DocuSign Announces Third Quarter Fiscal 2023 Financial Results

SAN FRANCISCO, Dec. 8, 2022 /PRNewswire/ — DocuSign, Inc. (NASDAQ: DOCU), which offers the world’s #1 e-signature product as part of its industry leading lineup, today announced results for its fiscal quarter ended October 31, 2022. DocuSign, Inc. (PRNewsFoto/DocuSign, Inc.) “We delivered solid third quarter results, and are pleased with […]

SAN FRANCISCO, Dec. 8, 2022 /PRNewswire/ — DocuSign, Inc. (NASDAQ: DOCU), which offers the world’s #1 e-signature product as part of its industry leading lineup, today announced results for its fiscal quarter ended October 31, 2022.

DocuSign, Inc. (PRNewsFoto/DocuSign, Inc.)

DocuSign, Inc. (PRNewsFoto/DocuSign, Inc.)

“We delivered solid third quarter results, and are pleased with the continued progress against our critical priorities,” said Allan Thygesen, CEO of DocuSign. “DocuSign is the pioneer and leader in eSignature. This gives us a strong foundation to create and deliver a delightful and differentiated workflow experience, making agreements smarter and easier for companies of all sizes.  I look forward to continuing to advance our business, as we both innovate and operate at scale to deliver value for all of our stakeholders.”

Third Quarter Financial Highlights

  • Total revenue was $645.5 million, an increase of 18% year-over-year. Subscription revenue was $624.1 million, an increase of 18% year-over-year. Professional services and other revenue was $21.4 million, an increase of 27% year-over-year.

  • Billings were $659.4 million, an increase of 17% year-over-year.

  • GAAP gross margin was 80% compared to 79% in the same period last year. Non-GAAP gross margin was 83% compared to 82% in the same period last year.

  • GAAP net loss per basic and diluted share was $0.15 on 201 million shares outstanding compared to $0.03 on 198 million shares outstanding in the same period last year.

  • Non-GAAP net income per diluted share was $0.57 on 206 million shares outstanding compared to $0.58 on 208 million shares outstanding in the same period last year.

  • Net cash provided by operating activities was $52.5 million compared to $105.4 million in the same period last year.

  • Free cash flow was $36.1 million compared to $90.0 million in the same period last year.

  • Cash, cash equivalents, restricted cash and investments were $1.1 billion at the end of the quarter.

A reconciliation of GAAP to non-GAAP financial measures has been provided in the tables included in this press release. An explanation of these measures is also included below under the heading “Non-GAAP Financial Measures and Other Key Metrics.”

Operational and Other Financial Highlights:

  • 2022 Gartner Magic Quadrant Leader. For the third year in a row, DocuSign was named a Leader in the 2022 Magic Quadrant for CLM research report by Gartner, Inc. This year, DocuSign was placed highest among the 18 vendors evaluated on the “ability to execute” axis, and highly on the “completeness of vision” axis.

  • DocuSign Agreement Cloud 2022 Product Release 3. DocuSign announced many new product capabilities with highlights in the following areas:

Outlook

The company currently expects the following guidance:

▪  Quarter ending January 31, 2023 (in millions, except percentages):

Total revenue

$637

to

$641

Subscription revenue

$624

to

$628

Billings

$705

to

$715

Non-GAAP gross margin

82 %

to

83 %

Non-GAAP operating margin

20 %

to

22 %

Non-GAAP diluted weighted-average shares outstanding

205

to

210

▪  Year ending January 31, 2023 (in millions, except percentages):

Total revenue

$2,493

to

$2,497

Subscription revenue

$2,423

to

$2,427

Billings

$2,626

to

$2,636

Non-GAAP gross margin

81 %

to

82 %

Non-GAAP operating margin

18 %

to

20 %

Non-GAAP diluted weighted-average shares outstanding

205

to

210

The company has not reconciled its guidance of non-GAAP financial measures to the corresponding GAAP measures because stock-based compensation expense cannot be reasonably calculated or predicted at this time. Accordingly, a reconciliation has not been provided.

