phases of the business, whether it's facilities, procurement, legal, IT operations. More and more companies are focusing on their core business and they're relying on service providers and other companies to do the non-core businesses. That makes a company have a ton of agreements to manage all these service partners. That's good for DocuSign. DocuSign, originally, the e-signature part of it is here. But the whole contract process is very long between hammering out the agreement, getting it signed, getting it updated in the records, changing payment terms, or maybe setting up metrics and measurements to manage these contracts over time and renewing them, and looking for clauses and being consistent across the thing. If you think about all of those functions that have all of those contracts, today, they're probably all over the organization on people's hard drives and then Word docs, everywhere. But e-signature is the gateway to this bigger document management Agreement Cloud business. What they're talking about is managing this whole entire process. Let me flip through. Here's the total addressable market. For e-signature, it's 25 billion, and really, you can see DocuSign has got this one billion dollar market share here in this huge, massive business, and everybody has been focused on getting e-signature implemented in their organization as folks have gone to remote work environments. But this prepare, act, and manage, they barely even touch that, which is doubling their total addressable market. As they've added, remember there's 50 percent of all of these new customers, as they get into this, they're going to realize the benefits of digitizing this entire process. This e-signature is this half of the business, and you look at contract lifecycle management, insights, analyzers, notaries, there's a number of other key products that are really in the infancy of growth. You look at CLM, contract lifecycle management, you can generate agreements, you can track them, you can have consistent agreements over time. There's a central search of all repository for this stuff. Insights, you can see this really cool search terms. You can search across contracts and you can say, well, how many have the word hurricane in them? You can look at things across all your contracts and start to get a repository and get better contracts overtime. Then analyzer, this is an AI driven thing that helps with legal reviews, does some scoring, and really that makes a lot of sense. There's a bunch of clauses that are consistent across contracts, and having this be driven by an AI versus some legal person who is highly paid reading through this, which is probably not their favorite thing to do, is a huge potential. Then, if you've ever had to get anything notarized, DocuSign now has this video agreement notary process, where you can do it digitally from your home.