DocuSign (NASDAQ: DOCU) is seeing some significant momentum. The e-signature and electronic document company's fiscal second-quarter results show a second quarter in a row of accelerating revenue growth. In addition, management boosted its outlook for the full year.
The quarter's strong performance was fueled by a big uptick in new customers as the company capitalizes on its leadership position in the e-signature market and sees broader adoption of its Agreement Cloud offering, or a service that digitizes and streamlines the preparation, signing, and managing of contracts.
DocuSign's e-signature product. Image source: DocuSign.
DocuSign's second-quarter results: The raw numbers
Revenue increased 41% year over year to $235.6 million, well ahead of management's guidance for revenue between $218 million and $222 million. This was also a meaningful acceleration from 37% revenue growth in the first quarter of fiscal 2020 and 34% growth in the fourth quarter of fiscal 2019.
DocuSign added an impressive 29,000 new customers during the quarter, bringing total customers to 537,000. This represents a 25% year-over-year increase. The company's large customers, which DocuSign calls enterprise and commercial customers, saw particularly strong growth, rising 31% year over year to 64,000 customers.
Despite this strong growth, the company's non-GAAP earnings per share fell from $0.03 in the year-ago period to $0.01. This is primarily due to the negative impact DocuSign's acquisition of cloud-based contract management company SpringCM has had on its gross profit margin; increased costs of outsourced data centers in developing regions, where the company doesn't have its own proprietary data centers; and a 54% year-over-year increase in sales and marketing expenses.
What management had to say
"The expansion of eSignature volumes and use cases was evident in our net dollar retention rate of 113%," said DocuSign CEO Daniel Springer in the company's fiscal second-quarter earnings call. "These results reflect solid progress for our second quarter and they support our confidence in and our excitement for [the] future."
Springer also pointed out the company's strong momentum with its nascent Agreement Cloud offering:
Earlier this year, we introduced DocuSign Agreement Cloud. It is the umbrella for our suite of more than a dozen products and over 350 pre-built integrations, all to help organizations connect and automate the entire agreement process for preparing, to signing, acting on and managing their agreement. This quarter we saw particularly strong progress from the [contract lifecycle management] product that came via our acquisition of SpringCM.
The tech company anticipates more strong growth throughout the rest of the fiscal year. Management significantly raised its outlook for fiscal 2020 revenue. DocuSign now forecasts revenue during this period to be between $947 million and $951 million. This is up from previous guidance for revenue between $917 million and $922 million.
For its fiscal third quarter, management said it expects revenue to be between $237 million and $241 million. The midpoint of this guidance range represents 38% year-over-year growth.
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