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Operator
Good afternoon, ladies and gentlemen. Thank you for joining DocuSign's fourth quarter and full fiscal year 23 earnings conference call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question and answer session. As a reminder, this call is being recorded and will be available for replay from the investor relations section of the website following this call. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. I will now pass the call over to Heather Harwood, head of investor relations. Please go ahead.
Heather Harwood
Thank you, operator. Good afternoon and welcome to the DocuSign Q4 and fiscal year 2023 earnings call. I am Heather Harwood, DocuSign's head of investor relations. Joining me on the call today are DocuSign's CEO, Alan Teegerson, and our CFO, Cynthia Gaylor. The press release announcing our fourth quarter and fiscal year 2023 results was issued earlier today and is posted on our investor relations website. Now let me remind everyone that some of our statements on today's call are forward looking. We believe our assumptions and expectations related to these forward looking statements are reasonable. but they are subject to known and unknown risks and uncertainties that may cause our actual results or performance to be materially different. In particular, our expectations regarding the pace of digital transformation and factors affecting customer demand are based on our best estimates at this time and are therefore subject to change. Please read and consider the risk factors in our filings with the SEC together with the content of this call. Any forward-looking statements are based on our assumptions and expectations to date, and except as required by law, we assume no obligation to update these statements in light of future events or new information. During this call, we will present GAAP and non-GAAP financial measures. In addition, we provide non-GAAP weighted average share counts and information regarding free cash flows and billing. These non-GAAP measures are not intended to be considered in isolation from, a substitute for, or superior to our GAAP results. We encourage you to consider all measures when analyzing our performance. For information regarding our non-GAAP financial information, the most directly comparable GAAP measures, and a quantitative reconciliation of those figures, please refer to today's earnings press release, which can be found on our website at investor.docusigns.com. I'd now like to turn the call over to Alan. Alan?
Heather Harwood
Thanks, Heather, and good afternoon, everyone. Our fourth quarter marked my first full quarter as DocuSign's CEO. Having led our organization for five months with the opportunity to meet many of our customers, partners, and employees, I'm even more optimistic today about the future of DocuSign. We had a solid finish to a transitional year, delivering across key financial metrics in Q4 while making tangible progress against our key priorities. Q4 total revenue came in at $660 million, up 14% versus prior year, finishing the year with $2.5 billion of revenue and 19% year-on-year growth. Driven by our continued focus on profitability and efficiency, we reported 24% non-GAAP operating margin for the quarter and 21% for the year. While we are pleased with our Q4 results, I also want to acknowledge today's challenging macro environment. Customer sentiment continues to be cautious, and that is reflected in moderated expansion rates. Before we get further into business updates, I want to acknowledge today's news that Cynthia Gaylor has decided to step down from her role as Chief Financial Officer. Cynthia has been with DocuSign for nearly four and a half years, first as a board member and chair of our audit committee, and last few years as our CFO. I know many of you know Cynthia well and gotten to know her even better over time as part of the DocuSign story. I want to thank Cynthia for her unwavering commitment and strategic leadership these last few years. Been a great partner to me during my first months as CEO. And she's been instrumental to the company and the board as we've navigated a period of dynamic change while laying a strong foundation for sustainable profitable growth at scale. I thank her for her support during the transition as we search for a successor. Let me turn back to the business. During Q4, we refined and communicated DocuSign's strategy throughout our organization to drive greater alignment on how our teams can deliver more strategic value to our customers. Today, we have a clearly defined strategy in place to underscore the key pillars of our strategic vision, We're inspired by customer feedback. Our focus is to deliver smarter, easier, and trusted agreements. We're improving the reach and efficiency of our go-to market by developing a world-class self-serve experience, strengthening our direct sales productivity, and amplifying our sales and marketing partnerships. We're also strengthening our internal operational efficiency by optimizing and modernizing systems and processes. Now, it's important to emphasize that even as the market leader in e-signature, we are just at the beginning of capitalizing on the opportunity to redefine and truly reimagine what a smarter agreement looks like. Today, e-sign provides an online replica of a static document. While that is a huge improvement in convenience and productivity for senders and signers, it's hardly the endpoint. Just like creating digital copies of maps or recorded music, was the beginning of a reimagination of long-established categories, fundamentally altering creation, distribution, and use. Our goal is to turn flat agreements into structured data that can be used to make intelligent decisions. Value of an agreement is in the data. Every step of an agreement can deliver more value when it's automated, intelligent, and seamlessly integrated into core business systems. DocuSign is uniquely positioned to redefine the agreement processes across every industry. Along these lines, we released several new product enhancements during the fourth quarter, including expanded integrations to better collaborate in Microsoft Teams, Slack, and Zoom. And for eSignature, we enabled new AI-assisted document highlighting and signing capabilities in mobile and web for faster time-to-value. In April, we will release web forms, which will help customers deliver a better and simpler experience by moving from legacy contract forms to a modern web and app experience. We also plan to accelerate our release cycles in fiscal 2024 with innovative and differentiated solutions that simplify the agreement process while we