DocuSign Announces Third Quarter Fiscal 2019 Financial Results

PRNewswire 6-Dec-2018 4:05 PM

SAN FRANCISCO, Dec. 6, 2018 /PRNewswire/ -- DocuSign (NASDAQ:DOCU), which offers the world's #1 eSignature solution as part of its broader platform for automating the agreement process, today announced results for its fiscal quarter ended October 31, 2018.

DocuSign, Inc. (PRNewsFoto/DocuSign, Inc.)

"With year-over-year growth of 37% in revenue and 40% in billings, DocuSign's business continued to excel in the third quarter. We added another 25,000 customers, bringing our total to 454,000 worldwide. Expansions within existing customers, traction around our System of Agreement vision, and our strategic partner ecosystem all contributed to our strong results," said Dan Springer, CEO of DocuSign.

Third Quarter Financial Highlights

  • Total revenue was $178.4 million, an increase of 37% year-over-year. Subscription revenue was $169.4 million, an increase of 38% year-over-year. Professional services and other revenue was $9.0 million, an increase of 17% year-over-year.
  • Billings were $198.0 million, an increase of 40% year-over-year.
  • GAAP gross margin was 75%, compared to 76% in the same period last year. Non-GAAP gross margin was 79% compared to 78% in the same period last year.
  • GAAP net loss per basic and diluted share was $0.31 in the third quarter of fiscal 2019 on 168 million shares outstanding compared to GAAP net loss per share of $0.45 in the third quarter of fiscal 2018 on 33 million shares outstanding.
  • Non-GAAP net income per diluted share was $0.00 in the third quarter of fiscal 2019 based on 192 million shares outstanding compared to a non-GAAP net loss per share of $0.17 in the third quarter of fiscal 2018 based on 33 million shares outstanding.
  • Net cash provided by operating activities was $4.3 million, compared to $11.6 million in the same period last year.
  • Free cash flow was negative $4.3 million in the third quarter of fiscal 2019 compared to free cash flow of $7.0 million in the same period last year.
  • Cash, cash equivalents and restricted cash was $1.1 billion at the end of the quarter. Our cash balance reflects the addition of $560.8 million of proceeds net of offering expenses from the issuance of Convertible Senior Notes on September 18, 2018.

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

  • SpringCM Inc. Acquisition. The company completed the acquisition of SpringCM Inc., a leading cloud-based document generation and contract lifecycle management software company, on September 4, 2018 for $218.8 million in cash, subject to adjustment. With SpringCM, DocuSign will accelerate customers' ability to modernize their Systems of Agreement all the way from preparing to signing, acting-on, and managing agreements.
  • Convertible Senior Notes Offering. The company issued $575.0 million in 0.5% Convertible Senior Notes due 2023. The offering generated net proceeds of $560.8 million. DocuSign used $67.6 million of the net proceeds to enter into capped call transactions to offset potential dilution upon conversion or any cash payments. DocuSign intends to use the remainder of the net proceeds for working capital, other general corporate purposes and potential acquisitions.

Outlook

The company currently expects:

Quarter ending January 31, 2019 (in millions, except percentages):




Total revenue

$192

to

$194


Billings

$245

to

$255


Non-GAAP gross margin

78%

to

81%


Non-GAAP sales and marketing

50%

to

52%


Non-GAAP research and development

16%

to

18%


Non-GAAP general and administrative

11%

to

13%


Interest and other income (expense)

$3

to

$4


Provision for income taxes

$0.75




Non-GAAP diluted weighted-average shares outstanding

185

to

190





Year ending January 31, 2019 (in millions, except percentages):




Total revenue

$693

to

$695


Billings

$795

to

$805


Non-GAAP gross margin

78%

to

81%


Non-GAAP sales and marketing

50%

to

52%


Non-GAAP research and development

16%

to

18%


Non-GAAP general and administrative

11%

to

13%


Provision for income taxes

$2

to

$4


Non-GAAP diluted weighted-average shares outstanding

155

to

160

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 6, 2018 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) December 20, 2018 using the passcode 13685199.

