Q1 2025 DocuSign Inc Earnings Call
Good afternoon, ladies and gentlemen, thank you for joining Darkies signs first quarter fiscal year 'twenty 'twenty 25 earnings conference call.
Operator: Good afternoon, ladies. Thank you for joining DocuSign's first quarter fiscal year 2025. At this time, all participants are in a listen-only mode.
At this time all participants are in a listen only mode. After.
Operator: After the speaker's presentation, there will be a question and answer session. As a reminder, this conference call is being recorded and will be available for replay from the Investor Relations section of the following website following. And I will now pass the call over to Matt Sonnenfeld, the Interim Head of Investor Relations. Please go ahead.
After the speaker's presentation, there will be a question and answer session.
As a reminder, this conference call is being recorded and will be available for replay from the Investor Relations section of the website following the call.
If anyone should require operator assistance during the conference. Please press Star zero.
Speaker Change: I will now pass the call over to Matt Seinfeld interim head of Investor Relations.
Matt Seinfeld: Please go ahead.
Matt Sonnenfeld: Thank you, operator. Good afternoon, and welcome to DocuSign's Q1 Fiscal 2025 Earnings Call. Joining me on today's call are DocuSign's CEO, Allan Thygesen, and CFO, Blake Grayson. The press release announcing our first quarter 2025 results was issued earlier today and is posted on our Investor Relations website as well as a published version of our prepared remarks. Before we begin, let me remind everyone that some of our statements on today's call are forward-looking. We believe our assumptions and expectations related to these forward-looking statements are reasonable, but they are subject to known and unknown risks and uncertainties that may cause our actual results or performance to be materially different.
Speaker Change: Thank you operator, good afternoon, and welcome to Darkey signs Q1 fiscal 2025 earnings call.
Speaker Change: On today's call are Darkey signs CEO, Allen <unk> and CFO Blake Grayson.
Speaker Change: Yes release announcing our first quarter 2025 results was issued earlier today and is posted on our Investor Relations website as well as the published version of our prepared remarks before we begin let me remind everyone that some of our statements on today's call are forward looking we believe our assumptions and expectations related to these forward looking statements are reasonable, but there are some.
Matt Sonnenfeld: In particular, our expectations regarding the pace of product innovation and factors affecting customer demand are based on our best estimates at this time and are therefore, Please read and consider the risk factors in our filings with the SEC, together with the content of this call. Any forward-looking statements are based on our assumptions and expectations to date, except as required by law. We assume no obligation to update these statements in light of future events or new information.
Speaker Change: Jack to known and unknown risks and uncertainties that may cause our actual results or performance to be materially different in particular.
Speaker Change: Vacations regarding the pace of product innovation and factors affecting customer demand are based on our best estimates at this time and are therefore subject to change please read and consider the risk factors in our filings with the SEC together with the content of this call any forward looking statements are based on our assumptions and expectations to date in <unk>.
Speaker Change: Except as required by law, we assume no obligation to update these statements in light of future events or new information during.
Matt Sonnenfeld: During this call, we will present GAAP and non-GAAP financial measures. In addition, we provide non-GAAP weighted average share counts and information regarding free cash flows and billings. These non-GAAP measures are not intended to be considered in isolation from, a substitute for, or superior to our GAAP results.
Speaker Change: During this call we will present GAAP and non-GAAP financial measures. In addition, we provide non-GAAP weighted average share count and information regarding free cash flows and billings. These non-GAAP measures are not intended to be considered in isolation from a substitute for or superior to our GAAP results. We encourage you to consider all measures when analyzing our performance.
Matt Sonnenfeld: We encourage you to consider all measures when analyzing our performance. For information regarding our non-GAAP financial information, the most directly comparable GAAP measures, and the quantitative reconciliation of those figures, please refer to today's earnings press release, which can be found on our website at Investor.DocuSign.com. Now, I'd like to turn the call over to Aleks.
For information regarding our non-GAAP financial information most directly comparable GAAP measures and a quantitative reconciliation of those figures. Please refer to today's earnings press release, which can be found on our website at investor Dot Dot Dot com.
Speaker Change: I'd like to turn the call over to Alan.
Aleks: Thanks, Matt, and good afternoon, everyone. We're off to a strong start in fiscal 2025. We launched a significant expansion to our company strategy with our announcement of the DocuSign Intelligent Agreement Management Platform. We also announced the acquisition of Lexion to accelerate the AI powering our platform. We continue to make clear progress on our three strategic pillars. Accelerating Product Innovation.
Alan: Thanks, Matt and good afternoon, everyone.
Alan: We're off to a strong start in fiscal 2025, we launched a significant expansion to our company strategy with our announcement of the Doctor sign intelligent agreement management platform.
Alan: We also announced the acquisition of Black sea on to accelerate the AI powering our platform.
Alan: We continue to make clear progress on our three strategic pillars accelerating product innovation.
Aleks: Improving our omni-channel go-to-market capabilities and increasing operating and financial efficiency. Our core business showed ongoing signs of stabilization. In Q1, revenue was $710 million, up 7% year-over-year.
Alan: Proving our omnichannel go to market capabilities, and increasing operating and financial efficiency.
Alan: Our core business showed ongoing signs stabilization Q.
Alan: Q1 revenue was $710 million.
Alan: Up 7% year over year.
Aleks: Dollar Net Retention improved versus the fourth quarter. Q1 non-GAAP operating margin increased approximately 2 percentage points to 28.5% versus 26.6% last year. Free cash flow generation remains strong, improving 8% year-over-year to $232 million and resulting in a 33% free cash flow margin. Strong cash flow gives us confidence to continue investing in our growth while opportunistically returning capital to shareholders, including through the new $1 billion buyback authorization that we announced today. Blake will share further business and financial details in his comments.
Alan: Dollar net retention improved versus the fourth quarter.
Alan: Q1, non-GAAP operating margin increased approximately two percentage points to 28.5% versus 26, 6% last year.
Alan: Free cash flow generation remained strong improving 8% year over year to $232 million and resulting in a 33% free cash flow margin.
Alan: Strong cash flow gives us confidence to continue investing in our growth.
Alan: While opportunistically, returning capital to shareholders, including through the new $1 billion buyback authorization that we announced today.
Speaker Change: Blake will share further business and financial details in his comments.
Aleks: Over the last 18 months, we've tightened operating efficiency, stabilized business and customer relationships, and launched a new platform that will support long-term growth. In Q1, we made a number of announcements to showcase our commitment to increasing product innovation for customers. At our flagship customer event, Momentum24, we outlined a bold new vision for intelligent agreement management and shared our product roadmap for that vision. We believe the launch of DocuSign Intelligent Agreement Management is a landmark moment in the company's transformation.
Blake Jeffrey Grayson: Over the last 18 months, we've tightened the operating efficiency stabilize the business and customer relationships.
Blake Jeffrey Grayson: Launched a new platform that will support long term growth.
Speaker Change: In Q1, we made a number of announcements to showcase our commitment increased product innovation for customers.
Speaker Change: At our flagship customer event momentum 24, we outlined a bold new vision for intelligent agreement management and shared our product roadmap for that vision.
Speaker Change: We believe the launch of Doctor sign intelligent agree with management as a landmark moment in the company's transformation.
Aleks: Intelligent Agreement Management, or DocuSign IAM, addresses customer pain points across the agreement. Companies experience universal friction and frustration in managing agreements, and the costs add up, according to a recent study by Deloitte. Poor agreement management systems and practices cost nearly $2 trillion in global economic value annually and cost workers billions of hours in lost productivity.
Speaker Change: Doctor sign in children, who gave me the management or Doctor sign I am.
Speaker Change: Dresses customer pain points across the agreement journey.
Speaker Change: Company's experience universal friction and frustration and managing agreements and the costs add up.
Speaker Change: According to a recent study by Deloitte.
Speaker Change: Poor agreement management systems and practices cost nearly two trillion dollars and global economic value annually.
Speaker Change: And costs workers billions of hours in last time.
Aleks: With DocuSign IAM, customers can transform agreement data into insights and action. Our new platform enables customers to create, commit to, and manage agreements all in one place. Our new capabilities help customers improve contract review cycles, streamline workflows, and boost productivity organization-wide. The DocuSign IAM platform is a significant departure from our past approach of only offering standalone products; it combines our current products, including our market-leading e-signature and CLM products, with new platform services customers have asked for, including Maestro, our new agreement workflow builder, which automates the creation of agreements without using code.
Speaker Change: With Doctor sign I am customers can transform agreement data into insights and actions.
Speaker Change: New platform enables customers to create <unk>.
Speaker Change: <unk>, two and managed agreements all in one place.
Speaker Change: Our new capabilities help customers improve contract review cycles streamlined workflows and boost productivity organization wide.
Speaker Change: The Doctor sign I am platform is a significant departure from our past approach only offering standalone products.
Speaker Change: The platform combines our current products, including our market, leading E signature and C. L M products.
Speaker Change: With new platform services that customers have asked for including <unk>.
Speaker Change: Dr signed maestro, our new agreement workflow builder.
Speaker Change: To automate the creation of agreements without using code.
Aleks: With Maestro, customers can configure custom agreement workflows in minutes, connecting DocuSign capabilities like signature, ID verification, and data verification with third-party apps, connecting to their business processes. DocuSign Navigator allows you to store, manage, and analyze the customer's entire library of accumulated agreements.
Speaker Change: Maestro customers can configure customer agreement workflows in minutes.
Speaker Change: Mining Darkies signed capabilities like signature I keep education and data verification with third party apps to connect to their business processes.
Speaker Change: Second.
Speaker Change: He signed navigator allows you to store manage and analyze the customer's entire library of accumulated agreements.
Aleks: This includes past agreements signed using DocuSign eSignature, as well as non-DocuSign agreements. Navigator leverages AI to transform unstructured agreements into structured data, making it easy to find agreements, quickly access Bible information, and gain valuable insights from a. And third, the DocuSign App Center, to help our customers easily integrate third-party applications into their agreement workflows without any coding or expensive custom development. This is particularly powerful for DocuSign admins and process builders who can easily configure IAM for their unique agreement management needs. At launch, our App Center features commonly used apps from Salesforce, ServiceNow, Hotspot, Stripe, and document sharing services like Google Drive and Microsoft's OneDrive and SharePoint.
Speaker Change: This includes past agreements signed using docker Saturdays signature as well as non doctors that acquaintance.
Speaker Change: Navigator Leverages AI to transform unstructured agreements into structured data base.
Speaker Change: Making it easy to find agreements quickly access vital information.
Speaker Change: And gain valuable insights from agreements.
Speaker Change: Third the Doctor sign epicenter.
Speaker Change: To help our customers easily integrate third party applications into their agreement workflows without any coding or expensive custom development.
Speaker Change: It is particularly powerful for Doctor site admin some process builders who can.
Speaker Change: Easily configure I am for their unique agreement management needs.
Speaker Change: At launch.
Speaker Change: Center features commonly used apps Salesforce service now hotspot stripe and document sharing services like Google drive and Microsoft Onedrive and Sharepoint.
Speaker Change: Okay.
Aleks: In addition to creating new platform services, we also unveiled application suites for specific functions within organizations. DocuSign IAM launched, starting with IAM for Customer Experience, IAM for Sales, and IAM Core for general purpose use. In time, we will also launch IAM applications for legal, procurement, and HR teams, as well as for specific industry verticals. On May 30, DocuSign IAM launched with availability for our small and mid-market customers in the U.S., with select plans also available in Canada and Australia.
Speaker Change: In addition to creating new platform services, we also unveiled application suites for specific functions within organizations.
Speaker Change: Darkies sign I am launched starting with I am for customer experience I am for sales and I am core, but general purpose usage.
Speaker Change: In time, we will also launch I am applications for legal procurement and HR teams as well as for specific industry verticals.
Speaker Change: On may 30th.
Speaker Change: Doctor sign I am launched with availability for our small and mid market customers in the U S with select plants also available in Canada and Australia.
