DocuSign Announces Third Quarter Fiscal 2019 Financial Results
SAN FRANCISCO, Dec. 6, 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 October 31, 2018.
"With year-over-year growth of 37% in revenue and 40% in billings, DocuSign's business continued to excel in the third quarter. We added another 25,000 customers, bringing our total to 454,000 worldwide. Expansions within existing customers, traction around our System of Agreement vision, and our strategic partner ecosystem all contributed to our strong results," said Dan Springer, CEO of DocuSign.
Third Quarter Financial Highlights
-- Total revenue was $178.4 million, an increase of 37% year-over-year.
Subscription revenue was $169.4 million, an increase of 38%
year-over-year. Professional services and other revenue was $9.0
million, an increase of 17% year-over-year.
-- Billings were $198.0 million, an increase of 40% year-over-year.
-- GAAP gross margin was 75%, compared to 76% in the same period last year.
Non-GAAP gross margin was 79% compared to 78% in the same period last
year.
-- GAAP net loss per basic and diluted share was $0.31 in the third quarter
of fiscal 2019 on 168 million shares outstanding compared to GAAP net
loss per share of $0.45 in the third quarter of fiscal 2018 on 33
million shares outstanding.
-- Non-GAAP net income per diluted share was $0.00 in the third quarter of
fiscal 2019 based on 192 million shares outstanding compared to a
non-GAAP net loss per share of $0.17 in the third quarter of fiscal 2018
based on 33 million shares outstanding.
-- Net cash provided by operating activities was $4.3 million, compared to
$11.6 million in the same period last year.
-- Free cash flow was negative $4.3 million in the third quarter of fiscal
2019 compared to free cash flow of $7.0 million in the same period last
year.
-- Cash, cash equivalents and restricted cash was $1.1 billion at the end
of the quarter. Our cash balance reflects the addition of $560.8 million
of proceeds net of offering expenses from the issuance of Convertible
Senior Notes on September 18, 2018.
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 completed the acquisition of
SpringCM Inc., a leading cloud-based document generation and contract
lifecycle management software company, on September 4, 2018 for $218.8
million in cash, subject to adjustment. With SpringCM, DocuSign will
accelerate customers' ability to modernize their Systems of Agreement
all the way from preparing to signing, acting-on, and managing
agreements.
-- Convertible Senior Notes Offering. The company issued $575.0 million in
0.5% Convertible Senior Notes due 2023. The offering generated net
proceeds of $560.8 million. DocuSign used $67.6 million of the net
proceeds to enter into capped call transactions to offset potential
dilution upon conversion or any cash payments. DocuSign intends to use
the remainder of the net proceeds for working capital, other general
corporate purposes and potential acquisitions.
Outlook
The company currently expects:
-- Quarter ending January 31, 2019 (in millions, except percentages):
Total revenue $192 to $194
Billings $245 to $255
Non-GAAP gross margin 78% to 81%
Non-GAAP sales and marketing 50% to 52%
Non-GAAP research and development 16% to 18%
Non-GAAP general and administrative 11% to 13%
Interest and other income (expense) $3 to $4
Provision for income taxes $0.75
Non-GAAP diluted weighted-average shares outstanding 185 to 190
-- Year ending January 31, 2019 (in millions, except percentages):
Total revenue $693 to $695
Billings $795 to $805
Non-GAAP gross margin 78% to 81%
Non-GAAP sales and marketing 50% to 52%
Non-GAAP research and development 16% to 18%
Non-GAAP general and administrative 11% to 13%
Provision for income taxes $2 to $4
Non-GAAP diluted weighted-average shares outstanding 155 to 160
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 December 6, 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) December 20, 2018 using the passcode 13685199.
About DocuSign
DocuSign (Nasdaq: DOCU) helps organizations connect and automate how they prepare, sign, act on, and manage agreements. As part of its cloud-based System of Agreement Platform, DocuSign offers eSignature-the world's #1 way to sign electronically on practically any device, from almost anywhere, at any time. Today, over 450,000 customers and hundreds of millions of users in over 180 countries 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 July 31, 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, amortization of debt discount and issuance costs from our convertible senior notes issued in September 2018, acquisition-related expenses, partial releases of valuation allowance due to acquisition, and, as applicable, other special items. Costs associated with acquisitions include legal, accounting, other professional fees and other non-recurring costs.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.
