DocuSign stock rises after earnings beat and raised outlook, despite macro pressures

By Wallace Witkowski

CEO Thygesen tells MarketWatch that leadership overhaul over past 15 months is 'a chance to have a shared mission'

DocuSign Inc. shares rose in the extended session Thursday after the e-signature company reported earnings that topped Wall Street expectations and hiked its outlook for the year.

DocuSign shares (DOCU) were up 4% after hours, following a 1.2% decline to close the regular session at $52.13.

The company reported fiscal second-quarter net income of $7.4 million, or 4 cents a share, versus a loss of $45.1 million, or 22 cents a share, in the year-ago period. Adjusted earnings, which exclude one-time charges and stock-based compensation charges, rose to 72 cents a share from 44 cents a share in the year-ago period.

Revenue rose to $687.7 million from $622.2 million in the year-ago period, while billings rose 10% to $711.2 million.

Analysts surveyed by FactSet had estimated 66 cents a share on revenue of $677.6 million, and billings of $652.2 million.

Those beats come 15 months into a corporate reorganization which left analysts wondering if there were any other organizational surprises in store.

Blake Grayson, on his first earnings call as chief financial officer since joining the company in mid-June to succeed Cynthia Gaylor, told analysts on the conference call the company had "no major plans" in the foreseeable future.

Following two waves of layoffs over the past year, Grayson said DocuSign had 6,748 employees, a 16% headcount reduction from the 8,061 employees in the year-ago period.

Chief Executive Allan Thygesen told MarketWatch in an interview following earnings that while changes have been sweeping, the company is starting off with a fresh and focused leadership team that's been put together over the past 15 months.

"It's fairly unusual to have that sort of dynamic on a leadership team," Thygesen said. Thygesen became CEO last Oct. 10 as part of a wide transformation at the company that was kicked off in June 2022.

"It also gives us that chance to have a shared mission," Thygesen told MarketWatch. "We're not coming in with different baggage. We're all here because we want to be part of this."

While the company's forecast may be above Street estimates in key areas, Thygesen said his view of macroeconomic conditions were largely unchanged from his view a quarter ago. Back then, Thygesen had warned of smaller deal sizes and expansion rates on "more moderate pipeline and cautious customer behavior."

For the quarter ending in January, the company forecast revenue of $687 million to $691 million, and billings of $668 million to $678 million. Analysts expect earnings of 58 cents a share on revenue of $697.5 million and billings of $668.2 million for the fourth quarter,

For the year, DocuSign hiked its revenue forecast to a range between $2.73 billion and $2.74 billion, up from a previous estimate of $2.71 billion to $2.73 billion, and forecast billings of $2.8 billion to $2.82 billion. Analysts forecast earnings of $2.56 a share on revenue of $2.72 billion and billings of $2.75 billion for the year.

"While we are pleased with our results, like many others, we're seeing continued macro pressures tempering expansion rates," CFO Grayson told analysts on the call. "However, we remain focused on what we can control, executing against our initiatives to drive innovation and operational efficiency, further setting the foundation for growth while navigating an uncertain environment."

DocuSign said its board authorized adding $300 million to its existing stock-buyback program, for a total authorization of $500 million. During the quarter, the company bought back 583,000 shares for about $30 million.

DocuSign shares are down 5.9% year to date, compared with a 15.9% year-to-date gain by the S&P 500 SPX and a 31.4% rise by the tech-heavy Nasdaq Composite COMP. DocuSign's stock is down 5.5% over the past 12 months, compared with a 11.8% gain by the S&P 500, and a 16.6% gain by the Nasdaq.

-Wallace Witkowski

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09-07-23 1859ET

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