Nov 25, 2022

DocuSign (DOCU) Long Term: 6-12 Months Zacks Recommendation: Neutral

(Since: 11/11/21)
$46.35 (As of 11/23/22)
Prior Recommendation: Underperform
Price Target (6-12 Months): $49.00
Short Term: 1-3 Months Zacks Rank: (1-5) 3-Hold

Zacks Style Scores: VGM:B

Value: C Growth: A Momentum: B

Summary Price, Consensus & Surprise

DocuSign's top line is being significantly benefited from
continued customer demand for eSignature, its anchor
product. The acquisitions of Seal Software and Liveoak
Technologies are expected to add functionality to DocuSign
Agreement Cloud and significantly expand the company’s
eNotary offerings. The company remains focused on
continuously acquiring eSignature customers, improving its
offerings, and expanding internationally. On the flip side,
DocuSign remains an unsuitable stock for investors seeking
cash dividends as the company never declared and currently
does not have any plan to pay cash dividends. Moreover, it is
seeing increase in expenses as it continues to invest in sales,
marketing and technical expertise. Partly due to these
negatives, the company's shares have declined in the past
year.

Data Overview Sales and EPS Growth Rates (Y/Y %)

52 Week High-Low $257.48 - $39.57 Sales EPS

20 Day Average Volume (sh) 4,342,583

Market Cap $9.3 B

YTD Price Change -69.6%

Beta 1.12

Dividend / Div Yld $0.00 / 0.0%

Industry Technology Services

Zacks Industry Rank Bottom 48% (132 out of 252)

Sales Estimates (millions of $)

Last EPS Surprise 4.8%
Q1 Q2 Q3 Q4 Annual*
Last Sales Surprise 3.3%
2024 659 E 681 E 691 E 710 E 2,741 E
EPS F1 Est- 4 week change 0.0%
2023 589 A 622 A 626 E 640 E 2,477 E
Expected Report Date 12/08/2022 2022 469 A 512 A 545 A 581 A 2,107 A
Earnings ESP 0.0%
EPS Estimates
Q1 Q2 Q3 Q4 Annual*
P/E TTM 24.7
2024 0.41 E 0.46 E 0.47 E 0.49 E 1.80 E
P/E F1 28.4
2023 0.38 A 0.44 A 0.41 E 0.40 E 1.63 E
PEG F1 0.6 2022 0.44 A 0.47 A 0.58 A 0.48 A 1.98 A
P/S TTM 4.0 *Quarterly figures may not add up to annual.

The data in the charts and tables, including the Zacks Consensus EPS and sales estimates, is as of 11/23/2022. The reports text and the price
target are as of 11/25/2022.

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 Overview
Founded in 2003 and headquartered in San Francisco, DocuSign is a
global provider of cloud-based software. The company’s DocuSign
Agreement Cloud is a cloud software suite that automates and connects
the entire agreement process.

Agreement cloud products include e-signature, DocuSign’s anchor

product that helps businesses prepare, sign, act on, and manage
agreements digitally; Contract Lifecycle Management, which automates
workflows across agreement process; Insight, which scouts and
analyzes agreements by legal concepts and clauses using artificial
intelligence; Analyzer, which acts as a add-on to insight and analyzes
inbound agreements, detectingclauses by type, scoring their risk, and
extracting important terms.

The suite also includes Gen for Salesforce that help sales
representatives to automatically produce customizable agreements;
Negotiate for Salesforce, which is Gen for Salesforce plus additional
support for approvals, document comparisons and version control; and
Guided Forms that features an interactive, step-by-step process for filling
complex forms.

Click supports no-signature-required “clickwrap” agreements for

standard terms and consents; Identify is a suite of enhanced signer-
identification options; Standards-Based Signatures support signatures
that comprise digital certificates; Payments for one-step collection of
signatures and payment, and eNotary, which enables electronic execution of in-person notarial acts.

DocuSign’s industry-specific Agreement Cloud offerings include Rooms for Real Estatethat supports brokers and agents in digitally managing
real estate transactions, Rooms for Mortgage, a digital workplace for creating and closing mortgages; eSignature for U.S. Federal Government, a
FedRAMP-authorized version of DocuSign eSignature for U.S. federal government agencies, and Life Sciences Modules for 21 CFR Part 11,
which are add-ons for DocuSign eSignature to support compliance with the electronic signature practices prescribed by the U.S. Food and Drug
Administration’s 21 CFR Part 11 regulations.

With customers ranging from sole proprietorships to the largest global organizations across industries, DocuSign‘ssales and marketing efforts
focus on enterprise, commercial, and very small businesses.