Webcast Conference Call Information

The company will host a conference call on December 8, 2022 at 1:30 p.m. PT (4:30 p.m. ET) to discuss its financial results. A live webcast of the event will be available on the DocuSign Investor Relations website at investor.docusign.com. A live dial-in will be available domestically at 877-407-0784 or internationally at 201-689-8560. A replay will be available domestically at 844-512-2921 or internationally at 412-317-6671 until midnight (ET) December 22, 2022 using the passcode 13734316.

About DocuSign

DocuSign helps organizations connect and automate how they navigate their systems of agreement. As part of its industry leading product lineup, DocuSign offers eSignature, the world’s #1 way to sign electronically on practically any device, from almost anywhere, at any time. Today, over 1.3 million customers and more than a billion users in over 180 countries use the DocuSign platform to accelerate the process of doing business and simplify people’s lives. For more information visit http://www.docusign.com

Copyright 2022. DocuSign, Inc. is the owner of DOCUSIGN® and all its other marks (www.docusign.com/IP).

Investor Relations:
DocuSign Investor Relations
[email protected]

Media Relations:
DocuSign Corporate Communications
[email protected]

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that are based on our management’s beliefs and assumptions and on information currently available to management, and which statements involve substantial risk and uncertainties. Forward-looking statements include all statements that are not historical facts and can be identified by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. Forward-looking statements in this press release include, among other things, statements under “Outlook” above and any other statements about expected financial metrics, such as revenue, billings, non-GAAP gross margin, non-GAAP diluted weighted-average shares outstanding, and non-financial metrics, such as customer growth, as well as statements related to our expectations regarding our growth. They also include statements about our future operating results and financial position, our business strategy and plans, market growth and trends, and our objectives for future operations. These statements are subject to substantial risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements.

These risks and uncertainties include, among other things, risks related to our expectations regarding global macro-economic conditions, including the effects of inflation, rising and fluctuating interest rates and market volatility on the global economy; our ability to estimate the size and growth of our total addressable market, and the development of the market for our products, which is new and evolving; our ability to effectively sustain and manage our growth and future expenses, achieve and maintain future profitability, attract new customers and maintain and expand our existing customer base; our ability to effectively implement and execute our restructuring plan; the impact of the coronavirus pandemic (the “COVID-19 pandemic”) or its abatement, on our business, results of operations, financial condition, and future profitability and growth; the impact of the evolving COVID-19 pandemic on the businesses of our customers, partners and suppliers, and the economy; our ability to scale and update our platform to respond to customers’ needs and rapid technological change; the effects of increased competition in our market and our ability to compete effectively; our ability to expand use cases within existing customers and vertical solutions; our ability to expand our operations and increase adoption of our platform internationally; our ability to strengthen and foster our relationships with developers; our ability to expand our direct sales force, customer success team and strategic partnerships around the world; the impact of any data breaches, cyberattacks or other malicious activity on our technology systems; our ability to identify targets for and execute potential acquisitions; our ability to successfully integrate the operations of businesses we may acquire, and to realize the anticipated benefits of such acquisitions; our ability to maintain, protect and enhance our brand; the sufficiency of our cash, cash equivalents and capital resources to satisfy our liquidity needs; limitations on us due to obligations we have under our credit facility or other indebtedness; our failure or the failure of our software to comply with applicable industry standards, laws and regulations; our ability to maintain, protect and enhance our intellectual property; our ability to successfully defend litigation against us; our ability to attract large organizations as users; our ability to maintain our corporate culture; our ability to offer high-quality customer support; our ability to hire, retain and motivate qualified personnel, including executive level management; our ability to successfully manage and integrate executive management transitions; uncertainties regarding the impact of general economic and market conditions, including as a result of regional and global conflicts or related government sanctions; our ability to successfully implement and maintain new and existing information technology systems, including our ERP system; and our ability to maintain proper and effective internal controls. Additional risks and uncertainties that could affect our financial results are included in the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our annual report on Form 10-K for the fiscal year ended January 31, 2022 filed on March 25, 2022, our quarterly report on Form 10-Q for the quarter ended October 31, 2022, which we expect to file on December 8, 2022 with the Securities and Exchange Commission (the “SEC”), and other filings that we make from time to time with the SEC. In addition, any forward-looking statements contained in this press release are based on assumptions that we believe to be reasonable as of this date. Except as required by law, we assume no obligation to update these forward-looking statements, or to update the reasons if actual results differ materially from those anticipated in the forward-looking statements.