Aleks: DocuSign IAM will roll out to more customers and more geographies over the next year. As we execute this rollout, We're focused on increasing flexibility for customers. IAM unleashes the ability for companies of all sizes to manage their agreements, significantly expanding the agreement management market. CLM, which remains our sophisticated enterprise offering, showed us the importance of giving customers an advanced set of workflows and deep agreement intelligence. IAM takes the learnings from CLM and applies them to a platform with broader agreement functionality that's accessible for any size customer to any member of their organization.
Speaker Change: Dr Sena, I am well roll out to more customers and more geographies over the next year.
Speaker Change: As we execute this rollout.
Speaker Change: We're focused on increasing flexibility for customers.
Speaker Change: I am unleashes the ability for companies of all sizes to manage their agreements significantly expanding the agreement management market.
Speaker Change: C O M, which remains our sophisticated enterprise offering showed us the importance of giving customers advanced set of workflows and deep agreement intelligence.
Speaker Change: I am takes the learnings from C O M P.
Speaker Change: Plays into a platform with broader agreement functionality, that's accessible for any size customer to any member of their organization.
Aleks: AI is central to our platform vision, and we're thrilled to welcome Lexion to the DocuSign family. Lexion is a proven leader in AI-based agreement technology, which significantly accelerates our IAM platform goals. We maintain a high bar for acquisition, and Lexion stood out due to its sophisticated AI capabilities.
Speaker Change: AI is central to our platform vision and we're thrilled to welcome Alexia on to the Doctor signed family.
Speaker Change: Like Xian is a proven leader in AI based agreement technology, which significantly accelerates our I am platform goals.
Speaker Change: We maintain a high bar for acquisitions and lexan stood out due to its sophisticated AI capabilities.
Speaker Change: Compatible technology architecture.
Speaker Change: And promising commercial traction with excellent customer feedback, particularly in the legal community.
Speaker Change: Additionally, we're bringing exceptional talent and strong AI VITAS each doctor site.
Aleks: [inaudible] Additionally, we're bringing exceptional talent and strong AI leaders into DocuSign. The acquisition of Lexion marks an important step forward in our platform journey. Let's turn to our omni-channel go-to-market, our second strategic pillar. In Q1, momentum was solid across the direct, partner, and digital routes to market. Overall customer growth remained consistent with Q4 at 11% year-over-year. Envelope Scent and Contract Utilization both saw modest year-over-year improvements for the second quarter in a row.
Speaker Change: The acquisition of <unk> marks an important step forward in our platform journey.
Speaker Change: Let's turn to our omni channel go to market, our second strategic pillar.
Speaker Change: In Q1 momentum was solid across the direct partner and digital routes to market.
Speaker Change: Overall customer growth remained consistent with Q4 at 11% year over year.
Speaker Change: Envelope sent in contract utilization, both saw a modest year over year improvements for the second quarter in a row.
Aleks: International and CLM revenue growth continues to meaningfully outpace total revenue growth. The Partner Channel continues to show improvement with strong growth from key partners like SAP and Microsoft. For example, DocuSign is one of the first co-pilot integrations in Office 365, Microsoft Dynamics, and Salesforce Sales Cloud, creating access to agreements and productivity and sales applications.
Speaker Change: International and CRM revenue growth continued to meaningfully outpace total revenue growth.
Speaker Change: The partner Channel continue to show improvement with strong growth from key partners like SAP and Microsoft.
Speaker Change: For example, Darkies side, it's one of the first co pilot integrations, and $3 65, and Microsoft dynamics, and Salesforce sales cloud, creating access to agreements and productivity and sales applications.
Speaker Change: Across all channels, we're focused on creating global engagement with customers behind.
Aleks: Across all channels, we're focused on creating global engagement with customers, behind a new DocuSign brand that's focused on bringing agreements to life. We welcome thousands of customers and partners to our largest customer event of the year, Momentum 24. This flagship New York event was the kickoff to a larger momentum series, spanning eight events in five continents.
Speaker Change: Behind the new Doctor sign brand, that's focused on bringing agreements to life. We welcome thousands of customers and partners to our largest customer a back of the year momentum 24.
Speaker Change: This flagship New York event was the kickoff to a logjam momentum series spanning eight events in five continents.
Aleks: This engagement paves the way for rolling out localized versions of DocuSign IAM in our largest international market. At these events, we recognize several customers who stand out for their innovation and business impact by deploying DocuSign capabilities within their company, in sales and customer experience use cases. JPMorgan's Commercial Bank Services has quickened its lending process by over two weeks across its base of clients.
This engagement paves the way for bowling out localized versions Darkies sign I am in our largest international markets.
Speaker Change: At these events, we recognized several customers who stand out for their innovation and business impact by deploying das signed capabilities within their companies.
Speaker Change: In sales and customer experience use cases.
Speaker Change: J P. Morgan's commercial bank services, it's quick and it's lending process by over two weeks across its base of clients and.
Aleks: And Red Hat now has 7,000 users on DocuSign CLM, sending over 30,000 sales-related uploads for signature annually. Customers using DocuSign in procurement and legal use cases stand out as well. Netta used DocuSign to analyze over one million contracts across customers, partners, and suppliers. Santander UK transformed its lending fulfillment process in its corporate and commercial bank, including reformatting its facility agreements through automation.
Speaker Change: And Red hat now has 7000 users on Doctor sign C. L M. Sending over 30000 sales related envelope for signature annually.
Speaker Change: Customers using docker, signing procurement legal use cases stand out as well meta use doctor sign to analyze over 1 million contracts across customers partners and suppliers.
Sometimes they're U K transformed its lending fulfillment process and its corporate and commercial bank, including Reformatting gets facility agreements through automation and.
Aleks: And FlowServe, one of the world's leading providers of fluid motion and control panel products and services, manages over $1.4 billion in contracts through DocuSign CLM. What's exciting is that this is just the beginning for DocuSign helping customers navigate their agreement management journey. In closing, Q1 was an important step forward as we reimagine DocuSign. With intelligent agreement management, we're leveraging our market leadership in e-signature and CLM to define a broader market opportunity by solving age-old customer problems that have never been addressed.
Speaker Change: And closer one of the world's leading providers of fluid motion and control panel products and services manages over $1 $4 billion in contracts.
Speaker Change: Hockey sides C L.
What's exciting is that this is just the beginning for doctor sign helping customers navigate their agreement management journeys.
Speaker Change: In closing Q1 was an important step forward as we re imagine darci side.
Speaker Change: With intelligent agreement management, we're leveraging our market leadership in Esignature and C. O M to define a broader market opportunity by solving age old customer problems that have never been addressed.
Aleks: We believe IAM unlocks a new wave of value for customers, as the system of record for agreements, and a new phase of growth, adoption. Thank you to our entire team for your passion and dedication to realizing our vision for customers. We're proud of what we've accomplished in recent months and quarters. And we're just getting started. With that, let me turn it over to Blake.
Speaker Change: We believe I am unlocks a new wave of value for customers as the system of record for agreements.
Speaker Change: A new phase of growth the doctor side.
Thank you to our entire team for your passion and dedication to realizing our vision for customers.
Speaker Change: We're proud of what we've accomplished in recent months and quarters.
And we're just getting started.
Speaker Change: With that let me turn it over to Blake.
Blake Jeffrey Grayson: Thanks, Allan, and good afternoon, everyone. We delivered strong business and financial results in Q1 that continue to demonstrate stabilization in our core business. In addition, we maintained our focus on operating efficiency while continuing to invest in the newly launched IAM platform, critical AI capabilities, and on-the-channel go-to-market initiatives that we believe can help drive our long-term growth aspirations. Q1 financial performance showed solid top-line growth, improving operating metrics, and continued efficiency gains resulting in strong operating income and free cash flow generation. Total revenue in Q1 increased 7% year-over-year to $710 million, and subscription revenue grew 8% year-over-year to $691 million. Billings grew 5% year-over-year to $710 million.
Blake Jeffrey Grayson: Thanks, Alan and good afternoon, everyone. We delivered strong business and financial results in Q1 that continued to demonstrate stabilization in our core business. In addition, we maintained our focus on operating efficiency, while continuing to invest in the newly launched I E M platform critical AI capability.
Blake Jeffrey Grayson: He's an omnichannel go to market initiatives that we believe can help drive our long term growth aspirations.
Blake Jeffrey Grayson: Q1 financial performance showed solid top line growth improving operating metrics and continued efficiency gains, resulting in strong operating income and free cash flow generation.
Blake Jeffrey Grayson: Total revenue in Q1 increased 7% year over year to 710 million and subscription revenue grew 8% year over year to $691 million.
Blake Jeffrey Grayson: Billings grew 5% year over year to $710 million.
Blake Jeffrey Grayson: The building's outperformance compared to our guidance was driven primarily by higher early renewals, as well as stronger retention rates. International revenue, a key long-term growth driver, continued to grow at approximately double the overall revenue growth rate and now represents 28% of total revenue. We continue to be excited about the long-term opportunity we still have remaining in our international market. Similar to the past two quarters, we are encouraged by several continued signs of business stabilization.
Blake Jeffrey Grayson: The billings outperformance compared to our guidance was driven primarily by higher early renewals as well as stronger retention rates.
Blake Jeffrey Grayson: International revenue a key long term growth driver continued to grow at approximately double the overall revenue growth rate and now represents 28% of total revenue.
Blake Jeffrey Grayson: We continue to be excited about the long term opportunity, we still have remaining in our international markets.
Blake Jeffrey Grayson: Similar to the past two quarters, we are encouraged by several continued signs of business stabilization.
Blake Jeffrey Grayson: First, as Allan mentioned, our dollar net retention rate improved to 99% in Q1 from 98% in Q4. This was the first sequential quarter-on-quarter improvement in several years. Gross retention rates improved modestly year over year, which was the primary driver of the sequential improvement in dollar net retention.
Speaker Change: First as Alan mentioned, our dollar net retention rate improved to 99% in Q1 from 98% in Q4. This is the first sequential quarter on quarter improvement in several years.
Speaker Change: Gross retention rates improved modestly year over year, which was the primary driver of the sequential improvement in dollar net retention.
Blake Jeffrey Grayson: We expect that these recent stabilization trends will continue, and in Q2, we anticipate the dollar net retention rate to be flat to down slightly. Longer term, we believe there is significant opportunity for growth across both our core business and with the addition of the Intelligent Agreement Management Platform through continued customer penetration and new expansion. Second, usage trends once again showed modest improvement, similar to what we experienced in the second half of fiscal 2024; envelope scent increased slightly year over year compared to the year over year declines we saw at this time last year. Consumption, a contract utilization measure, also improved slightly year over year, led by increases in the health care, insurance, and technology verticals.
Speaker Change: We expect that these recent stabilization trends will continue and in Q2, we anticipate dollar net retention rate to be flat to down slightly.
Speaker Change: Longer term, we believe there is significant opportunity for growth across both our core business and with the addition of the intelligent agreement management platform through continued customer penetration and new expansion.
Speaker Change: Second usage trends once again showed modest improvement similar to what we experienced in the second half of fiscal 'twenty 'twenty for NV.
Speaker Change: Envelope sent increased slightly year over year compared to the year over year declines we saw this time last year.
Speaker Change: <unk> our contract utilization measure also improved slightly year over year led by increases in the healthcare insurance and technology verticals.
Blake Jeffrey Grayson: Third, the number of large customers spending at least $300,000 annually remains stable at $1,059 in Q1, relatively similar to customer counts from Q4 and Q1 fiscal 2024. We saw lower volatility in large customers compared to Q1 of last year, when the number of customers spending over $300,000 decreased sequentially by 2%. Also, bookings from customers with total contract values over $1 million continue to increase by double-digit year-over-year rates in Q
Speaker Change: Third the number of large customers spending at least $300000 annually remains stable at 1059 in Q1 relatively similar to customer accounts from Q4, and Q1 fiscal 'twenty 'twenty four.