About DocuSign

DocuSign (NASDAQ:DOCU) helps organizations connect and automate how they prepare, sign, act on, and manage agreements. As part of its cloud-based System of Agreement Platform, DocuSign offers eSignature-the world's #1 way to sign electronically on practically any device, from almost anywhere, at any time. Today, over 450,000 customers and hundreds of millions of users in over 180 countries use DocuSign to accelerate the process of doing business and simplify people's lives.

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 acquisition of SpringCM and our ability to develop our System of Agreement platform and deliver product innovation. They also include statements about our possible or assumed business strategies, potential growth opportunities, new products 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 successfully integrate SpringCM's operations; our ability to implement our plans, forecasts and other expectations with respect to SpringCM's business; our ability to realize the anticipated benefits of acquisition of SpringCM, including the possibility that the expected benefits from the acquisition will not be realized or will not be realized within the expected time period; disruption from the acquisition making it more difficult to maintain business and operational relationships; the negative effects of consummation of the acquisition on the market price of our common stock or on our operating results; unknown liabilities from the acquisition; 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 and rapid technological change, increased competition on our market and our ability to compete effectively, and expansion of our operations and increased adoption of our platform internationally. 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 quarterly report on Form 10-Q for the quarter ended July 31, 2018 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, amortization of acquisition-related intangibles, amortization of debt discount and issuance costs from our convertible senior notes issued in September 2018, acquisition-related expenses, partial releases of valuation allowance due to acquisition, and, as applicable, other special items. Costs associated with acquisitions include legal, accounting, other professional fees and other non-recurring costs.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
October 31,


Nine Months Ended
October 31,

(in thousands, except per share data)

2018


2017


2018


2017

Revenue:








Subscription

$

169,426



$

122,905



$

476,085



$

347,305


Professional services and other

8,959



7,684



25,152



22,325


Total revenue

178,385



130,589



501,237



369,630


Cost of revenue:








Subscription

28,709



22,335



84,204



61,668


Professional services and other

16,364



8,881



55,524



25,130


Total cost of revenue

45,073



31,216



139,728



86,798


Gross profit

133,312



99,373



361,509



282,832


Operating expenses:








Sales and marketing

117,051



69,666



411,915



203,300


Research and development

38,404



22,522



143,047



68,997


General and administrative

36,274



19,528



170,242



55,923


Total expenses

191,729



111,716



725,204



328,220


Loss from operations

(58,417)



(12,343)



(363,695)



(45,388)


Interest expense

(3,503)



(154)



(3,743)



(474)


Interest income and other income (expense), net

3,395



(1,225)



4,165



699


Loss before provision for (benefit from) income taxes

(58,525)



(13,722)



(363,273)



(45,163)


Provision for (benefit from) income taxes

(5,712)



783



(3,059)



761


Net loss

$

(52,813)



$

(14,505)



$

(360,214)



$

(45,924)


Net loss per share attributable to common stockholders, basic and diluted

$

(0.31)



$

(0.45)



$

(2.90)



$

(1.49)


Weighted-average number of shares used in computing net loss per share attributable to common stockholders, basic and diluted

167,736



33,353



124,343



31,604










Stock-based compensation expense included in costs and expenses:








Cost of revenue—subscription

$

2,398



$

228



$

13,941



$

697


Cost of revenue—professional services

3,578



253



22,445



742


Sales and marketing

22,338



1,959



151,610



7,547


Research and development

9,919



1,042



64,546



3,721


General and administrative

13,515



3,113



109,165



10,806


 

DOCUSIGN, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


(in thousands, except share and per share data)

October 31, 2018


January 31, 2018

Assets




Current assets




Cash and cash equivalents

$

1,094,133



$

256,867


Restricted cash

367



569


Accounts receivable

130,611



123,750


Contract assets—current

12,056



14,260


Prepaid expense and other current assets

28,344



23,349


Total current assets

1,265,511



418,795


Property and equipment, net

73,965



63,019


Goodwill

194,533



37,306


Intangible assets, net

79,161



14,148


Deferred contract acquisition costs—noncurrent

97,091



75,535


Other assets—noncurrent

9,175



11,170


Total assets

$

1,719,436



$

619,973


Liabilities, Redeemable Convertible Preferred Stock and Stockholders' Equity (Deficit)




