Wall Street Wildlife Investing Podcast Podcast #45 - DocuSign deep dive
Jun 29, 2021
26:01
The world is moving to the “anywhere economy” where workers have the option to do anything from anywhere, and a key capability enabling this megatrend is the use of digital agreements and e-signatures. This week, we deep dive into DocuSign. Already the global leader in e-signatures, DocuSign are expanding their capabilities to support the entire life cycle of a digital agreement with their 'Agreement Cloud' suite of services.
- The digital transaction management market is currently estimated to be worth $50B, and DocuSign has 70% of the e-signature market. Research has shown that on average $36 is saved per agreement just from using e-signatures. Digital signatures are more secure and are easier to prove authenticity. Digital documents are easier to store, organise, search and analyse. Customers who see the benefits of having their agreements signed and managed digitally are unlikely to go back to paper. And with over 350 integrations with other systems, such as Microsoft, Google and Salesforce, customers can more easily integrate DocuSign into their existing processes and workflows.
- With their 'Agreement Cloud', DocuSign aims to support the entire lifecycle of digital agreements, from preparation to signing, execution and ongoing management. Strategic acquisitions have bolstered their capabilities in each of the stages. The acquisition of Seal Software in 2020 brought in the use of AI to analyse digital contracts; LiveOak in 2020 brought in online notarization, a service they released earlier this year; DocuSign also acquired Clause in 2021, with the aim of enhancing digital contracts into “living documents” with interactivity and digital functionality.
- DocuSign has grown its paying customers from 54,000 in 2012 to 892,000 by the end of 2020, representing a CAGR of 42%. They now have over one million paying customers with over one billion users in over 180 countries. Customers come from a wide range of sectors, from financial services and real estate to life science and government, with over 90% of Fortune 500 companies using DocuSign.
- Competitors in the e-signature space such as Adobe Sign and HelloSign (owned by DropBox) have largely stayed out of the market of contract lifecycle management. Adobe in particular has stated they do not want to be the system of record for documents. DocuSign is betting that businesses see value in having an ecosystem for digital agreements. The company has grown from a $4.4B market cap to $54B in just over three years, suggesting that they’re on the right track. CEO, Dan Springer estimates that the company is still less than 10% penetrated in its market.
- Their Q1 revenues for this year reached $469M, 7.6% higher than their own estimates just a few months ago, indicating higher demand for their products than even they expected. Full-year revenues are expected to reach $2B this year. GAAP gross margin increased 75% in the same period last year to 78%, while the dollar-based net retention rate (DBNRR) was 125%, demonstrating the value they are adding for existing customers. DocuSign raised $690M through a sale of convertible senior notes earlier this year, strengthening its cash position to $876M.
The following companies are mentioned in this episode: DOCU, ADBE, DBX
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