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Cloud Stocks: DocuSign Resilient to COVID-19

Posted on Wednesday, Mar 18th 2020

According to a Fortune Business Insights report, the global digital signature market is estimated to grow to $6.1 billion by the end of 2026 from $879.6 million in 2018. DocuSign (Nasdaq: DOCU), a leading player in the market, recently announced its quarterly results that beat estimates.

DocuSign’s Financials

DocuSign’s fourth quarter revenues grew 38% over the year to $274.9 million, ahead of the market’s estimates of $266.5 million. Billings grew 40% to $366.9 million. Net loss was $47.4 million, or $0.26 a share, compared with a loss of $66.2 million, or $0.40 a share, a year ago. On an adjusted basis, net income was $0.12 a share compared with $0.06 a share reported a year ago, and significantly ahead of the market’s forecast of $0.05 per share.

By segment, Subscription revenues grew 38% to $258.1 million and Professional services and other revenues grew 38% to $16.8 million.

For the full fiscal year 2019, revenues grew 39% to $974 million with Subscription revenues growing 38% to $918.5 million and Professional services and other revenues growing 495 to $55.5 million. On an adjusted basis, net income grew from $0.09 per share a year ago to $0.31 per share.

For the first quarter, DocuSign forecast revenues of $280-$284 million, compared with the Street’s forecast of $275.7 million. DocuSign expects to end 2020 with revenues of $1.272-$1.276 billion, ahead of the market’s forecast of $1.21 billion.

DocuSign’s Seal Acquisition

During the quarter, DocuSign announced the $188 million acquisition of Seal Software, a provider of artificial intelligence-powered contract discovery and contract management software solutions. Seal Software was set up in 2010 to provide contract discovery, data extraction, and analytics solutions for its customers. Using its solutions, organizations can find contracts across their networks, understand risks or opportunities hidden in said contracts and place them in a centralized repository. It helps organizations maximize revenue opportunities, reduce costs, and mitigate risks associated with contractual documents, systems, and processes. It uses AI and ML tools to allow business users to extract data; perform contract analytics, and access data visualization solutions.

DocuSign plans to leverage the acquisition to enhance its AI capabilities for its CLM offering. The integration will help DocuSign provide its customers with a “faster, more efficient agreement process”. It was already reselling Seal’s analytics and machine learning application as part of DocuSign Agreement Cloud. Prior to the acquisition, Seal Software was privately held and had raised $58 million from investors including Toba Capital, Tern, and DocuSign itself. DocuSign had invested $15 million in Seal in 2019.

The stock market has taken quite a hit due to the concerns of the rapidly spreading COVID-19 pandemic. However, DocuSign appears to be resilient to this dip. Analysts believe that the number of agreements being signed may decline in the near future, but digital signing will increase as people will avoid meeting each other face-to-face. DocuSign also believes that since most of its implementations are done remotely, COVID-19 could accelerate the transition of companies from physical to digital document signings.   

Its stock is currently trading at $77.32 with a market capitalization of $13 billion. It touched a 52-week high of $92.55 in February this year. It had fallen to a 52-week low of $43.13 in August last year.

This segment is a part in the series : Cloud Stocks


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