Non-GAAP Financial Measures and Other Key Metrics

To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use certain non-GAAP financial measures, as described below, to understand and evaluate our core operating performance. These non-GAAP financial measures, which may be different than similarly-titled measures used by other companies, are presented to enhance investors’ overall understanding of our financial performance and should not be considered a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

We believe that these non-GAAP financial measures provide useful information about our financial performance, enhance the overall understanding of our past performance and future prospects, and allow for greater transparency with respect to important metrics used by our management for financial and operational decision-making. We present these non-GAAP measures to assist investors in seeing our financial performance using a management view, and because we believe that these measures provide an additional tool for investors to use in comparing our core financial performance over multiple periods with other companies in our industry. However, these non-GAAP measures are not intended to be considered in isolation from, a substitute for, or superior to our GAAP results.

Non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP income from operations, non-GAAP operating margin, non-GAAP net income and non-GAAP net income per share: We define these non-GAAP financial measures as the respective GAAP measures, excluding expenses related to stock-based compensation, employer payroll tax on employee stock transactions, amortization of acquisition-related intangibles, amortization of debt discount and issuance costs, acquisition-related expenses, fair value adjustments to strategic investments, executive transition costs, lease-related impairment and lease-related charges, restructuring and other related charges, as these costs are not reflective of ongoing operations and, as applicable, other special items. The amount of employer payroll tax-related items on employee stock transactions is dependent on our stock price and other factors that are beyond our control and do not correlate to the operation of the business. When evaluating the performance of our business and making operating plans, we do not consider these items (for example, when considering the impact of equity award grants, we place a greater emphasis on overall stockholder dilution rather than the accounting charges associated with such grants). We believe it is useful to exclude these expenses in order to better understand the long-term performance of our core business and to facilitate comparison of our results to those of peer companies and over multiple periods. In addition to these exclusions, we subtract an assumed provision for income taxes to calculate non-GAAP net income. We utilize a fixed long-term projected tax rate in our computation of the non-GAAP income tax provision to provide better consistency across the reporting periods. For fiscal 2023, we determined the projected non-GAAP tax rate to be 20% tax rate.

Free cash flow: We define free cash flow as net cash provided by operating activities less purchases of property and equipment. We believe free cash flow is an important liquidity measure of the cash that is available (if any), after purchases of property and equipment, for operational expenses, investment in our business, and to make acquisitions. Free cash flow is useful to investors as a liquidity measure because it measures our ability to generate or use cash in excess of our capital investments in property and equipment. Once our business needs and obligations are met, cash can be used to maintain a strong balance sheet and invest in future growth.

Billings: We define billings as total revenues plus the change in our contract liabilities and refund liability less contract assets and unbilled accounts receivable in a given period. Billings reflects sales to new customers plus subscription renewals and additional sales to existing customers. Only amounts invoiced to a customer in a given period are included in billings. We believe billings is a key metric to measure our periodic performance. Given that most of our customers pay in annual installments one year in advance, but we typically recognize a majority of the related revenue ratably over time, we use billings to measure and monitor our ability to provide our business with the working capital generated by upfront payments from our customers.

