DocuSign Announces Second Quarter Fiscal 2019 Financial Results
SAN FRANCISCO, Sept. 5, 2018 /PRNewswire/ -- DocuSign (NASDAQ: DOCU), which offers the world's #1 eSignature solution as part of its broader platform for automating the agreement process, today announced results for its fiscal quarter ended July 31, 2018.
"We had a strong second quarter, driven by 35% year-over-year growth in subscription revenue. We added more than 25,000 customers, bringing our customer base to almost 430,000 worldwide," said Dan Springer, CEO of DocuSign. "And this week, we also closed our previously-announced acquisition of SpringCM, which accelerates our vision to modernize the world's Systems of Agreement--all the way from preparing to signing, acting-on, and managing agreements. With SpringCM, we have a broader set of products to sell, additional technologies to commercialize and a team whose experience complements ours almost perfectly."
Second Quarter Financial Highlights
-- Total revenue was $167.0 million, an increase of 33% year-over-year.
Subscription revenue was $158.5 million, an increase of 35%
year-over-year. Professional services and other revenue was $8.6
million, an increase of 7% year-over-year.
-- Billings were $172.2 million, an increase of 32% year-over-year.
-- GAAP gross margin was 78%, compared to 77% in the same period last year.
Non-GAAP gross margin was 81% compared to 79% in the same period last
year.
-- GAAP net loss per basic and diluted share was $0.22 in the second
quarter of fiscal 2019 on 166 million shares outstanding compared to
GAAP net loss per share of $0.39 in the second quarter of fiscal 2018 on
32 million shares outstanding.
-- Non-GAAP net income per diluted share was $0.03 in the second quarter of
fiscal 2019 based on 191 million shares outstanding compared to a
non-GAAP net loss per share of $0.05 in the second quarter of fiscal
2018 based on 32 million shares outstanding.
-- Net cash provided by operating activities was $22.7 million, compared to
$12.1 million in the same period last year.
-- Free cash flow was $18.4 million in the second quarter of fiscal 2019
compared to free cash flow of $7.8 million in the same period last year.
-- Cash, cash equivalents and restricted cash was $819.2 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
-- SpringCM Inc. Acquisition. The company signed a definitive agreement to
acquire Spring CM Inc. for approximately $220 million in cash, subject
to adjustment, on July 31, 2018. The acquisition was completed on
September 4, 2018.
-- Board and Management Transitions. Effective August 29, 2018, three new
directors joined DocuSign's board: former GoDaddy CEO Blake Irving,
Docker chairman and CEO Steve Singh, and IBM Watson business unit GM
Inhi Cho Suh, replacing Scott Darling, Rory O'Driscoll and Jonathan
Roberts. As part of this planned transition, DocuSign founder Tom
Gonser, and current chairman Keith Krach will leave their board roles on
December 31, 2018 and January 1, 2019, respectively. In addition, Neil
Hudspith notified us that after six years of leading DocuSign's sales
and customer operations, he intends to retire from his role as
President, Worldwide Field Operations at the end of this fiscal year.
Outlook
-- Quarter ending October 31, 2018* (in millions, except percentages):
Total revenue $172 to $175
Billings $169 to $179
Non-GAAP gross margin 78% to 81%
Non-GAAP sales and marketing 50% to 52%
Non-GAAP research and development 17% to 19%
Non-GAAP general and administrative 11% to 13%
Other expense <$0.5
Provision for income taxes $0.75
Non-GAAP diluted weighted-average shares outstanding 190 to 195
-- Year ending January 31, 2019* (in millions, except percentages):
Total revenue $683 to $688
Billings $732 to $752
Non-GAAP gross margin 78% to 81%
Non-GAAP sales and marketing 50% to 52%
Non-GAAP research and development 17% to 19%
Non-GAAP general and administrative 11% to 13%
Other expense <$2
Provision for income taxes $3
Non-GAAP diluted weighted-average shares outstanding 160 to 165
*These guidance ranges include estimated revenue contributions from
SpringCM of $2 to $4 million in the third quarter of fiscal 2019 and
$7 to $9 million in fiscal 2019 and operating losses of $5 to $7
million in the third quarter of fiscal 2019 and $9 to $12 million in
fiscal 2019, including $3 to $4 million of one-time integration
costs.