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 Nine Months Ended
October 31, October 31,
(in thousands, except per
share data) 2018 2017 2018 2017
---
Revenue:
Subscription $
169,426 $
122,905 $
476,085 $
347,305
Professional services and
other 8,959 7,684 25,152 22,325
Total revenue 178,385 130,589 501,237 369,630
Cost of revenue:
Subscription 28,709 22,335 84,204 61,668
Professional services and
other 16,364 8,881 55,524 25,130
Total cost of revenue 45,073 31,216 139,728 86,798
Gross profit 133,312 99,373 361,509 282,832
Operating expenses:
Sales and marketing 117,051 69,666 411,915 203,300
Research and development 38,404 22,522 143,047 68,997
General and administrative 36,274 19,528 170,242 55,923
Total expenses 191,729 111,716 725,204 328,220
Loss from operations (58,417) (12,343) (363,695) (45,388)
Interest expense (3,503) (154) (3,743) (474)
Interest income and other
income (expense), net 3,395 (1,225) 4,165 699
Loss before provision for
(benefit from) income
taxes (58,525) (13,722) (363,273) (45,163)
Provision for (benefit
from) income taxes (5,712) 783 (3,059) 761
Net loss $
(52,813) $
(14,505) $
(360,214) $
(45,924)
Net loss per share
attributable to common
stockholders, basic and
diluted $
(0.31) $
(0.45) $
(2.90) $
(1.49)
Weighted-average number
of shares used in
computing net loss per
share attributable to
common stockholders,
basic and diluted 167,736 33,353 124,343 31,604
Stock-based compensation expense included
in costs and expenses:
Cost of revenue-
subscription $
2,398 $
228 $
13,941 $
697
Cost of revenue-
professional services 3,578 253 22,445 742
Sales and marketing 22,338 1,959 151,610 7,547
Research and development 9,919 1,042 64,546 3,721
General and administrative 13,515 3,113 109,165 10,806
DOCUSIGN, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except share and
per share data) October 31, 2018 January 31, 2018
---
Assets
Current assets
Cash and cash equivalents $
1,094,133 $
256,867
Restricted cash 367 569
Accounts receivable 130,611 123,750
Contract assets-current 12,056 14,260
Prepaid expense and other
current assets 28,344 23,349
Total current assets 1,265,511 418,795
Property and equipment, net 73,965 63,019
Goodwill 194,533 37,306
Intangible assets, net 79,161 14,148
Deferred contract acquisition
costs-noncurrent 97,091 75,535
Other assets-noncurrent 9,175 11,170
Total assets $
1,719,436 $
619,973
Liabilities, Redeemable Convertible Preferred Stock
and Stockholders' Equity (Deficit)
Current liabilities
Accounts payable $
22,059 $
23,713
Accrued expenses 22,669 15,734
Accrued compensation 53,686 50,852
Contract liabilities-current 316,619 270,188
Deferred rent-current 2,029 1,758
Other liabilities-current 17,574 11,574
Total current liabilities 434,636 373,819
Convertible senior notes, net 432,572
Contract liabilities-noncurrent 7,135 7,736
Deferred rent-noncurrent 23,050 23,044
Deferred tax liability-
noncurrent 2,500 2,511
Other liabilities-noncurrent 9,374 4,010
Total liabilities 909,267 411,120
Redeemable convertible preferred
stock - 547,501
Stockholders' equity (deficit)
Preferred stock -
Common stock 16 4
Additional paid-in capital 1,676,180 160,265
Accumulated other comprehensive
(loss) income (3,493) 3,403
Accumulated deficit (862,534) (502,320)
Total stockholders' equity
(deficit) 810,169 (338,648)
Total liabilities, redeemable
convertible preferred stock,
and stockholders' equity
(deficit) $
1,719,436 $
619,973
DOCUSIGN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended Nine Months Ended
October 31, October 31,
(in thousands) 2018 2017 2018 2017
---
Cash flows from operating activities:
Net loss $
(52,813) $
(14,505) $
(360,214) $
(45,924)
Adjustments to reconcile net loss to net cash used
in operating activities
Depreciation and amortization 10,343 8,318 26,024 23,703
Amortization of deferred
contract acquisition and
fulfillment costs 10,743 7,731 29,889 22,022
Amortization of debt discount
and transaction costs 3,147 3,147
Stock-based compensation
expense 51,748 6,595 361,707 23,513
Deferred income taxes (7,335) 58 (7,347) 58
Other (1,204) 1,805 (2,079) (21)
