DOCUSIGN, INC. Q3 FY2025 earnings call

Product Innovation - Enhanced the Docusign Intelligent Agreement Management (IAM) platform across three fronts: launching new capabilities, expanding availability to more regions, and enabling department-level deployments for enterprise customers. Integrated Lexion's AI capabilities into the IAM platform, enhanced Navigator with third-party document imports and upgraded search experience, and expanded IAM availability to more geographies. - For Docusign CLM, incorporated Lexion's AI-assisted contract review, released document markup in Microsoft Word documents, and a new Docusign Connector for SAP Ariba. - Docusign CLM was named a leader in Gartner's Magic Quadrant for CLM. ### Omnichannel Go-to-Market - Accelerated rollout of IAM, with early sales momentum outpacing expectations; 80% of eligible reps closed at least three IAM deals in Q3. - Strong customer engagement with IAM, including quick time to live and increasing usage. - Invested in self-serve capability, with digital revenue growth accelerating, improved upsell capabilities, and additional add-on products available online. - Highlighted customer success stories like KPC Private Funds, Royal Neighbors of America, Catchafire, Cox Automotive, IKEA Portugal, and United Airlines using Docusign products. ### Efficiency Improvements - Achieved 29.6% non-GAAP operating margins in Q3, up from 26.8% in Q3 fiscal 2024. - Ended Q3 with 6,705 employees, down approximately 3% from last year. - Repurchased $173 million of stock through share buybacks in Q3, with $770 million remaining under the repurchase authorization.

In Q3, Docusign reported revenue of $755 million, up 8% year-over-year. Subscription revenue was $735 million, also up 8% year-over-year. Billings were $752 million, up 9% year-over-year. The dollar net retention rate improved to 100% in Q3, up from 98% in Q4 fiscal 2024. International revenue represented 28% of total revenue and grew 14% year-over-year. The number of large customers spending over $300,000 annually increased to 1,075 in Q3. Digital revenue growth accelerated from Q2, and usage trends showed modest improvements with envelope sent increasing for the fourth consecutive quarter.

Q4 Fiscal 2025 - Total revenue expected to be $758 million to $762 million (7% YOY growth at midpoint). - Subscription revenue expected to be $741 million to $745 million (7% YOY growth at midpoint). - Billings expected to be $870 million to $880 million (5% YOY growth at midpoint). - Non-GAAP gross margin expected to be 81.0% to 82.0%. - Non-GAAP operating margin expected to be 27.5% to 28.5%. - Non-GAAP fully diluted weighted average shares outstanding expected to be 209 million to 214 million. ### Fiscal 2025 - Total revenue expected to be $2.959 billion to $2.963 billion (7% YOY growth at midpoint). - Subscription revenue expected to be $2.885 billion to $2.889 billion (7% YOY growth at midpoint). - Billings expected to be $3.056 billion to $3.066 billion (5% YOY growth at midpoint). - Non-GAAP gross margin expected to be 81.9% to 82.1%. - Non-GAAP operating margin expected to be 29.5% to 29.7%. - Non-GAAP fully diluted weighted average shares outstanding expected to be 210 million to 212 million.

• Uncertainties related to forward-looking statements, including risks from known and unknown factors that may cause actual results to differ from expectations. - Market risks and competitive pressures that could impact customer demand and adoption of products. - Execution risks associated with the rollout and adoption of the IAM platform, including challenges in scaling and achieving expected growth.

Q: Jake Roberge asked about the driver of reacceleration between core business and IAM and sustainability of billings performance.

A: Blake Grayson responded that the predominant driver is the core business, with early IAM bookings being the smallest driver. Early billings performance was driven by early renewals, better retention in core, and digital growth.

Q: Jake Roberge asked about differences between IAM and CLM and why IAM sold faster.

A: Allan Thygesen explained that CLM serves large enterprises with complex B2B workflows, while IAM addresses a broader universe of agreement types, is more widely accessible, and targets a broader set of users and companies.

Q: Tyler Radke asked about margin opportunity and additional levers for efficiency.

A: Blake Grayson stated that operating margin has improved, and long-term operating leverage comes from accelerating growth, with focus on maintaining efficiency while supporting growth.

Q: Brent Thill asked about capital allocation to go-to-market team.

A: Allan Thygesen and Blake Grayson said sales and marketing investment envelope is appropriate, with focus on accelerating growth and self-funding potential investments.

Q: Austin Cole asked about IAM use cases and customer excitement for larger customers.

A: Allan Thygesen mentioned use cases like extracting renewal dates and automating workflows, with customer excitement due to IAM's ability to unlock agreement insights.

Q: Joshua Baer asked about e-signature penetration and billings guide.

A: Allan Thygesen said there's headroom in US SMB and international markets, and Blake Grayson explained billings guide reflects renewal estimates without onetime standout components.

Q: Sonak Kolar asked about IAM reps and capital allocation.

A: Blake Grayson said not disclosing rep numbers, and capital allocation strategy remains unchanged with focus on free cash flow generation.

Q: Michael Berg asked about gross retention improvement drivers.

A: Blake Grayson and Allan Thygesen cited improved operational execution, customer success efforts, and evolving product suite aiding retention.

Q: Arsenije Matovic asked about IAM reps, training, and growth guardrails.

A: Blake Grayson said not disclosing rep numbers, and early IAM growth is early with guardrails to be addressed in future guidance.

Q: Ian Black asked about NRR normalization and capacity rationalization.

A: Blake Grayson said dollar net retention is stabilizing, with COVID-related contract impact under 1%, and trends showing modest improvements.