The company has not reconciled its expectations 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 is not available without unreasonable effort.
Webcast Conference Call Information
The company will host a conference call on September 5, 2018 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 docusign.com/investors. 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) September 19, 2018 using the passcode 13682692.
About DocuSign
DocuSign (Nasdaq: DOCU) helps organizations become more agree-able by connecting and automating how they prepare, sign, act-on, and manage agreements. As part of our System of Agreement (SofA) platform, we offer DocuSign eSignature--the world's #1 way to sign electronically on practically any device, from anywhere, at any time. Almost 430,000 customers and hundreds of millions of users worldwide already use DocuSign to accelerate the process of doing business and simplify people's lives.
Investor Relations:
Annie Leschin
VP Investor Relations
investors@docusign.com
Media Relations:
Adrian Wainwright
Head of Communications
media@docusign.com
Forward-Looking Statements
This press release contains "forward-looking" statements that are based on our management's beliefs and assumptions and on information currently available to management. Forward-looking statements include 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 the benefits of the acquisition of SpringCM and our ability to develop our System of Agreement platform and deliver product innovation. They also include statements about our possible or assumed business strategies, potential growth opportunities, new products and potential market opportunities.
Forward-looking statements include all statements that are not historical facts and can be identified by terms such as "believe," "could," "potential," "will," "would" or similar expressions and the negatives of those terms. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. These risks include, but are not limited to, risks and uncertainties related to: our ability to successfully integrate SpringCM's operations; our ability to implement our plans, forecasts and other expectations with respect to SpringCM's business; our ability to realize the anticipated benefits of acquisition of SpringCM, including the possibility that the expected benefits from the acquisition will not be realized or will not be realized within the expected time period; disruption from the acquisition making it more difficult to maintain business and operational relationships; the negative effects of consummation of the acquisition on the market price of our common stock or on our operating results; unknown liabilities from the acquisition; our ability to 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 scale and update our platform to respond to customers' needs and rapid technological change, increased competition on our market and our ability to compete effectively, and expansion of our operations and increased adoption of our platform internationally. Additional risks and uncertainties that could affect our financial results are included in the section titled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our quarterly report on Form 10-Q for the quarter ended April 30, 2018 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 are presenting 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.
Non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP income (loss) from operations, non-GAAP operating margin, non-GAAP net income (loss) and non-GAAP net income (loss) per share: We define these non-GAAP financial measures as the respective GAAP measures, excluding expenses related to stock-based compensation, amortization of acquisition-related intangibles and, as applicable, other special items. We believe it is useful to exclude stock-based compensation 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. We also view amortization of acquisition-related intangible assets, such as the amortization of the cost associated with an acquired company's developed technology and trade names, as items arising from pre-acquisition activities determined at the time of an acquisition. While these intangible assets are continually evaluated for impairment, amortization of the cost of purchased intangibles is a static expense, one that is not typically affected by operations during any particular period.
Free cash flows: We define free cash flow as net cash provided by (used in) operating activities less purchases of property and equipment. We believe free cash flow is an important liquidity measure of the cash (if any) that is available, 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.