Changes in operating assets and liabilities
Accounts receivable (14,019) (146) 1,366 12,962
Contract assets 1,625 (1,338) 2,774 (2,313)
Prepaid expenses and other
current assets 1,023 (3,472) (2,383) (4,128)
Deferred contract acquisition
and fulfillment costs (22,206) (12,023) (52,545) (32,222)
Other assets 667 (165) 2,002 (333)
Accounts payable (956) 726 (5,990) (5,545)
Accrued expenses 1,304 1,735 3,610 1,218
Accrued compensation 1,811 3,227 2,171 (1,753)
Contract liabilities 16,353 11,309 35,856 30,445
Deferred rent 574 (110) 277 (174)
Other liabilities 3,456 1,873 3,684 1,511
Net cash provided by operating
activities 4,261 11,618 41,949 23,019
Cash flows from investing activities:
Cash paid for acquisition, net
of acquired cash (218,779) (218,779)
Purchases of property and
equipment (8,576) (4,603) (19,096) (15,692)
Proceeds from sale of business
held for sale - 467
Net cash used in investing
activities (227,355) (4,603) (237,875) (15,225)
Cash flows from financing activities:
Proceeds from issuance of
convertible senior notes, net
of initial purchasers'
discounts and transaction costs 560,756 560,756
Purchase of capped calls related
to issuance of convertible
senior notes (67,563) (67,563)
Proceeds from issuance of common
stock in initial public
offering, net of underwriting
commissions - 529,305
Proceeds from the exercise of
stock options 5,047 8,437 15,365 21,946
Payment of deferred offering
costs (170) (3,692)
Payment of holdback on prior
acquisition - (390) (390)
Net cash provided by financing
activities 498,070 8,047 1,034,171 21,556
Effect of foreign exchange on
cash, cash equivalents and
restricted cash 362 (571) (1,181) 1,572
Net increase in cash, cash
equivalents and restricted cash 275,338 14,491 837,064 30,922
Cash, cash equivalents and
restricted cash at beginning of
period 819,162 207,675 257,436 191,244
Cash, cash equivalents and
restricted cash at end of
period $
1,094,500 $
222,166 $
1,094,500 $
222,166
DOCUSIGN, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(Unaudited)
Reconciliation of gross profit and gross margin:
Three Months Ended Nine Months Ended
October 31, October 31,
---
(in thousands) 2018 2017 2018 2017
---
GAAP gross profit $
133,312 $
99,373 $
361,509 $
282,832
Add: Stock-based
compensation 5,976 481 36,386 1,439
Add: Amortization of
acquisition-related
intangibles 1,632 1,691 4,303 5,079
Add: Acquisition-related
expenses 108 108
Non-GAAP gross profit $
141,028 $
101,545 $
402,306 $
289,350
GAAP gross margin 75
% 76
% 72
% 77
%
Non-GAAP adjustments 4
% 2
% 8
% 1
%
Non-GAAP gross margin 79
% 78
% 80
% 78
%
GAAP subscription gross
profit $
140,717 $
100,570 $
391,881 $
285,637
Add: Stock-based
compensation 2,398 228 13,941 697
Add: Amortization of
acquisition-related
intangibles 1,632 1,691 4,303 5,079
Non-GAAP subscription
gross profit $
144,747 $
102,489 $
410,125 $
291,413
GAAP subscription gross
margin 83
% 82
% 82
% 82
%
Non-GAAP adjustments 2
% 1
% 4
% 2
%
Non-GAAP subscription
gross margin 85
% 83
% 86
% 84
%
GAAP professional services
and other gross loss $
(7,405) $
(1,197) $
(30,372) $
(2,805)
Add: Stock-based
compensation 3,578 253 22,445 742
Add: Acquisition-related
expenses 108 108
Non-GAAP professional
services and other gross
loss $
(3,719) $
(944) $
(7,819) $
(2,063)
GAAP professional services (83)
% (16)
% (121)
and other gross loss % (13)
%
Non-GAAP adjustments 41
% 4
% 90
% 4
%
Non-GAAP professional
services and other gross
loss (42)
% (12)
% (31)
% (9)
%
Reconciliation of operating expenses:
Three Months Ended Nine Months Ended
October 31, October 31,
(in thousands) 2018 2017 2018 2017
---
GAAP sales and marketing $
117,051 $
69,666 $
411,915 $
203,300
Less: Stock-based compensation (22,338) (1,959) (151,610) (7,547)
Less: Amortization of
acquisition-related
intangibles (2,257) (1,015) (3,787) (2,520)
Less: Acquisition-related
expenses (68) (68)
Non-GAAP sales and marketing $
92,388 $
66,692 $
256,450 $
193,233
GAAP sales and marketing as a
percentage of revenue 66
% 53
% 82
% 55
%
Non-GAAP sales and marketing
as a percentage of revenue 52
% 51
% 51
% 52
%
GAAP research and development $
38,404 $