identify new ways to revolutionize how businesses initiate, negotiate, and manage agreements. There's substantial interest in the industry about rapid advances in AI, and large language models in particular. We are already leveraging sophisticated AI models for contract analysis and automation of some workflows, and we're very excited to harness generative AI data and pattern identification as yet another way we can increase productivity, reduce friction, and save our customers time. As we move forward, mobility can be a compelling part of our business. and we're encouraged by the significant interest from some of the very largest players in our industry who recognize our domain leadership and expertise and want to partner with us. Moving to our product-led growth and self-serve initiatives, we've made solid progress over the last few months, modernizing our commerce experience to reduce friction, improve ease of use, and provide customers more flexibility. We've expanded seat capacity available We are web and mobile sites. We've expanded currency options available to make the buying process easier in international markets. Gain traction with these initiatives as we exit the quarter, and we will continue to keep you updated on our progress. Further, as you saw in an announcement a few weeks ago, I couldn't be more excited to have Robert Ciappone joining our team as President and General Manager of Growth. Robert brings a wealth of experience, and we look forward to benefiting from his insights and expertise for more than two decades of scaling global technology companies. He joins DocuSign from an organization that's broadly recognized as having a world-class product-led growth motion. Executing on our product growth strategy is a key priority for the company, as it will be a primary driver of customer acquisition, conversion, and expansion. I'm thrilled to have Robert leading our efforts in this area. Turning to our go-to-market, we're just coming off our global sales kickoff last week, and I can tell you that the sales team is incredibly excited and energized for the year ahead. We're focused on delivering across three complementary channels, direct, self-serve, and partners, and to provide world-class customer success, driving customer growth and retention through all three. As an example of global growth and multi-product expansion, this past quarter, a leading global consulting firm, who has been using eSignature for a decade, expanded and added our CLM cross product. This is a competitive sales cycle since the customer is already in the process of implementing a competitive CLM solution in a few countries. However, DocuSign 1 preferred vendor status as CLM, and the customer has since rolled us out in six countries across two continents and has built integrations with their internal systems and the DocuSign partner Salesforce and ServiceNow. Related to go-to-market, I want to acknowledge the restructuring we recently announced. It was a difficult decision, but it was a critically important step for our company to reshape and right-size our organization for the opportunity ahead. It was not a broad-based restructuring. 95% of the workforce reduction was in our worldwide field organization. Our assessment was that DocuSign could capture more efficiency in our overall go-to-market across all segments, and that we could unlock more profitable growth by investing part of the savings in product development and innovation. Now the direct channel remains absolutely critical to our future. We're rebalancing our approach towards offering a lighter touch experience with more self-serve capabilities that give customers of all sizes choice in how they engage with DocuSign. That pivot in turn frees up resources motion and expanded roadmap for agreement workflows, new AI capabilities, accelerating our migration to the cloud, and improving our internal systems. That in turn will create an even stronger and more valuable offering for our customers and for our sales team to sell. We still have some work to do to strengthen our self-serve experience over the next six to 12 months, and while we may see some modest near-term disruption, we're confident these are the right steps to going forward to drive innovation and growth for our customers for the long term. Additionally, a stronger self-serve motion will enable greater expansion opportunities internationally. Turning to our internal operations and processes, Anurag Akram recently joined as our Chief Operating Officer and will play a crucial role within our organization. Anurag's focus is to bring together and transform our strategy, develop new strategies around pricing and packaging, incremental efficiencies internally, and help evolve early-stage ideas into future growth initiatives. Related to these efforts, I noted on the last call that we rolled out product bundles to introduce more features and functionalities to our customers. I'm pleased to share that these bundle promotions performed better than expected, and we saw good adoption for our new SMB customers in particular. Our experience suggests that customers that adopt a broader set of features renew and expand their commitment with us. You should expect to see more initiatives around pricing and packaging in the future, including bundling and ensuring early adoption of our highest value features. Finally, I would like to update you on our partner ecosystem, another key pillar of our strategy. We're seeing good progress with a number of our largest software partners. ServiceNow is a good example, highlighted by the launch of the CLM Spoke as part of ServiceNow's automation engine. Our partnership has gained momentum with several leading organizations utilizing our integration to digitize their agreements. This is directly aligned with our focus on capturing opportunities by integrating more deeply with partner applications. So in closing, this year has been one of incredible change for DocuSign. And in Q4, we made meaningful strides towards defining our strategy, right-sizing and optimizing our organization. We believe the foundation has been set and that we're in a better position to navigate the evolving macro environment while investing for opportunities that enable long-term profitable growth. We're optimistic about the year ahead for DocuSign, and we're committed to delivering meaningful customer and shareholder value. We look forward to sharing further progress on our initiatives as we redefine how the world comes together and agrees. We will enable smarter, easier, and trusted agreements. With that, Let me once again thank Cynthia and turn the call over to her to walk through the financials.
