Many companies have benefitted from pandemic stay-at-home orders as commerce shifted to a virtual world. Online is where business is conducted these days, and that's a sweet spot for digital documents leader DocuSign (DOCU -3.18%). A strong Q1 earnings report with better than expected revenue, plus confidence the trend will continue through Q2 indicate that investors should consider signing the digital dotted line with a company leading a market expected to eclipse $6.1 billion by 2026.
Image Source: DocuSign
Digital transformation. It's kind of a big deal.
COVID-19 has radically changed the business environment. Handshakes and hand signed contracts are out. It's a virtual workspace now, and businesses that are transforming to digital operations are uniquely poised to weather the pandemic and thrive in the post-coronavirus world. DocuSign says it is uniquely poised to acclerate this process for its customers with its cloud-based suite of solutions.
"Our strong first quarter results reflect our ability to help organizations accelerate their digital transformation as they adapt to the changing business environment, magnified by COVID-19, DocuSign CEO Dan Springer said in an earnings call press release. "Led by eSignature, our Agreement Cloud offerings are not only helping customers carry on with business in this time of crisis, but will continue to deliver value as the world emerges from it." Springer said customers range from businesses taking "first steps" in the process and others that "are expanding their initiaves."
Launched in San Francisco in 2003 and publicly traded since 2018,
DocuSign is the leader in the e-signature market with 59.73% market share as of June 9, according to sales and marketing analytics firm Datanyze, ranking it at the top of 27 e-signature companies. Its closest rivals are private companies RightSignature (8.43%), SignNow (7.49%) and Adobe (ADBE -1.98%) with a 4.57% market share for Adobe Sign.
In September 2019 DocuSign bought document generation and contract lifecycle management company SpringCM, instantly adding more than 600 customers across the financial services, technology, and public sector to its portfolio.
DocuSign saw a 30% rise in customers from Q1 FY20 to Q1 FY21, from 508,000 to 661,000. Enterprise and commercial customers grew 49% over the same period, from 60,000 to 89,000. Total revenue for Q1 FY21 was $297.0 million, an increase of 39% year-over-year. That beat Wall Street projections of $281.1 million.
CFO Michael Sheridan said DocuSign added more than 10,000 new direct customers in the quarter as well as 58,000 self-service customers, an increase of 43% year-over-year.
Image Source: DocuSign
What's ahead?
Sheridan said the company anticipates that "total revenue will range between $316 million and $320 million in Q2 and $1.313 billion to $1.317 billion for fiscal '21."
DocuSign stock has zoomed over 95% since Wednesday March 11, the day the World Health Organization declared the COVID-19 outbreak a pandemic, closing at $75.00 and growing to $146.54 by June 8.
Dominating the e-signature market is one thing, but DocuSign has its sights in the clouds, or should I say, The Cloud. That's why I think it's a buy right now and a strong play for the future. It's Agreement Cloud is a suite of more than a dozen applications that allow businesses to manage contracts, including drafting and signing. The platform integrates with more than 350 existing systems like Salesforce, SAP, Workday, and more to cover the entire life cycle of the agreement process. Agreement Cloud has taken DocuSign from dominating the e-signature market to business contracts, where it also plans to dominate — even on the other side of the pandemic.
"Even when the COVID-19 situation is behind us, we don’t anticipate customers returning to paper or manual-based processes,” CEO Dan Springer said.
