DocuSign Stock Analysis

Earnings Highlights

• First quarter revenue was $589 million, representing 25% growth year-over-year.
• International revenue grew 43% year-over-year, making up 25% of total revenue versus 21% in Q1 of last year.
• Professional services and other revenue was $19.4 million, an increase of 13% year-over-year.
• Added nearly 67,000 new customers in Q1, an increase of 25% year-over-year.
• DocuSign announced an expansion of its global strategic partnership with Microsoft to offer new DocuSign Agreement Cloud integrations and capabilities across Microsoft’s business solutions. As part of the agreement, Microsoft and DocuSign will also expand the use of each other’s products within their own organizations.
• Appointment of Inhi Cho Suh from IBM, who will transition from being a DocuSign board member to becoming President of Product and Technology
• Appointment of Steve Shute as President of Worldwide Field Operations. Prior to joining DocuSign, Steve served as the President of Global Sales & GTM for Customer Success at SAP.

Risks

• A 25% growth rate is too slow for a growing SaaS company.
• Professional service revenue only increases by 13%, which means there are not many business customers who require deep integration.
• Operating expenses growth (27%) is growing quicker than the revenue growth.
• The management team is not stable as multiple leaders have been replaced.

Catalysts

• A strategic partnership with Microsoft could make Docusign an acquisition target of Microsoft in the future.

Conclusion

Bearish for both short term and long term

• DocuSign’s topline growth is too slow for a small SaaS company.
• DocuSign’s product has a low switch cost.
• DocuSign’s business customers are relatively small.

Better Choices

• Salesforce (CRM): has similar growth and valuation but a much wider moat under the current risky macro environment.
• Snowflake (SNOW): a SaaS company with a much higher growth rate (102%) and unique products that are widely used by large businesses.