DOCUSIGN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended July 31, Six Months Ended July 31,
(in thousands, except
share and per share data) 2018 2017 2018 2017
---- ---- ---- ----
Revenue:
Subscription $158,461 $117,553 $306,659 $224,400
Professional services and
other 8,583 7,990 16,193 14,641
Total revenue 167,044 125,543 322,852 239,041
------- ------- ------- -------
Cost of revenue:
Subscription 23,057 20,040 55,495 39,333
Professional services and
other 13,304 8,418 39,160 16,249
Total cost of revenue 36,361 28,458 94,655 55,582
------ ------ ------ ------
Gross profit 130,683 97,085 228,197 183,459
------- ------ ------- -------
Operating expenses:
Sales and marketing 103,779 68,943 294,864 133,634
Research and development 33,773 23,767 104,643 46,475
General and administrative 30,851 18,156 133,968 36,395
------ ------ ------- ------
Total expenses 168,403 110,866 533,475 216,504
------- ------- ------- -------
Loss from operations (37,720) (13,781) (305,278) (33,045)
Interest expense (47) (169) (240) (320)
Interest and other income,
net 2,998 2,034 770 1,924
----- ----- --- -----
Loss before provision for
(benefit from) income
taxes (34,769) (11,916) (304,748) (31,441)
Provision for (benefit
from) income taxes 1,945 121 2,653 (22)
----- --- ----- ---
Net loss $(36,714) $(12,037) $(307,401) $(31,419)
======== ======== ========= ========
Net loss per share
attributable to common
stockholders, basic and
diluted $(0.22) $(0.39) $(3.01) $(1.05)
====== ====== ====== ======
Weighted-average number
of shares used in
computing net loss per
share attributable to
common stockholders,
basic and diluted 166,083,686 31,638,340 102,284,494 30,715,624
Stock-based compensation expense included
in costs and expenses:
Cost of revenue-
subscription $1,588 $231 $11,543 $469
Cost of revenue-
professional services 2,822 254 18,867 489
Sales and marketing 16,791 2,883 129,272 5,588
Research and development 7,359 1,288 54,627 2,679
General and administrative 11,605 3,856 95,650 7,693
DOCUSIGN, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except share and
per share data) July 31, 2018 January 31, 2018
------------- ----------------
Assets
Current assets
Cash and cash equivalents $818,795 $256,867
Restricted cash 367 569
Accounts receivable 108,365 123,750
Contract assets-current 13,760 14,260
Prepaid expense and other
current assets 26,776 23,349
------ ------
Total current assets 968,063 418,795
Property and equipment, net 60,415 63,019
Goodwill 35,369 37,306
Intangible assets, net 10,139 14,148
Deferred contract acquisition
costs-noncurrent 86,199 75,535
Other assets-noncurrent 9,513 11,170
----- ------
Total assets $1,169,698 $619,973
========== ========
Liabilities, Redeemable Convertible Preferred Stock
and Stockholders' Equity (Deficit)
Current liabilities
Accounts payable $16,653 $23,713
Accrued expenses 18,368 15,734
Accrued compensation 51,212 50,852
Contract liabilities-current 289,724 270,188
Deferred rent-current 1,872 1,758
Other liabilities-current 11,761 11,574
------
Total current liabilities 389,590 373,819
Contract liabilities-noncurrent 7,703 7,736
Deferred rent-noncurrent 22,633 23,044
Deferred tax liability-
noncurrent 2,499 2,511
Other liabilities-noncurrent 3,803 4,010
-----
Total liabilities 426,228 411,120
------- -------
Redeemable convertible preferred
stock - 547,501
Stockholders' equity (deficit)
Preferred stock - -
Common stock 16 4
Additional paid-in capital 1,555,185 160,265
Accumulated other comprehensive
(loss) income (2,010) 3,403
Accumulated deficit (809,721) (502,320)
Total stockholders' equity
(deficit) 743,470 (338,648)
------- --------
Total liabilities, redeemable
convertible preferred stock,
and stockholders' equity
(deficit) $1,169,698 $619,973
========== ========
DOCUSIGN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended July 31, Six Months Ended July 31,
(in thousands) 2018 2017 2018 2017
---- ---- ---- ----
Cash flows from operating activities:
Net loss $(36,714) $(12,037) $(307,401) $(31,419)
