House Md Season 1 Bilibili

[Taj Barnett]

Foundedin 1993, The Motley Fool is a financial services company dedicated to making the world smarter, happier, and richer. The Motley Fool reaches millions of people every month through our premium investing solutions, free guidance and market analysis on Fool.com, top-rated podcasts, and non-profit The Motley Fool Foundation.

To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. To get started investing, check out our quick-start guide to investing in stocks. A full transcript follows the video.

10 stocks we like better than DocuSign

When our award-winning analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

Chris Hill: What shape will the companies you own shares of be in when we get to 2024? Motley Fool Money starts now. It's the Motley Fool Money radio show. I'm Chris Hill joining me in studio, senior analysts Emily Flippen and Jason Moser. Good to see you both.

Chris Hill: We've got the latest headlines from Wall Street. We'll answer your questions by dipping into the Fool mailbag. As always, we've got a couple of stocks on our radar. But we begin with one company's earnings report as a way to look at stocks in general. The company in question is DocuSign, the electronic signature company. At the open on Friday, shares pop nearly 20 percent after second quarter results came in higher than expected. DocuSign's management also maintain their guidance for the rest of the fiscal year. The stock dropped down from that early enthusiasm, Jason. Before we widen our gaze to look at stocks in general, what did you think about DocuSign's results?

Jason Moser: Chris, if I had put a bet on this the day before, I would bet we probably would have seen the stock in the red because management had guided down in this report. Pleasantly surprised, at least from that perspective, but it does feel like it was a mixed bag for the most part. This is a business in a state of flux and there's a lot of uncertainty right now as to what the future holds. It's encouraging that they maintain full year guidance with revenue and billings given the state of enterprise software today. It felt like they could have found themselves in a little bit more trouble than we're seeing. Thus we will look at some of the pros, with revenue grew 22 percent, billings up nine percent. That look not terribly inspiring, but it has exceeded internal guidance. Held gross margins steady compared to a year ago. Added 44,000 new customers during the quarter. Again, that was 22 percent increase and that brings their total global paying customer count of 1.28 million. Of that customer count, you look at the large customers and that's the customers that are generating greater than $300,000 in annualized contract value for the company.

That figure continues to grow as well up to 992 versus 852 at year end. International continues to grow taking up a little bit more of the business. The balance sheet remains in good shape. They've gotten greater than one billion dollars in cash and equivalents and they're not burning through that cash. But there are some cons that come along with this. In first and foremost, this is still a ship without a captain. We know Dan Springer step down just several months ago, the CEO search is still underway, but they feel like they're close to a decision there, so that's good. They need to make sure they get the right person in for this job. The net dollar retention rate, 110 percent, that really stood out. That's low. It's as low as it's been in a long time. Remember that metric compares the annual recurring revenue for active subscription contracts between two period end dates. Now to be fair, they pulled forward a lot of growth over the last couple of years. If you go back to 2019 in the same quarter, that number was 113 percent. It's not terribly out of whack with that, but certainly down from the recent highs that we've seen. It was an encouraging quarter, but not one where you feel like, these guys have turned the corner.

Chris Hill: Emily, this is a story we could tell about any number of stocks out there in the sense that we're seeing this pop in the stock today. Shares of DocuSign year-to-date still down 60 percent?

Emily Flippen: Yes and I had a full roast prepared for DocuSign today on the fact that the market was up 20 percent on this quarter. My opinions have been tempered a bit by the fact that the market has come down. I think DocuSign stock at the time of taping is up around eight percent now. A lot more reasonable. But to your point, if there is a narrative for what we're seeing across companies this quarter, I would say that guidance is really driving stock results. I think what we saw was a knee jerk reaction to the fact that DocuSign did not in fact lower full year guidance when maybe the market expected more of the worst, which caused that short lived enthusiasm.

But it is interesting because the narrative that we heard from DocuSign's management this quarter was that they're interested in cost cutting. That's where they're headed. Even though they grew the employee base 22 percent let's overlook that for the quarter. Management said until we get that full-time CEO and we're taking a measured approach to hiring, reassessing our expense base, and this is very much the same narrative we've heard from many companies this past earning season. Maybe they lowered guidance for the end of the year. Or they've said, look, we're cutting costs because we're not expecting much from the back half of 2022.

Chris Hill: This is where I want to broaden things because to that point, Jason, we've heard that narrative from some of the biggest and most profitable companies in the public markets, I'm thinking primarily of Alphabet, where the CEO has been talking for weeks now about how we have to get more efficient. Not really talking about layoffs, but throwing out the possibility that they could be reducing headcount at some point. Keep in mind, as big as Alphabet is, last quarter, they still grew revenue 13 percent. They're huge, they're profitable. If a company like that is talking about we need to get more efficient. I'm wondering if we as investors need to start looking at every company in our portfolio and every company on our watch list through the lens of what do I think this company is going to be doing in the next 15 months? Not the stock. In terms of the business itself, what are they going to be doing that in early 2024 what shape are they in?

Jason Moser: Yeah, a lot to unpack there. It feel like a lot of that really does center around leadership. If you can have consistent leadership with a consistent vision then I think you have a little bit more of a reliable strategy there. It does beg the question, why wouldn't all of these businesses always place such a priority on efficiency? Really that makes the most sense. But it's also understandable that in good times when everything is going up and everybody is so focused on growth, sometimes that can translate into growth at any cost. You're seeing a lot of businesses that are paying the price for that now and DocuSign is no exception here. I feel like you see their headcount up 22, 23 percent from a year ago.

To me, this is a business that feels very bloated. It just doesn't feel like it needs a workforce of 8,000 people given what they do. But here we are. Perhaps that is just a result of Dan Springer's actions leading up to this point. This does feel to me a little bit. It reminds me a little bit of PayPal. I think back to what PayPal went through over these last couple of years. What we saw with Dan Schulman, it's almost like taking your success for granted a little bit and feeling like maybe you bought into your own hype. Feeling like that all of the success is really due to these actions of pursuing growth at any cost without really fully acknowledging that the tide is rising and pretty much lifting every boat.

To me, it is something I think worth paying attention to always is looking at leadership, looking at the expenses that are involved with the business because we have a lot of these businesses today that we follow that have yet to get to that path to profitability. They're still on that path to profitability and for businesses that really ultimately need to get there. At some point, you want to have a clear vision of how they're going to get there. For DocuSign and for a lot of these businesses I'm not talking about Alphabet here, but for a lot of these businesses that are still working their way to it, you just make that assumption that they'll get there eventually. I think for investors, it's a good reminder to really in your mind when you start working out your thesis for investing in some of these businesses try to chart out. How you feel like they're going to get there and don't just chart it out based on what management is telling you on the call because that may not be the same team that you're dealing with a year from now.

Emily Flippen: I didn't get my little rant on DocuSign. Let me have a little rant on efficiency here if you'll hear me out. I think efficiency is something that's built into the fabric of companies. When the economy starts to get worse, you'll hear a lot of very inefficient businesses suddenly start talking about efficiency. Their definition of efficiency is oftentimes reducing headcount, cutting unnecessary expenses. But in my opinion, these things aren't efficient. If I could use a metaphor here, over the past couple of years, a number of us may have put on a couple of LPs myself included and that's like going out and saying, we'll look for the next month.

3a8082e126