Speaker Change: We saw lower volatility and large customers compared to Q1 of last year, when the number of customers spending over $300000 decreased sequentially by 2%.
Speaker Change: Also bookings from customers with total contract value over $1 million continuing to increase by double digit year over year rates in Q1.
Blake Jeffrey Grayson: Fourth, new customer acquisition growth remains strong in Q1, with total customers increasing by 11% year-over-year for the third consecutive quarter to 1.56 million. Our quarterly absolute net account additions of over 50,000 is the highest sequential gain we have seen in two years since Q1 of fiscal 2023. This was driven predominantly by growth in digital customers, which grew 11% year-over-year to 1.3 million.
Speaker Change: Fourth new customer acquisition growth remained strong in Q1 with total customers increasing by 11% year over year for the third consecutive quarter to 1.56 million.
Speaker Change: Our quarterly absolute net account additions of over 50000 is the highest sequential gain we have seen in two years since Q1 of fiscal 2023.
Speaker Change: This was driven predominantly by growth in digital customers that grew 11% year over year to $1 $3 million. We will continue to focus on driving self service features and adoption through our P. L. G motions.
Blake Jeffrey Grayson: We will continue to focus on driving self-service features and adoption through our PLG motion. Direct customers grew 13% year over year to 248,000. As we begin the measured rollout of Intelligent Agreement Management across segments and geographies, the scale of our customer base creates strong long-term expansion potential for the business and continues to be a unique asset across the software landscape. Turning to our financials, operating and financial efficiency initiatives delivered a strong performance in Q1. Non-GAAP gross margin for Q1 was 82.0% versus 82.6% last year, in line with guidance, given the ongoing cloud infrastructure migration that we expect will take place throughout fiscal 2025. Q1 non-GAAP subscription gross margin was 84.2% versus 85.2% last year. Also, impacted by the migration, non-GAAP operating income in Q1 was $202 million, up 15% year-over-year to a record high 28.5% operating margin.
Speaker Change: Direct customers grew 13% year over year to 248000.
Speaker Change: As we begin the measured rollout of intelligent agreement management across segments and geographies the scale of our customer base creates strong long term expansion potential for the business and continues to be a unique asset across the software landscape.
Speaker Change: Turning to our financials operating and financial efficiency initiatives drove strong performance in Q1.
non-GAAP gross margin for Q1 was 82.0% versus 82, 6% last year in line with guidance given the ongoing cloud infrastructure migration that we expect will take place throughout fiscal 2020 five.
Speaker Change: Q1, non-GAAP subscription gross margin was 84, 2% versus 85, 2% last year also impacted by the migration.
Speaker Change: non-GAAP operating income in Q1 was 202 million up 15% year over year to a record high 28, 5% operating margin.
Blake Jeffrey Grayson: This is up nearly 200 basis points versus Q1 last year and a significant increase from the 17.4% operating margin from two years ago. The improvement from last year has largely come from efficiency gains within our sales and marketing departments, where we've been able to reduce our spend as a share of revenue by over 200 basis points from a year ago to 33% of revenue, compared to 42% of revenue two years ago.
Speaker Change: This is up nearly 200 basis points versus Q1 last year and a significant increase from the 17, 4% operating margin from two years ago.
Speaker Change: The improvement from last year has largely come from efficiency gains within our sales and marketing departments, where we've been able to reduce our spend as a share of revenue by over 200 basis points from a year ago to 33% of revenue.
Speaker Change: Compared to 42% of revenue two years ago.
Blake Jeffrey Grayson: This has provided us with the ability to continue investing in R&D at a consistent percent of revenue. In Q1, non-GAAP operating margins benefited from lower headcount related to the previously announced restructure. We incurred $29 million in GAAP-specific restructuring charges in Q1, in line with our previous communication. Additionally, a portion of the outperformance in non-GAAP operating margin relative to our guidance was driven by expense time. We ended Q1 with 6,441 employees versus 6,586 at this time last year, approximately 2% lower than the prior year.
Speaker Change: This has provided us the ability to continue investing in R&D at a consistent percent of revenue.
Speaker Change: In Q1, non-GAAP operating margin benefited from lower head count related to the previously announced restructuring we incurred $29 million in GAAP specific restructuring charges in Q1 in line with our previous communications.
Speaker Change: A portion of the outperformance in non-GAAP operating margin relative to our guidance was driven by expense timing.
Speaker Change: We ended Q1 with 6441 employees versus 6586 at this time last year, approximately 2% lower than the prior year.
Blake Jeffrey Grayson: We will continue to manage our hiring plans to align our sales organization with our digital and partner GTM efforts, support long-term growth opportunities in R&D, and realize efficiencies of scale in G&A. We continue to benefit from a business model that generates significant cash flow. Free cash flow in Q1 increased to $232 million with a 33% margin versus 32% in Q1 of last year.
Speaker Change: We will continue to manage our hiring plans to align our sales organization with our digital and partner G. T. M motions support long term growth opportunities in R&D and realized efficiencies of scale in G&A.
Speaker Change: We continue to benefit from a business model that generates significant cash flow free.
Speaker Change: Free cash flow in Q1 increased to $232 million with a 33% margin versus 32% in Q1 of last year.
Blake Jeffrey Grayson: Efficiency initiatives continue to yield working capital improvements. In particular, collections efficiency has been a point of strength. We ended Q1 with less than 1% of our accounts receivable over 90 days past due, a significant improvement year over year. As discussed last quarter, we anticipate our full-year free cash flow margin will more closely approximate non-GAAP operating margin for fiscal 2025. Related to that, we expect to see a lower free cash flow yield rate in Q2 versus Q1. However, the balance sheet is in a strong position. At quarter end, we had $1.2 billion of cash, cash equivalents, and investments. We currently have no debt on the balance sheet.
Speaker Change: <unk> initiatives continue to yield working capital improvements in particular collections efficiency has been a point of strength. We ended Q1 with less than 1% of our accounts receivable over 90 days past due.
Speaker Change: Inefficient improvement year over year.
Speaker Change: As discussed last quarter, we anticipate our full year free cash flow margin will more closely approximate non-GAAP operating margin for fiscal 2025 related to that we expect to see a lower free cash flow yield rate in Q2 versus Q1.
Speaker Change: The balance sheet is in a strong position at quarter end, we had $1 2 billion of cash cash equivalents and investments. We currently have no debt on the balance sheet.
Blake Jeffrey Grayson: This strong financial foundation allows us to harness significant free cash flow generation to support future investment, as well as redeploy excess capital opportunistically to shareholders. To that end, during Q1, we used $149 million in cash to repurchase shares, more than three times greater versus the $40 million in share repurchases in Q1 of the prior year and slightly more than we repurchased in all of fiscal 2024. We also used $42 million in cash to pay taxes due on RSU settlements, reducing the diluted impact of our equity program.
Speaker Change: This strong financial foundation allows us to harness significant free cash flow generation to support future investment as well as redeploy excess capital opportunistically to shareholders.
And during Q1, we used $149 million in cash to repurchase shares more than three times greater versus the $40 million in share repurchases in Q1 of the prior year and slightly more than we've ever purchased in all of fiscal 2024.
Speaker Change: We also used $42 million in cash to pay taxes due on our S E settlements, reducing the dilutive impact of our equity programs.
Blake Jeffrey Grayson: As Allan mentioned, the board recently authorized an increase in our open-ended buyback program of $1 billion, which is on top of the approximately $140 million we have in remaining existing authorization. With regard to capital allocation, we also closed the Lexian acquisition on May 31st. Lexion is a strong strategic fit for DocuSign. We have a disciplined valuation framework and high cultural bar for acquisitions, and I'm excited for the opportunities this can ultimately provide for our customers.
Speaker Change: As Alan mentioned the board recently authorized an increase to our open ended buyback program of $1 billion, which is on top of the approximately $140 million, we have in remaining existing authorization.
Speaker Change: With regard to capital allocation. We also closed the Lexington acquisition on May 31st.
Speaker Change: <unk> is a strong strategic fit for <unk>.
Speaker Change: We have a disciplined valuation framework and high culture bar for acquisitions and I'm excited for the opportunities. This ultimately can provide for our customers.
Blake Jeffrey Grayson: Lexian's technology will accelerate our AI-powered IAM roadmap, and Lexian's founders and team will help strengthen our technical foundation with their AI industry leadership experience. In terms of financials, Lexian will not have a material impact on revenue and non-GAAP operating margins in fiscal 2025, and the financial impact is reflected in our current fiscal 2025 guidance. Non-GAAP diluted EPS for Q1 was $0.82, a $0.10 per share improvement from $0.72 last year. Gap Diluted EPS was $0.16 versus $0.00 last year. Diluted shares increased by approximately 1% year-over-year to 210 million shares.
<unk> technology will accelerate our AI powered I am roadmap Alexia <unk> founders and team will help strengthen our technical foundation with their AI industry leadership experience.
Speaker Change: In terms of financials lexan will not have a material impact on revenue and non-GAAP operating margins in fiscal 2025, and the financial impact is reflected in our current fiscal 2025 guidance.
Speaker Change: non-GAAP diluted EPS for Q1 was 82.
Speaker Change: A 10 cent per share improvement from 72 cents last year.
Speaker Change: GAAP diluted EPS was <unk> 16 cents versus zero cents last year.
Speaker Change: Diluted shares increased approximately 1% year over year to 210 million shares.
Blake Jeffrey Grayson: We are encouraged by gains in both non-GAAP and GAAP profitability, and we continue to target improvements in annual GAAP net income and per share profitability as we work to manage the dilution and cost of our equity program. In Q1, stock compensation expense as a percent of revenue, excluding the impact from restructuring, declined by 170 basis points year-over-year, from 21% in Q1 of fiscal 2024 to 19% in Q1 of fiscal 20 We continue to expect stock-based compensation, excluding the impact from restructuring, to be approximately flat year-over-year in fiscal 2025 and expect that cost as a percent of revenue to decline year-over-year.
Speaker Change: We are encouraged by gains in both non-GAAP and GAAP profitability and we continue to target improvements in annual GAAP net income and per share profitability as we work to manage the dilution and cost of our equity programs in.
Speaker Change: In Q1 stock compensation expense as a percent of revenue excluding the impact from restructuring declined by 170 basis points year over year from 21% in Q1 of fiscal 2024% to 19% in Q1 of fiscal 2025.
Speaker Change: We continue to expect stock based compensation, excluding the impact from restructuring to be approximately flat year over year in fiscal 2025, and expect that cost as a percent of revenue to decline year over year.
Blake Jeffrey Grayson: Related to our GAAP financials, in fiscal 2025, it is reasonably possible that we will release a valuation allowance on certain existing deferred tax assets, which was discussed in our 10-K that was published last quarter. When released, we estimate this would have a GAAP-only financial impact of decreasing our non-cash tax expense by approximately $750 to $850 million.
Speaker Change: Related to our GAAP financials in fiscal 2025, it is reasonably possible that we will release, our valuation allowance on certain existing deferred tax assets, which was discussed in our 10-K that was published last quarter. When released we estimate this would have a GAAP only financial impact of decreasing our noncash tax expense.
Speaker Change: By approximately 750 to 850 million further details will be found in the 10-Q filing.
Blake Jeffrey Grayson: Further details will be found in the 10-Q file. Now, with that, let me turn to guidance. For Q2 2025 and fiscal year 2025, we expect total revenue of $725 to $729 million in Q2, or a 6% year-over-year increase at the midpoint. For fiscal year 2025, we expect revenue between $2.920 to $2.932 billion, or a 6% year-over-year increase at the midpoint. Of this, we expect subscription revenue of $705 to $709 million in Q2, or a 6% year-over-year increase at the midpoint, and $2.844 to $2.856 billion for fiscal 2025, or a 6% year-over-year increase at the midpoint. For billings, we expect $715 to $725 million in Q2, and $2.980 to $3.030 billion for fiscal 2025.
Speaker Change: With that let me turn to guidance for Q2 'twenty five in fiscal year 2025, we expect total revenue of 725 to 729 million in Q2, or a 6% year over year increase at the midpoint.
