E-signature company DocuSign (DOCU) reported Q4 CY2024 results beating Wall Street’s revenue expectations, with sales up 9% year on year to $776.3 million. On the other hand, next quarter’s revenue guidance of $747 million was less impressive, coming in 1.4% below analysts’ estimates. Its non-GAAP profit of $0.86 per share was in line with analysts’ consensus estimates.
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DocuSign (DOCU) Q4 CY2024 Highlights:
- Revenue: $776.3 million vs analyst estimates of $761.5 million (9% year-on-year growth, 1.9% beat)
- Adjusted EPS: $0.86 vs analyst estimates of $0.85 (in line)
- Adjusted Operating Income: $223.7 million vs analyst estimates of $214.2 million (28.8% margin, 4.4% beat)
- Management’s revenue guidance for the upcoming financial year 2026 is $3.14 billion at the midpoint, in line with analyst expectations and implying 5.3% growth (vs 7.8% in FY2025)
- Operating Margin: 7.8%, up from 1.4% in the same quarter last year
- Free Cash Flow Margin: 36%, up from 27.9% in the previous quarter
- Billings: $923.2 million at quarter end, up 10.8% year on year
- Market Capitalization: $16.19 billion
"Fiscal 2025 was a transformative year for Docusign. We launched Docusign IAM, our AI-powered agreement management platform, which is driving rapid traction with customers," said Allan Thygesen, CEO of Docusign.
Company Overview
Founded by Seattle-based entrepreneur Tom Gonser, DocuSign (NASDAQ:DOCU) is the pioneer of e-signature and offers software as a service that allows people and organisations to sign legally binding documents electronically.
Document Management
The catch phrase "digital transformation" originally referred to the digitization of documents within enterprises. The growth of digital documents has spurred an explosion of collaboration within and between businesses, which in turn is driving the demand for e-signature and content management platforms.
Sales Growth
Examining a company’s long-term performance can provide clues about its quality. Any business can have short-term success, but a top-tier one grows for years. Over the last three years, DocuSign grew its sales at a 12.2% annual rate. Although this growth is acceptable on an absolute basis, it fell short of our standards for the software sector, which enjoys a number of secular tailwinds.
This quarter, DocuSign reported year-on-year revenue growth of 9%, and its $776.3 million of revenue exceeded Wall Street’s estimates by 1.9%. Company management is currently guiding for a 5.3% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 5.9% over the next 12 months, a deceleration versus the last three years. This projection is underwhelming and implies its products and services will face some demand challenges.
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Billings
Billings is a non-GAAP metric that is often called “cash revenue” because it shows how much money the company has collected from customers in a certain period. This is different from revenue, which must be recognized in pieces over the length of a contract.
DocuSign’s billings came in at $923.2 million in Q4, and over the last four quarters, its growth was underwhelming as it averaged 6.6% year-on-year increases. This performance mirrored its total sales and suggests that increasing competition is causing challenges in acquiring/retaining customers. 
Customer Acquisition Efficiency
The customer acquisition cost (CAC) payback period represents the months required to recover the cost of acquiring a new customer. Essentially, it’s the break-even point for sales and marketing investments. A shorter CAC payback period is ideal, as it implies better returns on investment and business scalability.
DocuSign’s recent customer acquisition efforts haven’t yielded returns as its CAC payback period was negative this quarter, meaning its incremental sales and marketing investments outpaced its revenue. The company’s inefficiency indicates it operates in a highly competitive environment where there is little differentiation between DocuSign’s products and its peers.
Key Takeaways from DocuSign’s Q4 Results
We were impressed by how significantly DocuSign blew past analysts’ billings expectations this quarter. We were also happy its revenue and EBITDA outperformed Wall Street’s estimates. On the other hand, its revenue guidance for next quarter slightly missed. Overall, this was a mixed quarter. The stock traded up 5.2% to $78.60 immediately after reporting.
So do we think DocuSign is an attractive buy at the current price? If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free.