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation and amortization 7,081 7,699 15,681 15,385
Amortization of deferred
contract acquisition and
fulfillment costs 9,900 7,278 19,146 14,291
Stock-based compensation expense 40,165 8,512 309,959 16,918
Deferred income taxes (6) 13 (12) -
Other (3,100) (1,023) (875) (1,826)
Changes in operating assets and liabilities
Accounts receivable (4,237) 1,531 15,385 13,108
Contract assets (1,397) (937) 1,149 (975)
Prepaid expenses and other
current assets 3,113 4,914 (3,406) (656)
Deferred contract acquisition
and fulfillment costs (18,013) (10,827) (30,339) (20,199)
Other assets 895 (1,052) 1,335 (168)
Accounts payable 2,184 (4,146) (5,034) (6,271)
Accrued expenses (996) 529 2,306 (517)
Accrued compensation 17,307 4,148 360 (4,980)
Contract liabilities 6,892 6,109 19,503 19,136
Deferred rent (168) 2,138 (297) (64)
Other liabilities (211) (751) 228 (362)
Net cash provided by operating
activities 22,695 12,098 37,688 11,401
Cash flows from investing activities:
Purchases of property and
equipment (4,336) (4,319) (10,520) (11,089)
Proceeds from sale of business
held for sale - 467 - 467
--- --- --- ---
Net cash used in investing
activities (4,336) (3,852) (10,520) (10,622)
Cash flows from financing activities:
Proceeds from issuance of common
stock in initial public
offering, net of underwriting
commissions 529,305 - 529,305 -
Proceeds from the exercise of
stock options 2,503 7,679 10,318 13,509
Payment of deferred offering
costs (1,328) - (3,522) -
Net cash provided by financing
activities 530,480 7,679 536,101 13,509
Effect of foreign exchange on
cash, cash equivalents and
restricted cash 527 1,659 (1,543) 2,143
Net increase in cash, cash
equivalents and restricted cash 549,366 17,584 561,726 16,431
Cash, cash equivalents and
restricted cash at beginning of
period 269,796 190,091 257,436 191,244
------- ------- ------- -------
Cash, cash equivalents and
restricted cash at end of
period $819,162 $207,675 $819,162 $207,675
======== ======== ======== ========
DOCUSIGN, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(Unaudited)
Reconciliation of gross profit and gross margin:
Three Months Ended July 31, Six Months Ended July 31,
(in thousands) 2018 2017 2018 2017
---- ---- ---- ----
GAAP gross profit $130,683 $97,085 $228,197 $183,459
Add: Stock-based
compensation 4,410 485 30,410 958
Add: Amortization of
acquisition-related
intangibles 1,003 1,691 2,671 3,388
----- ----- ----- -----
Non-GAAP gross profit $136,096 $99,261 $261,278 $187,805
======== ======= ======== ========
GAAP gross margin 78% 77% 71% 77%
Non-GAAP adjustments 3% 2% 10% 2%
Non-GAAP gross margin 81% 79% 81% 79%
GAAP subscription gross
profit $135,404 $97,513 $251,164 $185,067
Add: Stock-based
compensation 1,588 231 11,543 469
Add: Amortization of
acquisition-related
intangibles 1,003 1,691 2,671 3,388
----- ----- ----- -----
Non-GAAP subscription
gross profit $137,995 $99,435 $265,378 $188,924
======== ======= ======== ========
GAAP subscription gross
margin 85% 83% 82% 82%
Non-GAAP adjustments 2% 2% 5% 2%
Non-GAAP subscription
gross margin 87% 85% 87% 84%
GAAP professional services
and other gross loss $(4,721) $(428) $(22,967) $(1,608)
Add: Stock-based
compensation 2,822 254 18,867 489
----- --- ------ ---
Non-GAAP professional
services and other gross
loss $(1,899) $(174) $(4,100) $(1,119)
======= ===== ======= =======
GAAP professional services
and other gross loss (55)% (5)% (142)% (11)%
Non-GAAP adjustments 33% 3% 117% 3%
Non-GAAP professional
services and other gross
loss (22)% (2)% (25)% (8)%
Reconciliation of operating expenses:
Three Months Ended July 31, Six Months Ended July 31,
(in thousands) 2018 2017 2018 2017
---- ---- ---- ----
GAAP sales and marketing $103,779 $68,943 $294,864 $133,634
Less: Stock-based compensation (16,791) (2,883) (129,272) (5,588)
Less: Amortization of
acquisition-related
intangibles (765) (665) (1,530) (1,505)
---- ---- ------ ------
Non-GAAP sales and marketing $86,223 $65,395 $164,062 $126,541
======= ======= ======== ========
