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Cloud Stocks: DocuSign Acquires Amid COVID

Posted on Monday, Sep 28th 2020

The current remote working conditions have accelerated the adoption of digital signature services. According to a recent report, the global digital signature market was expected to grow from $1.5 billion in 2019 to $23.9 billion by 2030 at 29% CAGR. Early this month, electronic signature solutions leader DocuSign (NASDAQ: DOCU) reported a strong second quarter that beat market estimates.

DocuSign’s Financials

DocuSign recently reported its quarterly results. Revenues for the second quarter grew 45% to $342.2 million, significantly ahead of the market’s estimates of $319 million. Net loss was $64.5 million compared with a net loss of $68.6 million a year ago. On an adjusted basis, net income was $0.17 per share, compared with the market’s expectations of $0.08 per share.

Billings grew 61% to $405.7 million driven by demand for its eSignature solutions. It added more than 88,000 new customers, bringing its total to nearly 750,000 worldwide. Customers with ACVs greater than $300,000 grew 41% year over year to a total of 520 customers.

By segment, Subscription revenues grew 47% to $280.9 million. Professional services and other revenue grew 25% to $18.6 million. International revenue grew over 59% to $67 million. 

Cash, cash equivalents, restricted cash and investments were $740.6 million at the end of the quarter.

For the third quarter, DocuSign forecast revenues of $358-$362 million, compared with the Street’s forecast of $355million. DocuSign expects to end the year with revenues of $1.384-$1.388 billion, ahead of the market’s forecast of $1.317 billion.

In August, DocuSign announced Kamal Hathi as its new CTO. Kamal was the chief product and technology officer at Trader Interactive, a leading provider of online lifestyle vehicles marketplaces and had spent over 20 years at Microsoft, most recently as GM for its SaaS analytics and business intelligence solution, Power BI. As CTO, Kamal will oversee the development and execution of DocuSign’s technology roadmap, including the expansion of the DocuSign Agreement Cloud.

DocuSign’s Acquisitions Focus on Agreement Cloud and AI

Agreement Cloud is a strong focus area for DocuSign this year. DocuSign recently introduced several new features in the DocuSign Agreement Cloud 2020 Product Release 2 to support customers in their digital transformations. DocuSign eSignature for Workplace from Facebook allows access to DocuSign eSignature via a chatbot within Facebook from Work. Workflow Templates for DocuSign CLM allows business users to quickly configure common contract processes such as approvals, signature, and routing.

Even amid the pandemic, DocuSign continues to make acquisitions. In July, DocuSign expanded its Agreement Cloud offerings with the $38 million acquisition of Liveoak Technologies. For agreements that would normally require people to be physically present together, Liveoak enables the transaction to be done remotely via videoconferencing. The company’s platform includes several other technologies specific to remote agreements, such as video identity verification, collaborative form-filling, an integration with DocuSign eSignature, and a detailed audit trail. Based in Austin, Liveoak was founded in 2014 and had raised $13.5 million in venture funding. It was already a close partner of DocuSign.

DocuSign plans to leverage Liveoak’s technology and expertise to accelerate the launch of DocuSign Notary, a new product for remote online notarization, where signers and the notary public are in different places. The beta release of DocuSign Notary is currently slated for November 2020.

In May DocuSign closed its $188 million acquisition of Seal Software, a provider of artificial intelligence-powered contract discovery and contract management software solutions. DocuSign was also working closely with Seal, reselling Seal’s flagship product as DocuSign Intelligent Insights since 2018. It allows you to rapidly search large collections of agreements by legal and business concepts and get actionable insights. Founded in 2010, Seal had raised $58 million in venture funding including $15 million from DocuSign in 2019.

DocuSign is using the Seal acquisition to deliver a broader range of purpose-built AI models for needs like data privacy, Brexit, LIBOR, and analyzing agreements for COVID-19-related risks such as “force majeure” clauses. It is also accelerating the development of Seal’s technology and its integration with other Agreement Cloud products, such as DocuSign CLM. It also plans to advance its AI analytics infrastructure, which originated from DocuSign’s 2017 acquisition of technology from machine learning startup Appuri.

Docusign’s stock reflects its strong performance. Its stock is trading at year high levels of $212.36 with a market capitalization of $39.3 billion. It hit a 52-week high of $290.23 in just before its earnings in early September and a 52-week low of $59.58 in September last year. DocuSign is one of select few stocks that were unaffected by the pandemic.

This segment is a part in the series : Cloud Stocks


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