DocuSign had a difficult year during 2022, after the company saw 60% of its value wiped out, following a successful period during the height of COVID-19. The challenges resulted in a new CEO - Allan Thygesen - being brought in to steady the ship, with a renewed focus on product development in an attempt to establish the vendor as the ‘Agreement Cloud’ of choice.
This year has proven more fruitful for DocuSign, after a number of successful quarters and the company’s share price rebounding somewhat. This week the vendor announced its Q2 2024 results, which again beat expectations and resulted in gains in after hours trading.
CEO Thygesen said that DocuSign is focused on the factors it can control, despite continued pressures. He explained:
In the near-term, we're focused on the agreement management layer. We're taking something that's quite complex for our customers and making it easier and more delightful. And over-time, we're building the intelligence layer that will unlock agreement data.
While we are pleased with our results, like many others, we are seeing continued macro pressures tempering expansion rates. However, we remain focused on what we can control, executing against our initiatives to drive innovation and operational efficiency, further setting the foundation for growth while navigating an uncertain environment.
The key figures for Q2 2024 are:
Total revenue was $687.7 million, an increase of 11% year-over-year.
Subscription revenue was $669.4 million, an increase of 11% year-over-year.
Professional services and other revenue was $18.3 million, an increase of 8% year-over-year.
Billings were $711.2 million, an increase of 10% year-over-year.
GAAP gross margin was 79% compared to 78% in the same period last year. Non-GAAP gross margin was 82% for both periods.
The product strategy
Thygesen took his time during the analyst call this week to pull focus towards DocuSign’s continued product development. Historically the company has been defined as an ‘eSignature’ vendor, but DocuSign’s leadership is increasingly referring to its strategy as “intelligent agreement management”.
In the short-term DocuSign is focused on shipping new features and functionality that differentiate and streamline agreement workflows. For instance, the company recently announced the launch of its Liveness Detection for ID Verification, which brings AI-powered biometric checks and claims to bring in more accurate ID verification without the signee being present. DocuSign claims that this has reduced time to sign by approximately 60%.
Increasingly, DocuSign is also focused on intelligence that can be captured within the agreement workflows. Thygesen said:
As I've stated in the past, the value of an agreement is in the data and every step of the workflow will benefit when it's automated, intelligent and seamlessly integrated into core businesses. Web Forms is delivering on that vision. During the quarter, we shipped and announced more and increasingly sophisticated capabilities to our Web Forms offering.
This quarter we also announced that DocuSign Monitor is now available to our CLM customers. Monitor provides a comprehensive and holistic multiproduct view of user activity on one dashboard for both CLM and eSignature ensuring organizations can quickly and easily detect, investigate and respond to suspicious activity before incidents occur. For our customers, it's powerful reassurance. Losing even one high-value agreement can have a significant business impact.
Our goal is to unlock the market for intelligent agreement management from millions of businesses, automating billions of hours of manual work and improving business outcomes. Today, we are already monetizing AI directly through our CLM plus products and indirectly through its use in our products such as search.
Thygesen said that the next step on the journey is with AI Labs, which is a project that sees DocuSign co-innovate with customers, where it provides a sandbox that allows customers to share a select subset of agreements and find new features we're testing. He added:
Our customers get early access to developing technology and we receive early feedback that we will incorporate into our products. By working with our customers in the development phase, we're further reinforcing the trusted position we've earned over the last 20 years.
Thygesen also spent time during the analyst call talking about providing easier access for potential buyers to the company’s products, through new self-serve capabilities, as well as improving on the customer experience. He said that the company has made good traction over the quarter with higher traffic conversion rates. This is a good sign for broadening the install base and adopting a ‘land and expand’ strategy that has proven successful for other vendors in the market.
Commenting on DocuSign’s future ambitions, he said:
The future of agreements is not about attaching yourself to a legacy document format. As we continue our product evolution by adding intelligence and unlocking the data trapped in agreements, we're increasing productivity, reducing friction and saving our customers' time. This is a fundamental shift in the agreement space.
I'm confident in our competitive advantage as DocuSign is the largest player, focused solely on improving the agreement process. Moreover, there's no other company focused on the full end-to-end agreement process for companies of every size from SMBs up to the world's largest enterprises.
A solid few months suggests DocuSign is paving a path for more sustainable growth. We will be keeping an eye on the company, to see if it can sustain on its execution promises.