Docusign posts earnings beat and turns to next leg of post-pandemic strategy

By Emily Bary

The e-signature company recently started rolling out a new platform that uses AI and lets customers analyze all their contracts

Docusign Inc. continued to make profit progress in its most recent quarter, and now it's turning to the next leg of its post-pandemic transformation journey.

The company, which makes software for collecting electronic signatures and for other aspects of contract management, was a pandemic darling, as businesses looked for ways to formalize agreements without requiring face-to-face contact.

But growth became more challenging as the economy reopened, and since then Docusign (DOCU) has been focused on stabilizing the business, improving efficiencies and setting the stage for new growth. "In essence, what you're seeing today is, we've done a really nice job on the first two," Chief Executive Allan Thygesen told MarketWatch in discussing Docusign's fiscal second-quarter results on Thursday.

He deemed operating income the high point of Docusign's earnings, as that metric amounted to $237.2 million, representing a 32.2% margin. The company logged $169.9 million on the metric a year before.

After initially falling, shares ended Thursday's extended session up 0.8%.

Docusign's outlook for the fiscal third quarter calls for $743 million to $747 million in revenue, along with a 28.5% to 29.5% adjusted operating margin. Analysts were looking for $740 million in revenue.

In the just-completed period, Docusign posted earnings per share of $4.26, up from 4 cents a share a year before. On an adjusted basis, the company recorded 97 cents in earnings per share, whereas analysts tracked by FactSet were anticipating 81 cents.

Revenue rose 7% to $736 million, while analysts had been projecting $727 million. The company also saw a 7% boost in subscription revenue, which came in at $717 million and cleared the consensus view of $707 million.

The next big initiative for Docusign is its new platform that was just launched to a small portion of the company's customer base. While Docusign is best known for allowing people to collect electronic signatures, the company's new platform is for more broadly managing agreements.

"One example that has proven to be particularly popular with our early customers is basically your entire corpus of agreements, all the agreements that enterprise has stored in one place, immediately accessible, searchable, and we extract the metadata out of the agreement," Thygesen said.

That makes some use of artificial intelligence, and it allows customers to see things like all of their agreements that are up for renewal within six months, or where a customer may have exposure to a specific thing.

"We're essentially doing what AI is really good at," Thygesen said. "We're analyzing large volumes of text and extracting essential data that tends to be relatively consistent between agreements and then representing it back to you in a way that has high utility."

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-Emily Bary

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09-05-24 2144ET

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