Cynthia Gaylor
Cynthia? Thanks, Alan, for the kind words. I'd like to start off by thanking our employees and execution. We closed out the year strong, and I'm proud to share that we achieved an impressive milestone for the company, delivering $2.5 billion of revenue for the fiscal year, reflecting 19% growth year on year. Our Q4 results were solid, demonstrating the durability in our business model and DocuSign's important position in the broader ecosystem. While we are pleased with our results and execution in Q4, we continue to experience a challenging macro environment with softening demand trends, including moderating expansion rates. However, we are seeing healthy results as customers recognize that DocuSign offers high ROI applications that are easy to use, efficient, and cost effective. With that, let me turn to our Q4 and fiscal 23 results. For the fourth quarter, total revenue increased 14% year over year to $660 million, and subscription revenue grew 14% year over year to $644 million. Total revenue for the year reached $2.5 billion, a 19% increase over last year, and subscription revenue was $2.4 billion, a 20% year over year increase. Our international revenue grew 19% year over year to reach $165 million in the fourth quarter. For the full year, international revenue grew 29% to $260 million, representing 25% of total revenue for both periods. Fourth quarter billings rose 10% year over year to $739 million. For the full year, billings increased 13% to $2.7 billion. We added approximately 30,000 new customers during the quarter, bringing our total install base to 1.36 million at the end of the year, a 16% increase year-over-year. This includes the addition of approximately 9,000 direct customers to reach a total direct customer base of 211,000, a 24% year-over-year increase. We also saw a 27% year-over-year increase in customers with an annualized contract value greater than $300,000, reaching a total of 1,080 customers. Dollar net retention was 107% for the quarter. The headwinds we've highlighted over the last couple of quarters continue to persist, and as a result, we are seeing muted growth in our expansion rates. We expect this to continue into Q1, and as a result, would expect the dollar net retention in Q1 to trend lower. Non-GAAP gross margin for the fourth quarter was 83% compared with 81% a year ago. For the full year, gross margin was 82% in line with last quarter. Fourth quarter subscription gross margin was 85% consistent with last year. For the full year, subscription gross margin was also 85% flat versus prior years. Q4 non-GAAP operating income reached $155 million compared with $104 million last year. Non-GAAP operating margin was 24% compared to 18% last year. For the full year, non-GAAP operating income rose 23% to $517 million and operating margin was 21% versus 20% in fiscal 2022. In Q4, we saw Lower expenses for employee-related costs related to the workforce reduction announced in September, which contributed to the strong operating margin in the quarter. Non-GAAP net income for Q4 was $133 million, compared with $100 million in the fourth quarter of last year. For the full year, non-GAAP net income was $419 million, up from $411 million in fiscal 22, a growth rate of 2% year over year. As noted on our Q1 call last year, we introduced a non-GAAP tax rate on our non-GAAP net income calculation for fiscal 23 as we reached consistent non-GAAP profits for the prior three years. We are using a non-GAAP tax rate of 20% for fiscal 2023 and fiscal 24. Q4 non-GAAP EPS was $0.65, while full-year non-GAAP EPS was $2.03. Let me take this opportunity to share a bit more context regarding the recent restructuring. As Alan mentioned, this was a difficult decision and one not made lightly, but it was an important decision aligned with our strategy to reshape the company and free up resources to invest in critical areas across our innovation and product development efforts. As we outlined in the filing last month, we expect to incur related restructuring charges ranging from $25 million to $35 million with the majority of the expenses and related cash to be incurred in Q1 of this year, with the restructuring substantially completed by the end of the second quarter. We ended Q4 with 7,336 employees compared to 7,461 last year. Operating cash flow in the quarter grew 56% year over year to $137 million, representing a 21% margin. This compares with $88 million, a 15% margin in the same quarter a year ago. Free cash flow for the quarter was $113 million, a 17% margin, compared to $70 million, a 12% margin in the year prior, a 61% increase year over year. As we mentioned on our last call, we went live with a new ERP in Q3, which delayed some of our cash collections last quarter. As a result, we saw strong cash collections this quarter in addition to lower restructuring cash payments on a relative basis. For the full year, operating cash flow was $507 million, representing a 20% margin, compared to $506 million, a 24% margin a year ago. Free cash flow declined 4% year-over-year to $429 million, a 17% margin compared to $445 million, a 21% margin in fiscal 22. We exited Q4 with more than $1.2 billion in cash, cash equivalents, restricted cash, and investments. With that, let me turn to our Q1 and fiscal 24 guidance. As a reminder, on our Q3 earnings call, we provided a preliminary outlook for fiscal 24. We are pleased to narrow the preliminary range we provided incorporating our Q4 landing and the dynamics of the current environment into our guidance. We anticipate the macro environment will remain challenging as we move through the year, and as Alan mentioned, we may also see modest near-term disruption as we realign our sales force and shift to more of a self-serve motion. For the first quarter and fiscal year 24, we anticipate total revenue of $639 to $643 million in Q1, or growth of 9% year over year, and $2.695 to $2.707 billion for fiscal 24, or growth of 7% to 8% year over year. Of this, we expect subscription revenue of $625 to $629 million in Q1, or growth of 10 to 11% year over year, and 2.633 to 2.645 billion dollars for fiscal 24, or growth of 8% year over year. For billings, we expect 615 to 625 million dollars in Q1, or flat to 2% growth year over year, and 2.705 to 2.725 billion dollars for fiscal 24, or growth of 2% year over year. We expect non-GAAP gross margin to be 81% to 82% for both Q1 and the fiscal year. We expect non-GAAP operating margin to reach 21% to 22% for Q1 and 21% to 23% for fiscal 24. We expect non-GAAP fully diluted weighted average shares outstanding of 207 to 212 million for both Q1 and fiscal 24. Fiscal 23 was a year of transition and we are pleased with our execution and the progress we are making as we navigate a challenging macro environment. We remain committed to delivering sustainable growth and profitability at scale, and we will continue to be disciplined with our investments across strategic priorities. We are focused on delivering long-term value to our customers, partners, employees, and shareholders. Looking ahead, we are encouraged by the steps we are taking and look forward to updating you on our progress as we move forward. The journey to $2.5 billion has been hard work and a testament to the compelling value proposition DocuSign brings to our customers. Together, we have played an important role in how the world agrees. I look forward to the future. And finally, I'll be here a little while longer, as Alan said, so no goodbyes for now. And with that, we will open up the call for questions. Operator?
