Docusign Q4 2025 Earnings Report

Docusign EPS Results

• Actual EPS: $0.86
• Consensus EPS: $0.84
• Beat/Miss: Beat by +$0.02
• One Year Ago EPS: $0.76

Docusign Revenue Results

• Actual Revenue: $776.25 million
• Expected Revenue: $760.94 million
• Beat/Miss: Beat by +$15.31 million
• YoY Revenue Growth: +9.00%

Docusign Announcement Details

• Quarter: Q4 2025
• Date: 3/13/2025
• Time: After Market Closes
• Conference Call Date: Thursday, March 13, 2025
• Conference Call Time: 5:00PM ET

Docusign (NASDAQ:DOCU), Inc. provides electronic signature solution in the United States and internationally. The company provides e-signature solution that enables sending and signing of agreements on various devices; Contract Lifecycle Management (CLM), which automates workflows across the entire agreement process; Document Generation streamlines the process of generating new, custom agreements; and Gen for Salesforce, which allows sales representatives to automatically generate agreements with a few clicks from within Salesforce. It also provides Identify, a signer-identification option for checking government-issued IDs; Standards-Based Signatures, which support signatures that involve digital certificates; Monitor that uses advanced analytics to track DocuSign eSignature web, mobile, and API account; Notary which enables notaries public to conduct remote online notarization transactions; and Web Forms, a web forms that quickly draft agreements using pre-populated data from completed forms or external systems via APIs. In addition, the company offers Rooms for Real Estate that provides a way for brokers and agents to manage the entire real estate transaction digitally. Signature and CLM are FedRAMP, an authorized version of DocuSign eSignature for U.S. federal government agencies; and life sciences modules that support compliance with the electronic signature practices. The company sells its products through direct and partner-assisted sales, and digital self-service purchasing. DocuSign, Inc. was incorporated in 2003 and is headquartered in San Francisco, California.

Docusign Q4 2025 Earnings Call Transcript

Key Takeaways

• Q4 revenue of $776 million grew 9% year-over-year and full-year revenue reached $3 billion, up 8%, reflecting continued top-line momentum.
• Dollar net retention improved to 101% in Q4, the highest level in six quarters, driven by stronger gross retention and rising customer usage.
• The newly launched Intelligent Agreement Management (IAM) platform swiftly became the fastest-growing product in DocuSign history, representing over 20% of direct-channel SMB deal volume in Q4 and rolling out globally and into enterprise segments.
• Profitability gains continued with a 28.8% non-GAAP operating margin in Q4 and $920 million in free cash flow for fiscal 2025, of which nearly 75% funded $684 million in share repurchases.
• Fiscal 2026 guidance targets ~5% revenue growth (midpoint), with headwinds from foreign currency and ongoing cloud migration expected to moderate near-term top-line expansion despite accelerating billings.

Presentation

[Operator]

afternoon, ladies and gentlemen, and thank you for joining DocuSign's Fourth Quarter Fiscal Year twenty twenty five Earnings Conference Call. As a reminder, this call is being recorded and there will be available for replay from the Investor Relations section of the website following the call. I will now pass the call over to Matthew Sonnefeldt, Head of Investor Relations. Please go ahead.

[Matt Sonefeldt, Head - Investor Relations at DocuSign]

Thank you, operator. Good afternoon, and welcome to DocuSign's Q4 fiscal twenty twenty five earnings call. Joining me on today's call are DocuSign's CEO, Alan Tigason and CFO, Blake Grayson. The press release announcing our fourth quarter fiscal twenty twenty five results was issued earlier today and is posted on our Investor Relations website along with 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.

[Matt Sonefeldt, Head - Investor Relations at DocuSign]

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 except as required by law, we assume no obligation to update these statements in light of future events or new information.

[Matt Sonefeldt, Head - Investor Relations at DocuSign]

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 a quantitative reconciliation of these figures, please refer to today's earnings press release, which can be found on our website at investor.docusign.com.

[Matt Sonefeldt, Head - Investor Relations at DocuSign]

With that, I'd like to turn the call over to Alan.

[Allan Thygesen, Chief Executive Officer at DocuSign]

Thank you, Matt, and good afternoon, everyone. Fiscal twenty twenty five was a transformative year for DocuSign, led by the introduction of Intelligent Agreement Management or IAM. Our vision is that DocuSign IAM establishes a new system of record that transforms how organizations create, commit to and manage their agreements in a full suite AI powered end to end platform. During the year, we also improved the performance of our business, building a strong foundation to add greater customer value and drive future growth. Q4 revenue was $776,000,000 dollars up 9% year over year and fiscal twenty twenty five revenue was $3,000,000,000 up 8% year over year.

[Allan Thygesen, Chief Executive Officer at DocuSign]

I'm momentum was strong and fundamentals across the core business continued to improve with dollar net retention increasing to 101% in Q4. In addition, we produced strong profitability with 29% non GAAP operating margins in Q4 and 30% of fiscal twenty twenty five, both significant increases from fiscal twenty twenty four, reflecting continued progress in our commitment to improving efficiency, while prioritizing investment to reaccelerate growth. As we look to fiscal twenty twenty six, we're focused on increasing the value that we deliver to DocuSign customers as the world's leading agreement platform. We will continue to execute across our three strategic pillars, accelerating product innovation through an ambitious AI led product roadmap, involving our three routes to market and leveraging operating efficiency gains to invest in future growth. Let's dive deeper into why the future is bright.

[Allan Thygesen, Chief Executive Officer at DocuSign]

Turning first to innovation. Last spring, we introduced IAM at our momentum event, then rolled the platform out to our sales led small and mid market customer segment in The United States, Canada and Australia. At the end of the year, we launched departmental level deployments to enterprise customers, while also opening up I'm availability globally. The initial launch delivered DocuSign Navigator, our intelligent agreement repository DocuSign Maestro, our automated workflow builder and the DocuSign App Center, where ISV partners deliver third party apps to customers. We followed that launch by releasing DocuSign for developers to support our developer ecosystem.

[Allan Thygesen, Chief Executive Officer at DocuSign]

And through the acquisition of Lexion, we integrated additional powerful Agreement AI capabilities. Today, I and customers are using Agreement AI to streamline document review and editing, extract critical insights, verify parties and build workflows integrated with third party applications. Some I'm customers have reduced their contracting cycles by up to 75%. You can see our full list of recent product releases in our earning release. We hope you can join us at our April Momentum Customer Conference and Partner Day in New York, where we'll share our ambitious fiscal twenty twenty six product roadmap featuring agreement AI, innovative new workflows and expanded ecosystem and powerful new capabilities for enterprise customers, all with the goal of becoming the agreement system of record.

[Allan Thygesen, Chief Executive Officer at DocuSign]

Within our omni channel go to market pillar, I first want to highlight I'm strong momentum. In Q4, just the second quarter post launch to our small and mid market customers, I'm represented a high single digit percentage of in quarter deal volume for the direct channel at over 20% of direct new customer deals. Customer demand continues to exceed our expectations, indicating strong product market fit in this segment. In fact, I'm has quickly become the fastest growing new product in DocuSign's history. Our sellers are sharing the I'm vision with all customers and approaching the renewal process as a natural opportunity for customers to start their I'm journey.

[Allan Thygesen, Chief Executive Officer at DocuSign]

Metro Credit Union is using Maestro to optimize member account maintenance workflows, reducing the time required to process automated payment forms from five minutes to just a few seconds, saving nearly fifty hours of work each month. Metro Credit Union is an enterprise I'm deployment driven by our ecosystem partner, Sandbox Banking, an Encino company and trusted fintech integration provider in our app center. The HR team at Duncan Family Farms, a multi regional agricultural company, is building Maestro workflows integrated with our WhatsApp capabilities to onboard multinational workers and easily set up low friction direct deposit. Work that previously took days now gets done in minutes. Customer engagement also continues to increase.

