In what will likely go down as one of Wall Street’s biggest tantrums of the year, the single-day 40% implosion in shares of DocuSign Friday suggests something cataclysmic had happened — as if the era of digital documentation had somehow suddenly been disrupted or become obsolete.
How else could one characterize the instantaneous evaporation of roughly $20 billion in market value from a profitable, growing 20-year old business that dominates its category?
The revenues were there and up 42%. The earnings were better than expected, with 59,000 new customers signed up. However, DocuSign’s billings rose “just 28%” from a red hot year-ago period, instead of the 35-40% growth rate analysts and the company had been counting on — and the result was “look out below!”
In short, the world is not going back to paper and ink, and eSignatures are every bit as included in the connected economy of tomorrow, next year and beyond. As ever, it’s really just a matter of inevitable downshift in demand; from something bordering on frantic to a pace better characterized as brisk.
“We saw demand slow and the urgency of customers’ buying patterns temper,” DocuSign CEO Dan Springer told analysts and investors on the company’s Q3 earnings call.
Springer continued that while the company — and pretty much everybody — had always expected an eventual step-down from the peak levels of growth achieved during the height of the pandemic was coming, no one really saw any reason for it to suddenly happen now.
“The environment shifted more quickly than we anticipated, and these were the primary contributors to our billing results in Q3 and our outlook for Q4,” Springer added, pointing the San Francisco-based company’s new billings growth rate of 21% to 23% for the current quarter that ends January 31st and a full fiscal year billings growth rate of 36%.
Hardly the stuff of obsolescence.
Don’t Invest in Pens Just Yet
Despite the disastrous day on Wall Street, Springer was undaunted in his optimism about the industry and the company, telling investors that DocuSign was still uniquely positioned to lead and capture eSignature and the broader Agreement Cloud market opportunity.
“Even as the pandemic subsides and people begin to return to the office, they are not returning to paper,” Springer said. “eSignature and the broader Agreement Cloud are clearly here to stay, and DocuSign’s value will persist no matter how the future of work unfolds.”
To get back on track and also reverse a corporate mindset that was described as being more focused on fulfilling demand than generating it, Springer outlined a two-pronged strategy to get the company growing its billings more rapidly again.
In addition to a management shakeup, DocuSign will also be increasing investment in global sales capacity, training and field enablement, in an effort to fill the pipeline faster and drive new business and expansion within its existing 1.1 million customer base.
At the same time, Springer said the company would also be investing in product innovation, to grow its 10% share of a $25 billion industry that is still overwhelmingly “signature-centric”.
“We have strong confidence in our vision and strategy,” Springer said. “We are convinced that the growth opportunity for DocuSign remains largely untapped. We have products that are loved by our customers and their customers in turn, and technology that is making a difference in the global speed of business as well as the health of our planet.”