For a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measure, please see “Reconciliation of GAAP to Non-GAAP Financial Measures” below. In this press release, we have not reconciled our guidance of non-GAAP financial measures to the corresponding GAAP measures because stock-based compensation expense cannot be reasonably calculated or predicted at this time.

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

Three Months Ended
October 31,

Nine Months Ended
October 31,

(in thousands, except per share data)

2022

2021

2022

2021

Revenue:

Subscription

$    624,055

$    528,573

$ 1,798,500

$ 1,473,266

Professional services and other

21,408

16,890

57,839

53,119

Total revenue

645,463

545,463

1,856,339

1,526,385

Cost of revenue:

Subscription

102,524

84,579

315,614

247,105

Professional services and other

27,018

31,396

83,048

87,892

Total cost of revenue

129,542

115,975

398,662

334,997

Gross profit

515,921

429,488

1,457,677

1,191,388

Operating expenses:

Sales and marketing

313,783

275,619

938,062

777,110

Research and development

115,934

102,603

354,693

282,670

General and administrative

85,553

54,624

224,587

168,314

Restructuring and other related charges

28,082

28,082

Total operating expenses

543,352

432,846

1,545,424

1,228,094

Loss from operations

(27,431)

(3,358)

(87,747)

(36,706)

Interest expense

(1,456)

(1,485)

(4,737)

(4,826)

Interest income and other income (expense), net

820

(940)

(2,827)

4,034

Loss before provision for (benefit from) income taxes

(28,067)

(5,783)

(95,311)

(37,498)

Provision for (benefit from) income taxes

1,799

(107)

7,006

2,033

Net loss

$    (29,866)

$      (5,676)

$  (102,317)

$    (39,531)

Net loss per share attributable to common stockholders, basic and diluted

$        (0.15)

$        (0.03)

$        (0.51)

$       (0.20)

Weighted-average number of shares used in computing net loss per share attributable to common stockholders, basic and diluted

201,393

197,597

200,569

195,996

Stock-based compensation expense included in costs and expenses

Cost of revenue—subscription

$      11,665

$       8,095

$      35,272

$     21,652

Cost of revenue—professional services and other

6,767

7,270

18,327

19,250

Sales and marketing

57,925

49,663

166,574

134,720

Research and development

35,506

30,074

108,689

76,811

General and administrative

23,384

14,338

58,314

38,103

Restructuring and other related charges

5,590

5,590

 

CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

(in thousands)

October 31, 2022

January 31, 2022

Assets

Current assets

Cash and cash equivalents

$              632,620

$              509,059

Investments—current

342,730

293,763

Accounts receivable, net

422,612

440,950

Contract assets—current

13,609

12,588

Prepaid expenses and other current assets

68,814

63,236

Total current assets

1,480,385

1,319,596

Investments—noncurrent

129,783

94,938

Property and equipment, net

196,127

184,664

Operating lease right-of-use assets

92,155

126,021

Goodwill

352,423

355,058

Intangible assets, net

75,232

98,816

Deferred contract acquisition costs—noncurrent

329,958

311,835

Other assets—noncurrent

75,521

50,337

Total assets

$           2,731,584

$           2,541,265

Liabilities and stockholders’ equity

Current liabilities

Accounts payable

$                47,176

$                52,804

Accrued expenses and other current liabilities

96,227

91,377

Accrued compensation

146,297

160,163

Convertible senior notes—current

36,921

Contract liabilities—current

1,088,197

1,029,891

Operating lease liabilities—current

34,713

37,404

Total current liabilities

1,449,531

1,371,639

Convertible senior notes, net—noncurrent

684,861

718,487

Contract liabilities—noncurrent

15,242

16,725

Operating lease liabilities—noncurrent

81,237

126,340

Deferred tax liability—noncurrent

10,400

9,316

Other liabilities—noncurrent

21,807

23,255

Total liabilities

2,263,078

2,265,762

Stockholders’ equity

Common stock

20

20

Treasury stock

(1,785)