[Allan Thygesen, Chief Executive Officer at DocuSign]

The typical I'm customer now has approximately 4,000 contracts uploaded into navigator. This highlights the scale of challenge companies face with agreements and demonstrates the value I'm creates by transforming this complexity into actionable insights. User adoption of I'm also continues to rise. Monthly cohort data shows consistent growth in usage, particularly for Navigator as customers deepen their engagement with the platform. Beyond I'm we continue to drive improvement across the core business.

[Allan Thygesen, Chief Executive Officer at DocuSign]

In Q4, our dollar net retention rate once again improved, rising to 101, an increase of more than two percentage points from Q4 of fiscal twenty twenty four and the highest level in six quarters. Dollar net retention continues to benefit from improved gross retention and solid customer usage trends. We also saw sustained momentum in new customer growth at 10% year over year to nearly 1,700,000 customers. International and digital growth both continue to outpace the overall business and represent significant opportunities in the long term. Digital self-service revenue growth accelerated for the second straight quarter, a reflection on the improvement in our self-service capability.

[Allan Thygesen, Chief Executive Officer at DocuSign]

And the partner channel's contribution to the business continued to increase in Q4 and fiscal twenty twenty five, leveraging gains we've made with technology partners like Microsoft, SAP and Salesforce, as well as growing interest from independent software vendors and global system integrators. We continue to generate growth opportunities in our core business. Avis Budget Group, a leading global car rental company is using DocuSign to accelerate agreement generation, enhance collaboration, improve productivity and more effectively manage its supply chain. Our Gartner recognized DocuSign CLM product remains a market leader and top choice for customers with sophisticated enterprise workflows. Cognizant Technology Solutions, one of the world's leading professional services companies for creating digital solutions, is deploying CLM across its organization to streamline agreement processes, improve efficiency, mitigate risks and create AI driven workflows.

[Allan Thygesen, Chief Executive Officer at DocuSign]

In our direct sales channel, we have strong I'm momentum for small and medium sized customers. This segment represents a large opportunity for growth and customer impact in fiscal twenty twenty six, and it's where we expect the majority of near term sales and adoption. This year, our direct sales team will have greater ability to sell I'm across more SKUs and solutions, while also focusing on more consultative solution selling, resulting in greater upsell opportunities. In parallel, we'll continue to evolve both product and go to market for enterprise customers. In fiscal twenty twenty six, we will continue to focus on departmental level use case adoption within enterprises.

[Allan Thygesen, Chief Executive Officer at DocuSign]

Also a strong partner channel will continue to support and contribute to growth with enterprise customers. We're excited by the several early I'm enterprise customer wins after the initial Q4 launch. We'll also to continue to invest in our self-service channel to make it easier for customers of any size to discover, buy and manage our products digitally. In April, our larger direct customers will be able to add more capacity and renew their contracts via self serve. And soon after, we'll unlock the ability for new and existing customers to buy I'm standard and professional plans directly from DocuSign.com in The United States, Canada, France, Germany, The UK and Australia.

[Allan Thygesen, Chief Executive Officer at DocuSign]

Driving greater efficiencies and effectiveness across our sales and marketing efforts remains a large focus this year. In fiscal twenty twenty five, we made substantial improvements in our operating efficiency pillar. Our full year operating margin increased by four points and by nearly 10 points over the past two years. We've also become significantly more cash flow generative over the past two years, producing over $900,000,000 in free cash flow and deploying nearly 75% of it back to shareholders in share repurchases. In fiscal twenty twenty six, our priority is to retain the profitability gains we've made during the past two years, while making the necessary investments to accelerate growth.

[Allan Thygesen, Chief Executive Officer at DocuSign]

Beyond fiscal twenty twenty six, as growth increases, we believe we will create further profitability and margin gains, while driving towards our most important long term financial goal of reaccelerating to sustainable double digit top line growth. Blake will provide more detail about our fiscal twenty twenty six outlook in his remarks. In closing, DocuSign made incredible progress in fiscal twenty twenty five, and we're encouraged by customer enthusiasm about the I'm platform. With I'm we're building an AI powered end to end system of record that operates at scale and enables organizations of all sizes to manage their agreements and create value from their agreement data. I want to thank the entire team for their commitment and hard work in increasing the pace and scale of innovation at DocuSign.

[Allan Thygesen, Chief Executive Officer at DocuSign]

The past year marked a turning point for DocuSign and we're well positioned to pursue the significant opportunity that lies ahead. Now, I'll turn it over to Blake to discuss our financial results. Thanks, Alan, and good afternoon, everyone.

[Blake Grayson, Chief Financial Officer at DocuSign]

In fiscal twenty twenty five, we focused on stabilizing and improving our core business, while building a foundation for future growth through our three strategic pillars: accelerating product innovation, strengthening our omni channel go to market capabilities and increasing our operating efficiency. Q4 results delivered substantial progress towards these initiatives. The core business once again improved with both a rising dollar net retention rate and continued growth in customer usage, while IAM maintained strong early performance in both product delivery and customer adoption. We also continue to drive significant gains in profitability from an efficiency focus across the company. Q4 total revenue was $776,000,000 and subscription revenue was $758,000,000 both up 9% year over year, slightly higher than our full year fiscal twenty twenty five growth rates of 8%.

[Blake Grayson, Chief Financial Officer at DocuSign]

Q4 billings were $923,000,000 up 11% year over year and full year fiscal twenty twenty five billings were up 7% year over year. Outperformance in Q4 billings relative to our forecast was driven primarily by three factors. First, approximately half of the beat was driven by higher early renewals, including those influenced by increasing consumption trends where customers add extra capacity before their existing contract expires. That dynamic also drove some of the Q4 revenue outperformance versus our forecast. The remaining half of the billings beat were driven by the other two factors, higher I'm billings, as well as more deals shifting to annual billing terms.

[Blake Grayson, Chief Financial Officer at DocuSign]

While we invoice the vast majority of contracts upfront and annually, we saw the rate increase slightly in Q4, which impacts current quarter billings. As it relates to early renewals, we are making a concerted effort in fiscal year twenty twenty six to focus our go to market cycles more deeply on those with expansion opportunities and drive higher on time renewals for those without expansion. The dollar net retention rate improved to 101% in Q4, up from 100% in Q3 and from the historical low of 98% in Q4 of fiscal twenty twenty four. Improvements in gross retention continued to be the primary driver of overall DNR improvement. Over the past eighteen months, we've put a growing focus on improving our engagement with customers through better business operations, sales compensation design and an improved solution selling motion.

[Blake Grayson, Chief Financial Officer at DocuSign]

We are proud of the progress we have made this year in DNR and we recognize that we have remaining opportunities for improvement. Also, dollar net retention benefited from consistent year over year growth in both envelope cent and consumption. Customer consumption, a measure of contract utilization, increased year over year in Q4 in nearly every industry vertical and customer segment. We expect dollar net retention to be flat in Q1 of twenty twenty six and then moderately improved throughout the year based on both incremental improvements in gross retention, as well as the growing contribution from IAM upsell opportunities. In Q4, total customers grew 10% year over year approaching 1,700,000.

[Blake Grayson, Chief Financial Officer at DocuSign]

Our continued momentum in customer growth highlights the value of investing in diverse routes to market and geographies. Additionally, we continue to believe that the breadth and scale of our customer base provide a strong foundation for the continued growth of the I'm platform. The number of large customers spending over $300,000 annually increased both year over year and quarter over quarter to eleven thirty one in Q4. This was our strongest quarter for large customer growth in two years. In addition, investments in our self-service motion continue to deliver strong results.

