DocuSign Announces First Quarter Fiscal 2019 Results

SAN FRANCISCO, June 7, 2018 /PRNewswire/ -- DocuSign (Nasdaq: DOCU) today announced results for its fiscal quarter ended April 30, 2018.

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

"In the first quarter, our core e-signature solution-and our broader platform for automating the agreement process-continued to gain traction in helping to accelerate business and simplify life for hundreds of millions of users around the world. This led to 37% year-over-year growth in our total revenue and the addition of 30,000 new customers-bringing our total paying customer base to over 400,000," said Dan Springer, CEO of DocuSign. "We also saw strong growth, expansion and development of our international business. And we continue to deliver product innovation across our evolving System of Agreement platform in the areas of preparing, signing, acting on and managing agreements. I believe these results highlight the commitment, passion and drive that DocuSign has for the next big platform opportunity in cloud computing."

First Quarter Financial Highlights

  • Total revenue was $155.8 million, an increase of 37% year-over-year. Subscription revenue was $148.2 million, an increase of 39% year-over-year. Professional services and other revenue was $7.6 million, an increase of 14% year-over-year.
  • Contract liabilities were $290.5 million, an increase of 43% year-over-year.
  • Billings were $168.9 million, an increase of 33% year-over-year.
  • GAAP gross margin was 63%, compared to 76% in the same period last year. GAAP gross margin for the first quarter of fiscal 2019 included a $25.4 million stock-based compensation charge related to restricted stock units ("RSUs") with a liquidity event performance condition. Non-GAAP gross margin was 80% compared to 78% in the same period last year.
  • GAAP net loss per basic and diluted share was $7.46 in the first quarter of fiscal 2019 on 36 million shares outstanding compared to GAAP net loss per share of $0.66 in the first quarter of fiscal 2018 on 30 million shares outstanding. GAAP net loss for the first quarter of fiscal 2019 included a $262.8 million stock-based compensation charge related to RSUs with a liquidity event performance condition.
  • Non-GAAP earnings per diluted share was $0.01 in the first quarter of fiscal 2019 based on 60 million shares outstanding compared to a non-GAAP net loss per share of $0.30 in the first quarter of fiscal 2018 based on 30 million shares outstanding.
  • Net cash provided by operating activities was $15.0 million, compared to $0.7 million used in operating activities in the same period last year.
  • Free cash flow was $8.8 million in the first quarter of fiscal 2019 compared to negative free cash flow of $7.5 million in the same period last year.
  • Cash, cash equivalents and restricted cash was $269.8 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."

Initial Public Offering

On May 1, 2018 the company completed its initial public offering ("IPO"). The company sold 19,314,182 shares of common stock, raising net proceeds of $524.8 million, including the over-allotment option. Upon the completion of the IPO, all shares of outstanding convertible preferred stock automatically converted into 100,350,008 shares of common stock.

Stock-based Compensation Related to Liquidity Event Restricted Stock Units

RSUs issued through January 31, 2018 generally vest upon the satisfaction of both service-based and liquidity event performance conditions. The service condition is typically a four-year service period. liquidity event performance condition was satisfied upon the effectiveness of our IPO registration statement on April 26, 2018. On that date the company recorded a cumulative stock-based compensation expense of $262.8 million, of which $25.4 million was included in cost of revenue, related to all RSUs, for which the service was condition fully satisfied as of that date.

Outlook

Quarter ending July 31, 2018 (in millions, except percentages):




Total revenue

$157

to

$160


Billings

$160

to

$170


Non-GAAP gross margin

78%

to

81%


Non-GAAP Sales and marketing

49%

to

51%


Non-GAAP research and development

16%

to

18%


Non-GAAP general and administrative

10%

to

12%


Other expense

<$0.5




Provision for income taxes

$0.75




Non-GAAP diluted weighted-average shares outstanding

190

to

195

 

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




Total revenue

$652

to

$658


Billings

$680

to

$700


Non-GAAP gross margin

78%

to

81%


Non-GAAP Sales and marketing

49%

to

51%


Non-GAAP research and development

16%

to

18%


Non-GAAP general and administrative

10%

to

12%


Other expense

<$2




Provision for income taxes

$3




Non-GAAP diluted weighted-average shares outstanding

160

to

165

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 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) June 21, 2018 using the passcode 13680300.

About DocuSign

Founded in 2003, DocuSign® offers the leading e-signature solution as part of its broader platform for automating the agreement process. Today, DocuSign's cloud-based platform enables more than 400,000 customers and hundreds of millions of users in over 180 countries to accelerate business and simplify life.

Copyright 2003-2018. DocuSign, Inc. is the owner of DOCUSIGN® and all of its other marks (www.docusign.com/IP). All other marks appearing herein are the property of their respective owners.

