DocuSign delivered slightly weaker than expected earnings for its first quarter 2023 results, sending its shares downwards as much as 24% in extended trading on Thursday. However, as we have noted previously, the day to day market reaction to earnings updates isn’t always the best gauge of how a company is performing - and DocuSign is in the middle of a transitional period, as it lays the foundation for growth under its ‘Agreement Cloud’ proposition.
In a recent interview with diginomica, DocuSign CEO Dan Springer outlined how he is thinking about tying e-signatures into company processes, and how the ‘Agreement Cloud’ will grow as a way for organizations to interact with suppliers, customers and employees.
This thinking has meant building out new products and hiring new leadership to take the Agreement Cloud to market. But more on that shortly. First, let’s take a look at the numbers:
Total revenue was $588.7 million, an increase of 25% year-over-year.
Subscription revenue was $569.3 million, an increase of 26% year-over-year.
Professional services and other revenue was $19.4 million, an increase of 13% year-over-year.
Billings were $613.6 million , an increase of 16% year-over-year.
Non-GAAP net income per diluted share was $0.38 on 206 million shares outstanding, compared to $0.44 on 208 million shares outstanding in the same period last year.
Commenting on the results this week, Springer said:
DocuSign has begun the year delivering solid results. First quarter revenue was $589 million, representing 25% growth year-over-year. International revenue grew 43% year-over-year, making up 25% of total revenue versus 21% in Q1 of last year. Our billings grew 16% in the quarter, and we delivered dollar net retention of 114%, which is within our historical range.
Lastly, we added nearly 67,000 new customers in Q1, an increase of 25% year-over-year, bringing our total to 1.24 million paying customers around the world.
These results have required our team's unwavering commitment and flexibility, as we are adapting our go-to-market strategy to the post-pandemic world. Our results also highlight our continued momentum in the digital transformation of Agreement workflows for businesses across the globe.
However, he also noted that the current economic climate is posing some challenges. Springer added:
We are experiencing many of the macro challenges that our peers are seeing, with inflationary concerns, a volatile workforce environment and general global instability. We are ramping up our execution and go-to-market capabilities, as well as strengthening our leadership team for the growth opportunities ahead.
The dynamic macro environment only highlights the need for digital investments like DocuSign, and we will continue to partner with our customers to advance their digital transformation journeys.
We're confident in our strategy and path to becoming a $5 billion revenue company. DocuSign continues to be the clear market leader in the electronic signature space, and we are excited about our progress in defining the broader Agreement Cloud category as well.
Laying the groundwork
Given the results, Springer took his time to share with analysts how DocuSign is thinking about “strengthening the foundation” for the company’s next phase of growth, particularly with regards to how it is tackling the go-to-market challenges it has seen in recent quarters.
Firstly, DocuSign has made a number of new hires, including:
- Steve Shute as President of Worldwide Field Operations. Prior to joining DocuSign, Steve served as the President of Global Sales & GTM for Customer success at SAP.
Jim Shaughnessy as Chief Legal Officer. Prior to joining DocuSign, Jim spent 10 years at Workday where he served as General Counsel and Senior Advisor for Corporate Affairs.
Jennifer Christie as Chief People Officer. Prior to joining DocuSign, Jennifer served as the Chief HR Officer for Twitter and Bolt. She was also the SVP of HR at American Express and served as Special Assistant to the President for personnel.
Inhi Cho Suh as President of Product and Technology starting in July 2022, when she will transition off DocuSign's board of directors. Inhi has spent over 20 years at IBM.
Jerome Levadoux as DocuSign's Chief Product Officer. Prior to stepping into the CPO role, Jerome was the Head of eSignature Products for DocuSign.
In light of these key hires and with the team we now have in place, we are focused on a second half growth plan that allows us to be successful despite some of the current macro headwinds and gives us a foundation sustainable and predictable growth going into fiscal year 2024.
In addition to new hires, Springer also highlighted the company’s product advancements. He said:
The big announcement in Q1 was our launch of CLM Essentials, a new addition to our expanding family of contract life cycle management products. It's a streamlined CLM solution focused on faster time to value and is built specifically for growing organizations to centralize and automate the creating, negotiating and secure storage of their contracts.
Essentials also allows customers to easily accelerate contract work in the quote-to-cash process via deep integration with Salesforce. And as our customers' needs grow, there's a seamless upgrade path to our full CLM or CLM+ products. The other big area of innovation last quarter was in eSignature, where we continue to release a steady pace of features to further simplify and secure Signature workflows.
Our latest ID verification feature, enables signers to verify their identity via trusted financial institutions like Bank of America, Chase and Wells Fargo. This is a great example of how we're continuing our steady pace of innovation where it counts and leading our category as the name in eSignature. And that lead is reflected in our customer metrics.
For example, we grew our customers with a greater than $300,000 ACV by 32% from a year ago. As our successes during the quarter demonstrate, we continue to see both growth and leadership in eSignature, as well as progress across the rest of the Agreement Cloud suite.
In Q1, we also saw the continued trend of deeper Agreement Cloud adoption. For example, one of the world's largest and most prestigious global consulting firms made the jump from being a long-time eSignature customer to implementing CLM+ globally. With this move, they can now build and execute standardized end-to-end agreement processes, have centralized document repository with comprehensive metadata and leverage our AI to identify risk levels in previously executed, as well as in-flight agreements.
Finally, Springer was optimistic about some solid quarters in the near future for DocuSign, where he said:
So to summarize, we posted a solid first quarter for fiscal year 2023. We are beginning to see benefits from the optimizations we are making in our go-to-market motions post pandemic and from our new scale, sales and success leadership.
With a $50 billion TAM, we have confidence in our business strategy and importantly, the outstanding team we have in place. As we work to build momentum amidst macro headwinds, we're seeing a steady stream of wins and increased interest from our partner ecosystem to build deeper relationships.