GAAP sales and marketing as a
percentage of revenue 62% 55% 91% 56%
Non-GAAP sales and marketing
as a percentage of revenue 52% 52% 51% 53%
GAAP research and development $33,773 $23,767 $104,643 $46,475
Less: Stock-based compensation (7,359) (1,288) (54,627) (2,679)
------ ------ ------- ------
Non-GAAP research and
development $26,414 $22,479 $50,016 $43,796
======= ======= ======= =======
GAAP research and development
as a percentage of revenue 20% 19% 33% 19%
Non-GAAP research and
development as a percentage of
revenue 16% 18% 15% 18%
GAAP general and administrative $30,851 $18,156 $133,968 $36,395
Less: Stock-based compensation (11,605) (3,856) (95,650) (7,693)
------- ------ ------- ------
Non-GAAP general and
administrative $19,246 $14,300 $38,318 $28,702
======= ======= ======= =======
GAAP general and administrative
as a percentage of revenue 19% 14% 42% 16%
Non-GAAP general and
administrative as a percentage
of revenue 12% 11% 12% 12%
Reconciliation of income (loss) from operations and operating margin:
Three Months Ended July 31, Six Months Ended July 31,
(in thousands) 2018 2017 2018 2017
---- ---- ---- ----
GAAP operating loss $(37,720) $(13,781) $(305,278) $(33,045)
Add: Stock-based
compensation 40,165 8,512 309,959 16,918
Add: Amortization of
acquisition-related
intangibles 1,768 2,356 4,201 4,893
----- ----- ----- -----
Non-GAAP operating
income (loss) $4,213 $(2,913) $8,882 $(11,234)
====== ======= ====== ========
GAAP operating margin (23)% (11)% (95)% (14)%
Non-GAAP adjustments 26% 9% 98% 9%
Non-GAAP operating
margin (loss) 3% (2)% 3% (5)%
Reconciliation of net income (loss) and net income (loss) per share, basic and diluted:
Three Months Ended July 31, Six Months Ended July 31,
(in thousands, except per
share data) 2018 2017 2018 2017
---- ---- ---- ----
GAAP net loss $(36,714) $(12,037) $(307,401) $(31,419)
Add: Stock-based compensation 40,165 8,512 309,959 16,918
Add: Amortization of
acquisition-related
intangibles 1,768 2,356 4,201 4,893
----- ----- ----- -----
Non-GAAP net income (loss) $5,219 $(1,169) $6,759 $(9,608)
====== ======= ====== =======
Numerator:
Non-GAAP net income (loss) $5,219 $(1,169) $6,759 $(9,608)
Less: preferred stock
accretion - (366) (353) (721)
Less: net income allocated to
participating securities - - (2,085) -
Non-GAAP net income (loss)
attributable to common
stockholders $5,219 $(1,535) $4,321 $(10,329)
====== ======= ====== ========
Denominator:
Weighted-average common
shares outstanding, basic 166,084 31,638 102,284 30,716
Effect of dilutive securities 25,339 - 24,586 -
Non-GAAP weighted-average
common shares outstanding,
diluted 191,423 31,638 126,870 30,716
GAAP net loss per share,
basic and diluted $(0.22) $(0.39) $(3.01) $(1.05)
Non-GAAP net income (loss)
per share, basic 0.03 (0.05) 0.04 (0.34)
Non-GAAP net income (loss)
per share, diluted 0.03 (0.05) 0.03 (0.34)
Computation of free cash flow:
Three Months Ended July 31, Six Months Ended July 31,
(in thousands) 2018 2017 2018 2017
---- ---- ---- ----
Net cash provided
by operating
activities $22,695 $12,098 $37,688 $11,401
Less: purchase of
property and
equipment (4,336) (4,319) (10,520) (11,089)
------ ------ ------- -------
Non-GAAP free
cash flow $18,359 $7,779 $27,168 $312
======= ====== ======= ====
Computation of billings:
Three Months Ended July 31, Six Months Ended July 31,
(in thousands) 2018 2017 2018 2017
---- ---- ---- ----
Revenue $167,044 $125,543 $322,852 $239,041
Add: Contract
liabilities and
refund liability,
end of period 300,426 214,405 300,426 214,405
Less: Contract
liabilities and
refund liability,
beginning of
period (293,667) (208,882) (282,943) (195,501)
Add: Contract
assets and
unbilled accounts
receivable,
beginning of
period 14,555 10,400 16,899 10,095
Less: Contract
assets and
unbilled accounts
receivable, end
of period (16,196) (11,381) (16,196) (11,381)
Non-GAAP billings $172,162 $130,085 $341,038 $256,659
======== ======== ======== ========
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SOURCE DocuSign, Inc.