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 statements about expected financial metrics, such as revenue, billings, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP diluted weighted-average shares outstanding, and non-financial metrics, such as customer growth, as well as statements related to 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: sustaining and managing our growth and future expenses, achieving and maintaining future profitability, attracting new customers and maintaining and expanding 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 prospectus dated April 26, 2018, as filed with the Securities and Exchange Commission pursuant to Rule 424(b) under the Securities Act 1933, as amended, which is available on the SEC's website at www.sec.gov. Additional information will be made available in DocuSign Inc.'s quarterly report on Form 10-Q for the quarter ended April 30, 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 and, as applicable, other special items. We believe it is useful to exclude stock-based compensation 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. We also view amortization of acquisition-related intangible assets, such as the amortization of the cost associated with an acquired company's developed technology and trade names, as items arising from pre-acquisition activities determined at the time of an acquisition. While these intangible assets are continually evaluated for impairment, amortization of the cost of purchased intangibles is a static expense, one that is not typically affected by operations during any particular period.

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 April 30,

(in thousands, except share and per share data)

2018


2017

Revenue:




Subscription

$

148,198



$

106,847


Professional services and other

7,610



6,651


Total revenue

155,808



113,498


Cost of revenue:




Subscription

32,438



19,293


Professional services and other

25,856



7,831


Total cost of revenue

58,294



27,124


Gross profit

97,514



86,374


Operating expenses:




Sales and marketing

191,085



64,691


Research and development

70,870



22,708


General and administrative

103,117



18,239


Total expenses

365,072



105,638


Loss from operations

(267,558)



(19,264)


Interest expense

(193)



(151)


Interest income and other (expense), net

(2,228)



(110)


Loss before provision for (benefit from) income taxes

(269,979)



(19,525)


Provision for (benefit from) income taxes

708



(143)


Net loss

$

(270,687)



$

(19,382)


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

$

(7.46)



$

(0.66)


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

36,334,395



29,761,804






Stock-based compensation expense included in costs and expenses:




Cost of revenue—subscription

$

9,955



$

238


Cost of revenue—professional services

16,045



235


Sales and marketing

112,481



2,705


Research and development

47,268



1,391


General and administrative

84,045



3,837


 

DOCUSIGN, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


(in thousands, except share and per share data)

April 30, 2018


January 31, 2018

Assets




Current assets




Cash and cash equivalents

$

269,429



$

256,867


Restricted cash

367



569


Accounts receivable

104,128



123,750


Contract assets—current

12,030



14,260


Prepaid expense and other current assets

29,779



23,349


Total current assets

415,733



418,795


Property and equipment, net

60,095



63,019


Goodwill

36,074



37,306


Intangible assets, net

11,278



14,148


Deferred contract acquisition costs—noncurrent

78,401



75,535


Other assets—noncurrent

12,891



11,170


Total assets

$

614,472



$

619,973


Liabilities, Redeemable Convertible Preferred Stock and Stockholders' Deficit




Current liabilities




Accounts payable

$

13,269



$

23,713


Accrued expenses

19,023



15,734


Accrued compensation

33,905



50,852


Contract liabilities—current

282,470



270,188


Deferred rent—current

1,811



1,758


Other liabilities—current

12,017



11,574


Total current liabilities

362,495



373,819


Contract liabilities—noncurrent

8,065



7,736


Deferred rent—noncurrent

22,862



23,044


Deferred tax liability—noncurrent

2,505



2,511


Other liabilities—noncurrent

4,419



4,010


Total liabilities

400,346



411,120


Redeemable convertible preferred stock

547,854



547,501


Stockholders' deficit




Common stock

4



4


Additional paid-in capital

438,200



160,265


Accumulated other comprehensive income

1,075



3,403


Accumulated deficit

(773,007)



(502,320)


Total stockholders' deficit

(333,728)



(338,648)


Total liabilities, redeemable convertible preferred stock, and stockholders' deficit

$

614,472



$

619,973


 

DOCUSIGN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



Three Months Ended April 30,

(in thousands)

2018


2017

Cash flows from operating activities:




Net loss

$

(270,687)



$

(19,382)


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




Depreciation and amortization

8,600



7,686


Amortization of deferred contract acquisition and fulfillment costs

9,246



7,013


Stock-based compensation expense

269,794



8,406


Deferred income taxes

(6)



(13)


Other

2,225



(803)


Changes in operating assets and liabilities




Accounts receivable

19,622



11,577


Contract assets

2,546



(38)


Prepaid expenses & other current assets

(6,519)



(5,570)


Deferred contract acquisition and fulfillment costs

(12,326)



(9,372)


Other assets

440



884


Accounts payable

(7,218)



(2,125)


Accrued expenses

3,302



(1,046)


Accrued compensation

(16,947)



(9,128)


Contract liabilities

12,611



13,027


Deferred rent

(129)



(2,202)


Other liabilities

438



389


Net cash provided by (used in) operating activities

14,992



(697)


Cash flows from investing activities:




Purchases of property and equipment

(6,184)



(6,770)


Net cash used in investing activities

(6,184)



(6,770)


Cash flows from financing activities:




Proceeds from the exercise of stock options

7,815



5,830


Payment of deferred offering costs

(2,194)




Net cash provided by financing activities

5,621



5,830


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

(2,069)



484


Net increase (decrease) in cash, cash equivalents and restricted cash

12,360



(1,153)


