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Solid Liquidity Aids DocuSign (DOCU), Escalating Expenses Ail

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DocuSign, Inc. (DOCU - Free Report) is currently benefiting from solid growth strategies and strong liquidity. However, increasing expenses are worrisome.

DocuSign reported impressive second-quarter fiscal 2023 (ended Jul 31, 2022) results, with both earnings and revenues surpassing the Zacks Consensus Estimate. Non-GAAP earnings per share (excluding 66 cents from non-recurring items) of 44 cents beat the consensus mark by 4.8% but decreased 6.4% from the year-ago fiscal quarter’s reported figure. Revenues of $622.2 million also surpassed the Zacks Consensus Estimate by 3.3% and increased 21.6% from the year-ago fiscal quarter’s reported figure.

How is DocuSign Faring?

DocuSign has a set of business growth strategies. DOCU is focused on continuously acquiring eSignature customers, expanding eSignature use cases within existing customers, improving its offerings and popularizing other Agreement Cloud products to new and existing customers, and expanding internationally. DOCU continues to invest in sales, marketing and technical expertise across a number of industry verticals.

DocuSign’s  current ratio  (a measure of liquidity) stood at 1.02 at the end of second-quarter fiscal 2023, higher than 0.98 recorded at the end of the prior-year quarter. The gradually increasing current ratio bodes well for DocuSign, implying that the risk of default is less.

DocuSign’s top line is significantly benefiting from continued customer demand for eSignature. Despite this rising demand, the market for eSignature remains largely untapped, prompting DOCU to expand its geographies worldwide. Its revenues increased 21.6% year over year to $622.2 million in the second quarter of fiscal 2023.

DocuSign deepened its relationship with partners such as Salesforce (CRM - Free Report) and Microsoft (MSFT - Free Report) .

For instance, DOCU expanded its global strategic partnership with Salesforce. The two jointly develop solutions for automation of the contract process and expansion of collaboration among organizations that use Salesforce’s Slack. DocuSign’s eSignature was integrated with Microsoft Teams last year and is currently an official electronic signature provider on Microsoft Teams’ Approvals app.

However, DocuSign is seeing an increase in expenses as it continues investing in sales, marketing and technical expertise. Total operating expenses of $1.3 billion increased 34.8% year over year in fiscal 2022. Hence, DOCU’s bottom line is likely to remain under pressure going forward.

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