Current liabilities




Accounts payable

$

22,059



$

23,713


Accrued expenses

22,669



15,734


Accrued compensation

53,686



50,852


Contract liabilities—current

316,619



270,188


Deferred rent—current

2,029



1,758


Other liabilities—current

17,574



11,574


Total current liabilities

434,636



373,819


Convertible senior notes, net

432,572




Contract liabilities—noncurrent

7,135



7,736


Deferred rent—noncurrent

23,050



23,044


Deferred tax liability—noncurrent

2,500



2,511


Other liabilities—noncurrent

9,374



4,010


Total liabilities

909,267



411,120


Redeemable convertible preferred stock



547,501


Stockholders' equity (deficit)




Preferred stock




Common stock

16



4


Additional paid-in capital

1,676,180



160,265


Accumulated other comprehensive (loss) income

(3,493)



3,403


Accumulated deficit

(862,534)



(502,320)


Total stockholders' equity (deficit)

810,169



(338,648)


Total liabilities, redeemable convertible preferred stock, and stockholders' equity (deficit)

$

1,719,436



$

619,973


 

DOCUSIGN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



Three Months Ended
October 31,


Nine Months Ended
October 31,

(in thousands)

2018


2017


2018


2017

Cash flows from operating activities:








Net loss

$

(52,813)



$

(14,505)



$

(360,214)



$

(45,924)


Adjustments to reconcile net loss to net cash used in operating activities








Depreciation and amortization

10,343



8,318



26,024



23,703


Amortization of deferred contract acquisition and fulfillment costs

10,743



7,731



29,889



22,022


Amortization of debt discount and transaction costs

3,147





3,147




Stock-based compensation expense

51,748



6,595



361,707



23,513


Deferred income taxes

(7,335)



58



(7,347)



58


Other

(1,204)



1,805



(2,079)



(21)


Changes in operating assets and liabilities








Accounts receivable

(14,019)



(146)



1,366



12,962


Contract assets

1,625



(1,338)



2,774



(2,313)


Prepaid expenses and other current assets

1,023



(3,472)



(2,383)



(4,128)


Deferred contract acquisition and fulfillment costs

(22,206)



(12,023)



(52,545)



(32,222)


Other assets

667



(165)



2,002



(333)


Accounts payable

(956)



726



(5,990)



(5,545)


Accrued expenses

1,304



1,735



3,610



1,218


Accrued compensation

1,811



3,227



2,171



(1,753)


Contract liabilities

16,353



11,309



35,856



30,445


Deferred rent

574



(110)



277



(174)


Other liabilities

3,456



1,873



3,684



1,511


Net cash provided by operating activities

4,261



11,618



41,949



23,019


Cash flows from investing activities:








Cash paid for acquisition, net of acquired cash

(218,779)





(218,779)




Purchases of property and equipment

(8,576)



(4,603)



(19,096)



(15,692)


Proceeds from sale of business held for sale







467


Net cash used in investing activities

(227,355)



(4,603)



(237,875)



(15,225)


Cash flows from financing activities:








Proceeds from issuance of convertible senior notes, net of initial purchasers' discounts and transaction costs

560,756





560,756




Purchase of capped calls related to issuance of convertible senior notes

(67,563)





(67,563)




Proceeds from issuance of common stock in initial public offering, net of underwriting commissions





529,305




Proceeds from the exercise of stock options

5,047



8,437



15,365



21,946


Payment of deferred offering costs

(170)





(3,692)




Payment of holdback on prior acquisition



(390)





(390)


Net cash provided by financing activities

498,070



8,047



1,034,171



21,556


Effect of foreign exchange on cash, cash equivalents and restricted cash

362



(571)



(1,181)