Speaker Change: For fiscal year 2025, we expect revenue between $2 92 zero to two point 93, 2 billion or a 6% year over year increase at the midpoint of this we expect subscription revenue of 705 to 709 million in Q2, or a 6% year over year increase at the midpoint.
In 2.844 to $2 856 billion for fiscal 'twenty, and 'twenty, five or a 6% year over year increase at the midpoint.
Speaker Change: Billings, we expect 715 to 725 million in Q2, and 2.980 to 3.030 billion for fiscal 2025.
Blake Jeffrey Grayson: As continually shown in recent quarters and years, billings are heavily impacted by the timing of customer renewals, which can create meaningful variability from period to period. This impacts year-over-year and sequential quarter-over-quarter comparisons, and is further amplified by the scale of our book of business. As discussed in our results call last quarter, we expect Q2 to have the lowest year-over-year billings growth rate in fiscal 2025, primarily given the comparison versus last year's strong on-time renewal performance and the timing impacts of various customer contracts. We expect non-gap gross margins to be 80.5% to 81.5% for Q2 and 81.0 to 82.0% for fiscal 2025.
Speaker Change: Continually shown in recent quarters and years billings are heavily impacted by the timing of customer renewals, which can create meaningful variability from period to period. This impacts year over year and sequential quarter over quarter comparisons and is further amplified by the scale of our book of business as.
Speaker Change: As discussed in our results call last quarter, we expect Q2 to have the lowest year over year billings growth rate in fiscal 2025, primarily given comparison versus last year's strong on time renewal performance in the timing impacts of various customer contracts.
Speaker Change: We expect non-GAAP gross margin.
Speaker Change: To be 85% to 81, 5% for Q2, and 81.0% to 82.0% for fiscal 2025.
Blake Jeffrey Grayson: We expect a non-GAAP operating margin of 27.0 to 28.0 for Q2 and 26.5 to 28.0% for fiscal 2025. During the year, we continue to expect to realize lower costs from the restructuring announced in February, as well as several ongoing efficiency improvement initiatives across the company. Our ultimate goal is to invest in long-term growth opportunities, in particular in R&D, while generating efficiencies that allow us to scale profitably. We expect non-GAAP, fully diluted weighted average shares outstanding of $208 to $213 million for both Q2 and fiscal 2025.
Speaker Change: We expect non-GAAP operating margin of.
Speaker Change: Of 27.0 to 28.0 for Q2, and 26, 5% to 28.0% for fiscal 2025.
Speaker Change: During the year, we continue to expect to realize lower costs from the restructuring announced in February as well as several ongoing efficiency improvement initiatives across the company.
Speaker Change: Our ultimate goal is to invest in long term growth opportunities in particular in R&D, while generating efficiencies that allow us to scale profitably.
Speaker Change: We expect non-GAAP fully diluted weighted average shares outstanding of $208 million to $213 million for both Q2 and fiscal 2025.
Blake Jeffrey Grayson: In closing, we are pleased to report another quarter of progress against our three strategic pillars, accelerating product innovation, enhancing our go-to-market initiatives, and strengthening our financial and operational efficiency. Q1 showed solid progress in improving relationships with our customers and stabilizing business fundamentals, and we remain pleased with our overall profitability and free cash flow generation. We are committed to continuing to invest in realizing our vision of intelligent agreement management. With over 1.5 million customers worldwide and a strong position as the default trusted partner for customers with their agreements, we believe the future is bright as DocuSign endeavors to execute against our long-term strategy to deliver a new AI-powered IAM platform. That concludes our prepared remarks.
Speaker Change: In closing we are pleased to report another quarter of progress against our three strategic pillars accelerating product innovation enhancing our go to market initiatives and strengthened our financial and operational efficiency Q1 showed solid progress in improving the relationships with our customers and stabilizing business fundamentals and we remain.
Speaker Change: Pleased with our overall profitability and free cash flow generation.
Speaker Change: We are committed to continuing to invest in realizing our vision of intelligent agreement management with over $1 5 million customers worldwide and our strong position as the default trusted partner for customers with their agreements. We believe the future is bright as Doc you signed endeavors to execute against our long term strategy to deliver a new.
Speaker Change: <unk> AI powered I E M platform.
Speaker Change: That concludes our prepared remarks with that operator, let's open up the call for questions.
Operator: With that, Operator, let's open up the call for questions. We will now be conducting a question and answer session, and if you would like to ask for more information, Thill will indicate that you're in line. And you may press star 2 if you would like to remove your question from the queue. It may be necessary to pick up your handset before.
Speaker Change: Thank you we.
Speaker Change: We will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.
Speaker Change: Formations home will indicate that your line is in the question queue.
Speaker Change: And you May press star two if he would like to remove your question from the queue.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Operator: In the interest of time, we ask that you limit yourself to one question and rejoin the queue. Our first question comes from the line of Jake Roberge with William... Hi, thanks for taking my questions. Blake, could you just help us understand how recent consumption trends were factored into your subscription guide? Sounds like consumption improved in the quarter, but it doesn't look like the full subscription beat was pushed through the guide. So I'm curious if you started to see any impacts from the macro as you exit the quarter, or if the guide is really just conservatism and getting out in front of any potential macro headwinds. Thanks. Sure. Thanks, Jake.
Speaker Change: In the interest of time, we ask that you limit to one question and rejoin the queue as time allows.
Speaker Change: Our first question comes from the line of Jay <unk> with William Blair. Please proceed with your question.
Speaker Change: Hi, Thanks for taking the questions Blake could you just help us understand how recent consumption trends were factored into your subscription guidance sounds like consumption improved in the quarter, but it doesn't look like the full subscription b, which pushed through to the guide. So I'm curious if you're starting to see any impact from the macro that you exited the quarter or if the guy that is real.
Speaker Change: Just conservatism and getting out in front of any potential macro headwinds.
Blake Jeffrey Grayson: Thanks for the question. I think if you look at the guide, and especially if you look at it over the full year, we actually lifted our full year midpoint guide in total revenue by slightly more than our VEET and Q1. There's a little bit of back and forth between the sub-revenue line and then the professional services and other revenue, and that's really just a function of us getting a little bit more granular as far as contracts and maybe on-prem versus what we had assumed in our forecast and such. I would say on the macro side, Q1 was highly consistent from a linear monthly perspective and actually as we get into May as well, which we've been really happy with.
Blake Jeffrey Grayson: Sure. Thanks, Jay Thanks for the question I think if you look at the guide and especially if you look at it into the full year, we actually.
Blake Jeffrey Grayson: Lifted our full year midpoint guidance total revenue by slightly more than our beat in Q1, there's a little bit of back and forth between the sub revenue line and then the professional services and other revenue that's really just a function of us getting a little bit more granular as far as contracts that may be on prem versus what we had assumed in our forecast and such.
Blake Jeffrey Grayson: I would say macro side Q1 was like highly consistent from a linear like monthly perspective and actually as.
Blake Jeffrey Grayson: As we get into May as well, which we've been really happy with I haven't seen any material shift as companies continue to scrutinize investment spend we've had another quarter of stabilizing signs both in consumption and usage, both trended up modestly for us.
Blake Jeffrey Grayson: I haven't seen any material shift as companies continue to scrutinize investment spend. We've had another quarter of stabilizing signs both in consumption and usage. Both trended up modestly for us, and so I think it's also the fact for us that being able to see the account growth that we had in this quarter of over $50,000 is also encouraging, I think, from the macro perspective just because of the size of our book of business and the size of the account base that we have. And so I'm pretty happy about that.
Blake Jeffrey Grayson: And so I think it's also the fact for us being.
Blake Jeffrey Grayson: Being able to see the account growth that we had in this quarter of over 50000 is also encouraging I think from a macro perspective, just because of the size of our book of business on the size of the account base that we have and so I'm pretty happy about that.
Speaker Change: Great. Thanks for taking my question.
Speaker Change: Our next question comes from the line of Tyler Radke with Citi. Please proceed with your question.
unknown: Thanks for taking the question. Your next question comes from the line of Tyler Radke with Citi. Thanks for taking the question. I wanted to ask you, you know, there have been clearly a lot of announcements and momentum with the announcement of IAM. Can you just help us understand how specifically the Lexion deal fits in with that vision? Do you feel like with the combination of Lexion, your Cori signature, some of the assets around, you know, Spring CM and Seal, you have the complete product? Are there other areas you're looking for?
unknown: And then just any feedback that you could share from customers post that launch and how it's being perceived. Thank you. Yeah, I'll take that one.
Speaker Change: Thanks for taking the question.
Tyler Maverick Radke: I wanted to ask you are clearly a lot of.
Speaker Change: Announcements and momentum with.
Speaker Change: With the announcement of IAA and.
Speaker Change: Can you just help us understand how specifically the lexi on deal fits in into that vision do you feel like with a combination of lexan your core esignature share some of the assets around spring CN and seal.
Speaker Change: Do you have the complete product are there are there other areas you're looking for and then just any feedback that you could share from from customers post that launch.
Speaker Change: And how it's being perceived thank you.
unknown: So first of all, on Lexion, our engagement with Lexion really started in the fall when we decided as a team that we could go even faster, agreeing that there was just so much headroom, and it was so integral to our strategy. We keep a close tab on the venture ecosystem in our space and had a good idea of which companies to look at. We established a technical framework for evaluating, you know, their models and then ran several companies through that. Lexion came out ahead. And as we dug in further, we looked at the ease of integration into our existing platforms. They scored extremely well on that.
Speaker Change: Yes, I'll take that one.
Speaker Change: So first of all on lifestyle.
Speaker Change: Thanks.
Speaker Change: We are engaged with Exxon really started in the fall when we.
Speaker Change: Decided as a team that we thought we could go even faster in agreement that there was just so much headroom and it was so integral to our strategy, we keep a close close tab on the on the venture ecosystem.
Speaker Change: In our space and had.
Speaker Change: Good idea, which companies to look at.
Speaker Change: We established a technical framework for evaluating.
Speaker Change: Their models.
unknown: I was also really persuaded by the way that they engaged very deeply with customers, and listened extremely well. They had hundreds of customers. And so that was, I think, terrific validation of their platform, really accelerates productivity for legal teams, and they've done an excellent job with that. So overall, that's how it fits in. It's perfectly complementary to what we have. And so it was really hand in glove.
Speaker Change: And then.
Speaker Change: And then several companies through that Lexan came out ahead and as we dug in further and we looked at at the ease of integration into our existing platforms.
Speaker Change: Morning, extremely well on that I was also really persuaded by the way that they engaged very deeply with customers listen extremely well they have hundreds of customers and so that was I think terrific validation of our platform in terms of how it adds to the doctor side.
Speaker Change: I think an overall agreement AI, there theyre extraction quantity and quality.
Speaker Change: <unk> our platform.
Speaker Change: The area, where I think they are really market, leading using legal workflows. So workflow automation for lawyers for example, youre ingesting a.
Speaker Change: Third party agreement how can you immediately use AI to assess the agreement understand how terms may deviate from our standard templates and highlight languished since you might want to propose at the counter.
Speaker Change: Really accelerating productivity for legal teams and excellent job on that so overall, that's how it fits in and inch perfectly complementary to our to what we have and so it was really like hand in glove.
unknown: We're very excited to have brought them on. As you probably know, we closed that deal last Friday. And that team is now, they carry DocuSign badges.
We're excited to have brought demand as you probably know we closed that deal last Friday and that.
Speaker Change: <unk> team is now hey, Kary dockside patches.
unknown: I'm just trying to think if there are other aspects to your question. Early response to IAM, maybe quickly: obviously, we built the IAM roadmap heavily based on customer feedback and problem statements around the pain throughout the entire agreement journey. And as a result, we've had very good feedback during the early access and beta phases. We've had hundreds of clients live on what we have now shipped into general availability. We went into GA actually last Thursday, so it is now commercially available.