22,522 $
143,047 $
68,997
Less: Stock-based compensation (9,919) (1,042) (64,546) (3,721)
Less: Acquisition-related
expenses (302) (302)
Non-GAAP research and
development $
28,183 $
21,480 $
78,199 $
65,276
GAAP research and development
as a percentage of revenue 22
% 17
% 29
% 19
%
Non-GAAP research and
development as a percentage of
revenue 16
% 16
% 16
% 18
%
GAAP general and administrative $
36,274 $
19,528 $
170,242 $
55,923
Less: Stock-based compensation (13,515) (3,113) (109,165) (10,806)
Less: Acquisition-related
expenses (1,290) (1,290)
Non-GAAP general and
administrative $
21,469 $
16,415 $
59,787 $
45,117
GAAP general and administrative
as a percentage of revenue 20
% 15
% 34
% 15
%
Non-GAAP general and
administrative as a percentage
of revenue 12
% 13
% 12
% 12
%
Reconciliation of income (loss) from operations and operating margin:
Three Months Ended Nine Months Ended
October 31, October 31,
(in thousands) 2018 2017 2018 2017
---
GAAP operating loss $
(58,417) $
(12,343) $
(363,695) $
(45,388)
Add: Stock-based
compensation 51,748 6,595 361,707 23,513
Add: Amortization of
acquisition-related
intangibles 3,889 2,706 8,090 7,599
Add: Acquisition-related
expenses 1,768 1,768
Non-GAAP operating
income (loss) $
(1,012) $
(3,042) $
7,870 $
(14,276)
GAAP operating margin (33) (9)
% (73)
% (12)
% %
Non-GAAP adjustments 32
% 7
% 75
% 8
%
Non-GAAP operating
margin (loss) (1)
% (2)
% 2
% (4)
%
Reconciliation of net income (loss) and net income (loss) per share, basic and diluted:
Three Months Ended Nine Months Ended
October 31, October 31,
---
(in thousands, except per
share data) 2018 2017 2018 2017
---
GAAP net loss $
(52,813) $
(14,505) $
(360,214) $
(45,924)
Add: Stock-based
compensation 51,748 6,595 361,707 23,513
Add: Amortization of
acquisition-related
intangibles 3,889 2,706 8,090 7,599
Add: Acquisition-related
expenses 1,839 1,839
Add: Amortization of debt
discount and issuance costs 3,147 3,147
Less: Tax benefit from
SpringCM acquisition(1) (7,369) (7,369)
Non-GAAP net income (loss) $
441 $
(5,204) $
7,200 $
(14,812)
Numerator:
Non-GAAP net income (loss) $
441 $
(5,204) $
7,200 $
(14,812)
Less: preferred stock
accretion - (376) (353) (1,097)
Less: net income allocated to
participating securities - (1,427)
Non-GAAP net income (loss)
attributable to common
stockholders $
441 $
(5,580) $
5,420 $
(15,909)
Denominator:
Weighted-average common
shares outstanding, basic 167,736 33,353 124,343 31,604
Effect of dilutive securities 24,490 24,554
Non-GAAP weighted-average
common shares outstanding,
diluted 192,226 33,353 148,897 31,604
GAAP net loss per share,
basic and diluted $
(0.31) $
(0.45) $
(2.90) $
(1.49)
Non-GAAP net income (loss)
per share, basic 0.00 (0.17) 0.04 (0.50)
Non-GAAP net income (loss)
per share, diluted 0.00 (0.17) 0.04 (0.50)
(1) Represents a tax benefit
related to the release of a
portion of our deferred tax
asset valuation allowance
resulting from the SpringCM
Acquisition.
Computation of free cash flow:
Three Months Ended Nine Months Ended
October 31, October 31,
(in thousands) 2018 2017 2018 2017
---
Net cash provided
by operating
activities $
4,261 $
11,618 $
41,949 $
23,019
Less: purchase of
property and
equipment (8,576) (4,603) (19,096) (15,692)
Non-GAAP free
cash flow $
(4,315) $
7,015 $
22,853 $
7,327
Computation of billings:
Three Months Ended Nine Months Ended
October 31, October 31,
(in thousands) 2018 2017 2018 2017
---
Revenue $
178,385 $
130,589 $
501,237 $
369,630
Add: Contract
liabilities and
refund liability,
end of period 330,060 226,836 330,060 226,836
Less: Contract
liabilities and
refund liability,
beginning of
period (300,426) (214,405) (282,943) (195,501)
Add: Contract
assets and
unbilled accounts
receivable,
beginning of
period 16,196 11,381 16,899 10,095
Less: Contract
assets and
unbilled accounts
receivable, end of
period (15,229) (12,678) (15,229) (12,678)
Less: Contract
liabilities and
refund liability
contributed by the
acquisition of
SpringCM (11,002) (11,002)
Non-GAAP billings $
197,984 $
141,723 $
539,022 $
398,382
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SOURCE DocuSign, Inc.
