DocuSign Announces Third Quarter Fiscal 2021 Financial Results

SAN FRANCISCO, Dec. 3, 2020 /PRNewswire/ -- DocuSign, Inc. (NASDAQ: DOCU), which offers the world's #1 eSignature solution as part of the DocuSign Agreement Cloud, today announced results for its fiscal quarter ended October 31, 2020.

"As companies accelerate the digital transformation of their business and agreement processes, DocuSign's role as an essential cloud platform continues to grow," said Dan Springer, DocuSign CEO. "Our Q3 results reflect that tailwind, as well as the immediate and long-term value that customers see from eSignature and our broader Agreement Cloud."

Third Quarter Financial Highlights

• Total revenue was $382.9 million, an increase of 53% year-over-year. Subscription revenue was $366.6 million, an increase of 54% year-over-year. Professional services and other revenue was $16.3 million, an increase of 43% year-over-year.
• Billings were $440.4 million, an increase of 63% year-over-year.
• GAAP gross margin was 74% compared to 75% in the same period last year. Non-GAAP gross margin was 79% in both comparative periods.
• GAAP net loss per basic and diluted share was $0.31 on 186 million shares outstanding compared to $0.26 on 178 million shares outstanding in the same period last year.
• Non-GAAP net income per diluted share was $0.22 on 206 million shares outstanding compared to $0.11 on 191 million shares outstanding in the same period last year.
• Net cash provided by operating activities was $57.4 million compared to $1.9 million net cash used in operating activities in the same period last year.
• Free cash flow was $38.1 million compared to negative $14.1 million in the same period last year.
• Cash, cash equivalents, restricted cash and investments were $675.6 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 2020 Product Release 3. DocuSign announced more than a dozen new product capabilities to help customers get remote work done faster and easier. This includes:
• eSignature for Slack which enables users to send and sign important documents from directly within Slack;
• Drawing which streamlines processes by enabling a sender or signer to upload an image and leave free-form markups on the image;
• Agreement Actions which allow admins to easily configure rules to automate common post-signature actions; and
• iOS App Updates which includes an improved user experience and new features (including drag-and-drop tagging) for DocuSign's eSignature app for iOS.
• New Products. DocuSign continues to expand the Agreement Cloud with new products that make agreement processes smarter, faster, and more secure.
• DocuSign Analyzer helps customers negotiate better agreements, faster. It applies the AI-powered advanced contract analytics of DocuSign Insight to incoming contracts, accelerating contract review and negotiation while helping to manage risk.
• DocuSign CLM+ adds AI-driven analytics from DocuSign Analyzer and Insight to DocuSign's market-leading CLM solution. This combination empowers organizations to automate manual tasks, orchestrate complex workflows and eliminate unnecessary risks intelligently by embedding analytics and machine learning across every stage of the agreement lifecycle.
• DocuSign Monitor helps protect agreements with round-the-clock activity tracking. It uses advanced analytics to provide near real-time alerts—empowering security teams to detect unusual account activity, investigate incidents and respond to verified threats.
• DocuSign Quote Gen for Salesforce CPQ+ allows Salesforce CPQ customers to leverage Gen for Salesforce as their document-generation solution within CPQ+.

Outlook

The company currently expects the following guidance:

▪  Quarter ending January 31, 2021 (in millions, except percentages):

▪  Year ending January 31, 2021 (in millions, except percentages):

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 3, 2020 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 investor.docusign.com. 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 17, 2020 using the passcode 13713254.

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, over 820,000 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 2020. DocuSign, Inc. is the owner of DOCUSIGN® and all its other marks (www.docusign.com/IP).

Investor Relations:
Annie Leschin
VP Investor Relations
[email protected]

Media Relations:
Adrian Wainwright
Head of Communications
[email protected]

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 all statements that are not historical facts and can be identified by terms such as "may," "will," "should," "expects," "plans," "anticipates," "could," "intends," "target," "projects," "contemplates," "believes," "estimates," "predicts," "potential," or "continue" or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. Forward-looking statements in this press release include, among other things, statements under "Outlook" above and any other 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 our expectations regarding the benefits of the DocuSign Agreement Cloud and enhancements to it, additions to the Agreement Cloud suite of products, and the anticipated benefits of the acquisition and integration of Seal Software and Liveoak Technologies. They also include statements about our future operating results and financial position, our business strategy and plans, market growth and trends, and our objectives for future operations. These statements are subject to substantial risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements.

These risks include, among other things, risks related to the impact of the COVID-19 pandemic on our business, financial condition and results of operations as well as the businesses of our customers and partners and the economy as a whole; our ability to estimate the size of our total addressable market; our ability to effectively 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; the effects of increased competition in our market and our ability to compete effectively; our ability to expand use cases within existing customers and vertical solutions; our ability to expand our operations and increase adoption of our platform internationally; our ability to strengthen and foster our relationship with developers; our ability to expand our direct sales force, customer success team and strategic partnerships around the world; our ability to identify targets for, execute on, integrate the operations of and realize the anticipated benefits of potential acquisitions; our ability to maintain, protect and enhance our brand; the sufficiency of our cash and cash equivalents to satisfy our liquidity needs; our failure or the failure of our software to comply with applicable industry standards, laws and regulations; our ability to maintain, protect and enhance our intellectual property; our ability to successfully defend litigation against us; our ability to attract large organizations as users; our ability to maintain our corporate culture; our ability to offer high-quality customer support; our ability to hire, retain and motivate qualified personnel; and our ability to maintain proper and effective internal controls. Additional risks and uncertainties that could affect our financial results are included in the sections 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 fiscal year ended January 31, 2020 filed on March 27, 2020, our quarterly report on Form 10-Q for the quarter ended July 31, 2020 filed on September 4, 2020, and other filings that we make from time to time with the with the Securities and Exchange Commission (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 from operations, non-GAAP operating margin, non-GAAP net income and non-GAAP net income 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, acquisition-related expenses, 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 that do not correlate to the operation of the business. When evaluating the performance of our business and making operating plans, we do not consider these items (for example, when considering the impact of equity award grants, we place a greater emphasis on overall stockholder dilution rather than the accounting charges associated with such grants). 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 operating activities less purchases of property and equipment. We believe free cash flow is an important liquidity measure of the cash that is available (if any), 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.

SOURCE DocuSign, Inc.