Episode Details

Docusign (DOCU) Q2 FY2027 — It has added about 1.3% since the print, from a $65.97 close to roughly $66.80 in extended-hours trade. Operating income rose $52.4M year on year to $117.6M - a 13.4% GAAP margin against 8.1%, the best operating quarter Docusign has reported. Net income rose only $14.7M. Interest income fell $4.1M because the cash that earned it has gone into buybacks, and the tax provision rose $33.8M, from $13.5M to $47.3M - a 17.6% effective rate to 37.8%. Four fifths of that provision is non-cash: the cash-flow statement adds back $37.8M of deferred tax, and the non-current deferred tax asset falls $835.2M to $764.3M over six months. It is the FY2025 valuation-allowance release being repaid on paper. THE CALL: HOLD (3/5, MODERATE) — base-case value ~$67 vs ~$66.8 today. KEY METRICS: - Revenue $875.7M, +9.4% YoY (about 1.3pts of it currency); GAAP gross margin 79.7% vs 79.3% - GAAP operating income $117.6M, +80.3%; margin 13.4% vs 8.1%. Non-GAAP operating margin 31.6% vs 29.8% - GAAP diluted EPS $0.40 vs $0.30; non-GAAP diluted EPS $1.16 vs $0.92; diluted shares 193.1M vs 211.0M (-8.5%) - Tax provision $47.3M vs $13.5M - a 37.8% effective rate vs 17.6%. $37.8M of it is non-cash deferred tax (~80%) - Deferred tax assets fell $835.2M to $764.3M in six months, matching the $70.8M six-month deferred charge - Free cash flow $295.8M, a 34% margin vs 27%; first-half FCF $585.2M vs $445.5M - Buybacks $306.5M in the quarter, $624.0M in the half; cash and investments $973.1M, no borrowings - IAM was 15.1% of total ARR at 31 July vs 12.6% at 30 April; guided to 18-19% exiting Q4 FY2027 - Guidance raised: Q3 revenue $886-890M; FY2027 revenue $3,499-3,507M (+9%); ARR growth 8.50-9.00% What to watch: Q3 non-GAAP operating margin above 32% with revenue at or above the $890M top end (upgrade), or FCF margin under 30% for two quarters or any cut to the full-year revenue guide (downgrade) Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.