[Blake Grayson, Chief Financial Officer at DocuSign]

In Q4, digital revenue growth accelerated for the second consecutive quarter on the back of initiatives to make it easier for customers to self-service account upgrades and grow their business with DocuSign. In fiscal year twenty twenty six, self-service and PLG programs will remain an investment focus area to reduce friction and improve the customer experience across all customer sizes and segments, including those that historically were sales led. As we continue to make gains in self-service motions, it provides us with an opportunity in fiscal twenty twenty six to reinvest in higher value sales motions and IAM platform development. Progress in self-service allows us to continue evolving our go to market motion, create additional sales capacity and provide increased future operating leverage. As Alan mentioned, we are seeing encouraging signs of strong initial customer demand for the I'm platform.

[Blake Grayson, Chief Financial Officer at DocuSign]

In Q4, a high single digit percentage of direct customer deal volume included I'm representing a low single digit percentage share of our total subscription recurring revenue book of business. We expect this I'm contribution to grow this fiscal year and anticipate it representing a low double digit percentage share of our total subscription recurring revenue book of business by Q4 of fiscal twenty twenty six. International revenue in Q4 represented 28% of total revenue and grew 12% year over year. With improved stability and the launch of IAM in North America, we are seeing a changing dynamic across geographies. The domestic U.

[Blake Grayson, Chief Financial Officer at DocuSign]

S. Business has started to reaccelerate, while the international business, which is still growing faster on a relative basis, encountered growth headwinds in fiscal twenty twenty five. The Q4 launch of IAM outside of North America, where we will refocus our attention on upsell opportunities within our installed base, combined with a stronger partner channel, creates a significant long term international growth opportunity that we remain excited about in fiscal twenty twenty six and beyond. Although it is still early for I'm internationally, Q4 I'm deal volume in Europe and Latin America combined were up six times from Q3. Turning to the financials, our focus on operating efficiency initiatives drove strong results this quarter and in fiscal twenty twenty five.

[Blake Grayson, Chief Financial Officer at DocuSign]

Non GAAP gross margin for Q4 was 82.3%, down approximately 20 basis points from the prior year as benefits of higher revenue during the quarter mostly offset the impact of additional cloud migration costs. For fiscal twenty twenty five, non GAAP gross margin was 82.2%, also down slightly on a year over year basis. As discussed last quarter, gross margins have been impacted due to the ongoing cloud infrastructure migration, resulting in additional expenses associated with this transition. We expect a larger gross margin impact in fiscal twenty twenty six as we complete the bulk of that migration in fiscal twenty twenty six before easing in fiscal year twenty twenty seven and beyond. Non GAAP operating income for Q4 was $224,000,000 up 25% year over year resulting in a 28.8% operating margin.

[Blake Grayson, Chief Financial Officer at DocuSign]

Q4 operating margin was up 3.8 percentage points versus last year and significantly improved over the 23.6% operating margin from two years ago. Non GAAP operating income for fiscal twenty twenty five was $886,000,000 also up 25% year over year, resulting into a 29.8% operating margin versus 25.8% in fiscal twenty twenty four and twenty point five percent in fiscal of twenty twenty three. We have made significant improvements on profitability over the last two years and will continue to prioritize efficiency while making critical investments in areas like R and D. We ended Q4 with 6,838 employees versus 6,840 at the end of fiscal year twenty twenty four, essentially flat year over year, including our acquisition of Lexiom. We remain deliberate in our hiring approach to align with key initiatives and are mindful of hiring locations based on cost and skills required.

[Blake Grayson, Chief Financial Officer at DocuSign]

In Q4, we delivered $280,000,000 of free cash flow, a 36% margin. Our free cash flow margin improved by approximately one percentage point from the prior year, driven by increased collections efficiency and higher in quarter billings. For fiscal twenty twenty five, we delivered $920,000,000 of free cash flow, a 31 margin and more than double the annual free cash flow we generated two years ago. Our free cash flow margin for the year trended slightly higher versus non GAAP operating margins, a trend we expect to continue for fiscal twenty twenty six, driven mostly by the strength in our forecasted billings growth. Our balance sheet remains strong, closing the quarter with $1,100,000,000 in cash, cash equivalents and investments, we have no debt on the balance sheet.

[Blake Grayson, Chief Financial Officer at DocuSign]

This financial stability combined with consistent free cash flow generation enables us to invest in the business while also opportunistically returning capital to shareholders. In Q4, we repurchased $162,000,000 of stock through share buybacks. For fiscal twenty twenty five, we repurchased a total of $684,000,000 of stock using approximately 75% of our annual free cash flow generation. This rate is closer to 100% for the year when including the cash utilized to cover taxes on RSU vesting. We have $6.00 $8,000,000 remaining under our current repurchase authorization and we expect to continue to opportunistically repurchase shares as part of our capital allocation strategy.

[Blake Grayson, Chief Financial Officer at DocuSign]

Regarding the cost of our equity programs, our Q4 stock compensation expense as a percentage of revenue was 19.3%, down over three percentage points from the prior year. Non GAAP diluted EPS for Q4 was $0.86 a $0.1 per share improvement from $0.76 last year. GAAP diluted EPS for Q4 was $0.39 versus $0.13 last year. For full year 2025, non GAAP diluted EPS was $3.55 versus $2.98 in fiscal twenty twenty four and GAAP diluted EPS was $5.08 versus $0.36 last year. As a reminder, GAAP earnings in fiscal twenty twenty five were positively impacted by the tax valuation allowance release that occurred in Q2 of twenty twenty five and it's explained in more detail in our filings.

[Blake Grayson, Chief Financial Officer at DocuSign]

Diluted weighted shares outstanding for Q4 was $214,500,000 slightly higher than expected, primarily due to the impact of a higher share price on unvested awards, which are accounted for under the treasury stock method. Basic shares outstanding for Q4 decreased by 2,200,000.0 year over year to 203,300,000.0 total shares, reflecting the anti dilutive impact of our buyback program. With that, let me turn to guidance. For Q1 twenty twenty six, we expect total revenue between $745,000,000 and $749,000,000 in Q1 or a 5% year over year increase to the midpoint. And we expect full year fiscal twenty twenty six revenue between $3,129,000,000 and $3,141,000,000 also a 5% year over year increase at the midpoint. The guided growth rates include an approximate 0.7 percentage point of headwind to both Q1 and full year fiscal twenty twenty six revenue from the impact of forecasted foreign currency rates across our international business. We expect subscription revenue of $729,000,000 to $733,000,000 in Q1 or a 6% year over year increase at the midpoint and $3,062,000,000 to $3,074,000,000 for fiscal twenty twenty six or a 6% year over year increase at the midpoint.

[Blake Grayson, Chief Financial Officer at DocuSign]

For billings, we expect $741,000,000 to $751,000,000 in Q1 or a 5% year over year growth rate at the midpoint and we expect full year fiscal twenty twenty six billings between $3,300,000,000 to $3,354,000,000 or a 7% year over year growth rate at the midpoint. The guided growth rates include an approximate one percentage point of headwind to both Q1 and full year fiscal twenty twenty six billings from the impact of forecasted foreign currency rates across our international business. Our fiscal twenty twenty six guidance represents the first year we anticipate accelerated annual billings growth since fiscal year twenty twenty one as we build up demonstrated momentum in IAM and continued improvements in retention. As shown in recent quarters and years, billings are impacted by the timing of customer renewals, which can create meaningful variability from period to period. We included the following three considerations in our top line guidance.

