When Buybacks Flail - DocuSign Q2 FY1/24 Earnings Review
Fundamentals no longer in free-fall; management stock comp is the bull flag
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Getting Worse More Slowly Now
by Alex King
In common with a number of other enterprise software companies - Zscaler ZS 0.00%↑ for instance - DocuSign’s DOCU 0.00%↑ fundamental decline looks to be bottoming out. Recognized revenue growth declined once more, true, but not by much. Deferred revenue growth was 13% YoY this quarter, the same as last quarter, and a touch faster than recognized revenue growth. RPO growth was 12% YoY this quarter vs. 13% last quarter, and is back to record levels at $1.9bn (72% of TTM recognized revenue). TTM EBITDA and TTM unlevered pretax FCF margins continued to tick up.
The market is asking you to pay 3.8x TTM revenue / 15.5x TTM EBITDA / 32.9x TTM UFCF for this thing. On a revenue or EBITDA basis that's not expensive. The cashflow multiple is chunky.
We rate at Accumulate. We think the stock can make a slow recovery upwards. For our Premium and Pro users below, we walk through the numbers, our short- and medium-term stock price outlook, and why the whole share buyback fandango isn’t exactly as many investors will first assume.