DocuSign Announces First Quarter Fiscal 2020 Financial Results
SAN FRANCISCO, June 6, 2019 /PRNewswire/ -- DocuSign (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 April 30, 2019.
"Overall, we posted a solid first quarter for Fiscal 2020--revenues grew 37% year-over-year, we were again profitable on a non-GAAP basis, and we now have over half a million paying customers around the world. What's more, we are seeing strong results from the work we've done to optimize our go-to-market sales motion, bringing in net new customers and expanding use cases within our installed base. And with the announcement of the DocuSign Agreement Cloud this quarter--our suite of products and integrations for automating the entire agreement process--we can now deliver a much broader set of solutions to market, positioning us as the next 'must-have' cloud." said Dan Springer, CEO of DocuSign.
First Quarter Financial Highlights
-- Total revenue was $214.0 million, an increase of 37% year-over-year.
Subscription revenue was $201.5 million, an increase of 36%
year-over-year. Professional services and other revenue was $12.5
million, an increase of 64% year-over-year.
-- Billings were $215.0 million, an increase of 27% year-over-year.
-- GAAP gross margin was 76%, compared to 63% in the same period last year.
Non-GAAP gross margin was 79% compared to 80% in the same period last
year.
-- GAAP net loss per basic and diluted share was $0.27 on 172 million
shares outstanding compared to GAAP net loss per share of $7.46 in the
first quarter of fiscal 2019 on 36 million shares outstanding.
-- Non-GAAP net income per diluted share was $0.07 on 189 million shares
outstanding compared to non-GAAP net income per share of $0.01 in the
first quarter of fiscal 2019 on 60 million shares outstanding.
-- Net cash provided by operating activities was $45.7 million, compared to
$15.0 million in the same period last year.
-- Free cash flow was $30.4 million in the first quarter of fiscal 2020
compared to free cash flow of $8.8 million in the same period last year.
-- Cash, cash equivalents, restricted cash and investments were $937.0
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
-- DocuSign Agreement Cloud. In March the company announced the DocuSign
Agreement Cloud--a suite of more than a dozen products and 350
integrations for digitally transforming how organizations prepare, sign,
act on and manage agreements. By helping to automate and connect the
entire agreement process, the DocuSign Agreement Cloud allows
organizations to do business faster, with less risk, and lower costs,
and in turn deliver better experiences for customers, partners, and
employees. This comprehensive suite defines a new category of cloud
software that we believe has the potential to significantly expand our
total addressable market.
-- DocuSign Spring 19 Release. The company launched several new products
and updates as part of the DocuSign Agreement Cloud: DocuSign Gen for
Salesforce, which simplifies and accelerates the generation of
signature-ready contracts from within Salesforce; DocuSign Click, which
allows organizations of any size to capture consent to standard
agreement terms on websites, such as a privacy policy, with a single
click; and DocuSign Identify, which enables companies to automate the
verification of government-issued IDs and European eIDs, for
transactions that require them.
-- Seal Software Investment. The company announced a $15 million investment
in Seal Software, a leader in artificial intelligence. Building on the
partnership between DocuSign and Seal Software, this investment in
Seal's artificial intelligence-based agreement discovery and analytics
solutions builds on DocuSign's commitment to make the DocuSign Agreement
Cloud offering smarter and more impactful for customers.
Outlook
The company currently expects the following guidance:
-- Quarter ending July 31, 2019 (in millions, except percentages):
Total revenue $218
to $222
Billings $215
to $225
Non-GAAP gross margin 78%
to 80%
Non-GAAP sales and marketing 48%
to 50%
Non-GAAP research and development 15%
to 17%
Non-GAAP general and administrative 10%
to 14%
Interest and other income (expense) $3
to $4
Provision for income taxes $2
to $2.2
Non-GAAP diluted weighted-average shares outstanding 185
to 190
-- Year ending January 31, 2020 (in millions, except percentages):
Total revenue $917
to $922
Billings $1,010
to $1,030
Non-GAAP gross margin 78%
to 80%
Non-GAAP sales and marketing 48%
to 50%
Non-GAAP research and development 15%
to 17%
Non-GAAP general and administrative 10%
to 13%
Interest and other income (expense) $12
to $16
Provision for income taxes $8
to $10
Non-GAAP diluted weighted-average shares outstanding 190
to 195
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 June 6, 2019 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) June 20, 2019 using the passcode 13690792.