[Blake Grayson, Chief Financial Officer at DocuSign]

First, in Q1, we expect an approximate one percentage point headwind year over year to revenue from the leap year impact. Second, as mentioned above, the impact of foreign currency rates will have an approximate 0.7 percentage point headwind for revenue in Q1 and the full year of fiscal twenty twenty six. For billings, we expect an approximate one percentage point headwind in Q1 and the full year fiscal twenty twenty six. Third, for the full year fiscal twenty twenty six, we expect a billing specific headwind of approximately one percentage point to account for reduced early renewal volume as a result of go to market design changes to reflect a growing focus on I'm upsell, including the introduction of an I'm transition SKU that can help offer I'm features to customers through upsells without the need to renew existing contracts. We expect non GAAP gross margin to be 80.5% to 81.5% for both Q1 and fiscal twenty twenty six.

[Blake Grayson, Chief Financial Officer at DocuSign]

We expect non GAAP operating margin to reach 27% to 28% for Q1 and 27.8% to 28.8% for fiscal twenty twenty six. We included the following two considerations in our profitability guidance. For Q1 and the full year fiscal twenty twenty six, we expect an approximate one percentage point gross margin headwind due to the ongoing cloud data center migration efforts. As discussed previously, we expect a larger gross margin impact in fiscal twenty twenty six before easing in fiscal twenty twenty seven and beyond. Also for the full year fiscal twenty twenty six, we expect an approximate 1.5 percentage point operating margin headwind due to both the one percentage point gross margin impact from cloud migration as discussed above, as well as the hard comp against the previously discussed Q2 twenty twenty five one time release of a litigation reserve and the fiscal twenty twenty six shift of some roles to cash compensation versus equity.

[Blake Grayson, Chief Financial Officer at DocuSign]

This overall approach to profitability reflects our intent to maintain similar levels of operating margins realized in fiscal twenty twenty five, excluding the unique gross margin and operating expense headwinds noted above. This also allows us to prioritize I'm investments to drive longer term growth. When we combine these with forecasted accelerating billings growth in fiscal year twenty twenty six, we're excited about our longer term opportunity to improve operating leverage. We expect non GAAP fully diluted weighted average shares outstanding of $210,000,000 to $215,000,000 for both Q1 and fiscal twenty twenty six. In closing, in Q4, we made continued progress towards strengthening the I'm platform vision and improving the performance of our core business with solid revenue and billings growth.

[Blake Grayson, Chief Financial Officer at DocuSign]

We also maintain our focus on operating efficiency and produce strong non GAAP operating profit and free cash flow. Stepping back, fiscal twenty twenty five was a transformative year for DocuSign. We built a strong foundation created by nearly 1,700,000 customer relationships, improving business fundamentals and accelerated product innovation. We are excited to continue developing the I'm platform to create greater value for our customers across the verticals, geographies and company sizes. We remain in the early stages of bringing our agreement management vision to life and through consistent execution, we believe we can transform DocuSign for customers, employees and our shareholders.

[Blake Grayson, Chief Financial Officer at DocuSign]

That concludes our prepared remarks. With that operator, let's open up the call for questions.

[Operator]

Thank Our first question is from Jake Reberge with William Blair. Please proceed.

[Jake Roberge, Equity Research Analyst at William Blair & Company, L.L.C]

Yes. Thanks for taking the questions and congrats on the really strong results in Q4. Alan, you've obviously had a pretty successful start selling IEM into the F and B and commercial segment over the last few quarters. As you've started to move the product farther upmarket, curious how the early reception has been with those customers and if there have been any new learnings for I'm in the enterprise space?

[Allan Thygesen, Chief Executive Officer at DocuSign]

Yes. So just as a reminder for everyone, we launched to S and B and mid market customers in U. S, Canada and Australia in early June, and then to broader globally and to enterprise deployments at the December. So we just have a couple of months of data, but I would say the early signs both on the enterprise international front are very encouraging. As you start with international, we're seeing very similar patterns in sales productivity and customer acceptance in the SAB market segments and the new geographies we're targeting.

[Allan Thygesen, Chief Executive Officer at DocuSign]

The enterprise side obviously the sales side is longer, but we've already closed a number of enterprise deals. And I think the value prop is even stronger. I think it goes up more than proportionally with company size because the cost of complexity just increases as companies get larger. So we're seeing that interest. And of course, it's reflected if you draw a line back to CLM, CLM has historically been an enterprise first category and I'm is in many ways sort of a super set replatforming of that.

[Allan Thygesen, Chief Executive Officer at DocuSign]

So it's not surprising that there's a lot of appetite. And of course, with I'm we can provide that value to a much broader set of users inside the companies, not just to the people who historically have handled contracts full time, but frontline sellers, frontline buyers, frontline recruiters and so on. And there's a lot of appeal to that. So we're very bullish on the enterprise opportunity. We have still have some maturing to do both on the product and go to market side to be able to fully exploit that.

[Allan Thygesen, Chief Executive Officer at DocuSign]

But that's kind of part of the booster rocket for the business and why we're we think we have multiple years of expansion ahead.

[Jake Roberge, Equity Research Analyst at William Blair & Company, L.L.C]

Okay. That's helpful. And then Blake, can you help us better understand the revenue growth guide in the context of the nice billings acceleration you've seen over the past few quarters and the 11% billings growth you saw in Q4? Just be helpful to understand when we should start seeing that billings acceleration flow through to revenue growth on that pathway back to the double digit growth levels. Thanks.

[Blake Grayson, Chief Financial Officer at DocuSign]

Sure. And so what I would do is let me just start with subscription revenue because obviously that's the vast majority of our revenue. So the first thing I would do when you look at these things on a year over year basis, make sure to adjust for FX. We called out in the press release and the prepared remarks if you're reviewing that year over year. So our subscription revenue guide is about 5.8%, I think at the midpoint.

[Blake Grayson, Chief Financial Officer at DocuSign]

So if you reflect the 0.7% headwind from FX, that includes its normalized call it ex FX around 6.5%, which I think might make a bit more sense when you're looking at the flow through. The dynamic of revenue is that it just it lags billings, right? It takes six to seven quarters because our average duration our weighted average duration is still around nineteen months to recognize that revenue. So while billings growth decelerates as it has been over the past couple of years, revenue decelerates as well, but it's on a lag basis. It just takes time to shift.

[Blake Grayson, Chief Financial Officer at DocuSign]

And so in fiscal twenty twenty six, we're still rolling off the revenue tail from earlier contracts on deceleration. So in FY 2024, billings grew over 9%. In FY 2025, it grew under 7%. And so FY 2026 is unique though in that it's the first full year we're really expecting to accelerate our billings and that's particularly so when you think about excluding the impacts from FX. And that has a lot to do with the expected ramp we have in I'm you can imagine with the ramp that occurs a bit more into the second half of the year.

[Blake Grayson, Chief Financial Officer at DocuSign]

And so I'm really excited like if we can reaccelerate billings in FY '20 '20 '6 and continue that, I think we've got the opportunity to really accelerate revenue then in the longer term as well.

[Operator]

Our next question is from Brad Sills with Bank of America. Please proceed.

[Brad Sills, Analyst at Bank of America]

Great. Thank you so much. I did want to ask a question on the current macro environment. Given that you've got a front row seat here with a transactional model, at least in the core e signature business with the envelopes based pricing, What's your observation in terms of just activity in core e signature and expansion deals, a lot of moving parts right now with macro policy changes. So wanted to get your thoughts on that real time. Thank you.

[Allan Thygesen, Chief Executive Officer at DocuSign]

Yes. So we're not seeing material changes in trend in terms of envelope volume, for example, as we look at our February numbers, they were as expected and on the trend line. So nothing has flowed through to us yet. And I will stress, we are incredibly diversified across sectors and across company sizes and even somewhat on geography basis. And so to the extent that there are individual industries that are exposed, we would be less likely to see that in a strong way.