Operator
Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. We ask that you please limit to one question. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Cynthia
One moment, please, while we poll for questions. Our first question comes from Brad Sills with Bank of America.
Operator
Please proceed with your question.
spk04
Oh, great. Thank you. Cynthia, congratulations on your next move. It's been a pleasure working with you. I wanted to ask one on the moderating expansion activity that you saw during the quarter. Was it a certain cohort of customer where you saw that? Was it across the board? Was it in that enterprise cohort or just the broader base? Just any color on that. you know, any segments that you might have seen that occur. Thank you.
Cynthia Gaylor
Thanks, Brad. Yeah, so I think on the expansion rates, I think it's a continuing trend that we've been talking about from over the last few quarters, which is, you know, as the book of business has grown and the macro environment has softened, the rate at which customers are expanding is is slowing, so that growth rate and expansion is slowing. And so I would say there wasn't a big change in Q4 relative to the couple quarters before, but it is a continuing trend that's putting some pressure on the top line. On the cohorts, we actually do do a lot of analysis on the cohorts, and I would say, you know, some of the cohorts are probably expanding at a slower rate, and some are moderating the rate at which they're expanding. But I'd say overall it's having the same impact. And part of it is, as we've talked about in past quarters, is a little bit of the law of large numbers. As that book of business gets bigger, you need more and more expansion dollars to move it. And so customers are still expanding. But when you look at the top line, that's probably the biggest factor kind of impacting the compression of some of those growth rates.
Brad
Understood. Thanks, Cynthia. Yeah.
Cynthia
Our next question is from Brentville with Jefferies. Please proceed with your question.
spk17
Thanks. Alan, just on the sales overhaul, can you just talk to how long you expect this to send kind of a wake turbulence through the sales organ when you feel like you kind of resume full strength? And I had a quick follow-up for Cynthia just as it relates to the billings growth decel from 13% to 2%. Can you just give us a sense of kind of what you're factoring into that? Thanks.
Heather Harwood
I'll go first. Thanks, Brent. I think on the sales force, I'd say I think we are in a significantly more stable situation than six, let alone 12 months ago. Attrition rates have slowed. We've got, I think, a pretty full team in place. Steve's done a very nice job with that. There's more better execution, better predictability. Part of what gave us the confidence to take the restructuring action was in fact that and that we could see what our sales capacity was and we felt we had a little bit of excess capacity there as well as a keen understanding of where we could de-invest and free up resources to invest elsewhere. So we're being cautious in saying there could be a little bit of disruption as some of the, particularly at the very low end, some of the business that might previously have had a little bit of human touch, we'll try to do that more strictly through a self-serve motion. But I think that should play out in a relatively quick order over one to two quarters. But I think the sales force is actually in the best place it's been. I'm representing them saying that they're incredibly energized by the roadmap. And, you know, they all have slightly larger territories now, too. So it is a very positive feel, I think, throughout the sales team.
Cynthia Gaylor
And I'll take the billions question. But before I do that, I realize I misspoke on international revenue. So just to clarify, international revenue grew 29% to $620 million. I think I said $260 million. A clarification there. On the billings question, you know, I think it's related to a couple things. One is, you know, as we talked about last quarter, we're expecting a slower start to the year. You know, I think when you look at the macro environment, you know, it certainly hasn't gotten better and you could, you know, probably sense it's maybe gotten a little bit worse. You know, and on top of that, you know, we have, you know, made some changes to the fields which we think could cause some disruption. So I think that's certainly playing into both the revenue and the billing side we're giving to the year. I'd also say we always guide to what we can see. I think we can see Q1 better than we can see the rest of the year. But given the 1% guide in Q1, we would expect that to kind of improve as we move through the year and some of the investments we may start to take hold. So I think those are some of the dynamics.
Brad
Thank you.
Cynthia
Our next question is from Jackson Ader with SBB. Please proceed with your question.