About DocuSign
DocuSign helps organizations connect and automate how they prepare, sign, act on, and manage agreements. As part of the DocuSign Agreement Cloud, DocuSign offers eSignature: the world's #1 way to sign electronically on practically any device, from almost anywhere, at any time. Today, more than 500,000 customers and hundreds of millions of users in over 180 countries use DocuSign to accelerate the process of doing business and to simplify people's lives.
For more information, visit www.docusign.com, call +1-877-720-2040, or follow @DocuSign on Twitter, LinkedIn, Facebook and Instagram.
Copyright 2003-2019. DocuSign, Inc. is the owner of DOCUSIGN® and all its other marks (www.docusign.com/IP).
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 DocuSign Agreement Cloud, our estimated total addressable market and the impact of DocuSign Agreement Cloud on such market, the potential benefits of our investment in, and partnership with, Seal Software, and our ability to deliver product innovation. They also include statements about our possible or assumed business strategies, potential growth opportunities 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 estimate the size of our total addressable market; 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, rapid technological change and increased competition in our market; our ability to compete effectively, expand our operations and increase adoption of our platform internationally; our ability to successfully integrate SpringCM's operations; our ability to pay off our convertible senior notes when due; our ability to successfully defend assertions by third parties that we violate their intellectual property rights; and our ability to respond to a network or data security incident that allows unauthorized access to our network or data or our customers' data. 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 annual report on Form 10-K for the year ended January 31, 2019, 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, employer payroll tax on employee stock transactions, amortization of acquisition-related intangibles, amortization of debt discount and issuance costs from our convertible senior notes issued in September 2018, 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. 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 April 30,
(in thousands, except per
share data) 2019 2018
---
Revenue:
Subscription $
201,458 $
148,198
Professional services and
other 12,504 7,610
Total revenue 213,962 155,808
Cost of revenue:
Subscription 33,119 32,438
Professional services and
other 18,900 25,856
Total cost of revenue 52,019 58,294
Gross profit 161,943 97,514
Operating expenses:
Sales and marketing 129,936 191,085
Research and development 37,183 70,870
General and administrative 37,261 103,117
Total expenses 204,380 365,072
Loss from operations (42,437) (267,558)
Interest expense (7,156) (193)
Interest income and other
income (expense), net 5,217 (2,228)
Loss before provision for
income taxes (44,376) (269,979)
Provision for income taxes 1,346 708
Net loss $
(45,722) $
(270,687)
Net loss per share
attributable to common
stockholders, basic and
diluted $
(0.27) $
(7.46)
Weighted-average number
of shares used in
computing net loss per
share attributable to
common stockholders,
basic and diluted 172,101 36,334
Stock-based compensation expense included
in costs and expenses:
Cost of revenue-
subscription $
2,282 $
9,955
Cost of revenue-
professional services 3,440 16,045
Sales and marketing 18,102 112,481
Research and development 7,317 47,268
General and administrative 11,130 84,045
DOCUSIGN, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands) April 30, 2019 January 31, 2019
---
Assets
Current assets
Cash and cash equivalents $
236,476 $
517,811
Investments-current 515,648 251,203
Restricted cash 167 367
Accounts receivable 117,134 174,548
Contract assets-current 13,360 10,616
Prepaid expense and other
current assets 39,341 29,976
Total current assets 922,126 984,521
Investments-noncurrent 184,683 164,220
Property and equipment, net 84,094 75,832