Speaker Change: I'm just trying to think if there are other aspects to your question early early response to I M.
Speaker Change: Maybe quickly we we obviously built I am roadmap heavily based on customer feedback and problem statements around the pain.
Speaker Change: While the entire agreement journey and.
As a result, we are we've had very good feedback during the early access beta phases.
Speaker Change: Answer clients live on on what we now have shipped into general availability, we went into G. A actually last Thursday. So it is now commercially available.
unknown: The initial release is targeted at North American commercial customers, and then over time, we'll layer in more segments and geographies. But it's exciting to be out there, and the feedback couldn't be stronger. Maybe one last thing on that point: In addition to customer feedback, I've been really pleased with the response from the partner channel. DocuSign's e-signature product didn't need a ton of integration.
Speaker Change: Actual release is targeted to that.
Speaker Change: North American commercial customers and then over time, we'll layer in more segments and geographies.
Speaker Change: But it's exciting to be out there and the feedback couldnt be stronger maybe one last thing on that point.
In addition to customer feedback I've been really pleased with the response from the partner channel.
Speaker Change: <unk> had a doctor.
Speaker Change: Doctor signs esignature product didn't need a ton of integration five two months to do that themselves with CRM, we've engaged more with the Si channel, but with I am. This is really a full end to end platform program management and we've had tremendous engagement from several of the global size large practices.
unknown: Clients can also do that themselves. With CLM, we've engaged more with the SI channel. But with IAM, this is really a full end-to-end platform for agreement management, and we've had tremendous engagement from several of the global SIs who have large practices around company transformation and legal agreements and who've been looking for a platform that could support those efforts. So very bullish on that, and that's obviously great validation for us. This question comes from the line between Brent Thill and Jeffries.
Speaker Change: <unk>.
Speaker Change: Company transformation legal agreements and have been looking for a platform that can support those efforts.
Speaker Change: Very bullish on that and Thats, obviously, a great validation for us.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Brent Thill with Jefferies. Please proceed with your question.
unknown: Thanks, Blake. 28.5% margin in Q1, yet you're guiding below that at the midpoint for the full year. I guess when you think about the investments that need to happen to kind of hit that range, can you walk through what would cause margins to go down to make that number for the year? Sure. Thanks for the questions.
Speaker Change: Thanks Blake.
Eight 5% op margin in Q1, yet you're guiding.
Below that at the midpoint for the full year I guess, when you think about the investments need to happen.
Blake Jeffrey Grayson: Hit that range can you walk through what would cause margins to go down to make that number for the year.
Blake Jeffrey Grayson: The 28.5, you know, coming in above the midpoint of our guide, a fair chunk of that is driven not just by the revenue beat but also by the expense timing grant. Like, if you look at our, in particular, our non-GAAP G&A expenses, on a year-over-year basis, they're actually down on an absolute dollar basis, which, while we expect those to grow at a pretty low rate, being down year-over-year is really more a function of some timing. So, when you smooth that out, it's actually pretty steady throughout the year.
Speaker Change: Sure Thanks for the questions.
Speaker Change: The 28 five coming in above the midpoint of our guide a fair chunk of that.
Brian: Driven not just by the revenue beat but also by expense timing Brian.
Speaker Change: Look at our in particular, our non-GAAP G&A expenses on a year over year basis actually down on an absolute dollar basis, which while we expect those to grow at a pretty low rate.
Speaker Change: Being down year over year is really more of a function of some timing perspective. So when you smooth that out it's actually pretty steady throughout the year now what I, what we're trying to do here and Nokia sign right is balance. This continued focus on operating efficiency with also making sure that we maintain the right investment.
Blake Jeffrey Grayson: Now, what I, and what we're trying to do here at DocuSign, right, is balance this continued focus on operating efficiency with also making sure that we maintain the right investment in order to get IAM launched, engaged with customers, iterated with a product team, and then sold out, you know, to them. And so, I think, for us, what we're trying to do is balance that focus on efficiency and productivity, and we're always going to do that, but making sure that we set ourselves up in the best way possible in order to support something that we believe can really be a catalyst for us in the long term to, you know, really try to accelerate our growth.
Speaker Change: In order to get.
Speaker Change: <unk> launched engage with customers in a range of with our product team and then sold out to them and so I think for US what we're trying to do is balance that focus on efficiency and productivity and we're always going to do that but making sure that we set ourselves up and the best way possible in order to support something that we believe can be.
Speaker Change: Be a catalyst for us in the long term.
Speaker Change: Really trying to accelerate our growth.
Blake Jeffrey Grayson: And just quickly for Allan, I think your aspirations to be a double digit grower, I know you're not guiding for that this year, but is there anything that's still, you know, is inherently an obstacle in your way to achieving that longer-term goal?
Speaker Change: And then just quickly for Alan I think your aspirations to be a double digit grower I know youre not guiding for that this year, but is there anything that still.
Speaker Change: You know is inherently an ops coloring your way that to achieving that longer term goal.
Speaker Change: Okay.
Allan C. Thygesen: No, I think that's what we're all rallied around, that we feel that that's a reasonable long-term aspiration for us. And certainly, given the significant expansion in our addressable market with the launch of IAM, we think we've got plenty of headroom to do that. So, no, nothing. This is still an execution game.
Allan C. Thygesen: No I think Thats what were all rallied around that we feel that that's a reasonable long term aspiration for us and certainly given the.
Allan C. Thygesen: Significant expansion of our addressable market with the launch of <unk>.
Allan C. Thygesen: We've got plenty of headroom to do that.
Allan C. Thygesen: So no nothing.
Allan C. Thygesen: This is still an execution game I do want to stress that while we achieved some super important milestones this quarter with the <unk>.
Allan C. Thygesen: I do want to stress that while we achieved some super important milestones this quarter with the product launch and the marketing relaunch of DocuSign, the go-to-market side is still ahead of us. And we think we are starting in a very strong position with a customer base of a million and a half paying customers a month and all of the positive affinity that we have and our experience with Signature and CLM and so on.
Product launch and the marketing.
Allan C. Thygesen: Relaunched Doc you sign.
Allan C. Thygesen: The go to market side is still ahead of us and we.
Speaker Change: Hey, guys starting in a very strong position with our customer base or a million and a half paying customers a month.
Speaker Change: All of the positive affinity that we have at our experience with <unk> insurance the alignment is on.
Speaker Change: And obviously, where we built the product very heavily based on customer feedback, but it's still an evolution I think.
Allan C. Thygesen: And obviously, we built the product very heavily based on customer feedback, but it's still an evolution. I think we sell to enterprises very heavily today. I think we're in 93% of the Fortune 500 and similar stats in other countries.
Yeah, we have we sell to enterprises very heavily today I think I answered several fortune 500, similar stats in other countries.
Allan C. Thygesen: But there's a difference between selling a point application and then an enterprise platform for agreement management, and I think we still have some growing to do there. So, I'd say from an execution standpoint, that's where I'm the most focused.
Speaker Change: But.
There is a difference between selling a point application and then that an enterprise platform for our agreement management I think we still have some growing to do there. So I'd say from execution standpoint, that's where I'm. The most focused but we feel it's in our control we have a large addressable opportunity great set of products strong customer relationships and it's just up to us to.
Allan C. Thygesen: But we feel it's in our control. We have a large addressable opportunity, a great set of products, strong customer relationships, and it's just up to us to capitalize on that. Thank you.
Speaker Change: To capitalize on that.
Speaker Change: Great. Thank you.
Speaker Change: The next question comes from the line of Pat Walraven with JMP. Please. Please proceed with your question.
unknown: The next question comes from the line by Pat Walravens with JMS. Oh, great. Thank you.
unknown: So the launch of the IAM platform is super exciting, but it does make me wonder, what are you guys going to do in terms of creating a repeatable go-to-market motion? How are you going to sell this in a consistent manner given the way it's rolling out and you know the old products versus... Yeah, I can correct that. Well, first of all, we designed IAM to be very broadly applicable, right? So historically, if you think about the broader contract management space and CLM in particular, it was really only accessible to very large enterprises who could afford all the customization integration that was needed. IAM is more lightweight and can be deployed across a much broader set of companies and to a much broader set of users in any company that deploys it.
Speaker Change: Oh, great. Thank you.
Patrick D. Walravens: So that the launch of the I am platform is super exciting, but it does make me wonder.
Speaker Change: What are you guys going to do in terms of creating a repeatable go to market motion.
Speaker Change: Hum.
Speaker Change: How are you going to sell this in a consistent manner, given the way, it's rolling out and the old products versus the new ones.
Speaker Change: Yes, Bob.
Correct.
Speaker Change: Well so first of all we designed I am to be very broadly applicable right. So so historically, if you think about that.
Speaker Change: Broader contract management space and see all of them in particular, it was really only accessible to our very largest enterprises, who could afford all of the customization and integration that was needed.
Speaker Change: I am and small lightweight and can be deployed across a much broader set of companies into a much broader set of users in any company that deploys and the chinas. The camber to your question is that also means that it's a much more natural upsell. If you will a cross sell to our signature product, which obviously has a much broader distribution for us.
unknown: And the key event to your question is that it also means that it's a much more natural upsell, if you will, across sell to our signature product, which obviously has a much broader distribution than our CLM product. So look, I don't want to underplay that this is an evolution, as I just mentioned, in terms of the scale of the story and the number of constituencies and the complexity of that sales process. On the other hand, I think we're standing on the shoulders of our entire signature business.
Speaker Change: Hello.
Speaker Change: So look I don't want to underplay that.
Speaker Change: As an evolution as I just mentioned in terms of the scale of the.
Speaker Change: The story in the.
Speaker Change: Number of constituencies and complexity of that sales process on.
Speaker Change: On the other hand, I think we are standing on the shoulders of our entire esignature business and it's it's I think it's pretty exciting and we're already starting to close the deals. We only went into general availability a week go so.
unknown: And I think it's pretty exciting, and we're already starting to close some deals. We only went into general availability a week ago, so don't want to extract too much from that. But I'm feeling pretty good about our ability to develop a repeatable motion, starting in the commercial space and then moving up into our enterprise customers. And we're seeing a tremendous amount of inbound traffic on the platform right now. Great, thank you. This question comes from the line of Rishi Jalleria with RBC.
Speaker Change: I don't want to extract too much for that but I'm feeling pretty good about our ability to develop a repeatable motion starting in the commercial space and then moving up into into our enterprise customers.
Speaker Change: And we're seeing a tremendous amount of inbound.
Speaker Change: On the platform right now.
Speaker Change: Okay.
Speaker Change: Great. Thank you.
Speaker Change: Okay.
Speaker Change: Our next question comes from the line of Rishi <unk> with RBC capital markets. Please proceed with your question.
Speaker Change: Yeah.
unknown: Oh, wonderful. Thank you so much for taking my question. I just want to drill a little bit into Lexion.
Speaker Change: Wonderful. Thank you so much for taking my question.
Speaker Change: Wanted to drill a little bit of luck Xian.
unknown: You mentioned it's immaterial, but, you know, you paid $135 million for it. It's got hundreds of customers. Maybe can you walk us through the rate and the guide for the full year, how much of that is attributable to Lexion versus improved execution? Maybe you could just give us a little bit of color for our own models, what we should think about Lexion.
Speaker Change: You mentioned, it's immaterial, but.
Speaker Change: Yes, we paid $135 million spirit hundreds of customers, maybe can you walk us through.
Speaker Change: The raise in the guide for the full year, how much of that is attributable to lack xi'an versus improve execution, maybe if you could just give us a little bit of color for our own models. How do you think about last year. Thank you.
unknown: Thank you. Sure. You know, we're not breaking it out just because of its size and immateriality.
Speaker Change: Sure, we're not breaking it out just because of its size and the materiality of it doesn't it's not material to revenue or op margin for us than.
unknown: It doesn't, and it's not material to revenue or margin for us. The overarching message that I would like to send about Lexion is that the purchase of Lexion is about integrating the technology into the DocuSign IAM platform. That opportunity, for us, in the long term, can apply to the well over a million customers that we have. That's what really excites us about spinning that flywheel.