Jackson Ader
Great. Thanks for taking my questions, guys. First one on the macro environment. How does the macro environment actually impact you? Is it number of employees at your customers are coming down and so they don't need as many envelopes? I'd be surprised if it were... the DocuSign line item is like getting a bunch of scrutiny and IT budgets or something. But just given the ROI and the traditionally very quick payback, I would think that e-signature would be a place where people are actually like more willing to invest in a tough macro environment. So how do I square that?
Heather Harwood
Yeah, thanks for the question. The first thing I would say is the overall macro environment affects businesses of all sizes and their ability and willingness to spend on all kinds of software, including ours. But I don't think we're particularly more macro sensitive or less than others. In terms of the industry mix in the economy, we do have a little bit of overexposure, if you will, to real estate and a few other sectors that have been a little tougher. On the other hand, we are quite diversified and have some real strength in sectors like health and manufacturing telecommunications. So that's balancing out. In terms of the value prop, I agree with your statement. I think there's a very quick payback. I think we're seeing that. So customers, and that's also a key part of DocuSign's competitive value proposition vis-a-vis other competitors. People tend to respond fast. They're more likely to respond to an agreement. They're faster to respond, and they have a better positive experience. So overall, I think the macro environment presents some clouds for IT budgets of companies of all sizes. We're seeing maybe a little bit more vertical exposure than the average company, but are generally pretty balanced. And I think our value prop remains quite strong.
Jackson Ader
Okay. All right. Great. And then a very quick follow-up. How much of the, like, second kind of round of restructuring was factored into the preliminary margin guidance for the year that was given Cynthia on last quarter's call?
Cynthia Gaylor
Thanks for the question. So to be clear, in the outlook we provided, the most recent restructuring was not factored into that call. We were evaluating scenarios for this fiscal year as part of our annual plan and areas that we want to invest in across the strategic priorities, but that wasn't contemplated specifically at the time or based into the outlook we provided. That being said, I think as we went through the process of the annual plan, it was clear that we needed more room for investment across the key priorities. And as Alan articulated, the plan is to invest you know, in R&D in particular and innovation and kind of shift some of the investments into that initiative as well as PLG self-serve. So, you know, we were able to come a little bit above the outlook we provided. If you remember in Q3 on margin, we said, you know, at the low end of our long-term target range, which is 20% to 22%, the long-term target range, just as a reminder, is 20 to 25%, and our guide for the year is 21 to 23%. So we are going to be reinvesting, but we also, you know, increase the margin by a little bit. Got it.
Cynthia
Got it. All right, great. Thank you very much. Our next question is from Tyler Ratke with Citi. Please proceed with your question.
Tyler Ratke
Yes, thanks for taking the question. Just going back to the stales question, reorg and kind of the strategy moving forward and the move to a self-serve model. I was just wondering if you could elaborate on that and just kind of what your vision is for the company and where do you kind of make the threshold for when a sale becomes self-service? Is it at a certain deal size or maybe do you only have salespeople by industry or specialization like CLM, if you could elaborate on that. And then just a quick follow-up for Cynthia, just given that we've seen a cumulative risk of close to 20% of the workforce, I guess why wouldn't margins be higher for next year? You did about 24% EBIT margin on a non-GAAP basis here in Q4. And I think that was without a lot of the benefits you're seeing from the cost savings. So I guess why wouldn't we see higher margins than that next year, given 20% lower headcount? Thank you.
Heather Harwood
I'll take the first one. So in terms of our go-to-market, historically DocuSign has been very heavily focused on a direct sales motion for customers of all sizes. And we will retain direct sales as our principal go-to-market channel, and it's a huge strength for the company, and we certainly want to continue to improve there. But we feel we want to complement it in two areas. One is with the self-serve motion, and that's not just for little customers. That's for customers of all sizes. We just think that all customers appreciate an opportunity to self-serve for certain types of activities at all stages of their journey with us. And I'll come back to that in a second. And then third, we are really focused on maturing our partner go-to-market where we can use distributors and resellers in some international markets. We can partner with ISVs to be directly embedded in their applications. We have significant activity there, but can meaningfully improve. Let me quickly return to the self-serve piece in particular. I want to make sure that it's clear we want to stop treating digital if and when they wish. And I expect many customers will avail themselves of that. And then as a corollary, I want our sales teams to see the self-serve options as a positive complement to their activities. I think that's what we did at Google. I think that's what Robert did at Atlassian. I think that's what a lot of companies that are natively digital in their emotion do, and we have a tremendous amount of opportunity there. So that's our overall go-to-market plan. Cynthia, you want to take the second half?
Cynthia Gaylor
Sure. Yeah, so I totally understand the question. I would say Q4, the 24% margin, you know, was higher than probably what our steady rate is for a couple reasons. One is, you know, we had just gone through the fall restructuring, so that really dropped to margin. And then, in addition, the hiring in Q4 was slower than we had anticipated in the quarter. So as we kind of look into this year, you know, we see the opportunity in front of us and we want to invest into the key pillars of the strategic priorities that Alan talked about, right, in the product, in innovation, and then in PLG self-serve. And so we're really putting that money from the second restructuring back into the business to really level set, you know, against those key areas.
