DocuSign Delivers Solid Results; CFO Is Departing; Guidance Is Constructive

For the third consecutive quarter DocuSign DOCU reported good results, with fourth-quarter revenue and non-GAAP operating margin both exceeding the high end of guidance as well as our expectations. First-quarter guidance was constructive, albeit with better profitability compared with our expectations as a result of recent headcount reductions, and slightly lower revenue growth. DocuSign continues to see macroeconomic pressures resulting in deal compression and elongated sales cycles. In fact, management noted a slight deterioration in the demand environment. CFO Cynthia Gaylor is leaving, but will remain on board through next quarter’s earnings announcement. Her departure comes on the heels of a CEO transition just five months ago, which while not alarming, is certainly not a positive development. We tweaked our growth estimates down slightly and moved our profitability up slightly and are therefore maintaining our fair value estimate for narrow-moat DocuSign at $72 per share. With shares selling off in the aftermarket, we see upside to shares, but continue to prefer wide-moat stocks during this period of economic turmoil.

Total revenue grew 14% year over year to $660 million, above the high end of guidance at $641 million. Compared with the prior-year period, subscriptions grew 14%, while services declined 5%. The company tried several different product bundles, which worked better than anticipated. While management noted the environment was perhaps slightly worse this quarter, we see signs of strength in small and medium-size business arising from bundles. Real estate remains challenged in the rising rate environment, while other areas performed fairly well. The customer count grew loosely in line with revenue, while international sales growth continues to decelerate this quarter to 19% year over year.

The non-GAAP operating margin was strong at 23.6%, versus 17.9% a year ago. The company benefited from restructuring and internal streamlining in September 2022.