(1,532)

Additional paid-in capital

2,108,062

1,720,013

Accumulated other comprehensive loss

(34,244)

(4,809)

Accumulated deficit

(1,603,547)

(1,438,189)

Total stockholders’ equity

468,506

275,503

Total liabilities and stockholders’ equity

$           2,731,584

$           2,541,265

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

Three Months Ended
October 31,

Nine Months Ended
October 31,

(in thousands)

2022

2021

2022

2021

Cash flows from operating activities:

Net loss

$   (29,866)

$     (5,676)

$ (102,317)

$  (39,531)

Adjustments to reconcile net loss to net cash provided by operating activities

Depreciation and amortization

21,532

20,166

63,976

61,163

Amortization of deferred contract acquisition and fulfillment costs

44,806

37,283

134,381

100,759

Amortization of debt discount and transaction costs

1,243

1,255

3,725

3,848

Non-cash operating lease costs

7,002

6,527

20,468

20,176

Stock-based compensation expense

140,835

109,441

392,765

290,536

Deferred income taxes

(23)

(1,110)

3,045

(2,360)

Other

5,441

3,159

13,540

5,598

Changes in operating assets and liabilities:

Accounts receivable

(83,084)

(20,869)

18,338

17,969

Prepaid expenses and other current assets

8,435

(2,523)

(7,593)

(12,890)

Deferred contract acquisition and fulfillment costs

(53,305)

(52,528)

(161,620)

(147,946)

Other assets

(8,452)

(7,434)

(15,707)

(11,290)

Accounts payable

2,948

16,146

(1,739)

6,703

Accrued expenses and other liabilities

(2,094)

(5,136)

873

11,886

Accrued compensation

(1,808)

(9,734)

(15,827)

(22,781)

Contract liabilities

15,010

24,423

56,824

161,047

Operating lease liabilities

(16,083)

(7,979)

(33,430)

(24,212)

Net cash provided by operating activities

52,537

105,411

369,702

418,675

Cash flows from investing activities:

Cash paid for acquisition, net of acquired cash

(6,388)

Purchases of marketable securities

(105,956)

(117,134)

(402,249)

(302,762)

Sales of marketable securities

68

3,070

Maturities of marketable securities

121,590

79,900

311,769

193,071

Purchases of strategic and other investments

(1,000)

(250)

(3,625)

(750)

Purchases of property and equipment

(16,477)

(15,392)

(53,590)

(43,926)

Net cash used in investing activities

(1,843)

(52,808)

(147,695)

(157,685)

Cash flows from financing activities:

Repayments of convertible senior notes

(3,121)

(16)

(64,835)

Repurchases of common stock

(38,034)

(63,041)

Payment of tax withholding obligation on net RSU settlement and ESPP purchase

(23,263)

(94,534)

(67,120)

(323,109)

Proceeds from exercise of stock options

383

9,358

11,009

21,176

Proceeds from employee stock purchase plan

12,375

22,910

36,526

46,077

Net cash used in financing activities

(48,539)

(65,387)

(82,642)

(320,691)

Effect of foreign exchange on cash, cash equivalents and restricted cash

(6,612)

(1,909)

(14,652)

(2,472)

Net increase (decrease) in cash, cash equivalents and restricted cash

(4,457)

(14,693)

124,713

(62,173)

Cash, cash equivalents and restricted cash at beginning of period (1)

638,849

518,857

509,679

566,336

Cash, cash equivalents and restricted cash at end of period (1)

$   634,392

$   504,164

$  634,392

$  504,163

(1) Cash, cash equivalents and restricted cash included restricted cash of $1.8 million and $0.6 million at October 31, 2022 and January 31, 2022.

 

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(Unaudited)

Reconciliation of gross profit and gross margin:

Three Months Ended
October 31,

Nine Months Ended
October 31,

(in thousands)

2022

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