Speaker Change: The overarching message that I would like to send on let's say on that.
Speaker Change: The purchase of Blackstone is about integrating the technology into the dock you sign I am platform that opportunity for US we think in the long term can apply to the well over 1 million customers that we have that's what really excites us about spinning that flywheel is obviously, it's extremely early days and I can't even say extremely light.
unknown: It's obviously extremely early days, and I can't even say extremely loud enough, I guess, because we just closed on this transaction six days ago. But that is really what we're excited about in the long term for Lexion, integration and the ability to spin our flywheel and our AI development faster so that we can make IAM and the platform more valuable to our customers. Yeah, maybe I'll just add to that to say we took a lot of comfort from the fact that they had validated their platform with hundreds of customers.
Speaker Change: Now if I guess, because we just closed on this transaction six days ago.
Speaker Change: But that is really what we're excited about the long term for like some of that integration and the ability to spin our flywheel in our Gi development faster. So that we can make I am in the platform more valuable to our customers.
Speaker Change: Yes, no maybe.
Speaker Change: I'll just add to that to say.
Speaker Change: We took we took a lot of comfort from the fact that they have validated our platform customers.
unknown: But as Blake said, the primary motivation here was being able to deploy that capability across our entire IAM suite. I do want to emphasize, we intend to continue supporting Lexan products and Lexan customers. And as IAM integrates Lexan features, then we'll make that platform available to Lexan customers. All right, wonderful. Thank you. This question comes from Josh Baer with Morgan.
Blake Jeffrey Grayson: But as Blake said, the primary motivation here was and being able to deploy that capability across our entire suite I do want to emphasize we intend to continuous support.
Blake Jeffrey Grayson: <unk> product lifestyle customers and as I am integrate flex on features that will make that platform available to the lifestyle customers.
Blake Jeffrey Grayson: Yeah.
Speaker Change: Alright wonderful thank you.
Our next question comes from the line of Josh Baer with Morgan Stanley. Please proceed with your question.
unknown: Great, thank you very much. I wanted to stick to IAM. I was wondering what capabilities are missing or need to be rolled out in order to serve the broader market, upmarket in the enterprise? And I was wondering if you could shine a little light on what happens from an economic standpoint as customers adopt IAM. Yeah, so on the first point, oh, look, there's a long list of stuff that you can imagine the very largest customers will want. It's a never-ending list.
Joshua Phillip Baer: Great. Thank you very much.
Joshua Phillip Baer: I wanted to stick to iam wondering what capabilities are missing or need to be rolled out in order to serve the broader market upmarket in the enterprise.
Speaker Change: And was wondering if you could shine a little light on what happens from an economic standpoint as customers adopt I am.
unknown: But I mean, to give you a sense of what something that a large company would be particularly concerned about would be things like access control. So, the ability to tightly control who can access which agreements is something that needs to be robustly tied into existing permission systems and so on, and we're working on building that out. Another area of functionality that we've announced our intention to launch later this year is the ability to review, edit, and develop agreements based on playbooks.
Speaker Change: Yes, so on the first point.
Speaker Change: There's a long list of stuff that you can imagine the very largest customers will want that.
Speaker Change: As a never ending list, but I mean to give you a sense.
Speaker Change: Something that a large company would be particularly concerned about it would be things like access control, so ability to tightly control, who can access which agreements.
That's something that needs to be robustly tied into existing commission system. So on and we are working on building that out another area of functionality that we've announced our intention to launch later this year is in the area of being able to.
Speaker Change: Review and edit and develop agreements based on Playbooks again, having a playbook system for agreements tends to be a characteristic of a larger companies and youll see some of that functionality.
unknown: Again, having a playbook system for agreements tends to be a characteristic of larger companies, and you'll see some of that functionality deployed in IAM as well as a more robust, shall we say, agreement editing capability, and that's also where Alexion will play. In terms of the pricing structure, historically, our core signature product has principally been sold on an envelope capacity basis, so you buy a certain number of envelopes, although we also do offer a seat configuration, and CLM has predominantly been sold on a seat basis.
Speaker Change: <unk> deployed and I am as well as more robust.
Speaker Change: Should we say agreement editing capability and that's also where it works out.
Speaker Change: Well Oh plan.
Speaker Change: In terms of the pricing structure.
Speaker Change: Historically.
Speaker Change: Our core signature product has principally been sold on an envelope capacity basis.
Speaker Change: Number of envelope, although we also do offer seat configuration on the 11th and all had been sold on a seat basis, we are evolving towards I am sold principally on a seat basis with adjustments for different user profiles and then overlays for different.
unknown: We are evolving towards IAM being sold principally on a seat basis with adjustments for different user profiles and then overlays for different premium functionality. And so that's something that we're managing carefully. We want to make sure that customers who just need our basic e-signature product can continue to buy that in a way that they're accustomed.
Speaker Change: Premium functionality.
Speaker Change: And so that's something that we're managing carefully we want to make sure that especially we just need our basic esignature product can continue to buy that in a way that they are accustomed.
unknown: But customers who want to take advantage of IAM and some or all of the richness of what we've launched can do that, and that is sold at a premium to packages that we historically had. That's how we've been thinking about it. And just to pile on to what Allan said, you know, our overall philosophy as we think about IAM is that if we can create more value for customers, and we believe pretty strongly IAM is going to do just that, customers will agree to share in some of that value with us. And it can come in a number of different ways, right?
Speaker Change: Customers, who want to take advantage of I am.
Speaker Change: All of the richness of what were launched can do that and that is sold at a premium to.
Speaker Change: Two packages that we historically had.
Speaker Change: So that's how we've been thinking of it.
unknown: It can come from perhaps expansion as we become more integral, you know, to a customer and their workflows and their processes, or it can also become a stickier relationship, right, where we can drive better retention trends as well. So just to add on top of what Allan said. Yep. Great. Next question, from Scott Berg. Hi, everyone. Thanks for taking my questions. I have two.
Allan C. Thygesen: I would just to pile on to what Alan said.
Speaker Change: Our overall philosophy as we think about <unk> is that if we can create more value for customers and we believe pretty strongly I am is going to do just that customers will agree to share in some of that value with us and he can comment a number of different ways right. You can come from perhaps expansion as we become more integral to a customer in there.
Speaker Change: Flows on their processes or.
Speaker Change: It can also become a stickier relationship right, where we can drive better retention trends as well so just to add on top from what Alan said, yes.
Speaker Change: Great. Thank you.
Speaker Change: Our next question comes from the line of Scott Berg with Needham. Please proceed with your question.
unknown: Let's start with the continuing theme of IAM. I was obviously at the conference, customer interest is high, and it sounds like investor interest is high in it too. And that seems like this is probably your big bet for the next leg of growth for the company. But how do we think about the impact of the model here going forward? It was just released; I know it's gonna be released to commercial customers first and gradually moved up the market as you build out the feature functionality set.
Scott Randolph Berg: Hi, everyone. Thanks for taking my questions I have two let's start with the continuing theme on I I was obviously at the conference customer interest is high sounds like Investor interest is high on it too and it almost seems like this is probably your big bet for the next leg of growth for the company, but how do we think.
Speaker Change: About the impact should model here going forward. It was just released I know excuse me relates to the commercial customers first congratulate moved up market as you build out the feature functionality set but just to play for fiscal 2007, our fiscal 'twenty eight or do.
unknown: But it's just a play for fiscal 27 or fiscal 28. Do you think we can see some revenue impact maybe as early as next year? That's at least somewhat meaningful to the overall program. Yeah, I think we'll see some lift next year, but we're not ready yet to talk about the exact magnitude. But yes, that would be a reasonable expectation. Yeah. And I would just say, like, this is the challenge, right?
Do you think we could see some revenue impact maybe as early as next year, that's at least somewhat meaningful to the overall profile of the company.
Speaker Change: Yeah.
Speaker Change: Yes, I think we'll see some lift next year, but we're not.
Speaker Change: Got it yet to talk about the exact magnitude, but yes that would be a reasonable expectation, yes, and I would just say like.
unknown: Which is, we just launched this in general availability here, you know, a week or so ago, and it's going to take time to ramp up. I think one of the things we also have to keep in mind is just the general size of the book of business that we have and the renewal cycles that we have as well. So, you know, we've got, you know, I think our full year guide is just around $3 billion in billing.
Speaker Change: This is this is the challenge right, which is we just launched this in general availability here.
Speaker Change: A week or so ago, and it's going to take time to ramp I think one of the things. We also have to keep in mind is just the general size of the book of business that we have in the renewal cycle that we have as well. So we've got I think are our full year guide is just around $3 billion in billing so as far as like the magnitude to move that needle, it's going to take some time.
unknown: So, as far as, like, the magnitude of, you know, moving that needle, it's going to take some time. I'm mostly excited right now, to be honest, about getting the launch out and getting the customer experience right and giving the team the kind of urgency to iterate on those things. That's honestly, for me, in the early days of a new product launch, what we need to focus on besides, obviously, the go-to-market components as well. And if we get those right, that's the input that, you know, we then get that flywheel to spin on billings into the future. I got it.
Speaker Change: I'm, mostly excited right now to be honest about getting the launch out and getting the customer experience right and giving the team.
Speaker Change: The kind of the urgency to iterate on those things that honestly for me in the early days of a new product launch what we need to focus on besides obviously their go to market components as well.
Speaker Change: If we get those right. That's the input that we then get that flywheel to spin on billings into.
Speaker Change: Into the future.
Speaker Change: Got it helpful. And then I wanted to follow up on the stability comments from earlier now that you feel that the business seems to be at least in the right position.
unknown: Helpful. And then I wanted to follow up on the stability comments from earlier. Now that you feel that the business seems to be at least in the right position, how do we think about the upside in revenues over the near term? Does it come more from the installed base with some of the stability there?
Speaker Change: Do we think about upside to revenues over the near term does it come more from the installed base with some of the stability there or is the upside driven more from net new sales and net new customers coming on board in this macro where everything's a little bit challenging just wanted to see how you kind of balance those two and what might be the greater driver in the near term.
unknown: Or is the upside driven more from, you know, net new sales and net new customers coming on board? In this macro where everything's a little bit challenging, just wanted to see how you kind of balance those two and what might be the greater driver in the near future. Yes, yeah, I guess I'll say we're focused on both, right? Like our ability to improve our gross retention rates, which obviously, on a large book of business can have large impacts.
Yes, yes, yes, I guess I'll tell you we're focused on both right like our ability to improve our gross retention rates.
Obviously on a large book of business can have large impacts.
unknown: And, you know, while I'm super excited about the stabilization trends that we have, we have room to improve, right? And so we're focused greatly as an organization on that. We are, I mean, there are a lot of good steps that we took in this last quarter in order to improve those retention rates or to allocate, you know, customer success resources. It's being far more granular about getting in front of renewals and large renewals and how we can approach them and so forth.
Speaker Change: While I'm Super excited about the stabilization trends that we have we have room to improve right and so we're focused greatly as an organization on that we are I mean, there are a lot of good steps that we took in this last quarter in order to improve those retention rates sort of allocating customer success resources as being far more grand.
On or about getting in front of.
Speaker Change: Renewals and large renewals and how are we going to approach them and so forth. It's focusing on sticky feature adoption because we believe that is an input metric to be able to drive that the output.
unknown: If it's focusing on sticky feature adoption because we believe that's an input metric to be able to drive that output of, you know, kind of a lower churn and such, obviously, which helps you grow your billings. That's a big deal.
Speaker Change: Lower churn and such obviously, which helps you grow your billings that's a big deal now on the expansion side. Obviously, we still have a lot of penetration of available just within esignature, but on top of that obviously the big investment, we're making is on <unk> and so we can.
unknown: Now, on the expansion side, obviously, we still have a lot of penetration available just within the signature. But on top of that, obviously, the big investment we're making is in IM. And so if we can be able to drive expansion through those areas while improving renewals for us, I think we end up in a spot we're really happy with. And I think, you know, maybe to Alan's point earlier in the messaging, it's that the execution is what we are most responsible for.