1,572


Net increase in cash, cash equivalents and restricted cash

275,338



14,491



837,064



30,922


Cash, cash equivalents and restricted cash at beginning of period

819,162



207,675



257,436



191,244


Cash, cash equivalents and restricted cash at end of period

$

1,094,500



$

222,166



$

1,094,500



$

222,166


 

DOCUSIGN, INC.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(Unaudited)


Reconciliation of gross profit and gross margin:



Three Months Ended
October 31,


Nine Months Ended
October 31,

(in thousands)

2018


2017


2018


2017

GAAP gross profit

$

133,312



$

99,373



$

361,509



$

282,832


Add: Stock-based compensation

5,976



481



36,386



1,439


Add: Amortization of acquisition-related intangibles

1,632



1,691



4,303



5,079


Add: Acquisition-related expenses

108





108




Non-GAAP gross profit

$

141,028



$

101,545



$

402,306



$

289,350


GAAP gross margin

75

%


76

%


72

%


77

%

Non-GAAP adjustments

4

%


2

%


8

%


1

%

Non-GAAP gross margin

79

%


78

%


80

%


78

%









GAAP subscription gross profit

$

140,717



$

100,570



$

391,881



$

285,637


Add: Stock-based compensation

2,398



228



13,941



697


Add: Amortization of acquisition-related intangibles

1,632



1,691



4,303



5,079


Non-GAAP subscription gross profit

$

144,747



$

102,489



$

410,125



$

291,413


GAAP subscription gross margin

83

%


82

%


82

%


82

%

Non-GAAP adjustments

2

%


1

%


4

%


2

%

Non-GAAP subscription gross margin

85

%


83

%


86

%


84

%









GAAP professional services and other gross loss

$

(7,405)



$

(1,197)



$

(30,372)



$

(2,805)


Add: Stock-based compensation

3,578



253



22,445



742


Add: Acquisition-related expenses

108





108




Non-GAAP professional services and other gross loss

$

(3,719)



$

(944)



$

(7,819)



$

(2,063)


GAAP professional services and other gross loss

(83)

%


(16)

%


(121)

%


(13)

%

Non-GAAP adjustments

41

%


4

%


90

%


4

%

Non-GAAP professional services and other gross loss

(42)

%


(12)

%


(31)

%


(9)

%

 

Reconciliation of operating expenses:



Three Months Ended
October 31,


Nine Months Ended
October 31,

(in thousands)

2018


2017


2018


2017

GAAP sales and marketing

$

117,051



$

69,666



$

411,915



$

203,300


Less: Stock-based compensation

(22,338)



(1,959)



(151,610)



(7,547)


Less: Amortization of acquisition-related intangibles

(2,257)



(1,015)



(3,787)



(2,520)


Less: Acquisition-related expenses

(68)





(68)




Non-GAAP sales and marketing

$

92,388



$

66,692



$

256,450



$

193,233


GAAP sales and marketing as a percentage of revenue

66

%


53

%


82

%


55

%

Non-GAAP sales and marketing as a percentage of revenue

52

%


51

%


51

%


52

%









GAAP research and development

$

38,404



$

22,522



$

143,047



$

68,997


Less: Stock-based compensation

(9,919)



(1,042)



(64,546)



(3,721)


Less: Acquisition-related expenses

(302)





(302)




Non-GAAP research and development

$

28,183



$

21,480



$

78,199



$

65,276


GAAP research and development as a percentage of revenue

22

%


17

%


29

%


19

%

Non-GAAP research and development as a percentage of revenue

16

%


16

%


16

%


18

%









GAAP general and administrative

$

36,274



$

19,528



$

170,242



$

55,923


Less: Stock-based compensation

(13,515)



(3,113)



(109,165)



(10,806)


Less: Acquisition-related expenses

(1,290)





(1,290)




Non-GAAP general and administrative

$

21,469



$

16,415



$

59,787



$

45,117


GAAP general and administrative as a percentage of revenue

20

%


15

%


34

%


15

%

Non-GAAP general and administrative as a percentage of revenue

12

%


13

%


12

%


12

%

 

Reconciliation of income (loss) from operations and operating margin:



Three Months Ended
October 31,


Nine Months Ended
October 31,

(in thousands)

2018


2017


2018


2017

GAAP operating loss

$

(58,417)



$

(12,343)



$

(363,695)



$

(45,388)


Add: Stock-based compensation

51,748



6,595



361,707



23,513


Add: Amortization of acquisition-related intangibles

3,889



2,706



8,090



7,599


Add: Acquisition-related expenses

1,768





1,768




Non-GAAP operating income (loss)

$

(1,012)



$

(3,042)



$

7,870



$

(14,276)


GAAP operating margin

(33)

%


(9)

%


(73)

%


(12)

%

Non-GAAP adjustments

32

%


7

%


75

%


8

%

Non-GAAP operating margin (loss)

(1)

%


(2)

%


2

%


(4)

%

 

Reconciliation of net income (loss) and net income (loss) per share, basic and diluted:



Three Months Ended
October 31,


Nine Months Ended
October 31,

(in thousands, except per share data)

2018


2017


2018


2017

GAAP net loss

$

(52,813)



$

(14,505)



$

(360,214)



$

(45,924)


Add: Stock-based compensation

51,748



6,595



361,707



23,513


Add: Amortization of acquisition-related intangibles

3,889



2,706



8,090



7,599


Add: Acquisition-related expenses

1,839





1,839




Add: Amortization of debt discount and issuance costs

3,147





3,147




Less: Tax benefit from SpringCM acquisition(1)

(7,369)





(7,369)




Non-GAAP net income (loss)

$

441



$

(5,204)



$

7,200



$

(14,812)










Numerator:








Non-GAAP net income (loss)

$

441



$

(5,204)



$

7,200



$

(14,812)


Less: preferred stock accretion



(376)



(353)



(1,097)


Less: net income allocated to participating securities





(1,427)




Non-GAAP net income (loss) attributable to common stockholders

$

441



$

(5,580)



$

5,420



$

(15,909)










Denominator:








Weighted-average common shares outstanding, basic

167,736



33,353



124,343



31,604


Effect of dilutive securities

24,490





24,554




Non-GAAP weighted-average common shares outstanding, diluted

192,226



33,353



148,897



31,604










GAAP net loss per share, basic and diluted

$

(0.31)



$

(0.45)



$

(2.90)



$

(1.49)


Non-GAAP net income (loss) per share, basic

0.00



(0.17)



0.04



(0.50)


Non-GAAP net income (loss) per share, diluted

0.00



(0.17)



0.04



(0.50)




(1)

Represents a tax benefit related to the release of a portion of our deferred tax asset valuation allowance resulting from the SpringCM Acquisition.

 

Computation of free cash flow:



Three Months Ended
October 31,


Nine Months Ended
October 31,

(in thousands)

2018


2017


2018


2017

Net cash provided by operating activities

$

4,261



$

11,618



$

41,949



$

23,019


Less: purchase of property and equipment

(8,576)



(4,603)



(19,096)



(15,692)


Non-GAAP free cash flow

$

(4,315)



$

7,015



$

22,853



$

7,327


 

Computation of billings:



Three Months Ended
October 31,


Nine Months Ended
October 31,

(in thousands)

2018


2017


2018


2017

Revenue

$

178,385



$

130,589



$

501,237



$

369,630


Add: Contract liabilities and refund liability, end of period

330,060



226,836



330,060



226,836


Less: Contract liabilities and refund liability, beginning of period

(300,426)



(214,405)



(282,943)



(195,501)


Add: Contract assets and unbilled accounts receivable, beginning of period

16,196



11,381



16,899



10,095


Less: Contract assets and unbilled accounts receivable, end of period

(15,229)



(12,678)



(15,229)



(12,678)


Less: Contract liabilities and refund liability contributed by the acquisition of SpringCM

(11,002)





(11,002)




Non-GAAP billings

$

197,984



$

141,723



$

539,022



$

398,382


 

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/docusign-announces-third-quarter-fiscal-2019-financial-results-300761551.html

SOURCE DocuSign, Inc.

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