Zacks Equity Research: DOCU Page 2 of 9

 Reasons To Buy:
eSignature, DocuSign’s anchor product, enables virtual but secure signing and sending of DocuSign remains focused
agreements on a variety of devices, from anywhere in the world. The company’s top line is on continuously acquiring
significantly benefiting from continued customer demand for eSignature. Despite this rising eSignature customers,
demand, the market for eSignature remains largely untapped, and this keeps DocuSign in a improving its offerings and
position to expand eSignature across businesses around the world. popularizing other
Agreement Cloud products
DocuSign has a set of business growth strategies. The company remains focused on to new and existing
continuously acquiring eSignature customers, expanding eSignature use cases within existing customers.
customers, improving its offerings and popularizing other Agreement Cloud products to new
and existing customers, and expanding internationally. The company continues to invest in
sales, marketing and technical expertise across a number of industry verticals.

DocuSign’s current ratio (a measure of liquidity) stood at 1.02 at the end of second-quarter fiscal 2023, higher than the 0.98 recorded at the
end of the prior year quarter. The gradually increasing current ratio bodes for DocuSign as that implies that the risk of default is less.

Zacks Equity Research: DOCU Page 3 of 9

 Reasons To Sell:
DocuSign is seeing an increase in expenses as it continues to invest in sales, marketing and DocuSignnever
technical expertise. Total operating expenses of $1.3 billion increased 34.8% year over year in fiscal
2022. Hence, the company's bottom line is likely to remain under pressure going forward.
declared and
currently does not
DocuSign has never declared and currently does not have any plan to pay out cash dividends. So, have any plan to
the only way to achieve return on investment on the company’s stock is share price appreciation,
payout cash
which is not guaranteed. Investors seeking cash dividends should avoid buying DocuSign’s shares.
Partly due to this negative, the company's shares have declined 81.5% in the past year. dividends on
common stock.
DocuSign operates in a highly competitive environment. While the company’s main global e-
signature competitor is Adobe, several other specialized vendors give tough competition for other
offerings such as payments, ID verification and contract lifecycle management. Therefore, DocuSign remains under a constant competitive
pressure in terms of product quality, pricing and technology.

Zacks Equity Research: DOCU Page 4 of 9

 Last Earnings Report
DocuSign's Q2 Earnings & Revenues Beat Estimates Quarter Ending 07/2022

DocuSign reported impressive second-quarter fiscal 2023 (ended Jul 31, 2022) results, with both Report Date Sep 08, 2022
earnings and revenues surpassing the Zacks Consensus Estimate. Sales Surprise 3.34%
EPS Surprise 4.76%
Non-GAAP earnings per share (excluding 66 cents from non-recurring items) of 44 cents beat the
consensus mark by 4.8% but decreased 6.4% from the year-ago fiscal quarter’s reported figure. Quarterly EPS 0.44
Revenues of $622.2 million also surpassed the Zacks Consensus Estimate by 3.3% and Annual EPS (TTM) 1.88
increased 21.6% from the year-ago fiscal quarter’s reported figure.

Quarter in Detail

Subscription revenues came in at $605.2 million, up 23% year over year. Professional services and other revenues decreased 11% from the
year-ago fiscal quarter’s reported figure to $17 million. International revenues increased 35% from the year-ago fiscal quarter’s reported figure
and contributed 25% to total revenues. Billings of $647.7 million were up 9% from the year-ago fiscal quarter’s reported figure. DocuSign added
44,000 customers in the quarter, increasing the total global customer base to 1.28 million.

Non-GAAP gross margin of 82% was flat year over year. Non-GAAP operating profit of $112.2 million increased 12.5% year over year. Non-
GAAP operating margin of 18% declined from 19% in the year-ago quarter.

DocuSign ended the quarter with a cash and cash equivalent balance of $637.2 million compared with $638.2 million at the end of the previous
quarter. DOCU generated $120.9 million of cash from operating activities and a capex of $15.4 million. Non-GAAP free cash flow was $105.5
million.

Guidance

For the third quarter of fiscal 2023, DocuSign expects revenues in the range of $624-$628 million.Billings are expected between $584 million and
$594 million. Non-GAAP gross margin is anticipated between 79% and 81%. Non-GAAP operating margin is expected between 16% and 18%.

For fiscal 2023, DocuSign still expects revenues in the range of $2.47-$2.482 billion. Billings are expected between $2.55 billion and $2.57 billion.
Non-GAAP gross margin is anticipated between 79% and 81%. Non-GAAP operating margin is expected between 16% and 18%.

Zacks Equity Research: DOCU Page 5 of 9

 Recent News
On Sep 22, 2022, DocuSign announced that Allan Thygesen has been hired as the new CEO.

