DOCU stock ran up 10% in after-hours trading as the company reported earnings and revenue beats.

DOCU stock in the 15-minute time frame surges 10% in after-hours trading (brown shaded area) on December 5, 2019.

DocuSign, Inc. (NASDAQ: DOCU), which offers the world’s #1 eSignature solution as part of the DocuSign Agreement Cloud for digitally transforming how organizations prepare, sign, act on, and manage agreements, today announced results for its fiscal quarter ended October 31, 2019.

DocuSign reports Q3 non-GAAP EPS 11c, versus the consensus 3c. The company reports Q3 revenue of $249.5M, versus the consensus $239.86M. The company also raised its outlook for FY20 revenue and issued Q4 revenue guidance that beat estimates.

“We delivered another quarter of strong growth in billings and revenue, a significant expansion of our global customer base, and our eighth quarter of non-GAAP profitability,” said Dan Springer, CEO, DocuSign. “Customers and partners alike are seeing the benefits of having a single platform that connects and automates the entire agreement process. As we continue to expand our suite of Agreement Cloud products, we believe DocuSign is poised to lead the next big category of cloud platforms.”

Third Quarter Financial Highlights

  • Total revenue was $249.5 million, an increase of 40% year-over-year. Subscription revenue was $238.1 million, an increase of 41% year-over-year. Professional services and other revenue was $11.4 million, an increase of 28% year-over-year.
  • Billings were $269.4 million, an increase of 36% year-over-year.
  • GAAP gross margin was 75%, compared to 75% in the same period last year. Non-GAAP gross margin was 79% compared to 79% in the same period last year.
  • GAAP net loss per basic and diluted share was $0.26 on 178 million shares outstanding compared to GAAP net loss per share of $0.31 on 168 million shares outstanding in the same period last year.
  • Non-GAAP net income per diluted share was $0.11 on 191 million shares outstanding compared to non-GAAP net income per share of $0.00 on 192 million shares outstanding in the same period last year.
  • Net cash used in operating activities was $1.9 million, compared to net cash provided by operating activities of $4.3 million in the same period last year.
  • Free cash flow was negative $14.1 million in the third quarter of fiscal 2020 compared to free cash flow of negative $4.3 million in the same period last year.
  • Cash, cash equivalents, restricted cash and investments were $912.0 million 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

  • Extending the DocuSign Agreement Cloud for Salesforce. Ahead of Dreamforce in November, DocuSign announced two new offerings. The first was DocuSign Negotiate, a dedicated solution for smaller companies that simplifies and accelerates the process of generating, redlining, and negotiating agreements-the current version of which is optimized for the Salesforce ecosystem. The second was DocuSign CLM, the next generation of SpringCM’s enterprise-level contract lifecycle management solution. DocuSign eSignature for Salesforce CPQ was also enhanced this quarter, and now enables companies to collect a signer’s payment method at the time of signature, storing it in Salesforce Billing for future or recurring payments.
  • Real estate solution developments. DocuSign released DocuSign Rooms API v2.0 on the Developer Center, which enables DocuSign Rooms functionality to be easily integrated into existing environments. DocuSign also renewed its partnership with Lone Wolf Technologies, marked by a deeper integration between DocuSign Rooms for Real Estate and Lone Wolf’s zipForm Plus.
  • Executive appointments. As part of its drive to exceed the industry’s most rigorous security standards and create the highest levels of customer trust, DocuSign appointed former United Airlines CISO Emily Heath to the new role of chief trust and security officer in October.

On December 2, 2019, RBC Capital analyst Alex Zukin raised his price target on DocuSign (DOCU) to $93 and kept his Outperform rating ahead of its Q3 results, saying his conversations with partners and management along with his analysis of financials suggest that the quarter should be “solid”. The analyst sees the company benefiting from continued favorable trends seen in Q2, as its SpringCM product is performing ahead of expectations. Zukin adds that DocuSign is expanding relationships with ISV partners such as Salesforce (CRM).

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