DocuSign Stock Tumbles After a Guidance Cut

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DocuSign

(ticker: DOCU) shares are sharply lower in late trading Thursday after the e-signature company cut its guidance for the January 2023 fiscal year.

DocuSign
’s
business thrived during the pandemic, but has been slowing for the last couple of quarters. The company has been facing tough year-over-year comparisons, after business was boosted early in the pandemic by the use of its e-signature software for Covid-related government loans and programs.

CEO Dan Springer said in an interview that DocuSign (ticker: DOCU) also has been experiencing a spike in turnover in the company’s sales force, forcing the company to spend more time on recruiting new staff. “We’ve had to retool the field organization,” he says. “That’s been a challenge.”

Springer adds that there have been some impact on the size of new contracts from macro issues, particularly in part of Europe closer to Ukraine.

Springer noted that results in the April quarter were “solid in challenging times,” but the guidance for billings—a signal of future revenue growth—were reduced sharply for the full year.

For the fiscal first quarter ended April 30, DocuSign posted revenue of $588.7 million, up 25% from a year ago, and a little ahead of the company’s guidance range of $579 million to $583 million. Billings in the quarter were $613.6 million, up 16%, ahead of the company’s forecast of $573 million to $583 million. On an adjusted basis, the company earned 38 cents a share, below the Wall Street consensus forecast of 47 cents.

For the July quarter, DocuSign is projecting revenue of $600 million to $604 million, consistent with Wall Street’s consensus forecast of $602 million. The company sees billings for the quarter of $599 billion to $609 billion.

For the January 2023 fiscal year, the company reiterated its revenue guidance of $2.47 billion to $2.482 billion, while trimming billings guidance to a new range of $2.521 billion to $2.541 billion, down from a previous target of $2.706 billion to $2.726 billion.

Springer noted that the entire discussion on the company’s post-earnings conference call was around guidance, and in particular the reduction in the billings forecast. He said investors had hoped the company at this point would have completed the adjustment in its business coming out of the spike experienced during the pandemic—but that the process isn’t quite finished.

DocuSign shares were down 22% in late trading Thursday. The company’s stock had declined by 43% this year as of Thursday’s close. Earlier this year, DocuSign had provided an outlook that disappointed Wall Street.

Wall Street analysts have been mixed on DocuSign. About 50% have ratings of Buy or the equivalent on the stock, while roughly 45% have Hold ratings on the shares, according to FactSet.

Write to Eric J. Savitz at [email protected] and Tae Kim at [email protected]