DocuSign, Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended January 31, 2021 (not a standalone calendar Q4 report). Filed March 31, 2021. DocuSign provides subscription-based e-signature and agreement-process software through its Agreement Cloud; it reported more than 890,000 paying customers.
Financial results
| Metric | FY2021 | FY2020 | Change |
|---|---|---|---|
| Revenue | $1.453 billion | $974.0 million | +49% |
| Subscription revenue | $1.381 billion | $918.5 million | +50% |
| Gross margin | 75% | 75% | Unchanged |
| Operating loss | $173.9 million | $193.5 million | Improved |
| Net loss | $243.3 million | $208.4 million | Loss widened |
| Operating cash flow | $297.0 million | $115.7 million | +157% |
| Free cash flow (non-GAAP) | $214.6 million | $43.7 million | Increased |
| Billings (non-GAAP) | $1.723 billion | $1.104 billion | +56% |
- Subscription revenue was 95% of total revenue. GAAP net loss per share was $1.31 versus $1.18 in FY2020.
- GAAP subscription gross margin eased to 81% from 82%; professional services and other gross margin was negative 45% versus negative 43%. Overall GAAP gross margin remained 75%.
- Stock-based compensation expense was $286.9 million, up from $206.4 million. Non-GAAP operating income was $180.6 million (12% margin), compared with $47.3 million (5%) in FY2020; non-GAAP net income was $182.3 million. These measures exclude specified expenses and are not substitutes for GAAP results.
- At January 31, 2021, cash and cash equivalents were $566.1 million and investments were $300.2 million; cash, cash equivalents, restricted cash and investments totaled approximately $866.5 million as presented in MD&A. Total current assets were $1.162 billion and current liabilities $1.093 billion.
- Debt included $115 million principal of 0.5% convertible notes due 2023 and $690 million of 0% convertible notes due 2024. The company had no borrowings on its $500 million revolving credit facility and was in covenant compliance.
Material changes and unusual items
- Revenue growth accelerated amid pandemic-driven adoption of remote and digital agreements. Customers increased to more than 890,000 from more than 585,000; enterprise and commercial customers rose to more than 120,000 from more than 70,000.
- Operating expenses rose 37% to $1.263 billion, but declined as a share of revenue to 87% from 95%. Sales and marketing increased 35%, R&D 46%, and general and administrative 31%, largely reflecting staffing, growth investment, and acquisitions.
- FY2021 net loss included a $33.8 million loss on extinguishment of debt. In connection with issuing $690 million of 2024 notes, DocuSign repurchased $460 million principal of 2023 notes for approximately $1.7 billion in total consideration, including $459.2 million cash and 4.7 million shares valued at about $1.2 billion.
- DocuSign acquired Seal Software in May 2020 and Liveoak Technologies in July 2020. Acquisition cash outflow, net of acquired cash, was $180.4 million; the acquisitions added goodwill and intangible assets.
- Cash from operations benefited from increased customer billings and collections, including a $267.8 million increase in contract liabilities, while accounts receivable and deferred acquisition costs also increased.
Outlook, commentary and risks
- No quantitative FY2022 revenue, earnings or margin guidance is provided in the supplied filing text. Management expects subscription revenue to continue increasing, while continuing investment in sales, marketing, R&D, infrastructure and international expansion. It expects operating losses for the foreseeable future.
- Management believes customers that have digitized agreement processes are unlikely to return to manual processes, but cautions that demand may moderate as pandemic conditions ease. FY2021 growth may partly reflect accelerated adoption and may not persist at the same rate.
- COVID-19 also presents risks of demand volatility, customer churn or late payments, pricing pressure, operational disruption and elevated cybersecurity exposure. Travel and hospitality customers experienced slower or declining spending.
- Other principal risks include competition, dependence on e-signature revenue, service availability and cybersecurity, privacy and regulatory compliance, execution and integration of acquisitions, and the ability to sustain growth and reach profitability.
- DocuSign reported no legal proceedings expected to have a material adverse effect. The independent auditor gave unqualified opinions on the financial statements and internal control; revenue recognition was identified as a critical audit matter. Management reported effective controls, excluding the newly acquired Seal and Liveoak entities from its assessment.
Important facts for investors to verify
- Whether pandemic-related demand and the exceptional FY2021 growth and billings increase continue as customers return to more normalized operations.
- How GAAP operating losses, stock-based compensation and ongoing investment affect the path to sustained profitability.
- Cash generation, customer collections, deferred revenue growth and the costs of capitalized contract acquisition.
- Convertible-note settlement, potential dilution, cash obligations and compliance with revolving-credit covenants.
- Integration and commercial contribution of Seal and Liveoak, alongside security, privacy and service-continuity risks.