[Allan Thygesen, Chief Executive Officer at DocuSign]

So far, no material impact, but obviously to the extent that the global macro economy meaningfully accelerates or decelerates at some point that will flow through to us. But some of these more sectoral things or individual countries don't have as much effect.

[Brad Sills, Analyst at Bank of America]

Understood. Thank you for that. And then one more if I may just on I with the move towards more of a solution sale here workflow and end to end solution, it would seem that that's a more involved sales cycle than your traditional sales cycle. So if you could just give us an understanding please on kind of the preparedness and the direct sales channel for selling that type of a deal. Obviously, you're expecting real healthy results that ramp through this year.

[Brad Sills, Analyst at Bank of America]

So it would suggest that you are prepared in the channel, but just give us an idea for that effort and kind of where you're at with that. Thank you.

[Allan Thygesen, Chief Executive Officer at DocuSign]

Sure. I think it's a great question. Yes, so as I mentioned earlier, we lost to the SMB at mid market segment. Those tend to be shorter sales cycles relatively speaking, but still we're selling something a little bit more complex and broader. And we've been thrilled with the time to close the win rates.

[Allan Thygesen, Chief Executive Officer at DocuSign]

Obviously, the average deal size is larger and we're able to sell it very successfully. So I think and then we've seen very rapid install. We were able to turn on new clients in less than a month. I think seventeen, eighteen days is the average right now, which is pretty incredible for that software, particularly given some of what we're doing here. So I think that's very encouraging.

[Allan Thygesen, Chief Executive Officer at DocuSign]

As we look ahead to enterprise deployments, we are expecting that this is a more complicated sale to more stakeholders and more senior stakeholders. And so we are making some changes, which we've already implemented in our go to market to try to prepare for that. We're not counting on a lot from the enterprise segment this year. As I mentioned in my prepared remarks, most of the growth contribution in I'm is coming from the S and P and mid market segment in fiscal twenty twenty six. But obviously, the enterprise segment is huge for us in the long run.

[Allan Thygesen, Chief Executive Officer at DocuSign]

And so to prepare for that, we moved a significant number of accounts to a predominantly self serve model here at the beginning of this fiscal year. And that has then freed up ability to rejigger the portfolios and sales, so that everybody has smaller portfolios and ability to go deeper and with individual clients. And that's been incredibly well received by the sales team and I think is the first step in getting ready. Then there's quite a bit of enablement. So we just had our global sales kickoff and a whole bunch of training leading up to that.

[Allan Thygesen, Chief Executive Officer at DocuSign]

And so we're investing very heavily in upskilling our teams to be ready for that broader conversation. We've also made some changes to our incentive plans around rewarding more new growth as well as rewarding I'm more specifically. And there's all kinds of other initiatives as you would expect to align to this. Another area that we're investing in this year is deepening our work with partners for enterprise customers. And so our work with the big SIs, for example, is a key focus area to settle.

[Allan Thygesen, Chief Executive Officer at DocuSign]

That's a key element of both the sales and the post sale process. So we are we think we have some work to do to fully capitalize on the opportunity, but we're already seeing I think very good demand. And of course, we are this is a reminder, we have a lot of customers across all customer segments. We're 95% or more of the Fortune 500 and equivalent many of our overseas markets. So we already have a foot in the door.

[Allan Thygesen, Chief Executive Officer at DocuSign]

We're already approved vendor. We're already well regarded. And so that gives us a great starting point from which to sell this broader solution. But I'm not naive. I think we have work to do to become a full enterprise company and we're investing in that both on the product and the go to market side to be able to capitalize on the opportunity we have.

[Brad Sills, Analyst at Bank of America]

Very exciting. Thanks, Alan.

[Operator]

Our next question is from Kurt Materne with Evercore ISI. Please proceed.

[Kirk Materne, Senior Managing Director, Equity Research at Evercore ISI]

Yes. Thanks for Michel. Another one on I'm Alan, can you just try to dimensionalize the opportunity for I'm at accounts when you get in there? Meaning, is this something that can lift the average spend with you all from 20% to 50%? I'm just trying to think about that.

[Kirk Materne, Senior Managing Director, Equity Research at Evercore ISI]

I think you mentioned the enterprise could obviously be larger given the complexity, but how should we think about the opportunity in terms of customer penetration and then sort of the potential uplift for you all?

[Allan Thygesen, Chief Executive Officer at DocuSign]

Yes. I mean, we're not getting into the specific uplift, but suffice it to say, it's very meaningful. We don't even let reps sell I'm right now unless there's an uplift. And just because we believe we're delivering a tremendous amount of value and we want to be compensated for that and we're not seeing that as a huge friction point. In fact, we're doing very, very well with that.

[Allan Thygesen, Chief Executive Officer at DocuSign]

So in terms of how we enter, we I'd say that there are multiple functional areas that can be drivers. Sales, we've always had a strong relationship with sales organizations, whether it B2B or B2C customer onboarding, and that continues and I'm is very strong for that. Procurement tends to be another very important functional area. HR can be another area of opportunity. But really it cuts across the enterprise.

[Allan Thygesen, Chief Executive Officer at DocuSign]

The larger the company, the more likely as we enter in one of the functions. But in the smaller companies, it's often a single ubiquitous solution day one, all the agreements get ingested. And of course, we have often most or all of their agreements if they're an existing eSign customers. And So that just allows us to deliver value really day one. So I think we feel it's a very significant expansion opportunity with customers of all sizes.

[Allan Thygesen, Chief Executive Officer at DocuSign]

And as you mentioned, we'll just have to see just how big it can get with big enterprise clients. But this is an acute pain point. If you go to a really large company, this is tens of millions of dollars. So we're excited to pursue that.

[Kirk Materne, Senior Managing Director, Equity Research at Evercore ISI]

That sounds good. And then maybe a quick follow-up for Blake. I think you mentioned you're expecting net retention or net dollar retention to be flat this year. I guess is there anything going on from it seems like you made really good progress on gross. Are you sort of hitting a limit on the ability to keep moving that higher?

[Kirk Materne, Senior Managing Director, Equity Research at Evercore ISI]

I guess, can you just talk a little bit about the puts and takes of that? Thanks.

[Blake Grayson, Chief Financial Officer at DocuSign]

Sure. The commentary in the prepared remarks around the flat dollar net retention, that was specific to Q1. We actually do expect moderate gradual improvement throughout the year. So I think and the reason we believe that's an opportunity for us is both there's still gross retention improvements that we can continue to make. We made a lot so far.

[Blake Grayson, Chief Financial Officer at DocuSign]

The team's done hats off to the team there across DocuSign to be able to improve retention rates. We still have more opportunity remaining, so that's part of it. And then the other part obviously comes with expansion opportunities that we believe that in particular I'm provides us for, but also within our eSign business as well. And so with those two components, we believe that there's a moderate improvement opportunity for us to see throughout the year past Q1, which we're forecasting as being flat.

[Kirk Materne, Senior Managing Director, Equity Research at Evercore ISI]

Okay, perfect. Thanks for clarifying. Congrats on the quarter.

[Blake Grayson, Chief Financial Officer at DocuSign]

Thanks.

[Operator]

Our next question is from Brent Thill with Jefferies. Please proceed.

[Brent Thill, Tech Sector Leader, Software/Internet Research at Jefferies Financial Group]

Alan, just on the sales changes you're making, can you just maybe put that in context? Is this more of a tweak? Is this maybe the biggest overall you've had in your go to market in the last couple of years? How would you just characterize what you're doing to the sales team this year and a quick follow-up for Blake?

[Allan Thygesen, Chief Executive Officer at DocuSign]

Yes. I think it's neither. I think it's somewhere in the middle. I think, look, I don't want to underplay it. This is a big thing for us to graduate up to becoming a big time enterprise company and I'm well aware of what that takes and this is the beginning of that journey.

