DocuSign delivers strong quarter as new CEO lays out focus for the future

Derek du Preez Profile picture for user ddpreez December 9, 2022
Recently appointed CEO Allan Thygesen joins DocuSign from Google and has laid out plans for the company’s ‘Agreement Cloud’ future.

2d rendering Cloud computing cloud third wave concept © jijomathaidesigners - Shutterstock
(© jijomathaidesigners - Shutterstock)

DocuSign appears to have a more positive outlook than it did just a few short months ago, after a period in which the company lost more than 60% of its value in a year and its then CEO Dan Springer stepping down as a result. With a new chief executive at the helm, Allan Thygesen, and two strong consecutive quarters in a row, the ‘Agreement Cloud’ vendor saw its shares up by more than 13% earlier this week. 

Thygesen was announced as DocuSign’s new chief executive in October and during his first earnings call laid out his plans for streamlining the company’s operations and for how he sees the vendor’s product roadmap developing. 

Speaking to analysts, Thygesen didn’t shy away from acknowledging that there is room for improvement. He said: 

DocuSign created and built the eSignature category, yet agreement processes are still at the early stages of moving from pen to paper to more automated ways of working. In fact, I believe we're just at the beginning of revolutionizing how businesses initiate, negotiate and manage agreements, and we will lead that as we did for e-Signature.

For my first 60 days, I've focused on gaining a deeper understanding of our business, meeting with employees across the company as well as spending time with customers and partners. 

Through these conversations, I've started to identify some critical areas in which we can improve to strengthen our value proposition in addition to scaling the business by streamlining and creating efficiencies.

But before digging into the details on this, let’s take a look at the Q3 2023 numbers. DocuSign reported the following: 

  • Total revenue was $645.5 million, an increase of 18% year-over-year. Subscription revenue was $624.1 million, an increase of 18% year-over-year. Professional services and other revenue was $21.4 million, an increase of 27% year-over-year.

  • GAAP net loss per basic and diluted share was $0.15 on 201 million shares outstanding compared to $0.03 on 198 million shares outstanding in the same period last year.

  • Non-GAAP net income per diluted share was $0.57 on 206 million shares outstanding compared to $0.58 on 208 million shares outstanding in the same period last year.

  • Net cash provided by operating activities was $52.5 million compared to $105.4 million in the same period last year.

DocuSign’s customer growth also remained strong as it added approximately 42,000 new customers during the quarter, bringing its total installed base to 1.32 million customers worldwide at the end of Q3, a 19% increase compared to a year ago. This includes the addition of approximately 10,000 direct customers, to reach a total direct customer base of $202,000, a 26% increase over last year.

The vendor also saw a 34% year-over-year increase in customers with an annualized contract value greater than $300,000, reaching a total of 1,052 customers.

Where to next? 

Thygesen joined DocuSign after twelve years at Google. The newly appointed CEO said that the positive Q3 results should be a reflection of “continued signs of stabilization across the business”. He added that DocuSign is expanding across broader ‘agreement-related workflows’ and that the company has a strong foundation and a meaningful competitive advantage. 

On his decision to join DocuSign, Thygesen said: 

I followed the company for many years, and like our over 1 billion users, I find our value proposition distinctive and invaluable. We've built a powerful brand that's recognized by decision-makers well before we even engage with them. That combination of affinity that DocuSign has with customers and users, and our untapped market potential is very rare in the enterprise software space.

However, Thygesen was also incredibly clear about where DocuSign needed to improve in order to build on these strengths. He said: 

I believe it's important to acknowledge where we have not executed as well. It's clear we did not pivot quickly enough and we were slow to make changes.

As we experienced tremendous growth during the pandemic, we did not scale the team properly. We lost some innovation velocity. We didn't fully address the changing market dynamics nor mature our operations and systems sufficiently. We understand those gaps, and we're committed to moving forward with more transparency. I think the good news is that the future is in our own hands.

Thygesen added that DocuSign is committed to broadening its category focus moving forward, which means a more clearly defined product roadmap moving forward - one which places the company’s eSignature strength at its core and uses thi to deliver easier, smarter, trusted agreements. He said: 

We see opportunities beyond the replacement of paper signatures to deliver innovative new experiences and integrate more deeply with partner applications.

If you think about it, many use cases don't require editing or completion of the static, unstructured, highly formatted traditional agreement. Instead, I think data capture for agreements should happen through digital forms on the web or in an app. 

The agreements themselves should be dynamically generated, and the metadata should be automatically captured to enable personalization for future interactions.

With our new web forms offering, which is currently in early beta, we're enabling our customers to transition from a PDF-centric experience to guided web-native experiences. 

DocuSign is also focused on its Content Lifecycle Management (CLM) portfolio, which Thygesen said supports the company’s eSignature capabilities. He said: 

For example, this past quarter, we expanded our relationship with one of the largest ride-sharing organizations. Our team identified key areas of expansion using our Signature and CLM product to support their evolving business needs. They expanded their eSignature footprint and are now more streamlined in their internal processes, thanks to our CLM offering.

Over the next few quarters, we'll expand our work here and augment the road map to broaden the power of managing workflows throughout the agreement life cycle. 

While we're not seeing dramatic shifts recently in the competitive landscape, it is important to recognize that today's market is more competitive, particularly for the basic sign use cases, which further highlights the importance of an innovative and differentiated product portfolio like DocuSign's.

Improved operations

In terms of go-to-market, Thygesen also is focused on improving operations and sales productivity - with attention being placed on customer and frictionless experiences. Key to this will be self-service. He said: 

I was deeply involved in enabling self-serving for every stage of the order cycle for customers of all sizes at Google, and I know the power of a frictionless experience. I'm confident we can achieve both improved customer experiences and greater go-to-market efficiency as we move in this direction.

We already have over 1 million customers who self-serve. The inbound traffic to our website continues to grow, and we have a highly recognized and trusted brand. So we have a lot to work with. 

We also want to create stronger efficiencies in our direct sales and field efforts and strengthen our partner ecosystem. So I'm pleased that sales attrition is continuing to moderate, and we're seeing stabilization in the field.

Moving forward, we're focused on improving funnel conversion, consolidating and streamlining our teams, strengthening our focus on customer success and retention and implementing new incentive structures, all with the goal of driving efficiency and accountability.

DocuSign will also be rethinking how it prices and packages its products, with a focus on simplification. The vendor has recently begun rolling out its new product bundles, for example, to allow customers to access broader productivity features. Thygesen said: 

We know that customers who use more than three features are more likely to expand their footprint with us, and that will be critical for more profitable growth at scale.

On the partner side, he added: 

We already have an industry-leading partner ecosystem. This represents a significant opportunity to expand customer value and distribution reach through our network of ISVs, resellers, system integrators and developers. 

By reimagining how we engage that ecosystem, we expect to create a platform that will see stronger revenue contribution from our partners and help unlock and fuel international expansion opportunities in particular.

Thygesen concluded by saying that DocuSign is taking a long view of how it achieves success. He said: 

In summary, I believe we're acting with urgency to recalibrate the business and leverage our strong foundation to adapt to the evolving business landscape and the changing and challenging macro environment. 

These efforts will take time, and they represent a continued evolution for DocuSign. However, I am fully confident that the opportunity is here for DocuSign and is within our reach with a clear strategy, focus and execution.

A grey colored placeholder image