Operating lease right-of-use
assets 143,361
Goodwill 194,775 195,225
Intangible assets, net 69,490 74,203
Deferred contract acquisition
costs-noncurrent 115,924 112,583
Other assets-noncurrent 23,947 8,833
Total assets $
1,738,400 $
1,615,417
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $
21,436 $
19,590
Accrued expenses 28,133 21,755
Accrued compensation 57,684 77,553
Contract liabilities-current 385,460 381,060
Operating lease liabilities-
current 16,921
Deferred rent-current - 2,452
Other liabilities-current 12,973 13,903
Total current liabilities 522,607 516,313
Convertible senior notes, net 445,385 438,932
Contract liabilities-noncurrent 7,586 7,712
Operating lease liabilities-
noncurrent 154,778
Deferred rent-noncurrent - 24,195
Deferred tax liability-
noncurrent 4,267 4,207
Other liabilities-noncurrent 6,095 9,696
Total liabilities 1,140,718 1,001,055
Stockholders' equity
Common stock 17 17
Additional paid-in capital 1,575,471 1,545,088
Accumulated other comprehensive
loss (3,258) (1,965)
Accumulated deficit (974,548) (928,778)
Total stockholders' equity 597,682 614,362
Total liabilities and
stockholders' equity $
1,738,400 $
1,615,417
DOCUSIGN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended April 30,
(in thousands) 2019 2018
---
Cash flows from operating activities:
Net loss $
(45,722) $
(270,687)
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation and amortization 11,971 8,600
Amortization of deferred
contract acquisition and
fulfillment costs 14,260 9,246
Amortization of debt discount
and transaction costs 6,454
Amortization of operating lease
right-of-use assets 4,128
Stock-based compensation
expense 42,271 269,794
Deferred income taxes 52 (6)
Other (1,111) 2,225
Changes in operating assets and liabilities
Accounts receivable 57,414 19,622
Contract assets (2,701) 2,546
Prepaid expenses and other
current assets (7,107) (6,519)
Deferred contract acquisition
and fulfillment costs (20,487) (12,326)
Other assets 541 440
Accounts payable 282 (7,218)
Accrued expenses 6,442 3,302
Accrued compensation (19,869) (16,947)
Contract liabilities 4,274 12,611
Operating lease liabilities (3,705)
Other liabilities (1,732) 309
Net cash provided by operating
activities 45,655 14,992
Cash flows from investing activities:
Purchases of marketable
securities (375,211)
Maturities of marketable
securities 92,457
Purchases of strategic
investments (15,500)
Purchases of property and
equipment (15,237) (6,184)
Net cash used in investing
activities (313,491) (6,184)
Cash flows from financing activities:
Payment of tax withholding
obligation on RSU settlement (56,137)
Proceeds from exercise of stock
options 32,254 7,815
Proceeds from employee stock
purchase plan 10,563
Payment of deferred offering
costs - (2,194)
Net cash provided by (used in)
financing activities (13,320) 5,621
Effect of foreign exchange on
cash, cash equivalents and
restricted cash (379) (2,069)
Net increase (decrease) in
cash, cash equivalents and
restricted cash (281,535) 12,360
Cash, cash equivalents and
restricted cash at beginning
of period 518,178 257,436
Cash, cash equivalents and
restricted cash at end of
period $
236,643 $
269,796
DOCUSIGN, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(Unaudited)
Reconciliation of gross profit and gross margin:
Three Months Ended April 30,
(in thousands) 2019 2018
---
GAAP gross profit $
161,943 $
97,514
Add: Stock-based
compensation 5,722 26,000
Add: Amortization of
acquisition-related
intangibles 1,627 1,668
Add: Employer payroll tax
on employee stock
transactions 652
Non-GAAP gross profit $
169,944 $
125,182
GAAP gross margin 76
% 63
%
Non-GAAP adjustments 3
% 17
%
Non-GAAP gross margin 79
% 80
%
GAAP subscription gross
profit $
168,339 $
115,760
Add: Stock-based
compensation 2,282 9,955
Add: Amortization of
acquisition-related
intangibles 1,627 1,668
Add: Employer payroll tax
on employee stock
transactions 221
Non-GAAP subscription
gross profit $
172,469 $
127,383
GAAP subscription gross
margin 84
% 78
%
Non-GAAP adjustments 2
% 8
%
Non-GAAP subscription
gross margin 86
% 86
%
GAAP professional services