Speaker Change: Be able to drive expansion through those areas, while improving renewals for us I think we end up in a spot where we're really happy with and I think maybe to Alan's point earlier in the <unk>.
Speaker Change: <unk> is the execution is what we are most responsible for we need to focus on because we really do believe the opportunity is there and there is a clear need for the products and features that we're launching out to customers now.
unknown: We need to focus on because, you know, we really do believe the opportunity is there and there's a clear need for the products and features that we're launching out to customers now. Yeah, excellent. Thank you, on the line of Brad Thill, Inc. Oh, great. Thank you so much.
Speaker Change: Excellent. Thank you.
Our next question comes from the line of Brad Sills with Bank of America. Please proceed with your question.
unknown: I wanted to ask a question here on this exciting new launch here. As you guys make the pivot from, you know, more transactional e-signature to more of the suite approach here where you're getting more into workflow automation, speak to the level of preparedness for the sales to make that type of consultative sale.
Speaker Change: Oh, great. Thank you so much I wanted to ask a question here on I am exciting new launch here.
Speaker Change: As you guys make the pivot from more transactional esignature tomorrow of the suite approach here, where you're getting more into that workflow automation.
Speaker Change: Can you speak to the level of preparedness for the sales channel to make that type of a consultative sale.
unknown: I know these things don't happen overnight, kind of the roadmap there for making that transition towards a more strategic vendor in a more consultative sale. Yes. Yeah, so that's been top of mind, internally. And we have probably the largest enablement program in the company's history that has been underway over the last several months. And it's ongoing right now.
Speaker Change: I know these things don't happen overnight, if you could just speak to kind of the roadmap there for.
Speaker Change: Making that transition towards a more strategic vendor in a more consultative sale. Thank you.
Speaker Change: Yes.
Yes. So that's that's been top of mind, I'd say internally and.
Speaker Change: And that we have.
Speaker Change: Probably the largest enablement program in the company's history.
Speaker Change: It's been underway over the last several months.
unknown: I think that is a huge effort. At the same time, we're working on revising every aspect, how we organize our teams, and how we engage with partners. You know, I mentioned the importance of ESIs, complementing our direct sales efforts with a more robust and more frictionless reseller and distribution channel to further accelerate that, and that IM is available to partners day one. So all of that goes into it. But we can't take our eye off the ball.
Speaker Change: And it's ongoing right now.
Speaker Change: I think that is a huge effort at the same time, we're working on revising every aspect.
Speaker Change: How we organize our teams how we engage with partners.
Speaker Change: I mentioned the importance of the size complementing our direct sales efforts with a more robust and more frictionless reseller and distribution channel.
Speaker Change: To further accelerate pattern that I am as available to partners day one.
Speaker Change: So all of that goes into it.
Speaker Change: But we can't take our eye off the ball, we have an existing business that with a velocity that also needs to be maintained and so we need to be able to execute on both of those at the same time and where we're balancing those I think so far so good.
unknown: We have an existing business with velocity that also needs to be maintained. And so we need to be able to execute on both of those at the same time. And we're balancing those, I think, so far, so good. But look, I'm under no illusions.
Speaker Change: I'm under no illusions this will be a journey.
unknown: This will be a journey for us, probably over the next several years as we mature our entire go-to-market strategy to take full advantage of this opportunity. But first, we had to conceive of it, develop it, ship it, and position it overall. I think now that it has begun, and so far, I'm feeling very good about it. I don't think in my 20 months at DocuSign, I think this is as optimistic and excited as the company has ever felt. Thank you. This question comes from the line of Michael Turrin with Wells Fargo. Hey, great.
Over the next several years as we mature our our entire go to market to take full advantage of this opportunity.
Speaker Change: But first we had to conceive of it develop it ship it.
Speaker Change: And positioning overall and I think now now.
Speaker Change: Now that begins.
Speaker Change: So far I am feeling very very good about it I don't think in my 20 months of docking side I think this is optimistic and excited as the company has felt ever.
Speaker Change: That's great to hear thank you Allen.
Our next question comes from the line of Michael <unk> with Wells Fargo. Please proceed with your question.
unknown: Thanks. I appreciate you taking the time to answer the question. Blake, you had a comment about Q2 being the trough in terms of billings growth, and so I wanted to give you a chance to expand on what drives that. How much of it is visibility? How much of it is getting out of tougher renewal cohorts or other factors at play that are driving the expected improvement as we work? Sure. And so, you know, this is in line with what I talked about last quarter with regard to kind of the quarterly trends.
Michael: Hey, great. Thanks, I. Appreciate you taking the question Blake you had a comment around Q2 is the trough in terms of billings growth and so I wanted to give you a chance to expand on.
What drives that how much is it visibility how much of it is getting out of tougher renewal cohorts or other factors at play that are driving the expected improvement as we work further into the year.
And so.
Speaker Change: This is in line with what I talked about last quarter with regards to kind of the.
Our quarterly trends and so the issue we have with Q2 as we we've got to really hard really to hard comps.
unknown: And so the issue we have with Q2 is we've got two really hard, really two hard comps, particularly around renewals. So if you recall that in the first half of 2024, and particularly in Q2 of 2024, we had really quite strong on-time renewal volume. If you recall, we made some changes to our incentive program with our sales force such that we began incentivizing on-time renewals and retentions more, and we saw pretty large gains from that. And so we have a hard comp against that.
Speaker Change: Particularly around renewals. So if you recall that in the first half of 2024 and particularly in Q2 of 2024, we had really quite strong on time renewal volume. If you recall, we made some changes to our incentive program with our sales force such that we begin in <unk>.
Speaker Change: Providing.
Speaker Change: On time renewals and retention for and we saw.
Speaker Change: Pretty large gains from that until we have a hard comp against that and then on top of that if you are hearing.
unknown: Then on top of that, as you heard in the prepared remarks for Q1, part of the outperformance for our Q1 billings relative to our guide was driven by early renewals. So a little bit of a pull forward from Q2 into Q1. And so, just like in line with the same kind of discussion that I provided last quarter, we expect Q2 to be that drop in billings and then to accelerate a bit into the back half of the year. And that's indicative in the full year guide that you can see.
Speaker Change: <unk> heard from the prepared remarks for Q1 part of the outperformance for our Q1 billings relative to our guidance driven by early renewals, so a little bit of a pull forward from Q2 into Q1 for that and so just like in line with the same kind of discussion that I provided last quarter, we expect Q2 to be that trough in billings and then.
Speaker Change: Accelerated a bit into the back half of the year and that's.
Speaker Change: That's indicative in the full year guide that you can see.
Speaker Change: Okay. Just a small follow on is there anything we should be mindful of in terms of the added functionality.
unknown: Okay, just a small follow-on. Is there anything we should be mindful of in terms of the added functionality, the broader agreement platform, that could change the renewal dynamics, either having kind of pulled any activity into anything ahead of that, or could just add complexity that's better longer-term but impactful near-term that we should be thinking about at all? I think, relative to the IAM platform, it's brand new, obviously.
Speaker Change: The broader agreement platform that could change their renewal dynamics either.
Speaker Change: Having kind of pulled any activity into anything.
Speaker Change: Anything ahead of that or could just add complexity that's better.
Speaker Change: Longer term, but impactful near term that we should be thinking about at all here.
Speaker Change: I think relative to the Iam platform, it's brand new obviously, so obviously nothing theres nothing in the Q2 guide reflective of any expected changes on SAP I think.
unknown: So, you know, obviously nothing, there's nothing in the Q2 guide reflective of any expected kind of changes and stuff. And I think, you know, to be fair, those changes that we see, which we're obviously going to track diligently, again, it's got to reflect against this $3 billion book of business. So I would expect, you know, not material movements from it, but we're going to evaluate it over time. But there's nothing in particular that I would call out. This comes from the line of Aleksandr Zukin with Wolfe: Hi, this is Arseniy Matovich on behalf of Aleksandr Zukin from Wolf Research.
Speaker Change: To be fair those changes that we see which we're obviously going to attract diligently.
Speaker Change: Again, it's kind of a fight against this $3 billion bucket, so I would expect.
Not material movements from it but we're going to evaluate all the time, but theres nothing in particular I would call out.
Speaker Change: Thank you.
Okay.
Speaker Change: Our next question comes from the line of Alex Zukin with Wolfe Research. Please proceed with your question.
Sean: Hi, this is or sending them out of it Sean for Alex Zukin from Wolfe Research. So following up on a prior question and not asking for what the contribution is but simply excluding like Xian would your full year guidance for revenue and subscription revenue had been raised on an organic basis and just on macro has your outlook changed since you first set full year guidance.
unknown: So following up on a prior question and not asking for what the contribution is, but simply excluding Lexion, would your full year guidance for revenue and subscription revenue have been raised on an organic basis? And just on macro, has your outlook changed since you first set full year guidance? Thank you.
Speaker Change: Thank you.
unknown: So on macro, our macro stability has been very consistent, I would say, through this year. So there has been no change on the macro side for us. And, you know, we've actually continued to see consumption and usage improve. And then again, and to your first question about Lexion, we're not breaking it out. It's not material to our numbers. It's not material to revenue or operating margin. This question comes from the line of Karl Keirstead.
Speaker Change #100: Yes, So let me answer the second question first so on macro or macro stability has been very consistent I would say to this year. So no change on the macro side.
Speaker Change #101: For us and we've actually continued to see Consumptions and usage improvement, but again and then to your first question on lexicon, we're not breaking out it's not material to our numbers, it's not material to revenue or operating margin.
Speaker Change #102: Our next question comes from the line of Karl Keirstead with UBS. Please proceed with your question. Okay. Great. Thanks, maybe I'll direct this to Blake Blake on the Q1 numbers, it's good to hear your color com.
unknown: Okay, great, thanks. Maybe I'll direct this to Blake. Blake, on the Q1 numbers, it's good to hear your color commentary around the core stabilizing and new logos being good, and transaction volumes being good. But objectively, when we look at Q1, it was a very skinny revenue beat, revenues were down sequentially, and the billings beat was, you know, normal to a little bit light. So actually, the numbers don't support the view that things are stable or improving. It feels like there must have been some kind of offset that you saw. Maybe it was that 4Q was super strong, and it left the tank a little dry for 1Q.
Speaker Change #103: Terry around.
Speaker Change #104: The core stabilizing in new logos being good and transaction volumes being good but.
Speaker Change #105: Objectively when we look at Q1, it was a very skinny revenue beat and revenues were down sequentially.
And the billings beat was normal to a little bit light.
Speaker Change #105: So actually the numbers don't support the view that you know things are stable or improving it feels like there must have been some kind of offset that you saw maybe it was that <unk> was super strong in it it left the tank a little dry for one Q I'm just trying to figure out why why Q1 wasn't a little bit more robust if if.
unknown: I'm just trying to figure out why Q1 wasn't a little bit more robust if, in fact, your commentary about demand is that it was, in fact, pretty stable. Thank you. Sure. So with regard to your comment on the beat, we beat the top end of our guide for revenue. I think what you might be referring to is that historically, the company has had some larger beats over time.
Speaker Change #106: In fact your commentary about demand is is that it was in fact pretty stable. Thank you.
Speaker Change #107: Sure So with regard to your comment on the beat we beat the top end of our guide for revenue I think what you might be referring to is historically the company has had some larger bee silver time, and I think that it's hard to talk to those relative to how you forecast and such but.
unknown: And I think that it's hard to talk to those relative to how you forecast and such, but I'm quite pleased with how we performed in Q1 relative to that. With regard to the other comment you made on the sequential drop, there's a function of days in the quarter that affects that. So as you go from Q4 to Q1, there are two more days in Q4 versus Q1, I think. So you have to keep that in mind as well.
Im quite pleased with how we performed in Q1 relative to that regard with regard to the other comment you made.
