DocuSign IncDOCU74,55 $
In mid-June, DocuSign presented a report for the first quarter of 2022, which investors did not like. The next day, the shares of the American company in the premarket collapsed by more than 25%. Basic moments:
- revenue increased by 25%, up to $0.589 billion, vs market consensus of $0.582 billion;
- DocuSign's total customer base increased by 67,000 new users, up to 1.24 million accounts;
- the company failed to turn a profit in the quarter: net loss per share increased by 2,5 Times, to −0.14 $;
- adjusted net earnings per share was 0,38 $, slightly short of the market forecast - 0,46 $;
- free cash flow increased year-on-year by 42%, up to $0.175 billion.
Sales structure of the company
DocuSign divides its business management in two different ways: by type of earnings and geography of sales.
Earning type. DocuSign's main form of user interaction is subscription-based, by issuing which customers get full access to the company's services. Besides, there are additional services, which are mainly focused on customer service and have little effect, since they bring only about 3% of total income.
In the first quarter of 2022, the total revenue of the American company grew by 25%, up to $0.589 billion, thanks to subscription sales, whose income increased by 26%, up to $0.569 billion. The main reason for these results in the main segment is the increased demand for DocuSign services..
Sales geography. More than 1.2 million users from 180 countries have already subscribed to DocuSign services. So that shareholders have a greater understanding of how this business works, management divided it into two geographical divisions: American and international segments.
The main engine of growth in the first quarter of 2022 was the international segment, which increased by 44%, up to $0.144 billion, thanks to a strong influx of new customers. In the local market, the company showed more modest results, increasing sales by 21%, up to $0.444 billion, due to last year's high base.
Sales structure of the company, billion dollars
| By type of income | 1к2021 | 1к2022 | The change |
|---|---|---|---|
| Subscription revenue | 0,452 | 0,569 | 26% |
| Additional income | 0,017 | 0,019 | 12% |
| total revenues | 0,469 | 0,589 | 25% |
| By sales geography | 1к2021 | 1к2022 | The change |
| American segment | 0,368 | 0,444 | 21% |
| International segment | 0,100 | 0,144 | 44% |
| total revenues | 0,469 | 0,589 | 25% |
Structure of the company's sales by type of earnings, billion dollars
Sales structure of the company by sales geography, billion dollars
Profit
DocuSign is a fast growing American company, which is still investing a lot in its future development. That is why now the main task of management is to maintain the current growth rates by 20-30%, and not go into a strict plus on profit.
In the first quarter of 2022, net loss increased by 2,5 Times, from −0.004 billion to −0.014 billion dollars. The main reason is the strong growth in operating costs, which completely offset the excellent sales at the beginning of 2022. DocuSign increased investment in sales and marketing by 26%, in research and development 32%.
Wherein, if we discard one-time factors and look at the adjusted indicators, DocuSign results are not so bad: adjusted net income decreased in the first three months of the current year by only 16%, from $0.092 billion to $0.077 billion, and free cash flow, vice versa, grew up on 42%, up to $0.175 billion, thanks to better operating results.
Key financial results of the company, billion dollars
| 1к2021 | 1к2022 | The change | |
|---|---|---|---|
| Revenue | 0,469 | 0,589 | 25% |
| EBITDA | 0,009 | 0,002 | −78% |
| Net profit | −0,008 | −0,027 | 238% |
| Adjusted net income | 0,092 | 0,077 | −16% |
| FCF | 0,123 | 0,175 | 42% |
| net debt | 0,236 | 0,082 | −65% |
What happened to stocks
Over the past year, the shares of the American company have shown a truly catastrophic dynamics.: DocuSign quotes on the stock exchange NASDAQ collapsed from 300 BC 65 $. The reason was the unsatisfactory financial results in the second and third quarters of 2021, as well as a weak outlook for 2022.
At the end of 2021, DocuSign management published a negative report for the third quarter, in which the company informed investors, that the growth rate of its revenue will decrease from the current 50 to 35%. Investors did not like this forecast very much., as a result, the shares collapsed the next day immediately on 26%.
In the first quarter of 2022, the situation completely repeated itself.: the company announced a further decline in growth rates from 35% at the end of 2021 to 18% by the end of 2022. Major investment houses reacted negatively to this forecast., downgrading their recommendations, and investors staged a sale, crashing DocuSign stock the next day immediately on 26%.
Forecasts
Now the company's shares have fallen to their March 2020 lows., and DocuSign can buy at a reasonable price. For example, multiplier P / S over the past year has decreased from 35 to 6. But the main question, which interests investors, — will management be able to maintain the current momentum of growth or will they see a third decline since 2023? 18% to, say, 10—15%.
As long as everything points to, that the situation is difficult, but not hopeless, and management is trying to find a way out of it. For example, at the beginning of June, 2022 DocuSign announced expansion of partnership with Microsoft, under which Microsoft integrates DocuSign services into its products. In general, this should have a positive impact on the growth of new users..
Besides, if we return to the financial forecast, in general, it turned out to be only slightly worse than market expectations - in the next quarter, DocuSign plans to reach the following financial results:
- Total revenue will increase by 18%, to 0.6-0.604 billion dollars against the consensus forecast of 0.604 billion dollars. For comparison: growth rate in the second quarter of 2021 — +50%.
- Subscription revenue will be at the level of 0.583-0.587 billion dollars.
- Gross profit margin will remain at the same level and will be 79-81%, and operating profit will be at the level of 16-18%.
- The total number of shares will increase to 205-210 million units.
Forecast for 2022:
- Total revenue will increase by 18%, up to 2.47-2.482 billion dollars, against consensus forecast of $2.48 billion. Subscription revenue will be at the level of 2.394-2.406 billion dollars.
- Gross profit margin will be 79-81%, and operating profit will be at the level of 16-18%.
- The total number of shares will increase to 205-210 million units.
What's the bottom line?
DocuSign posted mixed financial results in the first quarter of 2022: The company's revenue increased by 25%, and adjusted net income decreased by 16%. In addition, management provided a disappointing outlook for all of 2022., which recorded a further decline in the company's growth rate.
However, the current drop in shares from 300 to 65 $ already looks redundant. And if management manages to stabilize the situation, for example, keeping growth rates at the level +20%, then the shareholders, probably, will see DocuSign quotes return to at least three-digit levels. Otherwise, the fall may continue..