[Allan Thygesen, Chief Executive Officer at DocuSign]

At the same time, I think you're well aware we've made some pretty substantial changes over the last couple of years and have come through that I think pretty well and those involved layoffs and other things. And this time we were able to move people around and make changes that are much more manageable. And I think the organization has already digested that. It was just I was just at the global sales kickoff last week with everyone. And it was fantastic to see just how lean in the team was, how they had already accept all their territories and quotas and new comp models and we're just excited to get going.

[Allan Thygesen, Chief Executive Officer at DocuSign]

And of course, it doesn't hurt that we've been pretty successful over the last six to eight months and everybody knows that. So there's a lot of excitement. So I'm we want to be purposeful and thoughtful about how we roll these changes. I just want to give a quick shout out to Paul Hanson, who as you probably all know joined us in early August of last year and really led all this work and has just been a fantastic addition to the CN team in every way and has had the full organization behind her and I think it's a testament to our leadership.

[Brent Thill, Tech Sector Leader, Software/Internet Research at Jefferies Financial Group]

Okay. And for Blake and I'm what is the kind of average uplift you're seeing in ASPs when you when I'm going in, I know it's across the board, but is there a rough range you put on that you're seeing so far?

[Blake Grayson, Chief Financial Officer at DocuSign]

There's not, Brett. I get asked this question frequently. And one of the reasons why, I mean, like Alan said, we are seeing larger deal sizes. We've actually set up publicly a number of times. We are the vast, vast majority of our I'm deals to date have been in kind of that SMB mid market, those segments.

[Blake Grayson, Chief Financial Officer at DocuSign]

And so until we get much further kind of up the chain or trying to give out expansion rates, I'm a little worried about things don't apply necessarily across all these customer segments, we'll have to see. But suffice it to say that our billings guide of accelerated billings for us next year reflects the expansion opportunities frankly that we get along with retention gains, which is still top of mind, but we're not breaking out the expansion rates in specific terms today.

[Brent Thill, Tech Sector Leader, Software/Internet Research at Jefferies Financial Group]

Great. Thanks.

[Operator]

Our next question is from Patrick Walravens with Citizens. Please proceed.

[Austin Cole, Software Equity Research Associate at Citizens JMP Securities, LLC]

Yes. This is Austin Cole on for Pat Walravens. I appreciate you guys taking the questions here and congrats on some nice results. Wanted to dig into the customers over 300,000 ACV had a nice uptick this quarter. I was wondering if there's any kind of more detail on what drove that number and what you're seeing in those larger customers?

[Blake Grayson, Chief Financial Officer at DocuSign]

I mean, I'll take a stab.

[Blake Grayson, Chief Financial Officer at DocuSign]

I would say most of that increase is from customers in our core, right? Like I'm there's a contribution there in I'm but it's not the majority of it at all. And you can imagine it's because we just launched into the larger customer segment. And so I think it just goes to seeing these trends of higher usage, higher trends getting customers that are already installed to lift up and expand with us. I'm really excited by it.

[Blake Grayson, Chief Financial Officer at DocuSign]

I think there's volatility in that number on a quarter to quarter basis, but it's really predominantly out of the core. And so it's what our enterprise and kind of larger customer segment go to market teams are working on and been really excited to see that progress.

[Allan Thygesen, Chief Executive Officer at DocuSign]

Yes. If I could just I'll just add to that to say that, I think in particular, we're really pleased with the continuing recovery and progress in our North America business where of course it's the bulk of our business as you know. And I think it's a testament to continued improvement there. And I think we're sort of more fully out of the shadows of the COVID stuff. And everybody wants better agreement processes and everybody's economic activity has been fairly decent across a broad range of sectors.

[Allan Thygesen, Chief Executive Officer at DocuSign]

And so we are well poised to capitalize on that.

[Austin Cole, Software Equity Research Associate at Citizens JMP Securities, LLC]

Great. And then there was actually some commentary about Dropbox is talking about kind of deemphasizing their sign business and just was wondering if you guys have seen or anticipate any kind of competitive opportunity there?

[Allan Thygesen, Chief Executive Officer at DocuSign]

No, we I mean, there are lots of companies that offer some basic science solutions and people come in and out. I think we've held our own very well. We continue to be the market leading player and I don't focus on individual companies specifically. Really the competitive environment I think at eSign is pretty stable at this point. And if anything, I think we're probably making a little bit of progress.

[Allan Thygesen, Chief Executive Officer at DocuSign]

So I'm pleased with how we've been able to stabilize that.

[Austin Cole, Software Equity Research Associate at Citizens JMP Securities, LLC]

Great. Thank you.

[Operator]

Our next question is from Mark Murphy with JPMorgan. Please proceed.

[Sonak Kolar, Software Equity Research Associate at JP Morgan]

Thanks. This is Sona Kolar on for Mark Murphy. Congrats on the results. Alan, I noticed this disclosure of essentially 100% penetration of the top 20 or 25 Fortune 500 companies across FinServ, healthcare and technology, which is no doubt quite impressive. As you consider the growth levers going forward, how do you think about the balance between net new customer wins versus sort of increasing the ARPU of your existing large install base, particularly with I'm

[Allan Thygesen, Chief Executive Officer at DocuSign]

Yes. I mean, it also I think from the question that as you might imagine, we're very focused on growing ARPU with existing customers. But we don't want to leave any still not turned on the new customer acquisition front. And as you can tell, we keep growing that and those are the future customers that grow into $300,000 or more. And we want to make sure we continue to win there at an appropriate rate.

[Allan Thygesen, Chief Executive Officer at DocuSign]

But our primary focus and the focus of our sales teams, increasingly the focus of our marketing teams is on upsell to the existing base in particular of I'm

[Sonak Kolar, Software Equity Research Associate at JP Morgan]

Thank you. And then as a quick follow-up, last quarter you seemed to convey a marginal improvement in the environment for enterprise technology, I think sort of towards the end of twenty twenty four. Fast forwarding to today amidst all this uncertainty around tariffs, trade wars, Doge, etcetera, has that view shifted at all? And are customers a bit more cautious perhaps to lean into some of that software spending plans?

[Allan Thygesen, Chief Executive Officer at DocuSign]

Yes, we haven't seen that yet. So as I mentioned, I think we see our envelopes volumes through the month of February, nothing changes. There's nothing on the activity front. It's certainly possible that sentiment could evolve to where that affects technology spend. And I think we are I think we're in a good place.

[Allan Thygesen, Chief Executive Officer at DocuSign]

We're relatively speaking to some other categories and that it's pretty fundamental to how companies operate to use electronic signing. And I'm has a fantastic and highly economic value proposition. And so but obviously if the global economy really takes a turn for the worse, the sentiment takes a turn significantly for the worse, then that will affect us as it will affect everybody.

[Sonak Kolar, Software Equity Research Associate at JP Morgan]

Thank you and congrats again.

[Operator]

Our next question is from Josh Buer with Morgan Stanley. Please proceed.

[Chris Quintero, Analyst at Morgan Stanley]

Hey guys, this is Chris Quintero on for Josh here. Thanks for taking the questions. Maybe one on IAM. As you make that move more into the enterprise, I guess like how much of a priority is IAM with those more senior stakeholders that you're having conversations with? What are those early conversations sounding like?

[Allan Thygesen, Chief Executive Officer at DocuSign]

Yes, I think we're this is a very it's ironic. It's a very acutely felt pain point, but I don't know that everybody's realized that there was a solution to the problem. So I think everybody has almost become accustomed to agreements being brittle and broken and delayed and causing inefficiencies throughout the enterprise. And so it's incredibly eye opening when we can show them solutions that address that problem because that immediately leads to, well, we can solve that. That is a game changer.