Cynthia
Our next question comes from George Wanek with Oppenheimer.
Operator
Please proceed with your question.
Cindy
Thank you for taking my question. Alan, maybe digging into the product bundling fraction you're seeing, can you give us some color on the adoption rates with SMBs and maybe put that in perspective of what you're also seeing from competitors?
Brad
Yeah.
Heather Harwood
So first of all, on a segment basis, and I think Cindy alluded to this, we have, first of all, a very balanced customer portfolio. So we have a significant S&B and mid-market business and a big emphasis on growing our enterprise business. And I'd say on balance, I don't know that there's a huge difference in momentum between those sectors. I know some companies are reporting particular challenges in S&B. I don't think we're seeing that. In fact, we had a some nice momentum on new accounts in particular. So I was pleased to see that. I think in terms of our, that was the segment piece. What was the other part of your question?
Cindy
Just what you're saying from a competitive, like competitive perspective.
Heather Harwood
Well, Okay. There's no question that over the last three to five years, the market's gotten more competitive. I don't know that we're seeing a material change in how competitive it is here in the last few quarters. I think we continue to be the market leader. We don't spend as much time worrying about what other people are doing. I think we want to really redefine the category and set the direction for the industry, and I think we're well on our way to doing that, and that's where we're focused from a competitive standpoint, if you will. In terms of the tactics, we are looking on pricing and packaging and at how can we be as agile as possible by segment, by country. There might be a few countries where we've gotten a little too far off the market. And so we're looking at that very carefully. I mentioned some bundling opportunities during my prepared remarks. So we think there's a lot of opportunities there. There's some enterprise license agreements. Some of our largest customers, we really want to be the ubiquitous e-signature solution for, in every instance, where they want to deploy that. And so we're in the process of both building out the product to enable that for embedding as well as direct sales and in structuring our license agreements so that that is as attractive as possible for our largest clients.
Cynthia Gaylor
One thing I would just add on the SMB, we did see some relative strength there across our business. And we ran some experiments in Q4, particularly around the bundles or around increasing number of seats. So we did see kind of a higher volume of SMB deals at lower price points. So higher volume, lower price, which we thought, especially like in NUCO, was a positive sign, as Alan mentioned. So just a little bit more color there. Mm-hmm.
Brad
Thank you.
Cynthia
Our next question is from Scott Berg with Needham and Company.
Operator
Please proceed with your question.
spk11
Hi, everyone. Thanks for taking my questions, and congrats on the strong finish to the year. I guess, Alan, I wanted to focus on product strategy going forward, because product seems to be a big theme of where you want to invest in going forward. But leveraging off your web How should we think about your product roadmap maybe over this next, I don't know, 12 to 24 months? Is it going to be more of a little small add-on solutions like what Webforms is likely to bring, at least from what my assumptions are of that product? Or is there an opportunity to see some product that's maybe a little bit more transformational, something that could give your sales and maybe bookings or billings more of an uplift going forward? Thanks.
Heather Harwood
Yeah. Actually, I think step forms has a little bit more potential than that. We're very optimistic because I think it really – it epitomizes the transformation of agreement from sort of a static representation of a traditional form to completely new customer experiences. And the other thing it does, of course, is it makes it much easier to capture all the metadata around the agreements. which is really where we're heading in the longer term. If you think about what we want to do is we want to decompose agreements into dynamic objects that can be filled both with data from the customer side and from the signer side. And web forms is the first step of that process. There's a lot more coming in the remainder of the year along those lines. So we're quite bullish on the cumulative impact of all of those launches, but obviously version 1.0 will we'll have some gaps. In terms of the transformational piece, I think I touched a little on the AI piece. We have we have a lot of opportunity there. And so we have some, we will be making some announcements on that later this spring as the beginning of a new product in that area. And over time, I think the work that we're doing now to completely revamp how we leverage AI is very exciting. So if you think about the application of AI in the agreement space, a lot of the excitement right now around ChatGPT and the competitors are around basically text generation, and that has an obvious analogy to the agreement space of drafting contracts. And we do think that's very exciting and that there's value to be captured there, and we will absolutely pursue that. But if you look at where companies actually find value from agreements, it would be more in the extraction of data and value out of the agreements as well as the search and analytics on that. And you can also apply AI to that, and that's an area where I think we are uniquely positioned to deliver a very compelling value, and we've got a number of large customers who are very excited to work with us on that type of next-generation AI activity. I don't think that's not going to hit in the next couple of quarters, but in terms of the longer-term roadmap and delivering on our vision, it's incredibly exciting and could really provide transformational growth.
Operator
Our next question is from Rishi Geluria with RBC Capital Markets. Please proceed with your question.
spk14
Oh, wonderful. Thanks so much for taking my questions. Two here. First, I wanted to start with kind of re-embracing more of your roots around self-service and PLG. I think the strategy makes a ton of sense and should absolutely help your sales efficiency as well. From a product standpoint, is there anything that you need to do to make that self-service PLG motion more intuitive or easier, especially outside of your mobile customers? If we think about even the mid-market customers, there should be a lot more software capabilities, just anything that you need to invest in or expand from a product perspective. And then I've got to follow up.