and other gross loss $
(6,396) $
(18,246)
Add: Stock-based
compensation 3,440 16,045
Add: Employer payroll tax
on employee stock
transactions 431
Non-GAAP professional
services and other gross
loss $
(2,525) $
(2,201)
GAAP professional services (51)
% (240)
and other gross margin %
Non-GAAP adjustments 31
% 211
%
Non-GAAP professional
services and other gross %
margin (20)
% (29)
Reconciliation of operating expenses:
Three Months Ended April 30,
(in thousands) 2019 2018
---
GAAP sales and marketing $
129,936 $
191,085
Less: Stock-based compensation (18,102) (112,481)
Less: Amortization of
acquisition-related
intangibles (3,106) (765)
Less: Employer payroll tax on
employee stock transactions (2,351)
Non-GAAP sales and marketing $
106,377 $
77,839
GAAP sales and marketing as a
percentage of revenue 61
% 123
%
Non-GAAP sales and marketing
as a percentage of revenue 50
% 50
%
GAAP research and development $
37,183 $
70,870
Less: Stock-based compensation (7,317) (47,268)
Less: Employer payroll tax on
employee stock transactions (1,150)
Non-GAAP research and
development $
28,716 $
23,602
GAAP research and development
as a percentage of revenue 17
% 45
%
Non-GAAP research and
development as a percentage of
revenue 13
% 15
%
GAAP general and administrative $
37,261 $
103,117
Less: Stock-based compensation (11,130) (84,045)
Less: Employer payroll tax on
employee stock transactions (1,602)
Non-GAAP general and
administrative $
24,529 $
19,072
GAAP general and administrative
as a percentage of revenue 18
% 67
%
Non-GAAP general and
administrative as a percentage
of revenue 11
% 12
%
Reconciliation of income (loss) from operations and operating margin:
Three Months Ended April 30,
(in thousands) 2019 2018
---
GAAP operating loss $
(42,437) $
(267,558)
Add: Stock-based
compensation 42,271 269,794
Add: Amortization of
acquisition-related
intangibles 4,733 2,433
Add: Employer payroll tax
on employee stock
transactions 5,755
Non-GAAP operating
income $
10,322 $
4,669
GAAP operating margin (20) (172)
% %
Non-GAAP adjustments 25
% 175
%
Non-GAAP operating
margin 5
% 3
%
Reconciliation of net income (loss) and net income (loss) per share, basic and diluted:
Three Months Ended April 30,
(in thousands, except per
share data) 2019 2018
---
GAAP net loss $
(45,722) $
(270,687)
Add: Stock-based
compensation 42,271 269,794
Add: Amortization of
acquisition-related
intangibles 4,733 2,433
Add: Employer payroll tax on
employee stock transactions 5,755
Add: Amortization of debt
discount and issuance costs 6,454
Non-GAAP net income $
13,491 $
1,540
Numerator:
Non-GAAP net income $
13,491 $
1,540
Less: preferred stock
accretion - (353)
Less: net income allocated
to participating securities - (871)
Non-GAAP net income
attributable to common
stockholders $
13,491 $
316
Denominator:
Weighted-average common
shares outstanding, basic 172,101 36,334
Effect of dilutive
securities 17,080 23,833
Non-GAAP weighted-average
common shares outstanding,
diluted 189,181 60,167
GAAP net loss per share,
basic and diluted $
(0.27) $
(7.46)
Non-GAAP net income per
share, basic 0.08 0.01
Non-GAAP net income per
share, diluted 0.07 0.01
Computation of free cash flow:
Three Months Ended April 30,
(in
thousands) 2019 2018
---
Net
cash
provided
by
operating
activities $
45,655 $
14,992
Less:
purchase
of
property
and
equipment (15,237) (6,184)
Non-
GAAP
free
cash
flow $
30,418 $
8,808
Net
cash
used
in
investing
activities $
(313,491) $
(6,184)
Net
cash
provided
by
(used
in)
financing
activities $
(13,320) $
5,621
Computation of billings:
Three Months Ended April 30,
(in
thousands) 2019 2018
---
Revenue $
213,962 $
155,808
Add:
Contract
liabilities
and
refund
liability,
end
of
period 395,254 293,667
Less:
Contract
liabilities
and
refund
liability,
beginning
of
period (390,887) (282,943)
Add:
Contract
assets
and
unbilled
accounts
receivable,
beginning
of
period 13,436 16,899
Less:
Contract
assets
and
unbilled
accounts
receivable,
end
of
period (16,810) (14,555)
Non-
GAAP
billings $
214,955 $
168,876
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SOURCE DocuSign, Inc.