[Allan Thygesen, Chief Executive Officer at DocuSign]

And so I find I meet with C suite executives in many of our Fortune 500 clients here and abroad. And I mean, it's exceptionally rare that I have a C suite meeting where the I'm proposition doesn't resonate incredibly strongly. So I feel like it's more on us to execute and mature the product to where it can be deployed in every use case in their company and meet all the various checks that you have to go through and for us to mature our go to market process to really fully deliver on that. But in terms of the core value proposition, it resonates incredibly solidly and perhaps even better in large companies and smaller companies.

[Chris Quintero, Analyst at Morgan Stanley]

Got it. That's super helpful. And then really great to see customer consumption increase year over year, but just curious what you're seeing on maybe the pricing front on e signature. Has that remained stable or is that also improving?

[Allan Thygesen, Chief Executive Officer at DocuSign]

I'll take it off, Blake.

[Blake Grayson, Chief Financial Officer at DocuSign]

Sure.

[Blake Grayson, Chief Financial Officer at DocuSign]

I mean, our pricing has been quite stable over time. It's something where we recognize that we are a premium product, but that's for a reason with the trust, the brand, the security, the features, the functionality that we bring. And I think we're set up well for that, but no changes in pricing that I would call out over the trending period.

[Chris Quintero, Analyst at Morgan Stanley]

Excellent. Thanks so much.

[Operator]

Our next question is from Rishi Jaluria with RBC. Please proceed.

[Rishi Jaluria, Managing Director at RBC Capital Markets]

Wonderful. Thanks so much for taking my questions. Nice to see continued momentum in the business. I apologize if I missed this during our prepared remarks or earlier, but when you gave your color around I'm contribution to subscription revenue for the year, Just how should we be thinking about exactly how that's being defined, especially given you've had revenue from CLM? Is that CLM revenue separate?

[Rishi Jaluria, Managing Director at RBC Capital Markets]

Is some of that being recategorized into I'm just help us understand the puts and takes around that definition? And then I have a quick follow-up.

[Blake Grayson, Chief Financial Officer at DocuSign]

Sure. So when we talk about the I'm as a percentage of our subscription recurring revenue book of business that does not include CLM. And it's essentially represents like book of business is for us, we're defining it as like essentially the monthly recurring revenue at the end of that period. And that's relative to our total subscription revenue book of business. So I think it's pretty simple and to just show that the momentum that I think we're launching out of here in Q4 with regards to our outlook for Q4 of twenty twenty six.

[Allan Thygesen, Chief Executive Officer at DocuSign]

Yes. I would just add so beyond the numbers, but we're continuing to sell CLM to enterprise clients very successfully. It's an industry leading product, Gartner, Magic Product for the last four years, all that. And it has some functionality for advanced workflows and AI that goes well beyond what we've built into the baseline I'm platform. And this year, you'll start to see a lot of the platform capabilities from I'm become available to CLM customers.

[Allan Thygesen, Chief Executive Officer at DocuSign]

So things like Navigator and Maestro as well as other things will announce in momentum, it should come, but we will be available to CLM customers. And so I think that vision of CLM as an integral component built on top of high end billing comes to fruition this year. And so I don't view the two as in conflict or cannibalizing more than it's a supercharger for our CLM vision and allows us to expand access to agreements to our much broader use set within large companies.

[Rishi Jaluria, Managing Director at RBC Capital Markets]

All right, got it. Thanks. That's really helpful. And then just going to the international business, you talked about you're seeing maybe that decelerate while domestic is accelerating, talked about the plans to reaccelerate growth with IAM. Maybe just help me understand, when I think about international, you're very underpenetrated, right?

[Rishi Jaluria, Managing Director at RBC Capital Markets]

I mean, in Europe and Japan, let alone some of the emerging markets and it feels like there's probably more TAM that's very greenfield in those. So why is it then that the core e signature in international geographies is slowing down on its own? And what steps can you take to accelerate just core e signature outside of The U. S? Thanks.

[Allan Thygesen, Chief Executive Officer at DocuSign]

Yes. Look, I think international is obviously still growing faster than our domestic business, but there definitely was a deceleration in second half of last year. I think it's a combination of factors. One is that we've historically been quite customer acquisition focused. And as we discussed earlier on this call, our pivot building needs to be towards more off sell and cross sell and use case deployment with existing customers.

[Allan Thygesen, Chief Executive Officer at DocuSign]

And that motion has been stronger in North America than, for example, in Europe. And so we have we've pivoted that and I think we're going to make significant progress on that. So I'd say that's more of an execution issue on our side. And then on the product side, we just launched I'm in international markets on December 1 with the localized product. And so we have a great opportunity there to for that as a further boost to our international momentum.

[Allan Thygesen, Chief Executive Officer at DocuSign]

And we saw some really nice early results in those first few months. And then lastly, say as a third lever is the evolution of the partner channel. This is early days, but historically DocuSign has been a very direct first, second and third channel company. And even in markets where frankly we had very limited direct capabilities. And so we try to get a lot crisper on top 10 markets or roughly that's where we're going to have a direct first model and then other markets where we'll be partner first or partner only.

[Allan Thygesen, Chief Executive Officer at DocuSign]

And so we're running a variety of experiments in individual countries and that I think can be a really nice growth lever for us as well. So I don't think we've had quite the right distribution mix, if you will, to pursue international. But we are absolutely convinced that international should be a major growth driver for the company. We're investing in product and back office and all that stuff to be able to support that. And I travel internationally very heavily.

[Allan Thygesen, Chief Executive Officer at DocuSign]

I think I was Europe 6 times last year. And so we are absolutely pushing to deepen that penetration because I agree with you that there's no question we are less penetrated, let's say, particularly outside of the major English speaking markets. And in some markets like Germany and Japan, it's really quite early and we have a lot of headroom.

[Rishi Jaluria, Managing Director at RBC Capital Markets]

All right, wonderful. Thank you guys.

[Operator]

Our next question is from Michael Turrin with Wells Fargo Securities. Please proceed.

[Michael Turrin, Managing Director, Software Equity Research Analyst at Wells Fargo]

Great. Thanks. Appreciate you sneaking me on. I was hoping we'd be further away from macro questions by now, but it's never the case. So the question is yours has been on public sector impacts and if there's anything to consider.

[Michael Turrin, Managing Director, Software Equity Research Analyst at Wells Fargo]

I don't think this is an outsized portion of DocuSign's business in any way, shape or form, but can you just speak to public sector and whether that's a potential opportunity or something you're taking a more cautious stance at all in the coming year just based on any initial signals you might be seeing there?

[Allan Thygesen, Chief Executive Officer at DocuSign]

Yes, I think it's mostly upside for us. We don't have a big federal business today. It's really pretty modest. We do quite a bit of business with state and local governments in The U. S.

[Allan Thygesen, Chief Executive Officer at DocuSign]

And have been perhaps a lot of our very successful deployments that we think we can replicate our success from there as well as with large enterprises with the federal government. And so we're investing and actually just brought on some senior leaders to lead our more concerted push into that area. And of course, our value prop, I think resonates well at a time when efficiency and better customer service, shall we will, for government service recipients and taxpayers is important. So we don't have a lot to lose and I think a big upside opportunity and so we're leaning into that.

[Michael Turrin, Managing Director, Software Equity Research Analyst at Wells Fargo]

Great. And just if I may, just one for Blake on just seasonality. I think you mentioned early renewal impacted Q4 revenue at least a touch as well. And I think just looking at the Q1 guide, it looks potentially especially conservative. But just walk us through one more time any seasonal components we should be contemplating and looking at Q4 to Q1 and then tying that into the fiscal year guidance? Thank you.

