What happened
Shares of DocuSign (DOCU -1.45%) climbed by 17.7% in December, according to data provided by S&P Global Market Intelligence.
The rise is a welcome relief for the electronic signature specialist, but its shares are still down nearly 65% for the year.
Image source: Getty Images.
So what
DocuSign reported a solid set of financials for its fiscal 2023's third quarter, which ended Oct. 31. Revenue increased by 18% year over year to $645.5 million with subscription revenue making up close to 97% of total sales. Net loss per share clocked in at $0.15 but was still 23% better than what analysts had estimated. The company continued to churn out healthy free cash flow of $36.1 million for the quarter, though it was lower than the $90 million reported a year earlier.
DocuSign also reported a healthy increase in total customers to 1.32 million at the end of Q3. Nearly three years ago, the company's customer base stood at just 589,000. The pandemic had accelerated the uptake of digital signatures and many corporations embraced DocuSign's Agreement Cloud to enable the seamless and secure signing of agreements. The number of enterprise and commercial customers also surpassed 200,000, close to triple the 75,000 it had in fiscal 2020. Importantly, DocuSign is seeing a larger base of customers with higher annual contract values (ACVs), even as it reported an impressive net retention rate of 108% as of Oct. 31. Customers with more than $300,000 in ACV jumped past 1,000, more than doubling from the 437 reported at the end of fiscal 2020.
Now what
DocuSign projects its fourth-quarter revenue will come in at $639 million with billings at $710 million. This estimate represents a 10% year-over-year revenue increase and just a 6% year-over-year rise in billings, significantly lower than the 35% year-over-year jump in revenue and a 25% year-over-year increase in billings reported in the fourth quarter of fiscal 2022. Still, these numbers show that DocuSign continues to chalk up growth, albeit at reduced rates, as the effects of the pandemic normalize.
Investors should not forget, though, that management still sees a massive opportunity for growth in the future with a total addressable market estimated at $50 billion. DocuSign continues to enhance its offerings with the release of version three of its popular Agreement Cloud, which features numerous new capabilities such as enhanced workflows, personalized signing, and digital certificates for notarial transactions. With these improvements and more, the company appears well positioned to continue capturing a share of this burgeoning market in the years to come.
