DocuSign, Inc.

Good afternoon, ladies and gentlemen. Thank you for joining DocuSign's first quarter fiscal year 2025 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 conference 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 the conference, please press star zero. I will now pass the call over to Matt Sonnenfeld, Interim Head of Investor Relations. Please go ahead.

Thank you, Operator. Good afternoon, and welcome to DocuSign's Q1 Fiscal 2025 Earnings Call. Joining me on today's call are DocuSign's CEO, Alan Teegerson, and CFO, Blake Grayson. The press release announcing our first quarter 2025 results was issued earlier today and is posted on our Investor Relations website, as well as a published version of our prepared remarks. Before we begin, 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 product innovation 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 accept 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 billings. 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 the quantitative reconciliation of those figures, please refer to today's earnings press release, which can be found on our website at investor.docusign.com. I'd like to turn the call over to Alex. Thanks, Matt, and good afternoon, everyone.

We're off to a strong start in fiscal 2025. We launched a significant expansion to our company strategy with our announcement of the DocuSign Intelligent Agreement Management Platform. We also announced the acquisition of Lexion to accelerate the AI powering our platform. We continue to make clear progress on our three strategic pillars, accelerating product innovation, improving our omnichannel go-to-market capabilities, and increasing operating and financial efficiency. Our core business showed ongoing signs of stabilization. In Q1, revenue was $710 million, up 7% year-over-year. Dollar net retention improved versus the fourth quarter. Q1 non-gap operating margin increased approximately two percentage points, to 28.5% versus 26.6% last year. Free cash flow generation remained strong, improving 8% year-over-year to $232 million and resulting in a 33% free cash flow margin. Strong cash flow gives us confidence to continue investing in our growth while opportunistically returning capital to shareholders, including through the new $1 billion buyback authorization that we announced today. Blake will share further business and financial details in his comments. Over the last 18 months, we've tightened operating efficiency, stabilized the business and customer relationships, and launched a new platform that will support long-term growth. In Q1, we made a number of announcements that showcase our commitment to increase product innovation for customers. At our flagship customer event, Momentum 24, we outlined a bold new vision for Intelligent Agreement Management and shared our product roadmap for that vision. We believe the launch of DocuSign Intelligent Agreement Management is a landmark moment in the company's transformation. DocuSign Intelligent Agreement Management, or DocuSign IAM, addresses customer pain points across the agreement journey. companies experience universal friction and frustration in managing agreements, and the costs add up. According to a recent study by Deloitte, poor agreement management systems and practices cost nearly $2 trillion in global economic value annually and cost workers billions of hours in lost time. With DocuSign IAM, customers can transform agreement data into insights and actions. Our new platform enables customers to create, commit to, and manage agreements all in one place. Our new capabilities help customers improve contract review cycles, streamline workflows, and boost productivity organization-wide. The DocuSign IAM platform is a significant departure from our past approach of only offering standalone products. The platform combines our current products including our market-leading e-signature and CLM products with new platform services that customers have asked for, including DocuSign Maestro, our new agreement workflow builder to automate the creation of agreements without using code. With Maestro, customers can configure custom agreement workflows in minutes, combining DocuSign capabilities like e-signature, ID verification, and data verification with third-party apps, to connect to their business processes. Second, DocuSign Navigator allows you to store, manage, and analyze a customer's entire library of accumulated agreements. This includes past agreements signed using DocuSign eSignature, as well as non-DocuSign agreements. Navigator leverages AI to transform unstructured agreements into structured data. making it easy to find agreements, quickly access vital information, and gain valuable insights from agreements. Third, the DocuSign App Center to help our customers easily integrate third-party applications into their agreement workflows without any coding or expensive custom development. This is particularly powerful for DocuSign admins and process builders who can easily configure IAM for their unique agreement management needs At launch, our App Center features commonly used apps from Salesforce, ServiceNow, Hotspot, Stripe, and document sharing services like Google Drive and Microsoft's OneDrive and SharePoint. In addition to creating new platform services, we also unveiled application suites for specific functions within organizations. DocuSign IAM launched starting with IAM for Customer Experience, IAM for Sales, and IAM core for general purpose usage. In time, we will also launch IAM applications for legal, procurement, and HR teams, as well as for specific industry verticals. On May 30th, DocuSign IAM launched with availability for our small and mid-market customers in the U.S., with select plans also available in Canada and Australia. DocuSign IAM will roll out to more customers and more geographies over the next year. As we execute this rollout, we're focused on increasing flexibility for customers. IAM unleashes the ability for companies of all sizes to manage their agreements, significantly expanding the agreement management market. CLM, which remains our sophisticated enterprise offering, showed us the importance of giving customers an advanced set of workflows and deep agreement intelligence. IAM takes the learnings from CLM and applies them to a platform with broader agreement functionality that's accessible for any size customer to any member of their organization. AI is central to our platform vision and we're thrilled to welcome Lexion to the DocuSign family. Lexion is a proven leader in AI-based agreement technology, which significantly accelerates our IAM platform goals. We maintain a high bar for acquisitions. And Lexion stood out due to its sophisticated AI capabilities, compatible technology architecture, and promising commercial traction with excellent customer feedback, particularly in the legal community. Additionally, we're bringing exceptional talent and strong AI leaders into DocuSign. The acquisition of Lexion marks an important step forward in our platform journey. Let's turn to our omnichannel go-to-market, our second strategic pillar. In Q1, momentum was solid across the direct, partner, and digital routes to market. Overall customer growth remained consistent with Q4 at 11% year-over-year. Envelope sent and contract utilization both saw modest year-over-year improvements for the second quarter in a row. International and CLM revenue growth continued to meaningfully outpace total revenue growth. The partner channel continued to show improvement with strong growth from key partners like SAP and Microsoft. For example, DocuSign is one of the first co-pilot integrations in 365 and Microsoft Dynamics and Salesforce Sales Cloud, creating access to agreements in productivity and sales applications. Across all channels, we're focused on creating global engagement with customers. Behind a new DocuSign brand that's focused on bringing agreements to life, we welcome thousands of customers and partners to our largest customer event of the year, Momentum 24. This flagship New York event was the kickoff to a larger Momentum series spanning eight events in five continents. This engagement paves the way for rolling out localized versions of DocuSign IAM in our largest international markets. At these events, we recognize several customers who stand out for their innovation and business impact by deploying DocuSign capabilities within their companies. In sales and customer experience use cases, JP Morgan's commercial bank services has quickened its lending process by over two weeks across its base of clients. And Red Hat now has 7,000 users on DocuSign CLM, sending over 30,000 sales-related uploads for signature annually. Customers using DocuSign in procurement and legal use cases stand out as well. Meta used DocuSign to analyze over 1 million contracts across customers, partners, and suppliers. Santander UK transformed its lending fulfillment process in its corporate and commercial bank, including reformatting its facility agreements through automation. And FlowServe, one of the world's leading providers of fluid motion and control panel products and services, manages over $1.4 billion in contracts through DocuSign CLM. What's exciting is that this is just the beginning for DocuSign, helping customers navigate their agreement management journeys. In closing, Q1 was an important step forward as we reimagined DocuSign. With intelligent agreement management, we're leveraging our market leadership in e-signature and CLM to define a broader market opportunity by solving age-old customer problems that have never been addressed. We believe IAM unlocks a new wave of value for customers as the system of record for agreements and a new phase of growth for DocuSign. Thank you to our entire team for your passion and dedication to realizing our vision for customers. We're proud of what we've accomplished in recent months and quarters, and we're just getting started.