Speaker Change #107: <unk> dropped and there is a function of days in the quarter that affects that so as you go from Q4 to Q1. There is two more days in Q4 versus Q1, and I think so you have to keep that in mind as well. So again I think that the performance of the company actually is quite reflective of the metrics that we've called out with the dollar net retention.
unknown: So again, I think that the performance of the company actually is quite reflective of the metrics that we called out, with the dollar net retention rate improving sequentially for the first time in several years, with the account growth doing well, and with the billings growth coming in, I think it was $20 million over the midpoint guide. And of course, some of that is early, but some of that's also based on that stronger gross retention rate. So nothing that I would call out and say that was any type of an offset like you're suggesting.
Speaker Change #107: Engine rate improving sequentially for the first time in several years with the account growth doing well with the billings growth coming in I think it was $20 million over the midpoint guide and of course some of that is or at least put some of that is also based on that stronger gross retention rate. So nothing that I would call out and say that was any type of an offset like yours.
unknown: Okay, that's encouraging. Thanks, Blake. I mean, if I just add to that, I would just say we've had some significant outperformance on past forecasts. We've been trying to both tighten the range and give you guys more precise guidance. And I think we've got a pretty good handle on the business now, so we're able to be a little bit tighter. But I completely agree with Blake.
Speaker Change #108: Okay, that's encouraging thanks Blake.
Speaker Change #109: And if I could just add to that I would just say we.
Speaker Change #110: We've had some.
Speaker Change #111: Significant outperformance on past forecast, we've been trying to both tighten the range and give you guys more precise guidance and I think we've got a pretty good handle on the business.
Speaker Change #111: I'm going to be a little bit a little bit tighter.
Speaker Change #111: Yeah.
Speaker Change #112: Completely agree with blank, we felt very very good about it. It was very solid there was really nothing material changing in the demand environment is like I said some of the underlying operating metrics actually showed meaningful improvements on a continued that stabilization thing. So that's the sentiment that we have here and I think it I think it does show in the numbers and we expect that stabilization.
unknown: We felt very, very good about it. It was very solid. There was really nothing material changing in the demand environment.
unknown: And as Blake said, several of the underlying operating metrics actually showed meaningful improvement, so it continued that stabilization theme. So that's the sentiment that we have here, and I think it does show in the numbers, and we expect that stabilization theme to continue. The next question comes from the line of... Hi, this is Sona Kolar on behalf of Mark Murphy. Thanks for taking the question. Blake, can you walk us through what might be embedded in the forecast for the back half in some of the more rate-sensitive end markets, such as real estate, given mortgages? I'm just looking at the concerns around a backdrop of higher rates for longer and want to see how that might be impacting the guide.
Speaker Change #112: Seem to continue.
Speaker Change #112: Okay.
Speaker Change #113: Our next question comes from the line of Mark Murphy with Jpmorgan. Please proceed with your question.
Speaker Change #114: Hi, This is <unk> on for Mark Murphy, Thanks for taking the question.
Speaker Change #115: Can you walk us through what might be embedded in the forecast for the back half and some of the more rate sensitive end markets such as real estate given mortgages I'm just I'm just looking at the concerns around the backdrop of higher for longer and want to see how that might be impacting the guide and then I also had a quick follow up on I am for Alan just just in the early days of.
unknown: And then I also had a quick follow-up on IAM for Allan. Just in the early days of IAM adoption, is it trending faster than the initial launch of CLM several years ago? So on the macro side, the way we handle our forecast is we forecast based on what we see and what we know. And so, you know, as far as verticals go, real estate continues to be one of those verticals. It's not terribly surprising that he has been under pressure.
Allan C. Thygesen: I am adoption is it so far trending faster than the initial launch of <unk> several years ago.
Speaker Change #116: Sure I'll start off.
Speaker Change #117: On the macro side the way, we handle our forecast as we forecast based on what we see and what we know and so as far as verticals go real estate continues to be one of those verticals is not terribly probably surprising that has been under pressure and so the general assumption that that would continue so I don't see.
unknown: And so the general assumption is that it would continue. So I don't see any terrible risk for higher interest rates for longer because it's based on what it is today. And so, as you know, I think those verticals have opportunities for us when the interest rate environment improves, but nothing aggressive. We don't make kind of future forecasts on the macro side in our guidance.
Speaker Change #117: Any terrible risk for higher for longer because it's based on what it is today and so as I think those verticals have actually opportunities for us when the interest rate environment improves but nothing.
Speaker Change #118: We don't make kind of like future forecast on the macro side.
Speaker Change #119: And our guidance Alan fault second part yes.
unknown: I'll let Allan follow up on the second part. Yeah, look, it's been a while since we got into the CLM space through the acquisitions of spring and seal. And at that point, those categories were already established, and our goal with IAM is to offer significantly broader functionality that at the same time is much easier to adopt, more configurable, and more broadly applicable to a broader set of customers and a broader set of users inside those customer organizations. I think CLM has historically been a pretty exclusive club because of the heavy lifting involved and because it was just optimized for particular power users.
Speaker Change #119: Because it's been a while since we.
Speaker Change #119: Got into the CRM space through the acquisition of spring in field.
Speaker Change #119: And at that point in those categories.
Speaker Change #119: We're already established.
Speaker Change #119: But I would just say.
Speaker Change #119: That our goal with I am has to be.
Speaker Change #119: Offer a significantly broader functionality that at the same time is much easier to adopt more configurable and more broadly applicable to a broad set of customers and a broader set of users inside those customer organizations.
Speaker Change #119: I think CRM has historically been a pretty exclusive club because of the heavy lifting involved.
Speaker Change #119: Because it was just optimize for for particular power users.
unknown: This is a much broader play. It encompasses CLM and Signature, but it's much broader. So I certainly expect over time that our IM business will become meaningful and larger than our CLM business, but they're just on very different maturity curves. Got it. Very helpful. Thank you. And our next question comes from the line of George Iwanyc with Oppenheimer.
Speaker Change #119: This is a much broader play.
Speaker Change #119: Encompass CRM and signature, but it's much broader.
Speaker Change #119: So I so it may expect it over time.
Speaker Change #120: Uh huh.
Speaker Change #120: <unk> will become meaningful is larger than our sealant business, but they're just on very different maturity curves.
Speaker Change #121: Got it very helpful. Thank you.
Speaker Change #121: Mhm.
Speaker Change #121: Yeah.
Speaker Change #122: And our next question comes from the line of George <unk> with Oppenheimer. Please proceed with your question.
unknown: Please proceed with your... Thank you for taking my question. Allan, could you drill down a little bit more into the strength you're seeing with the self-serve motion and the digital efforts and, you know, maybe as you expand on that, provide some perspective on what you're seeing with SMBs? Yeah. Overall, I think we're continuing to grow our digital business very nicely. I think we're quite pleased with the progress there, and that investment and effort will continue.
George: Thank you for taking my question Alan could you drill down a little bit more into the strength youre seeing with the self serve motion in that digital efforts and maybe expand on that provide some perspective on what youre seeing with Smbs.
George: Yes.
Allan C. Thygesen: Overall, I think we're continuing to grow our digital business very nicely I think where we're quite pleased with the progress there.
Allan C. Thygesen: And that will that investment and effort will continue and I think this is the year, where we go.
unknown: And I think this is the year where we're not just improving the journey for customers that are natively digital and have stayed in the digital realm, but also providing much better self-serve options for our direct customers, for those who are serviced by our sales teams, as well as for partners. And a lot of that functionality is rolling out this year, and that'll just free up time and resources internally and create a better customer experience.
Allan C. Thygesen: Not just improving the journey for customers that are natively digital and have stayed in the digital realm, but also provide much better self serve options for our direct customers, but those who are serviced by our sales teams.
Allan C. Thygesen: As well as for partners.
Allan C. Thygesen: All of that functionality is rolling out this year.
Allan C. Thygesen: And that'll just free up time, and resource internally and better customer experience, so I'm feeling pretty good about that.
unknown: So I'm feeling pretty good about that. And we have some nice, I think, upcoming functionality on the digital side that will continue to create that faster momentum. And just to add on top, you know, if we look at our quarterly net account additions, the bulk of those, you know, the over $50,000 came from the self-service kind of channel for us.
Allan C. Thygesen: And we have some some nice I think upcoming functionality on.
Allan C. Thygesen: On the digital side that we will continue to create that faster momentum.
Allan C. Thygesen: Let me see.
Speaker Change #124: Just to add on top as we look at our quarterly net account additions the bulk of those the over 50000 came from the self service channel for us.
unknown: And, you know, we've made improvements on targeting for, you know, on our marketing side, better targeting enhancements. We also improved the experience this quarter to move from trial to purchase, so that you become a paying customer. And we've also, you know, reduced friction with regard to things as simple as payments. And so, essentially, we launched ACH for customers, and we've also reduced the number of payment failures that we have.
Speaker Change #124: We've made improvements on targeting for our marketing side better targeting enhancements. We also improved the experience this quarter to move from trial to purchase so it can become a paying customer and we've also reduced friction with regards to things is.
Speaker Change #125: I'll call them as simple as payments and so essentially we launched CCH for customers and we've also reduced the number of payment failures that we have and so there's things that we can also work on the backend in order to kind of speed up that self service channel as well. In addition to those are more of a more tactical relative to the longer term efforts that Alan highlighted yeah, maybe one one last.
unknown: And so, there are things that we can also work on the back end in order to kind of speed up that self-service channel as well, in addition to those that are a little bit more tactical relative to the longer-term efforts that Allan's highlighted.
unknown: Yeah. Maybe one last thing, because I think at the end, you also asked about broader SMBs, right? So, look, I love the S&B business. I think we are blessed to have a very robust S&B business that provides a balance. And I think, if anything, I like having that diversification right now. We are well represented across enterprise, mid-market, and S&B. And I think the enterprise environment might be slightly tighter than the S&B environment right now.
Speaker Change #126: I think at the end you also asked about broader S&P friends.
Speaker Change #127: So look I.
The SMB business I think where we are blessed to have a very robust S&P businesses provides a balance.
Speaker Change #127: And I think if anything.
I like having that diversification right now we are well represented across enterprise mid market and SMB.
Speaker Change #127: <unk>.
Speaker Change #127: The enterprise environment might be slightly tighter than the S&P environment right now so overall.
Speaker Change #127: We have a very balanced book.
Speaker Change #127: And I think that is working in our favor.
Speaker Change #128: Thank you.
Speaker Change #127: Okay.
Speaker Change #129: Thank you okay.
Speaker Change #129: I think we'll wrap it there.
Speaker Change #130: Alright, that's okay.
unknown: So, overall, we have a very balanced book, and I think that is working in our favor. Okay, I think we'll wrap it there. Thank you, operator. Thank you all for joining today's call and, in closing, I am proud of the progress DocuSign continues to make and excited about the value we'll create for customers through the intelligent agreement management platform.
Speaker Change #131: Thank you operator, thank you all for joining today's call.
Speaker Change #131: I am proud of the progress docking signed continues to make.
Speaker Change #131: I'm excited for the value, we'll create for customers through the intelligent management platform. So I appreciate your support as we continue to realize that vision.
unknown: So we appreciate your support as we continue to realize that vision. Thank you. This concludes today's teleconference.
unknown: [inaudible] ??. .. .. .. .. .. .. [inaudible].
Speaker Change #131: You.
This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Speaker Change #131: Goodbye.
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unknown: ...... Copyright 2020, New Thinking Allowed Foundation. Bye! [inaudible]
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Yeah.
Speaker Change #131: Uh-huh.
Speaker Change #131: Mhm.
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Speaker Change #131: Hmm.
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Speaker Change #131: Hum.
Speaker Change #131: Okay.
Speaker Change #131: Yeah.
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Speaker Change #131: Yeah.
Speaker Change #131: Yeah.
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Speaker Change #131: Mhm.
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Speaker Change #131: Uh-huh.
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Okay.
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Speaker Change #131: Mhm.
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Hum.
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Speaker Change #131: Sure.