The other new position I’ve started during this down turn is $DOCU

Gross margin improvement 72 to 78 (last 3 yrs)

Op margin improvement neg 60 to neg 2

I still worry about having 61% of revenue in SGA and the fact that I can’t find their LTV/CAC. However this has been coming down from 106% of revenue in 2019

Net revenue retention 115% in ‘18 to 119% in ‘PE to 125% in ‘21

4 year compounded 42% revenue growth. A 4x for those keeping track. And yet despite the above improvements to the business the stock price is about the sam__e from 4 years ago.

Neg 80 mil net cash

Has been free cash flow positive since IPO

500 mil free cash flow in TTM

Only 14% of cash flow goes to capex

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Competitive advantage

They are a V**E**R**B**

Net promoter score 66

I haven’t met anyone say DOCU was hard to use

The old way of buying things driving somewhere with a pen and dead trees seems very 2019

Competition

Previously: Ink pens and random business that have a notary

Currently: Adobe and a few small players

DOCU 70-80% market. Adobe 12%

And with DOCU’s expanding net revenue retention (+10% over 3 years) I don’t see them losing significant market share

Future growth

Growing agreement cloud

Expanding notary

AI document analyzer sounds awesome if it works, scales and picks up adoption

Risk/Negatives

CEO was let go abruptly

High stock based compensation

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Projections

Great scenario

Revenue growth slows by DOCU historical standards, but still 20% a year. Achievable with their expanding net revenue retention

81% gross margin, decrease SGA spend as % revenue by 5% a year to 38%. maintain 18% R&D spend.

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Leaves us with 5.2 bil revenue. 1.3 bil op and 1.04 bil net. Market cap of 20 bil @20 PE and 40 bil @40 PE

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Bad scenario revenue slows to some analysis projections of 20% this year then to low teens. And they are unable to decrease SGA at their historical rate. SGA 52%. R&D 20%

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3.9 bil revenue. 470 mil op. 375 mil net. Which is 7.5B @20 PE and 15 B @40

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Current price to cash flow 21

With new CEO hoping for less stock based comp or to buy back 100% vs 80% which they have been buying back per year over last 3.

I’ve been DCA since April.