Enterprise technology vendors that have benefited the most during the COVID-19 pandemic are the ones that enable customers to effectively get work done with teams working in a distributed environment. DocuSign is filling that brief, with its Q3 numbers highlighting significant demand for e-signature capabilities, as companies continue to shift from paper-based to digital processes.
The company has posted strong third quarter results, which saw total revenue increase 53% year-over-year to $382.9 million. Subscription revenue meanwhile increased 54% year-over-year to $366.6 million.
Not only this, but DocuSign added 73,000 new customers during the quarter, of which approximately 14,000 were direct customers. This brings the company’s install base to nearly 822,000 customers worldwide.
Dan Springer, CEO of DocuSign, outlined to investors how the COVID-19 pandemic is positively impacting the business, which he believes won’t be a short term trend. Springer said:
It’s hard to believe that we are almost at the end of 2020 and just how challenging the year has been for so many people. Many companies, including DocuSign are still working remotely, collaborating virtually.
However, we’ve also seen the critical role that innovation can play at a time like this and how technology can help people adapt in the wake of the pandemic. As COVID-19 has accelerated the digital transformation of key business and agreement processes, DocuSign has become an increasingly essential cloud software platform.
The last few quarters of heightened demand have offered a glimpse into the long-term growth opportunity we have. These results reflect how the team has executed excellence amid the ongoing challenges. They also showcase the continued tailwinds for the expansion of eSignature as the first step in the adoption of the Agreement Cloud.
Overall, the response to COVID-19 has caused organizations to accelerate their digital transformation efforts by two, three, four years or more. They’ve seen remote work can be even more productive and the digital agreement processes are fast becoming business as usual. Let me share more on how our customers are doing that today.
When customers go from paper-based processes to digital agreement processes, they do not go back. We believe that trend will hold when the pandemic subsides and DocuSign’s value will persist no matter how the future of work unfolds. We are not waiting for the future though, as we continue to innovate across the entire Agreement Cloud suite.
Agreement Cloud opportunity
Whilst DocuSign has become the go-to vendor for signing documents digitally, the company has ambitions to play a broader role in the enterprise through its Agreement Cloud Suite - as signalled by Springer.
Agreement Cloud Suite was announced in May last year by the company and is essentially a suite of products and integrations for digitally transforming how organizations prepare, sign, act on, and manage agreements. DocuSign’s aim is to automate and connect the entire agreement process, allowing business to be done faster with less risk, lower costs, and better experiences.
However, whilst e-signature saw a significant boost during 2020, Springer does admit that demand for Agreement Cloud and CLM (contract lifecycle management) were put on the back burner by potential customers, as they reassessed their portfolio of projects. Springer explained:
If you recall when we finished Q4 last year, the message we had was there was a fairly significant acceleration in CLM, which was a major additional agreement of our product we had at that time and we were quite excited to see that coming into the New Year. And at the beginning of Q1, we saw that trend continuing.
After COVID hit...we saw a fairly significant change. We saw customers coming back to us saying, yes, long-term, we want to be Agreement Cloud companies. But right now, we have got some critical use cases that we need to get up to signature. And so we saw this dramatic acceleration on the signature side of the business and some slowing of deals and some slowing of those transactions of people who are working with some CLM sides.
I think we’ve seen the same thing throughout the year. And in the last quarter or so, we are starting to see that coming back. We think CIOs and other business leaders fundamentally had a reaction upfront which was I can only work on my critical projects. Remember, they were having to go to a work from home setting and they weren’t in their offices. And so, larger and more complex projects that required a systems integrator or at least some sort of statement of work, those got pushed out a little bit. Now people are coming back and saying those are critical to our future and so the Agreement Cloud is right back where we want it to be in terms of top of mind with our customers.
A growing ecosystem
Springer was also keen to highlight that Q3 saw DocuSign’s ecosystem of partners and ISVs go from strength to strength, which are integrating DocuSign into their own solutions and building practices around the Agreement Cloud. He said:
We continue to see overall traction with our more than 350 ISV integrations including those announced in Q3 with Slack and with Workplace from Facebook. These follow a familiar pattern for us to make DocuSign available wherever business gets done. And with our recent momentum, we continue to see new partners join our ecosystem at a healthy clip.
There has also been increased interest from SIs looking to build out Agreement Cloud practices that attach to their existing Salesforce, Oracle, SAP and Workday practices, thereby embedding DocuSign even deeper into critical front and back office business processes.
So, to wrap up my comments today, this is the third quarter in a row that we had these significant levels of growth. This acceleration in demand is laying the foundation for future expansion across the Agreement Cloud. And while substantial global, social and economic challenges undoubtedly remain, we believe we are still just scratching the surface of our long-term opportunity.
It’s a trend we’ve seen throughout the year across the enterprise vendor community, with those enabling digital work to be done remotely seeing demand for their products accelerate rapidly. As Springer notes, customers are significantly reducing the timeframes of their digital projects in order to continue operating effectively in a highly uncertain environment and to boost resiliency. For the likes of DocuSign, there is a significant opportunity to rapidly bolster their install base - getting in front of buyers making these long-term decisions for how they work.