DocuSign Gets Rug Pulled After Objectively “Strong” Earnings Report… Thanks A Lot, Billings…

Apologies for being blunt, but Docusign was torn a new a$$hole yesterday. The cloud SaaS company that praises Covid-19 for pumping it to relevance beat earnings, hiked revenue forecasts and launched a billion-dollar buyback… then, got absolutely curb-stomped by the market anyway. 

(Source: Giphy) 

In short, DocuSign’s Q1 results were objectively strong for a “good SaaS”. Adjusted EPS clocked in at $0.90, up from $0.82 last year, and just a hair below the $0.91 “whisper” number analysts were salivating over. Revenue reported at $763.7 million, up 8% year-over-year, beating both guidance and the average estimate. They even nudged up full-year revenue guidance to $3.151B–$3.163B, comfortably above Wall Street’s $3.137B consensus, and authorized another $1B for buybacks just for good measure. 

And yet, it was the billings that suplexed shares into oblivion. Billings came in at $739.6 million vs. a $741–$751 million company forecast and $747.8 million analyst consensus. Why is this a BFD? Because the Street treats billings like a sacred cow and DocuSign missed by a couple million, which in this market is like showing up to a wedding in all white. No bueno. 

(Source: Investopedia) 

Of course, CEO Allan Thygesen tried the “but we’re transforming” act on the earnings call with the fact that over 10,000 customers now use their new AI-powered Intelligent Agreement Management (IAM) platform, and the company is knee-deep in “foundational go-to-market changes.” Short version: they’re shoving everyone onto the new platform… and surprise, the pain came faster than expected, tanking early renewals and billings growth. Translation: That’s bad news for DocuSign, and good news for investor psychology mainly because even though investors heard “AI”, they immediately asked to see billings receipt. 

So yeah, it looks like we are growing up a tad where the days of just throwing money in people's faces with AI stamped on their forehead is the way of the Dinosaurs. Which is presumably why shares tumbled -19%. But, but, but… with that said, DocuSign is still up 3% year-to-date, so unless you FOMO’d in at the top, you’re basically back to square one… with Friday being DocuSign’s worst trading day in over two years. Imagine being up for the year, then instantly down bad because you missed a single metric while everyone else in SaaS is setting cash on fire LOL. 

(Source: Giphy) 

In the end though, DocuSign’s not going out of business. They’re still growing, AI isn’t just a sticker on the box, and recurring revenue is alive and well. But this earnings season is a meat grinder for anyone hoping to win with “pretty good.” If your numbers have even a whiff of weakness, investors will end up feeding you to the woodchipper. Just ask Broadcom. 

For now, we’ve arrived at the god awful point where perfection is required. Anything less than that, well… sorry boutcha. Meaning, keep your head on the swivel next week, and place your bets accordingly. Until next time, friends…

Stocks.News does not hold positions in companies mentioned in the article.