DocuSign’s (DOCU) better-than-expected fiscal fourth-quarter results demonstrated continued robustness in its core technology, as the company saw improvements in the reach of its go-to-market initiatives and in the operating leverage of its business model, Wedbush Securities said in a Friday client note.
The electronic signature firm late Thursday recorded an 8% gain in revenue for the quarter ended Jan. 31 to $712.4 million, topping the Capital IQ-polled consensus of $699.4 million. The topline surpassed the company’s own guidance as it saw further momentum with product innovation and customer growth globally, according to Wedbush.
Billings advanced 13% on an annual basis to $833.1 million, with the company benefiting from spillovers from the prior three-month period. DocuSign also experienced renewal strength in the quarter with sharp use cases across the small- and medium-sized business and enterprise landscape, the brokerage said.
Wedbush maintained its neutral rating on the company’s stock and lifted the 12-month price target to $65 from $56. DocuSign’s shares jumped 8.5% in recent premarket trading.
“We saw improving year-over-year usage trends in key verticals with technology, insurance, business services, financial services and health care all growing faster than the total business baseline,” Chief Financial Officer Blake Grayson said during a late Thursday earnings call, according to a Capital IQ transcript. “Also, consumption with direct customers, our contract utilization measure, increased slightly year-over-year.”
DocuSign’s dollar net retention continued to trend downward, coming in at 98% for the January quarter, as it continued to be impacted by software optimization and macro-related customer purchasing costs, Wedbush analysts led by Daniel Ives wrote in the note. Margins were stronger than expected while free cash flow came in above market estimates.
For fiscal 2025, DocuSign expects revenue to come in between $2.92 billion and $2.93 billion, while the Street is looking for $2.93 billion. Subscription revenue is pegged at $2.84 billion to $2.86 billion as the company seeks further international expansion and to improve its net retention, according to Wedbush. Billings are seen at $2.97 billion to $3.02 billion for the fiscal year.
“With the company generating solid traction quarter after quarter, we continue to see further successful execution with its (artificial intelligence) product portfolio picking up more steam heading into (fiscal 2025) to accelerate profitable growth,” Ives wrote in the note. “But it will take more time to create more confidence with the Street with the AI story starting to pick up.”