DocuSign Inc.’s rally in the extended session Thursday cooled after executives warned of smaller deal sizes and expansion rates as the e-signature company’s quarter and outlook surpassed Wall Street expectations.
DocuSign DOCU, +2.20% shares had initially surged as much as 14% after hours right after the company’s report, but the rally cooled after Chief Executive Allan Thygesen told analysts on a conference call that “we are seeing more moderate pipeline and cautious customer behavior coupled with smaller deal sizes and lower volumes.”
Pressure on shares increased as outgoing Chief Financial Officer Cynthia Gaylor expanded on Thygesen’s comment. The company also announced that Blake Grayson, who recently served as CFO at The Trade Desk. would succeed Gaylor as CFO.
“The macro environment continues to create uncertainty for our customers, and we’re seeing the impact of smaller deal sizes and lower expansion rates across the business as customers scrutinize budgets,” Gaylor told analysts.
Gains pared further as executives referred to tough macro conditions, and shares ended the after-hours session up 5%, following a 2.2% gain to close the regular session at $58.48.
The company reported fiscal first-quarter net income of $539,000, or break-even per share, versus a loss of $27.3 million, or 14 cents a share, in the year-ago period. Adjusted earnings, which exclude one-time charges and stock-based compensation charges, nearly doubled to 72 cents a share from 38 cents a share in the year-ago period.
Revenue rose to $661.4 million from $588.7 million in the year-ago period.
Analysts surveyed by FactSet had forecast 56 cents a share on revenue of $641.7 million.
The company forecast revenue of $675 million to $679 million for the July-ending quarter, and $2.71 billion to $2.73 billion for the year.
Analysts had estimated $667.7 million for the fiscal second quarter, and $2.7 billion for the year.
Like most tech company execs this earnings season, Thygesen told analysts how it is using generative AI, like OpenAI’s ChatGPT, for a feature that summarizes key parts of agreements for users. OpenAI is backed by Microsoft Corp. MSFT, +0.58%, which has invested billions of dollars in the company.
“This new feature, which is enabled by our integration with Microsoft’s Azure OpenAI service and tuned with our own proprietary agreement model, uses AI to summarize documents critical components, giving signers a clear grasp of the most relevant information within their agreement, while respecting data security and privacy,” Thygesen said, noting that DocuSign has “the world’s largest set of agreement data.”