DocuSign, Inc.

Good afternoon, ladies and gentlemen. Thank you for joining DocuSign's third quarter fiscal year 24 earnings conference call. At this time, all participants are in 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 the call. If anyone should require operator assistance during a 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.

Thank you, Operator. Good afternoon, and welcome to DocuSign's Q3 Fiscal Year 2024 Earnings Call. I'm Heather Harwood, DocuSign's Head of Investor Relations. Joining me on today's call are DocuSign's CEO, Alan Teegerson, and our CFO, Blake Grayson. The press release announcing our third quarter fiscal year 2024 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?

Thanks, Heather, and good afternoon, everyone. DocuSign's third quarter operating results reflect progress on our initiatives to expand beyond e-signature into agreement management, and our financial performance underscores our ongoing focus on driving profitability and sustaining healthy free cash flow. As I reflect on our journey over the last 12 months, the three key pillars of our strategic vision remain the same. First, to accelerate innovation towards agreement management, which we believe will further expand market opportunity. Second, improving the reach and efficiency of our omnichannel go-to-market efforts. And third, strengthening our financial and operational efficiency. Now, before we discuss each pillar in detail, let me first highlight this quarter's financial results. Total Q3 revenue came in at $700 million, up 9% versus prior year. We're particularly pleased with the improvement in our overall profitability of this quarter against persistent macro headwinds and belated customer caution. Specifically, our Q3 non-GAAP operating margin came in at 27%, a 400% basis point increase versus prior year, and non-GAAP operating income grew 27% year-over-year to 187 million. It also generated record-free cash flow in Q3, coming in at 240 million, up significantly versus the prior year. We're focused on strengthening our profitability while making balanced investments in areas with strong long-term growth opportunities. We're also seeing encouraging signs of business stabilization with improvement in some metrics, notably customers with annualized contract value greater than 300K. Blake will expand on the metrics further in his remarks. With respect to our first pillar, accelerating product innovation, our focus is twofold. First, we continue to improve our core e-signature product capability. In Q3, DocuSign became the exclusive e-signature provider for Microsoft's PowerPage integration making it easy for website makers to incorporate signatures and forms without code, improving the client signing experience, and opening the door to building pre- and post-signature workflows. In November, we also launched a WhatsApp integration for eSignature. In an internal comparative study, we found that agreements delivered via WhatsApp are signed nearly seven times faster than those sent via email. Given the ubiquity of WhatsApp globally, it's an important update to bring eSignature to markets outside the U.S. In addition, IDC recognized DocuSign as a leader in its 2023 eSignature assessment. DocuSign continues to hold the leadership position of IDC for eSignature based on having a complete portfolio of solutions for customers. And we're seeing existing customers grow and expand their use cases. Ants Group, which is a Michigan-based wealth management firm, is using eSignature to deliver a fully digital experience for its clients who have a proprietary mobile app and is expanding their use of DocuSign products with Notary, SMS, Identity Verification, and Monitor. Our APIs and strength and compliance made DocuSign the best choice for Ants, and they've made DocuSign the standard across their entire organization, which will approximately double their use of our products. Second, we're also investing towards broadening our value proposition beyond e-signature and into agreement management. In Q3, we shift embedded agreements that deliver a seamless signing experience directly on our customers' websites and applications. In addition, we launched Microsoft Power Automate for the generation of personalized, professional-looking documents for signing directly from Microsoft Power Automate flows. We also launched foundational features and functionality that help us expand beyond e-signature into wide-scale agreement management. These features deliver customer delight and remove friction from all aspects of the agreement process. We see the success of CLM as a proof point that there are broader agreement management use cases to address for customers of all sizes. CLM continues to grow well, particularly with North American enterprise customers. And for the fourth year in a row, our CLM solution was recognized as a leader by Gartner in contract lifecycle management, noting our strong market understanding, product strategy, and roadmap vision, including upcoming generative AI enhancements. This quarter, we expanded a relationship that began more than five years ago with Ricoh USA, who's the leader in workplace innovation. Rico began using DocuSign's new signature and has added CLM as part of his transformation into a digital services company. Our AI solution will help Rico streamline and enhance search and review of executed customer contracts with actionable insights to better serve its customers. Thank you to our partners at Spalding Ridge who are helping to strengthen our commitment and partnership with Rico. As we look ahead, we envision serving similar customer needs not addressed by CLM via a broader agreement management platform designed for all of our customers in all segments. We are previewing with select customers now, and we'll have much more to share on our product roadmap and strategic vision at our momentum user conference in April 2024. Across both our e-signature core and future agreement management products, We believe our investment will lead to even further differentiation in a competitive market. We're encouraged by steady win rates and excited for the impact we can create for customers. This past quarter also demonstrated execution against our second pillar, improved omnichannel go-to-market, where we gained traction across our direct sales, digital, and partner engagement. Our international business spends all channels as an important part of our addressable market. It's really an untapped opportunity for DocuSign expansion. In Q3, our international revenue grew approximately three times faster than our North American business. We also saw traction in the adoption of our identity education solution, which meets stringent regulatory standards in the EU and elsewhere. And in Q3, we launched a Japanese localized version of our CLM product. We recently launched WhatsApp integration, also highlights our international ambitions. Our digital channel once again grew at a faster rate than our direct business during the quarter, a strong sign that our product-like growth initiative continues to drive new customer acquisition and top-of-funnel activity. We continue to optimize our site and remove friction from the try-and-buy journey while creating a more personalized experience with improved localization. We've seen particular strength in new customer acquisition in our international markets, as well as improved conversion rates in the trial-to-paid license purchase conversion rates. Our trusted brand and product strength continue to be assets for our direct sales team. Mountain America Credit Union, one of the biggest credit unions in the U.S., has reduced the time it takes to close a credit card application by 30% by integrating DocuSign with its proprietary loan origination system. Mountain America switched to DocuSign from a different electronic signature provider, in part because our strong brand reputation inspires confidence from its members, but also because our rich catalog of best-in-class APIs give its developers the flexibility to create solutions that are customized to its exact needs. That is enabling Mountain America to deliver a seamless, minimal click experience that aligns with the standards its members expect from their financial institutions. An important pillar of our go-to-market plan is strengthening our partner ecosystem. In October, we hosted our first ever partner day. It was fantastic to meet with our system integrators, resellers, and software vendors from around the world, sharing our commitment to growing our business together. As an example, the ISV embed pay-as-you-go initiative we announced in Q2 is accelerating and driving new customer wins. Before I pass it to Blake, I want to address some progress on our third strategic pillar. Our companies focus on financial and operational efficiency. In the quarter, we delivered record operating margin and free cash flow. While we continue to invest for long-term growth, we will also continue to be strong financial stewards of the business. We still have a lot of work to do, but I am pleased with our progress over the past 12 months. I have more confidence than ever in the value we can create for our customers in our business and the scale and strength of our customer base. We're in the early stages of our journey to expand beyond e-signature into agreement management, but there is very concrete customer validation of the market opportunity and meaningful progress towards our goals. Thank you to the DocSign team who's inspired me with their commitment to this transformation. With that, let me turn it over to Blake.