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DocuSign stock falls on earnings miss

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Yahoo Finance Live’s Brian Sozzi, Brad Smith, and Julie Hyman discuss quarterly earnings for DocuSign.

Video Transcript

[MUSIC PLAYING]

BRIAN SOZZI: Welcome back to Yahoo Finance Live. DocuSign holding it down this Friday as the top trending ticker on the Yahoo Finance platform. And it's an honor the company probably doesn't want, guys. A couple red flags, among many, here. Another challenging earnings day for DocuSign. First, the Street really cuing in on an almost 7-- almost 8% cut to their full year billings total. And this stock historically trades off of that forward-looking billings number.

And then number two, just not another good earnings call from Dan Springer and his team over there, really talking about challenges retaining talent. And it appears-- this is the second straight quarter where they talked at length about this. They have lost what appears to be a lot of top talent, a lot of longtime leaders, sales leaders, inside the company that went out there and were trying to upsell clients. And now they have disappeared. They have went to work at other companies. And now a new wave of talent is inside of DocuSign. Maybe they're not doing such a good job.

BRAD SMITH: Right-- yeah.

JULIE HYMAN: I was just going to say, that's evidenced in billings. I mean, billings is really where analysts have been focusing their attention and where the disappointment is focused. I mean, if you look at the number, sales actually beat estimates last quarter. But it's the billings forecast that seems to be most alarming to folks.

So in the second quarter, their fiscal second quarter, billings as much as $609 million, that's $50 million below what analysts had been predicting. And likewise, for the full year, it comes up well short of forecasts. So that's really the concern here. And, you know, I mean, DocuSign, like, there's a big use case there, right? So it's interesting to see that the demand pull forward was so enormous during the pandemic--

BRIAN SOZZI: This was a $310 stock last summer.

JULIE HYMAN: Yeah, that it's-- I don't know. It's just such an interesting situation.

BRAD SMITH: Just to kind of put some definition around what billings is, for those who may not know, it reflects basically the sales to these new customers. Plus, it's their subscription renewals and their additional sales to existing customers. And so, if you were to think about an Uber and how they look at bookings within their business versus the revenue, same case here. Bookings would be the essentially same as billings for what DocuSign looks at.

And that's particularly what they had to say and acknowledge on the earnings call. CFO saying, while we've added customers at a steady tempo, they continue to expand their usage of DocuSign. They're expanding at a slower rate right now.

JULIE HYMAN: Yeah, well, that slower rate is a big problem. Dan Ives of Wedbush saying DocuSign's core growth story is now essentially over, he says--

BRIAN SOZZI: Friend of the show, Dan Ives.

JULIE HYMAN: --the clock striking midnight. The clock is striking 9:30 here in New York City, though. And that means it is time for stocks to begin trading. Our opening bell coverage is sponsored by FlexShares. And you see Snap-on Tools--

BRIAN SOZZI: They make amazing tools.

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BRIAN SOZZI: They really do.

JULIE HYMAN: Yeah?

BRIAN SOZZI: I mean, the auto mechanics, huge. Just a really good company.