[Blake Grayson, Chief Financial Officer at DocuSign]

Sure. So if you're looking at Q4 to Q1 subscription revenue, we normally have a seasonal drop, right? But you are right that if you look at our guide, it's a larger than normal seasonal guide. And so there are a couple of extra things that you have to take into account that are affecting that. The first is the leap year impact.

[Blake Grayson, Chief Financial Officer at DocuSign]

That's a point for us when you're looking at Q1, not for full year. And then obviously that revenue acceleration that we had in Q4, that was relatively unique for us from some larger customer contracts that essentially had pretty early renewals based on consumption trends. And so exciting to have that that was pretty unique. And then also we just got we have a bit of a hard comp on a seasonal basis against the digital usage. We started seeing digital usage kind of increase a fair amount beginning in fiscal year twenty twenty five. And so that Q4 twenty twenty four to Q1 twenty twenty five had that bump there. So those are the I would say the biggest three components that drive that quarter on quarter change is a little bit more magnified than you would have seen last year.

[Michael Turrin, Managing Director, Software Equity Research Analyst at Wells Fargo]

Thank you.

[Operator]

Our next question is from Alex Zukin with Wolfe Research. Please proceed.

[Alex Zukin, Analyst at Wolfe Research LLC]

Hey guys. Just two quick ones for me. First congrats on one of the strongest quarters in one of the most difficult single periods. But maybe just IAM, really like the disclosure of that going from a low single digit book of business to low double digit book of business next year. And that implies like a five to six x increase.

[Alex Zukin, Analyst at Wolfe Research LLC]

So aside from the visibility that you've seen with the better expected contribution this year and good execution, What are you seeing in conversations that gives you that confidence of the momentum continuing?

[Blake Grayson, Chief Financial Officer at DocuSign]

I mean, for me, honestly, it's just with the data that you see coming in and the deal volume that we have and how our go to market teams have embraced this as an opportunity to help customers add value. I think that is far and away what drives essentially that accelerating business growth. I mean, obviously, gross retention improvements mean a ton, right, because of our book of business and like our focus on that is still a number one priority for us. But I think that is the just that ramp that we've seen and how these go to market and product teams and everybody frankly across DocuSign has really bought into the concept of the extra value we're providing the customers across this platform and we're seeing it although it is probably still very early days, we have a lot of room left to go and execute against. That's what is driving that kind of excitement for us in that accelerated billings guide that you're seeing from us.

[Allan Thygesen, Chief Executive Officer at DocuSign]

Yes. I would just add that one way to think about our businesses, we have different cohorts that have been launched with I'm at different times, right? And we have the North America and Australia, mid market and SMB segment that we launched in June. And so we kind of know what that looks like now eight months in. And those results are very positive.

[Allan Thygesen, Chief Executive Officer at DocuSign]

And then we got a couple of early months of data from trying to replicate that with other customer segments and geographies, and it's showing similar patterns. And so that is part of what gives us that confidence in being able to roll forward without even relying on big success in the enterprise, which of course would provide extra upside and something that we hope to get in future years.

[Alex Zukin, Analyst at Wolfe Research LLC]

Makes sense. And then maybe I'll just ask the inverse of Michael's question, which is, if you look at DOGE and the push to digitize paperwork, are there any conversations that actually could be positive for you guys over the coming year that maybe could be a tailwind from that particular vertical for you?

[Allan Thygesen, Chief Executive Officer at DocuSign]

Well, we're bullish on our opportunity with the federal government. And as mentioned, we've hired two new senior leaders to lead those efforts. They're already jumping in and it's exciting to see. We're putting some product resources on it and we're going to have a very robust offering. And so I think we have and frankly with our products that we already have available today, we could add a lot of value to a lot of those processes, whether it's in procurement or in better and self serve options for taxpayers or service recipients.

[Allan Thygesen, Chief Executive Officer at DocuSign]

And so we have some of those early conversations that it's way too early to say whether it's going to contribute anything. It is not in our forecast, but if we get something that would be great.

[Alex Zukin, Analyst at Wolfe Research LLC]

Awesome. Thank you guys.

[Allan Thygesen, Chief Executive Officer at DocuSign]

Yes.

[Operator]

Our final question is from Will Power with Robert W. Baird. Please proceed.

[William Power, Senior Research Analyst at Baird]

Okay, great. Thanks for squeezing me in. You all had a lot of success for a few quarters with early renewal activity just due to consumption trends and expansion improvements. I guess I just wonder as you look at kind of the renewal cohorts that are coming up this year, why would we expect some of that to continue? Just it'd be great to kind of get kind of your flavor on what you're looking at in this coming year versus what you've seen here recently on the renewal front?

[Blake Grayson, Chief Financial Officer at DocuSign]

Sure. I'll take it, Steph. I think we talked about this actually as one of the headwinds for us in the full year guide, so one of the considerations you'll see in the prepared remarks. I think your point is accurate, which is early renewals are great. If they're customer driven, if you're doing a healthy renewal, that's great.

[Blake Grayson, Chief Financial Officer at DocuSign]

What it also though does is we have a certain amount of capacity available for us, right, with a given quarter. And so what we're trying to do in the go to market team and in Apollo's world is really make sure we're prioritizing resources in the quarters that provide the best opportunities for expansion. And so if we're doing a flat on time renewal, the only reason to bring that in early might be from a certain customer situation. If the customer is asking for it, we should absolutely make that consideration. But giving our go to market teams the most capacity available to focus on expansion opportunities, And so you can have early renewals with expansion and so that's good.

[Blake Grayson, Chief Financial Officer at DocuSign]

But how do we balance that out? And so you could see that in the past couple of quarters, we have talked about a little bit of an early on time tailwind for us coming in. What we're trying to do is just balance that out a little bit for us. And we think that gives us essentially more resources to put towards the expansion opportunities. And obviously, our number one job right now is to try to spin this flywheel, expand this business and accelerate growth.

[Blake Grayson, Chief Financial Officer at DocuSign]

We think that gives us the best opportunity to do that. Okay, great. Thank you.

[Operator]

We have reached the end of our question and answer session. I would like to turn the conference back over to Alan for closing remarks.

[Allan Thygesen, Chief Executive Officer at DocuSign]

Thank you, operator. Thank you to all who joined today's call.

[Allan Thygesen, Chief Executive Officer at DocuSign]

In closing, I'm really proud of DocuSign's progress as we improve the performance of our business and increase the pace and scale of innovation delivered to our customers through the I'm platform. Thank you to the team for your commitment as we continue to transform DocuSign into our owners as we pursue the significant opportunity that lies ahead. Thank you all.

[Operator]

Thank you. This will conclude today's conference. You may disconnect your lines at this time and thank you for your participation.

Participants

Executives

• Allan Thygesen, Chief Executive Officer
• Blake Grayson, Chief Financial Officer

Analysts

• Matt Sonefeldt, Head - Investor Relations at DocuSign
• Jake Roberge, Equity Research Analyst at William Blair & Company, L.L.C
• Brad Sills, Analyst at Bank of America
• Kirk Materne, Senior Managing Director, Equity Research at Evercore ISI
• Brent Thill, Tech Sector Leader, Software/Internet Research at Jefferies Financial Group
• Austin Cole, Software Equity Research Associate at Citizens JMP Securities, LLC
• Sonak Kolar, Software Equity Research Associate at JP Morgan
• Chris Quintero, Analyst at Morgan Stanley
• Rishi Jaluria, Managing Director at RBC Capital Markets
• Michael Turrin, Managing Director, Software Equity Research Analyst at Wells Fargo
• Alex Zukin, Analyst at Wolfe Research LLC
• William Power, Senior Research Analyst at Baird