UPDATED 20:42 EDT / JUNE 06 2019

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DocuSign sees stock tank despite posting solid earnings

E-signature company DocuSign Inc. must be wondering where it went wrong today after its stock crashed more than 20% in after-hours trading, despite posting first-quarter earnings that beat expectations and strong guidance for the period ahead.

The company, which likes to call itself a digital transaction management firm, reported earnings before certain costs such as stock compensation of 7 cents per share on revenue of $214 million, up 37% from a year ago. Wall Street was looking for earnings of 4 cents per share on revenue of $208.15 million.

DocuSign had further good news when it came to subscription revenue, which came to $201.5 million, up 36%. Professional services and other revenue jumped even more, growing 64% year-over-year to $12.5 million.

Guidance for the next quarter and full year didn’t disappoint either. For the second quarter, DocuSign said it expects revenue of $218 million to $222 million, more or less in line with the analyst consensus of $219.9 million. For the full year, DocuSign projects revenue of $917 million to $922 million, well above Wall Street’s estimated $913 million.

But for whatever reason, DocuSign’s shareholders just shrugged and turned their backs. The company’s stock fell 21% in after-hours trading.

MarketWatch said one possible reason for the stock drop was DocuSign’s billings, which came to $215 million in the quarter, up 27% from a year ago. The growth rate was lower than in previous quarters, something the company blamed on an “elongated sales cycle” that reflects the new services it offers.

Still, it was surprising to see DocuSign’s stock drop fall so far, as the company is making good progress in other areas too. For example in March, it unveiled new tools for managing documents as it looks to expand beyond its core e-signature business. DocuSign also struck up a key partnership with Google LLC in April that sees its tools integrated with Google Drive, increasing its exposure to thousands of new businesses.

“Overall, we posted a solid first quarter for Fiscal 2020,” said DocuSign Chief Executive Officer Dan Springer (pictured). “Revenues grew 37% year-over-year, we were again profitable on a non-GAAP basis, and we now have over half a million paying customers around the world.”

Holger Mueller, principal analyst and vice president of Constellation Research Inc., told SiliconANGLE that DocuSign was in a good position because enterprises need to move faster in order to thrive in the era of digital transformation, and that means adopting more electronic handling of business processes.

“Vendors like DocuSign profit from this trend as they help to automate and accelerate document handling dramatically over paper-based legacy best practices,” Mueller said. “The challenge is to insert this into all business processes, so partnerships like the one that DocuSign recently signed with Google are moves in the space.”

Photo: DocuSign

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