Online-signature company undershoots on annual guidance, shares fall more than 17% after hitting their lowest prices since April 2020 earlier in the week
The pandemic gains for DocuSign Inc. shares have already disappeared, and the stock is still moving lower.
DocuSign DOCU, -4.25% shares sank more than 17% in after-hours trading Thursday, following an earnings report that included a weaker-than-expected forecast for the new fiscal year. The stock has closed this week at its lowest prices since April 2020, when the COVID-19 pandemic produced a spike in demand for the online-signature technology at the heart of the San Francisco software company’s business.
The downfall of stocks that spiked throughout the pandemic as their services became more needed has been a theme in recent months, as companies such as videoconferencing specialist Zoom Video Communications Inc. ZM, -5.27% and at-home fitness company Peloton Interactive Inc. PTON, -3.54%. The problems have often not been in the results provided, but the forecasts for slowing growth as the threat of COVID-19 dissipates and people resume activities in ways they did before the virus invaded their lives.
Docusign’s results fit that pattern. The company easily topped analysts’ expectations for the fourth quarter with Thursday afternoon’s report, detailing a loss of $30.45 million, or 15 cents a share, on sales of $564 million, up from $410.2 million a year ago. Billings, which reflects committed revenue that has not yet been recognized, hit $670.1 million. After adjusting for stock-based compensation and other effects, the company reported earnings of 48 cents a share, up from 37 cents a share a year ago and on the nose with analysts’ estimates. Analysts on average were expecting adjusted earnings of 48 cents a share on sales of $562 million and billings of $654.1 million.
“In fiscal 2022, we grew revenues by 45% and billings by 37% year-over-year, while generating record operating and cash flow margins,” Chief Executive Dan Springer said in a statement. “While the year unfolded differently than expected, we are proud of the ongoing performance and resilience of our team as we scaled to become a multibillion-dollar company.”
DocuSign executives’ guidance for this year’s growth came in well lower than expectations, though. They expect 2022 revenue of $2.47 billion to $2.48 billion and billings of $2.71 billion to $2.73 billion, while analysts on average were modeling revenue of $2.61 billion and billings of $2.93 billion heading into the print. The growth decline is not delayed until the second half, either: First-quarter guidance for sales of $579 million to $583 million and billings of $573 million to $583 million were substantially lower than average estimates of $596 million and $648.3 million, respectively.
The disappointment was not entirely unexpected. UBS analysts in a note this week warned investors that “Street revs, billings and margins estimates for FY23 are all too high,” because there just wasn’t much easy growth left for the e-signature business.
“In terms of e-signature penetration, this round of checks consistently cited a 70%+ penetration level, at least among large U.S. enterprises, higher than in previous rounds of checks,” the analysts wrote, while dropping their price target to $110 from $170 but maintaining a neutral rating. “This implies that DocuSign might have a tough time maintaining its net retention rate above 120% in coming quarters, and it also encourages us to take a more conservative stance on our FY23 growth outlook.”
Doubts about continuing growth had already cost DocuSign its pandemic bounce. After more than tripling in 2020 and topping $300 a share at times in 2021, the stock has plunged more than 66% in the past six months, as the S&P 500 index SPX, -0.43% declined 4.1% Shares closed at their lowest price since April 2020 on Tuesday, $91.98, and after a rebound on Wednesday, fell 4.3% to $93.88 in Thursday’s regular session before plunging to less than $80 in after-hours trading following the report.