This Traditional Work 'Disruptor' Is Still Going Strong

The vaccines keep rolling out and each day we get a little closer to "normal"...

At this point, about half the U.S. population has been fully vaccinated. And we've already seen multiple states fully roll back their COVID-19 restrictions. Others are taking a more measured approach, but step-by-step they're all trying to get back to where we were before the pandemic. People can now return to places like restaurants, movie theaters, and even the office.

Early in the COVID-19 lockdowns last year, businesses scrambled to make sure their employees had the necessary tools to work remotely. Today we're checking back in on one of the biggest beneficiaries of the teleworking trend...

DocuSign (DOCU)'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... from your laptop, tablet, or smartphone.

It's the leader in the industry, taking up about 70% of market share. So it's likely the first choice of many businesses looking for e-signature solutions.

But that's not all it does. It has a suite of other products that can help businesses, like its partnership with Salesforce (CRM) that allows salespeople to create, route, and sign contracts all within Salesforce's software.

With businesses not able to work face-to-face, DocuSign's technology became mission-critical throughout 2020. There were very few in-person contract signings. Instead, many businesses conducted their operations almost exclusively through the Internet.

This led to incredible sales growth of more than 49% during the company's 2021 fiscal year, which ended in January. DocuSign also added 305,000 paid users during the fiscal year, for 52% growth.

As a result, shares nearly tripled in 2020. And while they've traded sideways in 2021, they still sit near their all-time high level. And the company's growth hasn't slowed yet...

The company reported a 58% year-over-year jump in first-quarter sales last week. It easily beat Wall Street's sales and earnings per share ("EPS") estimates.

The first quarter was so strong that DocuSign raised its second-quarter and full-year guidance. The company now sees second-quarter revenue of $479 million to $485 million versus the Wall Street estimate of $474.2 million.

For the full year, DocuSign is forecasting revenue of $2.03 billion to $2.04 billion versus its previous guidance of $1.96 billion to $1.97 billion.

Investors loved the report – sending shares nearly 20% higher the next day.

The strong guidance is encouraging, especially given what is going on in the economy. As folks start getting back to the office, it would make sense that the migration would hurt winners from the teleworking trend. But DocuSign is showing that this scenario is not playing out.

The company's guidance indicates that people will still gravitate to its software offerings even as things get back to normal. CEO Dan Springer noted that the company is growing new and existing customers at record rates.

So not only are people still signing up for DocuSign products... They're sticking around for the long term.

We've covered product "ecosystems" in the past. They give the company more chances to profit off customers. And they give the business's clients fewer reasons to switch to competing products, making them "sticky."

In DocuSign's case, it has done this by expanding beyond its e-signature products. And because of its relationship with Salesforce, its products are even easier to use so customers are more likely to keep buying from DocuSign.

What's more, it looks like the work landscape has changed over the course of the pandemic. It's doubtful that all companies will return to exactly the way they were before – with all the employees coming in every day. We've already seen multiple companies adopt "hybrid" work environments, where employees come in a few days a week and work remotely the other days.

While this isn't a pure teleworking environment like we saw throughout the pandemic, it still shows a need for businesses to invest in teleworking equipment. And there's a good chance that this is the preferred method for many offices in the near term while they work out a return plan.

That should continue to support DocuSign's growth, even if it isn't at pandemic-fueled levels. In the long-term, DocuSign's products make life a lot easier for business by "disrupting" the way things were always done. The company sells "sticky" products that keep customers from switching to competitors, and even expands the products it sells to existing customers. These are long-term tailwinds for the company.

Sometimes investing is simple.