E-signature company DocuSign (NASDAQ:DOCU) beat analysts' expectations in Q2 FY2024, with revenue up 10.5% year on year to $687.7 million. The company also expects next quarter's revenue to be around $689 million, in line with analysts' estimates. Turning to EPS, DocuSign made a non-GAAP profit of $0.72 per share, improving from its profit of $0.44 per share in the same quarter last year.
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DocuSign (DOCU) Q2 FY2024 Highlights:
- Revenue: $687.7 million vs analyst estimates of $677.4 million (1.52% beat)
- EPS (non-GAAP): $0.72 vs analyst estimates of $0.66 (9.69% beat)
- Revenue Guidance for Q3 2024 is $689 million at the midpoint, roughly in line with what analysts were expecting
- The company reconfirmed its revenue guidance for the full year of $2.73 billion at the midpoint
- Free Cash Flow of $183.6 million, down 14.4% from the previous quarter
- Gross Margin (GAAP): 78.8%, in line with the same quarter last year
- DocuSign's board of directors has authorized an increase of $300 million to its existing stock repurchase program for a total aggregate amount of up to $500 million of DocuSign's outstanding common stock.
Founded by Seattle-based entrepreneur Tom Gonser, DocuSign (NASDAQ:DOCU) is the pioneer of e-signature and offers software as a service that allows people and organisations to sign legally binding documents electronically.
The catch phrase "digital transformation" originally referred to the digitization of documents within enterprises. The growth of digital documents has spurred an explosion of collaboration within and between businesses, which in turn is driving the demand for e-signature and content management platforms.
Sales GrowthAs you can see below, DocuSign's revenue growth has been strong over the last two years, growing from $511.8 million in Q2 FY2022 to $687.7 million this quarter.
This quarter, DocuSign's quarterly revenue was once again up 10.5% year on year. We can see that DocuSign's revenue increased by $26.3 million quarter on quarter, which is a solid improvement from the $1.81 million increase in Q1 2024. Shareholders should applaud the acceleration of growth.
Next quarter's guidance suggests that DocuSign is expecting revenue to grow 6.75% year on year to $689 million, slowing down from the 18.3% year-on-year increase it recorded in the same quarter last year. Looking ahead, analysts covering the company were expecting sales to grow 5.9% over the next 12 months before the earnings results announcement.
ProfitabilityWhat makes the software as a service business so attractive is that once the software is developed, it typically shouldn't cost much to provide it as an ongoing service to customers. DocuSign's gross profit margin, an important metric measuring how much money there's left after paying for servers, licenses, technical support, and other necessary running expenses, was 78.8% in Q2.
That means that for every $1 in revenue the company had $0.79 left to spend on developing new products, sales and marketing, and general administrative overhead. DocuSign's impressive gross margin allows it to fund large investments in product and sales during periods of rapid growth and achieve profitability when reaching maturity. It's also comforting to see its gross margin remain stable, indicating that DocuSign is controlling its costs and not under pressure from its competitors to lower prices.
Key Takeaways from DocuSign's Q2 Results Sporting a market capitalization of $10.7 billion, more than $1.44 billion in cash on hand, and positive free cash flow over the last 12 months, we believe that DocuSign is attractively positioned to invest in growth.
It was encouraging to see DocuSign top analysts' revenue expectations this quarter. EPS also beat estimates and extension of the share buyback plan is something that the market typically likes to see. Zooming out, we think this was a decent quarter, showing that the company is staying on target. The stock is up 3.53% after reporting and currently trades at $54 per share.
The author has no position in any of the stocks mentioned in this report.