Cash, cash equivalents and restricted cash at beginning of period

257,436



191,244


Cash, cash equivalents and restricted cash at end of period

$

269,796



$

190,091






Supplemental disclosure:




Cash paid for interest

$

144



$

142


Cash paid for taxes

1,516



171


Non-cash investing and financing activities:




Property and equipment in accounts payable and other accrued liabilities

$

3,238



$

1,880


Accretion of preferred stock

353



355


Deferred offering costs in accounts payable and other accrued liabilities

1,173




 

DOCUSIGN, INC.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(Unaudited)


Reconciliation of gross profit and gross margin:



Three Months Ended April 30,

(in thousands)

2018


2017

GAAP gross profit

$

97,514



$

86,374


Add: Stock-based compensation

26,000



473


Add: Amortization of acquisition-related intangibles

1,668



1,697


Non-GAAP gross profit

$

125,182



$

88,544


GAAP gross margin

63

%


76

%

Non-GAAP adjustments

17

%


2

%

Non-GAAP gross margin

80

%


78

%





GAAP subscription gross profit

$

115,760



$

87,554


Add: Stock-based compensation

9,955



238


Add: Amortization of acquisition-related intangibles

1,668



1,697


Non-GAAP subscription gross profit

$

127,383



$

89,489


GAAP subscription gross margin

78

%


82

%

Non-GAAP adjustments

8

%


2

%

Non-GAAP subscription gross margin

86

%


84

%





GAAP professional services and other gross profit

$

(18,246)



$

(1,180)


Add: Stock-based compensation

16,045



235


Non-GAAP professional services and other gross profit

$

(2,201)



$

(945)


GAAP professional services and other gross margin

(240)

%


(18)

%

Non-GAAP adjustments

211

%


4

%

Non-GAAP professional services and other gross margin

(29)

%


(14)

%

 

Reconciliation of operating expenses:



Three Months Ended April 30,

(in thousands)

2018


2017

GAAP sales and marketing

$

191,085



$

64,691


Less: Stock-based compensation

(112,481)



(2,705)


Less: Amortization of acquisition-related intangibles

(765)



(840)


Non-GAAP sales and marketing

$

77,839



$

61,146


GAAP sales and marketing as a percentage of revenue

123

%


57

%

Non-GAAP sales and marketing as a percentage of revenue

50

%


54

%





GAAP research and development

$

70,870



$

22,708


Less: Stock-based compensation

(47,268)



(1,391)


Non-GAAP research and development

$

23,602



$

21,317


GAAP research and development as a percentage of revenue

45

%


20

%

Non-GAAP research and development as a percentage of revenue

15

%


19

%





GAAP general and administrative

$

103,117



$

18,239


Less: Stock-based compensation

(84,045)



(3,837)


Non-GAAP general and administrative

$

19,072



$

14,402


GAAP general and administrative as a percentage of revenue

67

%


16

%

Non-GAAP general and administrative as a percentage of revenue

12

%


13

%

 

Reconciliation of income (loss) from operations:



Three Months Ended April 30,

(in thousands)

2018


2017

GAAP operating loss

$

(267,558)



$

(19,264)


Add: Stock-based compensation

269,794



8,406


Add: Amortization of acquisition-related intangibles

2,433



2,537


Non-GAAP operating income (loss)

$

4,669



$

(8,321)


GAAP operating margin

(172)

%


(17)

%

Non-GAAP adjustments

175

%


10

%

Non-GAAP operating margin

3

%


(7)

%

 

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



Three Months Ended April 30,

(in thousands, except per share data)

2018


2017

GAAP net loss

$

(270,687)



$

(19,382)


Add: Stock-based compensation

269,794



8,406


Add: Amortization of acquisition-related intangibles

2,433



2,537


Non-GAAP net income (loss)

$

1,540



$

(8,439)






Numerator:




Non-GAAP net income (loss)

1,540



(8,439)


Less: preferred stock accretion

(353)



(355)


Less: net income allocated to participating securities

(871)




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

$

316



$

(8,794)






Denominator:




Weighted-average common shares outstanding, basic

36,334



29,762


Effect of dilutive securities

23,833




Non-GAAP weighted-average common shares outstanding, diluted

60,167



29,762






GAAP net loss per share, basic and diluted

$

(7.46)



$

(0.66)


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

0.01



(0.30)


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

0.01



(0.30)


 

Computation of free cash flow:



Three Months Ended April 30,

(in thousands)

2018


2017

Net cash provided by (used in) operating activities

$

14,992



$

(697)


Less:  purchase of property and equipment

(6,184)



(6,770)


Non-GAAP free cash flow

$

8,808



$

(7,467)


 

Computation of billings:



Three Months Ended April 30,

(in thousands)

2018


2017

Revenue

$

155,808



$

113,498


Add: Contract liabilities and refund liability, end of period

293,667



208,882


Less: Contract liabilities and refund liability, beginning of period

(282,943)



(195,501)


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

16,899



10,095


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

(14,555)



(10,400)


Non-GAAP billings

$

168,876



$

126,574


 

SOURCE DocuSign, Inc.