Huge gains can come from disrupting an entire industry.
Think about Apple (AAPL). When it introduced the iPhone in 2007, it changed the cellphone industry forever.
It pioneered the "smartphone" boom we're experiencing today.
Soon, industry stalwarts like Motorola and BlackBerry were scrambling to keep up with the innovation.
This left Apple competing against the two companies that did adapt – LG and Samsung – instead of competing in an overcrowded market.
And of course, Apple isn't the only industry disruptor out there.
Amazon (AMZN) has changed the retail industry forever by focusing on online sales... And Netflix's (NFLX) streaming service ensured that we'll never enjoy TV and movies the same again.
Huge gains came along with these "disruptors."
Apple is up more than 150% over the past five years. And Amazon and Netflix climbed more than 450% over the same period.
And today's company is no different...
DocuSign (Nasdaq: DOCU) is disrupting one of the fundamental actions of business – signing contracts.
The company's electronic signature ("e-signature") software eliminates the need for paper. It lets you securely sign contracts electronically from almost any device anywhere in the world... laptops, tablets, or smartphones.
If you bought a house recently, you may have signed the closing documents electronically without the stroke of a pen or any paper. Chances are, you used the company's software.
Its software delivers savings and speed by removing the friction from the old, slow, error-prone paper-contract process.
More than 80% of transactions that used DocuSign's platform were completed in one day or less – compared with days or weeks in the old processes.
Half of its transactions were done within 15 minutes.
A 2015 third-party study paid for by the company found that businesses using DocuSign's software saved $36 per document on average compared with the old paper processes.
This is what an industry disruptor looks like. It eliminates the need for faxing, scanning, e-mailing, mailing, or couriering.
And more and more companies are trusting DocuSign with their business.
DocuSign is used by the largest global businesses as well as small and medium-sized businesses and individuals.
The company has more than 560,000 customers today, including 65,000 enterprise and commercial companies with at least 10 employees and 495,000 small businesses with fewer than 10 employees. Hundreds of millions of people use its software in more than 180 countries and across all industries.
It has a big first-mover advantage in the market... and that translates to a leading position in the industry.
According to data provider Datanyze, DocuSign owns around 60% of the e-signature market. Its closest competitor – Adobe's (ADBE) Sign software – has around a 12% share.
And the best part about DocuSign's business is its recurring revenue model.
Nearly all (95%) of DocuSign's sales are recurring, subscription-based revenue. Most customers sign one-year contracts and pay up front, and then DocuSign spreads the revenue over the 12-month contract period.
Its products are "sticky" – meaning customers renew their subscriptions every year.
The company measures this stickiness through a metric called retention rate.
Last year, DocuSign's retention rate was 115%. That means that customers paid DocuSign 15% more this year than last year, even after factoring in all customers that didn't renew their contracts.
And that's great for growth.
Over the past 12 months, DocuSign has reported sales of $898 million. That's an incredible 38% growth rate over the prior period.
And on a long-term basis, the growth gets even more impressive.
DocuSign's sales have more than tripled in just three years.
And it's making moves to ensure this growth continues.
Last year, DocuSign extended its partnership with Software as a Service ("SaaS") pioneer Salesforce (CRM). The partnership lets salespeople create, route, and sign contracts all within Salesforce's software.
The company is also launching two new products – DocuSign Negotiate and DocuSign CLM – to its Salesforce customers.
By expanding its product offerings, DocuSign will draw more and more customers into its "ecosystem."
We've covered product "ecosystems" in the past. They give the company (in this case DocuSign) more chances to profit off customers. And they give the business's clients fewer reasons to switch to competing products.
DocuSign estimates that it has penetrated only 1% of the total global $25 billion e-signature market. And it now has more products to sell to its existing customer base.
This should ensure DocuSign's growth continues and its retention rate remains high.
Investors have taken note of these growth prospects...
Shares have soared more than 60% over the past year, and recently hit a fresh all-time high.
DocuSign is disrupting the contract-signature market. With fast-growing revenue and a "sticky" customer base, this stock should be set for gains for years to come.
Sometimes investing is simple.