Valuation
DocuSign’s shares are down 69.6% in the year-to-date period and 81.5% in the trailing 12-month period. Stocks in the Zacks sub-industry and
the Zacks Business Services sector are down 48.8% and 27.8% in the year-to-date period, respectively. In the past year, the Zacks sub-industry
and the sector are down 62.2% and 38.8%, respectively.
The S&P 500 index is down 16.7% in the year-to-date period and 13.9% in the past year.
The stock is currently trading at trailing 12-month EV/EBITDA of 39.67X, which compares to 36.32X for the Zacks sub-industry, 23.52X for the
Zacks sector and 12.22X for the S&P 500 index.
Our Neutral recommendation indicates that the stock will perform in-line with the market. Our $49.00 price target reflects 27.7X price to forward
12 months’ sales.
The table below shows summary valuation data for DOCU

Zacks Equity Research: DOCU Page 6 of 9

 Industry Analysis Zacks Industry Rank: Bottom 48% (132 out of 252) Top Peers
Company (Ticker) Rec Rank
V2X, Inc. (VVX) Outperform

Broadridge Financial Solutions, Inc. Neutral

(BR)
Equifax, Inc. (EFX) Neutral

Harsco Corporation (HSC) Neutral

Nu Holdings Ltd. (NU) Neutral

TELUS International CDA Inc. (TIXT) Neutral

TeleTech Holdings, Inc. (TTEC) Neutral

WeWork Inc. (WE) Neutral

Industry Comparison Industry: Technology Services Industry Peers

DOCU X Industry S&P 500 EFX TIXT TTEC

Zacks Recommendation (Long Term) Neutral - - Neutral Neutral Neutral

Zacks Rank (Short Term) - -

VGM Score - -
Market Cap 9.31 B 211.18 M 31.27 B 24.24 B 5.34 B 2.23 B
# of Analysts 7 2 13 13 5 6
Dividend Yield 0.00% 0.00% 1.61% 0.79% 0.00% 2.20%
Value Score - -
Cash/Price 0.11 0.19 0.04 0.01 0.03 0.08
EV/EBITDA 52.82 -0.44 13.79 18.19 13.19 9.45
PEG Ratio 0.61 1.74 2.13 2.00 1.12 1.14
Price/Book (P/B) 22.76 1.48 3.41 6.42 3.11 4.26
Price/Cash Flow (P/CF) 47.88 11.81 13.77 16.84 11.48 7.38
P/E (F1) 28.44 21.82 17.88 26.26 16.73 13.35
Price/Sales (P/S) 3.98 1.56 2.64 4.68 2.19 0.93
Earnings Yield 3.52% -3.70% 5.47% 3.81% 5.98% 7.49%
Debt/Equity 1.77 0.00 0.61 1.28 0.39 1.82
Cash Flow ($/share) 0.97 -0.06 8.16 11.76 1.75 6.41
Growth Score - -
Hist. EPS Growth (3-5 yrs) NA% 10.20% 10.68% 8.95% NA 21.45%
Proj. EPS Growth (F1/F0) -17.68% 6.93% 6.74% -1.31% 20.00% -23.38%
Curr. Cash Flow Growth 220.15% 25.15% 17.27% 14.25% 45.79% 15.89%
Hist. Cash Flow Growth (3-5 yrs) 37.79% 9.35% 10.94% 8.87% NA 17.72%
Current Ratio 1.01 1.81 1.23 0.64 0.88 1.60
Debt/Capital 63.90% 7.68% 39.71% 56.07% 28.09% 65.84%
Net Margin -4.65% -20.66% 13.02% 13.72% 7.59% 4.56%
Return on Equity -21.74% -18.23% 17.83% 25.88% 17.02% 27.79%
Sales/Assets 0.92 0.51 0.55 0.46 0.68 1.15
Proj. Sales Growth (F1/F0) 17.60% 0.82% 7.59% 3.60% 12.30% 6.20%
Momentum Score - -
Daily Price Chg 0.00% 0.00% 0.59% 0.00% 0.00% 0.00%
1 Week Price Chg -13.21% -3.03% 1.73% 3.19% -2.01% 2.38%
4 Week Price Chg -3.92% -3.80% 5.13% 18.84% -20.14% 5.72%
12 Week Price Chg -16.79% -16.82% 1.83% 4.15% -28.68% -9.13%
52 Week Price Chg -80.96% -61.76% -14.34% -30.17% -41.88% -45.86%
20 Day Average Volume 4,342,583 224,964 2,265,458 1,219,977 194,838 141,202
(F1) EPS Est 1 week change 0.00% 0.00% 0.00% 0.01% 0.00% 0.00%
(F1) EPS Est 4 week change 0.00% 0.00% -0.03% 0.00% -0.45% -0.49%
(F1) EPS Est 12 week change 16.67% -2.93% -0.28% -1.85% -0.67% -0.49%
(Q1) EPS Est Mthly Chg 0.00% -0.94% -1.24% 0.02% -6.05% -12.73%

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