Heather Harwood
Yeah. Um, So, first of all, I think when people first hear self-serve, they think, well, don't you already have a website? Can't people order on your website? And, of course, yes, we do, and yes, they can. But what I'm talking about is a significantly more transformational effort where customers can discover, try, embrace, and really deploy products without ever realizing. engaging with a DocuSign employee, and we can then engage with them as that potential is demonstrated and expressed, and we can apply our sales forces really more efficiently. So it becomes a huge multiplier for efficiency in our sales teams, and that's the model that companies like Atlassian have pioneered over time, and very excited to apply that at DocuSign. In terms of how that applies across segments, well, it's certainly true that you can imagine an SMB customer basically remaining a purely digital customer and we would love that. But as customers grow in scope and potential and complexity, then the application of those sales resources becomes both more profitable for us and more necessary for the customer. And so I do expect a heavier sales component as you move up market. Mid-market has always been a core strength for us and it remains a really important segment. A lot of our products, you start there and you sort of grow out from there. So I'm I think that will remain a critical segment for DocuSign and very relevant for the expanded self-serve motion that I just described.
spk14
All right, wonderful. That's really helpful. And then on the international front, I recall last quarter there was kind of a talk of working closer with partners, especially in Japan, right, which is, as you know, very unique geography, especially when it comes to enterprise software. Just wondering if you can give an update specifically on your efforts in Japan and kind of building out the partner ecosystem, especially because at least it feels like your product is viewed as significantly better than the competition and there's great branding out in Japan, but a lot of the kind of manual processes that need to be modernized, they feel a little bit behind. So I'd love to kind of hear how you're thinking about the Japan opportunity and partners there. Thanks.
Heather Harwood
Yeah. We are, you know, in active discussions internally exactly how we want to pursue Japan. I'd say Germany is another market where I don't think we have fully lived up to our potential. And I agree with you. We're in a great starting position. You know, our initial forays into both of those markets were really mostly just a direct sales motion. We didn't put, I think, quite enough resources behind it and all the other functions, including product. and our administrative functions. And as you noted, in markets like Japan, the road is littered with U.S. companies that have tried to go to lower Japan. So we're certainly going to be leveraging partners there. So stay tuned. I think we'll have more to report on both of those countries during the course of fiscal 24. But right now, it's sort of in the planning and decisioning exactly how we're going to pursue our broader international strategy.
Brad
Perfect. Thank you.
Cynthia
Our next question is from Michael Turin with Wells Fargo.
Operator
Please proceed with your question.
spk16
Great. I appreciate you taking the question. I can appreciate the fact that you're already operating within the stated target range on margin, but I think some of the questions are just digging out a little bit more. It seems like you could potentially push even harder given the product-led growth background, the core efficient base of the business. So why not do that with a little bit more emphasis here? And what informs the decision around balancing reinvesting into the product versus making sure the cuts you're making are the right size where you don't have to potentially go back again and make another tough decision? Thank you.
Heather Harwood
Yeah. I'd say, first of all, we feel like we have tuned the organization pretty well at this point and reallocated resources to where we'd see the highest investment. Look, I agree with you. I think we were not sufficiently efficient from a sales and marketing perspective. I hope to make us more efficient over time. You know, until I see that, I don't want to be, as Cynthia says, we want to project what we see. But you can assume there will be a lot of emphasis on getting increasingly efficient even beyond what we have. But I'm not ready to make any of that part of our forecast at this time. But that would certainly be the hope and expectation that we can accelerate top line and improve efficiency over time.
Cynthia
Thank you.
Heather Harwood
I'd say maybe one other point on the investment piece. We feel we have a very significant opportunity, and we have been, I think, a little underinvested in innovation over the last couple of years. We had and have the market-leading product, and it remains an incredible value proposition. But I'm excited to reinvigorate that and get us to capitalize on the larger opportunity that I outlined earlier. You know, we already got some stuff coming out in Q1, and there'll be a lot more over the next three quarters, and that will position us to a growth in future years.
Cynthia
Our next question is from Josh Baer with Morgan Stanley.
Operator
Please proceed with your question.
Cynthia
Great. Thanks for the question. Alan, I think you labeled 2022 well in characterizing it as a year of change. So if 22 is the year of change, what's 2023 the year of? Is it execution, stabilization, innovation, self-serve? Like what word would you use to frame 2023?
Heather Harwood
Yeah, I think change and transition for calendar 22, fiscal 23. For this year, I think it's about setting the foundations for growth. And we are We're really leaning into that. I think we have a fantastic opportunity to capitalize on this very large TAM that we believe we're appointed at. We're the market leader in e-signature and in CLM. We are the best position to capitalize on that opportunity, and we just need to go execute. So that's the job this year. It's not quite... as much of a turnaround transitional year as last year. It's much more of a foundation and preparation for growth building year.
Cynthia
That's great. And then one other one, just thinking about direct versus self-serve versus partner channels, what's the mix of business today and where do you want that to go in three years?
Heather Harwood
Yeah, I mean, I think we've reported in the past that 13% of our business is digital. But a lot of that is shaped by the fact that there's only a small number of products and options that you can buy on our website. And so we've been pushing actively, even relatively small customers, to have to order from a sales rep, which I will admit I was slightly shocked to learn when I joined. Our goal is to dramatically grow all the pieces of the business. And I'm not sure it's going to be as meaningful a year from now to talk about what's digital versus what's direct because in a lot of cases, a customer may order some things digitally and may talk to their sales rep about other things. And so then the whole thing becomes a little bit complicated. That's clear. From a partner perspective, I don't think we've externally reported on our partner mix. In terms of partner touched, it's a meaningful minority of our business. In terms of directly partners sold, that's a little smaller. I think both of those need to grow meaningfully. We don't have, I alluded to this in my comments, just as one example, There's a big opportunity to embed our market-leading signature and agreement workflow products directly into third-party products. We do some of that today, but we're not set up well to serve developers today. So we've got a couple quarters of work to do to really provide a world-class set of componentized tools that allow developers to pick and choose from all the things we have to create the most compelling agreement experiences inside of their products. That's going to be a really important growth driver, but I'm not prepared at this time to comment on the exact magnitude.
Brad
Great. Thank you.
Cynthia
Our next question is from Kirk Mattern with Evercore ISI.
Operator
Please proceed with your question.
spk13
Thanks very much. Alan, I was wondering if you could just talk about sort of the industry strategy or the vertical strategy. both in terms of what you're doing with the sales organization, meaning are you going to turn some of that sort of industry focus over to partners, and is there a way to build more sort of industry functionality into the product so it's just product-led in that respect? I was just kind of curious if you could talk about the strategy on that basis. Thanks.
Heather Harwood
Yeah, it's a great question. I would say we're at the earlier phases of our verticalization strategy. We've to tools for the real estate industry. I think they are best in class and will continue to tweak and improve on that. More recently, we've done some, I think, really nice work, for example, in the healthcare space where, you know, we've added some compliance with a variety of federal regulations that enables our products to be used for healthcare applications, and that's driven some really nice growth. I think we have opportunities And this is an active part of our product planning to basically have our products sufficiently componentized that we can easily create custom workflows that are tailored to individual industries. So, I mean, an obvious example, if you have something for mortgages, it's not that different from a loan application. It's not that different from an automotive car purchase. And those are all sectors that we already have business in and where I think we have opportunities to create deeper vertical agreements. Another example is government, and so we have big opportunities in the government space as well. But I'd say we've got some work to do to really fully capitalize on the verticalization opportunity that you alluded to, which I totally agree with.
Brad
Thank you.
Operator
Our last question is from Jake Roberge with William Blair. Please proceed with your question.
Jake Roberge
Hey, thanks for taking my questions and congrats on the results. Alan, you've talked a lot about the reoptimization of those R&D resources. Is that more about going deeper into some of your less mature products that have big opportunities like CLM, or is it about building the self-serve and more frictionless e-signature capabilities that you've talked a lot about? And which of those opportunities do you see being larger as we move forward?
Alan
Mm-hmm.
Heather Harwood
It's really across all those. So we are absolutely directing investment dollars towards accelerating our product growth motion. And so that absolutely. But in addition to that, we direct additional investment dollars into You know accelerating our agreement workflow roadmap into the CLM space and into our client migration I think many of you are aware that that we're in the process of migrating our suite to Microsoft Azure a very strong relationship with Microsoft and this is a really important year for for that migration to move some of the Once we get there, we get more scalability. We can do more of the verticalization that was referred to. We can better meet local requirements, international markets. And so it's just, for a variety of reasons, a really important migration. It won't be completed this year, but we will really get going in a material way here in fiscal 24. So those are all areas for incremental product investment beyond the self-serve PLG side.
Jake Roberge
Okay, great. That's helpful. And then just wanted to double click on the product bundles performing better than expected during the quarter. Can you provide some specific examples of those bundles and which products really stood out in terms of customer adoption?
Heather Harwood
Yeah. I mean, very quickly, I'd say the most successful one, and I alluded to this earlier, was what we call a new co-bundle, so a new customer acquisition, where we bundled our core signature product with a couple of key options, SMS and single sign-on, and we had some FAQs. a baseline services offering to accelerate onboarding. And that was a really nice bundle. Some of our highest value features that we feel are most highly correlated with both customer satisfaction and renewal and getting people off to a good start. It really is helpful for renewal as well. So I think that was the most successful work really well, and we need to do more of that.
Cynthia
Great. Thanks for taking my questions.
Heather Harwood
Okay, just quick, let's just wrap up here. Thank you all for joining and for your support as we continue to evolve our business. In closing, while this past year was challenging, the changes we're making are vital to driving our long-term growth and success. I think we delivered a solid finish to the year, and we're prioritizing our investment focus on the areas which we believe will drive increased value for our customers, employees, and shareholders. I'm really excited about the steps we've taken to accelerate innovation, improve and diversify our go-to-market, and support our vision of smarter, easier, and trusted agreements. I look forward to sharing more with all of you as the year progresses. Thank you.
Operator
This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.
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